" ! HOUSE OF REPRESENTATIVES 

111TH CONGRESS

2d Session 

REPORT

111–443 

THE RECONCILIATION ACT OF 2010 

R E P O R T 

OF THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

TO ACCOMPANY

H.R. 4872 

A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 202 OF THE CONCURRENT RESOLUTION ON THE BUDGET 

FOR FISCAL YEAR 2010 

together with 

MINORITY VIEWS 

VOLUME I 

DIVISION I 

MARCH 17, 2010.—Committed to the Committee of the Whole House on 

the State of the Union and ordered to be printed 


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THE RECONCILIATION ACT OF 2010—VOLUME I 


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U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

1 

55–104 

" ! HOUSE OF REPRESENTATIVES 

111TH CONGRESS

2d Session 

REPORT

2010

111–443 

THE RECONCILIATION ACT OF 2010 

R E P O R T 

OF THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

TO ACCOMPANY

H.R. 4872 

A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 202 OF THE CONCURRENT RESOLUTION ON THE BUDGET 

FOR FISCAL YEAR 2010 

together with 

MINORITY VIEWS 

VOLUME I 

DIVISION I 

MARCH 17, 2010.—Committed to the Committee of the Whole House on 

the State of the Union and ordered to be printed 


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(II) 

COMMITTEE ON THE BUDGET 

JOHN M. SPRATT, JR., South Carolina, Chairman 

ALLYSON Y. SCHWARTZ, Pennsylvania 

MARCY KAPTUR, Ohio 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL BLUMENAUER, Oregon 

MARION BERRY, Arkansas 

ALLEN BOYD, Florida 

JAMES P. MCGOVERN, Massachusetts 

NIKI TSONGAS, Massachusetts 

BOB ETHERIDGE, North Carolina 

BETTY MCCOLLUM, Minnesota 

JOHN A. YARMUTH, Kentucky 

ROBERT E. ANDREWS, New Jersey 

ROSA L. DELAURO, Connecticut, 

CHET EDWARDS, Texas 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

JAMES R. LANGEVIN, Rhode Island 

RICK LARSEN, Washington 

TIMOTHY H. BISHOP, New York 

GWEN MOORE, Wisconsin 

GERALD E. CONNOLLY, Virginia 

KURT SCHRADER, Oregon 

DENNIS MOORE, Kansas 

PAUL RYAN, Wisconsin, 

Ranking Minority Member 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

MARIO DIAZ–BALART, Florida 

MICHAEL K. SIMPSON, Idaho 

PATRICK T. MCHENRY, North Carolina 

CONNIE MACK, Florida 

JOHN CAMPBELL, California 

JIM JORDAN, Ohio 

CYNTHIA M. LUMMIS, Wyoming 

STEVE AUSTRIA, Ohio 

ROBERT B. ADERHOLT, Alabama 

DEVIN NUNES, California 

GREGG HARPER, Mississippi 

ROBERT E. LATTA, Ohio 

PROFESSIONAL STAFF

THOMAS S. KAHN, Staff Director and Chief Counsel 

AUSTIN SMYTHE, Minority Staff Director 


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(III) 

C O N T E N T S 

VOLUME I 

Page 

Introduction .............................................................................................................. 1 

Division I—Committee on Ways and Means: Health Care Reform ..................... 5 


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111TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 111–443 

THE RECONCILIATION ACT OF 2010 

PROVIDING FOR RECONCILIATION PURSUANT TO SECTION 202 OF THE 

CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2010 

MARCH 17, 2010.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. SPRATT, from the Committee on the Budget, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 4872] 

The Committee on the Budget, to whom reconciliation recommendations were submitted pursuant to section 202 of Senate 

Concurrent Resolution 13, the Concurrent Resolution on the Budget for Fiscal Year 2010, having considered the same, report the bill 

without recommendation. 

BUDGET COMMITTEE INTRODUCTION 

OVERVIEW

The reconciliation bill reported by the Budget Committee includes provisions for health care reform and for investing in education. The need for health care reform is clear. By most measures, 

we have the best medical care system in the world, but it is also 

by a wide margin the world’s most expensive, and it is not readily 

accessible to millions of Americans. The rising cost of health care 

is not sustainable, not only in household and business budgets, but 

in the federal budget as well. 


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Making higher education more affordable and accessible without 

adding to the deficit is also an important goal. A productive economy requires affordable, accessible, high-quality education and the 

higher education provisions included in the reconciliation bill will 

help advance that goal. 

The reconciliation process has been used 22 times in prior years. 

During the previous Administration and the previous Congressional majority, reconciliation was used in 2001 to pass tax cuts 

that worsened the bottom line by $1.35 trillion over ten years. In 

2003, a second round of tax cuts passed under reconciliation added 

$350 billion to the deficit. By contrast, the use of reconciliation in 

this year’s budget process requires that reconciliation legislation 

reduce the deficit, not add to it. 

Reconciliation has been used in the recent past to invest in education in a fiscally responsible way—the College Cost Reduction 

and Access Act of 2007 passed using reconciliation procedures. The 

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) 

gave recently separated workers the choice to temporarily continue 

employer-provided health coverage. When reconciliation was used 

in the Balanced Budget Act of 1997, the Children’s Health Insurance Program (CHIP), Medicare Payment Advisory Commission 

(MedPAC), and Medicare Advantage were created. The use of reconciliation in the current budget process lies well within those past 

practices. 

The Concurrent Resolution on the Budget for Fiscal Year 2010, 

S. Con. Res. 13, included two reconciliation instructions as part of 

Section 202—one for legislation on health care reform and the second for legislation investing in education. 

Under the Budget Act, a concurrent resolution on the budget can 

include reconciliation instructions to authorizing committees. These 

reconciliation instructions provide a specified dollar amount of 

budgetary change to be accomplished by reconciliation, but the decisions about the policies to be included in the reconciliation legislation are left to the authorizing committees themselves. 

The Budget Act assigns the Budget Committee the role of packaging the reconciliation bills sent to us by the authorizing committees and transmitting them to the House ‘‘without any substantive 

revision.’’ 

Division I of this year’s reconciliation bill consists of legislative 

language on health care reform submitted to the Budget Committee in October by the Ways and Means Committee. Division II 

of the bill consists of legislative language on health care reform 

submitted to the Budget Committee by the Education and Labor 

Committee. Division III consists of legislative language on investing in education submitted to the Budget Committee by the Education and Labor Committee. The recommendations that were submitted to the Budget Committee in October were in compliance 

with the savings required by Section 202 of the budget resolution. 

The Energy and Commerce Committee did not submit recommendations to the Budget Committee in response to the reconciliation instruction. 

As noted in the following material, after reporting the reconciliation legislation to the House, the Budget Committee approved a 

number of non-binding motions expressing support for certain 


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being made in order by the Rules Committee when it grants a rule 

for floor consideration of this reconciliation bill. 


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(5) 

DIVISION I 

LETTER OF TRANSMITTAL 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC, October 15, 2009. 

Hon. JOHN SPRATT, Chairman, Committee on the Budget, Cannon HOB, Washington, 

DC. 

DEAR CHAIRMAN SPRATT: On July 16, 2009, the Committee on 

Ways and Means ordered favorably reported to the House, an 

Amendment in the Nature of a Substitute to H.R. 3200 by a recorded vote of 23 to 18. Pursuant to section 202(c) of Senate Concurrent Resolution 13, I am hereby transmitting the Amendment 

in the Nature of a Substitute to you as fulfillment of the Committee on Ways and Means budget reconciliation instructions. 

Enclosed please find a copy of our Committee’s report on H.R. 

3200, including legislative language, explanatory report language, 

estimates from the Joint Committee on Taxation and additional 

views. Please feel free to contact me if you have any questions. 

Sincerely, 

CHARLES B. RANGEL

Chairman, 

Committee on Ways and Means. 

Enclosure. 


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111TH CONGRESS REPT. 111–299 " ! HOUSE OF REPRESENTATIVES 1st Session Part 2 

AMERICA’S AFFORDABLE HEALTH CHOICES ACT OF 2009 

OCTOBER 14, 2009.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. RANGEL, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

DISSENTING AND ADDITIONAL VIEWS 

[To accompany H.R. 3200] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 3200) to provide affordable, quality health care for all 

Americans and reduce the growth in health care spending, and for 

other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended 

do pass. 

The amendment is as follows: 

Strike out all after the enacting clause (other than title VII of division B and division C) and insert the following: 

SECTION 1. SHORT TITLE; TABLE OF DIVISIONS, TITLES, AND SUBTITLES. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘America’s Affordable Health 

Choices Act of 2009’’. 

(b) TABLE OF DIVISIONS, TITLES, AND SUBTITLES.—This Act is divided into divisions, titles, and subtitles as follows: 

DIVISION A—AFFORDABLE HEALTH CARE CHOICES 

TITLE I—PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH BENEFITS PLANS 

Subtitle A—General Standards 

Subtitle B—Standards Guaranteeing Access to Affordable Coverage 

Subtitle C—Standards Guaranteeing Access to Essential Benefits 

Subtitle D—Additional Consumer Protections 

Subtitle E—Governance 

Subtitle F—Relation to other requirements; Miscellaneous 

Subtitle G—Early Investments 

TITLE II—HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS 

Subtitle A—Health Insurance Exchange 

Subtitle B—Public health insurance option 

Subtitle C—Individual Affordability Credits 

TITLE III—SHARED RESPONSIBILITY 

Subtitle A—Individual responsibility 


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Subtitle B—Employer Responsibility 

TITLE IV—AMENDMENTS TO INTERNAL REVENUE CODE OF 1986 

Subtitle A—Shared responsibility 

Subtitle B—Credit for small business employee health coverage expenses 

Subtitle C—Disclosures to carry out health insurance exchange subsidies 

Subtitle D—Other revenue provisions 

DIVISION B—MEDICARE AND MEDICAID IMPROVEMENTS 

TITLE I—IMPROVING HEALTH CARE VALUE 

Subtitle A—Provisions related to Medicare part A 

Subtitle B—Provisions Related to Part B 

Subtitle C—Provisions Related to Medicare Parts A and B 

Subtitle D—Medicare Advantage Reforms 

Subtitle E—Improvements to Medicare Part D 

Subtitle F—Medicare Rural Access Protections 

TITLE II—MEDICARE BENEFICIARY IMPROVEMENTS 

Subtitle A—Improving and Simplifying Financial Assistance for Low Income Medicare Beneficiaries 

Subtitle B—Reducing Health Disparities 

Subtitle C—Miscellaneous Improvements 

TITLE III—PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES, AND COORDINATED CARE 

TITLE IV—QUALITY 

Subtitle A—Comparative Effectiveness Research 

Subtitle B—Nursing Home Transparency 

Subtitle C—Quality Measurements 

Subtitle D—Physician Payments Sunshine Provision 

Subtitle E—Public Reporting on Health Care-Associated Infections 

TITLE V—MEDICARE GRADUATE MEDICAL EDUCATION 

TITLE VI—PROGRAM INTEGRITY 

Subtitle A—Increased funding to fight waste, fraud, and abuse 

Subtitle B—Enhanced penalties for fraud and abuse 

Subtitle C—Enhanced Program and Provider Protections 

Subtitle D—Access to Information Needed to Prevent Fraud, Waste, and Abuse 

TITLE VII—MEDICAID AND CHIP 

Subtitle A—Medicaid and Health Reform 

Subtitle B—Prevention 

Subtitle C—Access 

Subtitle D—Coverage 

Subtitle E—Financing 

Subtitle F—Waste, Fraud, and Abuse 

Subtitle G—Puerto Rico and the Territories 

Subtitle H—Miscellaneous 

TITLE VIII—REVENUE-RELATED PROVISIONS 

TITLE IX—MISCELLANEOUS PROVISIONS 

DIVISION C—PUBLIC HEALTH AND WORKFORCE DEVELOPMENT 

TITLE I—COMMUNITY HEALTH CENTERS 

TITLE II—WORKFORCE 

Subtitle A—Primary care workforce 

Subtitle B—Nursing workforce 

Subtitle C—Public Health Workforce 

Subtitle D—Adapting workforce to evolving health system needs 

TITLE III—PREVENTION AND WELLNESS 

TITLE IV—QUALITY AND SURVEILLANCE 

TITLE V—OTHER PROVISIONS 

Subtitle A—Drug discount for rural and other hospitals 

Subtitle B—School-Based health clinics 

Subtitle C—National medical device registry 

Subtitle D—Grants for comprehensive programs To provide education to nurses and create a pipeline to nursing 

Subtitle E—States failing To adhere to certain employment obligations 

DIVISION A—AFFORDABLE HEALTH CARE 

CHOICES 

SEC. 100. PURPOSE; TABLE OF CONTENTS OF DIVISION; GENERAL DEFINITIONS. 

(a) PURPOSE.— 

(1) IN GENERAL.—The purpose of this division is to provide affordable, quality 

health care for all Americans and reduce the growth in health care spending. 

(2) BUILDING ON CURRENT SYSTEM.—This division achieves this purpose by 

building on what works in today’s health care system, while repairing the aspects that are broken. 

(3) INSURANCE REFORMS.—This division— 

(A) enacts strong insurance market reforms; 

(B) creates a new Health Insurance Exchange, with a public health insurance option alongside private plans; 

(C) includes sliding scale affordability credits; and 

(D) initiates shared responsibility among workers, employers, and the 

government; 

so that all Americans have coverage of essential health benefits. 

(4) HEALTH DELIVERY REFORM.—This division institutes health delivery system reforms both to increase quality and to reduce growth in health spending 


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so that health care becomes more affordable for businesses, families, and government. 

(b) TABLE OF CONTENTS OF DIVISION.—The table of contents of this division is as 

follows: 

Sec. 100. Purpose; table of contents of division; general definitions. 

TITLE I—PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH BENEFITS PLANS 

Subtitle A—General Standards 

Sec. 101. Requirements reforming health insurance marketplace. 

Sec. 102. Protecting the choice to keep current coverage. 

Subtitle B—Standards Guaranteeing Access to Affordable Coverage 

Sec. 111. Prohibiting pre-existing condition exclusions. 

Sec. 112. Guaranteed issue and renewal for insured plans. 

Sec. 113. Insurance rating rules. 

Sec. 114. Nondiscrimination in benefits; parity in mental health and substance abuse disorder benefits. 

Sec. 115. Ensuring adequacy of provider networks. 

Sec. 116. Ensuring value and lower premiums. 

Subtitle C—Standards Guaranteeing Access to Essential Benefits 

Sec. 121. Coverage of essential benefits package. 

Sec. 122. Essential benefits package defined. 

Sec. 123. Health Benefits Advisory Committee. 

Sec. 124. Process for adoption of recommendations; adoption of benefit standards. 

Subtitle D—Additional Consumer Protections 

Sec. 131. Requiring fair marketing practices by health insurers. 

Sec. 132. Requiring fair grievance and appeals mechanisms. 

Sec. 133. Requiring information transparency and plan disclosure. 

Sec. 134. Application to qualified health benefits plans not offered through the Health Insurance Exchange. 

Sec. 135. Timely payment of claims. 

Sec. 136. Standardized rules for coordination and subrogation of benefits. 

Sec. 137. Application of administrative simplification. 

Subtitle E—Governance 

Sec. 141. Health Choices Administration; Health Choices Commissioner. 

Sec. 142. Duties and authority of Commissioner. 

Sec. 143. Consultation and coordination. 

Sec. 144. Health Insurance Ombudsman. 

Subtitle F—Relation to Other Requirements; Miscellaneous 

Sec. 151. Relation to other requirements. 

Sec. 152. Prohibiting discrimination in health care. 

Sec. 153. Whistleblower protection. 

Sec. 154. Construction regarding collective bargaining. 

Sec. 155. Severability. 

Subtitle G—Early Investments 

Sec. 161. Ensuring value and lower premiums. 

Sec. 162. Ending health insurance rescission abuse. 

Sec. 163. Administrative simplification. 

Sec. 164. Reinsurance program for retirees. 

TITLE II—HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS 

Subtitle A—Health Insurance Exchange 

Sec. 201. Establishment of Health Insurance Exchange; outline of duties; definitions. 

Sec. 202. Exchange-eligible individuals and employers. 

Sec. 203. Benefits package levels. 

Sec. 204. Contracts for the offering of Exchange-participating health benefits plans. 

Sec. 205. Outreach and enrollment of Exchange-eligible individuals and employers in Exchange-participating 

health benefits plan. 

Sec. 206. Other functions. 

Sec. 207. Health Insurance Exchange Trust Fund. 

Sec. 208. Optional operation of State-based health insurance exchanges. 

Subtitle B—Public Health Insurance Option 

Sec. 221. Establishment and administration of a public health insurance option as an Exchange-qualified 

health benefits plan. 

Sec. 222. Premiums and financing. 

Sec. 223. Payment rates for items and services. 

Sec. 224. Modernized payment initiatives and delivery system reform. 

Sec. 225. Provider participation. 

Sec. 226. Application of fraud and abuse provisions. 

Subtitle C—Individual Affordability Credits 

Sec. 241. Availability through Health Insurance Exchange. 

Sec. 242. Affordable credit eligible individual. 

Sec. 243. Affordable premium credit. 

Sec. 244. Affordability cost-sharing credit. 

Sec. 245. Income determinations. 

Sec. 246. No Federal payment for undocumented aliens. 


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TITLE III—SHARED RESPONSIBILITY 

Subtitle A—Individual Responsibility 

Sec. 301. Individual responsibility. 

Subtitle B—Employer Responsibility 

PART 1—HEALTH COVERAGE PARTICIPATION REQUIREMENTS

Sec. 311. Health coverage participation requirements. 

Sec. 312. Employer responsibility to contribute towards employee and dependent coverage. 

Sec. 313. Employer contributions in lieu of coverage. 

Sec. 314. Authority related to improper steering. 

PART 2—SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS

Sec. 321. Satisfaction of health coverage participation requirements under the Employee Retirement Income Security Act of 1974. 

Sec. 322. Satisfaction of health coverage participation requirements under the Internal Revenue Code of 1986. 

Sec. 323. Satisfaction of health coverage participation requirements under the Public Health Service Act. 

Sec. 324. Additional rules relating to health coverage participation requirements. 

TITLE IV—AMENDMENTS TO INTERNAL REVENUE CODE OF 1986 

Subtitle A—Shared Responsibility 

PART 1—INDIVIDUAL RESPONSIBILITY

Sec. 401. Tax on individuals without acceptable health care coverage. 

PART 2—EMPLOYER RESPONSIBILITY

Sec. 411. Election to satisfy health coverage participation requirements. 

Sec. 412. Responsibilities of nonelecting employers. 

Subtitle B—Credit for Small Business Employee Health Coverage Expenses 

Sec. 421. Credit for small business employee health coverage expenses. 

Subtitle C—Disclosures to Carry Out Health Insurance Exchange Subsidies 

Sec. 431. Disclosures to carry out health insurance exchange subsidies. 

Subtitle D—Other Revenue Provisions 

PART 1—GENERAL PROVISIONS

Sec. 441. Surcharge on high income individuals. 

Sec. 442. Distributions for medicine qualified only if for prescribed drug or insulin. 

Sec. 443. Delay in application of worldwide allocation of interest. 

PART 2—PREVENTION OF TAX AVOIDANCE

Sec. 451. Limitation on treaty benefits for certain deductible payments. 

Sec. 452. Codification of economic substance doctrine. 

Sec. 453. Penalties for underpayments. 

PART 3—PARITY IN HEALTH BENEFITS

Sec. 461. Certain health related benefits applicable to spouses and dependents extended to eligible beneficiaries. 

(c) GENERAL DEFINITIONS.—Except as otherwise provided, in this division: 

(1) ACCEPTABLE COVERAGE.—The term ‘‘acceptable coverage’’ has the meaning 

given such term in section 202(d)(2). 

(2) BASIC PLAN.—The term ‘‘basic plan’’ has the meaning given such term in 

section 203(c). 

(3) COMMISSIONER.—The term ‘‘Commissioner’’ means the Health Choices 

Commissioner established under section 141. 

(4) COST-SHARING.—The term ‘‘cost-sharing’’ includes deductibles, coinsurance, 

copayments, and similar charges but does not include premiums or any network 

payment differential for covered services or spending for non-covered services. 

(5) DEPENDENT.—The term ‘‘dependent’’ has the meaning given such term by 

the Commissioner and includes a spouse. 

(6) EMPLOYMENT-BASED HEALTH PLAN.—The term ‘‘employment-based health 

plan’’— 

(A) means a group health plan (as defined in section 733(a)(1) of the Employee Retirement Income Security Act of 1974); and 

(B) includes such a plan that is the following: 

(i) FEDERAL, STATE, AND TRIBAL GOVERNMENTAL PLANS.—A governmental plan (as defined in section 3(32) of the Employee Retirement Income Security Act of 1974), including a health benefits plan offered 

under chapter 89 of title 5, United States Code. 

(ii) CHURCH PLANS.—A church plan (as defined in section 3(33) of the 

Employee Retirement Income Security Act of 1974). 

(7) ENHANCED PLAN.—The term ‘‘enhanced plan’’ has the meaning given such 

term in section 203(c). 


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(8) ESSENTIAL BENEFITS PACKAGE.—The term ‘‘essential benefits package’’ is 

defined in section 122(a). 

(9) FAMILY.—The term ‘‘family’’ means an individual and includes the individual’s dependents. 

(10) FEDERAL POVERTY LEVEL; FPL.—The terms ‘‘Federal poverty level’’ and 

‘‘FPL’’ have the meaning given the term ‘‘poverty line’’ in section 673(2) of the 

Community Services Block Grant Act (42 U.S.C. 9902(2)), including any revision 

required by such section. 

(11) HEALTH BENEFITS PLAN.—The terms ‘‘health benefits plan’’ means health 

insurance coverage and an employment-based health plan and includes the public health insurance option. 

(12) HEALTH INSURANCE COVERAGE; HEALTH INSURANCE ISSUER.—The terms 

‘‘health insurance coverage’’ and ‘‘health insurance issuer’’ have the meanings 

given such terms in section 2791 of the Public Health Service Act. 

(13) HEALTH INSURANCE EXCHANGE.—The term ‘‘Health Insurance Exchange’’ 

means the Health Insurance Exchange established under section 201. 

(14) MEDICAID.—The term ‘‘Medicaid’’ means a State plan under title XIX of 

the Social Security Act (whether or not the plan is operating under a waiver 

under section 1115 of such Act). 

(15) MEDICARE.—The term ‘‘Medicare’’ means the health insurance programs 

under title XVIII of the Social Security Act. 

(16) PLAN SPONSOR.—The term ‘‘plan sponsor’’ has the meaning given such 

term in section 3(16)(B) of the Employee Retirement Income Security Act of 

1974. 

(17) PLAN YEAR.—The term ‘‘plan year’’ means— 

(A) with respect to an employment-based health plan, a plan year as 

specified under such plan; or 

(B) with respect to a health benefits plan other than an employmentbased health plan, a 12-month period as specified by the Commissioner. 

(18) PREMIUM PLAN; PREMIUM-PLUS PLAN.—The terms ‘‘premium plan’’ and 

‘‘premium-plus plan’’ have the meanings given such terms in section 203(c). 

(19) QHBP OFFERING ENTITY.—The terms ‘‘QHBP offering entity’’ means, with 

respect to a health benefits plan that is— 

(A) a group health plan (as defined, subject to subsection (d), in section 

733(a)(1) of the Employee Retirement Income Security Act of 1974), the 

plan sponsor in relation to such group health plan, except that, in the case 

of a plan maintained jointly by 1 or more employers and 1 or more employee organizations and with respect to which an employer is the primary 

source of financing, such term means such employer; 

(B) health insurance coverage, the health insurance issuer offering the 

coverage; 

(C) the public health insurance option, the Secretary of Health and 

Human Services; 

(D) a non-Federal governmental plan (as defined in section 2791(d) of the 

Public Health Service Act), the State or political subdivision of a State (or 

agency or instrumentality of such State or subdivision) which establishes 

or maintains such plan; or 

(E) a Federal governmental plan (as defined in section 2791(d) of the 

Public Health Service Act), the appropriate Federal official. 

(20) QUALIFIED HEALTH BENEFITS PLAN.—The term ‘‘qualified health benefits 

plan’’ means a health benefits plan that meets the requirements for such a plan 

under title I and includes the public health insurance option. 

(21) PUBLIC HEALTH INSURANCE OPTION.—The term ‘‘public health insurance 

option’’ means the public health insurance option as provided under subtitle B 

of title II. 

(22) SERVICE AREA; PREMIUM RATING AREA.—The terms ‘‘service area’’ and 

‘‘premium rating area’’ mean with respect to health insurance coverage— 

(A) offered other than through the Health Insurance Exchange, such an 

area as established by the QHBP offering entity of such coverage in accordance with applicable State law; and 

(B) offered through the Health Insurance Exchange, such an area as established by such entity in accordance with applicable State law and applicable rules of the Commissioner for Exchange-participating health benefits 

plans. 

(23) STATE.—The term ‘‘State’’ means the 50 States and the District of Columbia. 

(24) STATE MEDICAID AGENCY.—The term ‘‘State Medicaid agency’’ means, 

with respect to a Medicaid plan, the single State agency responsible for administering such plan under title XIX of the Social Security Act. 


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(25) Y1, Y2, ETC.—The terms ‘‘Y1’’ , ‘‘Y2’’, ‘‘Y3’’, ‘‘Y4’’, ‘‘Y5’’, and similar subsequently numbered terms, mean 2013 and subsequent years, respectively. 

TITLE I—PROTECTIONS AND STANDARDS FOR 

QUALIFIED HEALTH BENEFITS PLANS 

Subtitle A—General Standards 

SEC. 101. REQUIREMENTS REFORMING HEALTH INSURANCE MARKETPLACE. 

(a) PURPOSE.—The purpose of this title is to establish standards to ensure that 

new health insurance coverage and employment-based health plans that are offered 

meet standards guaranteeing access to affordable coverage, essential benefits, and 

other consumer protections. 

(b) REQUIREMENTS FOR QUALIFIED HEALTH BENEFITS PLANS.—On or after the first 

day of Y1, a health benefits plan shall not be a qualified health benefits plan under 

this division unless the plan meets the applicable requirements of the following subtitles for the type of plan and plan year involved: 

(1) Subtitle B (relating to affordable coverage). 

(2) Subtitle C (relating to essential benefits). 

(3) Subtitle D (relating to consumer protection). 

(c) TERMINOLOGY.—In this division: 

(1) ENROLLMENT IN EMPLOYMENT-BASED HEALTH PLANS.—An individual shall 

be treated as being ‘‘enrolled’’ in an employment-based health plan if the individual is a participant or beneficiary (as such terms are defined in section 3(7) 

and 3(8), respectively, of the Employee Retirement Income Security Act of 1974) 

in such plan. 

(2) INDIVIDUAL AND GROUP HEALTH INSURANCE COVERAGE.—The terms ‘‘individual health insurance coverage’’ and ‘‘group health insurance coverage’’ mean 

health insurance coverage offered in the individual market or large or small 

group market, respectively, as defined in section 2791 of the Public Health Service Act. 

SEC. 102. PROTECTING THE CHOICE TO KEEP CURRENT COVERAGE. 

(a) GRANDFATHERED HEALTH INSURANCE COVERAGE DEFINED.—Subject to the succeeding provisions of this section, for purposes of establishing acceptable coverage 

under this division, the term ‘‘grandfathered health insurance coverage’’ means individual health insurance coverage that is offered and in force and effect before the 

first day of Y1 if the following conditions are met: 

(1) LIMITATION ON NEW ENROLLMENT.— 

(A) IN GENERAL.—Except as provided in this paragraph, the individual 

health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after 

the first day of Y1. 

(B) DEPENDENT COVERAGE PERMITTED.—Subparagraph (A) shall not affect 

the subsequent enrollment of a dependent of an individual who is covered 

as of such first day. 

(2) LIMITATION ON CHANGES IN TERMS OR CONDITIONS.—Subject to paragraph 

(3) and except as required by law, the issuer does not change any of its terms 

or conditions, including benefits and cost-sharing, from those in effect as of the 

day before the first day of Y1. 

(3) RESTRICTIONS ON PREMIUM INCREASES.—The issuer cannot vary the percentage increase in the premium for a risk group of enrollees in specific grandfathered health insurance coverage without changing the premium for all enrollees in the same risk group at the same rate, as specified by the Commissioner. 

(b) GRACE PERIOD FOR CURRENT EMPLOYMENT-BASED HEALTH PLANS.— 

(1) GRACE PERIOD.— 

(A) IN GENERAL.—The Commissioner shall establish a grace period whereby, for plan years beginning after the end of the 5-year period beginning 

with Y1, an employment-based health plan in operation as of the day before 

the first day of Y1 must meet the same requirements as apply to a qualified 

health benefits plan under section 101, including the essential benefit package requirement under section 121. 

(B) EXCEPTION FOR LIMITED BENEFITS PLANS.—Subparagraph (A) shall not 

apply to an employment-based health plan in which the coverage consists 

only of one or more of the following: 


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(i) Any coverage described in section 3001(a)(1)(B)(ii)(IV) of division 

B of the American Recovery and Reinvestment Act of 2009 (P.L. 111– 

5). 

(ii) Excepted benefits (as defined in section 733(c) of the Employee 

Retirement Income Security Act of 1974), including coverage under a 

specified disease or illness policy described in paragraph (3)(A) of such 

section. 

(iii) Such other limited benefits as the Commissioner may specify. 

In no case shall an employment-based health plan in which the coverage 

consists only of one or more of the coverage or benefits described in clauses 

(i) through (iii) be treated as acceptable coverage under this division 

(2) TRANSITIONAL TREATMENT AS ACCEPTABLE COVERAGE.—During the grace 

period specified in paragraph (1)(A), an employment-based health plan that is 

described in such paragraph shall be treated as acceptable coverage under this 

division. 

(c) LIMITATION ON INDIVIDUAL HEALTH INSURANCE COVERAGE.— 

(1) IN GENERAL.—Individual health insurance coverage that is not grandfathered health insurance coverage under subsection (a) may only be offered on 

or after the first day of Y1 as an Exchange-participating health benefits plan. 

(2) SEPARATE, EXCEPTED COVERAGE PERMITTED.—Excepted benefits (as defined 

in section 2791(c) of the Public Health Service Act) are not included within the 

definition of health insurance coverage. Nothing in paragraph (1) shall prevent 

the offering, other than through the Health Insurance Exchange, of excepted 

benefits so long as it is offered and priced separately from health insurance coverage. 

Subtitle B—Standards Guaranteeing Access to 

Affordable Coverage 

SEC. 111. PROHIBITING PRE-EXISTING CONDITION EXCLUSIONS. 

A qualified health benefits plan may not impose any pre-existing condition exclusion (as defined in section 2701(b)(1)(A) of the Public Health Service Act) or otherwise impose any limit or condition on the coverage under the plan with respect to 

an individual or dependent based on any health status-related factors (as defined 

in section 2791(d)(9) of the Public Health Service Act) in relation to the individual 

or dependent. 

SEC. 112. GUARANTEED ISSUE AND RENEWAL FOR INSURED PLANS. 

The requirements of sections 2711 (other than subsections (c) and (e)) and 2712 

(other than paragraphs (3), and (6) of subsection (b) and subsection (e)) of the Public 

Health Service Act, relating to guaranteed availability and renewability of health 

insurance coverage, shall apply to individuals and employers in all individual and 

group health insurance coverage, whether offered to individuals or employers 

through the Health Insurance Exchange, through any employment-based health 

plan, or otherwise, in the same manner as such sections apply to employers and 

health insurance coverage offered in the small group market, except that such section 2712(b)(1) shall apply only if, before nonrenewal or discontinuation of coverage, 

the issuer has provided the enrollee with notice of non-payment of premiums and 

there is a grace period during which the enrollees has an opportunity to correct such 

nonpayment. Rescissions of such coverage shall be prohibited except in cases of 

fraud as defined in sections 2712(b)(2) of such Act. 

SEC. 113. INSURANCE RATING RULES. 

(a) IN GENERAL.—The premium rate charged for an insured qualified health benefits plan may not vary except as follows: 

(1) LIMITED AGE VARIATION PERMITTED.—By age (within such age categories 

as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1. 

(2) BY AREA.—By premium rating area (as permitted by State insurance regulators or, in the case of Exchange-participating health benefits plans, as specified by the Commissioner in consultation with such regulators). 

(3) BY FAMILY ENROLLMENT.—By family enrollment (such as variations within 

categories and compositions of families) so long as the ratio of the premium for 

family enrollment (or enrollments) to the premium for individual enrollment is 

uniform, as specified under State law and consistent with rules of the Commissioner. 

(b) STUDY AND REPORTS.— 


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(1) STUDY.—The Commissioner, in coordination with the Secretary of Health 

and Human Services and the Secretary of Labor, shall conduct a study of the 

large group insured and self-insured employer health care markets. Such study 

shall examine the following: 

(A) The types of employers by key characteristics, including size, that 

purchase insured products versus those that self-insure. 

(B) The similarities and differences between typical insured and self-insured health plans. 

(C) The financial solvency and capital reserve levels of employers that 

self-insure by employer size. 

(D) The risk of self-insured employers not being able to pay obligations 

or otherwise becoming financially insolvent. 

(E) The extent to which rating rules are likely to cause adverse selection 

in the large group market or to encourage small and mid size employers 

to self-insure 

(2) REPORTS.—Not later than 18 months after the date of the enactment of 

this Act, the Commissioner shall submit to Congress and the applicable agencies a report on the study conducted under paragraph (1). Such report shall include any recommendations the Commissioner deems appropriate to ensure that 

the law does not provide incentives for small and mid-size employers to self-insure or create adverse selection in the risk pools of large group insurers and 

self-insured employers. Not later than 18 months after the first day of Y1, the 

Commissioner shall submit to Congress and the applicable agencies an updated 

report on such study, including updates on such recommendations. 

SEC. 114. NONDISCRIMINATION IN BENEFITS; PARITY IN MENTAL HEALTH AND SUBSTANCE 

ABUSE DISORDER BENEFITS. 

(a) NONDISCRIMINATION IN BENEFITS.—A qualified health benefits plan shall comply with standards established by the Commissioner to prohibit discrimination in 

health benefits or benefit structures for qualifying health benefits plans, building 

from sections 702 of Employee Retirement Income Security Act of 1974, 2702 of the 

Public Health Service Act, and section 9802 of the Internal Revenue Code of 1986. 

(b) PARITY IN MENTAL HEALTH AND SUBSTANCE ABUSE DISORDER BENEFITS.—To 

the extent such provisions are not superceded by or inconsistent with subtitle C, the 

provisions of section 2705 (other than subsections (a)(1), (a)(2), and (c)) of section 

2705 of the Public Health Service Act shall apply to a qualified health benefits plan, 

regardless of whether it is offered in the individual or group market, in the same 

manner as such provisions apply to health insurance coverage offered in the large 

group market. 

SEC. 115. ENSURING ADEQUACY OF PROVIDER NETWORKS. 

(a) IN GENERAL.—A qualified health benefits plan that uses a provider network 

for items and services shall meet such standards respecting provider networks as 

the Commissioner may establish to assure the adequacy of such networks in ensuring enrollee access to such items and services and transparency in the cost-sharing 

differentials between in-network coverage and out-of-network coverage. 

(b) PROVIDER NETWORK DEFINED.—In this division, the term ‘‘provider network’’ 

means the providers with respect to which covered benefits, treatments, and services are available under a health benefits plan. 

SEC. 116. ENSURING VALUE AND LOWER PREMIUMS. 

(a) IN GENERAL.—A qualified health benefits plan shall meet a medical loss ratio 

as defined by the Commissioner. For any plan year in which the qualified health 

benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment 

sufficient to meet such loss ratio. 

(b) BUILDING ON INTERIM RULES.—In implementing subsection (a), the Commissioner shall build on the definition and methodology developed by the Secretary of 

Health and Human Services under the amendments made by section 161 for determining how to calculate the medical loss ratio. Such methodology shall be set at the 

highest level medical loss ratio possible that is designed to ensure adequate participation by QHBP offering entities, competition in the health insurance market in and 

out of the Health Insurance Exchange, and value for consumers so that their premiums are used for services. 


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Subtitle C—Standards Guaranteeing Access to 

Essential Benefits 

SEC. 121. COVERAGE OF ESSENTIAL BENEFITS PACKAGE. 

(a) IN GENERAL.—A qualified health benefits plan shall provide coverage that at 

least meets the benefit standards adopted under section 124 for the essential benefits package described in section 122 for the plan year involved. 

(b) CHOICE OF COVERAGE.— 

(1) NON-EXCHANGE-PARTICIPATING HEALTH BENEFITS PLANS.—In the case of a 

qualified health benefits plan that is not an Exchange-participating health benefits plan, such plan may offer such coverage in addition to the essential benefits package as the QHBP offering entity may specify. 

(2) EXCHANGE-PARTICIPATING HEALTH BENEFITS PLANS.—In the case of an Exchange-participating health benefits plan, such plan is required under section 

203 to provide specified levels of benefits and, in the case of a plan offering a 

premium-plus level of benefits, provide additional benefits. 

(3) CONTINUATION OF OFFERING OF SEPARATE EXCEPTED BENEFITS COVERAGE.—Nothing in this division shall be construed as affecting the offering of 

health benefits in the form of excepted benefits (described in section 

102(b)(1)(B)(ii)) if such benefits are offered under a separate policy, contract, or 

certificate of insurance. 

(c) NO RESTRICTIONS ON COVERAGE UNRELATED TO CLINICAL APPROPRIATENESS.— 

A qualified health benefits plan may not impose any restriction (other than costsharing) unrelated to clinical appropriateness on the coverage of the health care 

items and services. 

SEC. 122. ESSENTIAL BENEFITS PACKAGE DEFINED. 

(a) IN GENERAL.—In this division, the term ‘‘essential benefits package’’ means 

health benefits coverage, consistent with standards adopted under section 124 to ensure the provision of quality health care and financial security, that— 

(1) provides payment for the items and services described in subsection (b) in 

accordance with generally accepted standards of medical or other appropriate 

clinical or professional practice; 

(2) limits cost-sharing for such covered health care items and services in accordance with such benefit standards, consistent with subsection (c); 

(3) does not impose any annual or lifetime limit on the coverage of covered 

health care items and services; 

(4) complies with section 115(a) (relating to network adequacy); and 

(5) is equivalent, as certified by Office of the Actuary of the Centers for Medicare & Medicaid Services, to the average prevailing employer-sponsored coverage. 

(b) MINIMUM SERVICES TO BE COVERED.—The items and services described in this 

subsection are the following: 

(1) Hospitalization. 

(2) Outpatient hospital and outpatient clinic services, including emergency department services. 

(3) Professional services of physicians and other health professionals. 

(4) Such services, equipment, and supplies incident to the services of a physician’s or a health professional’s delivery of care in institutional settings, physician offices, patients’ homes or place of residence, or other settings, as appropriate. 

(5) Prescription drugs. 

(6) Rehabilitative and habilitative services. 

(7) Mental health and substance use disorder services. 

(8) Preventive services, including those services recommended with a grade 

of A or B by the Task Force on Clinical Preventive Services and those vaccines 

recommended for use by the Director of the Centers for Disease Control and 

Prevention. 

(9) Maternity care. 

(10) Well baby and well child care and oral health, vision, and hearing services, equipment, and supplies at least for children under 21 years of age. 

(c) REQUIREMENTS RELATING TO COST-SHARING AND MINIMUM ACTUARIAL

VALUE.— 

(1) NO COST-SHARING FOR PREVENTIVE SERVICES.—There shall be no cost-sharing under the essential benefits package for preventive items and services (as 

specified under the benefit standards), including well baby and well child care. 

(2) ANNUAL LIMITATION.— 


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(A) ANNUAL LIMITATION.—The cost-sharing incurred under the essential 

benefits package with respect to an individual (or family) for a year does 

not exceed the applicable level specified in subparagraph (B). 

(B) APPLICABLE LEVEL.—The applicable level specified in this subparagraph for Y1 is $5,000 for an individual and $10,000 for a family. Such levels shall be increased (rounded to the nearest $100) for each subsequent 

year by the annual percentage increase in the Consumer Price Index 

(United States city average) applicable to such year. 

(C) USE OF COPAYMENTS.—In establishing cost-sharing levels for basic, 

enhanced, and premium plans under this subsection, the Secretary shall, to 

the maximum extent possible, use only copayments and not coinsurance. 

(3) MINIMUM ACTUARIAL VALUE.— 

(A) IN GENERAL.—The cost-sharing under the essential benefits package 

shall be designed to provide a level of coverage that is designed to provide 

benefits that are actuarially equivalent to approximately 70 percent of the 

full actuarial value of the benefits provided under the reference benefits 

package described in subparagraph (B). 

(B) REFERENCE BENEFITS PACKAGE DESCRIBED.—The reference benefits 

package described in this subparagraph is the essential benefits package if 

there were no cost-sharing imposed. 

SEC. 123. HEALTH BENEFITS ADVISORY COMMITTEE. 

(a) ESTABLISHMENT.— 

(1) IN GENERAL.—There is established a private-public advisory committee 

which shall be a panel of medical and other experts to be known as the Health 

Benefits Advisory Committee to recommend covered benefits and essential, enhanced, and premium plans. 

(2) CHAIR.—The Surgeon General shall be a member and the chair of the 

Health Benefits Advisory Committee. 

(3) MEMBERSHIP.—The Health Benefits Advisory Committee shall be composed of the following members, in addition to the Surgeon General: 

(A) 9 members who are not Federal employees or officers and who are appointed by the President. 

(B) 9 members who are not Federal employees or officers and who are appointed by the Comptroller General of the United States in a manner similar to the manner in which the Comptroller General appoints members to 

the Medicare Payment Advisory Commission under section 1805(c) of the 

Social Security Act. 

(C) Such even number of members (not to exceed 8) who are Federal employees and officers, as the President may appoint. 

Such initial appointments shall be made not later than 60 days after the date 

of the enactment of this Act. 

(4) TERMS.—Each member of the Health Benefits Advisory Committee shall 

serve a 3-year term on the Committee, except that the terms of the initial members shall be adjusted in order to provide for a staggered term of appointment 

for all such members. 

(5) PARTICIPATION.—The membership of the Health Benefits Advisory Committee shall at least reflect providers, consumer representatives, employers, 

labor, health insurance issuers, experts in health care financing and delivery, 

experts in racial and ethnic disparities, experts in care for those with disabilities, representatives of relevant governmental agencies. and at least one practicing physician or other health professional and an expert on children’s health 

and shall represent a balance among various sectors of the health care system 

so that no single sector unduly influences the recommendations of such Committee. 

(b) DUTIES.— 

(1) RECOMMENDATIONS ON BENEFIT STANDARDS.—The Health Benefits Advisory Committee shall recommend to the Secretary of Health and Human Services (in this subtitle referred to as the ‘‘Secretary’’) benefit standards (as defined 

in paragraph (4)), and periodic updates to such standards. In developing such 

recommendations, the Committee shall take into account innovation in health 

care and consider how such standards could reduce health disparities. 

(2) DEADLINE.—The Health Benefits Advisory Committee shall recommend 

initial benefit standards to the Secretary not later than 1 year after the date 

of the enactment of this Act. 

(3) PUBLIC INPUT.—The Health Benefits Advisory Committee shall allow for 

public input as a part of developing recommendations under this subsection. 

(4) BENEFIT STANDARDS DEFINED.—In this subtitle, the term ‘‘benefit standards’’ means standards respecting— 


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(A) the essential benefits package described in section 122, including categories of covered treatments, items and services within benefit classes, and 

cost-sharing; and 

(B) the cost-sharing levels for enhanced plans and premium plans (as provided under section 203(c)) consistent with paragraph (5). 

(5) LEVELS OF COST-SHARING FOR ENHANCED AND PREMIUM PLANS.— 

(A) ENHANCED PLAN.—The level of cost-sharing for enhanced plans shall 

be designed so that such plans have benefits that are actuarially equivalent 

to approximately 85 percent of the actuarial value of the benefits provided 

under the reference benefits package described in section 122(c)(3)(B). 

(B) PREMIUM PLAN.—The level of cost-sharing for premium plans shall be 

designed so that such plans have benefits that are actuarially equivalent 

to approximately 95 percent of the actuarial value of the benefits provided 

under the reference benefits package described in section 122(c)(3)(B). 

(c) OPERATIONS.— 

(1) PER DIEM PAY.—Each member of the Health Benefits Advisory Committee 

shall receive travel expenses, including per diem in accordance with applicable 

provisions under subchapter I of chapter 57 of title 5, United States Code, and 

shall otherwise serve without additional pay. 

(2) MEMBERS NOT TREATED AS FEDERAL EMPLOYEES.—Members of the Health 

Benefits Advisory Committee shall not be considered employees of the Federal 

government solely by reason of any service on the Committee. 

(3) APPLICATION OF FACA.—The Federal Advisory Committee Act (5 U.S.C. 

App.), other than section 14, shall apply to the Health Benefits Advisory Committee. 

(d) PUBLICATION.—The Secretary shall provide for publication in the Federal Register and the posting on the Internet website of the Department of Health and 

Human Services of all recommendations made by the Health Benefits Advisory 

Committee under this section. 

SEC. 124. PROCESS FOR ADOPTION OF RECOMMENDATIONS; ADOPTION OF BENEFIT STANDARDS. 

(a) PROCESS FOR ADOPTION OF RECOMMENDATIONS.— 

(1) REVIEW OF RECOMMENDED STANDARDS.—Not later than 45 days after the 

date of receipt of benefit standards recommended under section 123 (including 

such standards as modified under paragraph (2)(B)), the Secretary shall review 

such standards and shall determine whether to propose adoption of such standards as a package. 

(2) DETERMINATION TO ADOPT STANDARDS.—If the Secretary determines— 

(A) to propose adoption of benefit standards so recommended as a package, the Secretary shall, by regulation under section 553 of title 5, United 

States Code, propose adoption such standards; or 

(B) not to propose adoption of such standards as a package, the Secretary 

shall notify the Health Benefits Advisory Committee in writing of such determination and the reasons for not proposing the adoption of such recommendation and provide the Committee with a further opportunity to 

modify its previous recommendations and submit new recommendations to 

the Secretary on a timely basis. 

(3) CONTINGENCY.—If, because of the application of paragraph (2)(B), the Secretary would otherwise be unable to propose initial adoption of such recommended standards by the deadline specified in subsection (b)(1), the Secretary shall, by regulation under section 553 of title 5, United States Code, propose adoption of initial benefit standards by such deadline. 

(4) PUBLICATION.—The Secretary shall provide for publication in the Federal 

Register of all determinations made by the Secretary under this subsection. 

(b) ADOPTION OF STANDARDS.— 

(1) INITIAL STANDARDS.—Not later than 18 months after the date of the enactment of this Act, the Secretary shall, through the rulemaking process consistent 

with subsection (a), adopt an initial set of benefit standards. 

(2) PERIODIC UPDATING STANDARDS.—Under subsection (a), the Secretary shall 

provide for the periodic updating of the benefit standards previously adopted 

under this section. 

(3) REQUIREMENT.—The Secretary may not adopt any benefit standards for an 

essential benefits package or for level of cost-sharing that are inconsistent with 

the requirements for such a package or level under sections 122 and 123(b)(5). 


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Subtitle D—Additional Consumer Protections 

SEC. 131. REQUIRING FAIR MARKETING PRACTICES BY HEALTH INSURERS. 

The Commissioner shall establish uniform marketing standards that all insured 

QHBP offering entities shall meet. 

SEC. 132. REQUIRING FAIR GRIEVANCE AND APPEALS MECHANISMS. 

(a) IN GENERAL.—A QHBP offering entity shall provide for timely grievance and 

appeals mechanisms that the Commissioner shall establish. 

(b) INTERNAL CLAIMS AND APPEALS PROCESS.—Under a qualified health benefits 

plan the QHBP offering entity shall provide an internal claims and appeals process 

that initially incorporates the claims and appeals procedures (including urgent 

claims) set forth at section 2560.503–1 of title 29, Code of Federal Regulations, as 

published on November 21, 2000 (65 Fed. Reg. 70246) and shall update such process 

in accordance with any standards that the Commissioner may establish. 

(c) EXTERNAL REVIEW PROCESS.— 

(1) IN GENERAL.—The Commissioner shall establish an external review process (including procedures for expedited reviews of urgent claims) that provides 

for an impartial, independent, and de novo review of denied claims under this 

division. 

(2) REQUIRING FAIR GRIEVANCE AND APPEALS MECHANISMS.—A determination 

made, with respect to a qualified health benefits plan offered by a QHBP offering entity, under the external review process established under this subsection 

shall be binding on the plan and the entity. 

(d) CONSTRUCTION.—Nothing in this section shall be construed as affecting the 

availability of judicial review under State law for adverse decisions under subsection 

(b) or (c), subject to section 151. 

SEC. 133. REQUIRING INFORMATION TRANSPARENCY AND PLAN DISCLOSURE. 

(a) ACCURATE AND TIMELY DISCLOSURE.— 

(1) IN GENERAL.—A qualified health benefits plan shall comply with standards 

established by the Commissioner for the accurate and timely disclosure of plan 

documents, plan terms and conditions, claims payment policies and practices, 

periodic financial disclosure, data on enrollment, data on disenrollment, data on 

the number of claims denials, data on rating practices, information on cost-sharing and payments with respect to any out-of-network coverage, and other information as determined appropriate by the Commissioner. The Commissioner 

shall require that such disclosure be provided in plain language. 

(2) PLAIN LANGUAGE.—In this subsection, the term ‘‘plain language’’ means 

language that the intended audience, including individuals with limited English 

proficiency, can readily understand and use because that language is clean, concise, well-organized, and follows other best practices of plain language writing. 

(3) GUIDANCE.—The Commissioner shall develop and issue guidance on best 

practices of plain language writing. 

(b) CONTRACTING REIMBURSEMENT.—A qualified health benefits plan shall comply 

with standards established by the Commissioner to ensure transparency to each 

health care provider relating to reimbursement arrangements between such plan 

and such provider. 

(c) ADVANCE NOTICE OF PLAN CHANGES.—A change in a qualified health benefits 

plan shall not be made without such reasonable and timely advance notice to enrollees of such change. 

SEC. 134. APPLICATION TO QUALIFIED HEALTH BENEFITS PLANS NOT OFFERED THROUGH 

THE HEALTH INSURANCE EXCHANGE. 

The requirements of the previous provisions of this subtitle shall apply to qualified health benefits plans that are not being offered through the Health Insurance 

Exchange only to the extent specified by the Commissioner. 

SEC. 135. TIMELY PAYMENT OF CLAIMS. 

A QHBP offering entity shall comply with the requirements of section 1857(f) of 

the Social Security Act with respect to a qualified health benefits plan it offers in 

the same manner an Medicare Advantage organization is required to comply with 

such requirements with respect to a Medicare Advantage plan it offers under part 

C of Medicare. 

SEC. 136. STANDARDIZED RULES FOR COORDINATION AND SUBROGATION OF BENEFITS. 

The Commissioner shall establish standards for the coordination and subrogation 

of benefits and reimbursement of payments in cases involving individuals and multiple plan coverage. 


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SEC. 137. APPLICATION OF ADMINISTRATIVE SIMPLIFICATION. 

A QHBP offering entity is required to comply with standards for electronic financial and administrative transactions under section 1173A of the Social Security Act, 

added by section 163(a). 

Subtitle E—Governance 

SEC. 141. HEALTH CHOICES ADMINISTRATION; HEALTH CHOICES COMMISSIONER. 

(a) IN GENERAL.—There is hereby established, as an independent agency in the 

executive branch of the Government, a Health Choices Administration (in this division referred to as the ‘‘Administration’’). 

(b) COMMISSIONER.— (1) IN GENERAL.—The Administration shall be headed by a Health Choices 

Commissioner (in this division referred to as the ‘‘Commissioner’’) who shall be 

appointed by the President, by and with the advice and consent of the Senate. 

(2) COMPENSATION; ETC.—The provisions of paragraphs (2), (5), and (7) of subsection (a) (relating to compensation, terms, general powers, rulemaking, and 

delegation) of section 702 of the Social Security Act (42 U.S.C. 902) shall apply 

to the Commissioner and the Administration in the same manner as such provisions apply to the Commissioner of Social Security and the Social Security Administration. 

SEC. 142. DUTIES AND AUTHORITY OF COMMISSIONER. 

(a) DUTIES.—The Commissioner is responsible for carrying out the following functions under this division: 

(1) QUALIFIED PLAN STANDARDS.—The establishment of qualified health benefits plan standards under this title, including the enforcement of such standards 

in coordination with State insurance regulators and the Secretaries of Labor 

and the Treasury. 

(2) HEALTH INSURANCE EXCHANGE.—The establishment and operation of a 

Health Insurance Exchange under subtitle A of title II. 

(3) INDIVIDUAL AFFORDABILITY CREDITS.—The administration of individual affordability credits under subtitle C of title II, including determination of eligibility for such credits. 

(4) ADDITIONAL FUNCTIONS.—Such additional functions as may be specified in 

this division. 

(b) PROMOTING ACCOUNTABILITY.— 

(1) IN GENERAL.—The Commissioner shall undertake activities in accordance 

with this subtitle to promote accountability of QHBP offering entities in meeting Federal health insurance requirements, regardless of whether such accountability is with respect to qualified health benefits plans offered through the 

Health Insurance Exchange or outside of such Exchange. 

(2) COMPLIANCE EXAMINATION AND AUDITS.— 

(A) IN GENERAL.—The commissioner shall, in coordination with States, 

conduct audits of qualified health benefits plan compliance with Federal requirements. Such audits may include random compliance audits and targeted audits in response to complaints or other suspected non-compliance. 

(B) RECOUPMENT OF COSTS IN CONNECTION WITH EXAMINATION AND AUDITS.—The Commissioner is authorized to recoup from qualified health benefits plans reimbursement for the costs of such examinations and audit of 

such QHBP offering entities. 

(c) DATA COLLECTION.—The Commissioner shall collect data for purposes of carrying out the Commissioner’s duties, including for purposes of promoting quality 

and value, protecting consumers, and addressing disparities in health and health 

care and may share such data with the Secretary of Health and Human Services. 

(d) SANCTIONS AUTHORITY.— 

(1) IN GENERAL.—In the case that the Commissioner determines that a QHBP 

offering entity violates a requirement of this title, the Commissioner may, in coordination with State insurance regulators and the Secretary of Labor, provide, 

in addition to any other remedies authorized by law, for any of the remedies 

described in paragraph (2). 

(2) REMEDIES.—The remedies described in this paragraph, with respect to a 

qualified health benefits plan offered by a QHBP offering entity, are— 

(A) civil money penalties of not more than the amount that would be applicable under similar circumstances for similar violations under section 

1857(g) of the Social Security Act; 

(B) suspension of enrollment of individuals under such plan after the date 

the Commissioner notifies the entity of a determination under paragraph 


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(1) and until the Commissioner is satisfied that the basis for such determination has been corrected and is not likely to recur; 

(C) in the case of an Exchange-participating health benefits plan, suspension of payment to the entity under the Health Insurance Exchange for individuals enrolled in such plan after the date the Commissioner notifies the 

entity of a determination under paragraph (1) and until the Secretary is 

satisfied that the basis for such determination has been corrected and is not 

likely to recur; or 

(D) working with State insurance regulators to terminate plans for repeated failure by the offering entity to meet the requirements of this title. 

(e) STANDARD DEFINITIONS OF INSURANCE AND MEDICAL TERMS.—The Commissioner shall provide for the development of standards for the definitions of terms 

used in health insurance coverage, including insurance-related terms. 

(f) EFFICIENCY IN ADMINISTRATION.—The Commissioner shall issue regulations for 

the effective and efficient administration of the Health Insurance Exchange and affordability credits under subtitle C, including, with respect to the determination of 

eligibility for affordability credits, the use of personnel who are employed in accordance with the requirements of title 5, United States Code, to carry out the duties 

of the Commissioner or, in the case of sections 208 and 241(b)(2), the use of State 

personnel who are employed in accordance with standards prescribed by the Office 

of Personnel Management pursuant to section 208 of the Intergovernmental Personnel Act of 1970 (42 U.S.C. 4728). 

SEC. 143. CONSULTATION AND COORDINATION. 

(a) CONSULTATION.—In carrying out the Commissioner’s duties under this division, the Commissioner, as appropriate, shall consult with at least with the following: 

(1) The National Association of Insurance Commissioners, State attorneys 

general, and State insurance regulators, including concerning the standards for 

insured qualified health benefits plans under this title and enforcement of such 

standards. 

(2) Appropriate State agencies, specifically concerning the administration of 

individual affordability credits under subtitle C of title II and the offering of Exchange-participating health benefits plans, to Medicaid eligible individuals 

under subtitle A of such title. 

(3) Other appropriate Federal agencies. 

(4) Indian tribes and tribal organizations. 

(5) The National Association of Insurance Commissioners for purposes of 

using model guidelines established by such association for purposes of subtitles 

B and D. 

(b) COORDINATION.— 

(1) IN GENERAL.—In carrying out the functions of the Commissioner, including 

with respect to the enforcement of the provisions of this division, the Commissioner shall work in coordination with existing Federal and State entities to the 

maximum extent feasible consistent with this division and in a manner that 

prevents conflicts of interest in duties and ensures effective enforcement. 

(2) UNIFORM STANDARDS.—The Commissioner, in coordination with such entities, shall seek to achieve uniform standards that adequately protect consumers 

in a manner that does not unreasonably affect employers and insurers. 

SEC. 144. HEALTH INSURANCE OMBUDSMAN. 

(a) IN GENERAL.—The Commissioner shall appoint within the Health Choices Administration a Qualified Health Benefits Plan Ombudsman who shall have expertise 

and experience in the fields of health care and education of (and assistance to) individuals. 

(b) DUTIES.—The Qualified Health Benefits Plan Ombudsman shall, in a linguistically appropriate manner— 

(1) receive complaints, grievances, and requests for information submitted by 

individuals; 

(2) provide assistance with respect to complaints, grievances, and requests referred to in paragraph (1), including— 

(A) helping individuals determine the relevant information needed to seek 

an appeal of a decision or determination; 

(B) assistance to such individuals with any problems arising from 

disenrollment from such a plan; 

(C) assistance to such individuals in choosing a qualified health benefits 

plan in which to enroll; and 

(D) assistance to such individuals in presenting information under subtitle C (relating to affordability credits); and 


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(3) submit annual reports to Congress and the Commissioner that describe 

the activities of the Ombudsman and that include such recommendations for 

improvement in the administration of this division as the Ombudsman determines appropriate. The Ombudsman shall not serve as an advocate for any increases in payments or new coverage of services, but may identify issues and 

problems in payment or coverage policies. 

Subtitle F—Relation to Other Requirements; 

Miscellaneous 

SEC. 151. RELATION TO OTHER REQUIREMENTS. 

(a) COVERAGE NOT OFFERED THROUGH EXCHANGE.— (1) IN GENERAL.—In the case of health insurance coverage not offered through 

the Health Insurance Exchange (whether or not offered in connection with an 

employment-based health plan), and in the case of employment-based health 

plans, the requirements of this title do not supercede any requirements applicable under titles XXII and XXVII of the Public Health Service Act, parts 6 and 

7 of subtitle B of title I of the Employee Retirement Income Security Act of 

1974, or State law, except insofar as such requirements prevent the application 

of a requirement of this division, as determined by the Commissioner. 

(2) CONSTRUCTION.—Nothing in paragraph (1) shall be construed as affecting 

the application of section 514 of the Employee Retirement Income Security Act 

of 1974. 

(b) COVERAGE OFFERED THROUGH EXCHANGE.— (1) IN GENERAL.—In the case of health insurance coverage offered through the 

Health Insurance Exchange— 

(A) the requirements of this title do not supercede any requirements (including requirements relating to genetic information nondiscrimination and 

mental health) applicable under title XXVII of the Public Health Service 

Act or under State law, except insofar as such requirements prevent the application of a requirement of this division, as determined by the Commissioner; and 

(B) individual rights and remedies under State laws shall apply. 

(2) CONSTRUCTION.—In the case of coverage described in paragraph (1), nothing in such paragraph shall be construed as preventing the application of rights 

and remedies under State laws with respect to any requirement referred to in 

paragraph (1)(A). 

SEC. 152. PROHIBITING DISCRIMINATION IN HEALTH CARE. 

(a) IN GENERAL.—Except as otherwise explicitly permitted by this Act and by subsequent regulations consistent with this Act, all health care and related services (including insurance coverage and public health activities) covered by this Act shall be 

provided without regard to personal characteristics extraneous to the provision of 

high quality health care or related services. 

(b) IMPLEMENTATION.—To implement the requirement set forth in subsection (a), 

the Secretary of Health and Human Services shall, not later than 18 months after 

the date of the enactment of this Act, promulgate such regulations as are necessary 

or appropriate to insure that all health care and related services (including insurance coverage and public health activities) covered by this Act are provided (whether directly or through contractual, licensing, or other arrangements) without regard 

to personal characteristics extraneous to the provision of high quality health care 

or related services. 

SEC. 153. WHISTLEBLOWER PROTECTION. 

(a) RETALIATION PROHIBITED.—No employer may discharge any employee or otherwise discriminate against any employee with respect to his compensation, terms, 

conditions, or other privileges of employment because the employee (or any person 

acting pursuant to a request of the employee)— 

(1) provided, caused to be provided, or is about to provide or cause to be provided to the employer, the Federal Government, or the attorney general of a 

State information relating to any violation of, or any act or omission the employee reasonably believes to be a violation of any provision of this Act or any 

order, rule, or regulation promulgated under this Act; 

(2) testified or is about to testify in a proceeding concerning such violation; 

(3) assisted or participated or is about to assist or participate in such a proceeding; or 

(4) objected to, or refused to participate in, any activity, policy, practice, or 

assigned task that the employee (or other such person) reasonably believed to 


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be in violation of any provision of this Act or any order, rule, or regulation promulgated under this Act. 

(b) ENFORCEMENT ACTION.—An employee covered by this section who alleges discrimination by an employer in violation of subsection (a) may bring an action governed by the rules, procedures, legal burdens of proof, and remedies set forth in section 40(b) of the Consumer Product Safety Act (15 U.S.C. 2087(b)). 

(c) EMPLOYER DEFINED.—As used in this section, the term ‘‘employer’’ means any 

person (including one or more individuals, partnerships, associations, corporations, 

trusts, professional membership organization including a certification, disciplinary, 

or other professional body, unincorporated organizations, nongovernmental organizations, or trustees) engaged in profit or nonprofit business or industry whose activities are governed by this Act, and any agent, contractor, subcontractor, grantee, or 

consultant of such person. 

(d) RULE OF CONSTRUCTION.—The rule of construction set forth in section 

20109(h) of title 49, United States Code, shall also apply to this section. 

SEC. 154. CONSTRUCTION REGARDING COLLECTIVE BARGAINING. 

Nothing in this division shall be construed to alter of supercede any statutory or 

other obligation to engage in collective bargaining over the terms and conditions of 

employment related to health care. 

SEC. 155. SEVERABILITY. 

If any provision of this Act, or any application of such provision to any person 

or circumstance, is held to be unconstitutional, the remainder of the provisions of 

this Act and the application of the provision to any other person or circumstance 

shall not be affected. 

Subtitle G—Early Investments 

SEC. 161. ENSURING VALUE AND LOWER PREMIUMS. 

(a) GROUP HEALTH INSURANCE COVERAGE.—Title XXVII of the Public Health Service Act is amended by inserting after section 2713 the following new section: 

‘‘SEC. 2714. ENSURING VALUE AND LOWER PREMIUMS. 

‘‘(a) IN GENERAL.—Each health insurance issuer that offers health insurance coverage in the small or large group market shall provide that for any plan year in 

which the coverage has a medical loss ratio below a level specified by the Secretary, 

the issuer shall provide in a manner specified by the Secretary for rebates to enrollees of payment sufficient to meet such loss ratio. Such methodology shall be set at 

the highest level medical loss ratio possible that is designed to ensure adequate participation by issuers, competition in the health insurance market, and value for consumers so that their premiums are used for services. 

‘‘(b) UNIFORM DEFINITIONS.—The Secretary shall establish a uniform definition of 

medical loss ratio and methodology for determining how to calculate the medical 

loss ratio. Such methodology shall be designed to take into account the special circumstances of smaller plans, different types of plans, and newer plans.’’. 

(b) INDIVIDUAL HEALTH INSURANCE COVERAGE.—Such title is further amended by 

inserting after section 2753 the following new section: 

‘‘SEC. 2754. ENSURING VALUE AND LOWER PREMIUMS. 

‘‘The provisions of section 2714 shall apply to health insurance coverage offered 

in the individual market in the same manner as such provisions apply to health insurance coverage offered in the small or large group market.’’. 

(c) IMMEDIATE IMPLEMENTATION.—The amendments made by this section shall 

apply in the group and individual market for plan years beginning on or after January 1, 2011. 

SEC. 162. ENDING HEALTH INSURANCE RESCISSION ABUSE. 

(a) CLARIFICATION REGARDING APPLICATION OF GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH INSURANCE COVERAGE.—Section 2742 of the Public Health Service 

Act (42 U.S.C. 300gg–42) is amended— 

(1) in its heading, by inserting ‘‘AND CONTINUATION IN FORCE, INCLUDING PROHIBITION OF RESCISSION,’’ after ‘‘GUARANTEED RENEWABILITY’’; and 

(2) in subsection (a), by inserting ‘‘, including without rescission,’’ after ‘‘continue in force’’. 

(b) SECRETARIAL GUIDANCE REGARDING RESCISSIONS.—Section 2742 of such Act 

(42 U.S.C. 300gg–42) is amended by adding at the end the following: 


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‘‘(f) RESCISSION.—A health insurance issuer may rescind health insurance coverage only upon clear and convincing evidence of fraud described in subsection 

(b)(2). The Secretary, no later than July 1, 2010, shall issue guidance implementing 

this requirement, including procedures for independent, external third party review.’’. 

(c) OPPORTUNITY FOR INDEPENDENT, EXTERNAL THIRD PARTY REVIEW IN CERTAIN

CASES.—Subpart 1 of part B of title XXVII of such Act (42 U.S.C. 300gg–41 et seq.) 

is amended by adding at the end the following: 

‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL THIRD PARTY REVIEW IN CASES OF 

RESCISSION. 

‘‘(a) NOTICE AND REVIEW RIGHT.—If a health insurance issuer determines to rescind health insurance coverage for an individual in the individual market, before 

such rescission may take effect the issuer shall provide the individual with notice 

of such proposed rescission and an opportunity for a review of such determination 

by an independent, external third party under procedures specified by the Secretary 

under section 2742(f). 

‘‘(b) INDEPENDENT DETERMINATION.—If the individual requests such review by an 

independent, external third party of a rescission of health insurance coverage, the 

coverage shall remain in effect until such third party determines that the coverage 

may be rescinded under the guidance issued by the Secretary under section 

2742(f).’’. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply on and 

after October 1, 2010, with respect to health insurance coverage issued before, on, 

or after such date. 

SEC. 163. ADMINISTRATIVE SIMPLIFICATION. 

(a) STANDARDIZING ELECTRONIC ADMINISTRATIVE TRANSACTIONS.— 

(1) IN GENERAL.—Part C of title XI of the Social Security Act (42 U.S.C. 1320d 

et seq.) is amended by inserting after section 1173 the following new section: 

‘‘SEC. 1173A. STANDARDIZE ELECTRONIC ADMINISTRATIVE TRANSACTIONS. 

‘‘(a) STANDARDS FOR FINANCIAL AND ADMINISTRATIVE TRANSACTIONS.— 

‘‘(1) IN GENERAL.—The Secretary shall adopt and regularly update standards 

consistent with the goals described in paragraph (2). 

‘‘(2) GOALS FOR FINANCIAL AND ADMINISTRATIVE TRANSACTIONS.—The goals for 

standards under paragraph (1) are that such standards shall— 

‘‘(A) be unique with no conflicting or redundant standards; 

‘‘(B) be authoritative, permitting no additions or constraints for electronic 

transactions, including companion guides; 

‘‘(C) be comprehensive, efficient and robust, requiring minimal augmentation by paper transactions or clarification by further communications; 

‘‘(D) enable the real-time (or near real-time) determination of an individual’s financial responsibility at the point of service and, to the extent possible, prior to service, including whether the individual is eligible for a specific service with a specific physician at a specific facility, which may include utilization of a machine-readable health plan beneficiary identification card; 

‘‘(E) enable, where feasible, near real-time adjudication of claims; 

‘‘(F) provide for timely acknowledgment, response, and status reporting 

applicable to any electronic transaction deemed appropriate by the Secretary; 

‘‘(G) describe all data elements (such as reason and remark codes) in unambiguous terms, not permit optional fields, require that data elements be 

either required or conditioned upon set values in other fields, and prohibit 

additional conditions; and 

‘‘(H) harmonize all common data elements across administrative and clinical transaction standards. 

‘‘(3) TIME FOR ADOPTION.—Not later than 2 years after the date of implementation of the X12 Version 5010 transaction standards implemented under this 

part, the Secretary shall adopt standards under this section. 

‘‘(4) REQUIREMENTS FOR SPECIFIC STANDARDS.—The standards under this section shall be developed, adopted, and enforced so as to— 

‘‘(A) clarify, refine, complete, and expand, as needed, the standards required under section 1173; 

‘‘(B) require paper versions of standardized transactions to comply with 

the same standards as to data content such that a fully compliant, equivalent electronic transaction can be populated from the data from a paper 

version; 


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‘‘(C) enable electronic funds transfers, in order to allow automated reconciliation with the related health care payment and remittance advice; 

‘‘(D) require timely and transparent claim and denial management processes, including tracking, adjudication, and appeal processing; 

‘‘(E) require the use of a standard electronic transaction with which 

health care providers may quickly and efficiently enroll with a health plan 

to conduct the other electronic transactions provided for in this part; and 

‘‘(F) provide for other requirements relating to administrative simplification as identified by the Secretary, in consultation with stakeholders. 

‘‘(5) BUILDING ON EXISTING STANDARDS.—In developing the standards under 

this section, the Secretary shall build upon existing and planned standards. 

‘‘(6) IMPLEMENTATION AND ENFORCEMENT.—Not later than 6 months after the 

date of the enactment of this section, the Secretary shall submit to the appropriate committees of Congress a plan for the implementation and enforcement, 

by not later than 5 years after such date of enactment, of the standards under 

this section. Such plan shall include— 

‘‘(A) a process and timeframe with milestones for developing the complete 

set of standards; 

‘‘(B) an expedited upgrade program for continually developing and approving additions and modifications to the standards as often as annually 

to improve their quality and extend their functionality to meet evolving requirements in health care; 

‘‘(C) programs to provide incentives for, and ease the burden of, implementation for certain health care providers, with special consideration 

given to such providers serving rural or underserved areas and ensure coordination with standards, implementation specifications, and certification 

criteria being adopted under the HITECH Act; 

‘‘(D) programs to provide incentives for, and ease the burden of, health 

care providers who volunteer to participate in the process of setting standards for electronic transactions; 

‘‘(E) an estimate of total funds needed to ensure timely completion of the 

implementation plan; and 

‘‘(F) an enforcement process that includes timely investigation of complaints, random audits to ensure compliance, civil monetary and programmatic penalties for non-compliance consistent with existing laws and 

regulations, and a fair and reasonable appeals process building off of enforcement provisions under this part. 

‘‘(b) LIMITATIONS ON USE OF DATA.—Nothing in this section shall be construed to 

permit the use of information collected under this section in a manner that would 

adversely affect any individual. 

‘‘(c) PROTECTION OF DATA.—The Secretary shall ensure (through the promulgation 

of regulations or otherwise) that all data collected pursuant to subsection (a) are— 

‘‘(1) used and disclosed in a manner that meets the HIPAA privacy and security law (as defined in section 3009(a)(2) of the Public Health Service Act), including any privacy or security standard adopted under section 3004 of such 

Act; and 

‘‘(2) protected from all inappropriate internal use by any entity that collects, 

stores, or receives the data, including use of such data in determinations of eligibility (or continued eligibility) in health plans, and from other inappropriate 

uses, as defined by the Secretary.’’. 

(2) DEFINITIONS.—Section 1171 of such Act (42 U.S.C. 1320d) is amended— 

(A) in paragraph (7), by striking ‘‘with reference to’’ and all that follows 

and inserting ‘‘with reference to a transaction or data element of health information in section 1173 means implementation specifications, certification 

criteria, operating rules, messaging formats, codes, and code sets adopted 

or established by the Secretary for the electronic exchange and use of information’’; and 

(B) by adding at the end the following new paragraph: 

‘‘(9) OPERATING RULES.—The term ‘operating rules’ means business rules for 

using and processing transactions. Operating rules should address the following: 

‘‘(A) Requirements for data content using available and established national standards. 

‘‘(B) Infrastructure requirements that establish best practices for streamlining data flow to yield timely execution of transactions. 

‘‘(C) Policies defining the transaction related rights and responsibilities 

for entities that are transmitting or receiving data.’’. 

(3) CONFORMING AMENDMENT.—Section 1179(a) of such Act (42 U.S.C. 1320d– 

8(a)) is amended, in the matter before paragraph (1)— 


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(A) by inserting ‘‘on behalf of an individual’’ after ‘‘1978)’’; and 

(B) by inserting ‘‘on behalf of an individual’’ after ‘‘for a financial institution’’ and 

(b) STANDARDS FOR CLAIMS ATTACHMENTS AND COORDINATION OF BENEFITS .— 

(1) STANDARD FOR HEALTH CLAIMS ATTACHMENTS.—Not later than 1 year after 

the date of the enactment of this Act, the Secretary of Health and Human Services shall promulgate a final rule to establish a standard for health claims attachment transaction described in section 1173(a)(2)(B) of the Social Security 

Act (42 U.S.C. 1320d–2(a)(2)(B)) and coordination of benefits. 

(2) REVISION IN PROCESSING PAYMENT TRANSACTIONS BY FINANCIAL INSTITUTIONS.— 

(A) IN GENERAL.—Section 1179 of the Social Security Act (42 U.S.C. 

1320d–8) is amended, in the matter before paragraph (1)— 

(i) by striking ‘‘or is engaged’’ and inserting ‘‘and is engaged’’; and 

(ii) by inserting ‘‘(other than as a business associate for a covered entity)’’ after ‘‘for a financial institution’’. 

(B) EFFECTIVE DATE.—The amendments made by paragraph (1) shall 

apply to transactions occurring on or after such date (not later than 6 

months after the date of the enactment of this Act) as the Secretary of 

Health and Human Services shall specify. 

SEC. 164. REINSURANCE PROGRAM FOR RETIREES. 

(a) ESTABLISHMENT.— 

(1) IN GENERAL.—Not later than 90 days after the date of the enactment of 

this Act, the Secretary of Health and Human Services shall establish a temporary reinsurance program (in this section referred to as the ‘‘reinsurance program’’) to provide reimbursement to assist participating employment-based 

plans with the cost of providing health benefits to retirees and to eligible 

spouses, surviving spouses and dependents of such retirees. 

(2) DEFINITIONS.—For purposes of this section: 

(A) The term ‘‘eligible employment-based plan’’ means a group health 

benefits plan that— 

(i) is maintained by one or more employers, former employers or employee associations, or a voluntary employees’ beneficiary association, 

or a committee or board of individuals appointed to administer such 

plan, and 

(ii) provides health benefits to retirees. 

(B) The term ‘‘health benefits’’ means medical, surgical, hospital, prescription drug, and such other benefits as shall be determined by the Secretary, whether self-funded or delivered through the purchase of insurance 

or otherwise. 

(C) The term ‘‘participating employment-based plan’’ means an eligible 

employment-based plan that is participating in the reinsurance program. 

(D) The term ‘‘retiree’’ means, with respect to a participating employment-benefit plan, an individual who— 

(i) is 55 years of age or older; 

(ii) is not eligible for coverage under title XVIII of the Social Security 

Act; and 

(iii) is not an active employee of an employer maintaining the plan 

or of any employer that makes or has made substantial contributions 

to fund such plan. 

(E) The term ‘‘Secretary’’ means Secretary of Health and Human Services. 

(b) PARTICIPATION.—To be eligible to participate in the reinsurance program, an 

eligible employment-based plan shall submit to the Secretary an application for participation in the program, at such time, in such manner, and containing such information as the Secretary shall require. 

(c) PAYMENT.— 

(1) SUBMISSION OF CLAIMS.— 

(A) IN GENERAL.—Under the reinsurance program, a participating employment-based plan shall submit claims for reimbursement to the Secretary which shall contain documentation of the actual costs of the items 

and services for which each claim is being submitted. 

(B) BASIS FOR CLAIMS.—Each claim submitted under subparagraph (A) 

shall be based on the actual amount expended by the participating employment-based plan involved within the plan year for the appropriate employment based health benefits provided to a retiree or to the spouse, surviving 

spouse, or dependent of a retiree. In determining the amount of any claim 

for purposes of this subsection, the participating employment-based plan 


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shall take into account any negotiated price concessions (such as discounts, 

direct or indirect subsidies, rebates, and direct or indirect remunerations) 

obtained by such plan with respect to such health benefits. For purposes 

of calculating the amount of any claim, the costs paid by the retiree or by 

the spouse, surviving spouse, or dependent of the retiree in the form of 

deductibles, co-payments, and co-insurance shall be included along with the 

amounts paid by the participating employment-based plan. 

(2) PROGRAM PAYMENTS AND LIMIT.—If the Secretary determines that a participating employment-based plan has submitted a valid claim under paragraph 

(1), the Secretary shall reimburse such plan for 80 percent of that portion of 

the costs attributable to such claim that exceeds $15,000, but is less than 

$90,000. Such amounts shall be adjusted each year based on the percentage increase in the medical care component of the Consumer Price Index (rounded to 

the nearest multiple of $1,000) for the year involved. 

(3) USE OF PAYMENTS.—Amounts paid to a participating employment-based 

plan under this subsection shall be used to lower the costs borne directly by the 

participants and beneficiaries for health benefits provided under such plan in 

the form of premiums, co-payments, deductibles, co-insurance, or other out-ofpocket costs. Such payments shall not be used to reduce the costs of an employer maintaining the participating employment-based plan. The Secretary 

shall develop a mechanism to monitor the appropriate use of such payments by 

such plans. 

(4) APPEALS AND PROGRAM PROTECTIONS.—The Secretary shall establish— 

(A) an appeals process to permit participating employment-based plans to 

appeal a determination of the Secretary with respect to claims submitted 

under this section; and 

(B) procedures to protect against fraud, waste, and abuse under the program. 

(5) AUDITS.—The Secretary shall conduct annual audits of claims data submitted by participating employment-based plans under this section to ensure 

that they are in compliance with the requirements of this section. 

(d) RETIREE RESERVE TRUST FUND.— 

(1) ESTABLISHMENT.— 

(A) IN GENERAL.—There is established in the Treasury of the United 

States a trust fund to be known as the ‘‘Retiree Reserve Trust Fund’’ (referred to in this section as the ‘‘Trust Fund’’), that shall consist of such 

amounts as may be appropriated or credited to the Trust Fund as provided 

for in this subsection to enable the Secretary to carry out the reinsurance 

program. Such amounts shall remain available until expended. 

(B) FUNDING.—There are hereby appropriated to the Trust Fund, out of 

any moneys in the Treasury not otherwise appropriated, an amount requested by the Secretary as necessary to carry out this section, except that 

the total of all such amounts requested shall not exceed $10,000,000,000. 

(C) APPROPRIATIONS FROM THE TRUST FUND.— 

(i) IN GENERAL.—Amounts in the Trust Fund are appropriated to provide funding to carry out the reinsurance program and shall be used 

to carry out such program. 

(ii) BUDGETARY IMPLICATIONS.—Amounts appropriated under clause 

(i), and outlays flowing from such appropriations, shall not be taken 

into account for purposes of any budget enforcement procedures including allocations under section 302(a) and (b) of the Balanced Budget and 

Emergency Deficit Control Act and budget resolutions for fiscal years 

during which appropriations are made from the Trust Fund. 

(iii) LIMITATION TO AVAILABLE FUNDS.—The Secretary has the authority to stop taking applications for participation in the program or take 

such other steps in reducing expenditures under the reinsurance program in order to ensure that expenditures under the reinsurance program do not exceed the funds available under this subsection. 


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TITLE II—HEALTH INSURANCE EXCHANGE 

AND RELATED PROVISIONS 

Subtitle A—Health Insurance Exchange 

SEC. 201. ESTABLISHMENT OF HEALTH INSURANCE EXCHANGE; OUTLINE OF DUTIES; DEFINITIONS. 

(a) ESTABLISHMENT.—There is established within the Health Choices Administration and under the direction of the Commissioner a Health Insurance Exchange in 

order to facilitate access of individuals and employers, through a transparent process, to a variety of choices of affordable, quality health insurance coverage, including 

a public health insurance option. 

(b) OUTLINE OF DUTIES OF COMMISSIONER.—In accordance with this subtitle and 

in coordination with appropriate Federal and State officials as provided under section 143(b), the Commissioner shall— 

(1) under section 204 establish standards for, accept bids from, and negotiate 

and enter into contracts with, QHBP offering entities for the offering of health 

benefits plans through the Health Insurance Exchange, with different levels of 

benefits required under section 203, and including with respect to oversight and 

enforcement; 

(2) under section 205 facilitate outreach and enrollment in such plans of Exchange-eligible individuals and employers described in section 202; and 

(3) conduct such activities related to the Health Insurance Exchange as required, including establishment of a risk pooling mechanism under section 206 

and consumer protections under subtitle D of title I. 

(c) EXCHANGE-PARTICIPATING HEALTH BENEFITS PLAN DEFINED.—In this division, 

the term ‘‘Exchange-participating health benefits plan’’ means a qualified health 

benefits plan that is offered through the Health Insurance Exchange. 

SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS. 

(a) ACCESS TO COVERAGE.—In accordance with this section, all individuals are eligible to obtain coverage through enrollment in an Exchange-participating health 

benefits plan offered through the Health Insurance Exchange unless such individuals are enrolled in another qualified health benefits plan or other acceptable coverage. 

(b) DEFINITIONS.—In this division: 

(1) EXCHANGE-ELIGIBLE INDIVIDUAL.—The term ‘‘Exchange-eligible individual’’ 

means an individual who is eligible under this section to be enrolled through 

the Health Insurance Exchange in an Exchange-participating health benefits 

plan and, with respect to family coverage, includes dependents of such individual. 

(2) EXCHANGE-ELIGIBLE EMPLOYER.—The term ‘‘Exchange-eligible employer’’ 

means an employer that is eligible under this section to enroll through the 

Health Insurance Exchange employees of the employer (and their dependents) 

in Exchange-eligible health benefits plans. 

(3) EMPLOYMENT-RELATED DEFINITIONS.—The terms ‘‘employer’’, ‘‘employee’’, 

‘‘full-time employee’’, and ‘‘part-time employee’’ have the meanings given such 

terms by the Commissioner for purposes of this division. 

(c) TRANSITION.—Individuals and employers shall only be eligible to enroll or participate in the Health Insurance Exchange in accordance with the following transition schedule: 

(1) FIRST YEAR.—In Y1 (as defined in section 100(c))— 

(A) individuals described in subsection (d)(1), including individuals described in paragraphs (3) and (4) of subsection (d); and 

(B) smallest employers described in subsection (e)(1). 

(2) SECOND YEAR.—In Y2— 

(A) individuals and employers described in paragraph (1); and 

(B) smaller employers described in subsection (e)(2). 

(3) THIRD AND SUBSEQUENT YEARS.—In Y3 and subsequent years— 

(A) individuals and employers described in paragraph (2); and 

(B) larger employers as permitted by the Commissioner under subsection 

(e)(3). 

(d) INDIVIDUALS.— 

(1) INDIVIDUAL DESCRIBED.—Subject to the succeeding provisions of this subsection, an individual described in this paragraph is an individual who— 

(A) is not enrolled in coverage described in subparagraphs (C) through (F) 

of paragraph (2); and 


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(B) is not enrolled in coverage as a full-time employee (or as a dependent 

of such an employee) under a group health plan if the coverage and an employer contribution under the plan meet the requirements of section 312. 

For purposes of subparagraph (B), in the case of an individual who is self-employed, who has at least 1 employee, and who meets the requirements of section 

312, such individual shall be deemed a full-time employee described in such 

subparagraph. 

(2) ACCEPTABLE COVERAGE.—For purposes of this division, the term ‘‘acceptable coverage’’ means any of the following: 

(A) QUALIFIED HEALTH BENEFITS PLAN COVERAGE.—Coverage under a 

qualified health benefits plan. 

(B) GRANDFATHERED HEALTH INSURANCE COVERAGE; COVERAGE UNDER

CURRENT GROUP HEALTH PLAN.—Coverage under a grandfathered health insurance coverage (as defined in subsection (a) of section 102) or under a 

current group health plan (described in subsection (b) of such section). 

(C) MEDICARE.—Coverage under part A of title XVIII of the Social Security Act. 

(D) MEDICAID.—Coverage for medical assistance under title XIX of the 

Social Security Act, excluding such coverage that is only available because 

of the application of subsection (u), (z), or (aa) of section 1902 of such Act 

(E) MEMBERS OF THE ARMED FORCES AND DEPENDENTS (INCLUDING

TRICARE).—Coverage under chapter 55 of title 10, United States Code, including similar coverage furnished under section 1781 of title 38 of such 

Code. 

(F) VA.—Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code, but only if the coverage for the individual involved is determined by the Commissioner in coordination with the 

Secretary of Treasury to be not less than a level specified by the Commissioner and Secretary of Veteran’s Affairs, in coordination with the Secretary 

of Treasury, based on the individual’s priority for services as provided 

under section 1705(a) of such title. 

(G) OTHER COVERAGE.—Such other health benefits coverage, such as a 

State health benefits risk pool, as the Commissioner, in coordination with 

the Secretary of the Treasury, recognizes for purposes of this paragraph. 

The Commissioner shall make determinations under this paragraph in coordination with the Secretary of the Treasury. 

(3) TREATMENT OF CERTAIN NON-TRADITIONAL MEDICAID ELIGIBLE INDIVIDUALS.—An individual who is a non-traditional Medicaid eligible individual (as 

defined in section 205(e)(4)(C)) in a State may be an Exchange-eligible individual if the individual was enrolled in a qualified health benefits plan, grandfathered health insurance coverage, or current group health plan during the 6 

months before the individual became a non-traditional Medicaid eligible individual. During the period in which such an individual has chosen to enroll in 

an Exchange-participating health benefits plan, the individual is not also eligible for medical assistance under Medicaid. 

(4) CONTINUING ELIGIBILITY PERMITTED.— 

(A) IN GENERAL.—Except as provided in subparagraph (B), once an individual qualifies as an Exchange-eligible individual under this subsection 

(including as an employee or dependent of an employee of an Exchange-eligible employer) and enrolls under an Exchange-participating health benefits plan through the Health Insurance Exchange, the individual shall continue to be treated as an Exchange-eligible individual until the individual 

is no longer enrolled with an Exchange-participating health benefits plan. 

(B) EXCEPTIONS.— 

(i) IN GENERAL.—Subparagraph (A) shall not apply to an individual 

once the individual becomes eligible for coverage— 

(I) under part A of the Medicare program; 

(II) under the Medicaid program as a Medicaid eligible individual, except as permitted under paragraph (3) or clause (ii); or 

(III) in such other circumstances as the Commissioner may provide. 

(ii) TRANSITION PERIOD.—In the case described in clause (i)(II), the 

Commissioner shall permit the individual to continue treatment under 

subparagraph (A) until such limited time as the Commissioner determines it is administratively feasible, consistent with minimizing disruption in the individual’s access to health care. 

(e) EMPLOYERS.— 

(1) SMALLEST EMPLOYER.—Subject to paragraph (4), smallest employers described in this paragraph are employers with 10 or fewer employees. 


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(2) SMALLER EMPLOYERS.—Subject to paragraph (4), smaller employers described in this paragraph are employers that are not smallest employers described in paragraph (1) and have 20 or fewer employees. 

(3) LARGER EMPLOYERS.— 

(A) IN GENERAL.—Beginning with Y3, the Commissioner may permit employers not described in paragraph (1) or (2) to be Exchange-eligible employers. 

(B) PHASE-IN.—In applying subparagraph (A), the Commissioner may 

phase-in the application of such subparagraph based on the number of fulltime employees of an employer and such other considerations as the Commissioner deems appropriate. 

(4) CONTINUING ELIGIBILITY.—Once an employer is permitted to be an Exchange-eligible employer under this subsection and enrolls employees through 

the Health Insurance Exchange, the employer shall continue to be treated as 

an Exchange-eligible employer for each subsequent plan year regardless of the 

number of employees involved unless and until the employer meets the requirement of section 311(a) through paragraph (1) of such section by offering a group 

health plan and not through offering an Exchange-participating health benefits 

plan. 

(5) EMPLOYER PARTICIPATION AND CONTRIBUTIONS.— 

(A) SATISFACTION OF EMPLOYER RESPONSIBILITY.—For any year in which 

an employer is an Exchange-eligible employer, such employer may meet the 

requirements of section 312 with respect to employees of such employer by 

offering such employees the option of enrolling with Exchange-participating 

health benefits plans through the Health Insurance Exchange consistent 

with the provisions of subtitle B of title III. 

(B) EMPLOYEE CHOICE.—Any employee offered Exchange-participating 

health benefits plans by the employer of such employee under subparagraph (A) may choose coverage under any such plan. That choice includes, 

with respect to family coverage, coverage of the dependents of such employee. 

(6) AFFILIATED GROUPS.—Any employer which is part of a group of employers 

who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated, for purposes 

of this subtitle, as a single employer. 

(7) OTHER COUNTING RULES.—The Commissioner shall establish rules relating 

to how employees are counted for purposes of carrying out this subsection. 

(f) SPECIAL SITUATION AUTHORITY.—The Commissioner shall have the authority to 

establish such rules as may be necessary to deal with special situations with regard 

to uninsured individuals and employers participating as Exchange-eligible individuals and employers, such as transition periods for individuals and employers who 

gain, or lose, Exchange-eligible participation status, and to establish grace periods 

for premium payment. 

(g) SURVEYS OF INDIVIDUALS AND EMPLOYERS.—The Commissioner shall provide 

for periodic surveys of Exchange-eligible individuals and employers concerning satisfaction of such individuals and employers with the Health Insurance Exchange and 

Exchange-participating health benefits plans. 

(h) EXCHANGE ACCESS STUDY.— 

(1) IN GENERAL.—The Commissioner shall conduct a study of access to the 

Health Insurance Exchange for individuals and for employers, including individuals and employers who are not eligible and enrolled in Exchange-participating 

health benefits plans. The goal of the study is to determine if there are significant groups and types of individuals and employers who are not Exchange eligible individuals or employers, but who would have improved benefits and affordability if made eligible for coverage in the Exchange. 

(2) ITEMS INCLUDED IN STUDY.—Such study also shall examine— 

(A) the terms, conditions, and affordability of group health coverage offered by employers and QHBP offering entities outside of the Exchange 

compared to Exchange-participating health benefits plans; and 

(B) the affordability-test standard for access of certain employed individuals to coverage in the Health Insurance Exchange. 

(3) REPORT.—Not later than January 1 of Y3, in Y6, and thereafter, the Commissioner shall submit to Congress on the study conducted under this subsection and shall include in such report recommendations regarding changes in 

standards for Exchange eligibility for individuals and employers. 


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SEC. 203. BENEFITS PACKAGE LEVELS. 

(a) IN GENERAL.—The Commissioner shall specify the benefits to be made available under Exchange-participating health benefits plans during each plan year, consistent with subtitle C of title I and this section. 

(b) LIMITATION ON HEALTH BENEFITS PLANS OFFERED BY OFFERING ENTITIES.— The Commissioner may not enter into a contract with a QHBP offering entity under 

section 204(c) for the offering of an Exchange-participating health benefits plan in 

a service area unless the following requirements are met: 

(1) REQUIRED OFFERING OF BASIC PLAN.—The entity offers only one basic plan 

for such service area. 

(2) OPTIONAL OFFERING OF ENHANCED PLAN.—If and only if the entity offers 

a basic plan for such service area, the entity may offer one enhanced plan for 

such area. 

(3) OPTIONAL OFFERING OF PREMIUM PLAN.—If and only if the entity offers an 

enhanced plan for such service area, the entity may offer one premium plan for 

such area. 

(4) OPTIONAL OFFERING OF PREMIUM-PLUS PLANS.—If and only if the entity offers a premium plan for such service area, the entity may offer one or more premium-plus plans for such area. 

All such plans may be offered under a single contract with the Commissioner. 

(c) SPECIFICATION OF BENEFIT LEVELS FOR PLANS.— (1) IN GENERAL.—The Commissioner shall establish the following standards 

consistent with this subsection and title I: 

(A) BASIC, ENHANCED, AND PREMIUM PLANS.—Standards for 3 levels of Exchange-participating health benefits plans: basic, enhanced, and premium 

(in this division referred to as a ‘‘basic plan’’, ‘‘enhanced plan’’, and ‘‘premium plan’’, respectively). 

(B) PREMIUM-PLUS PLAN BENEFITS.—Standards for additional benefits 

that may be offered, consistent with this subsection and subtitle C of title 

I, under a premium plan (such a plan with additional benefits referred to 

in this division as a ‘‘premium-plus plan’’) . 

(2) BASIC PLAN.— (A) IN GENERAL.—A basic plan shall offer the essential benefits package 

required under title I for a qualified health benefits plan. 

(B) TIERED COST-SHARING FOR AFFORDABLE CREDIT ELIGIBLE INDIVID- UALS.—In the case of an affordable credit eligible individual (as defined in 

section 242(a)(1)) enrolled in an Exchange-participating health benefits 

plan, the benefits under a basic plan are modified to provide for the reduced 

cost-sharing for the income tier applicable to the individual under section 

244(c). 

(3) ENHANCED PLAN.—An enhanced plan shall offer, in addition to the level 

of benefits under the basic plan, a lower level of cost-sharing as provided under 

title I consistent with section 123(b)(5)(A). 

(4) PREMIUM PLAN.—A premium plan shall offer, in addition to the level of 

benefits under the basic plan, a lower level of cost-sharing as provided under 

title I consistent with section 123(b)(5)(B). 

(5) PREMIUM-PLUS PLAN.—A premium-plus plan is a premium plan that also 

provides additional benefits, such as adult oral health and vision care, approved 

by the Commissioner. The portion of the premium that is attributable to such 

additional benefits shall be separately specified. 

(6) RANGE OF PERMISSIBLE VARIATION IN COST-SHARING.—The Commissioner 

shall establish a permissible range of variation of cost-sharing for each basic, 

enhanced, and premium plan, except with respect to any benefit for which there 

is no cost-sharing permitted under the essential benefits package. Such variation shall permit a variation of not more than plus (or minus) 10 percent in 

cost-sharing with respect to each benefit category specified under section 122. 

(d) TREATMENT OF STATE BENEFIT MANDATES.—Insofar as a State requires a 

health insurance issuer offering health insurance coverage to include benefits beyond the essential benefits package, such requirement shall continue to apply to an 

Exchange-participating health benefits plan, if the State has entered into an arrangement satisfactory to the Commissioner to reimburse the Commissioner for the 

amount of any net increase in affordability premium credits under subtitle C as a 

result of an increase in premium in basic plans as a result of application of such 

requirement. 

SEC. 204. CONTRACTS FOR THE OFFERING OF EXCHANGE-PARTICIPATING HEALTH BENEFITS 

PLANS. 

(a) CONTRACTING DUTIES.—In carrying out section 201(b)(1) and consistent with 

this subtitle: 

(1) OFFERING ENTITY AND PLAN STANDARDS.—The Commissioner shall— 


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(A) establish standards necessary to implement the requirements of this 

title and title I for— 

(i) QHBP offering entities for the offering of an Exchange-participating health benefits plan; and 

(ii) for Exchange-participating health benefits plans; and 

(B) certify QHBP offering entities and qualified health benefits plans as 

meeting such standards and requirements of this title and title I for purposes of this subtitle. 

(2) SOLICITING AND NEGOTIATING BIDS; CONTRACTS.—The Commissioner 

shall— 

(A) solicit bids from QHBP offering entities for the offering of Exchangeparticipating health benefits plans; 

(B) based upon a review of such bids, negotiate with such entities for the 

offering of such plans; and 

(C) enter into contracts with such entities for the offering of such plans 

through the Health Insurance Exchange under terms (consistent with this 

title) negotiated between the Commissioner and such entities. 

(3) FAR NOT APPLICABLE.—The provisions of the Federal Acquisition Regulation shall not apply to contracts between the Commissioner and QHBP offering 

entities for the offering of Exchange-participating health benefits plans under 

this title. 

(b) STANDARDS FOR QHBP OFFERING ENTITIES TO OFFER EXCHANGE-PARTICIPATING HEALTH BENEFITS PLANS.—The standards established under subsection 

(a)(1)(A) shall require that, in order for a QHBP offering entity to offer an Exchange-participating health benefits plan, the entity must meet the following requirements: 

(1) LICENSED.—The entity shall be licensed to offer health insurance coverage 

under State law for each State in which it is offering such coverage. 

(2) DATA REPORTING.—The entity shall provide for the reporting of such information as the Commissioner may specify, including information necessary to 

administer the risk pooling mechanism described in section 206(b) and information to address disparities in health and health care. 

(3) IMPLEMENTING AFFORDABILITY CREDITS.—The entity shall provide for implementation of the affordability credits provided for enrollees under subtitle C, 

including the reduction in cost-sharing under section 244(c). 

(4) ENROLLMENT.—The entity shall accept all enrollments under this subtitle, 

subject to such exceptions (such as capacity limitations) in accordance with the 

requirements under title I for a qualified health benefits plan. The entity shall 

notify the Commissioner if the entity projects or anticipates reaching such a capacity limitation that would result in a limitation in enrollment. 

(5) RISK POOLING PARTICIPATION.—The entity shall participate in such risk 

pooling mechanism as the Commissioner establishes under section 206(b). 

(6) ESSENTIAL COMMUNITY PROVIDERS.—With respect to the basic plan offered 

by the entity, the entity shall contract for outpatient services with covered entities (as defined in section 340B(a)(4) of the Public Health Service Act, as in effect as of July 1, 2009). The Commissioner shall specify the extent to which and 

manner in which the previous sentence shall apply in the case of a basic plan 

with respect to which the Commissioner determines provides substantially all 

benefits through a health maintenance organization, as defined in section 

2791(b)(3) of the Public Health Service Act. 

(7) CULTURALLY AND LINGUISTICALLY APPROPRIATE SERVICES AND COMMUNICATIONS.—The entity shall provide for culturally and linguistically appropriate 

communication and health services. 

(8) ADDITIONAL REQUIREMENTS.—The entity shall comply with other applicable requirements of this title, as specified by the Commissioner, which shall include standards regarding billing and collection practices for premiums and related grace periods and which may include standards to ensure that the entity 

does not use coercive practices to force providers not to contract with other entities offering coverage through the Health Insurance Exchange. 

(c) CONTRACTS.— 

(1) BID APPLICATION.—To be eligible to enter into a contract under this section, a QHBP offering entity shall submit to the Commissioner a bid at such 

time, in such manner, and containing such information as the Commissioner 

may require. 

(2) TERM.—Each contract with a QHBP offering entity under this section 

shall be for a term of not less than one year, but may be made automatically 

renewable from term to term in the absence of notice of termination by either 

party. 


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(3) ENFORCEMENT OF NETWORK ADEQUACY.—In the case of a health benefits 

plan of a QHBP offering entity that uses a provider network, the contract under 

this section with the entity shall provide that if— 

(A) the Commissioner determines that such provider network does not 

meet such standards as the Commissioner shall establish under section 

115; and 

(B) an individual enrolled in such plan receives an item or service from 

a provider that is not within such network; 

then any cost-sharing for such item or service shall be equal to the amount of 

such cost-sharing that would be imposed if such item or service was furnished 

by a provider within such network. 

(4) OVERSIGHT AND ENFORCEMENT RESPONSIBILITIES.—The Commissioner 

shall establish processes, in coordination with State insurance regulators, to 

oversee, monitor, and enforce applicable requirements of this title with respect 

to QHBP offering entities offering Exchange-participating health benefits plans 

and such plans, including the marketing of such plans. Such processes shall include the following: 

(A) GRIEVANCE AND COMPLAINT MECHANISMS.—The Commissioner shall 

establish, in coordination with State insurance regulators, a process under 

which Exchange-eligible individuals and employers may file complaints concerning violations of such standards. 

(B) ENFORCEMENT.—In carrying out authorities under this division relating to the Health Insurance Exchange, the Commissioner may impose one 

or more of the intermediate sanctions described in section 142(c). 

(C) TERMINATION.— 

(i) IN GENERAL.—The Commissioner may terminate a contract with 

a QHBP offering entity under this section for the offering of an Exchange-participating health benefits plan if such entity fails to comply 

with the applicable requirements of this title. Any determination by the 

Commissioner to terminate a contract shall be made in accordance with 

formal investigation and compliance procedures established by the 

Commissioner under which— 

(I) the Commissioner provides the entity with the reasonable opportunity to develop and implement a corrective action plan to correct the deficiencies that were the basis of the Commissioner’s determination; and 

(II) the Commissioner provides the entity with reasonable notice 

and opportunity for hearing (including the right to appeal an initial 

decision) before terminating the contract. 

(ii) EXCEPTION FOR IMMINENT AND SERIOUS RISK TO HEALTH.—Clause 

(i) shall not apply if the Commissioner determines that a delay in termination, resulting from compliance with the procedures specified in 

such clause prior to termination, would pose an imminent and serious 

risk to the health of individuals enrolled under the qualified health 

benefits plan of the QHBP offering entity. 

(D) CONSTRUCTION.—Nothing in this subsection shall be construed as preventing the application of other sanctions under subtitle E of title I with 

respect to an entity for a violation of such a requirement. 

SEC. 205. OUTREACH AND ENROLLMENT OF EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS IN EXCHANGE-PARTICIPATING HEALTH BENEFITS PLAN. 

(a) IN GENERAL.— 

(1) OUTREACH.—The Commissioner shall conduct outreach activities consistent with subsection (c), including through use of appropriate entities as described in paragraph (4) of such subsection, to inform and educate individuals 

and employers about the Health Insurance Exchange and Exchange-participating health benefits plan options. Such outreach shall include outreach specific to vulnerable populations, such as children, individuals with disabilities, 

individuals with mental illness, and individuals with other cognitive impairments. 

(2) ELIGIBILITY.—The Commissioner shall make timely determinations of 

whether individuals and employers are Exchange-eligible individuals and employers (as defined in section 202). 

(3) ENROLLMENT.—The Commissioner shall establish and carry out an enrollment process for Exchange-eligible individuals and employers, including at community locations, in accordance with subsection (b). 

(b) ENROLLMENT PROCESS.— 

(1) IN GENERAL.—The Commissioner shall establish a process consistent with 

this title for enrollments in Exchange-participating health benefits plans. Such 


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process shall provide for enrollment through means such as the mail, by telephone, electronically, and in person. 

(2) ENROLLMENT PERIODS.— (A) OPEN ENROLLMENT PERIOD.—The Commissioner shall establish an annual open enrollment period during which an Exchange-eligible individual 

or employer may elect to enroll in an Exchange-participating health benefits plan for the following plan year and an enrollment period for affordability credits under subtitle C. Such periods shall be during September 

through November of each year, or such other time that would maximize 

timeliness of income verification for purposes of such subtitle. The open enrollment period shall not be less than 30 days. 

(B) SPECIAL ENROLLMENT.—The Commissioner shall also provide for special enrollment periods to take into account special circumstances of individuals and employers, such as an individual who— 

(i) loses acceptable coverage; 

(ii) experiences a change in marital or other dependent status; 

(iii) moves outside the service area of the Exchange-participating 

health benefits plan in which the individual is enrolled; or 

(iv) experiences a significant change in income. 

(C) ENROLLMENT INFORMATION.—The Commissioner shall provide for the 

broad dissemination of information to prospective enrollees on the enrollment process, including before each open enrollment period. In carrying out 

the previous sentence, the Commissioner may work with other appropriate 

entities to facilitate such provision of information. 

(3) AUTOMATIC ENROLLMENT FOR NON-MEDICAID ELIGIBLE INDIVIDUALS.— 

(A) IN GENERAL.—The Commissioner shall provide for a process under 

which individuals who are Exchange-eligible individuals described in subparagraph (B) are automatically enrolled under an appropriate Exchangeparticipating health benefits plan. Such process may involve a random assignment or some other form of assignment that takes into account the 

health care providers used by the individual involved or such other relevant 

factors as the Commissioner may specify. 

(B) SUBSIDIZED INDIVIDUALS DESCRIBED.—An individual described in this 

subparagraph is an Exchange-eligible individual who is either of the following: 

(i) AFFORDABILITY CREDIT ELIGIBLE INDIVIDUALS.—The individual— 

(I) has applied for, and been determined eligible for, affordability 

credits under subtitle C; 

(II) has not opted out from receiving such affordability credit; 

and 

(III) does not otherwise enroll in another Exchange-participating 

health benefits plan. 

(ii) INDIVIDUALS ENROLLED IN A TERMINATED PLAN.—The individual is 

enrolled in an Exchange-participating health benefits plan that is terminated (during or at the end of a plan year) and who does not otherwise enroll in another Exchange-participating health benefits plan. 

(4) DIRECT PAYMENT OF PREMIUMS TO PLANS.—Under the enrollment process, 

individuals enrolled in an Exchange-participating health benefits plan shall pay 

such plans directly, and not through the Commissioner or the Health Insurance 

Exchange. 

(c) COVERAGE INFORMATION AND ASSISTANCE.— 

(1) COVERAGE INFORMATION.—The Commissioner shall provide for the broad 

dissemination of information on Exchange-participating health benefits plans offered under this title. Such information shall be provided in a comparative manner, and shall include information on benefits, premiums, cost-sharing, quality, 

provider networks, and consumer satisfaction. 

(2) CONSUMER ASSISTANCE WITH CHOICE.—To provide assistance to Exchangeeligible individuals and employers, the Commissioner shall— 

(A) provide for the operation of a toll-free telephone hotline to respond to 

requests for assistance and maintain an Internet website through which individuals may obtain information on coverage under Exchange-participating 

health benefits plans and file complaints; 

(B) develop and disseminate information to Exchange-eligible enrollees on 

their rights and responsibilities; 

(C) assist Exchange-eligible individuals in selecting Exchange-participating health benefits plans and obtaining benefits through such plans; and 

(D) ensure that the Internet website described in subparagraph (A) and 

the information described in subparagraph (B) is developed using plain language (as defined in section 133(a)(2)). 


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(3) USE OF OTHER ENTITIES.—In carrying out this subsection, the Commissioner may work with other appropriate entities to facilitate the dissemination 

of information under this subsection and to provide assistance as described in 

paragraph (2). 

(d) SPECIAL DUTIES RELATED TO MEDICAID AND CHIP.— 

(1) COVERAGE FOR CERTAIN NEWBORNS.— (A) IN GENERAL.—In the case of a child born in the United States who 

at the time of birth is not otherwise covered under acceptable coverage, for 

the period of time beginning on the date of birth and ending on the date 

the child otherwise is covered under acceptable coverage (or, if earlier, the 

end of the month in which the 60-day period, beginning on the date of 

birth, ends), the child shall be deemed— 

(i) to be a non-traditional Medicaid eligible individual (as defined in 

subsection (e)(5)) for purposes of this division and Medicaid; and 

(ii) to have elected to enroll in Medicaid through the application of 

paragraph (3). 

(B) EXTENDED TREATMENT AS TRADITIONAL MEDICAID ELIGIBLE INDI- VIDUAL.—In the case of a child described in subparagraph (A) who at the 

end of the period referred to in such subparagraph is not otherwise covered 

under acceptable coverage, the child shall be deemed (until such time as the 

child obtains such coverage or the State otherwise makes a determination 

of the child’s eligibility for medical assistance under its Medicaid plan pursuant to section 1943(c)(1) of the Social Security Act) to be a traditional 

Medicaid eligible individual described in section 1902(l)(1)(B) of such Act. 

(2) CHIP TRANSITION.—A child who, as of the day before the first day of Y1, 

is eligible for child health assistance under title XXI of the Social Security Act 

(including a child receiving coverage under an arrangement described in section 

2101(a)(2) of such Act) is deemed as of such first day to be an Exchange-eligible 

individual unless the individual is a traditional Medicaid eligible individual as 

of such day. 

(3) AUTOMATIC ENROLLMENT OF MEDICAID ELIGIBLE INDIVIDUALS INTO MEDICAID.—The Commissioner shall provide for a process under which an individual 

who is described in section 202(d)(3) and has not elected to enroll in an Exchange-participating health benefits plan is automatically enrolled under Medicaid. 

(4) NOTIFICATIONS.—The Commissioner shall notify each State in Y1 and for 

purposes of section 1902(gg)(1) of the Social Security Act (as added by section 

1703(a)) whether the Health Insurance Exchange can support enrollment of 

children described in paragraph (2) in such State in such year. 

(e) MEDICAID COVERAGE FOR MEDICAID ELIGIBLE INDIVIDUALS.— 

(1) IN GENERAL.— 

(A) CHOICE FOR LIMITED EXCHANGE-ELIGIBLE INDIVIDUALS.—As part of the 

enrollment process under subsection (b), the Commissioner shall provide 

the option, in the case of an Exchange-eligible individual described in section 202(d)(3), for the individual to elect to enroll under Medicaid instead 

of under an Exchange-participating health benefits plan. Such an individual 

may change such election during an enrollment period under subsection 

(b)(2). 

(B) MEDICAID ENROLLMENT OBLIGATION.—An Exchange eligible individual 

may apply, in the manner described in section 241(b)(1), for a determination of whether the individual is a Medicaid-eligible individual. If the individual is determined to be so eligible, the Commissioner, through the Medicaid memorandum of understanding, shall provide for the enrollment of 

the individual under the State Medicaid plan in accordance with the Medicaid memorandum of understanding under paragraph (4). In the case of 

such an enrollment, the State shall provide for the same periodic redetermination of eligibility under Medicaid as would otherwise apply if the individual had directly applied for medical assistance to the State Medicaid 

agency. 

(2) NON-TRADITIONAL MEDICAID ELIGIBLE INDIVIDUALS.—In the case of a nontraditional Medicaid eligible individual described in section 202(d)(3) who elects 

to enroll under Medicaid under paragraph (1)(A), the Commissioner shall provide for the enrollment of the individual under the State Medicaid plan in accordance with the Medicaid memorandum of understanding under paragraph 

(4). 

(3) COORDINATED ENROLLMENT WITH STATE THROUGH MEMORANDUM OF UNDERSTANDING.—The Commissioner, in consultation with the Secretary of Health 

and Human Services, shall enter into a memorandum of understanding with 

each State (each in this division referred to as a ‘‘Medicaid memorandum of unVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00039 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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derstanding’’) with respect to coordinating enrollment of individuals in Exchange-participating health benefits plans and under the State’s Medicaid program consistent with this section and to otherwise coordinate the implementation of the provisions of this division with respect to the Medicaid program. 

Such memorandum shall permit the exchange of information consistent with 

the limitations described in section 1902(a)(7) of the Social Security Act. Nothing in this section shall be construed as permitting such memorandum to modify or vitiate any requirement of a State Medicaid plan. 

(4) MEDICAID ELIGIBLE INDIVIDUALS.—For purposes of this division: 

(A) MEDICAID ELIGIBLE INDIVIDUAL.—The term ‘‘Medicaid eligible individual’’ means an individual who is eligible for medical assistance under 

Medicaid. 

(B) TRADITIONAL MEDICAID ELIGIBLE INDIVIDUAL.—The term ‘‘traditional 

Medicaid eligible individual’’ means a Medicaid eligible individual other 

than an individual who is— 

(i) a Medicaid eligible individual by reason of the application of subclause (VIII) of section 1902(a)(10)(A)(i) of the Social Security Act; or 

(ii) a childless adult not described in section 1902(a)(10)(A) or (C) of 

such Act (as in effect as of the day before the date of the enactment 

of this Act). 

(C) NON-TRADITIONAL MEDICAID ELIGIBLE INDIVIDUAL.—The term ‘‘nontraditional Medicaid eligible individual’’ means a Medicaid eligible individual who is not a traditional Medicaid eligible individual. 

(f) EFFECTIVE CULTURALLY AND LINGUISTICALLY APPROPRIATE COMMUNICATION.— 

In carrying out this section, the Commissioner shall establish effective methods for 

communicating in plain language and a culturally and linguistically appropriate 

manner. 

SEC. 206. OTHER FUNCTIONS. 

(a) COORDINATION OF AFFORDABILITY CREDITS.—The Commissioner shall coordinate the distribution of affordability premium and cost-sharing credits under subtitle C to QHBP offering entities offering Exchange-participating health benefits 

plans. 

(b) COORDINATION OF RISK POOLING.—The Commissioner shall establish a mechanism whereby there is an adjustment made of the premium amounts payable among 

QHBP offering entities offering Exchange-participating health benefits plans of premiums collected for such plans that takes into account (in a manner specified by 

the Commissioner) the differences in the risk characteristics of individuals and employers enrolled under the different Exchange-participating health benefits plans offered by such entities so as to minimize the impact of adverse selection of enrollees 

among the plans offered by such entities. 

(c) SPECIAL INSPECTOR GENERAL FOR THE HEALTH INSURANCE EXCHANGE.— 

(1) ESTABLISHMENT; APPOINTMENT.—There is hereby established the Office of 

the Special Inspector General for the Health Insurance Exchange, to be headed 

by a Special Inspector General for the Health Insurance Exchange (in this subsection referred to as the ‘‘Special Inspector General’’) to be appointed by the 

President, by and with the advice and consent of the Senate. The nomination 

of an individual as Special Inspector General shall be made as soon as practicable after the establishment of the program under this subtitle. 

(2) DUTIES.—The Special Inspector General shall— 

(A) conduct, supervise, and coordinate audits, evaluations and investigations of the Health Insurance Exchange to protect the integrity of the 

Health Insurance Exchange, as well as the health and welfare of participants in the Exchange; 

(B) report both to the Commissioner and to the Congress regarding program and management problems and recommendations to correct them; 

(C) have other duties (described in paragraphs (2) and (3) of section 121 

of division A of Public Law 110–343) in relation to the duties described in 

the previous subparagraphs; and 

(D) have the authorities provided in section 6 of the Inspector General 

Act of 1978 in carrying out duties under this paragraph. 

(3) APPLICATION OF OTHER SPECIAL INSPECTOR GENERAL PROVISIONS.—The provisions of subsections (b) (other than paragraphs (1) and (3)), (d) (other than 

paragraph (1)), and (e) of section 121 of division A of the Emergency Economic 

Stabilization Act of 2009 (Public Law 110–343) shall apply to the Special Inspector General under this subsection in the same manner as such provisions 

apply to the Special Inspector General under such section. 

(4) REPORTS.—Not later than one year after the confirmation of the Special 

Inspector General, and annually thereafter, the Special Inspector General shall 


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submit to the appropriate committees of Congress a report summarizing the activities of the Special Inspector General during the one year period ending on 

the date such report is submitted. 

(5) TERMINATION.—The Office of the Special Inspector General shall terminate five years after the date of the enactment of this Act. 

SEC. 207. HEALTH INSURANCE EXCHANGE TRUST FUND. 

(a) ESTABLISHMENT OF HEALTH INSURANCE EXCHANGE TRUST FUND.—There is created within the Treasury of the United States a trust fund to be known as the 

‘‘Health Insurance Exchange Trust Fund’’ (in this section referred to as the ‘‘Trust 

Fund’’), consisting of such amounts as may be appropriated or credited to the Trust 

Fund under this section or any other provision of law. 

(b) PAYMENTS FROM TRUST FUND.—The Commissioner shall pay from time to time 

from the Trust Fund such amounts as the Commissioner determines are necessary 

to make payments to operate the Health Insurance Exchange, including payments 

under subtitle C (relating to affordability credits). 

(c) TRANSFERS TO TRUST FUND.— (1) DEDICATED PAYMENTS.—There is hereby appropriated to the Trust Fund 

amounts equivalent to the following: 

(A) TAXES ON INDIVIDUALS NOT OBTAINING ACCEPTABLE COVERAGE.—The 

amounts received in the Treasury under section 59B of the Internal Revenue Code of 1986 (relating to requirement of health insurance coverage for 

individuals). 

(B) EMPLOYMENT TAXES ON EMPLOYERS NOT PROVIDING ACCEPTABLE COV- ERAGE.—The amounts received in the Treasury under section 3111(c) of the 

Internal Revenue Code of 1986 (relating to employers electing to not provide health benefits). 

(C) EXCISE TAX ON FAILURES TO MEET CERTAIN HEALTH COVERAGE RE- QUIREMENTS.—The amounts received in the Treasury under section 

4980H(b) (relating to excise tax with respect to failure to meet health coverage participation requirements). 

(2) APPROPRIATIONS TO COVER GOVERNMENT CONTRIBUTIONS.—There are hereby appropriated, out of any moneys in the Treasury not otherwise appropriated, 

to the Trust Fund, an amount equivalent to the amount of payments made from 

the Trust Fund under subsection (b) plus such amounts as are necessary reduced by the amounts deposited under paragraph (1). 

(d) APPLICATION OF CERTAIN RULES.—Rules similar to the rules of subchapter B 

of chapter 98 of the Internal Revenue Code of 1986 shall apply with respect to the 

Trust Fund. 

SEC. 208. OPTIONAL OPERATION OF STATE-BASED HEALTH INSURANCE EXCHANGES. 

(a) IN GENERAL.—If— 

(1) a State (or group of States, subject to the approval of the Commissioner) 

applies to the Commissioner for approval of a State-based Health Insurance Exchange to operate in the State (or group of States); and 

(2) the Commissioner approves such State-based Health Insurance Exchange, 

then, subject to subsections (c) and (d), the State-based Health Insurance Exchange 

shall operate, instead of the Health Insurance Exchange, with respect to such State 

(or group of States). The Commissioner shall approve a State-based Health Insurance Exchange if it meets the requirements for approval under subsection (b). 

(b) REQUIREMENTS FOR APPROVAL.—The Commissioner may not approve a Statebased Health Insurance Exchange under this section unless the following requirements are met: 

(1) The State-based Health Insurance Exchange must demonstrate the capacity to and provide assurances satisfactory to the Commissioner that the Statebased Health Insurance Exchange will carry out the functions specified for the 

Health Insurance Exchange in the State (or States) involved, including— 

(A) negotiating and contracting with QHBP offering entities for the offering of Exchange-participating health benefits plan, which satisfy the standards and requirements of this title and title I; 

(B) enrolling Exchange-eligible individuals and employers in such State 

in such plans; 

(C) the establishment of sufficient local offices to meet the needs of Exchange-eligible individuals and employers; 

(D) administering affordability credits under subtitle B using the same 

methodologies (and at least the same income verification methods) as would 

otherwise apply under such subtitle and at a cost to the Federal Government which does exceed the cost to the Federal Government if this section 

did not apply; and 

(E) enforcement activities consistent with federal requirements. 


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(2) There is no more than one Health Insurance Exchange operating with respect to any one State. 

(3) The State provides assurances satisfactory to the Commissioner that approval of such an Exchange will not result in any net increase in expenditures 

to the Federal Government. 

(4) The State provides for reporting of such information as the Commissioner 

determines and assurances satisfactory to the Commissioner that it will vigorously enforce violations of applicable requirements. 

(5) Such other requirements as the Commissioner may specify. 

(c) CEASING OPERATION.— (1) IN GENERAL.—A State-based Health Insurance Exchange may, at the option of each State involved, and only after providing timely and reasonable notice to the Commissioner, cease operation as such an Exchange, in which case 

the Health Insurance Exchange shall operate, instead of such State-based 

Health Insurance Exchange, with respect to such State (or States). 

(2) TERMINATION; HEALTH INSURANCE EXCHANGE RESUMPTION OF FUNC- TIONS.—The Commissioner may terminate the approval (for some or all functions) of a State-based Health Insurance Exchange under this section if the 

Commissioner determines that such Exchange no longer meets the requirements of subsection (b) or is no longer capable of carrying out such functions 

in accordance with the requirements of this subtitle. In lieu of terminating such 

approval, the Commissioner may temporarily assume some or all functions of 

the State-based Health Insurance Exchange until such time as the Commissioner determines the State-based Health Insurance Exchange meets such requirements of subsection (b) and is capable of carrying out such functions in accordance with the requirements of this subtitle. 

(3) EFFECTIVENESS.—The ceasing or termination of a State-based Health Insurance Exchange under this subsection shall be effective in such time and 

manner as the Commissioner shall specify. 

(d) RETENTION OF AUTHORITY.— (1) AUTHORITY RETAINED.—Enforcement authorities of the Commissioner shall 

be retained by the Commissioner. 

(2) DISCRETION TO RETAIN ADDITIONAL AUTHORITY.—The Commissioner may 

specify functions of the Health Insurance Exchange that— 

(A) may not be performed by a State-based Health Insurance Exchange 

under this section; or 

(B) may be performed by the Commissioner and by such a State-based 

Health Insurance Exchange. 

(e) REFERENCES.—In the case of a State-based Health Insurance Exchange, except 

as the Commissioner may otherwise specify under subsection (d), any references in 

this subtitle to the Health Insurance Exchange or to the Commissioner in the area 

in which the State-based Health Insurance Exchange operates shall be deemed a 

reference to the State-based Health Insurance Exchange and the head of such Exchange, respectively. 

(f) FUNDING.—In the case of a State-based Health Insurance Exchange, there 

shall be assistance provided for the operation of such Exchange in the form of a 

matching grant with a State share of expenditures required. 

Subtitle B—Public Health Insurance Option 

SEC. 221. ESTABLISHMENT AND ADMINISTRATION OF A PUBLIC HEALTH INSURANCE OPTION 

AS AN EXCHANGE-QUALIFIED HEALTH BENEFITS PLAN. 

(a) ESTABLISHMENT.—For years beginning with Y1, the Secretary of Health and 

Human Services (in this subtitle referred to as the ‘‘Secretary’’) shall provide for the 

offering of an Exchange-participating health benefits plan (in this division referred 

to as the ‘‘public health insurance option’’) that ensures choice, competition, and stability of affordable, high quality coverage throughout the United States in accordance with this subtitle. In designing the option, the Secretary’s primary responsibility is to create a low-cost plan without compromising quality or access to care. 

(b) OFFERING AS AN EXCHANGE-PARTICIPATING HEALTH BENEFITS PLAN.— 

(1) EXCLUSIVE TO THE EXCHANGE.—The public health insurance option shall 

only be made available through the Health Insurance Exchange. 

(2) ENSURING A LEVEL PLAYING FIELD.—Consistent with this subtitle, the public health insurance option shall comply with requirements that are applicable 

under this title to an Exchange-participating health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost sharing. 

(3) PROVISION OF BENEFIT LEVELS.—The public health insurance option— 


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(A) shall offer basic, enhanced, and premium plans; and 

(B) may offer premium-plus plans. 

(c) ADMINISTRATIVE CONTRACTING.—The Secretary may enter into contracts for 

the purpose of performing administrative functions (including functions described in 

subsection (a)(4) of section 1874A of the Social Security Act) with respect to the public health insurance option in the same manner as the Secretary may enter into contracts under subsection (a)(1) of such section. The Secretary has the same authority 

with respect to the public health insurance option as the Secretary has under subsections (a)(1) and (b) of section 1874A of the Social Security Act with respect to 

title XVIII of such Act. Contracts under this subsection shall not involve the transfer of insurance risk to such entity. 

(d) OMBUDSMAN.—The Secretary shall establish an office of the ombudsman for 

the public health insurance option which shall have duties with respect to the public 

health insurance option similar to the duties of the Medicare Beneficiary Ombudsman under section 1808(c)(2) of the Social Security Act. 

(e) DATA COLLECTION.—The Secretary shall collect such data as may be required 

to establish premiums and payment rates for the public health insurance option and 

for other purposes under this subtitle, including to improve quality and to reduce 

racial, ethnic, and other disparities in health and health care. 

(f) TREATMENT OF PUBLIC HEALTH INSURANCE OPTION.—With respect to the public 

health insurance option, the Secretary shall be treated as a QHBP offering entity 

offering an Exchange-participating health benefits plan. 

(g) ACCESS TO FEDERAL COURTS.—The provisions of Medicare (and related provisions of title II of the Social Security Act) relating to access of Medicare beneficiaries to Federal courts for the enforcement of rights under Medicare, including 

with respect to amounts in controversy, shall apply to the public health insurance 

option and individuals enrolled under such option under this title in the same manner as such provisions apply to Medicare and Medicare beneficiaries. 

SEC. 222. PREMIUMS AND FINANCING. 

(a) ESTABLISHMENT OF PREMIUMS.— (1) IN GENERAL.—The Secretary shall establish geographically-adjusted premium rates for the public health insurance option in a manner— 

(A) that complies with the premium rules established by the Commissioner under section 113 for Exchange-participating health benefit plans; 

and 

(B) at a level sufficient to fully finance the costs of— 

(i) health benefits provided by the public health insurance option; 

and 

(ii) administrative costs related to operating the public health insurance option. 

(2) CONTINGENCY MARGIN.—In establishing premium rates under paragraph 

(1), the Secretary shall include an appropriate amount for a contingency margin. 

(b) ACCOUNT.— 

(1) ESTABLISHMENT.—There is established in the Treasury of the United 

States an Account for the receipts and disbursements attributable to the operation of the public health insurance option, including the start-up funding 

under paragraph (2). Section 1854(g) of the Social Security Act shall apply to 

receipts described in the previous sentence in the same manner as such section 

applies to payments or premiums described in such section. 

(2) START-UP FUNDING.— 

(A) IN GENERAL.—In order to provide for the establishment of the public 

health insurance option there is hereby appropriated to the Secretary, out 

of any funds in the Treasury not otherwise appropriated, $2,000,000,000. In 

order to provide for initial claims reserves before the collection of premiums, there is hereby appropriated to the Secretary, out of any funds in 

the Treasury not otherwise appropriated, such sums as necessary to cover 

90 days worth of claims reserves based on projected enrollment. 

(B) AMORTIZATION OF START-UP FUNDING.—The Secretary shall provide for 

the repayment of the startup funding provided under subparagraph (A) to 

the Treasury in an amortized manner over the 10-year period beginning 

with Y1. 

(C) LIMITATION ON FUNDING.—Nothing in this section shall be construed 

as authorizing any additional appropriations to the Account, other than 

such amounts as are otherwise provided with respect to other Exchangeparticipating health benefits plans. 

SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES. 

(a) RATES ESTABLISHED BY SECRETARY.— 


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(1) IN GENERAL.—The Secretary shall establish payment rates for the public 

health insurance option for services and health care providers consistent with 

this section and may change such payment rates in accordance with section 224. 

(2) INITIAL PAYMENT RULES.— 

(A) IN GENERAL.—Except as provided in subparagraph (B) and subsection 

(b)(1), during Y1, Y2, and Y3, the Secretary shall base the payment rates 

under this section for services and providers described in paragraph (1) on 

the payment rates for similar services and providers under parts A and B 

of Medicare. 

(B) EXCEPTIONS.— 

(i) PRACTITIONERS’ SERVICES.—Payment rates for practitioners’ services otherwise established under the fee schedule under section 1848 of 

the Social Security Act shall be applied without regard to the provisions under subsection (f) of such section and the update under subsection (d)(4) under such section for a year as applied under this paragraph shall be not less than 1 percent. 

(ii) ADJUSTMENTS.—The Secretary may determine the extent to which 

Medicare adjustments applicable to base payment rates under parts A 

and B of Medicare shall apply under this subtitle. 

(3) FOR NEW SERVICES.—The Secretary shall modify payment rates described 

in paragraph (2) in order to accommodate payments for services, such as wellchild visits, that are not otherwise covered under Medicare. 

(4) PRESCRIPTION DRUGS.—Payment rates under this section for prescription 

drugs that are not paid for under part A or part B of Medicare shall be at rates 

negotiated by the Secretary. 

(b) INCENTIVES FOR PARTICIPATING PROVIDERS.— 

(1) INITIAL INCENTIVE PERIOD.— 

(A) IN GENERAL.—The Secretary shall provide, in the case of services described in subparagraph (B) furnished during Y1, Y2, and Y3, for payment 

rates that are 5 percent greater than the rates established under subsection 

(a). 

(B) SERVICES DESCRIBED.—The services described in this subparagraph 

are items and professional services, under the public health insurance option by a physician or other health care practitioner who participates in 

both Medicare and the public health insurance option. 

(C) SPECIAL RULES.—A pediatrician and any other health care practitioner who is a type of practitioner that does not typically participate in 

Medicare (as determined by the Secretary) shall also be eligible for the increased payment rates under subparagraph (A). 

(2) SUBSEQUENT PERIODS.—Beginning with Y4 and for subsequent years, the 

Secretary shall continue to use an administrative process to set such rates in 

order to promote payment accuracy, to ensure adequate beneficiary access to 

providers, and to promote affordability and the efficient delivery of medical care 

consistent with section 221(a). Such rates shall not be set at levels expected to 

increase overall medical costs under the option beyond what would be expected 

if the process under subsection (a)(2) and paragraph (1) of this subsection were 

continued. 

(3) ESTABLISHMENT OF A PROVIDER NETWORK.—Health care providers participating under Medicare are participating providers in the public health insurance option unless they opt out in a process established by the Secretary. 

(c) ADMINISTRATIVE PROCESS FOR SETTING RATES.—Chapter 5 of title 5, United 

States Code shall apply to the process for the initial establishment of payment rates 

under this section but not to the specific methodology for establishing such rates or 

the calculation of such rates. 

(d) CONSTRUCTION.—Nothing in this subtitle shall be construed as limiting the 

Secretary’s authority to correct for payments that are excessive or deficient, taking 

into account the provisions of section 221(a) and the amounts paid for similar health 

care providers and services under other Exchange-participating health benefits 

plans. 

(e) CONSTRUCTION.—Nothing in this subtitle shall be construed as affecting the 

authority of the Secretary to establish payment rates, including payments to provide 

for the more efficient delivery of services, such as the initiatives provided for under 

section 224. 

(f) LIMITATIONS ON REVIEW.—There shall be no administrative or judicial review 

of a payment rate or methodology established under this section or under section 

224. 


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SEC. 224. MODERNIZED PAYMENT INITIATIVES AND DELIVERY SYSTEM REFORM. 

(a) IN GENERAL.—For plan years beginning with Y1, the Secretary may utilize innovative payment mechanisms and policies to determine payments for items and 

services under the public health insurance option. The payment mechanisms and 

policies under this section may include patient-centered medical home and other 

care management payments, accountable care organizations, value-based purchasing, bundling of services, differential payment rates, performance or utilization 

based payments, partial capitation, and direct contracting with providers. 

(b) REQUIREMENTS FOR INNOVATIVE PAYMENTS.—The Secretary shall design and 

implement the payment mechanisms and policies under this section in a manner 

that— 

(1) seeks to— 

(A) improve health outcomes; 

(B) reduce health disparities (including racial, ethnic, and other disparities); 

(C) provide efficient and affordable care; 

(D) address geographic variation in the provision of health services; or 

(E) prevent or manage chronic illness; and 

(2) promotes care that is integrated, patient-centered, quality, and efficient. 

(c) ENCOURAGING THE USE OF HIGH VALUE SERVICES.—To the extent allowed by 

the benefit standards applied to all Exchange-participating health benefits plans, 

the public health insurance option may modify cost sharing and payment rates to 

encourage the use of services that promote health and value. 

(d) NON-UNIFORMITY PERMITTED.—Nothing in this subtitle shall prevent the Secretary from varying payments based on different payment structure models (such 

as accountable care organizations and medical homes) under the public health insurance option for different geographic areas. 

SEC. 225. PROVIDER PARTICIPATION. 

(a) IN GENERAL.—The Secretary shall establish conditions of participation for 

health care providers under the public health insurance option. 

(b) LICENSURE OR CERTIFICATION.—The Secretary shall not allow a health care 

provider to participate in the public health insurance option unless such provider 

is appropriately licensed or certified under State law. 

(c) PAYMENT TERMS FOR PROVIDERS.— 

(1) PHYSICIANS.—The Secretary shall provide for the annual participation of 

physicians under the public health insurance option, for which payment may be 

made for services furnished during the year, in one of 2 classes: 

(A) PREFERRED PHYSICIANS.—Those physicians who agree to accept the 

payment rate established under section 223 (without regard to cost-sharing) 

as the payment in full. 

(B) PARTICIPATING, NON-PREFERRED PHYSICIANS.—Those physicians who 

agree not to impose charges (in relation to the payment rate described in 

section 223 for such physicians) that exceed the ratio permitted under section 1848(g)(2)(C) of the Social Security Act. 

(2) OTHER PROVIDERS.—The Secretary shall provide for the participation (on 

an annual or other basis specified by the Secretary) of health care providers 

(other than physicians) under the public health insurance option under which 

payment shall only be available if the provider agrees to accept the payment 

rate established under section 223 (without regard to cost-sharing) as the payment in full. 

(d) EXCLUSION OF CERTAIN PROVIDERS.—The Secretary shall exclude from participation under the public health insurance option a health care provider that is excluded from participation in a Federal health care program (as defined in section 

1128B(f) of the Social Security Act). 

SEC. 226. APPLICATION OF FRAUD AND ABUSE PROVISIONS. 

Provisions of law (other than criminal law provisions) identified by the Secretary 

by regulation, in consultation with the Inspector General of the Department of 

Health and Human Services, that impose sanctions with respect to waste, fraud, 

and abuse under Medicare, such as the False Claims Act (31 U.S.C. 3729 et seq.), 

shall also apply to the public health insurance option. 


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Subtitle C—Individual Affordability Credits 

SEC. 241. AVAILABILITY THROUGH HEALTH INSURANCE EXCHANGE. 

(a) IN GENERAL.—Subject to the succeeding provisions of this subtitle, in the case 

of an affordable credit eligible individual enrolled in an Exchange-participating 

health benefits plan— 

(1) the individual shall be eligible for, in accordance with this subtitle, affordability credits consisting of— 

(A) an affordability premium credit under section 243 to be applied 

against the premium for the Exchange-participating health benefits plan in 

which the individual is enrolled; and 

(B) an affordability cost-sharing credit under section 244 to be applied as 

a reduction of the cost-sharing otherwise applicable to such plan; and 

(2) the Commissioner shall pay the QHBP offering entity that offers such plan 

from the Health Insurance Exchange Trust Fund the aggregate amount of affordability credits for all affordable credit eligible individuals enrolled in such 

plan. 

(b) APPLICATION.— 

(1) IN GENERAL.—An Exchange eligible individual may apply to the Commissioner through the Health Insurance Exchange or through another entity under 

an arrangement made with the Commissioner, in a form and manner specified 

by the Commissioner. The Commissioner through the Health Insurance Exchange or through another public entity under an arrangement made with the 

Commissioner shall make a determination as to eligibility of an individual for 

affordability credits under this subtitle. The Commissioner shall establish a 

process whereby, on the basis of information otherwise available, individuals 

may be deemed to be affordable credit eligible individuals. In carrying this subtitle, the Commissioner shall establish effective methods that ensure that individuals with limited English proficiency are able to apply for affordability credits. 

(2) USE OF STATE MEDICAID AGENCIES.—If the Commissioner determines that 

a State Medicaid agency has the capacity to make a determination of eligibility 

for affordability credits under this subtitle and under the same standards as 

used by the Commissioner, under the Medicaid memorandum of understanding 

(as defined in section 205(c)(4))— 

(A) the State Medicaid agency is authorized to conduct such determinations for any Exchange-eligible individual who requests such a determination; and 

(B) the Commissioner shall reimburse the State Medicaid agency for the 

costs of conducting such determinations. 

(3) MEDICAID SCREEN AND ENROLL OBLIGATION.—In the case of an application 

made under paragraph (1), there shall be a determination of whether the individual is a Medicaid-eligible individual. If the individual is determined to be so 

eligible, the Commissioner, through the Medicaid memorandum of understanding, shall provide for the enrollment of the individual under the State 

Medicaid plan in accordance with the Medicaid memorandum of understanding. 

In the case of such an enrollment, the State shall provide for the same periodic 

redetermination of eligibility under Medicaid as would otherwise apply if the individual had directly applied for medical assistance to the State Medicaid agency. 

(c) USE OF AFFORDABILITY CREDITS.— 

(1) IN GENERAL.—In Y1 and Y2 an affordable credit eligible individual may 

use an affordability credit only with respect to a basic plan. 

(2) FLEXIBILITY IN PLAN ENROLLMENT AUTHORIZED.—Beginning with Y3, the 

Commissioner shall establish a process to allow an affordability credit to be 

used for enrollees in enhanced or premium plans. In the case of an affordable 

credit eligible individual who enrolls in an enhanced or premium plan, the individual shall be responsible for any difference between the premium for such 

plan and the affordability credit amount otherwise applicable if the individual 

had enrolled in a basic plan. 

(d) ACCESS TO DATA.—In carrying out this subtitle, the Commissioner shall request from the Secretary of the Treasury consistent with section 6103 of the Internal Revenue Code of 1986 such information as may be required to carry out this 

subtitle. 

(e) NO CASH REBATES.—In no case shall an affordable credit eligible individual 

receive any cash payment as a result of the application of this subtitle. 


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SEC. 242. AFFORDABLE CREDIT ELIGIBLE INDIVIDUAL. 

(a) DEFINITION.— 

(1) IN GENERAL.—For purposes of this division, the term ‘‘affordable credit eligible individual’’ means, subject to subsection (b), an individual who is lawfully 

present in a State in the United States (other than as a nonimmigrant described in a subparagraph (excluding subparagraphs (K), (T), (U), and (V)) of 

section 101(a)(15) of the Immigration and Nationality Act)— 

(A) who is enrolled under an Exchange-participating health benefits plan 

and is not enrolled under such plan as an employee (or dependent of an employee) through an employer qualified health benefits plan that meets the 

requirements of section 312; 

(B) with family income below 400 percent of the Federal poverty level for 

a family of the size involved; and 

(C) who is not a Medicaid eligible individual, other than an individual described in section 202(d)(3) or an individual during a transition period 

under section 202(d)(4)(B)(ii). 

(2) TREATMENT OF FAMILY.—Except as the Commissioner may otherwise provide, members of the same family who are affordable credit eligible individuals 

shall be treated as a single affordable credit individual eligible for the applicable credit for such a family under this subtitle. 

(b) LIMITATIONS ON EMPLOYEE AND DEPENDENT DISQUALIFICATION.— 

(1) IN GENERAL.—Subject to paragraph (2), the term ‘‘affordable credit eligible 

individual’’ does not include a full-time employee of an employer if the employer 

offers the employee coverage (for the employee and dependents) as a full-time 

employee under a group health plan if the coverage and employer contribution 

under the plan meet the requirements of section 312. 

(2) EXCEPTIONS.— 

(A) FOR CERTAIN FAMILY CIRCUMSTANCES.—The Commissioner shall establish such exceptions and special rules in the case described in paragraph 

(1) as may be appropriate in the case of a divorced or separated individual 

or such a dependent of an employee who would otherwise be an affordable 

credit eligible individual. 

(B) FOR UNAFFORDABLE EMPLOYER COVERAGE.—Beginning in Y2, in the 

case of full-time employees for which the cost of the employee premium for 

coverage under a group health plan would exceed 11 percent of current 

family income (determined by the Commissioner on the basis of verifiable 

documentation and without regard to section 245), paragraph (1) shall not 

apply. 

(c) INCOME DEFINED.— 

(1) IN GENERAL.—In this title, the term ‘‘income’’ means modified adjusted 

gross income (as defined in section 59B of the Internal Revenue Code of 1986). 

(2) STUDY OF INCOME DISREGARDS.—The Commissioner shall conduct a study 

that examines the application of income disregards for purposes of this subtitle. 

Not later than the first day of Y2, the Commissioner shall submit to Congress 

a report on such study and shall include such recommendations as the Commissioner determines appropriate. 

(d) CLARIFICATION OF TREATMENT OF AFFORDABILITY CREDITS.—Affordability credits under this subtitle shall not be treated, for purposes of title IV of the Personal 

Responsibility and Work Opportunity Reconciliation Act of 1996, to be a benefit provided under section 403 of such title. 

SEC. 243. AFFORDABILITY PREMIUM CREDIT. 

(a) IN GENERAL.—The affordability premium credit under this section for an affordable credit eligible individual enrolled in an Exchange-participating health benefits plan is in an amount equal to the amount (if any) by which the premium for 

the plan (or, if less, the reference premium amount specified in subsection (c)), exceeds the affordable premium amount specified in subsection (b) for the individual. 

(b) AFFORDABLE PREMIUM AMOUNT.— 

(1) IN GENERAL.—The affordable premium amount specified in this subsection 

for an individual for monthly premium in a plan year shall be equal to 1⁄12 of 

the product of— 

(A) the premium percentage limit specified in paragraph (2) for the individual based upon the individual’s family income for the plan year; and 

(B) the individual’s family income for such plan year. 

(2) PREMIUM PERCENTAGE LIMITS BASED ON TABLE.—The Commissioner shall 

establish premium percentage limits so that for individuals whose family income is within an income tier specified in the table in subsection (d) such percentage limits shall increase, on a sliding scale in a linear manner, from the 


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initial premium percentage to the final premium percentage specified in such 

table for such income tier. 

(c) REFERENCE PREMIUM AMOUNT.—The reference premium amount specified in 

this subsection for a plan year for an individual in a premium rating area is equal 

to the average premium for the 3 basic plans in the area for the plan year with 

the lowest premium levels. In computing such amount the Commissioner may exclude plans with extremely limited enrollments. 

(d) TABLE OF PREMIUM PERCENTAGE LIMITS AND ACTUARIAL VALUE PERCENTAGES

BASED ON INCOME TIER.— (1) IN GENERAL.—For purposes of this subtitle, the table specified in this subsection is as follows: 

In the case of family income (expressed as a 

percent of FPL) within the following income 

tier: 

The initial premium percentage is— The final premium percentage 

is— 

The actuarial value percentage is— 

133% through 150% 1.5% 3% 97% 

150% through 200% 3% 5% 93% 

200% through 250% 5% 7% 85% 

250% through 300% 7% 9% 78% 

300% through 350% 9% 10% 72% 

350% through 400% 10% 11% 70% 

(2) SPECIAL RULES.—For purposes of applying the table under paragraph (1)— 

(A) FOR LOWEST LEVEL OF INCOME.—In the case of an individual with income that does not exceed 133 percent of FPL, the individual shall be considered to have income that is 133% of FPL. 

(B) APPLICATION OF HIGHER ACTUARIAL VALUE PERCENTAGE AT TIER TRANSITION POINTS.—If two actuarial value percentages may be determined with 

respect to an individual, the actuarial value percentage shall be the higher 

of such percentages. 

SEC. 244. AFFORDABILITY COST-SHARING CREDIT. 

(a) IN GENERAL.—The affordability cost-sharing credit under this section for an 

affordable credit eligible individual enrolled in an Exchange-participating health 

benefits plan is in the form of the cost-sharing reduction described in subsection (b) 

provided under this section for the income tier in which the individual is classified 

based on the individual’s family income. 

(b) COST-SHARING REDUCTIONS.—The Commissioner shall specify a reduction in 

cost-sharing amounts and the annual limitation on cost-sharing specified in section 

122(c)(2)(B) under a basic plan for each income tier specified in the table under section 243(d), with respect to a year, in a manner so that, as estimated by the Commissioner, the actuarial value of the coverage with such reduced cost-sharing 

amounts (and the reduced annual cost-sharing limit) is equal to the actuarial value 

percentage (specified in the table under section 243(d) for the income tier involved) 

of the full actuarial value if there were no cost-sharing imposed under the plan. 

(c) DETERMINATION AND PAYMENT OF COST-SHARING AFFORDABILITY CREDIT.—In 

the case of an affordable credit eligible individual in a tier enrolled in an Exchangeparticipating health benefits plan offered by a QHBP offering entity, the Commissioner shall provide for payment to the offering entity of an amount equivalent to 

the increased actuarial value of the benefits under the plan provided under section 

203(c)(2)(B) resulting from the reduction in cost-sharing described in subsection (b). 

SEC. 245. INCOME DETERMINATIONS. 

(a) IN GENERAL.—In applying this subtitle for an affordability credit for an individual for a plan year, the individual’s income shall be the income (as defined in 

section 242(c)) for the individual for the most recent taxable year (as determined 

in accordance with rules of the Commissioner). The Federal poverty level applied 

shall be such level in effect as of the date of the application. 

(b) PROGRAM INTEGRITY; INCOME VERIFICATION PROCEDURES.— 

(1) PROGRAM INTEGRITY.—The Commissioner shall take such steps as may be 

appropriate to ensure the accuracy of determinations and redeterminations 

under this subtitle. 

(2) INCOME VERIFICATION.— 

(A) IN GENERAL.—Upon an initial application of an individual for an affordability credit under this subtitle (or in applying section 242(b)) or upon 

an application for a change in the affordability credit based upon a significant change in family income described in subparagraph (A)— 

(i) the Commissioner shall request from the Secretary of the Treasury the disclosure to the Commissioner of such information as may be 

permitted to verify the information contained in such application; and 


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(ii) the Commissioner shall use the information so disclosed to verify 

such information. 

(B) ALTERNATIVE PROCEDURES.—The Commissioner shall establish procedures for the verification of income for purposes of this subtitle if no income 

tax return is available for the most recent completed tax year. 

(c) SPECIAL RULES.— 

(1) CHANGES IN INCOME AS A PERCENT OF FPL.—In the case that an individual’s income (expressed as a percentage of the Federal poverty level for a family 

of the size involved) for a plan year is expected (in a manner specified by the 

Commissioner) to be significantly different from the income (as so expressed) 

used under subsection (a), the Commissioner shall establish rules requiring an 

individual to report, consistent with the mechanism established under paragraph (2), significant changes in such income (including a significant change in 

family composition) to the Commissioner and requiring the substitution of such 

income for the income otherwise applicable. 

(2) REPORTING OF SIGNIFICANT CHANGES IN INCOME.—The Commissioner shall 

establish rules under which an individual determined to be an affordable credit 

eligible individual would be required to inform the Commissioner when there 

is a significant change in the family income of the individual (expressed as a 

percentage of the FPL for a family of the size involved) and of the information 

regarding such change. Such mechanism shall provide for guidelines that specify the circumstances that qualify as a significant change, the verifiable information required to document such a change, and the process for submission of such 

information. If the Commissioner receives new information from an individual 

regarding the family income of the individual, the Commissioner shall provide 

for a redetermination of the individual’s eligibility to be an affordable credit eligible individual. 

(3) TRANSITION FOR CHIP.—In the case of a child described in section 

202(d)(2), the Commissioner shall establish rules under which the family income of the child is deemed to be no greater than the family income of the child 

as most recently determined before Y1 by the State under title XXI of the Social 

Security Act. 

(4) STUDY OF GEOGRAPHIC VARIATION IN APPLICATION OF FPL.—The Commissioner shall examine the feasibility and implication of adjusting the application 

of the Federal poverty level under this subtitle for different geographic areas 

so as to reflect the variations in cost-of-living among different areas within the 

United States. If the Commissioner determines that an adjustment is feasible, 

the study should include a methodology to make such an adjustment. Not later 

than the first day of Y2, the Commissioner shall submit to Congress a report 

on such study and shall include such recommendations as the Commissioner determines appropriate. 

(d) PENALTIES FOR MISREPRESENTATION.—In the case of an individual intentionally misrepresents family income or the individual fails (without regard to intent) to disclose to the Commissioner a significant change in family income under 

subsection (c) in a manner that results in the individual becoming an affordable 

credit eligible individual when the individual is not or in the amount of the affordability credit exceeding the correct amount— 

(1) the individual is liable for repayment of the amount of the improper affordability credit; ;and 

(2) in the case of such an intentional misrepresentation or other egregious circumstances specified by the Commissioner, the Commissioner may impose an 

additional penalty. 

SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED ALIENS. 

Nothing in this subtitle shall allow Federal payments for affordability credits on 

behalf of individuals who are not lawfully present in the United States. 

TITLE III—SHARED RESPONSIBILITY 

Subtitle A—Individual Responsibility 

SEC. 301. INDIVIDUAL RESPONSIBILITY. 

For an individual’s responsibility to obtain acceptable coverage, see section 59B 

of the Internal Revenue Code of 1986 (as added by section 401 of this Act). 


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Subtitle B—Employer Responsibility 

PART 1—HEALTH COVERAGE PARTICIPATION 

REQUIREMENTS 

SEC. 311. HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

An employer meets the requirements of this section if such employer does all of 

the following: 

(1) OFFER OF COVERAGE.—The employer offers each employee individual and 

family coverage under a qualified health benefits plan (or under a current employment-based health plan (within the meaning of section 102(b))) in accordance with section 312. 

(2) CONTRIBUTION TOWARDS COVERAGE.—If an employee accepts such offer of 

coverage, the employer makes timely contributions towards such coverage in accordance with section 312. 

(3) CONTRIBUTION IN LIEU OF COVERAGE.—Beginning with Y2, if an employee 

declines such offer but otherwise obtains coverage in an Exchange-participating 

health benefits plan (other than by reason of being covered by family coverage 

as a spouse or dependent of the primary insured), the employer shall make a 

timely contribution to the Health Insurance Exchange with respect to each such 

employee in accordance with section 313. 

SEC. 312. EMPLOYER RESPONSIBILITY TO CONTRIBUTE TOWARDS EMPLOYEE AND DEPENDENT COVERAGE. 

(a) IN GENERAL.—An employer meets the requirements of this section with respect 

to an employee if the following requirements are met: 

(1) OFFERING OF COVERAGE.—The employer offers the coverage described in 

section 311(1) either through an Exchange-participating health benefits plan or 

other than through such a plan. 

(2) EMPLOYER REQUIRED CONTRIBUTION.—The employer timely pays to the 

issuer of such coverage an amount not less than the employer required contribution specified in subsection (b) for such coverage. 

(3) PROVISION OF INFORMATION.—The employer provides the Health Choices 

Commissioner, the Secretary of Labor, the Secretary of Health and Human 

Services, and the Secretary of the Treasury, as applicable, with such information as the Commissioner may require to ascertain compliance with the requirements of this section. 

(4) AUTOENROLLMENT OF EMPLOYEES.—The employer provides for 

autoenrollment of the employee in accordance with subsection (c). 

(b) REDUCTION OF EMPLOYEE PREMIUMS THROUGH MINIMUM EMPLOYER CON- TRIBUTION.— (1) FULL-TIME EMPLOYEES.—The minimum employer contribution described in 

this subsection for coverage of a full-time employee (and, if any, the employee’s 

spouse and qualifying children (as defined in section 152(c) of the Internal Revenue Code of 1986) under a qualified health benefits plan (or current employment-based health plan) is equal to— 

(A) in case of individual coverage, not less than 72.5 percent of the applicable premium (as defined in section 4980B(f)(4) of such Code, subject to 

paragraph (2)) of the lowest cost plan offered by the employer that is a 

qualified health benefits plan (or is such current employment-based health 

plan); and 

(B) in the case of family coverage which includes coverage of such spouse 

and children, not less 65 percent of such applicable premium of such lowest 

cost plan. 

(2) APPLICABLE PREMIUM FOR EXCHANGE COVERAGE.—In this subtitle, the 

amount of the applicable premium of the lowest cost plan with respect to coverage of an employee under an Exchange-participating health benefits plan is 

the reference premium amount under section 243(c) for individual coverage (or, 

if elected, family coverage) for the premium rating area in which the individual 

or family resides. 

(3) MINIMUM EMPLOYER CONTRIBUTION FOR EMPLOYEES OTHER THAN FULLTIME EMPLOYEES.—In the case of coverage for an employee who is not a fulltime employee, the amount of the minimum employer contribution under this 

subsection shall be a proportion (as determined in accordance with rules of the 

Health Choices Commissioner, the Secretary of Labor, the Secretary of Health 

and Human Services, and the Secretary of the Treasury, as applicable) of the 

minimum employer contribution under this subsection with respect to a fulltime employee that reflects the proportion of— 


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(A) the average weekly hours of employment of the employee by the employer, to 

(B) the minimum weekly hours specified by the Commissioner for an employee to be a full-time employee. 

(4) SALARY REDUCTIONS NOT TREATED AS EMPLOYER CONTRIBUTIONS.—For purposes of this section, any contribution on behalf of an employee with respect to 

which there is a corresponding reduction in the compensation of the employee 

shall not be treated as an amount paid by the employer. 

(c) AUTOMATIC ENROLLMENT FOR EMPLOYER SPONSORED HEALTH BENEFITS.— (1) IN GENERAL.—The requirement of this subsection with respect to an employer and an employee is that the employer automatically enroll such employee 

into the employment-based health benefits plan for individual coverage under 

the plan option with the lowest applicable employee premium. 

(2) OPT-OUT.—In no case may an employer automatically enroll an employee 

in a plan under paragraph (1) if such employee makes an affirmative election 

to opt out of such plan or to elect coverage under an employment-based health 

benefits plan offered by such employer. An employer shall provide an employee 

with a 30-day period to make such an affirmative election before the employer 

may automatically enroll the employee in such a plan. 

(3) NOTICE REQUIREMENTS.— 

(A) IN GENERAL.—Each employer described in paragraph (1) who automatically enrolls an employee into a plan as described in such paragraph 

shall provide the employees, within a reasonable period before the beginning of each plan year (or, in the case of new employees, within a reasonable period before the end of the enrollment period for such a new employee), written notice of the employees’ rights and obligations relating to 

the automatic enrollment requirement under such paragraph. Such notice 

must be comprehensive and understood by the average employee to whom 

the automatic enrollment requirement applies. 

(B) INCLUSION OF SPECIFIC INFORMATION.—The written notice under subparagraph (A) must explain an employee’s right to opt out of being automatically enrolled in a plan and in the case that more than one level of benefits or employee premium level is offered by the employer involved, the notice must explain which level of benefits and employee premium level the 

employee will be automatically enrolled in the absence of an affirmative 

election by the employee. 

SEC. 313. EMPLOYER CONTRIBUTIONS IN LIEU OF COVERAGE. 

(a) IN GENERAL.—A contribution is made in accordance with this section with respect to an employee if such contribution is equal to an amount equal to 8 percent 

of the average wages paid by the employer during the period of enrollment (determined by taking into account all employees of the employer and in such manner as 

the Commissioner provides, including rules providing for the appropriate aggregation of related employers). Any such contribution— 

(1) shall be paid to the Health Choices Commissioner for deposit into the 

Health Insurance Exchange Trust Fund, and 

(2) shall not be applied against the premium of the employee under the Exchange-participating health benefits plan in which the employee is enrolled. 

(b) SPECIAL RULES FOR SMALL EMPLOYERS.— 

(1) IN GENERAL.—In the case of any employer who is a small employer for any 

calendar year, subsection (a) shall be applied by substituting the applicable percentage determined in accordance with the following table for ‘‘8 percent’’: 

If the annual payroll of such employer for the preceding calendar year: The applicable percentage is: 

Does not exceed $250,000 ..................................................................................... 0 percent 

Exceeds $250,000, but does not exceed $300,000 ............................................... 2 percent 

Exceeds $300,000, but does not exceed $350,000 ............................................... 4 percent 

Exceeds $350,000, but does not exceed $400,000 ............................................... 6 percent 

(2) SMALL EMPLOYER.—For purposes of this subsection, the term ‘‘small employer’’ means any employer for any calendar year if the annual payroll of such 

employer for the preceding calendar year does not exceed $400,000. 

(3) ANNUAL PAYROLL.—For purposes of this paragraph, the term ‘‘annual payroll’’ means, with respect to any employer for any calendar year, the aggregate 

wages paid by the employer during such calendar year. 

(4) AGGREGATION RULES.—Related employers and predecessors shall be treated as a single employer for purposes of this subsection. 

SEC. 314. AUTHORITY RELATED TO IMPROPER STEERING. 

The Health Choices Commissioner (in coordination with the Secretary of Labor, 

the Secretary of Health and Human Services, and the Secretary of the Treasury) 


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shall have authority to set standards for determining whether employers or insurers 

are undertaking any actions to affect the risk pool within the Health Insurance Exchange by inducing individuals to decline coverage under a qualified health benefits 

plan (or current employment-based health plan (within the meaning of section 

102(b)) offered by the employer and instead to enroll in an Exchange-participating 

health benefits plan. An employer violating such standards shall be treated as not 

meeting the requirements of this section. 

PART 2—SATISFACTION OF HEALTH COVERAGE 

PARTICIPATION REQUIREMENTS 

SEC. 321. SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS UNDER 

THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. 

(a) IN GENERAL.—Subtitle B of title I of the Employee Retirement Income Security 

Act of 1974 is amended by adding at the end the following new part: 

‘‘PART 8—NATIONAL HEALTH COVERAGE 

PARTICIPATION REQUIREMENTS 

‘‘SEC. 801. ELECTION OF EMPLOYER TO BE SUBJECT TO NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

‘‘(a) IN GENERAL.—An employer may make an election with the Secretary to be 

subject to the health coverage participation requirements. 

‘‘(b) TIME AND MANNER.—An election under subsection (a) may be made at such 

time and in such form and manner as the Secretary may prescribe. 

‘‘SEC. 802. TREATMENT OF COVERAGE RESULTING FROM ELECTION. 

‘‘(a) IN GENERAL.—If an employer makes an election to the Secretary under section 801— 

‘‘(1) such election shall be treated as the establishment and maintenance of 

a group health plan (as defined in section 733(a)) for purposes of this title, subject to section 151 of the America’s Affordable Health Choices Act of 2009, and 

‘‘(2) the health coverage participation requirements shall be deemed to be included as terms and conditions of such plan. 

‘‘(b) PERIODIC INVESTIGATIONS TO DISCOVER NONCOMPLIANCE.—The Secretary 

shall regularly audit a representative sampling of employers and group health plans 

and conduct investigations and other activities under section 504 with respect to 

such sampling of plans so as to discover noncompliance with the health coverage 

participation requirements in connection with such plans. The Secretary shall communicate findings of noncompliance made by the Secretary under this subsection to 

the Secretary of the Treasury and the Health Choices Commissioner. The Secretary 

shall take such timely enforcement action as appropriate to achieve compliance. 

‘‘SEC. 803. HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

‘‘For purposes of this part, the term ‘health coverage participation requirements’ 

means the requirements of part 1 of subtitle B of title III of division A of America’s 

Affordable Health Choices Act of 2009 (as in effect on the date of the enactment 

of such Act). 

‘‘SEC. 804. RULES FOR APPLYING REQUIREMENTS. 

‘‘(a) AFFILIATED GROUPS.—In the case of any employer which is part of a group 

of employers who are treated as a single employer under subsection (b), (c), (m), or 

(o) of section 414 of the Internal Revenue Code of 1986, the election under section 

801 shall be made by such employer as the Secretary may provide. Any such election, once made, shall apply to all members of such group. 

‘‘(b) SEPARATE ELECTIONS.—Under regulations prescribed by the Secretary, separate elections may be made under section 801 with respect to— 

‘‘(1) separate lines of business, and 

‘‘(2) full-time employees and employees who are not full-time employees. 

‘‘SEC. 805. TERMINATION OF ELECTION IN CASES OF SUBSTANTIAL NONCOMPLIANCE. 

‘‘The Secretary may terminate the election of any employer under section 801 if 

the Secretary (in coordination with the Health Choices Commissioner) determines 

that such employer is in substantial noncompliance with the health coverage participation requirements and shall refer any such determination to the Secretary of the 

Treasury as appropriate. 


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‘‘SEC. 806. REGULATIONS. 

‘‘The Secretary may promulgate such regulations as may be necessary or appropriate to carry out the provisions of this part, in accordance with section 324(a) of 

the America’s Affordable Health Choices Act of 2009. The Secretary may promulgate 

any interim final rules as the Secretary determines are appropriate to carry out this 

part.’’. 

(b) ENFORCEMENT OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS.—Section 

502 of such Act (29 U.S.C. 1132) is amended— 

(1) in subsection (a)(6), by striking ‘‘paragraph’’ and all that follows through 

‘‘subsection (c)’’ and inserting ‘‘paragraph (2), (4), (5), (6), (7), (8), (9), (10), or 

(11) of subsection (c)’’; and 

(2) in subsection (c), by redesignating the second paragraph (10) as paragraph 

(12) and by inserting after the first paragraph (10) the following new paragraph: 

‘‘(11) HEALTH COVERAGE PARTICIPATION REQUIREMENTS.— 

‘‘(A) CIVIL PENALTIES.—In the case of any employer who fails (during any 

period with respect to which an election under section 801(a) is in effect) 

to satisfy the health coverage participation requirements with respect to 

any employee, the Secretary may assess a civil penalty against the employer of $100 for each day in the period beginning on the date such failure 

first occurs and ending on the date such failure is corrected. 

‘‘(B) HEALTH COVERAGE PARTICIPATION REQUIREMENTS.—For purposes of 

this paragraph, the term ‘health coverage participation requirements’ has 

the meaning provided in section 803. 

‘‘(C) LIMITATIONS ON AMOUNT OF PENALTY.— 

‘‘(i) PENALTY NOT TO APPLY WHERE FAILURE NOT DISCOVERED EXERCISING REASONABLE DILIGENCE.—No penalty shall be assessed under 

subparagraph (A) with respect to any failure during any period for 

which it is established to the satisfaction of the Secretary that the employer did not know, or exercising reasonable diligence would not have 

known, that such failure existed. 

‘‘(ii) PENALTY NOT TO APPLY TO FAILURES CORRECTED WITHIN 30

DAYS.—No penalty shall be assessed under subparagraph (A) with respect to any failure if— 

‘‘(I) such failure was due to reasonable cause and not to willful 

neglect, and 

‘‘(II) such failure is corrected during the 30-day period beginning 

on the 1st date that the employer knew, or exercising reasonable 

diligence would have known, that such failure existed. 

‘‘(iii) OVERALL LIMITATION FOR UNINTENTIONAL FAILURES.—In the case 

of failures which are due to reasonable cause and not to willful neglect, 

the penalty assessed under subparagraph (A) for failures during any 1- 

year period shall not exceed the amount equal to the lesser of— 

‘‘(I) 10 percent of the aggregate amount paid or incurred by the 

employer (or predecessor employer) during the preceding 1-year period for group health plans, or 

‘‘(II) $500,000. 

‘‘(D) ADVANCE NOTIFICATION OF FAILURE PRIOR TO ASSESSMENT.—Before a 

reasonable time prior to the assessment of any penalty under this paragraph with respect to any failure by an employer, the Secretary shall inform the employer in writing of such failure and shall provide the employer 

information regarding efforts and procedures which may be undertaken by 

the employer to correct such failure. 

‘‘(E) COORDINATION WITH EXCISE TAX.—Under regulations prescribed in 

accordance with section 324 of the America’s Affordable Health Choices Act 

of 2009, the Secretary and the Secretary of the Treasury shall coordinate 

the assessment of penalties under this section in connection with failures 

to satisfy health coverage participation requirements with the imposition of 

excise taxes on such failures under section 4980H(b) of the Internal Revenue Code of 1986 so as to avoid duplication of penalties with respect to 

such failures. 

‘‘(F) DEPOSIT OF PENALTY COLLECTED.—Any amount of penalty collected 

under this paragraph shall be deposited as miscellaneous receipts in the 

Treasury of the United States.’’. 

(c) CLERICAL AMENDMENTS.—The table of contents in section 1 of such Act is 

amended by inserting after the item relating to section 734 the following new items: 

‘‘PART 8—NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS

‘‘Sec. 801. Election of employer to be subject to national health coverage participation requirements. 


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‘‘Sec. 802. Treatment of coverage resulting from election. 

‘‘Sec. 803. Health coverage participation requirements. 

‘‘Sec. 804. Rules for applying requirements. 

‘‘Sec. 805. Termination of election in cases of substantial noncompliance. 

‘‘Sec. 806. Regulations.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to periods beginning after December 31, 2012. 

SEC. 322. SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS UNDER 

THE INTERNAL REVENUE CODE OF 1986. 

(a) FAILURE TO ELECT, OR SUBSTANTIALLY COMPLY WITH, HEALTH COVERAGE PARTICIPATION REQUIREMENTS.—For employment tax on employers who fail to elect, or 

substantially comply with, the health coverage participation requirements described 

in part 1, see section 3111(c) of the Internal Revenue Code of 1986 (as added by 

section 412 of this Act). 

(b) OTHER FAILURES.—For excise tax on other failures of electing employers to 

comply with such requirements, see section 4980H of the Internal Revenue Code of 

1986 (as added by section 411 of this Act). 

SEC. 323. SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS UNDER 

THE PUBLIC HEALTH SERVICE ACT. 

(a) IN GENERAL.—Part C of title XXVII of the Public Health Service Act is amended by adding at the end the following new section: 

‘‘SEC. 2793. NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

‘‘(a) ELECTION OF EMPLOYER TO BE SUBJECT TO NATIONAL HEALTH COVERAGE

PARTICIPATION REQUIREMENTS.— 

‘‘(1) IN GENERAL.—An employer may make an election with the Secretary to 

be subject to the health coverage participation requirements. 

‘‘(2) TIME AND MANNER.—An election under paragraph (1) may be made at 

such time and in such form and manner as the Secretary may prescribe. 

‘‘(b) TREATMENT OF COVERAGE RESULTING FROM ELECTION.— 

‘‘(1) IN GENERAL.—If an employer makes an election to the Secretary under 

subsection (a)— 

‘‘(A) such election shall be treated as the establishment and maintenance 

of a group health plan for purposes of this title, subject to section 151 of 

the America’s Affordable Health Choices Act of 2009, and 

‘‘(B) the health coverage participation requirements shall be deemed to be 

included as terms and conditions of such plan. 

‘‘(2) PERIODIC INVESTIGATIONS TO DETERMINE COMPLIANCE WITH HEALTH COVERAGE PARTICIPATION REQUIREMENTS.—The Secretary shall regularly audit a 

representative sampling of employers and conduct investigations and other activities with respect to such sampling of employers so as to discover noncompliance with the health coverage participation requirements in connection with 

such employers (during any period with respect to which an election under subsection (a) is in effect). The Secretary shall communicate findings of noncompliance made by the Secretary under this subsection to the Secretary of the Treasury and the Health Choices Commissioner. The Secretary shall take such timely 

enforcement action as appropriate to achieve compliance. 

‘‘(c) HEALTH COVERAGE PARTICIPATION REQUIREMENTS.—For purposes of this section, the term ‘health coverage participation requirements’ means the requirements 

of part 1 of subtitle B of title III of division A of the America’s Affordable Health 

Choices Act of 2009 (as in effect on the date of the enactment of this section). 

‘‘(d) SEPARATE ELECTIONS.—Under regulations prescribed by the Secretary, separate elections may be made under subsection (a) with respect to full-time employees 

and employees who are not full-time employees. 

‘‘(e) TERMINATION OF ELECTION IN CASES OF SUBSTANTIAL NONCOMPLIANCE.—The 

Secretary may terminate the election of any employer under subsection (a) if the 

Secretary (in coordination with the Health Choices Commissioner) determines that 

such employer is in substantial noncompliance with the health coverage participation requirements and shall refer any such determination to the Secretary of the 

Treasury as appropriate. 

‘‘(f) ENFORCEMENT OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS.— 

‘‘(1) CIVIL PENALTIES.—In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee, the Secretary may assess a civil penalty against the employer of $100 

for each day in the period beginning on the date such failure first occurs and 

ending on the date such failure is corrected. 

‘‘(2) LIMITATIONS ON AMOUNT OF PENALTY.— 


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‘‘(A) PENALTY NOT TO APPLY WHERE FAILURE NOT DISCOVERED EXERCISING

REASONABLE DILIGENCE.—No penalty shall be assessed under paragraph (1) 

with respect to any failure during any period for which it is established to 

the satisfaction of the Secretary that the employer did not know, or exercising reasonable diligence would not have known, that such failure existed. 

‘‘(B) PENALTY NOT TO APPLY TO FAILURES CORRECTED WITHIN 30 DAYS.— 

No penalty shall be assessed under paragraph (1) with respect to any failure if— 

‘‘(i) such failure was due to reasonable cause and not to willful neglect, and 

‘‘(ii) such failure is corrected during the 30-day period beginning on 

the 1st date that the employer knew, or exercising reasonable diligence 

would have known, that such failure existed. 

‘‘(C) OVERALL LIMITATION FOR UNINTENTIONAL FAILURES.—In the case of 

failures which are due to reasonable cause and not to willful neglect, the 

penalty assessed under paragraph (1) for failures during any 1-year period 

shall not exceed the amount equal to the lesser of— 

‘‘(i) 10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for 

group health plans, or 

‘‘(ii) $500,000. 

‘‘(3) ADVANCE NOTIFICATION OF FAILURE PRIOR TO ASSESSMENT.—Before a reasonable time prior to the assessment of any penalty under paragraph (1) with 

respect to any failure by an employer, the Secretary shall inform the employer 

in writing of such failure and shall provide the employer information regarding 

efforts and procedures which may be undertaken by the employer to correct 

such failure. 

‘‘(4) ACTIONS TO ENFORCE ASSESSMENTS.—The Secretary may bring a civil action in any District Court of the United States to collect any civil penalty under 

this subsection. 

‘‘(5) COORDINATION WITH EXCISE TAX.—Under regulations prescribed in accordance with section 324 of the America’s Affordable Health Choices Act of 2009, 

the Secretary and the Secretary of the Treasury shall coordinate the assessment 

of penalties under paragraph (1) in connection with failures to satisfy health 

coverage participation requirements with the imposition of excise taxes on such 

failures under section 4980H(b) of the Internal Revenue Code of 1986 so as to 

avoid duplication of penalties with respect to such failures. 

‘‘(6) DEPOSIT OF PENALTY COLLECTED.—Any amount of penalty collected under 

this subsection shall be deposited as miscellaneous receipts in the Treasury of 

the United States. 

‘‘(g) REGULATIONS.—The Secretary may promulgate such regulations as may be 

necessary or appropriate to carry out the provisions of this section, in accordance 

with section 324(a) of the America’s Affordable Health Choices Act of 2009. The Secretary may promulgate any interim final rules as the Secretary determines are appropriate to carry out this section.’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to periods beginning after December 31, 2012. 

SEC. 324. ADDITIONAL RULES RELATING TO HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

(a) ASSURING COORDINATION.—The officers consisting of the Secretary of Labor, 

the Secretary of the Treasury, the Secretary of Health and Human Services, and 

the Health Choices Commissioner shall ensure, through the execution of an interagency memorandum of understanding among such officers, that— 

(1) regulations, rulings, and interpretations issued by such officers relating to 

the same matter over which two or more of such officers have responsibility 

under subpart B of part 6 of subtitle B of title I of the Employee Retirement 

Income Security Act of 1974, section 4980H of the Internal Revenue Code of 

1986, and section 2793 of the Public Health Service Act are administered so as 

to have the same effect at all times; and 

(2) coordination of policies relating to enforcing the same requirements 

through such officers in order to have a coordinated enforcement strategy that 

avoids duplication of enforcement efforts and assigns priorities in enforcement. 

(b) MULTIEMPLOYER PLANS.—In the case of a group health plan that is a multiemployer plan (as defined in section 3(37) of the Employee Retirement Income Security 

Act of 1974), the regulations prescribed in accordance with subsection (a) by the officers referred to in subsection (a) shall provide for the application of the health coverage participation requirements to the plan sponsor and contributing sponsors of 

such plan. 


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TITLE IV—AMENDMENTS TO INTERNAL 

REVENUE CODE OF 1986 

Subtitle A—Shared Responsibility 

PART 1—INDIVIDUAL RESPONSIBILITY 

SEC. 401. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE. 

(a) IN GENERAL.—Subchapter A of chapter 1 of the Internal Revenue Code of 1986 

is amended by adding at the end the following new part: 

‘‘PART VIII—HEALTH CARE RELATED TAXES 

‘‘SUBPART A. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE. 

‘‘Subpart A—Tax on Individuals Without Acceptable Health 

Care Coverage 

‘‘Sec. 59B. Tax on individuals without acceptable health care coverage. 

‘‘SEC. 59B. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE. 

‘‘(a) TAX IMPOSED.—In the case of any individual who does not meet the requirements of subsection (d) at any time during the taxable year, there is hereby imposed 

a tax equal to 2.5 percent of the excess of— 

‘‘(1) the taxpayer’s modified adjusted gross income for the taxable year, over 

‘‘(2) the amount of gross income specified in section 6012(a)(1) with respect 

to the taxpayer. 

‘‘(b) LIMITATIONS.— 

‘‘(1) TAX LIMITED TO AVERAGE PREMIUM.— 

‘‘(A) IN GENERAL.—The tax imposed under subsection (a) with respect to 

any taxpayer for any taxable year shall not exceed the applicable national 

average premium for such taxable year. 

‘‘(B) APPLICABLE NATIONAL AVERAGE PREMIUM.— 

‘‘(i) IN GENERAL.—For purposes of subparagraph (A), the ‘applicable 

national average premium’ means, with respect to any taxable year, the 

average premium (as determined by the Secretary, in coordination with 

the Health Choices Commissioner) for self-only coverage under a basic 

plan which is offered in a Health Insurance Exchange for the calendar 

year in which such taxable year begins. 

‘‘(ii) FAILURE TO PROVIDE COVERAGE FOR MORE THAN ONE INDIVIDUAL.—In the case of any taxpayer who fails to meet the requirements of subsection (e) with respect to more than one individual during 

the taxable year, clause (i) shall be applied by substituting ‘family coverage’ for ‘self-only coverage’. 

‘‘(2) PRORATION FOR PART YEAR FAILURES.—The tax imposed under subsection 

(a) with respect to any taxpayer for any taxable year shall not exceed the 

amount which bears the same ratio to the amount of tax so imposed (determined without regard to this paragraph and after application of paragraph (1)) 

as— 

‘‘(A) the aggregate periods during such taxable year for which such individual failed to meet the requirements of subsection (d), bears to 

‘‘(B) the entire taxable year. 

‘‘(c) EXCEPTIONS.— 

‘‘(1) DEPENDENTS.—Subsection (a) shall not apply to any individual for any 

taxable year if a deduction is allowable under section 151 with respect to such 

individual to another taxpayer for any taxable year beginning in the same calendar year as such taxable year. 

‘‘(2) NONRESIDENT ALIENS.—Subsection (a) shall not apply to any individual 

who is a nonresident alien. 

‘‘(3) INDIVIDUALS RESIDING OUTSIDE UNITED STATES.—Any qualified individual 

(as defined in section 911(d)) (and any qualifying child residing with such individual) shall be treated for purposes of this section as covered by acceptable coverage during the period described in subparagraph (A) or (B) of section 

911(d)(1), whichever is applicable. 


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‘‘(4) INDIVIDUALS RESIDING IN POSSESSIONS OF THE UNITED STATES.—Any individual who is a bona fide resident of any possession of the United States (as 

determined under section 937(a)) for any taxable year (and any qualifying child 

residing with such individual) shall be treated for purposes of this section as 

covered by acceptable coverage during such taxable year. 

‘‘(5) RELIGIOUS CONSCIENCE EXEMPTION.— 

‘‘(A) IN GENERAL.—Subsection (a) shall not apply to any individual (and 

any qualifying child residing with such individual) for any period if such 

individual has in effect an exemption which certifies that such individual 

is a member of a recognized religious sect or division thereof described in 

section 1402(g)(1) and an adherent of established tenets or teachings of 

such sect or division as described in such section. 

‘‘(B) EXEMPTION.—An application for the exemption described in subparagraph (A) shall be filed with the Secretary at such time and in such form 

and manner as the Secretary may prescribe. Any such exemption granted 

by the Secretary shall be effective for such period as the Secretary determines appropriate. 

‘‘(d) ACCEPTABLE COVERAGE REQUIREMENT.— 

‘‘(1) IN GENERAL.—The requirements of this subsection are met with respect 

to any individual for any period if such individual (and each qualifying child 

of such individual) is covered by acceptable coverage at all times during such 

period. 

‘‘(2) ACCEPTABLE COVERAGE.—For purposes of this section, the term ‘acceptable coverage’ means any of the following: 

‘‘(A) QUALIFIED HEALTH BENEFITS PLAN COVERAGE.—Coverage under a 

qualified health benefits plan (as defined in section 100(c) of the America’s 

Affordable Health Choices Act of 2009). 

‘‘(B) GRANDFATHERED HEALTH INSURANCE COVERAGE; COVERAGE UNDER

GRANDFATHERED EMPLOYMENT-BASED HEALTH PLAN.—Coverage under a 

grandfathered health insurance coverage (as defined in subsection (a) of 

section 102 of the America’s Affordable Health Choices Act of 2009) or 

under a current employment-based health plan (within the meaning of subsection (b) of such section). 

‘‘(C) MEDICARE.—Coverage under part A of title XVIII of the Social Security Act. 

‘‘(D) MEDICAID.—Coverage for medical assistance under title XIX of the 

Social Security Act. 

‘‘(E) MEMBERS OF THE ARMED FORCES AND DEPENDENTS (INCLUDING

TRICARE).—Coverage under chapter 55 of title 10, United States Code, including similar coverage furnished under section 1781 of title 38 of such 

Code. 

‘‘(F) VA.—Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code, but only if the coverage for the individual involved is determined by the Secretary in coordination with the 

Health Choices Commissioner to be not less than the level specified by the 

Secretary of the Treasury, in coordination with the Secretary of Veteran’s 

Affairs and the Health Choices Commissioner, based on the individual’s priority for services as provided under section 1705(a) of such title. 

‘‘(G) OTHER COVERAGE.—Such other health benefits coverage as the Secretary, in coordination with the Health Choices Commissioner, recognizes 

for purposes of this subsection. 

‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.— 

‘‘(1) QUALIFYING CHILD.—For purposes of this section, the term ‘qualifying 

child’ has the meaning given such term by section 152(c). With respect to any 

period during which health coverage for a child must be provided by an individual pursuant to a child support order, such child shall be treated as a qualifying child of such individual (and not as a qualifying child of any other individual). 

‘‘(2) BASIC PLAN.—For purposes of this section, the term ‘basic plan’ has the 

meaning given such term under section 100(c) of the America’s Affordable 

Health Choices Act of 2009. 

‘‘(3) HEALTH INSURANCE EXCHANGE.—For purposes of this section, the term 

‘Health Insurance Exchange’ has the meaning given such term under section 

100(c) of the America’s Affordable Health Choices Act of 2009, including any 

State-based health insurance exchange approved for operation under section 

208 of such Act. 

‘‘(4) FAMILY COVERAGE.—For purposes of this section, the term ‘family coverage’ means any coverage other than self-only coverage. 


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‘‘(5) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this section, the 

term ‘modified adjusted gross income’ means adjusted gross income— 

‘‘(A) determined without regard to section 911, and 

‘‘(B) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax. 

‘‘(6) NOT TREATED AS TAX IMPOSED BY THIS CHAPTER FOR CERTAIN PURPOSES.— 

The tax imposed under this section shall not be treated as tax imposed by this 

chapter for purposes of determining the amount of any credit under this chapter 

or for purposes of section 55. 

‘‘(f) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, 

including regulations or other guidance (developed in coordination with the Health 

Choices Commissioner) which provide— 

‘‘(1) exemption from the tax imposed under subsection (a) in cases of de minimis lapses of acceptable coverage, and 

‘‘(2) a process for applying for a waiver of the application of subsection (a) in 

cases of hardship.’’. 

(b) INFORMATION REPORTING.— 

(1) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 of such 

Code is amended by inserting after section 6050W the following new section: 

‘‘SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE COVERAGE. 

‘‘(a) REQUIREMENT OF REPORTING.—Every person who provides acceptable coverage (as defined in section 59B(d)) to any individual during any calendar year 

shall, at such time as the Secretary may prescribe, make the return described in 

subsection (b) with respect to such individual. 

‘‘(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 primary insured and the name 

of each other individual obtaining coverage under the policy, 

‘‘(B) the period for which each such individual was provided with the coverage referred to in subsection (a), and 

‘‘(C) such other information as the Secretary may require. 

‘‘(c) 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 primary insured whose name is required 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, and 

‘‘(2) the information required to be shown on the return with respect to such 

individual. 

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. 

‘‘(d) COVERAGE PROVIDED BY GOVERNMENTAL UNITS.—In the case of coverage provided by any governmental unit or any agency or instrumentality thereof, the officer 

or employee who enters into the agreement to provide such coverage (or the person 

appropriately designated for purposes of this section) shall make the returns and 

statements required by this section.’’. 

(2) PENALTY FOR FAILURE TO FILE.— 

(A) RETURN.—Subparagraph (B) of section 6724(d)(1) of such Code is 

amended by striking ‘‘or’’ at the end of clause (xxii), by striking ‘‘and’’ at 

the end of clause (xxiii) and inserting ‘‘or’’, and by adding at the end the 

following new clause: 

‘‘(xxiv) section 6050X (relating to returns relating to health insurance 

coverage), and’’. 

(B) STATEMENT.—Paragraph (2) of section 6724(d) of such Code is amended by striking ‘‘or’’ at the end of subparagraph (EE), by striking the period 

at the end of subparagraph (FF) and inserting ‘‘, or’’, and by inserting after 

subparagraph (FF) the following new subparagraph: 

‘‘(GG) section 6050X (relating to returns relating to health insurance coverage).’’. 

(c) RETURN REQUIREMENT.—Subsection (a) of section 6012 of such Code is amended by inserting after paragraph (9) the following new paragraph: 

‘‘(10) Every individual to whom section 59B(a) applies and who fails to meet 

the requirements of section 59B(d) with respect to such individual or any qualifying child (as defined in section 152(c)) of such individual.’’. 


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(d) CLERICAL AMENDMENTS.— 

(1) The table of parts for subchapter A of chapter 1 of the Internal Revenue 

Code of 1986 is amended by adding at the end the following new item: 

‘‘PART VIII. HEALTH CARE RELATED TAXES.’’. 

(2) The table of sections for subpart B of part III of subchapter A of chapter 

61 is amended by adding at the end the following new item: 

‘‘Sec. 6050X. Returns relating to health insurance coverage.’’. 

(e) SECTION 15 NOT TO APPLY.—The amendment made by subsection (a) shall not 

be treated as a change in a rate of tax for purposes of section 15 of the Internal 

Revenue Code of 1986. 

(f) EFFECTIVE DATE.— 

(1) IN GENERAL.—The amendments made by this section shall apply to taxable years beginning after December 31, 2012. 

(2) RETURNS.—The amendments made by subsection (b) shall apply to calendar years beginning after December 31, 2012. 

PART 2—EMPLOYER RESPONSIBILITY 

SEC. 411. ELECTION TO SATISFY HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

(a) IN GENERAL.—Chapter 43 of the Internal Revenue Code of 1986 is amended 

by adding at the end the following new section: 

‘‘SEC. 4980H. ELECTION WITH RESPECT TO HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

‘‘(a) ELECTION OF EMPLOYER RESPONSIBILITY TO PROVIDE HEALTH COVERAGE.— 

‘‘(1) IN GENERAL.—Subsection (b) shall apply to any employer with respect to 

whom an election under paragraph (2) is in effect. 

‘‘(2) TIME AND MANNER.—An employer may make an election under this paragraph at such time and in such form and manner as the Secretary may prescribe. 

‘‘(3) AFFILIATED GROUPS.—In the case of any employer which is part of a 

group of employers who are treated as a single employer under subsection (b), 

(c), (m), or (o) of section 414, the election under paragraph (2) shall be made 

by such person as the Secretary may provide. Any such election, once made, 

shall apply to all members of such group. 

‘‘(4) SEPARATE ELECTIONS.—Under regulations prescribed by the Secretary, 

separate elections may be made under paragraph (2) with respect to— 

‘‘(A) separate lines of business, and 

‘‘(B) full-time employees and employees who are not full-time employees. 

‘‘(5) TERMINATION OF ELECTION IN CASES OF SUBSTANTIAL NONCOMPLIANCE.— 

The Secretary may terminate the election of any employer under paragraph (2) 

if the Secretary (in coordination with the Health Choices Commissioner) determines that such employer is in substantial noncompliance with the health coverage participation requirements. 

‘‘(b) EXCISE TAX WITH RESPECT TO FAILURE TO MEET HEALTH COVERAGE PARTICIPATION REQUIREMENTS.— 

‘‘(1) IN GENERAL.—In the case of any employer who fails (during any period 

with respect to which the election under subsection (a) is in effect) to satisfy 

the health coverage participation requirements with respect to any employee to 

whom such election applies, there is hereby imposed on each such failure with 

respect to each such employee a tax of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure 

is corrected. 

‘‘(2) LIMITATIONS ON AMOUNT OF TAX.— 

‘‘(A) TAX NOT TO APPLY WHERE FAILURE NOT DISCOVERED EXERCISING REASONABLE DILIGENCE.—No tax shall be imposed by paragraph (1) on any failure during any period for which it is established to the satisfaction of the 

Secretary that the employer neither knew, nor exercising reasonable diligence would have known, that such failure existed. 

‘‘(B) TAX NOT TO APPLY TO FAILURES CORRECTED WITHIN 30 DAYS.—No tax 

shall be imposed by paragraph (1) on any failure if— 

‘‘(i) such failure was due to reasonable cause and not to willful neglect, and 

‘‘(ii) such failure is corrected during the 30-day period beginning on 

the 1st date that the employer knew, or exercising reasonable diligence 

would have known, that such failure existed. 


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‘‘(C) OVERALL LIMITATION FOR UNINTENTIONAL FAILURES.—In the case of 

failures which are due to reasonable cause and not to willful neglect, the 

tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of— 

‘‘(i) 10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for 

employment-based health plans, or 

‘‘(ii) $500,000. 

‘‘(D) COORDINATION WITH OTHER ENFORCEMENT PROVISIONS.—The tax imposed under paragraph (1) with respect to any failure shall be reduced (but 

not below zero) by the amount of any civil penalty collected under section 

502(c)(11) of the Employee Retirement Income Security Act of 1974 or section 2793(g) of the Public Health Service Act with respect to such failure. 

‘‘(c) HEALTH COVERAGE PARTICIPATION REQUIREMENTS.—For purposes of this section, the term ‘health coverage participation requirements’ means the requirements 

of part I of subtitle B of title III of the America’s Affordable Health Choices Act of 

2009 (as in effect on the date of the enactment of this section).’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 43 of such Code is 

amended by adding at the end the following new item: 

‘‘Sec. 4980H. Election with respect to health coverage participation requirements.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to periods beginning after December 31, 2012. 

SEC. 412. RESPONSIBILITIES OF NONELECTING EMPLOYERS. 

(a) IN GENERAL.—Section 3111 of the Internal Revenue Code of 1986 is amended 

by redesignating subsection (c) as subsection (d) and by inserting after subsection 

(b) the following new subsection: 

‘‘(c) EMPLOYERS ELECTING TO NOT PROVIDE HEALTH BENEFITS.— 

‘‘(1) IN GENERAL.—In addition to other taxes, there is hereby imposed on 

every nonelecting employer an excise tax, with respect to having individuals in 

his employ, equal to 8 percent of the wages (as defined in section 3121(a)) paid 

by him with respect to employment (as defined in section 3121(b)). 

‘‘(2) SPECIAL RULES FOR SMALL EMPLOYERS.— 

‘‘(A) IN GENERAL.—In the case of any employer who is small employer for 

any calendar year, paragraph (1) shall be applied by substituting the applicable percentage determined in accordance with the following table for ‘8 

percent’: 

‘‘If the annual payroll of such employer for the preceding calendar year: The applicable percentage is: 

Does not exceed $250,000 ..................................................................................... 0 percent 

Exceeds $250,000, but does not exceed $300,000 ............................................... 2 percent 

Exceeds $300,000, but does not exceed $350,000 ............................................... 4 percent 

Exceeds $350,000, but does not exceed $400,000 ............................................... 6 percent 

‘‘(B) SMALL EMPLOYER.—For purposes of this paragraph, the term ‘small 

employer’ means any employer for any calendar year if the annual payroll 

of such employer for the preceding calendar year does not exceed $400,000. 

‘‘(C) ANNUAL PAYROLL.—For purposes of this paragraph, the term ‘annual 

payroll’ means, with respect to any employer for any calendar year, the aggregate wages (as defined in section 3121(a)) paid by him with respect to 

employment (as defined in section 3121(b)) during such calendar year. 

‘‘(3) NONELECTING EMPLOYER.—For purposes of paragraph (1), the term ‘nonelecting employer’ means any employer for any period with respect to which 

such employer does not have an election under section 4980H(a) in effect. 

‘‘(4) SPECIAL RULE FOR SEPARATE ELECTIONS.—In the case of an employer who 

makes a separate election described in section 4980H(a)(4) for any period, paragraph (1) shall be applied for such period by taking into account only the wages 

paid to employees who are not subject to such election. 

‘‘(5) AGGREGATION; PREDECESSORS.—For purposes of this subsection— 

‘‘(A) all persons treated as a single employer under subsection (b), (c), (m), 

or (o) of section 414 shall be treated as 1 employer, and 

‘‘(B) any reference to any person shall be treated as including a reference 

to any predecessor of such person.’’. 

(b) DEFINITIONS.—Section 3121 of such Code is amended by adding at the end the 

following new subsection: 

‘‘(aa) SPECIAL RULES FOR TAX ON EMPLOYERS ELECTING NOT TO PROVIDE HEALTH

BENEFITS.—For purposes of section 3111(c)— 

‘‘(1) Paragraphs (1), (5), and (19) of subsection (b) shall not apply. 


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‘‘(2) Paragraph (7) of subsection (b) shall apply by treating all services as not 

covered by the retirement systems referred to in subparagraphs (C) and (F) 

thereof. 

‘‘(3) Subsection (e) shall not apply and the term ‘State’ shall include the District of Columbia.’’. 

(c) CONFORMING AMENDMENT.—Subsection (d) of section 3111 of such Code, as redesignated by this section, is amended by striking ‘‘this section’’ and inserting ‘‘subsections (a) and (b)’’. 

(d) APPLICATION TO RAILROADS.— 

(1) IN GENERAL.—Section 3221 of such Code is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following 

new subsection: 

‘‘(c) EMPLOYERS ELECTING TO NOT PROVIDE HEALTH BENEFITS.— 

‘‘(1) IN GENERAL.—In addition to other taxes, there is hereby imposed on 

every nonelecting employer an excise tax, with respect to having individuals in 

his employ, equal to 8 percent of the compensation paid during any calendar 

year by such employer for services rendered to such employer. 

‘‘(2) EXCEPTION FOR SMALL EMPLOYERS.—Rules similar to the rules of section 

3111(c)(2) shall apply for purposes of this subsection. 

‘‘(3) NONELECTING EMPLOYER.—For purposes of paragraph (1), the term ‘nonelecting employer’ means any employer for any period with respect to which 

such employer does not have an election under section 4980H(a) in effect. 

‘‘(4) SPECIAL RULE FOR SEPARATE ELECTIONS.—In the case of an employer who 

makes a separate election described in section 4980H(a)(4) for any period, subsection (a) shall be applied for such period by taking into account only the 

wages paid to employees who are not subject to such election.’’. 

(2) DEFINITIONS.—Subsection (e) of section 3231 of such Code is amended by 

adding at the end the following new paragraph: 

‘‘(13) SPECIAL RULES FOR TAX ON EMPLOYERS ELECTING NOT TO PROVIDE

HEALTH BENEFITS.—For purposes of section 3221(c)— 

‘‘(A) Paragraph (1) shall be applied without regard to the third sentence 

thereof. 

‘‘(B) Paragraph (2) shall not apply.’’. 

(3) CONFORMING AMENDMENT.—Subsection (d) of section 3221 of such Code, 

as redesignated by this section, is amended by striking ‘‘subsections (a) and (b), 

see section 3231(e)(2)’’ and inserting ‘‘this section, see paragraphs (2) and 

(13)(B) of section 3231(e)’’. 

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to periods beginning after December 31, 2012. 

Subtitle B—Credit for Small Business Employee 

Health Coverage Expenses 

SEC. 421. CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH COVERAGE 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 adding at the end the following new section: 

‘‘SEC. 45R. SMALL BUSINESS EMPLOYEE HEALTH COVERAGE CREDIT. 

‘‘(a) IN GENERAL.—For purposes of section 38, in the case of a qualified small employer, the small business employee health coverage credit determined under this 

section for the taxable year is an amount equal to the applicable percentage of the 

qualified employee health coverage expenses of such employer for such taxable year. 

‘‘(b) APPLICABLE PERCENTAGE.— 

‘‘(1) IN GENERAL.—For purposes of this section, the applicable percentage is 

50 percent. 

‘‘(2) PHASEOUT BASED ON AVERAGE COMPENSATION OF EMPLOYEES.—In the case 

of an employer whose average annual employee compensation for the taxable 

year exceeds $20,000, the percentage specified in paragraph (1) shall be reduced 

by a number of percentage points which bears the same ratio to 50 as such excess bears to $20,000. 

‘‘(c) LIMITATIONS.— 

‘‘(1) PHASEOUT BASED ON EMPLOYER SIZE.—In the case of an employer who 

employs more than 10 qualified employees during the taxable year, the credit 

determined under subsection (a) shall be reduced by an amount which bears the 

same ratio to the amount of such credit (determined without regard to this 

paragraph and after the application of the other provisions of this section) as— 


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‘‘(A) the excess of— 

‘‘(i) the number of qualified employees employed by the employer during the taxable year, over 

‘‘(ii) 10, bears to 

‘‘(B) 15. 

‘‘(2) CREDIT NOT ALLOWED WITH RESPECT TO CERTAIN HIGHLY COMPENSATED

EMPLOYEES.—No credit shall be allowed under subsection (a) with respect to 

qualified employee health coverage expenses paid or incurred with respect to 

any employee for any taxable year if the aggregate compensation paid by the 

employer to such employee during such taxable year exceeds $80,000. 

‘‘(d) QUALIFIED EMPLOYEE HEALTH COVERAGE EXPENSES.—For purposes of this 

section— 

‘‘(1) IN GENERAL.—The term ‘qualified employee health coverage expenses’ 

means, with respect to any employer for any taxable year, the aggregate 

amount paid or incurred by such employer during such taxable year for coverage of any qualified employee of the employer (including any family coverage 

which covers such employee) under qualified health coverage. 

‘‘(2) QUALIFIED HEALTH COVERAGE.—The term ‘qualified health coverage’ 

means acceptable coverage (as defined in section 59B(d)) which— 

‘‘(A) is provided pursuant to an election under section 4980H(a), and 

‘‘(B) satisfies the requirements referred to in section 4980H(c). 

‘‘(e) OTHER DEFINITIONS.—For purposes of this section— 

‘‘(1) QUALIFIED SMALL EMPLOYER.—For purposes of this section, the term 

‘qualified small employer’ means any employer for any taxable year if— 

‘‘(A) the number of qualified employees employed by such employer during the taxable year does not exceed 25, and 

‘‘(B) the average annual employee compensation of such employer for 

such taxable year does not exceed the sum of the dollar amounts in effect 

under subsection (b)(2). 

‘‘(2) QUALIFIED EMPLOYEE.—The term ‘qualified employee’ means any employee of an employer for any taxable year of the employer if such employee received at least $5,000 of compensation from such employer for services performed in the trade or business of such employer during such taxable year. 

‘‘(3) AVERAGE ANNUAL EMPLOYEE COMPENSATION.—The term ‘average annual 

employee compensation’ means, with respect to any employer for any taxable 

year, the average amount of compensation paid by such employer to qualified 

employees of such employer during such taxable year. 

‘‘(4) COMPENSATION.—The term ‘compensation’ has the meaning given such 

term in section 408(p)(6)(A). 

‘‘(5) FAMILY COVERAGE.—The term ‘family coverage’ means any coverage other 

than self-only coverage. 

‘‘(f) SPECIAL RULES.—For purposes of this section— 

‘‘(1) SPECIAL RULE FOR PARTNERSHIPS AND SELF-EMPLOYED.—In the case of a 

partnership (or a trade or business carried on by an individual) which has one 

or more qualified employees (determined without regard to this paragraph) with 

respect to whom the election under 4980H(a) applies, each partner (or, in the 

case of a trade or business carried on by an individual, such individual) shall 

be treated as an employee. 

‘‘(2) AGGREGATION RULE.—All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer. 

‘‘(3) DENIAL OF DOUBLE BENEFIT.—Any deduction otherwise allowable with respect to amounts paid or incurred for health insurance coverage to which subsection (a) applies shall be reduced by the amount of the credit determined 

under this section. 

‘‘(4) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 

2013, each of the dollar amounts in subsections (b)(2), (c)(2), and (e)(2) shall be 

increased by an amount equal to— 

‘‘(A) such dollar amount, multiplied by 

‘‘(B) the cost of living adjustment determined under section 1(f)(3) for the 

calendar year in which the taxable year begins determined by substituting 

‘calendar year 2012’ for ‘calendar year 1992’ in subparagraph (B) thereof. 

If any increase determined under this paragraph is not a multiple of $50, such 

increase shall be rounded to the next lowest multiple of $50.’’. 

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT.—Subsection (b) of section 

38 of such Code (relating to general business credit) is amended by striking ‘‘plus’’ 

at the end of paragraph (34), by striking the period at the end of paragraph (35) 

and inserting ‘‘, plus’’ , and by adding at the end the following new paragraph: 


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‘‘(36) in the case of a qualified small employer (as defined in section 45R(e)), 

the small business employee health coverage credit determined under section 

45R(a).’’. 

(c) CLERICAL AMENDMENT.—The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating 

to section 45Q the following new item: 

‘‘Sec. 45R. Small business employee health coverage credit.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2012. 

Subtitle C—Disclosures to Carry Out Health 

Insurance Exchange Subsidies 

SEC. 431. DISCLOSURES TO CARRY OUT HEALTH INSURANCE EXCHANGE SUBSIDIES. 

(a) IN GENERAL.—Subsection (l) of section 6103 of the Internal Revenue Code of 

1986 is amended by adding at the end the following new paragraph: 

‘‘(21) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT HEALTH INSURANCE

EXCHANGE SUBSIDIES.— 

‘‘(A) IN GENERAL.—The Secretary, upon written request from the Health 

Choices Commissioner or the head of a State-based health insurance exchange approved for operation under section 208 of the America’s Affordable Health Choices Act of 2009, shall disclose to officers and employees of 

the Health Choices Administration or such State-based health insurance exchange, as the case may be, return information of any taxpayer whose income is relevant in determining any affordability credit described in subtitle C of title II of the America’s Affordable Health Choices Act of 2009. 

Such return information shall be limited to— 

‘‘(i) taxpayer identity information with respect to such taxpayer, 

‘‘(ii) the filing status of such taxpayer, 

‘‘(iii) the modified adjusted gross income of such taxpayer (as defined 

in section 59B(e)(5)), 

‘‘(iv) the number of dependents of the taxpayer, 

‘‘(v) such other information as is prescribed by the Secretary by regulation as might indicate whether the taxpayer is eligible for such affordability credits (and the amount thereof), and 

‘‘(vi) the taxable year with respect to which the preceding information 

relates or, if applicable, the fact that such information is not available. 

‘‘(B) RESTRICTION ON USE OF DISCLOSED INFORMATION.—Return information disclosed under subparagraph (A) may be used by officers and employees of the Health Choices Administration or such State-based health insurance exchange, as the case may be, only for the purposes of, and to the extent necessary in, establishing and verifying the appropriate amount of any 

affordability credit described in subtitle C of title II of the America’s Affordable Health Choices Act of 2009 and providing for the repayment of any 

such credit which was in excess of such appropriate amount.’’. 

(b) PROCEDURES AND RECORDKEEPING RELATED TO DISCLOSURES.—Paragraph (4) 

of section 6103(p) of such Code is amended— 

(1) by inserting ‘‘, or any entity described in subsection (l)(21),’’ after ‘‘or (20)’’ 

in the matter preceding subparagraph (A), 

(2) by inserting ‘‘or any entity described in subsection (l)(21),’’ after ‘‘or 

(o)(1)(A),’’ in subparagraph (F)(ii), and 

(3) by inserting ‘‘or any entity described in subsection (l)(21),’’ after ‘‘or (20),’’ 

both places it appears in the matter after subparagraph (F). 

(c) UNAUTHORIZED DISCLOSURE OR INSPECTION.—Paragraph (2) of section 7213(a) 

of such Code is amended by striking ‘‘or (20)’’ and inserting ‘‘(20), or (21)’’. 

Subtitle D—Other Revenue Provisions 

PART 1—GENERAL PROVISIONS 

SEC. 441. SURCHARGE ON HIGH INCOME INDIVIDUALS. 

(a) IN GENERAL.—Part VIII of subchapter A of chapter 1 of the Internal Revenue 

Code of 1986, as added by this title, is amended by adding at the end the following 

new subpart: 


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‘‘Subpart B—Surcharge on High Income Individuals 

‘‘Sec. 59C. Surcharge on high income individuals. 

‘‘SEC. 59C. SURCHARGE ON HIGH INCOME INDIVIDUALS. 

‘‘(a) GENERAL RULE.—In the case of a taxpayer other than a corporation, there is 

hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal 

to— 

‘‘(1) 1 percent of so much of the modified adjusted gross income of the tax- payer as exceeds $350,000 but does not exceed $500,000, 

‘‘(2) 1.5 percent of so much of the modified adjusted gross income of the tax- payer as exceeds $500,000 but does not exceed $1,000,000, and 

‘‘(3) 5.4 percent of so much of the modified adjusted gross income of the tax- payer as exceeds $1,000,000. 

‘‘(b) TAXPAYERS NOT MAKING A JOINT RETURN.—In the case of any taxpayer other 

than a taxpayer making a joint return under section 6013 or a surviving spouse (as 

defined in section 2(a)), subsection (a) shall be applied by substituting for each of 

the dollar amounts therein (after any increase determined under subsection (e)) a 

dollar amount equal to— 

‘‘(1) 50 percent of the dollar amount so in effect in the case of a married individual filing a separate return, and 

‘‘(2) 80 percent of the dollar amount so in effect in any other case. 

‘‘(c) ADJUSTMENTS BASED ON FEDERAL HEALTH REFORM SAVINGS.— ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), in the case of any taxable year beginning after December 31, 2012, subsection (a) shall be applied— 

‘‘(A) by substituting ‘2 percent’ for ‘1 percent’, and 

‘‘(B) by substituting ‘3 percent’ for ‘1.5 percent’. 

‘‘(2) ADJUSTMENTS BASED ON EXCESS FEDERAL HEALTH REFORM SAVINGS.— ‘‘(A) EXCEPTION IF FEDERAL HEALTH REFORM SAVINGS SIGNIFICANTLY EX- CEEDS BASE AMOUNT.—If the excess Federal health reform savings is more than $150,000,000,000 but not more than $175,000,000,000, paragraph (1) 

shall not apply. 

‘‘(B) FURTHER ADJUSTMENT FOR ADDITIONAL FEDERAL HEALTH REFORM

SAVINGS.—If the excess Federal health reform savings is more than 

$175,000,000,000, paragraphs (1) and (2) of subsection (a) (and paragraph 

(1) of this subsection) shall not apply to any taxable year beginning after 

December 31, 2012. 

‘‘(C) EXCESS FEDERAL HEALTH REFORM SAVINGS.—For purposes of this 

subsection, the term ‘excess Federal health reform savings’ means the excess of— 

‘‘(i) the Federal health reform savings, over 

‘‘(ii) $525,000,000,000. 

‘‘(D) FEDERAL HEALTH REFORM SAVINGS.—The term ‘Federal health reform 

savings’ means the sum of the amounts described in subparagraphs (A) and 

(B) of paragraph (3). 

‘‘(3) DETERMINATION OF FEDERAL HEALTH REFORM SAVINGS.—Not later than 

December 1, 2012, the Director of the Office of Management and Budget shall— 

‘‘(A) determine, on the basis of the study conducted under paragraph (4), 

the aggregate reductions in Federal expenditures which have been achieved 

as a result of the provisions of, and amendments made by, division B of the 

America’s Affordable Health Choices Act of 2009 during the period beginning on October 1, 2009, and ending with the latest date with respect to 

which the Director has sufficient data to make such determination, and 

‘‘(B) estimate, on the basis of such study and the determination under 

subparagraph (A), the aggregate reductions in Federal expenditures which 

will be achieved as a result of such provisions and amendments during so 

much of the period beginning with fiscal year 2010 and ending with fiscal 

year 2019 as is not taken into account under subparagraph (A). 

‘‘(4) STUDY OF FEDERAL HEALTH REFORM SAVINGS.—The Director of the Office 

of Management and Budget shall conduct a study of the reductions in Federal 

expenditures during fiscal years 2010 through 2019 which are attributable to 

the provisions of, and amendments made by, division B of the America’s Affordable Health Choices Act of 2009. The Director shall complete such study not 

later than December 1, 2012. 

‘‘(5) REDUCTIONS IN FEDERAL EXPENDITURES DETERMINED WITHOUT REGARD TO

PROGRAM INVESTMENTS.—For purposes of paragraphs (3) and (4), reductions in 

Federal expenditures shall be determined without regard to section 1121 of the 

America’s Affordable Health Choices Act of 2009 and other program investments under division B thereof. 


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‘‘(d) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this section, the term 

‘modified adjusted gross income’ means adjusted gross income reduced by any deduction (not taken into account in determining adjusted gross income) allowed for 

investment interest (as defined in section 163(d)). In the case of an estate or trust, 

adjusted gross income shall be determined as provided in section 67(e). 

‘‘(e) INFLATION ADJUSTMENTS.— 

‘‘(1) IN GENERAL.—In the case of taxable years beginning after 2011, the dollar amounts in subsection (a) shall be increased by an amount equal to— 

‘‘(A) such dollar amount, multiplied by 

‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for the 

calendar year in which the taxable year begins, by substituting ‘calendar 

year 2010’ for ‘calendar year 1992’ in subparagraph (B) thereof. 

‘‘(2) ROUNDING.—If any amount as adjusted under paragraph (1) is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of 

$5,000. 

‘‘(f) SPECIAL RULES.— 

‘‘(1) NONRESIDENT ALIEN.—In the case of a nonresident alien individual, only 

amounts taken into account in connection with the tax imposed under section 

871(b) shall be taken into account under this section. 

‘‘(2) CITIZENS AND RESIDENTS LIVING ABROAD.—The dollar amounts in effect 

under subsection (a) (after the application of subsections (b) and (e)) shall be 

decreased by the excess of— 

‘‘(A) the amounts excluded from the taxpayer’s gross income under section 

911, over 

‘‘(B) the amounts of any deductions or exclusions disallowed under section 

911(d)(6) with respect to the amounts described in subparagraph (A). 

‘‘(3) CHARITABLE TRUSTS.—Subsection (a) shall not apply to a trust all the unexpired interests in which are devoted to one or more of the purposes described 

in section 170(c)(2)(B). 

‘‘(4) NOT TREATED AS TAX IMPOSED BY THIS CHAPTER FOR CERTAIN PURPOSES.— 

The tax imposed under this section shall not be treated as tax imposed by this 

chapter for purposes of determining the amount of any credit under this chapter 

or for purposes of section 55.’’. 

(b) CLERICAL AMENDMENT.—The table of subparts for part VIII of subchapter A 

of chapter 1 of such Code, as added by this title, is amended by inserting after the 

item relating to subpart A the following new item: 

‘‘SUBPART B. SURCHARGE ON HIGH INCOME INDIVIDUALS.’’. 

(c) SECTION 15 NOT TO APPLY.—The amendment made by subsection (a) shall not 

be treated as a change in a rate of tax for purposes of section 15 of the Internal 

Revenue Code of 1986. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2010. 

SEC. 442. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED DRUG OR INSULIN. 

(a) HSAS.—Subparagraph (A) of section 223(d)(2) of the Internal Revenue Code 

of 1986 is amended by adding at the end the following: ‘‘Such term shall include 

an amount paid for medicine or a drug only if such medicine or drug is a prescribed 

drug or is insulin.’’. 

(b) ARCHER MSAS.—Subparagraph (A) of section 220(d)(2) of such Code is amended by adding at the end the following: ‘‘Such term shall include an amount paid for 

medicine or a drug only if such medicine or drug is a prescribed drug or is insulin.’’. 

(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT

ARRANGEMENTS.—Section 106 of such Code is amended by adding at the end the following new subsection: 

‘‘(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED DRUGS AND INSULIN.—For purposes of this section and section 105, reimbursement for expenses 

incurred for a medicine or a drug shall be treated as a reimbursement for medical 

expenses only if such medicine or drug is a prescribed drug or is insulin.’’. 

(d) EFFECTIVE DATES.—The amendment made by this section shall apply to expenses incurred after December 31, 2009. 

SEC. 443. DELAY IN APPLICATION OF WORLDWIDE ALLOCATION OF INTEREST. 

(a) IN GENERAL.—Paragraphs (5)(D) and (6) of section 864(f) of the Internal Revenue Code of 1986 are each amended by striking ‘‘December 31, 2010’’ and inserting 

‘‘December 31, 2019’’. 

(b) TRANSITION.—Subsection (f) of section 864 of such Code is amended by striking 

paragraph (7). 


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PART 2—PREVENTION OF TAX AVOIDANCE 

SEC. 451. LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS. 

(a) IN GENERAL.—Section 894 of the Internal Revenue Code of 1986 (relating to 

income affected by treaty) is amended by adding at the end the following new subsection: 

‘‘(d) LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS.— 

‘‘(1) IN GENERAL.—In the case of any deductible related-party payment, any 

withholding tax imposed under chapter 3 (and any tax imposed under subpart 

A or B of this part) with respect to such payment may not be reduced under 

any treaty of the United States unless any such withholding tax would be reduced under a treaty of the United States if such payment were made directly 

to the foreign parent corporation. 

‘‘(2) DEDUCTIBLE RELATED-PARTY PAYMENT.—For purposes of this subsection, 

the term ‘deductible related-party payment’ means any payment made, directly 

or indirectly, by any person to any other person if the payment is allowable as 

a deduction under this chapter and both persons are members of the same foreign controlled group of entities. 

‘‘(3) FOREIGN CONTROLLED GROUP OF ENTITIES.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—The term ‘foreign controlled group of entities’ means 

a controlled group of entities the common parent of which is a foreign corporation. 

‘‘(B) CONTROLLED GROUP OF ENTITIES.—The term ‘controlled group of entities’ means a controlled group of corporations as defined in section 

1563(a)(1), except that— 

‘‘(i) ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears therein, and 

‘‘(ii) the determination shall be made without regard to subsections 

(a)(4) and (b)(2) of section 1563. 

A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled 

(within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence). 

‘‘(4) FOREIGN PARENT CORPORATION.—For purposes of this subsection, the 

term ‘foreign parent corporation’ means, with respect to any deductible relatedparty payment, the common parent of the foreign controlled group of entities 

referred to in paragraph (3)(A). 

‘‘(5) REGULATIONS.—The Secretary may prescribe such regulations or other 

guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provide for— 

‘‘(A) the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of 

such group if treated as one corporation, and 

‘‘(B) the treatment of any member of a foreign controlled group of entities 

as the common parent of such group if such treatment is appropriate taking 

into account the economic relationships among such entities.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to payments made after the date of the enactment of this Act. 

SEC. 452. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE. 

(a) IN GENERAL.—Section 7701 of the Internal Revenue Code of 1986 is amended 

by redesignating subsection (o) as subsection (p) and by inserting after subsection 

(n) the following new subsection: 

‘‘(o) CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.— 

‘‘(1) APPLICATION OF DOCTRINE.—In the case of any transaction to which the 

economic substance doctrine is relevant, such transaction shall be treated as 

having economic substance only if— 

‘‘(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and 

‘‘(B) the taxpayer has a substantial purpose (apart from Federal income 

tax effects) for entering into such transaction. 

‘‘(2) SPECIAL RULE WHERE TAXPAYER RELIES ON PROFIT POTENTIAL.— 

‘‘(A) IN GENERAL.—The potential for profit of a transaction shall be taken 

into account in determining whether the requirements of subparagraphs (A) 

and (B) of paragraph (1) are met with respect to the transaction only if the 

present value of the reasonably expected pre-tax profit from the transaction 


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is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected. 

‘‘(B) TREATMENT OF FEES AND FOREIGN TAXES.—Fees and other transaction expenses and foreign taxes shall be taken into account as expenses 

in determining pre-tax profit under subparagraph (A). 

‘‘(3) STATE AND LOCAL TAX BENEFITS.—For purposes of paragraph (1), any 

State or local income tax effect which is related to a Federal income tax effect 

shall be treated in the same manner as a Federal income tax effect. 

‘‘(4) FINANCIAL ACCOUNTING BENEFITS.—For purposes of paragraph (1)(B), 

achieving a financial accounting benefit shall not be taken into account as a 

purpose for entering into a transaction if the origin of such financial accounting 

benefit is a reduction of Federal income tax. 

‘‘(5) DEFINITIONS AND SPECIAL RULES.—For purposes of this subsection— 

‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.—The term ‘economic substance doctrine’ means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction 

does not have economic substance or lacks a business purpose. 

‘‘(B) EXCEPTION FOR PERSONAL TRANSACTIONS OF INDIVIDUALS.—In the 

case of an individual, paragraph (1) shall apply only to transactions entered 

into in connection with a trade or business or an activity engaged in for the 

production of income. 

‘‘(C) OTHER COMMON LAW DOCTRINES NOT AFFECTED.—Except as specifically provided in this subsection, the provisions of this subsection shall not 

be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any 

such other rule of law. 

‘‘(D) DETERMINATION OF APPLICATION OF DOCTRINE NOT AFFECTED.—The 

determination of whether the economic substance doctrine is relevant to a 

transaction (or series of transactions) shall be made in the same manner 

as if this subsection had never been enacted. 

‘‘(6) REGULATIONS.—The Secretary shall prescribe such regulations as may be 

necessary or appropriate to carry out the purposes of this subsection.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act. 

SEC. 453. PENALTIES FOR UNDERPAYMENTS. 

(a) PENALTY FOR UNDERPAYMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE.— 

(1) IN GENERAL.—Subsection (b) of section 6662 of the Internal Revenue Code 

of 1986 is amended by inserting after paragraph (5) the following new paragraph: 

‘‘(6) Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to 

meet the requirements of any similar rule of law.’’. 

(2) INCREASED PENALTY FOR NONDISCLOSED TRANSACTIONS.—Section 6662 of 

such Code is amended by adding at the end the following new subsection: 

‘‘(i) INCREASE IN PENALTY IN CASE OF NONDISCLOSED NONECONOMIC SUBSTANCE

TRANSACTIONS.— 

‘‘(1) IN GENERAL.—In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting ‘40 percent’ for ‘20 percent’. 

‘‘(2) NONDISCLOSED NONECONOMIC SUBSTANCE TRANSACTIONS.—For purposes 

of this subsection, the term ‘nondisclosed noneconomic substance transaction’ 

means any portion of a transaction described in subsection (b)(6) with respect 

to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return. 

‘‘(3) SPECIAL RULE FOR AMENDED RETURNS.—Except as provided in regulations, in no event shall any amendment or supplement to a return of tax be 

taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the 

Secretary regarding the examination of the return or such other date as is specified by the Secretary.’’. 

(3) CONFORMING AMENDMENT.—Subparagraph (B) of section 6662A(e)(2) of 

such Code is amended— 

(A) by striking ‘‘section 6662(h)’’ and inserting ‘‘subsections (h) or (i) of 

section 6662’’, and 

(B) by striking ‘‘GROSS VALUATION MISSTATEMENT PENALTY’’ in the heading 

and inserting ‘‘CERTAIN INCREASED UNDERPAYMENT PENALTIES’’. 


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(b) REASONABLE CAUSE EXCEPTION NOT APPLICABLE TO NONECONOMIC SUBSTANCE

TRANSACTIONS, TAX SHELTERS, AND CERTAIN LARGE OR PUBLICLY TRADED PER- SONS.—Subsection (c) of section 6664 of such Code is amended— 

(1) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively, 

(2) by striking ‘‘paragraph (2)’’ in paragraph (4)(A), as so redesignated, and 

inserting ‘‘paragraph (3)’’, and 

(3) by inserting after paragraph (1) the following new paragraph: 

‘‘(2) EXCEPTION.—Paragraph (1) shall not apply to— 

‘‘(A) to any portion of an underpayment which is attributable to one or 

more tax shelters (as defined in section 6662(d)(2)(C)) or transactions described in section 6662(b)(6), and 

‘‘(B) to any taxpayer if such taxpayer is a specified person (as defined in 

section 6662(d)(2)(D)(ii)).’’. 

(c) APPLICATION OF PENALTY FOR ERRONEOUS CLAIM FOR REFUND OR CREDIT TO

NONECONOMIC SUBSTANCE TRANSACTIONS.—Section 6676 of such Code is amended 

by redesignating subsection (c) as subsection (d) and inserting after subsection (b) 

the following new subsection: 

‘‘(c) NONECONOMIC SUBSTANCE TRANSACTIONS TREATED AS LACKING REASONABLE

BASIS.—For purposes of this section, any excessive amount which is attributable to 

any transaction described in section 6662(b)(6) shall not be treated as having a reasonable basis.’’. 

(d) SPECIAL UNDERSTATEMENT REDUCTION RULE FOR CERTAIN LARGE OR PUBLICLY

TRADED PERSONS.— 

(1) IN GENERAL.—Paragraph (2) of section 6662(d) of such Code is amended 

by adding at the end the following new subparagraph: 

‘‘(D) SPECIAL REDUCTION RULE FOR CERTAIN LARGE OR PUBLICLY TRADED

PERSONS.— 

‘‘(i) IN GENERAL.—In the case of any specified person— 

‘‘(I) subparagraph (B) shall not apply, and 

‘‘(II) the amount of the understatement under subparagraph (A) 

shall be reduced by that portion of the understatement which is attributable to any item with respect to which the taxpayer has a 

reasonable belief that the tax treatment of such item by the taxpayer is more likely than not the proper tax treatment of such 

item. 

‘‘(ii) SPECIFIED PERSON.—For purposes of this subparagraph, the term 

‘specified person’ means— 

‘‘(I) any person required to file periodic or other reports under 

section 13 of the Securities Exchange Act of 1934, and 

‘‘(II) any corporation with gross receipts in excess of $100,000,000 

for the taxable year involved. 

All persons treated as a single employer under section 52(a) shall be 

treated as one person for purposes of subclause (II).’’. 

(2) CONFORMING AMENDMENT.—Subparagraph (C) of section 6662(d)(2) of such 

Code is amended by striking ‘‘Subparagraph (B)’’ and inserting ‘‘Subparagraphs 

(B) and (D)(i)(II)’’. 

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act. 

PART 3—PARITY IN HEALTH BENEFITS 

SEC. 461. CERTAIN HEALTH RELATED BENEFITS APPLICABLE TO SPOUSES AND DEPENDENTS 

EXTENDED TO ELIGIBLE BENEFICIARIES. 

(a) APPLICATION OF ACCIDENT AND HEALTH PLANS TO ELIGIBLE BENEFICIARIES.— 

(1) EXCLUSION OF CONTRIBUTIONS.—Section 106 of the Internal Revenue Code 

of 1986, as amended by section 442, (relating to contributions by employer to 

accident and health plans) is amended by adding at the end the following new 

subsection: 

‘‘(g) COVERAGE PROVIDED FOR ELIGIBLE BENEFICIARIES OF EMPLOYEES.— 

‘‘(1) IN GENERAL.—Subsection (a) shall apply with respect to any eligible beneficiary of the employee. 

‘‘(2) ELIGIBLE BENEFICIARY.—For purposes of this subsection, the term ‘eligible 

beneficiary’ means any individual who is eligible to receive benefits or coverage 

under an accident or health plan.’’. 

(2) EXCLUSION OF AMOUNTS EXPENDED FOR MEDICAL CARE.—The first sentence 

of section 105(b) of such Code (relating to amounts expended for medical care) 

is amended— 


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(A) by striking ‘‘and his dependents’’ and inserting ‘‘his dependents’’, and 

(B) by inserting before the period the following: ‘‘and any eligible beneficiary (within the meaning of section 106(f)) with respect to the taxpayer’’. 

(3) PAYROLL TAXES.— 

(A) Section 3121(a)(2) of such Code is amended— 

(i) by striking ‘‘or any of his dependents’’ in the matter preceding subparagraph (A) and inserting ‘‘, any of his dependents, or any eligible 

beneficiary (within the meaning of section 106(g)) with respect to the 

employee’’, 

(ii) by striking ‘‘or any of his dependents,’’ in subparagraph (A) and 

inserting ‘‘, any of his dependents, or any eligible beneficiary (within 

the meaning of section 106(g)) with respect to the employee,’’, and 

(iii) by striking ‘‘and their dependents’’ both places it appears and inserting ‘‘and such employees’ dependents and eligible beneficiaries 

(within the meaning of section 106(g))’’. 

(B) Section 3231(e)(1) of such Code is amended— 

(i) by striking ‘‘or any of his dependents’’ and inserting ‘‘, any of his 

dependents, or any eligible beneficiary (within the meaning of section 

106(g)) with respect to the employee,’’, and 

(ii) by striking ‘‘and their dependents’’ both places it appears and inserting ‘‘and such employees’ dependents and eligible beneficiaries 

(within the meaning of section 106(g))’’. 

(C) Section 3306(b)(2) of such Code is amended— 

(i) by striking ‘‘or any of his dependents’’ in the matter preceding subparagraph (A) and inserting ‘‘, any of his dependents, or any eligible 

beneficiary (within the meaning of section 106(g)) with respect to the 

employee,’’, 

(ii) by striking ‘‘or any of his dependents’’ in subparagraph (A) and 

inserting ‘‘, any of his dependents, or any eligible beneficiary (within 

the meaning of section 106(g)) with respect to the employee’’, and 

(iii) by striking ‘‘and their dependents’’ both places it appears and inserting ‘‘and such employees’ dependents and eligible beneficiaries 

(within the meaning of section 106(g))’’. 

(D) Section 3401(a) of such Code is amended by striking ‘‘or’’ at the end 

of paragraph (22), by striking the period at the end of paragraph (23) and 

inserting ‘‘; or’’, and by inserting after paragraph (23) the following new 

paragraph: 

‘‘(24) for any payment made to or for the benefit of an employee or any eligible beneficiary (within the meaning of section 106(g)) if at the time of such payment it is reasonable to believe that the employee will be able to exclude such 

payment from income under section 106 or under section 105 by reference in 

section 105(b) to section 106(g).’’. 

(b) EXPANSION OF DEPENDENCY FOR PURPOSES OF DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.— 

(1) IN GENERAL.—Paragraph (1) of section 162(l) of the Internal Revenue Code 

of 1986 (relating to special rules for health insurance costs of self-employed individuals) is amended to read as follows: 

‘‘(1) ALLOWANCE OF DEDUCTION.—In the case of a taxpayer who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to the amount paid during the taxable year for insurance which constitutes medical care for— 

‘‘(A) the taxpayer, 

‘‘(B) the taxpayer’s spouse, 

‘‘(C) the taxpayer’s dependents, and 

‘‘(D) any individual who— 

‘‘(i) satisfies the age requirements of section 152(c)(3)(A), 

‘‘(ii) bears a relationship to the taxpayer described in section 

152(d)(2)(H), and 

‘‘(iii) meets the requirements of section 152(d)(1)(C), and 

‘‘(E) one individual who— 

‘‘(i) does not satisfy the age requirements of section 152(c)(3)(A), 

‘‘(ii) bears a relationship to the taxpayer described in section 

152(d)(2)(H), 

‘‘(iii) meets the requirements of section 152(d)(1)(D), and 

‘‘(iv) is not the spouse of the taxpayer and does not bear any relationship to the taxpayer described in subparagraphs (A) through (G) of section 152(d)(2).’’. 


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(2) CONFORMING AMENDMENT.—Subparagraph (B) of section 162(l)(2) of such 

Code is amended by inserting ‘‘, any dependent, or individual described in subparagraph (D) or (E) of paragraph (1) with respect to’’ after ‘‘spouse’’. 

(c) EXTENSION TO ELIGIBLE BENEFICIARIES OF SICK AND ACCIDENT BENEFITS PRO- VIDED TO MEMBERS OF A VOLUNTARY EMPLOYEES’ BENEFICIARY ASSOCIATION AND

THEIR DEPENDENTS.—Section 501(c)(9) of the Internal Revenue Code of 1986 (relating to list of exempt organizations) is amended by adding at the end the following 

new sentence: ‘‘For purposes of providing for the payment of sick and accident benefits to members of such an association and their dependents, the term ‘dependents’ 

shall include any individual who is an eligible beneficiary (within the meaning of 

section 106(f)), as determined under the terms of a medical benefit, health insurance, or other program under which members and their dependents are entitled to 

sick and accident benefits.’’. 

(d) FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT ARRANGEMENTS.—The Secretary of Treasury shall issue guidance of general applicability providing that medical expenses that otherwise qualify— 

(1) for reimbursement from a flexible spending arrangement under regulations in effect on the date of the enactment of this Act may be reimbursed from 

an employee’s flexible spending arrangement, notwithstanding the fact that 

such expenses are attributable to any individual who is not the employee’s 

spouse or dependent (within the meaning of section 105(b) of the Internal Revenue Code of 1986) but is an eligible beneficiary (within the meaning of section 

106(f) of such Code) under the flexible spending arrangement with respect to 

the employee, and 

(2) for reimbursement from a health reimbursement arrangement under regulations in effect on the date of the enactment of this Act may be reimbursed 

from an employee’s health reimbursement arrangement, notwithstanding the 

fact that such expenses are attributable to an individual who is not a spouse 

or dependent (within the meaning of section 105(b) of such Code) but is an eligible beneficiary (within the meaning of section 106(f) of such Code) under the 

health reimbursement arrangement with respect to the employee. 

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2009. 

DIVISION B—MEDICARE AND MEDICAID 

IMPROVEMENTS 

SEC. 1001. TABLE OF CONTENTS OF DIVISION. 

The table of contents for this division is as follows: 

DIVISION B—MEDICARE AND MEDICAID IMPROVEMENTS 

Sec. 1001. Table of contents of division. 

TITLE I—IMPROVING HEALTH CARE VALUE 

Subtitle A—Provisions Related to Medicare Part A 

PART 1—MARKET BASKET UPDATES

Sec. 1101. Skilled nursing facility payment update. 

Sec. 1102. Inpatient rehabilitation facility payment update. 

Sec. 1103. Incorporating productivity improvements into market basket updates that do not already incorporate 

such improvements. 

PART 2—OTHER MEDICARE PART A PROVISIONS

Sec. 1111. Payments to skilled nursing facilities. 

Sec. 1112. Medicare DSH report and payment adjustments in response to coverage expansion. 

Sec. 1113. Extension of hospice regulation moratorium. 

Subtitle B—Provisions Related to Part B 

PART 1—PHYSICIANS’ SERVICES

Sec. 1121. Sustainable growth rate reform. 

Sec. 1122. Misvalued codes under the physician fee schedule. 

Sec. 1123. Payments for efficient areas. 

Sec. 1124. Modifications to the Physician Quality Reporting Initiative (PQRI). 

Sec. 1125. Adjustment to Medicare payment localities. 

PART 2—MARKET BASKET UPDATES

Sec. 1131. Incorporating productivity improvements into market basket updates that do not already incorporate 

such improvements. 

PART 3—OTHER PROVISIONS

Sec. 1141. Rental and purchase of power-driven wheelchairs. 


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Sec. 1142. Extension of payment rule for brachytherapy. 

Sec. 1143. Home infusion therapy report to congress. 

Sec. 1144. Require ambulatory surgical centers (ASCs) to submit cost data and other data. 

Sec. 1145. Treatment of certain cancer hospitals. 

Sec. 1146. Medicare Improvement Fund. 

Sec. 1147. Payment for imaging services. 

Sec. 1148. Durable medical equipment program improvements. 

Sec. 1149. MedPAC study and report on bone mass measurement. 

Subtitle C—Provisions Related to Medicare Parts A and B 

Sec. 1151. Reducing potentially preventable hospital readmissions. 

Sec. 1152. Post acute care services payment reform plan and bundling pilot program. 

Sec. 1153. Home health payment update for 2010. 

Sec. 1154. Payment adjustments for home health care. 

Sec. 1155. Incorporating productivity improvements into market basket update for home health services. 

Sec. 1156. Limitation on Medicare exceptions to the prohibition on certain physician referrals made to hospitals. 

Sec. 1157. Institute of Medicine study of geographic adjustment factors under Medicare. 

Sec. 1158. Revision of medicare payment systems to address geographic inequities. 

Sec. 1159. Institute of Medicine study of geographic variation in health care spending and promoting high-value 

health care. 

Subtitle D—Medicare Advantage Reforms 

PART 1—PAYMENT AND ADMINISTRATION

Sec. 1161. Phase-in of payment based on fee-for-service costs. 

Sec. 1162. Quality bonus payments. 

Sec. 1163. Extension of Secretarial coding intensity adjustment authority. 

Sec. 1164. Simplification of annual beneficiary election periods. 

Sec. 1165. Extension of reasonable cost contracts. 

Sec. 1166. Limitation of waiver authority for employer group plans. 

Sec. 1167. Improving risk adjustment for payments. 

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

PART 2—BENEFICIARY PROTECTIONS AND ANTI-FRAUD

Sec. 1171. Limitation on cost-sharing for individual health services. 

Sec. 1172. Continuous open enrollment for enrollees in plans with enrollment suspension. 

Sec. 1173. Information for beneficiaries on MA plan administrative costs. 

Sec. 1174. Strengthening audit authority. 

Sec. 1175. Authority to deny plan bids. 

PART 3—TREATMENT OF SPECIAL NEEDS PLANS

Sec. 1176. Limitation on enrollment outside open enrollment period of individuals into chronic care specialized 

MA plans for special needs individuals. 

Sec. 1177. Extension of authority of special needs plans to restrict enrollment. 

Subtitle E—Improvements to Medicare Part D 

Sec. 1181. Elimination of coverage gap. 

Sec. 1182. Discounts for certain part D drugs in original coverage gap. 

Sec. 1183. Repeal of provision relating to submission of claims by pharmacies located in or contracting with 

long-term care facilities. 

Sec. 1184. Including costs incurred by AIDS drug assistance programs and Indian Health Service in providing 

prescription drugs toward the annual out-of-pocket threshold under part D. 

Sec. 1185. Permitting mid-year changes in enrollment for formulary changes that adversely impact an enrollee. 

Subtitle F—Medicare Rural Access Protections 

Sec. 1191. Telehealth expansion and enhancements. 

Sec. 1192. Extension of outpatient hold harmless provision. 

Sec. 1193. Extension of section 508 hospital reclassifications. 

Sec. 1194. Extension of geographic floor for work. 

Sec. 1195. Extension of payment for technical component of certain physician pathology services. 

Sec. 1196. Extension of ambulance add-ons. 

TITLE II—MEDICARE BENEFICIARY IMPROVEMENTS 

Subtitle A—Improving and Simplifying Financial Assistance for Low Income Medicare Beneficiaries 

Sec. 1201. Improving assets tests for Medicare Savings Program and low-income subsidy program. 

Sec. 1202. Elimination of part D cost-sharing for certain non-institutionalized full-benefit dual eligible individuals. 

Sec. 1203. Eliminating barriers to enrollment. 

Sec. 1204. Enhanced oversight relating to reimbursements for retroactive low income subsidy enrollment. 

Sec. 1205. Intelligent assignment in enrollment. 

Sec. 1206. Special enrollment period and automatic enrollment process for certain subsidy eligible individuals. 

Sec. 1207. Application of MA premiums prior to rebate in calculation of low income subsidy benchmark. 

Subtitle B—Reducing Health Disparities 

Sec. 1221. Ensuring effective communication in Medicare. 

Sec. 1222. Demonstration to promote access for Medicare beneficiaries with limited English proficiency by providing reimbursement for culturally and linguistically appropriate services. 

Sec. 1223. IOM report on impact of language access services. 

Sec. 1224. Definitions. 

Subtitle C—Miscellaneous Improvements 

Sec. 1231. Extension of therapy caps exceptions process. 

Sec. 1232. Extended months of coverage of immunosuppressive drugs for kidney transplant patients and other 

renal dialysis provisions. 


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Sec. 1233. Advance care planning consultation. 

Sec. 1234. Part B special enrollment period and waiver of limited enrollment penalty for TRICARE beneficiaries. 

Sec. 1235. Exception for use of more recent tax year in case of gains from sale of primary residence in computing part B income-related premium. 

Sec. 1236. Demonstration program on use of patient decisions aids. 

TITLE III—PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES, AND COORDINATED CARE 

Sec. 1301. Accountable Care Organization pilot program. 

Sec. 1302. Medical home pilot program. 

Sec. 1303. Payment incentive for selected primary care services. 

Sec. 1304. Increased reimbursement rate for certified nurse-midwives. 

Sec. 1305. Coverage and waiver of cost-sharing for preventive services. 

Sec. 1306. Waiver of deductible for colorectal cancer screening tests regardless of coding, subsequent diagnosis, 

or ancillary tissue removal. 

Sec. 1307. Excluding clinical social worker services from coverage under the medicare skilled nursing facility 

prospective payment system and consolidated payment. 

Sec. 1308. Coverage of marriage and family therapist services and mental health counselor services. 

Sec. 1309. Extension of physician fee schedule mental health add-on. 

Sec. 1310. Expanding access to vaccines. 

Sec. 1311. Expansion of Medicare-Covered Preventive Services at Federally Qualified Health Centers. 

TITLE IV—QUALITY 

Subtitle A—Comparative Effectiveness Research 

Sec. 1401. Comparative effectiveness research. 

Subtitle B—Nursing Home Transparency 

PART 1—IMPROVING TRANSPARENCY OF INFORMATION ON SKILLED NURSING FACILITIES AND NURSING FACILITIES

Sec. 1411. Required disclosure of ownership and additional disclosable parties information. 

Sec. 1412. Accountability requirements. 

Sec. 1413. Nursing home compare Medicare website. 

Sec. 1414. Reporting of expenditures. 

Sec. 1415. Standardized complaint form. 

Sec. 1416. Ensuring staffing accountability. 

PART 2—TARGETING ENFORCEMENT

Sec. 1421. Civil money penalties. 

Sec. 1422. National independent monitor pilot program. 

Sec. 1423. Notification of facility closure. 

PART 3—IMPROVING STAFF TRAINING

Sec. 1431. Dementia and abuse prevention training. 

Sec. 1432. Study and report on training required for certified nurse aides and supervisory staff. 

Subtitle C—Quality Measurements 

Sec. 1441. Establishment of national priorities for quality improvement. 

Sec. 1442. Development of new quality measures; GAO evaluation of data collection process for quality meas- urement. Sec. 1443. Multi-stakeholder pre-rulemaking input into selection of quality measures. 

Sec. 1444. Application of quality measures. 

Sec. 1445. Consensus-based entity funding. 

Subtitle D—Physician Payments Sunshine Provision 

Sec. 1451. Reports on financial relationships between manufacturers and distributors of covered drugs, devices, 

biologicals, or medical supplies under Medicare, Medicaid, or CHIP and physicians and other health 

care entities and between physicians and other health care entities. 

Subtitle E—Public Reporting on Health Care-Associated Infections 

Sec. 1461. Requirement for public reporting by hospitals and ambulatory surgical centers on health care-associated infections. 

TITLE V—MEDICARE GRADUATE MEDICAL EDUCATION 

Sec. 1501. Distribution of unused residency positions. 

Sec. 1502. Increasing training in nonprovider settings. 

Sec. 1503. Rules for counting resident time for didactic and scholarly activities and other activities. 

Sec. 1504. Preservation of resident cap positions from closed hospitals. 

Sec. 1505. Improving accountability for approved medical residency training. 

TITLE VI—PROGRAM INTEGRITY 

Subtitle A—Increased Funding to Fight Waste, Fraud, and Abuse 

Sec. 1601. Increased funding and flexibility to fight fraud and abuse. 

Subtitle B—Enhanced Penalties for Fraud and Abuse 

Sec. 1611. Enhanced penalties for false statements on provider or supplier enrollment applications. 

Sec. 1612. Enhanced penalties for submission of false statements material to a false claim. 

Sec. 1613. Enhanced penalties for delaying inspections. 

Sec. 1614. Enhanced hospice program safeguards. 

Sec. 1615. Enhanced penalties for individuals excluded from program participation. 

Sec. 1616. Enhanced penalties for provision of false information by Medicare Advantage and part D plans. 

Sec. 1617. Enhanced penalties for Medicare Advantage and part D marketing violations. 

Sec. 1618. Enhanced penalties for obstruction of program audits. 

Sec. 1619. Exclusion of certain individuals and entities from participation in Medicare and State health care 

programs. 


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Subtitle C—Enhanced Program and Provider Protections 

Sec. 1631. Enhanced CMS program protection authority. 

Sec. 1632. Enhanced Medicare, Medicaid, and CHIP program disclosure requirements relating to previous affiliations. 

Sec. 1633. Required inclusion of payment modifier for certain evaluation and management services. 

Sec. 1634. Evaluations and reports required under Medicare Integrity Program. 

Sec. 1635. Require providers and suppliers to adopt programs to reduce waste, fraud, and abuse. 

Sec. 1636. Maximum period for submission of Medicare claims reduced to not more than 12 months. 

Sec. 1637. Physicians who order durable medical equipment or home health services required to be Medicare 

enrolled physicians or eligible professionals. 

Sec. 1638. Requirement for physicians to provide documentation on referrals to programs at high risk of waste 

and abuse. 

Sec. 1639. Face to face encounter with patient required before physicians may certify eligibility for home health 

services or durable medical equipment under Medicare. 

Sec. 1640. Extension of testimonial subpoena authority to program exclusion investigations. 

Sec. 1641. Required repayments of Medicare and Medicaid overpayments. 

Sec. 1642. Expanded application of hardship waivers for OIG exclusions to beneficiaries of any Federal health 

care program. 

Sec. 1643. Access to certain information on renal dialysis facilities. 

Sec. 1644. Billing agents, clearinghouses, or other alternate payees required to register under Medicare. 

Sec. 1645. Conforming civil monetary penalties to False Claims Act amendments. 

Subtitle D—Access to Information Needed to Prevent Fraud, Waste, and Abuse 

Sec. 1651. Access to Information Necessary to Identify Fraud, Waste, and Abuse. 

Sec. 1652. Elimination of duplication between the Healthcare Integrity and Protection Data Bank and the National Practitioner Data Bank. 

Sec. 1653. Compliance with HIPAA privacy and security standards. 

[FOR ITEMS RELATING TO TITLE VII OF DIVISION B, SEE COPY OF BILL AS INTRODUCED ON JULY 

14, 2009] 

TITLE VIII—REVENUE-RELATED PROVISIONS 

Sec. 1801. Disclosures to facilitate identification of individuals likely to be ineligible for the low-income assistance under the Medicare prescription drug program to assist Social Security Administration’s outreach to eligible individuals. 

Sec. 1802. Comparative Effectiveness Research Trust Fund; financing for Trust Fund. 

TITLE IX—MISCELLANEOUS PROVISIONS 

Sec. 1901. Repeal of trigger provision. 

Sec. 1902. Repeal of comparative cost adjustment (CCA) program. 

Sec. 1903. Extension of gainsharing demonstration. 

Sec. 1904. Grants to States for quality home visitation programs for families with young children and families 

expecting children. 

Sec. 1905. Improved coordination and protection for dual eligibles. 

Sec. 1906. Assessment of Medicare cost-intensive diseases and conditions. 

TITLE I—IMPROVING HEALTH CARE VALUE 

Subtitle A—Provisions Related to Medicare Part A 

PART 1—MARKET BASKET UPDATES 

SEC. 1101. SKILLED NURSING FACILITY PAYMENT UPDATE. 

(a) IN GENERAL.—Section 1888(e)(4)(E)(ii) of the Social Security Act (42 U.S.C. 

1395yy(e)(4)(E)(ii)) is amended— 

(1) in subclause (III), by striking ‘‘and’’ at the end; 

(2) by redesignating subclause (IV) as subclause (VI); and 

(3) by inserting after subclause (III) the following new subclauses: 

‘‘(IV) for each of fiscal years 2004 through 2009, the rate computed for the previous fiscal year increased by the skilled nursing 

facility market basket percentage change for the fiscal year involved; 

‘‘(V) for fiscal year 2010, the rate computed for the previous fiscal 

year; and’’. 

(b) DELAYED EFFECTIVE DATE.—Section 1888(e)(4)(E)(ii)(V) of the Social Security 

Act, as inserted by subsection (a)(3), shall not apply to payment for days before January 1, 2010. 

SEC. 1102. INPATIENT REHABILITATION FACILITY PAYMENT UPDATE. 

(a) IN GENERAL.—Section 1886(j)(3)(C) of the Social Security Act (42 U.S.C. 

1395ww(j)(3)(C)) is amended by striking ‘‘and 2009’’ and inserting ‘‘through 2010’’. 

(b) DELAYED EFFECTIVE DATE.—The amendment made by subsection (a) shall not 

apply to payment units occurring before January 1, 2010. 


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SEC. 1103. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATES 

THAT DO NOT ALREADY INCORPORATE SUCH IMPROVEMENTS. 

(a) INPATIENT ACUTE HOSPITALS.—Section 1886(b)(3)(B) of the Social Security Act 

(42 U.S.C. 1395ww(b)(3)(B)) is amended— 

(1) in clause (iii)— 

(A) by striking ‘‘(iii) For purposes of this subparagraph,’’ and inserting 

‘‘(iii)(I) For purposes of this subparagraph, subject to the productivity adjustment described in subclause (II),’’; and 

(B) by adding at the end the following new subclause: 

‘‘(II) The productivity adjustment described in this subclause, with respect to an 

increase or change for a fiscal year or year or cost reporting period, or other annual 

period, is a productivity offset equal to the percentage change in the 10-year moving 

average of annual economy-wide private nonfarm business multi-factor productivity 

(as recently published before the promulgation of such increase for the year or period involved). Except as otherwise provided, any reference to the increase described 

in this clause shall be a reference to the percentage increase described in subclause 

(I) minus the percentage change under this subclause.’’; 

(2) in the first sentence of clause (viii)(I), by inserting ‘‘(but not below zero)’’ 

after ‘‘shall be reduced’’; and 

(3) in the first sentence of clause (ix)(I)— 

(A) by inserting ‘‘(determined without regard to clause (iii)(II)’’ after 

‘‘clause (i)’’ the second time it appears; and 

(B) by inserting ‘‘(but not below zero)’’ after ‘‘reduced’’. 

(b) SKILLED NURSING FACILITIES.—Section 1888(e)(5)(B) of such Act (42 U.S.C. 

1395yy(e)(5))(B) is amended by inserting ‘‘subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)’’ after ‘‘as calculated by the Secretary’’. 

(c) LONG TERM CARE HOSPITALS.—Section 1886(m) of the Social Security Act (42 

U.S.C. 1395ww(m)) is amended by adding at the end the following new paragraph: 

‘‘(3) PRODUCTIVITY ADJUSTMENT.—In implementing the system described in 

paragraph (1) for discharges occurring during the rate year ending in 2010 or 

any subsequent rate year for a hospital, to the extent that an annual percentage 

increase factor applies to a base rate for such discharges for the hospital, such 

factor shall be subject to the productivity adjustment described in subsection 

(b)(3)(B)(iii)(II).’’. 

(d) INPATIENT REHABILITATION FACILITIES.—The second sentence of section 

1886(j)(3)(C) of the Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is amended by 

inserting ‘‘(subject to the productivity adjustment described in subsection 

(b)(3)(B)(iii)(II))’’ after ‘‘appropriate percentage increase’’. 

(e) PSYCHIATRIC HOSPITALS.—Section 1886 of the Social Security Act (42 U.S.C. 

1395ww) is amended by adding at the end the following new subsection: 

‘‘(o) PROSPECTIVE PAYMENT FOR PSYCHIATRIC HOSPITALS.— 

‘‘(1) REFERENCE TO ESTABLISHMENT AND IMPLEMENTATION OF SYSTEM.—For 

provisions related to the establishment and implementation of a prospective 

payment system for payments under this title for inpatient hospital services 

furnished by psychiatric hospitals (as described in clause (i) of subsection 

(d)(1)(B) and psychiatric units (as described in the matter following clause (v) 

of such subsection), see section 124 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999. 

‘‘(2) PRODUCTIVITY ADJUSTMENT.—In implementing the system described in 

paragraph (1) for discharges occurring during the rate year ending in 2011 or 

any subsequent rate year for a psychiatric hospital or unit described in such 

paragraph, to the extent that an annual percentage increase factor applies to 

a base rate for such discharges for the hospital or unit, respectively, such factor 

shall be subject to the productivity adjustment described in subsection 

(b)(3)(B)(iii)(II).’’. 

(f) HOSPICE CARE.—Subclause (VII) of section 1814(i)(1)(C)(ii) of the Social Security Act (42 U.S.C. 1395f(i)(1)(C)(ii)) is amended by inserting after ‘‘the market basket percentage increase’’ the following: ‘‘(which is subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II))’’. 

(g) EFFECTIVE DATE.—The amendments made by subsections (a), (b), (d), and (f) 

shall apply to annual increases effected for fiscal years beginning with fiscal year 

2010. 

PART 2—OTHER MEDICARE PART A PROVISIONS 

SEC. 1111. PAYMENTS TO SKILLED NURSING FACILITIES. 

(a) CHANGE IN RECALIBRATION FACTOR.— 


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(1) ANALYSIS.—The Secretary of Health and Human Services shall conduct, 

using calendar year 2006 claims data, an initial analysis comparing total payments under title XVIII of the Social Security Act for skilled nursing facility 

services under the RUG–53 and under the RUG–44 classification systems. 

(2) ADJUSTMENT IN RECALIBRATION FACTOR.—Based on the initial analysis 

under paragraph (1), the Secretary shall adjust the case mix indexes under section 1888(e)(4)(G)(i) of the Social Security Act (42 U.S.C. 1395yy(e)(4)(G)(i)) for 

fiscal year 2010 by the appropriate recalibration factor as proposed in the proposed rule for Medicare skilled nursing facilities issued by such Secretary on 

May 12, 2009 (74 Federal Register 22214 et seq.). 

(b) CHANGE IN PAYMENT FOR NONTHERAPY ANCILLARY (NTA) SERVICES AND THER- APY SERVICES.— (1) CHANGES UNDER CURRENT SNF CLASSIFICATION SYSTEM.— (A) IN GENERAL.—Subject to subparagraph (B), the Secretary of Health 

and Human Services shall, under the system for payment of skilled nursing 

facility services under section 1888(e) of the Social Security Act (42 U.S.C. 

1395yy(e)), increase payment by 10 percent for non-therapy ancillary services (as specified by the Secretary in the notice issued on November 27, 

1998 (63 Federal Register 65561 et seq.)) and shall decrease payment for 

the therapy case mix component of such rates by 5.5 percent. 

(B) EFFECTIVE DATE.—The changes in payment described in subparagraph (A) shall apply for days on or after January 1, 2010, and until the 

Secretary implements an alternative case mix classification system for payment of skilled nursing facility services under section 1888(e) of the Social 

Security Act (42 U.S.C. 1395yy(e)). 

(C) IMPLEMENTATION.—Notwithstanding any other provision of law, the 

Secretary may implement by program instruction or otherwise the provisions of this paragraph. 

(2) CHANGES UNDER A FUTURE SNF CASE MIX CLASSIFICATION SYSTEM.— 

(A) ANALYSIS.— 

(i) IN GENERAL.—The Secretary of Health and Human Services shall 

analyze payments for non-therapy ancillary services under a future 

skilled nursing facility classification system to ensure the accuracy of 

payment for non-therapy ancillary services. Such analysis shall consider use of appropriate predictors which may include age, physical and 

mental status, ability to perform activities of daily living, prior nursing 

home stay, diagnoses, broad RUG category, and a proxy for length of 

stay. 

(ii) APPLICATION.—Such analysis shall be conducted in a manner 

such that the future skilled nursing facility classification system is implemented to apply to services furnished during a fiscal year beginning 

with fiscal year 2011. 

(B) CONSULTATION.—In conducting the analysis under subparagraph (A), 

the Secretary shall consult with interested parties, including the Medicare 

Payment Advisory Commission and other interested stakeholders, to identify appropriate predictors of nontherapy ancillary costs. 

(C) RULEMAKING.—The Secretary shall include the result of the analysis 

under subparagraph (A) in the fiscal year 2011 rulemaking cycle for purposes of implementation beginning for such fiscal year. 

(D) IMPLEMENTATION.—Subject to subparagraph (E) and consistent with 

subparagraph (A)(ii), the Secretary shall implement changes to payments 

for non-therapy ancillary services (which shall include a separate rate component for non-therapy ancillary services and may include use of a model 

that predicts payment amounts applicable for non-therapy ancillary services) under such future skilled nursing facility services classification system 

as the Secretary determines appropriate based on the analysis conducted 

pursuant to subparagraph (A). 

(E) BUDGET NEUTRALITY.—The Secretary shall implement changes described in subparagraph (D) in a manner such that the estimated expenditures under such future skilled nursing facility services classification system for a fiscal year beginning with fiscal year 2011 with such changes 

would be equal to the estimated expenditures that would otherwise occur 

under title XVIII of the Social Security Act under such future skilled nursing facility services classification system for such year without such 

changes. 

(c) OUTLIER POLICY FOR NTA AND THERAPY.—Section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)) is amended by adding at the end the following new 

paragraph: 

‘‘(13) OUTLIERS FOR NTA AND THERAPY.— 


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‘‘(A) IN GENERAL.—With respect to outliers because of unusual variations 

in the type or amount of medically necessary care, beginning with October 

1, 2010, the Secretary— 

‘‘(i) shall provide for an addition or adjustment to the payment 

amount otherwise made under this section with respect to non-therapy 

ancillary services in the case of such outliers; and 

‘‘(ii) may provide for such an addition or adjustment to the payment 

amount otherwise made under this section with respect to therapy 

services in the case of such outliers. 

‘‘(B) OUTLIERS BASED ON AGGREGATE COSTS.—Outlier adjustments or additional payments described in subparagraph (A) shall be based on aggregate 

costs during a stay in a skilled nursing facility and not on the number of 

days in such stay. 

‘‘(C) BUDGET NEUTRALITY.—The Secretary shall reduce estimated payments that would otherwise be made under the prospective payment system 

under this subsection with respect to a fiscal year by 2 percent. The total 

amount of the additional payments or payment adjustments for outliers 

made under this paragraph with respect to a fiscal year may not exceed 2 

percent of the total payments projected or estimated to be made based on 

the prospective payment system under this subsection for the fiscal year.’’. 

(d) CONFORMING AMENDMENTS.—Section 1888(e)(8) of such Act (42 U.S.C. 

1395yy(e)(8)) is amended— 

(1) in subparagraph (A)— 

(A) by striking ‘‘and’’ before ‘‘adjustments’’; and 

(B) by inserting ‘‘, and adjustment under section 1111(b) of the America’s 

Affordable Health Choices Act of 2009’’ before the semicolon at the end; 

(2) in subparagraph (B), by striking ‘‘and’’; 

(3) in subparagraph (C), by striking the period and inserting ‘‘; and’’; and 

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

‘‘(D) the establishment of outliers under paragraph (13).’’. 

SEC. 1112. MEDICARE DSH REPORT AND PAYMENT ADJUSTMENTS IN RESPONSE TO COVERAGE EXPANSION. 

(a) DSH REPORT.— 

(1) IN GENERAL.—Not later than January 1, 2016, the Secretary of Health and 

Human Services shall submit to Congress a report on Medicare DSH taking into 

account the impact of the health care reforms carried out under division A in 

reducing the number of uninsured individuals. The report shall include recommendations relating to the following: 

(A) The appropriate amount, targeting, and distribution of Medicare DSH 

to compensate for higher Medicare costs associated with serving low-income 

beneficiaries (taking into account variations in the empirical justification 

for Medicare DSH attributable to hospital characteristics, including bed 

size), consistent with the original intent of Medicare DSH. 

(B) The appropriate amount, targeting, and distribution of Medicare DSH 

to hospitals given their continued uncompensated care costs, to the extent 

such costs remain. 

(2) COORDINATION WITH MEDICAID DSH REPORT.—The Secretary shall coordinate the report under this subsection with the report on Medicaid DSH under 

section 1704(a). 

(b) PAYMENT ADJUSTMENTS IN RESPONSE TO COVERAGE EXPANSION.— 

(1) IN GENERAL.—If there is a significant decrease in the national rate of 

uninsurance as a result of this Act (as determined under paragraph (2)(A)), 

then the Secretary of Health and Human Services shall, beginning in fiscal year 

2017, implement the following adjustments to Medicare DSH: 

(A) In lieu of the amount of Medicare DSH payment that would otherwise 

be made under section 1886(d)(5)(F) of the Social Security Act, the amount 

of Medicare DSH payment shall be an amount based on the recommendations of the report under subsection (a)(1)(A) and shall take into account 

variations in the empirical justification for Medicare DSH attributable to 

hospital characteristics, including bed size. 

(B) Subject to paragraph (3), make an additional payment to a hospital 

by an amount that is estimated based on the amount of uncompensated 

care provided by the hospital based on criteria for uncompensated care as 

determined by the Secretary, which shall exclude bad debt. 

(2) SIGNIFICANT DECREASE IN NATIONAL RATE OF UNINSURANCE AS A RESULT

OF THIS ACT.—For purposes of this subsection— 

(A) IN GENERAL.—There is a ‘‘significant decrease in the national rate of 

uninsurance as a result of this Act’’ if there is a decrease in the national 


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rate of uninsurance (as defined in subparagraph (B)) from 2012 to 2014 

that exceeds 8 percentage points. 

(B) NATIONAL RATE OF UNINSURANCE DEFINED.—The term ‘‘national rate 

of uninsurance’’ means, for a year, such rate for the under-65 population 

for the year as determined and published by the Bureau of the Census in 

its Current Population Survey in or about September of the succeeding 

year. 

(3) UNCOMPENSATED CARE INCREASE.— (A) COMPUTATION OF DSH SAVINGS.—For each fiscal year (beginning with 

fiscal year 2017), the Secretary shall estimate the aggregate reduction in 

the amount of Medicare DSH payment that would be expected to result 

from the adjustment under paragraph (1)(A). 

(B) STRUCTURE OF PAYMENT INCREASE.—The Secretary shall compute the 

additional payment to a hospital as described in paragraph (1)(B) for a fiscal year in accordance with a formula established by the Secretary that provides that— 

(i) the estimated aggregate amount of such increase for the fiscal 

year does not exceed 50 percent of the aggregate reduction in Medicare 

DSH estimated by the Secretary for such fiscal year; and 

(ii) hospitals with higher levels of uncompensated care receive a 

greater increase. 

(c) MEDICARE DSH.—In this section, the term ‘‘Medicare DSH’’ means adjustments in payments under section 1886(d)(5)(F) of the Social Security Act (42 U.S.C. 

1395ww(d)(5)(F)) for inpatient hospital services furnished by disproportionate share 

hospitals. 

SEC. 1113. EXTENSION OF HOSPICE REGULATION MORATORIUM. 

Section 4301(a) of division B of the American Recovery and Reinvestment Act of 

2009 (Public Law 111–5) is amended— 

(1) by striking ‘‘October 1, 2009’’ and inserting ‘‘October 1, 2010’’; and 

(2) by striking ‘‘for fiscal year 2009’’ and inserting ‘‘for fiscal years 2009 and 

2010’’. 

Subtitle B—Provisions Related to Part B 

PART 1—PHYSICIANS’ SERVICES 

SEC. 1121. SUSTAINABLE GROWTH RATE REFORM. 

(a) TRANSITIONAL UPDATE FOR 2010.—Section 1848(d) of the Social Security Act 

(42 U.S.C. 1395w–4(d)) is amended by adding at the end the following new paragraph: 

‘‘(10) UPDATE FOR 2010.—The update to the single conversion factor established in paragraph (1)(C) for 2010 shall be the percentage increase in the MEI 

(as defined in section 1842(i)(3)) for that year.’’. 

(b) REBASING SGR USING 2009; LIMITATION ON CUMULATIVE ADJUSTMENT PE- RIOD.—Section 1848(d)(4) of such Act (42 U.S.C. 1395w–4(d)(4)) is amended— 

(1) in subparagraph (B), by striking ‘‘subparagraph (D)’’ and inserting ‘‘subparagraphs (D) and (G)’’; and 

(2) by adding at the end the following new subparagraph: 

‘‘(G) REBASING USING 2009 FOR FUTURE UPDATE ADJUSTMENTS.—In determining the update adjustment factor under subparagraph (B) for 2011 and 

subsequent years— 

‘‘(i) the allowed expenditures for 2009 shall be equal to the amount 

of the actual expenditures for physicians’ services during 2009; and 

‘‘(ii) the reference in subparagraph (B)(ii)(I) to ‘April 1, 1996’ shall be 

treated as a reference to ‘January 1, 2009 (or, if later, the first day of 

the fifth year before the year involved)’.’’. 

(c) LIMITATION ON PHYSICIANS’ SERVICES INCLUDED IN TARGET GROWTH RATE

COMPUTATION TO SERVICES COVERED UNDER PHYSICIAN FEE SCHEDULE.—Effective 

for services furnished on or after January 1, 2009, section 1848(f)(4)(A) of such Act 

is amended by striking ‘‘(such as clinical’’ and all that follows through ‘‘in a physician’s office’’ and inserting ‘‘for which payment under this part is made under the 

fee schedule under this section, for services for practitioners described in section 

1842(b)(18)(C) on a basis related to such fee schedule, or for services described in 

section 1861(p) (other than such services when furnished in the facility of a provider 

of services)’’. 

(d) ESTABLISHMENT OF SEPARATE TARGET GROWTH RATES FOR CATEGORIES OF

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(1) ESTABLISHMENT OF SERVICE CATEGORIES.—Subsection (j) of section 1848 of 

the Social Security Act (42 U.S.C. 1395w–4) is amended by adding at the end 

the following new paragraph: 

‘‘(5) SERVICE CATEGORIES.—For services furnished on or after January 1, 

2009, each of the following categories of physicians’ services (as defined in paragraph (3)) shall be treated as a separate ‘service category’: 

‘‘(A) Evaluation and management services that are procedure codes (for 

services covered under this title) for— 

‘‘(i) services in the category designated Evaluation and Management 

in the Health Care Common Procedure Coding System (established by 

the Secretary under subsection (c)(5) as of December 31, 2009, and as 

subsequently modified by the Secretary); and 

‘‘(ii) preventive services (as defined in section 1861(iii)) for which payment is made under this section. 

‘‘(B) All other services not described in subparagraph (A). 

Service categories established under this paragraph shall apply without regard 

to the specialty of the physician furnishing the service.’’. 

(2) ESTABLISHMENT OF SEPARATE CONVERSION FACTORS FOR EACH SERVICE

CATEGORY.—Subsection (d)(1) of section 1848 of the Social Security Act (42 

U.S.C. 1395w–4) is amended— 

(A) in subparagraph (A)— 

(i) by designating the sentence beginning ‘‘The conversion factor’’ as 

clause (i) with the heading ‘‘APPLICATION OF SINGLE CONVERSION FACTOR.—’’ and with appropriate indentation; 

(ii) by striking ‘‘The conversion factor’’ and inserting ‘‘Subject to 

clause (ii), the conversion factor’’; and 

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

‘‘(ii) APPLICATION OF MULTIPLE CONVERSION FACTORS BEGINNING WITH

2011.— 

‘‘(I) IN GENERAL.—In applying clause (i) for years beginning with 

2011, separate conversion factors shall be established for each service category of physicians’ services (as defined in subsection (j)(5)) 

and any reference in this section to a conversion factor for such 

years shall be deemed to be a reference to the conversion factor for 

each of such categories. 

‘‘(II) INITIAL CONVERSION FACTORS.—Such factors for 2011 shall 

be based upon the single conversion factor for the previous year 

multiplied by the update established under paragraph (11) for such 

category for 2011. 

‘‘(III) UPDATING OF CONVERSION FACTORS.—Such factor for a service category for a subsequent year shall be based upon the conversion factor for such category for the previous year and adjusted by 

the update established for such category under paragraph (11) for 

the year involved.’’; and 

(B) in subparagraph (D), by striking ‘‘other physicians’ services’’ and inserting ‘‘for physicians’ services described in the service category described 

in subsection (j)(5)(B)’’. 

(3) ESTABLISHING UPDATES FOR CONVERSION FACTORS FOR SERVICE CATEGORIES.—Section 1848(d) of the Social Security Act (42 U.S.C. 1395w–4(d)), as 

amended by subsection (a), is amended— 

(A) in paragraph (4)(C)(iii), by striking ‘‘The allowed’’ and inserting ‘‘Subject to paragraph (11)(B), the allowed’’; and 

(B) by adding at the end the following new paragraph: 

‘‘(11) UPDATES FOR SERVICE CATEGORIES BEGINNING WITH 2011.— 

‘‘(A) IN GENERAL.—In applying paragraph (4) for a year beginning with 

2011, the following rules apply: 

‘‘(i) APPLICATION OF SEPARATE UPDATE ADJUSTMENTS FOR EACH SERVICE CATEGORY.—Pursuant to paragraph (1)(A)(ii)(I), the update shall be 

made to the conversion factor for each service category (as defined in 

subsection (j)(5)) based upon an update adjustment factor for the respective category and year and the update adjustment factor shall be 

computed, for a year, separately for each service category. 

‘‘(ii) COMPUTATION OF ALLOWED AND ACTUAL EXPENDITURES BASED ON

SERVICE CATEGORIES.—In computing the prior year adjustment component and the cumulative adjustment component under clauses (i) and 

(ii) of paragraph (4)(B), the following rules apply: 

‘‘(I) APPLICATION BASED ON SERVICE CATEGORIES.—The allowed 

expenditures and actual expenditures shall be the allowed and acVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00078 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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tual expenditures for the service category, as determined under 

subparagraph (B). 

‘‘(II) APPLICATION OF CATEGORY SPECIFIC TARGET GROWTH RATE.— 

The growth rate applied under clause (ii)(II) of such paragraph 

shall be the target growth rate for the service category involved 

under subsection (f)(5). 

‘‘(B) DETERMINATION OF ALLOWED EXPENDITURES.—In applying paragraph 

(4) for a year beginning with 2010, notwithstanding subparagraph (C)(iii) 

of such paragraph, the allowed expenditures for a service category for a 

year is an amount computed by the Secretary as follows: 

‘‘(i) FOR 2010.—For 2010: 

‘‘(I) TOTAL 2009 ACTUAL EXPENDITURES FOR ALL SERVICES INCLUDED IN SGR COMPUTATION FOR EACH SERVICE CATEGORY.—Compute total actual expenditures for physicians’ services (as defined 

in subsection (f)(4)(A)) for 2009 for each service category. 

‘‘(II) INCREASE BY GROWTH RATE TO OBTAIN 2010 ALLOWED EXPENDITURES FOR SERVICE CATEGORY.—Compute allowed expenditures for the service category for 2010 by increasing the allowed expenditures for the service category for 2009 computed under subclause (I) by the target growth rate for such service category under 

subsection (f) for 2010. 

‘‘(ii) FOR SUBSEQUENT YEARS.—For a subsequent year, take the 

amount of allowed expenditures for such category for the preceding 

year (under clause (i) or this clause) and increase it by the target 

growth rate determined under subsection (f) for such category and 

year.’’. 

(4) APPLICATION OF SEPARATE TARGET GROWTH RATES FOR EACH CATEGORY.— 

(A) IN GENERAL.—Section 1848(f) of the Social Security Act (42 U.S.C. 

1395w–4(f)) is amended by adding at the end the following new paragraph: 

‘‘(5) APPLICATION OF SEPARATE TARGET GROWTH RATES FOR EACH SERVICE CATEGORY BEGINNING WITH 2010.—The target growth rate for a year beginning with 

2010 shall be computed and applied separately under this subsection for each 

service category (as defined in subsection (j)(5)) and shall be computed using the 

same method for computing the target growth rate except that the factor described in paragraph (2)(C) for— 

‘‘(A) the service category described in subsection (j)(5)(A) shall be increased by 0.02; and 

‘‘(B) the service category described in subsection (j)(5)(B) shall be increased by 0.01.’’. 

(B) USE OF TARGET GROWTH RATES.—Section 1848 of such Act is further 

amended— 

(i) in subsection (d)— 

(I) in paragraph (1)(E)(ii), by inserting ‘‘or target’’ after ‘‘sustainable’’; and 

(II) in paragraph (4)(B)(ii)(II), by inserting ‘‘or target’’ after ‘‘sustainable’’; and 

(ii) in the heading of subsection (f), by inserting ‘‘AND TARGET

GROWTH RATE’’ after ‘‘SUSTAINABLE GROWTH RATE’’; 

(iii) in subsection (f)(1)— 

(I) by striking ‘‘and’’ at the end of subparagraph (A); 

(II) in subparagraph (B), by inserting ‘‘before 2010’’ after ‘‘each 

succeeding year’’ and by striking the period at the end and inserting ‘‘; and’’; and 

(III) by adding at the end the following new subparagraph: 

‘‘(C) November 1 of each succeeding year the target growth rate for such 

succeeding year and each of the 2 preceding years.’’; and 

(iv) in subsection (f)(2), in the matter before subparagraph (A), by inserting after ‘‘beginning with 2000’’ the following: ‘‘and ending with 

2009’’. 

(e) APPLICATION TO ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM.—In applying the target growth rate under subsections (d) and (f) of section 1848 of the 

Social Security Act to services furnished by a practitioner to beneficiaries who are 

attributable to an accountable care organization under the pilot program provided 

under section 1866D of such Act, the Secretary of Health and Human Services shall 

develop, not later than January 1, 2012, for application beginning with 2012, a 

method that— 

(1) allows each such organization to have its own expenditure targets and updates for such practitioners, with respect to beneficiaries who are attributable 


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to that organization, that are consistent with the methodologies described in 

such subsection (f); and 

(2) provides that the target growth rate applicable to other physicians shall 

not apply to such physicians to the extent that the physicians’ services are furnished through the accountable care organization. 

In applying paragraph (1), the Secretary of Health and Human Services may apply 

the difference in the update under such paragraph on a claim-by-claim or lump sum 

basis and such a payment shall be taken into account under the pilot program. 

SEC. 1122. MISVALUED CODES UNDER THE PHYSICIAN FEE SCHEDULE. 

(a) IN GENERAL.—Section 1848(c)(2) of the Social Security Act (42 U.S.C. 1395w– 

4(c)(2)) is amended by adding at the end the following new subparagraphs: 

‘‘(K) POTENTIALLY MISVALUED CODES.— 

‘‘(i) IN GENERAL.—The Secretary shall— 

‘‘(I) periodically identify services as being potentially misvalued 

using criteria specified in clause (ii); and 

‘‘(II) review and make appropriate adjustments to the relative 

values established under this paragraph for services identified as 

being potentially misvalued under subclause (I). 

‘‘(ii) IDENTIFICATION OF POTENTIALLY MISVALUED CODES.—For purposes of identifying potentially misvalued services pursuant to clause 

(i)(I), the Secretary shall examine (as the Secretary determines to be 

appropriate) codes (and families of codes as appropriate) for which 

there has been the fastest growth; codes (and families of codes as appropriate) that have experienced substantial changes in practice expenses; codes for new technologies or services within an appropriate period (such as three years) after the relative values are initially established for such codes; multiple codes that are frequently billed in conjunction with furnishing a single service; codes with low relative values, particularly those that are often billed multiple times for a single 

treatment; codes which have not been subject to review since the implementation of the RBRVS (the so-called ‘Harvard-valued codes’); and 

such other codes determined to be appropriate by the Secretary. 

‘‘(iii) REVIEW AND ADJUSTMENTS.— 

‘‘(I) The Secretary may use existing processes to receive recommendations on the review and appropriate adjustment of potentially misvalued services described clause (i)(II). 

‘‘(II) The Secretary may conduct surveys, other data collection activities, studies, or other analyses as the Secretary determines to 

be appropriate to facilitate the review and appropriate adjustment 

described in clause (i)(II). 

‘‘(III) The Secretary may use analytic contractors to identify and 

analyze services identified under clause (i)(I), conduct surveys or 

collect data, and make recommendations on the review and appropriate adjustment of services described in clause (i)(II). 

‘‘(IV) The Secretary may coordinate the review and appropriate 

adjustment described in clause (i)(II) with the periodic review described in subparagraph (B). 

‘‘(V) As part of the review and adjustment described in clause 

(i)(II), including with respect to codes with low relative values described in clause (ii), the Secretary may make appropriate coding 

revisions (including using existing processes for consideration of 

coding changes) which may include consolidation of individual services into bundled codes for payment under the fee schedule under 

subsection (b). 

‘‘(VI) The provisions of subparagraph (B)(ii)(II) shall apply to adjustments to relative value units made pursuant to this subparagraph in the same manner as such provisions apply to adjustments 

under subparagraph (B)(ii)(II). 

‘‘(L) VALIDATING RELATIVE VALUE UNITS.— 

‘‘(i) IN GENERAL.—The Secretary shall establish a process to validate 

relative value units under the fee schedule under subsection (b). 

‘‘(ii) COMPONENTS AND ELEMENTS OF WORK.—The process described in 

clause (i) may include validation of work elements (such as time, mental effort and professional judgment, technical skill and physical effort, 

and stress due to risk) involved with furnishing a service and may include validation of the pre, post, and intra-service components of work. 


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‘‘(iii) SCOPE OF CODES.—The validation of work relative value units 

shall include a sampling of codes for services that is the same as the 

codes listed under subparagraph (K)(ii) 

‘‘(iv) METHODS.—The Secretary may conduct the validation under 

this subparagraph using methods described in subclauses (I) through 

(V) of subparagraph (K)(iii) as the Secretary determines to be appropriate. 

‘‘(v) ADJUSTMENTS.—The Secretary shall make appropriate adjustments to the work relative value units under the fee schedule under 

subsection (b). The provisions of subparagraph (B)(ii)(II) shall apply to 

adjustments to relative value units made pursuant to this subparagraph in the same manner as such provisions apply to adjustments 

under subparagraph (B)(ii)(II).’’. 

(b) IMPLEMENTATION.— 

(1) FUNDING.—For purposes of carrying out the provisions of subparagraphs 

(K) and (L) of 1848(c)(2) of the Social Security Act, as added by subsection (a), 

in addition to funds otherwise available, out of any funds in the Treasury not 

otherwise appropriated, there are appropriated to the Secretary of Health and 

Human Services for the Center for Medicare & Medicaid Services Program 

Management Account $20,000,000 for fiscal year 2010 and each subsequent fiscal year. Amounts appropriated under this paragraph for a fiscal year shall be 

available until expended. 

(2) ADMINISTRATION.— 

(A) Chapter 35 of title 44, United States Code and the provisions of the 

Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to this section or the amendment made by this section. 

(B) Notwithstanding any other provision of law, the Secretary may implement subparagraphs (K) and (L) of 1848(c)(2) of the Social Security Act, as 

added by subsection (a), by program instruction or otherwise. 

(C) Section 4505(d) of the Balanced Budget Act of 1997 is repealed. 

(D) Except for provisions related to confidentiality of information, the provisions of the Federal Acquisition Regulation shall not apply to this section 

or the amendment made by this section. 

(3) FOCUSING CMS RESOURCES ON POTENTIALLY OVERVALUED CODES.—Section 

1868(a) of the Social Security Act (42 1395ee(a)) is repealed. 

SEC. 1123. PAYMENTS FOR EFFICIENT AREAS. 

Section 1833 of the Social Security Act (42 U.S.C. 1395l) is amended by adding 

at the end the following new subsection: 

‘‘(x) INCENTIVE PAYMENTS FOR EFFICIENT AREAS.— 

‘‘(1) IN GENERAL.—In the case of services furnished under the physician fee 

schedule under section 1848 on or after January 1, 2011, and before January 

1, 2013, by a supplier that is paid under such fee schedule in an efficient area 

(as identified under paragraph (2)), in addition to the amount of payment that 

would otherwise be made for such services under this part, there also shall be 

paid (on a monthly or quarterly basis) an amount equal to 5 percent of the payment amount for the services under this part. 

‘‘(2) IDENTIFICATION OF EFFICIENT AREAS.— 

‘‘(A) IN GENERAL.—Based upon available data, the Secretary shall identify 

those counties or equivalent areas in the United States in the lowest fifth 

percentile of utilization based on per capita spending under this part and 

part A for services provided in the most recent year for which data are 

available as of the date of the enactment of this subsection, as standardized 

to eliminate the effect of geographic adjustments in payment rates. 

‘‘(B) IDENTIFICATION OF COUNTIES WHERE SERVICE IS FURNISHED.—For 

purposes of paying the additional amount specified in paragraph (1), if the 

Secretary uses the 5-digit postal ZIP Code where the service is furnished, 

the dominant county of the postal ZIP Code (as determined by the United 

States Postal Service, or otherwise) shall be used to determine whether the 

postal ZIP Code is in a county described in subparagraph (A). 

‘‘(C) LIMITATION ON REVIEW.—There shall be no administrative or judicial 

review under section 1869, 1878, or otherwise, respecting— 

‘‘(i) the identification of a county or other area under subparagraph 

(A); or 

‘‘(ii) the assignment of a postal ZIP Code to a county or other area 

under subparagraph (B). 

‘‘(D) PUBLICATION OF LIST OF COUNTIES; POSTING ON WEBSITE.—With respect to a year for which a county or area is identified under this paragraph, the Secretary shall identify such counties or areas as part of the proVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00081 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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posed and final rule to implement the physician fee schedule under section 

1848 for the applicable year. The Secretary shall post the list of counties 

identified under this paragraph on the Internet website of the Centers for 

Medicare & Medicaid Services.’’. 

SEC. 1124. MODIFICATIONS TO THE PHYSICIAN QUALITY REPORTING INITIATIVE (PQRI). 

(a) FEEDBACK.—Section 1848(m)(5) of the Social Security Act (42 U.S.C. 1395w– 

4(m)(5)) is amended by adding at the end the following new subparagraph: 

‘‘(H) FEEDBACK.—The Secretary shall provide timely feedback to eligible 

professionals on the performance of the eligible professional with respect to 

satisfactorily submitting data on quality measures under this subsection.’’. 

(b) APPEALS.—Such section is further amended— 

(1) in subparagraph (E), by striking ‘‘There shall be’’ and inserting ‘‘Subject 

to subparagraph (I), there shall be’’; and 

(2) by adding at the end the following new subparagraph: 

‘‘(I) INFORMAL APPEALS PROCESS.—Notwithstanding subparagraph (E), by 

not later than January 1, 2011, the Secretary shall establish and have in 

place an informal process for eligible professionals to appeal the determination that an eligible professional did not satisfactorily submit data on quality measures under this subsection.’’. 

(c) INTEGRATION OF PHYSICIAN QUALITY REPORTING AND EHR REPORTING.—Section 1848(m) of such Act is amended by adding at the end the following new paragraph: 

‘‘(7) INTEGRATION OF PHYSICIAN QUALITY REPORTING AND EHR REPORTING.—Not 

later than January 1, 2012, the Secretary shall develop a plan to integrate clinical reporting on quality measures under this subsection with reporting requirements under subsection (o) relating to the meaningful use of electronic health 

records. Such integration shall consist of the following: 

‘‘(A) The development of measures, the reporting of which would both 

demonstrate— 

‘‘(i) meaningful use of an electronic health record for purposes of subsection (o); and 

‘‘(ii) clinical quality of care furnished to an individual. 

‘‘(B) The collection of health data to identify deficiencies in the quality 

and coordination of care for individuals eligible for benefits under this part. 

‘‘(C) Such other activities as specified by the Secretary.’’. 

(d) EXTENSION OF INCENTIVE PAYMENTS.—Section 1848(m)(1) of such Act (42 

U.S.C. 1395w–4(m)(1)) is amended— 

(1) in subparagraph (A), by striking ‘‘2010’’ and inserting ‘‘2012’’; and 

(2) in subparagraph (B)(ii), by striking ‘‘2009 and 2010’’ and inserting ‘‘for 

each of the years 2009 through 2012’’. 

SEC. 1125. ADJUSTMENT TO MEDICARE PAYMENT LOCALITIES. 

(a) IN GENERAL.—Section 1848(e) of the Social Security Act (42 U.S.C.1395w–4(e)) 

is amended by adding at the end the following new paragraph: 

‘‘(6) TRANSITION TO USE OF MSAS AS FEE SCHEDULE AREAS IN CALIFORNIA.— 

‘‘(A) IN GENERAL.— 

‘‘(i) REVISION.—Subject to clause (ii) and notwithstanding the previous provisions of this subsection, for services furnished on or after 

January 1, 2011, the Secretary shall revise the fee schedule areas used 

for payment under this section applicable to the State of California 

using the Metropolitan Statistical Area (MSA) iterative Geographic Adjustment Factor methodology as follows: 

‘‘(I) The Secretary shall configure the physician fee schedule 

areas using the Core-Based Statistical Areas-Metropolitan Statistical Areas (each in this paragraph referred to as an ‘MSA’), as defined by the Director of the Office of Management and Budget, as 

the basis for the fee schedule areas. The Secretary shall employ an 

iterative process to transition fee schedule areas. First, the Secretary shall list all MSAs within the State by Geographic Adjustment Factor described in paragraph (2) (in this paragraph referred 

to as a ‘GAF’) in descending order. In the first iteration, the Secretary shall compare the GAF of the highest cost MSA in the State 

to the weighted-average GAF of the group of remaining MSAs in 

the State. If the ratio of the GAF of the highest cost MSA to the 

weighted-average GAF of the rest of State is 1.05 or greater then 

the highest cost MSA becomes a separate fee schedule area. 

‘‘(II) In the next iteration, the Secretary shall compare the MSA 

of the second-highest GAF to the weighted-average GAF of the 

group of remaining MSAs. If the ratio of the second-highest MSA’s 


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GAF to the weighted-average of the remaining lower cost MSAs is 

1.05 or greater, the second-highest MSA becomes a separate fee 

schedule area. The iterative process continues until the ratio of the 

GAF of the highest-cost remaining MSA to the weighted-average of 

the remaining lower-cost MSAs is less than 1.05, and the remaining group of lower cost MSAs form a single fee schedule area, If 

two MSAs have identical GAFs, they shall be combined in the 

iterative comparison. 

‘‘(ii) TRANSITION.—For services furnished on or after January 1, 2011, 

and before January 1, 2016, in the State of California, after calculating 

the work, practice expense, and malpractice geographic indices described in clauses (i), (ii), and (iii) of paragraph (1)(A) that would otherwise apply through application of this paragraph, the Secretary shall 

increase any such index to the county-based fee schedule area value on 

December 31, 2009, if such index would otherwise be less than the 

value on January 1, 2010. 

‘‘(B) SUBSEQUENT REVISIONS.— 

‘‘(i) PERIODIC REVIEW AND ADJUSTMENTS IN FEE SCHEDULE AREAS.— 

Subsequent to the process outlined in paragraph (1)(C), not less often 

than every three years, the Secretary shall review and update the California Rest-of-State fee schedule area using MSAs as defined by the Director of the Office of Management and Budget and the iterative methodology described in subparagraph (A)(i). 

‘‘(ii) LINK WITH GEOGRAPHIC INDEX DATA REVISION.—The revision described in clause (i) shall be made effective concurrently with the application of the periodic review of the adjustment factors required under 

paragraph (1)(C) for California for 2012 and subsequent periods. Upon 

request, the Secretary shall make available to the public any countylevel or MSA derived data used to calculate the geographic practice cost 

index. 

‘‘(C) REFERENCES TO FEE SCHEDULE AREAS.—Effective for services furnished on or after January 1, 2010, for the State of California, any reference in this section to a fee schedule area shall be deemed a reference 

to an MSA in the State.’’. 

(b) CONFORMING AMENDMENT TO DEFINITION OF FEE SCHEDULE AREA.—Section 

1848(j)(2) of the Social Security Act (42 U.S.C. 1395w(j)(2)) is amended by striking 

‘‘The term’’ and inserting ‘‘Except as provided in subsection (e)(6)(C), the term’’. 

PART 2—MARKET BASKET UPDATES 

SEC. 1131. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATES 

THAT DO NOT ALREADY INCORPORATE SUCH IMPROVEMENTS. 

(a) OUTPATIENT HOSPITALS.— 

(1) IN GENERAL.—The first sentence of section 1833(t)(3)(C)(iv) of the Social 

Security Act (42 U.S.C. 1395l(t)(3)(C)(iv)) is amended— 

(A) by inserting ‘‘(which is subject to the productivity adjustment described in subclause (II) of such section)’’ after ‘‘1886(b)(3)(B)(iii)’’; and 

(B) by inserting ‘‘(but not below 0)’’ after ‘‘reduced’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall apply to 

increase factors for services furnished in years beginning with 2010. 

(b) AMBULANCE SERVICES.—Section 1834(l)(3)(B) of such Act (42 U.S.C. 

1395m(l)(3)(B))) is amended by inserting before the period at the end the following: 

‘‘and, in the case of years beginning with 2010, subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)’’. 

(c) AMBULATORY SURGICAL CENTER SERVICES.—Section 1833(i)(2)(D) of such Act 

(42 U.S.C. 1395l(i)(2)(D)) is amended— 

(1) by redesignating clause (v) as clause (vi); and 

(2) by inserting after clause (iv) the following new clause: 

‘‘(v) In implementing the system described in clause (i), for services furnished during 2010 or any subsequent year, to the extent that an annual percentage change 

factor applies, such factor shall be subject to the productivity adjustment described 

in section 1886(b)(3)(B)(iii)(II).’’. 

(d) LABORATORY SERVICES.—Section 1833(h)(2)(A) of such Act (42 U.S.C. 

1395l(h)(2)(A)) is amended— 

(1) in clause (i), by striking ‘‘for each of the years 2009 through 2013’’ and 

inserting ‘‘for 2009’’; and 

(2) clause (ii)— 

(A) by striking ‘‘and’’ at the end of subclause (III); 


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(B) by striking the period at the end of subclause (IV) and inserting ‘‘; 

and’’; and 

(C) by adding at the end the following new subclause: 

‘‘(V) the annual adjustment in the fee schedules determined under clause (i) 

for years beginning with 2010 shall be subject to the productivity adjustment 

described in section 1886(b)(3)(B)(iii)(II).’’. 

(e) CERTAIN DURABLE MEDICAL EQUIPMENT.—Section 1834(a)(14) of such Act (42 

U.S.C. 1395m(a)(14)) is amended— 

(1) in subparagraph (K), by inserting before the semicolon at the end the following: ‘‘, subject to the productivity adjustment described in section 

1886(b)(3)(B)(iii)(II)’’; 

(2) in subparagraph (L)(i), by inserting after ‘‘June 2013,’’ the following: ‘‘subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II),’’; 

(3) in subparagraph (L)(ii), by inserting after ‘‘June 2013’’ the following: ‘‘, 

subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)’’; 

and 

(4) in subparagraph (M), by inserting before the period at the end the following: ‘‘, subject to the productivity adjustment described in section 

1886(b)(3)(B)(iii)(II)’’. 

PART 3—OTHER PROVISIONS 

SEC. 1141. RENTAL AND PURCHASE OF POWER-DRIVEN WHEELCHAIRS. 

(a) IN GENERAL.—Section 1834(a)(7)(A)(iii) of the Social Security Act (42 U.S.C. 

1395m(a)(7)(A)(iii)) is amended— 

(1) in the heading, by inserting ‘‘CERTAIN COMPLEX REHABILITATIVE’’ after ‘‘OPTION FOR’’; and 

(2) by striking ‘‘power-driven wheelchair’’ and inserting ‘‘complex rehabilitative power-driven wheelchair recognized by the Secretary as classified within 

group 3 or higher’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall take effect 

on January 1, 2011, and shall apply to power-driven wheelchairs furnished on or 

after such date. Such amendments shall not apply to contracts entered into under 

section 1847 of the Social Security Act (42 U.S.C. 1395w–3) pursuant to a bid submitted under such section before October 1, 2010, under subsection (a)(1)(B)(i)(I) of 

such section. 

SEC. 1142. EXTENSION OF PAYMENT RULE FOR BRACHYTHERAPY. 

Section 1833(t)(16)(C) of the Social Security Act (42 U.S.C. 1395l(t)(16)(C)), as 

amended by section 142 of the Medicare Improvements for Patients and Providers 

Act of 2008 (Public Law 110–275), is amended by striking, the first place it appears, 

‘‘January 1, 2010’’ and inserting ‘‘January 1, 2012’’. 

SEC. 1143. HOME INFUSION THERAPY REPORT TO CONGRESS. 

Not later than 12 months after the date of enactment of this Act, the Medicare 

Payment Advisory Commission shall submit to Congress a report on the following: 

(1) The scope of coverage for home infusion therapy in the fee-for-service 

Medicare program under title XVIII of the Social Security Act, Medicare Advantage under part C of such title, the veteran’s health care program under chapter 

17 of title 38, United States Code, and among private payers, including an analysis of the scope of services provided by home infusion therapy providers to 

their patients in such programs. 

(2) The benefits and costs of providing such coverage under the Medicare program, including a calculation of the potential savings achieved through avoided 

or shortened hospital and nursing home stays as a result of Medicare coverage 

of home infusion therapy. 

(3) An assessment of sources of data on the costs of home infusion therapy 

that might be used to construct payment mechanisms in the Medicare program. 

(4) Recommendations, if any, on the structure of a payment system under the 

Medicare program for home infusion therapy, including an analysis of the payment methodologies used under Medicare Advantage plans and private health 

plans for the provision of home infusion therapy and their applicability to the 

Medicare program. 

SEC. 1144. REQUIRE AMBULATORY SURGICAL CENTERS (ASCS) TO SUBMIT COST DATA AND 

OTHER DATA. 

(a) COST REPORTING.— 

(1) IN GENERAL.—Section 1833(i) of the Social Security Act (42 U.S.C. 1395l(i)) 

is amended by adding at the end the following new paragraph: 


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‘‘(8) The Secretary shall require, as a condition of the agreement described in section 1832(a)(2)(F)(i), the submission of such cost report as the Secretary may specify, 

taking into account the requirements for such reports under section 1815 in the case 

of a hospital.’’. 

(2) DEVELOPMENT OF COST REPORT.—Not later than 3 years after the date of 

the enactment of this Act, the Secretary of Health and Human Services shall 

develop a cost report form for use under section 1833(i)(8) of the Social Security 

Act, as added by paragraph (1). 

(3) AUDIT REQUIREMENT.—The Secretary shall provide for periodic auditing of 

cost reports submitted under section 1833(i)(8) of the Social Security Act, as 

added by paragraph (1). 

(4) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to 

agreements applicable to cost reporting periods beginning 18 months after the 

date the Secretary develops the cost report form under paragraph (2). 

(b) ADDITIONAL DATA ON QUALITY.— 

(1) IN GENERAL.—Section 1833(i)(7) of such Act (42 U.S.C. 1395l(i)(7)) is 

amended— 

(A) in subparagraph (B), by inserting ‘‘subject to subparagraph (C),’’ after 

‘‘may otherwise provide,’’; and 

(B) by adding at the end the following new subparagraph: 

‘‘(C) Under subparagraph (B) the Secretary shall require the reporting of such additional data relating to quality of services furnished in an ambulatory surgical facility, including data on health care associated infections, as the Secretary may 

specify.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall to reporting for years beginning with 2012. 

SEC. 1145. TREATMENT OF CERTAIN CANCER HOSPITALS. 

Section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)) is amended by adding at the end the following new paragraph: 

‘‘(18) AUTHORIZATION OF ADJUSTMENT FOR CANCER HOSPITALS.— 

‘‘(A) STUDY.—The Secretary shall conduct a study to determine if, under 

the system under this subsection, costs incurred by hospitals described in 

section 1886(d)(1)(B)(v) with respect to ambulatory payment classification 

groups exceed those costs incurred by other hospitals furnishing services 

under this subsection (as determined appropriate by the Secretary). 

‘‘(B) AUTHORIZATION OF ADJUSTMENT.—Insofar as the Secretary determines under subparagraph (A) that costs incurred by hospitals described in 

section 1886(d)(1)(B)(v) exceed those costs incurred by other hospitals furnishing services under this subsection, the Secretary shall provide for an 

appropriate adjustment under paragraph (2)(E) to reflect those higher costs 

effective for services furnished on or after January 1, 2011.’’. 

SEC. 1146. MEDICARE IMPROVEMENT FUND. 

Section 1898(b)(1)(A) of the Social Security Act (42 U.S.C. 1395iii(b)(1)(A)) is 

amended to read as follows: 

‘‘(A) the period beginning with fiscal year 2011 and ending with fiscal 

year 2019, $8,000,000,000; and’’. 

SEC. 1147. PAYMENT FOR IMAGING SERVICES. 

(a) ADJUSTMENT IN PRACTICE EXPENSE TO REFLECT HIGHER PRESUMED UTILIZATION.—Section 1848 of the Social Security Act (42 U.S.C. 1395w) is amended— 

(1) in subsection (b)(4)— 

(A) in subparagraph (B), by striking ‘‘subparagraph (A)’’ and inserting 

‘‘this paragraph’’; and 

(B) by adding at the end the following new subparagraph: 

‘‘(C) ADJUSTMENT IN PRACTICE EXPENSE TO REFLECT HIGHER PRESUMED

UTILIZATION.—In computing the number of practice expense relative value 

units under subsection (c)(2)(C)(ii) with respect to advanced diagnostic imaging services (as defined in section 1834(e)(1)(B)), the Secretary shall adjust such number of units so it reflects a 75 percent (rather than 50 percent) presumed rate of utilization of imaging equipment.’’; and 

(2) in subsection (c)(2)(B)(v)(II), by inserting ‘‘AND OTHER PROVISIONS’’ after 

‘‘OPD PAYMENT CAP’’. 

(b) ADJUSTMENT IN TECHNICAL COMPONENT ‘‘DISCOUNT’’ ON SINGLE-SESSION IMAGING TO CONSECUTIVE BODY PARTS.—Section 1848(b)(4) of such Act is further amended by adding at the end the following new subparagraph: 

‘‘(D) ADJUSTMENT IN TECHNICAL COMPONENT DISCOUNT ON SINGLE-SESSION

IMAGING INVOLVING CONSECUTIVE BODY PARTS.—The Secretary shall increase the reduction in expenditures attributable to the multiple procedure 


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payment reduction applicable to the technical component for imaging under 

the final rule published by the Secretary in the Federal Register on November 21, 2005 (part 405 of title 42, Code of Federal Regulations) from 25 percent to 50 percent.’’. 

(c) EFFECTIVE DATE.—Except as otherwise provided, this section, and the amendments made by this section, shall apply to services furnished on or after January 

1, 2011. 

SEC. 1148. DURABLE MEDICAL EQUIPMENT PROGRAM IMPROVEMENTS. 

(a) WAIVER OF SURETY BOND REQUIREMENT.—Section 1834(a)(16) of the Social Security Act (42 U.S.C. 1395m(a)(16)) is amended by adding at the end the following: 

‘‘The requirement for a surety bond described in subparagraph (B) shall not apply 

in the case of a pharmacy (i) that has been enrolled under section 1866(j) as a supplier of durable medical equipment, prosthetics, orthotics, and supplies and has 

been issued (which may include renewal of) a provider number (as described in the 

first sentence of this paragraph) for at least 5 years, and (ii) for which a final adverse action (as defined in section 424.57(a) of title 42, Code of Federal Regulations) 

has never been imposed.’’. 

(b) ENSURING SUPPLY OF OXYGEN EQUIPMENT .— 

(1) IN GENERAL.—Section 1834(a)(5)(F) of the Social Security Act (42 U.S.C. 

1395m(a)(5)(F)) is amended— 

(A) in clause (ii), by striking ‘‘After the’’ and inserting ‘‘Except as provided 

in clause (iii), after the’’; and 

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

‘‘(iii) CONTINUATION OF SUPPLY.—In the case of a supplier furnishing 

such equipment to an individual under this subsection as of the 27th 

month of the 36 months described in clause (i), the supplier furnishing 

such equipment as of such month shall continue to furnish such equipment to such individual (either directly or though arrangements with 

other suppliers of such equipment) during any subsequent period of 

medical need for the remainder of the reasonable useful lifetime of the 

equipment, as determined by the Secretary, regardless of the location 

of the individual, unless another supplier has accepted responsibility 

for continuing to furnish such equipment during the remainder of such 

period.’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall take effect as of the date of the enactment of this Act and shall apply to the furnishing 

of equipment to individuals for whom the 27th month of a continuous period 

of use of oxygen equipment described in section 1834(a)(5)(F) of the Social Security Act occurs on or after July 1, 2010. 

(c) TREATMENT OF CURRENT ACCREDITATION APPLICATIONS.—Section 

1834(a)(20)(F) of such Act (42 U.S.C. 1395m(a)(20)(F)) is amended— 

(1) in clause (i)— 

(A) by striking ‘‘clause (ii)’’ and inserting ‘‘clauses (ii) and (iii)’’; and 

(B) by striking ‘‘and’’ at the end; 

(2) by striking the period at the end of clause (ii)(II) and by inserting ‘‘; and’’; 

(3) by inserting after clause (ii) the following new clause: 

‘‘(iii) the requirement for accreditation described in clause (i) shall 

not apply for purposes of supplying diabetic testing supplies, canes, and 

crutches in the case of a pharmacy that is enrolled under section 

1866(j) as a supplier of durable medical equipment, prosthetics, 

orthotics, and supplies.’’; and 

(4) by adding after and below clause (iii) the following: 

‘‘Any supplier that has submitted an application for accreditation before 

August 1, 2009, shall be deemed as meeting applicable standards and accreditation requirement under this subparagraph until such time as the 

independent accreditation organization takes action on the supplier’s application.’’. 

(d) RESTORING 36-MONTH OXYGEN RENTAL PERIOD IN CASE OF SUPPLIER BANKRUPTCY FOR CERTAIN INDIVIDUALS.—Section 1834(a)(5)(F) of such Act (42 U.S.C. 

1395m(a)(5)(F)), as amended by subsection (b), is further amended by adding at the 

end the following new clause: 

‘‘(iv) EXCEPTION FOR BANKRUPTCY.—If a supplier who furnishes oxygen and oxygen equipment to an individual is declared bankrupt and 

its assets are liquidated and at the time of such declaration and liquidation more than 24 months of rental payments have been made, 

such individual may begin a new 36-month rental period under this 

subparagraph with another supplier of oxygen.’’. 


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SEC. 1149. MEDPAC STUDY AND REPORT ON BONE MASS MEASUREMENT. 

(a) IN GENERAL.—The Medicare Payment Advisory Commission shall conduct a 

study regarding bone mass measurement, including computed tomography, duel-energy x-ray absorptriometry, and vertebral fracture assessment. The study shall focus 

on the following: 

(1) An assessment of the adequacy of Medicare payment rates for such services, taking into account costs of acquiring the necessary equipment, professional work time, and practice expense costs. 

(2) The impact of Medicare payment changes since 2006 on beneficiary access 

to bone mass measurement benefits in general and in rural and minority communities specifically. 

(3) A review of the clinically appropriate and recommended use among Medicare beneficiaries and how usage rates among such beneficiaries compares to 

such recommendations. 

(4) In conjunction with the findings under (3), recommendations, if necessary, 

regarding methods for reaching appropriate use of bone mass measurement 

studies among Medicare beneficiaries. 

(b) REPORT.—The Commission shall submit a report to the Congress, not later 

than 9 months after the date of the enactment of this Act, containing a description 

of the results of the study conducted under subsection (a) and the conclusions and 

recommendations, if any, regarding each of the issues described in paragraphs (1), 

(2) (3) and (4) of such subsection. 

Subtitle C—Provisions Related to Medicare Parts 

A and B 

SEC. 1151. REDUCING POTENTIALLY PREVENTABLE HOSPITAL READMISSIONS. 

(a) HOSPITALS.— 

(1) IN GENERAL.—Section 1886 of the Social Security Act (42 U.S.C. 1395ww), 

as amended by section 1103(a), is amended by adding at the end the following 

new subsection: 

‘‘(p) ADJUSTMENT TO HOSPITAL PAYMENTS FOR EXCESS READMISSIONS.— 

‘‘(1) IN GENERAL.—With respect to payment for discharges from an applicable 

hospital (as defined in paragraph (5)(C)) occurring during a fiscal year beginning on or after October 1, 2011, in order to account for excess readmissions 

in the hospital, the Secretary shall reduce the payments that would otherwise 

be made to such hospital under subsection (d) (or section 1814(b)(3), as the case 

may be) for such a discharge by an amount equal to the product of— 

‘‘(A) the base operating DRG payment amount (as defined in paragraph 

(2)) for the discharge; and 

‘‘(B) the adjustment factor (described in paragraph (3)(A)) for the hospital 

for the fiscal year. 

‘‘(2) BASE OPERATING DRG PAYMENT AMOUNT.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), for purposes 

of this subsection, the term ‘base operating DRG payment amount’ means, 

with respect to a hospital for a fiscal year, the payment amount that would 

otherwise be made under subsection (d) for a discharge if this subsection 

did not apply, reduced by any portion of such amount that is attributable 

to payments under subparagraphs (B) and (F) of paragraph (5). 

‘‘(B) ADJUSTMENTS.—For purposes of subparagraph (A), in the case of a 

hospital that is paid under section 1814(b)(3), the term ‘base operating DRG 

payment amount’ means the payment amount under such section. 

‘‘(3) ADJUSTMENT FACTOR.— 

‘‘(A) IN GENERAL.—For purposes of paragraph (1), the adjustment factor 

under this paragraph for an applicable hospital for a fiscal year is equal 

to the greater of— 

‘‘(i) the ratio described in subparagraph (B) for the hospital for the 

applicable period (as defined in paragraph (5)(D)) for such fiscal year; 

or 

‘‘(ii) the floor adjustment factor specified in subparagraph (C). 

‘‘(B) RATIO.—The ratio described in this subparagraph for a hospital for 

an applicable period is equal to 1 minus the ratio of— 

‘‘(i) the aggregate payments for excess readmissions (as defined in 

paragraph (4)(A)) with respect to an applicable hospital for the applicable period; and 


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‘‘(ii) the aggregate payments for all discharges (as defined in paragraph (4)(B)) with respect to such applicable hospital for such applicable period. 

‘‘(C) FLOOR ADJUSTMENT FACTOR.—For purposes of subparagraph (A), the 

floor adjustment factor specified in this subparagraph for— 

‘‘(i) fiscal year 2012 is 0.99; 

‘‘(ii) fiscal year 2013 is 0.98; 

‘‘(iii) fiscal year 2014 is 0.97; or 

‘‘(iv) a subsequent fiscal year is 0.95. 

‘‘(4) AGGREGATE PAYMENTS, EXCESS READMISSION RATIO DEFINED.—For purposes of this subsection: 

‘‘(A) AGGREGATE PAYMENTS FOR EXCESS READMISSIONS.—The term ‘aggregate payments for excess readmissions’ means, for a hospital for a fiscal 

year, the sum, for applicable conditions (as defined in paragraph (5)(A)), of 

the product, for each applicable condition, of— 

‘‘(i) the base operating DRG payment amount for such hospital for 

such fiscal year for such condition; 

‘‘(ii) the number of admissions for such condition for such hospital for 

such fiscal year; and 

‘‘(iii) the excess readmissions ratio (as defined in subparagraph (C)) 

for such hospital for the applicable period for such fiscal year minus 1. 

‘‘(B) AGGREGATE PAYMENTS FOR ALL DISCHARGES.—The term ‘aggregate 

payments for all discharges’ means, for a hospital for a fiscal year, the sum 

of the base operating DRG payment amounts for all discharges for all conditions from such hospital for such fiscal year. 

‘‘(C) EXCESS READMISSION RATIO.— 

‘‘(i) IN GENERAL.—Subject to clauses (ii) and (iii), the term ‘excess readmissions ratio’ means, with respect to an applicable condition for a 

hospital for an applicable period, the ratio (but not less than 1.0) of— 

‘‘(I) the risk adjusted readmissions based on actual readmissions, 

as determined consistent with a readmission measure methodology 

that has been endorsed under paragraph (5)(A)(ii)(I), for an applicable hospital for such condition with respect to the applicable period; to 

‘‘(II) the risk adjusted expected readmissions (as determined consistent with such a methodology) for such hospital for such condition with respect to such applicable period. 

‘‘(ii) EXCLUSION OF CERTAIN READMISSIONS.—For purposes of clause 

(i), with respect to a hospital, excess readmissions shall not include readmissions for an applicable condition for which there are fewer than 

a minimum number (as determined by the Secretary) of discharges for 

such applicable condition for the applicable period and such hospital. 

‘‘(iii) ADJUSTMENT.—In order to promote a reduction over time in the 

overall rate of readmissions for applicable conditions, the Secretary 

may provide, beginning with discharges for fiscal year 2014, for the determination of the excess readmissions ratio under subparagraph (C) to 

be based on a ranking of hospitals by readmission ratios (from lower 

to higher readmission ratios) normalized to a benchmark that is lower 

than the 50th percentile. 

‘‘(5) DEFINITIONS.—For purposes of this subsection: 

‘‘(A) APPLICABLE CONDITION.—The term ‘applicable condition’ means, subject to subparagraph (B), a condition or procedure selected by the Secretary 

among conditions and procedures for which— 

‘‘(i) readmissions (as defined in subparagraph (E)) that represent conditions or procedures that are high volume or high expenditures under 

this title (or other criteria specified by the Secretary); and 

‘‘(ii) measures of such readmissions— 

‘‘(I) have been endorsed by the entity with a contract under section 1890(a); and 

‘‘(II) such endorsed measures have appropriate exclusions for readmissions that are unrelated to the prior discharge (such as a 

planned readmission or transfer to another applicable hospital). 

‘‘(B) EXPANSION OF APPLICABLE CONDITIONS.—Beginning with fiscal year 

2013, the Secretary shall expand the applicable conditions beyond the 3 

conditions for which measures have been endorsed as described in subparagraph (A)(ii)(I) as of the date of the enactment of this subsection to the additional 4 conditions that have been so identified by the Medicare Payment 

Advisory Commission in its report to Congress in June 2007 and to other 

conditions and procedures which may include an all-condition measure of 


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readmissions, as determined appropriate by the Secretary. In expanding 

such applicable conditions, the Secretary shall seek the endorsement described in subparagraph (A)(ii)(I) but may apply such measures without 

such an endorsement. 

‘‘(C) APPLICABLE HOSPITAL.—The term ‘applicable hospital’ means a subsection (d) hospital or a hospital that is paid under section 1814(b)(3). 

‘‘(D) APPLICABLE PERIOD.—The term ‘applicable period’ means, with respect to a fiscal year, such period as the Secretary shall specify for purposes 

of determining excess readmissions. 

‘‘(E) READMISSION.—The term ‘readmission’ means, in the case of an individual who is discharged from an applicable hospital, the admission of the 

individual to the same or another applicable hospital within a time period 

specified by the Secretary from the date of such discharge. Insofar as the 

discharge relates to an applicable condition for which there is an endorsed 

measure described in subparagraph (A)(ii)(I), such time period (such as 30 

days) shall be consistent with the time period specified for such measure. 

‘‘(6) LIMITATIONS ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of— 

‘‘(A) the determination of base operating DRG payment amounts; 

‘‘(B) the methodology for determining the adjustment factor under paragraph (3), including excess readmissions ratio under paragraph (4)(C), aggregate payments for excess readmissions under paragraph (4)(A), and aggregate payments for all discharges under paragraph (4)(B), and applicable 

periods and applicable conditions under paragraph (5); 

‘‘(C) the measures of readmissions as described in paragraph (5)(A)(ii); 

and 

‘‘(D) the determination of a targeted hospital under paragraph (8)(B)(i), 

the increase in payment under paragraph (8)(B)(ii), the aggregate cap 

under paragraph (8)(C)(i), the hospital-specific limit under paragraph 

(8)(C)(ii), and the form of payment made by the Secretary under paragraph 

(8)(D). 

‘‘(7) MONITORING INAPPROPRIATE CHANGES IN ADMISSIONS PRACTICES.—The 

Secretary shall monitor the activities of applicable hospitals to determine if 

such hospitals have taken steps to avoid patients at risk in order to reduce the 

likelihood of increasing readmissions for applicable conditions. If the Secretary 

determines that such a hospital has taken such a step, after notice to the hospital and opportunity for the hospital to undertake action to alleviate such 

steps, the Secretary may impose an appropriate sanction. 

‘‘(8) ASSISTANCE TO CERTAIN HOSPITALS.— 

‘‘(A) IN GENERAL.—For purposes of providing funds to applicable hospitals 

to take steps described in subparagraph (E) to address factors that may impact readmissions of individuals who are discharged from such a hospital, 

for fiscal years beginning on or after October 1, 2011, the Secretary shall 

make a payment adjustment for a hospital described in subparagraph (B), 

with respect to each such fiscal year, by a percent estimated by the Secretary to be consistent with subparagraph (C). 

‘‘(B) TARGETED HOSPITALS.—Subparagraph (A) shall apply to an applicable hospital that— 

‘‘(i) received (or, in the case of an 1814(b)(3) hospital, otherwise would 

have been eligible to receive) $10,000,000 or more in disproportionate 

share payments using the latest available data as estimated by the Secretary; and 

‘‘(ii) provides assurances satisfactory to the Secretary that the increase in payment under this paragraph shall be used for purposes described in subparagraph (E). 

‘‘(C) CAPS.— 

‘‘(i) AGGREGATE CAP.—The aggregate amount of the payment adjustment under this paragraph for a fiscal year shall not exceed 5 percent 

of the estimated difference in the spending that would occur for such 

fiscal year with and without application of the adjustment factor described in paragraph (3) and applied pursuant to paragraph (1). 

‘‘(ii) HOSPITAL-SPECIFIC LIMIT.—The aggregate amount of the payment adjustment for a hospital under this paragraph shall not exceed 

the estimated difference in spending that would occur for such fiscal 

year for such hospital with and without application of the adjustment 

factor described in paragraph (3) and applied pursuant to paragraph 

(1). 


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‘‘(D) FORM OF PAYMENT.—The Secretary may make the additional payments under this paragraph on a lump sum basis, a periodic basis, a claim 

by claim basis, or otherwise. 

‘‘(E) USE OF ADDITIONAL PAYMENT.—Funding under this paragraph shall 

be used by targeted hospitals for transitional care activities designed to address the patient noncompliance issues that result in higher than normal 

readmission rates, such as one or more of the following: 

‘‘(i) Providing care coordination services to assist in transitions from 

the targeted hospital to other settings. 

‘‘(ii) Hiring translators and interpreters. 

‘‘(iii) Increasing services offered by discharge planners. 

‘‘(iv) Ensuring that individuals receive a summary of care and medication orders upon discharge. 

‘‘(v) Developing a quality improvement plan to assess and remedy 

preventable readmission rates. 

‘‘(vi) Assigning discharged individuals to a medical home. 

‘‘(vii) Doing other activities as determined appropriate by the Secretary. 

‘‘(F) GAO REPORT ON USE OF FUNDS.—Not later than 3 years after the 

date on which funds are first made available under this paragraph, the 

Comptroller General of the United States shall submit to Congress a report 

on the use of such funds. 

‘‘(G) DISPROPORTIONATE SHARE HOSPITAL PAYMENT.—In this paragraph, 

the term ‘disproportionate share hospital payment’ means an additional 

payment amount under subsection (d)(5)(F).’’. 

(b) APPLICATION TO CRITICAL ACCESS HOSPITALS.—Section 1814(l) of the Social Security Act (42 U.S.C. 1395f(l)) is amended— 

(1) in paragraph (5)— 

(A) by striking ‘‘and’’ at the end of subparagraph (C); 

(B) by striking the period at the end of subparagraph (D) and inserting 

‘‘; and’’; 

(C) by inserting at the end the following new subparagraph: 

‘‘(E) the methodology for determining the adjustment factor under paragraph 

(5), including the determination of aggregate payments for actual and expected 

readmissions, applicable periods, applicable conditions and measures of readmissions.’’; and 

(D) by redesignating such paragraph as paragraph (6); and 

(2) by inserting after paragraph (4) the following new paragraph: 

‘‘(5) The adjustment factor described in section 1886(p)(3) shall apply to payments 

with respect to a critical access hospital with respect to a cost reporting period beginning in fiscal year 2012 and each subsequent fiscal year (after application of 

paragraph (4) of this subsection) in a manner similar to the manner in which such 

section applies with respect to a fiscal year to an applicable hospital as described 

in section 1886(p)(2).’’. 

(c) POST ACUTE CARE PROVIDERS.— 

(1) INTERIM POLICY.— 

(A) IN GENERAL.—With respect to a readmission to an applicable hospital 

or a critical access hospital (as described in section 1814(l) of the Social Security Act) from a post acute care provider (as defined in paragraph (3)) and 

such a readmission is not governed by section 412.531 of title 42, Code of 

Federal Regulations, if the claim submitted by such a post-acute care provider under title XVIII of the Social Security Act indicates that the individual was readmitted to a hospital from such a post-acute care provider 

or admitted from home and under the care of a home health agency within 

30 days of an initial discharge from an applicable hospital or critical access 

hospital, the payment under such title on such claim shall be the applicable 

percent specified in subparagraph (B) of the payment that would otherwise 

be made under the respective payment system under such title for such 

post-acute care provider if this subsection did not apply. 

(B) APPLICABLE PERCENT DEFINED.—For purposes of subparagraph (A), 

the applicable percent is— 

(i) for fiscal or rate year 2012 is 0.996; 

(ii) for fiscal or rate year 2013 is 0.993; and 

(iii) for fiscal or rate year 2014 is 0.99. 

(C) EFFECTIVE DATE.—Subparagraph (1) shall apply to discharges or services furnished (as the case may be with respect to the applicable post acute 

care provider) on or after the first day of the fiscal year or rate year, beginning on or after October 1, 2011, with respect to the applicable post acute 

care provider. 


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(2) DEVELOPMENT AND APPLICATION OF PERFORMANCE MEASURES.— 

(A) IN GENERAL.—The Secretary of Health and Human Services shall develop appropriate measures of readmission rates for post acute care providers. The Secretary shall seek endorsement of such measures by the entity with a contract under section 1890(a) of the Social Security Act but may 

adopt and apply such measures under this paragraph without such an endorsement. The Secretary shall expand such measures in a manner similar 

to the manner in which applicable conditions are expanded under paragraph (5)(B) of section 1886(p) of the Social Security Act, as added by subsection (a). 

(B) IMPLEMENTATION.—The Secretary shall apply, on or after October 1, 

2014, with respect to post acute care providers, policies similar to the policies applied with respect to applicable hospitals and critical access hospitals 

under the amendments made by subsection (a). The provisions of paragraph 

(1) shall apply with respect to any period on or after October 1, 2014, and 

before such application date described in the previous sentence in the same 

manner as such provisions apply with respect to fiscal or rate year 2014. 

(C) MONITORING AND PENALTIES.—The provisions of paragraph (7) of such 

section 1886(p) shall apply to providers under this paragraph in the same 

manner as they apply to hospitals under such section. 

(3) DEFINITIONS.—For purposes of this subsection: 

(A) POST ACUTE CARE PROVIDER.—The term ‘‘post acute care provider’’ 

means— 

(i) a skilled nursing facility (as defined in section 1819(a) of the Social Security Act); 

(ii) an inpatient rehabilitation facility (described in section 

1886(h)(1)(A) of such Act); 

(iii) a home health agency (as defined in section 1861(o) of such Act); 

and 

(iv) a long term care hospital (as defined in section 1861(ccc) of such 

Act). 

(B) OTHER TERMS .—The terms ‘‘applicable condition’’, ‘‘applicable hospital’’, and ‘‘readmission’’ have the meanings given such terms in section 

1886(p)(5) of the Social Security Act, as added by subsection (a)(1). 

(d) PHYSICIANS.— 

(1) STUDY.—The Secretary of Health and Human Services shall conduct a 

study to determine how the readmissions policy described in the previous subsections could be applied to physicians. 

(2) CONSIDERATIONS.—In conducting the study, the Secretary shall consider 

approaches such as— 

(A) creating a new code (or codes) and payment amount (or amounts) 

under the fee schedule in section 1848 of the Social Security Act (in a budget neutral manner) for services furnished by an appropriate physician who 

sees an individual within the first week after discharge from a hospital or 

critical access hospital; 

(B) developing measures of rates of readmission for individuals treated by 

physicians; 

(C) applying a payment reduction for physicians who treat the patient 

during the initial admission that results in a readmission; and 

(D) methods for attributing payments or payment reductions to the appropriate physician or physicians. 

(3) REPORT.—The Secretary shall issue a public report on such study not later 

than the date that is one year after the date of the enactment of this Act. 

(e) FUNDING.—For purposes of carrying out the provisions of this section, in addition to funds otherwise available, out of any funds in the Treasury not otherwise 

appropriated, there are appropriated to the Secretary of Health and Human Services for the Center for Medicare & Medicaid Services Program Management Account 

$25,000,000 for each fiscal year beginning with 2010. Amounts appropriated under 

this subsection for a fiscal year shall be available until expended. 

SEC. 1152. POST ACUTE CARE SERVICES PAYMENT REFORM PLAN AND BUNDLING PILOT PROGRAM. 

(a) PLAN.— 

(1) IN GENERAL.—The Secretary of Health and Human Services (in this section referred to as the ‘‘Secretary’’) shall develop a detailed plan to reform payment for post acute care (PAC) services under the Medicare program under title 

XVIII of the Social Security Act (in this section referred to as the ‘‘Medicare program)’’. The goals of such payment reform are to— 

(A) improve the coordination, quality, and efficiency of such services; and 


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(B) improve outcomes for individuals such as reducing the need for readmission to hospitals from providers of such services. 

(2) BUNDLING POST ACUTE SERVICES.—The plan described in paragraph (1) 

shall include detailed specifications for a bundled payment for post acute services (in this section referred to as the ‘‘post acute care bundle’’), and may include other approaches determined appropriate by the Secretary. 

(3) POST ACUTE SERVICES.—For purposes of this section, the term ‘‘post acute 

services’’ means services for which payment may be made under the Medicare 

program that are furnished by skilled nursing facilities, inpatient rehabilitation 

facilities, long term care hospitals, hospital based outpatient rehabilitation facilities and home health agencies to an individual after discharge of such individual from a hospital, and such other services determined appropriate by the 

Secretary. 

(b) DETAILS.—The plan described in subsection (a)(1) shall include consideration 

of the following issues: 

(1) The nature of payments under a post acute care bundle, including the type 

of provider or entity to whom payment should be made, the scope of activities 

and services included in the bundle, whether payment for physicians’ services 

should be included in the bundle, and the period covered by the bundle. 

(2) Whether the payment should be consolidated with the payment under the 

inpatient prospective system under section 1886 of the Social Security Act (in 

this section referred to as MS–DRGs) or a separate payment should be established for such bundle, and if a separate payment is established, whether it 

should be made only upon use of post acute care services or for every discharge. 

(3) Whether the bundle should be applied across all categories of providers 

of inpatient services (including critical access hospitals) and post acute care 

services or whether it should be limited to certain categories of providers, services, or discharges, such as high volume or high cost MS–DRGs. 

(4) The extent to which payment rates could be established to achieve offsets 

for efficiencies that could be expected to be achieved with a bundle payment, 

whether such rates should be established on a national basis or for different geographic areas, should vary according to discharge, case mix, outliers, and geographic differences in wages or other appropriate adjustments, and how to update such rates. 

(5) The nature of protections needed for individuals under a system of bundled payments to ensure that individuals receive quality care, are furnished the 

level and amount of services needed as determined by an appropriate assessment instrument, are offered choice of provider, and the extent to which transitional care services would improve quality of care for individuals and the functioning of a bundled post-acute system. 

(6) The nature of relationships that may be required between hospitals and 

providers of post acute care services to facilitate bundled payments, including 

the application of gainsharing, anti-referral, anti-kickback, and anti-trust laws. 

(7) Quality measures that would be appropriate for reporting by hospitals and 

post acute providers (such as measures that assess changes in functional status 

and quality measures appropriate for each type of post acute services provider 

including how the reporting of such quality measures could be coordinated with 

other reporting of such quality measures by such providers otherwise required). 

(8) How cost-sharing for a post acute care bundle should be treated relative 

to current rules for cost-sharing for inpatient hospital, home health, skilled 

nursing facility, and other services. 

(9) How other programmatic issues should be treated in a post acute care 

bundle, including rules specific to various types of post-acute providers such as 

the post-acute transfer policy, three-day hospital stay to qualify for services furnished by skilled nursing facilities, and the coordination of payments and care 

under the Medicare program and the Medicaid program. 

(10) Such other issues as the Secretary deems appropriate. 

(c) CONSULTATIONS AND ANALYSIS.— 

(1) CONSULTATION WITH STAKEHOLDERS.—In developing the plan under subsection (a)(1), the Secretary shall consult with relevant stakeholders and shall 

consider experience with such research studies and demonstrations that the 

Secretary determines appropriate. 

(2) ANALYSIS AND DATA COLLECTION.—In developing such plan, the Secretary 

shall— 

(A) analyze the issues described in subsection (b) and other issues that 

the Secretary determines appropriate; 

(B) analyze the impacts (including geographic impacts) of post acute service reform approaches, including bundling of such services on individuals, 

hospitals, post acute care providers, and physicians; 


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(C) use existing data (such as data submitted on claims) and collect such 

data as the Secretary determines are appropriate to develop such plan required in this section; and 

(D) if patient functional status measures are appropriate for the analysis, 

to the extent practical, build upon the CARE tool being developed pursuant 

to section 5008 of the Deficit Reduction Act of 2005. 

(d) ADMINISTRATION.— (1) FUNDING.—For purposes of carrying out the provisions of this section, in 

addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary for the Center for 

Medicare & Medicaid Services Program Management Account $15,000,000 for 

each of the fiscal years 2010 through 2012. Amounts appropriated under this 

paragraph for a fiscal year shall be available until expended. 

(2) EXPEDITED DATA COLLECTION.—Chapter 35 of title 44, United States Code 

shall not apply to this section. 

(e) PUBLIC REPORTS.— (1) INTERIM REPORTS.—The Secretary shall issue interim public reports on a 

periodic basis on the plan described in subsection (a)(1), the issues described in 

subsection (b), and impact analyses as the Secretary determines appropriate. 

(2) FINAL REPORT.—Not later than the date that is 3 years after the date of 

the enactment of this Act, the Secretary shall issue a final public report on such 

plan, including analysis of issues described in subsection (b) and impact analyses. 

(f) CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION TO PILOT PROGRAM AND

EXPANSION TO INCLUDE POST ACUTE SERVICES.— (1) IN GENERAL.—Part E of title XVIII of the Social Security Act is amended 

by inserting after section 1866C the following new section: 

‘‘CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION TO PILOT PROGRAM AND

EXPANSION TO INCLUDE POST ACUTE SERVICES

‘‘SEC. 1866D. (a) CONVERSION AND EXPANSION.— ‘‘(1) IN GENERAL.—By not later than January 1, 2011, the Secretary shall, for 

the purpose of promoting the use of bundled payments to promote efficient and 

high quality delivery of care— 

‘‘(A) convert the acute care episode demonstration program conducted 

under section 1866C to a pilot program; and 

‘‘(B) subject to subsection (c), expand such program as so converted to include post acute services and such other services the Secretary determines 

to be appropriate, which may include transitional services. 

‘‘(2) BUNDLED PAYMENT STRUCTURES.— ‘‘(A) IN GENERAL.—In carrying out paragraph (1), the Secretary may 

apply bundled payments with respect to— 

‘‘(i) hospitals and physicians; 

‘‘(ii) hospitals and post-acute care providers; 

‘‘(iii) hospitals, physicians, and post-acute care providers; or 

‘‘(iv) combinations of post-acute providers. 

‘‘(B) FURTHER APPLICATION.— ‘‘(i) IN GENERAL.—In carrying out paragraph (1), the Secretary shall 

apply bundled payments in a manner so as to include collaborative care 

networks and continuing care hospitals. 

‘‘(ii) COLLABORATIVE CARE NETWORK DEFINED.—For purposes of this 

subparagraph, the term ‘collaborative care network’ means a consortium of health care providers that provides a comprehensive range of 

coordinated and integrated health care services to low-income patient 

populations (including the uninsured) which may include coordinated 

and comprehensive care by safety net providers to reduce any unnecessary use of items and services furnished in emergency departments, 

manage chronic conditions, improve quality and efficiency of care, increase preventive services, and promote adherence to post-acute and 

follow-up care plans. 

‘‘(iii) CONTINUING CARE HOSPITAL DEFINED.—For purposes of this subparagraph, the term ‘continuing care hospital’ means an entity that has 

demonstrated the ability to meet patient care and patient safety standards and that provides under common management the medical and rehabilitation services provided in inpatient rehabilitation hospitals and 

units (as defined in section 1886(d)(1)(B)(ii)), long-term care hospitals 

(as defined in section 1886(d)(1)(B)(iv)(I)), and skilled nursing facilities 

(as defined in section 1819(a)) that are located in a hospital described 

in section 1886(d). 


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‘‘(b) SCOPE.—The pilot program under subsection (a) may include additional geographic areas and additional conditions which account for significant program 

spending, as defined by the Secretary. Nothing in this subsection shall be construed 

as limiting the number of hospital and physician groups or the number of hospital 

and post-acute provider groups that may participate in the pilot program. 

‘‘(c) LIMITATION.—The Secretary shall only expand the pilot program under subsection (a) if the Secretary finds that— 

‘‘(1) the demonstration program under section 1866C and pilot program under 

this section maintain or increase the quality of care received by individuals enrolled under this title; and 

‘‘(2) such demonstration program and pilot program reduce program expenditures and, based on the certification under subsection (d), that the expansion 

of such pilot program would result in estimated spending that would be less 

than what spending would otherwise be in the absence of this section. 

‘‘(d) CERTIFICATION.—For purposes of subsection (c), the Chief Actuary of the Centers for Medicare & Medicaid Services shall certify whether expansion of the pilot 

program under this section would result in estimated spending that would be less 

than what spending would otherwise be in the absence of this section. 

‘‘(e) VOLUNTARY PARTICIPATION.—Nothing in this paragraph shall be construed as 

requiring the participation of an entity in the pilot program under this section. 

‘‘(f) EVALUATION ON COST AND QUALITY OF CARE.—The Secretary shall conduct an 

evaluation of the pilot program under subsection (a) to study the effect of such program on costs and quality of care. The findings of such evaluation shall be included 

in the final report required under section 1152(e)(2) of America’s Affordable Health 

Choices Act of 2009. 

‘‘(g) STUDY OF ADDITIONAL BUNDLING AND EPISODE-BASED PAYMENT FOR PHYSI- CIANS’ SERVICES.— ‘‘(1) IN GENERAL.—The Secretary shall provide for a study of and development 

of a plan for testing additional ways to increase bundling of payments for physicians in connection with an episode of care, such as in connection with outpatient hospital services or services rendered in physicians’ offices, other than 

those provided under the pilot program. 

‘‘(2) APPLICATION.—The Secretary may implement such a plan through a demonstration program.’’. 

(2) CONFORMING AMENDMENT.—Section 1866C(b) of the Social Security Act 

(42 U.S.C. 1395cc–3(b)) is amended by striking ‘‘The Secretary’’ and inserting 

‘‘Subject to section 1866D, the Secretary’’. 

SEC. 1153. HOME HEALTH PAYMENT UPDATE FOR 2010. 

Section 1895(b)(3)(B)(ii) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) 

is amended— 

(1) in subclause (IV), by striking ‘‘and’’; 

(2) by redesignating subclause (V) as subclause (VII); and 

(3) by inserting after subclause (IV) the following new subclauses: 

‘‘(V) 2007, 2008, and 2009, subject to clause (v), the home health 

market basket percentage increase; 

‘‘(VI) 2010, subject to clause (v), 0 percent; and’’. 

SEC. 1154. PAYMENT ADJUSTMENTS FOR HOME HEALTH CARE. 

(a) ACCELERATION OF ADJUSTMENT FOR CASE MIX CHANGES.—Section 

1895(b)(3)(B) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended— 

(1) in clause (iv), by striking ‘‘Insofar as’’ and inserting ‘‘Subject to clause (vi), 

insofar as’’; and 

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

‘‘(vi) SPECIAL RULE FOR CASE MIX CHANGES FOR 2011.— 

‘‘(I) IN GENERAL.—With respect to the case mix adjustments established in section 484.220(a) of title 42, Code of Federal Regulations, the Secretary shall apply, in 2010, the adjustment established in paragraph (3) of such section for 2011, in addition to applying the adjustment established in paragraph (2) for 2010. 

‘‘(II) CONSTRUCTION.—Nothing in this clause shall be construed 

as limiting the amount of adjustment for case mix for 2010 or 2011 

if more recent data indicate an appropriate adjustment that is 

greater than the amount established in the section described in 

subclause (I).’’. 

(b) REBASING HOME HEALTH PROSPECTIVE PAYMENT AMOUNT.—Section 

1895(b)(3)(A) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(A)) is amended— 

(1) in clause (i)— 

(A) in subclause (III), by inserting ‘‘and before 2011’’ after ‘‘after the period described in subclause (II)’’; and 


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(B) by inserting after subclause (III) the following new subclauses: 

‘‘(IV) Subject to clause (iii)(I), for 2011, such amount (or amounts) 

shall be adjusted by a uniform percentage determined to be appropriate by the Secretary based on analysis of factors such as 

changes in the average number and types of visits in an episode, 

the change in intensity of visits in an episode, growth in cost per 

episode, and other factors that the Secretary considers to be relevant. 

‘‘(V) Subject to clause (iii)(II), for a year after 2011, such a 

amount (or amounts) shall be equal to the amount (or amounts) determined under this clause for the previous year, updated under 

subparagraph (B).’’; and 

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

‘‘(iii) SPECIAL RULE IN CASE OF INABILITY TO EFFECT TIMELY RE- BASING.— 

‘‘(I) APPLICATION OF PROXY AMOUNT FOR 2011.—If the Secretary is 

not able to compute the amount (or amounts) under clause (i)(IV) 

so as to permit, on a timely basis, the application of such clause 

for 2011, the Secretary shall substitute for such amount (or 

amounts) 95 percent of the amount (or amounts) that would otherwise be specified under clause (i)(III) if it applied for 2011. 

‘‘(II) ADJUSTMENT FOR SUBSEQUENT YEARS BASED ON DATA.—If 

the Secretary applies subclause (I), the Secretary before July 1, 

2011, shall compare the amount (or amounts) applied under such 

subclause with the amount (or amounts) that should have been applied under clause (i)(IV). The Secretary shall decrease or increase 

the prospective payment amount (or amounts) under clause (i)(V) 

for 2012 (or, at the Secretary’s discretion, over a period of several 

years beginning with 2012) by the amount (if any) by which the 

amount (or amounts) applied under subclause (I) is greater or less, 

respectively, than the amount (or amounts) that should have been 

applied under clause (i)(IV).’’. 

SEC. 1155. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATE 

FOR HOME HEALTH SERVICES. 

(a) IN GENERAL.—Section 1895(b)(3)(B) of the Social Security Act (42 U.S.C. 

1395fff(b)(3)(B)) is amended— 

(1) in clause (iii), by inserting ‘‘(including being subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II))’’ after ‘‘in the same manner’’; 

and 

(2) in clause (v)(I), by inserting ‘‘(but not below 0)’’ after ‘‘reduced’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to home 

health market basket percentage increases for years beginning with 2010. 

SEC. 1156. LIMITATION ON MEDICARE EXCEPTIONS TO THE PROHIBITION ON CERTAIN PHYSICIAN REFERRALS MADE TO HOSPITALS. 

(a) IN GENERAL.—Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is 

amended— 

(1) in subsection (d)(2)— 

(A) in subparagraph (A), by striking ‘‘and’’ at the end; 

(B) in subparagraph (B), by striking the period at the end and inserting 

‘‘; and’’; and 

(C) by adding at the end the following new subparagraph: 

‘‘(C) in the case where the entity is a hospital, the hospital meets the requirements of paragraph (3)(D).’’; 

(2) in subsection (d)(3)— 

(A) in subparagraph (B), by striking ‘‘and’’ at the end; 

(B) in subparagraph (C), by striking the period at the end and inserting 

‘‘; and’’; and 

(C) by adding at the end the following new subparagraph: 

‘‘(D) the hospital meets the requirements described in subsection (i)(1).’’; 

(3) by amending subsection (f) to read as follows: 

‘‘(f) REPORTING AND DISCLOSURE REQUIREMENTS.— 

‘‘(1) IN GENERAL.—Each entity providing covered items or services for which 

payment may be made under this title shall provide the Secretary with the information concerning the entity’s ownership, investment, and compensation arrangements, including— 

‘‘(A) the covered items and services provided by the entity, and 

‘‘(B) the names and unique physician identification numbers of all physicians with an ownership or investment interest (as described in subsection 


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(a)(2)(A)), or with a compensation arrangement (as described in subsection 

(a)(2)(B)), in the entity, or whose immediate relatives have such an ownership or investment interest or who have such a compensation relationship 

with the entity. 

Such information shall be provided in such form, manner, and at such times 

as the Secretary shall specify. The requirement of this subsection shall not 

apply to designated health services provided outside the United States or to entities which the Secretary determines provide services for which payment may 

be made under this title very infrequently. 

‘‘(2) REQUIREMENTS FOR HOSPITALS WITH PHYSICIAN OWNERSHIP OR INVEST- MENT.—In the case of a hospital that meets the requirements described in subsection (i)(1), the hospital shall— 

‘‘(A) submit to the Secretary an initial report, and periodic updates at a 

frequency determined by the Secretary, containing a detailed description of 

the identity of each physician owner and physician investor and any other 

owners or investors of the hospital; 

‘‘(B) require that any referring physician owner or investor discloses to 

the individual being referred, by a time that permits the individual to make 

a meaningful decision regarding the receipt of services, as determined by 

the Secretary, the ownership or investment interest, as applicable, of such 

referring physician in the hospital; and 

‘‘(C) disclose the fact that the hospital is partially or wholly owned by one 

or more physicians or has one or more physician investors— 

‘‘(i) on any public website for the hospital; and 

‘‘(ii) in any public advertising for the hospital. 

The information to be reported or disclosed under this paragraph shall be provided in such form, manner, and at such times as the Secretary shall specify. 

The requirements of this paragraph shall not apply to designated health services furnished outside the United States or to entities which the Secretary determines provide services for which payment may be made under this title very 

infrequently. 

‘‘(3) PUBLICATION OF INFORMATION.—The Secretary shall publish, and periodically update, the information submitted by hospitals under paragraph (2)(A) on 

the public Internet website of the Centers for Medicare & Medicaid Services.’’; 

(4) by amending subsection (g)(5) to read as follows: 

‘‘(5) FAILURE TO REPORT OR DISCLOSE INFORMATION.— 

‘‘(A) REPORTING.—Any person who is required, but fails, to meet a reporting requirement of paragraphs (1) and (2)(A) of subsection (f) is subject to 

a civil money penalty of not more than $10,000 for each day for which reporting is required to have been made. 

‘‘(B) DISCLOSURE.—Any physician who is required, but fails, to meet a 

disclosure requirement of subsection (f)(2)(B) or a hospital that is required, 

but fails, to meet a disclosure requirement of subsection (f)(2)(C) is subject 

to a civil money penalty of not more than $10,000 for each case in which 

disclosure is required to have been made. 

‘‘(C) APPLICATION.—The provisions of section 1128A (other than the first 

sentence of subsection (a) and other than subsection (b)) shall apply to a 

civil money penalty under subparagraphs (A) and (B) in the same manner 

as such provisions apply to a penalty or proceeding under section 

1128A(a).’’; and 

(5) by adding at the end the following new subsection: 

‘‘(i) REQUIREMENTS TO QUALIFY FOR RURAL PROVIDER AND HOSPITAL OWNERSHIP

EXCEPTIONS TO SELF-REFERRAL PROHIBITION.— 

‘‘(1) REQUIREMENTS DESCRIBED.—For purposes of subsection (d)(3)(D), the requirements described in this paragraph are as follows: 

‘‘(A) PROVIDER AGREEMENT.—The hospital had— 

‘‘(i) physician ownership or investment on January 1, 2009; and 

‘‘(ii) a provider agreement under section 1866 in effect on such date. 

‘‘(B) PROHIBITION ON PHYSICIAN OWNERSHIP OR INVESTMENT.—The percentage of the total value of the ownership or investment interests held in 

the hospital, or in an entity whose assets include the hospital, by physician 

owners or investors in the aggregate does not exceed such percentage as of 

the date of enactment of this subsection. 

‘‘(C) PROHIBITION ON EXPANSION OF FACILITY CAPACITY.—Except as provided in paragraph (2), the number of operating rooms, procedure rooms, 

or beds of the hospital at any time on or after the date of the enactment 

of this subsection are no greater than the number of operating rooms, procedure rooms, or beds, respectively, as of such date. 

‘‘(D) ENSURING BONA FIDE OWNERSHIP AND INVESTMENT.— 


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‘‘(i) Any ownership or investment interests that the hospital offers to 

a physician are not offered on more favorable terms than the terms offered to a person who is not in a position to refer patients or otherwise 

generate business for the hospital. 

‘‘(ii) The hospital (or any investors in the hospital) does not directly 

or indirectly provide loans or financing for any physician owner or investor in the hospital. 

‘‘(iii) The hospital (or any investors in the hospital) does not directly 

or indirectly guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan, for any physician owner or investor or group 

of physician owners or investors that is related to acquiring any ownership or investment interest in the hospital. 

‘‘(iv) Ownership or investment returns are distributed to each owner 

or investor in the hospital in an amount that is directly proportional 

to the ownership or investment interest of such owner or investor in 

the hospital. 

‘‘(v) The investment interest of the owner or investor is directly proportional to the owner’s or investor’s capital contributions made at the 

time the ownership or investment interest is obtained. 

‘‘(vi) Physician owners and investors do not receive, directly or indirectly, any guaranteed receipt of or right to purchase other business interests related to the hospital, including the purchase or lease of any 

property under the control of other owners or investors in the hospital 

or located near the premises of the hospital. 

‘‘(vii) The hospital does not offer a physician owner or investor the 

opportunity to purchase or lease any property under the control of the 

hospital or any other owner or investor in the hospital on more favorable terms than the terms offered to a person that is not a physician 

owner or investor. 

‘‘(viii) The hospital does not condition any physician ownership or investment interests either directly or indirectly on the physician owner 

or investor making or influencing referrals to the hospital or otherwise 

generating business for the hospital. 

‘‘(E) PATIENT SAFETY.—In the case of a hospital that does not offer emergency services, the hospital has the capacity to— 

‘‘(i) provide assessment and initial treatment for medical emergencies; and 

‘‘(ii) if the hospital lacks additional capabilities required to treat the 

emergency involved, refer and transfer the patient with the medical 

emergency to a hospital with the required capability. 

‘‘(F) LIMITATION ON APPLICATION TO CERTAIN CONVERTED FACILITIES.—The 

hospital was not converted from an ambulatory surgical center to a hospital 

on or after the date of enactment of this subsection. 

‘‘(2) EXCEPTION TO PROHIBITION ON EXPANSION OF FACILITY CAPACITY.— 

‘‘(A) PROCESS.— 

‘‘(i) ESTABLISHMENT.—The Secretary shall establish and implement a 

process under which a hospital may apply for an exception from the requirement under paragraph (1)(C). 

‘‘(ii) OPPORTUNITY FOR COMMUNITY INPUT.—The process under clause 

(i) shall provide persons and entities in the community in which the 

hospital applying for an exception is located with the opportunity to 

provide input with respect to the application. 

‘‘(iii) TIMING FOR IMPLEMENTATION.—The Secretary shall implement 

the process under clause (i) on the date that is one month after the promulgation of regulations described in clause (iv). 

‘‘(iv) REGULATIONS.—Not later than the first day of the month beginning 18 months after the date of the enactment of this subsection, the 

Secretary shall promulgate regulations to carry out the process under 

clause (i). The Secretary may issue such regulations as interim final 

regulations. 

‘‘(B) FREQUENCY.—The process described in subparagraph (A) shall permit a hospital to apply for an exception up to once every 2 years. 

‘‘(C) PERMITTED INCREASE.— 

‘‘(i) IN GENERAL.—Subject to clause (ii) and subparagraph (D), a hospital granted an exception under the process described in subparagraph 

(A) may increase the number of operating rooms, procedure rooms, or 

beds of the hospital above the baseline number of operating rooms, procedure rooms, or beds, respectively, of the hospital (or, if the hospital 

has been granted a previous exception under this paragraph, above the 


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number of operating rooms, procedure rooms, or beds, respectively, of 

the hospital after the application of the most recent increase under 

such an exception). 

‘‘(ii) 100 PERCENT INCREASE LIMITATION.—The Secretary shall not permit an increase in the number of operating rooms, procedure rooms, or 

beds of a hospital under clause (i) to the extent such increase would 

result in the number of operating rooms, procedure rooms, or beds of 

the hospital exceeding 200 percent of the baseline number of operating 

rooms, procedure rooms, or beds of the hospital. 

‘‘(iii) BASELINE NUMBER OF OPERATING ROOMS, PROCEDURE ROOMS, OR

BEDS.—In this paragraph, the term ‘baseline number of operating 

rooms, procedure rooms, or beds’ means the number of operating rooms, 

procedure rooms, or beds of a hospital as of the date of enactment of 

this subsection. 

‘‘(D) INCREASE LIMITED TO FACILITIES ON THE MAIN CAMPUS OF THE HOS- PITAL.—Any increase in the number of operating rooms, procedure rooms, 

or beds of a hospital pursuant to this paragraph may only occur in facilities 

on the main campus of the hospital. 

‘‘(E) CONDITIONS FOR APPROVAL OF AN INCREASE IN FACILITY CAPACITY.— The Secretary may grant an exception under the process described in subparagraph (A) only to a hospital— 

‘‘(i) that is located in a county in which the percentage increase in 

the population during the most recent 5-year period for which data are 

available is estimated to be at least 150 percent of the percentage increase in the population growth of the State in which the hospital is 

located during that period, as estimated by Bureau of the Census and 

available to the Secretary; 

‘‘(ii) whose annual percent of total inpatient admissions that represent inpatient admissions under the program under title XIX is estimated to be equal to or greater than the average percent with respect 

to such admissions for all hospitals located in the county in which the 

hospital is located; 

‘‘(iii) that does not discriminate against beneficiaries of Federal 

health care programs and does not permit physicians practicing at the 

hospital to discriminate against such beneficiaries; 

‘‘(iv) that is located in a State in which the average bed capacity in 

the State is estimated to be less than the national average bed capacity; 

‘‘(v) that has an average bed occupancy rate that is estimated to be 

greater than the average bed occupancy rate in the State in which the 

hospital is located; and 

‘‘(vi) that meets other conditions as determined by the Secretary. 

‘‘(F) PROCEDURE ROOMS.—In this subsection, the term ‘procedure rooms’ 

includes rooms in which catheterizations, angiographies, angiograms, and 

endoscopies are furnished, but such term shall not include emergency 

rooms or departments (except for rooms in which catheterizations, 

angiographies, angiograms, and endoscopies are furnished). 

‘‘(G) PUBLICATION OF FINAL DECISIONS.—Not later than 120 days after receiving a complete application under this paragraph, the Secretary shall 

publish on the public Internet website of the Centers for Medicare & Medicaid Services the final decision with respect to such application. 

‘‘(H) LIMITATION ON REVIEW.—There shall be no administrative or judicial 

review under section 1869, section 1878, or otherwise of the exception process under this paragraph, including the establishment of such process, and 

any determination made under such process. 

‘‘(3) PHYSICIAN OWNER OR INVESTOR DEFINED.—For purposes of this subsection 

and subsection (f)(2), the term ‘physician owner or investor’ means a physician 

(or an immediate family member of such physician) with a direct or an indirect 

ownership or investment interest in the hospital. 

‘‘(4) PATIENT SAFETY REQUIREMENT.—In the case of a hospital to which the requirements of paragraph (1) apply, insofar as the hospital admits a patient and 

does not have any physician available on the premises 24 hours per day, 7 days 

per week, before admitting the patient— 

‘‘(A) the hospital shall disclose such fact to the patient; and 

‘‘(B) following such disclosure, the hospital shall receive from the patient 

a signed acknowledgment that the patient understands such fact. 

‘‘(5) CLARIFICATION.—Nothing in this subsection shall be construed as preventing the Secretary from terminating a hospital’s provider agreement if the 

hospital is not in compliance with regulations pursuant to section 1866.’’. 


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(b) VERIFYING COMPLIANCE.—The Secretary of Health and Human Services shall 

establish policies and procedures to verify compliance with the requirements described in subsections (i)(1) and (i)(4) of section 1877 of the Social Security Act, as 

added by subsection (a)(5). The Secretary may use unannounced site reviews of hospitals and audits to verify compliance with such requirements. 

(c) IMPLEMENTATION.— (1) FUNDING.—For purposes of carrying out the amendments made by subsection (a) and the provisions of subsection (b), in addition to funds otherwise 

available, out of any funds in the Treasury not otherwise appropriated there are 

appropriated to the Secretary of Health and Human Services for the Centers 

for Medicare & Medicaid Services Program Management Account $5,000,000 for 

each fiscal year beginning with fiscal year 2010. Amounts appropriated under 

this paragraph for a fiscal year shall be available until expended. 

(2) ADMINISTRATION.—Chapter 35 of title 44, United States Code, shall not 

apply to the amendments made by subsection (a) and the provisions of subsection (b). 

SEC. 1157. INSTITUTE OF MEDICINE STUDY OF GEOGRAPHIC ADJUSTMENT FACTORS UNDER 

MEDICARE. 

(a) IN GENERAL.—The Secretary of Health and Human Services shall enter into 

a contract with the Institute of Medicine of the National Academy of Science to conduct a comprehensive empirical study, and provide recommendations as appropriate, 

on the accuracy of the geographic adjustment factors established under sections 

1848(e) and 1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395w–4(e), 

11395ww(d)(3)). 

(b) MATTERS INCLUDED.—Such study shall include an evaluation and assessment 

of the following with respect to such adjustment factors: 

(1) Empirical validity of the adjustment factors. 

(2) Methodology used to determine the adjustment factors. 

(3) Measures used for the adjustment factors, taking into account— 

(A) timeliness of data and frequency of revisions to such data; 

(B) sources of data and the degree to which such data are representative 

of costs; and 

(C) operational costs of providers who participate in Medicare. 

(c) EVALUATION.—Such study shall, within the context of the United States health 

care marketplace, evaluate and consider the following: 

(1) The effect of the adjustment factors on the level and distribution of the 

health care workforce and resources, including— 

(A) recruitment and retention that takes into account workforce mobility 

between urban and rural areas; 

(B) ability of hospitals and other facilities to maintain an adequate and 

skilled workforce; and 

(C) patient access to providers and needed medical technologies. 

(2) The effect of the adjustment factors on population health and quality of 

care. 

(3) The effect of the adjustment factors on the ability of providers to furnish 

efficient, high value care. 

(d) REPORT.—The contract under subsection (a) shall provide for the Institute of 

Medicine to submit, not later than one year after the date of the enactment of this 

Act, to the Secretary and the Congress a report containing results and recommendations of the study conducted under this section. 

(e) FUNDING.—There are authorized to be appropriated to carry out this section 

such sums as may be necessary. 

SEC. 1158. REVISION OF MEDICARE PAYMENT SYSTEMS TO ADDRESS GEOGRAPHIC INEQUITIES. 

(a) REVISION OF MEDICARE PAYMENT SYSTEMS.—Taking into account the recommendations described in the report under section 1157, and notwithstanding the 

geographic adjustments that would otherwise apply under section 1848(e) and section 1886(d)(3)(E) of the Social Security Act ((42 U.S.C. 1395w-4, 1395ww(d)), the 

Secretary of Health and Human Services shall include in proposed rules applicable 

to the rulemaking cycle for payment systems for physicians’ services and inpatient 

hospital services under sections 1848 and section 1886(d) of such Act, respectively, 

proposals (as the Secretary determines to be appropriate) to revise the geographic 

adjustment factors used in such systems. Such proposals’ rules shall be contained 

in the next rulemaking cycle following the submission to the Secretary of the report 

described in section 1157. 

(b) PAYMENT ADJUSTMENTS.— 

(1) FUNDING FOR IMPROVEMENTS.—The Secretary shall use funds as provided 

under subsection (c) in making changes to the geographic adjustment factors 


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pursuant to subsection (a). In making such changes to such geographic adjustment factors, the Secretary shall ensure that the estimated increased expenditures resulting from such changes does not exceed the amounts provided under 

subsection (c). 

(2) ENSURING FAIRNESS.—In carrying out this subsection, the Secretary shall 

not reduce the geographic adjustment below the factor that applied for such 

payment system in the payment year before such changes. 

(c) FUNDING.—Amounts in the Medicare Improvement Fund under section 1898, 

as amended by section 1146, shall be available to the Secretary to make changes 

to the geographic adjustments factors as described in subsections (a) and (b) with 

respect to services furnished before January 1, 2014. No more than one-half of 

such amounts shall be available with respect to services furnished in any one payment year. 

SEC. 1159. INSTITUTE OF MEDICINE STUDY OF GEOGRAPHIC VARIATION IN HEALTH CARE 

SPENDING AND PROMOTING HIGH-VALUE HEALTH CARE. 

(a) IN GENERAL.—The Secretary of Health and Human Services shall enter into 

an agreement with the Institutes of Medicine of the National Academies (referred 

to in this section as the ‘‘Institute’’) to conduct a study on geographic variation in 

per capita health care spending among both the Medicare and privately insured populations. Such study shall include each of the following: 

(1) An evaluation of the extent and range of such variation using various 

units of geographic measurement. 

(2) The extent to which geographic variation can be attributed to differences 

in input prices, practice patterns, access to medical services, supply of medical 

services, socio-economic factors, and provider organizational models. 

(3) The extent to which variations in spending are correlated with patient access to care, distribution of health care resources, and consensus-based measures of health care quality. 

(4) The extent to which variation can be attributed to physician and practitioner discretion in making treatment decisions, and the degree to which discretionary treatment decisions are made that could be characterized as different 

from the best available medical evidence. 

(5) An assessment of the degree to which variation cannot be explained by 

empirical evidence. 

(6) Other factors the Institute deems appropriate. 

(b) RECOMMENDATIONS.—Taking into account the findings under subsection (a), 

the Institute shall recommend strategies for addressing variation in per capita 

spending by promoting high-value care (as defined in subsection (e)). In making 

such recommendations, the Institute shall consider each of the following: 

(1) Measurement and reporting on quality and population health. 

(2) Reducing fragmented and duplicative care. 

(3) Promoting the practice of evidence-based medicine. 

(4) Empowering patients to make value-based care decisions. 

(5) Leveraging the use of health information technology. 

(6) The role of financial and other incentives. 

(7) Other topics the Institute deems appropriate. 

(c) SPECIFIC CONSIDERATIONS.—In making the recommendations under subsection 

(b), the Institute shall specifically address whether payment systems under title 

XVIII of the Social Security Act for physicians and hospitals should be further modified to incentivize high-value care. In so doing, the Institute shall consider the adoption of a value index based on a composite of appropriate measures of quality and 

cost that would adjust provider payments on a regional or provider-level basis. If 

the Institute finds that application of such a value index would significantly 

incentivize providers to furnish high-value care, it shall make specific recommendations on how such an index would be designed and implemented. In so doing, it 

should identify specific measures of quality and cost appropriate for use in such an 

index, and include a thorough analysis (including on a geographic basis) of how payments and spending under such title would be affected by such an index. 

(d) REPORT.— Not later than three years after the date of the enactment of this 

Act, the Institute shall submit to Congress a report containing findings and recommendations of the study conducted under this section. 

(e) HIGH-VALUE CARE DEFINED.—For purposes of this section, the term ‘‘highvalue care’’ means the efficient delivery of high quality, evidence-based, patient-centered care. 

(f) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated 

such sums as are necessary to carry out this section. Such sums are authorized to 

remain available until expended. 


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Subtitle D—Medicare Advantage Reforms 

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) IN GENERAL.—In the case of a qualifying plan in a qualifying county with 

respect to a year beginning with 2011, the blended benchmark amount under 

subsection (n)(1) shall be increased— 

‘‘(A) for 2011, by 2.6 percent; 

‘‘(B) for 2012, by 5.3 percent; and 

‘‘(C) for a subsequent year, by 8.0 percent. 

‘‘(2) QUALIFYING PLAN AND QUALIFYING COUNTY DEFINED.—For purposes of 

this subsection: 

‘‘(A) QUALIFYING PLAN.—The term ‘qualifying plan’ means, for a year and 

subject to paragraph (4), a plan that, in a preceding year specified by the 

Secretary, had a quality ranking (based on the quality ranking system established by the Centers for Medicare & Medicaid Services for Medicare Advantage plans) of 4 stars or higher. 

‘‘(B) QUALIFYING COUNTY.—The term ‘qualifying county’ means, for a 

year, a county— 

‘‘(i) that ranked within the lowest quartile of counties in the amount 

specified in subsection (n)(2) for the year specified by the Secretary 

under subparagraph (A); and 

‘‘(ii) for which, as of June of such specified year, of the Medicare Advantage eligible individuals residing in the county— 

‘‘(I) at least 50 percent of such individuals were enrolled in Medicare Advantage plans; and 

‘‘(II) of the residents so enrolled at least 50 percent of such individuals were enrolled in such plans with a quality ranking (based 


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on the quality ranking system established by the Centers for Medicare & Medicaid Services for Medicare Advantage plans) of 4 stars 

or higher. 

‘‘(3) NOTIFICATION.—The Secretary, in the annual announcement required 

under subsection (b)(1)(B) in 2010 and each succeeding year, shall notify the 

Medicare Advantage organization that is offering a qualifying plan in a qualifying county of such identification for the year. The Secretary shall provide for 

publication on the website for the Medicare program of the information described in the previous sentence. 

‘‘(4) AUTHORITY TO DISQUALIFY DEFICIENT PLANS.—The Secretary may determine that a Medicare Advantage plan is not a qualifying plan if the Secretary 

has identified deficiencies in the plan’s compliance with rules for Medicare Advantage plans under this part.’’. 

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. 


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(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. 

PART 2—BENEFICIARY PROTECTIONS AND ANTI-FRAUD 

SEC. 1171. LIMITATION ON COST-SHARING FOR INDIVIDUAL HEALTH SERVICES. 

(a) IN GENERAL.—Section 1852(a)(1) of the Social Security Act (42 U.S.C. 1395w– 

22(a)(1)) is amended— 

(1) in subparagraph (A), by inserting before the period at the end the following: ‘‘with cost-sharing that is no greater (and may be less) than the costsharing that would otherwise be imposed under such program option’’; 

(2) in subparagraph (B)(i), by striking ‘‘or an actuarially equivalent level of 

cost-sharing as determined in this part’’; and 

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

‘‘(ii) PERMITTING USE OF FLAT COPAYMENT OR PER DIEM RATE.—Nothing in clause (i) shall be construed as prohibiting a Medicare Advantage 

plan from using a flat copayment or per diem rate, in lieu of the costsharing that would be imposed under part A or B, so long as the 

amount of the cost-sharing imposed does not exceed the amount of the 

cost-sharing that would be imposed under the respective part if the individual were not enrolled in a plan under this part.’’. 

(b) LIMITATION FOR DUAL ELIGIBLES AND QUALIFIED MEDICARE BENEFICIARIES.— 

Section 1852(a)(7) of such Act is amended to read as follows: 

‘‘(7) LIMITATION ON COST-SHARING FOR DUAL ELIGIBLES AND QUALIFIED MEDICARE BENEFICIARIES.—In the case of a individual who is a full-benefit dual eligible individual (as defined in section 1935(c)(6)) or a qualified medicare beneficiary (as defined in section 1905(p)(1)) who is enrolled in a Medicare Advantage plan, the plan may not impose cost-sharing that exceeds the amount of 

cost-sharing that would be permitted with respect to the individual under this 

title and title XIX if the individual were not enrolled with such plan.’’. 

(c) EFFECTIVE DATES.— 

(1) The amendments made by subsection (a) shall apply to plan years beginning on or after January 1, 2011. 

(2) The amendments made by subsection (b) shall apply to plan years beginning on or after January 1, 2011. 

SEC. 1172. CONTINUOUS OPEN ENROLLMENT FOR ENROLLEES IN PLANS WITH ENROLLMENT 

SUSPENSION. 

Section 1851(e)(4) of the Social Security Act (42 U.S.C. 1395w(e)(4)) is amended— 

(1) in subparagraph (C), by striking at the end ‘‘or’’; 

(2) in subparagraph (D)— 

(A) by inserting ‘‘, taking into account the health or well-being of the individual’’ before the period; and 

(B) by redesignating such subparagraph as subparagraph (E); and 

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

‘‘(D) the individual is enrolled in an MA plan and enrollment in the plan 

is suspended under paragraph (2)(B) or (3)(C) of section 1857(g) because of 

a failure of the plan to meet applicable requirements; or’’. 

SEC. 1173. INFORMATION FOR BENEFICIARIES ON MA PLAN ADMINISTRATIVE COSTS. 

(a) DISCLOSURE OF MEDICAL LOSS RATIOS AND OTHER EXPENSE DATA.—Section 

1851 of the Social Security Act (42 U.S.C. 1395w–21), as previously amended by this 

subtitle, is amended by adding at the end the following new subsection: 

‘‘(p) PUBLICATION OF MEDICAL LOSS RATIOS AND OTHER COST-RELATED INFORMATION.— 

‘‘(1) IN GENERAL.—The Secretary shall publish, not later than November 1 of 

each year (beginning with 2011), for each MA plan contract, the medical loss 

ratio of the plan in the previous year. 

‘‘(2) SUBMISSION OF DATA.— 


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‘‘(A) IN GENERAL.—Each MA organization shall submit to the Secretary, 

in a form and manner specified by the Secretary, data necessary for the 

Secretary to publish the medical loss ratio on a timely basis. 

‘‘(B) DATA FOR 2010 AND 2011.—The data submitted under subparagraph 

(A) for 2010 and for 2011 shall be consistent in content with the data reported as part of the MA plan bid in June 2009 for 2010. 

‘‘(C) USE OF STANDARDIZED ELEMENTS AND DEFINITIONS.—The data to be 

submitted under subparagraph (A) relating to medical loss ratio for a year, 

beginning with 2012, shall be submitted based on the standardized elements and definitions developed under paragraph (3). 

‘‘(3) DEVELOPMENT OF DATA REPORTING STANDARDS.— ‘‘(A) IN GENERAL.—The Secretary shall develop and implement standardized data elements and definitions for reporting under this subsection, for 

contract years beginning with 2012, of data necessary for the calculation of 

the medical loss ratio for MA plans. Not later than December 31, 2010, the 

Secretary shall publish a report describing the elements and definitions so 

developed. 

‘‘(B) CONSULTATION.—The Secretary shall consult with the Health 

Choices Commissioner, representatives of MA organizations, experts on 

health plan accounting systems, and representatives of the National Association of Insurance Commissioners, in the development of such data elements and definitions. 

‘‘(4) MEDICAL LOSS RATIO TO BE DEFINED.—For purposes of this part, the term 

‘medical loss ratio’ has the meaning given such term by the Secretary, taking 

into account the meaning given such term by the Health Choices Commissioner 

under section 116 of the America’s Affordable Health Choices Act of 2009.’’. 

(b) MINIMUM MEDICAL LOSS RATIO.—Section 1857(e) of the Social Security Act (42 

U.S.C. 1395w–27(e)) is amended by adding at the end the following new paragraph: 

‘‘(4) REQUIREMENT FOR MINIMUM MEDICAL LOSS RATIO.—If the Secretary determines for a contract year (beginning with 2014) that an MA plan has failed to 

have a medical loss ratio (as defined in section 1851(p)(4)) of at least .85— 

‘‘(A) the Secretary shall require the Medicare Advantage organization offering the plan to give enrollees a rebate (in the second succeeding contract 

year) of premiums under this part (or part B or part D, if applicable) by 

such amount as would provide for a benefits ratio of at least .85; 

‘‘(B) for 3 consecutive contract years, the Secretary shall not permit the 

enrollment of new enrollees under the plan for coverage during the second 

succeeding contract year; and 

‘‘(C) the Secretary shall terminate the plan contract if the plan fails to 

have such a medical loss ratio for 5 consecutive contract years.’’. 

SEC. 1174. STRENGTHENING AUDIT AUTHORITY. 

(a) FOR PART C PAYMENTS RISK ADJUSTMENT.—Section 1857(d)(1) of the Social Security Act (42 U.S.C. 1395w–27(d)(1)) is amended by inserting after ‘‘section 

1858(c))’’ the following: ‘‘, and data submitted with respect to risk adjustment under 

section 1853(a)(3)’’. 

(b) ENFORCEMENT OF AUDITS AND DEFICIENCIES.— 

(1) IN GENERAL.—Section 1857(e) of such Act, as amended by section 1173, is 

amended by adding at the end the following new paragraph: 

‘‘(5) ENFORCEMENT OF AUDITS AND DEFICIENCIES.— 

‘‘(A) INFORMATION IN CONTRACT.—The Secretary shall require that each 

contract with an MA organization under this section shall include terms 

that inform the organization of the provisions in subsection (d). 

‘‘(B) ENFORCEMENT AUTHORITY.—The Secretary is authorized, in connection with conducting audits and other activities under subsection (d), to 

take such actions, including pursuit of financial recoveries, necessary to address deficiencies identified in such audits or other activities.’’. 

(2) APPLICATION UNDER PART D.—For provision applying the amendment 

made by paragraph (1) to prescription drug plans under part D, see section 

1860D–12(b)(3)(D) of the Social Security Act. 

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect on 

the date of the enactment of this Act and shall apply to audits and activities conducted for contract years beginning on or after January 1, 2011. 

SEC. 1175. 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.—Nothing in this section shall be construed as 

requiring the Secretary to accept any or every bid by an MA organization 

under this subsection.’’. 


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(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 under this section in the same manner as it applies to bids by 

an MA organization under such section.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to bids 

for contract years beginning on or after January 1, 2011. 

PART 3—TREATMENT OF SPECIAL NEEDS PLANS 

SEC. 1176. LIMITATION ON ENROLLMENT OUTSIDE OPEN ENROLLMENT PERIOD OF INDIVIDUALS INTO CHRONIC CARE SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS. 

Section 1859(f)(4) of the Social Security Act (42 U.S.C. 1395w–28(f)(4)) is amended 

by adding at the end the following new subparagraph: 

‘‘(C) The plan does not enroll an individual on or after January 1, 2011, 

other than during an annual, coordinated open enrollment period or when 

at the time of the diagnosis of the disease or condition that qualifies the 

individual as an individual described in subsection (b)(6)(B)(iii).’’. 

SEC. 1177. EXTENSION OF AUTHORITY OF SPECIAL NEEDS PLANS TO RESTRICT ENROLLMENT. 

(a) IN GENERAL.—Section 1859(f)(1) of the Social Security Act (42 U.S.C. 1395w– 

28(f)(1)) is amended by striking ‘‘January 1, 2011’’ and inserting ‘‘January 1, 2013 

(or January 1, 2016, in the case of a plan described in section 1177(b)(1) of the 

America’s Affordable Health Choices Act of 2009)’’. 

(b) GRANDFATHERING OF CERTAIN PLANS.— 

(1) PLANS DESCRIBED.—For purposes of section 1859(f)(1) of the Social Security Act (42 U.S.C. 1395w–28(f)(1)), a plan described in this paragraph is a plan 

that had a contract with a State that had a State program to operate an integrated Medicaid-Medicare program that had been approved by the Centers for 

Medicare & Medicaid Services as of January 1, 2004. 

(2) ANALYSIS; REPORT.—The Secretary of Health and Human Services shall 

provide, through a contract with an independent health services evaluation organization, for an analysis of the plans described in paragraph (1) with regard 

to the impact of such plans on cost, quality of care, patient satisfaction, and 

other subjects as specified by the Secretary. Not later than December 31, 2011, 

the Secretary shall submit to Congress a report on such analysis and shall include in such report such recommendations with regard to the treatment of 

such plans as the Secretary deems appropriate. 

Subtitle E—Improvements to Medicare Part D 

SEC. 1181. ELIMINATION OF COVERAGE GAP. 

(a) IN GENERAL.—Section 1860D–2(b) of such Act (42 U.S.C. 1395w–102(b)) is 

amended— 

(1) in paragraph (3)(A), by striking ‘‘paragraph (4)’’ and inserting ‘‘paragraphs 

(4) and (7)’’; 

(2) in paragraph (4)(B)(i), by inserting ‘‘subject to paragraph (7)’’ after ‘‘purposes of this part’’; and 

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

‘‘(7) PHASED-IN ELIMINATION OF COVERAGE GAP.— 

‘‘(A) IN GENERAL.—For each year beginning with 2011, the Secretary shall 

consistent with this paragraph progressively increase the initial coverage 

limit (described in subsection (b)(3)) and decrease the annual out-of-pocket 

threshold from the amounts otherwise computed until there is a continuation of coverage from the initial coverage limit for expenditures incurred 

through the total amount of expenditures at which benefits are available 

under paragraph (4). 

‘‘(B) INCREASE IN INITIAL COVERAGE LIMIT.—For a year beginning with 

2011, the initial coverage limit otherwise computed without regard to this 

paragraph shall be increased by 1⁄2 of the cumulative phase-in percentage 

(as defined in subparagraph (D)(ii) for the year) times the out-of-pocket gap 

amount (as defined in subparagraph (E)) for the year. 

‘‘(C) DECREASE IN ANNUAL OUT-OF-POCKET THRESHOLD.—For a year beginning with 2011, the annual out-of-pocket threshold otherwise computed 

without regard to this paragraph shall be decreased by 1⁄2 of the cumulative 


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phase-in percentage of the out-of-pocket gap amount for the year multiplied 

by 1.75. 

‘‘(D) PHASE–IN.—For purposes of this paragraph: 

‘‘(i) ANNUAL PHASE-IN PERCENTAGE.—The term ‘annual phase-in percentage’ means— 

‘‘(I) for 2011, 13 percent; 

‘‘(II) for 2012, 2013, 2014, and 2015, 5 percent; 

‘‘(III) for 2016 through 2018, 7.5 percent; and 

‘‘(IV) for 2019 and each subsequent year, 10 percent. 

‘‘(ii) CUMULATIVE PHASE-IN PERCENTAGE.—The term ‘cumulative 

phase-in percentage’ means for a year the sum of the annual phase-in 

percentage for the year and the annual phase-in percentages for each 

previous year beginning with 2011, but in no case more than 100 percent. 

‘‘(E) OUT-OF-POCKET GAP AMOUNT.—For purposes of this paragraph, the 

term ‘out-of-pocket gap amount’ means for a year the amount by which— 

‘‘(i) the annual out-of-pocket threshold specified in paragraph (4)(B) 

for the year (as determined as if this paragraph did not apply), exceeds 

‘‘(ii) the sum of— 

‘‘(I) the annual deductible under paragraph (1) for the year; and 

‘‘(II) 1⁄4 of the amount by which the initial coverage limit under 

paragraph (3) for the year (as determined as if this paragraph did 

not apply) exceeds such annual deductible.’’. 

(b) REQUIRING DRUG MANUFACTURERS TO PROVIDE DRUG REBATES FOR FULL-BENEFIT DUAL ELIGIBLES.— 

(1) IN GENERAL.—Section 1860D–2 of the Social Security Act (42 U.S.C. 

1396r–8) is amended— 

(A) in subsection (e)(1), in the matter before subparagraph (A), by inserting ‘‘and subsection (f)’’ after ‘‘this subsection’’; and 

(B) by adding at the end the following new subsection: 

‘‘(f) PRESCRIPTION DRUG REBATE AGREEMENT FOR FULL-BENEFIT DUAL ELIGIBLE

INDIVIDUALS.— 

‘‘(1) IN GENERAL.—In this part, the term ‘covered part D drug’ does not include any drug or biologic that is manufactured by a manufacturer that has not 

entered into and have in effect a rebate agreement described in paragraph (2). 

‘‘(2) REBATE AGREEMENT.—A rebate agreement under this subsection shall require the manufacturer to provide to the Secretary a rebate for each rebate period (as defined in paragraph (6)(B)) ending after December 31, 2010, in the 

amount specified in paragraph (3) for any covered part D drug of the manufacturer dispensed after December 31, 2010, to any full-benefit dual eligible individual (as defined in paragraph (6)(A)) for which payment was made by a PDP 

sponsor under part D or a MA organization under part C for such period. Such 

rebate shall be paid by the manufacturer to the Secretary not later than 30 

days after the date of receipt of the information described in section 1860D– 

12(b)(7), including as such section is applied under section 1857(f)(3). 

‘‘(3) REBATE FOR FULL-BENEFIT DUAL ELIGIBLE MEDICARE DRUG PLAN ENROLLEES.— 

‘‘(A) IN GENERAL.—The amount of the rebate specified under this paragraph for a manufacturer for a rebate period, with respect to each dosage 

form and strength of any covered part D drug provided by such manufacturer and dispensed to a full-benefit dual eligible individual, shall be equal 

to the product of— 

‘‘(i) the total number of units of such dosage form and strength of the 

drug so provided and dispensed for which payment was made by a PDP 

sponsor under part D or a MA organization under part C for the rebate 

period (as reported under section 1860D–12(b)(7), including as such section is applied under section 1857(f)(3)); and 

‘‘(ii) the amount (if any) by which— 

‘‘(I) the Medicaid rebate amount (as defined in subparagraph (B)) 

for such form, strength, and period, exceeds 

‘‘(II) the average Medicare drug program full-benefit dual eligible 

rebate amount (as defined in subparagraph (C)) for such form, 

strength, and period. 

‘‘(B) MEDICAID REBATE AMOUNT.—For purposes of this paragraph, the 

term ‘Medicaid rebate amount’ means, with respect to each dosage form and 

strength of a covered part D drug provided by the manufacturer for a rebate period— 

‘‘(i) in the case of a single source drug or an innovator multiple 

source drug, the amount specified in paragraph (1)(A)(ii) of section 


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1927(b) plus the amount, if any, specified in paragraph (2)(A)(ii) of such 

section, for such form, strength, and period; or 

‘‘(ii) in the case of any other covered outpatient drug, the amount 

specified in paragraph (3)(A)(i) of such section for such form, strength, 

and period. 

‘‘(C) AVERAGE MEDICARE DRUG PROGRAM FULL-BENEFIT DUAL ELIGIBLE REBATE AMOUNT.—For purposes of this subsection, the term ‘average Medicare 

drug program full-benefit dual eligible rebate amount’ means, with respect 

to each dosage form and strength of a covered part D drug provided by a 

manufacturer for a rebate period, the sum, for all PDP sponsors under part 

D and MA organizations administering a MA–PD plan under part C, of— 

‘‘(i) the product, for each such sponsor or organization, of— 

‘‘(I) the sum of all rebates, discounts, or other price concessions 

(not taking into account any rebate provided under paragraph (2) 

for such dosage form and strength of the drug dispensed, calculated 

on a per-unit basis, but only to the extent that any such rebate, 

discount, or other price concession applies equally to drugs dispensed to full-benefit dual eligible Medicare drug plan enrollees 

and drugs dispensed to PDP and MA–PD enrollees who are not 

full-benefit dual eligible individuals; and 

‘‘(II) the number of the units of such dosage and strength of the 

drug dispensed during the rebate period to full-benefit dual eligible 

individuals enrolled in the prescription drug plans administered by 

the PDP sponsor or the MA–PD plans administered by the MA–PD 

organization; divided by 

‘‘(ii) the total number of units of such dosage and strength of the drug 

dispensed during the rebate period to full-benefit dual eligible individuals enrolled in all prescription drug plans administered by PDP sponsors and all MA–PD plans administered by MA–PD organizations. 

‘‘(4) LENGTH OF AGREEMENT.—The provisions of paragraph (4) of section 

1927(b) (other than clauses (iv) and (v) of subparagraph (B)) shall apply to rebate agreements under this subsection in the same manner as such paragraph 

applies to a rebate agreement under such section. 

‘‘(5) OTHER TERMS AND CONDITIONS.—The Secretary shall establish other 

terms and conditions of the rebate agreement under this subsection, including 

terms and conditions related to compliance, that are consistent with this subsection. 

‘‘(6) DEFINITIONS.—In this subsection and section 1860D–12(b)(7): 

‘‘(A) FULL-BENEFIT DUAL ELIGIBLE INDIVIDUAL.—The term ‘full-benefit 

dual eligible individual’ has the meaning given such term in section 

1935(c)(6). 

‘‘(B) REBATE PERIOD.—The term ‘rebate period’ has the meaning given 

such term in section 1927(k)(8).’’. 

(2) REPORTING REQUIREMENT FOR THE DETERMINATION AND PAYMENT OF REBATES BY MANUFACTURES RELATED TO REBATE FOR FULL-BENEFIT DUAL ELIGIBLE

MEDICARE DRUG PLAN ENROLLEES.— 

(A) REQUIREMENTS FOR PDP SPONSORS.—Section 1860D–12(b) of the Social 

Security Act (42 U.S.C. 1395w–112(b)) is amended by adding at the end the 

following new paragraph: 

‘‘(7) REPORTING REQUIREMENT FOR THE DETERMINATION AND PAYMENT OF REBATES BY MANUFACTURERS RELATED TO REBATE FOR FULL-BENEFIT DUAL ELIGIBLE MEDICARE DRUG PLAN ENROLLEES.— 

‘‘(A) IN GENERAL.—For purposes of the rebate under section 1860D–2(f) 

for contract years beginning on or after January 1, 2011, each contract entered into with a PDP sponsor under this part with respect to a prescription 

drug plan shall require that the sponsor comply with subparagraphs (B) 

and (C). 

‘‘(B) REPORT FORM AND CONTENTS.—Not later than 60 days after the end 

of each rebate period (as defined in section 1860D–2(f)(6)(B)) within such 

a contract year to which such section applies, a PDP sponsor of a prescription drug plan under this part shall report to each manufacturer— 

‘‘(i) information (by National Drug Code number) on the total number 

of units of each dosage, form, and strength of each drug of such manufacturer dispensed to full-benefit dual eligible Medicare drug plan enrollees under any prescription drug plan operated by the PDP sponsor 

during the rebate period; 

‘‘(ii) information on the price discounts, price concessions, and rebates 

for such drugs for such form, strength, and period; 


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‘‘(iii) information on the extent to which such price discounts, price 

concessions, and rebates apply equally to full-benefit dual eligible Medicare drug plan enrollees and PDP enrollees who are not full-benefit 

dual eligible Medicare drug plan enrollees; and 

‘‘(iv) any additional information that the Secretary determines is necessary to enable the Secretary to calculate the average Medicare drug 

program full-benefit dual eligible rebate amount (as defined in paragraph (3)(C) of such section), and to determine the amount of the rebate required under this section, for such form, strength, and period. 

Such report shall be in a form consistent with a standard reporting format 

established by the Secretary. 

‘‘(C) SUBMISSION TO SECRETARY.—Each PDP sponsor shall promptly 

transmit a copy of the information reported under subparagraph (B) to the 

Secretary for the purpose of audit oversight and evaluation. 

‘‘(D) CONFIDENTIALITY OF INFORMATION.—The provisions of subparagraph 

(D) of section 1927(b)(3), relating to confidentiality of information, shall 

apply to information reported by PDP sponsors under this paragraph in the 

same manner that such provisions apply to information disclosed by manufacturers or wholesalers under such section, except— 

‘‘(i) that any reference to ‘this section’ in clause (i) of such subparagraph shall be treated as being a reference to this section; 

‘‘(ii) the reference to the Director of the Congressional Budget Office 

in clause (iii) of such subparagraph shall be treated as including a reference to the Medicare Payment Advisory Commission; and 

‘‘(iii) clause (iv) of such subparagraph shall not apply. 

‘‘(E) OVERSIGHT.—Information reported under this paragraph may be 

used by the Inspector General of the Department of Health and Human 

Services for the statutorily authorized purposes of audit, investigation, and 

evaluations. 

‘‘(F) PENALTIES FOR FAILURE TO PROVIDE TIMELY INFORMATION AND PROVISION OF FALSE INFORMATION.—In the case of a PDP sponsor— 

‘‘(i) that fails to provide information required under subparagraph (B) 

on a timely basis, the sponsor is subject to a civil money penalty in the 

amount of $10,000 for each day in which such information has not been 

provided; or 

‘‘(ii) that knowingly (as defined in section 1128A(i)) provides false information under such subparagraph, the sponsor is subject to a civil 

money penalty in an amount not to exceed $100,000 for each item of 

false information. 

Such civil money penalties are in addition to other penalties as may be prescribed by law. The provisions of section 1128A (other than subsections (a) 

and (b)) shall apply to a civil money penalty under this subparagraph in 

the same manner as such provisions apply to a penalty or proceeding under 

section 1128A(a).’’. 

(B) APPLICATION TO MA ORGANIZATIONS.—Section 1857(f)(3) of the Social 

Security Act (42 U.S.C. 1395w–27(f)(3)) is amended by adding at the end 

the following: 

‘‘(D) REPORTING REQUIREMENT RELATED TO REBATE FOR FULL-BENEFIT

DUAL ELIGIBLE MEDICARE DRUG PLAN ENROLLEES.—Section 1860D–12(b)(7).’’. 

(3) DEPOSIT OF REBATES INTO MEDICARE PRESCRIPTION DRUG ACCOUNT.—Section 1860D–16(c) of such Act (42 U.S.C. 1395w–116(c)) is amended by adding 

at the end the following new paragraph: 

‘‘(6) REBATE FOR FULL-BENEFIT DUAL ELIGIBLE MEDICARE DRUG PLAN ENROLLEES.—Amounts paid under a rebate agreement under section 1860D–2(f) shall 

be deposited into the Account and shall be used to pay for all or part of the 

gradual elimination of the coverage gap under section 1860D–2(b)(7).’’. 

SEC. 1182. DISCOUNTS FOR CERTAIN PART D DRUGS IN ORIGINAL COVERAGE GAP. 

Section 1860D–2 of the Social Security Act (42 U.S.C. 1395w–102), as amended 

by section 1181, is amended— 

(1) in subsection (b)(4)(C)(ii), by inserting ‘‘subject to subsection (g)(2)(C),’’ 

after ‘‘(ii)’’; 

(2) in subsection (e)(1), in the matter before subparagraph (A), by striking 

‘‘subsection (f)’’ and inserting ‘‘subsections (f) and (g)’’ after ‘‘this subsection’’; 

and 

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

‘‘(g) REQUIREMENT FOR MANUFACTURER DISCOUNT AGREEMENT FOR CERTAIN

QUALIFYING DRUGS.— 


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‘‘(1) IN GENERAL.—In this part, the term ‘covered part D drug’ does not include any drug or biologic that is manufactured by a manufacturer that has not 

entered into and have in effect for all qualifying drugs (as defined in paragraph 

(5)(A)) a discount agreement described in paragraph (2). 

‘‘(2) DISCOUNT AGREEMENT.— ‘‘(A) PERIODIC DISCOUNTS.—A discount agreement under this paragraph 

shall require the manufacturer involved to provide, to each PDP sponsor 

with respect to a prescription drug plan or each MA organization with respect to each MA–PD plan, a discount in an amount specified in paragraph 

(3) for qualifying drugs (as defined in paragraph (5)(A)) of the manufacturer 

dispensed to a qualifying enrollee after December 31, 2010, insofar as the 

individual is in the original gap in coverage (as defined in paragraph 

(5)(E)). 

‘‘(B) DISCOUNT AGREEMENT.—Insofar as not inconsistent with this subsection, the Secretary shall establish terms and conditions of such agreement, including terms and conditions relating to compliance, similar to the 

terms and conditions for rebate agreements under paragraphs (2), (3), and 

(4) of section 1927(b), except that— 

‘‘(i) discounts shall be applied under this subsection to prescription 

drug plans and MA–PD plans instead of State plans under title XIX; 

‘‘(ii) PDP sponsors and MA organizations shall be responsible, instead 

of States, for provision of necessary utilization information to drug 

manufacturers; and 

‘‘(iii) sponsors and MA organizations shall be responsible for reporting information on drug-component negotiated price, instead of other 

manufacturer prices. 

‘‘(C) COUNTING DISCOUNT TOWARD TRUE OUT-OF-POCKET COSTS.—Under 

the discount agreement, in applying subsection (b)(4), with regard to subparagraph (C)(i) of such subsection, if a qualified enrollee purchases the 

qualified drug insofar as the enrollee is in an actual gap of coverage (as defined in paragraph (5)(D)), the amount of the discount under the agreement 

shall be treated and counted as costs incurred by the plan enrollee. 

‘‘(3) DISCOUNT AMOUNT.—The amount of the discount specified in this paragraph for a discount period for a plan is equal to 50 percent of the amount of 

the drug-component negotiated price (as defined in paragraph (5)(C)) for qualifying drugs for the period involved. 

‘‘(4) ADDITIONAL TERMS.—In the case of a discount provided under this subsection with respect to a prescription drug plan offered by a PDP sponsor or an 

MA–PD plan offered by an MA organization, if a qualified enrollee purchases 

the qualified drug— 

‘‘(A) insofar as the enrollee is in an actual gap of coverage (as defined in 

paragraph (5)(D)), the sponsor or plan shall provide the discount to the enrollee at the time the enrollee pays for the drug; and 

‘‘(B) insofar as the enrollee is in the portion of the original gap in coverage (as defined in paragraph (5)(E)) that is not in the actual gap in coverage, the discount shall not be applied against the negotiated price (as defined in subsection (d)(1)(B)) for the purpose of calculating the beneficiary 

payment. 

‘‘(5) DEFINITIONS.—In this subsection: 

‘‘(A) QUALIFYING DRUG.—The term ‘qualifying drug’ means, with respect 

to a prescription drug plan or MA–PD plan, a drug or biological product 

that— 

‘‘(i)(I) is a drug produced or distributed under an original new drug 

application approved by the Food and Drug Administration, including 

a drug product marketed by any cross-licensed producers or distributors operating under the new drug application; 

‘‘(II) is a drug that was originally marketed under an original new 

drug application approved by the Food and Drug Administration; or 

‘‘(III) is a biological product as approved under Section 351(a) of the 

Public Health Services Act; 

‘‘(ii) is covered under the formulary of the plan; and 

‘‘(iii) is dispensed to an individual who is in the original gap in coverage. 

‘‘(B) QUALIFYING ENROLLEE.—The term ‘qualifying enrollee’ means an individual enrolled in a prescription drug plan or MA–PD plan other than 

such an individual who is a subsidy-eligible individual (as defined in section 

1860D–14(a)(3)). 

‘‘(C) DRUG-COMPONENT NEGOTIATED PRICE.—The term ‘drug-component 

negotiated price’ means, with respect to a qualifying drug, the negotiated 


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price (as defined in subsection (d)(1)(B)), as determined without regard to 

any dispensing fee, of the drug under the prescription drug plan or MA– 

PD plan involved. 

‘‘(D) ACTUAL GAP IN COVERAGE.—The term ‘actual gap in coverage’ means 

the gap in prescription drug coverage that occurs between the initial coverage limit (as modified under subparagraph (B) of subsection (b)(7)) and 

the annual out-of-pocket threshold (as modified under subparagraph (C) of 

such subsection). 

‘‘(E) ORIGINAL GAP IN COVERAGE.—The term ‘original in gap coverage’ 

means the gap in prescription drug coverage that would occur between the 

initial coverage limit (described in subsection (b)(3)) and the out-of-pocket 

threshold (as defined in subsection (b)(4))(B) if subsection (b)(7) did not 

apply.’’. 

SEC. 1183. REPEAL OF PROVISION RELATING TO SUBMISSION OF CLAIMS BY PHARMACIES LOCATED IN OR CONTRACTING WITH LONG-TERM CARE FACILITIES. 

(a) PART D SUBMISSION.—Section 1860D–12(b) of the Social Security Act (42 

U.S.C. 1395w–112(b)), as amended by section 172(a)(1) of Public Law 110–275, is 

amended by striking paragraph (5) and redesignating paragraph (6) and paragraph 

(7), as added by section 1181(b)(2), as paragraph (5) and paragraph (6), respectively. 

(b) SUBMISSION TO MA–PD PLANS.—Section 1857(f)(3) of the Social Security Act 

(42 U.S.C. 1395w-27(f)(3)), as added by section 171(b) of Public Law 110–275 and 

amended by section 172(a)(2) of such Public Law and section 1181 of this Act, is 

amended by striking subparagraph (B) and redesignating subparagraphs (C) and (D) 

as subparagraphs (B) and (C) respectively. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply for contract years beginning with 2010. 

SEC. 1184. INCLUDING COSTS INCURRED BY AIDS DRUG ASSISTANCE PROGRAMS AND INDIAN 

HEALTH SERVICE IN PROVIDING PRESCRIPTION DRUGS TOWARD THE ANNUAL 

OUT-OF-POCKET THRESHOLD UNDER PART D. 

(a) IN GENERAL.—Section 1860D–2(b)(4)(C) of the Social Security Act (42 U.S.C. 

1395w–102(b)(4)(C)) is amended— 

(1) in clause (i), by striking ‘‘and’’ at the end; 

(2) in clause (ii)— 

(A) by striking ‘‘such costs shall be treated as incurred only if’’ and inserting ‘‘subject to clause (iii), such costs shall be treated as incurred only if’’; 

(B) by striking ‘‘, under section 1860D–14, or under a State Pharmaceutical Assistance Program’’; and 

(C) by striking the period at the end and inserting ‘‘; and’’; and 

(3) by inserting after clause (ii) the following new clause: 

‘‘(iii) such costs shall be treated as incurred and shall not be considered to be reimbursed under clause (ii) if such costs are borne or paid— 

‘‘(I) under section 1860D–14; 

‘‘(II) under a State Pharmaceutical Assistance Program; 

‘‘(III) by the Indian Health Service, an Indian tribe or tribal organization, or an urban Indian organization (as defined in section 

4 of the Indian Health Care Improvement Act); or 

‘‘(IV) under an AIDS Drug Assistance Program under part B of 

title XXVI of the Public Health Service Act.’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to 

costs incurred on or after January 1, 2011. 

SEC. 1185. PERMITTING MID-YEAR CHANGES IN ENROLLMENT FOR FORMULARY CHANGES 

THAT ADVERSELY IMPACT AN ENROLLEE. 

(a) IN GENERAL.—Section 1860D–1(b)(3) of the Social Security Act (42 U.S.C. 

1395w–101(b)(3)) is amended by adding at the end the following new subparagraph: 

‘‘(F) CHANGE IN FORMULARY RESULTING IN INCREASE IN COST-SHARING.— 

‘‘(i) IN GENERAL.—Except as provided in clause (ii), in the case of an 

individual enrolled in a prescription drug plan (or MA–PD plan) who 

has been prescribed and is using a covered part D drug while so enrolled, if the formulary of the plan is materially changed (other than 

at the end of a contract year) so to reduce the coverage (or increase the 

cost-sharing) of the drug under the plan. 

‘‘(ii) EXCEPTION.—Clause (i) shall not apply in the case that a drug 

is removed from the formulary of a plan because of a recall or withdrawal of the drug issued by the Food and Drug Administration, because the drug is replaced with a generic drug that is a therapeutic 

equivalent, or because of utilization management applied to— 


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‘‘(I) a drug whose labeling includes a boxed warning required by 

the Food and Drug Administration under section 210.57(c)(1) of 

title 21, Code of Federal Regulations (or a successor regulation); or 

‘‘(II) a drug required under subsection (c)(2) of section 505–1 of 

the Federal Food, Drug, and Cosmetic Act to have a Risk Evaluation and Management Strategy that includes elements under subsection (f) of such section.’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to contract years beginning on or after January 1, 2011. 

Subtitle F—Medicare Rural Access Protections 

SEC. 1191. TELEHEALTH EXPANSION AND ENHANCEMENTS. . 

(a) ADDITIONAL TELEHEALTH SITE.— (1) IN GENERAL.—Paragraph (4)(C)(ii) of section 1834(m) of the Social Security 

Act (42 U.S.C. 1395m(m)) is amended by adding at the end the following new 

subclause: 

‘‘(IX) A renal dialysis facility.’’ 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to 

services furnished on or after January 1, 2011. 

(b) TELEHEALTH ADVISORY COMMITTEE.— (1) ESTABLISHMENT.—Section 1868 of the Social Security Act (42 U.S.C. 

1395ee) is amended— 

(A) in the heading, by adding at the end the following: ‘‘TELEHEALTH ADVI- SORY COMMITTEE’’; and 

(B) by adding at the end the following new subsection: 

‘‘(c) TELEHEALTH ADVISORY COMMITTEE.— ‘‘(1) IN GENERAL.—The Secretary shall appoint a Telehealth Advisory Committee (in this subsection referred to as the ‘Advisory Committee’) to make recommendations to the Secretary on policies of the Centers for Medicare & Medicaid Services regarding telehealth services as established under section 

1834(m), including the appropriate addition or deletion of services (and HCPCS 

codes) to those specified in paragraphs (4)(F)(i) and (4)(F)(ii) of such section and 

for authorized payment under paragraph (1) of such section. 

‘‘(2) MEMBERSHIP; TERMS.— ‘‘(A) MEMBERSHIP.— ‘‘(i) IN GENERAL.—The Advisory Committee shall be composed of 9 

members, to be appointed by the Secretary, of whom— 

‘‘(I) 5 shall be practicing physicians; 

‘‘(II) 2 shall be practicing non-physician health care practitioners; 

and 

‘‘(III) 2 shall be administrators of telehealth programs. 

‘‘(ii) REQUIREMENTS FOR APPOINTING MEMBERS.—In appointing members of the Advisory Committee, the Secretary shall— 

‘‘(I) ensure that each member has prior experience with the practice of telemedicine or telehealth; 

‘‘(II) give preference to individuals who are currently providing 

telemedicine or telehealth services or who are involved in telemedicine or telehealth programs; 

‘‘(III) ensure that the membership of the Advisory Committee 

represents a balance of specialties and geographic regions; and 

‘‘(IV) take into account the recommendations of stakeholders. 

‘‘(B) TERMS.—The members of the Advisory Committee shall serve for 

such term as the Secretary may specify. 

‘‘(C) CONFLICTS OF INTEREST.—An advisory committee member may not 

participate with respect to a particular matter considered in an advisory 

committee meeting if such member (or an immediate family member of 

such member) has a financial interest that could be affected by the advice 

given to the Secretary with respect to such matter. 

‘‘(3) MEETINGS.—The Advisory Committee shall meet twice each calendar year 

and at such other times as the Secretary may provide. 

‘‘(4) PERMANENT COMMITTEE.—Section 14 of the Federal Advisory Committee 

Act (5 U.S.C. App.) shall not apply to the Advisory Committee.’’ 

(2) FOLLOWING RECOMMENDATIONS.—Section 1834(m)(4)(F) of such Act (42 

U.S.C. 1395m(m)(4)(F)) is amended by adding at the end the following new 

clause: 

‘‘(iii) RECOMMENDATIONS OF THE TELEHEALTH ADVISORY COMMITTEE.— 

In making determinations under clauses (i) and (ii), the Secretary shall 


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take into account the recommendations of the Telehealth Advisory 

Committee (established under section 1868(c)) when adding or deleting 

services (and HCPCS codes) and in establishing policies of the Centers 

for Medicare & Medicaid Services regarding the delivery of telehealth 

services. If the Secretary does not implement such a recommendation, 

the Secretary shall publish in the Federal Register a statement regarding the reason such recommendation was not implemented.’’ 

(3) WAIVER OF ADMINISTRATIVE LIMITATION.—The Secretary of Health and 

Human Services shall establish the Telehealth Advisory Committee under the 

amendment made by paragraph (1) notwithstanding any limitation that may 

apply to the number of advisory committees that may be established (within the 

Department of Health and Human Services or otherwise). 

(c) CREDENTIALING TELEMEDICINE PRACTITIONERS.—Section 1834(m) of such Act 

(42 U.S.C. 1395m(m)) is amended by adding at the end the following new paragraph: 

‘‘(5) HOSPITAL CREDENTIALING OF TELEMEDICINE PRACTITIONERS.—A telemedicine practitioner that is credentialed by a hospital in compliance with the Joint 

Commission Standards for Telemedicine shall be considered in compliance with 

conditions of participation and reimbursement credentialing requirements 

under this title for telemedicine services.’’. 

SEC. 1192. EXTENSION OF OUTPATIENT HOLD HARMLESS PROVISION. 

Section 1833(t)(7)(D)(i) of the Social Security Act (42 U.S.C. 1395l(t)(7)(D)(i)) is 

amended— 

(1) in subclause (II)— 

(A) in the first sentence, by striking ‘‘‘2010’’ and inserting ‘‘2012’’; and 

(B) in the second sentence, by striking ‘‘or 2009’’ and inserting ‘‘, 2009, 

2010, or 2011’’; and 

(2) in subclause (III), by striking ‘‘January 1, 2010’’ and inserting ‘‘January 

1, 2012’’. 

SEC. 1193. EXTENSION OF SECTION 508 HOSPITAL RECLASSIFICATIONS. 

Subsection (a) of section 106 of division B of the Tax Relief and Health Care Act 

of 2006 (42 U.S.C. 1395 note), as amended by section 117 of the Medicare, Medicaid, 

and SCHIP Extension Act of 2007 (Public Law 110–173) and section 124 of the 

Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110– 

275), is amended by striking ‘‘September 30, 2009’’ and inserting ‘‘September 30, 

2011’’. 

SEC. 1194. EXTENSION OF GEOGRAPHIC FLOOR FOR WORK. 

Section 1848(e)(1)(E) of the Social Security Act (42 U.S.C. 1395w–4(e)(1)(E)) is 

amended by striking ‘‘before January 1, 2010’’ and inserting ‘‘before January 1, 

2012’’. 

SEC. 1195. EXTENSION OF PAYMENT FOR TECHNICAL COMPONENT OF CERTAIN PHYSICIAN 

PATHOLOGY SERVICES. 

Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits Improvement and 

Protection Act of 2000 (as enacted into law by section 1(a)(6) of Public Law 106– 

554), as amended by section 732 of the Medicare Prescription Drug, Improvement, 

and Modernization Act of 2003 (42 U.S.C. 1395w–4 note), section 104 of division B 

of the Tax Relief and Health Care Act of 2006 (42 U.S.C. 1395w–4 note), section 

104 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law 110– 

173), and section 136 of the Medicare Improvements for Patients and Providers Act 

of 1008 (Public Law 110–275), is amended by striking ‘‘and 2009’’ and inserting 

‘‘2009, 2010, and 2011’’. 

SEC. 1196. EXTENSION OF AMBULANCE ADD-ONS. 

(a) IN GENERAL.—Section 1834(l)(13) of the Social Security Act (42 U.S.C. 

1395m(l)(13)) is amended— 

(1) in subparagraph (A)— 

(A) in the matter preceding clause (i), by striking ‘‘before January 1, 

2010’’ and inserting ‘‘before January 1, 2012’’; and 

(B) in each of clauses (i) and (ii), by striking ‘‘before January 1, 2010’’ and 

inserting ‘‘before January 1, 2012’’. 

(b) AIR AMBULANCE IMPROVEMENTS.—Section 146(b)(1) of the Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110–275) is amended by 

striking ‘‘ending on December 31, 2009’’ and inserting ‘‘ending on December 31, 

2011’’. 


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TITLE II—MEDICARE BENEFICIARY 

IMPROVEMENTS 

Subtitle A—Improving and Simplifying Financial 

Assistance for Low Income Medicare Beneficiaries 

SEC. 1201. IMPROVING ASSETS TESTS FOR MEDICARE SAVINGS PROGRAM AND LOW-INCOME 

SUBSIDY PROGRAM. 

(a) APPLICATION OF HIGHEST LEVEL PERMITTED UNDER LIS TO ALL SUBSIDY ELIGI- BLE INDIVIDUALS.— (1) IN GENERAL.—Section 1860D–14(a)(1) of the Social Security Act (42 U.S.C. 

1395w–114(a)(1)) is amended in the matter before subparagraph (A), by inserting ‘‘(or, beginning with 2012, paragraph (3)(E))’’ after ‘‘paragraph (3)(D)’’. 

(2) ANNUAL INCREASE IN LIS RESOURCE TEST.—Section 1860D–14(a)(3)(E)(i) of 

such Act (42 U.S.C. 1395w–114(a)(3)(E)(i)) is amended— 

(A) by striking ‘‘and’’ at the end of subclause (I); 

(B) in subclause (II), by inserting ‘‘(before 2012)’’ after ‘‘subsequent year’’; 

(C) by striking the period at the end of subclause (II) and inserting a 

semicolon; 

(D) by inserting after subclause (II) the following new subclauses: ‘‘(III) for 2012, $17,000 (or $34,000 in the case of the combined 

value of the individual’s assets or resources and the assets or resources of the individual’s spouse); and 

‘‘(IV) for a subsequent year, the dollar amounts specified in this 

subclause (or subclause (III)) for the previous year increased by the 

annual percentage increase in the consumer price index (all items; 

U.S. city average) as of September of such previous year.’’; and 

(E) in the last sentence, by inserting ‘‘or (IV)’’ after ‘‘subclause (II)’’. 

(3) APPLICATION OF LIS TEST UNDER MEDICARE SAVINGS PROGRAM.—Section 

1905(p)(1)(C) of such Act (42 U.S.C. 1396d(p)(1)(C)) is amended— 

(A) by striking ‘‘effective beginning with January 1, 2010’’ and inserting 

‘‘effective for the period beginning with January 1, 2010, and ending with 

December 31, 2011’’; and 

(B) by inserting before the period at the end the following: ‘‘or, effective 

beginning with January 1, 2012, whose resources (as so determined) do not 

exceed the maximum resource level applied for the year under subparagraph (E) of section 1860D–14(a)(3) (determined without regard to the life 

insurance policy exclusion provided under subparagraph (G) of such section) 

applicable to an individual or to the individual and the individual’s spouse 

(as the case may be)’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to eligibility determinations for income-related subsidies and medicare cost-sharing furnished for periods beginning on or after January 1, 2012. 

SEC. 1202. ELIMINATION OF PART D COST-SHARING FOR CERTAIN NON-INSTITUTIONALIZED 

FULL-BENEFIT DUAL ELIGIBLE INDIVIDUALS. 

(a) IN GENERAL.—Section 1860D–14(a)(1)(D)(i) of the Social Security Act (42 

U.S.C. 1395w–114(a)(1)(D)(i)) is amended— 

(1) by striking ‘‘INSTITUTIONALIZED INDIVIDUALS.—In’’ and inserting ‘‘ELIMI- NATION OF COST-SHARING FOR CERTAIN FULL-BENEFIT DUAL ELIGIBLE INDIVID- UALS.— ‘‘(I) INSTITUTIONALIZED INDIVIDUALS.—In’’; and 

(2) by adding at the end the following new subclause: 

‘‘(II) CERTAIN OTHER INDIVIDUALS.—In the case of an individual 

who is a full-benefit dual eligible individual and with respect to 

whom there has been a determination that but for the provision of 

home and community based care (whether under section 1915, 

1932, or under a waiver under section 1115) the individual would 

require the level of care provided in a hospital or a nursing facility 

or intermediate care facility for the mentally retarded the cost of 

which could be reimbursed under the State plan under title XIX, 

the elimination of any beneficiary coinsurance described in section 

1860D–2(b)(2) (for all amounts through the total amount of expenditures at which benefits are available under section 1860D– 

2(b)(4)).’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to 

drugs dispensed on or after January 1, 2011. 


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SEC. 1203. ELIMINATING BARRIERS TO ENROLLMENT. 

(a) ADMINISTRATIVE VERIFICATION OF INCOME AND RESOURCES UNDER THE LOW- INCOME SUBSIDY PROGRAM.— (1) IN GENERAL.—Clause (iii) of section 1860D–14(a)(3)(E) of the Social Security Act (42 U.S.C. 1395w–114(a)(3)(E)) is amended to read as follows: 

‘‘(iii) CERTIFICATION OF INCOME AND RESOURCES.—For purposes of applying this section— 

‘‘(I) an individual shall be permitted to apply on the basis of selfcertification of income and resources; and 

‘‘(II) matters attested to in the application shall be subject to appropriate methods of verification without the need of the individual 

to provide additional documentation, except in extraordinary situations as determined by the Commissioner.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply beginning January 1, 2010. 

(b) DISCLOSURES TO FACILITATE IDENTIFICATION OF INDIVIDUALS LIKELY TO BE IN- ELIGIBLE FOR THE LOW-INCOME ASSISTANCE UNDER THE MEDICARE PRESCRIPTION

DRUG PROGRAM TO ASSIST SOCIAL SECURITY ADMINISTRATION’S OUTREACH TO ELIGI- BLE INDIVIDUALS.—For provision authorizing disclosure of return information to facilitate identification of individuals likely to be ineligible for low-income subsidies 

under Medicare prescription drug program, see section 1801. 

SEC. 1204. ENHANCED OVERSIGHT RELATING TO REIMBURSEMENTS FOR RETROACTIVE LOW 

INCOME SUBSIDY ENROLLMENT. 

(a) IN GENERAL.—In the case of a retroactive LIS enrollment beneficiary who is 

enrolled under a prescription drug plan under part D of title XVIII of the Social Security Act (or an MA–PD plan under part C of such title), the beneficiary (or any 

eligible third party) is entitled to reimbursement by the plan for covered drug costs 

incurred by the beneficiary during the retroactive coverage period of the beneficiary 

in accordance with subsection (b) and in the case of such a beneficiary described in 

subsection (c)(4)(A)(i), such reimbursement shall be made automatically by the plan 

upon receipt of appropriate notice the beneficiary is eligible for assistance described 

in such subsection (c)(4)(A)(i) without further information required to be filed with 

the plan by the beneficiary. 

(b) ADMINISTRATIVE REQUIREMENTS RELATING TO REIMBURSEMENTS.— (1) LINE-ITEM DESCRIPTION.—Each reimbursement made by a prescription 

drug plan or MA–PD plan under subsection (a) shall include a line-item description of the items for which the reimbursement is made. 

(2) TIMING OF REIMBURSEMENTS.—A prescription drug plan or MA–PD plan 

must make a reimbursement under subsection (a) to a retroactive LIS enrollment beneficiary, with respect to a claim, not later than 45 days after— 

(A) in the case of a beneficiary described in subsection (c)(4)(A)(i), the 

date on which the plan receives notice from the Secretary that the beneficiary is eligible for assistance described in such subsection; or 

(B) in the case of a beneficiary described in subsection (c)(4)(A)(ii), the 

date on which the beneficiary files the claim with the plan. 

(3) REPORTING REQUIREMENT.—For each month beginning with January 2011, 

each prescription drug plan and each MA–PD plan shall report to the Secretary 

the following: 

(A) The number of claims the plan has readjudicated during the month 

due to a beneficiary becoming retroactively eligible for subsidies available 

under section 1860D–14 of the Social Security Act. 

(B) The total value of the readjudicated claim amount for the month. 

(C) The Medicare Health Insurance Claims Number of beneficiaries for 

whom claims were readjudicated. 

(D) For the claims described in subparagraphs (A) and (B), an attestation 

to the Administrator of the Centers for Medicare & Medicaid Services of the 

total amount of reimbursement the plan has provided to beneficiaries for 

premiums and cost-sharing that the beneficiary overpaid for which the plan 

received payment from the Centers for Medicare & Medicaid Services. 

(c) DEFINITIONS.—For purposes of this section: 

(1) COVERED DRUG COSTS.—The term ‘‘covered drug costs’’ means, with respect 

to a retroactive LIS enrollment beneficiary enrolled under a prescription drug 

plan under part D of title XVIII of the Social Security Act (or an MA–PD plan 

under part C of such title), the amount by which— 

(A) the costs incurred by such beneficiary during the retroactive coverage 

period of the beneficiary for covered part D drugs, premiums, and cost-sharing under such title; exceeds 

(B) such costs that would have been incurred by such beneficiary during 

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nized by such plan as qualified during such period for the low income subsidy under section 1860D–14 of the Social Security Act to which the individual is entitled. 

(2) ELIGIBLE THIRD PARTY.—The term ‘‘eligible third party’’ means, with respect to a retroactive LIS enrollment beneficiary, an organization or other third 

party that is owed payment on behalf of such beneficiary for covered drug costs 

incurred by such beneficiary during the retroactive coverage period of such beneficiary. 

(3) RETROACTIVE COVERAGE PERIOD.—The term ‘‘retroactive coverage period’’ 

means— 

(A) with respect to a retroactive LIS enrollment beneficiary described in 

paragraph (4)(A)(i), the period— 

(i) beginning on the effective date of the assistance described in such 

paragraph for which the individual is eligible; and 

(ii) ending on the date the plan effectuates the status of such individual as so eligible; and 

(B) with respect to a retroactive LIS enrollment beneficiary described in 

paragraph (4)(A)(ii), the period— 

(i) beginning on the date the individual is both entitled to benefits 

under part A, or enrolled under part B, of title XVIII of the Social Security Act and eligible for medical assistance under a State plan under 

title XIX of such Act; and 

(ii) ending on the date the plan effectuates the status of such individual as a full-benefit dual eligible individual (as defined in section 

1935(c)(6) of such Act). 

(4) RETROACTIVE LIS ENROLLMENT BENEFICIARY.— 

(A) IN GENERAL.—The term ‘‘retroactive LIS enrollment beneficiary’’ 

means an individual who— 

(i) is enrolled in a prescription drug plan under part D of title XVIII 

of the Social Security Act (or an MA–PD plan under part C of such 

title) and subsequently becomes eligible as a full-benefit dual eligible 

individual (as defined in section 1935(c)(6) of such Act), an individual 

receiving a low-income subsidy under section 1860D–14 of such Act, an 

individual receiving assistance under the Medicare Savings Program 

implemented under clauses (i), (iii), and (iv) of section 1902(a)(10)(E) of 

such Act, or an individual receiving assistance under the supplemental 

security income program under section 1611 of such Act; or 

(ii) subject to subparagraph (B)(i), is a full-benefit dual eligible individual (as defined in section 1935(c)(6) of such Act) who is automatically enrolled in such a plan under section 1860D–1(b)(1)(C) of such 

Act. 

(B) EXCEPTION FOR BENEFICIARIES ENROLLED IN RFP PLAN.— 

(i) IN GENERAL.—In no case shall an individual described in subparagraph (A)(ii) include an individual who is enrolled, pursuant to a RFP 

contract described in clause (ii), in a prescription drug plan offered by 

the sponsor of such plan awarded such contract. 

(ii) RFP CONTRACT DESCRIBED.—The RFP contract described in this 

section is a contract entered into between the Secretary and a sponsor 

of a prescription drug plan pursuant to the Centers for Medicare & 

Medicaid Services’ request for proposals issued on February 17, 2009, 

relating to Medicare part D retroactive coverage for certain low income 

beneficiaries, or a similar subsequent request for proposals. 

SEC. 1205. INTELLIGENT ASSIGNMENT IN ENROLLMENT. 

(a) IN GENERAL.—Section 1860D–1(b)(1)(C) of the Social Security Act (42 U.S.C. 

1395w–101(b)(1)(C)) is amended by adding after ‘‘PDP region’’ the following: ‘‘or 

through use of an intelligent assignment process that is designed to maximize the 

access of such individual to necessary prescription drugs while minimizing costs to 

such individual and to the program under this part to the greatest extent possible. 

In the case the Secretary enrolls such individuals through use of an intelligent assignment process, such process shall take into account the extent to which prescription drugs necessary for the individual are covered in the case of a PDP sponsor 

of a prescription drug plan that uses a formulary, the use of prior authorization or 

other restrictions on access to coverage of such prescription drugs by such a sponsor, 

and the overall quality of a prescription drug plan as measured by quality ratings 

established by the Secretary’’ 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall take effect for 

contract years beginning with 2012. 


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SEC. 1206. SPECIAL ENROLLMENT PERIOD AND AUTOMATIC ENROLLMENT PROCESS FOR 

CERTAIN SUBSIDY ELIGIBLE INDIVIDUALS. 

(a) SPECIAL ENROLLMENT PERIOD.—Section 1860D–1(b)(3)(D) of the Social Security Act (42 U.S.C. 1395w–101(b)(3)(D)) is amended to read as follows: 

‘‘(D) SUBSIDY ELIGIBLE INDIVIDUALS.—In the case of an individual (as determined by the Secretary) who is determined under subparagraph (B) of 

section 1860D–14(a)(3) to be a subsidy eligible individual.’’. 

(b) AUTOMATIC ENROLLMENT.—Section 1860D–1(b)(1) of the Social Security Act 

(42 U.S.C. 1395w–101(b)(1)) is amended by adding at the end the following new subparagraph: 

‘‘(D) SPECIAL RULE FOR SUBSIDY ELIGIBLE INDIVIDUALS.—The process established under subparagraph (A) shall include, in the case of an individual 

described in section 1860D–1(b)(3)(D) who fails to enroll in a prescription 

drug plan or an MA–PD plan during the special enrollment established 

under such section applicable to such individual, the application of the assignment process described in subparagraph (C) to such individual in the 

same manner as such assignment process applies to a part D eligible individual described in such subparagraph (C). Nothing in the previous sentence shall prevent an individual described in such sentence from declining 

enrollment in a plan determined appropriate by the Secretary (or in the 

program under this part) or from changing such enrollment.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to subsidy determinations made for months beginning with January 2011. 

SEC. 1207. APPLICATION OF MA PREMIUMS PRIOR TO REBATE IN CALCULATION OF LOW INCOME SUBSIDY BENCHMARK. 

(a) IN GENERAL.—Section 1860D–14(b)(2)(B)(iii) of the Social Security Act (42 

U.S.C. 1395w–114(b)(2)(B)(iii)) is amended by inserting before the period the following: ‘‘before the application of the monthly rebate computed under section 

1854(b)(1)(C)(i) for that plan and year involved’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to subsidy determinations made for months beginning with January 2011. 

Subtitle B—Reducing Health Disparities 

SEC. 1221. ENSURING EFFECTIVE COMMUNICATION IN MEDICARE. 

(a) ENSURING EFFECTIVE COMMUNICATION BY THE CENTERS FOR MEDICARE & 

MEDICAID SERVICES.— 

(1) STUDY ON MEDICARE PAYMENTS FOR LANGUAGE SERVICES.—The Secretary 

of Health and Human Services shall conduct a study that examines the extent 

to which Medicare service providers utilize, offer, or make available language 

services for beneficiaries who are limited English proficient and ways that 

Medicare should develop payment systems for language services. 

(2) ANALYSES.—The study shall include an analysis of each of the following: 

(A) How to develop and structure appropriate payment systems for language services for all Medicare service providers. 

(B) The feasibility of adopting a payment methodology for on-site interpreters, including interpreters who work as independent contractors and interpreters who work for agencies that provide on-site interpretation, pursuant to which such interpreters could directly bill Medicare for services provided in support of physician office services for an LEP Medicare patient. 

(C) The feasibility of Medicare contracting directly with agencies that provide off-site interpretation including telephonic and video interpretation 

pursuant to which such contractors could directly bill Medicare for the services provided in support of physician office services for an LEP Medicare 

patient. 

(D) The feasibility of modifying the existing Medicare resource-based relative value scale (RBRVS) by using adjustments (such as multipliers or 

add-ons) when a patient is LEP. 

(E) How each of options described in a previous paragraph would be funded and how such funding would affect physician payments, a physician’s 

practice, and beneficiary cost-sharing. 

(F) The extent to which providers under parts A and B of title XVIII of 

the Social Security Act, MA organizations offering Medicare Advantage 

plans under part C of such title and PDP sponsors of a prescription drug 

plan under part D of such title utilize, offer, or make available language 

services for beneficiaries with limited English proficiency. 


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(G) The nature and type of language services provided by States under 

title XIX of the Social Security Act and the extent to which such services 

could be utilized by beneficiaries and providers under title XVIII of such 

Act. 

(3) VARIATION IN PAYMENT SYSTEM DESCRIBED.—The payment systems described in paragraph (2)(A) may allow variations based upon types of service 

providers, available delivery methods, and costs for providing language services 

including such factors as— 

(A) the type of language services provided (such as provision of health 

care or health care related services directly in a non-English language by 

a bilingual provider or use of an interpreter); 

(B) type of interpretation services provided (such as in-person, telephonic, 

video interpretation); 

(C) the methods and costs of providing language services (including the 

costs of providing language services with internal staff or through contract 

with external independent contractors or agencies, or both); 

(D) providing services for languages not frequently encountered in the 

United States; and 

(E) providing services in rural areas. 

(4) REPORT.—The Secretary shall submit a report on the study conducted 

under subsection (a) to appropriate committees of Congress not later than 12 

months after the date of the enactment of this Act. 

(5) EXEMPTION FROM PAPERWORK REDUCTION ACT.—Chapter 35 of title 44, 

United States Code (commonly known as the ‘‘Paperwork Reduction Act’’ ), shall 

not apply for purposes of carrying out this subsection. 

(6) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to carry out this subsection such sums as are necessary. 

(b) HEALTH PLANS.—Section 1857(g)(1) of the Social Security Act (42 U.S.C. 

1395w–27(g)(1)) is amended— 

(1) by striking ‘‘or’’ at the end of subparagraph (F); 

(2) by adding ‘‘or’’ at the end of subparagraph (G); and 

(3) by inserting after subparagraph (G) the following new subparagraph: 

‘‘(H) fails substantially to provide language services to limited English 

proficient beneficiaries enrolled in the plan that are required under law;’’. 

SEC. 1222. DEMONSTRATION TO PROMOTE ACCESS FOR MEDICARE BENEFICIARIES WITH LIMITED ENGLISH PROFICIENCY BY PROVIDING REIMBURSEMENT FOR CULTURALLY 

AND LINGUISTICALLY APPROPRIATE SERVICES. 

(a) IN GENERAL.—Not later than 6 months after the date of the completion of the 

study described in section 1221(a), the Secretary, acting through the Centers for 

Medicare & Medicaid Services, shall carry out a demonstration program under 

which the Secretary shall award not fewer than 24 3-year grants to eligible Medicare service providers (as described in subsection (b)(1)) to improve effective communication between such providers and Medicare beneficiaries who are living in communities where racial and ethnic minorities, including populations that face language barriers, are underserved with respect to such services. In designing and carrying out the demonstration the Secretary shall take into consideration the results 

of the study conducted under section 1221(a) and adjust, as appropriate, the distribution of grants so as to better target Medicare beneficiaries who are in the greatest need of language services. The Secretary shall not authorize a grant larger than 

$500,000 over three years for any grantee. 

(b) ELIGIBILITY; PRIORITY.— 

(1) ELIGIBILITY.—To be eligible to receive a grant under subsection (a) an entity shall— 

(A) be— 

(i) a provider of services under part A of title XVIII of the Social Security Act; 

(ii) a service provider under part B of such title; 

(iii) a part C organization offering a Medicare part C plan under part 

C of such title; or 

(iv) a PDP sponsor of a prescription drug plan under part D of such 

title; and 

(B) prepare and submit to the Secretary an application, at such time, in 

such manner, and accompanied by such additional information as the Secretary may require. 

(2) PRIORITY.— 

(A) DISTRIBUTION.—To the extent feasible, in awarding grants under this 

section, the Secretary shall award— 

(i) at least 6 grants to providers of services described in paragraph 

(1)(A)(i); 


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(ii) at least 6 grants to service providers described in paragraph 

(1)(A)(ii); 

(iii) at least 6 grants to organizations described in paragraph 

(1)(A)(iii); and 

(iv) at least 6 grants to sponsors described in paragraph (1)(A)(iv). 

(B) FOR COMMUNITY ORGANIZATIONS.—The Secretary shall give priority to 

applicants that have developed partnerships with community organizations 

or with agencies with experience in language access. 

(C) VARIATION IN GRANTEES.—The Secretary shall also ensure that the 

grantees under this section represent, among other factors, variations in— 

(i) different types of language services provided and of service providers and organizations under parts A through D of title XVIII of the 

Social Security Act; 

(ii) languages needed and their frequency of use; 

(iii) urban and rural settings; 

(iv) at least two geographic regions, as defined by the Secretary; and 

(v) at least two large metropolitan statistical areas with diverse populations. 

(c) USE OF FUNDS.— (1) IN GENERAL.—A grantee shall use grant funds received under this section 

to pay for the provision of competent language services to Medicare beneficiaries 

who are limited English proficient. Competent interpreter services may be provided through on-site interpretation, telephonic interpretation, or video interpretation or direct provision of health care or health care related services by a 

bilingual health care provider. A grantee may use bilingual providers, staff, or 

contract interpreters. A grantee may use grant funds to pay for competent 

translation services. A grantee may use up to 10 percent of the grant funds to 

pay for administrative costs associated with the provision of competent language services and for reporting required under subsection (e). 

(2) ORGANIZATIONS.—Grantees that are part C organizations or PDP sponsors 

must ensure that their network providers receive at least 50 percent of the 

grant funds to pay for the provision of competent language services to Medicare 

beneficiaries who are limited English proficient, including physicians and pharmacies. 

(3) DETERMINATION OF PAYMENTS FOR LANGUAGE SERVICES.—Payments to 

grantees shall be calculated based on the estimated numbers of limited English 

proficient Medicare beneficiaries in a grantee’s service area utilizing— 

(A) data on the numbers of limited English proficient individuals who 

speak English less than ‘‘very well’’ from the most recently available data 

from the Bureau of the Census or other State-based study the Secretary determines likely to yield accurate data regarding the number of such individuals served by the grantee; or 

(B) the grantee’s own data if the grantee routinely collects data on Medicare beneficiaries’ primary language in a manner determined by the Secretary to yield accurate data and such data shows greater numbers of limited English proficient individuals than the data listed in subparagraph (A). 

(4) LIMITATIONS.— 

(A) REPORTING.—Payments shall only be provided under this section to 

grantees that report their costs of providing language services as required 

under subsection (e) and may be modified annually at the discretion of the 

Secretary. If a grantee fails to provide the reports under such section for 

the first year of a grant, the Secretary may terminate the grant and solicit 

applications from new grantees to participate in the subsequent two years 

of the demonstration program. 

(B) TYPE OF SERVICES.— 

(i) IN GENERAL.—Subject to clause (ii), payments shall be provided 

under this section only to grantees that utilize competent bilingual 

staff or competent interpreter or translation services which— 

(I) if the grantee operates in a State that has statewide health 

care interpreter standards, meet the State standards currently in 

effect; or 

(II) if the grantee operates in a State that does not have statewide health care interpreter standards, utilizes competent interpreters who follow the National Council on Interpreting in Health 

Care’s Code of Ethics and Standards of Practice. 

(ii) EXEMPTIONS.—The requirements of clause (i) shall not apply— 

(I) in the case of a Medicare beneficiary who is limited English 

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ices) and who requests the use of family, friends, or other persons 

untrained in interpretation or translation and the grantee documents the request in the beneficiary’s record; and 

(II) in the case of a medical emergency where the delay directly 

associated with obtaining a competent interpreter or translation 

services would jeopardize the health of the patient. 

Nothing in clause (ii)(II) shall be construed to exempt emergency rooms 

or similar entities that regularly provide health care services in medical emergencies from having in place systems to provide competent interpreter and translation services without undue delay. 

(d) ASSURANCES.—Grantees under this section shall— 

(1) ensure that appropriate clinical and support staff receive ongoing education and training in linguistically appropriate service delivery; 

(2) ensure the linguistic competence of bilingual providers; 

(3) offer and provide appropriate language services at no additional charge to 

each patient with limited English proficiency at all points of contact, in a timely 

manner during all hours of operation; 

(4) notify Medicare beneficiaries of their right to receive language services in 

their primary language; 

(5) post signage in the languages of the commonly encountered group or 

groups present in the service area of the organization; and 

(6) ensure that— 

(A) primary language data are collected for recipients of language services; and 

(B) consistent with the privacy protections provided under the regulations 

promulgated pursuant to section 264(c) of the Health Insurance Portability 

and Accountability Act of 1996 (42 U.S.C. 1320d–2 note), if the recipient of 

language services is a minor or is incapacitated, the primary language of 

the parent or legal guardian is collected and utilized. 

(e) REPORTING REQUIREMENTS.—Grantees under this section shall provide the Secretary with reports at the conclusion of the each year of a grant under this section. 

Each report shall include at least the following information: 

(1) The number of Medicare beneficiaries to whom language services are provided. 

(2) The languages of those Medicare beneficiaries. 

(3) The types of language services provided (such as provision of services directly in non-English language by a bilingual health care provider or use of an 

interpreter). 

(4) Type of interpretation (such as in-person, telephonic, or video interpretation). 

(5) The methods of providing language services (such as staff or contract with 

external independent contractors or agencies). 

(6) The length of time for each interpretation encounter. 

(7) The costs of providing language services (which may be actual or estimated, as determined by the Secretary). 

(f) NO COST SHARING.—Limited English proficient Medicare beneficiaries shall not 

have to pay cost-sharing or co-pays for language services provided through this demonstration program. 

(g) EVALUATION AND REPORT.—The Secretary shall conduct an evaluation of the 

demonstration program under this section and shall submit to the appropriate committees of Congress a report not later than 1 year after the completion of the program. The report shall include the following: 

(1) An analysis of the patient outcomes and costs of furnishing care to the 

limited English proficient Medicare beneficiaries participating in the project as 

compared to such outcomes and costs for limited English proficient Medicare 

beneficiaries not participating. 

(2) The effect of delivering culturally and linguistically appropriate services 

on beneficiary access to care, utilization of services, efficiency and cost-effectiveness of health care delivery, patient satisfaction, and select health outcomes. 

(3) Recommendations, if any, regarding the extension of such project to the 

entire Medicare program. 

(h) GENERAL PROVISIONS.—Nothing in this section shall be construed to limit otherwise existing obligations of recipients of Federal financial assistance under title 

VI of the Civil Rights Act of 1964 (42 U.S.C. 2000(d) et seq.) or any other statute. 

(i) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated 

to carry out this section $16,000,000 for each fiscal year of the demonstration program. 


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SEC. 1223. IOM REPORT ON IMPACT OF LANGUAGE ACCESS SERVICES. 

(a) IN GENERAL.—The Secretary of Health and Human Services shall enter into 

an arrangement with the Institute of Medicine under which the Institute will prepare and publish, not later than 3 years after the date of the enactment of this Act, 

a report on the impact of language access services on the health and health care 

of limited English proficient populations. 

(b) CONTENTS.—Such report shall include— 

(1) recommendations on the development and implementation of policies and 

practices by health care organizations and providers for limited English proficient patient populations; 

(2) a description of the effect of providing language access services on quality 

of health care and access to care and reduced medical error; and 

(3) a description of the costs associated with or savings related to provision 

of language access services. 

SEC. 1224. DEFINITIONS. 

In this subtitle: 

(1) BILINGUAL.—The term ‘‘bilingual’’ with respect to an individual means a 

person who has sufficient degree of proficiency in two languages and can ensure 

effective communication can occur in both languages. 

(2) COMPETENT INTERPRETER SERVICES.—The term ‘‘competent interpreter 

services’’ means a trans-language rendition of a spoken message in which the 

interpreter comprehends the source language and can speak comprehensively in 

the target language to convey the meaning intended in the source language. 

The interpreter knows health and health-related terminology and provides accurate interpretations by choosing equivalent expressions that convey the best 

matching and meaning to the source language and captures, to the greatest possible extent, all nuances intended in the source message. 

(3) COMPETENT TRANSLATION SERVICES.—The term ‘‘competent translation 

services’’ means a trans-language rendition of a written document in which the 

translator comprehends the source language and can write comprehensively in 

the target language to convey the meaning intended in the source language. 

The translator knows health and health-related terminology and provides accurate translations by choosing equivalent expressions that convey the best 

matching and meaning to the source language and captures, to the greatest possible extent, all nuances intended in the source document. 

(4) EFFECTIVE COMMUNICATION.—The term ‘‘effective communication’’ means 

an exchange of information between the provider of health care or health carerelated services and the limited English proficient recipient of such services 

that enables limited English proficient individuals to access, understand, and 

benefit from health care or health care-related services. 

(5) INTERPRETING/INTERPRETATION.—The terms ‘‘interpreting’’ and ‘‘interpretation’’ mean the transmission of a spoken message from one language into another, faithfully, accurately, and objectively. 

(6) HEALTH CARE SERVICES.—The term ‘‘health care services’’ means services 

that address physical as well as mental health conditions in all care settings. 

(7) HEALTH CARE-RELATED SERVICES.—The term ‘‘health care-related services’’ 

means human or social services programs or activities that provide access, referrals or links to health care. 

(8) LANGUAGE ACCESS.—The term ‘‘language access’’ means the provision of 

language services to an LEP individual designed to enhance that individual’s 

access to, understanding of or benefit from health care or health care-related 

services. 

(9) LANGUAGE SERVICES.—The term ‘‘language services’’ means provision of 

health care services directly in a non-English language, interpretation, translation, and non-English signage. 

(10) LIMITED ENGLISH PROFICIENT.—The term ‘‘limited English proficient’’ or 

‘‘LEP’’ with respect to an individual means an individual who speaks a primary 

language other than English and who cannot speak, read, write or understand 

the English language at a level that permits the individual to effectively communicate with clinical or nonclinical staff at an entity providing health care or 

health care related services. 

(11) MEDICARE BENEFICIARY.—The term ‘‘Medicare beneficiary’’ means an individual entitled to benefits under part A of title XVIII of the Social Security 

Act or enrolled under part B of such title. 

(12) MEDICARE PROGRAM.—The term ‘‘Medicare program’’ means the programs 

under parts A through D of title XVIII of the Social Security Act. 


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(13) SERVICE PROVIDER.—The term ‘‘service provider’’ includes all suppliers, 

providers of services, or entities under contract to provide coverage, items or 

services under any part of title XVIII of the Social Security Act. 

Subtitle C—Miscellaneous Improvements 

SEC. 1231. EXTENSION OF THERAPY CAPS EXCEPTIONS PROCESS. 

Section 1833(g)(5) of the Social Security Act (42 U.S.C. 1395l(g)(5)), as amended 

by section 141 of the Medicare Improvements for Patients and Providers Act of 2008 

(Public Law 110–275), is amended by striking ‘‘December 31, 2009’’ and inserting 

‘‘December 31, 2011’’. 

SEC. 1232. EXTENDED MONTHS OF COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR KIDNEY 

TRANSPLANT PATIENTS AND OTHER RENAL DIALYSIS PROVISIONS. 

(a) PROVISION OF APPROPRIATE COVERAGE OF IMMUNOSUPPRESSIVE DRUGS UNDER

THE MEDICARE PROGRAM FOR KIDNEY TRANSPLANT RECIPIENTS.— (1) CONTINUED ENTITLEMENT TO IMMUNOSUPPRESSIVE DRUGS.— (A) KIDNEY TRANSPLANT RECIPIENTS.—Section 226A(b)(2) of the Social Security Act (42 U.S.C. 426–1(b)(2)) is amended by inserting ‘‘(except for coverage of immunosuppressive drugs under section 1861(s)(2)(J))’’ before ‘‘, 

with the thirty-sixth month’’. 

(B) APPLICATION.—Section 1836 of such Act (42 U.S.C. 1395o) is amended— 

(i) by striking ‘‘Every individual who’’ and inserting ‘‘(a) IN GENERAL.—Every individual who’’; and 

(ii) by adding at the end the following new subsection: 

‘‘(b) SPECIAL RULES APPLICABLE TO INDIVIDUALS ONLY ELIGIBLE FOR COVERAGE OF

IMMUNOSUPPRESSIVE DRUGS.— 

‘‘(1) IN GENERAL.—In the case of an individual whose eligibility for benefits 

under this title has ended on or after January 1, 2012, except for the coverage 

of immunosuppressive drugs by reason of section 226A(b)(2), the following rules 

shall apply: 

‘‘(A) The individual shall be deemed to be enrolled under this part for 

purposes of receiving coverage of such drugs. 

‘‘(B) The individual shall be responsible for providing for payment of the 

portion of the premium under section 1839 which is not covered under the 

Medicare savings program (as defined in section 1144(c)(7)) in order to receive such coverage. 

‘‘(C) The provision of such drugs shall be subject to the application of— 

‘‘(i) the deductible under section 1833(b); and 

‘‘(ii) the coinsurance amount applicable for such drugs (as determined 

under this part). 

‘‘(D) If the individual is an inpatient of a hospital or other entity, the individual is entitled to receive coverage of such drugs under this part. 

‘‘(2) ESTABLISHMENT OF PROCEDURES IN ORDER TO IMPLEMENT COVERAGE.— 

The Secretary shall establish procedures for— 

‘‘(A) identifying individuals that are entitled to coverage of immunosuppressive drugs by reason of section 226A(b)(2); and 

‘‘(B) distinguishing such individuals from individuals that are enrolled 

under this part for the complete package of benefits under this part.’’. 

(C) TECHNICAL AMENDMENT TO CORRECT DUPLICATE SUBSECTION DESIGNATION.—Subsection (c) of section 226A of such Act (42 U.S.C. 426–1), as 

added by section 201(a)(3)(D)(ii) of the Social Security Independence and 

Program Improvements Act of 1994 (Public Law 103–296; 108 Stat. 1497), 

is redesignated as subsection (d). 

(2) EXTENSION OF SECONDARY PAYER REQUIREMENTS FOR ESRD BENEFICIARIES.—Section 1862(b)(1)(C) of such Act (42 U.S.C. 1395y(b)(1)(C)) is 

amended by adding at the end the following new sentence: ‘‘With regard to immunosuppressive drugs furnished on or after the date of the enactment of the 

America’s Affordable Health Choices Act of 2009, this subparagraph shall be applied without regard to any time limitation.’’. 

(b) MEDICARE COVERAGE FOR ESRD PATIENTS.—Section 1881 of such Act is further amended— 

(1) in subsection (b)(14)(B)(iii), by inserting ‘‘, including oral drugs that are 

not the oral equivalent of an intravenous drug (such as oral phosphate binders 

and calcimimetics),’’ after ‘‘other drugs and biologicals’’; 

(2) in subsection (b)(14)(E)(ii)— 

(A) in the first sentence— 


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(i) by striking ‘‘a one-time election to be excluded from the phase-in’’ 

and inserting ‘‘an election, with respect to 2011, 2012, or 2013, to be 

excluded from the phase-in (or the remainder of the phase-in)’’; and 

(ii) by adding before the period at the end the following: ‘‘for such 

year and for each subsequent year during the phase-in described in 

clause (i)’’; and 

(B) in the second sentence— 

(i) by striking ‘‘January 1, 2011’’ and inserting ‘‘the first date of such 

year’’; and 

(ii) by inserting ‘‘and at a time’’ after ‘‘form and manner’’; and 

(3) in subsection (h)(4)(E), by striking ‘‘lesser’’ and inserting ‘‘greater’’. 

SEC. 1233. ADVANCE CARE PLANNING CONSULTATION. 

(a) MEDICARE.— (1) IN GENERAL.—Section 1861 of the Social Security Act (42 U.S.C. 1395x) 

is amended— 

(A) in subsection (s)(2)— 

(i) by striking ‘‘and’’ at the end of subparagraph (DD); 

(ii) by adding ‘‘and’’ at the end of subparagraph (EE); and 

(iii) by adding at the end the following new subparagraph: 

‘‘(FF) advance care planning consultation (as defined in subsection (hhh)(1));’’; 

and 

(B) by adding at the end the following new subsection: 

‘‘Advance Care Planning Consultation 

‘‘(hhh)(1) Subject to paragraphs (3) and (4), the term ‘advance care planning consultation’ means a consultation between the individual and a practitioner described 

in paragraph (2) regarding advance care planning, if, subject to paragraph (3), the 

individual involved has not had such a consultation within the last 5 years. Such 

consultation shall include the following: 

‘‘(A) An explanation by the practitioner of advance care planning, including 

key questions and considerations, important steps, and suggested people to talk 

to. 

‘‘(B) An explanation by the practitioner of advance directives, including living 

wills and durable powers of attorney, and their uses. 

‘‘(C) An explanation by the practitioner of the role and responsibilities of a 

health care proxy. 

‘‘(D) The provision by the practitioner of a list of national and State-specific 

resources to assist consumers and their families with advance care planning, including the national toll-free hotline, the advance care planning clearinghouses, 

and State legal service organizations (including those funded through the Older 

Americans Act of 1965). 

‘‘(E) An explanation by the practitioner of the continuum of end-of-life services 

and supports available, including palliative care and hospice, and benefits for 

such services and supports that are available under this title. 

‘‘(F)(i) Subject to clause (ii), an explanation of orders regarding life sustaining 

treatment or similar orders, which shall include— 

‘‘(I) the reasons why the development of such an order is beneficial to the 

individual and the individual’s family and the reasons why such an order 

should be updated periodically as the health of the individual changes; 

‘‘(II) the information needed for an individual or legal surrogate to make 

informed decisions regarding the completion of such an order; and 

‘‘(III) the identification of resources that an individual may use to determine the requirements of the State in which such individual resides so that 

the treatment wishes of that individual will be carried out if the individual 

is unable to communicate those wishes, including requirements regarding 

the designation of a surrogate decisionmaker (also known as a health care 

proxy). 

‘‘(ii) The Secretary shall limit the requirement for explanations under clause 

(i) to consultations furnished in a State— 

‘‘(I) in which all legal barriers have been addressed for enabling orders 

for life sustaining treatment to constitute a set of medical orders respected 

across all care settings; and 

‘‘(II) that has in effect a program for orders for life sustaining treatment 

described in clause (iii). 

‘‘(iii) A program for orders for life sustaining treatment for a States described 

in this clause is a program that— 

‘‘(I) ensures such orders are standardized and uniquely identifiable 

throughout the State; 


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‘‘(II) distributes or makes accessible such orders to physicians and other 

health professionals that (acting within the scope of the professional’s authority under State law) may sign orders for life sustaining treatment; 

‘‘(III) provides training for health care professionals across the continuum 

of care about the goals and use of orders for life sustaining treatment; and 

‘‘(IV) is guided by a coalition of stakeholders includes representatives 

from emergency medical services, emergency department physicians or 

nurses, state long-term care association, state medical association, state 

surveyors, agency responsible for senior services, state department of 

health, state hospital association, home health association, state bar association, and state hospice association. 

‘‘(2) A practitioner described in this paragraph is— 

‘‘(A) a physician (as defined in subsection (r)(1)); and 

‘‘(B) a nurse practitioner or physician assistant who has the authority under 

State law to sign orders for life sustaining treatments. 

‘‘(3)(A) An initial preventive physical examination under subsection (WW), including any related discussion during such examination, shall not be considered an advance care planning consultation for purposes of applying the 5-year limitation 

under paragraph (1). 

‘‘(B) An advance care planning consultation with respect to an individual may be 

conducted more frequently than provided under paragraph (1) if there is a significant change in the health condition of the individual, including diagnosis of a chronic, progressive, life-limiting disease, a life-threatening or terminal diagnosis or lifethreatening injury, or upon admission to a skilled nursing facility, a long-term care 

facility (as defined by the Secretary), or a hospice program. 

‘‘(4) A consultation under this subsection may include the formulation of an order 

regarding life sustaining treatment or a similar order. 

‘‘(5)(A) For purposes of this section, the term ‘order regarding life sustaining treatment’ means, with respect to an individual, an actionable medical order relating to 

the treatment of that individual that— 

‘‘(i) is signed and dated by a physician (as defined in subsection (r)(1)) or another health care professional (as specified by the Secretary and who is acting 

within the scope of the professional’s authority under State law in signing such 

an order, including a nurse practitioner or physician assistant) and is in a form 

that permits it to stay with the individual and be followed by health care professionals and providers across the continuum of care; 

‘‘(ii) effectively communicates the individual’s preferences regarding life sustaining treatment, including an indication of the treatment and care desired by 

the individual; 

‘‘(iii) is uniquely identifiable and standardized within a given locality, region, 

or State (as identified by the Secretary); and 

‘‘(iv) may incorporate any advance directive (as defined in section 1866(f)(3)) 

if executed by the individual. 

‘‘(B) The level of treatment indicated under subparagraph (A)(ii) may range from 

an indication for full treatment to an indication to limit some or all or specified 

interventions. Such indicated levels of treatment may include indications respecting, 

among other items— 

‘‘(i) the intensity of medical intervention if the patient is pulse less, apneic, 

or has serious cardiac or pulmonary problems; 

‘‘(ii) the individual’s desire regarding transfer to a hospital or remaining at 

the current care setting; 

‘‘(iii) the use of antibiotics; and 

‘‘(iv) the use of artificially administered nutrition and hydration.’’. 

(2) PAYMENT.—Section 1848(j)(3) of such Act (42 U.S.C. 1395w-4(j)(3)) is 

amended by inserting ‘‘(2)(FF),’’ after ‘‘(2)(EE),’’. 

(3) FREQUENCY LIMITATION.—Section 1862(a) of such Act (42 U.S.C. 1395y(a)) 

is amended— 

(A) in paragraph (1)— 

(i) in subparagraph (N), by striking ‘‘and’’ at the end; 

(ii) in subparagraph (O) by striking the semicolon at the end and inserting ‘‘, and’’; and 

(iii) by adding at the end the following new subparagraph: 

‘‘(P) in the case of advance care planning consultations (as defined in section 1861(hhh)(1)), which are performed more frequently than is covered 

under such section;’’; and 

(B) in paragraph (7), by striking ‘‘or (K)’’ and inserting ‘‘(K), or (P)’’. 

(4) EFFECTIVE DATE.—The amendments made by this subsection shall apply 

to consultations furnished on or after January 1, 2011. 


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(b) EXPANSION OF PHYSICIAN QUALITY REPORTING INITIATIVE FOR END OF LIFE

CARE.— 

(1) PHYSICIAN’S QUALITY REPORTING INITIATIVE.—Section 1848(k)(2) of the Social Security Act (42 U.S.C. 1395w–4(k)(2)) is amended by adding at the end the 

following new subparagraph: 

‘‘(E) PHYSICIAN’S QUALITY REPORTING INITIATIVE.— 

‘‘(i) IN GENERAL.—For purposes of reporting data on quality measures 

for covered professional services furnished during 2011 and any subsequent year, to the extent that measures are available, the Secretary 

shall include quality measures on end of life care and advanced care 

planning that have been adopted or endorsed by a consensus-based organization, if appropriate. Such measures shall measure both the creation of and adherence to orders for life-sustaining treatment. 

‘‘(ii) PROPOSED SET OF MEASURES.—The Secretary shall publish in the 

Federal Register proposed quality measures on end of life care and advanced care planning that the Secretary determines are described in 

subparagraph (A) and would be appropriate for eligible professionals to 

use to submit data to the Secretary. The Secretary shall provide for a 

period of public comment on such set of measures before finalizing such 

proposed measures.’’. 

(c) INCLUSION OF INFORMATION IN MEDICARE & YOU HANDBOOK.— 

(1) MEDICARE & YOU HANDBOOK.— 

(A) IN GENERAL.—Not later than 1 year after the date of the enactment 

of this Act, the Secretary of Health and Human Services shall update the 

online version of the Medicare & You Handbook to include the following: 

(i) An explanation of advance care planning and advance directives, 

including— 

(I) living wills; 

(II) durable power of attorney; 

(III) orders of life-sustaining treatment; and 

(IV) health care proxies. 

(ii) A description of Federal and State resources available to assist 

individuals and their families with advance care planning and advance 

directives, including— 

(I) available State legal service organizations to assist individuals with advance care planning, including those organizations 

that receive funding pursuant to the Older Americans Act of 1965 

(42 U.S.C. 93001 et seq.); 

(II) website links or addresses for State-specific advance directive 

forms; and 

(III) any additional information, as determined by the Secretary. 

(B) UPDATE OF PAPER AND SUBSEQUENT VERSIONS.—The Secretary shall 

include the information described in subparagraph (A) in all paper and electronic versions of the Medicare & You Handbook that are published on or 

after the date that is 1 year after the date of the enactment of this Act. 

SEC. 1234. PART B SPECIAL ENROLLMENT PERIOD AND WAIVER OF LIMITED ENROLLMENT 

PENALTY FOR TRICARE BENEFICIARIES. 

(a) PART B SPECIAL ENROLLMENT PERIOD.— 

(1) IN GENERAL.—Section 1837 of the Social Security Act (42 U.S.C. 1395p) 

is amended by adding at the end the following new subsection: 

‘‘(l)(1) In the case of any individual who is a covered beneficiary (as defined in 

section 1072(5) of title 10, United States Code) at the time the individual is entitled 

to hospital insurance benefits under part A under section 226(b) or section 226A and 

who is eligible to enroll but who has elected not to enroll (or to be deemed enrolled) 

during the individual’s initial enrollment period, there shall be a special enrollment 

period described in paragraph (2). 

‘‘(2) The special enrollment period described in this paragraph, with respect to an 

individual, is the 12-month period beginning on the day after the last day of the 

initial enrollment period of the individual or, if later, the 12-month period beginning 

with the month the individual is notified of enrollment under this section. 

‘‘(3) In the case of an individual who enrolls during the special enrollment period 

provided under paragraph (1), the coverage period under this part shall begin on 

the first day of the month in which the individual enrolls or, at the option of the 

individual, on the first day of the second month following the last month of the individual’s initial enrollment period. 

‘‘(4) The Secretary of Defense shall establish a method for identifying individuals 

described in paragraph (1) and providing notice to them of their eligibility for enrollment during the special enrollment period described in paragraph (2).’’. 


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(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to 

elections made on or after the date of the enactment of this Act. 

(b) WAIVER OF INCREASE OF PREMIUM.— 

(1) IN GENERAL.—Section 1839(b) of the Social Security Act (42 U.S.C. 

1395r(b)) is amended by striking ‘‘section 1837(i)(4)’’ and inserting ‘‘subsection 

(i)(4) or (l) of section 1837’’. 

(2) EFFECTIVE DATE.— 

(A) IN GENERAL.—The amendment made by paragraph (1) shall apply 

with respect to elections made on or after the date of the enactment of this 

Act. 

(B) REBATES FOR CERTAIN DISABLED AND ESRD BENEFICIARIES.— 

(i) IN GENERAL.—With respect to premiums for months on or after 

January 2005 and before the month of the enactment of this Act, no 

increase in the premium shall be effected for a month in the case of 

any individual who is a covered beneficiary (as defined in section 

1072(5) of title 10, United States Code) at the time the individual is 

entitled to hospital insurance benefits under part A of title XVIII of the 

Social Security Act under section 226(b) or 226A of such Act, and who 

is eligible to enroll, but who has elected not to enroll (or to be deemed 

enrolled), during the individual’s initial enrollment period, and who enrolls under this part within the 12-month period that begins on the 

first day of the month after the month of notification of entitlement 

under this part. 

(ii) CONSULTATION WITH DEPARTMENT OF DEFENSE.—The Secretary of 

Health and Human Services shall consult with the Secretary of Defense 

in identifying individuals described in this paragraph. 

(iii) REBATES.—The Secretary of Health and Human Services shall 

establish a method for providing rebates of premium increases paid for 

months on or after January 1, 2005, and before the month of the enactment of this Act for which a penalty was applied and collected. 

SEC. 1235. EXCEPTION FOR USE OF MORE RECENT TAX YEAR IN CASE OF GAINS FROM SALE 

OF PRIMARY RESIDENCE IN COMPUTING PART B INCOME-RELATED PREMIUM. 

(a) IN GENERAL.—Section 1839(i)(4)(C)(ii)(II) of the Social Security Act (42 U.S.C. 

1395r(i)(4)(C)(ii)(II)) is amended by inserting ‘‘sale of primary residence,’’ after ‘‘divorce of such individual,’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to premiums and payments for years beginning with 2011. 

SEC. 1236. DEMONSTRATION PROGRAM ON USE OF PATIENT DECISIONS AIDS. 

(a) IN GENERAL.—The Secretary of Health and Human Services shall establish a 

shared decision making demonstration program (in this subsection referred to as the 

‘‘program’’) under the Medicare program using patient decision aids to meet the objective of improving the understanding by Medicare beneficiaries of their medical 

treatment options, as compared to comparable Medicare beneficiaries who do not 

participate in a shared decision making process using patient decision aids. 

(b) SITES.— 

(1) ENROLLMENT.—The Secretary shall enroll in the program not more than 

30 eligible providers who have experience in implementing, and have invested 

in the necessary infrastructure to implement, shared decision making using patient decision aids. 

(2) APPLICATION.—An eligible provider seeking to participate in the program 

shall submit to the Secretary an application at such time and containing such 

information as the Secretary may require. 

(3) PREFERENCE.—In enrolling eligible providers in the program, the Secretary shall give preference to eligible providers that— 

(A) have documented experience in using patient decision aids for the 

conditions identified by the Secretary and in using shared decision making; 

(B) have the necessary information technology infrastructure to collect 

the information required by the Secretary for reporting purposes; and 

(C) are trained in how to use patient decision aids and shared decision 

making. 

(c) FOLLOW-UP COUNSELING VISIT.— 

(1) IN GENERAL.—An eligible provider participating in the program shall routinely schedule Medicare beneficiaries for a counseling visit after the viewing 

of such a patient decision aid to answer any questions the beneficiary may have 

with respect to the medical care of the condition involved and to assist the beneficiary in thinking through how their preferences and concerns relate to their 

medical care. 


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(2) PAYMENT FOR FOLLOW-UP COUNSELING VISIT.—The Secretary shall establish procedures for making payments for such counseling visits provided to 

Medicare beneficiaries under the program. Such procedures shall provide for the 

establishment— 

(A) of a code (or codes) to represent such services; and 

(B) of a single payment amount for such service that includes the professional time of the health care provider and a portion of the reasonable costs 

of the infrastructure of the eligible provider such as would be made under 

the applicable payment systems to that provider for similar covered services. 

(d) COSTS OF AIDS.—An eligible provider participating in the program shall be responsible for the costs of selecting, purchasing, and incorporating such patient decision aids into the provider’s practice, and reporting data on quality and outcome 

measures under the program. 

(e) FUNDING.—The Secretary shall provide for the transfer from the Federal Supplementary Medical Insurance Trust Fund established under section 1841 of the Social Security Act (42 U.S.C. 1395t) of such funds as are necessary for the costs of 

carrying out the program. 

(f) WAIVER AUTHORITY.—The Secretary may waive such requirements of titles XI 

and XVIII of the Social Security Act (42 U.S.C. 1301 et seq. and 1395 et seq.) as 

may be necessary for the purpose of carrying out the program. 

(g) REPORT.—Not later than 12 months after the date of completion of the program, the Secretary shall submit to Congress a report on such program, together 

with recommendations for such legislation and administrative action as the Secretary determines to be appropriate. The final report shall include an evaluation of 

the impact of the use of the program on health quality, utilization of health care 

services, and on improving the quality of life of such beneficiaries. 

(h) DEFINITIONS.—In this section: 

(1) ELIGIBLE PROVIDER.—The term ‘‘eligible provider’’ means the following: 

(A) A primary care practice. 

(B) A specialty practice. 

(C) A multispecialty group practice. 

(D) A hospital. 

(E) A rural health clinic. 

(F) A Federally qualified health center (as defined in section 1861(aa)(4) 

of the Social Security Act (42 U.S.C. 1395x(aa)(4)). 

(G) An integrated delivery system. 

(H) A State cooperative entity that includes the State government and at 

least one other health care provider which is set up for the purpose of testing shared decision making and patient decision aids. 

(2) PATIENT DECISION AID.—The term ‘‘patient decision aid’’ means an educational tool (such as the Internet, a video, or a pamphlet) that helps patients 

(or, if appropriate, the family caregiver of the patient) understand and communicate their beliefs and preferences related to their treatment options, and to 

decide with their health care provider what treatments are best for them based 

on their treatment options, scientific evidence, circumstances, beliefs, and preferences. 

(3) SHARED DECISION MAKING.—The term ‘‘shared decision making’’ means a 

collaborative process between patient and clinician that engages the patient in 

decision making, provides patients with information about trade-offs among 

treatment options, and facilitates the incorporation of patient preferences and 

values into the medical plan. 

TITLE III—PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES, AND COORDINATED 

CARE 

SEC. 1301. ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM. 

Title XVIII of the Social Security Act is amended by inserting after section 1866D, 

as added by section 1152(f) of this Act, the following new section: 

‘‘ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM

‘‘SEC. 1866E. (a) IN GENERAL.—The Secretary shall conduct a pilot program (in 

this section referred to as the ‘pilot program’) to test different payment incentive 

models, including (to the extent practicable) the specific payment incentive models 

described in subsection (c), designed to reduce the growth of expenditures and imVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00126 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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prove health outcomes in the provision of items and services under this title to applicable beneficiaries (as defined in subsection (d)) by qualifying accountable care organizations (as defined in subsection (b)(1)) in order to— 

‘‘(1) promote accountability for a patient population and coordinate items and 

services under parts A and B; 

‘‘(2) encourage investment in infrastructure and redesigned care processes for 

high quality and efficient service delivery; and 

‘‘(3) reward physician practices and other physician organizational models for 

the provision of high quality and efficient health care services. 

‘‘(b) QUALIFYING ACCOUNTABLE CARE ORGANIZATIONS (ACOS).— 

‘‘(1) QUALIFYING ACO DEFINED.—In this section: 

‘‘(A) IN GENERAL.—The terms ‘qualifying accountable care organization’ 

and ‘qualifying ACO’ mean a group of physicians or other physician organizational model (as defined in subparagraph (D)) that— 

‘‘(i) is organized at least in part for the purpose of providing physicians’ services; and 

‘‘(ii) meets such criteria as the Secretary determines to be appropriate to participate in the pilot program, including the criteria specified in paragraph (2). 

‘‘(B) INCLUSION OF OTHER PROVIDERS.—Nothing in this subsection shall be 

construed as preventing a qualifying ACO from including a hospital or any 

other provider of services or supplier furnishing items or services for which 

payment may be made under this title that is affiliated with the ACO 

under an arrangement structured so that such provider or supplier participates in the pilot program and shares in any incentive payments under the 

pilot program. 

‘‘(C) PHYSICIAN.—The term ‘physician’ includes, except as the Secretary 

may otherwise provide, any individual who furnishes services for which 

payment may be made as physicians’ services. 

‘‘(D) OTHER PHYSICIAN ORGANIZATIONAL MODEL.—The term ‘other physician organization model’ means, with respect to a qualifying ACO any 

model of organization under which physicians enter into agreements with 

other providers for the purposes of participation in the pilot program in 

order to provide high quality and efficient health care services and share 

in any incentive payments under such program 

‘‘(E) OTHER SERVICES.—Nothing in this paragraph shall be construed as 

preventing a qualifying ACO from furnishing items or services, for which 

payment may not be made under this title, for purposes of achieving performance goals under the pilot program. 

‘‘(2) QUALIFYING CRITERIA.—The following are criteria described in this paragraph for an organized group of physicians to be a qualifying ACO: 

‘‘(A) The group has a legal structure that would allow the group to receive 

and distribute incentive payments under this section. 

‘‘(B) The group includes a sufficient number of primary care physicians 

(regardless of specialty) for the applicable beneficiaries for whose care the 

group is accountable (as determined by the Secretary). 

‘‘(C) The group reports on quality measures in such form, manner, and 

frequency as specified by the Secretary (which may be for the group, for 

providers of services and suppliers, or both). 

‘‘(D) The group reports to the Secretary (in a form, manner and frequency 

as specified by the Secretary) such data as the Secretary determines appropriate to monitor and evaluate the pilot program. 

‘‘(E) The group provides notice to applicable beneficiaries regarding the 

pilot program (as determined appropriate by the Secretary). 

‘‘(F) The group contributes to a best practices network or website, that 

shall be maintained by the Secretary for the purpose of sharing strategies 

on quality improvement, care coordination, and efficiency that the groups 

believe are effective. 

‘‘(G) The group utilizes patient-centered processes of care, including those 

that emphasize patient and caregiver involvement in planning and monitoring of ongoing care management plan. 

‘‘(H) The group meets other criteria determined to be appropriate by the 

Secretary. 

‘‘(c) SPECIFIC PAYMENT INCENTIVE MODELS.—The specific payment incentive models described in this subsection are the following: 

‘‘(1) PERFORMANCE TARGET MODEL.—Under the performance target model 

under this paragraph (in this paragraph referred to as the ‘performance target 

model’): 


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‘‘(A) IN GENERAL.—A qualifying ACO qualifies to receive an incentive payment if expenditures for applicable beneficiaries are less than a target 

spending level or a target rate of growth. The incentive payment shall be 

made only if savings are greater than would result from normal variation 

in expenditures for items and services covered under parts A and B. 

‘‘(B) COMPUTATION OF PERFORMANCE TARGET.— ‘‘(i) IN GENERAL.—The Secretary shall establish a performance target 

for each qualifying ACO comprised of a base amount (described in 

clause (ii)) increased to the current year by an adjustment factor (described in clause (iii)). Such a target may be established on a per capita 

basis, as the Secretary determines to be appropriate. 

‘‘(ii) BASE AMOUNT.—For purposes of clause (i), the base amount in 

this subparagraph is equal to the average total payments (or allowed 

charges) under parts A and B (and may include part D, if the Secretary 

determines appropriate) for applicable beneficiaries for whom the qualifying ACO furnishes items and services in a base period determined by 

the Secretary. Such base amount may be determined on a per capita 

basis. 

‘‘(iii) ADJUSTMENT FACTOR.—For purposes of clause (i), the adjustment factor in this clause may equal an annual per capita amount that 

reflects changes in expenditures from the period of the base amount to 

the current year that would represent an appropriate performance target for applicable beneficiaries (as determined by the Secretary). Such 

adjustment factor may be determined as an amount or rate, may be determined on a national, regional, local, or organization-specific basis, 

and may be determined on a per capita basis. Such adjustment factor 

also may be adjusted for risk as determined appropriate by the Secretary. 

‘‘(iv) REBASING.—Under this model the Secretary shall periodically 

rebase the base expenditure amount described in clause (ii). 

‘‘(C) MEETING TARGET.— 

‘‘(i) IN GENERAL.—Subject to clause (ii), a qualifying ACO that meet 

or exceeds annual quality and performance targets for a year shall receive an incentive payment for such year equal to a portion (as determined appropriate by the Secretary) of the amount by which payments 

under this title for such year relative are estimated to be below the performance target for such year, as determined by the Secretary. The Secretary may establish a cap on incentive payments for a year for a qualifying ACO. 

‘‘(ii) LIMITATION.— The Secretary shall limit incentive payments to 

each qualifying ACO under this paragraph as necessary to ensure that 

the aggregate expenditures with respect to applicable beneficiaries for 

such ACOs under this title (inclusive of incentive payments described 

in this subparagraph) do not exceed the amount that the Secretary estimates would be expended for such ACO for such beneficiaries if the 

pilot program under this section were not implemented. 

‘‘(D) REPORTING AND OTHER REQUIREMENTS.—In carrying out such model, 

the Secretary may (as the Secretary determines to be appropriate) incorporate reporting requirements, incentive payments, and penalties related to 

the physician quality reporting initiative (PQRI), electronic prescribing, 

electronic health records, and other similar initiatives under section 1848, 

and may use alternative criteria than would otherwise apply under such 

section for determining whether to make such payments. The incentive payments described in this subparagraph shall not be included in the limit described in subparagraph (C)(ii) or in the performance target model described in this paragraph. 

‘‘(2) PARTIAL CAPITATION MODEL.— 

‘‘(A) IN GENERAL.—Subject to subparagraph (B), a partial capitation 

model described in this paragraph (in this paragraph referred to as a ‘partial capitation model’) is a model in which a qualifying ACO would be at 

financial risk for some, but not all, of the items and services covered under 

parts A and B, such as at risk for some or all physicians’ services or all 

items and services under part B. The Secretary may limit a partial capitation model to ACOs that are highly integrated systems of care and to ACOs 

capable of bearing risk, as determined to be appropriate by the Secretary. 

‘‘(B) NO ADDITIONAL PROGRAM EXPENDITURES.—Payments to a qualifying 

ACO for applicable beneficiaries for a year under the partial capitation 

model shall be established in a manner that does not result in spending 

more for such ACO for such beneficiaries than would otherwise be expended 


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for such ACO for such beneficiaries for such year if the pilot program were 

not implemented, as estimated by the Secretary. 

‘‘(3) OTHER PAYMENT MODELS.— 

‘‘(A) IN GENERAL.—Subject to subparagraph (B), the Secretary may develop other payment models that meet the goals of this pilot program to improve quality and efficiency. 

‘‘(B) NO ADDITIONAL PROGRAM EXPENDITURES.—Subparagraph (B) of paragraph (2) shall apply to a payment model under subparagraph (A) in a similar manner as such subparagraph (B) applies to the payment model under 

paragraph (2). 

‘‘(d) APPLICABLE BENEFICIARIES.— 

‘‘(1) IN GENERAL.—In this section, the term ‘applicable beneficiary’ means, 

with respect to a qualifying ACO, an individual who— 

‘‘(A) is enrolled under part B and entitled to benefits under part A; 

‘‘(B) is not enrolled in a Medicare Advantage plan under part C or a 

PACE program under section 1894; and 

‘‘(C) meets such other criteria as the Secretary determines appropriate, 

which may include criteria relating to frequency of contact with physicians 

in the ACO 

‘‘(2) FOLLOWING APPLICABLE BENEFICIARIES.—The Secretary may monitor data 

on expenditures and quality of services under this title after an applicable beneficiary discontinues receiving services under this title through a qualifying 

ACO. 

‘‘(e) IMPLEMENTATION.— 

‘‘(1) STARTING DATE.—The pilot program shall begin no later than January 1, 

2012. An agreement with a qualifying ACO under the pilot program may cover 

a multi-year period of between 3 and 5 years. 

‘‘(2) WAIVER.—The Secretary may waive such provisions of this title (including 

section 1877) and title XI in the manner the Secretary determines necessary in 

order implement the pilot program. 

‘‘(3) PERFORMANCE RESULTS REPORTS.—The Secretary shall report performance results to qualifying ACOs under the pilot program at least annually. 

‘‘(4) LIMITATIONS ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of— 

‘‘(A) the elements, parameters, scope, and duration of the pilot program; 

‘‘(B) the selection of qualifying ACOs for the pilot program; 

‘‘(C) the establishment of targets, measurement of performance, determinations with respect to whether savings have been achieved and the 

amount of savings; 

‘‘(D) determinations regarding whether, to whom, and in what amounts 

incentive payments are paid; and 

‘‘(E) decisions about the extension of the program under subsection (g), 

expansion of the program under subsection (h) or extensions under subsection (i). 

‘‘(5) ADMINISTRATION.—Chapter 35 of title 44, United States Code shall not 

apply to this section. 

‘‘(f) EVALUATION; MONITORING.— 

‘‘(1) IN GENERAL.—The Secretary shall evaluate the payment incentive model 

for each qualifying ACO under the pilot program to assess impacts on beneficiaries, providers of services, suppliers and the program under this title. The 

Secretary shall make such evaluation publicly available within 60 days of the 

date of completion of such report. 

‘‘(2) MONITORING.—The Inspector General of the Department of Health and 

Human Services shall provide for monitoring of the operation of ACOs under 

the pilot program with regard to violations of section 1877 (popularly known as 

the ‘Stark law’). 

‘‘(g) EXTENSION OF PILOT AGREEMENT WITH SUCCESSFUL ORGANIZATIONS.— 

‘‘(1) REPORTS TO CONGRESS.—Not later than 2 years after the date the first 

agreement is entered into under this section, and biennially thereafter for six 

years, the Secretary shall submit to Congress and make publicly available a report on the use of authorities under the pilot program. Each report shall address the impact of the use of those authorities on expenditures, access, and 

quality under this title. 

‘‘(2) EXTENSION.—Subject to the report provided under paragraph (1), with respect to a qualifying ACO, the Secretary may extend the duration of the agreement for such ACO under the pilot program as the Secretary determines appropriate if— 


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‘‘(A) the ACO receives incentive payments with respect to any of the first 

4 years of the pilot agreement and is consistently meeting quality standards 

or 

‘‘(B) the ACO is consistently exceeding quality standards and is not increasing spending under the program. 

‘‘(3) TERMINATION.—The Secretary may terminate an agreement with a qualifying ACO under the pilot program if such ACO did not receive incentive payments or consistently failed to meet quality standards in any of the first 3 years 

under the program. 

‘‘(h) EXPANSION TO ADDITIONAL ACOS.— 

‘‘(1) TESTING AND REFINEMENT OF PAYMENT INCENTIVE MODELS.—Subject to 

the evaluation described in subsection (f), the Secretary may enter into agreements under the pilot program with additional qualifying ACOs to further test 

and refine payment incentive models with respect to qualifying ACOs. 

‘‘(2) EXPANDING USE OF SUCCESSFUL MODELS TO PROGRAM IMPLEMENTATION.— 

‘‘(A) IN GENERAL.—Subject to subparagraph (B), the Secretary may issue 

regulations to implement, on a permanent basis, 1 or more models if, and 

to the extent that, such models are beneficial to the program under this 

title, as determined by the Secretary. 

‘‘(B) CERTIFICATION.—The Chief Actuary of the Centers for Medicare & 

Medicaid Services shall certify that 1 or more of such models described in 

subparagraph (A) would result in estimated spending that would be less 

than what spending would otherwise be estimated to be in the absence of 

such expansion. 

‘‘(i) TREATMENT OF PHYSICIAN GROUP PRACTICE DEMONSTRATION.— 

‘‘(1) EXTENSION.—The Secretary may enter in to an agreement with a qualifying ACO under the demonstration under section 1866A, subject to rebasing 

and other modifications deemed appropriate by the Secretary, until the pilot 

program under this section is operational. 

‘‘(2) TRANSITION.—For purposes of extension of an agreement with a qualifying ACO under subsection (g)(2), the Secretary shall treat receipt of an incentive payment for a year by an organization under the physician group practice 

demonstration pursuant to section 1866A as a year for which an incentive payment is made under such subsection, as long as such practice group practice organization meets the criteria under subsection (b)(2). 

‘‘(j) ADDITIONAL PROVISIONS.— 

‘‘(1) AUTHORITY FOR SEPARATE INCENTIVE ARRANGEMENTS.—The Secretary 

may create separate incentive arrangements (including using multiple years of 

data, varying thresholds, varying shared savings amounts, and varying shared 

savings limits) for different categories of qualifying ACOs to reflect natural variations in data availability, variation in average annual attributable expenditures, program integrity, and other matters the Secretary deems appropriate. 

‘‘(2) ENCOURAGEMENT OF PARTICIPATION OF SMALLER ORGANIZATIONS.—In 

order to encourage the participation of smaller accountable care organizations 

under the pilot program, the Secretary may limit a qualifying ACO’s exposure 

to high cost patients under the program. 

‘‘(3) INVOLVEMENT IN PRIVATE PAYER ARRANGEMENTS.—Nothing in this section 

shall be construed as preventing qualifying ACOs participating in the pilot program from negotiating similar contracts with private payers. 

‘‘(4) ANTIDISCRIMINATION LIMITATION.—The Secretary shall not enter into an 

agreement with an entity to provide health care items or services under the 

pilot program, or with an entity to administer the program, unless such entity 

guarantees that it will not deny, limit, or condition the coverage or provision 

of benefits under the program, for individuals eligible to be enrolled under such 

program, based on any health status-related factor described in section 

2702(a)(1) of the Public Health Service Act. 

‘‘(5) CONSTRUCTION.—Nothing in this section shall be construed to compel or 

require an organization to use an organization-specific target growth rate for an 

accountable care organization under this section for purposes of section 1848. 

‘‘(6) FUNDING.—For purposes of administering and carrying out the pilot program, other than for payments for items and services furnished under this title 

and incentive payments under subsection (c)(1), in addition to funds otherwise 

appropriated, there are appropriated to the Secretary for the Center for Medicare & Medicaid Services Program Management Account $25,000,000 for each 

of fiscal years 2010 through 2014 and $20,000,000 for fiscal year 2015. Amounts 

appropriated under this paragraph for a fiscal year shall be available until expended.’’. 


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SEC. 1302. MEDICAL HOME PILOT PROGRAM. 

(a) IN GENERAL.—Title XVIII of the Social Security Act is amended by inserting 

after section 1866E, as inserted by section 1301, the following new section: 

‘‘MEDICAL HOME PILOT PROGRAM

‘‘SEC. 1866F. (a) ESTABLISHMENT AND MEDICAL HOME MODELS.— ‘‘(1) ESTABLISHMENT OF PILOT PROGRAM.—The Secretary shall establish a 

medical home pilot program (in this section referred to as the ‘pilot program’) 

for the purpose of evaluating the feasibility and advisability of reimbursing 

qualified patient-centered medical homes for furnishing medical home services 

(as defined under subsection (b)(1)) to high need beneficiaries (as defined in subsection (d)(1)(C)) and to targeted high need beneficiaries (as defined in subsection (c)(1)(C)). 

‘‘(2) SCOPE.—Subject to subsection (g), the pilot program shall include urban, 

rural, and underserved areas. 

‘‘(3) MODELS OF MEDICAL HOMES IN THE PILOT PROGRAM.—The pilot program 

shall evaluate each of the following medical home models: 

‘‘(A) INDEPENDENT PATIENT-CENTERED MEDICAL HOME MODEL.—Independent patient-centered medical home model under subsection (c). 

‘‘(B) COMMUNITY-BASED MEDICAL HOME MODEL.—Community-based medical home model under subsection (d). 

‘‘(4) PARTICIPATION OF NURSE PRACTITIONERS AND PHYSICIAN ASSISTANTS.— ‘‘(A) Nothing in this section shall be construed as preventing a nurse 

practitioner from leading a patient centered medical home so long as— 

‘‘(i) all the requirements of this section are met; and 

‘‘(ii) the nurse practitioner is acting consistently with State law. 

‘‘(B) Nothing in this section shall be construed as preventing a physician 

assistant from participating in a patient centered medical home so long 

as— ‘‘(i) all the requirements of this section are met; and 

‘‘(ii) the physician assistant is acting consistently with State law. 

‘‘(b) DEFINITIONS.—For purposes of this section: 

‘‘(1) PATIENT-CENTERED MEDICAL HOME SERVICES.—The term ‘patient-centered 

medical home services’ means services that— 

‘‘(A) provide beneficiaries with direct and ongoing access to a primary 

care or principal care by a physician or nurse practitioner who accepts responsibility for providing first contact, continuous and comprehensive care 

to such beneficiary; 

‘‘(B) coordinate the care provided to a beneficiary by a team of individuals 

at the practice level across office, institutional and home settings led by a 

primary care or principal care physician or nurse practitioner, as needed 

and appropriate; 

‘‘(C) provide for all the patient’s health care needs or take responsibility 

for appropriately arranging care with other qualified providers for all stages 

of life; 

‘‘(D) provide continuous access to care and communication with participating beneficiaries; 

‘‘(E) provide support for patient self-management, proactive and regular 

patient monitoring, support for family caregivers, use patient-centered processes, and coordination with community resources; 

‘‘(F) integrate readily accessible, clinically useful information on participating patients that enables the practice to treat such patients comprehensively and systematically; and 

‘‘(G) implement evidence-based guidelines and apply such guidelines to 

the identified needs of beneficiaries over time and with the intensity needed 

by such beneficiaries. 

‘‘(2) PRIMARY CARE.—The term ‘primary care’ means health care that is provided by a physician, nurse practitioner, or physician assistant who practices 

in the field of family medicine, general internal medicine, geriatric medicine, or 

pediatric medicine. 

‘‘(3) PRINCIPAL CARE.—The term ‘principal care’ means integrated, accessible 

health care that is provided by a physician who is a medical subspecialist that 

addresses the majority of the personal health care needs of patients with chronic conditions requiring the subspecialist’s expertise, and for whom the subspecialist assumes care management. 

‘‘(c) INDEPENDENT PATIENT-CENTERED MEDICAL HOME MODEL.— 

‘‘(1) IN GENERAL.— 

‘‘(A) PAYMENT AUTHORITY.—Under the independent patient-centered medical home model under this subsection, the Secretary shall make payments 


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for medical home services furnished by an independent patient-centered 

medical home (as defined in subparagraph (B)) pursuant to paragraph 

(3)(B) for a targeted high need beneficiaries (as defined in subparagraph 

(C)). 

‘‘(B) INDEPENDENT PATIENT-CENTERED MEDICAL HOME DEFINED.—In this 

section, the term ‘independent patient-centered medical home’ means a physician-directed or nurse-practitioner-directed practice that is qualified under 

paragraph (2) as— 

‘‘(i) providing beneficiaries with patient-centered medical home services; and 

‘‘(ii) meets such other requirements as the Secretary may specify. 

‘‘(C) TARGETED HIGH NEED BENEFICIARY DEFINED.—For purposes of this 

subsection, the term ‘targeted high need beneficiary’ means a high need 

beneficiary who, based on a risk score as specified by the Secretary, is generally within the upper 50th percentile of Medicare beneficiaries. 

‘‘(D) BENEFICIARY ELECTION TO PARTICIPATE.—The Secretary shall determine an appropriate method of ensuring that beneficiaries have agreed to 

participate in the pilot program. 

‘‘(E) IMPLEMENTATION.—The pilot program under this subsection shall 

begin no later than 6 months after the date of the enactment of this section. 

‘‘(2) STANDARD SETTING AND QUALIFICATION PROCESS FOR PATIENT-CENTERED

MEDICAL HOMES.—The Secretary shall review alternative models for standard 

setting and qualification, and shall establish a process— 

‘‘(A) to establish standards to enable medical practices to qualify as patient-centered medical homes; and 

‘‘(B) to initially provide for the review and certification of medical practices as meeting such standards. 

‘‘(3) PAYMENT.— 

‘‘(A) ESTABLISHMENT OF METHODOLOGY.—The Secretary shall establish a 

methodology for the payment for medical home services furnished by independent patient-centered medical homes. Under such methodology, the Secretary shall adjust payments to medical homes based on beneficiary risk 

scores to ensure that higher payments are made for higher risk beneficiaries. 

‘‘(B) PER BENEFICIARY PER MONTH PAYMENTS.—Under such payment 

methodology, the Secretary shall pay independent patient-centered medical 

homes a monthly fee for each targeted high need beneficiary who consents 

to receive medical home services through such medical home. 

‘‘(C) PROSPECTIVE PAYMENT.—The fee under subparagraph (B) shall be 

paid on a prospective basis. 

‘‘(D) AMOUNT OF PAYMENT.—In determining the amount of such fee, the 

Secretary shall consider the following: 

‘‘(i) The clinical work and practice expenses involved in providing the 

medical home services provided by the independent patient-centered 

medical home (such as providing increased access, care coordination, 

population disease management, and teaching self-care skills for managing chronic illnesses) for which payment is not made under this title 

as of the date of the enactment of this section. 

‘‘(ii) Allow for differential payments based on capabilities of the independent patient-centered medical home. 

‘‘(iii) Use appropriate risk-adjustment in determining the amount of 

the per beneficiary per month payment under this paragraph in a manner that ensures that higher payments are made for higher risk beneficiaries. 

‘‘(4) ENCOURAGING PARTICIPATION OF VARIETY OF PRACTICES.—The pilot program under this subsection shall be designed to include the participation of 

physicians in practices with fewer than 10 full-time equivalent physicians, as 

well as physicians in larger practices, particularly in underserved and rural 

areas, as well as federally qualified community health centers, and rural health 

centers. 

‘‘(5) NO DUPLICATION IN PILOT PARTICIPATION.—A physician in a group practice that participates in the accountable care organization pilot program under 

section 1866D shall not be eligible to participate in the pilot program under this 

subsection, unless the pilot program under this section has been implemented 

on a permanent basis under subsection (e)(3). 

‘‘(d) COMMUNITY-BASED MEDICAL HOME MODEL.— 

‘‘(1) IN GENERAL.— 

‘‘(A) AUTHORITY FOR PAYMENTS.—Under the community-based medical 

home model under this subsection (in this section referred to as the ‘CBMH 


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model’), the Secretary shall make payments for the furnishing of medical 

home services by a community-based medical home (as defined in subparagraph (B)) pursuant to paragraph (5)(B) for high need beneficiaries. 

‘‘(B) COMMUNITY-BASED MEDICAL HOME DEFINED.—In this section, the 

term ‘community-based medical home’ means a nonprofit community-based 

or State-based organization that is certified under paragraph (2) as meeting 

the following requirements: 

‘‘(i) The organization provides beneficiaries with medical home services. 

‘‘(ii) The organization provides medical home services under the supervision of and in close collaboration with the primary care or principal care physician, nurse practitioner, or physician assistant designated by the beneficiary as his or her community-based medical home 

provider. 

‘‘(iii) The organization employs community health workers, including 

nurses or other non-physician practitioners, lay health workers, or 

other persons as determined appropriate by the Secretary, that assist 

the primary or principal care physician, nurse practitioner, or physician 

assistant in chronic care management activities such as teaching selfcare skills for managing chronic illnesses, transitional care services, 

care plan setting, medication therapy management services for patients 

with multiple chronic diseases, or help beneficiaries access the health 

care and community-based resources in their local geographic area. 

‘‘(iv) The organization meets such other requirements as the Secretary may specify. 

‘‘(C) HIGH NEED BENEFICIARY.—In this section, the term ‘high need beneficiary’ means an individual who requires regular medical monitoring, advising, or treatment. 

‘‘(2) QUALIFICATION PROCESS FOR COMMUNITY-BASED MEDICAL HOMES.—The 

Secretary shall establish a process— 

‘‘(A) for the initial qualification of community-based or State-based organizations as community-based medical homes; and 

‘‘(B) to provide for the review and qualification of such community-based 

and State-based organizations pursuant to criteria established by the Secretary. 

‘‘(3) DURATION.—The pilot program for community-based medical homes 

under this subsection shall start no later than 2 years after the date of the enactment of this section. Each demonstration site under the pilot program shall 

operate for a period of up to 5 years after the initial implementation phase, 

without regard to the receipt of a initial implementation funding under subsection (i). 

‘‘(4) PREFERENCE.—In selecting sites for the CBMH model, the Secretary may 

give preference to— 

‘‘(A) applications from geographic areas that propose to coordinate health 

care services for chronically ill beneficiaries across a variety of health care 

settings, such as primary care physician practices with fewer than 10 physicians, specialty physicians, nurse practitioner practices, Federally qualified 

health centers, rural health clinics, and other settings; 

‘‘(B) applications that include other payors that furnish medical home 

services for chronically ill patients covered by such payors; and 

‘‘(C) applications from States that propose to use the medical home model 

to coordinate health care services for individuals enrolled under this title, 

individuals enrolled under title XIX, and full-benefit dual eligible individuals (as defined in section 1935(c)(6)) with chronic diseases across a variety 

of health care settings. 

‘‘(5) PAYMENTS.— 

‘‘(A) ESTABLISHMENT OF METHODOLOGY.—The Secretary shall establish a 

methodology for the payment for medical home services furnished under the 

CBMH model. 

‘‘(B) PER BENEFICIARY PER MONTH PAYMENTS.—Under such payment 

methodology, the Secretary shall make two separate monthly payments for 

each high need beneficiary who consents to receive medical home services 

through such medical home, as follows: 

‘‘(i) PAYMENT TO COMMUNITY-BASED ORGANIZATION.—One monthly 

payment to a community-based or State-based organization. 

‘‘(ii) PAYMENT TO PRIMARY OR PRINCIPAL CARE PRACTICE.—One monthly payment to the primary or principal care practice for such beneficiary. 


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‘‘(C) PROSPECTIVE PAYMENT.—The payments under subparagraph (B) 

shall be paid on a prospective basis. 

‘‘(D) AMOUNT OF PAYMENT.—In determining the amount of such payment, 

the Secretary shall consider the following: 

‘‘(i) The clinical work and practice expenses involved in providing the 

medical home services provided by the community-based medical home 

(such as providing increased access, care coordination, care plan setting, population disease management, and teaching self-care skills for 

managing chronic illnesses) for which payment is not made under this 

title as of the date of the enactment of this section. 

‘‘(ii) Use appropriate risk-adjustment in determining the amount of 

the per beneficiary per month payment under this paragraph. 

‘‘(6) INITIAL IMPLEMENTATION FUNDING.—The Secretary may make available 

initial implementation funding to a community based or State-based organization or a State that is participating in the pilot program under this subsection. 

Such organization shall provide the Secretary with a detailed implementation 

plan that includes how such funds will be used. 

‘‘(e) EXPANSION OF PROGRAM.— ‘‘(1) EVALUATION OF COST AND QUALITY.—The Secretary shall evaluate the 

pilot program to determine— 

‘‘(A) the extent to which medical homes result in— 

‘‘(i) improvement in the quality and coordination of health care services, particularly with regard to the care of complex patients; 

‘‘(ii) improvement in reducing health disparities; 

‘‘(iii) reductions in preventable hospitalizations; 

‘‘(iv) prevention of readmissions; 

‘‘(v) reductions in emergency room visits; 

‘‘(vi) improvement in health outcomes, including patient functional 

status where applicable; 

‘‘(vii) improvement in patient satisfaction; 

‘‘(viii) improved efficiency of care such as reducing duplicative diagnostic tests and laboratory tests; and 

‘‘(ix) reductions in health care expenditures; and 

‘‘(B) the feasability and advisability of reimbursing medical homes for 

medical home services under this title on a permanent basis. 

‘‘(2) REPORT.—Not later than 60 days after the date of completion of the evaluation under paragraph (1), the Secretary shall submit to Congress and make 

available to the public a report on the findings of the evaluation under paragraph (1). 

‘‘(3) EXPANSION OF PROGRAM.— 

‘‘(A) IN GENERAL.—Subject to the results of the evaluation under paragraph (1) and subparagraph (B), the Secretary may issue regulations to implement, on a permanent basis, one or more models, if, and to the extent 

that such model or models, are beneficial to the program under this title, 

including that such implementation will improve quality of care, as determined by the Secretary. 

‘‘(B) CERTIFICATION REQUIREMENT.—The Secretary may not issue such 

regulations unless the Chief Actuary of the Centers for Medicare & Medicaid Services certifies that the expansion of the components of the pilot 

program described in subparagraph (A) would result in estimated spending 

under this title that would be no more than the level of spending that the 

Secretary estimates would otherwise be spent under this title in the absence of such expansion. 

‘‘(f) ADMINISTRATIVE PROVISIONS.— 

‘‘(1) NO DUPLICATION IN PAYMENTS.—During any month, the Secretary may 

not make payments under this section under more than one model or through 

more than one medical home under any model for the furnishing of medical 

home services to an individual. 

‘‘(2) NO EFFECT ON PAYMENT FOR EVALUATION AND MANAGEMENT SERVICES.— 

Payments made under this section are in addition to, and have no effect on the 

amount of, payment for evaluation and management services made under this 

title 

‘‘(3) ADMINISTRATION.—Chapter 35 of title 44, United States Code shall not 

apply to this section. 

‘‘(g) FUNDING.— 

‘‘(1) OPERATIONAL COSTS.—For purposes of administering and carrying out the 

pilot program (including the design, implementation, technical assistance for 

and evaluation of such program), in addition to funds otherwise available, there 

shall be transferred from the Federal Supplementary Medical Insurance Trust 


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Fund under section 1841 to the Secretary for the Centers for Medicare & Medicaid Services Program Management Account $6,000,000 for each of fiscal years 

2010 through 2014. Amounts appropriated under this paragraph for a fiscal 

year shall be available until expended. 

‘‘(2) PATIENT-CENTERED MEDICAL HOME SERVICES.—In addition to funds otherwise available, there shall be available to the Secretary for the Centers for 

Medicare & Medicaid Services, from the Federal Supplementary Medical Insurance Trust Fund under section 1841— 

‘‘(A) $200,000,000 for each of fiscal years 2010 through 2014 for payments 

for medical home services under subsection (c)(3); and 

‘‘(B) $125,000,000 for each of fiscal years 2012 through 2016, for payments under subsection (d)(5). 

Amounts available under this paragraph for a fiscal year shall be available 

until expended. 

‘‘(3) INITIAL IMPLEMENTATION.—In addition to funds otherwise available, there 

shall be available to the Secretary for the Centers for Medicare & Medicaid 

Services, from the Federal Supplementary Medical Insurance Trust Fund under 

section 1841, $2,500,000 for each of fiscal years 2010 through 2012, under subsection (d)(6). Amounts available under this paragraph for a fiscal year shall be 

available until expended. 

‘‘(h) TREATMENT OF TRHCA MEDICARE MEDICAL HOME DEMONSTRATION FUNDING.— 

‘‘(1) In addition to funds otherwise available for payment of medical home 

services under subsection (c)(3), there shall also be available the amount provided in subsection (g) of section 204 of division B of the Tax Relief and Health 

Care Act of 2006 (42 U.S.C. 1395b–1 note). 

‘‘(2) Notwithstanding section 1302(c) of the America’s Affordable Health 

Choices Act of 2009, in addition to funds provided in paragraph (1) and subsection (g)(2)(A), the funding for medical home services that would otherwise 

have been available if such section 204 medical home demonstration had been 

implemented (without regard to subsection (g) of such section) shall be available 

to the independent patient-centered medical home model described in subsection (c).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to services furnished on or after the date of the enactment of this Act. 

(c) CONFORMING REPEAL.—Section 204 of division B of the Tax Relief and Health 

Care Act of 2006 (42 U.S.C. 1395b–1 note), as amended by section 133(a)(2) of the 

Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110– 

275), is repealed. 

SEC. 1303. PAYMENT INCENTIVE FOR SELECTED PRIMARY CARE SERVICES. 

(a) IN GENERAL.—Section 1833 of the Social Security Act is amended by inserting 

after subsection (o) the following new subsection: 

‘‘(p) PRIMARY CARE PAYMENT INCENTIVES.— 

‘‘(1) IN GENERAL.—In the case of primary care services (as defined in paragraph (2)) furnished on or after January 1, 2011, by a primary care practitioner 

(as defined in paragraph (3)) for which amounts are payable under section 1848, 

in addition to the amount otherwise paid under this part there shall also be 

paid to the practitioner (or to an employer or facility in the cases described in 

clause (A) of section 1842(b)(6)) (on a monthly or quarterly basis) from the Federal Supplementary Medical Insurance Trust Fund an amount equal 5 percent 

(or 10 percent if the practitioner predominately furnishes such services in an 

area that is designated (under section 332(a)(1)(A) of the Public Health Service 

Act) as a primary care health professional shortage area. 

‘‘(2) PRIMARY CARE SERVICES DEFINED.—In this subsection, the term ‘primary 

care services’— 

‘‘(A) means services which are evaluation and management services as 

defined in section 1848(j)(5)(A); and 

‘‘(B) includes services furnished by another health care professional that 

would be described in subparagraph (A) if furnished by a physician. 

‘‘(3) PRIMARY CARE PRACTITIONER DEFINED.—In this subsection, the term ‘primary care practitioner’— 

‘‘(A) means a physician or other health care practitioner (including a 

nurse practitioner) who— 

‘‘(i) specializes in family medicine, general internal medicine, general 

pediatrics, geriatrics, or obstetrics and gynecology; and 

‘‘(ii) has allowed charges for primary care services that account for 

at least 50 percent of the physician’s or practitioner’s total allowed 


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charges under section 1848, as determined by the Secretary for the 

most recent period for which data are available; and 

‘‘(B) includes a physician assistant who is under the supervision of a physician described in subparagraph (A). 

‘‘(4) LIMITATION ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise, respecting— 

‘‘(A) any determination or designation under this subsection; 

‘‘(B) the identification of services as primary care services under this subsection; and 

‘‘(C) the identification of a practitioner as a primary care practitioner 

under this subsection. 

‘‘(5) COORDINATION WITH OTHER PAYMENTS.— 

‘‘(A) WITH OTHER PRIMARY CARE INCENTIVES.—The provisions of this subsection shall not be taken into account in applying subsections (m) and (u) 

and any payment under such subsections shall not be taken into account 

in computing payments under this subsection. 

‘‘(B) WITH QUALITY INCENTIVES.—Payments under this subsection shall 

not be taken into account in determining the amounts that would otherwise 

be paid under this part for purposes of section 1834(g)(2)(B).’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 1833(m) of such Act (42 U.S.C. 1395l(m)) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the 

following new paragraph: 

‘‘(4) The provisions of this subsection shall not be taken into account in applying 

subsections (m) or (u) and any payment under such subsections shall not be taken 

into account in computing payments under this subsection.’’. 

(2) Section 1848(m)(5)(B) of such Act (42 U.S.C. 1395w–4(m)(5)(B)) is amended by inserting ‘‘, (p),’’ after ‘‘(m)’’. 

(3) Section 1848(o)(1)(B)(iv) of such Act (42 U.S.C. 1395w–4(o)(1)(B)(iv)) is 

amended by inserting ‘‘primary care’’ before ‘‘health professional shortage area’’. 

SEC. 1304. INCREASED REIMBURSEMENT RATE FOR CERTIFIED NURSE-MIDWIVES. 

(a) IN GENERAL.—Section 1833(a)(1)(K) of the Social Security Act (42 

U.S.C.1395l(a)(1)(K)) is amended by striking ‘‘(but in no event’’ and all that follows 

through ‘‘performed by a physician)’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to services furnished on or after January 1, 2011. 

SEC. 1305. COVERAGE AND WAIVER OF COST-SHARING FOR PREVENTIVE SERVICES. 

(a) MEDICARE COVERED PREVENTIVE SERVICES DEFINED.—Section 1861 of the Social Security Act (42 U.S.C. 1395x), as amended by section 1233(a)(1)(B), is amended 

by adding at the end the following new subsection: 

‘‘Medicare Covered Preventive Services 

‘‘(iii)(1) Subject to the succeeding provisions of this subsection, the term ‘Medicare 

covered preventive services’ means the following: 

‘‘(A) Prostate cancer screening tests (as defined in subsection (oo)). 

‘‘(B) Colorectal cancer screening tests (as defined in subsection (pp). 

‘‘(C) Diabetes outpatient self-management training services (as defined in subsection (qq)). 

‘‘(D) Screening for glaucoma for certain individuals (as described in subsection 

(s)(2)(U)). 

‘‘(E) Medical nutrition therapy services for certain individuals (as described 

in subsection (s)(2)(V)). 

‘‘(F) An initial preventive physical examination (as defined in subsection 

(ww)). 

‘‘(G) Cardiovascular screening blood tests (as defined in subsection (xx)(1)). 

‘‘(H) Diabetes screening tests (as defined in subsection (yy)). 

‘‘(I) Ultrasound screening for abdominal aortic aneurysm for certain individuals (as described in subsection (s)(2)(AA)). 

‘‘(J) Pneumococcal and influenza vaccines and their administration (as described in subsection (s)(10)(A)) and hepatitis B vaccine and its administration 

for certain individuals (as described in subsection (s)(10)(B)). 

‘‘(K) Screening mammography (as defined in subsection (jj)). 

‘‘(L) Screening pap smear and screening pelvic exam (as defined in subsection 

(nn)). 

‘‘(M) Bone mass measurement (as defined in subsection (rr)). 

‘‘(N) Kidney disease education services (as defined in subsection (ggg)). 

‘‘(O) Additional preventive services (as defined in subsection (ddd)). 


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‘‘(2) With respect to specific Medicare covered preventive services, the limitations 

and conditions described in the provisions referenced in paragraph (1) with respect 

to such services shall apply.’’. 

(b) PAYMENT AND ELIMINATION OF COST-SHARING.— 

(1) IN GENERAL.— 

(A) IN GENERAL.—Section 1833(a) of the Social Security Act (42 U.S.C. 

1395l(a)) is amended by adding after and below paragraph (9) the following: 

‘‘With respect to Medicare covered preventive services, in any case in which the payment rate otherwise provided under this part is computed as a percent of less than 

100 percent of an actual charge, fee schedule rate, or other rate, such percentage 

shall be increased to 100 percent.’’. 

(B) APPLICATION TO SIGMOIDOSCOPIES AND COLONOSCOPIES.—Section 

1834(d) of such Act (42 U.S.C. 1395m(d)) is amended— 

(i) in paragraph (2)(C), by amending clause (ii) to read as follows: 

‘‘(ii) NO COINSURANCE.—In the case of a beneficiary who receives 

services described in clause (i), there shall be no coinsurance applied.’’; 

and 

(ii) in paragraph (3)(C), by amending clause (ii) to read as follows: 

‘‘(ii) NO COINSURANCE.—In the case of a beneficiary who receives 

services described in clause (i), there shall be no coinsurance applied.’’. 

(2) ELIMINATION OF COINSURANCE IN OUTPATIENT HOSPITAL SETTINGS.— 

(A) EXCLUSION FROM OPD FEE SCHEDULE.—Section 1833(t)(1)(B)(iv) of the 

Social Security Act (42 U.S.C. 1395l(t)(1)(B)(iv)) is amended by striking 

‘‘screening mammography (as defined in section 1861(jj)) and diagnostic 

mammography’’ and inserting ‘‘diagnostic mammograms and Medicare covered preventive services (as defined in section 1861(iii)(1))’’. 

(B) CONFORMING AMENDMENTS.—Section 1833(a)(2) of the Social Security 

Act (42 U.S.C. 1395l(a)(2)) is amended— 

(i) in subparagraph (F), by striking ‘‘and’’ after the semicolon at the 

end; 

(ii) in subparagraph (G), by adding ‘‘and’’ at the end; and 

(iii) by adding at the end the following new subparagraph: 

‘‘(H) with respect to additional preventive services (as defined in section 

1861(ddd)) furnished by an outpatient department of a hospital, the amount 

determined under paragraph (1)(W);’’. 

(3) WAIVER OF APPLICATION OF DEDUCTIBLE FOR ALL PREVENTIVE SERVICES.— 

The first sentence of section 1833(b) of the Social Security Act (42 U.S.C. 

1395l(b)) is amended— 

(A) in clause (1), by striking ‘‘items and services described in section 

1861(s)(10)(A)’’ and inserting ‘‘Medicare covered preventive services (as defined in section 1861(iii))’’; 

(B) by inserting ‘‘and’’ before ‘‘(4)’’; and 

(C) by striking clauses (5) through (8). 

(4) APPLICATION TO PROVIDERS OF SERVICES.—Section 1866(a)(2)(A)(ii) of such 

Act (42 U.S.C. 1395cc(a)(2)(A)(ii)) is amended by inserting ‘‘other than for Medicare covered preventive services and’’ after ‘‘for such items and services (’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to services furnished on or after January 1, 2011. 

SEC. 1306. WAIVER OF DEDUCTIBLE FOR COLORECTAL CANCER SCREENING TESTS REGARDLESS OF CODING, SUBSEQUENT DIAGNOSIS, OR ANCILLARY TISSUE REMOVAL. 

(a) IN GENERAL.—Section 1833 of the Social Security Act (42 U.S.C. 1395l(b)), as 

amended by section 1305(b), is further amended— 

(1) in subsection (a), in the sentence added by section 1305(b)(1)(A), by inserting ‘‘(including services described in the last sentence of section 1833(b))’’ after 

‘‘preventive services’’; and 

(2) in subsection (b), by adding at the end the following new sentence: ‘‘Clause 

(1) of the first sentence of this subsection shall apply with respect to a colorectal 

cancer screening test regardless of the code that is billed for the establishment 

of a diagnosis as a result of the test, or for the removal of tissue or other matter 

or other procedure that is furnished in connection with, as a result of, and in 

the same clinical encounter as, the screening test.’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to 

items and services furnished on or after January 1, 2011. 


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SEC. 1307. EXCLUDING CLINICAL SOCIAL WORKER SERVICES FROM COVERAGE UNDER THE 

MEDICARE SKILLED NURSING FACILITY PROSPECTIVE PAYMENT SYSTEM AND 

CONSOLIDATED PAYMENT. 

(a) IN GENERAL.—Section 1888(e)(2)(A)(ii) of the Social Security Act (42 U.S.C. 

1395yy(e)(2)(A)(ii)) is amended by inserting ‘‘clinical social worker services,’’ after 

‘‘qualified psychologist services,’’. 

(b) CONFORMING AMENDMENT.—Section 1861(hh)(2) of the Social Security Act (42 

U.S.C. 1395x(hh)(2)) is amended by striking ‘‘and other than services furnished to 

an inpatient of a skilled nursing facility which the facility is required to provide as 

a requirement for participation’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to items 

and services furnished on or after July 1, 2010. 

SEC. 1308. COVERAGE OF MARRIAGE AND FAMILY THERAPIST SERVICES AND MENTAL 

HEALTH COUNSELOR SERVICES. 

(a) COVERAGE OF MARRIAGE AND FAMILY THERAPIST SERVICES.— 

(1) COVERAGE OF SERVICES.—Section 1861(s)(2) of the Social Security Act (42 

U.S.C. 1395x(s)(2)), as amended by section 1235, is amended— 

(A) in subparagraph (EE), by striking ‘‘and’’ at the end; 

(B) in subparagraph (FF), by adding ‘‘and’’ at the end; and 

(C) by adding at the end the following new subparagraph: 

‘‘(GG) marriage and family therapist services (as defined in subsection 

(jjj));’’. 

(2) DEFINITION.—Section 1861 of the Social Security Act (42 U.S.C. 1395x), as 

amended by sections 1233 and 1305, is amended by adding at the end the following new subsection: 

‘‘Marriage and Family Therapist Services 

‘‘(jjj)(1) The term ‘marriage and family therapist services’ means services performed by a marriage and family therapist (as defined in paragraph (2)) for the diagnosis and treatment of mental illnesses, which the marriage and family therapist 

is legally authorized to perform under State law (or the State regulatory mechanism 

provided by State law) of the State in which such services are performed, as would 

otherwise be covered if furnished by a physician or as incident to a physician’s professional service, but only if no facility or other provider charges or is paid any 

amounts with respect to the furnishing of such services. 

‘‘(2) The term ‘marriage and family therapist’ means an individual who— 

‘‘(A) possesses a master’s or doctoral degree which qualifies for licensure or 

certification as a marriage and family therapist pursuant to State law; 

‘‘(B) after obtaining such degree has performed at least 2 years of clinical supervised experience in marriage and family therapy; and 

‘‘(C) is licensed or certified as a marriage and family therapist in the State 

in which marriage and family therapist services are performed.’’. 

(3) PROVISION FOR PAYMENT UNDER PART B.—Section 1832(a)(2)(B) of the Social Security Act (42 U.S.C. 1395k(a)(2)(B)) is amended by adding at the end 

the following new clause: 

‘‘(v) marriage and family therapist services;’’. 

(4) AMOUNT OF PAYMENT.— 

(A) IN GENERAL.—Section 1833(a)(1) of the Social Security Act (42 U.S.C. 

1395l(a)(1)) is amended— 

(i) by striking ‘‘and’’ before ‘‘(W)’’; and 

(ii) by inserting before the semicolon at the end the following: ‘‘, and 

(X) with respect to marriage and family therapist services under section 1861(s)(2)(GG), the amounts paid shall be 80 percent of the lesser 

of the actual charge for the services or 75 percent of the amount determined for payment of a psychologist under clause (L)’’. 

(B) DEVELOPMENT OF CRITERIA WITH RESPECT TO CONSULTATION WITH A

HEALTH CARE PROFESSIONAL.—The Secretary of Health and Human Services 

shall, taking into consideration concerns for patient confidentiality, develop 

criteria with respect to payment for marriage and family therapist services 

for which payment may be made directly to the marriage and family therapist under part B of title XVIII of the Social Security Act (42 U.S.C. 1395j 

et seq.) under which such a therapist must agree to consult with a patient’s 

attending or primary care physician or nurse practitioner in accordance 

with such criteria. 

(5) EXCLUSION OF MARRIAGE AND FAMILY THERAPIST SERVICES FROM SKILLED

NURSING FACILITY PROSPECTIVE PAYMENT SYSTEM.—Section 1888(e)(2)(A)(ii) of 

the Social Security Act (42 U.S.C. 1395yy(e)(2)(A)(ii)), as amended by section 


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1307(a), is amended by inserting ‘‘marriage and family therapist services (as defined in subsection (jjj)(1)),’’ after ‘‘clinical social worker services,’’. 

(6) COVERAGE OF MARRIAGE AND FAMILY THERAPIST SERVICES PROVIDED IN

RURAL HEALTH CLINICS AND FEDERALLY QUALIFIED HEALTH CENTERS.—Section 

1861(aa)(1)(B) of the Social Security Act (42 U.S.C. 1395x(aa)(1)(B)) is amended 

by striking ‘‘or by a clinical social worker (as defined in subsection (hh)(1)),’’ and 

inserting ‘‘, by a clinical social worker (as defined in subsection (hh)(1)), or by 

a marriage and family therapist (as defined in subsection (jjj)(2)),’’. 

(7) INCLUSION OF MARRIAGE AND FAMILY THERAPISTS AS PRACTITIONERS FOR

ASSIGNMENT OF CLAIMS.—Section 1842(b)(18)(C) of the Social Security Act (42 

U.S.C. 1395u(b)(18)(C)) is amended by adding at the end the following new 

clause: 

‘‘(vii) A marriage and family therapist (as defined in section 1861(jjj)(2)).’’. 

(b) COVERAGE OF MENTAL HEALTH COUNSELOR SERVICES.— 

(1) COVERAGE OF SERVICES.—Section 1861(s)(2) of the Social Security Act (42 

U.S.C. 1395x(s)(2)), as previously amended, is further amended— 

(A) in subparagraph (FF), by striking ‘‘and’’ at the end; 

(B) in subparagraph (GG), by inserting ‘‘and’’ at the end; and 

(C) by adding at the end the following new subparagraph: 

‘‘(HH) mental health counselor services (as defined in subsection (kkk)(1));’’. 

(2) DEFINITION.—Section 1861 of the Social Security Act (42 U.S.C. 1395x), as 

previously amended, is amended by adding at the end the following new subsection: 

‘‘Mental Health Counselor Services 

‘‘(kkk)(1) The term ‘mental health counselor services’ means services performed by 

a mental health counselor (as defined in paragraph (2)) for the diagnosis and treatment of mental illnesses which the mental health counselor is legally authorized to 

perform under State law (or the State regulatory mechanism provided by the State 

law) of the State in which such services are performed, as would otherwise be covered if furnished by a physician or as incident to a physician’s professional service, 

but only if no facility or other provider charges or is paid any amounts with respect 

to the furnishing of such services. 

‘‘(2) The term ‘mental health counselor’ means an individual who— 

‘‘(A) possesses a master’s or doctor’s degree which qualifies the individual for 

licensure or certification for the practice of mental health counseling in the 

State in which the services are performed; 

‘‘(B) after obtaining such a degree has performed at least 2 years of supervised mental health counselor practice; and 

‘‘(C) is licensed or certified as a mental health counselor or professional counselor by the State in which the services are performed.’’. 

(3) PROVISION FOR PAYMENT UNDER PART B.—Section 1832(a)(2)(B) of the Social Security Act (42 U.S.C. 1395k(a)(2)(B)), as amended by subsection (a)(3), is 

further amended— 

(A) by striking ‘‘and’’ at the end of clause (iv); 

(B) by adding ‘‘and’’ at the end of clause (v); and 

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

‘‘(vi) mental health counselor services;’’. 

(4) AMOUNT OF PAYMENT.— 

(A) IN GENERAL.—Section 1833(a)(1) of the Social Security Act (42 U.S.C. 

1395l(a)(1)), as amended by subsection (a), is further amended— 

(i) by striking ‘‘and’’ before ‘‘(X)’’; and 

(ii) by inserting before the semicolon at the end the following: ‘‘, and 

(Y), with respect to mental health counselor services under section 

1861(s)(2)(HH), the amounts paid shall be 80 percent of the lesser of 

the actual charge for the services or 75 percent of the amount determined for payment of a psychologist under clause (L)’’. 

(B) DEVELOPMENT OF CRITERIA WITH RESPECT TO CONSULTATION WITH A

PHYSICIAN.—The Secretary of Health and Human Services shall, taking into 

consideration concerns for patient confidentiality, develop criteria with respect to payment for mental health counselor services for which payment 

may be made directly to the mental health counselor under part B of title 

XVIII of the Social Security Act (42 U.S.C. 1395j et seq.) under which such 

a counselor must agree to consult with a patient’s attending or primary 

care physician in accordance with such criteria. 

(5) EXCLUSION OF MENTAL HEALTH COUNSELOR SERVICES FROM SKILLED NURSING FACILITY PROSPECTIVE PAYMENT SYSTEM.—Section 1888(e)(2)(A)(ii) of the Social Security Act (42 U.S.C. 1395yy(e)(2)(A)(ii)), as amended by section 1307(a) 


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and subsection (a), is amended by inserting ‘‘mental health counselor services 

(as defined in section 1861(kkk)(1)),’’ after ‘‘marriage and family therapist services (as defined in subsection (jjj)(1)),’’. 

(6) COVERAGE OF MENTAL HEALTH COUNSELOR SERVICES PROVIDED IN RURAL

HEALTH CLINICS AND FEDERALLY QUALIFIED HEALTH CENTERS.—Section 

1861(aa)(1)(B) of the Social Security Act (42 U.S.C. 1395x(aa)(1)(B)), as amended by subsection (a), is amended by striking ‘‘or by a marriage and family therapist (as defined in subsection (jjj)(2)),’’ and inserting ‘‘by a marriage and family 

therapist (as defined in subsection (jjj)(2)), or a mental health counselor (as defined in subsection (kkk)(2)),’’. 

(7) INCLUSION OF MENTAL HEALTH COUNSELORS AS PRACTITIONERS FOR ASSIGNMENT OF CLAIMS.—Section 1842(b)(18)(C) of the Social Security Act (42 U.S.C. 

1395u(b)(18)(C)), as amended by subsection (a)(7), is amended by adding at the 

end the following new clause: 

‘‘(viii) A mental health counselor (as defined in section 1861(kkk)(2)).’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to items 

and services furnished on or after January 1, 2011. 

SEC. 1309. EXTENSION OF PHYSICIAN FEE SCHEDULE MENTAL HEALTH ADD-ON. 

Section 138(a)(1) of the Medicare Improvements for Patients and Providers Act of 

2008 (Public Law 110–275) is amended by striking ‘‘December 31, 2009’’ and inserting ‘‘December 31, 2011’’. 

SEC. 1310. EXPANDING ACCESS TO VACCINES. 

(a) IN GENERAL.—Paragraph (10) of section 1861(s) of the Social Security Act (42 

U.S.C. 1395w(s)) is amended to read as follows: 

‘‘(10) federally recommended vaccines (as defined in subsection (lll)) and their 

respective administration;’’. 

(b) FEDERALLY RECOMMENDED VACCINES DEFINED.—Section 1861 of such Act is 

further amended by adding at the end the following new subsection: 

‘‘Federally Recommended Vaccines 

‘‘(lll) The term ‘federally recommended vaccine’ means an approved vaccine recommended by the Advisory Committee on Immunization Practices (an advisory committee established by the Secretary, acting through the Director of the Centers for 

Disease Control and Prevention).’’. 

(c) CONFORMING AMENDMENTS.— 

(1) Section 1833 of such Act (42 U.S.C. 1395l) is amended, in each of subsections (a)(1)(B), (a)(2)(G), and (a)(3)(A), by striking ‘‘1861(s)(10)(A)’’ and inserting ‘‘1861(s)(10)’’ each place it appears. 

(2) Section 1842(o)(1)(A)(iv) of such Act (42 U.S.C. 1395u(o)(1)(A)(iv)) is 

amended— 

(A) by striking ‘‘subparagraph (A) or (B) of’’; and 

(B) by inserting before the period the following: ‘‘and before January 1, 

2011, and influenza vaccines furnished on or after January 1, 2011’’. 

(3) Section 1847A(c)(6) of such Act (42 U.S.C. 1395w–3a(c)(6)) is amended by 

striking subparagraph (G) and inserting the following: 

‘‘(G) IMPLEMENTATION.—Chapter 35 of title 44, United States Code shall 

not apply to manufacturer provision of information pursuant to section 

1927(b)(3)(A)(iii) for purposes of implementation of this section.’’. 

(4) Section 1860D–2(e)(1) of such Act (42 U.S.C. 1395w–102(e)(1)) is amended 

by striking ‘‘such term includes a vaccine’’ and all that follows through ‘‘its administration) and’’. 

(5) Section 1861(ww)(2)(A) of such Act (42 U.S.C. 1395x(ww)(2)(A))) is amended by striking ‘‘Pneumococcal, influenza, and hepatitis B vaccine and administration’’ and inserting ‘‘Federally recommended vaccines (as defined in subsection (lll)) and their respective administration’’. 

(6) Section 1861(iii)(1) of such Act, as added by section 1305(a), is amended 

by amending subparagraph (J) to read as follows: 

‘‘(J) Federally recommended vaccines (as defined in subsection (lll)) and their 

respective administration.’’. 

(7) Section 1927(b)(3)(A)(iii) of such Act (42 U.S.C. 1396r–8(b)(3)(A)(iii)) is 

amended, in the matter following subclause (III), by inserting ‘‘(A)(iv) (including 

influenza vaccines furnished on or after January 1, 2011),’’ after ‘‘described in 

subparagraph’’ 

(d) EFFECTIVE DATES.—The amendments made by— 

(1) this section (other than by subsection (c)(7)) shall apply to vaccines administered on or after January 1, 2011; and 


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(2) by subsection (c)(7) shall apply to calendar quarters beginning on or after 

January 1, 2010. 

SEC. 1311. EXPANSION OF MEDICARE-COVERED PREVENTIVE SERVICES AT FEDERALLY 

QUALIFIED HEALTH CENTERS. 

Section 1861(aa)(3)(A) of the Social Security Act (42 U.S.C. 1395w (aa)(3)(A)) is 

amended to read as follows:

‘‘(A) services of the type described subparagraphs (A) through (C) of paragraph (1) and services described in section 1861(iii); and’’. 

TITLE IV—QUALITY 

Subtitle A—Comparative Effectiveness Research 

SEC. 1401. COMPARATIVE EFFECTIVENESS RESEARCH. 

(a) IN GENERAL.—Title XI of the Social Security Act is amended by adding at the 

end the following new part: 

‘‘PART D—COMPARATIVE EFFECTIVENESS RESEARCH

‘‘COMPARATIVE EFFECTIVENESS RESEARCH

‘‘SEC. 1181. (a) CENTER FOR COMPARATIVE EFFECTIVENESS RESEARCH ESTABLISHED.— 

‘‘(1) IN GENERAL.—The Secretary shall establish within the Agency for 

Healthcare Research and Quality a Center for Comparative Effectiveness Research (in this section referred to as the ‘Center’) to conduct, support, and synthesize research (including research conducted or supported under section 1013 

of the Medicare Prescription Drug, Improvement, and Modernization Act of 

2003) with respect to the outcomes, effectiveness, and appropriateness of health 

care services and procedures in order to identify the manner in which diseases, 

disorders, and other health conditions can most effectively and appropriately be 

prevented, diagnosed, treated, and managed clinically. 

‘‘(2) DUTIES.—The Center shall— 

‘‘(A) conduct, support, and synthesize research relevant to the comparative effectiveness of the full spectrum of health care items, services and systems, including pharmaceuticals, medical devices, medical and surgical procedures, and other medical interventions; 

‘‘(B) conduct and support systematic reviews of clinical research, including original research conducted subsequent to the date of the enactment of 

this section; 

‘‘(C) continuously develop rigorous scientific methodologies for conducting 

comparative effectiveness studies, and use such methodologies appropriately; 

‘‘(D) submit to the Comparative Effectiveness Research Commission, the 

Secretary, and Congress appropriate relevant reports described in subsection (d)(2); and 

‘‘(E) encourage, as appropriate, the development and use of clinical registries and the development of clinical effectiveness research data networks 

from electronic health records, post marketing drug and medical device surveillance efforts, and other forms of electronic health data. 

‘‘(3) POWERS.— 

‘‘(A) OBTAINING OFFICIAL DATA.—The Center may secure directly from any 

department or agency of the United States information necessary to enable 

it to carry out this section. Upon request of the Center, the head of that 

department or agency shall furnish that information to the Center on an 

agreed upon schedule. 

‘‘(B) DATA COLLECTION.—In order to carry out its functions, the Center 

shall— 

‘‘(i) utilize existing information, both published and unpublished, 

where possible, collected and assessed either by its own staff or under 

other arrangements made in accordance with this section, 

‘‘(ii) carry out, or award grants or contracts for, original research and 

experimentation, where existing information is inadequate, and 

‘‘(iii) adopt procedures allowing any interested party to submit information for the use by the Center and Commission under subsection (b) 

in making reports and recommendations. 


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‘‘(C) ACCESS OF GAO TO INFORMATION.—The Comptroller General shall 

have unrestricted access to all deliberations, records, and nonproprietary 

data of the Center and Commission under subsection (b), immediately upon 

request. 

‘‘(D) PERIODIC AUDIT.—The Center and Commission under subsection (b) 

shall be subject to periodic audit by the Comptroller General. 

‘‘(b) OVERSIGHT BY COMPARATIVE EFFECTIVENESS RESEARCH COMMISSION.— ‘‘(1) IN GENERAL.—The Secretary shall establish an independent Comparative 

Effectiveness Research Commission (in this section referred to as the ‘Commission’) to oversee and evaluate the activities carried out by the Center under subsection (a), subject to the authority of the Secretary, to ensure such activities 

result in highly credible research and information resulting from such research. 

‘‘(2) DUTIES.—The Commission shall— 

‘‘(A) determine national priorities for research described in subsection (a) 

and in making such determinations consult with a broad array of public 

and private stakeholders, including patients and health care providers and 

payers; 

‘‘(B) monitor the appropriateness of use of the CERTF described in subsection (g) with respect to the timely production of comparative effectiveness research determined to be a national priority under subparagraph (A); 

‘‘(C) identify highly credible research methods and standards of evidence 

for such research to be considered by the Center; 

‘‘(D) review the methodologies developed by the center under subsection 

(a)(2)(C); 

‘‘(E) not later than one year after the date of the enactment of this section, enter into an arrangement under which the Institute of Medicine of 

the National Academy of Sciences shall conduct an evaluation and report 

on standards of evidence for such research; 

‘‘(F) support forums to increase stakeholder awareness and permit stakeholder feedback on the efforts of the Center to advance methods and standards that promote highly credible research; 

‘‘(G) make recommendations for policies that would allow for public access 

of data produced under this section, in accordance with appropriate privacy 

and proprietary practices, while ensuring that the information produced 

through such data is timely and credible; 

‘‘(H) appoint a clinical perspective advisory panel for each research priority determined under subparagraph (A), which shall consult with patients 

and advise the Center on research questions, methods, and evidence gaps 

in terms of clinical outcomes for the specific research inquiry to be examined with respect to such priority to ensure that the information produced 

from such research is clinically relevant to decisions made by clinicians and 

patients at the point of care; 

‘‘(I) make recommendations for the priority for periodic reviews of previous comparative effectiveness research and studies conducted by the Center under subsection (a); 

‘‘(J) routinely review processes of the Center with respect to such research to confirm that the information produced by such research is objective, credible, consistent with standards of evidence established under this 

section, and developed through a transparent process that includes consultations with appropriate stakeholders; and 

‘‘(K) make recommendations to the center for the broad dissemination of 

the findings of research conducted and supported under this section that 

enables clinicians, patients, consumers, and payers to make more informed 

health care decisions that improve quality and value. 

‘‘(3) COMPOSITION OF COMMISSION.— 

‘‘(A) IN GENERAL.—The members of the Commission shall consist of— 

‘‘(i) the Director of the Agency for Healthcare Research and Quality; 

‘‘(ii) the Chief Medical Officer of the Centers for Medicare & Medicaid 

Services; and 

‘‘(iii) 15 additional members who shall represent broad constituencies 

of stakeholders including clinicians, patients, researchers, third-party 

payers, consumers of Federal and State beneficiary programs. 

Of such members, at least 9 shall be practicing physicians, health care 

practitioners, consumers, or patients. 

‘‘(B) QUALIFICATIONS.— 

‘‘(i) DIVERSE REPRESENTATION OF PERSPECTIVES.—The members of the 

Commission shall represent a broad range of perspectives and shall collectively have experience in the following areas: 

‘‘(I) Epidemiology. 


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‘‘(II) Health services research. 

‘‘(III) Bioethics. 

‘‘(IV) Decision sciences. 

‘‘(V) Health disparities. 

‘‘(VI) Economics. 

‘‘(ii) DIVERSE REPRESENTATION OF HEALTH CARE COMMUNITY.—At 

least one member shall represent each of the following health care communities: 

‘‘(I) Patients. 

‘‘(II) Health care consumers. 

‘‘(III) Practicing Physicians, including surgeons. 

‘‘(IV) Other health care practitioners engaged in clinical care. 

‘‘(V) Employers. 

‘‘(VI) Public payers. 

‘‘(VII) Insurance plans. 

‘‘(VIII) Clinical researchers who conduct research on behalf of 

pharmaceutical or device manufacturers. 

‘‘(C) LIMITATION.—No more than 3 of the Members of the Commission 

may be representatives of pharmaceutical or device manufacturers and 

such representatives shall be clinical researchers described under subparagraph (B)(ii)(VIII). 

‘‘(4) APPOINTMENT.— 

‘‘(A) IN GENERAL.—The Secretary shall appoint the members of the Commission. 

‘‘(B) CONSULTATION.—In considering candidates for appointment to the 

Commission, the Secretary may consult with the Government Accountability Office and the Institute of Medicine of the National Academy of 

Sciences. 

‘‘(5) CHAIRMAN; VICE CHAIRMAN.—The Secretary shall designate a member of 

the Commission, at the time of appointment of the member, as Chairman and 

a member as Vice Chairman for that term of appointment, except that in the 

case of vacancy of the Chairmanship or Vice Chairmanship, the Secretary may 

designate another member for the remainder of that member’s term. The Chairman shall serve as an ex officio member of the National Advisory Council of 

the Agency for Health Care Research and Quality under section 931(c)(3)(B) of 

the Public Health Service Act. 

‘‘(6) TERMS.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), each member 

of the Commission shall be appointed for a term of 4 years. 

‘‘(B) TERMS OF INITIAL APPOINTEES.—Of the members first appointed— 

‘‘(i) 8 shall be appointed for a term of 4 years; and 

‘‘(ii) 7 shall be appointed for a term of 3 years. 

‘‘(7) COORDINATION.—To enhance effectiveness and coordination, the Secretary 

is encouraged, to the greatest extent possible, to seek coordination between the 

Commission and the National Advisory Council of the Agency for Healthcare 

Research and Quality. 

‘‘(8) CONFLICTS OF INTEREST.— 

‘‘(A) IN GENERAL.—In appointing the members of the Commission or a 

clinical perspective advisory panel described in paragraph (2)(H), the Secretary or the Commission, respectively, shall take into consideration any financial interest (as defined in subparagraph (D)), consistent with this paragraph, and develop a plan for managing any identified conflicts. 

‘‘(B) EVALUATION AND CRITERIA.—When considering an appointment to 

the Commission or a clinical perspective advisory panel described paragraph (2)(H) the Secretary or the Commission shall review the expertise of 

the individual and the financial disclosure report filed by the individual 

pursuant to the Ethics in Government Act of 1978 for each individual under 

consideration for the appointment, so as to reduce the likelihood that an appointed individual will later require a written determination as referred to 

in section 208(b)(1) of title 18, United States Code, a written certification 

as referred to in section 208(b)(3) of title 18, United States Code, or a waiver as referred to in subparagraph (D)(iii) for service on the Commission at 

a meeting of the Commission. 

‘‘(C) DISCLOSURES; PROHIBITIONS ON PARTICIPATION; WAIVERS.— 

‘‘(i) DISCLOSURE OF FINANCIAL INTEREST.—Prior to a meeting of the 

Commission or a clinical perspective advisory panel described in paragraph (2)(H) regarding a ‘particular matter’ (as that term is used in 

section 208 of title 18, United States Code), each member of the Commission or the clinical perspective advisory panel who is a full-time 


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Government employee or special Government employee shall disclose to 

the Secretary financial interests in accordance with subsection (b) of 

such section 208. 

‘‘(ii) PROHIBITIONS ON PARTICIPATION.—Except as provided under 

clause (iii), a member of the Commission or a clinical perspective advisory panel described in paragraph (2)(H) may not participate with respect to a particular matter considered in meeting of the Commission 

or the clinical perspective advisory panel if such member (or an immediate family member of such member) has a financial interest that 

could be affected by the advice given to the Secretary with respect to 

such matter, excluding interests exempted in regulations issued by the 

Director of the Office of Government Ethics as too remote or inconsequential to affect the integrity of the services of the Government officers or employees to which such regulations apply. 

‘‘(iii) WAIVER.—If the Secretary determines it necessary to afford the 

Commission or a clinical perspective advisory panel described in paragraph 2(H) essential expertise, the Secretary may grant a waiver of the 

prohibition in clause (ii) to permit a member described in such subparagraph to— 

‘‘(I) participate as a non-voting member with respect to a particular matter considered in a Commission or a clinical perspective 

advisory panel meeting; or 

‘‘(II) participate as a voting member with respect to a particular 

matter considered in a Commission or a clinical perspective advisory panel meeting. 

‘‘(iv) LIMITATION ON WAIVERS AND OTHER EXCEPTIONS.— 

‘‘(I) DETERMINATION OF ALLOWABLE EXCEPTIONS FOR THE COMMISSION.—The number of waivers granted to members of the Commission cannot exceed one-half of the total number of members for the 

Commission. 

‘‘(II) PROHIBITION ON VOTING STATUS ON CLINICAL PERSPECTIVE

ADVISORY PANELS.—No voting member of any clinical perspective 

advisory panel shall be in receipt of a waiver. No more than two 

nonvoting members of any clinical perspective advisory panel shall 

receive a waiver. 

‘‘(D) FINANCIAL INTEREST DEFINED.—For purposes of this paragraph, the 

term ‘financial interest’ means a financial interest under section 208(a) of 

title 18, United States Code. 

‘‘(9) COMPENSATION.—While serving on the business of the Commission (including travel time), a member of the Commission shall be entitled to compensation at the per diem equivalent of the rate provided for level IV of the Executive Schedule under section 5315 of title 5, United States Code; and while 

so serving away from home and the member’s regular place of business, a member may be allowed travel expenses, as authorized by the Director of the Commission. 

‘‘(10) AVAILABILITY OF REPORTS.—The Commission shall transmit to the Secretary a copy of each report submitted under this subsection and shall make 

such reports available to the public. 

‘‘(11) DIRECTOR AND STAFF; EXPERTS AND CONSULTANTS.—Subject to such review as the Secretary deems necessary to assure the efficient administration of 

the Commission, the Commission may— 

‘‘(A) appoint an Executive Director (subject to the approval of the Secretary) and such other personnel as Federal employees under section 2105 

of title 5, United States Code, as may be necessary to carry out its duties 

(without regard to the provisions of title 5, United States Code, governing 

appointments in the competitive service); 

‘‘(B) seek such assistance and support as may be required in the performance of its duties from appropriate Federal departments and agencies; 

‘‘(C) enter into contracts or make other arrangements, as may be necessary for the conduct of the work of the Commission (without regard to 

section 3709 of the Revised Statutes (41 U.S.C. 5)); 

‘‘(D) make advance, progress, and other payments which relate to the 

work of the Commission; 

‘‘(E) provide transportation and subsistence for persons serving without 

compensation; and 

‘‘(F) prescribe such rules and regulations as it deems necessary with respect to the internal organization and operation of the Commission. 

‘‘(c) RESEARCH REQUIREMENTS.—Any research conducted, supported, or synthesized under this section shall meet the following requirements: 


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‘‘(1) ENSURING TRANSPARENCY, CREDIBILITY, AND ACCESS.— 

‘‘(A) The establishment of the agenda and conduct of the research shall 

be insulated from inappropriate political or stakeholder influence. 

‘‘(B) Methods of conducting such research shall be scientifically based. 

‘‘(C) All aspects of the prioritization of research, conduct of the research, 

and development of conclusions based on the research shall be transparent 

to all stakeholders. 

‘‘(D) The process and methods for conducting such research shall be publicly documented and available to all stakeholders. 

‘‘(E) Throughout the process of such research, the Center shall provide 

opportunities for all stakeholders involved to review and provide public 

comment on the methods and findings of such research. 

‘‘(2) USE OF CLINICAL PERSPECTIVE ADVISORY PANELS.—The research shall 

meet a national research priority determined under subsection (b)(2)(A) and 

shall consider advice given to the Center by the clinical perspective advisory 

panel for the national research priority. 

‘‘(3) STAKEHOLDER INPUT.— 

‘‘(A) IN GENERAL.—The Commission shall consult with patients, health 

care providers, health care consumer representatives, and other appropriate 

stakeholders with an interest in the research through a transparent process 

recommended by the Commission. 

‘‘(B) SPECIFIC AREAS OF CONSULTATION.—Consultation shall include where 

deemed appropriate by the Commission— 

‘‘(i) recommending research priorities and questions; 

‘‘(ii) recommending research methodologies; and 

‘‘(iii) advising on and assisting with efforts to disseminate research 

findings. 

‘‘(C) OMBUDSMAN.—The Secretary shall designate a patient ombudsman. 

The ombudsman shall— 

‘‘(i) serve as an available point of contact for any patients with an interest in proposed comparative effectiveness studies by the Center; and 

‘‘(ii) ensure that any comments from patients regarding proposed 

comparative effectiveness studies are reviewed by the Commission. 

‘‘(4) TAKING INTO ACCOUNT POTENTIAL DIFFERENCES.—Research shall— 

‘‘(A) be designed, as appropriate, to take into account the potential for differences in the effectiveness of health care items and services used with 

various subpopulations such as racial and ethnic minorities, women, different age groups (including children, adolescents, adults, and seniors), and 

individuals with different comorbidities; and— 

‘‘(B) seek, as feasible and appropriate, to include members of such subpopulations as subjects in the research. 

‘‘(d) PUBLIC ACCESS TO COMPARATIVE EFFECTIVENESS INFORMATION.— 

‘‘(1) IN GENERAL.—Not later than 90 days after receipt by the Center or Commission, as applicable, of a relevant report described in paragraph (2) made by 

the Center, Commission, or clinical perspective advisory panel under this section, appropriate information contained in such report shall be posted on the 

official public Internet site of the Center and of the Commission, as applicable. 

‘‘(2) RELEVANT REPORTS DESCRIBED.—For purposes of this section, a relevant 

report is each of the following submitted by the Center or a grantee or contractor of the Center: 

‘‘(A) Any interim or progress reports as deemed appropriate by the Secretary. 

‘‘(B) Stakeholder comments. 

‘‘(C) A final report. 

‘‘(e) DISSEMINATION AND INCORPORATION OF COMPARATIVE EFFECTIVENESS INFORMATION.— 

‘‘(1) DISSEMINATION.—The Center shall provide for the dissemination of appropriate findings produced by research supported, conducted, or synthesized under 

this section to health care providers, patients, vendors of health information 

technology focused on clinical decision support, appropriate professional associations, and Federal and private health plans, and other relevant stakeholders. 

In disseminating such findings the Center shall— 

‘‘(A) convey findings of research so that they are comprehensible and useful to patients and providers in making health care decisions; 

‘‘(B) discuss findings and other considerations specific to certain sub-populations, risk factors, and comorbidities as appropriate; 

‘‘(C) include considerations such as limitations of research and what further research may be needed, as appropriate; 


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‘‘(D) not include any data that the dissemination of which would violate 

the privacy of research participants or violate any confidentiality agreements made with respect to the use of data under this section; and 

‘‘(E) assist the users of health information technology focused on clinical 

decision support to promote the timely incorporation of such findings into 

clinical practices and promote the ease of use of such incorporation. 

‘‘(2) DISSEMINATION PROTOCOLS AND STRATEGIES.—The Center shall develop 

protocols and strategies for the appropriate dissemination of research findings 

in order to ensure effective communication of findings and the use and incorporation of such findings into relevant activities for the purpose of informing higher quality and more effective and efficient decisions regarding medical items 

and services. In developing and adopting such protocols and strategies, the Center shall consult with stakeholders concerning the types of dissemination that 

will be most useful to the end users of information and may provide for the utilization of multiple formats for conveying findings to different audiences, including dissemination to individuals with limited English proficiency. 

‘‘(f) REPORTS TO CONGRESS.— ‘‘(1) ANNUAL REPORTS.—Beginning not later than one year after the date of 

the enactment of this section, the Director of the Agency of Healthcare Research 

and Quality and the Commission shall submit to Congress an annual report on 

the activities of the Center and the Commission, as well as the research, conducted under this section. Each such report shall include a discussion of the 

Center’s compliance with subsection (c)(4)(B), including any reasons for lack of 

compliance with such subsection. 

‘‘(2) RECOMMENDATION FOR FAIR SHARE PER CAPITA AMOUNT FOR ALL-PAYER FI- NANCING.—Beginning not later than December 31, 2011, the Secretary shall 

submit to Congress an annual recommendation for a fair share per capita 

amount described in subsection (c)(1) of section 9511 of the Internal Revenue 

Code of 1986 for purposes of funding the CERTF under such section. 

‘‘(3) ANALYSIS AND REVIEW.—Not later than December 31, 2013, the Secretary, 

in consultation with the Commission, shall submit to Congress a report on all 

activities conducted or supported under this section as of such date. Such report 

shall include an evaluation of the overall costs of such activities and an analysis 

of the backlog of any research proposals approved by the Commission but not 

funded. 

‘‘(g) FUNDING OF COMPARATIVE EFFECTIVENESS RESEARCH.—For fiscal year 2010 

and each subsequent fiscal year, amounts in the Comparative Effectiveness Research Trust Fund (referred to in this section as the ‘CERTF’) under section 9511 

of the Internal Revenue Code of 1986 shall be available, without the need for further appropriations and without fiscal year limitation, to the Secretary to carry out 

this section. 

‘‘(h) CONSTRUCTION.—Nothing in this section shall be construed to permit the 

Commission or the Center to mandate coverage, reimbursement, or other policies for 

any public or private payer.’’. 

(b) COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND; FINANCING FOR THE

TRUST FUND.—For provision establishing a Comparative Effectiveness Research 

Trust Fund and financing such Trust Fund, see section 1802. 

Subtitle B—Nursing Home Transparency 

PART 1—IMPROVING TRANSPARENCY OF INFORMATION 

ON SKILLED NURSING FACILITIES AND NURSING FACILITIES 

SEC. 1411. REQUIRED DISCLOSURE OF OWNERSHIP AND ADDITIONAL DISCLOSABLE PARTIES 

INFORMATION. 

(a) IN GENERAL.—Section 1124 of the Social Security Act (42 U.S.C. 1320a–3) is 

amended by adding at the end the following new subsection: 

‘‘(c) REQUIRED DISCLOSURE OF OWNERSHIP AND ADDITIONAL DISCLOSABLE PARTIES

INFORMATION.— 

‘‘(1) DISCLOSURE.—A facility (as defined in paragraph (7)(B)) shall have the 

information described in paragraph (3) available— 

‘‘(A) during the period beginning on the date of the enactment of this subsection and ending on the date such information is made available to the 

public under section 1411(b) of the America’s Affordable Health Choices Act 

of 2009, for submission to the Secretary, the Inspector General of the Department of Health and Human Services, the State in which the facility is 


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located, and the State long-term care ombudsman in the case where the 

Secretary, the Inspector General, the State, or the State long-term care ombudsman requests such information; and 

‘‘(B) beginning on the effective date of the final regulations promulgated 

under paragraph (4)(A), for reporting such information in accordance with 

such final regulations. 

Nothing in subparagraph (A) shall be construed as authorizing a facility to dispose of or delete information described in such subparagraph after the effective 

date of the final regulations promulgated under paragraph (4)(A). 

‘‘(2) PUBLIC AVAILABILITY OF INFORMATION.—During the period described in 

paragraph (1)(A), a facility shall— 

‘‘(A) make the information described in paragraph (3) available to the 

public upon request and update such information as may be necessary to 

reflect changes in such information; and 

‘‘(B) post a notice of the availability of such information in the lobby of 

the facility in a prominent manner. 

‘‘(3) INFORMATION DESCRIBED.— ‘‘(A) IN GENERAL.—The following information is described in this paragraph: 

‘‘(i) The information described in subsections (a) and (b), subject to 

subparagraph (C). 

‘‘(ii) The identity of and information on— 

‘‘(I) each member of the governing body of the facility, including 

the name, title, and period of service of each such member; 

‘‘(II) each person or entity who is an officer, director, member, 

partner, trustee, or managing employee of the facility, including 

the name, title, and date of start of service of each such person or 

entity; and 

‘‘(III) each person or entity who is an additional disclosable party 

of the facility. 

‘‘(iii) The organizational structure of each person and entity described 

in subclauses (II) and (III) of clause (ii) and a description of the relationship of each such person or entity to the facility and to one another. 

‘‘(B) SPECIAL RULE WHERE INFORMATION IS ALREADY REPORTED OR SUBMITTED.—To the extent that information reported by a facility to the Internal Revenue Service on Form 990, information submitted by a facility to the 

Securities and Exchange Commission, or information otherwise submitted 

to the Secretary or any other Federal agency contains the information described in clauses (i), (ii), or (iii) of subparagraph (A), the Secretary may 

allow, to the extent practicable, such Form or such information to meet the 

requirements of paragraph (1) and to be submitted in a manner specified 

by the Secretary. 

‘‘(C) SPECIAL RULE.—In applying subparagraph (A)(i)— 

‘‘(i) with respect to subsections (a) and (b), ‘ownership or control interest’ shall include direct or indirect interests, including such interests 

in intermediate entities; and 

‘‘(ii) subsection (a)(3)(A)(ii) shall include the owner of a whole or part 

interest in any mortgage, deed of trust, note, or other obligation secured, in whole or in part, by the entity or any of the property or assets 

thereof, if the interest is equal to or exceeds 5 percent of the total property or assets of the entirety. 

‘‘(4) REPORTING.— 

‘‘(A) IN GENERAL.—Not later than the date that is 2 years after the date 

of the enactment of this subsection, the Secretary shall promulgate regulations requiring, effective on the date that is 90 days after the date on which 

such final regulations are published in the Federal Register, a facility to report the information described in paragraph (3) to the Secretary in a standardized format, and such other regulations as are necessary to carry out 

this subsection. Such final regulations shall ensure that the facility certifies, as a condition of participation and payment under the program under 

title XVIII or XIX, that the information reported by the facility in accordance with such final regulations is accurate and current. 

‘‘(B) GUIDANCE.—The Secretary shall provide guidance and technical assistance to States on how to adopt the standardized format under subparagraph (A). 

‘‘(5) NO EFFECT ON EXISTING REPORTING REQUIREMENTS.—Nothing in this subsection shall reduce, diminish, or alter any reporting requirement for a facility 

that is in effect as of the date of the enactment of this subsection. 

‘‘(6) DEFINITIONS.—In this subsection: 


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‘‘(A) ADDITIONAL DISCLOSABLE PARTY.—The term ‘additional disclosable 

party’ means, with respect to a facility, any person or entity who— 

‘‘(i) exercises operational, financial, or managerial control over the facility or a part thereof, or provides policies or procedures for any of the 

operations of the facility, or provides financial or cash management 

services to the facility; 

‘‘(ii) leases or subleases real property to the facility, or owns a whole 

or part interest equal to or exceeding 5 percent of the total value of 

such real property; 

‘‘(iii) lends funds or provides a financial guarantee to the facility in 

an amount which is equal to or exceeds $50,000; or 

‘‘(iv) provides management or administrative services, clinical consulting services, or accounting or financial services to the facility. 

‘‘(B) FACILITY.—The term ‘facility’ means a disclosing entity which is— 

‘‘(i) a skilled nursing facility (as defined in section 1819(a)); or 

‘‘(ii) a nursing facility (as defined in section 1919(a)). 

‘‘(C) MANAGING EMPLOYEE.—The term ‘managing employee’ means, with 

respect to a facility, an individual (including a general manager, business 

manager, administrator, director, or consultant) who directly or indirectly 

manages, advises, or supervises any element of the practices, finances, or 

operations of the facility. 

‘‘(D) ORGANIZATIONAL STRUCTURE.—The term ‘organizational structure’ 

means, in the case of— 

‘‘(i) a corporation, the officers, directors, and shareholders of the corporation who have an ownership interest in the corporation which is 

equal to or exceeds 5 percent; 

‘‘(ii) a limited liability company, the members and managers of the 

limited liability company (including, as applicable, what percentage 

each member and manager has of the ownership interest in the limited 

liability company); 

‘‘(iii) a general partnership, the partners of the general partnership; 

‘‘(iv) a limited partnership, the general partners and any limited 

partners of the limited partnership who have an ownership interest in 

the limited partnership which is equal to or exceeds 10 percent; 

‘‘(v) a trust, the trustees of the trust; 

‘‘(vi) an individual, contact information for the individual; and 

‘‘(vii) any other person or entity, such information as the Secretary 

determines appropriate.’’. 

(b) PUBLIC AVAILABILITY OF INFORMATION.— 

(1) IN GENERAL.—Not later than the date that is 1 year after the date on 

which the final regulations promulgated under section 1124(c)(4)(A) of the Social Security Act, as added by subsection (a), are published in the Federal Register, the information reported in accordance with such final regulations shall 

be made available to the public in accordance with procedures established by 

the Secretary. 

(2) DEFINITIONS.—In this subsection: 

(A) NURSING FACILITY.—The term ‘‘nursing facility’’ has the meaning 

given such term in section 1919(a) of the Social Security Act (42 U.S.C. 

1396r(a)). 

(B) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of Health 

and Human Services. 

(C) SKILLED NURSING FACILITY.—The term ‘‘skilled nursing facility’’ has 

the meaning given such term in section 1819(a) of the Social Security Act 

(42 U.S.C. 1395i–3(a)). 

(c) CONFORMING AMENDMENTS.— 

(1) SKILLED NURSING FACILITIES.—Section 1819(d)(1) of the Social Security Act 

(42 U.S.C. 1395i–3(d)(1)) is amended by striking subparagraph (B) and redesignating subparagraph (C) as subparagraph (B). 

(2) NURSING FACILITIES.—Section 1919(d)(1) of the Social Security Act (42 

U.S.C. 1396r(d)(1)) is amended by striking subparagraph (B) and redesignating 

subparagraph (C) as subparagraph (B). 

SEC. 1412. ACCOUNTABILITY REQUIREMENTS. 

(a) EFFECTIVE COMPLIANCE AND ETHICS PROGRAMS.— 

(1) SKILLED NURSING FACILITIES.—Section 1819(d)(1) of the Social Security Act 

(42 U.S.C. 1395i–3(d)(1)), as amended by section 1411(c)(1), is amended by adding at the end the following new subparagraph: 

‘‘(C) COMPLIANCE AND ETHICS PROGRAMS.— 


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‘‘(i) REQUIREMENT.—On or after the date that is 36 months after the 

date of the enactment of this subparagraph, a skilled nursing facility 

shall, with respect to the entity that operates the facility (in this subparagraph referred to as the ‘operating organization’ or ‘organization’), 

have in operation a compliance and ethics program that is effective in 

preventing and detecting criminal, civil, and administrative violations 

under this Act and in promoting quality of care consistent with regulations developed under clause (ii). 

‘‘(ii) DEVELOPMENT OF REGULATIONS.— 

‘‘(I) IN GENERAL.—Not later than the date that is 2 years after 

such date of the enactment, the Secretary, in consultation with the 

Inspector General of the Department of Health and Human Services, shall promulgate regulations for an effective compliance and 

ethics program for operating organizations, which may include a 

model compliance program. 

‘‘(II) DESIGN OF REGULATIONS.—Such regulations with respect to 

specific elements or formality of a program may vary with the size 

of the organization, such that larger organizations should have a 

more formal and rigorous program and include established written 

policies defining the standards and procedures to be followed by its 

employees. Such requirements shall specifically apply to the corporate level management of multi-unit nursing home chains. 

‘‘(III) EVALUATION.—Not later than 3 years after the date of promulgation of regulations under this clause, the Secretary shall 

complete an evaluation of the compliance and ethics programs required to be established under this subparagraph. Such evaluation 

shall determine if such programs led to changes in deficiency citations, changes in quality performance, or changes in other metrics 

of resident quality of care. The Secretary shall submit to Congress 

a report on such evaluation and shall include in such report such 

recommendations regarding changes in the requirements for such 

programs as the Secretary determines appropriate. 

‘‘(iii) REQUIREMENTS FOR COMPLIANCE AND ETHICS PROGRAMS.—In this 

subparagraph, the term ‘compliance and ethics program’ means, with 

respect to a skilled nursing facility, a program of the operating organization that— 

‘‘(I) has been reasonably designed, implemented, and enforced so 

that it generally will be effective in preventing and detecting criminal, civil, and administrative violations under this Act and in promoting quality of care; and 

‘‘(II) includes at least the required components specified in clause 

(iv). 

‘‘(iv) REQUIRED COMPONENTS OF PROGRAM.—The required components 

of a compliance and ethics program of an organization are the following: 

‘‘(I) The organization must have established compliance standards and procedures to be followed by its employees, contractors, 

and other agents that are reasonably capable of reducing the prospect of criminal, civil, and administrative violations under this Act. 

‘‘(II) Specific individuals within high-level personnel of the organization must have been assigned overall responsibility to oversee 

compliance with such standards and procedures and have sufficient 

resources and authority to assure such compliance. 

‘‘(III) The organization must have used due care not to delegate 

substantial discretionary authority to individuals whom the organization knew, or should have known through the exercise of due 

diligence, had a propensity to engage in criminal, civil, and administrative violations under this Act. 

‘‘(IV) The organization must have taken steps to communicate effectively its standards and procedures to all employees and other 

agents, such as by requiring participation in training programs or 

by disseminating publications that explain in a practical manner 

what is required. 

‘‘(V) The organization must have taken reasonable steps to 

achieve compliance with its standards, such as by utilizing monitoring and auditing systems reasonably designed to detect criminal, 

civil, and administrative violations under this Act by its employees 

and other agents and by having in place and publicizing a reportVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00149 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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ing system whereby employees and other agents could report violations by others within the organization without fear of retribution. 

‘‘(VI) The standards must have been consistently enforced 

through appropriate disciplinary mechanisms, including, as appropriate, discipline of individuals responsible for the failure to detect 

an offense. 

‘‘(VII) After an offense has been detected, the organization must 

have taken all reasonable steps to respond appropriately to the offense and to prevent further similar offenses, including repayment 

of any funds to which it was not entitled and any necessary modification to its program to prevent and detect criminal, civil, and administrative violations under this Act. 

‘‘(VIII) The organization must periodically undertake reassessment of its compliance program to identify changes necessary to reflect changes within the organization and its facilities. 

‘‘(v) COORDINATION.—The provisions of this subparagraph shall apply 

with respect to a skilled nursing facility in lieu of section 1874(d).’’. 

(2) NURSING FACILITIES.—Section 1919(d)(1) of the Social Security Act (42 

U.S.C. 1396r(d)(1)), as amended by section 1411(c)(2), is amended by adding at 

the end the following new subparagraph: 

‘‘(C) COMPLIANCE AND ETHICS PROGRAM.— 

‘‘(i) REQUIREMENT.—On or after the date that is 36 months after the 

date of the enactment of this subparagraph, a nursing facility shall, 

with respect to the entity that operates the facility (in this subparagraph referred to as the ‘operating organization’ or ‘organization’), have 

in operation a compliance and ethics program that is effective in preventing and detecting criminal, civil, and administrative violations 

under this Act and in promoting quality of care consistent with regulations developed under clause (ii). 

‘‘(ii) DEVELOPMENT OF REGULATIONS.— 

‘‘(I) IN GENERAL.—Not later than the date that is 2 years after 

such date of the enactment, the Secretary, in consultation with the 

Inspector General of the Department of Health and Human Services, shall develop regulations for an effective compliance and ethics program for operating organizations, which may include a 

model compliance program. 

‘‘(II) DESIGN OF REGULATIONS.—Such regulations with respect to 

specific elements or formality of a program may vary with the size 

of the organization, such that larger organizations should have a 

more formal and rigorous program and include established written 

policies defining the standards and procedures to be followed by its 

employees. Such requirements may specifically apply to the corporate level management of multi-unit nursing home chains. 

‘‘(III) EVALUATION.—Not later than 3 years after the date of promulgation of regulations under this clause the Secretary shall complete an evaluation of the compliance and ethics programs required 

to be established under this subparagraph. Such evaluation shall 

determine if such programs led to changes in deficiency citations, 

changes in quality performance, or changes in other metrics of resident quality of care. The Secretary shall submit to Congress a report on such evaluation and shall include in such report such recommendations regarding changes in the requirements for such programs as the Secretary determines appropriate. 

‘‘(iii) REQUIREMENTS FOR COMPLIANCE AND ETHICS PROGRAMS.—In this 

subparagraph, the term ‘compliance and ethics program’ means, with 

respect to a nursing facility, a program of the operating organization 

that— 

‘‘(I) has been reasonably designed, implemented, and enforced so 

that it generally will be effective in preventing and detecting criminal, civil, and administrative violations under this Act and in promoting quality of care; and 

‘‘(II) includes at least the required components specified in clause 

(iv). 

‘‘(iv) REQUIRED COMPONENTS OF PROGRAM.—The required components 

of a compliance and ethics program of an organization are the following: 

‘‘(I) The organization must have established compliance standards and procedures to be followed by its employees and other 


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agents that are reasonably capable of reducing the prospect of 

criminal, civil, and administrative violations under this Act. 

‘‘(II) Specific individuals within high-level personnel of the organization must have been assigned overall responsibility to oversee 

compliance with such standards and procedures and has sufficient 

resources and authority to assure such compliance. 

‘‘(III) The organization must have used due care not to delegate 

substantial discretionary authority to individuals whom the organization knew, or should have known through the exercise of due 

diligence, had a propensity to engage in criminal, civil, and administrative violations under this Act. 

‘‘(IV) The organization must have taken steps to communicate effectively its standards and procedures to all employees and other 

agents, such as by requiring participation in training programs or 

by disseminating publications that explain in a practical manner 

what is required. 

‘‘(V) The organization must have taken reasonable steps to 

achieve compliance with its standards, such as by utilizing monitoring and auditing systems reasonably designed to detect criminal, 

civil, and administrative violations under this Act by its employees 

and other agents and by having in place and publicizing a reporting system whereby employees and other agents could report violations by others within the organization without fear of retribution. 

‘‘(VI) The standards must have been consistently enforced 

through appropriate disciplinary mechanisms, including, as appropriate, discipline of individuals responsible for the failure to detect 

an offense. 

‘‘(VII) After an offense has been detected, the organization must 

have taken all reasonable steps to respond appropriately to the offense and to prevent further similar offenses, including repayment 

of any funds to which it was not entitled and any necessary modification to its program to prevent and detect criminal, civil, and administrative violations under this Act. 

‘‘(VIII) The organization must periodically undertake reassessment of its compliance program to identify changes necessary to reflect changes within the organization and its facilities. 

‘‘(v) COORDINATION.—The provisions of this subparagraph shall apply 

with respect to a nursing facility in lieu of section 1902(a)(77).’’. 

(b) QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT PROGRAM.— 

(1) SKILLED NURSING FACILITIES.—Section 1819(b)(1)(B) of the Social Security 

Act (42 U.S.C. 1396r(b)(1)(B)) is amended— 

(A) by striking ‘‘ASSURANCE’’ and inserting ‘‘ASSURANCE AND QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT PROGRAM’’; 

(B) by designating the matter beginning with ‘‘A skilled nursing facility’’ 

as a clause (i) with the heading ‘‘IN GENERAL.—’’ and the appropriate indentation; 

(C) in clause (i) (as so designated by subparagraph (B)), by redesignating 

clauses (i) and (ii) as subclauses (I) and (II), respectively; and 

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

‘‘(ii) QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT PROGRAM.— 

‘‘(I) IN GENERAL.—Not later than December 31, 2011, the Secretary shall establish and implement a quality assurance and performance improvement program (in this clause referred to as the 

‘QAPI program’) for skilled nursing facilities, including multi-unit 

chains of such facilities. Under the QAPI program, the Secretary 

shall establish standards relating to such facilities and provide 

technical assistance to such facilities on the development of best 

practices in order to meet such standards. Not later than 1 year 

after the date on which the regulations are promulgated under subclause (II), a skilled nursing facility must submit to the Secretary 

a plan for the facility to meet such standards and implement such 

best practices, including how to coordinate the implementation of 

such plan with quality assessment and assurance activities conducted under clause (i). 

‘‘(II) REGULATIONS.—The Secretary shall promulgate regulations 

to carry out this clause.’’. 

(2) NURSING FACILITIES.—Section 1919(b)(1)(B) of the Social Security Act (42 

U.S.C. 1396r(b)(1)(B)) is amended— 


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(A) by striking ‘‘ASSURANCE’’ and inserting ‘‘ASSURANCE AND QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT PROGRAM’’; 

(B) by designating the matter beginning with ‘‘A nursing facility’’ as a 

clause (i) with the heading ‘‘IN GENERAL.—’’ and the appropriate indentation; and 

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

‘‘(ii) QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT PROGRAM.— 

‘‘(I) IN GENERAL.—Not later than December 31, 2011, the Secretary shall establish and implement a quality assurance and performance improvement program (in this clause referred to as the 

‘QAPI program’) for nursing facilities, including multi-unit chains 

of such facilities. Under the QAPI program, the Secretary shall establish standards relating to such facilities and provide technical 

assistance to such facilities on the development of best practices in 

order to meet such standards. Not later than 1 year after the date 

on which the regulations are promulgated under subclause (II), a 

nursing facility must submit to the Secretary a plan for the facility 

to meet such standards and implement such best practices, including how to coordinate the implementation of such plan with quality 

assessment and assurance activities conducted under clause (i). 

‘‘(II) REGULATIONS.—The Secretary shall promulgate regulations 

to carry out this clause.’’. 

(3) PROPOSAL TO REVISE QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT

PROGRAMS.—The Secretary shall include in the proposed rule published under 

section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)(5)(A)) for the subsequent fiscal year to the extent otherwise authorized under section 

1819(b)(1)(B) or 1819(d)(1)(C) of the Social Security Act or other statutory or 

regulatory authority, one or more proposals for skilled nursing facilities to modify and strengthen quality assurance and performance improvement programs 

in such facilities. At the time of publication of such proposed rule and to the 

extent otherwise authorized under section 1919(b)(1)(B) or 1919(d)(1)(C) of such 

Act or other regulatory authority. 

(4) FACILITY PLAN.—Not later than 1 year after the date on which the regulations are promulgated under subclause (II) of clause (ii) of sections 1819(b)(1)(B) 

and 1919(b)(1)(B) of the Social Security Act, as added by paragraphs (1) and (2), 

a skilled nursing facility and a nursing facility must submit to the Secretary 

a plan for the facility to meet the standards under such regulations and implement such best practices, including how to coordinate the implementation of 

such plan with quality assessment and assurance activities conducted under 

clause (i) of such sections. 

(c) GAO STUDY ON NURSING FACILITY UNDERCAPITALIZATION.— 

(1) IN GENERAL.—The Comptroller General of the United States shall conduct 

a study that examines the following: 

(A) The extent to which corporations that own or operate large numbers 

of nursing facilities, taking into account ownership type (including private 

equity and control interests), are undercapitalizing such facilities. 

(B) The effects of such undercapitalization on quality of care, including 

staffing and food costs, at such facilities. 

(C) Options to address such undercapitalization, such as requirements relating to surety bonds, liability insurance, or minimum capitalization. 

(2) REPORT.—Not later than 18 months after the date of the enactment of this 

Act, the Comptroller General shall submit to Congress a report on the study 

conducted under paragraph (1). 

(3) NURSING FACILITY.—In this subsection, the term ‘‘nursing facility’’ includes 

a skilled nursing facility. 

SEC. 1413. NURSING HOME COMPARE MEDICARE WEBSITE. 

(a) SKILLED NURSING FACILITIES.— 

(1) IN GENERAL.—Section 1819 of the Social Security Act (42 U.S.C. 1395i– 

3) is amended— 

(A) by redesignating subsection (i) as subsection (j); and 

(B) by inserting after subsection (h) the following new subsection: 

‘‘(i) NURSING HOME COMPARE WEBSITE.— 

‘‘(1) INCLUSION OF ADDITIONAL INFORMATION.— 

‘‘(A) IN GENERAL.—The Secretary shall ensure that the Department of 

Health and Human Services includes, as part of the information provided 

for comparison of nursing homes on the official Internet website of the Federal Government for Medicare beneficiaries (commonly referred to as the 


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‘Nursing Home Compare’ Medicare website) (or a successor website), the 

following information in a manner that is prominent, easily accessible, 

readily understandable to consumers of long-term care services, and searchable: 

‘‘(i) Information that is reported to the Secretary under section 

1124(c)(4). 

‘‘(ii) Information on the ‘Special Focus Facility program’ (or a successor program) established by the Centers for Medicare and Medicaid 

Services, according to procedures established by the Secretary. Such 

procedures shall provide for the inclusion of information with respect 

to, and the names and locations of, those facilities that, since the previous quarter— 

‘‘(I) were newly enrolled in the program; 

‘‘(II) are enrolled in the program and have failed to significantly 

improve; 

‘‘(III) are enrolled in the program and have significantly improved; 

‘‘(IV) have graduated from the program; and 

‘‘(V) have closed voluntarily or no longer participate under this 

title. 

‘‘(iii) Staffing data for each facility (including resident census data 

and data on the hours of care provided per resident per day) based on 

data submitted under subsection (b)(8)(C), including information on 

staffing turnover and tenure, in a format that is clearly understandable 

to consumers of long-term care services and allows such consumers to 

compare differences in staffing between facilities and State and national averages for the facilities. Such format shall include— 

‘‘(I) concise explanations of how to interpret the data (such as a 

plain English explanation of data reflecting ‘nursing home staff 

hours per resident day’); 

‘‘(II) differences in types of staff (such as training associated with 

different categories of staff); 

‘‘(III) the relationship between nurse staffing levels and quality 

of care; and 

‘‘(IV) an explanation that appropriate staffing levels vary based 

on patient case mix. 

‘‘(iv) Links to State Internet websites with information regarding 

State survey and certification programs, links to Form 2567 State inspection reports (or a successor form) on such websites, information to 

guide consumers in how to interpret and understand such reports, and 

the facility plan of correction or other response to such report. 

‘‘(v) The standardized complaint form developed under subsection 

(f)(8), including explanatory material on what complaint forms are, how 

they are used, and how to file a complaint with the State survey and 

certification program and the State long-term care ombudsman program. 

‘‘(vi) Summary information on the number, type, severity, and outcome of substantiated complaints. 

‘‘(vii) The number of adjudicated instances of criminal violations by 

employees of a nursing facility— 

‘‘(I) that were committed inside the facility; 

‘‘(II) with respect to such instances of violations or crimes committed inside of the facility that were the violations or crimes of 

abuse, neglect, and exploitation, criminal sexual abuse, or other 

violations or crimes that resulted in serious bodily injury; and 

‘‘(III) the number of civil monetary penalties levied against the 

facility, employees, contractors, and other agents. 

‘‘(B) DEADLINE FOR PROVISION OF INFORMATION.— 

‘‘(i) IN GENERAL.—Except as provided in clause (ii), the Secretary 

shall ensure that the information described in subparagraph (A) is included on such website (or a successor website) not later than 1 year 

after the date of the enactment of this subsection. 

‘‘(ii) EXCEPTION.—The Secretary shall ensure that the information described in subparagraph (A)(i) and (A)(iii) is included on such website 

(or a successor website) not later than the date on which the requirements under section 1124(c)(4) and subsection (b)(8)(C)(ii) are implemented. 

‘‘(2) REVIEW AND MODIFICATION OF WEBSITE.— 

‘‘(A) IN GENERAL.—The Secretary shall establish a process— 


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‘‘(i) to review the accuracy, clarity of presentation, timeliness, and 

comprehensiveness of information reported on such website as of the 

day before the date of the enactment of this subsection; and 

‘‘(ii) not later than 1 year after the date of the enactment of this subsection, to modify or revamp such website in accordance with the review conducted under clause (i). 

‘‘(B) CONSULTATION.—In conducting the review under subparagraph 

(A)(i), the Secretary shall consult with— 

‘‘(i) State long-term care ombudsman programs; 

‘‘(ii) consumer advocacy groups; 

‘‘(iii) provider stakeholder groups; and 

‘‘(iv) any other representatives of programs or groups the Secretary 

determines appropriate.’’. 

(2) TIMELINESS OF SUBMISSION OF SURVEY AND CERTIFICATION INFORMATION.— (A) IN GENERAL.—Section 1819(g)(5) of the Social Security Act (42 U.S.C. 

1395i–3(g)(5)) is amended by adding at the end the following new subparagraph: 

‘‘(E) SUBMISSION OF SURVEY AND CERTIFICATION INFORMATION TO THE SEC- RETARY.—In order to improve the timeliness of information made available 

to the public under subparagraph (A) and provided on the Nursing Home 

Compare Medicare website under subsection (i), each State shall submit information respecting any survey or certification made respecting a skilled 

nursing facility (including any enforcement actions taken by the State) to 

the Secretary not later than the date on which the State sends such information to the facility. The Secretary shall use the information submitted 

under the preceding sentence to update the information provided on the 

Nursing Home Compare Medicare website as expeditiously as practicable 

but not less frequently than quarterly.’’. 

(B) EFFECTIVE DATE.—The amendment made by this paragraph shall take 

effect 1 year after the date of the enactment of this Act. 

(3) SPECIAL FOCUS FACILITY PROGRAM.—Section 1819(f) of such Act is amended by adding at the end the following new paragraph: 

‘‘(8) SPECIAL FOCUS FACILITY PROGRAM.— 

‘‘(A) IN GENERAL.—The Secretary shall conduct a special focus facility program for enforcement of requirements for skilled nursing facilities that the 

Secretary has identified as having substantially failed to meet applicable 

requirement of this Act. 

‘‘(B) PERIODIC SURVEYS.—Under such program the Secretary shall conduct surveys of each facility in the program not less than once every 6 

months.’’. 

(b) NURSING FACILITIES.— 

(1) IN GENERAL.—Section 1919 of the Social Security Act (42 U.S.C. 1396r) is 

amended— 

(A) by redesignating subsection (i) as subsection (j); and 

(B) by inserting after subsection (h) the following new subsection: 

‘‘(i) NURSING HOME COMPARE WEBSITE.— 

‘‘(1) INCLUSION OF ADDITIONAL INFORMATION.— 

‘‘(A) IN GENERAL.—The Secretary shall ensure that the Department of 

Health and Human Services includes, as part of the information provided 

for comparison of nursing homes on the official Internet website of the Federal Government for Medicare beneficiaries (commonly referred to as the 

‘Nursing Home Compare’ Medicare website) (or a successor website), the 

following information in a manner that is prominent, easily accessible, 

readily understandable to consumers of long-term care services, and searchable: 

‘‘(i) Staffing data for each facility (including resident census data and 

data on the hours of care provided per resident per day) based on data 

submitted under subsection (b)(8)(C)(ii), including information on staffing turnover and tenure, in a format that is clearly understandable to 

consumers of long-term care services and allows such consumers to 

compare differences in staffing between facilities and State and national averages for the facilities. Such format shall include— 

‘‘(I) concise explanations of how to interpret the data (such as 

plain English explanation of data reflecting ‘nursing home staff 

hours per resident day’); 

‘‘(II) differences in types of staff (such as training associated with 

different categories of staff); 

‘‘(III) the relationship between nurse staffing levels and quality 

of care; and 


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‘‘(IV) an explanation that appropriate staffing levels vary based 

on patient case mix. 

‘‘(ii) Links to State Internet websites with information regarding 

State survey and certification programs, links to Form 2567 State inspection reports (or a successor form) on such websites, information to 

guide consumers in how to interpret and understand such reports, and 

the facility plan of correction or other response to such report. 

‘‘(iii) The standardized complaint form developed under subsection 

(f)(10), including explanatory material on what complaint forms are, 

how they are used, and how to file a complaint with the State survey 

and certification program and the State long-term care ombudsman 

program. 

‘‘(iv) Summary information on the number, type, severity, and outcome of substantiated complaints. 

‘‘(v) The number of adjudicated instances of criminal violations by 

employees of a nursing facility— 

‘‘(I) that were committed inside of the facility; and 

‘‘(II) with respect to such instances of violations or crimes committed outside of the facility, that were the violations or crimes 

that resulted in the serious bodily injury of an elder. 

‘‘(B) DEADLINE FOR PROVISION OF INFORMATION.— 

‘‘(i) IN GENERAL.—Except as provided in clause (ii), the Secretary 

shall ensure that the information described in subparagraph (A) is included on such website (or a successor website) not later than 1 year 

after the date of the enactment of this subsection. 

‘‘(ii) EXCEPTION.—The Secretary shall ensure that the information described in subparagraph (A)(i) and (A)(iii) is included on such website 

(or a successor website) not later than the date on which the requirements under section 1124(c)(4) and subsection (b)(8)(C)(ii) are implemented. 

‘‘(2) REVIEW AND MODIFICATION OF WEBSITE.— 

‘‘(A) IN GENERAL.—The Secretary shall establish a process— 

‘‘(i) to review the accuracy, clarity of presentation, timeliness, and 

comprehensiveness of information reported on such website as of the 

day before the date of the enactment of this subsection; and 

‘‘(ii) not later than 1 year after the date of the enactment of this subsection, to modify or revamp such website in accordance with the review conducted under clause (i). 

‘‘(B) CONSULTATION.—In conducting the review under subparagraph 

(A)(i), the Secretary shall consult with— 

‘‘(i) State long-term care ombudsman programs; 

‘‘(ii) consumer advocacy groups; 

‘‘(iii) provider stakeholder groups; 

‘‘(iv) skilled nursing facility employees and their representatives; and 

‘‘(v) any other representatives of programs or groups the Secretary 

determines appropriate.’’. 

(2) TIMELINESS OF SUBMISSION OF SURVEY AND CERTIFICATION INFORMATION.— 

(A) IN GENERAL.—Section 1919(g)(5) of the Social Security Act (42 U.S.C. 

1396r(g)(5)) is amended by adding at the end the following new subparagraph: 

‘‘(E) SUBMISSION OF SURVEY AND CERTIFICATION INFORMATION TO THE SECRETARY.—In order to improve the timeliness of information made available 

to the public under subparagraph (A) and provided on the Nursing Home 

Compare Medicare website under subsection (i), each State shall submit information respecting any survey or certification made respecting a nursing 

facility (including any enforcement actions taken by the State) to the Secretary not later than the date on which the State sends such information 

to the facility. The Secretary shall use the information submitted under the 

preceding sentence to update the information provided on the Nursing 

Home Compare Medicare website as expeditiously as practicable but not 

less frequently than quarterly.’’. 

(B) EFFECTIVE DATE.—The amendment made by this paragraph shall take 

effect 1 year after the date of the enactment of this Act. 

(3) SPECIAL FOCUS FACILITY PROGRAM.—Section 1919(f) of such Act is amended by adding at the end of the following new paragraph: 

‘‘(10) SPECIAL FOCUS FACILITY PROGRAM.— 

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retary has identified as having substantially failed to meet applicable requirements of this Act. 

‘‘(B) PERIODIC SURVEYS.—Under such program the Secretary shall conduct surveys of each facility in the program not less often than once every 

6 months.’’. 

(c) AVAILABILITY OF REPORTS ON SURVEYS, CERTIFICATIONS, AND COMPLAINT INVESTIGATIONS.— 

(1) SKILLED NURSING FACILITIES.—Section 1819(d)(1) of the Social Security Act 

(42 U.S.C. 1395i–3(d)(1)), as amended by sections 1411 and 1412, is amended 

by adding at the end the following new subparagraph: 

‘‘(D) AVAILABILITY OF SURVEY, CERTIFICATION, AND COMPLAINT INVESTIGATION REPORTS.—A skilled nursing facility must— 

‘‘(i) have reports with respect to any surveys, certifications, and complaint investigations made respecting the facility during the 3 preceding years available for any individual to review upon request; and 

‘‘(ii) post notice of the availability of such reports in areas of the facility that are prominent and accessible to the public. 

The facility shall not make available under clause (i) identifying information about complainants or residents.’’. 

(2) NURSING FACILITIES.—Section 1919(d)(1) of the Social Security Act (42 

U.S.C. 1396r(d)(1)), as amended by sections 1411 and 1412, is amended by adding at the end the following new subparagraph: 

‘‘(D) AVAILABILITY OF SURVEY, CERTIFICATION, AND COMPLAINT INVESTIGATION REPORTS.—A nursing facility must— 

‘‘(i) have reports with respect to any surveys, certifications, and complaint investigations made respecting the facility during the 3 preceding years available for any individual to review upon request; and 

‘‘(ii) post notice of the availability of such reports in areas of the facility that are prominent and accessible to the public. 

The facility shall not make available under clause (i) identifying information about complainants or residents.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall take effect 1 year after the date of the enactment of this Act. 

(d) GUIDANCE TO STATES ON FORM 2567 STATE INSPECTION REPORTS AND COMPLAINT INVESTIGATION REPORTS.— 

(1) GUIDANCE.—The Secretary of Health and Human Services (in this subtitle 

referred to as the ‘‘Secretary’’) shall provide guidance to States on how States 

can establish electronic links to Form 2567 State inspection reports (or a successor form), complaint investigation reports, and a facility’s plan of correction 

or other response to such Form 2567 State inspection reports (or a successor 

form) on the Internet website of the State that provides information on skilled 

nursing facilities and nursing facilities and the Secretary shall, if possible, include such information on Nursing Home Compare. 

(2) REQUIREMENT.—Section 1902(a)(9) of the Social Security Act (42 U.S.C. 

1396a(a)(9)) is amended— 

(A) by striking ‘‘and’’ at the end of subparagraph (B); 

(B) by striking the semicolon at the end of subparagraph (C) and inserting ‘‘, and’’; and 

(C) by adding at the end the following new subparagraph: 

‘‘(D) that the State maintain a consumer-oriented website providing useful information to consumers regarding all skilled nursing facilities and all 

nursing facilities in the State, including for each facility, Form 2567 State 

inspection reports (or a successor form), complaint investigation reports, the 

facility’s plan of correction, and such other information that the State or the 

Secretary considers useful in assisting the public to assess the quality of 

long term care options and the quality of care provided by individual facilities;’’. 

(3) DEFINITIONS.—In this subsection: 

(A) NURSING FACILITY.—The term ‘‘nursing facility’’ has the meaning 

given such term in section 1919(a) of the Social Security Act (42 U.S.C. 

1396r(a)). 

(B) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of Health 

and Human Services. 

(C) SKILLED NURSING FACILITY.—The term ‘‘skilled nursing facility’’ has 

the meaning given such term in section 1819(a) of the Social Security Act 

(42 U.S.C. 1395i–3(a)). 


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SEC. 1414. REPORTING OF EXPENDITURES. 

Section 1888 of the Social Security Act (42 U.S.C. 1395yy) is amended by adding 

at the end the following new subsection: 

‘‘(f) REPORTING OF DIRECT CARE EXPENDITURES.— 

‘‘(1) IN GENERAL.—For cost reports submitted under this title for cost reporting periods beginning on or after the date that is 3 years after the date of the 

enactment of this subsection, skilled nursing facilities shall separately report 

expenditures for wages and benefits for direct care staff (breaking out (at a minimum) registered nurses, licensed professional nurses, certified nurse assistants, and other medical and therapy staff). 

‘‘(2) MODIFICATION OF FORM.—The Secretary, in consultation with private sector accountants experienced with skilled nursing facility cost reports, shall redesign such reports to meet the requirement of paragraph (1) not later than 1 

year after the date of the enactment of this subsection. 

‘‘(3) CATEGORIZATION BY FUNCTIONAL ACCOUNTS.—Not later than 30 months 

after the date of the enactment of this subsection, the Secretary, working in 

consultation with the Medicare Payment Advisory Commission, the Inspector 

General of the Department of Health and Human Services, and other expert 

parties the Secretary determines appropriate, shall take the expenditures listed 

on cost reports, as modified under paragraph (1), submitted by skilled nursing 

facilities and categorize such expenditures, regardless of any source of payment 

for such expenditures, for each skilled nursing facility into the following functional accounts on an annual basis: 

‘‘(A) Spending on direct care services (including nursing, therapy, and 

medical services). 

‘‘(B) Spending on indirect care (including housekeeping and dietary services). 

‘‘(C) Capital assets (including building and land costs). 

‘‘(D) Administrative services costs. 

‘‘(4) AVAILABILITY OF INFORMATION SUBMITTED.—The Secretary shall establish 

procedures to make information on expenditures submitted under this subsection readily available to interested parties upon request, subject to such requirements as the Secretary may specify under the procedures established 

under this paragraph.’’. 

SEC. 1415. STANDARDIZED COMPLAINT FORM. 

(a) SKILLED NURSING FACILITIES.— 

(1) DEVELOPMENT BY THE SECRETARY.—Section 1819(f) of the Social Security 

Act (42 U.S.C. 1395i–3(f)), as amended by section 1413(a)(3), is amended by 

adding at the end the following new paragraph: 

‘‘(9) STANDARDIZED COMPLAINT FORM.—The Secretary shall develop a standardized complaint form for use by a resident (or a person acting on the resident’s behalf) in filing a complaint with a State survey and certification agency 

and a State long-term care ombudsman program with respect to a skilled nursing facility.’’. 

(2) STATE REQUIREMENTS.—Section 1819(e) of the Social Security Act (42 

U.S.C. 1395i–3(e)) is amended by adding at the end the following new paragraph: 

‘‘(6) COMPLAINT PROCESSES AND WHISTLE-BLOWER PROTECTION.— 

‘‘(A) COMPLAINT FORMS.—The State must make the standardized complaint form developed under subsection (f)(9) available upon request to— 

‘‘(i) a resident of a skilled nursing facility; 

‘‘(ii) any person acting on the resident’s behalf; and 

‘‘(iii) any person who works at a skilled nursing facility or is a representative of such a worker. 

‘‘(B) COMPLAINT RESOLUTION PROCESS.—The State must establish a complaint resolution process in order to ensure that a resident, the legal representative of a resident of a skilled nursing facility, or other responsible 

party is not retaliated against if the resident, legal representative, or responsible party has complained, in good faith, about the quality of care or 

other issues relating to the skilled nursing facility, that the legal representative of a resident of a skilled nursing facility or other responsible party 

is not denied access to such resident or otherwise retaliated against if such 

representative party has complained, in good faith, about the quality of care 

provided by the facility or other issues relating to the facility, and that a 

person who works at a skilled nursing facility is not retaliated against if 

the worker has complained, in good faith, about quality of care or services 

or an issue relating to the quality of care or services provided at the facility, 

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er used the form developed under subsection (f)(9) or some other method 

for submitting the complaint. Such complaint resolution process shall include— 

‘‘(i) procedures to assure accurate tracking of complaints received, including notification to the complainant that a complaint has been received; 

‘‘(ii) procedures to determine the likely severity of a complaint and 

for the investigation of the complaint; 

‘‘(iii) deadlines for responding to a complaint and for notifying the 

complainant of the outcome of the investigation; and 

‘‘(iv) procedures to ensure that the identity of the complainant will 

be kept confidential. 

‘‘(C) WHISTLEBLOWER PROTECTION.— 

‘‘(i) PROHIBITION AGAINST RETALIATION.—No person who works at a 

skilled nursing facility may be penalized, discriminated, or retaliated 

against with respect to any aspect of employment, including discharge, 

promotion, compensation, terms, conditions, or privileges of employment, or have a contract for services terminated, because the person (or 

anyone acting at the person’s request) complained, in good faith, about 

the quality of care or services provided by a nursing facility or about 

other issues relating to quality of care or services, whether using the 

form developed under subsection (f)(9) or some other method for submitting the complaint. 

‘‘(ii) RETALIATORY REPORTING.—A skilled nursing facility may not file 

a complaint or a report against a person who works (or has worked at 

the facility with the appropriate State professional disciplinary agency 

because the person (or anyone acting at the person’s request) complained in good faith, as described in clause (i). 

‘‘(iii) COMMENCEMENT OF ACTION.—Any person who believes the person has been penalized, discriminated , or retaliated against or had a 

contract for services terminated in violation of clause (i) or against 

whom a complaint has been filed in violation of clause (ii) may bring 

an action at law or equity in the appropriate district court of the 

United States, which shall have jurisdiction over such action without 

regard to the amount in controversy or the citizenship of the parties, 

and which shall have jurisdiction to grant complete relief, including, 

but not limited to, injunctive relief (such as reinstatement, compensatory damages (which may include reimbursement of lost wages, compensation, and benefits), costs of litigation (including reasonable attorney and expert witness fees), exemplary damages where appropriate, 

and such other relief as the court deems just and proper. 

‘‘(iv) RIGHTS NOT WAIVABLE.—The rights protected by this paragraph 

may not be diminished by contract or other agreement, and nothing in 

this paragraph shall be construed to diminish any greater or additional 

protection provided by Federal or State law or by contract or other 

agreement. 

‘‘(v) REQUIREMENT TO POST NOTICE OF EMPLOYEE RIGHTS.—Each 

skilled nursing facility shall post conspicuously in an appropriate location a sign (in a form specified by the Secretary) specifying the rights 

of persons under this paragraph and including a statement that an employee may file a complaint with the Secretary against a skilled nursing facility that violates the provisions of this paragraph and information with respect to the manner of filing such a complaint. 

‘‘(D) RULE OF CONSTRUCTION.—Nothing in this paragraph shall be construed as preventing a resident of a skilled nursing facility (or a person acting on the resident’s behalf) from submitting a complaint in a manner or 

format other than by using the standardized complaint form developed 

under subsection (f)(9) (including submitting a complaint orally). 

‘‘(E) GOOD FAITH DEFINED.—For purposes of this paragraph, an individual 

shall be deemed to be acting in good faith with respect to the filing of a 

complaint if the individual reasonably believes— 

‘‘(i) the information reported or disclosed in the complaint is true; and 

‘‘(ii) the violation of this title has occurred or may occur in relation 

to such information.’’. 

(b) NURSING FACILITIES.— 

(1) DEVELOPMENT BY THE SECRETARY.—Section 1919(f) of the Social Security 

Act (42 U.S.C. 1395i–3(f)), as amended by section 1413(b), is amended by adding 

at the end the following new paragraph: 


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‘‘(11) STANDARDIZED COMPLAINT FORM.—The Secretary shall develop a standardized complaint form for use by a resident (or a person acting on the resident’s behalf) in filing a complaint with a State survey and certification agency 

and a State long-term care ombudsman program with respect to a nursing facility.’’. 

(2) STATE REQUIREMENTS.—Section 1919(e) of the Social Security Act (42 

U.S.C. 1395i–3(e)) is amended by adding at the end the following new paragraph: 

‘‘(8) COMPLAINT PROCESSES AND WHISTLEBLOWER PROTECTION.— ‘‘(A) COMPLAINT FORMS.—The State must make the standardized complaint form developed under subsection (f)(11) available upon request to— 

‘‘(i) a resident of a nursing facility; 

‘‘(ii) any person acting on the resident’s behalf; and 

‘‘(iii) any person who works at a nursing facility or a representative 

of such a worker. 

‘‘(B) COMPLAINT RESOLUTION PROCESS.—The State must establish a complaint resolution process in order to ensure that a resident, the legal representative of a resident of a nursing facility, or other responsible party is 

not retaliated against if the resident, legal representative, or responsible 

party has complained, in good faith, about the quality of care or other 

issues relating to the nursing facility, that the legal representative of a resident of a nursing facility or other responsible party is not denied access to 

such resident or otherwise retaliated against if such representative party 

has complained, in good faith, about the quality of care provided by the facility or other issues relating to the facility, and that a person who works 

at a nursing facility is not retaliated against if the worker has complained, 

in good faith, about quality of care or services or an issue relating to the 

quality of care or services provided at the facility, whether the resident, 

legal representative, other responsible party, or worker used the form developed under subsection (f)(11) or some other method for submitting the 

complaint. Such complaint resolution process shall include— 

‘‘(i) procedures to assure accurate tracking of complaints received, including notification to the complainant that a complaint has been received; 

‘‘(ii) procedures to determine the likely severity of a complaint and 

for the investigation of the complaint; 

‘‘(iii) deadlines for responding to a complaint and for notifying the 

complainant of the outcome of the investigation; and 

‘‘(iv) procedures to ensure that the identity of the complainant will 

be kept confidential. 

‘‘(C) WHISTLEBLOWER PROTECTION.— 

‘‘(i) PROHIBITION AGAINST RETALIATION.—No person who works at a 

nursing facility may be penalized, discriminated, or retaliated against 

with respect to any aspect of employment, including discharge, promotion, compensation, terms, conditions, or privileges of employment, 

or have a contract for services terminated, because the person (or anyone acting at the person’s request) complained, in good faith, about the 

quality of care or services provided by a nursing facility or about other 

issues relating to quality of care or services, whether using the form 

developed under subsection (f)(11) or some other method for submitting 

the complaint. 

‘‘(ii) RETALIATORY REPORTING.—A nursing facility may not file a complaint or a report against a person who works (or has worked at the 

facility with the appropriate State professional disciplinary agency because the person (or anyone acting at the person’s request) complained 

in good faith, as described in clause (i). 

‘‘(iii) COMMENCEMENT OF ACTION.—Any person who believes the person has been penalized, discriminated, or retaliated against or had a 

contract for services terminated in violation of clause (i) or against 

whom a complaint has been filed in violation of clause (ii) may bring 

an action at law or equity in the appropriate district court of the 

United States, which shall have jurisdiction over such action without 

regard to the amount in controversy or the citizenship of the parties, 

and which shall have jurisdiction to grant complete relief, including, 

but not limited to, injunctive relief (such as reinstatement, compensatory damages (which may include reimbursement of lost wages, compensation, and benefits), costs of litigation (including reasonable attorney and expert witness fees), exemplary damages where appropriate, 

and such other relief as the court deems just and proper. 


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‘‘(iv) RIGHTS NOT WAIVABLE.—The rights protected by this paragraph 

may not be diminished by contract or other agreement, and nothing in 

this paragraph shall be construed to diminish any greater or additional 

protection provided by Federal or State law or by contract or other 

agreement. 

‘‘(v) REQUIREMENT TO POST NOTICE OF EMPLOYEE RIGHTS.—Each nursing facility shall post conspicuously in an appropriate location a sign 

(in a form specified by the Secretary) specifying the rights of persons 

under this paragraph and including a statement that an employee may 

file a complaint with the Secretary against a nursing facility that violates the provisions of this paragraph and information with respect to 

the manner of filing such a complaint. 

‘‘(D) RULE OF CONSTRUCTION.—Nothing in this paragraph shall be construed as preventing a resident of a nursing facility (or a person acting on 

the resident’s behalf) from submitting a complaint in a manner or format 

other than by using the standardized complaint form developed under subsection (f)(11) (including submitting a complaint orally). 

‘‘(E) GOOD FAITH DEFINED.—For purposes of this paragraph, an individual 

shall be deemed to be acting in good faith with respect to the filing of a 

complaint if the individual reasonably believes— 

‘‘(i) the information reported or disclosed in the complaint is true; and 

‘‘(ii) the violation of this title has occurred or may occur in relation 

to such information.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect 1 

year after the date of the enactment of this Act. 

SEC. 1416. ENSURING STAFFING ACCOUNTABILITY. 

(a) SKILLED NURSING FACILITIES.—Section 1819(b)(8) of the Social Security Act 

(42 U.S.C. 1395i–3(b)(8)) is amended by adding at the end the following new subparagraph: 

‘‘(C) SUBMISSION OF STAFFING INFORMATION BASED ON PAYROLL DATA IN

A UNIFORM FORMAT.—Beginning not later than 2 years after the date of the 

enactment of this subparagraph, and after consulting with State long-term 

care ombudsman programs, consumer advocacy groups, provider stakeholder groups, employees and their representatives, and other parties the 

Secretary deems appropriate, the Secretary shall require a skilled nursing 

facility to electronically submit to the Secretary direct care staffing information (including information with respect to agency and contract staff) based 

on payroll and other verifiable and auditable data in a uniform format (according to specifications established by the Secretary in consultation with 

such programs, groups, and parties). Such specifications shall require that 

the information submitted under the preceding sentence— 

‘‘(i) specify the category of work a certified employee performs (such 

as whether the employee is a registered nurse, licensed practical nurse, 

licensed vocational nurse, certified nursing assistant, therapist, or 

other medical personnel); 

‘‘(ii) include resident census data and information on resident case 

mix; 

‘‘(iii) include a regular reporting schedule; and 

‘‘(iv) include information on employee turnover and tenure and on the 

hours of care provided by each category of certified employees referenced in clause (i) per resident per day. 

Nothing in this subparagraph shall be construed as preventing the Secretary from requiring submission of such information with respect to specific categories, such as nursing staff, before other categories of certified 

employees. Information under this subparagraph with respect to agency 

and contract staff shall be kept separate from information on employee 

staffing.’’. 

(b) NURSING FACILITIES.—Section 1919(b)(8) of the Social Security Act (42 U.S.C. 

1396r(b)(8)) is amended by adding at the end the following new subparagraph: 

‘‘(C) SUBMISSION OF STAFFING INFORMATION BASED ON PAYROLL DATA IN

A UNIFORM FORMAT.—Beginning not later than 2 years after the date of the 

enactment of this subparagraph, and after consulting with State long-term 

care ombudsman programs, consumer advocacy groups, provider stakeholder groups, employees and their representatives, and other parties the 

Secretary deems appropriate, the Secretary shall require a nursing facility 

to electronically submit to the Secretary direct care staffing information (including information with respect to agency and contract staff) based on payroll and other verifiable and auditable data in a uniform format (according 


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to specifications established by the Secretary in consultation with such programs, groups, and parties). Such specifications shall require that the information submitted under the preceding sentence— 

‘‘(i) specify the category of work a certified employee performs (such 

as whether the employee is a registered nurse, licensed practical nurse, 

licensed vocational nurse, certified nursing assistant, therapist, or 

other medical personnel); 

‘‘(ii) include resident census data and information on resident case 

mix; 

‘‘(iii) include a regular reporting schedule; and 

‘‘(iv) include information on employee turnover and tenure and on the 

hours of care provided by each category of certified employees referenced in clause (i) per resident per day. 

Nothing in this subparagraph shall be construed as preventing the Secretary from requiring submission of such information with respect to specific categories, such as nursing staff, before other categories of certified 

employees. Information under this subparagraph with respect to agency 

and contract staff shall be kept separate from information on employee 

staffing.’’. 

PART 2—TARGETING ENFORCEMENT 

SEC. 1421. CIVIL MONEY PENALTIES. 

(a) SKILLED NURSING FACILITIES.— 

(1) IN GENERAL.—Section 1819(h)(2)(B)(ii) of the Social Security Act (42 U.S.C. 

1395i–3(h)(2)(B)(ii)) is amended to read as follows: 

‘‘(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PENALTIES.— 

‘‘(I) AMOUNT.—The Secretary may impose a civil money penalty 

in the applicable per instance or per day amount (as defined in 

subclause (II) and (III)) for each day or instance, respectively, of 

noncompliance (as determined appropriate by the Secretary). 

‘‘(II) APPLICABLE PER INSTANCE AMOUNT.—In this clause, the 

term ‘applicable per instance amount’ means— 

‘‘(aa) in the case where the deficiency is found to be a direct 

proximate cause of death of a resident of the facility, an 

amount not to exceed $100,000. 

‘‘(bb) in each case of a deficiency where the facility is cited 

for actual harm or immediate jeopardy, an amount not less 

than $3,050 and not more than $25,000; and 

‘‘(cc) in each case of any other deficiency, an amount not less 

than $250 and not to exceed $3050. 

‘‘(III) APPLICABLE PER DAY AMOUNT.—In this clause, the term ‘applicable per day amount’ means— 

‘‘(aa) in each case of a deficiency where the facility is cited 

for actual harm or immediate jeopardy, an amount not less 

than $3,050 and not more than $25,000 and 

‘‘(bb) in each case of any other deficiency, an amount not less 

than $250 and not to exceed $3,050. 

‘‘(IV) REDUCTION OF CIVIL MONEY PENALTIES IN CERTAIN CIRCUMSTANCES.—Subject to subclauses (V) and (VI), in the case 

where a facility self-reports and promptly corrects a deficiency for 

which a penalty was imposed under this clause not later than 10 

calendar days after the date of such imposition, the Secretary may 

reduce the amount of the penalty imposed by not more than 50 

percent. 

‘‘(V) PROHIBITION ON REDUCTION FOR CERTAIN DEFICIENCIES.— 

‘‘(aa) REPEAT DEFICIENCIES.—The Secretary may not reduce 

under subclause (IV) the amount of a penalty if the deficiency 

is a repeat deficiency. 

‘‘(bb) CERTAIN OTHER DEFICIENCIES.—The Secretary may not 

reduce under subclause (IV) the amount of a penalty if the 

penalty is imposed for a deficiency described in subclause 

(II)(aa) or (III)(aa) and the actual harm or widespread harm 

immediately jeopardizes the health or safety of a resident or 

residents of the facility, or if the penalty is imposed for a deficiency described in subclause (II)(bb). 

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cent on the basis of self-reporting, on the basis of a waiver or an 

appeal (as provided for under regulations under section 488.436 of 

title 42, Code of Federal Regulations), or on the basis of both. 

‘‘(VII) COLLECTION OF CIVIL MONEY PENALTIES.—In the case of a 

civil money penalty imposed under this clause, the Secretary— 

‘‘(aa) subject to item (cc), shall, not later than 30 days after 

the date of imposition of the penalty, provide the opportunity 

for the facility to participate in an independent informal dispute resolution process which generates a written record prior 

to the collection of such penalty, but such opportunity shall not 

affect the responsibility of the State survey agency for making 

final recommendations for such penalties; 

‘‘(bb) in the case where the penalty is imposed for each day 

of noncompliance, shall not impose a penalty for any day during the period beginning on the initial day of the imposition of 

the penalty and ending on the day on which the informal dispute resolution process under item (aa) is completed; 

‘‘(cc) may provide for the collection of such civil money penalty and the placement of such amounts collected in an escrow 

account under the direction of the Secretary on the earlier of 

the date on which the informal dispute resolution process 

under item (aa) is completed or the date that is 90 days after 

the date of the imposition of the penalty; 

‘‘(dd) may provide that such amounts collected are kept in 

such account pending the resolution of any subsequent appeals; 

‘‘(ee) in the case where the facility successfully appeals the 

penalty, may provide for the return of such amounts collected 

(plus interest) to the facility; and 

‘‘(ff) in the case where all such appeals are unsuccessful, may 

provide that some portion of such amounts collected may be 

used to support activities that benefit residents, including assistance to support and protect residents of a facility that 

closes (voluntarily or involuntarily) or is decertified (including 

offsetting costs of relocating residents to home and communitybased settings or another facility), projects that support resident and family councils and other consumer involvement in 

assuring quality care in facilities, and facility improvement initiatives approved by the Secretary (including joint training of 

facility staff and surveyors, technical assistance for facilities 

under quality assurance programs, the appointment of temporary management, and other activities approved by the Secretary). 

‘‘(VIII) PROCEDURE.—The provisions of section 1128A (other than 

subsections (a) and (b) and except to the extent that such provisions require a hearing prior to the imposition of a civil money penalty) shall apply to a civil money penalty under this clause in the 

same manner as such provisions apply to a penalty or proceeding 

under section 1128A(a).’’. 

(2) CONFORMING AMENDMENT.—The second sentence of section 1819(h)(5) of 

the Social Security Act (42 U.S.C. 1395i–3(h)(5)) is amended by inserting 

‘‘(ii),’’after ‘‘(i),’’. 

(b) NURSING FACILITIES.— 

(1) PENALTIES IMPOSED BY THE STATE.— 

(A) IN GENERAL.—Section 1919(h)(2) of the Social Security Act (42 U.S.C. 

1396r(h)(2)) is amended— 

(i) in subparagraph (A)(ii), by striking the first sentence and inserting the following: ‘‘A civil money penalty in accordance with subparagraph (G).’’; and 

(ii) by adding at the end the following new subparagraph: 

‘‘(G) CIVIL MONEY PENALTIES.— 

‘‘(i) IN GENERAL.—The State may impose a civil money penalty under 

subparagraph (A)(ii) in the applicable per instance or per day amount 

(as defined in subclause (II) and (III)) for each day or instance, respectively, of noncompliance (as determined appropriate by the Secretary). 

‘‘(ii) APPLICABLE PER INSTANCE AMOUNT.—In this subparagraph, the 

term ‘applicable per instance amount’ means— 


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‘‘(I) in the case where the deficiency is found to be a direct proximate cause of death of a resident of the facility, an amount not to 

exceed $100,000. 

‘‘(II) in each case of a deficiency where the facility is cited for ac- tual harm or immediate jeopardy, an amount not less than $3,050 

and not more than $25,000; and 

‘‘(III) in each case of any other deficiency, an amount not less than $250 and not to exceed $3050. 

‘‘(iii) APPLICABLE PER DAY AMOUNT.—In this subparagraph, the term 

‘applicable per day amount’ means— 

‘‘(I) in each case of a deficiency where the facility is cited for ac- tual harm or immediate jeopardy, an amount not less than $3,050 

and not more than $25,000 and 

‘‘(II) in each case of any other deficiency, an amount not less than $250 and not to exceed $3,050. 

‘‘(iv) REDUCTION OF CIVIL MONEY PENALTIES IN CERTAIN CIR- CUMSTANCES.—Subject to clauses (v) and (vi), in the case where a facility self-reports and promptly corrects a deficiency for which a penalty 

was imposed under subparagraph (A)(ii) not later than 10 calendar 

days after the date of such imposition, the State may reduce the 

amount of the penalty imposed by not more than 50 percent. 

‘‘(v) PROHIBITION ON REDUCTION FOR CERTAIN DEFICIENCIES.— 

‘‘(I) REPEAT DEFICIENCIES.—The State may not reduce under 

clause (iv) the amount of a penalty if the State had reduced a penalty imposed on the facility in the preceding year under such 

clause with respect to a repeat deficiency. 

‘‘(II) CERTAIN OTHER DEFICIENCIES.—The State may not reduce 

under clause (iv) the amount of a penalty if the penalty is imposed 

for a deficiency described in clause (ii)(II) or (iii)(I) and the actual 

harm or widespread harm that immediately jeopardizes the health 

or safety of a resident or residents of the facility, or if the penalty 

is imposed for a deficiency described in clause (ii)(I). 

‘‘(III) LIMITATION ON AGGREGATE REDUCTIONS.—The aggregate reduction in a penalty under clause (iv) may not exceed 35 percent 

on the basis of self-reporting, on the basis of a waiver or an appeal 

(as provided for under regulations under section 488.436 of title 42, 

Code of Federal Regulations), or on the basis of both. 

‘‘(vi) COLLECTION OF CIVIL MONEY PENALTIES.—In the case of a civil 

money penalty imposed under subparagraph (A)(ii), the State— 

‘‘(I) subject to subclause (III), shall, not later than 30 days after 

the date of imposition of the penalty, provide the opportunity for 

the facility to participate in an independent informal dispute resolution process which generates a written record prior to the collection of such penalty, but such opportunity shall not affect the responsibility of the State survey agency for making final recommendations for such penalties; 

‘‘(II) in the case where the penalty is imposed for each day of 

noncompliance, shall not impose a penalty for any day during the 

period beginning on the initial day of the imposition of the penalty 

and ending on the day on which the informal dispute resolution 

process under subclause (I) is completed; 

‘‘(III) may provide for the collection of such civil money penalty 

and the placement of such amounts collected in an escrow account 

under the direction of the State on the earlier of the date on which 

the informal dispute resolution process under subclause (I) is completed or the date that is 90 days after the date of the imposition 

of the penalty; 

‘‘(IV) may provide that such amounts collected are kept in such 

account pending the resolution of any subsequent appeals; 

‘‘(V) in the case where the facility successfully appeals the penalty, may provide for the return of such amounts collected (plus interest) to the facility; and 

‘‘(VI) in the case where all such appeals are unsuccessful, may 

provide that such funds collected shall be used for the purposes described in the second sentence of subparagraph (A)(ii).’’. 

(B) CONFORMING AMENDMENT.—The second sentence of section 

1919(h)(2)(A)(ii) of the Social Security Act (42 U.S.C. 1396r(h)(2)(A)(ii)) is 

amended by inserting before the period at the end the following: ‘‘, and 

some portion of such funds may be used to support activities that benefit 


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residents, including assistance to support and protect residents of a facility 

that closes (voluntarily or involuntarily) or is decertified (including offsetting costs of relocating residents to home and community-based settings or 

another facility), projects that support resident and family councils and 

other consumer involvement in assuring quality care in facilities, and facility improvement initiatives approved by the Secretary (including joint 

training of facility staff and surveyors, providing technical assistance to facilities under quality assurance programs, the appointment of temporary 

management, and other activities approved by the Secretary)’’. 

(2) PENALTIES IMPOSED BY THE SECRETARY.— (A) IN GENERAL.—Section 1919(h)(3)(C)(ii) of the Social Security Act (42 

U.S.C. 1396r(h)(3)(C)) is amended to read as follows: 

‘‘(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PENALTIES.— ‘‘(I) AMOUNT.—Subject to subclause (II), the Secretary may im- pose a civil money penalty in an amount not to exceed $10,000 for 

each day or each instance of noncompliance (as determined appropriate by the Secretary). 

‘‘(II) REDUCTION OF CIVIL MONEY PENALTIES IN CERTAIN CIR- CUMSTANCES.—Subject to subclause (III), in the case where a facility self-reports and promptly corrects a deficiency for which a penalty was imposed under this clause not later than 10 calendar days 

after the date of such imposition, the Secretary may reduce the 

amount of the penalty imposed by not more than 50 percent. 

‘‘(III) PROHIBITION ON REDUCTION FOR REPEAT DEFICIENCIES.— 

The Secretary may not reduce the amount of a penalty under subclause (II) if the Secretary had reduced a penalty imposed on the 

facility in the preceding year under such subclause with respect to 

a repeat deficiency. 

‘‘(IV) COLLECTION OF CIVIL MONEY PENALTIES.—In the case of a 

civil money penalty imposed under this clause, the Secretary— 

‘‘(aa) subject to item (bb), shall, not later than 30 days after 

the date of imposition of the penalty, provide the opportunity 

for the facility to participate in an independent informal dispute resolution process which generates a written record prior 

to the collection of such penalty; 

‘‘(bb) in the case where the penalty is imposed for each day 

of noncompliance, shall not impose a penalty for any day during the period beginning on the initial day of the imposition of 

the penalty and ending on the day on which the informal dispute resolution process under item (aa) is completed; 

‘‘(cc) may provide for the collection of such civil money penalty and the placement of such amounts collected in an escrow 

account under the direction of the Secretary on the earlier of 

the date on which the informal dispute resolution process 

under item (aa) is completed or the date that is 90 days after 

the date of the imposition of the penalty; 

‘‘(dd) may provide that such amounts collected are kept in 

such account pending the resolution of any subsequent appeals; 

‘‘(ee) in the case where the facility successfully appeals the 

penalty, may provide for the return of such amounts collected 

(plus interest) to the facility; and 

‘‘(ff) in the case where all such appeals are unsuccessful, may 

provide that some portion of such amounts collected may be 

used to support activities that benefit residents, including assistance to support and protect residents of a facility that 

closes (voluntarily or involuntarily) or is decertified (including 

offsetting costs of relocating residents to home and communitybased settings or another facility), projects that support resident and family councils and other consumer involvement in 

assuring quality care in facilities, and facility improvement initiatives approved by the Secretary (including joint training of 

facility staff and surveyors, technical assistance for facilities 

under quality assurance programs, the appointment of temporary management, and other activities approved by the Secretary). 

‘‘(V) PROCEDURE.—The provisions of section 1128A (other than 

subsections (a) and (b) and except to the extent that such provisions require a hearing prior to the imposition of a civil money penVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00164 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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alty) shall apply to a civil money penalty under this clause in the 

same manner as such provisions apply to a penalty or proceeding 

under section 1128A(a).’’. 

(B) CONFORMING AMENDMENT.—Section 1919(h)(8) of the Social Security 

Act (42 U.S.C. 1396r(h)(5)(8)) is amended by inserting ‘‘and in paragraph 

(3)(C)(ii)’’ after ‘‘paragraph (2)(A)’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect 1 

year after the date of the enactment of this Act. 

SEC. 1422. NATIONAL INDEPENDENT MONITOR PILOT PROGRAM. 

(a) ESTABLISHMENT.— 

(1) IN GENERAL.—The Secretary, in consultation with the Inspector General 

of the Department of Health and Human Services, shall establish a pilot program (in this section referred to as the ‘‘pilot program’’) to develop, test, and 

implement use of an independent monitor to oversee interstate and large intrastate chains of skilled nursing facilities and nursing facilities. 

(2) SELECTION.—The Secretary shall select chains of skilled nursing facilities 

and nursing facilities described in paragraph (1) to participate in the pilot program from among those chains that submit an application to the Secretary at 

such time, in such manner, and containing such information as the Secretary 

may require. 

(3) DURATION.—The Secretary shall conduct the pilot program for a two-year 

period. 

(4) IMPLEMENTATION.—The Secretary shall implement the pilot program not 

later than one year after the date of the enactment of this Act. 

(b) REQUIREMENTS.—The Secretary shall evaluate chains selected to participate in 

the pilot program based on criteria selected by the Secretary, including where evidence suggests that one or more facilities of the chain are experiencing serious safety and quality of care problems. Such criteria may include the evaluation of a chain 

that includes one or more facilities participating in the ‘‘Special Focus Facility’’ program (or a successor program) or one or more facilities with a record of repeated 

serious safety and quality of care deficiencies. 

(c) RESPONSIBILITIES OF THE INDEPENDENT MONITOR.—An independent monitor 

that enters into a contract with the Secretary to participate in the conduct of such 

program shall— 

(1) conduct periodic reviews and prepare root-cause quality and deficiency 

analyses of a chain to assess if facilities of the chain are in compliance with 

State and Federal laws and regulations applicable to the facilities; 

(2) undertake sustained oversight of the chain, whether publicly or privately 

held, to involve the owners of the chain and the principal business partners of 

such owners in facilitating compliance by facilities of the chain with State and 

Federal laws and regulations applicable to the facilities; 

(3) analyze the management structure, distribution of expenditures, and 

nurse staffing levels of facilities of the chain in relation to resident census, staff 

turnover rates, and tenure; 

(4) report findings and recommendations with respect to such reviews, analyses, and oversight to the chain and facilities of the chain, to the Secretary and 

to relevant States; and 

(5) publish the results of such reviews, analyses, and oversight. 

(d) IMPLEMENTATION OF RECOMMENDATIONS.— 

(1) RECEIPT OF FINDING BY CHAIN.—Not later than 10 days after receipt of a 

finding of an independent monitor under subsection (c)(4), a chain participating 

in the pilot program shall submit to the independent monitor a report— 

(A) outlining corrective actions the chain will take to implement the recommendations in such report; or 

(B) indicating that the chain will not implement such recommendations 

and why it will not do so. 

(2) RECEIPT OF REPORT BY INDEPENDENT MONITOR.—Not later than 10 days 

after the date of receipt of a report submitted by a chain under paragraph (1), 

an independent monitor shall finalize its recommendations and submit a report 

to the chain and facilities of the chain, the Secretary, and the State (or States) 

involved, as appropriate, containing such final recommendations. 

(e) COST OF APPOINTMENT.—A chain shall be responsible for a portion of the costs 

associated with the appointment of independent monitors under the pilot program. 

The chain shall pay such portion to the Secretary (in an amount and in accordance 

with procedures established by the Secretary). 

(f) WAIVER AUTHORITY.—The Secretary may waive such requirements of titles 

XVIII and XIX of the Social Security Act (42 U.S.C. 1395 et seq.; 1396 et seq.) as 

may be necessary for the purpose of carrying out the pilot program. 


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(g) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated 

such sums as may be necessary to carry out this section. 

(h) DEFINITIONS.—In this section: 

(1) FACILITY.—The term ‘‘facility’’ means a skilled nursing facility or a nursing facility. 

(2) NURSING FACILITY.—The term ‘‘nursing facility’’ has the meaning given 

such term in section 1919(a) of the Social Security Act (42 U.S.C. 1396r(a)). 

(3) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of Health and 

Human Services, acting through the Assistant Secretary for Planning and Evaluation. 

(4) SKILLED NURSING FACILITY.—The term ‘‘skilled nursing facility’’ has the 

meaning given such term in section 1819(a) of the Social Security Act (42 U.S.C. 

1395(a)). 

(i) EVALUATION AND REPORT.— 

(1) EVALUATION.—The Inspector General of the Department of Health and 

Human Services shall evaluate the pilot program. Such evaluation shall— 

(A) determine whether the independent monitor program should be established on a permanent basis; and 

(B) if the Inspector General determines that the independent monitor 

program should be established on a permanent basis, recommend appropriate procedures and mechanisms for such establishment. 

(2) REPORT.—Not later than 180 days after the completion of the pilot program, the Inspector General shall submit to Congress and the Secretary a report containing the results of the evaluation conducted under paragraph (1), together with recommendations for such legislation and administrative action as 

the Inspector General determines appropriate. 

SEC. 1423. NOTIFICATION OF FACILITY CLOSURE. 

(a) SKILLED NURSING FACILITIES.— 

(1) IN GENERAL.—Section 1819(c) of the Social Security Act (42 U.S.C. 1395i– 

3(c)) is amended by adding at the end the following new paragraph: 

‘‘(7) NOTIFICATION OF FACILITY CLOSURE.— 

‘‘(A) IN GENERAL.—Any individual who is the administrator of a skilled 

nursing facility must— 

‘‘(i) submit to the Secretary, the State long-term care ombudsman, 

residents of the facility, and the legal representatives of such residents 

or other responsible parties, written notification of an impending closure— 

‘‘(I) subject to subclause (II), not later than the date that is 60 

days prior to the date of such closure; and 

‘‘(II) in the case of a facility where the Secretary terminates the 

facility’s participation under this title, not later than the date that 

the Secretary determines appropriate; 

‘‘(ii) ensure that the facility does not admit any new residents on or 

after the date on which such written notification is submitted; and 

‘‘(iii) include in the notice a plan for the transfer and adequate relocation of the residents of the facility by a specified date prior to closure 

that has been approved by the State, including assurances that the 

residents will be transferred to the most appropriate facility or other 

setting in terms of quality, services, and location, taking into consideration the needs and best interests of each resident. 

‘‘(B) RELOCATION.— 

‘‘(i) IN GENERAL.—The State shall ensure that, before a facility closes, 

all residents of the facility have been successfully relocated to another 

facility or an alternative home and community-based setting. 

‘‘(ii) CONTINUATION OF PAYMENTS UNTIL RESIDENTS RELOCATED.—The 

Secretary may, as the Secretary determines appropriate, continue to 

make payments under this title with respect to residents of a facility 

that has submitted a notification under subparagraph (A) during the 

period beginning on the date such notification is submitted and ending 

on the date on which the resident is successfully relocated.’’. 

(2) CONFORMING AMENDMENTS.—Section 1819(h)(4) of the Social Security Act 

(42 U.S.C. 1395i–3(h)(4)) is amended— 

(A) in the first sentence, by striking ‘‘the Secretary shall terminate’’ and 

inserting ‘‘the Secretary, subject to subsection (c)(7), shall terminate’’; and 

(B) in the second sentence, by striking ‘‘subsection (c)(2)’’ and inserting 

‘‘paragraphs (2) and (7) of subsection (c)’’. 

(b) NURSING FACILITIES.— 


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(1) IN GENERAL.—Section 1919(c) of the Social Security Act (42 U.S.C. 

1396r(c)) is amended by adding at the end the following new paragraph: 

‘‘(9) NOTIFICATION OF FACILITY CLOSURE.— ‘‘(A) IN GENERAL.—Any individual who is an administrator of a nursing 

facility must— 

‘‘(i) submit to the Secretary, the State long-term care ombudsman, 

residents of the facility, and the legal representatives of such residents 

or other responsible parties, written notification of an impending closure— ‘‘(I) subject to subclause (II), not later than the date that is 60 

days prior to the date of such closure; and 

‘‘(II) in the case of a facility where the Secretary terminates the 

facility’s participation under this title, not later than the date that 

the Secretary determines appropriate; 

‘‘(ii) ensure that the facility does not admit any new residents on or 

after the date on which such written notification is submitted; and 

‘‘(iii) include in the notice a plan for the transfer and adequate relocation of the residents of the facility by a specified date prior to closure 

that has been approved by the State, including assurances that the 

residents will be transferred to the most appropriate facility or other 

setting in terms of quality, services, and location, taking into consideration the needs and best interests of each resident. 

‘‘(B) RELOCATION.— ‘‘(i) IN GENERAL.—The State shall ensure that, before a facility closes, 

all residents of the facility have been successfully relocated to another 

facility or an alternative home and community-based setting. 

‘‘(ii) CONTINUATION OF PAYMENTS UNTIL RESIDENTS RELOCATED.—The 

Secretary may, as the Secretary determines appropriate, continue to 

make payments under this title with respect to residents of a facility 

that has submitted a notification under subparagraph (A) during the 

period beginning on the date such notification is submitted and ending 

on the date on which the resident is successfully relocated.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect 1 

year after the date of the enactment of this Act. 

PART 3—IMPROVING STAFF TRAINING 

SEC. 1431. DEMENTIA AND ABUSE PREVENTION TRAINING. 

(a) SKILLED NURSING FACILITIES.—Section 1819(f)(2)(A)(i)(I) of the Social Security 

Act (42 U.S.C. 1395i–3(f)(2)(A)(i)(I)) is amended by inserting ‘‘(including, in the case 

of initial training and, if the Secretary determines appropriate, in the case of ongoing training, dementia management training and resident abuse prevention training)’’ after ‘‘curriculum’’. 

(b) NURSING FACILITIES.—Section 1919(f)(2)(A)(i)(I) of the Social Security Act (42 

U.S.C. 1396r(f)(2)(A)(i)(I)) is amended by inserting ‘‘(including, in the case of initial 

training and, if the Secretary determines appropriate, in the case of ongoing training, dementia management training and resident abuse prevention training)’’ after 

‘‘curriculum’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect 1 

year after the date of the enactment of this Act. 

SEC. 1432. STUDY AND REPORT ON TRAINING REQUIRED FOR CERTIFIED NURSE AIDES AND 

SUPERVISORY STAFF. 

(a) STUDY.— (1) IN GENERAL.—The Secretary shall conduct a study on the content of training for certified nurse aides and supervisory staff of skilled nursing facilities 

and nursing facilities. The study shall include an analysis of the following: 

(A) Whether the number of initial training hours for certified nurse aides 

required under sections 1819(f)(2)(A)(i)(II) and 1919(f)(2)(A)(i)(II) of the Social Security Act (42 U.S.C. 1395i–3(f)(2)(A)(i)(II); 1396r(f)(2)(A)(i)(II)) 

should be increased from 75 and, if so, what the required number of initial 

training hours should be, including any recommendations for the content of 

such training (including training related to dementia). 

(B) Whether requirements for ongoing training under such sections 

1819(f)(2)(A)(i)(II) and 1919(f)(2)(A)(i)(II) should be increased from 12 hours 

per year, including any recommendations for the content of such training. 

(2) CONSULTATION.—In conducting the analysis under paragraph (1)(A), the 

Secretary shall consult with States that, as of the date of the enactment of this 

Act, require more than 75 hours of training for certified nurse aides. 


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(3) DEFINITIONS.—In this section: 

(A) NURSING FACILITY.—The term ‘‘nursing facility’’ has the meaning 

given such term in section 1919(a) of the Social Security Act (42 U.S.C. 

1396r(a)). 

(B) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of Health 

and Human Services, acting through the Assistant Secretary for Planning 

and Evaluation. 

(C) SKILLED NURSING FACILITY.—The term ‘‘skilled nursing facility’’ has 

the meaning given such term in section 1819(a) of the Social Security Act 

(42 U.S.C. 1395(a)). 

(b) REPORT.—Not later than 2 years after the date of the enactment of this Act, 

the Secretary shall submit to Congress a report containing the results of the study 

conducted under subsection (a), together with recommendations for such legislation 

and administrative action as the Secretary determines appropriate. 

Subtitle C—Quality Measurements 

SEC. 1441. ESTABLISHMENT OF NATIONAL PRIORITIES FOR QUALITY IMPROVEMENT. 

Title XI of the Social Security Act, as amended by section 1401(a), is further 

amended by adding at the end the following new part: 

‘‘PART E—QUALITY IMPROVEMENT

‘‘ESTABLISHMENT OF NATIONAL PRIORITIES FOR PERFORMANCE IMPROVEMENT

‘‘SEC. 1191. (a) ESTABLISHMENT OF NATIONAL PRIORITIES BY THE SECRETARY.—The 

Secretary shall establish and periodically update, not less frequently than triennially, national priorities for performance improvement. 

‘‘(b) RECOMMENDATIONS FOR NATIONAL PRIORITIES.—In establishing and updating 

national priorities under subsection (a), the Secretary shall solicit and consider recommendations from multiple outside stakeholders. 

‘‘(c) CONSIDERATIONS IN SETTING NATIONAL PRIORITIES.—With respect to such priorities, the Secretary shall ensure that priority is given to areas in the delivery of 

health care services in the United States that— 

‘‘(1) contribute to a large burden of disease, including those that address the 

health care provided to patients with prevalent, high-cost chronic diseases; 

‘‘(2) have the greatest potential to decrease morbidity and mortality in this 

country, including those that are designed to eliminate harm to patients; 

‘‘(3) have the greatest potential for improving the performance, affordability, 

and patient-centeredness of health care, including those due to variations in 

care; 

‘‘(4) address health disparities across groups and areas; and 

‘‘(5) have the potential for rapid improvement due to existing evidence, standards of care or other reasons. 

‘‘(d) DEFINITIONS.—In this part: 

‘‘(1) CONSENSUS-BASED ENTITY.—The term ‘consensus-based entity’ means an 

entity with a contract with the Secretary under section 1890. 

‘‘(2) QUALITY MEASURE.—The term ‘quality measure’ means a national consensus standard for measuring the performance and improvement of population 

health, or of institutional providers of services, physicians, and other health 

care practitioners in the delivery of health care services. 

‘‘(e) FUNDING.— 

‘‘(1) IN GENERAL.—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 under section 1841 (in such proportion 

as the Secretary determines appropriate), of $2,000,000, for the activities under 

this section for each of the fiscal years 2010 through 2014. 

‘‘(2) AUTHORIZATION OF APPROPRIATIONS.—For purposes of carrying out the 

provisions of this section, in addition to funds otherwise available, out of any 

funds in the Treasury not otherwise appropriated, there are appropriated to the 

Secretary of Health and Human Services $2,000,000 for each of the fiscal years 

2010 through 2014.’’. 

SEC. 1442. DEVELOPMENT OF NEW QUALITY MEASURES; GAO EVALUATION OF DATA COLLECTION PROCESS FOR QUALITY MEASUREMENT. 

Part E of title XI of the Social Security Act, as added by section 1441, is amended 

by adding at the end the following new sections: 


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‘‘SEC. 1192. DEVELOPMENT OF NEW QUALITY MEASURES. 

‘‘(a) AGREEMENTS WITH QUALIFIED ENTITIES.— 

‘‘(1) IN GENERAL.—The Secretary shall enter into agreements with qualified 

entities to develop quality measures for the delivery of health care services in 

the United States. 

‘‘(2) FORM OF AGREEMENTS.—The Secretary may carry out paragraph (1) by 

contract, grant, or otherwise. 

‘‘(3) RECOMMENDATIONS OF CONSENSUS-BASED ENTITY.—In carrying out this 

section, the Secretary shall— 

‘‘(A) seek public input; and 

‘‘(B) take into consideration recommendations of the consensus-based entity with a contract with the Secretary under section 1890(a). 

‘‘(b) DETERMINATION OF AREAS WHERE QUALITY MEASURES ARE REQUIRED.—Consistent with the national priorities established under this part and with the programs administered by the Centers for Medicare & Medicaid Services and in consultation with other relevant Federal agencies, the Secretary shall determine areas 

in which quality measures for assessing health care services in the United States 

are needed. 

‘‘(c) DEVELOPMENT OF QUALITY MEASURES.— 

‘‘(1) PATIENT-CENTERED AND POPULATION-BASED MEASURES.—Quality measures 

developed under agreements under subsection (a) shall be designed— 

‘‘(A) to assess outcomes and functional status of patients; 

‘‘(B) to assess the continuity and coordination of care and care transitions 

for patients across providers and health care settings, including end of life 

care; 

‘‘(C) to assess patient experience and patient engagement; 

‘‘(D) to assess the safety, effectiveness, and timeliness of care; 

‘‘(E) to assess health disparities including those associated with individual race, ethnicity, age, gender, place of residence or language; 

‘‘(F) to assess the efficiency and resource use in the provision of care; 

‘‘(G) to the extent feasible, to be collected as part of health information 

technologies supporting better delivery of health care services; 

‘‘(H) to be available free of charge to users for the use of such measures; 

and 

‘‘(I) to assess delivery of health care services to individuals regardless of 

age. 

‘‘(2) AVAILABILITY OF MEASURES.—The Secretary shall make quality measures 

developed under this section available to the public. 

‘‘(3) TESTING OF PROPOSED MEASURES.—The Secretary may use amounts made 

available under subsection (f) to fund the testing of proposed quality measures 

by qualified entities. Testing funded under this paragraph shall include testing 

of the feasibility and usability of proposed measures. 

‘‘(4) UPDATING OF ENDORSED MEASURES.—The Secretary may use amounts 

made available under subsection (f) to fund the updating (and testing, if applicable) by consensus-based entities of quality measures that have been previously endorsed by such an entity as new evidence is developed, in a manner 

consistent with section 1890(b)(3). 

‘‘(d) QUALIFIED ENTITIES.—Before entering into agreements with a qualified entity, the Secretary shall ensure that the entity is a public, nonprofit or academic institution with technical expertise in the area of health quality measurement. 

‘‘(e) APPLICATION FOR GRANT.—A grant may be made under this section only if an 

application for the grant is submitted to the Secretary and the application is in such 

form, is made in such manner, and contains such agreements, assurances, and information as the Secretary determines to be necessary to carry out this section. 

‘‘(f) FUNDING.— 

‘‘(1) IN GENERAL.—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 under section 1841 (in such proportion 

as the Secretary determines appropriate), of $25,000,000, to the Secretary for 

purposes of carrying out this section for each of the fiscal years 2010 through 

2014. 

‘‘(2) AUTHORIZATION OF APPROPRIATIONS.—For purposes of carrying out the 

provisions of this section, in addition to funds otherwise available, out of any 

funds in the Treasury not otherwise appropriated, there are appropriated to the 

Secretary of Health and Human Services $25,000,000 for each of the fiscal years 

2010 through 2014. 


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‘‘SEC. 1193. GAO EVALUATION OF DATA COLLECTION PROCESS FOR QUALITY MEASUREMENT. 

‘‘(a) GAO EVALUATIONS.—The Comptroller General of the United States shall conduct periodic evaluations of the implementation of the data collection processes for 

quality measures used by the Secretary. 

‘‘(b) CONSIDERATIONS.—In carrying out the evaluation under subsection (a), the 

Comptroller General shall determine— 

‘‘(1) whether the system for the collection of data for quality measures provides for validation of data as relevant and scientifically credible; 

‘‘(2) whether data collection efforts under the system use the most efficient 

and cost-effective means in a manner that minimizes administrative burden on 

persons required to collect data and that adequately protects the privacy of patients’ personal health information and provides data security; 

‘‘(3) whether standards under the system provide for an appropriate opportunity for physicians and other clinicians and institutional providers of services 

to review and correct findings; and 

‘‘(4) the extent to which quality measures are consistent with section 

1192(c)(1) or result in direct or indirect costs to users of such measures. 

‘‘(c) REPORT.—The Comptroller General shall submit reports to Congress and to 

the Secretary containing a description of the findings and conclusions of the results 

of each such evaluation.’’. 

SEC. 1443. MULTI-STAKEHOLDER PRE-RULEMAKING INPUT INTO SELECTION OF QUALITY 

MEASURES. 

Section 1808 of the Social Security Act (42 U.S.C. 1395b–9) is amended by adding 

at the end the following new subsection: 

‘‘(d) MULTI-STAKEHOLDER PRE-RULEMAKING INPUT INTO SELECTION OF QUALITY

MEASURES.— ‘‘(1) LIST OF MEASURES.—Not later than December 1 before each year (beginning with 2011), the Secretary shall make public a list of measures being considered for selection for quality measurement by the Secretary in rulemaking 

with respect to payment systems under this title beginning in the payment year 

beginning in such year and for payment systems beginning in the calendar year 

following such year, as the case may be. 

‘‘(2) CONSULTATION ON SELECTION OF ENDORSED QUALITY MEASURES.—A consensus-based entity that has entered into a contract under section 1890 shall, 

as part of such contract, convene multi-stakeholder groups to provide recommendations on the selection of individual or composite quality measures, for 

use in reporting performance information to the public or for use in public 

health care programs. 

‘‘(3) MULTI-STAKEHOLDER INPUT.—Not later than February 1 of each year (beginning with 2011), the consensus-based entity described in paragraph (2) shall 

transmit to the Secretary the recommendations of multi-stakeholder groups provided under paragraph (2). Such recommendations shall be included in the 

transmissions the consensus-based entity makes to the Secretary under the contract provided for under section 1890. 

‘‘(4) REQUIREMENT FOR TRANSPARENCY IN PROCESS.— ‘‘(A) IN GENERAL.—In convening multi-stakeholder groups under paragraph (2) with respect to the selection of quality measures, the consensusbased entity described in such paragraph shall provide for an open and 

transparent process for the activities conducted pursuant to such convening. 

‘‘(B) SELECTION OF ORGANIZATIONS PARTICIPATING IN MULTI-STAKEHOLDER

GROUPS.—The process under paragraph (2) shall ensure that the selection 

of representatives of multi-stakeholder groups includes provision for public 

nominations for, and the opportunity for public comment on, such selection. 

‘‘(5) USE OF INPUT.—The respective proposed rule shall contain a summary of 

the recommendations made by the multi-stakeholder groups under paragraph 

(2), as well as other comments received regarding the proposed measures, and 

the extent to which such proposed rule follows such recommendations and the 

rationale for not following such recommendations. 

‘‘(6) MULTI-STAKEHOLDER GROUPS.—For purposes of this subsection, the term 

‘multi-stakeholder groups’ means, with respect to a quality measure, a voluntary collaborative of organizations representing persons interested in or affected by the use of such quality measure, such as the following: 

‘‘(A) Hospitals and other institutional providers. 

‘‘(B) Physicians. 

‘‘(C) Health care quality alliances. 

‘‘(D) Nurses and other health care practitioners. 

‘‘(E) Health plans. 

‘‘(F) Patient advocates and consumer groups. 

‘‘(G) Employers. 


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‘‘(H) Public and private purchasers of health care items and services. 

‘‘(I) Labor organizations. 

‘‘(J) Relevant departments or agencies of the United States. 

‘‘(K) Biopharmaceutical companies and manufacturers of medical devices. 

‘‘(L) Licensing, credentialing, and accrediting bodies. 

‘‘(7) FUNDING.— 

‘‘(A) IN GENERAL.—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 under section 1841 (in such 

proportion as the Secretary determines appropriate), of $1,000,000, to the 

Secretary for purposes of carrying out this subsection for each of the fiscal 

years 2010 through 2014. 

‘‘(B) AUTHORIZATION OF APPROPRIATIONS.—For purposes of carrying out 

the provisions of this subsection, in addition to funds otherwise available, 

out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary of Health and Human Services $1,000,000 for 

each of the fiscal years 2010 through 2014.’’. 

SEC. 1444. APPLICATION OF QUALITY MEASURES. 

(a) INPATIENT HOSPITAL SERVICES.—Section 1886(b)(3)(B) of such Act (42 U.S.C. 

1395ww(b)(3)(B)) is amended by adding at the end the following new clause: 

‘‘(x)(I) Subject to subclause (II), for purposes of reporting data on quality measures 

for inpatient hospital services furnished during fiscal year 2012 and each subsequent fiscal year, the quality measures specified under clause (viii) shall be measures selected by the Secretary from measures that have been endorsed by the entity 

with a contract with the Secretary under section 1890(a). 

‘‘(II) In the case of a specified area or medical topic determined appropriate by 

the Secretary for which a feasible and practical quality measure has not been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by 

the Secretary. The Secretary shall submit such a non-endorsed measure to the entity for consideration for endorsement. If the entity considers but does not endorse 

such a measure and if the Secretary does not phase-out use of such measure, the 

Secretary shall include the rationale for continued use of such a measure in rulemaking.’’. 

(b) OUTPATIENT HOSPITAL SERVICES.—Section 1833(t)(17) of such Act (42 U.S.C. 

1395l(t)(17)) is amended by adding at the end the following new subparagraph: 

‘‘(F) USE OF ENDORSED QUALITY MEASURES.—The provisions of clause (x) 

of section 1886(b)(3)(C) shall apply to quality measures for covered OPD 

services under this paragraph in the same manner as such provisions apply 

to quality measures for inpatient hospital services.’’. 

(c) PHYSICIANS’ SERVICES.—Section 1848(k)(2)(C)(ii) of such Act (42 U.S.C. 1395w4(k)(2)(C)(ii)) is amended by adding at the end the following: ‘‘The Secretary shall 

submit such a non-endorsed measure to the entity for consideration for endorsement. If the entity considers but does not endorse such a measure and if the Secretary does not phase-out use of such measure, the Secretary shall include the rationale for continued use of such a measure in rulemaking.’’. 

(d) RENAL DIALYSIS SERVICES.—Section 1881(h)(2)(B)(ii) of such Act (42 U.S.C. 

1395rr(h)(2)(B)(ii)) is amended by adding at the end the following: ‘‘The Secretary 

shall submit such a non-endorsed measure to the entity for consideration for endorsement. If the entity considers but does not endorse such a measure and if the 

Secretary does not phase-out use of such measure, the Secretary shall include the 

rationale for continued use of such a measure in rulemaking.’’. 

(e) ENDORSEMENT OF STANDARDS.—Section 1890(b)(2) of the Social Security Act 

(42 U.S.C. 1395aaa(b)(2)) is amended by adding after and below subparagraph (B) 

the following: 

‘‘If the entity does not endorse a measure, such entity shall explain the reasons 

and provide suggestions about changes to such measure that might make it a 

potentially endorsable measure.’’. 

(f) EFFECTIVE DATE.—Except as otherwise provided, the amendments made by 

this section shall apply to quality measures applied for payment years beginning 

with 2012 or fiscal year 2012, as the case may be. 

SEC. 1445. CONSENSUS-BASED ENTITY FUNDING. 

Section 1890(d) of the Social Security Act (42 U.S.C. 1395aaa(d)) is amended by 

striking ‘‘for each of fiscal years 2009 through 2012’’ and inserting ‘‘for fiscal year 

2009, and $12,000,000 for each of the fiscal years 2010 through 2012’’ 


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Subtitle D—Physician Payments Sunshine 

Provision 

SEC. 1451. REPORTS ON FINANCIAL RELATIONSHIPS BETWEEN MANUFACTURERS AND DISTRIBUTORS OF COVERED DRUGS, DEVICES, BIOLOGICALS, OR MEDICAL SUPPLIES 

UNDER MEDICARE, MEDICAID, OR CHIP AND PHYSICIANS AND OTHER HEALTH 

CARE ENTITIES AND BETWEEN PHYSICIANS AND OTHER HEALTH CARE ENTITIES. 

(a) IN GENERAL.—Part A of title XI of the Social Security Act (42 U.S.C. 1301 et 

seq.), as amended by section 1631(a), is further amended by inserting after section 

1128G the following new section: 

‘‘SEC. 1128H. FINANCIAL REPORTS ON PHYSICIANS’ FINANCIAL RELATIONSHIPS WITH MANUFACTURERS AND DISTRIBUTORS OF COVERED DRUGS, DEVICES, BIOLOGICALS, OR 

MEDICAL SUPPLIES UNDER MEDICARE, MEDICAID, OR CHIP AND WITH ENTITIES 

THAT BILL FOR SERVICES UNDER MEDICARE. 

‘‘(a) REPORTING OF PAYMENTS OR OTHER TRANSFERS OF VALUE.— 

‘‘(1) IN GENERAL.—Except as provided in this subsection, not later than March 

31, 2011 and annually thereafter, each applicable manufacturer or distributor 

that provides a payment or other transfer of value to a covered recipient, or to 

an entity or individual at the request of or designated on behalf of a covered 

recipient, shall submit to the Secretary, in such electronic form as the Secretary 

shall require, the following information with respect to the preceding calendar 

year: 

‘‘(A) With respect to the covered recipient, the recipient’s name, business 

address, physician specialty, and national provider identifier. 

‘‘(B) With respect to the payment or other transfer of value, other than 

a drug sample— 

‘‘(i) its value and date; 

‘‘(ii) the name of the related drug, device, or supply, if available; and 

‘‘(iii) a description of its form, indicated (as appropriate for all that 

apply) as— 

‘‘(I) cash or a cash equivalent; 

‘‘(II) in-kind items or services; 

‘‘(III) stock, a stock option, or any other ownership interest, dividend, profit, or other return on investment; or 

‘‘(IV) any other form (as defined by the Secretary). 

‘‘(C) With respect to a drug sample, the name, number, date, and dosage 

units of the sample. 

‘‘(2) AGGREGATE REPORTING.—Information submitted by an applicable manufacturer or distributor under paragraph (1) shall include the aggregate amount 

of all payments or other transfers of value provided by the manufacturer or distributor to covered recipients (and to entities or individuals at the request of 

or designated on behalf of a covered recipient) during the year involved, including all payments and transfers of value regardless of whether such payments 

or transfer of value were individually disclosed. 

‘‘(3) SPECIAL RULE FOR CERTAIN PAYMENTS OR OTHER TRANSFERS OF VALUE.— 

In the case where an applicable manufacturer or distributor provides a payment 

or other transfer of value to an entity or individual at the request of or designated on behalf of a covered recipient, the manufacturer or distributor shall 

disclose that payment or other transfer of value under the name of the covered 

recipient. 

‘‘(4) DELAYED REPORTING FOR PAYMENTS MADE PURSUANT TO PRODUCT DEVELOPMENT AGREEMENTS.—In the case of a payment or other transfer of value 

made to a covered recipient by an applicable manufacturer or distributor pursuant to a product development agreement for services furnished in connection 

with the development of a new drug, device, biological, or medical supply, the 

applicable manufacturer or distributor may report the value and recipient of 

such payment or other transfer of value in the first reporting period under this 

subsection in the next reporting deadline after the earlier of the following: 

‘‘(A) The date of the approval or clearance of the covered drug, device, biological, or medical supply by the Food and Drug Administration. 

‘‘(B) Two calendar years after the date such payment or other transfer of 

value was made. 

‘‘(5) DELAYED REPORTING FOR PAYMENTS MADE PURSUANT TO CLINICAL INVESTIGATIONS.—In the case of a payment or other transfer of value made to a covered recipient by an applicable manufacturer or distributor in connection with 

a clinical investigation regarding a new drug, device, biological, or medical supply, the applicable manufacturer or distributor may report as required under 


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this section in the next reporting period under this subsection after the earlier 

of the following: 

‘‘(A) The date that the clinical investigation is registered on the website 

maintained by the National Institutes of Health pursuant to section 671 of 

the Food and Drug Administration Amendments Act of 2007. 

‘‘(B) Two calendar years after the date such payment or other transfer of 

value was made. 

‘‘(6) CONFIDENTIALITY.—Information described in paragraph (4) or (5) shall be 

considered confidential and shall not be subject to disclosure under section 552 

of title 5, United States Code, or any other similar Federal, State, or local law, 

until or after the date on which the information is made available to the public 

under such paragraph. 

‘‘(b) REPORTING OF OWNERSHIP INTEREST BY PHYSICIANS IN HOSPITALS AND OTHER

ENTITIES THAT BILL MEDICARE.—Not later than March 31 of each year (beginning 

with 2011), each hospital or other health care entity (not including a Medicare Advantage organization) that bills the Secretary under part A or part B of title XVIII 

for services shall report on the ownership shares (other than ownership shares described in section 1877(c)) of each physician who, directly or indirectly, owns an interest in the entity. In this subsection, the term ‘physician’ includes a physician’s 

immediate family members (as defined for purposes of section 1877(a)). 

‘‘(c) PUBLIC AVAILABILITY.— 

‘‘(1) IN GENERAL.—The Secretary shall establish procedures to ensure that, 

not later than September 30, 2011, and on June 30 of each year beginning 

thereafter, the information submitted under subsections (a) and (b), other than 

information regard drug samples, with respect to the preceding calendar year 

is made available through an Internet website that— 

‘‘(A) is searchable and is in a format that is clear and understandable; 

‘‘(B) contains information that is presented by the name of the applicable 

manufacturer or distributor, the name of the covered recipient, the business 

address of the covered recipient, the specialty (if applicable) of the covered 

recipient, the value of the payment or other transfer of value, the date on 

which the payment or other transfer of value was provided to the covered 

recipient, the form of the payment or other transfer of value, indicated (as 

appropriate) under subsection (a)(1)(B)(ii), the nature of the payment or 

other transfer of value, indicated (as appropriate) under subsection 

(a)(1)(B)(iii), and the name of the covered drug, device, biological, or medical 

supply, as applicable; 

‘‘(C) contains information that is able to be easily aggregated and 

downloaded; 

‘‘(D) contains a description of any enforcement actions taken to carry out 

this section, including any penalties imposed under subsection (d), during 

the preceding year; 

‘‘(E) contains background information on industry-physician relationships; 

‘‘(F) in the case of information submitted with respect to a payment or 

other transfer of value described in subsection (a)(5), lists such information 

separately from the other information submitted under subsection (a) and 

designates such separately listed information as funding for clinical research; 

‘‘(G) contains any other information the Secretary determines would be 

helpful to the average consumer; and 

‘‘(H) provides the covered recipient an opportunity to submit corrections 

to the information made available to the public with respect to the covered 

recipient. 

‘‘(2) ACCURACY OF REPORTING.—The accuracy of the information that is submitted under subsections (a) and (b) and made available under paragraph (1) 

shall be the responsibility of the applicable manufacturer or distributor of a covered drug, device, biological, or medical supply reporting under subsection (a) 

or hospital or other health care entity reporting physician ownership under subsection (b). The Secretary shall establish procedures to ensure that the covered 

recipient is provided with an opportunity to submit corrections to the manufacturer, distributor, hospital, or other entity reporting under subsection (a) or (b) 

with regard to information made public with respect to the covered recipient 

and, under such procedures, the corrections shall be transmitted to the Secretary. 

‘‘(3) SPECIAL RULE FOR DRUG SAMPLES.—Information relating to drug samples 

provided under subsection (a) shall not be made available to the public by the 

Secretary but may be made available outside the Department of Health and 

Human Services by the Secretary for research or legitimate business purposes 

pursuant to data use agreements. 


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‘‘(4) SPECIAL RULE FOR NATIONAL PROVIDER IDENTIFIERS.—Information relating 

to national provider identifiers provided under subsection (a) shall not be made 

available to the public by the Secretary but may be made available outside the 

Department of Health and Human Services by the Secretary for research or legitimate business purposes pursuant to data use agreements. 

‘‘(d) PENALTIES FOR NONCOMPLIANCE.— 

‘‘(1) FAILURE TO REPORT.— 

‘‘(A) IN GENERAL.—Subject to subparagraph (B), except as provided in 

paragraph (2), any applicable manufacturer or distributor that fails to submit information required under subsection (a) in a timely manner in accordance with regulations promulgated to carry out such subsection, and any 

hospital or other entity that fails to submit information required under subsection (b) in a timely manner in accordance with regulations promulgated 

to carry out such subsection shall be subject to a civil money penalty of not 

less than $1,000, but not more than $10,000, for each payment or other 

transfer of value or ownership or investment interest not reported as required under such subsection. Such penalty shall be imposed and collected 

in the same manner as civil money penalties under subsection (a) of section 

1128A are imposed and collected under that section. 

‘‘(B) LIMITATION.—The total amount of civil money penalties imposed 

under subparagraph (A) with respect to each annual submission of information under subsection (a) by an applicable manufacturer or distributor or 

other entity shall not exceed $150,000. 

‘‘(2) KNOWING FAILURE TO REPORT.— 

‘‘(A) IN GENERAL.—Subject to subparagraph (B), any applicable manufacturer or distributor that knowingly fails to submit information required 

under subsection (a) in a timely manner in accordance with regulations promulgated to carry out such subsection and any hospital or other entity that 

fails to submit information required under subsection (b) in a timely manner in accordance with regulations promulgated to carry out such subsection, shall be subject to a civil money penalty of not less than $10,000, 

but not more than $100,000, for each payment or other transfer of value 

or ownership or investment interest not reported as required under such 

subsection. Such penalty shall be imposed and collected in the same manner as civil money penalties under subsection (a) of section 1128A are imposed and collected under that section. 

‘‘(B) LIMITATION.—The total amount of civil money penalties imposed 

under subparagraph (A) with respect to each annual submission of information under subsection (a) or (b) by an applicable manufacturer, distributor, 

or entity shall not exceed $1,000,000, or, if greater, 0.1 percentage of the 

total annual revenues of the manufacturer, distributor, or entity. 

‘‘(3) USE OF FUNDS.—Funds collected by the Secretary as a result of the imposition of a civil money penalty under this subsection shall be used to carry out 

this section. 

‘‘(4) ENFORCEMENT THROUGH STATE ATTORNEYS GENERAL.—The attorney general of a State, after providing notice to the Secretary of an intent to proceed 

under this paragraph in a specific case and providing the Secretary with an opportunity to bring an action under this subsection and the Secretary declining 

such opportunity, may proceed under this subsection against a manufacturer or 

distributor in the State. 

‘‘(e) ANNUAL REPORT TO CONGRESS.—Not later than April 1 of each year beginning 

with 2011, the Secretary shall submit to Congress a report that includes the following: 

‘‘(1) The information submitted under this section during the preceding year, 

aggregated for each applicable manufacturer or distributor of a covered drug, 

device, biological, or medical supply that submitted such information during 

such year. 

‘‘(2) A description of any enforcement actions taken to carry out this section, 

including any penalties imposed under subsection (d), during the preceding 

year. 

‘‘(f) DEFINITIONS.—In this section: 

‘‘(1) APPLICABLE MANUFACTURER; APPLICABLE DISTRIBUTOR.—The term ‘applicable manufacturer’ means a manufacturer of a covered drug, device, biological, 

or medical supply, and the term ‘applicable distributor’ means a distributor of 

a covered drug, device, or medical supply. 

‘‘(2) CLINICAL INVESTIGATION.—The term ‘clinical investigation’ means any experiment involving one or more human subjects, or materials derived from 

human subjects, in which a drug or device is administered, dispensed, or used. 


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‘‘(3) COVERED DRUG, DEVICE, BIOLOGICAL, OR MEDICAL SUPPLY.—The term ‘covered’ means, with respect to a drug, device, biological, or medical supply, such 

a drug, device, biological, or medical supply for which payment is available 

under title XVIII or a State plan under title XIX or XXI (or a waiver of such 

a plan). 

‘‘(4) COVERED RECIPIENT.—The term ‘covered recipient’ means the following: 

‘‘(A) A physician. 

‘‘(B) A physician group practice. 

‘‘(C) Any other prescriber of a covered drug, device, biological, or medical 

supply. 

‘‘(D) A pharmacy or pharmacist. 

‘‘(E) A health insurance issuer, group health plan, or other entity offering 

a health benefits plan, including any employee of such an issuer, plan, or 

entity. 

‘‘(F) A pharmacy benefit manager, including any employee of such a manager. 

‘‘(G) A hospital. 

‘‘(H) A medical school. 

‘‘(I) A sponsor of a continuing medical education program. 

‘‘(J) A patient advocacy or disease specific group. 

‘‘(K) A organization of health care professionals. 

‘‘(L) A biomedical researcher. 

‘‘(M) A group purchasing organization. 

‘‘(5) DISTRIBUTOR OF A COVERED DRUG, DEVICE, OR MEDICAL SUPPLY.—The 

term ‘distributor of a covered drug, device, or medical supply’ means any entity 

which is engaged in the marketing or distribution of a covered drug, device, or 

medical supply (or any subsidiary of or entity affiliated with such entity), but 

does not include a wholesale pharmaceutical distributor. 

‘‘(6) EMPLOYEE.—The term ‘employee’ has the meaning given such term in 

section 1877(h)(2). 

‘‘(7) KNOWINGLY.—The term ‘knowingly’ has the meaning given such term in 

section 3729(b) of title 31, United States Code. 

‘‘(8) MANUFACTURER OF A COVERED DRUG, DEVICE, BIOLOGICAL, OR MEDICAL

SUPPLY.—The term ‘manufacturer of a covered drug, device, biological, or medical supply’ means any entity which is engaged in the production, preparation, 

propagation, compounding, conversion, processing, marketing, or distribution of 

a covered drug, device, biological, or medical supply (or any subsidiary of or entity affiliated with such entity). 

‘‘(9) PAYMENT OR OTHER TRANSFER OF VALUE.— 

‘‘(A) IN GENERAL.—The term ‘payment or other transfer of value’ means 

a transfer of anything of value for or of any of the following: 

‘‘(i) Gift, food, or entertainment. 

‘‘(ii) Travel or trip. 

‘‘(iii) Honoraria. 

‘‘(iv) Research funding or grant. 

‘‘(v) Education or conference funding. 

‘‘(vi) Consulting fees. 

‘‘(vii) Ownership or investment interest and royalties or license fee. 

‘‘(B) INCLUSIONS.—Subject to subparagraph (C), the term ‘payment or 

other transfer of value’ includes any compensation, gift, honorarium, speaking fee, consulting fee, travel, services, dividend, profit distribution, stock 

or stock option grant, or any ownership or investment interest held by a 

physician in a manufacturer (excluding a dividend or other profit distribution from, or ownership or investment interest in, a publicly traded security 

or mutual fund (as described in section 1877(c))). 

‘‘(C) EXCLUSIONS.—The term ‘payment or other transfer of value’ does not 

include the following: 

‘‘(i) Any payment or other transfer of value provided by an applicable 

manufacturer or distributor to a covered recipient where the amount 

transferred to, requested by, or designated on behalf of the covered recipient does not exceed $5. 

‘‘(ii) The loan of a covered device for a short-term trial period, not to 

exceed 90 days, to permit evaluation of the covered device by the covered recipient. 

‘‘(iii) Items or services provided under a contractual warranty, including the replacement of a covered device, where the terms of the warranty are set forth in the purchase or lease agreement for the covered 

device. 


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‘‘(iv) A transfer of anything of value to a covered recipient when the 

covered recipient is a patient and not acting in the professional capacity of a covered recipient. 

‘‘(v) In-kind items used for the provision of charity care. 

‘‘(vi) A dividend or other profit distribution from, or ownership or investment interest in, a publicly traded security and mutual fund (as described in section 1877(c)). 

‘‘(vii) Compensation paid by a manufacturer or distributor of a covered drug, device, biological, or medical supply to a covered recipient 

who is directly employed by and works solely for such manufacturer or 

distributor. 

‘‘(viii) Any discount or cash rebate. 

‘‘(10) PHYSICIAN.—The term ‘physician’ has the meaning given that term in 

section 1861(r). For purposes of this section, such term does not include a physician who is an employee of the applicable manufacturer that is required to submit information under subsection (a). 

‘‘(g) ANNUAL REPORTS TO STATES.—Not later than April 1 of each year beginning 

with 2011, the Secretary shall submit to States a report that includes a summary 

of the information submitted under subsections (a) and (d) during the preceding 

year with respect to covered recipients or other hospitals and entities in the State. 

‘‘(h) RELATION TO STATE LAWS.— ‘‘(1) IN GENERAL.—Effective on January 1, 2011, subject to paragraph (2), the 

provisions of this section shall preempt any law or regulation of a State or of 

a political subdivision of a State that requires an applicable manufacturer and 

applicable distributor (as such terms are defined in subsection (f)) to disclose 

or report, in any format, the type of information (described in subsection (a)) 

regarding a payment or other transfer of value provided by the manufacturer 

to a covered recipient (as so defined). 

‘‘(2) NO PREEMPTION OF ADDITIONAL REQUIREMENTS.—Paragraph (1) shall not 

preempt any law or regulation of a State or of a political subdivision of a State 

that requires any of the following: 

‘‘(A) The disclosure or reporting of information not of the type required 

to be disclosed or reported under this section. 

‘‘(B) The disclosure or reporting, in any format, of the type of information 

required to be disclosed or reported under this section to a Federal, State, 

or local governmental agency for public health surveillance, investigation, 

or other public health purposes or health oversight purposes. 

‘‘(C) The discovery or admissibility of information described in this section 

in a criminal, civil, or administrative proceeding.’’. 

(b) AVAILABILITY OF INFORMATION FROM THE DISCLOSURE OF FINANCIAL RELA- TIONSHIP REPORT (DFRR).—The Secretary of Health and Human Services shall submit to Congress a report on the full results of the Disclosure of Physician Financial 

Relationships surveys required pursuant to section 5006 of the Deficit Reduction Act 

of 2005. Such report shall be submitted to Congress not later than the date that 

is 6 months after the date such surveys are collected and shall be made publicly 

available on an Internet website of the Department of Health and Human Services. 

Subtitle E—Public Reporting on Health CareAssociated Infections 

SEC. 1461. REQUIREMENT FOR PUBLIC REPORTING BY HOSPITALS AND AMBULATORY SURGICAL CENTERS ON HEALTH CARE-ASSOCIATED INFECTIONS. 

(a) IN GENERAL.—Title XI of the Social Security Act is amended by inserting after 

section 1138 the following section: 

‘‘SEC. 1138A. REQUIREMENT FOR PUBLIC REPORTING BY HOSPITALS AND AMBULATORY SURGICAL CENTERS ON HEALTH CARE-ASSOCIATED INFECTIONS. 

‘‘(a) REPORTING REQUIREMENT.— 

‘‘(1) IN GENERAL.—The Secretary shall provide that a hospital (as defined in 

subsection (g)) or ambulatory surgical center meeting the requirements of titles 

XVIII or XIX may participate in the programs established under such titles 

(pursuant to the applicable provisions of law, including sections 1866(a)(1) and 

1832(a)(1)(F)(i)) only if, in accordance with this section, the hospital or center 

reports such information on health care-associated infections that develop in the 

hospital or center (and such demographic information associated with such infections) as the Secretary specifies. 

‘‘(2) REPORTING PROTOCOLS.— Such information shall be reported in accordance with reporting protocols established by the Secretary through the Director 


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of the Centers for Disease Control and Prevention (in this section referred to 

as the ‘CDC’) and to the National Healthcare Safety Network of the CDC or 

under such another reporting system of such Centers as determined appropriate 

by the Secretary in consultation with such Director. 

‘‘(3) COORDINATION WITH HIT.—The Secretary, through the Director of the 

CDC and the Office of the National Coordinator for Health Information Technology, shall ensure that the transmission of information under this subsection 

is coordinated with systems established under the HITECH Act, where appropriate. 

‘‘(4) PROCEDURES TO ENSURE THE VALIDITY OF INFORMATION.—The Secretary 

shall establish procedures regarding the validity of the information submitted 

under this subsection in order to ensure that such information is appropriately 

compared across hospitals and centers. Such procedures shall address failures 

to report as well as errors in reporting. 

‘‘(5) IMPLEMENTATION.—Not later than 1 year after the date of enactment of 

this section, the Secretary, through the Director of CDC, shall promulgate regulations to carry out this section. 

‘‘(b) PUBLIC POSTING OF INFORMATION.—The Secretary shall promptly post, on the 

official public Internet site of the Department of Health and Human Services, the 

information reported under subsection (a). Such information shall be set forth in a 

manner that allows for the comparison of information on health care-associated infections— 

‘‘(1) among hospitals and ambulatory surgical centers; and 

‘‘(2) by demographic information. 

‘‘(c) ANNUAL REPORT TO CONGRESS.—On an annual basis the Secretary shall submit to the Congress a report that summarizes each of the following: 

‘‘(1) The number and types of health care-associated infections reported under 

subsection (a) in hospitals and ambulatory surgical centers during such year. 

‘‘(2) Factors that contribute to the occurrence of such infections, including 

health care worker immunization rates. 

‘‘(3) Based on the most recent information available to the Secretary on the 

composition of the professional staff of hospitals and ambulatory surgical centers, the number of certified infection control professionals on the staff of hospitals and ambulatory surgical centers. 

‘‘(4) The total increases or decreases in health care costs that resulted from 

increases or decreases in the rates of occurrence of each such type of infection 

during such year. 

‘‘(5) Recommendations, in coordination with the Center for Quality Improvement established under section 931 of the Public Health Service Act, for best 

practices to eliminate the rates of occurrence of each such type of infection in 

hospitals and ambulatory surgical centers. 

‘‘(d) NON-PREEMPTION OF STATE LAWS.—Nothing in this section shall be construed 

as preempting or otherwise affecting any provision of State law relating to the disclosure of information on health care-associated infections or patient safety procedures for a hospital or ambulatory surgical center. 

‘‘(e) HEALTH CARE-ASSOCIATED INFECTION.—For purposes of this section: 

‘‘(1) IN GENERAL.—The term ‘health care-associated infection’ means an infection that develops in a patient who has received care in any institutional setting 

where health care is delivered and is related to receiving health care. 

‘‘(2) RELATED TO RECEIVING HEALTH CARE.—The term ‘related to receiving 

health care’, with respect to an infection, means that the infection was not incubating or present at the time health care was provided. 

‘‘(f) APPLICATION TO CRITICAL ACCESS HOSPITALS.—For purposes of this section, 

the term ‘hospital’ includes a critical access hospital, as defined in section 

1861(mm)(1).’’. 

(b) EFFECTIVE DATE.—With respect to section 1138A of the Social Security Act (as 

inserted by subsection (a) of this section), the requirement under such section that 

hospitals and ambulatory surgical centers submit reports takes effect on such date 

(not later than 2 years after the date of the enactment of this Act) as the Secretary 

of Health and Human Services shall specify. In order to meet such deadline, the 

Secretary may implement such section through guidance or other instructions. 

(c) GAO REPORT.—Not later than 18 months after the date of the enactment of 

this Act, the Comptroller General of the United States shall submit to Congress a 

report on the program established under section 1138A of the Social Security Act, 

as inserted by subsection (a). Such report shall include an analysis of the appropriateness of the types of information required for submission, compliance with reporting requirements, the success of the validity procedures established, and any 

conflict or overlap between the reporting required under such section and any other 

reporting systems mandated by either the States or the Federal Government. 


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(d) REPORT ON ADDITIONAL DATA.—Not later than 18 months after the date of the 

enactment of this Act, the Secretary of Health and Human Services shall submit 

to the Congress a report on the appropriateness of expanding the requirements 

under such section to include additional information (such as health care worker immunization rates), in order to improve health care quality and patient safety. 

TITLE V—MEDICARE GRADUATE MEDICAL 

EDUCATION 

SEC. 1501. DISTRIBUTION OF UNUSED RESIDENCY POSITIONS. 

(a) IN GENERAL.—Section 1886(h) of the Social Security Act (42 U.S.C. 1395ww(h)) 

is amended— 

(1) in paragraph (4)(F)(i), by striking ‘‘paragraph (7)’’ and inserting ‘‘paragraphs (7) and (8)’’; 

(2) in paragraph (4)(H)(i), by striking ‘‘paragraph (7)’’ and inserting ‘‘paragraphs (7) and (8)’’; 

(3) in paragraph (7)(E), by inserting ‘‘and paragraph (8)’’ after ‘‘this paragraph’’; and 

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

‘‘(8) ADDITIONAL REDISTRIBUTION OF UNUSED RESIDENCY POSITIONS.— 

‘‘(A) REDUCTIONS IN LIMIT BASED ON UNUSED POSITIONS.— 

‘‘(i) PROGRAMS SUBJECT TO REDUCTION.—If a hospital’s reference resident level (specified in clause (ii)) is less than the otherwise applicable 

resident limit (as defined in subparagraph (C)(ii)), effective for portions 

of cost reporting periods occurring on or after July 1, 2011, the otherwise applicable resident limit shall be reduced by 90 percent of the difference between such otherwise applicable resident limit and such reference resident level. 

‘‘(ii) REFERENCE RESIDENT LEVEL.— 

‘‘(I) IN GENERAL.—Except as otherwise provided in a subsequent 

subclause, the reference resident level specified in this clause for 

a hospital is the highest resident level for any of the 3 most recent 

cost reporting periods (ending before the date of the enactment of 

this paragraph) of the hospital for which a cost report has been settled (or, if not, submitted (subject to audit)), as determined by the 

Secretary. 

‘‘(II) USE OF MOST RECENT ACCOUNTING PERIOD TO RECOGNIZE EXPANSION OF EXISTING PROGRAMS.—If a hospital submits a timely request to increase its resident level due to an expansion, or planned 

expansion, of an existing residency training program that is not reflected on the most recent settled or submitted cost report, after 

audit and subject to the discretion of the Secretary, subject to subclause (IV), the reference resident level for such hospital is the 

resident level that includes the additional residents attributable to 

such expansion or establishment, as determined by the Secretary. 

The Secretary is authorized to determine an alternative reference 

resident level for a hospital that submitted to the Secretary a timely request, before the start of the 2009–2010 academic year, for an 

increase in its reference resident level due to a planned expansion. 

‘‘(III) SPECIAL PROVIDER AGREEMENT.—In the case of a hospital 

described in paragraph (4)(H)(v), the reference resident level specified in this clause is the limitation applicable under subclause (I) 

of such paragraph. 

‘‘(IV) PREVIOUS REDISTRIBUTION.—The reference resident level 

specified in this clause for a hospital shall be increased to the extent required to take into account an increase in resident positions 

made available to the hospital under paragraph (7)(B) that are not 

otherwise taken into account under a previous subclause. 

‘‘(iii) AFFILIATION.—The provisions of clause (i) shall be applied to 

hospitals which are members of the same affiliated group (as defined 

by the Secretary under paragraph (4)(H)(ii)) and to the extent the hospitals can demonstrate that they are filling any additional resident 

slots allocated to other hospitals through an affiliation agreement, the 

Secretary shall adjust the determination of available slots accordingly, 

or which the Secretary otherwise has permitted the resident positions 

(under section 402 of the Social Security Amendments of 1967) to be 


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aggregated for purposes of applying the resident position limitations 

under this subsection. 

‘‘(B) REDISTRIBUTION.— ‘‘(i) IN GENERAL.—The Secretary shall increase the otherwise applicable resident limit for each qualifying hospital that submits an application under this subparagraph by such number as the Secretary may approve for portions of cost reporting periods occurring on or after July 

1, 2011. The estimated aggregate number of increases in the otherwise 

applicable resident limit under this subparagraph may not exceed the 

Secretary’s estimate of the aggregate reduction in such limits attributable to subparagraph (A). 

‘‘(ii) REQUIREMENTS FOR QUALIFYING HOSPITALS.—A hospital is not a 

qualifying hospital for purposes of this paragraph unless the following 

requirements are met: 

‘‘(I) MAINTENANCE OF PRIMARY CARE RESIDENT LEVEL.—The hospital maintains the number of primary care residents at a level 

that is not less than the base level of primary care residents increased by the number of additional primary care resident positions provided to the hospital under this subparagraph. For purposes of this subparagraph, the ‘base level of primary care residents’ for a hospital is the level of such residents as of a base period (specified by the Secretary), determined without regard to 

whether such positions were in excess of the otherwise applicable 

resident limit for such period but taking into account the application of subclauses (II) and (III) of subparagraph (A)(ii). 

‘‘(II) DEDICATED ASSIGNMENT OF ADDITIONAL RESIDENT POSITIONS

TO PRIMARY CARE.—The hospital assigns all such additional resident positions for primary care residents. 

‘‘(III) ACCREDITATION.—The hospital’s residency programs in primary care are fully accredited or, in the case of a residency training program not in operation as of the base year, the hospital is 

actively applying for such accreditation for the program for such 

additional resident positions (as determined by the Secretary). 

‘‘(iii) CONSIDERATIONS IN REDISTRIBUTION.—In determining for which 

qualifying hospitals the increase in the otherwise applicable resident 

limit is provided under this subparagraph, the Secretary shall take into 

account the demonstrated likelihood of the hospital filling the positions 

within the first 3 cost reporting periods beginning on or after July 1, 

2011, made available under this subparagraph, as determined by the 

Secretary. 

‘‘(iv) PRIORITY FOR CERTAIN HOSPITALS.—In determining for which 

qualifying hospitals the increase in the otherwise applicable resident 

limit is provided under this subparagraph, the Secretary shall distribute the increase to qualifying hospitals based on the following criteria: 

‘‘(I) The Secretary shall give preference to hospitals that had a 

reduction in resident training positions under subparagraph (A). 

‘‘(II) The Secretary shall give preference to hospitals with 3-year 

primary care residency training programs, such as family practice 

and general internal medicine. 

‘‘(III) The Secretary shall give preference to hospitals insofar as 

they have in effect formal arrangements (as determined by the Secretary) that place greater emphasis upon training in Federally 

qualified health centers, rural health clinics, and other nonprovider 

settings, and to hospitals that receive additional payments under 

subsection (d)(5)(F) and emphasize training in an outpatient department. 

‘‘(IV) The Secretary shall give preference to hospitals with a 

number of positions (as of July 1, 2009) in excess of the otherwise 

applicable resident limit for such period. 

‘‘(V) The Secretary shall give preference to hospitals that place 

greater emphasis upon training in a health professional shortage 

area (designated under section 332 of the Public Health Service 

Act) or a health professional needs area (designated under section 

2211 of such Act). 

‘‘(VI) The Secretary shall give preference to hospitals in States 

that have low resident-to-population ratios (including a greater 

preference for those States with lower resident-to-population ratios). 


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‘‘(v) LIMITATION.—In no case shall more than 20 full-time equivalent 

additional residency positions be made available under this subparagraph with respect to any hospital. 

‘‘(vi) APPLICATION OF PER RESIDENT AMOUNTS FOR PRIMARY CARE.— 

With respect to additional residency positions in a hospital attributable 

to the increase provided under this subparagraph, the approved FTE 

resident amounts are deemed to be equal to the hospital per resident 

amounts for primary care and nonprimary care computed under paragraph (2)(D) for that hospital. 

‘‘(vii) DISTRIBUTION.—The Secretary shall distribute the increase in 

resident training positions to qualifying hospitals under this subparagraph not later than July 1, 2011. 

‘‘(C) RESIDENT LEVEL AND LIMIT DEFINED.—In this paragraph: 

‘‘(i) The term ‘resident level’ has the meaning given such term in 

paragraph (7)(C)(i). 

‘‘(ii) The term ‘otherwise applicable resident limit’ means, with respect to a hospital, the limit otherwise applicable under subparagraphs 

(F)(i) and (H) of paragraph (4) on the resident level for the hospital determined without regard to this paragraph but taking into account 

paragraph (7)(A). 

‘‘(D) MAINTENANCE OF PRIMARY CARE RESIDENT LEVEL.—In carrying out 

this paragraph, the Secretary shall require hospitals that receive additional 

resident positions under subparagraph (B)— 

‘‘(i) to maintain records, and periodically report to the Secretary, on 

the number of primary care residents in its residency training programs; and 

‘‘(ii) as a condition of payment for a cost reporting period under this 

subsection for such positions, to maintain the level of such positions at 

not less than the sum of— 

‘‘(I) the base level of primary care resident positions (as determined under subparagraph (B)(ii)(I)) before receiving such additional positions; and 

‘‘(II) the number of such additional positions.’’. 

(b) IME.— 

(1) IN GENERAL.—Section 1886(d)(5)(B)(v) of the Social Security Act (42 U.S.C. 

1395ww(d)(5)(B)(v)), in the third sentence, is amended— 

(A) by striking ‘‘subsection (h)(7)’’ and inserting ‘‘subsections (h)(7) and 

(h)(8)’’; and 

(B) by striking ‘‘it applies’’ and inserting ‘‘they apply’’. 

(2) CONFORMING PROVISION.—Section 1886(d)(5)(B) of the Social Security Act 

(42 U.S.C. 1395ww(d)(5)(B)) is amended by adding at the end the following 

clause: 

‘‘(x) For discharges occurring on or after July 1, 2011, insofar as an additional 

payment amount under this subparagraph is attributable to resident positions distributed to a hospital under subsection (h)(8)(B), the indirect teaching adjustment 

factor shall be computed in the same manner as provided under clause (ii) with respect to such resident positions.’’. 

(c) CONFORMING AMENDMENT.—Section 422(b)(2) of the Medicare Prescription 

Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173) is amended by striking ‘‘section 1886(h)(7)’’ and all that follows and inserting ‘‘paragraphs 

(7) and (8) of subsection (h) of section 1886 of the Social Security Act.’’. 

SEC. 1502. INCREASING TRAINING IN NONPROVIDER SETTINGS. 

(a) DIRECT GME.—Section 1886(h)(4)(E) of the Social Security Act (42 U.S.C. 

1395ww(h)) is amended— 

(1) by designating the first sentence as a clause (i) with the heading ‘‘IN GENERAL.—’’ and appropriate indentation; 

(2) by striking ‘‘shall be counted and that all the time’’ and inserting ‘‘shall 

be counted and that— 

‘‘(I) effective for cost reporting periods beginning before July 1, 

2009, all the time’’; 

(3) in subclause (I), as inserted by paragraph (1), by striking the period at 

the end and inserting ‘‘; and’’; and 

(A) by inserting after subclause (I), as so inserted, the following: 

‘‘(II) effective for cost reporting periods beginning on or after July 

1, 2009, all the time so spent by a resident shall be counted towards the determination of full-time equivalency, without regard to 

the setting in which the activities are performed, if the hospital inVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00180 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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curs the costs of the stipends and fringe benefits of the resident 

during the time the resident spends in that setting. 

Any hospital claiming under this subparagraph for time spent in a nonprovider setting shall maintain and make available to the Secretary 

records regarding the amount of such time and such amount in comparison with amounts of such time in such base year as the Secretary 

shall specify.’’. 

(b) IME.—Section 1886(d)(5)(B)(iv) of the Social Security Act (42 U.S.C. 

1395ww(d)(5)(B)(iv)) is amended— 

(1) by striking ‘‘(iv) Effective for discharges occurring on or after October 1, 

1997’’ and inserting ‘‘(iv)(I) Effective for discharges occurring on or after October 

1, 1997, and before July 1, 2009’’; and 

(2) by inserting after subclause (I), as inserted by paragraph (1), the following 

new subclause: 

‘‘(II) Effective for discharges occurring on or after July 1, 2009, all the time 

spent by an intern or resident in patient care activities at an entity in a nonprovider setting shall be counted towards the determination of full-time equivalency if the hospital incurs the costs of the stipends and fringe benefits of the 

intern or resident during the time the intern or resident spends in that setting.’’. 

(c) OIG STUDY ON IMPACT ON TRAINING.—The Inspector General of the Department of Health and Human Services shall analyze the data collected by the Secretary of Health and Human Services from the records made available to the Secretary under section 1886(h)(4)(E) of the Social Security Act, as amended by subsection (a), in order to assess the extent to which there is an increase in time spent 

by medical residents in training in nonprovider settings as a result of the amendments made by this section. Not later than 4 years after the date of the enactment 

of this Act, the Inspector General shall submit a report to Congress on such analysis 

and assessment. 

(d) DEMONSTRATION PROJECT FOR APPROVED TEACHING HEALTH CENTERS.— (1) IN GENERAL.—The Secretary of Health and Human Services shall conduct 

a demonstration project under which an approved teaching health center (as defined in paragraph (3)) would be eligible for payment under subsections (h) and 

(k) of section 1886 of the Social Security Act (42 U.S.C. 1395ww) of amounts 

for its own direct costs of graduate medical education activities for primary care 

residents, as well as for the direct costs of graduate medical education activities 

of its contracting hospital for such residents, in a manner similar to the manner 

in which such payments would be made to a hospital if the hospital were to 

operate such a program. 

(2) CONDITIONS.—Under the demonstration project— 

(A) an approved teaching health center shall contract with an accredited 

teaching hospital to carry out the inpatient responsibilities of the primary 

care residency program of the hospital involved and is responsible for payment to the hospital for the hospital’s costs of the salary and fringe benefits 

for residents in the program; 

(B) the number of primary care residents of the center shall not count 

against the contracting hospital’s resident limit; and 

(C) the contracting hospital shall agree not to diminish the number of 

residents in its primary care residency training program. 

(3) APPROVED TEACHING HEALTH CENTER DEFINED.—In this subsection, the 

term ‘‘approved teaching health center’’ means a nonprovider setting, such as 

a Federally qualified health center or rural health clinic (as defined in section 

1861(aa) of the Social Security Act), that develops and operates an accredited 

primary care residency program for which funding would be available if it were 

operated by a hospital. 

SEC. 1503. RULES FOR COUNTING RESIDENT TIME FOR DIDACTIC AND SCHOLARLY ACTIVITIES AND OTHER ACTIVITIES. 

(a) DIRECT GME.—Section 1886(h) of the Social Security Act (42 U.S.C. 

1395ww(h)) is amended— 

(1) in paragraph (4)(E), as amended by section 1502(a)— 

(A) in clause (i), by striking ‘‘Such rules’’ and inserting ‘‘Subject to clause 

(ii), such rules’’; and 

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

‘‘(ii) TREATMENT OF CERTAIN NONPROVIDER AND DIDACTIC ACTIVITIES.—Such rules shall provide that all time spent by an intern or resident in an approved medical residency training program in a nonprovider setting that is primarily engaged in furnishing patient care (as 

defined in paragraph (5)(K)) in nonpatient care activities, such as didactic conferences and seminars, but not including research not associVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00181 Fmt 6659 Sfmt 6621 E:\HR\OC\HR443P1.XXX HR443P1

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ated with the treatment or diagnosis of a particular patient, as such 

time and activities are defined by the Secretary, shall be counted toward the determination of full-time equivalency.’’; 

(2) in paragraph (4), by adding at the end the following new subparagraph: 

‘‘(I) TREATMENT OF CERTAIN TIME IN APPROVED MEDICAL RESIDENCY TRAINING PROGRAMING.—In determining the hospital’s number of full-time equivalent residents for purposes of this subsection, all the time that is spent by 

an intern or resident in an approved medical residency training program 

on vacation, sick leave, or other approved leave, as such time is defined by 

the Secretary, and that does not prolong the total time the resident is participating in the approved program beyond the normal duration of the program shall be counted toward the determination of full-time equivalency.’’; 

and 

(3) in paragraph (5), by adding at the end the following new subparagraph: 

‘‘(K) NONPROVIDER SETTING THAT IS PRIMARILY ENGAGED IN FURNISHING

PATIENT CARE.—The term ‘nonprovider setting that is primarily engaged in 

furnishing patient care’ means a nonprovider setting in which the primary 

activity is the care and treatment of patients, as defined by the Secretary.’’. 

(b) IME DETERMINATIONS.—Section 1886(d)(5)(B) of such Act (42 U.S.C. 

1395ww(d)(5)(B)), as amended by section 1501(b), is amended by adding at the end 

the following new clause: 

‘‘(xi)(I) The provisions of subparagraph (I) of subsection (h)(4) shall apply under 

this subparagraph in the same manner as they apply under such subsection. 

‘‘(II) In determining the hospital’s number of full-time equivalent residents for 

purposes of this subparagraph, all the time spent by an intern or resident in an approved medical residency training program in nonpatient care activities, such as didactic conferences and seminars, as such time and activities are defined by the Secretary, that occurs in the hospital shall be counted toward the determination of fulltime equivalency if the hospital— 

‘‘(aa) is recognized as a subsection (d) hospital; 

‘‘(bb) is recognized as a subsection (d) Puerto Rico hospital; 

‘‘(cc) is reimbursed under a reimbursement system authorized under section 

1814(b)(3); or 

‘‘(dd) is a provider-based hospital outpatient department. 

‘‘(III) In determining the hospital’s number of full-time equivalent residents for 

purposes of this subparagraph, all the time spent by an intern or resident in an approved medical residency training program in research activities that are not associated with the treatment or diagnosis of a particular patient, as such time and activities are defined by the Secretary, shall not be counted toward the determination of 

full-time equivalency.’’. 

(c) EFFECTIVE DATES; APPLICATION.— 

(1) IN GENERAL.—Except as otherwise provided, the Secretary of Health and 

Human Services shall implement the amendments made by this section in a 

manner so as to apply to cost reporting periods beginning on or after January 

1, 1983. 

(2) DIRECT GME.—Section 1886(h)(4)(E)(ii) of the Social Security Act, as added 

by subsection (a)(1)(B), shall apply to cost reporting periods beginning on or 

after July 1, 2008. 

(3) IME.—Section 1886(d)(5)(B)(x)(III) of the Social Security Act, as added by 

subsection (b), shall apply to cost reporting periods beginning on or after October 1, 2001. Such section, as so added, shall not give rise to any inference on 

how the law in effect prior to such date should be interpreted. 

(4) APPLICATION.—The amendments made by this section shall not be applied 

in a manner that requires reopening of any settled hospital cost reports as to 

which there is not a jurisdictionally proper appeal pending as of the date of the 

enactment of this Act on the issue of payment for indirect costs of medical education under section 1886(d)(5)(B) of the Social Security Act or for direct graduate medical education costs under section 1886(h) of such Act. 

SEC. 1504. PRESERVATION OF RESIDENT CAP POSITIONS FROM CLOSED HOSPITALS. 

(a) DIRECT GME.—Section 1886(h)(4)(H) of the Social Security Act (42 U.S.C. Section 1395ww(h)(4)(H)) is amended by adding at the end the following new clause: 

‘‘(vi) REDISTRIBUTION OF RESIDENCY SLOTS AFTER A HOSPITAL

CLOSES.— 

‘‘(I) IN GENERAL.—The Secretary shall, by regulation, establish a 

process consistent with subclauses (II) and (III) under which, in the 

case where a hospital (other than a hospital described in clause (v)) 

with an approved medical residency program in a State closes on 

or after the date that is 2 years before the date of the enactment 


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of this clause, the Secretary shall increase the otherwise applicable 

resident limit under this paragraph for other hospitals in the State 

in accordance with this clause. 

‘‘(II) PROCESS FOR HOSPITALS IN CERTAIN AREAS.—In determining 

for which hospitals the increase in the otherwise applicable resident limit described in subclause (I) is provided, the Secretary 

shall establish a process to provide for such increase to one or more 

hospitals located in the State. Such process shall take into consideration the recommendations submitted to the Secretary by the 

senior health official (as designated by the chief executive officer of 

such State) if such recommendations are submitted not later than 

180 days after the date of the hospital closure involved (or, in the 

case of a hospital that closed after the date that is 2 years before 

the date of the enactment of this clause, 180 days after such date 

of enactment). 

‘‘(III) LIMITATION.—The estimated aggregate number of increases 

in the otherwise applicable resident limits for hospitals under this 

clause shall be equal to the estimated number of resident positions 

in the approved medical residency programs that closed on or after 

the date described in subclause (I).’’. 

(b) NO EFFECT ON TEMPORARY FTE CAP ADJUSTMENTS.—The amendments made 

by this section shall not effect any temporary adjustment to a hospital’s FTE cap 

under section 413.79(h) of title 42, Code of Federal Regulations (as in effect on the 

date of enactment of this Act) and shall not affect the application of section 

1886(h)(4)(H)(v) of the Social Security Act. 

(c) CONFORMING AMENDMENTS.— 

(1) Section 422(b)(2) of the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (Public Law 108–173), as amended by section 

1501(c), is amended by striking ‘‘(7) and’’ and inserting ‘‘(4)(H)(vi), (7), and’’. 

(2) Section 1886(h)(7)(E) of the Social Security Act (42 U.S.C. 

1395ww(h)(7)(E)) is amended by inserting ‘‘or under paragraph (4)(H)(vi)’’ after 

‘‘under this paragraph’’. 

SEC. 1505. IMPROVING ACCOUNTABILITY FOR APPROVED MEDICAL RESIDENCY TRAINING. 

(a) SPECIFICATION OF GOALS FOR APPROVED MEDICAL RESIDENCY TRAINING PROGRAMS.—Section 1886(h)(1) of the Social Security Act (42 U.S.C. 1395ww(h)(1)) is 

amended— 

(1) by designating the matter beginning with ‘‘Notwithstanding’’ as a subparagraph (A) with the heading ‘‘IN GENERAL.—’’ and with appropriate indentation; 

and 

(2) by adding at the end the following new subparagraph: 

‘‘(B) GOALS AND ACCOUNTABILITY FOR APPROVED MEDICAL RESIDENCY

TRAINING PROGRAMS.—The goals of medical residency training programs are 

to foster a physician workforce so that physicians are trained to be able to 

do the following: 

‘‘(i) Work effectively in various health care delivery settings, such as 

nonprovider settings. 

‘‘(ii) Coordinate patient care within and across settings relevant to 

their specialties. 

‘‘(iii) Understand the relevant cost and value of various diagnostic 

and treatment options. 

‘‘(iv) Work in inter-professional teams and multi-disciplinary teambased models in provider and nonprovider settings to enhance safety 

and improve quality of patient care. 

‘‘(v) Be knowledgeable in methods of identifying systematic errors in 

health care delivery and in implementing systematic solutions in case 

of such errors, including experience and participation in continuous 

quality improvement projects to improve health outcomes of the population the physicians serve. 

‘‘(vi) Be meaningful EHR users (as determined under section 

1848(o)(2)) in the delivery of care and in improving the quality of the 

health of the community and the individuals that the hospital serves.’’ 

(b) GAO STUDY ON EVALUATION OF TRAINING PROGRAMS.— 

(1) IN GENERAL.—The Comptroller General of the United States shall conduct 

a study to evaluate the extent to which medical residency training programs— 

(A) are meeting the goals described in section 1886(h)(1)(B) of the Social 

Security Act, as added by subsection (a), in a range of residency programs, 

including primary care and other specialties; and 


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(B) have the appropriate faculty expertise to teach the topics required to 

achieve such goals. 

(2) REPORT.—Not later than 18 months after the date of the enactment of this 

Act, the Comptroller General shall submit to Congress a report on such study 

and shall include in such report recommendations as to how medical residency 

training programs could be further encouraged to meet such goals through 

means such as— 

(A) development of curriculum requirements; and 

(B) assessment of the accreditation processes of the Accreditation Council 

for Graduate Medical Education and the American Osteopathic Association 

and effectiveness of those processes in accrediting medical residency programs that meet the goals referred to in paragraph (1)(A). 

TITLE VI—PROGRAM INTEGRITY 

Subtitle A—Increased Funding to Fight Waste, 

Fraud, and Abuse 

SEC. 1601. INCREASED FUNDING AND FLEXIBILITY TO FIGHT FRAUD AND ABUSE. 

(a) IN GENERAL.—Section 1817(k) of the Social Security Act (42 U.S.C. 1395i(k)) 

is amended— 

(1) by adding at the end the following new paragraph: 

‘‘(7) ADDITIONAL FUNDING.—In addition to the funds otherwise appropriated 

to the Account from the Trust Fund under paragraphs (3) and (4) and for purposes described in paragraphs (3)(C) and (4)(A), there are hereby appropriated 

an additional $100,000,000 to such Account from such Trust Fund for each fiscal year beginning with 2011. The funds appropriated under this paragraph 

shall be allocated in the same proportion as the total funding appropriated with 

respect to paragraphs (3)(A) and (4)(A) was allocated with respect to fiscal year 

2010, and shall be available without further appropriation until expended.’’. 

(2) in paragraph (4)(A)— 

(A) by inserting ‘‘for activities described in paragraph (3)(C) and’’ after 

‘‘necessary’’; and 

(B) by inserting ‘‘until expended’’ after ‘‘appropriation’’. 

(b) FLEXIBILITY IN PURSUING FRAUD AND ABUSE.—Section 1893(a) of the Social Security Act (42 U.S.C. 1395ddd(a)) is amended by inserting ‘‘, or otherwise,’’ after ‘‘entities’’. 

Subtitle B—Enhanced Penalties for Fraud and 

Abuse 

SEC. 1611. ENHANCED PENALTIES FOR FALSE STATEMENTS ON PROVIDER OR SUPPLIER ENROLLMENT APPLICATIONS. 

(a) IN GENERAL.—Section 1128A(a) of the Social Security Act (42 U.S.C. 1320a– 

7a(a)) is amended— 

(1) in paragraph (1)(D), by striking all that follows ‘‘in which the person was 

excluded’’ and inserting ‘‘under Federal law from the Federal health care program under which the claim was made, or’’; 

(2) by striking ‘‘or’’ at the end of paragraph (6); 

(3) in paragraph (7), by inserting at the end ‘‘or’’; 

(4) by inserting after paragraph (7) the following new paragraph: 

‘‘(8) knowingly makes or causes to be made any false statement, omission, or 

misrepresentation of a material fact in any application, agreement, bid, or contract to participate or enroll as a provider of services or supplier under a Federal health care program, including managed care organizations under title 

XIX, Medicare Advantage organizations under part C of title XVIII, prescription 

drug plan sponsors under part D of title XVIII, and entities that apply to participate as providers of services or suppliers in such managed care organizations 

and such plans;’’; 

(5) in the matter following paragraph (8), as inserted by paragraph (4), by 

striking ‘‘or in cases under paragraph (7), $50,000 for each such act)’’ and inserting ‘‘in cases under paragraph (7), $50,000 for each such act, or in cases 

under paragraph (8), $50,000 for each false statement, omission, or misrepresentation of a material fact)’’; and 


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(6) in the second sentence, by striking ‘‘for a lawful purpose)’’ and inserting 

‘‘for a lawful purpose, or in cases under paragraph (8), an assessment of not 

more than 3 times the amount claimed as the result of the false statement, 

omission, or misrepresentation of material fact claimed by a provider of services 

or supplier whose application to participate contained such false statement, 

omission, or misrepresentation)’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to acts 

committed on or after January 1, 2010. 

SEC. 1612. ENHANCED PENALTIES FOR SUBMISSION OF FALSE STATEMENTS MATERIAL TO A 

FALSE CLAIM. 

(a) IN GENERAL.—Section 1128A(a) of the Social Security Act (42 U.S.C. 1320a– 

7a(a)), as amended by section 1611, is further amended— 

(1) in paragraph (7), by striking ‘‘or’’ at the end; 

(2) in paragraph (8), by inserting ‘‘or’’ at the end; and 

(3) by inserting after paragraph (8), the following new paragraph: 

‘‘(9) knowingly makes, uses, or causes to be made or used, a false record or 

statement material to a false or fraudulent claim for payment for items and 

services furnished under a Federal health care program;’’; and 

(4) in the matter following paragraph (9), as inserted by paragraph (3)— 

(A) by striking ‘‘or in cases under paragraph (8)’’ and inserting ‘‘in cases 

under paragraph (8)’’; and 

(B) by striking ‘‘a material fact)’’ and inserting ‘‘a material fact, in cases 

under paragraph (9), $50,000 for each false record or statement)’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to acts 

committed on or after January 1, 2010. 

SEC. 1613. ENHANCED PENALTIES FOR DELAYING INSPECTIONS. 

(a) IN GENERAL.—Section 1128A(a) of the Social Security Act (42 U.S.C. 1320a– 

7a(a)), as amended by sections 1611 and 1612, is further amended— 

(1) in paragraph (8), by striking ‘‘or’’ at the end; 

(2) in paragraph (9), by inserting ‘‘or’’ at the end; 

(3) by inserting after paragraph (9) the following new paragraph: 

‘‘(10) fails to grant timely access, upon reasonable request (as defined by the 

Secretary in regulations), to the Inspector General of the Department of Health 

and Human Services, for the purpose of audits, investigations, evaluations, or 

other statutory functions of the Inspector General of the Department of Health 

and Human Services;’’; and 

(4) in the matter following paragraph (10), as inserted by paragraph (3), by 

inserting ‘‘, or in cases under paragraph (10), $15,000 for each day of the failure 

described in such paragraph’’ after ‘‘false record or statement’’. 

(b) ENSURING TIMELY INSPECTIONS RELATING TO CONTRACTS WITH MA ORGANIZATIONS.—Section 1857(d)(2) of such Act (42 U.S.C. 1395w–27(d)(2)) is amended— 

(1) in subparagraph (A), by inserting ‘‘timely’’ before ‘‘inspect’’; and 

(2) in subparagraph (B), by inserting ‘‘timely’’ before ‘‘audit and inspect’’. 

(c) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to violations committed on or after January 1, 2010. 

SEC. 1614. ENHANCED HOSPICE PROGRAM SAFEGUARDS. 

(a) MEDICARE.—Part A of title XVIII of the Social Security Act is amended by inserting after section 1819 the following new section: 

‘‘SEC. 1819A. ASSURING QUALITY OF CARE IN HOSPICE CARE. 

‘‘(a) IN GENERAL.—If the Secretary determines on the basis of a survey or otherwise, that a hospice program that is certified for participation under this title has 

demonstrated a substandard quality of care and failed to meet such other requirements as the Secretary may find necessary in the interest of the health and safety 

of the individuals who are provided care and services by the agency or organization 

involved and determines— 

‘‘(1) that the deficiencies involved immediately jeopardize the health and safety of the individuals to whom the program furnishes items and services, the 

Secretary shall take immediate action to remove the jeopardy and correct the 

deficiencies through the remedy specified in subsection (b)(2)(A)(iii) or terminate 

the certification of the program, and may provide, in addition, for 1 or more of 

the other remedies described in subsection (b)(2)(A); or 

‘‘(2) that the deficiencies involved do not immediately jeopardize the health 

and safety of the individuals to whom the program furnishes items and services, 

the Secretary may— 

‘‘(A) impose intermediate sanctions developed pursuant to subsection (b), 

in lieu of terminating the certification of the program; and 


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‘‘(B) if, after such a period of intermediate sanctions, the program is still 

not in compliance with such requirements, the Secretary shall terminate 

the certification of the program. 

If the Secretary determines that a hospice program that is certified for participation under this title is in compliance with such requirements but, as of a previous period, was not in compliance with such requirements, the Secretary may 

provide for a civil money penalty under subsection (b)(2)(A)(i) for the days in 

which it finds that the program was not in compliance with such requirements. 

‘‘(b) INTERMEDIATE SANCTIONS.— 

‘‘(1) DEVELOPMENT AND IMPLEMENTATION.—The Secretary shall develop and 

implement, by not later than July 1, 2012— 

‘‘(A) a range of intermediate sanctions to apply to hospice programs under 

the conditions described in subsection (a), and 

‘‘(B) appropriate procedures for appealing determinations relating to the 

imposition of such sanctions. 

‘‘(2) SPECIFIED SANCTIONS.— 

‘‘(A) IN GENERAL.—The intermediate sanctions developed under paragraph (1) may include— 

‘‘(i) civil money penalties in an amount not to exceed $10,000 for each 

day of noncompliance or, in the case of a per instance penalty applied 

by the Secretary, not to exceed $25,000, 

‘‘(ii) denial of all or part of the payments to which a hospice program 

would otherwise be entitled under this title with respect to items and 

services furnished by a hospice program on or after the date on which 

the Secretary determines that intermediate sanctions should be imposed pursuant to subsection (a)(2), 

‘‘(iii) the appointment of temporary management to oversee the operation of the hospice program and to protect and assure the health and 

safety of the individuals under the care of the program while improvements are made, 

‘‘(iv) corrective action plans, and 

‘‘(v) in-service training for staff. 

The provisions of section 1128A (other than subsections (a) and (b)) shall 

apply to a civil money penalty under clause (i) in the same manner as such 

provisions apply to a penalty or proceeding under section 1128A(a). The 

temporary management under clause (iii) shall not be terminated until the 

Secretary has determined that the program has the management capability 

to ensure continued compliance with all requirements referred to in that 

clause. 

‘‘(B) CLARIFICATION.—The sanctions specified in subparagraph (A) are in 

addition to sanctions otherwise available under State or Federal law and 

shall not be construed as limiting other remedies, including any remedy 

available to an individual at common law. 

‘‘(C) COMMENCEMENT OF PAYMENT.—A denial of payment under subparagraph (A)(ii) shall terminate when the Secretary determines that the hospice program no longer demonstrates a substandard quality of care and 

meets such other requirements as the Secretary may find necessary in the 

interest of the health and safety of the individuals who are provided care 

and services by the agency or organization involved. 

‘‘(3) SECRETARIAL AUTHORITY.—The Secretary shall develop and implement, by 

not later than July 1, 2011, specific procedures with respect to the conditions 

under which each of the intermediate sanctions developed under paragraph (1) 

is to be applied, including the amount of any fines and the severity of each of 

these sanctions. Such procedures shall be designed so as to minimize the time 

between identification of deficiencies and imposition of these sanctions and shall 

provide for the imposition of incrementally more severe fines for repeated or uncorrected deficiencies.’’. 

(b) APPLICATION TO MEDICAID.—Section 1905(o) of the Social Security Act (42 

U.S.C. 1396d(o)) is amended by adding at the end the following new paragraph: 

‘‘(4) The provisions of section 1819A shall apply to a hospice program providing 

hospice care under this title in the same manner as such provisions apply to a hospice program providing hospice care under title XVIII.’’. 

(c) APPLICATION TO CHIP.—Title XXI of the Social Security Act is amended by 

adding at the end the following new section: 

‘‘SEC. 2114. ASSURING QUALITY OF CARE IN HOSPICE CARE. 

‘‘The provisions of section 1819A shall apply to a hospice program providing hospice care under this title in the same manner such provisions apply to a hospice 

program providing hospice care under title XVIII.’’. 


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SEC. 1615. ENHANCED PENALTIES FOR INDIVIDUALS EXCLUDED FROM PROGRAM PARTICIPATION. 

(a) IN GENERAL.—Section 1128A(a) of the Social Security Act (42 U.S.C. 1320a– 

7a(a)), as amended by the previous sections, is further amended— 

(1) by striking ‘‘or’’ at the end of paragraph (9); 

(2) by inserting ‘‘or’’ at the end of paragraph (10); 

(3) by inserting after paragraph (10) the following new paragraph: 

‘‘(11) orders or prescribes an item or service, including without limitation 

home health care, diagnostic and clinical lab tests, prescription drugs, durable 

medical equipment, ambulance services, physical or occupational therapy, or 

any other item or service, during a period when the person has been excluded 

from participation in a Federal health care program, and the person knows or 

should know that a claim for such item or service will be presented to such a 

program;’’; and 

(4) in the matter following paragraph (11), as inserted by paragraph (2), by 

striking ‘‘$15,000 for each day of the failure described in such paragraph’’ and 

inserting ‘‘$15,000 for each day of the failure described in such paragraph, or 

in cases under paragraph (11), $50,000 for each order or prescription for an 

item or service by an excluded individual’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to violations committed on or after January 1, 2010. 

SEC. 1616. ENHANCED PENALTIES FOR PROVISION OF FALSE INFORMATION BY MEDICARE 

ADVANTAGE AND PART D PLANS. 

(a) IN GENERAL.—Section 1857(g)(2)(A) of the Social Security Act (42 U.S.C. 

1395w—27(g)(2)(A)) is amended by inserting ‘‘except with respect to a determination 

under subparagraph (E), an assessment of not more than 3 times the amount 

claimed by such plan or plan sponsor based upon the misrepresentation or falsified 

information involved,’’ after ‘‘for each such determination,’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to violations committed on or after January 1, 2010. 

SEC. 1617. ENHANCED PENALTIES FOR MEDICARE ADVANTAGE AND PART D MARKETING VIOLATIONS. 

(a) IN GENERAL.—Section 1857(g)(1) of the Social Security Act (42 U.S.C. 1395w— 

27(g)(1)), as amended by section 1221(b), is amended— 

(1) in subparagraph (G), by striking ‘‘or’’ at the end; 

(2) by inserting after subparagraph (H) the following new subparagraphs: 

‘‘(I) except as provided under subparagraph (C) or (D) of section 1860D– 

1(b)(1), enrolls an individual in any plan under this part without the prior 

consent of the individual or the designee of the individual; 

‘‘(J) transfers an individual enrolled under this part from one plan to another without the prior consent of the individual or the designee of the individual or solely for the purpose of earning a commission; 

‘‘(K) fails to comply with marketing restrictions described in subsections 

(h) and (j) of section 1851 or applicable implementing regulations or guidance; or 

‘‘(L) employs or contracts with any individual or entity who engages in 

the conduct described in subparagraphs (A) through (K) of this paragraph;’’; 

and 

(3) by adding at the end the following new sentence: ‘‘The Secretary may provide, in addition to any other remedies authorized by law, for any of the remedies described in paragraph (2), if the Secretary determines that any employee 

or agent of such organization, or any provider or supplier who contracts with 

such organization, has engaged in any conduct described in subparagraphs (A) 

through (L) of this paragraph.’’ 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to violations committed on or after January 1, 2010. 

SEC. 1618. ENHANCED PENALTIES FOR OBSTRUCTION OF PROGRAM AUDITS. 

(a) IN GENERAL.—Section 1128(b)(2) of the Social Security Act (42 U.S.C. 1320a– 

7(b)(2)) is amended— 

(1) in the heading, by inserting ‘‘OR AUDIT’’ after ‘‘INVESTIGATION’’; and 

(2) by striking ‘‘investigation into’’ and all that follows through the period and 

inserting ‘‘investigation or audit related to—’’ 

‘‘(i) any offense described in paragraph (1) or in subsection (a); or 

‘‘(ii) the use of funds received, directly or indirectly, from any Federal 

health care program (as defined in section 1128B(f)).’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to violations committed on or after January 1, 2010. 


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SEC. 1619. EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM PARTICIPATION IN 

MEDICARE AND STATE HEALTH CARE PROGRAMS. 

(a) IN GENERAL.—Section 1128(c) of the Social Security Act, as previously amended by this division, is further amended— 

(1) in the heading, by striking ‘‘AND PERIOD’’ and inserting ‘‘PERIOD, AND EF- FECT’’; and 

(2) by adding at the end the following new paragraph: 

‘‘(4)(A) For purposes of this Act, subject to subparagraph (C), the effect of exclusion is that no payment may be made by any Federal health care program (as defined in section 1128B(f)) with respect to any item or service furnished— 

‘‘(i) by an excluded individual or entity; or 

‘‘(ii) at the medical direction or on the prescription of a physician or other authorized individual when the person submitting a claim for such item or service 

knew or had reason to know of the exclusion of such individual. 

‘‘(B) For purposes of this section and sections 1128A and 1128B, subject to subparagraph (C), an item or service has been furnished by an individual or entity if 

the individual or entity directly or indirectly provided, ordered, manufactured, distributed, prescribed, or otherwise supplied the item or service regardless of how the 

item or service was paid for by a Federal health care program or to whom such payment was made. 

‘‘(C)(i) Payment may be made under a Federal health care program for emergency 

items or services (not including items or services furnished in an emergency room 

of a hospital) furnished by an excluded individual or entity, or at the medical direction or on the prescription of an excluded physician or other authorized individual 

during the period of such individual’s exclusion. 

‘‘(ii) In the case that an individual eligible for benefits under title XVIII or XIX 

submits a claim for payment for items or services furnished by an excluded individual or entity, and such individual eligible for such benefits did not know or have 

reason to know that such excluded individual or entity was so excluded, then, notwithstanding such exclusion, payment shall be made for such items or services. In 

such case the Secretary shall notify such individual eligible for such benefits of the 

exclusion of the individual or entity furnishing the items or services. Payment shall 

not be made for items or services furnished by an excluded individual or entity to 

an individual eligible for such benefits after a reasonable time (as determined by 

the Secretary in regulations) after the Secretary has notified the individual eligible 

for such benefits of the exclusion of the individual or entity furnishing the items 

or services. 

‘‘(iii) In the case that a claim for payment for items or services furnished by an 

excluded individual or entity is submitted by an individual or entity other than an 

individual eligible for benefits under title XVIII or XIX or the excluded individual 

or entity, and the Secretary determines that the individual or entity that submitted 

the claim took reasonable steps to learn of the exclusion and reasonably relied upon 

inaccurate or misleading information from the relevant Federal health care program 

or its contractor, the Secretary may waive repayment of the amount paid in violation of the exclusion to the individual or entity that submitted the claim for the 

items or services furnished by the excluded individual or entity. If a Federal health 

care program contractor provided inaccurate or misleading information that resulted 

in the waiver of an overpayment under this clause, the Secretary shall take appropriate action to recover the improperly paid amount from the contractor.’’. 

Subtitle C—Enhanced Program and Provider 

Protections 

SEC. 1631. ENHANCED CMS PROGRAM PROTECTION AUTHORITY. 

(a) IN GENERAL.—Title XI of the Social Security Act (42 U.S.C. 1301 et seq.) is 

amended by inserting after section 1128F the following new section: 

‘‘SEC. 1128G. ENHANCED PROGRAM AND PROVIDER PROTECTIONS IN THE MEDICARE, MEDICAID, AND CHIP PROGRAMS. 

‘‘(a) CERTAIN AUTHORIZED SCREENING, ENHANCED OVERSIGHT PERIODS, AND ENROLLMENT MORATORIA.— 

‘‘(1) IN GENERAL.—For periods beginning after January 1, 2011, in the case 

that the Secretary determines there is a significant risk of fraudulent activity 

(as determined by the Secretary based on relevant complaints, reports, referrals 

by law enforcement or other sources, data analysis, trending information, or 

claims submissions by providers of services and suppliers) with respect to a category of provider of services or supplier of items or services, including a category within a geographic area, under title XVIII, XIX, or XXI, the Secretary 


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may impose any of the following requirements with respect to a provider of 

services or a supplier (whether such provider or supplier is initially enrolling 

in the program or is renewing such enrollment): 

‘‘(A) Screening under paragraph (2). 

‘‘(B) Enhanced oversight periods under paragraph (3). 

‘‘(C) Enrollment moratoria under paragraph (4). 

In applying this subsection for purposes of title XIX and XXI the Secretary may 

require a State to carry out the provisions of this subsection as a requirement 

of the State plan under title XIX or the child health plan under title XXI. Actions taken and determinations made under this subsection shall not be subject 

to review by a judicial tribunal. 

‘‘(2) SCREENING.—For purposes of paragraph (1), the Secretary shall establish 

procedures under which screening is conducted with respect to providers of 

services and suppliers described in such paragraph. Such screening may include— 

‘‘(A) licensing board checks; 

‘‘(B) screening against the list of individuals and entities excluded from 

the program under title XVIII, XIX, or XXI; 

‘‘(C) the excluded provider list system; 

‘‘(D) background checks; and 

‘‘(E) unannounced pre-enrollment or other site visits. 

‘‘(3) ENHANCED OVERSIGHT PERIOD.—For purposes of paragraph (1), the Secretary shall establish procedures to provide for a period of not less than 30 days 

and not more than 365 days during which providers of services and suppliers 

described in such paragraph, as the Secretary determines appropriate, would be 

subject to enhanced oversight, such as required or unannounced (or required 

and unannounced) site visits or inspections, prepayment review, enhanced review of claims, and such other actions as specified by the Secretary, under the 

programs under titles XVIII, XIX, and XXI. Under such procedures, the Secretary may extend such period for more than 365 days if the Secretary determines that after the initial period such additional period of oversight is necessary. 

‘‘(4) MORATORIUM ON ENROLLMENT OF PROVIDERS AND SUPPLIERS.—For purposes of paragraph (1), the Secretary, based upon a finding of a risk of serious 

ongoing fraud within a program under title XVIII, XIX, or XXI, may impose a 

moratorium on the enrollment of providers of services and suppliers within a 

category of providers of services and suppliers (including a category within a 

specific geographic area) under such title. Such a moratorium may only be imposed if the Secretary makes a determination that the moratorium would not 

adversely impact access of individuals to care under such program. 

‘‘(5) CLARIFICATION.—Nothing in this subsection shall be interpreted to preclude or limit the ability of a State to engage in provider screening or enhanced 

provider oversight activities beyond those required by the Secretary.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) MEDICAID.—Section 1902(a) of the Social Security Act (42 U.S.C. 42 U.S.C. 

1396a(a)) is amended— 

(A) in paragraph (23), by inserting before the semicolon at the end the 

following: ‘‘or by a person to whom or entity to which a moratorium under 

section 1128G(a)(4) is applied during the period of such moratorium’’; 

(B) in paragraph (72); by striking at the end ‘‘and’’; 

(C) in paragraph (73), by striking the period at the end and inserting ‘‘; 

and’’; and 

(D) by adding after paragraph (73) the following new paragraph: 

‘‘(74) provide that the State will enforce any determination made by the Secretary under subsection (a) of section 1128G (relating to a significant risk of 

fraudulent activity with respect to a category of provider or supplier described 

in such subsection (a) through use of the appropriate procedures described in 

such subsection (a)), and that the State will carry out any activities as required 

by the Secretary for purposes of such subsection (a).’’. 

(2) CHIP.—Section 2102 of such Act (42 U.S.C. 1397bb) is amended by adding 

at the end the following new subsection: 

‘‘(d) PROGRAM INTEGRITY.—A State child health plan shall include a description 

of the procedures to be used by the State— 

‘‘(1) to enforce any determination made by the Secretary under subsection (a) 

of section 1128G (relating to a significant risk of fraudulent activity with respect to a category of provider or supplier described in such subsection through 

use of the appropriate procedures described in such subsection); and 

‘‘(2) to carry out any activities as required by the Secretary for purposes of 

such subsection.’’. 


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(3) MEDICARE.—Section 1866(j) of such Act (42 U.S.C. 1395cc(j)) is amended 

by adding at the end the following new paragraph: 

‘‘(3) PROGRAM INTEGRITY.—The provisions of section 1128G(a) apply to enrollments and renewals of enrollments of providers of services and suppliers under 

this title.’’. 

SEC. 1632. ENHANCED MEDICARE, MEDICAID, AND CHIP PROGRAM DISCLOSURE REQUIREMENTS RELATING TO PREVIOUS AFFILIATIONS. 

(a) IN GENERAL.—Section 1128G of the Social Security Act, as inserted by section 

1631, is amended by adding at the end the following new subsection: 

‘‘(b) ENHANCED PROGRAM DISCLOSURE REQUIREMENTS.— 

‘‘(1) DISCLOSURE.—A provider of services or supplier who submits on or after 

July 1, 2011, an application for enrollment and renewing enrollment in a program under title XVIII, XIX, or XXI shall disclose (in a form and manner determined by the Secretary) any current affiliation or affiliation within the previous 

10-year period with a provider of services or supplier that has uncollected debt 

or with a person or entity that has been suspended or excluded under such program, subject to a payment suspension, or has had its billing privileges revoked. 

‘‘(2) ENHANCED SAFEGUARDS.—If the Secretary determines that such previous 

affiliation of such provider or supplier poses a risk of fraud, waste, or abuse, 

the Secretary may apply such enhanced safeguards as the Secretary determines 

necessary to reduce such risk associated with such provider or supplier enrolling or participating in the program under title XVIII, XIX, or XXI. Such safeguards may include enhanced oversight, such as enhanced screening of claims, 

required or unannounced (or required and unannounced) site visits or inspections, additional information reporting requirements, and conditioning such enrollment on the provision of a surety bond. 

‘‘(3) AUTHORITY TO DENY PARTICIPATION.—If the Secretary determines that 

there has been at least one such affiliation and that such affiliation or affiliations, as applicable, of such provider or supplier poses a serious risk of fraud, 

waste, or abuse, the Secretary may deny the application of such provider or supplier.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) MEDICAID.—Paragraph (74) of section 1902(a) of such Act (42 U.S.C. 

1396a(a)), as added by section 1631(b)(1), is amended— 

(A) by inserting ‘‘or subsection (b) of such section (relating to disclosure 

requirements)’’ before ‘‘, and that the State’’; and 

(B) by inserting before the period the following: ‘‘and apply any enhanced 

safeguards, with respect to a provider or supplier described in such subsection (b), as the Secretary determines necessary under such subsection 

(b)’’. 

(2) CHIP.—Subsection (d) of section 2102 of such Act (42 U.S.C. 1397bb), as 

added by section 1631(b)(2), is amended— 

(A) in paragraph (1), by striking at the end ‘‘and’’; 

(B) in paragraph (2) by striking the period at the end and inserting ‘‘; 

and’ ’’ and 

(C) by adding at the end the following new paragraph: 

‘‘(3) to enforce any determination made by the Secretary under subsection (b) 

of section 1128G (relating to disclosure requirements) and to apply any enhanced safeguards, with respect to a provider or supplier described in such subsection, as the Secretary determines necessary under such subsection.’’. 

SEC. 1633. REQUIRED INCLUSION OF PAYMENT MODIFIER FOR CERTAIN EVALUATION AND 

MANAGEMENT SERVICES. 

Section 1848 of the Social Security Act (42 U.S.C. 1395w–4), as amended by section 4101 of the HITECH Act (Public Law 111–5), is amended by adding at the end 

the following new subsection: 

‘‘(p) PAYMENT MODIFIER FOR CERTAIN EVALUATION AND MANAGEMENT SERVICES.— 

The Secretary shall establish a payment modifier under the fee schedule under this 

section for evaluation and management services (as specified in section 

1842(b)(16)(B)(ii)) that result in the ordering of additional services (such as lab 

tests), the prescription of drugs, the furnishing or ordering of durable medical equipment in order to enable better monitoring of claims for payment for such additional 

services under this title, or the ordering, furnishing, or prescribing of other items 

and services determined by the Secretary to pose a high risk of waste, fraud, and 

abuse. The Secretary may require providers of services or suppliers to report such 

modifier in claims submitted for payment.’’. 


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SEC. 1634. EVALUATIONS AND REPORTS REQUIRED UNDER MEDICARE INTEGRITY PROGRAM. 

(a) IN GENERAL.—Section 1893(c) of the Social Security Act (42 U.S.C. 1395ddd(c)) 

is amended— 

(1) in paragraph (3), by striking at the end ‘‘and’’; 

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

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

‘‘(4) for the contract year beginning in 2011 and each subsequent contract 

year, the entity provides assurances to the satisfaction of the Secretary that the 

entity will conduct periodic evaluations of the effectiveness of the activities carried out by such entity under the Program and will submit to the Secretary an 

annual report on such activities; and’’. 

(b) REFERENCE TO MEDICAID INTEGRITY PROGRAM.—For a similar provision with 

respect to the Medicaid Integrity Program, see section 1752. 

SEC. 1635. REQUIRE PROVIDERS AND SUPPLIERS TO ADOPT PROGRAMS TO REDUCE WASTE, 

FRAUD, AND ABUSE. 

(a) IN GENERAL.—Section 1874 of the Social Security Act (42 U.S.C. 42 U.S.C. 

1395kk) is amended by adding at the end the following new subsection: 

‘‘(e) COMPLIANCE PROGRAMS FOR PROVIDERS OF SERVICES AND SUPPLIERS.— ‘‘(1) IN GENERAL.—The Secretary may disenroll a provider of services or a supplier (other than a physician or a skilled nursing facility) under this title (or 

may impose any civil monetary penalty or other intermediate sanction under 

paragraph (4)) if such provider of services or supplier fails to, subject to paragraph (5), establish a compliance program that contains the core elements established under paragraph (2). 

‘‘(2) ESTABLISHMENT OF CORE ELEMENTS.—The Secretary, in consultation with 

the Inspector General of the Department of Health and Human Services, shall 

establish core elements for a compliance program under paragraph (1). Such 

elements may include written policies, procedures, and standards of conduct, a 

designated compliance officer and a compliance committee; effective training 

and education pertaining to fraud, waste, and abuse for the organization’s employees and contractors; a confidential or anonymous mechanism, such as a hotline, to receive compliance questions and reports of fraud, waste, or abuse; disciplinary guidelines for enforcement of standards; internal monitoring and auditing procedures, including monitoring and auditing of contractors; procedures 

for ensuring prompt responses to detected offenses and development of corrective action initiatives, including responses to potential offenses; and procedures 

to return all identified overpayments to the programs under this title, title XIX, 

and title XXI. 

‘‘(3) TIMELINE FOR IMPLEMENTATION.—The Secretary shall determine a 

timeline for the establishment of the core elements under paragraph (2) and the 

date on which a provider of services and suppliers (other than physicians) shall 

be required to have established such a program for purposes of this subsection. 

‘‘(4) CMS ENFORCEMENT AUTHORITY.—The Administrator for the Centers of 

Medicare & Medicaid Services shall have the authority to determine whether 

a provider of services or supplier described in subparagraph (3) has met the requirement of this subsection and to impose a civil monetary penalty not to exceed $50,000 for each violation. The Secretary may also impose other intermediate sanctions, including corrective action plans and additional monitoring 

in the case of a violation of this subsection. 

‘‘(5) PILOT PROGRAM.—The Secretary may conduct a pilot program on the application of this subsection with respect to a category of providers of services 

or suppliers (other than physicians) that the Secretary determines to be a category which is at high risk for waste, fraud, and abuse before implementing the 

requirements of this subsection to all providers of services and suppliers described in paragraph (3).’’. 

(b) REFERENCE TO SIMILAR MEDICAID PROVISION.—For a similar provision with respect to the Medicaid program under title XIX of the Social Security Act, see section 

1753. 

SEC. 1636. MAXIMUM PERIOD FOR SUBMISSION OF MEDICARE CLAIMS REDUCED TO NOT 

MORE THAN 12 MONTHS. 

(a) PURPOSE.—In general, the 36-month period currently allowed for claims filing 

under parts A, B, C, and, D of title XVIII of the Social Security Act presents opportunities for fraud schemes in which processing patterns of the Centers for Medicare 

& Medicaid Services can be observed and exploited. Narrowing the window for 

claims processing will not overburden providers and will reduce fraud and abuse. 

(b) REDUCING MAXIMUM PERIOD FOR SUBMISSION.— 

(1) PART A.—Section 1814(a) of the Social Security Act (42 U.S.C. 1395f(a)) 

is amended— 


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(A) in paragraph (1), by striking ‘‘period of 3 calendar years’’ and all that 

follows and inserting ‘‘period of 1 calendar year from which such services 

are furnished; and’’; and 

(B) by adding at the end the following new sentence: ‘‘In applying paragraph (1), the Secretary may specify exceptions to the 1 calendar year period specified in such paragraph.’’. 

(2) PART B.—Section 1835(a) of such Act (42 U.S.C. 1395n(a)) is amended— 

(A) in paragraph (1), by striking ‘‘period of 3 calendar years’’ and all that 

follows and inserting ‘‘period of 1 calendar year from which such services 

are furnished; and’’; and 

(B) by adding at the end the following new sentence: ‘‘In applying paragraph (1), the Secretary may specify exceptions to the 1 calendar year period specified in such paragraph.’’. 

(3) PARTS C AND D.—Section 1857(d) of such Act is amended by adding at the 

end the following new paragraph: 

‘‘(7) PERIOD FOR SUBMISSION OF CLAIMS.—The contract shall require an MA 

organization or PDP sponsor to require any provider of services under contract 

with, in partnership with, or affiliated with such organization or sponsor to ensure that, with respect to items and services furnished by such provider to an 

enrollee of such organization, written request, signed by such enrollee, except 

in cases in which the Secretary finds it impracticable for the enrollee to do so, 

is filed for payment for such items and services in such form, in such manner, 

and by such person or persons as the Secretary may by regulation prescribe, 

no later than the close of the 1 calendar year period after such items and services are furnished. In applying the previous sentence, the Secretary may specify 

exceptions to the 1 calendar year period specified.’’. 

(c) EFFECTIVE DATE.—The amendments made by subsection (b) shall be effective 

for items and services furnished on or after January 1, 2011. 

SEC. 1637. PHYSICIANS WHO ORDER DURABLE MEDICAL EQUIPMENT OR HOME HEALTH 

SERVICES REQUIRED TO BE MEDICARE ENROLLED PHYSICIANS OR ELIGIBLE PROFESSIONALS. 

(a) DME.—Section 1834(a)(11)(B) of the Social Security Act (42 U.S.C. 

1395m(a)(11)(B)) is amended by striking ‘‘physician’’ and inserting ‘‘physician enrolled under section 1866(j) or an eligible professional under section 1848(k)(3)(B)’’. 

(b) HOME HEALTH SERVICES.— 

(1) PART A.—Section 1814(a)(2) of such Act (42 U.S.C. 1395(a)(2)) is amended 

in the matter preceding subparagraph (A) by inserting ‘‘in the case of services 

described in subparagraph (C), a physician enrolled under section 1866(j) or an 

eligible professional under section 1848(k)(3)(B),’’ before ‘‘or, in the case of services’’. 

(2) PART B.—Section 1835(a)(2) of such Act (42 U.S.C. 1395n(a)(2)) is amended 

in the matter preceding subparagraph (A) by inserting ‘‘, or in the case of services described in subparagraph (A), a physician enrolled under section 1866(j) 

or an eligible professional under section 1848(k)(3)(B),’’ after ‘‘a physician’’. 

(c) DISCRETION TO EXPAND APPLICATION.—The Secretary may extend the requirement applied by the amendments made by subsections (a) and (b) to durable medical equipment and home health services (relating to requiring certifications and 

written orders to be made by enrolled physicians and health professions) to other 

categories of items or services under this title, including covered part D drugs as 

defined in section 1860D–2(e), if the Secretary determines that such application 

would help to reduce the risk of waste, fraud, and abuse with respect to such other 

categories under title XVIII of the Social Security Act. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to written orders and certifications made on or after July 1, 2010. 

SEC. 1638. REQUIREMENT FOR PHYSICIANS TO PROVIDE DOCUMENTATION ON REFERRALS 

TO PROGRAMS AT HIGH RISK OF WASTE AND ABUSE. 

(a) PHYSICIANS AND OTHER SUPPLIERS.—Section 1842(h) of the Social Security Act, 

is amended by adding at the end the following new paragraph 

‘‘(10) The Secretary may disenroll, for a period of not more than one year for each 

act, a physician or supplier under section 1866(j) if such physician or supplier fails 

to maintain and, upon request of the Secretary, provide access to documentation relating to written orders or requests for payment for durable medical equipment, certifications for home health services, or referrals for other items or services written 

or ordered by such physician or supplier under this title, as specified by the Secretary.’’. 

(b) PROVIDERS OF SERVICES.—Section 1866(a)(1) of such Act (42 U.S.C. 1395cc), is 

amended— 

(1) in subparagraph (U), by striking at the end ‘‘and’’; 


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(2) in subparagraph (V), by striking the period at the end and adding ‘‘; and’’; 

and 

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

‘‘(W) maintain and, upon request of the Secretary, provide access to documentation relating to written orders or requests for payment for durable 

medical equipment, certifications for home health services, or referrals for 

other items or services written or ordered by the provider under this title, 

as specified by the Secretary.’’. 

(c) OIG PERMISSIVE EXCLUSION AUTHORITY.—Section 1128(b)(11) of the Social Security Act (42 U.S.C. 1320a–7(b)(11)) is amended by inserting ‘‘, ordering, referring 

for furnishing, or certifying the need for’’ after ‘‘furnishing’’. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to orders, certifications, and referrals made on or after January 1, 2010. 

SEC. 1639. FACE TO FACE ENCOUNTER WITH PATIENT REQUIRED BEFORE PHYSICIANS MAY 

CERTIFY ELIGIBILITY FOR HOME HEALTH SERVICES OR DURABLE MEDICAL 

EQUIPMENT UNDER MEDICARE. 

(a) CONDITION OF PAYMENT FOR HOME HEALTH SERVICES.— 

(1) PART A.—Section 1814(a)(2)(C) of such Act is amended— 

(A) by striking ‘‘and such services’’ and inserting ‘‘such services’’; and 

(B) by inserting after ‘‘care of a physician’’ the following: ‘‘, and, in the 

case of a certification or recertification made by a physician after January 

1, 2010, prior to making such certification the physician must document 

that the physician has had a face-to-face encounter (including through use 

of telehealth and other than with respect to encounters that are incident 

to services involved) with the individual during the 6-month period preceding such certification, or other reasonable timeframe as determined by 

the Secretary’’. 

(2) PART B.—Section 1835(a)(2)(A) of the Social Security Act is amended— 

(A) by striking ‘‘and’’ before ‘‘(iii)’’; and 

(B) by inserting after ‘‘care of a physician’’ the following: ‘‘, and (iv) in the 

case of a certification or recertification after January 1, 2010, prior to making such certification the physician must document that the physician has 

had a face-to-face encounter (including through use of telehealth and other 

than with respect to encounters that are incident to services involved) with 

the individual during the 6-month period preceding such certification or recertification, or other reasonable timeframe as determined by the Secretary’’. 

(b) CONDITION OF PAYMENT FOR DURABLE MEDICAL EQUIPMENT.—Section 

1834(a)(11)(B) of the Social Security Act (42 U.S.C. 1395m(a)(11)(B)) is amended by 

adding before the period at the end the following: ‘‘and shall require that such an 

order be written pursuant to the physician documenting that the physician has had 

a face-to-face encounter (including through use of telehealth and other than with respect to encounters that are incident to services involved) with the individual involved during the 6-month period preceding such written order, or other reasonable 

timeframe as determined by the Secretary’’. 

(c) APPLICATION TO OTHER AREAS UNDER MEDICARE.—The Secretary may apply 

the face-to-face encounter requirement described in the amendments made by subsections (a) and (b) to other items and services for which payment is provided under 

title XVIII of the Social Security Act based upon a finding that such an decision 

would reduce the risk of waste, fraud, or abuse. 

(d) APPLICATION TO MEDICAID AND CHIP.—The requirements pursuant to the 

amendments made by subsections (a) and (b) shall apply in the case of physicians 

making certifications for home health services under title XIX or XXI of the Social 

Security Act, in the same manner and to the same extent as such requirements 

apply in the case of physicians making such certifications under title XVIII of such 

Act. 

SEC. 1640. EXTENSION OF TESTIMONIAL SUBPOENA AUTHORITY TO PROGRAM EXCLUSION INVESTIGATIONS. 

(a) IN GENERAL.—Section 1128(f) of the Social Security Act (42 U.S.C. 1320a-7(f)) 

is amended by adding at the end the following new paragraph: 

‘‘(4) The provisions of subsections (d) and (e) of section 205 shall apply with respect to this section to the same extent as they are applicable with respect to title 

II. The Secretary may delegate the authority granted by section 205(d) (as made applicable to this section) to the Inspector General of the Department of Health and 

Human Services or the Administrator of the Centers for Medicare & Medicaid Services for purposes of any investigation under this section.’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to investigations beginning on or after January 1, 2010. 


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SEC. 1641. REQUIRED REPAYMENTS OF MEDICARE AND MEDICAID OVERPAYMENTS. 

Section 1128G of the Social Security Act, as inserted by section 1631 and amended by section 1632, is further amended by adding at the end the following new subsection: 

‘‘(c) REPORTS ON AND REPAYMENT OF OVERPAYMENTS IDENTIFIED THROUGH INTERNAL AUDITS AND REVIEWS.— 

‘‘(1) REPORTING AND RETURNING OVERPAYMENTS.—If a person knows of an 

overpayment, the person must— 

‘‘(A) report and return the overpayment to the Secretary, the State, an 

intermediary, a carrier, or a contractor, as appropriate, at the correct address, and 

‘‘(B) notify the Secretary, the State, intermediary, carrier, or contractor 

to whom the overpayment was returned in writing of the reason for the 

overpayment. 

‘‘(2) TIMING.—An overpayment must be reported and returned under paragraph (1)(A) by not later than the date that is 60 days after the date the person 

knows of the overpayment. 

Any known overpayment retained later than the applicable date specified in 

this paragraph creates an obligation as defined in section 3729(b)(3) of title 31 

of the United States Code. 

‘‘(3) CLARIFICATION.—Repayment of any overpayments (or refunding by withholding of future payments) by a provider of services or supplier does not otherwise limit the provider or supplier’s potential liability for administrative obligations such as applicable interests, fines, and specialties or civil or criminal sanctions involving the same claim if it is determined later that the reason for the 

overpayment was related to fraud by the provider or supplier or the employees 

or agents of such provider or supplier. 

‘‘(4) DEFINITIONS.—In this subsection: 

‘‘(A) KNOWS.—The term ‘knows’ has the meaning given the terms ‘knowing’ and ‘knowingly’ in section 3729(b) of title 31 of the United States Code. 

‘‘(B) OVERPAYMENT.—The term ‘‘overpayment’’ means any finally determined funds that a person receives or retains under title XVIII, XIX, or XXI 

to which the person, after applicable reconciliation, is not entitled under 

such title. 

‘‘(C) PERSON.—The term ‘person’ means a provider of services, supplier, 

Medicaid managed care organization (as defined in section 1903(m)(1)(A)), 

Medicare Advantage organization (as defined in section 1859(a)(1)), or PDP 

sponsor (as defined in section 1860D–41(a)(13)), but excluding a beneficiary.’’. 

SEC. 1642. EXPANDED APPLICATION OF HARDSHIP WAIVERS FOR OIG EXCLUSIONS TO BENEFICIARIES OF ANY FEDERAL HEALTH CARE PROGRAM. 

Section 1128(c)(3)(B) of the Social Security Act (42 U.S.C. 1320a–7(c)(3)(B)) is 

amended by striking ‘‘individuals entitled to benefits under part A of title XVIII or 

enrolled under part B of such title, or both’’ and inserting ‘‘beneficiaries (as defined 

in section 1128A(i)(5)) of that program’’. 

SEC. 1643. ACCESS TO CERTAIN INFORMATION ON RENAL DIALYSIS FACILITIES. 

Section 1881(b) of the Social Security Act (42 U.S.C. 1395rr(b)) is amended by 

adding at the end the following new paragraph: 

‘‘(15) For purposes of evaluating or auditing payments made to renal dialysis facilities for items and services under this section under paragraph (1), each such 

renal dialysis facility, upon the request of the Secretary, shall provide to the Secretary access to information relating to any ownership or compensation arrangement between such facility and the medical director of such facility or between such 

facility and any physician.’’. 

SEC. 1644. BILLING AGENTS, CLEARINGHOUSES, OR OTHER ALTERNATE PAYEES REQUIRED 

TO REGISTER UNDER MEDICARE. 

(a) MEDICARE.—Section 1866(j)(1) of the Social Security Act (42 U.S.C. 

1395cc(j)(1)) is amended by adding at the end the following new subparagraph: 

‘‘(D) BILLING AGENTS AND CLEARINGHOUSES REQUIRED TO BE REGISTERED

UNDER MEDICARE.—Any agent, clearinghouse, or other alternate payee that 

submits claims on behalf of a health care provider must be registered with 

the Secretary in a form and manner specified by the Secretary.’’. 

(b) MEDICAID.—For a similar provision with respect to the Medicaid program 

under title XIX of the Social Security Act, see section 1759. 

(c) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to 

claims submitted on or after January 1, 2012. 


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SEC. 1645. CONFORMING CIVIL MONETARY PENALTIES TO FALSE CLAIMS ACT AMENDMENTS. 

Section 1128A of the Social Security Act, as amended by sections 1611, 1612, 

1613, and 1615, is further amended— 

(1) in subsection (a)— 

(A) in paragraph (1), by striking ‘‘to an officer, employee, or agent of the 

United States, or of any department or agency thereof, or of any State 

agency (as defined in subsection (i)(1))’’; 

(B) in paragraph (4)— 

(i) in the matter preceding subparagraph (A), by striking ‘‘participating in a program under title XVIII or a State health care program’’ 

and inserting ‘‘participating in a Federal health care program (as defined in section 1128B(f))’’; and 

(ii) in subparagraph (A), by striking ‘‘title XVIII or a State health 

care program’’ and inserting ‘‘a Federal health care program (as defined 

in section 1128B(f))’’; 

(C) by striking ‘‘or’’ at the end of paragraph (10); 

(D) by inserting after paragraph (11) the following new paragraphs: 

‘‘(12) conspires to commit a violation of this section; or 

‘‘(13) knowingly makes, uses, or causes to be made or used, a false record or 

statement material to an obligation to pay or transmit money or property to a 

Federal health care program, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to 

a Federal health care program;’’; and 

(E) in the matter following paragraph (13), as inserted by subparagraph 

(D)— 

(i) by striking ‘‘or’’ before ‘‘in cases under paragraph (11)’’; and 

(ii) by inserting ‘‘, in cases under paragraph (12), $50,000 for any violation described in this section committed in furtherance of the conspiracy involved; or in cases under paragraph (13), $50,000 for each 

false record or statement, or concealment, avoidance, or decrease’’ after 

‘‘by an excluded individual’’; and 

(F) in the second sentence, by striking ‘‘such false statement, omission, 

or misrepresentation)’’ and inserting ‘‘such false statement or misrepresentation, in cases under paragraph (12), an assessment of not more than 3 

times the total amount that would otherwise apply for any violation described in this section committed in furtherance of the conspiracy involved, 

or in cases under paragraph (13), an assessment of not more than 3 times 

the total amount of the obligation to which the false record or statement 

was material or that was avoided or decreased)’’. 

(2) in subsection (c)(1), by striking ‘‘six years’’ and inserting ‘‘10 years’’; and 

(3) in subsection (i)— 

(A) by amending paragraph (2) to read as follows: 

‘‘(2) The term ‘claim’ means any application, request, or demand, whether 

under contract, or otherwise, for money or property for items and services under 

a Federal health care program (as defined in section 1128B(f)), whether or not 

the United States or a State agency has title to the money or property, that— 

‘‘(A) is presented or caused to be presented to an officer, employee, or 

agent of the United States, or of any department or agency thereof, or of 

any State agency (as defined in subsection (i)(1)); or 

‘‘(B) is made to a contractor, grantee, or other recipient if the money or 

property is to be spent or used on the Federal health care program’s behalf 

or to advance a Federal health care program interest, and if the Federal 

health care program— 

‘‘(i) provides or has provided any portion of the money or property requested or demanded; or 

‘‘(ii) will reimburse such contractor, grantee, or other recipient for 

any portion of the money or property which is requested or demanded.’’; 

(B) by amending paragraph (3) to read as follows: 

‘‘(3) The term ‘item or service’ means, without limitation, any medical, social, 

management, administrative, or other item or service used in connection with 

or directly or indirectly related to a Federal health care program.’’; 

(C) in paragraph (6)— 

(i) in subparagraph (C), by striking at the end ‘‘or’’; 

(ii) in the first subparagraph (D), by striking at the end the period 

and inserting ‘‘; or’’; and 

(iii) by redesignating the second subparagraph (D) as a subparagraph 

(E); 

(D) by amending paragraph (7) to read as follows: 


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‘‘(7) The terms ‘knowing’, ‘knowingly’, and ‘should know’ mean that a person, 

with respect to information— 

‘‘(A) has actual knowledge of the information; 

‘‘(B) acts in deliberate ignorance of the truth or falsity of the information; 

or 

‘‘(C) acts in reckless disregard of the truth or falsity of the information; 

and require no proof of specific intent to defraud.’’; and 

(E) by adding at the end the following new paragraphs: 

‘‘(8) The term ‘obligation’ means an established duty, whether or not fixed, 

arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or 

regulation, or from the retention of any overpayment. 

‘‘(9) The term ‘material’ means having a natural tendency to influence, or be 

capable of influencing, the payment or receipt of money or property.’’. 

Subtitle D—Access to Information Needed to 

Prevent Fraud, Waste, and Abuse 

SEC. 1651. ACCESS TO INFORMATION NECESSARY TO IDENTIFY FRAUD, WASTE, AND ABUSE. 

Section 1128G of the Social Security Act, as added by section 1631 and amended 

by sections 1632 and 1641, is further amended by adding at the end the following 

new subsection; 

‘‘(d) ACCESS TO INFORMATION NECESSARY TO IDENTIFY FRAUD, WASTE, AND

ABUSE.—For purposes of law enforcement activity, and to the extent consistent with 

applicable disclosure, privacy, and security laws, including the Health Insurance 

Portability and Accountability Act of 1996 and the Privacy Act of 1974, and subject 

to any information systems security requirements enacted by law or otherwise required by the Secretary, the Attorney General shall have access, facilitation by the 

Inspector General of the Department of Health and Human Services, to claims and 

payment data relating to titles XVIII and XIX, in consultation with the Centers for 

Medicare & Medicaid Services or the owner of such data.’’. 

SEC. 1652. ELIMINATION OF DUPLICATION BETWEEN THE HEALTHCARE INTEGRITY AND PROTECTION DATA BANK AND THE NATIONAL PRACTITIONER DATA BANK. 

(a) IN GENERAL.—To eliminate duplication between the Healthcare Integrity and 

Protection Data Bank (HIPDB) established under section 1128E of the Social Security Act and the National Practitioner Data Bank (NPBD) established under the 

Health Care Quality Improvement Act of 1986, section 1128E of the Social Security 

Act (42 U.S.C. 1320a-7e) is amended— 

(1) in subsection (a), by striking ‘‘Not later than’’ and inserting ‘‘Subject to 

subsection (h), not later than’’; 

(2) in the first sentence of subsection (d)(2), by striking ‘‘(other than with respect to requests by Federal agencies)’’; and 

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

‘‘(h) SUNSET OF THE HEALTHCARE INTEGRITY AND PROTECTION DATA BANK; TRANSITION PROCESS.—Effective upon the enactment of this subsection, the Secretary 

shall implement a process to eliminate duplication between the Healthcare Integrity 

and Protection Data Bank (in this subsection referred to as the ‘HIPDB’ established 

pursuant to subsection (a) and the National Practitioner Data Bank (in this subsection referred to as the ‘NPDB’) as implemented under the Health Care Quality 

Improvement Act of 1986 and section 1921 of this Act, including systems testing 

necessary to ensure that information formerly collected in the HIPDB will be accessible through the NPDB, and other activities necessary to eliminate duplication between the two data banks. Upon the completion of such process, notwithstanding 

any other provision of law, the Secretary shall cease the operation of the HIPDB 

and shall collect information required to be reported under the preceding provisions 

of this section in the NPDB. Except as otherwise provided in this subsection, the 

provisions of subsections (a) through (g) shall continue to apply with respect to the 

reporting of (or failure to report), access to, and other treatment of the information 

specified in this section.’’. 

(b) ELIMINATION OF THE RESPONSIBILITY OF THE HHS OFFICE OF THE INSPECTOR

GENERAL.—Section 1128C(a)(1) of the Social Security Act (42 U.S.C. 1320a-7c(a)(1)) 

is amended— 

(1) in subparagraph (C), by adding at the end ‘‘and’’; 

(2) in subparagraph (D), by striking at the end ‘‘, and’’ and inserting a period; 

and 

(3) by striking subparagraph (E). 


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(c) SPECIAL PROVISION FOR ACCESS TO THE NATIONAL PRACTITIONER DATA BANK

BY THE DEPARTMENT OF VETERANS AFFAIRS.— 

(1) IN GENERAL.—Notwithstanding any other provision of law, during the one 

year period that begins on the effective date specified in subsection (e)(1), the 

information described in paragraph (2) shall be available from the National 

Practitioner Data Bank (described in section 1921 of the Social Security Act) to 

the Secretary of Veterans Affairs without charge. 

(2) INFORMATION DESCRIBED.—For purposes of paragraph (1), the information 

described in this paragraph is the information that would, but for the amendments made by this section, have been available to the Secretary of Veterans 

Affairs from the Healthcare Integrity and Protection Data Bank. 

(d) FUNDING.—Notwithstanding any provisions of this Act, sections 1128E(d)(2) 

and 1817(k)(3) of the Social Security Act, or any other provision of law, there shall 

be available for carrying out the transition process under section 1128E(h) of the 

Social Security Act over the period required to complete such process, and for operation of the National Practitioner Data Bank until such process is completed, without fiscal year limitation— 

(1) any fees collected pursuant to section 1128E(d)(2) of such Act; and 

(2) such additional amounts as necessary, from appropriations available to 

the Secretary and to the Office of the Inspector General of the Department of 

Health and Human Services under clauses (i) and (ii), respectively, of section 

1817(k)(3)(A) of such Act, for costs of such activities during the first 12 months 

following the date of the enactment of this Act. 

(e) EFFECTIVE DATE.—The amendments made— 

(1) by subsection (a)(2) shall take effect on the first day after the Secretary 

of Health and Human Services certifies that the process implemented pursuant 

to section 1128E(h) of the Social Security Act (as added by subsection (a)(3)) is 

complete; and 

(2) by subsection (b) shall take effect on the earlier of the date specified in 

paragraph (1) or the first day of the second succeeding fiscal year after the fiscal year during which this Act is enacted. 

SEC. 1653. COMPLIANCE WITH HIPAA PRIVACY AND SECURITY STANDARDS. 

The provisions of sections 262(a) and 264 of the Health Insurance Portability and 

Accountability Act of 1996 (and standards promulgated pursuant to such sections) 

and the Privacy Act of 1974 shall apply with respect to the provisions of this subtitle and amendments made by this subtitle. 

øTITLE VII—MEDICAID AND CHIP¿ 

øFor title VII of division B, see text of bill as introduced on July 14, 2009.¿ 

TITLE VIII—REVENUE-RELATED PROVISIONS 

SEC. 1801. DISCLOSURES TO FACILITATE IDENTIFICATION OF INDIVIDUALS LIKELY TO BE INELIGIBLE FOR THE LOW-INCOME ASSISTANCE UNDER THE MEDICARE PRESCRIPTION DRUG PROGRAM TO ASSIST SOCIAL SECURITY ADMINISTRATION’S OUTREACH TO ELIGIBLE INDIVIDUALS. 

(a) IN GENERAL.—Paragraph (19) of section 6103(l) of the Internal Revenue Code 

of 1986 is amended to read as follows: 

‘‘(19) DISCLOSURES TO FACILITATE IDENTIFICATION OF INDIVIDUALS LIKELY TO

BE INELIGIBLE FOR LOW-INCOME SUBSIDIES UNDER MEDICARE PRESCRIPTION DRUG

PROGRAM TO ASSIST SOCIAL SECURITY ADMINISTRATION’S OUTREACH TO ELIGIBLE

INDIVIDUALS.— 

‘‘(A) IN GENERAL.—Upon written request from the Commissioner of Social 

Security, the following return information (including such information disclosed to the Social Security Administration under paragraph (1) or (5)) 

shall be disclosed to officers and employees of the Social Security Administration, with respect to any taxpayer identified by the Commissioner of Social Security— 

‘‘(i) return information for the applicable year from returns with respect to wages (as defined in section 3121(a) or 3401(a)) and payments 

of retirement income (as described in paragraph (1) of this subsection), 

‘‘(ii) unearned income information and income information of the taxpayer from partnerships, trusts, estates, and subchapter S corporations 

for the applicable year, 


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‘‘(iii) if the individual filed an income tax return for the applicable 

year, the filing status, number of dependents, income from farming, 

and income from self-employment, on such return, 

‘‘(iv) if the individual is a married individual filing a separate return 

for the applicable year, the social security number (if reasonably available) of the spouse on such return, 

‘‘(v) if the individual files a joint return for the applicable year, the 

social security number, unearned income information, and income information from partnerships, trusts, estates, and subchapter S corporations of the individual’s spouse on such return, and 

‘‘(vi) such other return information relating to the individual (or the 

individual’s spouse in the case of a joint return) as is prescribed by the 

Secretary by regulation as might indicate that the individual is likely 

to be ineligible for a low-income prescription drug subsidy under section 

1860D–14 of the Social Security Act. 

‘‘(B) APPLICABLE YEAR.—For the purposes of this paragraph, the term ‘applicable year’ means the most recent taxable year for which information is 

available in the Internal Revenue Service’s taxpayer information records. 

‘‘(C) RESTRICTION ON INDIVIDUALS FOR WHOM DISCLOSURE MAY BE RE- QUESTED.—The Commissioner of Social Security shall request information 

under this paragraph only with respect to— 

‘‘(i) individuals the Social Security Administration has identified, 

using all other reasonably available information, as likely to be eligible 

for a low-income prescription drug subsidy under section 1860D–14 of 

the Social Security Act and who have not applied for such subsidy, and 

‘‘(ii) any individual the Social Security Administration has identified 

as a spouse of an individual described in clause (i). 

‘‘(D) RESTRICTION ON USE OF DISCLOSED INFORMATION.—Return information disclosed under this paragraph may be used only by officers and employees of the Social Security Administration solely for purposes of identifying individuals likely to be ineligible for a low-income prescription drug 

subsidy under section 1860D–14 of the Social Security Act for use in outreach efforts under section 1144 of the Social Security Act.’’. 

(b) SAFEGUARDS.—Paragraph (4) of section 6103(p) of such Code is amended— 

(1) by striking ‘‘(19),’’ each place it appears, and 

(2) by striking ‘‘or (17)’’ each place it appears and inserting ‘‘(17), or (19)’’. 

(c) CONFORMING AMENDMENT.—Paragraph (3) of section 6103(a) of such Code is 

amended by striking ‘‘(19),’’. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to disclosures made after the date which is 12 months after the date of the enactment of 

this Act. 

SEC. 1802. COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND; FINANCING FOR TRUST 

FUND. 

(a) ESTABLISHMENT OF TRUST FUND.— 

(1) IN GENERAL.—Subchapter A of chapter 98 of the Internal Revenue Code 

of 1986 (relating to trust fund code) is amended by adding at the end the following new section: 

‘‘SEC. 9511. HEALTH CARE COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND. 

‘‘(a) CREATION OF TRUST FUND.—There is established in the Treasury of the 

United States a trust fund to be known as the ‘Health Care Comparative Effectiveness Research Trust Fund’ (hereinafter in this section referred to as the ‘CERTF’), 

consisting of such amounts as may be appropriated or credited to such Trust Fund 

as provided in this section and section 9602(b). 

‘‘(b) TRANSFERS TO FUND.—There are hereby appropriated to the Trust Fund the 

following: 

‘‘(1) For fiscal year 2010, $90,000,000. 

‘‘(2) For fiscal year 2011, $100,000,000. 

‘‘(3) For fiscal year 2012, $110,000,000. 

‘‘(4) For each fiscal year beginning with fiscal year 2013— 

‘‘(A) an amount equivalent to the net revenues received in the Treasury 

from the fees imposed under subchapter B of chapter 34 (relating to fees 

on health insurance and self-insured plans) for such fiscal year; and 

‘‘(B) subject to subsection (c)(2), amounts determined by the Secretary of 

Health and Human Services to be equivalent to the fair share per capita 

amount computed under subsection (c)(1) for the fiscal year multiplied by 

the average number of individuals entitled to benefits under part A, or enrolled under part B, of title XVIII of the Social Security Act during such 

fiscal year. 


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The amounts appropriated under paragraphs (1), (2), (3), and (4)(B) shall be transferred from the Federal Hospital Insurance Trust Fund and from the Federal Supplementary Medical Insurance Trust Fund (established under section 1841 of such 

Act), and from the Medicare Prescription Drug Account within such Trust Fund, in 

proportion (as estimated by the Secretary) to the total expenditures during such fiscal year that are made under title XVIII of such Act from the respective trust fund 

or account. 

‘‘(c) FAIR SHARE PER CAPITA AMOUNT.— ‘‘(1) COMPUTATION.— ‘‘(A) IN GENERAL.—Subject to subparagraph (B), the fair share per capita 

amount under this paragraph for a fiscal year (beginning with fiscal year 

2013) is an amount computed by the Secretary of Health and Human Services for such fiscal year that, when applied under this section and subchapter B of chapter 34 of the Internal Revenue Code of 1986, will result 

in revenues to the CERTF of $375,000,000 for the fiscal year. 

‘‘(B) ALTERNATIVE COMPUTATION.— ‘‘(i) IN GENERAL.—If the Secretary is unable to compute the fair share 

per capita amount under subparagraph (A) for a fiscal year, the fair 

share per capita amount under this paragraph for the fiscal year shall 

be the default amount determined under clause (ii) for the fiscal year. 

‘‘(ii) DEFAULT AMOUNT.—The default amount under this clause for— 

‘‘(I) fiscal year 2013 is equal to $2; or 

‘‘(II) a subsequent year is equal to the default amount under this 

clause for the preceding fiscal year increased by the annual percentage increase in the medical care component of the consumer 

price index (United States city average) for the 12-month period 

ending with April of the preceding fiscal year. 

Any amount determined under subclause (II) shall be rounded to the 

nearest penny. 

‘‘(2) LIMITATION ON MEDICARE FUNDING.—In no case shall the amount transferred under subsection (b)(4)(B) for any fiscal year exceed $90,000,000. 

‘‘(d) EXPENDITURES FROM FUND.— ‘‘(1) IN GENERAL.—Subject to paragraph (2), amounts in the CERTF are available, without the need for further appropriations and without fiscal year limitation, to the Secretary of Health and Human Services for carrying out section 

1181 of the Social Security Act. 

‘‘(2) ALLOCATION FOR COMMISSION.—Not less than the following amounts in 

the CERTF for a fiscal year shall be available to carry out the activities of the 

Comparative Effectiveness Research Commission established under section 

1181(b) of the Social Security Act for such fiscal year: ‘‘(A) For fiscal year 2010, $7,000,000. 

‘‘(B) For fiscal year 2011, $9,000,000. 

‘‘(C) For each fiscal year beginning with 2012, $10,000,000. 

Nothing in this paragraph shall be construed as preventing additional amounts 

in the CERTF from being made available to the Comparative Effectiveness Research Commission for such activities. 

‘‘(e) NET REVENUES.—For purposes of this section, the term ‘net revenues’ means 

the amount estimated by the Secretary based on the excess of— 

‘‘(1) the fees received in the Treasury under subchapter B of chapter 34, over 

‘‘(2) the decrease in the tax imposed by chapter 1 resulting from the fees imposed by such subchapter.’’. 

(2) CLERICAL AMENDMENT.—The table of sections for such subchapter A is 

amended by adding at the end thereof the following new item: 

‘‘Sec. 9511. Health Care Comparative Effectiveness Research Trust Fund.’’. 

(b) FINANCING FOR FUND FROM FEES ON INSURED AND SELF-INSURED HEALTH

PLANS.— 

(1) GENERAL RULE.—Chapter 34 of the Internal Revenue Code of 1986 is 

amended by adding at the end the following new subchapter: 

‘‘Subchapter B—Insured and Self-Insured Health Plans 

‘‘Sec. 4375. Health insurance. 

‘‘Sec. 4376. Self-insured health plans. 

‘‘Sec. 4377. Definitions and special rules. 

‘‘SEC. 4375. HEALTH INSURANCE. 

‘‘(a) IMPOSITION OF FEE.—There is hereby imposed on each specified health insurance policy for each policy year a fee equal to the fair share per capita amount determined under section 9511(c)(1) multiplied by the average number of lives covered 

under the policy. 


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‘‘(b) LIABILITY FOR FEE.—The fee imposed by subsection (a) shall be paid by the 

issuer of the policy. 

‘‘(c) SPECIFIED HEALTH INSURANCE POLICY.—For purposes of this section: 

‘‘(1) IN GENERAL.—Except as otherwise provided in this section, the term 

‘specified health insurance policy’ means any accident or health insurance policy 

issued with respect to individuals residing in the United States. 

‘‘(2) EXEMPTION FOR CERTAIN POLICIES.—The term ‘specified health insurance 

policy’ does not include any insurance if substantially all of its coverage is of 

excepted benefits described in section 9832(c). 

‘‘(3) TREATMENT OF PREPAID HEALTH COVERAGE ARRANGEMENTS.— 

‘‘(A) IN GENERAL.—In the case of any arrangement described in subparagraph (B)— 

‘‘(i) such arrangement shall be treated as a specified health insurance 

policy, and 

‘‘(ii) the person referred to in such subparagraph shall be treated as 

the issuer. 

‘‘(B) DESCRIPTION OF ARRANGEMENTS.—An arrangement is described in 

this subparagraph if under such arrangement fixed payments or premiums 

are received as consideration for any person’s agreement to provide or arrange for the provision of accident or health coverage to residents of the 

United States, regardless of how such coverage is provided or arranged to 

be provided. 

‘‘SEC. 4376. SELF-INSURED HEALTH PLANS. 

‘‘(a) IMPOSITION OF FEE.—In the case of any applicable self-insured health plan 

for each plan year, there is hereby imposed a fee equal to the fair share per capita 

amount determined under section 9511(c)(1) multiplied by the average number of 

lives covered under the plan. 

‘‘(b) LIABILITY FOR FEE.— 

‘‘(1) IN GENERAL.—The fee imposed by subsection (a) shall be paid by the plan 

sponsor. 

‘‘(2) PLAN SPONSOR.—For purposes of paragraph (1) the term ‘plan sponsor’ 

means— 

‘‘(A) the employer in the case of a plan established or maintained by a 

single employer, 

‘‘(B) the employee organization in the case of a plan established or maintained by an employee organization, 

‘‘(C) in the case of— 

‘‘(i) a plan established or maintained by 2 or more employers or jointly by 1 or more employers and 1 or more employee organizations, 

‘‘(ii) a multiple employer welfare arrangement, or 

‘‘(iii) a voluntary employees’ beneficiary association described in section 501(c)(9), 

the association, committee, joint board of trustees, or other similar group 

of representatives of the parties who establish or maintain the plan, or 

‘‘(D) the cooperative or association described in subsection (c)(2)(F) in the 

case of a plan established or maintained by such a cooperative or association. 

‘‘(c) APPLICABLE SELF-INSURED HEALTH PLAN.—For purposes of this section, the 

term ‘applicable self-insured health plan’ means any plan for providing accident or 

health coverage if— 

‘‘(1) any portion of such coverage is provided other than through an insurance 

policy, and 

‘‘(2) such plan is established or maintained— 

‘‘(A) by one or more employers for the benefit of their employees or former 

employees, 

‘‘(B) by one or more employee organizations for the benefit of their members or former members, 

‘‘(C) jointly by 1 or more employers and 1 or more employee organizations 

for the benefit of employees or former employees, 

‘‘(D) by a voluntary employees’ beneficiary association described in section 

501(c)(9), 

‘‘(E) by any organization described in section 501(c)(6), or 

‘‘(F) in the case of a plan not described in the preceding subparagraphs, 

by a multiple employer welfare arrangement (as defined in section 3(40) of 

Employee Retirement Income Security Act of 1974), a rural electric cooperative (as defined in section 3(40)(B)(iv) of such Act), or a rural telephone cooperative association (as defined in section 3(40)(B)(v) of such Act). 


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‘‘SEC. 4377. DEFINITIONS AND SPECIAL RULES. 

‘‘(a) DEFINITIONS.—For purposes of this subchapter— 

‘‘(1) ACCIDENT AND HEALTH COVERAGE.—The term ‘accident and health coverage’ means any coverage which, if provided by an insurance policy, would 

cause such policy to be a specified health insurance policy (as defined in section 

4375(c)). 

‘‘(2) INSURANCE POLICY.—The term ‘insurance policy’ means any policy or 

other instrument whereby a contract of insurance is issued, renewed, or extended. 

‘‘(3) UNITED STATES.—The term ‘United States’ includes any possession of the 

United States. 

‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.— 

‘‘(1) IN GENERAL.—For purposes of this subchapter— 

‘‘(A) the term ‘person’ includes any governmental entity, and 

‘‘(B) notwithstanding any other law or rule of law, governmental entities 

shall not be exempt from the fees imposed by this subchapter except as provided in paragraph (2). 

‘‘(2) TREATMENT OF EXEMPT GOVERNMENTAL PROGRAMS.—In the case of an exempt governmental program, no fee shall be imposed under section 4375 or section 4376 on any covered life under such program. 

‘‘(3) EXEMPT GOVERNMENTAL PROGRAM DEFINED.—For purposes of this subchapter, the term ‘exempt governmental program’ means— 

‘‘(A) any insurance program established under title XVIII of the Social Security Act, 

‘‘(B) the medical assistance program established by title XIX or XXI of the 

Social Security Act, 

‘‘(C) any program established by Federal law for providing medical care 

(other than through insurance policies) to individuals (or the spouses and 

dependents thereof) by reason of such individuals being— 

‘‘(i) members of the Armed Forces of the United States, or 

‘‘(ii) veterans, and 

‘‘(D) any program established by Federal law for providing medical care 

(other than through insurance policies) to members of Indian tribes (as defined in section 4(d) of the Indian Health Care Improvement Act). 

‘‘(c) TREATMENT AS TAX.—For purposes of subtitle F, the fees imposed by this subchapter shall be treated as if they were taxes. 

‘‘(d) NO COVER OVER TO POSSESSIONS.—Notwithstanding any other provision of 

law, no amount collected under this subchapter shall be covered over to any possession of the United States.’’. 

(2) CLERICAL AMENDMENTS.— 

(A) Chapter 34 of such Code is amended by striking the chapter heading 

and inserting the following: 

‘‘CHAPTER 34—TAXES ON CERTAIN INSURANCE POLICIES 

‘‘SUBCHAPTER A. POLICIES ISSUED BY FOREIGN INSURERS

‘‘SUBCHAPTER B. INSURED AND SELF-INSURED HEALTH PLANS

‘‘Subchapter A—Policies Issued By Foreign Insurers’’. 

(B) The table of chapters for subtitle D of such Code is amended by striking the item relating to chapter 34 and inserting the following new item: 

‘‘CHAPTER 34—TAXES ON CERTAIN INSURANCE POLICIES’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply 

with respect to policies and plans for portions of policy or plan years beginning 

on or after October 1, 2012. 

TITLE IX—MISCELLANEOUS PROVISIONS 

SEC. 1901. REPEAL OF TRIGGER PROVISION. 

Subtitle A of title VIII of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173) is repealed and the provisions of law 

amended by such subtitle are restored as if such subtitle had never been enacted. 


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SEC. 1902. REPEAL OF COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM. 

Section 1860C–1 of the Social Security Act (42 U.S.C. 1395w–29), as added by section 241(a) of the Medicare Prescription Drug, Improvement, and Modernization Act 

of 2003 (Public Law 108–173), is repealed. 

SEC. 1903. EXTENSION OF GAINSHARING DEMONSTRATION. 

(a) IN GENERAL.—Subsection (d)(3) of section 5007 of the Deficit Reduction Act of 

2005 (Public Law 109–171) is amended by inserting ‘‘(or September 30, 2011, in the 

case of a demonstration project in operation as of October 1, 2008)’’ after ‘‘December 

31, 2009’’. 

(b) FUNDING.— (1) IN GENERAL.—Subsection (f)(1) of such section is amended by inserting ‘‘and for fiscal year 2010, $1,600,000,’’ after ‘‘$6,000,000,’’. 

(2) AVAILABILITY.—Subsection (f)(2) of such section is amended by striking 

‘‘2010’’ and inserting ‘‘2014 or until expended’’. 

(c) REPORTS.— (1) QUALITY IMPROVEMENT AND SAVINGS.—Subsection (e)(3) of such section is 

amended by striking ‘‘December 1, 2008’’ and inserting ‘‘March 31, 2011’’. 

(2) FINAL REPORT.—Subsection (e)(4) of such section is amended by striking 

‘‘May 1, 2010’’ and inserting ‘‘March 31, 2013’’. 

SEC. 1904. GRANTS TO STATES FOR QUALITY HOME VISITATION PROGRAMS FOR FAMILIES 

WITH YOUNG CHILDREN AND FAMILIES EXPECTING CHILDREN. 

Part B of title IV of the Social Security Act (42 U.S.C. 621–629i) is amended by 

adding at the end the following: 

‘‘Subpart 3—Support for Quality Home Visitation Programs 

‘‘SEC. 440. HOME VISITATION PROGRAMS FOR FAMILIES WITH YOUNG CHILDREN AND FAMILIES EXPECTING CHILDREN. 

‘‘(a) PURPOSE.—The purpose of this section is to improve the well-being, health, 

and development of children by enabling the establishment and expansion of high 

quality programs providing voluntary home visitation for families with young children and families expecting children. 

‘‘(b) GRANT APPLICATION.—A State that desires to receive a grant under this section shall submit to the Secretary for approval, at such time and in such manner 

as the Secretary may require, an application for the grant that includes the following: 

‘‘(1) DESCRIPTION OF HOME VISITATION PROGRAMS.—A description of the high 

quality programs of home visitation for families with young children and families expecting children that will be supported by a grant made to the State 

under this section, the outcomes the programs are intended to achieve, and the 

evidence supporting the effectiveness of the programs. 

‘‘(2) RESULTS OF NEEDS ASSESSMENT.—The results of a statewide needs assessment that describes— 

‘‘(A) the number, quality, and capacity of home visitation programs for 

families with young children and families expecting children in the State; 

‘‘(B) the number and types of families who are receiving services under 

the programs; 

‘‘(C) the sources and amount of funding provided to the programs; 

‘‘(D) the gaps in home visitation in the State, including identification of 

communities that are in high need of the services; and 

‘‘(E) training and technical assistance activities designed to achieve or 

support the goals of the programs. 

‘‘(3) ASSURANCES.—Assurances from the State that— 

‘‘(A) in supporting home visitation programs using funds provided under 

this section, the State shall identify and prioritize serving communities that 

are in high need of such services, especially communities with a high proportion of low-income families or a high incidence of child maltreatment; 

‘‘(B) the State will reserve 5 percent of the grant funds for training and 

technical assistance to the home visitation programs using such funds; 

‘‘(C) in supporting home visitation programs using funds provided under 

this section, the State will promote coordination and collaboration with 

other home visitation programs (including programs funded under title 

XIX) and with other child and family services, health services, income supports, and other related assistance; 

‘‘(D) home visitation programs supported using such funds will, when appropriate, provide referrals to other programs serving children and families; 

and 


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‘‘(E) the State will comply with subsection (i), and cooperate with any 

evaluation conducted under subsection (j). 

‘‘(4) OTHER INFORMATION.—Such other information as the Secretary may require. 

‘‘(c) ALLOTMENTS.— 

‘‘(1) INDIAN TRIBES.—From the amount reserved under subsection (l)(2) for a 

fiscal year, the Secretary shall allot to each Indian tribe that meets the requirement of subsection (d), if applicable, for the fiscal year the amount that bears 

the same ratio to the amount so reserved as the number of children in the Indian tribe whose families have income that does not exceed 200 percent of the 

poverty line bears to the total number of children in such Indian tribes whose 

families have income that does not exceed 200 percent of the poverty line. 

‘‘(2) STATES AND TERRITORIES.—From the amount appropriated under subsection (m) for a fiscal year that remains after making the reservations required 

by subsection (l), the Secretary shall allot to each State that is not an Indian 

tribe and that meets the requirement of subsection (d), if applicable, for the fiscal year the amount that bears the same ratio to the remainder of the amount 

so appropriated as the number of children in the State whose families have income that does not exceed 200 percent of the poverty line bears to the total 

number of children in such States whose families have income that does not exceed 200 percent of the poverty line. 

‘‘(3) REALLOTMENTS.—The amount of any allotment to a State under a paragraph of this subsection for any fiscal year that the State certifies to the Secretary will not be expended by the State pursuant to this section shall be available for reallotment using the allotment methodology specified in that paragraph. Any amount so reallotted to a State is deemed part of the allotment of 

the State under this subsection. 

‘‘(d) MAINTENANCE OF EFFORT.—Beginning with fiscal year 2011, a State meets 

the requirement of this subsection for a fiscal year if the Secretary finds that the 

aggregate expenditures by the State from State and local sources for programs of 

home visitation for families with young children and families expecting children for 

the then preceding fiscal year was not less than 100 percent of such aggregate expenditures for the then 2nd preceding fiscal year. 

‘‘(e) PAYMENT OF GRANT.— 

‘‘(1) IN GENERAL.—The Secretary shall make a grant to each State that meets 

the requirements of subsections (b) and (d), if applicable, for a fiscal year for 

which funds are appropriated under subsection (m), in an amount equal to the 

reimbursable percentage of the eligible expenditures of the State for the fiscal 

year, but not more than the amount allotted to the State under subsection (c) 

for the fiscal year. 

‘‘(2) REIMBURSABLE PERCENTAGE DEFINED.—In paragraph (1), the term ‘reimbursable percentage’ means, with respect to a fiscal year— 

‘‘(A) 85 percent, in the case of fiscal year 2010; 

‘‘(B) 80 percent, in the case of fiscal year 2011; or 

‘‘(C) 75 percent, in the case of fiscal year 2012 and any succeeding fiscal 

year. 

‘‘(f) ELIGIBLE EXPENDITURES.— 

‘‘(1) IN GENERAL.—In this section, the term ‘eligible expenditures’— 

‘‘(A) means expenditures to provide voluntary home visitation for as many 

families with young children (under the age of school entry) and families 

expecting children as practicable, through the implementation or expansion 

of high quality home visitation programs that— 

‘‘(i) adhere to clear evidence-based models of home visitation that 

have demonstrated positive effects on important program-determined 

child and parenting outcomes, such as reducing abuse and neglect and 

improving child health and development; 

‘‘(ii) employ well-trained and competent staff, maintain high quality 

supervision, provide for ongoing training and professional development, 

and show strong organizational capacity to implement such a program; 

‘‘(iii) establish appropriate linkages and referrals to other community 

resources and supports; 

‘‘(iv) monitor fidelity of program implementation to ensure that services are delivered according to the specified model; and 

‘‘(v) provide parents with— 

‘‘(I) knowledge of age-appropriate child development in cognitive, 

language, social, emotional, and motor domains (including knowledge of second language acquisition, in the case of English language learners); 


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‘‘(II) knowledge of realistic expectations of age-appropriate child 

behaviors; 

‘‘(III) knowledge of health and wellness issues for children and 

parents; 

‘‘(IV) modeling, consulting, and coaching on parenting practices; 

‘‘(V) skills to interact with their child to enhance age-appropriate 

development; 

‘‘(VI) skills to recognize and seek help for issues related to 

health, developmental delays, and social, emotional, and behavioral 

skills; and 

‘‘(VII) activities designed to help parents become full partners in 

the education of their children; 

‘‘(B) includes expenditures for training, technical assistance, and evaluations related to the programs; and 

‘‘(C) does not include any expenditure with respect to which a State has 

submitted a claim for payment under any other provision of Federal law. 

‘‘(2) PRIORITY FUNDING FOR PROGRAMS WITH STRONGEST EVIDENCE.— ‘‘(A) IN GENERAL.—The expenditures, described in paragraph (1), of a 

State for a fiscal year that are attributable to the cost of programs that do 

not adhere to a model of home visitation with the strongest evidence of effectiveness shall not be considered eligible expenditures for the fiscal year 

to the extent that the total of the expenditures exceeds the applicable percentage for the fiscal year of the allotment of the State under subsection 

(c) for the fiscal year. 

‘‘(B) APPLICABLE PERCENTAGE DEFINED.—In subparagraph (A), the term 

‘applicable percentage’ means, with respect to a fiscal year— 

‘‘(i) 60 percent for fiscal year 2010; 

‘‘(ii) 55 percent for fiscal year 2011; 

‘‘(iii) 50 percent for fiscal year 2012; 

‘‘(iv) 45 percent for fiscal year 2013; or 

‘‘(v) 40 percent for fiscal year 2014. 

‘‘(g) NO USE OF OTHER FEDERAL FUNDS FOR STATE MATCH.—A State to which a 

grant is made under this section may not expend any Federal funds to meet the 

State share of the cost of an eligible expenditure for which the State receives a payment under this section. 

‘‘(h) WAIVER AUTHORITY.— 

‘‘(1) IN GENERAL.—The Secretary may waive or modify the application of any 

provision of this section, other than subsection (b) or (f), to an Indian tribe if 

the failure to do so would impose an undue burden on the Indian tribe. 

‘‘(2) SPECIAL RULE.—An Indian tribe is deemed to meet the requirement of 

subsection (d) for purposes of subsections (c) and (e) if— 

‘‘(A) the Secretary waives the requirement; or 

‘‘(B) the Secretary modifies the requirement, and the Indian tribe meets 

the modified requirement. 

‘‘(i) STATE REPORTS.—Each State to which a grant is made under this section shall 

submit to the Secretary an annual report on the progress made by the State in addressing the purposes of this section. Each such report shall include a description 

of— 

‘‘(1) the services delivered by the programs that received funds from the 

grant; 

‘‘(2) the characteristics of each such program, including information on the 

service model used by the program and the performance of the program; 

‘‘(3) the characteristics of the providers of services through the program, including staff qualifications, work experience, and demographic characteristics; 

‘‘(4) the characteristics of the recipients of services provided through the program, including the number of the recipients, the demographic characteristics 

of the recipients, and family retention; 

‘‘(5) the annual cost of implementing the program, including the cost per family served under the program; 

‘‘(6) the outcomes experienced by recipients of services through the program; 

‘‘(7) the training and technical assistance provided to aid implementation of 

the program, and how the training and technical assistance contributed to the 

outcomes achieved through the program; 

‘‘(8) the indicators and methods used to monitor whether the program is being 

implemented as designed; and 

‘‘(9) other information as determined necessary by the Secretary. 

‘‘(j) EVALUATION.— 

‘‘(1) IN GENERAL.—The Secretary shall, by grant or contract, provide for the 

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grams receiving funds provided under this section, which shall examine the following: 

‘‘(A) The effect of home visitation programs on child and parent outcomes, 

including child maltreatment, child health and development, school readiness, and links to community services. 

‘‘(B) The effectiveness of home visitation programs on different populations, including the extent to which the ability of programs to improve 

outcomes varies across programs and populations. 

‘‘(2) REPORTS TO THE CONGRESS.— ‘‘(A) INTERIM REPORT.—Within 3 years after the date of the enactment of 

this section, the Secretary shall submit to the Congress an interim report 

on the evaluation conducted pursuant to paragraph (1). 

‘‘(B) FINAL REPORT.—Within 5 years after the date of the enactment of 

this section, the Secretary shall submit to the Congress a final report on 

the evaluation conducted pursuant to paragraph (1). 

‘‘(k) ANNUAL REPORTS TO THE CONGRESS.—The Secretary shall submit annually 

to the Congress a report on the activities carried out using funds made available 

under this section, which shall include a description of the following: 

‘‘(1) The high need communities targeted by States for programs carried out 

under this section. 

‘‘(2) The service delivery models used in the programs receiving funds provided under this section. 

‘‘(3) The characteristics of the programs, including— 

‘‘(A) the qualifications and demographic characteristics of program staff; 

and 

‘‘(B) recipient characteristics including the number of families served, the 

demographic characteristics of the families served, and family retention and 

duration of services. 

‘‘(4) The outcomes reported by the programs. 

‘‘(5) The research-based instruction, materials, and activities being used in 

the activities funded under the grant. 

‘‘(6) The training and technical activities, including on-going professional development, provided to the programs. 

‘‘(7) The annual costs of implementing the programs, including the cost per 

family served under the programs. 

‘‘(8) The indicators and methods used by States to monitor whether the programs are being been implemented as designed. 

‘‘(l) RESERVATIONS OF FUNDS.—From the amounts appropriated for a fiscal year 

under subsection (m), the Secretary shall reserve— 

‘‘(1) an amount equal to 5 percent of the amounts to pay the cost of the evaluation provided for in subsection (j), and the provision to States of training and 

technical assistance, including the dissemination of best practices in early childhood home visitation; and 

‘‘(2) after making the reservation required by paragraph (1), an amount equal 

to 3 percent of the amount so appropriated, to pay for grants to Indian tribes 

under this section. 

‘‘(m) APPROPRIATIONS.—Out of any money in the Treasury of the United States 

not otherwise appropriated, there is appropriated to the Secretary to carry out this 

section— 

‘‘(1) $50,000,000 for fiscal year 2010; 

‘‘(2) $100,000,000 for fiscal year 2011; 

‘‘(3) $150,000,000 for fiscal year 2012; 

‘‘(4) $200,000,000 for fiscal year 2013; and 

‘‘(5) $250,000,000 for fiscal year 2014. 

‘‘(n) INDIAN TRIBES TREATED AS STATES.—In this section, paragraphs (4), (5), and 

(6) of section 431(a) shall apply.’’. 

SEC. 1905. IMPROVED COORDINATION AND PROTECTION FOR DUAL ELIGIBLES. 

Title XI of the Social Security Act is amended by inserting after section 1150 the 

following new section: 

‘‘IMPROVED COORDINATION AND PROTECTION FOR DUAL ELIGIBLES

‘‘SEC. 1150A. (a) IN GENERAL.—The Secretary shall provide, through an identifiable office or program within the Centers for Medicare & Medicaid Services, for a 

focused effort to provide for improved coordination between Medicare and Medicaid 

and protection in the case of dual eligibles (as defined in subsection (e)). The office 

or program shall— 

‘‘(1) review Medicare and Medicaid policies related to enrollment, benefits, 

service delivery, payment, and grievance and appeals processes under parts A 


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and B of title XVIII, under the Medicare Advantage program under part C of 

such title, and under title XIX; 

‘‘(2) identify areas of such policies where better coordination and protection 

could improve care and costs; and 

‘‘(3) issue guidance to States regarding improving such coordination and protection. 

‘‘(b) ELEMENTS.—The improved coordination and protection under this section 

shall include efforts— 

‘‘(1) to simplify access of dual eligibles to benefits and services under Medicare and Medicaid; 

‘‘(2) to improve care continuity for dual eligibles and ensure safe and effective 

care transitions; 

‘‘(3) to harmonize regulatory conflicts between Medicare and Medicaid rules 

with regard to dual eligibles; and 

‘‘(4) to improve total cost and quality performance under Medicare and Medicaid for dual eligibles. 

‘‘(c) RESPONSIBILITIES.—In carrying out this section, the Secretary shall provide 

for the following: 

‘‘(1) An examination of Medicare and Medicaid payment systems to develop 

strategies to foster more integrated and higher quality care. 

‘‘(2) Development of methods to facilitate access to post-acute and communitybased services and to identify actions that could lead to better coordination of 

community-based care. 

‘‘(3) A study of enrollment of dual eligibles in the Medicare Savings Program 

(as defined in section 1144(c)(7)), under Medicaid, and in the low-income subsidy program under section 1860D–14 to identify methods to more efficiently 

and effectively reach and enroll dual eligibles. 

‘‘(4) An assessment of communication strategies for dual eligibles to determine whether additional informational materials or outreach is needed, including an assessment of the Medicare website, 1–800–MEDICARE, and the Medicare handbook. 

‘‘(5) Research and evaluation of areas where service utilization, quality, and 

access to cost sharing protection could be improved and an assessment of factors 

related to enrollee satisfaction with services and care delivery. 

‘‘(6) Collection (and making available to the public) of data and a database 

that describe the eligibility, benefit and cost-sharing assistance available to dual 

eligibles by State. 

‘‘(7) Monitoring total combined Medicare and Medicaid program costs in serving dual eligibles and making recommendations for optimizing total quality and 

cost performance across both programs. 

‘‘(8) Coordination of activities relating to Medicare Advantage plans under 

1859(b)(6)(B)(ii) and Medicaid. 

‘‘(d) PERIODIC REPORTS.—Not later than 1 year after the date of the enactment 

of this section and every 3 years thereafter the Secretary shall submit to Congress 

a report on progress in activities conducted under this section. 

‘‘(e) DEFINITIONS.—In this section: 

‘‘(1) DUAL ELIGIBLE.—The term ‘dual eligible’ means an individual who is dually eligible for benefits under title XVIII, and medical assistance under title 

XIX, including such individuals who are eligible for benefits under the Medicare 

Savings Program (as defined in section 1144(c)(7)). 

‘‘(2) MEDICARE; MEDICAID.—The terms ‘Medicare’ and ‘Medicaid’ mean the programs under titles XVIII and XIX, respectively.’’. 

SEC. 1906. ASSESSMENT OF MEDICARE COST-INTENSIVE DISEASES AND CONDITIONS. 

(a) INITIAL ASSESSMENT.— 

(1) IN GENERAL.—The Administrator of the Centers for Medicare & Medicaid 

Services shall conduct an assessment of the diseases and conditions that are the 

most cost-intensive for the Medicare program. The assessment shall inform research priorities within the Department of Health and Human Services in order 

improve the prevention, or treatment or cure, of such diseases and conditions. 

(2) REPORT.—Not later than January 1, 2011, the Administrator shall submit 

to the Secretary of Health and Human Services a report on such assessment 

and the Secretary shall transmit such report to the Congress. 

(b) UPDATES OF ASSESSMENT.—Not later than January 1, 2013, and biennially 

thereafter, the Administrator of the Centers for Medicare & Medicaid Services shall 

review and update the assessment described in subsection (a) and make such recommendations to the Secretary on changes in research priorities referred to in such 

subsection as may be appropriate. The Secretary shall submit to the Congress a report on such recommendations. 


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(c) MEDICARE COST-INTENSIVE RESEARCH FUND.—There is established in the 

Treasury of the United States a Fund to be known as the Medicare Cost-Intensive 

Research Fund (in this subsection referred to as the ‘‘Fund’’), consisting of such 

amounts as may be appropriated or credited to such Fund for research priorities 

identified as a result of the assessments conducted under this section. 

øDIVISION C—PUBLIC HEALTH AND 

WORKFORCE DEVELOPMENT¿ 

øFor division C, see text of bill as introduced on July 14, 2009.¿ 

I. INTRODUCTION 

A. PURPOSE AND SUMMARY

The purpose of the bill, H.R. 3200, (‘‘America’s Affordable Health 

Choices Act of 2009’’) is to provide affordable, quality health care 

for all Americans and reduce the rate of growth in health care 

spending. 

B. BACKGROUND AND NEED FOR LEGISLATION

AFFORDABLE COVERAGE FOR ALL AMERICANS

I am confident that we can devise a [health care] system which 

will enhance and not hinder the remarkable progress which has 

been made and is being made in practice of the professions of medicine and surgery in the United States. 

We have accepted, so to speak, a second Bill of Rights under 

which a new basis of security and prosperity can be established for 

all—regardless of station, race, or creed. Among these are . . . The 

right to adequate medical care and the opportunity to achieve and 

enjoy good health.—President Franklin D. Roosevelt 

We should resolve now that the health of this Nation is a national 

concern; that financial barriers in the way of attaining health shall 

be removed; that the health of all its citizens deserves the help of 

all the Nation.—President Harry S. Truman 

‘‘If a free society cannot help the many who are poor, it cannot 

save the few who are rich’’—President John F. Kennedy 

No longer will older Americans be denied the healing miracle of 

modern medicine. No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they 

might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply 

because they are carrying out their deep moral obligations to their 

parents, and to their uncles, and their aunts. And this is not just 

our tradition—or the tradition of the Democratic Party—or even the 

tradition of the Nation. It is as old as the day it was first commanded: ‘‘Thou shalt open thine hand wide unto thy brother, to thy 

poor, to thy needy, in thy land.’’—President Lyndon B. Johnson 

An all-directions reform of our health care system—so that every 

citizen will be able to get quality health care at reasonable cost regardless of income and regardless of area of residence—remains an 

item of highest priority on my unfinished agenda for America in the 

1970s.—President Richard Nixon 


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This country spends more on health care than any other nation 

. . . We have the finest medical facilities and highly skilled, dedicated health professionals. Yet many of our people still lack adequate medical care, and the cost of care is rising so rapidly it jeopardizes our health goals and our other important social objectives.— President Jimmy Carter 

While Medicare takes care of Americans over the age of 65, we’re 

the only Western industrial nation that doesn’t provide a system of 

health insurance for all working people under 65 . . . we should 

provide assistance to unemployed workers to help them keep their 

health insurance until they find a new job. We also need to make 

it easier for small businesses to buy into insurance risk pools that 

are large enough to make it possible to offer coverage at a reasonable cost.—President Bill Clinton 

I am not the first President to take up this cause, but I am determined to be the last. It has now been nearly a century since Theodore Roosevelt first called for health care reform. And ever since, 

nearly every President and Congress, whether Democrat or Republican, has attempted to meet this challenge in some way. A bill for 

comprehensive health reform was first introduced by John Dingell 

Sr. in 1943. Sixty-five years later, his son continues to introduce 

that same bill at the beginning of each session. 

Our collective failure to meet this challenge—year after year, decade after decade—has led us to the breaking point. Everyone understands the extraordinary hardships that are placed on the uninsured, who live every day just one accident or illness away from 

bankruptcy. These are not primarily people on welfare. These are 

middle-class Americans. Some can’t get insurance on the job. Others 

are self-employed, and can’t afford it, since buying insurance on 

your own costs you three times as much as the coverage you get from 

your employer. Many other Americans who are willing and able to 

pay are still denied insurance due to previous illnesses or conditions 

that insurance companies decide are too risky or too expensive to 

cover. 

We are the only democracy—the only advanced democracy on 

Earth—the only wealthy nation—that allows such hardship for millions of its people. There are now more than 30 million American 

citizens who cannot get coverage. In just a two-year period, one in 

every three Americans goes without health care coverage at some 

point. And every day, 14,000 Americans lose their coverage. In other 

words, it can happen to anyone. 

But the problem that plagues the health care system is not just 

a problem for the uninsured. Those who do have insurance have 

never had less security and stability than they do today. More and 

more Americans worry that if you move, lose your job, or change 

your job, you’ll lose your health insurance too. More and more 

Americans pay their premiums, only to discover that their insurance 

company has dropped their coverage when they get sick, or won’t 

pay the full cost of care. It happens every day.—President Barack 

Obama 

This legislation fulfills a vision carried forth by Presidents Roosevelt, Truman, Kennedy, Nixon, Carter, Clinton, and now President Obama, to provide affordable, quality health care for all 

Americans. 


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It ensures affordable health care for 97 percent of Americans, 

and tackles rising health care costs—a key component of health reform. 

To minimize disruption of the current system, the legislation 

builds on what works in today’s health care system, while repairing 

the aspects that are broken. 

It enacts comprehensive insurance market reforms to ensure that 

no one is denied coverage because of a pre-existing condition, 

charged more because of their gender or denied coverage when they 

get sick. 

It limits annual out-of-pocket costs for individuals and families 

so that people will no longer be forced into bankruptcy because of 

medical expenses. 

It creates a new Health Insurance Exchange to enforce federal 

consumer protections and insurance requirements and to provide a 

transparent, fair marketplace where individuals, families and employers can comparison shop for high quality, affordable health 

care plans. 

It creates a public health insurance option that will operate on 

a level-playing field alongside private plans in the Exchange. The 

public health insurance option will foster competition, quality and 

choice for consumers. It will also reduce costs in the system as it 

will force private plans to compete on quality and price rather than 

by avoiding risk as they do in today’s broken health care marketplace. 

It provides affordability credits to assist families with incomes 

below 400% of the federal poverty limit (about $88,000 for a family 

of four in 2009) with premiums and cost-sharing to make affordable 

health insurance a reality for all. Annual caps on out-of-pocket 

spending add further financial protections for individuals and families. 

It requires shared responsibility among individuals, employers, 

and the government so that all Americans obtain essential health 

benefits. 

By building on what works, America’s Affordable Health Choices 

Act will increase employer-sponsored health coverage, broaden 

Medicaid to meet the needs of those with the lowest incomes, make 

improvements to Medicare, and create a new Health Insurance Exchange where people can choose from public and private health insurance options. Under this Act, all Americans will have access to 

quality, affordable health care. 

HEALTH DELIVERY REFORM

This legislation institutes health delivery and payment system 

reforms both to increase quality and to reduce growth in health 

spending so that health care becomes more affordable for businesses, families, and government. 

The reforms are designed to make the nation’s health care system more efficient by incentivizing providers to deliver high quality, coordinated, patient-centered care. It does so in large part by 

recognizing the importance of primary and preventive care. Ensuring that patients receive the right care at the right time means 

making sure that every American has access to a primary care provider, and that providers and patients alike have access to the best 

information about evidence-based medicine. 


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These improvements will not come overnight. But programs such 

as Medicare, Medicaid and the public insurance option can drive 

innovative strategies for reforming the health care delivery system 

in a way that will improve care for every patient and family. 

STRENGTHENING MEDICARE AND MEDICAID

This legislation keeps a trust with the American people to preserve the sustainability of the Medicare program. It strengthens 

the program by making fiscally prudent modifications to provider 

payments, eliminating waste in the Medicare Advantage program, 

investing in prevention and extending the Medicare Trust Fund 

solvency by five years. It makes important investments in Medicare 

for our nation’s seniors and people with disabilities by eliminating 

cost-sharing for preventive care, closing the gap in prescription 

drug coverage (the so-called ‘‘donut’’ hole), increasing access for 

low-income beneficiaries, expanding coverage of mental health providers so beneficiaries can better access these vital services, and 

limiting Medicare Advantage plans’ ability to charge excessive cost 

sharing. The legislation also reforms the way Medicare updates 

payments to physicians in a way that is sustainable for providers 

while still holding physicians accountable for spending growth. 

It strengthens the Medicaid program by improving access to primary care services and providers, and expands eligibility so that all 

individuals under 133 percent of the federal poverty level are assured Medicaid coverage. 

WORKFORCE INVESTMENTS

Expansions in coverage will strain an already stressed health 

workforce. Under the legislation, existing scholarship, loan repayment, and training grant programs are strengthened to address the 

need for primary care, nursing and public health professionals. 

Medicare payments are also adjusted to increase reimbursements 

for primary care providers and to encourage the training of primary care providers as well. 

CONCLUSION

America’s Affordable Health Care Choices Act will provide 97 

percent of Americans with affordable, quality health care. It also 

begins to change the way health care is delivered in America to obtain better value and reduce the growth in future health care costs. 

H.R. 3200 fulfills the economic and moral obligation to reform the 

health care system to make it more equitable and accessible for all. 

C. LEGISLATIVE HISTORY

BACKGROUND

A discussion draft of H.R. 3200 was released to the public on 

June 19, 2009. H.R. 3200, ‘‘America’s Affordable Health Choices 

Act of 2009’’ was introduced in the House of Representatives on 

July 15, 2009, and was referred to the Committee on Energy and 

Commerce, the Committee on Ways and Means, the Committee on 

Education and Labor, the Committee on Oversight and Government Reform and the Committee on the Budget. 


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SUBCOMMITTEE ACTION

The Subcommittee on Health of the Committee on Ways and 

Means held one hearing this year on MedPAC’s Annual Report to 

Congress on Medicare Payment Policy on March 17, 2009. 

In the 110th Congress, the Subcommittee on Health held a number of hearings on health reform and related Medicare issues that 

explored various parts of the health system and informed policy 

contained in H.R. 3200. The following is a list of these hearings in 

chronological order. 

March 8, 2007—Hearing on Medicare Program Integrity. 

March 21, 2007—Hearing on Medicare Advantage. 

May 3, 2007—Hearing on Medicare Programs for Low-Income 

Beneficiaries. 

June 12, 2007—Hearing on Strategies to Increase Information on 

Comparative Clinical Effectiveness. 

June 21, 2007—Hearing on Beneficiary Protections in Medicare 

Part D. 

October 16, 2007—Joint Hearing with the Oversight Subcommittee on Statutorily Required Audits of Medicare Advantage 

Plan Bids. 

November 15, 2007—Hearing on Trends in Nursing Home Ownership and Quality. 

February 28, 2008—Hearing on Medicare Advantage. 

April 15, 2008—Hearing on the Instability of Health Coverage in 

America. 

May 14, 2008—Hearing on Health Savings Accounts (HSAs) and 

Consumer Driven Health Care: Cost Containment or Cost-Shift? 

June 10, 2008—Addressing Disparities in Health and 

Healthcare: Issues for Reform. 

July 15, 2008—Hearing on State Coverage Initiatives. 

September 11, 2008—Hearing on Reforming Medicare’s Physician 

Payment System. 

September 23, 2008—Hearing on the Health of the Private 

Health Insurance Market. 

FULL COMMITTEE ACTION

The Committee on Ways and Means held six hearings on health 

reform in the 111th Congress. These hearings explored the current 

state of various parts of the health system and opportunities 

through which the system could be reformed and strengthened. In 

addition, the Committee held a markup of H.R. 3200 on July 16, 

2009. The following is a list of these hearings and markups in 

chronological order. 

March 11, 2009—Health Reform in the 21st Century: Expanding 

Coverage, Improving Quality, Controlling Costs. 

April 1, 2009—Health Reform in the 21st Century: Reforming the 

Health Care Delivery System. 

April 22, 2009—Health Reform in the 21st Century: Insurance 

Market Reforms. 

April 29, 2009—Health Reform in the 21st Century: Employer 

Sponsored Insurance. 

May 6, 2009—Health Reform in the 21st Century: A Conversation 

with Health and Human Services Secretary Kathleen Sebelius. 


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June 24, 2009—Health Reform in the 21st Century: Proposals to 

Reform the Health System. 

July 17, 2009—The Committee on Ways and Means Marked up 

the bill, and ordered, as amended, favorably reported. 

II. EXPLANATION OF THE BILL 

DIVISION A—AFFORDABLE HEALTH CARE CHOICES 

TITLE I—PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH

BENEFITS PLANS

Subtitle A—General Standards 

Sec. 100. Purpose; Table of Contents of Division; General Definitions 

Purpose 

The purpose of this division is to provide affordable, quality 

health care for all Americans and reduce the growth in health care 

spending. This division achieves this purpose by building on what 

works in today’s health care system, while repairing the aspects 

that are broken by: 

• Enacting strong insurance market reforms; 

• Creating a new Health Insurance Exchange, with a public 

health insurance option alongside private plans; 

• Including sliding scale affordability credits; and 

• Initiating shared responsibility among workers, employers, and 

the government. 

This division institutes health delivery system reforms both to 

increase quality and to reduce growth in health spending so that 

health care becomes more affordable for businesses, families, and 

government. 

General Definitions (Created within this Act) 

• Acceptable Coverage.—a qualified health benefit plan coverage, 

coverage under a grandfathered health insurance coverage or current group health plan, Medicare Part A, Medicaid, Military Health 

System, certain coverage under Veteran’s Health Care Program 

(VA), and other coverage the Secretary of HHS in coordination with 

the Health Choices Commissioner sees fit. 

• Basic Plan.—a plan that offers the essential benefits package’s 

minimum requirements to be a qualified health benefits plan approximately 70% of the actuarial value of the benefits provided. 

• Cost-sharing.—includes deductibles, coinsurance, copayments, 

and similar charges but does not include premiums or any network 

payment differential for covered services or spending for non-covered services. 

• Employment-Based Health Plan.—the term given to group 

health plans (as defined in section 733(a)(1) of ERISA (as an employee welfare benefit plan to the extent that plan provides medical 

care to employees or their dependents, either directly, through insurance or otherwise)—and is comprised of federal and state government plans, tribal plans and church plans. 

• Enhanced Plan.—a plan that offers, in addition to the level of 

benefits under a basic plan, a lower level of cost-sharing equivalent 


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to approximately 85% of the actuarial value of the benefits provided. 

• Essential Benefits Package.—health benefits coverage, consistent with the standards set forth by the Secretary no later than 

18 months after enactment of this Act. 

• Health Benefits Plan.—health insurance coverage and a group 

health plan, including the public health insurance option. 

• Health Insurance Exchange.—created by this bill to facilitate 

access of individuals and employers, through a transparent process, 

to a variety of choices of affordable, quality health insurance coverage, including a public health insurance option. 

• Premium Plan.—a plan that offers, in addition to the level of 

benefits under a basic plan, a lower level of cost-sharing equivalent 

to approximately 95% of the actuarial value of the benefits provided. 

• Premium Plus Plan.—a premium plan that also offers additional benefits, such as oral health and vision care, all of which is 

approved by the Commissioner. 

• Qualified Health Benefits Plan (QHBP).—a health benefits 

plan that meets the requirements set forth in Title I (by the Secretary) including the public health insurance option. 

• QHBP Offering Entity.—an entity can be any of the following: 

a health benefits plan (that is a group health plan) in which the 

employer is the main source of financing, health insurance coverage which the insurance issuer is offering the coverage, the public health insurance option, a non-federal government plan established by the State or political subdivision of a State, and a federal 

government plan. 

• Public Health Insurance Option.—a public plan (only available 

through the Health Insurance Exchange) with payment rates established by the Secretary. The public option would be required to 

offer basic, enhanced, and premium plans, and would be allowed to 

offer premium-plus plans. Payment rates for prescription drugs not 

covered by Medicare Part A or B will be covered by the public option at prices negotiated by the Secretary. 

• Service Area, Premium Rating Area.—with respect to health insurance coverage: (1) if not within the Health Insurance Exchange, 

an area established by a QHBP offering entity of such coverage in 

accordance with applicable state law or (2) within the Health Insurance Exchange, an area established by such entity in accordance with state law and applicable rules set forth by the Commissioner for Exchange-participating health benefits plans. 

• ‘‘State’’.—given term for purposes of the Medicaid program, but 

only includes the 50 states and the District of Columbia. 

• Y1, Y2, etc.—2013, 2014, etc. 

Sec. 101. Requirements Reforming Health Insurance Marketplace 

Current Law 

Regulation of the private health insurance market is primarily 

done at the state level. State regulatory authority is broad in scope 

and includes requirements related to the issuance and renewal of 

coverage, benefits, rating, consumer protections, and other issues. 

Federal regulation of the private market is more narrow in scope 

and applicable mostly to employer-sponsored health insurance (i.e., 


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through the Employee Retirement Income Security Act of 1974 

(ERISA)) and through established federal minimum standards (i.e., 

through the Genetic Information Nondiscrimination Act of 2008 

and the Paul Wellstone and Pete Domenici Mental Health Parity 

and Addiction Equity Act of 2008, etc). 

Proposed Law 

This provision would require Qualified Health Benefits Plans 

(QHBPs) to meet the new federal health insurance standards specified in Subtitles B (relating to affordable coverage), C (relating to 

essential benefits) and D (relating to consumer protection) of Title 

I. The section also provides terminology for the phrases ‘‘enrollment 

in employment-based health plans’’ and ‘‘individual and group 

health insurance coverage.’’ 

Reason for Change 

Lays out the purpose of the legislation. 

Effective Date 

January 1, 2013. 

Sec. 102. Protecting the Choice to Keep Current Coverage 

Current Law 

See description under Sec. 101. 

Proposed Law 

‘‘Grandfathered health insurance coverage’’ would be defined as 

individual health insurance coverage that is in effect before the 

first day of Y1, as long as the insurance carrier does not (1) enroll 

new individuals on or after the first day of Y1 (would not affect 

subsequent enrollment of a dependent); (2) change any terms or 

conditions of the individual coverage, except as required by law; 

and (3) vary the percentage increase in premiums for a risk group 

of enrollees without changing the premium for all enrollees in the 

same risk group at the same rate, as specified by the Commissioner. The Commissioner would establish a 5-year grace period beginning Y1 for existing group health plans to transition to the new 

federal health insurance standards applied to QHBPs. Limited benefits plans specified in the provision, such as dental only, vision 

only, flexible spending arrangements, and others, are unaffected by 

these reforms and may continue to be sold to new applicants irrespective of other reforms. 

Individual health insurance coverage that is not grandfathered 

may only be offered after the first day of Y1 as an Exchange plan. 

Excepted benefits (e.g., accident or disability insurance) could be offered as long as they are offered and priced separately from health 

insurance coverage. 

For purposes of the individual mandate (established under title 

III of Division A), an individual would be required to have ‘‘acceptable coverage.’’ In order for an individual health insurance policy 

to be considered acceptable coverage, the policy would be either 

grandfathered health insurance coverage, in effect prior to Y1 or offered through the Exchange (established under title II of Division 


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A). Group health coverage provided during the grace period would 

be considered acceptable coverage. 

Reason for Change 

This section ensures that people can keep current health coverage as long as they’d like. Employers currently offering coverage 

will have five years to meet insurance reform requirements and the 

benefit standards (which 96 percent of employer sponsored plans 

already do today according to an ARC Analysis of BLS National 

Compensation Survey). These changes are designed to minimize 

disruption in health insurance coverage and ensure compliance for 

those who are currently covered. 

Effective Date 

January 1, 2013. 

Subtitle B—Standards Guaranteeing Access to Affordable Coverage 

Sec. 111. Prohibiting Pre-Existing Condition Exclusions 

Current Law 

The Health Insurance Portability and Accountability Act of 1996 

(HIPAA), which amended ERISA, limits the duration that issuers 

in the group market may exclude coverage for pre-existing health 

conditions for ‘‘HIPAA eligible’’ individuals, among other provisions. Group plans may impose pre-existing condition exclusions for 

no longer than 12 months (18 months in the case of a late enrollee), 

and must decrease that exclusion period by the number of months 

an enrollee had prior ‘‘creditable coverage.’’ HIPAA outright prohibits issuers in the individual market from excluding coverage for 

pre-existing conditions for HIPAA eligibles. 

All states require health issuers to reduce the period of time 

when coverage for pre-existing health conditions may be excluded, 

in compliance with HIPAA. As of January 2009 in the small group 

market, 21 states had pre-existing condition exclusion rules that 

provided consumer protection above the federal standard. And, as 

of December 2008, 42 states limit the period of time when coverage 

for pre-existing health conditions may be excluded for non-HIPAA 

eligible enrollees in the individual market. 

Proposed Law 

This provision would prohibit a qualified health benefits plan 

from excluding coverage for pre-existing health conditions, or otherwise limit or condition such coverage with respect to an 12 individual or dependent based on any health status-related factors. 

Such factors include health status, medical condition (including 

both physical and mental illnesses), claims experience, receipt of 

health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence) 

and disability. 

Reason for Change 

The HIPAA limitation on pre-existing conditions did not apply to 

all health plans and permitted pre-existing condition exclusions to 

be imposed or continued in certain areas.. This provision ends the 

discriminatory practice of health insurers denying coverage for preVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00215 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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existing conditions. All plans will be required to meet these standards. 

Effective Date 

January 1, 2013. 

Sec. 112. Guaranteed Issue and Renewal for Insured Plans 

Current Law 

HIPAA requires that coverage sold to small groups (2–50 employees) must be sold on a guaranteed issue basis. That is, the issuer 

must accept every small employer that applies for coverage. (Guaranteed issue rules do not address premiums.) HIPAA also guarantees that each issuer in the individual market make at least two 

policies available (‘‘guaranteed availability’’) to all HIPAA eligible 

individuals. In addition, HIPAA guarantees renewal or continuation of group coverage at the option of the plan sponsor (e.g., employer) and individual coverage at the option of the individual, with 

some exceptions. Insurers may not renew coverage under specified 

circumstances, such as nonpayment of premiums or fraud. 

All states require issuers to offer policies to firms with 2–50 

workers on a guaranteed issue basis, in compliance with HIPAA. 

As of January 2009 in the small group market, 13 states also require issuers to offer policies on a guaranteed issue basis to selfemployed ‘‘groups of one.’’ And, as of December 2008, 15 states require issuers in the individual market to offer some or all of their 

insurance products on a guaranteed issue basis to non-HIPAA eligible individuals. 

Proposed Law 

This provision would require issuers to offer all health insurance 

coverage on a guaranteed issue and renewal basis beginning in Y1, 

whether offered through the Exchange (established under Subtitle 

A of Title II), through any employment-based health plan, or otherwise. Rescissions of coverage would be prohibited, except in cases 

of fraud. 

Reason for Change 

This section provides consumer protections to ensure that people 

can obtain health coverage and can’t have it arbitrarily taken 

away. All new plans will be required to meet these requirements. 

Effective Date 

January 1, 2013. 

Sec. 113. Insurance Rating Rules 

Current Law 

There are a limited number of federal rating rules applicable to 

the private group health insurance market. However, many states 

currently impose stronger rating rules on insurance carriers in the 

small group and individual markets. Existing state rating rules restrict an insurer’s ability to price insurance policies according to 

the risk of the person or group seeking coverage, and vary considerably from state to state. Such restrictions may specify the case 

characteristics (or risk factors) that may or may not be considered 


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when setting a premium, such as age. The spectrum of existing 

state rating limitations ranges from pure community rating, to adjusted (or modified) community rating to rate bands. Some states 

have no limits on rating practices which permits insurance companies to charge unlimited amounts. Pure community rating means 

that premiums cannot vary based on any characteristic related to 

a person’s or group’s risk, including health. Adjusted community 

rating means that premiums cannot vary based on health, but may 

vary based on other key risk factors, such as gender. Rate bands 

allow premium variation based on health and/or age, but such variation is limited according to a range specified by the state. Moreover, both adjusted community rating and rate bands allow premium variation based on any other permitted case characteristic, 

such as industry. For each characteristic, the state typically specifies the amount of allowable variation. As of January 2009 in the 

small group market, one state has pure community rating rules, 

eleven have adjusted community rating rules, and 35 have rate 

bands. As of December 2008 in the individual market, two states 

have pure community rating rules, five have adjusted community 

rating rules, and eleven have rate bands. 

There are no federally-established rating areas in the private 

health insurance market. However, some states have enacted rating rules in the individual and small group markets that include 

geographic location as a factor on which premiums may vary. In 

these cases, the state has established rating areas. Typically, states 

use counties or zip codes to define those areas. 

Proposed Law 

This provision would impose new federal rating rules on qualified 

health benefits plans. QHBP premiums would vary only by age (by 

no more than a 2:1 ratio within age categories specified by the 

Commissioner (established under Sec. 141)), premium rating area 

(as permitted by state regulators or, in the case of an Exchange 

plan, as specified by the Commissioner), and family enrollment (as 

specified under State law and consistent with Commissioner rules). 

The Commissioner, in coordination with the Secretaries of 

Health and Human Services (HHS) and Labor, would conduct a 

study of the large group market to examine (1) characteristics of 

employers who purchase fully-insured health insurance products 

and employers who self-fund health benefits, including characteristics related to bearing risk and solvency, and (2) the extent to 

which rating rules cause adverse selection in the large group market or encourage small and mid-size employers to self-insure health 

benefits. The Commissioner would submit this report to Congress 

and the applicable agencies no later than 18 months after enactment, and include any recommendations to ensure that the law 

does not provide incentives for small and mid-size employers to 

self-insure or create adverse selection in the risk pools of large 

group insurers and self-insured employers. 

Reason for Change 

The provision ensures that Qualified Health Benefits Plans and 

plans offered outside the exchange offer fair health insurance policies that don’t discriminate against enrollees or applicants. It provides for uniform national standards, so employers, employees or 


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individuals moving from state-to-state won’t be subject to a patchwork of requirements and protections. It requires a study of the 

large group marketplace to establish whether these changes have 

any unforeseen consequences and to advise as to whether Congress 

should take further action in this arena. All new plans will be required to meet these requirements. There is nothing that prohibits 

states from requiring stricter rating limits than the federal requirements described here. 

Effective Date 

January 1, 2013. 

Sec. 114. Nondiscrimination in Benefits 

Current Law 

HIPAA established federal rules regarding non-discrimination 

based on health status-related factors. Group issuers are prohibited 

from establishing rules for eligibility and premium contributions 

based on health status-related factors. Those factors include health 

status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, 

genetic information, evidence of insurability (including conditions 

arising out of acts of domestic violence) and disability. In addition, 

the Genetic Information Nondiscrimination Act of 2008 prohibits 

issuers in the individual health insurance market from establishing 

eligibility rules (including continued eligibility) based on an individual’s genetic information, and the Mental Health Parity Act of 

1996, as amended, establishes parity by prohibiting the placement 

of a dollar limit (either annual or aggregate lifetime) on mental 

health benefits that is less than such a limit for medical/surgical 

benefits for groups with more than 50 employees. 

Proposed Law 

This provision would require QHBPs to comply with new non-discrimination standards regarding health benefits or benefit structures established by the Commissioner, building on existing federal 

non-discrimination rules in ERISA, the Public Health Service Act 

(PHSA), and the Internal Revenue Code of 1986. These standards 

would apply to plans offered to individuals and groups of all sizes 

in QHBPs, not just groups with over 50 employees. Existing mental 

health parity rules, specifically concerning (1) no requirement on 

group plans to provide mental health benefits, and (2) no impact 

of limited mental health parity on terms and conditions relating to 

the amount, duration, or scope of mental health benefits, apply to 

QHBPs and other policies, regardless of whether coverage is offered 

in the individual or group market. 

Reason for Change 

Currently, insurers can and do discriminate in the individual and 

group market. This section would guarantee that insurers could not 

discriminate against anyone due to a health-related condition. In 

addition, it strengthens protections afforded to individuals with 

mental health needs by extending the existing rules to everyone 

enrolled in a QHBP. 


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Effective Date 

January 1, 2013. 

Sec. 115. Ensuring Adequacy of Provider Networks 

Current Law 

HIPAA established special rules for plans that develop a network 

of providers. It allows small group issuers to (1) limit the employers that apply for coverage to those firms with eligible individuals 

who live or work in the network service area, and (2) deny coverage 

to small employers if the issuer demonstrates (if required) to the 

State that it has limited provider capacity due to obligations to existing enrollees and it is applying this decision uniformly without 

regard to claims experience or health status-related factors. HIPAA 

also prohibits a small group issuer that has denied coverage in any 

service area to offer small group coverage in that area for 180 days 

after the denial. 

Proposed Law 

This provision would require QHBPs that use provider networks 

to meet provider network standards that may be established by the 

Commissioner to ensure the adequacy of networks, and transparency in the cost-sharing differences between in- and out-of-network coverage. The term ‘‘provider network’’ means the providers 

with respect to covered benefits, treatments, and services available 

under a health benefit plan. 

Reason for Change 

This provision provides the Commissioner with the authority to 

set network adequacy requirements to ensure that plans have the 

right number of providers to meet the needs of enrollees. 

Effective Date 

January 1, 2013. 

Sec. 116. Ensuring Value and Lower Premiums 

Current Law 

Medical loss ratio (MLR) describes is the share of total premium 

revenue spent on medical claims. Medigap insurance policies are 

private supplemental health care policies that Medicare beneficiaries can purchase to help cover some items, services, and cost 

sharing not covered under Medicare. Medigap plans are required to 

have a MLR ratio of 65% for individual policies and 75% for group 

policies. In addition, some states impose MLR or related requirements on insurers in the individual and/or small group health insurance markets. As of June 2008, MLR required by states ranged 

from 55% to 80%. 

Proposed Law 

This provision would require QHBPs to comply with a medical 

loss ratio standard to be determined by the Commissioner. QHBPs 

that do not meet such a standard would be required to provide rebates to enrollees, in a manner specified by the Commissioner, in 

sufficient amounts to meet such a loss ratio. To establish the medVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00219 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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ical loss ratio standard, the Commissioner would build on the definition and methodology, developed by the HHS Secretary under 

Section 161, for determining how to calculate such a ratio. The 

methodology would set the highest ratio possible to ensure adequate QHBP participation, competition both in and out of the Exchange, and value for consumers so that their premium payments 

are used predominately for medical claims. 

Reason for Change 

This provision provides the Commissioner with the authority to 

ensure that premiums are used primarily to provide health benefits 

and not lost to excessive administrative costs or profit. The Committee is interested in establishing a minimum level of 85 percent. 

Effective Date 

January 1, 2013. 

Subtitle C—Standards Guaranteeing Access to Essential Benefits 

Sec. 121. Coverage of Essential Benefits Package 

Current Law 

There are very limited federal benefit mandates for health insurance. These standards were added to the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and other Acts 

such as Paul Wellstone and Pete Domenici Mental Health Parity 

and Addiction Equity Act of 2008 or the Genetic Information Nondiscrimination Act of 2008 and are described in the discussion of 

Section 122. In addition, there are more than 2,000 state-level benefit mandates that vary across the country. 

Proposed Law 

This provision would require a QHBP to cover at least an ‘‘essential benefit package’’. QHBPs could be offered in or outside of an 

Exchange. QHBPs offered outside of an Exchange would be allowed 

to offer additional benefits beyond those specified in the essential 

benefits package. For QHBPs offered through the Exchange, a plan 

offering a premium-plus level of benefits (established under Section 

203) could also provide additional benefits. 

The requirements under Division A would not affect the offering 

of limited-purpose or ‘‘excepted’’ benefit plans, including policies 

covering dental or vision treatment, long-term care, workers’ compensation, and other similar benefits, if such benefit plans are offered under a separate policy, contract, or certificate of insurance. 

A QHBP would not be allowed to impose coverage restrictions 

(except cost sharing) on anything unrelated to the clinical appropriateness of the health care items and services. 

Reason for Change 

The provision ensures the offering of minimum standard benefits, 

called the essential benefits package, to ensure that all plans meet 

basic needs and enable people to compare policies in the Exchange 

on the basis of cost and quality—not hidden differences in benefits. 

Outside of the Exchange, group health plans eventually have to 

meet the essential benefits package, as a minimum standard, but 

can offer additional benefits, as many do today. 


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Effective Date 

January 1, 2013. 

Sec. 122. Essential Benefit Package Defined 

Current Law 

There are very few federally mandated benefits. The laws that 

provide guidance are found in the Employee Retirement Income Security Act (ERISA), which covers employer-sponsored plans; the 

Public Health Service Act (PHSA), which covers some insurance 

plans and state and local government plans; and the Internal Revenue Code (IRC), which covers Church plans in certain circumstances. There is no federal requirement that employers offer 

health insurance, or that any plans that are offered cover any specific benefits. However, the mandates that do exist require that if 

a plan (governed by ERISA, PHSA, or IRC) covers a particular 

service that is addressed in the statutes, then that benefit must be 

designed in a certain way. Those mandates include: 

• The Paul Wellstone and Pete Domenici Mental Health Parity 

and Addiction Equity Act of 2008 (MHPA) (P.L. 110–343) prevents 

a large group health plan from placing annual or lifetime dollar 

limits on mental health benefits that are lower—less favorable— 

than annual or lifetime dollar limits for medical and surgical benefits offered under the plan, but does not require a plan to cover 

mental health benefits. 

• The Newborns’ and Mothers’ Health Protection Act of 1996 

(NMHPA) (P.L. 104–204) requires plans that offer maternity coverage to pay for at least a 48-hour hospital stay following childbirth 

(96-hour stay in the case of a cesarean section). 

• The Women’s Health and Cancer Rights Act of 1998 (P.L. 105– 

277) contains protections for patients who elect breast reconstruction in connection with a mastectomy. For plan participants and 

beneficiaries receiving benefits in connection with a mastectomy, 

plans offering coverage for a mastectomy must also cover reconstructive surgery and other benefits related to a mastectomy. 

• The Genetic Information Nondiscrimination Act of 2008 

(GINA) (P.L. 110–233) prohibits discrimination based on genetic information by health insurers and employers. GINA strengthens 

and clarifies existing HIPAA nondiscrimination and portability provisions. Broadly, GINA prohibits health insurers from engaging in 

three practices: (1) using genetic information about an individual 

to adjust a group plan’s premiums, or, in the case of individual 

plans, to deny coverage, adjust premiums, or impose a pre-existing 

condition exclusion; (2) requiring or requesting genetic testing; and 

(3) requesting, requiring, or purchasing genetic information for underwriting purposes. It also prohibits employers from making hiring or firing decisions based on genetic information. 

• Michelle’s Law (P.L. 110–381) ensures that dependent post secondary education students who take a medically necessary leave of 

absence do not lose health insurance coverage. The law provides 

that a group health plan may not terminate a college student’s 

health coverage simply because the student takes a medically necessary leave of absence from school or changes to part-time status. 

The leave of absence must be medically necessary, begin while the 


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student is suffering from a serious illness or injury and would otherwise result in a loss of coverage. 

Although current federal law provides only a limited number of 

service and coverage mandates, it does provide some guidance toward the definition of preventive services for use by public programs and private insurance. The U.S. Preventive Services Task 

Force (USPSTF), administered by the Agency for Healthcare Research and Quality (AHRQ), reviews scientific evidence and makes 

recommendations to the health care community regarding the use 

of clinical preventive services, based on evidence of effectiveness 

and any harm associated with specific services. The USPSTF 

grades services as ‘‘A’’ through ‘‘D,’’ or notes that there is insufficient evidence to support a recommendation. Clinical services graded ‘‘A’’ or ‘‘B’’ by the USPSTF are recommended for use in clinical 

practice. 

Similarly, the Advisory Committee on Immunization Practices 

(ACIP), administered by the Centers for Disease Control and Prevention (CDC), reviews scientific evidence and makes 19 recommendations to the Secretary and the CDC Director for the routine administration of vaccines to children, adolescents, and adults 

in the U.S. civilian population. The ACIP is not explicitly authorized; rather, it is based in general authorities of the Secretary in 

Titles II and III of the PHSA. 

‘‘Actuarial value’’ is a summary measure of a health insurance 

plan’s benefit generosity. It is expressed as the percentage of medical expenses estimated to be paid by the insurer for a standard 

population and set of allowed charges. Two plans that have the 

same actuarial value are ‘‘actuarially equivalent.’’ Because these 

are summary measures, two plans that are actuarially equivalent 

may not provide the same benefits for any two individuals. State 

health insurance regulations may include requirements expressed 

in terms of actuarial value. 

Proposed Law 

This provision would require the essential benefits package to 

cover specified items and services, limit cost sharing, prohibit annual and lifetime limits on covered services, ensure the adequacy 

of provider networks, and be equivalent (as certified by the Office 

of the Actuary of the Centers for Medicare and Medicaid Services) 

to the average prevailing employer-sponsored coverage. 

The essential benefits package would be required to cover the following items and services: 

• Hospitalization; 

• Outpatient hospital and clinic services, including emergency department services; 

• Services of physicians and other health professionals; 

• Services, equipment, and supplies incident to the services 

of a physician or health professional in appropriate settings; 

• Prescription drugs; 

• Rehabilitative and ‘‘habilitative’’ services (i.e., services to 

maintain or prevent the deterioration of the physical, intellectual, emotional, and social functioning of developmentally delayed individuals); 

• Mental health and substance use disorder services; 


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• Preventive services, include those graded ‘‘A’’ or ‘‘B’’ by the 

Task Force on Clinical and Preventive Services, as established 

by this Act, and those vaccines recommended by the Director 

of the CDC; 

• Maternity care; and 

• Well-baby and well-child care and oral health, vision, and 

hearing services, equipment, and supplies for those under age 

21. 

The essential benefits package would be subject to various requirements concerning cost-sharing. The package would be required to provide preventive items and services without cost-sharing (including well-baby and well-child care). The annual out-ofpocket limit in Y1 would be $5,000 for an individual and $10,000 

for a family: These limits would be annually adjusted for inflation 

using the Consumer Price Index for all Urban Consumers (CPI-U). 

To the extent possible, the Secretary would establish cost-sharing 

levels using copayments (a flat dollar fee) and not coinsurance (a 

percentage fee). Cost-sharing for the Essential Benefits Package 

would result in coverage equal to approximately 70 percent of the 

actuarial value of the benefits if there were no cost-sharing imposed. 

Reason for Change 

To ensure that Americans will be guaranteed a defined level of 

benefits, with numerous options available in order to ease comparison shopping among plans based on cost and quality not manipulation of benefits. 

Effective date 

January 1, 2013. 

Sec. 123. Health Benefits Advisory Committee 

Current Law 

No provision. 

Proposed Law 

A Health Benefits Advisory Committee would be established to 

recommend covered benefits and cost-sharing parameters and the 

essential, enhanced, and premium plans. The Committee would be 

chaired by the Surgeon General. The Committee membership 

would be comprised of: 

• Nine members, appointed by the President, who are neither federal employees nor officers; 

• Nine members, appointed by the Comptroller General, 

who are neither federal employees nor officers; and 

• An even number, up to eight members, appointed by the 

President, who are federal employees and officers. 

The initial appointments would be made within 60 days of enactment. Each Committee member would serve a three-year term, except the terms of the initial appointments would be adjusted to provide for staggered years of appointment. The members would reflect the interests of the many diverse groups of stakeholders so 

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flect physicians and other health care providers, consumer representatives, employers, labor, health insurance issuers, experts in 

health care delivery, and experts in health disparities, and government agencies. At least one Committee member would be a practicing physician or health professional, and another member would 

be an expert on children’s health. 

The Committee’s recommendations to the Secretary on the essential benefits package (as defined in Section 122), cost-sharing levels 

for the enhanced plans and premium plans (as defined in Section 

203), and periodic updates of the package would be required to incorporate innovation in health care. The Committee members 

would also be required to consider how the package would reduce 

health disparities, and would allow for public input as part of developing its recommendations. The Committee’s initial benefit recommendations must be made to the Secretary within one year of 

enactment. 

In developing standards for the basic, enhanced and premium 

plans, the Committee would be required to calculate cost-sharing 

such that the enhanced plan would have benefits that are actuarially equivalent to about 85% of the actuarial value of the benefits 

provided in the essential benefits package, and the premium plans 

would have benefits that are actuarially equivalent to about 95% 

of the actuarial value of the benefits provided in the essential benefits package. 

Committee members would serve without pay, but would receive 

federal travel expenses, including per diem expenses. In addition, 

the Committee would be subject to the Federal Advisory Committee 

Act (which provides sunshine and transparency over advisory committee actions). 

The Secretary would be required to publish all recommendations 

developed pursuant to this Section in the Federal Register and on 

the HHS website. 

Reason for Change 

This section provides for the advice of an expert panel to define 

the initial essential benefits package; cost-sharing parameters for 

the basic, enhanced and premium plans; and make updates to that 

package for the future. It ensures that experts who make up the 

array of groups impacted by the decision (consumers, employers, 

doctors, etc.) are part of developing the essential benefits package. 

Effective Date 

Date of enactment. 

Sec. 124. Process for Adoption of Recommendations; Adoption of 

Benefit Standards 

Current Law 

No provision. 

Proposed Law 

This Section proposes a timeline under which the Secretary must 

choose whether to adopt the recommendations of the Committee established under section 123 of this bill. Within 45 days of receiving 

the Committee’s recommendations regarding the essential benefits 


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package, the Secretary would be required either to adopt the benefit standards as written or not adopt the benefit standards. If the 

Secretary does not wish to adopt the recommendations, the Secretary shall notify the Committee of the reasons for this decision, 

and provide an opportunity for the Committee to revise and resubmit its recommendations. 

The Secretary would be required to adopt an initial set of benefit 

standards within 18 months of enactment either by adopting the 

recommendations (and any revisions) of the Committee, or absent 

that, by proposing an initial set of benefit standards. 

The Secretary would be required to publish all determinations 

under this Section in the Federal Register. 

The Secretary would be required to periodically update the benefit standards. However, an essential benefits package that does 

not meet the essential benefits requirements specified in section 

122 could not be adopted. 

Reason for Change 

This section lays out a timeline to ensure that the benefit standards are developed and adopted on a timely basis. 

Effective Date 

Date of enactment. 

Subtitle D—Additional Consumer Protections 

Sec. 131. Requiring Fair Marketing Practices by Health Insurers 

Current Law 

States have established fair marketing standards to regulate insurers’ marketing activities. 

Proposed Law 

This provision would require the Commissioner to establish uniform marketing standards for QHBPs. 

Reason for Change 

This provision prohibits insurers from using unfair marketing 

practices as a mechanism to avoid risk and ensure that individuals 

and businesses are not misled by insurance companies when purchasing insurance. 

Effective Date 

January 1, 2013. 

Sec. 132. Requiring Fair Grievance and Appeals Mechanisms 

Current Law 

ERISA does not require an employer to offer health benefits, but 

does mandate compliance to certain standards if an employer 

chooses to offer health benefits, such as procedures for appealing 

denied benefit claims. In addition, as of February 2008, 44 states 

and the District of Columbia mandate the independent review of 

benefit denials by an entity outside of the health plan (‘‘external review’’). 


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Proposed Law 

This provision would require QHBPs to provide for timely grievance and appeals mechanisms as established by the Commissioner. 

QHBPs would provide an internal claims and appeals process that 

initially incorporates the claims and appeals procedures (including 

urgent claims) promulgated by the Labor Department and published in the Code of Federal Regulations on November 21, 2000 

(65 Fed. Reg. 70246). Such a process would be updated in accordance with any relevant standards that may be established by the 

Commissioner. The Commissioner would establish standards for an 

external review process (including expedited review of urgent 

claims), and any determination made with respect to a QHBP 

under an external review process would be binding. The requirements under this section would not affect the availability of judicial 

review under State law for adverse decisions under either the internal or external review process, subject to Section 151. 

Reason for Change 

To protect patients by ensuring a fair internal and external appeals processes in cases in which a patient needs to challenge a 

health plan’s coverage denial or determination. 

Effective Date 

January 1, 2013. 

Sec. 133. Requiring Information Transparency and Plan Disclosure 

Current Law 

ERISA requires applicable health plans (as well as other ‘‘welfare 

benefit’’ plans) to disclose and report certain plan information to 

enrollees and regulators. For example, plan administrators must 

provide to enrollees a written summary plan description (SPD) that 

contains the terms of the plan and the benefits offered, including 

any material modifications, and the SPD must be written in a manner that can be understood by the average enrollee. Certain plans 

must file an 24 annual report with the Department of Labor, containing information about the operation, funding, assets, and investments of those plans. 

Proposed Law 

This provision would require QHBPs to comply with disclosure 

standards established by the Commissioner concerning plan terms 

and conditions, claims payment policies, plan finances, claims denials, and other information as determined appropriate by the Commissioner. The Commissioner would require such disclosure to be 

provided in plain language. QHBPs would be required to comply 

with standards established by the Commissioner to ensure transparency regarding reimbursements between the plan and health 

care providers. A change in a QHBP could not be made without 

reasonable and timely advance notice to enrollees about the 

change. 

Reason for Change 

To ensure that enrollees and contracting health providers understand the terms and conditions of QHBP’s and other health plans. 


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Effective Date 

January 1, 2013. 

Sec. 134. Application to Qualified Health Benefits Plans Not Offered 

Through the Health Insurance Exchange 

Current Law 

No Provision. 

Proposed Law 

The previous disclosure and other standards would apply to 

QHBPs offered outside of the Exchange only to the extent specified 

by the Commissioner. 

Reason for Change 

Provides the Commissioner with flexibility with regard to applying the provisions of this section to plans outside of the Exchange. 

Effective Date 

January 1, 2013. 

Sec. 135. Timely Payment of Claims 

Current Law 

Under Medicare Advantage (MA), private health plans are paid 

a per-person amount to provide all Medicare-covered benefits (except hospice) to beneficiaries who enroll in their plans. MA plans 

include health maintenance organizations (HMO’s) and private feefor-service (PFFS) plans, among other plan types. MA PFFS plans 

that generally do not currently contract with providers are required 

to pay 95% of ‘‘clean claims’’ within 30 days of receipt. The Centers 

for Medicare and Medicaid Services (CMS) defines a clean claim as 

a claim that has no defect or impropriety, and is submitted with 

all the required documentation. The 30-day rule also applies to 

claims submitted to any MA organization by a provider who does 

not have a written contract with the plan. MA organizations are required to pay interest on clean claims that are not paid within 30 

days. All other claims from non-contracted providers must be paid 

within 60 days. MA organizations that contract with providers (i.e., 

HMOs and PPOs) must include a prompt payment provision in 

their contracts. 

Proposed Law 

This provision would require QHBPs to comply with the prompt 

pay requirements applicable to Medicare Advantage plans. 

Reason for Change 

To ensure fair and timely payment for services rendered in the 

reformed health care system. 

Effective Date 

January 1, 2013. 


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Sec. 136. Standardized Rules for Coordination and Subrogation of 

Benefits 

Current Law 

While there are no federal statutes specifying primary and secondary payment rules for multiple insurers in the private market, 

Section 1862(b) of the Social Security Act authorizes the Medicare 

Secondary Payer (MSP) program, which identifies specific conditions under which another party pays first and Medicare is only responsible for qualified secondary payments. The statute authorizes 

several methods to identify cases when an insurer other than Medicare is the primary payer and to facilitate recoveries when incorrect Medicare payments have been made. Under certain conditions, 

the law makes Medicare the secondary payer to insurance plans 

and programs for beneficiaries covered through (1) a group health 

plan based on either their own or a spouse’s current employment; 

(2) auto and other liability insurance; (3) no-fault liability insurance; and (4) workers’ compensation situations, including the Black 

Lung program. Additionally, the Medicare statutes exclude Medicare coverage for items and services paid for directly or indirectly 

by a government entity, subject to certain limitations. This includes 

the Department of Veterans Affairs, among others. 

Proposed Law 

The Commissioner would establish standards for the coordination of benefits and reimbursement of payments in cases involving 

individual and multiple plan coverage. 

Reason for Change 

These changes are needed to enable effective coordination of 

varying health plans. 

Effective Date 

January 1, 2013. 

Sec. 137. Application of Administrative Simplification 

Current Law 

To support the growth of electronic record keeping and claims 

processing, HIPAA’s Administrative Simplification provisions instructed the Secretary to adopt electronic format and data standards for several routine administrative and financial transactions 

between health care providers and health plans/payers. The standards apply to health care providers (who transmit any health information in electronic form in connection with a HIPAA-specified 

transaction), health plans, and health care clearinghouses. 

Proposed Law 

This provision would require QHBP-offering entities (as defined 

in the bill) to comply with the new administrative simplification 

standards adopted under Sec. 163 (discussed below). 


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Reason for Change 

These changes are needed to eliminate waste from today’s health 

system and will provide savings for providers—ensuring a more efficient health care delivery system. 

Effective Date 

January 1, 2013. 

Subtitle E—Governance 

Sec. 141. Health Choices Administration; Health Choices Commissioner 

Current Law 

No provision. 

Proposed Law 

This provision would establish an independent agency in the Executive Branch of the United States called the Health Choices Administration (‘‘Administration’’). The Administration would be 

headed by a Health Choices Commissioner (‘‘Commissioner’’), who 

would be appointed by the President, with advice and consent of 

the Senate. Section 702 of the Social Security Act (detailing compensation, terms, general powers, rule-making, and delegation as 

applied to the Commissioner of Social Security and the Social Security Administration) would apply to the Commissioner. 

Reason for Change 

This Act brings significant new responsibilities to the government. In order to ensure these duties are carried out, a new agency 

is needed to coordinate the efforts. 

Effective Date 

Date of enactment. 

Sec. 142. Duties and Authority of Commissioner 

Current Law 

No provision. 

Proposed Law 

This provision would make the Commissioner responsible for carrying out the following functions: • Qualified Plan Standards—Establishing qualified health benefits plan (‘‘QHBP’’) standards, including the enforcement of such 

standards in coordination with State insurance regulators and the 

Secretaries of Labor and the Treasury. • Health Insurance Exchange—Establishing and operating the 

Health Insurance Exchange. • Individual Affordability Credits—Administering individual affordability credits, including the determination of eligibility for 

such credits. 

• Promoting Accountability—Undertaking activities in accordance with this section to promote accountability of QHBP offering 

entities in meeting Federal health insurance requirements, regardless of whether such accountability is with respect to qualified 


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health benefit plans offered through or outside the Health Insurance Exchange. 

• Compliance Examination and Audits—Coordinating with 

States to conduct audits of qualified health benefits plans compliance with federal requirements. These audits would include random compliance audits and targeted audits in response to complaints or other suspected non-compliance. 

• Recoupment of Costs in Connection with Examination and Audits—Authorizing the Commissioner to recoup from qualified 

health benefits plans reimbursement for costs of such examinations 

and audit of such QHBP offering entities. 

• Data Collection—Collecting data for the purposes of carrying 

out the Commissioner’s duties, including promoting quality, value, 

protecting consumers and addressing disparities in health and 

health care; the commissioner may share such data with Secretary 

of Health and Human Services. 

• Sanctions Authority—Providing any of the following remedies 

(in addition to any other authorized by law) in coordination with 

State insurance regulators and the Secretary of Labor if it is determined that a QHBP offering entity violates a requirement: 

1. Civil money penalties of not more than the amount applicable under similar circumstances for similar violations under 

Medicare; 

2. Suspension of plan enrollment of individuals under such 

plan after the date the Commissioner notifies the entity of a 

decision, until the Commissioner is satisfied with rectification; 

3. In the case of an Exchange-participating health benefits 

plan, suspension of payment under the Health Insurance Exchange for individuals enrolled in the plan after the date the 

Commissioner notifies the entity of such decision and until the 

Commissioner is satisfied with corrective action; or 

4. Work with State insurance regulators to terminate plans 

for repeated failure by the QHBP offering entity to meet this 

title’s requirements. 

• Standard Definitions of Insurance and Medical Terms—Providing the development of standards for defining terms used in 

health insurance coverage, including insurance-related terms. 

• Efficiency in Administration—Issuing regulations for the effective and efficient administration of the Health Insurance Exchange 

and affordability credits including: 

1. The determination of eligibility for affordability credits. 

2. The use of personnel to carry out the duties of the Commissioner or in the case of sections 208 and 241(b)(2) of this 

Act, the use of State personnel in accordance with statutes. 

Reason for Change 

Authority needs to be granted to carry out the implementation 

of this Act. The Health Choices Commissioner is established to perform these functions as outlined above. 

Effective Date 

Date of enactment. 


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Sec. 143. Consultation and Coordination 

Current Law 

No provision. 

Proposed Law 

The Commissioner, as appropriate, would be required to consult 

with, at a minimum, the National Association of Insurance Commissioners (for purposes of using model guidelines), State attorneys 

general, and State insurance regulators concerning the standards 

and enforcement for insured qualified health benefits plans described in this title. Concurrently, the Commissioner would be required to consult with, at a minimum, Indian tribes and tribal organizations, appropriate federal agencies, and appropriate State 

agencies concerning affordability credits and the offering of Exchange-participating health benefits plans (including Medicaid concerning standards for insured qualified health benefit plans). 

The Commissioner would be required to work in coordination 

with existing Federal and State entities to the maximum extent 

feasible and in a manner preventing conflicts of interests. Concurrently, the Commissioner would seek to achieve uniform standards 

that sufficiently protect consumers in a manner that does not unreasonably affect employers and insurers. 

Reason for Change 

Health care is regulated at the State and federal level and by a 

wide variety of agencies. To ensure effective implementation of the 

Act and uniform requirements across the country, it is important 

that all regulatory bodies coordinate efforts. 

Effective Date 

Date of enactment. 

Sec. 144. Health Insurance Ombudsman 

Current Law 

The Department of Health and Human Services houses various 

complaint handling and client-assistance ombudsmen: 

Food and Drug Administration (FDA) Ombudsman—Reviews 

marketing or investigational applications; provides information on 

import or export issues, ensures a fair hearing of claims of unfair 

or unequal treatment; also determines the jurisdiction of a product. 

Long-Term Care Ombudsman—Mandated by Older Americans 

Act of 1965, consists of 1,000 paid and 14,000 volunteers who identify, investigate, and resolve complaints made by, or on the behalf, 

of residents. They have a blend of federal and state oversight. 

Medicare Beneficiary Ombudsman—Created by the Medicare 

Prescription Drug, Improvement, and Modernization Act of 2003 

(P.L. 108–173), is intended to ensure those eligible for Medicare 

have reliable and current information about their benefits, rights 

and protections under the Medicare program, and the procedures 

for getting problems and disputes resolved. The Ombudsman is to 

aid Medicare recipients in filing appeals if their insurance did not 

pay proper amounts for their medical services or those services 

were denied. 


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Specialized Jurisdictional Ombudsmen—The FDA also has four 

additional ombudsmen who serve as the points of contact for specific public complaints connected to the subject of their jurisdiction. 

They are located at the Center for Biologics Evaluation and Research, Center for Drug Evaluation and Research, Center for Devices and Radiological Health, and Center for Veterinary Medicine. 

If any of the above cannot resolve or rectify a complaint, the issue 

is then sent to the FDA Office of Ombudsman. 

In addition, several states (including VT, MN, and IL) have created State health insurance ombudsmen, with the core responsibilities of rectifying concerns encompassing access to care, billing 

problems, and access to health insurance. The Ombudsman provides information on state and federal programs that may be available, explains continuation rights under an existing health plan, 

provides help on how to shop for health insurance, and assists in 

appealing decisions made by their health insurance. 

Proposed Law 

The Commissioner would appoint within the Health Choices Administration a Qualified Health Benefits Ombudsman (with experience and expertise in the fields of health care and education). The 

Ombudsman would be required to perform the following duties: • Receive and provide assistance with complaints, grievances, 

and requests for information submitted by individuals. The assistance would be provided more specifically in instances such as helping individuals determine relevant information for an appeal, assisting with any problems arising from disenrollment, choosing a 

qualified health benefits plan to enroll, and presenting information 

relevant to affordability credits. • Submit annual reports to Congress and the Commissioner describing the activities of the Ombudsman, including recommendations for improvement in the Administration of this Division, as determined appropriate. The Ombudsman would not serve as an advocate for any increases in payments or new coverage of services, 

but would identify issues and problems in payment or coverage 

policies. 

Reason for Change 

Like the other ombudsman offices that have been established, 

this new ombudsman is created to protect consumers’ interests and 

provide a consumer-oriented point of contact within the new agency. 

Effective Date 

Date of enactment. 

Subtitle F—Relation to Other Requirements; Miscellaneous 

Sec. 151. Relation to Other Requirements 

Current Law 

No provision. 

Proposed Law 

• Coverage Not Offered Through the Exchange—The requirements of this provision would not supersede specified federal and 


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state laws with respect to the health insurance coverage not offered 

through the Health Insurance Exchange (whether or not offered in 

connection with an employment-based health plan). Such laws encompass applicable requirements under the Public Health Service 

Act for certain group health plans and state and local employees 

requirements for health insurance coverage, group health plan 

standards and requirements under ERISA, or other applicable 

State laws. Nothing in this subsection would prevent application of 

State laws creating private rights of action with remedies or affect 

the application preemption (under Section 514 of ERISA). 

• Coverage Offered Through the Exchange—The requirements 

under this title would not supersede any requirements relating to 

genetic information non-discrimination and mental health for such 

health insurance coverage (as long as those related do not prevent 

the application of requirements detailed in this division; as determined by the Commissioner). Concurrently, individual rights and 

remedies under State laws would apply. Nothing detailed in this 

paragraph would be construed as preventing the application of 

rights and remedies under State laws with respect to any referred 

requirement. 

Reason for Change 

This section clarifies the interaction between federal and state 

laws. 

Effective Date 

January 1, 2013. 

Sec. 152. Prohibiting Discrimination in Health Care 

Current Law 

HIPAA established federal rules regarding non-discrimination 

based on health status-related factors. It prohibits group issuers 

from establishing rules for eligibility and premium contributions 

based on health status-related factors. Those factors include health 

status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, 

genetic information, evidence of insurability (including conditions 

arising out of acts of domestic violence) and disability. In addition, 

the Genetic Information Nondiscrimination Act of 2008 (GINA, P.L. 

110–233) prohibits issuers in the individual health insurance market from establishing eligibility rules (including continued eligibility) based on an individual’s genetic information. The Mental 

Health Parity Act of 1996, as amended, establishes parity by prohibiting the placement of a dollar limit (either annual or aggregate 

lifetime) on mental health benefits that is less than such a limit 

for medical/surgical benefits for group health plans with more than 

50 employees. 

Proposed Law 

Unless explicitly permitted within this Act and subsequent related regulations, all health care and related services (including insurance coverage and public health activities) covered by this Act 

would be provided regardless of personal characteristics extraneous 

to the provision of high quality health care or related services. 


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Within 18 months of enactment, the Secretary would be required 

to ensure that all health care and related services would be provided without regard for extraneous personal characteristics. 

Reason for Change 

Makes clear that civil rights protections are applicable to health 

insurance plans. 

Effective Date 

Within 18 months of enactment. 

Sec. 153. Whistleblower Protection 

Current Law 

No provision. 

Proposed Law 

No employer may discharge any employee (or otherwise discriminate against) with respect to his compensation, terms, conditions, 

or other privileges of employment because the employee (or an individual acting at the request of the employee): 

• Provides or causes to provide to the employer, Federal Government, the attorney general of a relevant State, information relating 

to any violation of, or any act or omission the employee reasonably 

believes to be a violation of any provision, order, rule, or regulation 

promulgated under this Act. 

• Testifies or is about to testify in a proceeding concerning such 

violation. 

• Assists, participates or is about to assist and participate in 

such a proceeding. 

• Objects to, or refused to participate in any activity, policy, 

practice, or assigned task that the employee reasonably believes to 

be in violation of any provision, order, rule and regulation promulgated under this Act. 

Enforcement Action—An employee covered by this section who alleges discrimination by an employer in violation may bring an action governed by the rules, procedures, legal burden of proof, and 

remedies detailed in section 40(b) of the Consumer Product Safety 

Act. 

Employer Defined—The term employer in this section means any 

person (including one or more individuals, partnerships, associations, corporations, trusts, professional membership organization 

including a certification, disciplinary, or other professional body, 

unincorporated organizations, nongovernmental organizations, or 

trustees) engaged in profit or nonprofit business or industry whose 

activities are governed by this Act, and any agent, contractor, subcontractor, grantee, or consultant of such person. 

Rule of Construction—The rule of construction set forth concerning employee protections in the United States Code would 

apply to this section. 

Reason for Change 

To ensure the provision of quality, efficient health care, it is vital 

that health care workers be protected in instances where they conVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00234 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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tribute to reporting of violations of this act. Otherwise, the fear of 

retaliation will discourage many to report such violations. 

Effective Date 

Date of enactment. 

Sec. 154. Construction Regarding Collective Bargaining 

Current Law 

No provision. 

Proposed Law 

Nothing in this division would be construed to alter or supersede 

any statutory authority (or other obligation) to engage in collective 

bargaining over the terms and conditions of employment related to 

health care. 

Reason for Change 

Preserves collective bargaining rights. 

Effective Date 

Date of enactment. 

Sec. 155. Severability 

Current Law 

No provision. 

Proposed Law 

If any provision of this Act, or the application thereof toward any 

person or circumstance, is held unconstitutional, the application of 

the remaining provisions would not be affected. 

Reason for Change 

To protect other sections of the act if any particular section is 

found unconstitutional. 

Effective Date 

Date of enactment. 

Subtitle G—Early Investments 

Sec. 161. Ensuring Value and Lower Premiums 

Current Law 

Medical loss ratio is the share of total premium revenue spent 

on medical claims. Medigap insurance policies are private supplemental health care policies that Medicare beneficiaries can purchase to help cover some items, services, and cost sharing not covered under Medicare. Medigap plans are required to have a minimum medical loss ratio of 65% for individual policies and 75% for 

group policies. In addition, some states impose medical loss ratios 

or related requirements on insurers in the individual and/or small 

group health insurance markets. As of June 2008, minimum ratios 

required by states ranged from 55% to 80%. 


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Proposed Law 

Each health insurance issuer that offers health insurance coverage in the small or large group market would be required to provide rebates to enrollees if the coverage provided had a medical 

loss ratio below a level specified by the Secretary, for any plan 

year. The amount of the rebate would be sufficient to meet such 

loss ratio. The methodology would be set at the highest level medical loss ratio possible designed to ensure adequate participation by 

issuers, competition in the health insurance market, and value for 

consumer so that their premiums would be used for services. The 

Secretary would establish a uniform definition and a methodology 

for determining medical loss ratio, taking into account special circumstances of plans such as size, type, and longevity of the plan. 

These same provisions would also apply to health insurance coverage offered in the individual market. 

Reason for Change 

To ensure that plans are investing enrollee premiums in the provision of health benefits and not simply excessive administrative 

costs or profit. 

Effective Date 

These provisions would be effective for plan years beginning on 

or after January 1, 2011. 

Sec. 162. Ending health insurance rescission abuse 

Current Law 

In the individual health insurance market, HIPAA guarantees 

renewal or continuation of individual health coverage at the option 

of the individual, except under specified circumstances. Those circumstances include nonpayment of premiums, fraud (including intentional misrepresentation of material fact) on the part of the enrollee, plan terminates coverage in the individual market, move of 

enrollee outside of the network service area, and enrollee membership in an association ends (in the case of association sponsored 

coverage). In addition, a handful of states prohibit issuers from rescinding or cancelling an enrollee’s coverage in the individual market without prior review and approval from the state insurance department. 

Proposed Law 

This provision would clarify that the existing guaranteed renewability rules under HIPAA include prohibition of rescissions. An 

issuer would be allowed to rescind policies only upon clear and convincing evidence of fraud. No later than July 1, 2010, the Secretary 

would issue guidance on implementing this requirement. In order 

for a rescission to take effect, the issuer would be required to provide notice to the enrollee of the proposed rescission and give that 

enrollee the opportunity for a review of the determination by an 

independent, external third party under procedures specified by the 

Secretary. The health coverage for an enrollee who requests such 

a review would remain in effect until the third party determines 

such coverage may be rescinded under Secretarial guidance. The 

requirements related to external review would apply on and after 


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October 1, 2010 to all health insurance coverage, regardless of date 

of issue. 

Reason for Change 

This section curbs abuses by health insurers that retroactively 

deny patients their health coverage at the very time that coverage 

is most needed. 

Effective Date 

October 1, 2010. 

Sec. 163. Administrative Simplification 

Current Law 

HIPAA’s Administrative Simplification provisions required the 

Secretary to adopt electronic format and data standards for nine 

specified administrative and financial transactions, including those 

related to enrollment in a health plan, eligibility for a plan, and 

health care payment and remittance. In addition, HIPAA directed 

the Secretary to adopt a standard for transferring standard data 

elements among health plans for the coordination of benefits and 

the sequential processing of claims. In 2000, CMS issued an initial 

set of standards for seven of the nine specified transactions and for 

the coordination of benefits. As required under HIPAA, CMS published an updated version of the standards in early 2009. The compliance date for implementing those updated standards is January 

1, 2012. 

In September 2005, CMS published a proposed rule on a standard for electronic health care claims attachments, one of the two 

remaining transactions standards required to be adopted. A claims 

attachment transaction is used to request and supply additional 

data necessary to adjudicate a claim and typically includes specific 

clinical information that a plan needs in order to decide whether 

a service should be covered. This type of transaction is a key bridge 

between administrative transactions and clinical data. The claims 

attachment standard has yet to be finalized. 

HIPAA’s Administrative Simplification provisions also instructed 

the Secretary to develop security standards to safeguard electronic 

health information from unauthorized access, use, and disclosure, 

and to issue standards to protect the privacy of patient information. The HIPAA privacy rule, which took effect in 2003, established a set of patient rights, including the right of access to one’s 

medical information, and placed certain limitations of when and 

how health plans and health care providers may use and disclose 

patient information. The Health Information Technology for Economic and Clinical Health (HITECH) Act, enacted earlier this year 

as part of the Recovery Act, included a series of privacy and security provisions that amended and expanded the current HIPAA requirements. The HIPAA Administrative Simplification standards 

do not apply to the use and disclosure of information by financial 

institutions that are responsible for authorizing, processing, clearing, billing, transferring or collecting payments for premiums or 

health care. 


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Proposed Law 

This provision would amend the HIPAA Administrative Simplification provisions by adding a new section requiring the Secretary, within two years of implementation of the updated HIPAA 

electronic transactions standards (i.e., by January 2014), to adopt 

an additional set of financial and administrative transactions 

standards to help clarify, complete, and expand the existing requirements. The goal would be for the standards to be unique (with 

no conflicting or redundant standards), authoritative, and comprehensive, requiring minimal augmentation by paper transactions. 

In addition, the standards would describe all data elements in unambiguous terms and not permit optional fields. They would enable 

real-time (or near real-time) determination of a patient’s financial 

responsibility at the point of service and adjudication of claims, and 

harmonize all common data elements across transactions standards. Finally, the standards would have to support electronic funds 

transfers as well as timely and transparent claim and denial management processes, enable providers to quickly and efficiently enroll with a health plan so as to conduct other electronic transactions, and provide for other requirements related to administrative simplification as identified by the Secretary. 

In developing the standards, the Secretary would be required to 

build upon existing and planned standards and regularly update 

the new standards. Within six months of enactment, the Secretary 

would be required to submit to Congress a plan for implementing 

and enforcing the new standards within five years of enactment. 

The plan would have to include a timetable for developing and regularly updating the new standards, implementation programs to 

help rural and other providers, an estimate of the funding needed 

to ensure timely completion of the implementation plan, and an enforcement process including timely investigation of complaints, random audits, and a fair and reasonable appeals process. The Secretary would have to ensure that all data collected pursuant to the 

new standards meets the HIPAA privacy and security requirements, as modified by the HITECH Act. 

The provision would require the Secretary, within one year of enactment, to issue a final rule to establish a standard for health 

claims attachment transactions. It also would clarify that the 

HIPAA standards do not apply to the use and disclosure of information by financial institutions that process payments unless they 

are business associates of health plans and health care providers. 

Reason for Change 

These changes are needed to eliminate waste from today’s health 

system and will provide savings for providers—ensuring a more efficient health care delivery system. 

Effective Date 

For subsection (a), regarding new HIPAA standards for electronic 

administrative and financial transactions, within five years of enactment. For subsection (b), new standards for claims attachments 

and coordination of benefits, adopted within one year of enactment, 

would apply to transactions occurring on or after six months after 

enactment. 


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Sec. 164. Reinsurance Program for Retirees 

Current Law 

No provision in current law. Average per capita health spending among the near elderly (55- to 64-year-olds) in 2004 was $7,787, or 

50% more than spending among 45- to 54-year-olds ($5,210), and 

more than double that of 19- to 44-year olds ($3,370). These spending levels carry over into health insurance costs for these age 

groups. In the non-group market, average premiums for the near 

elderly were nearly $1,200 more than 45- to 54-year-olds and triple 

that for 25- to 34-year olds. The near elderly were more likely than 

their younger adult counterparts to spend more than 10% of their 

after-tax income on health care and health insurance premiums. 

Proposed Law 

No later than 90 days after enactment, the Secretary would establish a temporary reinsurance program, to provide reimbursement to assist participating employment-based plans with the cost 

of providing health benefits to eligible retirees who are 55 and 

older and their dependents, including eligible and surviving 

spouses. Health benefits would be required to include medical, surgical, hospital, prescription drug, and other benefits determined by 

the Secretary. An eligible employment-based plan would submit an 

application to the Secretary, as required. A participating employment-based program would submit claims for reimbursement to the 

Secretary, documenting the actual cost of items and services for 

each claim. Each claim would be based on the actual amount expended by the participant. The participating employment-based 

plan would take into account any negotiated price concessions, such 

as discounts, subsidies, and rebates. The cost of deductibles and 

cost-sharing would be included in the cost of the claim, along with 

the amounts paid by the plan. For any valid claim, the Secretary 

would reimburse the plan for 80% of the portion of costs above 

$15,000 and below $90,000. This amount would be adjusted annually based on the percent increase in the medical care component 

of the Consumer Price Index, rounded to the nearest multiple of 

$1,000. Amounts paid to a participating employment-based plan 

would be used to lower costs directly to participants and beneficiaries in the form of premiums, co-payments, deductibles, co-insurance, or other out-of-pocket costs, but would not be used to reduce the costs of an employer maintaining the employment-based 

plan. The Secretary would establish an appeals process for denied 

claims, procedures to protect against fraud, waste, and abuse, and 

would conduct annual audits of claims data. 

The Retiree Reserve Trust Fund would be established consisting 

of such amounts as appropriated or credited to the Fund to enable 

the Secretary to carry out the reinsurance program. The Secretary 

could request such sums as necessary to carry out this section, not 

to exceed $10 billion. Amounts appropriated and outlays from such 

appropriation would not be taken into account for purpose of any 

budget enforcement procedures, thus exempting the Fund from the 

framework of the budget resolution and the points of order which 

enforce that framework. The Secretary would have the authority to 

stop taking applications or take other steps to reduce expenditures 

to ensure that expenditures did not exceed available funds. 


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Reason for Change 

The provision of employer-sponsored retiree health benefits is of 

significant value to retirees. These investments also benefit the 

health system at large by keeping many of these individuals from 

otherwise becoming uninsured and resulting in higher uncompensated health care costs. This section provides financial assistance 

for those employers who continue to offer health benefits to their 

early retirees to encourage them to continue providing this valuable coverage. 

The Committee intends to remove the language referring to an 

exemption from budget enforcement procedures prior to consideration by the House. 

Effective Date 

Not later than 90 days after enactment. 

TITLE II—HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS

Subtitle A—Health Insurance Exchange 

Current Law 

No provision. 

Proposed Law 

Sec. 201. Establishment of Health Insurance Exchange; Outline of 

Duties; Definitions 

A Health Insurance Exchange (‘‘Exchange’’) would be established 

to facilitate access of individuals and employers to a variety of 

choices of affordable, quality health insurance coverage, including 

a public health insurance option. The Exchange would exist within 

the Health Choices Administration under the direction of the 

Health Choices Commissioner (described above in Sections 141 and 

142). As described in greater detail in the following sections, regarding the Exchange, the Commissioner would (1) establish standards for, accept bids from, and negotiate and enter into contracts 

with entities seeking to offer qualified health benefits plans 

(QHBPs) through the Exchange, (2) facilitate outreach and enrollment of Exchange-eligible individuals and employers, and (3) conduct appropriate activities related to the Exchange, including establishment of a risk pooling mechanism and consumer protections. 

Reason for Change 

This provision would create a new, fair health insurance marketplace for individuals and families to choose from among a variety 

of plan options. The Commissioner of the Exchange will enforce 

federal minimum requirements for the individual and group market described in Title I. The Exchange would bring transparency to 

the health insurance marketplace so that individuals and families 

know what benefits their plan covers and what it will cost them. 

Sec. 202. Exchange-eligible Individuals and Employers 

Beginning in Y1, all individuals generally would be eligible to obtain coverage through the Exchange, unless they were enrolled in 


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the following (as determined by the Commissioner, in coordination 

with the Treasury Secretary): • a group plan through a full-time employee (including a 

self-employed person with at least one employee) for which the 

employer makes an adequate contribution (described below in 

Section 312); • Medicare; • Medicaid (except in certain cases, discussed below); or • Military and VA coverage. 

Regarding Medicaid, individuals could still participate in the Exchange if their Medicaid eligibility was related to COBRA continuation coverage, tuberculosis, or breast or cervical cancer. As described in greater detail in Section 1701, Medicaid would be expanded to cover individuals up to 133% FPL who are not eligible 

under current state Medicaid programs—called ‘‘non-traditional 

Medicaid eligible individuals’’ per Section 205. A non-traditional 

Medicaid eligible individual could be Exchange-eligible if the individual was enrolled in a qualified health benefits plan, grandfathered health insurance coverage, or current group health plan 

during the six months before the individual became a non-traditional Medicaid eligible individual. During the period in which such 

an individual had chosen to enroll in an Exchange plan, the individual would be ineligible for regular Medicaid. 

Except for the Medicaid exception described above, individuals 

would lose eligibility for Exchange coverage once they become eligible for Medicare Part A, Medicaid (although in this case, the Commissioner could permit continued Exchange eligibility for such limited time as the Commissioner determines it is administratively 

feasible and consistent with minimizing disruption in the individual’s access to health care), and other circumstances as the Commissioner provides. Besides those cases, once individuals enroll in 

an Exchange plan, they would continue to be eligible until they are 

no longer enrolled. 

Exchange-eligible employers could meet the requirements of the 

employer responsibility (Section 312) by offering and contributing 

adequately toward employees’ enrollment through the Exchange. 

Those employees would be able to choose any of the available Exchange plans. Once employers are Exchange eligible and enroll 

their employees through the Exchange, they would continue to be 

Exchange eligible, unless they decided to then offer their own 

qualified health benefits plan(s). 

In Y1, only employers with 10 or fewer employees would be Exchange-eligible. In Y2, employers with 20 or fewer employees would 

be Exchange-eligible. Beginning in Y3, the Commissioner could 

permit larger employers to participate in the Exchange. These additional employers could be phased in or made eligible based on the 

number of full-time employees or other considerations the Commissioner deems appropriate. (‘‘Employer’’ and other employment-related definitions would be defined by the Commissioner.) 

The Commissioner would have the authority to establish rules to 

deal with special situations with regard to uninsured individuals 

participating as Exchange-eligible individuals and employers, such 

as transition periods for individuals and employers who gain, or 

lose, Exchange-eligible participation status, and to establish grace 

periods for premium payment. 


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The Commissioner would be required to provide for periodic surveys of Exchange-eligible individuals and employers concerning 

their satisfaction with the Exchange and its plans. 

The Commissioner would conduct an Exchange Access Study—a 

study of access to the Health Insurance Exchange for individuals 

and for employers, including individuals such as Medicaid recipients and employers who are not eligible and enrolled in Exchange 

plans. The goal of the study would be to determine if there are significant groups and types of individuals and employers who are not 

Exchange eligible but who would have improved benefits and affordability if made eligible. The study also would examine the 

terms, conditions, and affordability of group health coverage offered 

by employers and QHBP-offering insurers outside of the Exchange 

compared to Exchange-participating health benefits plans, as well 

as the affordability test standard for access of certain employed individuals to coverage in the Health Insurance Exchange. The Commissioner would submit the study to Congress by January 1 of Y3, 

Y6 and thereafter, and would include in the report recommendations regarding changes in standards for Exchange eligibility for individuals and employers. 

Reason for Change 

This provision permits any individual or family to purchase a 

plan in the Exchange with their own funds if they are not enrolled 

in other coverage. This provision provides the Commissioner flexibility and discretion to make certain the Exchange operates effectively, including determinations of when certain sized employers 

could access the Exchange after the second year of operation. The 

Committee intends that the Commissioner open the Exchange to 

larger employers over time. 

Sec. 203. Benefits Package Levels 

The Commissioner would specify the benefits to be made available under Exchange plans during each plan year, consistent with 

this section and sections 121–134 above. The Commissioner could 

not enter into a contract with an entity wanting to offer coverage 

through the Exchange in a service area(s), unless the following requirements are met: 

• The entity offers only one Basic plan in the service area. 

• The entity may offer one Enhanced plan in the service area. 

• If the entity offers an Enhanced plan in a service area, the entity may offer one Premium plan for the area. 

• If the entity offers a Premium plan for a service area, the entity may offer one or more Premium-Plus plans for the area. 

All such plans could be offered under a single contract with the 

Commissioner. 

Consistent with the standards in Sections 101–164 above, the 

Commissioner would also establish the following standards for the 

three primary levels of Exchange plans—Basic, Enhanced, and Premium—and for additional benefits that may be offered in PremiumPlus plans. Besides offering the essential benefits package (Section 

122 above) for a QHBP, Basic plan benefit packages would be 

modified to provide for reduced cost-sharing for individuals eligible 

for the ‘‘affordability cost-sharing credit,’’ described below in Section 244. Excluding the credit, the benefit package of a Basic plan 


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would have an actuarial value representing payment for approximately 70% of all the covered items and services in the essential 

benefits package (Section 122 above). Enhanced plans would have 

lower cost-sharing than Basic plans, representing approximately 

85% of the actuarial value of all the covered items and services in 

the essential benefits package. Premium plans would have lower 

cost-sharing than Enhanced plans, representing approximately 95% 

of the actuarial value of all the covered items and services in the 

essential benefits package. Premium-Plus plans would be Premium 

plans that also provide additional benefits, such as adult oral 

health and vision care, approved by the Commissioner. The portion 

of the premium that is attributable to such additional benefits 

would be separately specified. 

The Commissioner would establish a permissible range of variation of cost-sharing for the Basic, Enhanced and Premium plans. 

Such variation would permit variations up to 10% in cost-sharing 

with respect to several benefit categories (Section 122); for example, with respect to a standard that provides for 20% coinsurance, 

the permissible variation would be between 18% and 22% coinsurance. 

If a state requires health insurers to offer benefits beyond the essential benefits package, such requirements would continue to 

apply to Exchange plans, but only if the state has entered into an 

arrangement satisfactory to the Commissioner to reimburse the 

Commissioner for the amount of any resulting net increase in affordability premium credits (Section 243). 

Reason for change 

This provision establishes consistent benefit packages so that 

consumers can easily choose among plans and so that plans do not 

use differences in benefit packages as a way to avoid consumers 

with high health care risks. 

Sec. 204. Contracts for the Offering of Exchange-participating 

Health Benefits Plans 

The Commissioner would establish standards, described below, 

for Exchange-participating entities and their health benefits plans. 

The Commissioner would certify entities and plans if the 43 standards are met. The Commissioner would solicit and review bids from 

QHBP-offering entities for offering Exchange plans, negotiate with 

the entities, and enter into contracts with the entities for offering 

plans through the Exchange under terms negotiated between the 

Exchange and the entities. 

The Federal Acquisition Regulation (the principal set of rules 

that govern the contracting process for the federal government) 

would not apply to contracts between the Commissioner and 

QHBP-offering entities for offering Exchange plans. 

The standards for Exchange-participating entities would consist 

of the following requirements: 

• The entity must be licensed to offer health insurance coverage 

under state law for each state in which it offers coverage. 

• The entity must provide for reporting data/information specified by the Commissioner, including information necessary to administer the risk pooling mechanism in Section 206 and information to address disparities in health and health care. 


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• The entity must provide for implementation of the affordability 

credits provided for enrollees (described in Sections 241–246 

below). 

• The entity must accept all applicable enrollment via the Exchange, subject to such exceptions (such as capacity limitations) in 

accordance with the federal requirements for QHBPs (discussed 

under Title I), and would notify the Commissioner if it projects or 

anticipates reaching a capacity that would result in a limitation in 

enrollment. 

• The entity must participate in the pooling mechanism as established by the Commissioner (described in Section 206 below). 

• Regarding the Basic plan offered by the entity, the entity must 

contract for outpatient services with certain federally supported 

health care providers. The Commissioner would also specify how 

this requirement would apply to Health Maintenance Organizations (HMOs). 

• The entity must provide culturally and linguistically appropriate communication and health services. 

• The entity must comply with other applicable requirements of 

this title specified by the Commissioner, which would include 

standards regarding billing and collection practices for premiums 

and grace periods and which may include standards to ensure that 

the entity does not use coercive practices to force providers not to 

contract with other entities offering coverage through the Exchange. 

For the contracting process, entities’ bids would have to contain 

the information required by the Commissioner. Contracts would 

last at least one year, but could be automatically renewed in the 

absence of notice of termination by either party. The contract 

would provide that if the Commissioner determines that a plan’s 

provider network is not adequate, then the cost-sharing charged to 

a person who received out-of-network care would be the same as 

if the care had been provided in-network. 

In coordination with state insurance regulators, the Commissioner would establish processes to oversee, monitor, and enforce 

applicable requirements on Exchange-participating entities and 

QHBPs, including plan marketing. In conjunction with state insurance regulators, the Commissioner would establish a process for individuals and employers to file complaints concerning violations. 

The Commissioner could terminate a contract with an entity if it 

fails to comply with the requirements of this title; the Commissioner could also impose one or more intermediate sanctions. 

Any determination by the Commissioner to terminate a contract 

would be made in accordance with formal investigation and compliance procedures established by the Commissioner under which (a) 

the Commissioner provides the entity with the reasonable opportunity to develop and implement a corrective action plan to correct 

the deficiencies that were the basis of the Commissioner’s determination; and (b) the Commissioner provides the entity with reasonable notice and opportunity for hearing (including the right to 

appeal an initial decision) before terminating the contract. However, these procedures need not apply if the Commissioner determined that a delay in termination would pose an imminent and serious risk to the health of individuals enrolled under the plan. 


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Reason for change 

To effectively operate an Exchange, the Commissioner will need 

to work with the States and establish the regulations needed to ensure plans offered in the Exchange meet federal requirements and 

certify that they meet the terms for operating in the Exchange. 

Sec. 205. Outreach and Enrollment of Exchange-eligible Individuals 

and Employers in Exchange-participating Health Benefits Plan 

Outreach. The Commissioner would conduct outreach activities to 

inform and educate individuals and employers about the Exchange 

and its participating health plans. Such outreach would include 

outreach specific to vulnerable populations, such as children, individuals with disabilities, individuals with mental illness, and individuals with other cognitive impairments. The Commissioner’s required outreach activities would include the following: 

• broadly disseminate information on Exchange-participating plans, provided in a comparative manner and including 

information on benefits, premiums, cost-sharing, quality, provider networks, and consumer satisfaction; 

• provide assistance to Exchange-eligible individuals and 

employers via a toll-free telephone hotline and an Internet 

website; 

• develop and disseminate information to Exchange-eligible 

enrollees on their rights and responsibilities; 

• assist Exchange-eligible individuals in selecting plans and 

obtaining benefits; and 

• ensure the information is developed using plain language 

(described in Section 133 above). 

Enrollment. The Commissioner would be required to make timely 

determinations of whether individuals and employers are eligible 

for Exchange coverage and to establish and carry out an enrollment process, including at community locations. Enrollment would 

be permitted by mail, telephone, electronically, or in person. 

Open enrollment for individuals and employers to enroll in an 

Exchange plan and affordability credits (described in Sections 241– 

245 below) would be at least 30 days and would be during September through November of each year before benefits would begin, 

or such other time that would maximize the timeliness of income 

verification. However, the Commissioner would also provide for 

special enrollment periods to take into account special circumstances of individuals and employers, such as an individual 

who loses acceptable coverage, experiences a change in marital or 

other dependent status, moves outside the plan’s service area, or 

experiences a significant change in income. The Commissioner, potentially with other appropriate entities, would be required to 

broadly disseminate information on the enrollment process, including before each enrollment period. 

The Commissioner would establish a process to automatically enroll the following individuals into an appropriate Exchange plan 

(potentially involving a random assignment or some other form of 

assignment that takes into account the health care providers used 

by the individual, or such other relevant factors specified by the 

Commissioner): 


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• those who have applied for affordability credits, been determined eligible, have not opted out from receiving such credit, and do not enroll in another Exchange plan; and • those enrolled in an Exchange plan that is terminated 

(during or at the end of a plan year) who do not enroll in another Exchange plan. 

Under the enrollment process, individuals enrolled in an Exchange plan would pay such plans directly, not through the Commissioner or the Exchange. 

Special provisions apply to newborns born in the United States 

without acceptable coverage at birth. Until other acceptable coverage begins, the child would be considered a non-traditional Medicaid-eligible individual (for whom the state would be paid 100% 

federal reimbursement) and would be deemed as having elected 

Medicaid coverage. This coverage would end no later than the end 

of the month 60 days after the child’s birth; at the end of that period, if the child still does not have acceptable coverage, the child 

is deemed a traditional Medicaid-eligible individual, for whom the 

state receives the regular Medicaid federal matching rate. 

As of the day before the first day of Yl, CHIP-eligible children, 

including targeted low-income children in a Medicaid-expansion 

CHIP program, would be deemed to be Exchange eligible. 

The Commissioner would notify each state in Y1 whether the Exchange could support enrollment of these children. 

A ‘‘traditional Medicaid eligible individual’’ is a Medicaid-eligible 

individual excluding (1) those who are eligible because of the expansion of Medicaid in Section 1701 of this legislation to individuals up to 133% FPL and (2) a childless adult who would not otherwise be classified as categorically needy (as per current Medicaid 

statute, Section 1902(a)(10)(A)) or medically needy (as per current 

Medicaid statute, Section 1902(a)(10)(C)) as in effect as of the day 

before the date of enactment of this Act. A ‘‘non-traditional Medicaid-eligible individual’’ is a Medicaid-eligible individual who is not 

a traditional Medicaid-eligible individual. Section 202 of the legislation includes provisions so that a non-traditional Medicaid eligible 

individual could be Exchange-eligible if the individual was enrolled 

in a qualified health benefits plan, grandfathered health insurance 

coverage, or current group health plan during the six months before the individual became a non-traditional Medicaid eligible individual. Under this section, the Commissioner would provide these 

individuals with the option to enroll in Medicaid rather than an 

Exchange plan and to change that election during open enrollment 

periods described earlier in this section. 

An Exchange-eligible individual could apply for a Medicaid-eligibility determination. If the individual is determined to be eligible, 

the Commissioner would provide for the individual’s enrollment 

under the state Medicaid plan in accordance with the Medicaid 

memorandum of understanding. In the case of such an enrollment, 

the state would provide for the same periodic redetermination of 

eligibility under Medicaid that would apply if the individual had directly applied to the state Medicaid agency. The legislation would 

require the Commissioner, in consultation with the HHS Secretary, 

to enter into a memorandum of understanding with each state with 

respect to coordinating enrollment of individuals in Exchange plans 

and under state Medicaid programs, and to otherwise coordinate 


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the implementation of these provisions with respect to the Medicaid program. This memorandum would permit the exchange of information consistent with limitations specified in Medicaid statute 

with respect to providing safeguards that restrict the use or disclosure of information concerning applicants and recipients to purposes directly connected with the administration of the state Medicaid plan, and at state option, the exchange of information necessary to verify eligibility for other federal programs (e.g., for free 

and reduced price school lunches). None of these provisions could 

be construed as permitting such memorandum to modify or vitiate 

any requirement of a state Medicaid plan. 

In carrying out this section, the Commissioner would establish 

effective methods for communicating in plain language and a culturally and linguistically appropriate manner. 

Reason for Change 

To ensure that individuals and families are well aware of their 

rights and responsibilities under the act, the Commissioner must 

establish procedures to educate and enroll individuals and families. 

Sec. 206. Other Functions 

The Commissioner would be required to coordinate the distribution of affordability premium and cost-sharing credits (described 

below in Sections 243–244) to the Exchange plans. The Commissioner would also be required to establish a risk-pooling mechanism, to adjust premium payments to Exchange plans to take into 

account (in a manner specified by the Commissioner) the differences in the risk characteristics of individuals and employers enrolled under the Exchange plans. 

An Office of the Special Inspector General for the Exchange 

would be established, headed by a Special Inspector General appointed by the President and confirmed by the Senate. The Special 

Inspector General’s nomination would be made as soon as practicable after the establishment of the Exchange. 

The duties of the Special Inspector General would consist of the 

following: 

• conduct, supervise, and coordinate audits, evaluations and 

investigations of the Health Insurance Exchange to protect the 

integrity of the Exchange as well as the health and welfare of 

participants in the Exchange; 

• report both to the Commissioner and to the Congress regarding program and management problems and recommendations to correct them; 

• related to the duties above, have other duties described as 

applying to the Special Inspector General of the Troubled Asset 

Relief Program (TARP), per paragraphs (2) and (3) of Section 

121 of P.L. 110–343; and 

• in carrying out these duties, have the authorities of inspectors general in Section 6 of the Inspector General Act of 1978. 

Other provisions of the TARP Special Inspector General would 

also be applied, regarding the basis of the Special Inspector General’s appointment, how s/he might be removed, his/her salary, and 

available personnel, facilities and other resources. 

Not later than one year after the confirmation of the Special Inspector General, and annually thereafter, the Special Inspector 


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General would submit to the appropriate committees of Congress 

a report summarizing the activities of the Special Inspector General during the one year period ending on the date the report is 

submitted. 

The Office of the Special Inspector General would terminate five 

years after the date of the enactment of this Act. 

Reason for Change 

This provision ensures the Commissioner has full authority to 

operate the Exchange and creates an Inspector General to ensure 

adequate oversight and to combat waste, fraud and abuse within 

the system. 

Sec. 207. Health Insurance Exchange Trust Fund 

A ‘‘Health Insurance Exchange Trust Fund’’ would be created 

within the U.S. Treasury, consisting of such amounts as may be appropriated or credited to the fund. The Commissioner would pay 

from the Trust Fund amounts as determined necessary to make 

payments to operate the Exchange, including affordability credits. 

Dedicated payments to the Trust Fund would include the following: • taxes on individuals not obtaining acceptable coverage 

(Section 401); • taxes on employers electing to not provide health benefits 

(Section 412); and • excise tax on employers who fail to satisfy health coverage 

participation requirements (Section 411). 

Such additional sums as necessary would be appropriated. General provisions in the Internal Revenue Code regarding federal government trust funds would apply. 

Reason for change 

A trust fund is needed to hold the taxes collected under this act 

and to enable the payment from that fund for affordability credits 

and other costs of the Exchange. 

Sec. 208. Optional Operation of State-based Health Insurance Exchanges 

If a state (or group of states, subject to the Commissioner’s approval) applied to the Commissioner for approval of a state-based 

Health Insurance Exchange, and if the Commissioner approves 

such state-based Exchange, then the state-based Exchange would 

operate instead of the federal Exchange in that state(s). 

The Commissioner could not approve a state-based Exchange unless the following requirements were met (and would be required 

to approve it if the conditions were met): 

• The state-based Exchange must demonstrate the capacity to 

and provide assurances satisfactory to the Commissioner that it 

could carry out the functions specified for the federal Exchange in 

the state(s) including: 

Æ negotiating and contracting with qualified plans; 

Æ enrolling Exchange-eligible individuals and employers in 

plans; 

Æ establishing sufficient local offices to meet the needs of Exchange-eligible individuals and employers; 


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Æ administering premium and cost-sharing credits (described 

below in Sections 241–246) using the same methodologies, and 

at least the same income verification methods, as would otherwise apply and at a cost to the federal government that is not 

greater than what would otherwise apply; and 

Æ enforcement activities consistent with federal requirements. 

• There is no more than one Exchange in operation in any one 

state. 

• The state provides assurances satisfactory to the Commissioner that approval of such an Exchange would not result in any 

net increase in expenditures to the federal government. 

• The State provides for reporting of such information as the 

Commissioner determines and assurances satisfactory to the Commissioner that it will vigorously enforce violations of applicable requirements. 

• Such other requirements as the Commissioner may specify. 

A state-based Exchange could, at the option of the state, and 

only after providing timely and reasonable notice to the Commissioner, cease operation. In this case, the federal Exchange would be 

operational in the state(s). 

The Commissioner could terminate the approval (for some or all 

functions) of a state-based Exchange if the Commissioner determined that it no longer met the requirements listed above or was 

no longer capable of carrying out such functions. In lieu of terminating the state-based Exchange’s approval, the Commissioner 

could temporarily assume some or all functions of the state-based 

Exchange until the Commissioner determined that it met the applicable requirements and was capable of carrying out those functions. The ceasing or termination of a state-based Exchange would 

be effective in such time and manner as the Commissioner would 

specify. 

Enforcement authorities of the Commissioner would be retained 

by the Commissioner. The Commissioner could specify functions of 

the federal Exchange that may not be performed by a state-based 

Exchange or that could be performed by both the Commissioner 

and the state-based Exchange. 

In the case of a state-based Exchange, except as the Commissioner may otherwise specify, any references to the ‘‘Exchange’’ or 

to the ‘‘Commissioner’’ in the area in which the state-based Exchange operates would be deemed a reference to the state-based 

Exchange and the head of that Exchange. 

In the case of a state-based Exchange, funding assistance would 

be provided for its operation in the form of a matching grant, with 

a state share of expenditures required. 

Reason for Change 

Ensures that States have the flexibility to choose to operate their 

own exchanges in lieu of the national Exchange. It also ensures 

that federally mandated minimum requirements are established 

and enforced across the nation and that states must meet federally 

mandated minimum requirements, but nothing in this title prevents a state from setting standards above the federal requirements. 


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Effective Date 

January 1, 2013 for sections 201–208. 

Subtitle B—Public Health Insurance Option 

Sec. 221. Establishment and Administration of a Public Health Insurance Option As An Exchange-Qualified Health Benefits Plan 

Current Law 

There is no federal public health insurance option that is currently available for the non-disabled population under age 65. 

Medicare is an example of a federal public health insurance program for the aged and disabled. Under Medicare, Congress and the 

Department of Health and Human Services (HHS), Centers for 

Medicare and Medicaid Services (CMS) determine many parameters of the program including eligibility rules, financing (including 

determination of payroll taxes, and premiums), required benefits, 

payments to health care providers, and cost-sharing amounts. 

Proposed Law 

The provision would require the Secretary of Health and Human 

Services (Secretary) to provide for the offering of a public health insurance option through the Exchange starting Y1. The Secretary 

would be required to ensure that the public option provided choice, 

competition and stability of affordable, high quality coverage 

throughout the United States. The Secretary’s primary responsibility would be to create a low-cost plan without compromising 

quality or access to care. 

The public option would only be available through the Health Insurance Exchange. The public option would be required to comply 

with requirements applicable to Exchange-participating health benefit plans, including requirements related to benefits, benefit levels, 

provider networks, notices, consumer protections, and cost sharing. 

The public option would be required to offer basic, enhanced, and 

premium plans, and would be allowed to offer premium-plus plans. 

The Secretary would be allowed to enter into contracts for the 

administration of the public option in the same manner as the Secretary is allowed to enter into contracts for the administration of 

the Medicare program. These administrative functions include, subject to restrictions, determination of payment amounts, making 

payments, beneficiary education and assistance, provider consultative services, communication with providers, and provider education and technical assistance. The provision would prohibit contracts that involve the transfer of insurance risk. 

The Secretary would be required to establish an office of the ombudsman for the public health insurance option which would have 

duties similar to those of the Medicare Beneficiary Ombudsman. 

The Secretary would be required to collect data necessary to establish premiums and payment rates and for other purposes, including improving quality and reducing racial and ethnic disparities in health and health care. 

With respect to the public health insurance option, the Secretary 

would be treated as an entity offering a Quality Health Benefit 

Plan through the Exchange. 


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The provisions relating to access to Federal courts for enforcement of rights under Medicare would apply to the public option and 

individuals enrolled under the public option in the same manner 

that they apply to Medicare and Medicare beneficiaries. 

Reason for Change 

Many parts of the country have no effective competition in the 

insurance market. Health reform won’t change that on its own. 

Only the creation of a national public health insurance option 

would ensure that all communities have access to a choice of health 

plans. 

In addition to expanding choice, a public health insurance option 

would inject price competition into the marketplace. Because the 

public option would not need to return profits to shareholders or 

pay exorbitant CEO salaries, the Congressional Budget Office estimates that it would be able to offer premiums slightly lower than 

private insurers do today. By injecting a lower price point into the 

market and providing more choice for people, the public option 

would force private insurers to seek efficiencies so they could lower 

their prices and improve their customer service to effectively compete. 

For health reform to prove effective, it must also change the way 

health care is delivered in our country—promoting primary care, 

encouraging coordinated care, and improving quality. The public 

health insurance option will be able to institute new payment 

structures and incentives to promote these critical reforms. As our 

experience with Medicare has shown, such innovations will expand 

access across the health care system as private plans adopt features that benefit their bottom lines. This will help cut costs across 

the system. 

In sum, the public health insurance option would expand choice, 

lower cost, and enhance innovation—all key components of health 

reform. 

Effective Date 

January 1, 2013. 

Sec. 222. Premiums and Financing 

Current Law 

No provision. 

Proposed Law 

The Secretary would be required to establish geographically-adjusted premiums for the public option in a manner that complies 

with the premium rules established by the Commissioner for Exchange-participating health benefit plans and at a level sufficient 

to fully finance the cost of health benefits and administration for 

the public option. Premiums would be required to include an appropriate amount for a contingency margin. 

The provision would establish an account in the Treasury for receipts and disbursements attributable to the public option, including start-up funding. The start-up funding would be equal to the 

sum of $2 billion for the establishment of the public option, and 

such sums as may be necessary to cover 90 days worth of reserves 


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based on projected enrollment. These amounts would be authorized 

to be appropriated to the Secretary out of any funds in the Treasury not otherwise appropriated. The Secretary would be required 

to provide for repayment of the startup funding in an amortized 

manner over a 10-year period starting in Y1. The provision specifies that nothing in this section could be construed as authorizing 

any additional appropriations to the account, other than amounts 

otherwise provided with respect to other Exchange-participating 

plans. As under the Medicare Advantage program, states would be 

prohibited from imposing a premium tax or similar tax with respect to the public option. 

Reason for Change 

This provision makes clear that HHS will have to determine premiums for the public option in each region similar to other plans 

in the Exchange. To ensure a level playing field with private plans, 

HHS will have to include initial start-up costs; however, the public 

option will be required to repay these initial funds in full. Beyond 

the initial appropriation (which will be repaid), the public option 

will finance costs for medical benefits and administration through 

its premiums. 

Effective Date 

January 1, 2013. 

Sec. 223. Payment Rates for Items and Services 

Current Law 

No provision. 

Proposed Law 

The Secretary would be required to establish payment rates for 

services and health care providers under the public option, and 

would have the authority to change payment rates in accordance 

with reforms under Section 224 as described below. 

In general, during the first three years of the public option, the 

Secretary would be required to base payment rates on the rates for 

similar services and providers under Medicare. Several exceptions 

to this provision would apply. First, payments for physicians’ services otherwise established under Medicare would be applied to the 

public option without regard to the sustainable growth rate—one 

component of the formula used to update Medicare payments for 

physicians’ services. Second, the update factor for physicians’ payments for a year under the public option would not be less than 

1%. Third, the Secretary would be given the authority to determine 

the extent to which adjustments applicable to the base payment 

rates under Part A and B of Medicare would apply to the public 

option. The Secretary would be required to modify the payments 

based on Medicare to accommodate payments for services not otherwise covered under Medicare, such as well-child visits. Under the 

public option, payments for prescription drugs that are not covered 

under Medicare Part A or B would be based on rates negotiated by 

the Secretary. As introduced and reported, H.R. 3200 would allow 

the Secretary discretion to establish a prescription drug formulary, 

and use other methods, including those used by private sector 


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pharmacy benefit managers, to reduce prescription drug costs 

under the public health insurance option, and the Committee expects that the Secretary would implement such a formulary. 

For services furnished in Y1, Y2, and Y3 of the public option, 

physicians and other health care practitioners who participate in 

both Medicare and the public option would receive payment rates 

5% greater than rates otherwise established by the Secretary for 

items and professional services. Pediatricians and other practitioners who do not typically participate in Medicare—as determined by the Secretary—would also be eligible for the increased 

payment rates. Beginning in Y4 of the public option, the Secretary 

would be required to continue to use an administrative process to 

set payment rates to promote payment accuracy, to ensure adequate beneficiary access to providers, and to promote affordability 

and the efficient delivery of health care. The Secretary would be 

prohibited from setting rates at levels expected to increase overall 

medical costs for the public option beyond what would be expected 

if Medicare rates (plus the 5% addition) were to continue. 

Medicare participating providers would be participating providers under the public option unless they opted out in a process 

established by the Secretary. 

Chapter 5 of title 5 of the United States Code, dealing with administrative procedures in . government organizations, would apply 

to the process for initially establishing payment rates for the public 

option, but not to the specific methodology or calculation of those 

rates. Nothing in this section would limit the Secretary’s authority 

to correct payments that were excessive or deficient, taking into account the amounts paid for similar health care providers and services under other Exchange-participating plans. Nothing in this section would affect the Secretary’s authority to establish payment 

rates, including payments to providers for more efficient delivery of 

services, such as the initiatives under Section 244 of this bill, as 

described below. The provision would prohibit administrative or judicial review of a payment or methodology established under this 

section, or Section 244 on modernized payment initiatives and delivery system reform. 

Reason for Change 

Outlines payment rates for the public option providers and provides the Secretary more with considerably more flexibility than 

current law Medicare to establish rates in the public option. Ensures that provider participation in the public option is voluntary. 

Effective Date 

January 1, 2013. 

Sec. 224. Modernized Payment Initiatives and Delivery System Reform 

Current Law 

No provision. 

Proposed Law 

Beginning in the first year of the public option, the Secretary 

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nisms and policies to determine payments for items and services 

under the public option. The payment mechanisms and policies 

may include the following: patient-centered medical home, other 

care management payments, accountable care organizations, valuebased purchasing, bundling of services, differential payment rates, 

performance or utilization based payments, partial capitation, and 

direct contracting with providers. The Secretary would be required 

to design and implement the payment mechanisms and policies in 

a way that promotes high-quality care that is integrated, patientcentered and efficient, and that seeks to either (a) improve health 

outcomes, (b) reduce health disparities, (c) address geographic variation in the provision of health services, (d) prevent or manage 

chronic illness, or (e) provide efficient and affordable care. To the 

extent allowed under the rules for Exchange-participating plans, 

the provision would allow cost-sharing and payment rates under 

the public option to be modified to encourage the use of services 

that promote health and value. The provision specifies that nothing 

in the subtitle would prevent the Secretary from varying payments 

based on different payment structure models for different geographic areas. 

Reason for Change 

Provides the Secretary of HHS with broad authority to implement payment reforms to improve the delivery of health care and 

encourages the Secretary to build on efforts begun in Medicare. 

Effective Date 

January 1, 2013. 

Sec. 225. Provider Participation 

Current Law 

No provision. 

Proposed Law 

The Secretary would be required to establish conditions of participation for health care providers under the public option. The 

Secretary would be prohibited from allowing a health care provider 

to participate unless appropriately licensed or certified under State 

law. A health care provider that was excluded from participation 

in a Federal health care program (as defined in Section 1128(f) of 

the Social Security Act), would be prohibited from participating 

under the public option. 

Annually, the Secretary would be required to provide for physicians to participate in the public plan in one of two classes: (a) preferred physician, or (b) participating non-preferred physician. A 

preferred physician would be one who agreed to accept the established rate as payment in full. A participating non-preferred physician would be one who could impose charges that exceed the 

charges that may be imposed for such items and services in relation to the payment rate for such items and services under the public option (i.e. to ‘‘balance bill’’). The participating non-preferred 

physician would agree not to impose charges that exceed 115% of 

the amount established under Sec. 223 (consisting of the Medicare 

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vide for the participation of non-physician providers. Non-physician 

providers would only be allowed to participate if they accepted the 

established rates as payment in full. 

Reason for Change 

This provision ensures that the Secretary has the tools to establish the terms and conditions for providers to participate in the 

public option. The provision also defines two levels of physician 

participation and, in order to protect consumers, establishes rules 

on permissible cost sharing and payment to non-participating providers who treat enrollees in the public option. 

Effective Date 

January 1, 2013. 

Sec. 226. Application of Fraud and Abuse Provisions 

Current Law 

Title XVIII of the SSA, the Medicare statutes, requires activities 

that prevent, detect, investigate and prosecute health care fraud 

and abuse. In general, initiatives designed to fight fraud, waste, 

and abuse are considered program integrity activities. Program integrity is considered a component of the effective and efficient administration of government programs, which are entrusted with ensuring that taxpayer dollars are spent wisely. Efforts to ensure 

Medicare program integrity encompass a wide range of activities 

and require coordination among multiple private and public entities. This includes processes directed at reducing payment errors to 

Medicare providers, as well as activities to prevent, detect, investigate, and ultimately prosecute health care fraud and abuse. 

Proposed Law 

The provisions of law (other than criminal law) identified by the 

Secretary by regulation, in consultation with the Inspector General, 

that impose sanctions with respect to waste, fraud, and abuse 

under Medicare would also apply to the public health insurance option. 

Reason for Change 

Applies Medicare waste, fraud and abuse requirements in a similar manner to the public option. 

Effective Date 

January 1, 2013. 

Subtitle C—Individual Affordability Credits 

Sec. 241. Availability Through Health Insurance Exchange 

Current Law 

No provision. 

Proposed Law 

This provision would provide premium and cost-sharing credits 

to ‘‘affordable credit eligible individuals’’ (defined in Section 242) 

for certain individuals enrolled in coverage through the Exchange. 


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The Commissioner would pay each QHBP participating in the Exchange the aggregate amount of credits for all eligible individuals 

enrolled in that plan. 

An Exchange-eligible individual could apply to the Commissioner, through the Exchange or another entity under an arrangement made with the Commissioner, in a form and manner specified 

by the Commissioner. The Commissioner, through the Health Insurance Exchange or through another public entity under an arrangement made with the Commissioner, would make a determination as to eligibility of an individual for affordability credits. The 

Commissioner would establish a process whereby, on the basis of 

information otherwise available, individuals may be deemed eligible for credits. The Commissioner would also establish effective 

methods that ensure that individuals with limited English proficiency are able to apply for affordability credits. 

If the Commissioner determines that a state Medicaid agency 

has the capacity to make a determination of eligibility for affordability credits under the same standards as used by the Commissioner under the Medicaid memorandum of understanding (described above in Section 205), the state Medicaid agency is authorized to conduct such determinations for any Exchange-eligible individual who requests such a determination, and the Commissioner 

would reimburse the state Medicaid agency for the costs of conducting such determinations. 

In addition, there would be a Medicaid screen-and-enroll obligation, which would ensure that individuals applying for affordability 

credits, may be screened for Medicaid eligibility. If they are determined eligible for Medicaid, the Commissioner, through the Medicaid memorandum of understanding, would provide for their enrollment under the state Medicaid plan, and the state would provide for the same periodic redetermination of eligibility under Medicaid as would otherwise apply. 

During the first two years of implementation, credits would be 

allowed for coverage under a Basic plan only. Beginning in the 

third year, credits would be allowed for coverage under Enhanced 

or Premium plans by a process established by the Commissioner. 

Credits would continue to be based on the basic plan, the individual would be responsible for any difference between the premium for an Enhanced or Premium plan and the credit amount 

based on a Basic plan applicable to that enrollee. 

The Commissioner would be authorized to request from the 

Treasury Secretary information that may be required to carry out 

this subtitle (regarding individual affordability credits), consistent 

with existing rules regarding confidentiality and disclosure of tax 

return information. Individuals who are eligible to receive credits 

would not receive them in the form of cash payments. 

Reason for Change 

Establishes affordability credits for those without other coverage—or an offer of affordable coverage—to assist individuals and 

families with the purchase of health insurance coverage. These 

credits are key to ensuring people affordable health coverage. It 

also provides for the Exchange to coordinate with state Medicaid 

programs to ensure people are enrolled in the appropriate program. 


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Effective Date 

January 1, 2013. 

Sec. 242. Affordable Credit Eligible Individual 

Current Law 

No provision. 

Proposed Law 

This provision would define an ‘‘affordable credit eligible individual’’ as an individual who (1) is lawfully present in a state in 

the United States (other than a nonimmigrant, with some exceptions), (2) is enrolled in an Exchange plan and is not enrolled 

through an employer plan that meets the employer responsibility 

to contribute toward employee and dependent coverage (described 

below in Section 312), (3) has family income below 400% FPL, and 

(4) who is not a Medicaid-eligible individual (other than some exceptions described above in Section 202). Family members who are 

eligible for credits will be treated as a single affordable credit eligible individual. 

Credits would not be available to full-time employees of an employer offering coverage consistent with the employer contribution 

rules described in Section 312. The Commissioner would make exceptions to this rule for divorced or separated individuals, or dependents of employees who would otherwise be eligible for credits. 

Exceptions would also be made, beginning in Y2, for full-time employees whose premium costs under a group health plan exceed 

11% of family income. 

Income would be defined as ‘‘modified adjusted gross income’’ 

(MAGI), per the new section 59B of the Internal Revenue Code, 

added in Sec. 401. The Commissioner would conduct a study to examine the application of income disregards for the purposes of the 

affordability credits. The Commissioner would submit a report to 

Congress of such a study, including recommendations as the Commissioner determines appropriate. Affordability credits would not 

be treated as a federal means-tested public benefit for eligibility 

purposes for qualified aliens under the Personal Responsibility and 

Work Opportunity Reconciliation Act of 1996. 

Reason for Change 

This provision establishes that only American citizens and legal 

immigrants without an affordable offer of coverage (defined as premiums above 11 percent of family income) can apply for and receive credits toward health insurance coverage in the Exchange. 

The credits are focused on families most in need of assistance with 

the cost of health insurance coverage and are designed to assure 

that people obtain needed health care at an affordable price. 

Effective Date 

January 1, 2013. 

Sec. 243. Affordable Premium Credit 

Current Law 

No provision. 


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Proposed Law 

This section would establish the rules for determining the 

amount of the premium credit provided to eligible individuals enrolled in an Exchange plan. The ‘‘affordability premium credit’’ 

would be an amount equal to the lesser of (1) the amount by which 

the enrollee’s premium exceeds a specified level that is considered 

affordable (‘‘affordable premium amount’’), or (2) the amount by 

which the ‘‘reference premium’’ (the average premium of the three 

least expensive Basic plans in the individual’s premium rating 

area) exceeds the ‘‘affordable premium amount.’’ In calculating the 

reference premium, the Commissioner may exclude plans with extremely limited enrollments to ensure a more representative calculation. 

The affordable premium credit amount would be calculated on a 

monthly basis, based on the following table, to limit individuals’ 

premium payments to a percentage of family income (MAGI) relative to the poverty level, as specified in the table below. 

Federal poverty level (FPL) 

(in percent) 

Premium payment 

limit, as a percent of 

income 

133 or less ..................................................................................................................................................... 1.5 

150 ................................................................................................................................................................. 3 

200 ................................................................................................................................................................. 5 

250 ................................................................................................................................................................. 7 

300 ................................................................................................................................................................. 9 

350 ................................................................................................................................................................. 10 

400 ................................................................................................................................................................. 11 

The Commissioner would establish premium percentage limits so 

whose family income is between the income tiers specified in the 

table, the percentage limits would increase on a linear sliding 

scale. 

Reason for Change 

Establishes the limits on premiums for individuals and families 

who are eligible for affordability credits. These limitations help ensure affordable health premiums for people below 400% of federal 

poverty who are buying coverage through the Exchange. 

Effective Date 

January 1, 2013 

Sec. 244. Affordability Cost-Sharing Credit. 

Current Law 

No provision. 

Proposed Law 

The affordability cost-sharing credit under this section would be 

available to those enrolled in an Exchange plan whose income is 

less than 400% FPL. The Commissioner would specify reductions 

in cost-sharing amounts and the annual limitation (out-of-pocket 

maximum) on cost-sharing under a Basic plan so that the average 

percentage of covered benefits paid by the plan (as estimated by 

the Commissioner) is equal to the percentages (actuarial values) in 

the table for each income tier. 


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Federal poverty level (FPL) 

(in percent) 

Actuarial value percentage 

150 or less ..................................................................................................................................................... 97 

200 ................................................................................................................................................................. 93 

250 ................................................................................................................................................................. 85 

300 ................................................................................................................................................................. 78 

350 ................................................................................................................................................................. 72 

400 ................................................................................................................................................................. 70 

The Commissioner would provide payments to QHBP-offering entities in an amount equivalent to the increased actuarial value of 

benefits resulting from the cost-sharing reductions. 

Reason for Change 

Establishes cost sharing limitations for individuals and families 

who are eligible for affordability credits. These limitations help ensure affordable cost-sharing and access for people below 400% of 

federal poverty who are buying coverage through the Exchange. 

Effective Date 

January 1, 2013. 

Sec. 245 Income Determinations 

Current Law 

No provision. 

Proposed Law 

This provision would use an individual’s adjusted gross income 

in the most recent taxable year for determination of a credit under 

this Subtitle. The Commissioner would take steps as may be appropriate to ensure the accuracy of determinations and redeterminations under this subtitle. The Commissioner would request information from the Treasury Secretary as may be permitted to verify 

income information submitted in applications for credits. The Commissioner would establish procedures for verification of income if 

no tax return is available for the most recent completed tax year. 

The Commissioner would establish special rules for cases when an 

individual’s income is expected (in a manner specified by the Commissioner) to be significantly different from the income submitted 

for application for and determination of a credit. The Commissioner 

would establish rules under which an individual would be required 

to inform the Commissioner when there is a significant change in 

income. Such mechanism would provide for guidelines that specify 

the circumstances that qualify as a significant change, the 

verifiable information required to document such a change, and the 

process for submission of such information. If the Commissioner receives new information from an individual regarding the family income of the individual, the Commissioner would provide for a redetermination of the individual’s eligibility to be an affordable credit 

eligible individual. 

For a CHIP-eligible child deemed to be eligible for coverage 

through the Exchange, during the first year of implementation the 

Commissioner would establish rules under which family income of 

the child is deemed to be no greater than the family income of that 

child as most recently determined by the State under CHIP. The 

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justing the application of the federal poverty level in this Subtitle 

to take into account geographic differences, in order to reflect costof-living variations across the country. The Commissioner would 

submit a report to Congress, no later than the first day of the second year of implementation, on such a study and make recommendations as appropriate. An individual who intentionally misrepresents family income or fails to disclose to the Commissioner 

a significant change in family income would be liable for repayment 

of any improperly received credit and, in the case of intentional 

misrepresentation, may be required to pay an additional penalty as 

imposed by the Commissioner. 

Reason for change 

Establishes the process for the Commissioner to determine income eligibility for affordability credits and directs the Commissioner to establish clear, enforceable procedures for eligibility determinations so that financial assistance is provided as outlined in 

this act. 

Effective Date 

January 1, 2013. 

Sec. 246. No Federal Payment for Undocumented Aliens 

Current Law 

No provision. 

Proposed Law 

No credits would be given to individuals who are not lawfully 

present in the country. 

Reason for change 

The provision reinforces that credits are not available for undocumented persons and that the Commissioner will have to establish 

a process to enforce this federal requirement. 

Effective Date 

January 1, 2013. 

TITLE III—SHARED RESPONSIBILITY 

A. Individual Responsibility (sec. 301 of the bill) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

Individual responsibility is a key component of health reform. In 

order to control rising health care costs, it is vital that everyone be 

part of the health care system. The only way to ensure that almost 

everyone is participating is to require such participation by law. To 

that end, the bill institutes a tax on individuals who choose not to 

purchase qualified health insurance as the mechanism to enforce 

participation. The Committee believes that a fair tax rate is based 


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1Sec. 162. However see special rules in section 419 and 419A for the deductibility of contributions to welfare benefit plans with respect to medical benefits for employees and their dependents. 2Secs. 3121(a)(2) and 3306(b)(2). 

3Sec. 106. 

4Sec. 105(b). 

5Sec. 125. 

6Pub.L. No. 93–406. 

on the individual’s ability to pay, but capped at the average cost 

of health insurance in the national market. 

EXPLANATION OF PROVISION

The provision cross-references the shared responsibility provisions of section 59B of the Code (as added by section 401 of the bill) 

which provides for a tax on an individual (or a husband and wife 

in the case of a joint return) who do not maintain coverage under 

acceptable health insurance for themselves and each of their qualifying children. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2012. 

B. Health Coverage Participation Requirements (sec. 311 of the 

bill) 

PRESENT LAW

For employers that currently choose to provide health coverage 

for their employees, the cost to an employer of providing health 

coverage for its employees is generally deductible as an ordinary 

and necessary business expense for employee compensation.1 In addition, compensation in the form of employer-provided health insurance is not subject to payroll taxes.2

The Code generally provides that employees are not taxed on 

(that is, may exclude from gross income) the value of employer-provided health coverage under an accident or health plan.3 In addition, medical care provided under an accident or health plan for 

employees, their spouses, and their dependents is excluded from 

the gross income of the employee.4 Employees participating in a 

cafeteria plan may be able to pay their share of premiums on a pretax basis through salary reduction.5 Such salary reduction contributions are treated as employer contributions and thus are also 

excluded from gross income. 

The Employee Retirement Income Security Act of 1974 

(‘‘ERISA’’) 6 preempts State law relating to certain employee benefit 

plans, including employer-sponsored health plans. While ERISA 

specifically provides that its preemption rule does not exempt or relieve any person from any State law which regulates insurance, 

ERISA also provides that an employee benefit plan is not deemed 

to be engaged in the business of insurance for purposes of any 

State law regulating insurance companies or insurance contracts. 

As a result of this ERISA preemption, self-insured employer-sponsored health plans need not provide benefits that are mandated 

under State insurance law. 

While ERISA does not require an employer to offer health benefits, it does require compliance with certain rules if an employer 


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7 42 U.S.C. GA. 

8Pub. L. No. 99–272. 

9Pub. L. No. 104–191. 

10Secs. 4980B and 4980D. 11 U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services, ‘‘The State Children’s Health Insurance Program,’’ Powerpoint Presentation, March 5, 2007, 

p. 14. 12For a plan to be a ‘‘qualified health benefits plan’’ it needs to meet certain minimum coverage requirements, but it need not be offered through the Exchange. 

chooses to offer health benefits, such as compliance with plan fiduciary standards, reporting and disclosure requirements, and procedures for appealing denied benefit claims. ERISA was amended (as 

well as the Public Health Service Act 7 and the Internal Revenue 

Code) in the Consolidated Omnibus Budget Reconciliation Act of 

1985 (‘‘COBRA’’) 8 and the Health Insurance Portability and Accountability Act of 1996 (‘‘HIPAA’’),9 adding other Federal requirements for health plans, including rules for health care continuation 

coverage, limitations on exclusions from coverage based on preexisting conditions, and a few benefit requirements such as minimum hospital stay requirements for mothers following the birth of 

a child. 

The Code imposes an excise tax on group health plans that fail 

to meet HIPAA and COBRA requirements. The excise tax generally 

is equal to $100 per day per failure during the period of noncompliance and generally is imposed on the employer sponsoring the 

plan.10

Under Medicaid, states may establish ‘‘premium assistance’’ programs, which pay a Medicaid beneficiary’s share of premiums for 

employer-sponsored health coverage. Besides being available to the 

beneficiary through his or her employer, the coverage must be comprehensive and cost-effective for the State. A 2007 analysis showed 

that 12 states had Medicaid premium assistance programs as authorized under current law.11

REASONS FOR CHANGE

The Committee believes that individuals, employers, and the government share responsibility to ensure that all Americans have affordable coverage of essential health benefits. The Committee believes that employers have a particular responsibility to either offer 

coverage to their employees or contribute to the cost of health care 

coverage, and that the most effective means of implementing 

health care reform is to build on the current system of employersponsored health coverage that already provides coverage to many 

American families. 

EXPLANATION OF PROVISION

Employers offering health benefit plans are required to offer individual and family coverage under a qualified health benefits plan 12

(or under certain grandfathered plans) and to make contributions 

to help discharge the coverage costs of employees enrolled in the 

employer-provided plan. 

Beginning in the second year after the general effective date of 

the market reforms of the bill, employers are required to make contributions to the Health Insurance Exchange (the ‘‘Exchange’’) for 

employees who decline employer-provided coverage and instead enroll in an Exchange-participating plan. However contributions are 


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13Sec. 162. However see special rules in section 419 and 419A for the deductibility of contributions to welfare benefit plans with respect to medical benefits for employees and their dependents. 14Secs. 3121(a)(2) and 3306(b)(2). 15For a plan to be a ‘‘qualified health benefits plan’’ it needs to meet certain minimum coverage requirements, but it need not be offered through the Health Insurance Exchange. 16The essential benefits package includes certain specified limits on required cost sharing, 

bans annual or life time limits on covered health care items or services and certain specified 

minimum services, and imposes certain requirements as to network adequacy as determined by 

the Health Choices Commissioner. 17There is a special rule for determining the lowest cost plan with respect to coverage of an 

employee under an Exchange participating health benefits plan. In that case the lowest cost 

plan is the reference premium used for determining the amount of affordability credits. 

not required if the employee declines coverage because the employee is enrolled in family coverage in the Exchange as a spouse 

or dependent of another insured. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

C. Employer Responsibility to Contribute Towards Employee and 

Dependant Coverage (sec. 312 of the bill) 

PRESENT LAW

For employers who choose to offer coverage to their employees, 

the cost to an employer of providing health coverage for its employees, including the cost of employer contributions towards health 

coverage premiums, is generally deductible as an ordinary and necessary business expense for employee compensation.13 In addition, 

compensation in the form of employer-provided health insurance is 

not subject to payroll taxes.14

REASONS FOR CHANGE

The Committee believes that employers have a particular responsibility to contribute to the cost of health care of their employees, 

and this requires substantive contributions to single or family 

health plans provided by the employer. These employer contributions will help in the effort to provide quality, affordable health 

coverage for all Americans. 

EXPLANATION OF PROVISION

Contribution requirements 

Employers that offer health benefit plans are required to offer individual and family coverage under a qualified health benefit 

plan15 (or certain grandfathered health insurance plans) and to 

make contributions to help discharge the coverage costs of employees (and their spouses and qualifying children, if any) enrolled in 

the employer-provided plan. 

For full time employees, the contribution amount is required to 

be at least 72.5 percent of the lowest cost plan offered by the employer which meets the requirements of the essential benefits package 16 (65 percent for eligible employees electing family coverage).17

For part time employees, the contribution amount is a fraction (as 

determined in accordance with rules of the Health Choices Commissioner and the Secretaries of Labor, Health and Human Services, and the Treasury, as applicable) of the minimum contributions 


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18Sec. 162. However, see special rules in section 419 and 419A for the deductibility of contributions to welfare benefit plans with respect to medical benefits for employees and their dependents. 19Secs. 3121(a)(2) and 3306(b)(2). 

made for full time employees, with such fraction being equal to a 

ratio of the average weekly hours worked by the employee compared to the minimum weekly hours specified by the Health 

Choices Commissioner. An employer cannot satisfy the minimum 

contribution requirement through a salary reduction arrangement 

with the employee. 

Automatic enrollment for employee sponsored health benefits 

An employer that elects to offer health benefit plans must provide each employee with a 30–day opt-out period after the employee becomes eligible for employer-provided coverage in which to 

either decline coverage entirely of affirmatively enroll in a health 

plan. At the end of the 30–day period, if the employee does not 

make an affirmative election with respect to health coverage, the 

employer must automatically enroll the employee for individual 

(not family) coverage in the employer-sponsored health benefit plan 

with the lowest applicable employee premium. 

Employers are required, within a reasonable period before the 

beginning of each plan year, to provide employees with written notice of employees’ rights and obligations relating to automatic enrollment. The notice must be both comprehensive in scope (for example, it must explain opt-out and affirmative election rights) and 

easily understood by the average employee to whom it pertains. 

Specifically, the notice must explain an employee’s right to make 

an affirmative election as to health coverage rather than being 

automatically enrolled; and, if more than one level of benefits or 

employee premium is offered by the employer, the notice must explain in which level of benefits and employee premium the employee will be automatically enrolled absent an affirmative election. 

Provision of information to multiple agencies 

Employers that offer health benefit plans are required to provide 

the Health Choices Commissioner, and the Secretaries of Labor, 

Health and Human Services, and the Treasury with information 

required by the Health Choices Commissioner to ascertain compliance with the provision’s requirements. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

D. Employer Contributions in Lieu of Coverage (sec. 313 of the bill) 

PRESENT LAW

For employers who choose to provide coverage for their employees, the cost to an employer of providing health coverage for its employees is generally deductible as an ordinary and necessary business expense for employee compensation.18 In addition, compensation in the form of employer-provided health insurance is not subject to payroll taxes.19


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REASONS FOR CHANGE

If an employer offers coverage and some employees make an affirmative choice not to enroll in employer-provided plans because 

they cannot afford the provided coverage, the employers’ responsibility to play a role in the provision of health care is not waived 

if that employee chooses coverage in the Exchange. Employers’ contribution in lieu of coverage ensures that employers contribute to 

the provision of health care for all employees who either accept 

their employer-sponsored insurance or who seek more affordable 

coverage in the Exchange. For small businesses, reduced contributions help to ensure that small businesses continue to thrive. 

EXPLANATION OF PROVISION

Beginning in the second year after enactment of the provision, 

employers are required to make contributions to the Health Insurance Exchange for employees who decline employer-provided coverage and instead enroll in an Exchange-participating plan. The 

contribution amount is equal to eight percent of the average wages 

paid by the employer to its employee during the time the employee 

was enrolled in the non-employer-provided plan. However, contributions are not required if the employee declines coverage because the employee is enrolled in family coverage as a spouse or 

dependent of another insured. Employers with annual payrolls not 

exceeding $250,000 during the preceding calendar year are not subject to the tax. Employers with annual payrolls between $250,000 

and $400,000 during the preceding calendar year are subject to a 

reduced rate. Employer contributions are paid to the Health 

Choices Commissioner and deposited into the Health Insurance Exchange Trust Fund. The contributions are not tied to a particular 

employee (i.e., the contribution does not subsidize an employee’s 

premium liability). This contribution requirement parallels the payroll tax equal to eight percent of wages that applies to nonelecting 

employers. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

E. Authority Related to Improper Steering (sec. 314 of the bill) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

The availability of affordability credits for qualifying individuals 

might lead employers to manipulate their offer of health coverage 

in order to encourage selection of healthier employees into their 

health plan while less healthy employees disproportionately join 

the Exchange. Consequently, the Health Choices Commissioner 

must be given tools to allow it to address abusive practices and ensure that both employer and Exchange health plans attract a broad 

range of risk which will promote efficient insurance markets and 

mitigate adverse selection. 


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EXPLANATION OF PROVISION

The Health Choices Commissioner (in coordination with the Secretaries of Labor, Health and Human Services, and the Treasury) 

has the authority to set standards for determining whether employers, in the course of offering coverage, are undertaking any actions 

to affect the risk pool within the Health Insurance Exchange by inducing employees to enroll in Exchange-participating health plans 

rather than in employer-provided plans. An employer found to be 

violating these standards is treated as not meeting the provision’s 

coverage requirements. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

F. Satisfaction of Health Coverage Participation Requirements 

Under the Employee Retirement Income Security Act of 1974 

(sec. 321 of the bill) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

The Committee believes that individuals, employers, and the government share responsibility in ensuring that all Americans have 

affordable coverage of essential health benefits. The Committee believes that employers have a particular responsibility to either offer 

coverage to their employees or contribute to the cost of health care 

coverage, and that the most effective means of implementing 

health care reform is to build on the current system of employersponsored health coverage that provides coverage to many American families. 

EXPLANATION OF PROVISION

Elections 

Under the provision, employers are required to make an affirmative election regarding whether to offer health benefit plans to employees. Employers electing to offer health benefit plans are required to have their plans meet certain minimum coverage requirements. Employers electing to offer health benefit plans are treated 

as having established and maintained a group health plan for purposes of ERISA, and the provision’s health coverage participation 

requirements are deemed to be part of the terms and conditions of 

the employer-provided plan. 

The Secretary of Labor is required to conduct periodic audits of 

a representative sampling of employers and employer-provided 

group health plans in order to discover noncompliance. The Secretary of Labor must share findings of noncompliance with the Secretary of the Treasury and the Health Choices Commissioner, and 

must take timely enforcement action as appropriate to achieve compliance. 


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20Section 414(b) provides that, for specified employee benefit purposes, all employees of all 

corporations which are members of a controlled group of corporations are treated as employed 

by a single employer. There is a similar rule in section 414(c) under which all employees of 

trades or businesses (whether or not incorporated) which are under common control are treated 

under regulations as employed by a single employer, and, in section 414(m), under which employees of an affiliated service group (as defined in that section) are treated as employed by a 

single employer. Section 414(o) authorizes the Treasury to issue regulations to prevent avoidance of the requirements under section 414(m). 21The provision permits the penalties to be assessed through an excise tax or a civil penalty 

under the Employee Retirement Income Security Act of 1974 or the Public Health Service Act. 

Penalties for any particular failure may not be duplicated, however. 

Aggregation rules 

For affiliated groups of employers, the identity of the employer 

would generally be determined by applying the employer aggregation rules in section 414(b), (c), (m), and (o).20 The same election 

would apply to all employers in the aggregated group. Employers 

would be able to make separate elections for employees in separate 

lines of business, or for full time employees and part time employees. 

Noncompliance with coverage requirements 

Termination of election 

The Secretary of Labor (in coordination with the Health Choices 

Commissioner) may terminate an employer’s election (and thus 

subject the employer to the payroll tax imposed on employers that 

do not offer coverage) if the Secretary determines that the employer was substantially noncompliant with the health coverage 

participation requirements. The Secretary is permitted to promulgate regulations to carry out the provisions of these coverage requirements, and may issue interim final rules as appropriate. 

Civil penalties 

Employers who elect to provide coverage but whose health benefit plans fail to meet the provision’s minimum health coverage 

participation requirements are subject to penalties of $100 per day 

for each employee to whom the failure applies.21 The Secretary of 

Labor is required to give advance written notification of failure to 

employers prior to the assessment of a penalty. 

The penalties do not apply to (1) periods during which an employer used reasonable diligence but did not discover any failures, 

and (2) failures that were corrected within 30 days of discovery 

(but only if such failures were due to reasonable cause and not willful neglect). Penalties imposed on employers for unintentional failures (i.e., due to reasonable cause and not willful neglect) are to 

be limited to the lesser of 10 percent of the aggregate amount paid 

or incurred by the employer during the preceding taxable year for 

group health plans, or $500,000. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 


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G. Satisfaction of Health Coverage Participation Requirements 

Under the Internal Revenue Code of 1986 (sec. 322 of the bill) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

The Committee believes that individuals, employers, and the government share responsibility to ensure that all Americans have affordable coverage of essential health benefits. The Committee believes that employers have a particular responsibility to contribute 

to the health care coverage of their employees and that such responsibility exists even on the part of employers who choose not to 

provide health care to their employees. 

EXPLANATION OF PROVISION

The provision cross-references the satisfaction of health coverage 

participation requirements in section 3111(c) of the Code (as added 

by section 412 of the bill) and the excise tax provisions relating to 

failures of electing employers to comply with coverage requirements in section 4980H of the Code (as added by section 411 of the 

bill). 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

H. Satisfaction of Health Coverage Participation Requirements 

Under the Public Health Service Act (sec. 323 of the bill) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

The Committee believes that individuals, employers, and the government share responsibility in ensuring that all Americans have 

affordable coverage of essential health benefits. The Committee believes that employers have a particular responsibility to contribute 

to the health care coverage of their employees, and that the most 

effective means of implementing health care reform is to build on 

the current system of employer-sponsored health coverage that provides coverage to many American families. 

EXPLANATION OF PROVISION

Elections 

Under the provision, employers are required to make an affirmative election regarding whether to offer health benefit plans to employees. Employers electing to offer health benefit plans are required to have their plans meet certain minimum coverage requirements. Employers electing to offer health benefit plans are treated 

as having established and maintained a group health plan for purVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00268 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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22 42 U.S.C. 6A. 23Section 414(b) provides that, for specified employee benefit purposes, all employees of all 

corporations which are members of a controlled group of corporations are treated as employed 

by a single employer. There is a similar rule in section 414(c) under which all employees of 

trades or businesses (whether or not incorporated) which are under common control are treated 

under regulations as employed by a single employer, and, in section 414(m), under which employees of an affiliated service group (as defined in that section) are treated as employed by a 

single employer. Section 414(o) authorizes the Treasury to issue regulations to prevent avoidance of the requirements under section 414(m). The same election would apply to all employers 

in the aggregated group. Employers would be able to make separate elections for employees in 

separate lines of business, or for full time employees and part time employees. 24The provision permits the penalties to be assessed through an excise tax or a civil penalty 

under the Employee Retirement Income Security Act of 1974 or the Public Health Service Act. 

Penalties for any particular failure may not be duplicated, however. 

poses of the Public Health Service Act,22 and the provision’s health 

coverage participation requirements are deemed to be part of the 

terms and conditions of the employer-provided plan. 

The Secretary of Health and Human Services is required to conduct periodic audits of a representative sampling of employers and 

employer-provided group health plans in order to discover noncompliance. The Secretary of Health and Human Services must 

share findings of noncompliance with the Secretary of the Treasury 

and the Health Choices Commissioner, and must take timely enforcement action as appropriate to achieve compliance. 

Aggregation rules 

For affiliated groups of employers, the identity of the employer 

would generally be determined by applying the employer aggregation rules in section 414(b), (c), (m), and (o).23

Noncompliance with coverage requirements 

Termination of election 

The Secretary of Health and Human Services (in coordination 

with the Health Choices Commissioner) may terminate an employer’s election (and thus subject the employer to the payroll tax imposed on employers that do not offer coverage) if the Secretary determines that the employer was substantially noncompliant with 

the health coverage participation requirements. The Secretary is 

permitted to promulgate regulations to carry out the provisions of 

these coverage requirements, and may issue interim final rules as 

appropriate. 

Civil penalties 

Employers who elect to provide coverage but whose health benefit plans fail to meet the provision’s minimum health coverage 

participation requirements are subject to penalties of $100 per day 

for each employee to whom the failure applies.24 The Secretary of 

Health and Human Services is required to give advance written notification of failure to employers prior to the assessment of a penalty. 

The penalties do not apply to (1) periods during which an employer used reasonable diligence but did not discover any failures, 

and (2) failures that were corrected within 30 days of discovery 

(but only if such failures were due to reasonable cause and not willful neglect). Penalties imposed on employers for unintentional failures (i.e., due to reasonable cause and not willful neglect) are to 

be limited to the lesser of 10 percent of the aggregate amount paid 


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25 A multiemployer plan is a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. ERISA sec. 3(37). 

or incurred by the employer during the preceding taxable year for 

group health plans, or $500,000. 

The Secretary of Health and Human Services is permitted to 

bring a civil action in any United States District Court to collect 

civil penalties. 

Regulations 

The Secretary of Health and Human Services is permitted to promulgate regulations to carry out the terms of the provision, and 

may issue interim final rules as appropriate. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

I. Additional Rules Relating to Health Coverage Participation 

Requirements (sec. 324 of the bill) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

The reforms implemented by the bill must be interpreted and enforced in a uniform and consistent manner so that American families and businesses can realize the benefits provided by comprehensive health reform. Requiring the Exchange and the Departments 

of Health and Human Services, Labor, and Treasury to develop coordinated interpretative and enforcement measures with respect to 

employer-provided health care furthers this objective. 

EXPLANATION OF PROVISION

The Health Choices Commissioner and the Secretaries of Labor, 

Health and Human Services, and the Treasury are required to execute an interagency memorandum of understanding to ensure coordination with respect to regulations, rulings, interpretations, and 

enforcement of the employer responsibility requirements relating to 

the offering of health insurance set forth in the Code and the parallel provisions in ERISA and the Public Health Service Act. The 

interagency memorandum must provide that in the case of multiemployer group health plans 25 the health coverage participation 

requirements apply to the plan sponsor and the contributing sponsors of the plan. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 


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26 Under section 152(c), a child generally is a qualifying child of a taxpayer if the child satisfies each of five tests: (1) the child has the same principal place of abode as the taxpayer for 

more than one-half the taxable year; (2) the child has a specified relationship to the taxpayer; 

(3) the child has not yet attained a specified age; (4) the child has not provided over one-half 

of their own support for the calendar year in which the taxable year of the taxpayer begins; 

and (5) the qualifying child has not filed a joint return (other than for a claim of refund) with 

their spouse for the taxable year beginning in the calendar year in which the taxable year of 

the taxpayer begins. A tie-breaking rule applies if more than one taxpayer claims a child as 

a qualifying child. The specified relationship is that the child is the taxpayer’s son, daughter, 

stepson, stepdaughter, brother, sister, stepbrother, stepsister, or a descendant of any such individual. With respect to the specified age, a child must be under age 19 (or under age 24 in the 

case of a full-time student). However, no age limit applies with respect to individuals who are 

totally and permanently disabled within the meaning of section 22(e)(3) at any time during the 

calendar year. Other rules may apply. The provision includes a special rule under which a child 

is treated as a qualifying child of an individual for purposes of the provision (and not the qualifying child of any other individual) if such individual is required to provide health care coverage 

for the child pursuant to a child support order. 27 Under the other provisions of the bill, a new independent agency is established called the 

Health Choices Administration which is headed by a Health Choices Commissioner. The Health 

Choices Commissioner will establish qualified plan standards, establish and operate the Health 

Insurance Exchange, administer the Individual Affordability Credits and perform other functions. 28Generally, in 2009, the filing threshold is $9,350 for a single person or a married person 

filing separately and is $18,700 for married filing jointly. 1R–2008–117, Oct 16, 2008. 

TITLE IV—AMENDMENTS TO INTERNAL REVENUE CODE OF 

1986 

A. Tax on Individuals Without Acceptable Health Care Coverage 

(sec. 401 of the bill and new Code sec. 59B) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

A tax on individuals who opt not to purchase health insurance 

creates an incentive for uninsured individuals to purchase insurance. Consequently, the tax will enhance the effects of insurance 

market reforms that are a critical component of comprehensive 

healthcare reform. The Committee believes that a fair tax is based 

on the individual’s ability to pay, but should be capped at the average cost of health insurance premiums in the national market. 

EXPLANATION OF PROVISION

Maintenance of health insurance coverage 

An individual (or a husband and wife in the case of a joint return) who does not maintain acceptable health insurance coverage 

for themselves and each of their qualifying children 26 is subject to 

an additional tax. The tax is equal to the lesser of (a) the national 

average premium for single or family coverage, as applicable, as determined by the Secretary of Treasury in coordination with the 

Health Choices Commissioner 27 or (b) 2.5 percent of the excess of 

the taxpayer’s adjusted gross income (‘‘AGI’’) over the threshold 

amount of income required for income tax return filing for that taxpayer under section 6012(a)(1).28 For purposes of calculating the 

tax, a taxpayer’s modified AGI is calculated by adding any tax-exempt interest or foreign earned income to the individual’s AGI. Any 

individual who is a bona fide resident of a possession of the United 

States (as determined under section 937(a)) (and any qualifying 

child residing with the individual) is treated as maintaining acceptVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00271 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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29 Veterans’ Administration coverage is acceptable coverage only if the coverage is not less 

than a level specified by the Secretary of the Treasury and the Secretary of Veterans Affairs, 

in coordination with the Health Choices Commissioner, based on the individual’s priority for 

services. 30These requirements are detailed in the other provisions of the bill. 31The definition of grandfathered plan is set forth in the other provisions of the bill. No new 

enrollment is permitted in grandfathered plans (other than dependents of individuals already 

enrolled). 32 Under section 7701(b)(1)(A), an alien is considered a resident of the United States if the 

individual: (1) is a lawful permanent U.S. resident (the ‘‘green card test’’) at any time during 

the relevant year; (2) is present in the United States for 31 or more days during the current 

calendar year and has been present in the United States for a substantial period of time—during a three-year period, 183 or more days weighted toward the present year (the ‘‘substantial 

presence test’’); or (3) makes a ‘‘first-year election’’ to be treated as a resident of the United 

States (a numerical formula under which an alien may pass the substantial presence test one 

year earlier than under normal rules). 33Generally, in 2009, the filing threshold is $9,350 for a single person or a married person filing separately and is $18,700 for married filing jointly. IR–2008–117, Oct. 16, 2008. 34Sections 1402(g) and 3127 (incorporating section 1402(g) by reference) provide a process for 

individuals (and employers for themselves and their employees) to file for an exemption from 

the self-employment tax and Federal Insurance Contributions Act (‘‘FICA’’) tax if, among other 

requirements, they are members of a recognized religious sect that has established tenets or 

able coverage. This tax is in addition to both the regular income 

tax and the alternative minimum tax. 

Under the provision, acceptable coverage includes coverage under 

a qualified health plan, a grandfathered plan, Medicare, Medicaid, 

Tricare (and other Armed Services coverage), Veterans Administration coverage 29 and other coverage approved by the Secretary of 

the Treasury in coordination with the Health Choices Commissioner. 

A qualified health plan generally is a health plan that covers at 

least an essential benefits package and that includes certain specified limits on required cost sharing, no annual or lifetime limit on 

covered health care items or services, certain specified minimum 

services, and certain requirements as to network adequacy as determined by the Health Choices Commissioner.30 A grandfathered 

plan generally is a health insurance plan purchased in the individual market in which the taxpayer was enrolled prior to date of 

enactment and the terms or conditions of which are not changed 

subsequent to the date of enactment other than to reflect area 

changes.31 Certain group coverage in effect on the general effective 

date of the insurance market reforms of the bill (i.e., after December 31, 2012) also qualifies as grandfathered coverage, but only for 

the five year period following the general effective date. 

Exceptions 

The additional tax applies to United States citizens and resident 

aliens.32 The additional tax does not apply for non-resident aliens 

or U.S. citizens and residents who satisfy the definition of a qualified individual, as defined by section 911(d) (relating to individuals 

whose tax home is in a foreign country and who reside in a foreign 

country for certain minimum specified time periods). The additional 

tax does not apply if the maintenance of acceptable coverage would 

result in a hardship to the individual. The additional tax does not 

apply if the person’s income is below the threshold for filing a Federal income tax return.33 The additional tax also does not apply to 

any individual (or any qualifying child of the individual) if the individual has in effect an exemption which certifies that the individual is a member of a religious sect described in section 

1402(g)(1) and an adherent of established tenets of such sect or division described in section 1402(g)(1).34 For taxpayers who mainVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00272 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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teachings by which individuals are conscientiously opposed to the acceptance of any private or 

public insurance which makes payments in the event of death, disability, old age, retirement 

or makes payments toward the cost of, or provides services for, medical care. 

tain insurance for only part of the year, their annual tax is calculated and then pro-rated for the duration of time when insurance 

was not maintained. Lastly, the additional tax does not apply to an 

individual if the individual is (or may be) claimed as a dependent 

on the income tax return of another taxpayer for the taxable year. 

However, parents or guardians claiming qualified children as dependents on their Federal income tax returns are required to maintain coverage for these dependents. 

Delegation of regulatory authority 

The provision delegates authority to the Secretary of the Treasury to issue regulations or other guidance as necessary to carry out 

the purposes of the provision. The provision specifically directs the 

Secretary to issue guidance to provide an exemption from the tax 

for de minimis lapses of acceptable coverage and a process for applying for a waiver of the requirement to maintain coverage in 

cases of hardship (due to cost, or otherwise). The exemption for de 

minimis lapses of acceptable coverage includes lapses of a short duration that arise on account of a change in an individual’s employer 

or employment status. For example, the additional tax is not intended to apply to a reservist who is deactivated from active duty 

and obtains coverage within a reasonable time period after the expiration of military coverage. In developing guidance in these two 

specific areas, the Secretary of the Treasury is directed to coordinate with the Health Choices Commissioner. 

Information reporting 

The new additional tax for failure to maintain health insurance 

is accompanied by new reporting requirements for providers of insurance coverage. The provider of acceptable coverage is required 

to supply information to the Department of the Treasury and the 

primary insured individual including the name, address and taxpayer identification numbers of all individuals receiving insurance 

under the policy by January 31 of the year following the calendar 

year for which the insurance was provided. Failure to file the required information return or to include complete and correct information on the required return is subject to the failure to file correct 

information returns penalty of section 6721. 

EFFECTIVE DATE

The new additional tax is effective for taxable years beginning 

after December 31, 2012. The information reporting is effective for 

calendar years beginning after December 31, 2012. 

B. Election to Satisfy Health Coverage Participation Requirements 

(sec. 411 of the bill and new sec. 4980H of the Code) 

PRESENT LAW

The Code does not require employers to provide health insurance 

to employees, and it does not provide a tax credit for any employer 

that does provide health coverage for its employees. The cost to an 

employer of providing health coverage for its employees is generally 


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35Sec. 162. However, see special rules in section 419 and 419A for the deductibility of contributions to welfare benefit plans with respect to medical benefits for employees and their dependents. 36Secs. 3121(a)(2) and 3306(b)(2). 37Sec. 106. 38Sec. 105(b). 39Sec. 125. 40Pub. L. No. 43–406. 41Pub. L. No. 99–272. 42Pub. L. No. 104–191. 43Secs. 4980B and 4980D. 

deductible as an ordinary and necessary business expense for employee compensation.35 In addition, compensation in the form of 

employer-provided health insurance is not subject to payroll 

taxes.36

The Code generally provides that employees are not taxed on 

(that is, may exclude from gross income) the value of employer-provided health coverage under an accident or health plan.37 In addition, medical care provided under an accident or health plan for 

employees, their spouses, and their dependents is excluded from 

the gross income of the employee.38 Employees participating in a 

cafeteria plan may be able to pay their share of premiums on a pretax basis through salary reduction.39 Such salary reduction contributions are treated as employer contributions and thus are also 

excluded from gross income. 

The Employee Retirement Income Security Act of 1974 

(‘‘ERISA’’) 40 preempts State law relating to certain employee benefit plans, including employer-sponsored health plans. While 

ERISA specifically provides that its preemption rule does not exempt or relieve any person from any State law which regulates insurance, ERISA also provides that an employee benefit plan is not 

deemed to be engaged in the business of insurance for purposes of 

any State law regulating insurance companies or insurance contracts. As a result of this ERISA preemption, self-insured employer-sponsored health plans need not provide benefits that are 

mandated under State insurance law. 

While ERISA does not require an employer to offer health benefits, it does require compliance with certain rules if an employer 

chooses to offer health benefits, such as compliance with plan fiduciary standards, reporting and disclosure requirements, and procedures for appealing denied benefit claims. ERISA was amended (as 

well as the Public Health Service Act and the Internal Revenue 

Code) in the Consolidated Omnibus Budget Reconciliation Act of 

1985 (‘‘COBRA’’) 41 and the Health Insurance Portability and Accountability Act of 1996 (‘‘HIPAA’’),42 adding other Federal requirements for health plans, including rules for health care continuation 

coverage, limitations on exclusions from coverage based on preexisting conditions, and a few benefit requirements such as minimum hospital stay requirements for mothers following the birth of 

a child. 

The Code imposes an excise tax on group health plans that fail 

to meet HIPAA and COBRA requirements. The excise tax generally 

is equal to $100 per day per failure during the period of noncompliance and generally is imposed on the employer sponsoring the 

plan.43

Under Medicaid, states may establish ‘‘premium assistance’’ programs, which pay a Medicaid beneficiary’s share of premiums for 


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44 U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services, ‘‘The State Children’s Health Insurance Program,’’ Powerpoint Presentation, March 5, 2007, 

p. 14. 45There is an exception for certain small employers. Employers with annual payrolls not ex- ceeding $250,000 during the preceding calendar year are not subject to the tax. Employers with 

annual payrolls between $250,000 and $400,000 during the preceding calendar year are subject 

to a reduced rate. 46 Employers electing to offer health benefit plans are to be treated as having established and 

maintained a group health plan for purposes of ERISA and the Public Health Service Act 

(‘‘PHSA’’) (42 U.S.C. 6A) and the provision’s health coverage participation requirements are 

deemed to be part of the terms and conditions of the employer-provided plan. 47 42 U.S.C. 6A. 

employer-sponsored health coverage. Besides being available to the 

beneficiary through his or her employer, the coverage must be comprehensive and cost-effective for the State. A 2007 analysis showed 

that 12 states had Medicaid premium assistance programs as authorized under current law.44

REASONS FOR CHANGE

The Committee believes that individuals, employers, and the government share responsibility in ensuring that all Americans have 

affordable coverage of essential health benefits. The Committee believes that employers have a particular responsibility to contribute 

to the health care coverage of their employees, and that the most 

effective means of implementing health care reform is to build on 

the current system of employer-sponsored health coverage that provides coverage to many American families. 

EXPLANATION OF PROVISION

Elections 

Under the provision, employers are required to make an affirmative election regarding whether to offer health benefit plans to employees. Employers electing to offer health benefit plans must meet 

certain minimum benefit and contribution requirements. Employers choosing not to offer health benefit plans, or offering plans that 

do not meet the minimum benefit and contribution requirements, 

are subject to a payroll tax (as described in section 412 of the 

bill).45

The Secretary of the Treasury will prescribe rules for employer 

elections regarding coverage, including rules for the time, manner 

and form of elections, and the treatment of affiliated groups of employers, separate lines of business, and full versus part time employees.46 Employers are required to provide verification of their 

compliance with the provision’s health coverage participation requirement to the Health Choices Commissioner and to the Secretaries of Labor, Health and Human Services, and the Treasury. 

Parallel provisions for this election (including termination of the 

election) are provided in ERISA and the Public Health Service Act 

(‘‘PHSA’’).47 The Secretary of the Treasury shares authority for providing rules for employers making this election, and authority to 

terminate the election, with the Secretaries of Labor and Health 

and Human Services. 

Aggregation rules 

For affiliated groups of employers, the identity of the employer 

is generally determined by applying the employer aggregation rules 


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48Section 414(b) provides that, for specified employee benefit purposes, all employees of all 

corporations which are members of a controlled group of corporations are treated as employed 

by a single employer. There is a similar rule in section 414(c) under which all employees of 

trades or businesses (whether or not incorporated) which are under common control are treated 

under regulations as employed by a single employer, and, in section 414(m), under which employees of an affiliated service group (as defined in that section) are treated as employed by a 

single employer. Section 414(o) authorizes the Treasury to issue regulations to prevent avoidance of the requirements under section 414(m). 49For a plan to be a ‘‘qualified health benefits plan’’ it needs to meet certain minimum coverage requirements, but it need not be offered through the Health Insurance Exchange. 50 Beginning in the second year after the general effective date of the insurance market reforms of the bill, employers are required to make contributions to the Health Insurance Exchange for employees who decline employer-provided coverage and instead enroll in an Exchange-participating plan. The contribution amount is equal to eight percent of the average 

wages paid by the employer to its employee during the time the employee was enrolled in the 

non-employer-provided plan. Employers with annual payrolls not exceeding $250,000 during the 

preceding calendar year are not subject to the tax. Employers with annual payrolls between 

$250,000 and $400,000 during the preceding calendar year are subject to a reduced rate. Employer contributions are paid to the Health Choices Commissioner and deposited into the Health 

Insurance Exchange Trust Fund. The contributions are not tied to a particular employee (i.e., 

the contribution does not subsidize an employee’s premium liability). This contribution requirement parallels the payroll tax equal to eight percent of wages that applies to nonelecting employers. 51The essential benefits package includes certain specified limits on required cost sharing, 

bans annual or life time limits on covered health care items or services and certain specified 

minimum services, and imposes certain requirements as to network adequacy as determined by 

the Health Choices Commissioner. 52 Under the provision, there is created within the Treasury of the United States a trust fund 

known as the ‘‘Health Insurance Exchange Trust Fund’’ which consists of such amount as may 

be appropriated or credited to the trust fund. Under the provision, an amount equal to these 

excise taxes received from non compliant employers is automatically appropriated to, and thus 

used to fund, the new Health Insurance Exchange Trust Fund. 

in section 414(b), (c), (m), and (0).48 The same election must apply 

to all employers in the aggregated group. Employers are able to 

make separate elections for employees in separate lines of business, 

or for full time employees and part time employees. 

Contribution requirements 

Employers that elect to offer health benefit plans are required to 

offer individual and family coverage under a qualified health benefit plan (or certain grandfathered health insurance plans) 49 and 

to make contributions to help discharge the coverage costs of employees.50 For full time employees, the contribution amount is required to be at least 72.5 percent of the lowest cost plan offered by 

the employer which meets the requirements of the essential benefits package 51 (65 percent for eligible employees electing family 

coverage). For part time employees, the contribution amount is a 

fraction (as determined in accordance with rules of the Health 

Choices Commissioner and the Secretaries of Labor, Health and 

Human Services, and the Treasury, as applicable) of the minimum 

contributions made for full time employees, with such fraction 

being equal to a ratio of the average weekly hours worked by the 

employee compared to the minimum weekly hours specified by the 

Health Choices Commissioner. An employer cannot satisfy the minimum contribution requirement through a salary reduction arrangement with the employee. 

Noncompliance with coverage requirements 

Employers who elect to provide coverage but whose health benefit plans fail to meet the provision’s minimum health coverage 

participation requirement are subject to an excise tax of $100 per 

day for each employee to whom the failure applies.52 The excise tax 

does not apply to (1) periods during which an employer used reasonable diligence but did not discover any failures, and (2) failures 


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53The provision permits the penalties to be assessed through an excise tax or through a civil 

penalty under ERISA or PHSA. Penalties for any particular failure are not to be duplicated, 

however. The Secretary of Labor or Health and Human Services, as appropriate, is required to 

give advance written notification of failure to employers prior to the assessment of a penalty. 

The Secretary of Health and Human Services is able to bring civil actions in Federal court to 

collect civil penalties assessed under PHSA. 54Secs. 3101–3128 (FICA). Sections 3501–3510 provide additional rules. 

that are corrected within 30 days of discovery (but only if such failures are due to reasonable cause and not willful neglect). Excise 

taxes imposed on employers for unintentional failures (i.e., due to 

reasonable cause and not willful neglect) are limited to the lesser 

of 10 percent of the aggregate amount paid or incurred by the employer during the preceding taxable year for group health plans, or 

$500,000. There are parallel civil penalties provided in ERISA and 

PHSA.53 The excise tax with respect to any failure is reduced (but 

not below zero) by the amount of any civil penalty collected under 

these parallel provisions. The Secretary is also able to terminate an 

employer’s election (and thus subject the employer to the payroll 

tax imposed on employers that do not offer coverage) if it is determined that the employer was substantially noncompliant with 

health coverage participation requirements. 

Multi-agency coordination 

The Health Choices Commissioner and the Secretaries of Labor, 

Health and Human Services, and the Treasury are required to execute an interagency memorandum of understanding to ensure coordination with respect to regulations, rulings, interpretations, and 

enforcement of the provision and the parallel provisions in ERISA 

and PHSA. The Secretaries of Labor and Health and Human Services are required to conduct periodic audits of employers in order 

to discover any noncompliance with health coverage participation 

requirements. The Secretaries of Labor, Health and Human. Services, and the Treasury, and the Health Choices Commissioner are 

all informed of audit results. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

C. Responsibilities of Nonelecting Employers (sec. 412 of the bill 

and sec. 3111(c) of the Code) 

PRESENT LAW

In general 

An employer’s payroll tax obligations are not affected by its determination whether to offer health insurance coverage to its employees. 

Under the Federal Insurance Contributions Act (‘‘FICA’’), separate taxes are imposed on every employer and employee with respect to wages paid by the employer to the employee.54 These two 

taxes are commonly referred to as the employer’s and the employee’s share of FICA. The employee’s share of FICA is collected by 

means of payroll withholding by the employee’s employer. 

For both the employer and the employee’s share of FICA, the tax 

consists of two parts: (1) old age, survivor, and disability insurance 


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55Pursuant to sec. 201(a) and (b) of the Social Security Act, 42 U.S.C. 401(a) and (b), these 

OASDI payroll taxes fund the Federal Old and Survivor Insurance Trust Fund and the Federal 

Disability Trust Fund, respectively. For each fiscal year, an amount equal to the OASDI payroll 

taxes collected is appropriated for these trust funds. 56Pursuant to Sec. 1817 of the Social Security Act, 42 U.S.C. 1395i, the HI payroll taxes fund 

the Federal Hospital Insurance Trust Fund. For each fiscal year, an amount equal to the HI 

payroll taxes collected is appropriated for this trust fund. 57Sec. 3121(a). 58Sec. 3121(b). For example, employment for FICA purposes includes certain service with respect to American vessels or aircrafts and also includes service that is designated-as employment under an agreement entered into under section 233 of the Social Security Act. 59Sec. 3121(h). 

(‘‘OASDI’’), which correlates to the Social Security program that 

provides monthly benefits after retirement, disability, or death; 55

and (2) Medicare hospital insurance (‘‘HI’’).56 The OASDI tax rate 

is 6.2 percent on both the employee and employer (for a total rate 

of 12.4 percent). The OASDI tax rate applies to wages up to the 

OASDI wage base ($106,800 for 2009). The HI tax rate is 1.45 percent on both the employee and the employer (for a total rate of 2.9 

percent). Unlike the OASDI tax, the HI tax is not limited to a specific amount of wages, but applies to all wages. 

For purposes of the employer’s and employee’s share of FICA, 

wages generally means all remuneration for employment including 

the cash value of all remuneration paid in a medium other than 

cash. However, the general definition of wages is subject to a number of special rules and exceptions.57

Employment for FICA purposes generally means any service of 

whatever nature performed by an employee for the employer (irrespective of the citizenship or residence of either) within the United 

States. In the case of service outside the United States, employment also includes service performed by a United States citizen or 

resident as an employee for an American employer. As in the case 

of the definition of wages, the definition of employment is also subject to a number of exceptions and special rules.58 An American 

employer is defined as an employer which is: (1) the United States 

or any instrumentality thereof; (2) an individual who is a resident 

of the United States; (3) a partnership, if at least two-thirds of the 

partners are United States residents; (4) a trust, if all of the trustees are United States residents; or (5) a corporation organized 

under the laws of the United States or any of the States.59

REASONS FOR CHANGE

The Committee believes that individuals, employers, and the government share responsibility to ensure that all Americans have affordable coverage of essential health benefits. The Committee believes that employers have a particular responsibility to contribute 

to the health care coverage of their employees and that such responsibility exists even on the part of employers who choose not to 

provide health care to their employees. The Committee recognizes, 

however, that small businesses face special challenges in providing 

health coverage to their employees, and thus special rules should 

be provided for small businesses. 

EXPLANATION OF PROVISION

Employers that elect not to provide health benefit plans to their 

employees are subject to an additional payroll tax equal to eight 


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60 Under the provision, there is created within the Treasury of the United States a trust fund 

known as the ‘‘Health Insurance Exchange Trust Fund’’ which consists of such amount as may 

be appropriated or credited to the trust fund. Under the provision, an amount equal to these 

payroll taxes received from employers electing not to provide health benefits is automatically 

appropriated to, and thus used to fund, the new Health Insurance Exchange Trust Fund. 

percent of wages.60 The provision’s definitions of the terms wages, 

employment, and employer, are generally the same as under 

present FICA provisions. The provision, however, differs from 

present law in several respects. First, the tax is imposed as a result of a voluntary election by the employer not to offer an eligible 

health plan and not to make the required contribution toward each 

employee’s premium for the plan. Second, as is currently the case 

for HI, there is no taxable wage base for purposes of the new payroll tax. Third, the definition of employment includes services performed by certain foreign agricultural workers, aliens performing 

services pursuant to certain nonimmigrant visas, and government 

workers, among others who are carved out under current law. 

Employers are permitted to make separate elections for separate 

lines of business, or full-time employees and part-time employees 

(or vice-versa). The new payroll tax applies only to wages paid to 

employees who are not offered health benefits by their employers. 

There is an exception and a reduced rate structure for certain 

small employers. Employers with annual payrolls not exceeding 

$250,000 during the preceding calendar year are not subject to the 

tax. Employers with annual payrolls between $250,000 and 

$400,000 during the preceding calendar year are subject to a reduced rate, as follows: two percent if the annual payroll does not 

exceed $300,000; four percent if the annual payroll exceeds 

$300,000 but does not exceed $350,000; and six percent if the annual payroll exceeds 350,000 but does not exceed $400,000. Annual 

payroll is defined as the aggregate wages (as defined in section 

3121(a)) paid by the employer with respect to employment (as defined in section 3121(b)) during the calendar year. 

A parallel payroll tax, including the exception and a reduced rate 

structure for small employers, applies to railroad carriers. 

Territories and possessions of the United States are not treated 

as States for purposes of the new payroll tax. 

EFFECTIVE DATE

The provision is effective for periods beginning after December 

31, 2012. 

D. Credit For Small Business Employee Health Coverage Expenses 

(sec. 421 of the bill and new sec. 45R of the Code) 

PRESENT LAW

Deduction of employer contributions for health coverage for employees 

The Code does not provide a tax credit to any employer for the 

provision of health coverage for its employees. The cost to an employer of providing health coverage for its employees is generally 

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61Sec. 162. However see special rules in section 419 and 419A for the deductibility of contributions to welfare benefit plans with respect to medical benefits for employees and their dependents. 62Secs. 3121(a)(2) and 3306(b)(2). 63Sec. 106. 64Sec. 105(b). 65Sec. 125. 

ployee compensation.61 In addition, compensation in the form of 

employer-provided health insurance is not subject to payroll 

taxes.62

Employer contributions for health coverage 

The Code generally provides that employees are not taxed on 

(that is, may ‘‘exclude’’ from gross income) the value of employerprovided health coverage under an accident or health plan.63 In addition, medical care provided under an accident or health plan for 

employees, their spouses, and their dependents is excluded from 

gross income of the employee.64 Employees participating in a cafeteria plan may be able to pay their share of premiums on a pretax basis through salary reduction.65 Such salary reduction contributions are treated as employer contributions and thus also are 

excluded from gross income. 

REASONS FOR CHANGE

The Committee supports additional incentives and assistance to 

encourage small business employers with low-wage employees to 

provide health insurance coverage to their employees. Providing 

health insurance coverage is particularly challenging for these 

small business employers. In particular, the cost of health insurance may be disproportionately large as a portion of payroll expenses. The tax credit for qualified employee health coverage expenses is designed to make the provision of health insurance coverage by small business employers of low-wage employees more affordable. 

EXPLANATION OF PROVISION

General rule 

The provision generally provides a tax credit to a qualified small 

employer for up to 50 percent of its qualified health coverage expenses for the taxable year. Qualified employee health coverage expenses are, with respect to any employer for any taxable year, the 

aggregate amount paid or incurred by the employer for coverage of 

any qualified employee of the employer (including any family coverage which covers the employee) under qualified health coverage. 

However, for this purpose, amounts paid by the employer do not include amounts based on a salary reduction election made by an employee under a cafeteria plan (although such amounts are generally 

treated as an employer contribution). The credit is a general business credit, eligible to be carried back for one year and carried forward for 20 years. 

Qualified small employer 

A qualified small employer for purposes of the provision is an 

employer with less than 25 qualified employees employed during 

the employer’s taxable year, and whose average annual employee 


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66The provision specifies that compensation has the same meaning as the definition of compensation for simple plans under section 408(p)(6)(A). 67 Under the provision, for employers that elect to provide coverage rather than pay an additional payroll tax, employers are required to make contributions to help discharge the coverage 

costs of employees enrolled in the employer-provided plan. For example, for full-time employees, 

the contribution amount is required to be at least 72.5 percent of the lowest cost plan meeting 

the requirements of the essential benefits package (reduced to 65 percent for eligible employees 

electing family coverage). 

compensation is less than $40,000. However, the full amount of the 

credit (50 percent of qualified health coverage expenses) is available only to an employer with no more than 10 qualified employees 

and whose average annual employee compensation does not exceed 

$20,000. Average annual employee compensation is determined by 

dividing the total aggregate compensation for the taxable year of 

all qualified employees by the number of qualified employees. 

Under the provision, an employee is a qualified employee of an employer for a taxable year if the employee receives at least $5,000 

of compensation from the employer during the taxable year for 

services as an employee of a trade or business. Self-employed individuals, including partners and sole proprietors, are treated as employees with respect to a business or partnership that generates 

net earnings from self employment for the individual but only if 

the business or partnership also has common law employees who 

are qualified employees. 

For a common law employee, compensation means wages for purposes of income tax withholding plus elective deferrals within the 

meaning of section 402(g) and compensation deferred under an eligible deferred compensation plan under section 457. For a self-employed individual, compensation means net earnings from self employment, prior to subtracting any elective contributions. These 

definitions of compensation 66 are used to determine both whether 

an individual is a qualified employee and to determine average annual employee compensation. 

Qualified health coverage and expenses 

Qualified health coverage includes two elements. First, the coverage must be acceptable coverage as defined for purposes of the 

individual responsibility requirement for obtaining health coverage. 

Second, the coverage must be provided by the employer pursuant 

to its election to satisfy the employer responsibility requirement by 

offering coverage, and the employer’s contribution toward the cost 

of the coverage must be at least the minimum required for that 

purpose.67 The credit is only available for qualified health expenses 

paid or incurred by the employer for the purchase of health care 

coverage. 

Phase out of the credit 

If an employer’s average annual employee compensation exceeds 

$20,000, the credit percentage phases out from the maximum available credit of 50 percent. The percentage is reduced by one percentage point for each $400 by which average annual employee compensation exceeds $20,000. For example, a firm with average compensation of $24,000 and 10 or fewer employees is entitled to a 40- 

percent credit. In general, if such firm had qualified employee 

health coverage expenses of $50,000, the credit amount would 

equal 40 percent of $50,000, or $20,000. 


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68 (16–10)/115 = 40 percent. 69Section 414(b) provides that, for specified employee benefit purposes, all employees of all 

corporations which are members of a controlled group of corporations are treated as employed 

by a single employer. There is a similar rule in section 414(c) under which all employees of 

trades or businesses (whether or not incorporated) which are under common control are treated 

under regulations as employed by a single employer, and, in section 414(m), under which employees of an affiliated service group (as defined in that section) are treated as employed by a 

single employer. Section 414(o) authorizes the Treasury to issue regulations to prevent avoidance of the requirements of section 414(m). 70Sec. 6103(1)(20). 

The credit amount determined above is subject to a further 

phaseout for employers with more than 10 qualified employees. For 

employers with more than 10 qualified employees, the credit 

amount is reduced by an amount which bears the same ratio to the 

amount of the credit as the number of qualified employees of the 

employer in excess of 10 bears to 15. For example, if a firm has 

16 qualified employees, the credit amount is reduced by 40 percent.68 In the example above, the $20,000 credit is thus reduced by $8,000 (40 percent of $20,000) to a credit of $12,000. 

Special rules 

The employer is determined by applying the employer aggregations rules in section 414(b), (c), (m), and (o) and treating the aggregated group of employers as a single employer.69 Thus, all employees of the aggregated group are taken into account in determining if the employer is a qualified small employer. The credit is 

not available with respect to qualified employee health coverage expenses for any employee if the employee’s compensation for the taxable year exceeds $80,000. Under the provision, the employer generally is allowed a deduction under section 162 for qualified employee health coverage expenses equal to total health coverage expenses minus the dollar amount of the credit. The $5,000 compensation threshold for identifying qualified employees, the $20,000 

average annual compensation limit, and the $80,000 compensation 

amount are indexed to changes in the consumer price index for all 

urban consumers (‘‘CPI–U’’). However, in each case, if the resulting 

amount is not a multiple of $50, the amount is rounded down to 

the next lowest multiple of $50. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2012. 

E. Disclosures to Carry Out Health Insurance Exchange Subsidies 

(sec. 431 of the bill and sec. 6103(1)(21) of the Code) 

PRESENT LAW

Section 6103 provides that returns and return information are 

confidential and may not be disclosed by the Internal Revenue 

Service (‘‘IRS’’), other Federal employees, State employees, and certain others having access to such information except as provided in 

the Internal Revenue Code. Section 6103 contains a number of exceptions to the general rule of nondisclosure that authorize disclosure in specifically identified circumstances. For example, section 

6103 provides for the disclosure of certain return information for 

purposes of establishing the appropriate amount of any Medicare 

Part B Premium Subsidy Adjustment.70


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71Sec. 6103(p)(4)(D). 72Sec. 7213. 73Sec. 7213A. 74Sec. 7431. 

Section 6103(p)(4) requires, as a condition of receiving returns 

and return information, that Federal and State agencies (and certain other recipients) provide safeguards as prescribed by the Secretary of the Treasury by regulation to be necessary or appropriate 

to protect the confidentiality of returns or return information.71

Unauthorized disclosure of a return or return information is a felony punishable by a fine not exceeding $5,000 or imprisonment of 

not more than five years, or both, together with the costs of prosecution.72 The unauthorized inspection of a return or return information is punishable by a fine not exceeding $1,000 or imprisonment of not more than one year, or both, together with the costs 

of prosecution.73 An action for civil damages also may be brought 

for unauthorized disclosure.74

REASONS FOR CHANGE

The bill creates within the Health Choices Administration a National Health Insurance Exchange (‘‘Exchange’’) to facilitate the 

purchase of health insurance. A State has the option of forming its 

own health insurance exchange at the State level that must be approved for operation by the Federal government (‘‘approved State 

Exchange’’). The bill provides for ‘‘affordability credits,’’ administered by the Exchanges, which subsidize the purchase of health insurance through the Exchanges and the cost of paying for medical 

care. The affordability credits generally are available on a sliding 

scale for persons and families with incomes between Medicaid eligibility and 400 percent of the poverty level. To ensure the appropriate level of subsidy is delivered to American families, the Committee believes it is appropriate to allow for the disclosure of certain tax return information to the Exchange, or approved State Exchange to administer the affordability credits. 

EXPLANATION OF PROVISION

Upon receipt of a valid written request from the Health Choices 

Commissioner or the head of the approved State Exchange, the IRS 

is authorized to disclose limited return information of any taxpayer 

whose income is relevant in determining the amount of the affordability credit(s). Such return information is limited to (1) taxpayer 

identity information, (2) filing status, (3) modified adjusted gross 

income, (4) the number of dependents of the taxpayer, (5) such 

other information as is prescribed by the Secretary by regulation 

as might indicate that the taxpayer is eligible for such affordability 

credit(s) (and the amount thereof), and (6) the taxable year with respect to which the preceding information relates or, if applicable, 

the fact that such information is not available. 

The return information disclosed is to be used by officers and employees of the Health Choices Administration, or approved State 

Exchange, only for the purposes of and to the extent necessary in 

establishing and verifying the appropriate amount of any affordability credit and providing for the repayment of any such credit 

that was in excess of the appropriate amount. 


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75Foreign tax credits generally are available against U.S. income tax imposed on foreign 

source income to the extent of foreign income taxes paid on that income. A nonresident alien 

generally is subject to the U.S. individual income tax only on income with a sufficient nexus 

to the United States. 76 In general, partnerships and S corporations are treated as pass-through entities for Federal 

income tax purposes. Thus, no Federal income tax is imposed at the entity level. Rather, income 

of these entities is passed through and taxed to the owners at the individual level. 77 In general, estates and most trusts pay tax on income at the entity level, unless the income 

is distributed or required to be distributed under governing law or under the terms of the governing instrument. These entities determine their tax liability using a special tax rate schedule 

and may be subject to the alternative minimum tax. Other trusts are treated as being owned 

by grantors in whole or in part for tax purposes; in such cases, the grantors are taxed on the 

income of the trust. 

The general rule of confidentiality applies to the information disclosed, as well as the safeguard requirements, penalties, and civil 

damage remedies for unauthorized disclosure or inspection. 

EFFECTIVE DATE

The provision is effective on the date of enactment. 

F. Surcharge on High-Income Individuals (sec. 441 of the bill and 

new sec. 59C of the Code) 

PRESENT LAW

In general 

An individual who is a citizen or resident of the United States 

is subject to income tax on his or her taxable income.75 An individual computes taxable income by reducing gross income by the 

sum of (i) the deductions allowable in computing adjusted gross income, (ii) the standard deduction (or itemized deductions, at the 

election of the taxpayer), and (iii) the deduction for personal exemptions. Graduated tax rates are then applied to a taxpayer’s taxable income to determine his or her individual income tax liability. 

Lower rates apply to net capital gain and qualified dividend income. A taxpayer may also be subject to an alternative minimum 

tax. A taxpayer may reduce his or her income tax liability by certain tax credits. 

Gross income 

Gross income means income from whatever source derived other 

than certain items excluded from gross income. Sources of gross income generally include, among other things, compensation for services, interest, dividends, capital gains, rents, royalties, alimony and 

separate maintenance payments, annuities, income from life insurance and endowment contracts (other than certain death benefits), 

pensions, gross profits from a trade or business, income in respect 

of a decedent, and income from S corporations, partnerships,76

trusts or estates.77 Exclusions from gross income include death 

benefits payable under a life insurance contract, interest on certain 

State and local bonds, employer-provided health insurance, employer-provided pension contributions, and certain other employerprovided benefits. 

Adjusted gross income 

An individual’s adjusted gross income (‘‘AGI’’) is determined by 

subtracting certain allowable deductions from gross income. These 

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tions are generally the deductions incurred to produce gross income. For example, these deductions include trade or business deductions (such as cost of goods sold, small business expensing, depreciation, the domestic production activities deduction, and compensation paid to employees), losses from the sale or exchange of 

property, deductions attributable to rents and royalties, contributions to pensions and other retirement plans, and moving expenses. 

Thus, AGI generally is an approximation of ‘‘economic income.’’ 

Some deductions are not allowable in computing adjusted gross 

income. These deductions generally are referred to as itemized deductions. The principal itemized deductions are the deductions for 

interest on a personal residence and investment interest, taxes, 

charitable contributions, nonbusiness casualty and theft losses, investment expenses, medical and dental expenses, and certain employee expenses. An individual who does not elect to deduct 

itemized deductions is allowed a standard deduction, which also is 

not allowable in computing adjusted gross income. 

REASONS FOR CHANGE

The Committee strongly believes that health care reform should 

not add to the Federal deficit. The Committee also believes that a 

surcharge on the highest income individuals increases fairness and 

progressivity in the tax Code. It also fulfills the goal of not adding 

to the tax burden of the large majority of taxpayers. The Committee also believes that the lower levels of the surcharge should 

not apply if cost savings from health care reform satisfy certain 

goals. 

EXPLANATION OF PROVISION

The bill imposes a tax at the rates of one percent, 1.5 percent, 

and 5.4 percent on certain income of high-income individuals. In 

the case of a joint return or return of a surviving spouse, the one 

percent rate applies to so much of the taxpayer’s modified adjusted 

gross income as exceeds $350,000 but does not exceed $500,000; the 

1.5 percent rate applies to so much of the taxpayer’s modified adjusted gross income as exceeds $500,000 but does not exceed 

$1,000,000; and the 5.4 percent rate applies to so much of the 

modified adjusted gross income as exceeds $1,000,000. In the case 

of a married individual filing a separate return, the dollar amounts 

are 50 percent of the above dollar amounts. In the case of unmarried individuals, heads of households and trusts and estates, the 

dollar amounts are 80 percent of the above dollar amounts. The 

dollar amounts are indexed for inflation for taxable years beginning 

after December 31, 2011. 

The bill directs the Director of the Office of Management and 

Budget (‘‘OMB’’) to determine before December 1, 2012 whether the 

Federal health reform savings under division B of this bill for the 

period beginning October 1, 2009 and ending before October 1, 

2019, exceed the $525 billion of savings currently estimated by the 

Congressional Budget Office (‘‘CBO’’). If these savings (over $525 

billion) do not exceed $150 billion, then the one percent and 1.5 

percent rates will become two percent and three percent, respectively, for taxable years beginning after December 31, 2012. If the 

Director of OMB determines these savings exceed CBO’s current 

estimated savings by more than $150 billion for the period, then 


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78Sec. 213(a). 79Sec. 213(d). There are certain limitations on the general definition including a rule that cosmetic surgery or similar procedures are generally not medical care. 80Sec. 213(b). 81Sec 106. 

the one percent and 1.5 percent rates shall not increase after December 31, 2012. If Director of OMB determines these savings exceed the CBO’s current estimated savings by more than $175 billion for the period, then neither the one percent nor 1.5 percent 

rates shall apply after December 31, 2012. The Committee anticipates that OMB will provide an explanation of its estimate (including a discussion of its key assumptions and estimating techniques) 

as part of its final determination. 

Modified adjusted gross income is the taxpayer’s adjusted gross 

income reduced by the itemized deduction for investment interest. 

In the case of a nonresident alien, only amounts taken into account in computing taxable income are taken into account in computing this tax. 

In the case of a taxpayer with an amount excluded under section 

911 (relating to income earned outside the United States), the dollar amounts applicable to the taxpayer are reduced by the amount 

of the exclusion (net of disallowed deductions and exclusions). 

Charitable trusts are not subject to the tax. 

No credits are allowed against this tax and this tax is not taken 

into account in computing alternative minimum tax liability. 

EFFECTIVE DATE

The provision applies to taxable years beginning after December 

31, 2010. 

G. Distributions for Medicine Qualified Only If for Prescribed Drug 

or Insulin (sec. 442 of the bill and secs. 105, 106, 220, and 223 

of the Code) 

PRESENT LAW

Individual deduction for medical expenses 

Expenses for medical care, not compensated for by insurance or 

otherwise, are deductible by an individual under the rules relating 

to itemized deductions to the extent the expenses exceed 7.5 percent of AGI.78 Medical care generally is defined broadly as amounts 

paid for diagnoses, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure of the body.79

However, any amount paid during a taxable year for medicine or 

drugs is explicitly deductible as a medical expense only if the medicine or drug is a prescribed drug or is insulin.80 Thus, any amount 

paid for over-the-counter medicine is not deductible as a medical 

expense. 

Exclusion for employer-provided health care 

The Code generally provides that employees are not taxed on 

(that is, may exclude from gross income) the value of employer-provided health coverage under an accident or health plan.81 In addition, any reimbursements under an accident or health plan for 

medical care expenses for employees, their spouses, and their deVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00286 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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82Sec. 105(b). 83Sec. 105(b) provides that reimbursements for medical care within the meaning of section 

213(d) pursuant to employer-provided health coverage are excludible from gross income. The definition of medical care in section 213(d) does not include the prescription drug limitation in section 213(b). 84Sec. 223. 85For 2009, the maximum aggregate annual contribution that can be made to an HSA is $3,000 in the case of self-only coverage and $5,950 in the case of family coverage ($3,050 and 

$6,150 for 2010). The annual contribution limits are increased for individuals who have attained 

age 55 by the end of the taxable year (referred to as ‘‘catch-up contributions’’). In the case of 

policyholders and covered spouses who are age 55 or older, the HSA annual contribution limit 

is greater than the otherwise applicable limit by $1,000 in 2009 and thereafter. Contributions, 

including catch-up contributions, cannot be made once an individual is enrolled in Medicare. 86Sec. 223(f). 87Sec. 223(d)(2). 88Sec. 220. 

pendents generally are excluded from gross income.82 An employer 

may agree to reimburse expenses for medical care of its employees 

(and their spouses and dependents), not covered by a health insurance plan, through a flexible spending arrangement (‘‘FSA’’) which 

allows reimbursement not in excess of a specified dollar amount. 

Such dollar amount is either elected by an employee under a cafeteria plan (‘‘Health FSA’’) or otherwise specified by the employer 

under an arrangement called a health reimbursement arrangement 

(‘‘HRA’’). Reimbursements under these arrangements are also excludible from gross income as employer-provided health coverage. 

The general definition of medical care without the explicit limitation on medicine applies for purposes of the exclusion for employerprovided health coverage and medical care.83 Thus, under an HRA 

or under a Health FSA, amounts paid for over-the-counter medicine are treated as medical expenses, and reimbursements for such 

amounts are excludible from gross income. 

Medical savings arrangements 

Present law provides that individuals with a high deductible 

health plan (and generally no other health plan) purchased either 

through the individual market or through an employer may establish and make tax-deductible contributions to a health savings account (‘‘HSA’’).84 Subject to certain limitations,85 contributions 

made to an HSA by an employer, including contributions made 

through a cafeteria plan through salary reduction, are excluded 

from income (and from wages for payroll tax purposes). Contributions made by individuals are deductible for income tax purposes, 

regardless of whether the individuals itemize. Distributions from 

an HSA that are used for qualified medical expenses are excludible 

from gross income.86 The general definition of medical care without 

the explicit limitation on medicine also applies for purposes of this 

exclusion.87 Similar rules apply for another type of medical savings 

arrangement called an Archer MSA.88 Thus, a distribution from a 

HSA or an Archer MSA used to purchase over-the-counter medicine 

also is excludible as an amount used for qualified medical expenses. 

REASONS FOR CHANGE

In 1982, Congress eliminated the individual medical expense deduction for over-the counter medicine (other than insulin) to simplify the deduction, to conform the coverage of the deduction more 

closely to the coverage of private health insurance policies, and because expenses for over-the-counter medicine are more likely to 


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89Sec. 213(b) was added by sec. 202 of the Tax Equity and Fiscal Responsibility Act of 1982, 

Pub. L. 97–248. The reasons for the change to limit the deduction to prescription medicine are 

described in JCS–38–82 at 24–25. 90 However, exceptions to the fungibility principle are provided in particular cases, some of 

which are described below. 

represent expenses for ordinary consumption than ‘‘extraordinary’’ 

medical expenses that should be deductible.89 However, Congress 

did not similarly remove the cost of over-the-counter medicine from 

the eligibility for excludible reimbursements under Health FSAs 

(and in later years, HRAs, HSAs, and Archer MSAs) even though 

similar reasons for not treating reimbursement for these expenses 

as excludible from gross income apply. The Committee believes 

that the treatment of reimbursements for over-the-counter medicine under HRAs, Health FSAs, HSAs, and Archer MSAs should be 

conformed to the treatment of over-the-counter medicine under the 

itemized deduction for medical expenses. 

EXPLANATION OF PROVISION

Under the provision, with respect to medicines, the definition of 

medical expense for purposes of employer-provided health coverage 

(including HRAs and Health FSAs), HSAs, and Archer MSAs, is 

conformed to the definition for purposes of the itemized deduction 

for medical expenses. Thus, under the provision, the cost of overthe-counter medicines may not be reimbursed with excludible income through a Health FSA, HRA, HSA, or Archer MSA. 

EFFECTIVE DATE

The provision is effective for expenses incurred after December 

31, 2009. 

H. Delay in Application of Worldwide Allocation of Interest (sec. 

443 of the bill and sec. 864 of the Code) 

PRESENT LAW

In general 

To compute the foreign tax credit limitation, a taxpayer must determine the amount of its taxable income from foreign sources. 

Thus, the taxpayer must allocate and apportion deductions between items of U.S.-source gross income, on the one hand, and 

items of foreign-source gross income, on the other. 

In the case of interest expense, the rules generally are based on 

the approach that money is fungible and that interest expense is 

properly attributable to all business activities and property of a 

taxpayer, regardless of any specific purpose for incurring an obligation on which interest is paid.90 For interest allocation purposes, 

all members of an affiliated group of corporations generally are 

treated as a single corporation (the so-called ‘‘one-taxpayer rule’’) 

and allocation must be made on the basis of assets rather than 

gross income. The term ‘‘affiliated group’’ in this context generally 

is defined by reference to the rules for determining whether corporations are eligible to file consolidated returns. 

For consolidation purposes, the term ‘‘affiliated group’’ means one 

or more chains of includible corporations connected through stock 

ownership with a common parent corporation that is an includible 

corporation, but only if: (1) the common parent owns directly stock 


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91One such exception is that the affiliated group for interest allocation purposes includes section 936 corporations (certain electing domestic corporations that have income from the active 

conduct of a trade or business in Puerto Rico or another U.S. possession) that are excluded from 

the consolidated group. 92Treas. Reg. sec. 1.861–11T(d)(4). 93Sec. 864(e)(5)(C). 94Sec. 864(e)(5)(D). 

possessing at least 80 percent of the total voting power and at least 

80 percent of the total value of at least one other includible corporation; and (2) stock meeting the same voting power and value 

standards with respect to each includible corporation (excluding the 

common parent) is directly owned by one or more other includible 

corporations. 

Generally, the term ‘‘includible corporation’’ means any domestic 

corporation except certain corporations exempt from tax under section 501 (for example, corporations organized and operated exclusively for charitable or educational purposes), certain life insurance 

companies, corporations electing application of the possession tax 

credit, regulated investment companies, real estate investment 

trusts, and domestic international sales corporations. A foreign corporation generally is not an includible corporation. 

Subject to exceptions, the consolidated return and interest allocation definitions of affiliation generally are consistent with each 

other.91 For example, both definitions generally exclude all foreign 

corporations from the affiliated group. Thus, while debt generally 

is considered fungible among the assets of a group of domestic affiliated corporations, the same rules do not apply as between the 

domestic and foreign members of a group with the same degree of 

common control as the domestic affiliated group. 

Banks, savings institutions, and other financial affiliates 

The affiliated group for interest allocation purposes generally excludes what are referred to in the Treasury regulations as financial 

corporations.92 A financial corporation includes any corporation, 

otherwise a member of the affiliated group for consolidation purposes, that is a financial institution (described in section 581 or 

section 591), the business of which is predominantly with persons 

other than related persons or their customers, and which is required by State or Federal law to be operated separately from any 

other entity that is not a financial institution.93 The category of financial corporations also includes, to the extent provided in regulations, bank holding companies (including financial holding companies), subsidiaries of banks and bank holding companies (including 

financial holding companies), and savings institutions predominantly engaged in the active conduct of a banking, financing, or 

similar business.94

A financial corporation is not treated as a member of the regular 

affiliated group for purposes of applying the one-taxpayer rule to 

other non-financial members of that group. Instead, all such financial corporations that would be so affiliated are treated as a separate single corporation for interest allocation purposes. 


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95Pub. L. No. 108-357, sec. 401. 96For purposes of determining the assets of the worldwide affiliated group, neither stock in 

corporations within the group nor indebtedness (including receivables) between members of the 

group is taken into account. 97 Although the interest expense of a foreign subsidiary is taken into account for purposes of 

allocating the interest expense of the domestic members of the electing worldwide affiliated 

group for foreign tax credit limitation purposes, the interest expense incurred by a foreign subsidiary is not deductible on a U.S. return. 98 Indirect ownership is determined under the rules of section 958(a)(2) or through applying 

rules similar to those of section 958(a)(2) to stock owned directly or indirectly by domestic partnerships, trusts, or estates. 

Worldwide interest allocation 

In general 

The American Jobs Creation Act of 2004 (‘‘AJCA’’) 95 modified the 

interest expense allocation rules described above (which generally 

apply for purposes of computing the foreign tax credit limitation) 

by providing a one-time election (the ‘‘worldwide affiliated group 

election’’) under which the taxable income of the domestic members 

of an affiliated group from sources outside the United States generally is determined by allocating and apportioning interest expense of the domestic members of a worldwide affiliated group on 

a worldwide-group basis (i.e., as if all members of the worldwide 

group were a single corporation). If a group makes this election, the 

taxable income of the domestic members of a worldwide affiliated 

group from sources outside the United States is determined by allocating and apportioning the third-party interest expense of those 

domestic members to foreign-source income in an amount equal to 

the excess (if any) of (1) the worldwide affiliated group’s worldwide 

third-party interest expense multiplied by the ratio that the foreign 

assets of the worldwide affiliated group bears to the total assets of 

the worldwide affiliated group,96 over (2) the third-party interest 

expense incurred by foreign members of the group to the extent 

such interest would be allocated to foreign sources if the principles 

of worldwide interest allocation were applied separately to the foreign members of the group.97

For purposes of the new elective rules based on worldwide 

fungibility, the worldwide affiliated group means all corporations in 

an affiliated group as well as all controlled foreign corporations 

that, in the aggregate, either directly or indirectly,98 would be 

members of such an affiliated group if section 1504(b)(3) did not 

apply (i.e., in which at least 80 percent of the vote and value of the 

stock of such corporations is owned by one or more other corporations included in the affiliated group). Thus, if an affiliated group 

makes this election, the taxable income from sources outside the 

United States of domestic group members generally is determined 

by allocating and apportioning interest expense of the domestic 

members of the worldwide affiliated group as if all of the interest 

expense and assets of 80-percent or greater owned domestic corporations (i.e., corporations that are part of the affiliated group, as 

modified to include insurance companies) and certain controlled 

foreign corporations were attributable to a single corporation. 

Financial institution group election 

Taxpayers are allowed to apply the bank group rules to exclude 

certain financial institutions from the affiliated group for interest 

allocation purposes under the worldwide fungibility approach. The 


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99See Treas. Reg. sec. 1.904–4(e)(2). 100 As originally enacted under AJCA, the worldwide interest allocation rules were effective 

for taxable years beginning after December 31, 2008. However, the Housing and Economic Recovery Act of 2008 (‘‘HERA’’) delayed the implementation of the worldwide interest allocation 

rules for two years, until taxable years beginning after December 31, 2010. Pub. L. No. 110– 

289, sec. 3093. 

rules also provide a one-time financial institution group election 

that expands the bank group. At the election of the common parent 

of the preelection worldwide affiliated group, the interest expense 

allocation rules are applied separately to a subgroup of the worldwide affiliated group that consists of (1) all corporations that are 

part of the bank group, and (2) all financial corporations. For this 

purpose, a corporation is a financial corporation if at least 80 percent of its gross income is financial services income (as described 

in section 904(d)(2)(C)(i) and the regulations thereunder) that is derived from transactions with unrelated persons.99 For these purposes, items of income or gain from a transaction or series of transactions are disregarded if a principal purpose for the transaction or 

transactions is to qualify any corporation as a financial corporation. 

In addition, anti-abuse rules are provided under which certain 

transfers from one member of a financial institution group to a 

member of the worldwide affiliated group outside of the financial 

institution group are treated as reducing the amount of indebtedness of the separate financial institution group. Regulatory authority is provided with respect to the election to provide for the direct 

allocation of interest expense in circumstances in which such allocation is appropriate to carry out the purposes of these rules, to 

prevent assets or interest expense from being taken into account 

more than once, or to address changes in members of any group 

(through acquisitions or otherwise) treated as affiliated under these 

rules. 

Effective date of worldwide interest allocation 

The common parent of the domestic affiliated group must make 

the worldwide affiliated group election. It must be made for the 

first taxable year beginning after December 31, 2010, in which a 

worldwide affiliated group exists that includes at least one foreign 

corporation that meets the requirements for inclusion in a worldwide affiliated group.100 The common parent of the pre-election 

worldwide affiliated group must make the election for the first taxable year beginning after December 31, 2010, in which a worldwide 

affiliated group includes a financial corporation. Once either election is made, it applies to the common parent and all other members of the worldwide affiliated group or to all members of the financial institution group, as applicable, for the taxable year for 

which the election is made and all subsequent taxable years, unless 

revoked with the consent of the Secretary of the Treasury. 

Phase-in rule 

HERA also provided a special phase-in rule in the case of the 

first taxable year to which the worldwide interest allocation rules 

apply. For that year, the amount of the taxpayer’s taxable income 

from foreign sources is reduced by 70 percent of the excess of (i) 

the amount of its taxable income from foreign sources as calculated 

using the worldwide interest allocation rules over (ii) the amount 

of its taxable income from foreign sources as calculated using the 


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present-law interest allocation rules. For that year, the amount of 

the taxpayer’s taxable income from domestic sources is increased 

by a corresponding amount. Any foreign tax credits disallowed by 

virtue of this reduction in foreign-source taxable income may be 

carried back or forward under the normal rules for carrybacks and 

carryforwards of excess foreign tax credits. 

REASONS FOR CHANGE

The Committee believes that it is appropriate to delay implementation of the worldwide interest allocation rules. 

EXPLANATION OF PROVISION

The provision delays the effective date of worldwide interest allocation rules for nine years, until taxable years beginning after December 31, 2019. The required dates for making the worldwide affiliated group election and the financial institution group election 

are changed accordingly. 

The provision also eliminates the special phase-in rule that applies in the case of the first taxable year to which the worldwide 

interest allocation rules apply. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2010. 

I. Limitation on Treaty Benefits for Certain Deductible Payments 

(sec. 451 of the bill and sec. 894 of the Code) 

PRESENT LAW

In general 

The United States taxes foreign corporations only on income that 

has a sufficient nexus to the United States. Thus, a foreign corporation is generally subject to net-basis U.S. tax only on income 

that is effectively connected with the conduct of a trade or business 

in the United States. Such effectively connected income generally 

is taxed in the same manner and at the same rates as the income 

of a U.S. corporation. An applicable tax treaty may limit the imposition of U.S. tax on business operations of a foreign corporation to 

cases in which the business is conducted through a permanent establishment in the United States. 

In addition, foreign corporations generally are subject to a grossbasis U.S. tax at a flat 30-percent rate on the receipt of interest, 

dividends, rents, royalties, and certain similar types of income derived from U.S. sources, subject to certain exceptions. The tax 

(‘‘U.S. withholding tax’’) generally is collected by means of withholding by the person making the payment. U.S. withholding tax 

may be reduced or eliminated under an applicable tax treaty, subject to the conditions discussed below. 

Tax treaties 

A foreign corporation may not benefit from a provision of a U.S. 

tax treaty with a foreign country that eliminates or reduces U.S. 

withholding tax unless the foreign corporation is both a resident of 

such foreign country and qualifies under any limitation-on-benefits 


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101 United States Model Income Tax Convention of November 15, 2006, Art. 4, par. 1. 102 U.S. income tax treaties with Greece, Hungary, Pakistan, the Philippines, Poland, and Romania are examples of such treaties, each of which entered into force more than 25 years ago. 

The United States recently concluded negotiations for a new income tax treaty with Hungary 

that contains a modern limitation-on-benefits provision; the U.S. Senate must still ratify that 

treaty before it may enter into force. 103 United States Model Income Tax Convention of November 15, 2006, Art. 22. 

provision contained in the U.S. tax treaty with such foreign country. In general, a foreign corporation is a resident of a foreign country under a U.S. tax treaty with that foreign country if it is liable 

to tax in that country by reason of its domicile, residence, citizenship, place of management, place of incorporation, or other criterion 

of a similar nature.101

Limitation-on-benefits provisions generally 

Limitation-on-benefits provisions in income tax treaties are intended to deny treaty benefits in certain cases of treaty shopping 

or income stripping engaged in by third-country residents. Treaty 

shopping is said to occur when an entity that is resident in a country with respect to which there is no relevant tax treaty in force 

(or there is such a treaty in force but the taxpayer desires better 

benefits than those offered under that treaty) becomes resident in 

a treaty country or conducts a transaction in such a country for the 

purpose of qualifying for treaty benefits. For example, treaty shopping by a third-country resident may involve organizing in a treaty 

country a corporation that is entitled to the benefits of the treaty. 

Alternatively, a third-country resident eligible for favorable treatment under the tax rules of its country of residency may attempt 

to reduce the income base of a related treaty-country resident by 

having that treaty country resident pay to it, directly or indirectly, 

interest, royalties, or other amounts that are deductible in the treaty country from which the payments are made. 

U.S. tax treaties contain a variety of limitation-on-benefits provisions due to the continued and recently accelerated development of 

limitation-on-benefits concepts, and the negotiated nature of tax 

treaties in general. Although many older U.S. tax treaties may lack 

limitation-on-benefits provisions 102 or lack the refinements now 

thought essential to such provisions, the U.S. model income tax 

treaty, as most recently revised in 2006 (‘‘U.S. model treaty’’),103

and the newer U.S. treaties include limitation-on-benefits provisions that limit treaty benefits to resident taxpayers that meet certain detailed requirements intended to minimize these abuses. 

Present Treasury Department policy, which has been repeatedly 

ratified by the Senate, is broadly to revise older treaties by tightening limitation-on-benefits provisions to prevent treaty shopping. 

The limitation-on-benefits rules included in U.S. income tax treaties and protocols signed since 2001 generally correspond with the 

limitation-on-benefits provisions of the U.S. model treaty. Certain 

features of the limitation-on-benefits provisions in recent treaties 

and protocols, however, differ from the rules in the U.S. model 

treaty, and some recent treaties and protocols include additional 

limitation-on-benefits rules not included in the U.S. model treaty. 

Some of the additions and differences make limitation-on-benefits 

provisions more restrictive than the rules in the U.S. model treaty, 

and others make the provisions less restrictive. 


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The U.S. model treaty limitation-on-benefits provision 

The limitation-on-benefits rules of the U.S. model treaty include 

three provisions under which a resident of a treaty country may 

qualify for treaty benefits. First, a treaty-country resident may 

qualify for all treaty benefits if it has any one of several listed attributes. Second, a treaty-country resident that does not have one 

of the listed attributes may qualify for treaty benefits for income 

items that are derived from the other treaty country and that are 

related to a trade or business carried on in the residence country. 

Third, a treaty-country resident that would not be eligible for treaty benefits under either of the preceding two provisions may qualify for treaty benefits at the discretion of the competent authority 

of the other treaty country. These three provisions are described in 

more detail below. 

Listed attributes qualifying a treaty-country resident for treaty benefits 

A treaty-country resident may qualify for treaty benefits under 

the U.S. model treaty if it has one of the following attributes: it is 

(1) an individual; (2) a contracting state or a political subdivision 

or a local authority of the contracting state; (3) a company that satisfies either a public trading or ownership test described below; (4) 

a pension fund or other tax-exempt organization (if, in the case of 

a pension fund, more than 50 percent of the fund’s beneficiaries, 

members, or participants are individuals resident in either treaty 

country); or (5) a person other than an individual that satisfies the 

ownership and base erosion test described below. 

Public trading and ownership tests.—A company satisfies the 

public trading test if its principal class of shares (and any disproportionate class of shares) is regularly traded on one or more 

recognized stock exchanges and either its principal class of shares 

is primarily traded on one or more recognized stock exchanges located in the treaty country in which the company is a resident or 

the company’s primary place of management and control is in its 

country of residence. A company may satisfy the ownership test if 

at least 50 percent of the aggregate vote and value of the company’s shares (and at least 50 percent of any disproportionate class 

of the company’s shares) is owned directly or indirectly by five or 

fewer companies entitled to benefits under the public trading test 

described above. This ownership test may be satisfied by indirect 

ownership only if each intermediate owner is a resident of either 

treaty country. 

Ownership and base erosion test.—A resident of a treaty country 

satisfies the ownership prong of the ownership and base erosion 

test if on at least half the days of the taxable year, persons that 

are residents of that country and that are entitled to treaty benefits as individuals, governments, companies that satisfy the public 

trading test, or pension funds or other tax-exempt organizations 

own, directly or indirectly, stock representing at least 50 percent 

of the aggregate voting power and value (and at least 50 percent 

of any disproportionate class of shares) of the resident for whom 

treaty benefit eligibility is being tested. This ownership requirement may be satisfied by indirect ownership only if each intermediate owner is a resident of the country of residence of the person for which entitlement to treaty benefits is being tested. A resiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00294 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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dent of a treaty country satisfies the base erosion prong of the ownership and base erosion test if less than 50 percent of the person’s 

gross income for the taxable year, as determined in the person’s 

country of residence, is paid or accrued, directly or indirectly, in 

the form of deductible payments to persons who are not residents 

of either treaty country entitled to treaty benefits as individuals, 

governments, companies that satisfy the public trading test, or pension funds or other tax-exempt organizations (other than arm’slength payments in the ordinary course of business for services or 

tangible property). 

Items of income derived from an active trade or business 

Under the U.S. model treaty, a resident of a treaty country that 

is not eligible for all treaty benefits under any of the rules described above may be entitled to treaty benefits with respect to a 

particular item of income derived from the other treaty country. A 

resident is entitled to treaty benefits for such an income item if the 

resident is engaged in the active conduct of a trade or business in 

its country of residence (other than the business of making or managing investments for the resident’s own account, unless these activities are banking, insurance, or securities activities carried on by 

a bank, an insurance company, or a registered securities dealer) 

and the income derived from the other treaty country is derived in 

connection with, or is incidental to, that trade or business. If a resident of a treaty country derives an item of income from a trade or 

business activity that it conducts in the other treaty country, or derives an income item arising in that other country from a related 

person, the income item eligibility rule just described is considered 

satisfied for that income item only if the trade or business activity 

carried on by the resident in its country of residence is substantial 

in relation to the trade or business activity carried on by the resident or the related person in the other country. The determination 

whether a trade or business activity is substantial is based on all 

the facts and circumstances. 

Discretionary grant of benefits by competent authority 

A resident of a treaty country not otherwise eligible for treaty 

benefits under the U.S. model treaty may be eligible for the benefits of the treaty generally or eligible for the benefits with respect 

to a specific item of income, based on a determination by the competent authority of the other treaty country. The competent authority may grant such benefits if it determines that the establishment, 

acquisition, or maintenance of the person for whom treaty benefits 

eligibility is being tested, and the conduct of that person’s operations, did not have as one of its principal purposes the obtaining 

of benefits under the treaty. 

REASONS FOR CHANGE

The Committee is aware that even though many recent U.S. income tax treaties include limitation-on-benefits provisions intended 

to ensure that only persons with sufficient nexus to the treaty partner countries may obtain treaty benefits, foreign multinational taxpayers residing in countries with which the United States does not 

have comprehensive tax treaties (including tax havens) may engage 

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104 As documented in the Department of the Treasury Report to the Congress on Earnings 

Stripping, Transfer Pricing and U.S. Income Tax Treaties, some of the older U.S. income treaties 

that do not have limitation-on-benefits provisions, or treaties that lack all of the recent refinements to such provisions, provide for zero or low rates of U.S. withholding on certain deductible 

payments, including interest. Department of the Treasury, Report to the Congress on Earnings 

Stripping, Transfer Pricing and U.S. Income Tax Treaties 82 (2007). 105 Under section 1563(b)(2), a corporation that is a member of a controlled group of corporations on December 31 of a taxable year is treated as an excluded member of the group for the 

taxable year that includes such December 31 if such corporation— 

panies may involve organizing, in jurisdictions that have income 

tax treaties with the United States that offer favorable U.S. withholding rates on deductible payments, subsidiaries with no substantial business activities or other connections to those jurisdictions.104 Such payments may ultimately be distributed to the foreign parent corporations in the non-tax-treaty jurisdictions, although payments made directly to the parent companies would not 

have been eligible for reduced treaty withholding rates. The Committee believes that some instances of treaty shopping of the sort 

described above involve formerly U.S.-based companies that engaged in corporate inversion transactions prior to the enactment of 

the anti-inversion rules of section 7874. As a result of these inversion transactions, U.S. parent corporations of multinational groups 

became subsidiaries of foreign corporations organized in low- or notax jurisdictions. The Committee believes that it is inappropriate to 

allow treaty benefits for deductible payments in cases in which a 

foreign parent corporation would not have qualified for benefits 

under a U.S. tax treaty if the payment had been made directly to 

the parent, including in cases in which the parent is resident in a 

tax haven. 

EXPLANATION OF PROVISION

The provision limits tax treaty benefits with respect to U.S. withholding tax imposed on deductible related-party payments. Under 

the provision, the amount of U.S. withholding tax imposed on deductible related-party payments may not be reduced under any 

U.S. income tax treaty unless such withholding tax would have 

been reduced under a U.S. income tax treaty if the payment were 

made directly to the foreign parent corporation of the payee. A payment is a deductible related-party payment if it is made directly or 

indirectly by any entity to any other entity, it is allowable as a deduction for U.S. tax purposes, and both entities are members of the 

same foreign controlled group of entities. 

For purposes of the provision, a foreign controlled group of entities is a controlled group of corporations as defined in section 

1563(a)(1), modified as described below, in which the common parent company is a foreign corporation. Such common parent company is referred to as the ‘‘foreign parent corporation.’’ A controlled 

group of corporations consists of a chain or chains of corporations 

connected through direct stock ownership of at least 80 percent of 

the total combined voting power of all classes of stock entitled to 

vote or at least 80 percent of the total value of shares of all classes 

of stock of each of the corporations. For purposes of the provision, 

the relevant ownership threshold is lowered from ‘‘at least 80 percent’’ to more than 50 percent, certain members of the controlled 

group of corporations that would otherwise be treated as excluded 

members are not treated as excluded members,105 and insurance 


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(A) is a member of the group for less than one-half the number of days in such taxable year 

which precedes such December 31; 

(B) is exempt from taxation under section 501(a) for such taxable year; 

(C) is a foreign corporation subject to tax under section 881 for such taxable year; 

(D) is an insurance company subject to taxation under section 801; or 

(E) is a franchised corporation (as defined in section 1563(f)(4)). 

companies are not treated as members of a separate controlled 

group of corporations. In addition, a partnership or other noncorporate entity is treated as a member of a controlled group of corporations if such entity is controlled by members of the group. 

The Secretary may prescribe regulations that are necessary or 

appropriate to carry out the purposes of the provision, including 

regulations providing for the treatment of two or more persons as 

members of a foreign controlled group of entities if such persons 

would be the common parent of such group if treated as one corporation, and regulations providing for the treatment of any member of a foreign controlled group of entities as the common parent 

of that group if such treatment is appropriate taking into account 

the economic relationships among the group entities. 

For example, under the provision, a deductible payment made by 

a U.S. entity to a foreign entity with a foreign parent corporation 

that is resident in a country with respect to which the United 

States does not have an income tax treaty is always subject to the 

statutory U.S. withholding tax rate of 30 percent, irrespective of 

whether the payee qualifies for benefits under a tax treaty. If, instead, the foreign parent corporation is a resident of a country with 

respect to which the United States does have an income tax treaty 

that would reduce the withholding tax rate on a payment made directly to the foreign parent corporation (regardless of the amount 

of such reduction), and the payment would qualify for benefits 

under that treaty if the payment were made directly to the foreign 

parent corporation, then the payee entity will continue to be eligible for the reduced withholding tax rate under the U.S. income tax 

treaty with the payee entity’s residence country (even if such reduced treaty rate is lower than the rate that would be imposed on 

a hypothetical direct payment to the foreign parent corporation). 

EFFECTIVE DATE

The provision is effective for payments made after the date of enactment. 

J. Codification of Economic Substance Doctrine (sec. 452 of the bill 

and sec. 7701 of the Code) 

PRESENT LAW

In general 

The Code provides detailed rules specifying the computation of 

taxable income, including the amount, timing, source, and character of items of income, gain, loss, and deduction. These rules permit both taxpayers and the government to compute taxable income 

with reasonable accuracy and predictability. Taxpayers generally 

may plan their transactions in reliance on these rules to determine 

the federal income tax consequences arising from the transactions. 

In addition to the statutory provisions, courts have developed 

several doctrines that can be applied to deny the tax benefits of a 


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106See, e.g., ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir. 1998), aff’g 73 T.C.M. 

(CCH) 2189 (1997), cert. denied 526 U.S. 1017 (1999); Klamath Strategic Investment Fund, LLC 

v. United States, 472 F. Supp. 2d 885 (E.D. Texas 2007), aff’d 568 F.3d 537 (5th Cir. 2009); 

Coltec Industries, Inc. v. United States, 454 F.3d 1340 (Fed. Cir. 2006), vacating and remanding 

62 Fed. Cl. 716 (2004) (slip opinion at 123–124, 128); cert. denied, 127 S. Ct. 1261 (Mem.) (2007). 

Closely related doctrines also applied by the courts (sometimes interchangeably with the economic substance doctrine) include the ‘‘sham transaction doctrine’’ and the ‘‘business purpose 

doctrine.’’ See, e.g., Knetsch v. United States, 364 U.S. 361 (1960) (denying interest deductions 

on a ‘‘sham transaction’’ whose only purpose was to create the deductions). Certain ‘‘substance 

over form’’ cases involving tax-indifferent parties, in which courts have found that the substance 

of the transaction did not comport with the form asserted by the taxpayer, have also involved 

examination of whether the change in economic position that occurred, if any, was consistent 

with the form asserted, and whether the claimed business purpose supported the particular tax 

benefits that were claimed. See, e.g., TIFD– III–E, Inc. v. United States, 459 F.3d 220 (2d Cir. 

2006); BB&T Corporation v. United States, 2007–1 USTC P 50,130 (M.D.N.C. 2007), aff’d 523 

F.3d 461 (4th Cir. 2008). 107 ACM Partnership v. Commissioner, 73 T.C.M. at 2215. 108See ACM Partnership v. Commissioner, 157 F.3d at 256 n.48. 

tax-motivated transaction, notwithstanding that the transaction 

may satisfy the literal requirements of a specific tax provision. 

These common-law doctrines are not entirely distinguishable, and 

their application to a given set of facts is often blurred by the 

courts, the IRS, and litigants. Although these doctrines serve an 

important role in the administration of the tax system, they can be 

seen as at odds with an objective, rule-based system of taxation. 

One common-law doctrine applied over the years is the economic 

substance doctrine. In general, this doctrine denies tax benefits 

arising from transactions that do not result in a meaningful change 

to the taxpayer’s economic position other than a purported reduction in federal income tax.106

Economic substance doctrine 

Courts generally deny claimed tax benefits if the transaction that 

gives rise to those benefits lacks economic substance independent 

of U.S. federal income tax considerations—notwithstanding that 

the purported activity actually occurred. The Tax Court has described the doctrine as follows: 

The tax law . . . requires that the intended transactions 

have economic substance separate and distinct from economic benefit achieved solely by tax reduction. The doctrine of economic substance becomes applicable, and a judicial remedy is warranted, where a taxpayer seeks to claim 

tax benefits, unintended by Congress, by means of transactions that serve no economic purpose other than tax savings.107

Business purpose doctrine 

A common law doctrine that often is considered together with the 

economic substance doctrine is the business purpose doctrine. The 

business purpose doctrine involves an inquiry into the subjective 

motives of the taxpayer—that is, whether the taxpayer intended 

the transaction to serve some useful non-tax purpose. In making 

this determination, some courts have bifurcated a transaction in 

which activities with non-tax objectives have been combined with 

unrelated activities having only tax-avoidance objectives, in order 

to disallow the tax benefits of the overall transaction.108


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109 ’’The casebooks are glutted with [economic substance] tests. Many such tests proliferate because they give the comforting illusion of consistency and precision. They often obscure rather 

than clarify.’’ Collins v. Commissioner, 857 F.2d 1383, 1386 (9th Cir. 1988). 110See, e.g., Pasternak v. Commissioner, 990 F.2d 893, 898 (6th Cir. 1993) (‘‘The threshold 

question is whether the transaction has economic substance. If the answer is yes, the question 

becomes whether the taxpayer was motivated by profit to participate in the transaction.’’). See 

also, Klamath Strategic Investment Fund v. United States, 568 F. 3d 537 (5th Cir. 2009) (even 

if taxpayers may have had a profit motive, a transaction was disregarded where it did not in 

fact have any realistic possibility of profit and funding was never at risk). 111See, e.g., Rice’s Toyota World v. Commissioner, 752 F.2d 89, 91–92 (4th Cir. 1985) (‘‘To 

treat a transaction as a sham, the court must find that the taxpayer was motivated by no business purposes other than obtaining tax benefits in entering the transaction, and, second, that 

the transaction has no economic substance because no reasonable possibility of a profit exists.’’); 

IES Industries v. United States, 253 F.3d 350, 358 (8th Cir. 2001) (‘‘In determining whether a 

transaction is a sham for tax purposes [under the Eighth Circuit test], a transaction will be 

characterized as a sham if it is not motivated by any economic purpose out of tax considerations 

(the business purpose test), and if it is without economic substance because no real potential 

for profit exists (the economic substance test).’’). As noted earlier, the economic substance doctrine and the sham transaction doctrine are similar and sometimes are applied interchangeably. 

For a more detailed discussion of the sham transaction doctrine, see, e.g., Joint Committee on 

Taxation, Study of Present-Law Penalty and Interest Provisions as Required by Section 3801 of 

the Internal Revenue Service Restructuring and Reform Act of 1998 (including Provisions Relating to Corporate Tax Shelters) (JCS–3–99) at 182. 112See, e.g., ACM Partnership v. Commissioner, 157 F.3d at 247; James v. Commissioner, 899 

F.2d 905, 908 (10th Cir. 1995); Sacks v. Commissioner, 69 F.3d 982, 985 (9th Cir. 1995) (‘‘Instead, the consideration of business purpose and economic substance are simply more precise 

factors to consider . . . We have repeatedly and carefully noted that this formulation cannot 

be used as a ’rigid two-step analysis’.’’) 113 Coltec Industries, Inc. v. United States, 62 Fed. Cl. 716 (2004) (slip opinion at 123–124, 

128); vacated and remanded, 454 F.3d 1340 (Fed. Cir. 2006), cert. denied, 127 S. Ct. 1261 (Mem.) 

(2007). 114The Federal Circuit Court stated that ‘‘when the taxpayer claims a deduction, it is the taxpayer who bears the burden of proving that the transaction has economic substance.’’ The FedContinued 

Application by the courts 

Elements of the doctrine 

There is a lack of uniformity regarding the proper application of 

the economic substance doctrine.109 Some courts apply a conjunctive test that requires a taxpayer to establish the presence of both 

economic substance (i.e., the objective component) and business 

purpose (i.e., the subjective component) in order for the transaction 

to survive judicial scrutiny.110 A narrower approach used by some 

courts is to conclude that either a business purpose or economic 

substance is sufficient to respect the transaction.111 A third approach regards economic substance and business purpose as ‘‘simply more precise factors to consider’’ in determining whether a 

transaction has any practical economic effects other than the creation of tax benefits.112

One decision by the Court of Federal Claims questioned the continuing viability of the doctrine. That court also stated that ‘‘the 

use of the economic substance doctrine to trump mere compliance 

with the Code would violate the separation of powers’’ though that 

court also found that the particular transaction at issue in the case 

did not lack economic substance. The Court of Appeals for the Federal Circuit (‘‘Federal Circuit Court’’) overruled the Court of Federal Claims decision, reiterating the viability of the economic substance doctrine and concluding that the transaction in question violated that doctrine.113 The Federal Circuit Court stated that 

‘‘[w]hile the doctrine may well also apply if the taxpayer’s sole subjective motivation is tax avoidance even if the transaction has economic substance, [footnote omitted], a lack of economic substance 

is sufficient to disqualify the transaction without proof that the 

taxpayer’s sole motive is tax avoidance.’’ 114


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eral Circuit Court quoted a decision of its predecessor court, stating that ‘‘Gregory v. Helvering 

requires that a taxpayer carry an unusually heavy burden when he attempts to demonstrate 

that Congress intended to give favorable tax treatment to the kind of transaction that would 

never occur absent the motive of tax avoidance.’’ The Court also stated that ‘‘while the taxpayer’s subjective motivation may be pertinent to the existence of a tax avoidance purpose, all 

courts have looked to the objective reality of a transaction in assessing its economic substance.’’ 

Coltec Industries, Inc. v. United States, 454 F.3d at 1355, 1356. 115See, e.g., Coltec Industries v. United States, 454 F.3d 1340 (Fed. Cir. 2006). The court analyzed the transfer to a subsidiary of a note purporting to provide high stock basis in exchange 

for a purported assumption of liabilities, and held these transactions unnecessary to accomplish 

any business purpose of using a subsidiary to manage asbestos liabilities. The court also held 

that the purported business purpose of adding a barrier to veil-piercing claims by third parties 

was not accomplished by the transaction. 454 F.3d at 1358–1360 (Fed. Cir. 2006). 116See, e.g., Knetsch, 364 U.S. at 361; Goldstein v. Commissioner, 364 F.2d 734 (2d Cir. 1966) 

(holding that an unprofitable, leveraged acquisition of Treasury bills, and accompanying prepaid 

interest deduction, lacked economic substance). 117See, e.g., Goldstein v. Commissioner, 364 F.2d at 739–40 (disallowing deduction even 

though taxpayer had a possibility of small gain or loss by owning Treasury bills); Sheldon v. 

Commissioner, 94 T.C. 738, 768 (1990) (stating that ‘‘potential for gain . . . is infinitesimally 

nominal and vastly insignificant when considered in comparison with the claimed deductions’’). 118See, e.g., Rice’s Toyota World v. Commissioner, 752 F. 2d 89, 94 (4th Cir. 1985) (the economic substance inquiry requires an objective determination of whether a reasonable possibility 

of profit from the transaction existed apart from tax benefits); Compaq Computer Corp. v. Commissioner, 277 F.3d 778, 781 (5th Cir. 2001) (applied the same test, citing Rice’s Toyota World); 

IES Industries v. United States, 253 F.3d 350, 354 (8th Cir. 2001). 119See American Electric Power, Inc. v. United States, 136 F. Supp. 2d 762, 791–92 (S.D. Ohio 

2001), aff’d, 326 F.3d.737 (6th Cir. 2003). 120See, e.g., Joint Committee on Taxation, Report of Investigation of Enron Corporation and 

Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations 

(JCX–3–03) February, 2003 (‘‘Enron Report’’), Volume III at C–93, 289. Enron Corporation relied 

on Frank Lyon Co. v. United States, 435 U.S. 561, 577–78 (1978), and Newman v. Commissioner, 

Nontax economic benefits 

There also is a lack of uniformity regarding the type of non-tax 

economic benefit a taxpayer must establish in order to demonstrate 

that a transaction has economic substance. Some courts have denied tax benefits on the grounds that a stated business benefit of 

a particular structure was not in fact obtained by that structure.115

Several courts have denied tax benefits on the grounds that the 

subject transactions lacked profit potentia1.116 In addition, some 

courts have applied the economic substance doctrine to disallow tax 

benefits in transactions in which a taxpayer was exposed to risk 

and the transaction had a profit potential, but the court concluded 

that the economic risks and profit potential were insignificant 

when compared to the tax benefits.117 Under this analysis, the taxpayer’s profit potential must be more than nominal. Conversely, 

other courts view the application of the economic substance doctrine as requiring an objective determination of whether a ‘‘reasonable possibility of profit’’ from the transaction existed apart from 

the tax benefits.118 In these cases, in assessing whether a reasonable possibility of profit exists, it may be sufficient if there is a 

nominal amount of pre-tax profit as measured against expected tax 

benefits. 

Financial accounting benefits 

In determining whether a taxpayer had a valid business purpose 

for entering into a transaction, at least one court has concluded 

that financial accounting benefits arising from tax savings do not 

qualify as a non-tax business purpose.119 However, based on court 

decisions that recognize the importance of financial accounting 

treatment, taxpayers have asserted that financial accounting benefits arising from tax savings can satisfy the business purpose 

test.120


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902 F.2d 159, 163 (2d Cir. 1990), to argue that financial accounting benefits arising from tax 

savings constitute a good business purpose. 121See, e.g., ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir. 1998), aff’g 73 T.C.M. 

(CCH) 2189 (1997), cert. denied 526 U.S. 1017 (1999). 122See, e.g., TIFD-III-E, Inc. v. United States, 459 F.3d 220 (2d Cir. 2006). 123 In applying these tests, any State or local income tax effect which is related to a Federal 

income tax effect shall be treated in the same manner as a Federal income tax effect. 

Tax-indifferent parties 

A number of cases have involved transactions structured to allocate income for Federal tax purposes to a tax-indifferent party, 

with a corresponding deduction, or favorable basis result, to a taxable person. The income allocated to the tax-indifferent party for 

tax purposes was structured to exceed any actual economic income 

to be received by the tax indifferent party from the transaction. 

Courts have sometimes concluded that a particular type of transaction did not satisfy the economic substance doctrine.121 In other 

cases, courts have indicated that the substance of a transaction did 

not support the form of income allocations asserted by the taxpayer 

and have questioned whether asserted business purpose or other 

standards were met.122

REASONS FOR CHANCE

Tax avoidance transactions have relied upon the interaction of 

highly technical tax law provisions to produce tax consequences not 

contemplated by Congress. When successful, taxpayers who engage 

in these transactions enlarge the tax gap by gaining unintended 

tax relief and by undermining the overall integrity of the tax system. 

A strictly rule-based tax system cannot efficiently prescribe the 

appropriate outcome of every conceivable transaction that might be 

devised and is, as a result, incapable of preventing all unintended 

consequences. Thus, many courts have long recognized the need to 

supplement tax rules with anti-tax-avoidance standards, such as 

the economic substance doctrine, in order to assure the Congressional purpose is achieved. The Committee recognizes that the IRS 

has achieved a number of recent successes in litigation. The Committee believes it is still desirable to provide greater clarity and 

uniformity in the application of the economic substance doctrine in 

order to improve its effectiveness at deterring unintended consequences. 

EXPLANATION OF PROVISION

The provision clarifies and enhances the application of the economic substance doctrine. Under the provision, in the case of any 

transaction to which the economic substance doctrine is relevant, 

such transaction shall be treated as having economic substance 

only if (1) the transaction changes in a meaningful way (apart from 

Federal income tax effects) the taxpayer’s economic position, and 

(2) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.123 The provision provides a uniform definition of economic substance, but does 

not alter the flexibility of the courts in other respects. 

The determination of whether the economic substance doctrine is 

relevant to a transaction shall be made in the same manner as if 

the provision had never been enacted. Thus, the provision does not 


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124 If the tax benefits are clearly consistent with all applicable provisions of the Code and the 

purposes of such provisions, it is not intended that such tax benefits be disallowed if the only 

reason for such disallowance is that the transaction fails the economic substance doctrine as defined in this provision. See, e.g., Treas. Reg. sec. 1.269–2, stating that characteristic of circumstances in which a deduction otherwise allowed will be disallowed are those in which the 

effect of the deduction, credit, or other allowance would be to distort the liability of the particular taxpayer when the essential nature of the transaction or situation is examined in the 

light of the basic purpose or plan which the deduction, credit, or other allowance was designed 

by the Congress to effectuate. 125The examples are illustrative and not exclusive. 126See, e.g., John Kelley Co. v. Commissioner, 326 U.S. 521 (1946) (respecting debt characterization in one case and not in the other, based on all the facts and circumstances). 127See, e.g., Sam Siegel v. Commissioner, 45. T.C. 566 (1966), acq. 1966–2 C.B. 3. But see 

Commissioner v. Bollinger, 485 U.S. 340 (1988) (agency principles applied to title-holding corporation under the facts and circumstances). 128See, e.g., Rev. Proc. 2009–3 2009–11R.B. 108, Secs. 3.01(38), (39), and (41) (IRS will not 

rule on certain matters relating to incorporations or reorganizations unless there is a ‘‘significant issue’’); compare Gregory v. Helvering, 293 U.S. 465 (1935). 129See, e.g., National Carbide v. Commissioner, 336 U.S. 422 (1949), Moline Properties v. 

Commissioner, 319 U.S. 435 (1943); compare, e.g. Aiken Industries, Inc. v. Commissioner, 56 T.C. 

925 (1971), acq., 19722 C.B. 1; Commissioner v. Bollinger, 485 U.S. 340 (1988); see also sec. 7701(1). 130See, e.g., Frank Lyon v. Commissioner, 435 U.S. 561 (1978); Hilton v. Commissioner, 74 

T.C. 305, aff’d, 671 F. 2d 316 (9th Cir. 1982), cert. denied, 459 U.S. 907 (1982); Coltec Industries 

v. United States, 454 F.3d 1340 (Fed. Cir. 2006), cert. denied, 127 S. Ct. 1261 (Mem.) (2007); 

BB&T Corporation v. United States, 2007–1 USTC P 50,130 (M.D.N.C. 2007), aff’d, 523 F.3d 

461 (4th Cir. 2008). 131 As examples of cases in which courts have found that a transaction does not meet the requirements for the treatment claimed by the taxpayer under the Code, or does not have economic substance, see e.g., TIFD- III-E, Inc. v. United States, 459 F.3d 220 (2d Cir. 2006); BB&T 

Corporation v. United States, 2007–1 USTC P 50,130 (M.D.N.C. 2007) aff’d, 523 F.3d 461 (4th 

Cir. 2008); Tribune Company and Subsidiaries v. Commissioner, 125 T.C. 110 (2005); H.J. Heinz 

Company and Subsidiaries v. United States, 76 Fed. Cl. 570 (2007); Coltec Industries, Inc. v. 

United States, 454 F.3d 1340 (Fed. Cir. 2006), cert. denied 127 S. Ct. 1261 (Mem.) (2007); Long 

Term Capital Holdings LP v. United States, 330 F. Supp. 2d 122 (D. Conn. 2004), aff’d, 150 

Fed. Appx. 40 (2d Cir. 2005); Klamath Strategic Investment Fund, LLC v. United States, 472 

F. Supp. 2d 885 (E.D. Texas 2007); aff’d, 568 F.3D 537 (5th Cir. 2009); Santa Monica Pictures 

LLC v. Commissioner, 89 T.C.M. 1157 (2005). 

change current law standards in determining when to utilize an 

economic substance analysis.124

The provision is not intended to alter the tax treatment of certain basic business transactions that, under longstanding judicial 

and administrative practice are respected, merely because the 

choice between meaningful economic alternatives is largely or entirely based on comparative tax advantages. Among 125 these basic 

transactions are (1) the choice between capitalizing a business enterprise with debt or equity; 126 (2) a U.S. person’s choice between 

utilizing a foreign corporation or a domestic corporation to make a 

foreign investment; 127 (3) the choice to enter a transaction or series of transactions that constitute a corporate organization or reorganization under subchapter C; 128 and (4) the choice to utilize a 

related-party entity in a transaction, provided that the arm’s 

length standard of section 482 and other applicable concepts are 

satisfied.129 Leasing transactions, like all other types of transactions, will continue to be analyzed in light of all the facts and circumstances.130 As under present law, whether a particular transaction meets the requirements for specific treatment under any of 

these provisions can be a question of facts and circumstances. Also, 

the fact that a transaction does meet the requirements for specific 

treatment under any provision of the Code is not determinative of 

whether a transaction or series of transactions of which it is a part 

has economic substance.131

The provision does not alter the court’s ability to aggregate, 

disaggregate, or otherwise recharacterize a transaction when applying the doctrine. For example, the provision reiterates the presentVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00302 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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132See, e.g., Coltec Industries, Inc. v. United States, 454 F.3d 1340 (Fed. Cir. 2006), cert. denied 127 S. Ct. 1261 (Mem.) (2007) (‘‘the first asserted business purpose focuses on the wrong 

transaction—the creation of Garrison as a separate subsidiary to manage asbestos liabilities. . 

. . [W]e must focus on the transaction that gave the taxpayer a high basis in the stock and thus 

gave rise to the alleged benefit upon sale...’’) 454 F.3d 1340, 1358 (Fed. Cir. 2006). See also ACM 

Partnership v. Commissioner, 157 F.3d at 256 n.48; Minnesota Tea Co. v. Helvering, 302 U.S. 

609, 613 (1938) (‘‘A given result at the end of a straight path is not made a different result 

because reached by following a devious path.’’). 133For purposes of these tests, any State or local income tax effect which is related to a Federal income tax effect shall be treated in the same manner as a Federal income tax effect. 134The provision defines ‘‘economic substance doctrine’’ as the common law doctrine under 

which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose. Thus, the definition includes any doctrine that denies tax benefits for lack of economic substance, for lack of business 

purpose, or for lack of both. 135See, e.g., Treas. Reg. sec. 1.269–2(b) (stating that a distortion of tax liability indicating the 

principal purpose of tax evasion or avoidance might be evidenced by the fact that ‘‘the transaction was not undertaken for reasons germane to the conduct of the business of the taxpayer’’). 

Similarly, in ACM Partnership v. Commissioner, 73 T.C.M. (CCH) 2189 (1997), the court stated: 

Key to [the determination of whether a transaction has economic substance] is that the transaction must be rationally related to a useful nontax purpose that is plausible in light of the 

taxpayer’s conduct and useful in light of the taxpayer’s economic situation and intentions. Both 

the utility of the stated purpose and the rationality of the means chosen to effectuate it must 

be evaluated in accordance with commercial practices in the relevant industry. A rational relationship between purpose and means ordinarily will not be found unless there was a reasonable 

expectation that the nontax benefits would be at least commensurate with the transaction costs. 

[Citations omitted.] 

law ability of the courts to bifurcate a transaction in which independent activities with non-tax objectives are combined with an unrelated item having only tax-avoidance objectives in order to disallow those tax-motivated benefits.132

Conjunctive analysis 

The provision clarifies that the economic substance doctrine involves a conjunctive analysis—there must be an inquiry regarding 

the objective effects of the transaction on the taxpayer’s economic 

position as well as an inquiry regarding the taxpayer’s subjective 

motives for engaging in the transaction. Under the provision, a 

transaction must satisfy both tests, i.e., the transaction must 

change in a meaningful way (apart from Federal income tax effects) 

the taxpayer’s economic position, and the taxpayer must have a 

substantial non-Federal-income-tax purpose 133 for entering into 

such transaction, in order to satisfy the economic substance doctrine. This clarification eliminates the disparity that exists among 

the Federal circuit courts regarding the application of the doctrine, 

and modifies its application in those circuits in which either a 

change in economic position or a non-tax business purpose (without 

having both) is sufficient to satisfy the economic substance doctrine.134

Non-Federal-tax business purpose 

Under the provision, a taxpayer’s non-Federal-income-tax purpose for entering into a transaction (the second prong in the analysis) must be substantial.135 For purposes of this analysis, any 

State or local income tax effect which is related to a Federal income tax effect shall be treated in the same manner as a Federal 

income tax effect. Also, a purpose of achieving a favorable accounting treatment for financial reporting purposes shall not be taken 

into account as a non-Federal-income-tax purpose if the origin of 


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136 Claiming that a financial accounting benefit constitutes a substantial non-tax purpose fails 

to consider the origin of the accounting benefit (i.e., reduction of taxes) and significantly diminishes the purpose for having a substantial non-tax purpose requirement. See, e.g., American 

Electric Power, Inc. v. United States, 136 F. Supp. 2d 762, 791–92 (S.D. Ohio 2001) (‘‘AEP’s intended use of the cash flows generated by the [corporate-owned life insurance] plan is irrelevant 

to the subjective prong of the economic substance analysis. If a legitimate business purpose for 

the use of the tax savings ’were sufficient to breathe substance into a transaction whose only 

purpose was to reduce taxes, [then] every sham tax-shelter device might succeed,’. . .’’) (citing 

Winn-Dixie v. Commissioner, 113 T.C. 254, 287 (1999)); aff’d, 326 Fad 737 (6th Cir. 2003). 137Thus, a ‘‘reasonable possibility of profit’’ alone will not be sufficient to establish that a 

transaction has economic substance. 

such financial accounting benefit is a reduction of Federal income 

tax.136

Profit potential 

Under the provision, a taxpayer may rely on factors other than 

profit potential to demonstrate that a transaction results in a 

meaningful change in the taxpayer’s economic position or that the 

taxpayer has a substantial non-Federal-tax purpose for entering 

into such transaction. The provision does not require or establish 

a specified minimum return that will satisfy the profit potential 

test. However, if a taxpayer relies on a profit potential, the present 

value of the reasonably expected pre-tax profit must be substantial 

in relation to the present value of the expected net tax benefits 

that would be allowed if the transaction were respected.137 Fees 

and other transaction expenses and foreign taxes shall be taken 

into account as expenses in determining pre-tax profit. 

Personal transactions of individuals 

In the case of an individual, the provision applies only to transactions entered into in connection with a trade or business or an 

activity engaged in for the production of income. 

Other rules 

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of the provision. 

No inference is intended as to the proper application of the economic substance doctrine under present law. In addition, the provision shall not be construed as alter or supplanting any other rule 

of law, including any common-law doctrine or provision of the Code 

or regulations or other guidance thereunder; and the provision 

shall be construed as being additive to any such other rule of law. 

EFFECTIVE DATE

The provision applies to transactions entered into after the date 

of enactment. 

K. Penalties for Underpayments Attributable to Transactions Lacking Economic Substance (sec. 453 of the bill and sec. 6662 and 

sec. 6664 of the Code) 

PRESENT LAW

General accuracy-related penalty 

An accuracy-related penalty under section 6662 applies to the 

portion of any underpayment that is attributable to (1) negligence, 

(2) any substantial understatement of income tax, (3) any substantial valuation misstatement, (4) any substantial overstatement of 


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138Sec. 6662. 139 A tax shelter is defined for this purpose as a partnership or other entity, an investment 

plan or arrangement, or any other plan or arrangement if a significant purpose of such partnership, other entity, plan, or arrangement is the avoidance or evasion of Federal income tax. Sec. 

6662(d)(2)(C). 140Sec. 6664(c). 141Treas. Reg. sec. 1.6662–4(g)(4)(i)(B); Treas. Reg. sec. 1.6664–4(c). 142See Treas. Reg. Sec. 1.6664–4(c). In addition to the requirements applicable to taxpayers 

under the regulations, advisors may be subject to potential penalties under section 6694 (applicable to return preparers), and to monetary penalties and other sanctions under Circular 230 

(which provides rules governing persons practicing before the IRS). Under Circular 230, if a 

transaction is a ‘‘covered transaction’’ (a term that includes listed transactions and certain nonlisted reportable transactions) a ‘‘more likely than not’’ confidence level is required for written 

tax advice that may be relied upon by a taxpayer for the purpose of avoiding penalties, and certain other standards must also be met. Treasury Dept. Circular 230 (Rev. 4–2008) Sec. 10.35. 

For other tax advice, Circular 230 generally requires a lower ‘‘realistic possibility’’ confidence 

level or a ‘‘non-frivolous’’ confidence level coupled with advising the client of any opportunity 

to avoid the accuracy related penalty under section 6662 by adequate disclosure. Treasury Dept. 

Circular 230 (Rev. 4–2008) Sec. 10.34. 

pension liabilities, or (5) any substantial estate or gift tax valuation 

understatement. If the correct income tax liability exceeds that reported by the taxpayer by the greater of 10 percent of the correct 

tax or $5,000 (or, in the case of corporations, by the lesser of (a) 

10 percent of the correct tax (or $10,000 if greater) or (b) $10 million), then a substantial understatement exists and a penalty may 

be imposed equal to 20 percent of the underpayment of tax attributable to the understatement.138 Except in the case of tax shelters,139 the amount of any understatement is reduced by any portion attributable to an item if (1) the treatment of the item is supported by substantial authority, or (2) facts relevant to the tax 

treatment of the item were adequately disclosed and there was a 

reasonable basis for its tax treatment. The Treasury Secretary may 

prescribe a list of positions which the Secretary believes do not 

meet the requirements for substantial authority under this provision. 

The section 6662 penalty generally is abated (even with respect 

to tax shelters) in cases in which the taxpayer can demonstrate 

that there was ‘‘reasonable cause’’ for the underpayment and that 

the taxpayer acted in good faith.140 The relevant regulations for a 

tax shelter provide that reasonable cause exists where the taxpayer 

‘‘reasonably relies in good faith on an opinion based on a professional tax advisor’s analysis of the pertinent facts and authorities 

[that] . . . unambiguously concludes that there is a greater than 

50-percent likelihood that the tax treatment of the item will be 

upheld if challenged’’ by the IRS.141 For transactions other than 

tax shelters, the relevant regulations provide a facts and circumstances test, the most important factor generally being the extent of the taxpayer’s effort to assess the proper tax liability. If a 

taxpayer relies on an opinion, reliance is not reasonable if the taxpayer knows or should have known that the advisor lacked knowledge in the relevant aspects of Federal tax law, or if the taxpayer 

fails to disclose a fact that it knows or should have known is relevant. Certain additional requirements apply with respect to the 

advice.142

Listed transactions and reportable avoidance transactions 

In general 

A separate accuracy-related penalty under section 6662A applies 

to any listed transaction and to any other reportable transaction 


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143Sec. 6662A(b)(2). 144Sec. 6707A(c)(1). 145Sec. 6707A(c)(2). 146Sec. 6662A(a). 147Section 6664(d)(3)(B) would not allow a reasonable belief to be based on a ‘‘disqualified 

opinion’’ or on an opinion from a ‘‘disqualified tax advisor’’. 148Sec. 6662A(c). 149Sec. 6664(d). 150Sec. 6707A(d). 

that is not a listed transaction, if a significant purpose of such 

transaction is the avoidance or evasion of Federal income tax 143

(‘‘reportable avoidance transaction’’). The penalty rate and defenses 

available to avoid the penalty vary depending on whether the 

transaction was adequately disclosed. 

Both listed transactions and other reportable transactions are allowed to be described by the Treasury Department under section 

6011 as transactions that must be reported, and section 6707A(c) 

imposes a penalty for failure to adequately report such transactions 

under section 6011. A reportable transaction is defined as one that 

the Treasury Secretary determines is required to be disclosed because it is determined to have a potential for tax avoidance or evasion.144 A listed transaction is defined as a reportable transaction 

which is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction 

for purposes of the reporting disclosure requirements.145

Disclosed transactions 

In general, a 20-percent accuracy-related penalty is imposed on 

any understatement attributable to an adequately disclosed listed 

transaction or reportable avoidance transaction.146 The only exception to the penalty is if the taxpayer satisfies a more stringent reasonable cause and good faith exception (‘‘strengthened reasonable 

cause exception’’), which is described below. The strengthened reasonable cause exception is available only if the relevant facts affecting the tax treatment were adequately disclosed, there is or was 

substantial authority for the claimed tax treatment, and the taxpayer reasonably believed that the claimed tax treatment was more 

likely than not the proper treatment. A reasonable belief must be 

based on the facts and law as they exist at the time that the return 

in question is filed, and not take into account the possibility that 

a return would not be audited. Moreover, reliance on professional 

advice may support a reasonable belief only in certain circumstances.147

Undisclosed transactions 

If the taxpayer does not adequately disclose the transaction, the 

strengthened-reasonable-cause exception is not available (i.e., a 

strict-liability penalty generally applies), and the taxpayer is subject to an increased penalty equal to 30 percent of the understatement.148 However, a taxpayer will be treated as having adequately 

disclosed a transaction for this purpose if the IRS Commissioner 

has separately rescinded the separate penalty under section 6707A 

for failure to disclose a reportable transaction.149 The IRS Commissioner is authorized to do this only if the failure does not relate to 

a listed transaction and only if rescinding the penalty would promote compliance and effective tax administration.150


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151Sec. 6707A(e). 152For this purpose, any reduction in the excess of deductions allowed for the taxable year 

over gross income for such year, and any reduction in the amount of capital losses which would 

(without regard to section 1211) be allowed for such year, shall be treated as an increase in 

taxable income. Sec. 6662A(b). 153Sec. 6662A(e)(3). 154See the previous discussion regarding the penalty for failing to disclose a reportable transaction. 

A public entity that is required to pay a penalty for an undisclosed listed or reportable transaction must disclose the imposition 

of the penalty in reports to the SEC for such periods as the Secretary shall specify. The disclosure to the SEC applies without regard to whether the taxpayer determines the amount of the penalty 

to be material to the reports in which the penalty must appear, 

and any failure to disclose such penalty in the reports is treated 

as a failure to disclose a listed transaction. A taxpayer must disclose a penalty in reports to the SEC once the taxpayer has exhausted its administrative and judicial remedies with respect to 

the penalty (or if earlier, when paid).151

Determination of the understatement amount 

The penalty is applied to the amount of any understatement attributable to the listed or reportable avoidance transaction without 

regard to other items on the tax return. For purposes of this provision, the amount of the understatement is determined as the sum 

of: (1) the product of the highest corporate or individual tax rate 

(as appropriate) and the increase in taxable income resulting from 

the difference between the taxpayer’s treatment of the item and the 

proper treatment of the item (without regard to other items on the 

tax return); 152 and (2) the amount of any decrease in the aggregate 

amount of credits which results from a difference between the taxpayer’s treatment of an item and the proper tax treatment of such 

item. 

Except as provided in regulations, a taxpayer’s treatment of an 

item shall not take into account any amendment or supplement to 

a return if the amendment or supplement is filed after the earlier 

of when the taxpayer is first contacted regarding an examination 

of the return or such other date as specified by the Secretary.153

Strengthened reasonable cause exception 

A penalty is not imposed under section 6662A with respect to 

any portion of an understatement if it is shown that there was reasonable cause for such portion and the taxpayer acted in good faith. 

Such a showing requires: (1) adequate disclosure of the facts affecting the transaction in accordance with the regulations under section 6011; 154 (2) that there is or was substantial authority for such 

treatment; and (3) that the taxpayer reasonably believed that such 

treatment was more likely than not the proper treatment. For this 

purpose, a taxpayer will be treated as having a reasonable belief 

with respect to the tax treatment of an item only if such belief: (1) 

is based on the facts and law that exist at the time the tax return 

(that includes the item) is filed; and (2) relates solely to the taxpayer’s chances of success on the merits and does not take into account the possibility that (a) a return will not be audited, (b) the 


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155Sec. 6664(d). 156The term ‘‘material advisor’’ means any person who provides any material aid, assistance, 

or advice with respect to organizing, managing, promoting, selling, implementing, or carrying 

out any reportable transaction, and who derives gross income in excess of $50,000 in the case 

of a reportable transaction substantially all of the tax benefits from which are provided to natural persons ($250,000 in any other case). Sec. 6111(b)(1). 157This situation could arise, for example, when an advisor has an arrangement or understanding (oral or written) with an organizer, manager, or promoter of a reportable transaction 

that such party will recommend or refer potential participants to the advisor for an opinion regarding the tax treatment of the transaction. 158 An advisor should not be treated as participating in the organization of a transaction if 

the advisor’s only involvement with respect to the organization of the transaction is the rendering of an opinion regarding the tax consequences of such transaction. However, such an advisor may be a ‘‘disqualified tax advisor’’ with respect to the transaction if the advisor participates 

in the management, promotion, or sale of the transaction (or if the advisor is compensated by 

a material advisor, has a fee arrangement that is contingent on the tax benefits of the transaction, or as determined by the Secretary, has a continuing financial interest with respect to 

the transaction). See Notice 2005–12, 2005–1 C.B. 494 regarding disqualified compensation arrangements. 

treatment will not be raised on audit, or (c) the treatment will be 

resolved through settlement if raised.155

A taxpayer may (but is not required to) rely on an opinion of a 

tax advisor in establishing its reasonable belief with respect to the 

tax treatment of the item. However, a taxpayer may not rely on an 

opinion of a tax advisor for this purpose if the opinion (1) is provided by a disqualified tax advisor or (2) is a disqualified opinion. 

Disqualified tax advisor 

A disqualified tax advisor is any advisor who: (1) is a material 

advisor 156 and who participates in the organization, management, 

promotion, or sale of the transaction or is related (within the meaning of section 267(b) or 707(b)(1)) to any person who so participates; 

(2) is compensated directly or indirectly 157 by a material advisor 

with respect to the transaction; (3) has a fee arrangement with respect to the transaction that is contingent on all or part of the intended tax benefits from the transaction being sustained; or (4) as 

determined under regulations prescribed by the Secretary, has a 

disqualifying financial interest with respect to the transaction. 

A material advisor is considered as participating in the organization of a transaction if the advisor performs acts relating to the development of the transaction. This may include, for example, preparing documents: (1) establishing a structure used in connection 

with the transaction (such as a partnership agreement); (2) describing the transaction (such as an offering memorandum or other 

statement describing the transaction); or (3) relating to the registration of the transaction with any Federal, State, or local government body.158 Participation in the management of a transaction 

means involvement in the decision-making process regarding any 

business activity with respect to the transaction. Participation in 

the promotion or sale of a transaction means involvement in the 

marketing or solicitation of the transaction to others. Thus, an advisor who provides information about the transaction to a potential 

participant is involved in the promotion or sale of a transaction, as 

is any advisor who recommends the transaction to a potential participant. 

Disqualified opinion 

An opinion may not be relied upon if the opinion: (1) is based on 

unreasonable factual or legal assumptions (including assumptions 

as to future events); (2) unreasonably relies upon representations, 


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159Sec. 6676. 

statements, finding or agreements of the taxpayer or any other person; (3) does not identify and consider all relevant facts; or (4) fails 

to meet any other requirement prescribed by the Secretary. 

Coordination with other penalties 

To the extent a penalty on an understatement is imposed under 

section 6662A, that same amount of understatement is not also 

subject to the accuracy-related penalty under section 6662(a) or to 

the valuation misstatement penalties under section 6662(e) or 

6662(h). However, such amount of understatement is included for 

purposes of determining whether any understatement (as defined 

in section 6662(d)(2)) is a substantial understatement as defined 

under section 6662(d)(1) and for purposes of identifying an underpayment under the section 6663 fraud penalty. 

The penalty imposed under section 6662A does not apply to any 

portion of an understatement to which a fraud penalty is applied 

under section 6663. 

Erroneous claim for refund or credit 

If a claim for refund or credit with respect to income tax (other 

than a claim relating to the earned income tax credit) is made for 

an excessive amount, unless it is shown that the claim for such excessive amount has a reasonable basis, the person making such 

claim is subject to a penalty in an amount equal to 20 percent of 

the excessive amount.159

The term ‘‘excessive amount’’ means the amount by which the 

amount of the claim for refund for any taxable year exceeds the 

amount of such claim allowable for the taxable year. 

This penalty does not apply to any portion of the excessive 

amount of a claim for refund or credit which is subject to a penalty 

imposed under the accuracy related or fraud penalty provisions (including the general accuracy related penalty, or the penalty with 

respect to listed and reportable transactions, described above). 

REASONS FOR CHANGE

The Committee believes that a stronger penalty under section 

6662 should be imposed on understatements attributable to noneconomic substance and similar transactions, to improve compliance by deterring taxpayers from entering such transactions. The 

Committee is concerned that under present law there is a potential 

to avoid penalties in such cases (based for example on certain levels of tax advice), and that the potential that a taxpayer in such 

cases may pay only the tax due plus interest is not a sufficient deterrent. The Committee therefore believes it is appropriate to impose a new strict liability penalty in such cases. The Committee 

also believes that a similar strict liability standard should apply to 

tax shelter transactions. 

In addition, the Committee believes that for large corporations, 

and for persons required to file reports under section 13 of the Securities Exchange Act of 1934, any position for which a reasonable 

cause and good faith defense to penalties is still available should 

satisfy a confidence level of being at least more likely than not to 

prevail, and the same level of confidence should be required of such 


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160That provision generally provides that in any case in which a court determines that the 

economic substance doctrine is relevant, a transaction has economic substance only if: (1) the 

transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s 

economic position, and (2) the taxpayer has a substantial purpose (apart from Federal income 

tax effects) for entering into such transaction. Specific other rules also apply. See ‘‘Explanation 

of Provision’’ for the immediately preceding provision, ‘‘Codification of the economic substance 

doctrine.’’. 161For example, the penalty would apply to a transaction that is disregarded as a result of 

the application of the same factors and analysis that is required under the provision for an economic substance analysis, even if a different term is used to describe the doctrine. 162 I.e., section 6662(b) of present law applies to the new penalty as well. 163 As under present law, the penalties under section 6662 (including the new penalty) do not 

apply to any portion of an underpayment on which a fraud penalty is imposed. 

taxpayers in determining whether there is a substantial understatement of income tax. 

EXPLANATION OF PROVISION

The provision imposes a new, stronger penalty under section 

6662 for an understatement attributable to any disallowance of 

claimed tax benefits by reason of a transaction lacking economic 

substance, as defined in new section 7701(p),160 or failing to meet 

the requirements of any similar rule of law.161 The penalty rate is 

20 percent (increased to 40 percent if the taxpayer does not adequately disclose the relevant facts affecting the tax treatment in 

the return or a statement attached to the return). Except as provided in regulations, an amended return or supplement to a return 

is not taken into account if filed after the taxpayer has been contacted for audit or such other date as is specified by the Secretary. 

No exceptions (including the reasonable cause rules) to the penalty 

are available (i.e., the penalty is a strict-liability penalty). Thus, 

under the provision, outside opinions or in-house analysis would 

not protect a taxpayer from imposition of a penalty if it is determined that the transaction lacks economic substance or fails to 

meet the requirements of any similar rule of law. Similarly, a claim 

for refund that is excessive under section 6676 due to a claim that 

is lacking in economic substance or failing to meet the requirements of any similar rule of law is subject to the 20 percent penalty under that section, and the reasonable basis exception is not 

available. 

The penalty does not apply to any portion of an underpayment 

on which a fraud penalty is imposed.162 The new 20-percent penalty (and 40-percent penalty for nondisclosed transactions) is also 

added to the penalties to which section 6662A will not also 

apply.163

As described above, under the provision, the reasonable cause 

and good faith exception of present law section 6664(c)(1) does not 

apply to any portion of an underpayment which is attributable to 

a transaction lacking economic substance, as defined in section 

7701(p), or failing to meet the requirements of any similar rule of 

law, or to any tax shelter (as defined in present law section 

6662(d)(2)(C)). In addition, the reasonable cause and good faith exception of present law section 6664(c)(1) also does not apply to any 

underpayment in which the taxpayer is a specified person. A specified person is defined as (i) any person required to file periodic or 

other reports under section 13 of the Securities and Exchange Act 


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164For purposes of this rule, all persons treated as a single employer under section 52(a) are 

treated as one person. 165The rules and exceptions of section 6662(d) do not apply to any understatement attributable to a transaction that lacks economic substance or fails to meet the requirements of any 

similar rule of law. 166Sec. 106 and proposed Treas. Reg. sec. 1.106–1. 167Sec. 105(b). 

of 1934, and (ii) any corporation with gross receipts in excess of 

$100 million for the taxable year involved.164

In the case of a substantial understatement of income tax (which 

is a separate type of understatement under new section 6662(b) 

than an understatement attributable to a transaction lacking economic substance or failing to meet the requirements of any similar 

rule of law),165 the rules of section 6662(d) still apply, but are 

changed in the case of a specified person (as defined above). In the 

case of such a person, it is no longer the case that a substantial 

understatement is reduced if there is or was substantial authority 

for the taxpayer’s treatment, or if the relevant facts were disclosed 

and there is a reasonable basis for the taxpayer’s tax treatment. 

Under the provision, a substantial understatement of a specified 

person can be reduced only by that portion attributable to any item 

with respect to which the taxpayer had a reasonable belief that the 

tax treatment by the taxpayer is more likely than not the proper 

treatment. 

EFFECTIVE DATE

The provision applies to transactions entered into after the date 

of enactment. 

L. Certain Health Related Benefits Applicable to Spouses and Dependents Extended to Eligible Designated Beneficiaries (sec. 461 

of the bill and secs. 105, 106, 162, 501, 3121, 3306, and 3401 of 

the Code) 

PRESENT LAW

Definition of dependent for exclusion for employer-provided health 

coverage 

The Code generally provides that employees are not taxed on 

(that is, may exclude from gross income) the value of employer-provided health coverage for employees, their spouses, and their dependents under an accident or health plan.166 In addition, any reimbursements under the accident or health plan for medical care 

expenses for employees, their spouses, and their dependents generally are excluded from gross income.167 For purposes of these exclusions, dependents are determined under section 152, but without 

regard to section 152(b)(1), (b)(2), and (d)(1)(B). Section 152 defines 

a dependent as a qualifying child or qualifying relative. 

Under section 152(c), a child generally is a qualifying child of a 

taxpayer if the child satisfies each of five tests for the taxable year: 

(1) the child has the same principal place of abode as the taxpayer 

for more than one-half of the taxable year; (2) the child has a specified relationship to the taxpayer; (3) the child has not yet attained 

a specified age; (4) the child has not provided over one-half of their 

own support for the calendar year in which the taxable year of the 

taxpayer begins; and (5) the qualifying child has not filed a joint 


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168This requirement is provide in section 152(d)(l)(B) and thus is disregarded for purposes of 

determining whether an individual is a taxpayer’s dependent for purposes of the exclusions for 

employer-provided health coverage. 169Generally, same-sex partners do not qualify as dependents under section 152. In addition, 

same-sex partners are not recognized as spouses for purposes of the Code. Defense of Marriage 

Act, Pub. L. No. 104–199. 170Secs. 3121(a)(2) and 3306(b)(2). 

return (other than for a claim of refund) with their spouse for the 

taxable year beginning in the calendar year in which the taxable 

year of the taxpayer begins. A tie-breaking rule applies if more 

than one taxpayer claims a child as a qualifying child. The specified relationship is that the child is the taxpayer’s son, daughter, 

stepson, stepdaughter, brother, sister, stepbrother, stepsister, or a 

descendant of any such individual. With respect to the specified 

age, a child must be under age 19 (or under age 24 in the case of 

a full-time student). However, no age limit applies with respect to 

individuals who are totally and permanently disabled within the 

meaning of section 22(e)(3) at any time during the calendar year. 

Other rules may apply. 

Under section 152(d) a qualifying relative means an individual 

that satisfies four tests for the taxable year: (1) the individual 

bears a specified relationship to the taxpayer; (2) the individual’s 

gross income for the calendar year in which such taxable year begins is less than the exemption amount under section 151(d);168 (3) 

the taxpayer provides more than one-half the individual’s support 

for the calendar year in which the taxable year begins; and (4) the 

individual is not a qualifying child of the taxpayer—or any other 

taxpayer for any taxable year beginning in the calendar year in 

which such taxable year begins. The specified relationship test for 

a qualifying relative is satisfied if that individual is the taxpayer’s: 

(1) child or descendant of a child; (2) brother, sister, stepbrother or 

stepsister; (3) father, mother or ancestor of either; (4) stepfather or 

stepmother; (5) niece or nephew; (6) aunt or uncle; (7) in-law; or (8) 

certain other individuals, who for the taxable year of the taxpayer, 

have the same principal place of abode as the taxpayer and are 

members of the taxpayer’s household.169

Employers may agree to reimburse medical expenses of their employees (and their spouses and dependents), not covered by a 

health insurance plan, through flexible spending arrangements 

which allow reimbursement not in excess of a specified dollar 

amount (either elected by an employee under a cafeteria plan or 

otherwise specified by the employer). Reimbursements under these 

arrangements are also excludible from gross income as employerprovided health coverage. The same definition of dependent applies 

for purposes of flexible spending arrangements. 

A similar rule excludes employer-provided health insurance coverage and reimbursements for medical expenses for employees, 

their spouses, and their dependents from the employees’ wages for 

payroll tax purposes.170 The same definition of dependent applies 

for purposes of this exclusion. 

Deduction for health insurance premiums of self-employed individuals 

Under present law, self-employed individuals may deduct the 

cost of health insurance for themselves and their spouses and dependents. The deduction is not available for any month in which 


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171Secs. 419(e) and 501(c)(9). 172The provision does not modify the present law dependency exemption. 173Secs. 3121(a)(2), 3231(e)(1), 3306(b)(2), 3401(a)(24). 

the self-employed individual is eligible to participate in an employer-subsidized health plan. Moreover, the deduction may not exceed the individual’s self-employment income. The deduction applies only to the cost of insurance (i.e., it does not apply to out-ofpocket expenses that are not reimbursed by insurance). The deduction does not apply for self-employment tax purposes. For purposes 

of the deduction, a more than two percent shareholder-employee of 

an S corporation is treated the same as a self-employed individual. 

Thus, the exclusion for employer-provided health care coverage 

does not apply to such individuals, but they are entitled to the deduction for health insurance costs as if they were self-employed. 

Voluntary employees’ beneficiary associations 

A voluntary employees’ beneficiary association (‘‘VEBA’’) is a taxexempt entity that is a part of a plan for providing life, sick or accident benefits to its members or their dependents or designated 

beneficiaries.171 No part of the net earnings of the association inures (other than through the payment of life, sick, accident or other 

benefits) to the benefit of any private shareholder or individual. A 

VEBA may be funded with employer contributions or employee contributions or a combination of employer contributions and employee 

contributions. The same definition of dependent applies for purposes of receipt of medical benefits through a VEBA. 

REASONS FOR CHANGE

The Committee recognizes that an increasing number of employers and self-employed individuals offer or desire to offer health coverage and reimbursements for medical expenses to non-spouse, 

non-dependent beneficiaries, such as same- and opposite-sex domestic partners and their children. Under current law, the provision of these benefits results in additional Federal income tax for 

the employee or self-employed individual and additional Federal 

payroll taxes for the employer and the employee. As a result of 

these additional costs, employers and self-employed individuals 

may decline to provide coverage to non-spouse, non-dependent 

beneficiaries or, in cases where such coverage is offered, employees 

may decline it. Either case results in an increase in the number of 

individuals and families who are not covered by employer-provided 

health insurance. The provision will end these tax inequities, thereby encouraging employers and self-employed individuals to expand 

coverage and increase the number of Americans covered by employer-sponsored health plans. 

EXPLANATION OF PROVISION

Exclusion for employer-provided health coverage 

The provision amends sections 105 and 106 to extend the general 

exclusion for employer-provided health coverage to eligible beneficiaries.172 The parallel provisions for excluding employer-provided 

health care from payroll taxes are also amended.173 An eligible 

beneficiary is defined as any individual who is eligible to receive 

benefits or coverage under an accident or health plan. The proviVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00313 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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sion does not place a limit on the number of eligible beneficiaries 

an individual is able to claim for purposes of the exclusion. 

The provision directs the Secretary of the Treasury to issue guidance providing that eligibility for reimbursements from FSAs and 

HRAs is extended to otherwise qualifying medical expenses of any 

eligible beneficiary. 

A parallel change is made for VEBAs. 

Deduction for health insurance premiums of self-employed individuals 

The provision amends section 162(l) to permit self-employed individuals to take a deduction for an individual who meets the following criteria: (1) younger than age 19 (24 for full-time students); 

(2) has the same principal abode as the taxpayer and is a member 

of the taxpayer’s household for the taxable year; and (3) receives 

more than one-half of his or her support from the taxpayer for the 

calendar year in which the taxable year begins. The provision does 

not place a limit on the number of such individuals that a taxpayer 

is able to claim for purposes of the deduction. 

The provision also permits a self-employed individual to take a 

deduction for an individual who is (1) older than age 19 (or 24 for 

students); (2) has the same principal abode as the taxpayer and is 

a member of the taxpayer’s household for the taxable year; and (3) 

is not the individual’s spouse, qualifying child or qualifying relative. Self-employed individuals may only take a deduction for one 

such individual in any tax year. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2009. 

DIVISION B—MEDICARE AND MEDICAID IMPROVEMENTS 

TITLE I—IMPROVING HEALTH CARE VALUE 

Subtitle A—Provisions Related to Medicare Part A 

Part 1—Market Basket Updates 

Sec. 1101. Skilled Nursing Facility Payment Update 

Current Law 

Skilled nursing facilities (SNFs) are paid through a prospective 

payment system (PPS) which is composed of a daily (‘‘per-diem’’) 

urban or rural base payment amount that is then adjusted for case 

mix and area wages. The federal per diem payment is intended to 

cover all the services provided to the beneficiary that day, including room and board, nursing, therapy, and prescription drugs. The 

urban and rural federal per diem payment rates are increased annually by an update factor that is determined, in part, by the projected increase in the SNF market basket (MB) index. This index 

measures changes in the costs of goods and services purchased by 

SNFs. Each year, the update of the payment rate also includes, as 

appropriate, an adjustment to account for the MB forecast error for 

previous years. 


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Proposed Law 

The provision would eliminate the MB update for FY 2010. For 

each subsequent fiscal year, the rate would be increased by the 

skilled nursing facility MB percentage change for the fiscal year involved. This provision would not apply to payments for days before 

January 1, 2010. 

Reason for Change 

The Medicare Payment Advisory Commission (MedPAC) makes 

annual recommendations regarding automatic payment updates in 

the law for Medicare providers. In MedPAC’s assessment, the SNF 

industry is healthy as the supply of facilities has remained relatively constant over the last four years. The average Medicare 

margin for free-standing SNFs was 14.5 percent in 2007 and is projected to be 12.6 percent in 2009. Medicare spending on SNFs grew 

12 percent from 2006 to 2007, with average annual growth rates 

of 11 percent from 2000 to 2007. In light of these facts, MedPAC 

recommended a zero percent update for skilled nursing facilities for 

FY2010 and the Committee followed this recommendation. The 

Committee notes that this market basket change is effective for 

only the last three quarters of FY2010, thus resulting in a small 

positive update overall. Preliminary estimates are that even with 

this change, SNFs will yield positive Medicare margins of 7 to 8 

percent in FY2010. 

The Committee would note that while overall margins may be 

lower, it is not appropriate to use Medicare Part A Trust Fund dollars to cross-subsidize Medicaid payment rates, which are set at 

the state level, independently by each state governor. 

The Committee would also highlight that skilled nursing facilities directly benefit by the extension of the exceptions process for 

therapy services included in this Act and by removing clinical social workers from the SNF consolidated billing requirement. 

Effective Date 

October 1, 2010. 

Sec. 1102. Inpatient Rehabilitation Facility Payment Update 

Current Law 

Starting January 1, 2002, payments to inpatient rehabilitation 

facilities (IRFs) are made under a discharge-based prospective payment system where one payment covers capital and operating 

costs. Typically, the per discharge payment amount is increased 

each fiscal year by an update factor based on the increase in the 

market basket index. However, for fiscal years 2008 and 2009, the 

update factor has been set at zero percent, starting for discharges 

as of April 1, 2008. 

Proposed Law 

The zero update factor would be extended until September 30, 

2010 (the end of fiscal year 2010) but would not apply to payment 

units occurring before January 1, 2010. 


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Explanation of Change 

MedPAC recommends a zero update for IRFs for FY2010, as indicators of Medicare payment adequacy on net are more positive than 

negative, capacity remains adequate to meet demand, and 

MedPAC’s assessment is that IRFs can absorb cost increases and 

continue to provide care to clinically appropriate Medicare cases 

with no update to payments in 2010. The Committee followed the 

MedPAC recommendation. The Committee notes that this market 

basket change is effective for only the last three quarters of 

FY2010, thus resulting in a small positive update overall. 

Effective Date 

October 1, 2010. 

Sec. 1103. Incorporating Productivity Improvements into Market 

Basket Updates That Do Not Already Incorporate Such Improvements 

Current Law 

Currently, most providers in fee-for-service (or traditional) Medicare, including acute care hospitals, skilled nursing facilities 

(SNFs), long term care hospitals (LTCHs), inpatient rehabilitation 

facilities (IRFs), inpatient psychiatric facilities (IPFs), and hospice 

care receive predetermined payment amounts established under 

different, unique prospective payment systems. Each year, the base 

payment amounts in the different Medicare payment systems are 

increased by an update factor to reflect the increase in the unit 

costs associated with providing health care services. Generally, 

Medicare’s annual updates are linked to projected changes in specific market basket (MB) indices which are designed to measure 

the change in the price of goods and services purchased by the provider. Annual updates to the Medicare physician fee schedule are 

determined by a separate method that includes the sustainable 

growth rate (SGR) formula, which already incorporates adjustments for gains in physician productivity. 

Each year, the Medicare Payment Advisory Commission 

(MedPAC) makes payment update recommendations for the different payment systems. In its view, Medicare’s payment systems 

should encourage efficiency: providers should be able to reduce the 

quantity of inputs to produce a unit of service while maintaining 

quality. Accordingly, MedPAC begins its update deliberations with 

an assumption that all providers can achieve efficiency gains similar to the economy and examines the Bureau of Labor Statistics’ estimate of the 10-year moving average rate of past growth in total 

factor productivity for the economy as a whole. This policy target 

links Medicare’s expectations for efficiency improvements to the 

productivity gains achieved by firms and workers who pay taxes 

that fund Medicare. MedPAC’s annual update recommendation will 

depend on its overall assessment of the circumstances of a given 

set of providers in any year. These MedPAC recommendations are 

not binding on Medicare payment policies. 

Starting in FY2007, acute care hospitals paid under Medicare’s 

inpatient prospective payment system (IPPS) that do not submit 

required quality data will have the applicable MB percentage reduced by two percentage points. The reduction would apply for that 


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year and would not be taken into account in subsequent years. Beginning in FY2015, one quarter of the applicable MB update will 

be reduced if the required quality data are not submitted. Unless 

significant hardship is demonstrated, the remainder of the MB update (or three-quarters of the MB update) is subject to reduction 

in IPPS hospitals that are not meaningful electronic health record 

(EHR) users by FY2015. This reduction will be increased over a 

three year period. In FY2015, three-quarters of the applicable MB 

update will be reduced by 31.33%; in FY2016 three-quarters of the 

applicable MB update will be reduced by 66.66% and in FY2017 

and beyond it will be reduced by 100%. These reductions would 

apply only to the fiscal year involved and would not be taken into 

account in subsequent fiscal years. 

Proposed Law 

The update factors for certain providers would include a productivity adjustment. The productivity offset would equal the percentage change in 10-year moving average of annual economy-wide private nonfarm business multi-factor productivity. The estimate used 

would be that published before the promulgation of the regulation 

establishing increases in the Medicare rates for the year or period. 

The productivity adjustment would be included in annual updates 

for IPPS hospitals, SNFs, IRFs, and hospice care for fiscal years 

beginning in 2010. To the extent that the base rate for LTCHs 

would be subject to an annual update, the update factor would be 

subject to a productivity adjustment starting for rate year 2010. To 

the extent that the base rate for IPFs would be subject to an annual update, the update factor would be subject to a productivity 

adjustment starting for rate year 2011. 

The percentage of the IPPS update that is reduced by 2 percentage points when the acute care hospital does not submit quality 

data would not be reduced below zero. 

For IPPS hospitals, starting in FY2015, the productivity adjustment would not apply to 75% of the otherwise applicable MB update that is subject to reduction if the hospital is not a meaningful 

EHR user. In no case would an IPPS hospital receive an annual 

update for this component of the update that was less than zero. 

Reason for Change 

The annual update to the Medicare physician fee schedule already incorporates adjustments for gains in productivity. This provision creates uniformity across Medicare providers by creating a 

productivity adjustment for all Part A providers. This adjustment 

will encourage greater efficiency in health care provision, hold 

Medicare providers accountable for achieving productivity gains on 

par with the overall economy, and more accurately align Medicare 

payments with provider costs. 

Effective Date 

October 1, 2010. 


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Part 2—Other Medicare Part A Provisions 

Sec. 1111. Payments to Skilled Nursing Facilities 

Current Law 

Skilled nursing facilities (SNFs) are paid through a prospective 

payment system (PPS) which is composed of a daily (‘‘per-diem’’) 

urban or rural base payment amount that is then adjusted for case 

mix and area wages. The federal per diem payment is intended to 

cover all the services provided to the beneficiary that day, including room and board, nursing, therapy, and prescription drugs. 

The ‘‘federal per diem rate’’ is adjusted for treatment type and 

care needs of the beneficiary based on the resource utilization 

group (RUG) assignment of the beneficiary. The beneficiary is classified into one of 53 RUG categories. Each RUG represents a payment adjusted for case mix and is composed of three parts. For 

RUGs used to pay for the care of patients who require intensive 

therapy, the three parts include (a) a nursing component; (b) a 

variable therapy component; and (c) a non-case mix adjusted flat 

rate component. For RUGs used to pay for the care of patients who 

do not require intensive therapy, the three components are: (a) a 

nursing component; (b) a flat therapy component; and (c) a noncase mix adjusted flat rate component. The nursing component also 

includes payment for non-therapy ancillary (NTA) services. 

On October 1, 2005, refinements to the SNF PPS became effective. As reported in the SNF FY2009 Proposed Rule, these refinements updated and recalibrated (using FY 2001 claims data) the 

therapy and nursing case-mix indices associated with all of the 

RUGs and added nine new Rehabilitation plus Extensive Services 

groups into the RUG classification system (increasing the number 

of RUGs from 44 to 53). At the time, the Centers for Medicare and 

Medicaid Services (CMS) applied a parity adjustment to ensure 

that estimated total payments under the 53-group model would 

maintain parity to those that would have been made under the 44- 

group model in a budget neutral manner. CMS also applied an adjustment to account for the variability in the use of NTA services. 

After noting that actual utilization patterns differed from what 

CMS projected, CMS used actual claims data to update its calibrations and its parity adjustment so as to reestablish budget neutrality (using CY 2006 payment data) and its NTA adjustment component. According to CMS, the total impact of this change for FY 

2009, accounting for the market basket increase of 3.1 percentage 

points, would have resulted in a decrease of 0.3%, assuming facilities do not change their care delivery and billing practices in response. However, this change was never implemented in the final 

regulation. 

The proposed PPS and Consolidated Billing SNF payment regulation for FY 2010 describes how the Secretary would recalibrate 

the case-mix indexes (CMIs) for 2010 to more accurately match the 

service needs of beneficiaries, resulting in a $390 million, or 1.2 

percent payment reduction from FY2009. 

Proposed Law 

The proposal would require the Secretary to conduct, using 

FY2006 claims data, an initial analysis comparing total Medicare 


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SNF payments under the RUG–53 and RUG–44 classification systems. Based on this initial analysis, the Secretary would be required to adjust the case mix indexes for FY2010 by the appropriate recalibration factor, as proposed in the SNF proposed rule 

issued by the Secretary on May 12, 2009. 

In general, the Secretary would be required to increase payments 

by 10% for non-therapy ancillary services and would be required to 

decrease payments for the therapy case mix component of such 

rates by 5.5%. Such payment changes would be required to apply 

for days on or after January 1, 2010, and until the Secretary implements an alternative case mix classification system for the SNF 

PPS. 

The Secretary would be required to analyze payments for nontherapy ancillary (NTA) services under a future SNF classification 

system to ensure the accuracy of payments for NTA services. Such 

analysis would be required to consider use of appropriate predictors 

which may include age, physical and mental status, ability to perform activities of daily living, prior nursing home stay diagnoses, 

broad RUG category, and a proxy for length of stay. Such analysis 

would be required to be conducted such that the future SNF classification system would apply to services furnished during a fiscal 

year beginning with FY 2011. 

In conducting the analysis, the Secretary would be required to 

consult with interested parties, including the Medicare Payment 

Advisory Commission and other interested stakeholders, to identify 

appropriate predictors of NTA costs. 

The Secretary would be required to include the result of this 

analysis in the fiscal year 2011 rulemaking cycle for purposes of 

implementation beginning for such fiscal year. 

The Secretary would also be required to implement changes to 

payments for NTA services (which would be required to include a 

separate rate component for NTA services and may include use of 

a model that predicts payment amounts applicable for NTA services) under such future SNF services classification system as the 

Secretary determines appropriate based on this analysis. These 

changes would be required to be implemented such that the estimated expenditures for a fiscal year, beginning with fiscal year 

2011, with such changes, would be equal to the estimated expenditures that would otherwise occur under Medicare under such future SNF services classification system for such year without such 

changes. 

With respect to SNF PPS outlier payments for unusual variations in the type or amount of medically necessary care, the Secretary, beginning with October 1, 2010, would be required to provide for an addition or adjustment to the payment amount with respect to NTA services; and may provide for an addition or adjustment to the payment amount otherwise made with respect to therapy services in the case of outliers. 

Outlier adjustments or additional payments would be based on 

aggregate costs during a SNF stay and not on the number of days 

in such stays. The Secretary would be required to reduce estimated 

payments that would otherwise be made under the PPS with respect to a fiscal year by 2 percent. The total amount of additional 

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to a fiscal year could not exceed 2 percent of total payments projected or estimated based on the SNF PPS. 

No administrative or judicial review would be permitted to be 

conducted regarding these payment changes for NTA or outliers. 

Reason for Change 

The Committee believes that multiple reforms to the SNF PPS 

are necessary to improve patient access and quality of care, and ensure payment accuracy and fiscal sustainability in the Medicare 

program. 

In moving from the RUG–44 to the RUG–53 classification system 

for SNF payments in FY2006, CMS overestimated the adjustment 

that would be necessary to remain budget neutral—as intended— 

between these classification systems. This section requires the Secretary to prospectively adjust the payments to account for this 

error. The Committee notes that the provision does not recollect 

the overpayments made to SNFs in the past three years. The Secretary proposed this change via regulation in FY2009, but the 

change was not included in the final regulation for FY2009. In the 

proposed regulation for FY2010, CMS again proposed to make the 

adjustment, stating that ‘‘. . . the 2006 adjustment inadvertently 

triggered a significant increase in overall payment levels, representing substantial overpayments to SNFs’’. According to CMS’s 

analysis, the adjustment necessary to achieve budget neutrality 

was 9.68 percent, much lower than the actual adjustment provided 

of 17.9 percent. The Committee intends that moving forward, payments to SNFs should be restored to the appropriate levels by accounting for this error. 

MedPAC, CMS and the GAO have identified that the SNF PPS 

does not accurately account for variability in costs for NTA services, such as intravenous medication or ventilator support. Currently, the SNF PPS pays for NTA services through the nursing 

component of the PPS, yet NTA costs vary more dramatically than 

costs for nursing care across stays. For instance, while NTA costs 

may vary 18-fold for costs per day, the nursing component of the 

payment only varies by 2-fold. This results in overpayments for 

beneficiaries who do not need NTA services, and underpayment for 

those beneficiaries who need expensive NTA services. 

Hospitals have reported difficulty placing patients expected to 

need expensive NTA services in SNFs because facilities expect to 

be underpaid. While CMS made adjustments for 2006 to account 

for this payment inaccuracy, including an across-the-board increase 

to the nursing component, MedPAC advises that the payment is 

still poorly targeted to accurately pay for NTA services. The current PPS explains 5 percent of the variation in NTA services; a revised system would explain 23 percent of the variance. In order to 

improve payment accuracy and improve beneficiary access to NTA 

services, the Committee is providing this short-term adjustment directing the Secretary to conduct an analysis of NTA payments in 

order to incorporate accurate payments into a future SNF classification system which shall be implemented by FY2011. 

At the same time, the current SNF PPS payments for therapy 

services encourages increased utilization of these services. The 

share of days grouped into the categories with intensive therapy 

services has increased from 32 percent in 2001 to 60 percent in 


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2007. MedPAC reports that some publicly traded nursing homes 

have increased their focus on patients that need these types of 

services in order to increase Medicare revenues. The underpayments for patients who need NTA services and the financial incentive to provide therapy services cause a wide divergence in Medicare margins for different facilities, depending on their mix of patients. For instance, for-profit SNFs have Medicare margins of 17.5 

percent, while non-profit SNFs have an average Medicare margin 

of only 4.5 percent. This section would begin to remedy this discrepancy by increasing and better targeting payments for NTA 

services, and decreasing payments for therapy services. 

The Committee is also following MedPAC recommendations by 

creating an outlier adjustment for NTA services. Medicare has 

outlier policies for most of its prospective payment systems except 

SNFs. An outlier policy would increase the accuracy of payments 

for stays that are exceptionally costly; MedPAC projects that 

outlier payments would be made for fewer than 2 percent of stays, 

only after the loss attributable to ancillary services exceeds $3,000. 

By minimizing financial risks for SNFs, the outlier policy will ensure that potentially high-cost beneficiaries do not experience barriers to access and that costly beneficiaries admitted to the SNF 

are not denied necessary care. The Committee also notes that reforming the SNF PPS to better capture differences in use of NTA 

services and adopting an outlier policy would improve the financial 

situation for hospital-based SNFs. 

Effective Date 

Subsection (a), pertaining to the recalibration factor, is effective 

for October 1, 2010. Subsection (b)(1), pertaining to the payment 

for NTA and therapy services, is effective January 1, 2010. Subsections (b)(2) and (c) are effective for October 1, 2011. 

Sec. 1112. Medicare DSH Report 

Current Law 

Since 1986, an increasing number of acute care hospitals have 

received additional Medicare payments because they serve a disproportionate share of low-income patients. The original legislative 

intent of the DSH adjustment was to compensate hospitals for the 

higher Medicare costs associated with treating a large proportion 

of low-income patients. The adjustment is now also considered as 

a way to protect access to care for vulnerable populations. Most 

DSH hospitals receive the additional payments based on a formula 

calculated using the proportion of the hospital’s Medicare inpatient 

days provided to poor Medicare beneficiaries (those who receive 

Supplemental Security Income or SSI) added to the proportion of 

total hospital days provided to Medicaid recipients. A few urban 

hospitals receive DSH payments under an alternative formula that 

considers the proportion of a hospital’s patient care revenues that 

are received from State and local indigent care funds. 

Proposed Law 

No later than July 1, 2016, the Secretary would be required to 

submit a report on Medicare DSH that would take into account the 

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viduals. The report would include recommendations concerning the 

appropriate amount, targeting, and distribution of Medicare DSH 

payments to compensate hospitals for their higher Medicare costs 

associated with serving low-income beneficiaries, consistent with 

the original intent of Medicare DSH adjustment, taking into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size. The report 

would also address the appropriate amount, targeting, and distribution of Medicare DSH to hospitals given their continued uncompensated care costs, to the extent that such costs remain. The 

Secretary would coordinate the issuance of this report with this 

legislation’s required report on Medicaid DSH. 

If there is a significant decrease in the national rate of 

uninsurance as a result of this legislation, starting in FY2017, the 

Secretary would implement a Medicare DSH adjustment based on 

the recommendations of the required report that would take into 

account variation in the empirical justification for Medicare DSH 

attributable to hospital characteristics, including bed size. An additional hospital payment would be made based on the estimated 

amount of uncompensated care, excluding bad debt, provided by 

the hospital. 

A significant decrease in the national rate of uninsurance would 

be established if there is a decrease in the uninsured under-65 population from 2012 to 2014 that exceeds eight percentage points. 

This rate for a year would be determined by the Bureau of Census 

in its Current Population Survey that is published in or about September of the succeeding year. 

For each fiscal year (starting in FY2017) the Secretary would estimate the aggregate reduction in the amount of the Medicare DSH 

payments by implementing the empirically justified DSH adjustment. The Secretary would compute the additional hospital payments for uncompensated care so that the estimated aggregate 

amounts for the fiscal year do not exceed 50% of the aggregate 

DSH reduction. Also, hospitals with higher levels of uncompensated care would receive higher uncompensated care payments. 

Reason for Change 

The reforms provided under Division A are expected to expand 

health insurance coverage and lower the number of individuals 

who lack insurance. To the extent there are fewer uninsured individuals, the need for Medicare DSH may be somewhat lessened. 

However, the Committee is very concerned that some individuals 

will still lack access to health insurance, presenting a continued 

and strong need for Medicare DSH. The committee is reluctant for 

any Medicare DSH cuts to go into effect until a drop in the uninsured rate occurs. 

Furthermore, the Committee notes that the original statutory intent for Medicare DSH still exists, and Medicare must continue to 

compensate hospitals for the additional costs per Medicare case 

that are linked to serving low-income patients in a hospital. According to analysis in its June 2007 report, MedPAC found a 

stronger and much larger relationship between Medicare costs and 

the share of low-income patients observed at urban hospitals with 

more than 100 beds. MedPAC found no positive cost relationship 

between care to the poor and costs per case for rural hospitals and 


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urban hospitals with fewer than 100 beds. It is the Committee’s intent that in continuing to compensate for the empirically justified 

level of Medicare DSH, the Secretary shall set, and vary, the 

amount in a manner such that differences in hospital size are 

taken into account. 

Effective Date 

July 1, 2016. 

Sec. 1113. Extension of Hospice Regulation Moratorium 

Current Law 

The prospective payment methodology for hospice was established in 1983. This prospective payment system (PPS) pays hospices according to the general type of care provided to a beneficiary 

on a daily basis. This rate attempts to adjust for geographic differences through a wage index adjustment. The current hospice 

wage index methodology was implemented in 1997 through the 

rule making process. The hospice wage index is updated annually 

and based upon the most current hospital wage data and any 

changes to the Office of Management and Budget’s (OMB) Metropolitan Statistical Areas (MSA) definitions. Prior to this date, the 

wage adjustment used a hospice wage index based upon 1981 hospital data collected by the Bureau of Labor Statistics (BLS). The 

change in 1997 was intended to improve the data used to account 

for disparities in geographic location and improve accuracy, reliability, and equity of Medicare payments to hospices across the 

country. 

When the data source used to adjust hospice payments for differences in the cost of labor across geographic area was changed in 

1997 from the 1983 Bureau of Labor Statistics data to the hospital 

wage data, a budget neutrality adjustment factor (BNAF) was instituted by the Secretary to prevent participating hospices from experiencing reductions in total payments as a result of the change. 

This BNAF increases payments to those hospices that would otherwise experience a payment reduction by boosting hospice payments 

to these providers by amounts that would make overall payments 

budget neutral to the levels that they would have received had the 

Secretary used the 1983 Bureau of Labor Statistics wage adjustment. According to the proposed rule published by the Department 

of Health and Human Services (HHS) in the Federal Register on 

May 1, 2008, the BNAF boosts total payments to hospice providers 

by about 4%. 

According to the Hospice FY 2010 final rule, published in the 

Federal Register on August 6, 2009, the BNAF was modified to be 

phased out over 7 years instead of 3 years. The BNAF phase-out 

would begin with a 10 percent reduction in FY 2010 and an additional 15 percent reduction for each year over the next 6 years. 

The BNAF phase-out has been controversial. Many policymakers 

rejected the prospect of payment reductions for hospice. As a result, 

the American Recovery and Reinvestment Act of 2009 (P.L. 111– 

5) included a provision that delayed the implementation of the 

phase-out of the budget neutrality adjustment factor during 

FY2009. Consequently, Medicare payments to 145 hospice during 

FY2009 will contain budget neutrality adjustments similar to those 


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in previous years. Without changes to current law, the phase-out 

will begin in FY2010, starting on October 2, 2009. Industry groups 

have also filed a lawsuit to block implementation of the final hospice payment rule. 

Proposed Law 

The provision would extend the delay on the implementation of 

the phase-out of the budget neutrality adjustment factor until October 1, 2010. 

Reason for Change 

Hospice programs served nearly one million Medicare beneficiaries and their families in 2007, providing compassionate endof-life care. A moratorium on the Medicare regulation for fiscal 

year 2010 would ensure that hospices continue to receive the same 

reimbursement rate for wages. 

Subtitle B—Provisions Related to Part B 

Part 1—Physicians Services 

Sec. 1121. Sustainable Growth Rate Reform 

Current Law 

Medicare payments for services of physicians and certain nonphysician practitioners are made on the basis of a fee schedule. The 

fee schedule assigns relative values to services that reflect physician work (i.e., time, skill, and intensity it takes to provide the 

service), practice expenses, and malpractice costs. The relative values are adjusted for geographic variation in costs. The adjusted relative values are then converted into a dollar payment amount by 

a conversion factor. The law specifies a formula, commonly referred 

to as the sustainable growth rate (SGR) system, for calculating the 

annual update to the conversion factors and the resulting fees. 

If cumulative physician expenditures are below the expenditure 

target, then an annual update is increased by at least the Medicare 

Economic Index (MEI). (Created in 1975, the MEI is an inflation 

index similar to the CPI that includes the prices of inputs required 

for the production of physician services including the physician’s 

time, the cost of hiring employees such as technicians and clerical 

staff, rent, medical equipment, supplies, and drugs.) However, if 

cumulative physician expenditures exceed the expenditure target, 

then the annual update factor for all physician payments under the 

fee schedule are reduced in an attempt to bring expenditures in 

line with the target. 

Reductions resulting from application of the SGR have been frequently overridden by legislation. Section 101 of the Medicare, 

Medicaid, and SCHIP Extension Act of 2007 (P.L. 110–173, 

MMSEA) increased the update to the conversion factor for Medicare physician 146 payment by 0.5% compared with 2007 rates for 

the first six months of 2008. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110–275) extended 

the 0.5% increase in the physician fee schedule that was set to expire on June 30, 2008, through the end of 2008 and set the update 

to the conversion factor to 1.1% for 2009. The conversion factor for 

2010 and subsequent years will be computed as if this modification 


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had never applied, so unless further legislation is passed, the update formula will require a 21% reduction in physician fees beginning January 1, 2010 and by additional amounts annually for at 

least several years thereafter. 

The calculation of the expenditure target has been criticized for 

including items that are not reimbursed under the Medicare physician fee schedule. Specifically, MedPAC and various physician organizations have suggested removing Part B drugs from the calculation of the baseline and growth targets. In its proposed rule for 

payment for physicians’ services in 2010, CMS proposed removing 

Part B drugs from those targets. 

Proposed Law 

The bill would make a number of substantial revisions to the 

SGR formula. Instead of grouping all physician expenditures together in the calculation of the annual update to the fee schedule, 

the bill would establish two separate target growth rates, one for 

evaluation and management services and preventive services and 

another for all other physician services. 

The bill would also rebase the revised formula for the purposes 

of calculating future expenditure targets. Instead of setting the expenditure target using physician expenditures since April 1, 1996, 

the proposal would base the new physician expenditure targets on 

physician expenditures beginning January 1, 2009, with future targets determined under a revised formula. The proposal would also 

exclude ‘‘incident to’’ services such as prescription drugs from the 

formula, limiting services included in the target growth rate computation to services paid for under the physician fee schedule. 

The bill would modify how updates to the fee schedule would be 

determined. For 2010, the update to the single conversion factor 

would be the percentage increase in the MEI. To calculate future 

updates, separate target growth rates would be established for two 

categories of services: evaluation and management services and all 

other services. Evaluation and management services would include 

procedure codes for Medicare covered services in the category designated Evaluation and Management in the Health Care Common 

Procedure Coding and Medicare covered preventive services. The 

service categories would apply without regard to the specialty of 

the physician providing the service. The calculation of the update 

factors would be based on physician expenditures in these categories beginning January 1, 2009. 

The application of multiple conversion factors would begin with 

2011. The initial conversion factors for 2011 would be based upon 

the single conversion factor for 2010 multiplied by the update factors for such category for 2011. To update the conversion factors for 

the two service categories in subsequent years, the conversion factor for each category for the previous year would be adjusted by the 

update established for the category. 

In determining the allowed expenditures for 2010, total 2009 actual expenditures for all services included in the target spending 

formula computation for each service category would be increased 

by the growth rate to obtain 2010 allowed expenditures for each 

service category. In subsequent years, the amount of allowed expenditures for such category would be the allowed expenditures for 


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the preceding year increased by the target growth rate (as described below) for such category and year. 

Each category would have a separate target growth rate. The target growth rate for a given year, beginning with 2010, would be 

computed and applied separately for each service category (as defined above) and would be computed using the same method for 

computing the target growth rate except that the update to the 

conversion factor for evaluation and management services as well 

as Medicare covered preventive services would be allowed to increase by the percentage growth rate of Gross Domestic Product 

(GDP) per capita plus two percentage points, while the increase for 

all other physicians’ services would be allowed to grow at the percentage rate of increase in GDP per capita plus one percentage 

point. The Secretary would publish the target growth rate for such 

succeeding year and each of the two preceding years by November 

1 of each year. 

Providers participating in the accountable care organization 

(ACO) pilot program would have the option of pursuing separate 

target growth amounts applicable only that organization. No later 

than January 1, 2012, the Secretary would develop a method that 

would (1) allow each ACO to have its own Medicare physician fee 

schedule expenditure targets and updates that would be consistent 

with the methodologies described above, and (2) provide that the 

target growth rate applicable to other physicians would not apply 

to physicians to the extent that their services are furnished 

through the ACO. This method would apply beginning with 2012. 

In determining the expenditure targets and updates for physicians 

in the ACO pilot program, the Secretary could apply the difference 

in the update on a claim-by-claim or lump sum basis and such a 

payment would be taken into account under the pilot program. 

Reason for Change 

Despite recommendations from MedPAC and others overhaul the 

SGR mechanism, Congress has consistently failed to make substantive changes to the formula. Since 2002, Congress has enacted 

a series of short-term fixes that have avoided payment reductions 

called for by the SGR, but failed to address the fundamental flaws 

with the formula. Meanwhile, the projected budgetary cost of comprehensive reform to the SGR has soared and the depth of required 

payment rate reductions have deepened. 

The Committee has long recognized that the current update 

methodology is unsustainable and must be replaced. This legislation makes needed reforms that reflect more realistic allowances 

for growth in spending on physician services, while still holding 

physicians accountable for overall spending on the services they 

provide. 

Creating two separate expenditure targets and allowing higher 

growth for evaluation and management and preventive services infuses additional resources into these services to encourage their 

use. Furthermore, removing labs, drugs, and other ‘‘incident to’’ 

services from the calculation will result in the targets being more 

closely aligned with actual spending for physician services, rather 

than drug price inflation. 

When developing the evaluation and management service category, the Secretary should give strong consideration to including 


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codes described as medical examination, evaluation, and management services that do not fall in the traditional grouping of evaluation and management services. For example, certain ophthalmology 

services are not included in the evaluation and management procedure codes, but encompass a similar array of services described by 

the evaluation and management codes. 

In addition, the Secretary should make appropriate adjustments 

to the each of the spending targets following any administrative 

adjustments to relative value units for services under the fee 

schedule. Such adjustments will avoid confounding actual growth 

for each spending category with administrative changes how physician services are valued. 

Allowing Accountable Care Organizations to have their own 

unique spending targets will increase the incentive for physicians 

to form or join such organizations. Physicians who participate in 

ACOs and choose to have their own spending targets will be held 

harmless from spending growth on physician services that occurs 

outside the ACO, further incentivizing those physicians to provide 

efficient, coordinated care. The Committee believes the connection 

between these two payment policies has great potential to reduce 

the rate of spending growth in the Medicare program and result in 

better care for Medicare beneficiaries. 

Effective Date 

January 1, 2010. 

Sec. 1122. Misvalued Codes Under the Physician Fee Schedule 

Current Law 

The Medicare physician fee schedule is based on assigning relative weights to each of the approximately 7,500 physician service 

codes used to bill Medicare. The relative value for a service compares the relative work involved in performing one service with the 

work involved in 149 providing other physicians’ services. The scale 

used to compare the value of one service with another is known as 

a resource-based relative value scale (RBRVS). 

The Centers for Medicare and Medicaid Services (CMS), which is 

responsible for maintaining and updating the fee schedule, continually modifies and refines the methodology for estimating relative 

value units (RVUs). CMS relies on advice and recommendations 

from the American Medical Association/Specialty Society Relative 

Value Scale Update Committee (RUC) in its assessments. In general, as currently implemented, increases in RVUs for a service or 

number of services lowers the resultant fees for other physician 

services. One consequence has been that the payments for evaluation and management codes, whose RVUs typically are not increased over time, have fallen relative to other codes whose RVUs 

have increased; new technologies that have been introduced into 

coverage with relatively high RVUs also contribute to this problem. 

CMS is required to review the RVUs no less than every five years. 

In determining adjustments to RVUs used as the basis for calculating Medicare physician reimbursement under the fee schedule, 

the Secretary has authority to adjust the number of RVUs for any 

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tion of new procedures. The Secretary is required publish an explanation of the basis for such adjustments. 

These adjustments are subject to a budget neutrality condition. 

With the exception of certain expenditures that are exempt by statute, the adjustments may not cause the amount of expenditures 

made under the Medicare physician fee schedule to differ from year 

to year by more than $20,000,000 from the expenditures that would 

have been incurred without such an adjustment. 

Under current law, the Secretary appoints 15 physicians (nominated by physicians organizations) to form the Practicing Physicians Advisory Council, including both participating and nonparticipating physicians and physicians practicing in rural areas 

and underserved urban areas. This council meets each quarter to 

discuss certain proposed changes in regulations and carrier manual 

instructions related to physician services identified by the Secretary. 

Section 4505(d) of the Balanced Budget Act of 1997 (P.L. 105–33, 

BBA) requires that, in developing the resource based practice expense RVUs, the Secretary (1) use generally accepted cost accounting principles, to the maximum extent possible, that recognize all 

staff, equipment, supplies, and expenses, not solely those that can 

be linked to specific procedures and actual data on equipment utilization, (2) develop a refinement method to be used during the transition, and (3) consider, in the course of notice and comment rulemaking, impact projections that compare new proposed payment 

amounts to data on actual physician practice expense. 

Proposed Law 

The Secretary would periodically identify and make appropriate 

adjustments to the relative values for the services identified as 

being potentially misvalued. The Secretary would examine the following, as appropriate: (1) codes (and families of codes as appropriate) for which there has been the fastest growth; (2) codes (and 

families of codes as appropriate) that have experienced substantial 

changes in practice expenses; (3) codes for new technologies or 

services within an appropriate period (such as three years) after 

the relative values are initially established for such codes; (4) multiple codes that are frequently billed in conjunction with furnishing 

a single service; (5) codes with low relative values, particularly 

those that are often billed multiple times for a single treatment; (6) 

codes that have not been subject to review since the implementation of the RBRVS (the so-called ‘Harvard-valued codes’); and (7) 

such other codes determined to be appropriate by the Secretary. 

In conducting the review and adjustments, (1) the Secretary 

could use existing processes to receive recommendations on the review and appropriate adjustment of potentially misvalued services; 

(2) the Secretary could conduct surveys, other data collection activities, studies, or other analyses as appropriate to facilitate the review and appropriate adjustment; (3) the Secretary could use analytic contractors to identify and analyze potentially misvalued services identified, conduct surveys or collect data, and make recommendations on the review and appropriate adjustment of services; (4) the Secretary could coordinate the review and appropriate 

adjustment with the existing periodic (no less often than every 5 

years) review of the relative values; (5) the Secretary could make 


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appropriate coding revisions (including using existing processes for 

consideration of coding changes) that could include consolidation of 

individual services into bundled codes for payment under the fee 

schedule; and (6) the Secretary would apply the existing budget 

neutrality condition that applies to relative value adjustments to 

this proposal. 

The Secretary would establish a process to validate relative value 

units under the fee schedule. The evaluation process could include 

validation of work elements (such as time, mental effort and professional judgment, technical skill and physical effort, and stress due 

to risk) involved with furnishing a service and could include validation of the pre, post, and intra-service components of work. The validation of work relative value units would include a sampling of 

codes for services that is the same as the potentially misvalued 

codes described above. 

The Secretary could conduct the validation using methods described above to identify potentially misvalued services, as the Secretary determines to be appropriate. Following the evaluation, the 

Secretary would make appropriate adjustments to the work relative value units under the fee schedule. The same budget neutrality provision would apply to adjustments to relative value units 

made as a result of the evaluation. 

For FY2010 and each subsequent fiscal year, $20 million would 

be appropriated for the CMS Program Management Account to 

carry out the provisions described above. The amounts appropriated for a fiscal year would be available until expended. 

The provision also clarifies how certain existing statutes might 

pertain to the proposals contained in this section. Chapter 35 of 

title 44 of the United States Code, pertaining to the Coordination 

of Federal Information Policy, and the provisions of the Federal Advisory Committee Act (5 U.S.C. App.) would not apply to the modifications proposed in this section. Notwithstanding any other provision of law, the Secretary could implement the proposed modifications in order to identify, adjust, and evaluate potentially 

misvalued codes by program instruction or otherwise. Section 

4505(d) of BBA, which placed requirements on how the Secretary 

developed the practice expense RVUs, would be repealed. Except 

for provisions related to confidentiality of information, the provisions of the Federal Acquisition Regulation would not apply to this 

section or the amendment made by this section. Finally, the statute 

establishing the Practicing Physicians Advisory Council would be 

repealed. 

Reason for Change 

Traditionally the five-year review has led to more increases in 

work RVUs than decreases. MedPAC and other observers have 

stated that more attention needs to be given to the accurate valuation of services in order to maintain the integrity of the fee schedule. 

The provision gives clearer direction to the Secretary to maintain 

accurate valuation of services and prioritizes identification of potentially misvalued codes. For instance, rapid rises in the volume 

of administratively priced services can be a warning sign of incorrect incentives; this problem can be addressed by giving the Secretary authority to impose a downward adjustment in the price of 


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rapidly rising services (after taking into account evidence of clinical 

benefit that would justify growth) to be reconsidered by outside 

consultants during the five year review. The provision also addresses concerns that CMS does not have sufficient resources or administrative authority to conduct such reviews; among other improvements, providing additional resources will promote collection of 

more timely and accurate data that can be used to improve valuation of services. 

Effective Date 

Date of enactment. 

Sec. 1123. Payments for Efficient Areas 

Current Law 

Medicare uses a fee schedule to reimburse physicians for the 

services they provide. In certain circumstances, physicians receive 

an additional payment to encourage targeted activities. These bonuses, typically a percentage increase above the Medicare fee 

schedule amounts, can be awarded for a number of activities including demonstrating quality achievements, participating in electronic prescribing, or practicing in underserved areas. 

Proposed Law 

The proposal would create new incentive payments for ‘‘efficient’’ 

areas. Providers delivering services on or after January 1, 2011, 

and before January 1, 2013 who practice in an area identified as 

an ‘‘efficient’’ area would receive an additional payment (on a 

monthly or quarterly basis) equal to 5% of the payment amount for 

the Medicare Part B services. 

Based upon available data, the Secretary would identify those 

counties or equivalent areas in the United States in the lowest fifth 

percentile of utilization based on per capita spending for Medicare 

Part A and part B services provided in the most recent year for 

which data are available as of the date of the enactment. The Secretary would standardize per capita spending to eliminate the effect of geographic adjustments in payment rates. 

For purposes of the additional payment for providers in ‘‘efficient’’ areas, if the Secretary were to use the 5-digit postal ZIP 

Code where the service is furnished, the dominant county of the 

postal ZIP Code would be used to determine whether the postal 

ZIP Code is in a county described as an ‘‘efficient’’ area. There 

would be no administrative or judicial review respecting (1) the 

identification of a county or other area as an efficient area; or (2) 

the assignment of a postal ZIP Code to a county or other area designated as an efficient area. 

The Secretary would identify counties or areas designated as ‘‘efficient’’ as part of the proposed and final rule to implement the 

physician fee schedule for the applicable year. The Secretary would 

post the list of counties identified as ‘‘efficient’’ on the CMS 

website. 

Reason for Change 

In certain regions of the country, Medicare beneficiaries use a 

very low volume of services. This could be caused by problems with 


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access to physician services or highly efficient practice by local physicians. The incentive payments would either address problems 

with access or reward efficient practice. 

Effective Date 

January 1, 2011. 

Sec. 1124. Modifications to the Physician Quality Reporting Initiative (PQRI) 

Current Law 

Tax Relief and Health Care Act of 2006 (TRHCA, P.L. 109–432) 

required the establishment of a physician quality reporting system 

that would include an incentive payment, based on a percentage of 

the allowed Medicare charges for all such covered professional services, to eligible professionals who satisfactorily report data on quality measures. CMS named this program the Physician Quality Reporting Initiative (PQRI). The Medicare Improvements for Patients 

and Providers Act of 2008 (MIPPA, P.L. 110–275) made this program permanent and extended the bonuses through 2010; the incentive payment was increased from 1.5% of total allowable 

charges under the physician fee schedule in 2007 and 2008 to 2% 

in 2009 and 2010. 

Providers that successfully report for services provided in calendar year 2009 will receive an incentive payment of two percent 

of total allowable charges for the physician fee schedule. Providers 

may choose claims-based reporting or registry-based reporting. For 

claims-based reporting, providers seeking incentive payments for 

the entire calendar year may meet the requirement by reporting on 

one measures group for a sample of 30 consecutive Medicare Part 

B fee-for-service patients (FFS), or report for one measures group 

for 80% of applicable Medicare Part B FFS patients. For providers 

seeking to report for the six-month period beginning July 1, 2009, 

similar criteria apply for those that report through CMS approved 

registries. 

Proposed Law 

The bill would modify the PQRI to include a feedback program 

for physicians, integrate PQRI and electronic health record (EHR) 

reporting, and extend the years of bonus payments. Not later than 

January 1, 2011, the Secretary would develop and implement a 

mechanism to provide timely feedback to eligible professionals on 

the performance of the eligible professional with respect to satisfactorily submitting data on quality measures under the PQRI program. 

Not later than January 1, 2011, the Secretary would establish 

and have in place an informal process for eligible professionals to 

appeal the determination that an eligible professional did not satisfactorily submit data on quality measures for the PQRI program. 

The bill would integrate physician quality reporting under the 

PQRI and EHR reporting relating to the meaningful use of EHR. 

The integration would consist of the following: (1) the development 

of measures that would both demonstrate meaningful use of an 

electronic health record for purposes of EHR reporting and provide 

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vidual; (2) the collection of health data to identify deficiencies in 

the quality and coordination of care for Medicare beneficiaries; and 

(3) other activities as specified by the Secretary. The Secretary 

would develop such a plan no later than January 1, 2012. 

Incentive payments under the PQRI program would be extended 

through 2012; for each of the years 2009 through 2012, the bonus 

would be 2% of Part B payments. 

Reason for Change 

The PQRI program has the potential to be a valuable tool in 

measuring the quality of services furnished by physicians to Medicare beneficiaries. However, its potential usefulness has been undermined by problems with the way the initiative has been implemented. This section addresses those problems, extends the payment initiative for several years, and improves the program by integrating it with the incentive program for the adoption and use of 

health information technology. 

Effective Date 

Date of enactment. 

Sec. 1125. Adjustment to Medicare Payment Localities 

Current Law 

The Medicare fee schedule pays providers differently according to 

the geographic location, known as a Medicare physician payment 

locality, in which the provider practices. At the time when they 

were originally defined the costs of providing physician services 

were relatively consistent within each payment locality; sub-regions 

of a state were designated as separate payment localities only if 

the data showed a marked difference between the costs in that 

area compared with the rest of the state. 

Each year, the Centers for Medicare and Medicaid Services 

(CMS) uses data from a number of sources to calculate separate geographic practice cost indices (GPCIs) for each payment locality for 

each of three component inputs required to produce physician services (physician work, practice expense, and medical malpractice insurance). For each locality, these 3 GPCIs are then combined to 

produce a weighted average index of relative costs, called the geographic adjustment factor (GAF). 

In constructing the payment localities, the Health Care Financing Administration (HCFA, now CMS) used an iterative criteria 

that compared the relative cost (the GAF) of a potentially distinct 

locality with the weighted average costs (GAFs) in the rest of the 

state. Localities that had GAFs at least 5% higher than the rest 

of the state were designated as a separate locality; this process was 

repeated until this condition was not met, whereupon the remaining regions of the state were combined into one locality. In 1996, 

HCFA reduced the number of Medicare localities for physician payment by aggregating several existing contiguous localities with 

similar costs and combining other localities to create a single payment area for the entire state. As a result, there are currently 89 

Medicare physician payment localities based on counties or aggregates of counties across the 50 states; some localities are the enVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00332 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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tirety of the state while other states may have several payment localities. None of the payment localities cross state lines. 

Economic conditions have affected parts of the country differently 

in the years since the payment localities were created. If localities 

were to be created based on data from recent years using the original methodology, the resulting number and composition of the payment localities might not be the same as the ones that currently 

exist. 

Proposed Law 

The payment localities used as the basis for the geographic adjustment of Medicare physician payments under the fee schedule 

would be changed in the state of California. Under the proposal, 

payments to California physicians would transition from a system 

based on the current localities to one based on Metropolitan Statistical Areas (MSAs). For services furnished on or after January 1, 

2011, the Secretary would revise the Medicare physician payment 

areas for the State of California to be based on Metropolitan Statistical Areas (MSA). 

The methodology for constructing the new payment areas would 

be similar to the original methodology, but the Core-Based Statistical Areas-Metropolitan Statistical Areas, as defined by the Office 

of Management and Budget (OMB), would be used as the geographic units for comparing GAFs. First, the Secretary would list 

all MSAs within California by their GAFs in descending order. In 

the first iteration, the Secretary would compare the GAF of the 

highest cost MSA in the State to the weighted-average GAF of the 

group of remaining MSAs in the State. If the ratio of the GAF of 

the highest cost MSA to the weighted-average GAF of the rest of 

State is 1.05 or greater than the highest cost MSA becomes a separate fee schedule area. In each subsequent iteration, the Secretary 

would compare the MSA of the next-highest GAF to the weightedaverage GAF of the group of remaining MSAs. If the ratio of the 

next-highest MSA’s GAF to the weighted-average of the remaining 

lower cost MSAs is 1.05 or greater, that MSA would become a separate fee schedule area. The iterative process would continue until 

the ratio of the GAF of the highest-cost remaining MSA to the 

weighted-average of the remaining lower-cost MSAs is less than 

1.05, and the remaining group of lower cost MSAs would form a 

single fee schedule area. If two MSAs were to have identical GAFs, 

they would be combined in that step of the iterative comparison. 

The provision would require that no GPCIs be reduced during 

the first 5 years of the transition from the former county-based 

payment localities to the MSA-based fee schedule areas. For services furnished in California on or after January 1, 2011 and before 

January 1, 2016, the Secretary would increase any such index to 

the county-based fee schedule area value on December 31, 2009, if 

the index under the new calculation would be less than the value 

on January 1, 2010. 

The new fee schedule areas would be subject to periodic review 

and adjustments. Not less often than every 3 years, the Secretary 

would review and update the California Rest-of-State fee schedule 

area using MSAs as defined by the OMB applying the iterative 

methodology described above. This revision would be made effective 

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justment factors required under current law for California for 2012 

and subsequent periods and would be linked to the review of the 

GPCIs for all fee schedule areas that occurs not less often than 

every 3 years. Upon request, the Secretary would make any countylevel or MSA-derived data used to calculate the geographic practice 

cost index available to the public. 

Reason for Change 

A GAO report issued July 2007 confirmed significant problems 

with inaccurate pricing that result from current methodology used 

to establish Medicare’s payment localities. While the problem is not 

limited to California, during the last 15 years that state has experienced some of the largest economic and demographic shifts, leading 

to large disparities between local costs and geographic price adjustments. Revising and updating the state’s payment localities to reflect costs at the MSA level will achieve the greatest balance between price accuracy and administrative feasibility. In order to 

minimize the effect of resources shifting from one area of the state 

to another that result from this change, the legislation provides 

temporary relief to counties in California that would be adjusted 

downward. 

Effective Date 

January 1, 2010. 

Part 2—Market Basket Updates 

Sec. 1131. Incorporating Productivity Improvements into Market 

Basket Updates That Do Not Already Incorporate Such Improvements 

Current Law 

Medicare pays for hospital outpatient department services under 

its outpatient prospective payment system (OPPS). Generally, 

Medicare’s OPPS base payment amount is increased each year by 

an annual update that is linked to projected changes in specific 

market basket (MB) indices which are designed to measure the 

change in the price of goods and services purchased by the provider. Starting in CY2009, hospitals paid under OPPS that do not 

submit required quality data will have the applicable MB percentage reduced by two percentage points. The reduction would apply 

for that year and would not be taken into account in subsequent 

years. 

Ambulance services are paid on the basis of a national fee schedule, which is being phased-in. The national fee schedule is fully 

phased-in for air ambulance services. For ground ambulance services, payments through 2009 are equal to the greater of the national fee schedule or a blend of the national and regional fee 

schedule amounts. The portion of the blend based on national rates 

is 80% for 2007–2009. In 2010 and subsequently, the payments in 

all areas will be based on the national fee schedule amount. The 

fee schedule amounts are updated each year by the consumer price 

index for all urban consumers (CPI-U). 

Starting January 1, 2008, Medicare will pay for surgery-related 

facility services provided in an ambulatory surgery center (ASC) 

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ment system will be implemented over a four-year transition period. Beginning in CY2010, the ASC conversion factor will be updated annually using the CPI-U. This update will be subject to a 

2 percentage point reduction if required quality data are not provided. 

Clinical lab services are paid on the basis of area-wide fee schedules. The fee schedule amounts are periodically updated. The annual clinical laboratory test fee schedule update adjustment for 

2009–2013 will be the percentage increase or decrease in the CPIU minus 0.5 percentage points. 

Except in Competitive Acquisition Areas where payments for 

items and services are to be based on suppliers’ bids, Medicare 

pays for durable medical equipment (DME) on the basis of fee 

schedules. Items are classified into five groups for determining the 

fee schedules and making payments: (1) inexpensive or other routinely purchased equipment (defined as items costing less than 

$150 or which are purchased at least 75% of the time); (2) items 

requiring frequent and substantial servicing; (3) customized items; 

(4) oxygen and oxygen equipment; and (5) other items referred to 

as capped rental items. In general, fee schedule rates are established locally and are subject to national limits. In general, fee 

schedule amounts are updated annually by the CPI-U. Updates 

were eliminated for 1998–2000; payments were increased by the 

CPI-U for 2001; and payments were frozen for 2002. MMA eliminated the updates for 2004–2008. In 2009, for items and services 

selected before July 1, 2008 to be part of a Competitive Acquisition 

Program for durable medical equipment, prosthetics, orthotics, and 

supplies (DMEPOS), the update was a decrease of 9.5 percent. This 

decrease applied across geographic areas and was not restricted to 

Competitive Acquisition Areas. This adjustment allowed provisions 

in the Medicare Improvements for Patients and Providers Act of 

2008 (MIPPA, P.L.110–275) delaying the implementation of the 

Competitive Acquisition Program to be budget neutral. For items 

and services that had not been selected before July 1, 2008 to be 

part of the Competitive Acquisition Program, the payment update 

for 2009 was the CPI-U. For 2010 through 2013, the updates are 

to be the CPI-U. In 2014, if an item received a payment decrease 

in 2009, the update is to be equal to the CPI-U plus 2 percentage 

points, otherwise the update is to be the CPI-U. Starting in 2015, 

the update is to be the CPI-U. Payment updates for DME do not 

include an adjustment for productivity. 

Proposed Law 

Starting in CY2010, the OPPS, ambulance services, clinical laboratory services updates would be subject to the productivity adjustment established earlier in the legislation and applicable to certain Part A providers, including IPPS hospitals. Starting in 

CY2010, to the extent an annual percentage change factor applies 

to ASC services, it would include the productivity factor established 

earlier in legislation. 

Reason for Change 

The annual update to the Medicare physician fee schedule already incorporates adjustments for gains in productivity. This provision creates uniformity across Medicare providers by creating a 


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productivity adjustment for other Part B providers. This adjustment will encourage greater efficiency in health care provision, 

hold Medicare providers accountable for achieving productivity 

gains on par with the overall economy, and more accurately align 

Medicare payments with provider costs. 

Effective Date 

January 1, 2010. 

Part 3—Other Provisions 

Sec. 1141. Rental and Purchase of Power-driven Wheelchairs 

Current Law 

Wheelchairs, including power-driven wheelchairs, are covered by 

Medicare Part B under the capped-rental category of the durable 

medical equipment (DME) benefit. Medicare pays for power-driven 

wheelchairs in one of two ways: either Medicare will pay the supplier a monthly rental amount during the beneficiary’s period of 

medical need (though payments are not to exceed 13 continuous 

months), or payment is made on a lump-sum basis at the time the 

supplier furnishes the chair, if the beneficiary chooses the lumpsum payment option. The same payment choice applies to replacement power-driven wheelchairs as well. 

Medicare covers over 600 power wheelchair models under 42 procedure codes (Healthcare Common Procedure Coding System, 

HCPCS). Power wheelchairs are further classified into 3 broad 

groups based on their reported performance in categories such as 

speed, range of travel and the height of the vertical obstruction 

they can climb. Group 3 must meet the highest performance standards. Group 2 and Group 1 must meet intermediate and the lowest 

performance requirements, respectively. For example, a group 3 

wheelchair must be able to travel a minimum of 12 miles on a single charge of its batteries, while the minimum travel requirements 

for Group 2 and Group 1 chairs are 7 and 5 miles, respectively. 

The Secretary is required to establish a competitive acquisition 

program for specified durable medical equipment; the competitive 

acquisition program would replace the Medicare fee schedule payments. The program is to be phased in, starting in 10 of the largest 

metropolitan statistical areas (MSAs) in 2009; expanding to 80 of 

the largest MSAs in 2011 and remaining areas after 2011. The Secretary is permitted to phase in first items and services with the 

highest cost and highest volume, or those items and services that 

the Secretary determines to have the largest savings potential first, 

which includes power-driven wheelchairs. 

Proposed Law 

This provision would restrict the ‘lump-sum’ payment provision 

for new and replacement power-driven wheelchairs to those recognized by the Secretary as classified within group 3 or higher. The 

provision would be effective for chairs furnished on or after January 1, 2010, but would not apply to competitive bidding areas 

where bids had been submitted before October 1, 2010. 


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Reason for Change 

By eliminating the first month full purchase option, the provision 

reduces waste in the Medicare program as there are a sizeable 

number of wheelchairs which are purchased in the first month, but 

end up not needed by the beneficiary beyond the 13-month window 

during which rental payments would otherwise be made. Furthermore, this change protects beneficiaries from the burden of paying 

the cost-sharing associated with the wheelchair in one lump sum, 

as would be the case under a first-month purchase. 

The Committee is concerned about the practical requirements of 

this provision for patients whose complex medical conditions justify 

the outright purchase of mobility devices rather than short- or 

long-term rentals. These special needs patients will require wheelchairs that are highly customized, use complex technologies, and 

are in use for very long periods—if not for the rest of the patient’s 

life. As such, the provision continues to allow for first-month purchase of complex mobility devices classified as group 3 or higher. 

Effective Date 

January 1, 2011. 

Sec. 1142. Extension of Payment Rule for Brachytherapy 

Current Law 

The Medicare Prescription Drug, Improvement and Modernization Act (MMA, P.L. 108–173) required Medicare’s outpatient prospective payment system to make separate payments for specified 

brachytherapy sources. As mandated by the Tax Relief and Health 

Care Act of 2006 (TRHCA, P.L. 109–432), this separate payment 

will be made using hospitals’ charges adjusted to their costs until 

January 1, 2008. The Medicare, Medicaid, and SCHIP Extension 

Act of 2007 (MMSEA, P.L. 110–173) extended cost reimbursement 

for brachytherapy services until July 1, 2008. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 

110–275) extended cost reimbursement for brachytherapy until 

January 1, 2010. 

Proposed Law 

The provision would extend cost reimbursement for 

brachytherapy until January 1, 2012. 

Reason for Change 

This section guarantees access to care for beneficiaries who need 

brachytherapy. 

Effective Date 

Date of enactment. 

Sec. 1143. Home Infusion Therapy Report to Congress 

Current Law 

Infusion therapy involves the administration of medication 

through a needle or a catheter. If a physician determines that it 

is medically appropriate for a particular patient, some infusion 

therapies may be provided in a patient’s home. Infusion therapies 


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that can be provided in the home include such things as antibiotic 

therapy, chemotherapy, pain management, and hydration therapy. 

Infusion drugs administered in a patient’s home are covered 

under the Medicare Part D drug benefit. Medicare Part D does not, 

however, cover supplies, equipment or professional services associated with home infusion therapy. 

Proposed Law 

The provision would require the Medicare Payment Advisory 

Commission (MedPAC) to submit a report to Congress not later 

than 12 months after the date of enactment. The report would be 

required to include (a) an analysis of the scope of coverage for 

home infusion therapy services (and the scope of services provided) 

in traditional Medicare, Medicare Advantage, the Veterans Health 

Administration, and among private payers; (b) the benefits and 

costs of providing such coverage under the Medicare program, including a calculation of the potential savings achieved through 

avoided or shortened hospital or nursing home stays; (c) an assessment of data on home infusion therapy that might be used to construct payment mechanisms under Medicare; and (d) recommendations, if any, on the structure of a payment system under the Medicare program for home infusion therapy services, including an 

analysis of MA and private plan payment methodologies for home 

infusion therapy and their applicability to the Medicare program. 

Reason for Change 

The Committee is concerned about beneficiary access to home infusion therapy services under Medicare. While Part D pays for the 

infusion therapy medications, it does not cover the associated supplies or services to administer the medications. The Secretary has 

directed Part D plans to ensure that beneficiaries have access to 

an entity—such as a home health agency or outpatient facility— 

where these supplies and services are available before dispensing 

home infusion drugs. But receiving infusion drugs through a home 

health agency or outpatient facility may not be optimal for many 

beneficiaries. This study would assist the Committee in understanding the most appropriate course of action to ensure that beneficiaries have proper access to home infusion therapy services. 

Effective Date 

Date of enactment. 

Sec. 1144. Require Ambulatory Surgical Centers (ASCs) to Submit 

Cost Data and Other Data 

Current Law 

Ambulatory surgery centers (ASCs) must meet certain health, 

safety, and other specified standards in order to participate in 

Medicare. The Centers for Medicare and Medicaid Services is implementing a new payment system for ASCs starting in January 1, 

2008. The new payment system, which will be phased in over a 4- 

year period, uses the ambulatory payment classification groups 

that are the basis for Medicare’s outpatient prospective payment 

system (OPPS) for hospital outpatient departments. ASCs have 

never been required to submit cost reports. In March 2009, the 


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Medicare Payment Advisory Commission recommended that Congress require ASCs to submit cost data and quality data that would 

allow for an effective evaluation of the adequacy of Medicare’s payment rates. 

Proposed Law 

The Secretary would require ASCs to submit reports on their facility costs as a condition for agreeing to participate in Medicare. 

The specifications for this data would take into account the requirements for hospital cost data. No later than 3 years from enactment, an ASC cost reporting form would be developed. The ASC 

cost reports would be periodically audited. The requirements would 

apply to agreements applicable to cost reporting periods beginning 

18 months after the date the Secretary develops the cost reporting 

form. The Secretary would require ASCs to report quality data, including data on health care associated infections. The amendment 

would apply starting 2012. 

Reason for Change 

The number of Medicare-certified ASCs has increased substantially in recent years, growing at an annual rate of 6.7 percent 

from 2002 to 2007. Spending per beneficiary also increased substantially during that time period, growing at an average annual 

rate of 8.4 percent. ASCs received $2.9 billion in payments from 

Medicare and beneficiary cost-sharing in 2007. Ninety-one percent 

of ASCs have at least one physician owner and MedPAC has advised that the presence of physician ownership of ASCs may influence referral patterns. 

MedPAC uses cost data to analyze the adequacy of Medicare payments in many areas. However, cost data are not available for 

ASCs, thus limiting MedPAC’s ability to assess payment adequacy. 

This provision requires collection of cost report data, which will 

allow for proper assessments of Medicare’s payment adequacy for 

ASCs. This provision also follows MedPAC’s recommendation to require reporting of quality data. 

Effective Date 

The requirement to submit cost reports is effective 18 months 

after the Secretary develops a cost report. The quality reporting requirement is effective January 1, 2012. 

Sec. 1145. Treatment of Certain Cancer Hospitals 

Current Law 

Eleven cancer hospitals are exempt from the inpatient prospective payment system (IPPS) used to pay inpatient hospital services 

provided by acute care hospitals. Historically, they have been paid 

on a reasonable cost basis, subject to certain payment limitations 

and incentives. These hospitals are also held harmless under the 

outpatient prospective payment system (OPPS) and will not receive 

less from Medicare under this payment system than under the 

prior outpatient payment system. Under OPPS, Medicare pays for 

outpatient services using ambulatory payment classification (APC) 

groups. 


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Proposed Law 

The Secretary would be required to determine if the costs incurred by cancer hospitals with respect to APCs exceed those costs 

incurred by other hospitals reimbursed under OPPS. If the costs in 

cancer hospitals exceed the costs incurred by other hospitals, the 

Secretary would be required to provide for an appropriate adjustment for cancer hospitals for services furnished starting January 1, 

2011. 

Reason for Change 

The Committee is concerned that the cost of outpatient services 

at PPS-exempt cancer hospitals is greater than that at other outpatient hospitals and that these higher costs are not currently reflected and adequately reimbursed under the current payment system. This provision directs CMS to assess whether such a cost differential exists, and if so, to remedy it. The Committee notes that 

this provision is in addition to the existing hold harmless provision 

under 1833(t)(7)(D)(ii) of the Social Security Act as the hold harmless will continue to apply in the situation where the combination 

of existing payments and any payment change under this section 

results in a payment less than the pre-BBA amount. 

Effective Date 

January 1, 2011. 

Sec. 1146. Medicare Improvement Fund 

Current Law 

Section 188 of MIPPA established the Medicare Improvement 

Fund (MIF), available to the Secretary to make improvements 

under the original fee-for-service program under Parts A and B for 

Medicare beneficiaries. Under current law, $2.29 billion from the 

fund are available for services furnished during FY2014 and an additional $19.9 billion are available for FY2014 through FY2017. 

Proposed Law 

The proposal would modify the amount of monies in the fund so 

that $8 billion would be available for the period beginning with fiscal year 2011 and ending with fiscal year 2019. 

Reason for Change 

Over the course of several years, money has been set aside in the 

MIF to fund policies that would improve and modernize the Medicare program. This provision would fulfill this intent by using the 

MIF to offset important investments in Medicare made by this bill. 

The remaining $8 billion will be available to fund increases in payment rates implemented under Section 1158, regarding Medicare 

geographic payment adjustments. 

Effective Date 

Date of enactment. 


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Sec. 1147. Payment for Imaging Services 

Current Law 

Under the Medicare fee schedule, some services have separate 

payments for the technical component and the professional component. For example, imaging procedures generally have two parts: 

the actual taking of the image (the technical component), and the 

interpretation of the image (the professional component). Medicare 

pays for each of these components separately when the technical 

component is furnished by one provider and the professional component by another. When both components are furnished by one 

provider, Medicare makes a single global payment that is equal to 

the sum of the payment for each of the components. 

CMS’s method for calculating the Medicare fee schedule reimbursement rate for advanced imaging services assumes that imaging machines are operated 25 hours per week, or 50% of the time 

that practices are open for business. Setting the equipment use factor at a lower—rather than at a higher—rate has led to higher payment for these services. Citing evidence showing that the utilization rate is 90%, rather than the 50% previously assumed, 

MedPAC is urging CMS to use the higher utilization rate in the 

calculation of fee schedule payments for advanced imaging services. 

According to MedPAC and the Government Accountability Office 

(GAO), there are opportunities to improve the efficiency of the 

Medicare fee schedule. In 2005, MedPAC recommended reducing 

certain fees to account for efficiencies and savings from the technical preparation and supplies achieved when multiple imaging 

services are furnished sequentially on contiguous body parts during 

the same visit. Starting January 1, 2006, physicians receive the full 

technical component fee for the highest paid imaging service in a 

visit, but technical component fees for additional imaging services 

are reduced by 25%. 

The work relative value units in the Medicare physician fee 

schedule are developed with input from the physician community. 

Refinements in existing values and the establishment of values for 

new services are included in the annual fee schedule updates. The 

refinement and update process is based in part on recommendations made by the American Medical Association’s Specialty Society 

Relative Value Update Committee (RUC), which receives input 

from many physician specialty societies. Current law requires a review of the relative values every five years. 

Section 1834(e)(1)(B) of the SSA defines advanced diagnostic imaging services to include diagnostic magnetic resonance imaging, 

computed tomography, and nuclear medicine (including positron 

emission tomography), and other diagnostic imaging services as 

specified by the Secretary in consultation with physician specialty 

organizations and other stakeholders. 

Proposed Law 

The utilization rate for calculating the payment for advanced diagnostic imaging equipment as defined under current law would be 

increased from 50% to 75%. For single session imaging involving 

continuous body parts, the proposal would reduce the technical 

component fees for additional imaging services to 50%. These modiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00341 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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fications would apply to services furnished on or after January 1, 

2011. 

Reason for Change 

MedPAC and other observers have expressed concerns that sizeable increases in the volume of physician services, particularly for 

imaging services, need to be addressed. Recent MedPAC analysis 

found problems with the current calculation of practice expenses 

for certain imaging services. CMS assumes that the equipment is 

used half the time the practice is open for business. MedPAC found 

that most advanced imaging equipment is actually in use close to 

90 percent of the time. Low assumptions about equipment use artificially inflate the price Medicare pays for imaging services. 

MedPAC has recommended increasing the utilization assumption 

for advanced imaging equipment to more accurately reflect actual 

utilization rates. 

MedPAC has also recommended reducing the technical component for a second image on a contiguous body part. When a second 

image on an adjacent body part is taken, the clerical time, preparation, and supplies needed for the second image are significantly reduced. In 2006, CMS administratively proposed to reduce payment 

for the second image by 50 percent, but eventually implemented a 

smaller 25 percent discount. By increasing the discount to 50 percent, this provision would better reflect costs of performing studies 

on multiple body parts and bring Medicare payment policy in line 

with private payers. 

Effective Date 

January 1, 2011. 

Sec. 1148. Durable Medical Equipment Program Improvements 

Current Law 

The Secretary is prohibited from issuing or renewing a provider 

number for payment of Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) claims for a supplier unless the supplier provides the Secretary with a surety bond of not 

less than 550,000. The Secretary may waive this requirement in 

the case of a supplier that provides a comparable surety bond 

under State law. The final regulation exempts certain individuals 

from the surety bond requirement, including certain physicians and 

non-physician practitioners, physical and occupational therapists, 

state-licensed orthotic and prosthetic personnel, and governmentowned suppliers. 

Medicare Part B pays for certain items of durable medical equipment (DME) including oxygen and oxygen equipment. The Deficit 

Reduction Act (DRA, P.L. 109–171) changed how long Medicare 

would make rental payments for oxygen equipment. It changed 

from the entire period of medical need, to a rental period of 36 

months. The Medicare Improvements for Patients and Providers 

Act of 2008 (MIPPA, P.L. 110–275) requires suppliers to continue 

furnishing the equipment during any period of medical need for the 

remainder of the reasonable useful lifetime of the equipment, 

which is defined by the Secretary as 5 years (or 60 months). 


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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108–173) required the Secretary to establish and implement quality and accreditation requirements for 

Medicare suppliers of DMEPOS. The Medicare Improvements for 

Patients and Providers Act of 2008 (MIPPA, P.L. 110–275) exempted a group of health care professionals from having to become accredited unless the Secretary determined the standards were designed specifically to be applied to those professionals. The Secretary was given authority to exempt certain professionals from the 

accreditation requirement if the Secretary determined that licensing, accreditation, or other mandatory quality requirements applied 

to those professionals. The provision identified some of the professionals subject to the provision, including: physicians; physical or 

occupational therapists; physicians assistants; nurse practitioners; 

clinical nurse specialists; orthotists; and prosthetists. 

Proposed Law 

Surety Bond: This provision would waive the surety bond requirement for a pharmacy that (1) supplies durable medical equipment, prosthetics, orthotics, and supplies, (2) has been issued a 

provider number for at least 5 years, and (3) has not received an 

adverse action, as defined in the ‘Special payment rules for items 

furnished by DMEPOS suppliers and issuance of DMEPOS supplier billing privileges’ in the Code of Federal Regulations. 

Oxygen Equipment: This provision would modify the time period 

during which the supplier would be required to furnish medically 

necessary oxygen and oxygen equipment. As of the 27th month of 

the 36 month rental period, the supplier furnishing the equipment 

would be required to continue furnishing the equipment (either directly or through arrangements with other suppliers) during any 

subsequent period of medical need for the remainder of the reasonable useful lifetime of the equipment, as determined by the Secretary, regardless of the location of the individual, unless another 

supplier accepted the responsibility to furnish equipment during 

the remainder of the period. This provision would be effective upon 

enactment and would apply to equipment furnished to individuals 

for whom the 27th month of a continuous period of use occurred 

on or after July 1, 2010. 

This provision would also allow a beneficiary to begin a new 36- 

month rental period if the supplier who had been furnishing oxygen and oxygen equipment to the beneficiary was declared bankrupt and its assets were liquidated and at the time of the declaration and liquidation more than 24 months of rental payments had 

been made. 

Accreditation: This provision would exempt pharmacies enrolled 

as Medicare DMEPOS suppliers from the accreditation requirement for the purposes of supplying diabetic testing supplies, canes, 

and crutches. Any supplier that had submitted an application for 

accreditation before August 1, 2009 would be deemed as meeting 

applicable standards and accreditation requirements under the 

subparagraph until the independent accreditation organization took 

action on the suppliers application. 


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Reason for Change 

This section will make a number of changes to the durable medical equipment program that will improve the program for beneficiaries. The provisions regarding surety bonds and accreditation 

recognize the fact that very few pharmacies are involved in fraud 

associated with the DME program, and the important role pharmacies play in ensuring beneficiaries have access to certain types 

of medical equipment. Given that income from DME represents a 

small portion of total revenues for most pharmacies, the Committee 

is concerned that the cost of complying with the surety bond and 

accreditation requirements could cause many pharmacies to stop 

furnishing these items to Medicare beneficiaries. 

In addition, this section will make needed changes to the way 

CMS has implemented the 36 month rental cap on oxygen equipment. Right now, when a beneficiary moves from one area of the 

country to another after reaching the 36-month rental cap, the supplier is obligated to continue servicing the equipment through the 

remainder of the useful life of the equiptment. Beneficiaries who 

move just prior to hitting the 36-month rental cap are not afforded 

the same protection. Extending the requirement that suppliers continue servicing equipment to earlier in the rental period will protect beneficiaries who move shortly before hitting the 36-month 

rental cap. This section also provides critical beneficiary protections 

in instances where an oxygen supplier goes out of business. 

Effective Date 

Date of enactment. 

Sec. 1149. MedPAC Study and Report on Bone Mass Measurement 

Current Law 

No provision. 

Proposed Law 

The Medicare Payment Advisory Commission would conduct a 

study regarding bone mass measurement, including computed tomography, duel-energy x-ray absorptiometry, and vertebral fracture assessment. The study would focus on the following: (1) an assessment of the adequacy of Medicare payment rates for such services, taking into account costs of acquiring the necessary equipment, professional work time, and practice expense costs; (2) the 

impact of Medicare payment changes since 2006 on beneficiary access to bone mass measurement benefits in general and in rural 

and minority communities specifically; (3) a review of the clinically 

appropriate and recommended use among Medicare beneficiaries 

and how usage rates among such beneficiaries compares to such 

recommendations; and (4) in conjunction with the findings under 

(3), recommendations, if necessary, regarding methods for reaching 

appropriate use of bone mass measurement studies among Medicare beneficiaries. Not later than 9 months after enactment, the 

Commission would submit a report to the Congress containing a 

description of the results of the aforementioned study and the conclusions and recommendations, if any, regarding each of the issues 

described above. 


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Reason for change 

Dual-energy absorptiometry and vertebral fracture assessment 

are important in the early detection of osteoporosis and bone fractures. Recent changes in the way that these two tests are valued 

by Medicare has caused fees to drop and raised questions about 

whether the program is adequately paying physicians for these 

services. This policy directs MedPAC to create a study that would 

evaluate the impact of the Medicare payment changes and will review issues of access in rural and minority communities and the 

usage rates among Medicare beneficiaries. 

Effective Date 

Date of enactment. 

Subtitle C—Provisions Related to Medicare Parts A and B 

Sec. 1151. Reducing Potentially Preventable Hospital Readmissions 

Current Law 

Medicare pays for most acute care hospital stays using a prospectively determined payment for each discharge. Payment also depends on the relative resource use associated with a patient classification group, referred to as the Medicare Severity diagnosis related groups (MS-DRGs), to which the patient is assigned based on 

an estimate of the relative resources needed to care for a patient 

with a specific diagnosis and set of care needs. Medicare’s inpatient 

prospective payment system (IPPS) includes adjustments that reflect certain characteristics of the hospital. For instance, a hospital 

with an approved resident training program would qualify for an 

indirect medical education (IME) adjustment; hospitals that serve 

a sufficient number of poor Medicare or Medicaid patients would 

receive higher Medicare payments because of their disproportionate 

share hospital (DSH) adjustment. Hospitals in Maryland are not 

paid using IPPS; rather they receive Medicare payments based on 

a state-specific Medicare reimbursement system. 

Critical Access Hospitals (CAHs) are limited-service facilities 

that are located more than 35 miles from another hospital (15 

miles in certain circumstances) or designated by the state as a necessary provider of health care; offer 24-hour emergency care; have 

no more than 25 acute care inpatient beds; and have a 96-hour average length of stay. Medicare pays CAHs on the basis of 101% of 

the reasonable costs of the facility for inpatient and outpatient 

services. Certain aspects of the CAH payment system are not subject to administrative or judicial review. 

According to Medicare Payment Advisory Commission’s 

(MedPAC) analysis of 2005 Medicare data, 6.2% of hospitalizations 

of Medicare beneficiaries resulted in readmission within 7 days and 

17.6% of hospitalizations resulted in readmission within 30 days. 

The 17.6% of hospital readmission accounts for $15 billion in Medicare spending. These readmission rates reflect the total number of 

readmissions, including those that may not have been related to 

the initial diagnosis and may not have been preventable. MedPAC, 

CMS, and others have expressed concern that providers do not 

have financial incentives to reduce potentially preventable readmissions. In addition, MedPAC, in its June 2008 report, recommended 


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that Medicare’s payments to hospitals with relatively high readmission rates for select conditions be reduced. 

Proposed Law 

Penalties for Hospitals 

IPPS hospitals and those hospitals in Maryland paid under a 

state-specific Medicare payment system would receive reduced payments for potentially preventable hospital readmissions occurring 

on or after October 1, 2011. Under this proposal, hospitals with 

lower potentially preventable readmission rates would receive 

smaller payment reductions while hospitals with higher potentially 

preventable readmission rates would receive higher payment reductions. Certain components of Medicare hospital payments would be 

exempt from these payment reductions. 

Reduced hospital payments for readmissions would calculated by 

multiplying the base operating DRG payment amount by an adjustment amount. The base operating DRG payment amount is the 

base amount that would have been paid under IPPS, reduced by 

payments associated with IME and DSH. In the case of hospitals 

in Maryland, the base amount would be the payment amount 

under their state system. 

The adjustment factor for a hospital in a fiscal year would be the 

greater of (1) a floor adjustment factor equal to a reduced percentage of the discharge payment or (2) the excess readmissions ratio 

for the applicable fiscal year. The floor adjustment factor would be 

0.99 of the discharge payments in FY2012, 0.98 of the discharge in 

FY 2013, 0.97 in FY 2014 or 0.95 in subsequent fiscal years. The 

excess readmissions ratio would equal 1 minus the ratio of the aggregate payments for excess readmissions for the hospital divided 

by the aggregate payments for all discharges. 

Aggregate payments for excess readmissions for a hospital for a 

fiscal year would be the sum of the applicable conditions of the 

product of the base operating DRG payment for each applicable 

condition multiplied by the number of admissions for each condition multiplied by the excess readmissions ratio minus one. The excess readmissions ratio is the ratio of the risk adjusted readmissions based on actual readmissions divided by the risk adjusted expected readmissions. This number would not be less than one. The 

ratio would be calculated for each applicable condition for a hospital for the applicable period. The aggregate payments for all discharges would be calculated as the sum of the hospital’s base operating DRG payments for all discharges for all conditions for such 

a fiscal year. 

Under the readmissions policy, the Secretary would be prohibited 

from including conditions for which there are fewer than a certain 

minimum number (as determined by the Secretary) of discharges 

within a certain time period. To encourage hospitals to continue to 

do reduce their potentially preventable readmission rates over 

time, beginning with discharges for FY2014, the Secretary would 

be able to determine the excess readmissions ratio based on a ranking of hospitals by readmission ratios (from lower to higher readmissions) normalized to a benchmark that is lower than the 50th 

percentile. 


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An applicable condition would be defined as a condition or procedure that represents high volume or high expenditures for Medicare or meets other specified criteria that also satisfies certain 

measures of readmissions. These measures of readmission would be 

those that have been endorsed by a consensus based entity with a 

performance measurement contract under 1890 of the Social Security Act, excluding readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital). Readmission would be defined as an admission to 

the hospital of an individual who had been discharged from either 

the same or another applicable hospital within a time period from 

the date of discharge as specified by the Secretary. 

Starting in FY2012, the Secretary would select 3 applicable conditions that have been endorsed by the consensus based entity as 

of the date of enactment. Beginning with FY2013, the Secretary 

would be required to expand the list of applicable conditions for 

such readmissions to include 4 conditions identified by the 

MedPAC in its June 2007 Report to Congress. The Secretary would 

also be able to include an appropriate all-condition measure of readmissions. In expanding the list of conditions, the Secretary would 

be required to seek the endorsement by a consensus-based entity, 

but would be able to apply such conditions with such endorsement. 

The Secretary would be required to monitor activities of applicable hospitals to determine if such hospitals took the steps to avoid 

patients at risk to reduce the likelihood of increasing readmissions 

for applicable conditions. If the Secretary determined that such a 

hospital had taken such steps, the Secretary could impose an appropriate sanction after having provided notice to the hospital and 

the opportunity for that hospital to alleviate such steps. It is the 

intent of the Committee that the Secretary would monitor, and impose appropriate sanctions, to hospitals that took inappropriate 

steps in an effort to avoid the readmissions policy such as transferring patients inappropriately to other hospitals or ‘‘planning’’ inappropriate rehospitalizations. 

For fiscal years beginning on or after FY2011, the Secretary 

would be required to increase DSH payments to targeted hospitals 

that received $10 million or more in disproportionate share payments in their most recently settled cost report. These targeted 

hospitals would be required to provide satisfactory assurances that 

the increased payments would be used for transitional care activities. These would be activities designed to address the patient noncompliance issues that result in higher than normal readmission 

rates, such as one or more of the following: (1) providing care coordination services to assist in transitions from the targeted hospital to another setting; (2) hiring translators and interpreters; (3) 

increasing services offered by discharge planners; (4) ensuring that 

individuals receive a summary of care and medication orders upon 

discharge; (5) developing a quality improvement plan to assess and 

remedy preventable readmission rates; and (6) assigning discharged individuals to a medical home; and (7) doing other activities as determined by the Secretary. 

The Secretary would estimate the percent of the DSH increase 

subject to aggregate and hospital-specific caps. In the aggregate, increases would not exceed 5% of the estimated savings that would 

occur in a fiscal year from hospital readmissions policies described 


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above. For specific hospitals, DSH increases would not exceed the 

estimated difference in spending that would occur in a fiscal year 

for a hospital due to the application of the excess readmissions policy. The Secretary would make these additional DSH payments on 

a lump sum basis, a periodic basis, a claim by claim basis or in any 

other form deemed appropriate. Not later than 3 years after funds 

are first made available, GAO would be required to submit a report 

on the use of such funds. 

No administrative or judicial review could be conducted of the determination of the base operating DRG amounts; the methodology 

for determining the adjustment factor and its various components 

(excess readmissions ratio, aggregate payments for excess readmissions and aggregate payments for all discharges, applicable conditions, and applicable periods); measures of readmissions; the determination of a targeted hospital for additional DSH payments, the 

increase in DSH payments, the aggregate DSH cap, the hospitalspecific DSH limit, and the form of DSH payment. 

Application to Critical Access Hospitals (CAHs) 

CAHs would receive reduced payments for preventable hospital 

readmissions starting for cost reporting periods beginning in 

FY2012 and in subsequent fiscal years. The adjustment factor for 

acute care hospitals would be applied. The methodology for determining the adjustment factor, including the determination of aggregate payments for actual and expected readmissions, applicable 

periods, applicable conditions and measures of readmission would 

not be subject to administrative or judicial review. 

Application to Post-Acute Care Providers 

The proposal would also reduce Medicare payments on claims 

from post-acute care providers (skilled nursing facilities, inpatient 

rehabilitation facilities, home health agencies, and long-term care 

hospitals) for patients readmitted to an applicable hospital or a 

CAH within 30 days of an initial discharge from a hospital or a 

CAH. Payments to post-acute providers would be reduced by 0.996 

for the fiscal year or rate year 2011; 0.993 for the fiscal or rate year 

2013; and 0.99 for fiscal or rate year 2014. This policy would apply 

to the discharges or services furnished on or after the first day of 

the rate year, beginning on or after October 1, 2011. 

The Secretary would be required to develop appropriate measures of readmissions rates for post-acute care providers and to submit such measures for endorsement through a consensus-based entity, such as the National Quality Forum. The Secretary would be 

required to adopt, expand and apply such measures, in the same 

manner as for applicable hospitals established earlier in the legislation. To the extent such measures would be adopted, the Secretary would adopt similar payment policies for post-acute providers on or after October 1, 2013 that have been established for 

applicable hospitals and CAHs earlier in this proposed legislation. 

Post-acute providers would also be subject to the monitoring and 

penalties established for applicable hospitals and CAHs earlier in 

this proposed legislation. 


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Physicians 

The Secretary would be required to conduct a study to determine 

how this readmissions policy could be applied to physicians and 

issue a public report no later than one year after enactment. Such 

approaches would be required to be considered: (1) creating a code 

(or codes) and budget neutral payment amount(s) under the fee 

schedule for services furnished by an appropriate physicians who 

sees an individual within the first week after discharge from a hospital or CAH; (2) developing measures of readmissions rates for individuals treated by physicians; (3) applying a payment reduction 

for physicians who treat the patient during the initial admissions 

that results in a readmission; and (4) methods for attributing payments or payment reductions to the appropriate physician or physicians. 

Funding 

In addition to funds otherwise available, out of any funds in the 

Treasury not otherwise appropriated, there would be appropriated, 

to the CMS Program Management Account, $25 million for each 

fiscal year beginning with 2010. Amounts appropriated for a fiscal 

year would be required to be available until expended. 

Reason for Change 

Hospital readmissions for Medicare beneficiaries are costly and 

prevalent. Studies have demonstrated that almost 20% of Medicare 

beneficiaries who had been discharged from a hospital were rehospitalized within 30 days and accounted for almost $15 billion in 

spending in a year. A number of interventions at the time of discharge have been shown to decrease the frequency of readmissions. 

Researchers have suggested that supportive palliative care and increased efforts to coordinate prompt and reliable follow-up care 

with primary care physicians by hospital providers would reduce 

readmissions and increase patient satisfaction. 

MedPAC has pointed out that high readmission rates sometimes 

indicate poor care or missed opportunities to better coordinate care. 

Their report highlights that seven medical and surgical conditions 

(heart failure, chronic obstructive pulmonary disease, pneumonia, 

acute myocardial infarction, coronary artery bypass graft, 

percutaneous transluminal coronary angioplasty, and other vascular procedures) account for almost 30% of readmissions in the 15- 

day window after discharge. Of these, three measures (heart failure, pneumonia and acute myocardial infarction) have been endorsed by the National Quality Forum (NQF) as risk-adjusted 

measures for hospital readmission events. 

Various factors that may increase readmission rates include medical errors in the initial admission, improper discharge directions 

regarding medications and follow-up appointments, or inadequate 

access to follow-up care within the community. However, despite 

the clinical risk-adjustment of these measures, factors such as cultural paradigms of health, limited English proficiency, health literacy levels, and lack of access to proper follow-up care or medications are factors that may be barriers to lowering readmissions 

rates and are additive to patient nonadherence to follow-up discharge. Another element that contributes to rehospitalizations is 

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viders such as nursing homes, rehabilitation providers or community providers. 

To reduce readmission rates, enhance quality of care and improve coordination during discharge planning, MedPAC has recommended certain policies for the reduction of readmission rates. 

This provision takes into account the recommendations set forth by 

MedPAC regarding payment policies pegged to readmission rates. 

The policy adjusts payments for hospitals, critical access hospitals 

and hospitals paid under section 1814(b)(3) of the SSA based on the 

dollar value of each hospital percentage of potentially preventable 

Medicare readmissions for 3 conditions that have been endorsed by 

NQF as risk-adjusted readmission measures. It also directs the 

Secretary to expand the policy to additional conditions in future 

years and authorizes the Secretary to modify the adjustment based 

on a hospital’s performance in readmission rates compared to a 

ranking of hospitals nationally. 

The policy provides assistance to certain hospitals for transitional care activities to address patient non-adherence issues that 

may result in high readmission rates. Some of the factors that may 

contribute to higher rates of admissions and readmissions include 

(1) patients lack of understanding about medications and directions 

for follow-up care due to low health literacy levels or limited 

English proficiency; (2) patients’ inability to navigate through a 

complex tertiary care center to arrange for follow-up appointments 

for specialists or diagnostic tests; (3) lack of access to medications 

or providers; and (4) lack of appropriate cultural or linguistic discharge directions. 

The above conditions are more prevalent in safety net hospitals 

and in communities which they serve. Hospitals eligible to receive 

assistance would receive additional disproportionate share payments and are required to provide transitional care activities to address patient nonadherence issues such as translators for discharge 

planning and patient education. This provision includes an interim 

policy for post-acute providers beginning in fiscal year 2012, and 

directs the Secretary to develop risk-adjusted readmission rates for 

post-acute providers. 

Physicians’ role in patient care management also can affect the 

rate of potentially preventable hospital readmissions. However, the 

process of determining the responsible provider and accountability 

for the rehospitalization is complicated. This provision charges the 

Secretary with evaluating how this policy could be applied to physicians. 

Effective Date 

October 1, 2011. 

Sec. 1152. Post Acute Care Services Payment Reform Plan and Bundling Pilot Program 

Current Law 

Medicare pays for most post-acute care (PAC) services, including 

skilled nursing facilities (SNF), long-term care hospitals (LTCH), 

inpatient rehabilitation facilities (IRF), and home health, under 

prospective payment systems (PPS) established for each type of 

provider. Under each PPS, a predetermined rate is paid for each 


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unit of service, such as a hospital discharge or a payment classification group. As some Medicare beneficiaries with complex health 

conditions and multiple co-morbidities move between hospital stays 

and a range of PAC providers, Medicare makes separate payments 

to each provider for covered services. Payments across PAC settings may differ considerably even though the clinical characteristics of the patient and the services delivered may be very similar. 

The Deficit Reduction Act of 2005 (P.L. 109–171) required the 

Centers for Medicare and Medicaid Services (CMS) to develop a 

Post Acute Care Payment Reform Demonstration (PAC demonstration). The goal of this initiative is to standardize patient assessment information from PAC settings and to use these data to guide 

payment policy in the Medicare program. This demonstration 

began in 2008 and a report is expected to be submitted to Congress 

by the Secretary in 2011. CMS has also established a 3–year Acute 

Care Episode (ACE) Demonstration to test the effects of using a 

bundled payment for hospital and physician services for a set of 9 

orthopedic and 28 cardiovascular conditions. There are 5 participants in the ACE demonstration which began early in 2009. 

The Medicare Payment Advisory Commission (MedPAC), among 

others, has expressed concern that providers do not have financial 

incentives to coordinate across episodes of care nor to evaluate the 

full spectrum of care a patient may receive. In its June 2008 report, MedPAC recommended that a bundled payment system for an 

episode of care where separate payments for distinct types of providers would be eliminated be explored in a pilot program. Under 

this voluntary program, a single provider entity would receive a 

bundled payment intended to cover the costs of the full range of 

care needed over the hospitalization episode, including 30 days 

post-discharge. The pilot program should have clearly established 

guidelines for determining whether it should be discontinued or expanded to the entire Medicare program. 

Proposed Law 

The Secretary would be required to develop a detailed plan to reform payment for Medicare’s PAC services, including specifications 

for a bundled payment, to improve their coordination, quality, and 

efficiency and outcomes for individuals, such as reducing the need 

for readmission to hospitals from such PAC providers. For this 

plan, PAC services would include those services provided by SNFs, 

IRFs, LTCHs, hospital-based outpatient rehabilitation facilities, 

and home health agencies to individuals after discharge from a 

hospital and such other services as determined appropriate by the 

Secretary. 

The plan would be required to include consideration of the following issues: (1) the nature of payments under a PAC bundle, including the type of provider or entity to whom payment should be 

made, the scope of activities and services included in the bundle, 

whether payment for physicians’ services would be included, and 

the period covered by the bundle; (2) whether the payment should 

be consolidated with the payment under the inpatient prospective 

system or a separate payment established for such bundle, and if 

a separate payment is established, whether it should be made only 

upon use of PAC services or for every discharge; (3) whether the 

bundle should be applied across all categories of providers of inpaVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00351 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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tient services and PAC services or whether it should be limited to 

certain categories of providers, services, or discharges, such as high 

volume or high cost MS-DRGs; (4) the extent to which payment 

rates could be established to achieve offsets for efficiencies that 

could be expected to be achieved with a bundle payment, whether 

such rates should be established on a national basis or, for different geographic areas, should vary according to discharge, case 

mix, outliers, and geographic differences; (5) the nature of protections needed for individuals under a system of bundled payments 

to ensure that individuals receive quality care, are furnished the 

level and amount of services needed, as determined by an appropriate assessment instrument, and the extent to which transitional 

care services would improve quality of care for individuals and the 

functioning of a bundled post-acute system; (6) the nature of relationships that may be required between hospitals and providers of 

PAC services to facilitate bundled payments, including the application of gainsharing, anti-referral, anti-kickback, and anti-trust 

laws; (7) quality measures that would be appropriate for reporting 

by hospitals and post-acute providers; (8) how cost-sharing for a 

PAC bundle should be treated relative to current rules for costsharing for inpatient hospital, home health, skilled nursing facility, 

and other services; (9) how other programmatic issues should be 

treated in a PAC bundle; and (10) such other issues as the Secretary would deem appropriate. 

In the development of this plan, the Secretary would be required 

to consult relevant stakeholders and to consider experience with 

such research studies and demonstrations that the Secretary determines appropriate. In addition, the Secretary would be required to 

analyze the impacts (including geographic impacts) of PAC reform 

approaches, including the effect on beneficiaries, hospitals, PAC 

providers, and physicians; use existing data (such as data submitted on claims) and collect such data as the Secretary would determine appropriate; and if patient functional status measures are 

appropriate for the analysis, to the extent practical, build upon the 

Continuity Assessment Record and Evaluation (CARE) tool being 

developed to measure the health and functional status of Medicare 

acute discharges and changes in severity and other outcomes for 

Medicare PAC patients under CMS’ PAC demonstration plan. 

Out of any funds in the Treasury not otherwise appropriated, 

there would be appropriated to the Secretary for the CMS Program 

Management Account $15 million for each of the fiscal years 2010 

through 2012. These amounts appropriated for a fiscal years would 

be required to be 176 available until expended. Provisions concerning the coordination of federal information policy contained in 

the U.S. code would not apply. 

The Secretary would be required to issue interim public reports 

on a periodic basis and, not later than 3 years after enactment, 

issue a final public report on this plan and its impact. 

Conversion of Acute Care Episode Demonstration to Pilot Program 

and Expansion to Include Post-Acute Services 

This provision would require the Secretary, by no later than January 1, 2011 and for the purpose of promoting bundled payments 

to promote efficient and high quality delivery of care, to convert the 

acute care episode demonstration into a pilot program and expand 


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it to include post-acute services and such other services the Secretary determines to be appropriate (which may include transitional services). Under this pilot program, the Secretary could 

apply bundled payments to: (i) hospitals and physicians; (ii) hospitals and post-acute-care providers; (iii) hospitals, physicians, and 

post-acute care providers; or (iv) combinations of post-acute providers. Bundled payments would be applied in manner as to include collaborative care networks and continuing care hospitals. 

A collaborative care network would be defined as a consortium 

of health care providers that would provide a range of coordinated 

and integrated health care services to low-income patient populations (including the uninsured) which may include coordinated 

and comprehensive care by safety net providers to reduce any unnecessary use of items and services furnished in emergency departments, manage chronic conditions, improve quality and efficiency of 

care, increase preventive services, and promote adherence to postacute and follow-up care plans. 

A continuing care hospital would mean an entity that has demonstrated the ability to meet patient care and patient safety standards and that would provide, under common management, the 

medical and rehabilitation services provided in inpatient rehabilitation hospitals and units, longterm care hospitals, and SNFs that 

are located in a hospital. 

The pilot program could include additional geographic areas and 

conditions which account for significant program spending, as defined by the Secretary. No number limit would be imposed on hospital and physician groups or the number of hospital and postacute provider groups that may participate in the pilot program. 

The Secretary would be required to only expand the pilot program 

if the CMS’ Chief Actuary certifies that the demonstration and 

pilot programs maintain or increase the quality of care received by 

individuals and such demonstration program and pilot program reduce program expenditures and result in estimated spending that 

would be less than otherwise. Participation in this pilot program 

would be voluntary. 

The Secretary would be required to conduct an evaluation of the 

pilot program to study its effect on costs and quality of care. Findings would be included in the final report required under section 

1152(e)(2) of America’s Affordable Health Choices Act of 2009. 

Study of Additional Bundling and Episode-Based Payment for Physicians’ Services 

The Secretary would also be required to provide a study of and 

development of a plan to test additional ways to increase bundling 

of payments for physicians in connection with an episode of care, 

such as with outpatient hospital services or services rendered in 

physicians’ offices, other than those provided under the pilot program. This plan could be implemented by the Secretary in a demonstration. 

Reason for Change 

According to MedPAC, the fee-for-service payment system encourages volume growth and fails to encourage care coordination 

delivered across an episode of care. Ideally, the payment system 

should incentivize hospitals, post-acute institutions and physicians 


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to collaborate in coordinating care for Medicare beneficiaries and to 

work efficiently together. However, under the current feefor-service 

payment structure, each sector of the healthcare delivery system 

functions independently in terms of delivery of care And with respect to reimbursement of services. 

Currently, hospitals are paid a single amount that is based on 

the patient’s diagnosis which covers all hospital costs associated 

with the stay except for the physician fee portions. Surgeons are 

also paid a bundled fee called a global surgical fee that includes the 

post-surgical follow up visits. MedPAC suggests that while these 

payment innovations may have improved providers’ efficiency (e.g. 

shorter length of stay) during the episode of care, they apply to 

only one provider and therefore have a limited effect in reducing 

the aggregate volume of services paid for by Medicare. 

Health policy experts have recommended that under a bundled 

payment structure, Medicare would pay a single provider entity an 

amount intended to cover the costs of providing a full range of care 

needed over a hospitalization episode, including the acute care and 

the post-acute care setting. However, a bundled payment system 

has significant implications pertaining to future delivery of care for 

Medicare beneficiaries. Such a broad policy has never been tested 

for post-acute care services, though the ACE demonstration model 

has tested the concept with physicians for specific procedures. 

Issues include: (1) potential reduction of services or ‘‘stinting’’ of 

care as providers take on greater risk in the system; (2) how payments are consolidated and which entity receives the payment; (3) 

the quality measures used to evaluate such an innovative payment 

and delivery of care model; and (4) anti-trust issues as well as 

other competitive issues as outlined in the provision. 

This legislation directs the Secretary to create a payment plan 

that will consider these critical issues. The Secretary shall also conduct a study on bundling payments for physician services in the 

outpatient setting that could lead to a demonstration project. The 

ACE demonstration is extended to evaluate different provider combination entities that would receive a bundled payment and considers a collaborative care network for coordinated care. This provision also directs the Secretary to support Collaborative Care Networks in replicating effective models that reduce avoidable use of 

emergency rooms for non-urgent care while improving health status and care coordination for vulnerable populations. The new pilot 

structure would allow the Secretary to expand the program if budget neutrality and quality of care is maintained or improved. 

Effective Date 

January 1, 2011. 

Sec. 1153. Home Health Payment Update for 2010 

Current Law 

Home health agencies (HHAs) are paid under a prospective payment system (PPS) that began on October 1, 2000. Payment is 

based on 60-day episodes of care for beneficiaries, subject to several 

adjustments, with unlimited episodes of care in a year. The payment covers skilled nursing, therapy, medical social services, aide 

visits, medical supplies, and others. Durable medical equipment is 


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not included in the home health PPS. The base payment amount, 

or national standardized 60-day episode rate, is increased annually 

by an update factor that is determined, in part, by the projected 

increase in the home health market basket (MB) index. This index 

measures changes in the costs of goods and services purchased by 

HHAs. Starting in 2007, HHAs are required to submit to the Secretary health care quality data. A HHA that does not submit the 

required quality data will receive an update of the MB minus two 

percentage points. This reduction only applies to the fiscal year in 

question. 

Proposed Law 

The provision would eliminate the MB update for home health 

payments for 2010. Home health agencies would still be subject to 

the data quality provision for subsequent years. 

Reason for Change 

This section implements a MedPAC recommendation to freeze 

payment rates for home health agencies (HHAs) for 2010. Not only 

do HHAs have extremely healthy Medicare margins—indicating 

that they are paid significantly above costs—beneficiaries have 

ample access to HHAs, volume of services continues to rise, quality 

of care remains largely stable and the entry of new agencies suggests that access to capital is robust. All of these indicators of payment adequacy are positive, and the Committee believes that the 

freeze in payment rates will not adversely affect beneficiary access 

to or quality of home health care. 

Effective Date 

January 1, 2010. 

Sec. 1154. Payment Adjustments for Home Health Care 

Current Law 

Home health agencies (HHAs) are paid under a prospective payment system (PPS). Payment is based on 60-day episodes of care 

for beneficiaries, subject to several adjustments, with unlimited 

episodes of care in a year. The payment covers skilled nursing, 

therapy, medical social services, aide visits, medical supplies, and 

others. Durable medical equipment is not included in the home 

health PPS. The base payment amount, or national standardized 

60-day episode rate, is increased annually by an update factor that 

is determined, in part, by the projected increase in the home health 

market basket (MB) index. This index measures changes in the 

costs of goods and services purchased by HHAs. HHAs are required 

to submit to the Secretary health care quality data. A HHA that 

does not submit the required quality data will receive an update 

of the MB minus two percentage points for that fiscal year. 

In calendar year (CY) 2008, CMS made refinements to the home 

health (HH) PPS to try to improve payment efficiencies. These refinements included a reduction in the national standardized 60-day 

episode payment rate for 4 years to account for changes in case mix 

that are not related to HH patients’ actual clinical conditions; 

changes to the case-mix model to account differently for 

comorbidities and the differing health characteristics of longer-stay 


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patients, including increasing the HH resource groups from 80 to 

153 case mix groups; changes to the way the PPS accounts for the 

impact of rehabilitation services on resource use to reduce the impact of financial incentives on the delivery of therapy visits; and an 

increased payment for low utilization payment adjustment (LUPA) 

episodes that occur as the only episode or the first episode during 

a period of HH to account for front-loading of costs; among other 

changes. These refinements resulted in payment reductions described in Federal Regulation § 484.220 issued on Aug. 29, 2007 (72 

FR 49879). 

Specifically, this regulation established changes to the HHA casemix index to account for the relative resource utilization of different patients. These changes modified the coding or classification 

of different units of service that do not reflect real changes in casemix. As a result, the national prospective 60-day episode payment 

rate was adjusted downward by 2.75% for CY 2008; by 2.75% for 

each year of CY 2009 and CY 2010, and by 2.71% and for CY 2011. 

Proposed Law 

The provision would accelerate the case-mix adjustments described in 42 FR § 484.220 by implementing both the planned CY 

2011 adjustment of 2.71% and the planned CY 2010 of 2.75% at the 

same time in CY 2010, for a total CY2010 downward adjustment 

of 5.46%. The 180 amounts of these adjustments would not be limited if more recent data were to indicate that a greater adjustment 

would be appropriate. 

Starting in 2011, HH prospective payment amounts would be adjusted by a uniform percentage determined appropriate by the Secretary and based on analysis of factors such as changes in the average number and types of visits in an episode, changes in the intensity of visits in an episode, growth in cost per episodes, and other 

factors that the Secretary would consider to be relevant. For years 

after 2011, such amounts would be required to be equal to the 

amount paid for the previous year updated by the HH market basket. 

If the Secretary is not able to compute the changed prospective 

payment amounts for 2011 on a timely basis, then the Secretary 

would be required to pay 95% of what the prospective payment 

amount would have been had this provision not applied. And, 

under such circumstances, the Secretary would be required to compare, before July 1, 2011, amounts paid to the amount that would 

have been paid had the Secretary been able to compute the adjustment on a timely basis. For 2012, the Secretary would be required 

to decrease or increase the prospective payment amount (or at the 

Secretary’s discretion, over a period of several years beginning with 

2012), by the amount (if any) by which the amount applied is 

greater or less, respectively, than the amount that should have 

been applied. 

Reason for Change 

Nine percent of Medicare beneficiaries used home health services 

in 2007, an increase of 23 percent since 2002, and Medicare spending on home health services grew 12 percent from 2006, to $16 billion. Home health agencies (HHAs) have Medicare margins of almost 17 percent, suggesting that Medicare payments significantly 


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exceed costs for agencies. Ninety-seven percent of Medicare beneficiaries live in areas served by two or more HHAs. MedPAC concludes that agencies should be able to absorb cost increases without 

an increase in base payments and without negative effects on beneficiary access to care or quality of treatment. 

This section would implement a MedPAC recommendation to reduce payments to HHAs in FY2010 and advance a planned payment reduction for FY2011. These payment reductions will bring 

Medicare payments more in line with costs, restoring payment accuracy fiscal responsibility to home health payments. Given currently robust beneficiary access to care at home health agencies, 

the Committee is confident that these payment reductions will not 

adversely affect access to care. 

One source of Medicare overpayments to HHAs results from an 

assumption in the payment rates that agencies provide 32 visits 

per 60-day episode. However, this measurement is based on data 

from 1998; since then, the number of visits per episode has dropped 

by 30 percent, to an average of 22 visits. Other changes in utilization of home health—such as types of visits, intensity of visits, 

growth in cost per episode—affect payment rates, and the Committee intends that those rates should be updated to reflect more 

recent data. MedPAC advises that rebasing payments to providers’ 

actual costs will limit exorbitant profit margins and help restore efficiency to the home health sector. 

Recognizing that the Secretary may not be able to complete the 

rebasing analysis in a timely fashion to implement for 2011—but 

also that absent a payment change in addition to the annual updates, HHAs will continue to be overpaid by the Medicare program—the Committee intends that the Secretary implement a fallback payment adjustment if the rebasing analysis is not complete. 

This would ensure that fiscal responsibility is restored to the home 

health sector. 

Effective Date 

January 1, 2010. 

Sec. 1155. Incorporating Productivity Improvements Into Market 

Basket Update For Home Health Services 

Current Law 

Home health agencies (HHAs) are paid under a prospective payment system (PPS) based on 60-day episodes of care for beneficiaries, subject to several adjustments, with unlimited episodes of 

care in a year. The payment covers skilled nursing, therapy, medical social services, aide visits, medical supplies, and others. Durable medical equipment is not included in the home health PPS. 

The base payment amount, or national standardized 60-day episode rate, is increased annually by an update factor that is determined, in part, by the projected increase in the home health market basket (MB) index. This index measures changes in the costs 

of goods and services purchased by HHAs. HHAs are required to 

submit to the Secretary health care quality data. A HHA that does 

not submit the required quality data will receive an update of the 

MB minus two percentage points. 


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Each year, the Medicare Payment Advisory Commission 

(MedPAC) makes payment update recommendations for the different payment systems. In its view, Medicare’s payment systems 

should encourage efficiency: providers should be able to reduce the 

quantity of inputs to produce a unit of service while maintaining 

quality. Accordingly, MedPAC begins its update deliberations with 

an assumption that all providers can achieve efficiency gains similar to the economy and examines the Bureau of Labor Statistics’ estimate of the 10-year moving average rate of past growth in total 

factor productivity for the economy as a whole. This policy target 

links Medicare’s expectations for efficiency improvements to the 

productivity gains achieved by firms and workers who pay taxes 

that fund Medicare. MedPAC’s annual update recommendation will 

depend on its overall assessment of the circumstances of a given 

set of providers in any year. These MedPAC recommendations are 

not binding on Medicare payment policies. 

Proposed Law 

The provision would make annual updates by the HH MB subject 

to a productivity adjustment as long as the annual update would 

not be less than zero. The productivity adjustment would equal the 

10-year moving average of changes in annual economy-wide private 

non-farm business multi-factor productivity. The estimate used 

would be that published before the promulgation of the regulation 

establishing the Medicare rates for the year or period. This provision would be required to apply to home health market basket percentage increases for years beginning with 2010. 

Reason for Change 

The annual update to the Medicare physician fee schedule already incorporates adjustments for gains in productivity. This provision creates uniformity across Medicare providers by creating a 

productivity adjustment for home health agencies. This adjustment 

will encourage greater efficiency in health care provision, hold 

Medicare providers accountable for achieving productivity gains on 

par with the overall economy, and more accurately align Medicare 

payments with provider costs. 

Effective Date 

January 1, 2010. 

Sec. 1156. Limitation on Medicare Exception to the Prohibition on 

Certain Physician Referrals for Hospitals 

Current Law 

Physicians are generally prohibited from referring Medicare patients for certain services to facilities in which they (or their immediate family members) have financial interests. However, among 

other exceptions, physicians are not prohibited from referring patients to whole hospitals in which they have ownership or investment interests. Providers that furnish substantially all of designated health services to individuals residing in rural areas are 

exempt as well. 

Entities receiving Medicare payment for covered items and services are required to provide the information on the entities’ ownerVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00358 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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ship, investment, and compensation arrangements. This information includes the covered items and services provided by the entity, 

and the names and unique physician identification numbers of all 

physicians (or those whose immediate relatives) who have an ownership or investment interest, or certain compensation arrangements. 

Proposed Law 

Only hospitals meeting certain requirements would be exempt 

from the prohibition on self-referral. Hospitals (including rural providers) that have physician ownership and a provider agreement in 

operation on January 1, 2009 and that met other specified reporting and disclosure requirements would be exempt from this self-referral ban. Hospitals would be allowed to maintain the percentage 

of the total ownership or investment held in the hospital (or in an 

entity whose assets include the hospital) by physician owners or investors in the aggregate at the level that existed as of date of enactment. Hospitals would be allowed to expand the number of operating rooms, procedure rooms, or beds of the hospital if certain criteria are met. The hospital could not have converted from an ambulatory surgical center to a hospital after enactment. 

To qualify for the self-referral exemption, entities receiving Medicare payment for covered items and services would be required to 

provide the information on the entities’ ownership, investment, and 

compensation arrangements. This information would include the 

covered items and services provided by the entity, and the names 

and unique physician identification numbers of all physicians (or 

those with immediate relatives) who have an ownership or investment interest, or certain compensation arrangements. Such information would be provided in the form, manner, and at such times 

as specified. This requirement would not apply to designated 

health services provided outside of the United States or to entities 

deemed to provide infrequent services paid by Medicare. 

An exempt entity would also be required to (1) submit an initial 

report and periodic updates at specified intervals that contain a detailed description of the identity of each physician owner and investor as well as any other owners and investors in the hospital, and 

any other information on the nature and extent of all ownership interests in the hospital; (2) disclose to each patient of any referring 

physician owner or investor (by a time that permits the patient to 

make a meaningful decision regarding the receipt of care) their 

ownership interest in the hospital and, if applicable, any such ownership interest of the treating physician; and (3) disclose the fact 

that the hospital is partially or wholly owned by one or more physician investors on any public website for the hospital and in any 

public advertising for the hospital. This requirement would not 

apply to designated health services provided outside of the United 

States or to entities deemed to provide infrequent services paid by 

Medicare. Information provided by hospitals would be published 

and periodically updated on the Internet website of the Centers for 

Medicare and Medicaid Services (CMS). Any person who fails to 

meet required reporting and disclosure requirements would be subject to a civil monetary penalty of not more than $10,000 for each 

day for which reporting is required to have been made or for each 

case in which disclosure is required to have been made. 


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Exempt hospitals would ensure bona fide ownership and investment by meeting the following requirements (1) any ownership or 

investment interest offered to a physician could not be offered on 

more favorable terms than those offered to a person who is not in 

a position to refer patients or otherwise generate hospital business; 

(2) the hospital (or investors in the hospital) could not directly or 

indirectly provide loans or financing for physician owners or investors in the hospital; (3) the hospital or its investors could not guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan to any individual physician owner, investor, group of 

physician owners or investors that is related to acquiring an ownership or investment interest in the hospital; (4) ownership or investment returns would have to be distributed to investors in the hospital in an amount that is directly proportional to the investment 

or ownership by the hospital investor; (5) the investment interest 

of the owner or investor would be required to be directly proportional to the capital contributions made at the time the ownership 

or investment interest is obtained; (6) physician owners and investors could not receive any guaranteed receipt or right to purchase 

other business related interests in the hospital, including the purchase or lease of any property under the control of other investors 

in the hospital or located near the premises of the hospital; (7) the 

hospital could not offer a physician owner the opportunity to purchase or lease any property under hospital control on more favorable terms than those offered to others and (8) the hospital could 

not condition any physician ownership or investment interests on 

the physician making or influencing referrals to the hospital or 

generating business for the hospital. 

To ensure patient safety, those exempt hospitals that do not offer 

emergency services would have to have the capacity to (1) provide 

assessment and initial treatment for medical emergencies; and (2) 

refer and transfer the patient with the medical emergency to a hospital with the required capability if the exempt hospital lacks the 

capabilities to treat the involved emergency. Those hospitals that 

do not have any physician available on the premises 24 hours per 

day, 7 days a week would have to disclose such a fact to the patient 

before admitting the patient. Following such a disclosure, the hospital would receive a signed acknowledgement from the patient 

that the patient understands that fact. The Secretary would retain 

the ability to terminate a hospital’s provider agreement if the hospital is not in compliance with Medicare’s conditions of participation. 

Exempt hospitals would be permitted to increase the number of 

operating rooms, procedure rooms or beds after the date of enactment under certain criteria. A procedure room includes a room in 

which catheterizations, angiographies, angiograms, and 

endoscopies are furnished. This would not include emergency rooms 

or departments (except for rooms in which catheterizations, 

angiographies, angiograms, and endoscopies are furnished). Hospitals meeting certain criteria would be allowed to expand, with 

these criteria including (1) a hospital that is located in a county 

where the population increased during the most recent 5 year period at a rate that is at least 150% of the State’s population increase; (2) a hospital whose Medicaid inpatient admission percentage is equal to or greater than average percentage for all hospitals 


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located in the county; (3) a hospital that does not discriminate 

against beneficiaries of Federal health care programs and does not 

permit physicians practicing at the hospital to discriminate against 

such beneficiaries; (4) a hospital that is located in a State with an 

average bed capacity less than the national average; (5) a hospital 

that has an average bed occupancy rate that is greater than the 

State average bed occupancy rate; and (6) meets other established 

requirements. 

This capacity increase would be limited to facilities on the main 

campus of the hospital and could not exceed 200% of the number 

of operating rooms, procedure rooms and beds at the time of enactment. The process for expansion should allow the opportunity for 

community input and should permit an applicable hospital to apply 

for the expansion exception up to once every two years. The Secretary would be required to promulgate regulations establishing an 

appeals process no later than the first day of the month beginning 

18 months after the date of enactment. The appeals process would 

be implemented one month after the date of regulations are promulgated. These regulations could be issued as interim final regulations. The final decision regarding an expansion request should 

be posted on the CMS website no later than 120 days after a complete application is received. There would be no administrative or 

judicial review of this process. 

The Secretary would be required to establish policies and procedures to ensure compliance with these requirements. Enforcement 

efforts could include unannounced site reviews of hospitals. In addition to funds otherwise available, starting in FY2010, $5 million 

would be appropriated in each fiscal year from not otherwise appropriated funds in the Treasury for purposes of carrying out this section. Appropriated funds would be available until expended. Certain federal laws with respect to the coordination of federal information policy established by Chapter 35 of Title 44 of the United 

States Code would not apply to these requirements. 

Reason for Change 

When originally enacted, the physician self-referral laws included 

an allowance for physicians to have ownership in a whole hospital. 

It was included because, at the time, there were a number of rural 

hospitals in particular where such ownership arrangements were 

in effect. Ownership in a whole hospital was not then viewed as a 

significant incentive for self-referral because these hospitals were 

usually the only hospitals in the area and they provided a breadth 

of services. The original physician self-referral law did explicitly 

prohibit ownership in ‘‘a subdivision of a hospital’’ because of the 

concern that if physicians owned only their particular part of a hospital—like a cardiac wing—there would be an incentive for self-referral. 

Since enactment of the self-referral laws, entities have been created that identify and license themselves as ‘‘hospitals’’ under state 

law. However, many of these facilities no longer provide the full 

range of services a layperson would expect from a hospital. Instead, 

they limit their services to a narrow band of services. These bands 

have also tended to be profit centers for hospitals—most commonly 

cardiac procedures and orthopedic procedures. In effect, they’ve 

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pital in order to circumvent the prohibition in the physician selfreferral laws which prohibit self-referral when the ownership is 

‘‘merely in a subdivision of a hospital.’’ 

There have also been a number of facilities that have converted 

from ambulatory surgical centers to hospitals. These entities may 

provide more than one subset of services and appear to look more 

like a typical hospital, but they too often focus on high-profit services, fail to have fully-staffed emergency rooms, and treat low percentages of Medicaid patients or uncompensated care patients compared to other hospitals in their communities. 

Many of these new physician-owned hospitals are called ‘‘specialty hospitals’’ or ‘‘limited service hospitals’’. The Medicare Payment Advisory Commission and other experts have studied these 

facilities and raised concerns that they result in unnecessary procedures, increasing health care spending, and selecting more profitable patients. In a report to Congress, MedPAC found that ‘‘entrance of a physician owned cardiac hospital was associated with 

a 6% increase in the number of cardiac surgeries per 1000 patients.’’ They also found that the profit margins for these facilities 

far exceed those of full-service community hospitals—averaging 

34% return on capital at the average orthopedic hospital. Finally, 

MedPAC raised concerns that these facilities focus on patients with 

private insurance, low-severity cases, and perform many outpatient 

services at these facilities where they get reimbursed at a higher 

rate than would an ambulatory surgical center which can also safely perform these services. 

In the past several years, there have been at least three publicized instances in which patients have died in these facilities because there was no doctor to provide care when they had complications post-surgery. 

While most research has focused on the specialty hospitals, concerns are being raised about physician ownership of any hospital. 

Recently, a highly regarded surgeon and health policy expert, Dr. 

Atul Gawande, wrote an article in the New Yorker about the medical care provided in McAllen, Texas, one of the poorest counties in 

our nation, yet is second only to Miami, Florida in health care 

spending. Referring to a new physician-owned hospital in the county, Dr. Gawande writes: 

It is the newest hospital in the area. It is physicianowned. And it has a reputation (which it disclaims) for aggressively recruiting high-volume physicians to become investors and send patients there. Physicians who do so receive not only their fee for whatever service they provide 

but also a percentage of the hospital’s profits from the 

tests, surgery, or other care patients are given. (In 2007, 

its profits totaled thirty-four million dollars.) Romero and 

others argued that this gives physicians an unholy temptation to overorder. 

It is no longer the case that most rural community hospitals 

have financial arrangements that include physician ownership. 

Given that change, and the concern about self-referral to these 

physician-owned hospitals, this provision eliminates the whole hospital exception all together. The provision grandfathers existing facilities if they are willing to meet a strong set of financial and qualVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00362 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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ity standards going forward. This provision also allows for growth 

of the hospital in circumstances of community need. 

The Committee notes that Congress has been confronting concerns about physician-owned hospitals for most of the decade. The 

Medicare Modernization Act of 2003 enacted a temporary moratorium on the entrance of new physician-owned specialty hospitals 

into the Medicare program. 

Since then, the House has passed legislation to prohibit physician self-referrals to hospitals in which they have ownership three 

times. In its original inception, passed as part of the Children’s 

Health and Medicare Protection Act on August 1, 2007 (H.R. 3162 

in 110th Congress), the provision would have required most physician-owned hospitals to restructure their ownership arrangements 

in order to continue participating in Medicare. It would have limited aggregate physician ownership to forty percent of the hospital 

and limited individual ownerships to two percent. In addition, it 

would have prohibited any growth of the facilities that were allowed to continue with this more limited ownership arrangement. 

That provision was scored by the Congressional Budget Office as 

saving $2.9 billion over 10 years. 

The House next passed a similar provision on March 5, 2008 as 

a financing mechanism for H.R. 1424, the Paul Wellstone Mental 

Health and Addiction Equity Act. That version was modified from 

the original language and the savings reduced to $2.4 billion over 

10 years. The Senate passed a further revised provision on May 22, 

2008 as part of the Iraq Supplemental legislation. The House most 

recently passed a version very similar to the Senate as part of the 

CHIP Reauthorization Act on January 14, 2009. The savings were 

reduced to $1.2 billion due to the passage of time and modifications 

that had been made in the Senate. The provisions in H.R. 3200 are 

similar to that bill, with changes only reflecting technical improvements, and savings are now only $1 billion over 10 years. 

As Congress has grappled with this issue during the last several 

years, modifications have been made to address the concerns of existing physician-owned hospitals. As drafted, the bill protects all 

physician-owned hospitals that were participating in Medicare as of 

January 1, 2009. That date is the same as the legislation passed 

earlier this Congress. It also modifies the original language by permitting them to pursue limited growth when there is clear community need. 

Effective Date 

Date of enactment. 

Sec. 1157. Institute of Medicine Study of Geographic Adjustment 

Factors Under Medicare 

Current Law 

Generally, Medicare’s payment systems include adjustment factors to account for the geographic differences in the costs of providing health care services. For example, Medicare’s physician fee 

schedule (which with modifications is used to reimburse other 

health care practitioners) uses the geographic practice cost index 

(GPCI) for this purpose; Medicare’s inpatient prospective payment 

system (IPPS) uses a hospital wage index to adjust payments for 


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acute care hospitals. With modifications, the IPPS wage index is 

used to calculate payments for inpatient rehabilitation hospitals, 

inpatient psychiatric hospitals, long term care hospitals, skilled 

nursing facilities, and home health agencies. 

Proposed Law 

The Secretary would enter into a contract with the Institutes of 

Medicine of the National Academy of Sciences (IOM) to conduct a 

comprehensive empirical study with appropriate recommendations 

on the accuracy of the geographic adjustment factors established 

for Medicare’s physician fee schedule and for Medicare’s IPPS. The 

study would include an evaluation of the empirical validity of the 

adjustments, methodology used to determine the adjustments, and 

measures used for the adjustments. The latter would take into account the timeliness of the data and frequency of data revisions, 

data sources and validity, and operational costs of participating 

providers. The study would also examine the effect of the adjustment factors on the level and distribution of the health workforce 

within the United States. This would include the recruitment and 

retention accounting for workforce mobility between urban and 

rural areas; ability of hospital and other facilities to maintain an 

adequate and skilled workforce; patient access to providers and 

needed medical technology. The study would also examine the effect of the adjustment factors on population health and quality of 

care and the ability of providers to furnish efficient, high-value 

care. The IOM report would be submitted to the Secretary and to 

Congress no later than one year from enactment. Necessary funds 

would be authorized to be appropriated to carry out this study. 

Reason for Change 

This provision addresses concerns about the methodology and 

data used to geographically adjust Medicare payment rates. Such 

adjustments, which are mandated by the Social Security Act, are 

intended to reflect geographic differences in input costs faced by 

practitioners and hospitals, such as wage rates, overhead costs, 

rent, and malpractice insurance. The IOM will conduct an empirical study into whether CMS is using valid methods and data to 

make these adjustments, and directs IOM to take factors such as 

provider recruitment and retention into consideration. To the extent this study finds that the methods and data being used to make 

these adjustments are not optimal or appropriate, IOM is directed 

to make recommendations on changes. 

Effective Date 

Date of enactment. 

Sec. 1158. Revision of Medicare Payment Systems to Address Geographic Inequities 

Current Law 

Generally, Medicare’s payment systems include adjustment factors to account for the geographic differences in the costs of providing health care services. In the previous section, IOM is required to conduct a study of the geographic practice cost index 

(GPCI) used to adjust Medicare’s physician fee schedule and the 


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hospital wage index used in Medicare’s inpatient prospective payment system (IPPS). With modifications, Medicare’s physician fee 

schedule and the hospital wage index are used to reimburse other 

practitioners and providers. 

Generally, the Centers for Medicare and Medicare Services promulgates changes to Medicare’s physician fee schedule and IPPS 

through an annual rulemaking process where proposed changes 

and a notice of a public comment period are published in the Federal Register with the final rule establishing the payment polices 

and responding to the public comments issued subsequently in the 

Federal Register. Medicare’s IPPS and physician payments are on 

different payment years and therefore rulemaking schedules. Generally the new IPPS payment rates are effective October 1st of each 

year and new physician fee schedule is effective as of January 1st 

of each year. 

Proposed Law 

The Secretary would be required to take into account the IOM 

recommendations included in their report on the adequacy of Medicare’s geographic adjustments established in the previous section. 

Appropriate proposals to revise the respective geographic adjustments would be included in the proposed rules applicable to the 

rulemaking process for Medicare’s payments for physicians’ services and IPPS hospitals. The proposals would be included in the 

next applicable rulemaking cycle after submission of the IOM report to the Secretary. The Secretary would be able to change the 

geographic adjustments accordingly, but could not reduce an adjustment below that which applied in the payment system in the 

prior payment year. These adjustments for services furnished before January 1, 2014 could not exceed the amounts in the Medicare 

Improvement Fund as amended in this legislation. No more than 

half of that $8 billion would be available in any one payment year. 

Reason for Change 

Any recommendations made by the IOM in the study mandated 

by section 1157 must be immediately taken into account by CMS. 

The study under section 1157 is intended to improve the methods 

and data used by CMS to adjust Medicare payment rates for practitioners and hospitals for geographic differences in input costs. To 

the extent that such recommendations result in payment rates 

being increased, $4 billion a year for two years is provided to fund 

additional spending resulting from the rate increases in any area. 

To facilitate the transition to revised payment adjustments, payment rates may not be decreased as a result of the study’s recommendations for a period of two years. After the two-year transition period, payment rates will be adjusted on a budget neutral 

basis. 

Effective Date 

Date of enactment. 


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Sec. 1159. Institute of Medicine Study of Geographic Variation in 

Health Care Spending and Promoting High-Value Health Care 

Current Law 

No current law. Significant geographic variation in the medical 

spending has been well documented in the health care literature. 

However, the underlying causes of these spending differences, but 

more importantly, the appropriate policy responses to such variation has been the subject of much debate. 

Proposed Law 

The Secretary would enter into an agreement with the Institutes 

of Medicine (IOM) to conduct a study on the geographic variation 

of per capita health spending among both the Medicare and privately insured populations. The studies would include evaluations 

of (1) the extent and range of such variation using various units 

of geographic measurement; (2) the extent to which geographic variation can be attributed to differences in input prices, practice patterns, access to medical services, supply of medical services, socioeconomic factors, and provider organizational models; (3) the extent 

to which variation are correlated with patient access to care, distribution of health care resources and consensus-based measures of 

health care quality; (4) the extent to which variation can be attributed to physician and practitioner discretion in making treatment 

decisions, and the degree to which these discretionary treatment 

decisions are made without regard to the best available medical 

evidence; (5) the degree to which variation cannot be explained by 

empirical evidence; and (6) other appropriate factors. 

IOM would recommend strategies for addressing variation in per 

capita spending by promoting high-value care, by considering measurement and reporting on quality and population health, reducing 

fragmented and duplicative care; promoting the practice of evidence-based medicine; empowering patients to make value-based 

medical decisions; leveraging the use of health information technology, the role of financial and other incentives as well as other 

appropriate topics. High-value care would be defined as the efficient delivery of high quality, evidence-based, patient-centered 

care. 

In making the recommendations, IOM would address whether 

Medicare’s physician and hospital payment systems should be further modified to provide incentives for high-value care. IOM would 

consider the adoption of a value based index based on a composite 

of appropriate measures of quality and cost that would adjust provider payments on a regional or provider-level basis. If adoption is 

deemed appropriate, IOM would make specific recommendation on 

the design and implementation of the index, including the identification of specific measures of quality and cost and a thorough 

analysis of how Medicare payments and spending on a geographic 

basis would be affected. The IOM report would be submitted to 

Congress no later than 3 years after the date of enactment. Necessary sums to conduct the study would be authorized to be appropriated. 


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Reason for Change 

The Committee is interested in knowing more about variation in 

the utilization of health care services throughout the country. Studies indicate there is a significant amount of variation in health care 

spending between different regions of the country, as well as between providers within each region. This provision will direct IOM 

to conduct a thorough empirical examination of variation in health 

care spending attributable to differences in utilization patterns 

rather than in payment rates or special payments that are largely 

unrelated to care for individual patients. 

The study under this section is intended to provide a better understanding of how much and why utilization varies from providerto-provider and region-to-region. This will help shed light on the 

extent to which variation can be attributed to differences in patient 

health status, socio-economic factors, patient compliance or other 

similar factors that are largely outside the control of providers. It 

will also look at variation in treatment patterns that can be traced 

to the discretion of individual providers, and whether such variation is justified or, as some analysts have contended, represent 

provision of services that do not result in improved health outcomes. 

Taking the findings of this study into account, the IOM is directed to consider whether Medicare’s payment systems should be 

changed to better incentivize the delivery of high-value health care. 

To the extent that IOM finds Medicare’s payment systems should 

be changed, it is directed to make specific recommendations on how 

to do so. In making any recommendations, IOM should consider a 

‘‘value index’’ approach that would adjust payment rates according 

to measures of quality and per-capita spending, but IOM is not required to recommend use of the value index. Furthermore, it is the 

Committee’s intent that any recommendations be directed toward 

changing the way Medicare pays for care and should not include 

changes to special programs designed to achieve specific policy 

goals, such as payments for graduate medical education, indirect 

medical education, and health information technology. This approach is consistent with legislation introduced in the House to institute a value index adjustment in the Medicare program. 

To maximize the utility and reliability of the study and any recommendations, the study should be conducted by individuals who 

have a wide and balanced range of expertise in areas such as clinical medicine, economics, academic medicine, and health care management. The Committee also urges IOM to make recommendations that are consistent with the core goals of the Medicare program to provide accessible, affordable health care to every Medicare beneficiary. As such, to the extent the IOM recommends substantial payment changes, the IOM report shall include an appropriate phase-in that takes into account the impact of such changes 

on providers and facilities and preserves access to care for Medicare beneficiaries. 

Effective Date 

Date of enactment. 


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Subtitle D—Medicare Advantage Reforms 

Part 1—Payment and Administration 

Sec. 1161. Phase-in of Payment Based on Fee-for-Service Costs 

Current Law 

Medicare Advantage (MA) is an alternative way for Medicare 

beneficiaries to receive covered benefits. Under MA, private health 

plans are paid a per-person amount to provide all Medicare-covered 

benefits (except hospice) to beneficiaries who enroll in their plan. 

Beginning in 2006, the Secretary began determining MA payment 

rates by comparing plan bids to a benchmark. Each bid represents 

the plan’s estimated revenue requirement for providing required 

Parts A and B Medicare services to an average Medicare beneficiary. The benchmark amounts represent the maximum amount 

the federal government will pay a plan for providing required 

Medicare benefits. If a plan’s bid is less than the benchmark, its 

payment equals its bid plus a rebate of 75% of the difference between the benchmark and the bid. The rebate must be used to provide additional benefits, reduce enrollees’ Medicare cost sharing expenses, or reduce enrollees’ monthly Part B, Part D, or supplemental premiums (for services beyond required Medicare benefits). 

The remaining 25% of the difference is retained by the federal government. If a plan’s bid is equal to or above the benchmark, its 

payment is equal to the benchmark amount, and each enrollee in 

that plan will pay an additional premium equal to the amount by 

which the bid exceeds the benchmark. 

In general, the MA benchmarks in each local area (county) are 

updated annually by the overall growth in Medicare expenditures, 

otherwise known as the National MA Growth Percentage. In certain years (known as rebasing years), plan payments are updated 

by the greater of the growth percentage or 100% of fee-for-service 

(FFS) costs, with adjustments. Beginning in 2010, the benchmarks 

are adjusted to phase-out the value of indirect medical education 

costs. 

MA benchmarks are based, in part, on historical Medicare private plan payment rates. The Balanced Budget Act of 1997 (P.L. 

105–33, BBA) increased payments to private plans above rates of 

per capita FFS costs in some areas. Subsequent legislation also increased payment rates to private plans. The historical payment 

rates were used as the basis for the benchmark amounts, as specified in the Medicare Prescription Drug, Improvements, and Modernization Act of 2003, (P.L. 108–173, MMA). As a result, current 

MA benchmarks exceed per capita FFS costs in almost all areas. 

Proposed Law 

Starting in 2011, the provision would phase-in MA benchmarks 

equal to per capita FFS spending in each county. Starting in 2013, 

MA benchmarks would be equal to per capita FFS spending in each 

county. In no event would a benchmark be less than per capita 

FFS spending. This provision would not apply to Programs of AllInclusive Care for the Elderly (PACE). 


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Reason for Change 

Private plans were initially included in the Medicare program to 

test whether managed care would improve efficiency and innovation and reduce costs, especially in parts of the country where traditional, or fee-for-service (FFS), Medicare was an inefficient purchaser. Reflecting this goal, Medicare Health Maintenance Organizations were originally paid at 95 percent of the average adjusted 

per capita costs (AAPCC) in fee-for-service Medicare at the county 

level. New Medicare policies enacted in 1997, 2000, and 2003 now 

result in overpayments to Medicare Advantage (MA) plans. The 

Medicare Payment Advisory Commission (MedPAC) estimates that, 

on average, payments to plans are 14 percent higher than costs in 

fee-for-service Medicare in 2009. The current MA payment system 

encourages participation of inefficient private plans and unnecessarily drives up costs to the Medicare program. Overpayments to MA plans exceed $1,000 per MA enrollee per 

year and MedPAC estimates that in 2009, the Medicare program 

will pay MA plans $12 billion more for their enrollees than if the 

same enrollees were in traditional Medicare. These overpayments 

increase all Medicare beneficiaries’ Part B premiums by $4 per 

month, and cause the Part A Trust Fund to become insolvent a 

year and a half sooner than it otherwise would. The fact and 

amount of overpayments to MA plans are indisputable. CBO, 

MedPAC and others have documented these amounts in testimony 

before the Committee and in numerous reports. MedPAC has recommended since 2001 that overpayments to MA plans be eliminated and advises that the Congress establish a level playing field 

where MA plans are paid the same—not more but not less—than 

the cost for the same beneficiaries in traditional Medicare. 

Phasing MA payments down to FFS costs in each county over 

three years gives MA plans time to adjust, if necessary, to the new 

payment rates. This policy simply returns to the way that plans 

used to be paid, based on local FFS costs, or the cost of doing business. Private plans that can achieve efficiencies greater than traditional Medicare—such as HMOs which on average project their 

costs at 98 percent of the cost of traditional Medicare—are rewarded with a rebate to offer extra benefits to their enrollees. Private plans that are inefficient relative to traditional Medicare 

should not be subsidized by taxpayers and other Medicare beneficiaries. The phase-out of overpayments to MA plans would result 

in savings to the Medicare program and taxpayers of $48 billion 

over five years and $156 billion over 10 years. 

The phase-down of MA payments to FFS costs applies equally to 

all 50 states and the territories, however, Puerto Rico is a unique 

situation that the Committee expects that the Secretary will use 

authority under current law to examine. Specifically, very few 

Medicare beneficiaries in Puerto Rico choose to enroll in Part B; instead, MA plans buy down the Part B premium for enrollees and 

therefore many Medicare beneficiaries enroll in MA to receive all 

of their Medicare services. 

With only a small population enrolled in Part B through traditional Medicare, the county FFS expenditures calculated by the 

Secretary are artificially low and unstable from year-to-year. 

Therefore, the Committee expects that when calculating county 

FFS rates for Puerto Rico, the Secretary will use utilization and exVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00369 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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penditure data from MA plans under current authority and adjust 

these rates and risk scores appropriately. 

The Program for All-Inclusive Care for the Elderly (PACE) is a 

very small program in Medicare that covers the most frail elderly 

beneficiaries who would otherwise be in nursing homes. Unlike 

other MA plans, PACE providers fully integrate Medicare and Medicaid benefits, including long-term care. They are also unable to 

alter benefits or raise premiums on their beneficiaries. Because of 

its unique nature, the PACE programs would continue to be paid 

at current levels. 

Effective Date 

January 1, 2011. 

Sec. 1162. Quality Bonus Payments 

Current Law 

No provision. 

Proposed Law 

For plan years starting with 2011, a qualifying plan in a qualifying county would receive an increase in their benchmark 

amounts equal to 2.6% in 2011, 5.3% in 2012 and 8.0% in subsequent years. 

A qualifying plan would be defined as a plan that, in a preceding 

year specified by the Secretary, had a quality ranking (based on 

the quality ranking system established by CMS) of 4 stars or higher. A qualifying county would be defined as a county, for a year, 

(a) that was within the lowest quarter of counties with respect to 

per capita spending in original Medicare, and (b) within which, 50 

percent of individuals were enrolled in MA and of the residents enrolled, at least 50 percent were enrolled in a plan with a quality 

ranking of 4 stars or higher. Starting in 2010, the Secretary would 

be required to notify the qualifying MA organization that is offering a qualified plan in a qualifying county of their status through 

the annual announcement of benchmark rates and through publication on the Medicare program website. The Secretary would have 

the authority to disqualify a plan if the Secretary identifies deficiencies in the plan’s compliance with MA rules under this part. 

Reason for Change 

In certain areas of the country, MA plans have achieved a high 

penetration rate and have received high quality ratings from CMS. 

Both criteria indicate that plans are offering beneficiaries a valuable benefit and have high patient satisfaction; low FFS spending 

in the same area may also indicate that efficiencies gained by the 

MA plans have spilled over into the traditional Medicare program. 

Effective Date 

January 1, 2011. 


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Sec. 1163. Extension of Secretarial Coding Intensity Adjustment Authority 

Current Law 

In general, Medicare payments to MA plans are risk-adjusted to 

account for the variation in the cost of providing care. Risk adjustment is designed to compensate plans for the increased cost of 

treating older and sicker beneficiaries, and thus discourage plans 

from preferential enrollment of healthier individuals. The Medicare 

risk adjustment models take into account the variation in expected 

medical expenditures of the Medicare population associated with 

demographic characteristics (age, sex, current Medicaid eligibility, 

original Medicare eligibility due to a disability), as well as medical 

diagnoses. The Deficit Reduction Act of 2005 (Pl. 109–171, DRA) 

required the Secretary, when risk adjusting payments to MA plans 

during 2008, 2009, and 2010, to adjust for patterns of diagnosis 

coding differences between MA plans and providers under parts A 

and B of Medicare, to the extent that the Secretary identified such 

differences based on an analysis of data submitted for 2004 and 

subsequent years. 

Proposed Law 

The provision would extend the requirement that MA plan payments be adjusted for differences in coding patterns beyond 2010. 

The provision would require the Secretary to conduct analyses of 

coding differences periodically and incorporate the findings on a 

timely basis. 

Reason for Change 

When the Deficit Reduction Act gave the Secretary explicit authority to adjust MA payment rates to account for differences in 

the intensity of diagnosis codes between MA and traditional Medicare that are attributable to inaccurate coding, it limited this authority to three years. For two out of the three years, CMS studied 

and identified a difference in coding intensity, yet did not adjust 

MA payments to account for this difference. For 2010, CMS will 

make a downward adjustment to all MA plan payments to account 

for its findings of inaccurate coding. While the MA payment system 

appropriately pays more to plans that enroll a riskier population, 

CMS’ finding suggests that MA plans assign more severe risk codes 

than the same beneficiary would be assigned in traditional Medicare, possibly increasing the plan payment without clinical justification. Giving the Secretary permanent authority to address this 

inequity allows the Agency to make appropriate and accurate payments to MA plans, and discourages any practice of ‘‘upcoding’’. 

Effective Date 

Date of enactment. 

Sec. 1164. Simplification of Annual Beneficiary Election Periods 

Current Law 

Medicare beneficiaries may enroll in or change their enrollment 

in MA from November 15 to December 31 each year (the annual, 

coordinated election period). Changes go into effect January 1st of 


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the next year. During the first three months of the year, beneficiaries can enroll in an MA plan, and individuals enrolled in an 

MA plan can either switch to a different MA plan or return to 

original Medicare. This period is known as the continuous open enrollment and disenrollment period. However, during the threemonth period, beneficiaries cannot change their drug coverage. 

Proposed Law 

The provision would move the annual, coordinated election period to 15 days earlier in the year—November 1st to December 

15th, rather than from November 15th to December 30th. The provision would eliminate the continuous open enrollment and 

disenrollment period (during the first three months of the year.) 

Reason for Change 

The current annual election period, from November 15 through 

December 31, gives MA and Part D plans very little, if any, time 

to process enrollment requests and ensure that on January 1, each 

beneficiary is properly enrolled in the plan. Allowing for a twoweek processing period between the end of the annual election period and the start of the plan year better ensures that enrollees do 

not experience any gaps in coverage, and that plans are able to 

process enrollments in time for the start of the plan year. 

The open enrollment period has been a source of confusion for 

beneficiaries and very few have chosen to take advantage of this 

three-month opportunity. Only one out of every five annual enrollments takes place during the open enrollment period, even though 

it is twice as long as the annual election period. Though it was 

originally conceived of as a beneficiary protection, giving enrollees 

an opportunity to switch plans after the year began if they discovered a problem with their plan, the confusing restrictions on which 

plans enrollees are permitted to switch into have severely limited 

its utility. Moreover, other sections of this bill and CMS have established numerous special enrollment periods that allow enrollees 

to switch plans if they have exceptional circumstances. 

Effective Date 

January 1, 2011. 

Sec. 1165. Extension of Reasonable Cost Contracts 

Current Law 

Reasonable Cost plans are MA plans that are reimbursed by 

Medicare for the actual cost of providing services to enrollees. Cost 

plans were created in the Tax Equity and Fiscal Responsibility Act 

(P.L. 97–248, TEFRA) of 1982. Balanced Budget Act of 1997 (P.L. 

105–33, BBA) included a provision to phase-out the reasonable cost 

contracts, however, the phase-out has been delayed over the years 

through Congressional action. These plans are allowed to operate 

indefinitely, unless two other plans of the same type (i.e., either 2 

local or 2 regional plans) offered by different organizations operate 

for the entire year in the cost contract’s service area. After January 

1, 2010, the Secretary may not extend or renew a reasonable cost 

contract for a service area if (1) during the entire previous year 

there were either two or more MA regional plans or two or more 


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MA local plans in the service area offered by different MA organizations; and (2) these regional or local plans meet minimum enrollment requirements. 

Proposed Law 

This provision would extend for two years—from January 1, 

2010, to January 1, 2012—the length of time reasonable cost plans 

could continue operating regardless of any other MA plans serving 

the area. The provision would modify the minimum enrollment requirement used as one of the criteria the Secretary considers when 

determining whether to renew or extend a reasonable cost plan. 

The enrollment criteria would apply to the portion of the MA regional or local plan’s service area for the year that it was within 

the service area of the reasonable cost contract (and not the total 

service area of the MA regional or local plan). 

Reason for Change 

Cost plan enrollees are older than the average Medicare beneficiary and are particularly vulnerable to the type of confusion that 

results from Medicare program changes. Extending cost plan authority through 2011 will ensure that Cost plan beneficiaries— 

many of whom have been in their plans for years—can maintain 

a stable Medicare health plan choice. This provision also clarifies 

Congressional intent with regard to how CMS counts enrollment 

for the purpose of prohibiting new Cost plans. 

Effective Date 

Date of enactment. 

Sec. 1166. Limitation of Waiver Authority for Employer Group 

Plans 

Current Law 

The Secretary has the authority to waive or modify requirements 

that hinder the design of, the offering of, or the enrollment in employer or union sponsored MA plans. Such plans can be offered either under contracts between the union or employer group and a 

Medicare Advantage organization, or directly by the employer or 

union group. 

Proposed Law 

For employers or unions that sponsor an MA plan directly and 

for employers that contract with a private MA organization, the 

Secretary would only have authority to waive or modify MA requirements for the plan if 90% of eligible individuals enrolled in 

the plan live in a county in which the MA organization offers an 

MA local plan. This provision would apply to plan years on or after 

January 1, 2011. The provision would not apply to plans in effect 

as of December 31, 2010. 

Reason for Change 

The MMA gave broad authority to CMS to waive virtually any 

requirement in order to encourage employers to provide retiree coverage through Medicare Advantage. While some requirements of 

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ble to employers contracting with or offering an MA plan, and can 

appropriately be waived, it is crucial that retirees enrolling in such 

an MA plan have adequate access to a provider network. Requiring 

that MA plans offer local plans alongside employer group plans ensures that they are meeting network adequacy requirements and 

enrollees are protected. 

Effective Date 

January 1, 2011. 

Sec. 1167. Improving Risk Adjustment for MA Payments 

Current Law 

In general, Medicare payments to MA plans are risk adjusted to 

account for the variation in the cost of providing care. Risk adjustment is designed to compensate plans for the increased cost of 

treating older and sicker beneficiaries, and thus discourage plans 

from preferential enrollment of healthier individuals. The Medicare 

risk adjustment models take into account the variation in expected 

medical expenditures of the Medicare population associated with 

demographic characteristics (age, sex, current Medicaid eligibility, 

original Medicare eligibility due to a disability), as well as medical 

diagnoses, and differences in coding practices between MA and providers under Medicare Part A and B. 

Proposed Law 

Not later than 1 year after enactment, the Secretary would be required to submit a report to Congress evaluating the adequacy of 

the Medicare Advantage risk adjustment system at predicting costs 

for beneficiaries with chronic or co-morbid conditions, beneficiaries 

dually-eligible for Medicare and Medicaid, and non-Medicaid eligible low-income beneficiaries. The report would also be required to 

address the need and feasibility of including further gradations of 

diseases or conditions and multiple years of beneficiary data. Taking this report into account, not later than January 1, 2012, the 

Secretary would be required to implement necessary improvements 

to the MA risk adjustment system. 

Reason for Change 

The Committee is concerned that the Medicare Advantage (MA) 

risk adjustment system does not adequately account for a variety 

of factors, such as costs associated with low income and chronic 

conditions, and that multiple years of beneficiary data and further 

gradations of disease are not included in the system yet could improve the system’s accuracy. This evaluation will allow the Secretary to determine if, accounting for these factors, the risk adjustment system can be improved to better project enrollees’ costs. 

Effective Date 

Date of enactment. 

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

Current Law 

MMA created the MA Regional Program and established the MA 

Regional Plan Stabilization Fund to encourage plans to enter into 


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and/or remain in the MA Regional Program. The fund was originally set at $10 billion with additional money added to the fund 

from savings in the bidding process. Funds were to be available 

from 2007 through the end of 2013. Subsequent legislation decreased the amount of funds available and delayed their availability. Most recently, MIPPA reduced the initial funding of the 

program to one dollar. Money from the regional plan bidding process continues to flow into the Fund. Expenditures from the Fund 

are delayed until 2014. 

Proposed Law 

The provision would eliminate the MA Regional Plan Stabilization Fund. Any amounts contained in the Fund would be transferred to the Federal Supplementary Medical Insurance Trust 

Fund. 

Reason for Change 

Regional PPOs are no longer a new plan type and the Medicare 

Advantage program is a relatively stable market. This fund is not 

necessary. 

Effective Date 

Date of enactment. 

Part 2—Consumer Protections and Anti-Fraud 

Sec. 1171. Limitation on Out-of-pocket Costs for Individual Health 

Services 

Current Law 

Each MA plan must provide all required Part A and B Medicare 

benefits (other than hospice) to individuals entitled to Medicare 

Part A and enrolled in Part B. The aggregate amount of cost sharing in a MA plan must be equal to the aggregate amount of cost 

sharing in traditional Medicare. Cost sharing per enrollee (excluding premiums) for covered services cannot be more than the actuarial value of the deductibles, coinsurance, and co-payments under 

traditional Medicare. Dual eligibles are persons also entitled to the 

full range of benefits under their state’s Medicaid program. Qualified Medicare beneficiaries (QMBs) are those aged or disabled individuals that are entitled to have some of their Medicare cost sharing and Part B premiums paid by the federal-state Medicaid program, but are not entitled to coverage of Medicaid plan services. 

Proposed Law 

For plan years beginning on or after January 1, 2011, MA plans 

would be prohibited from offering benefits with cost sharing requirements that are greater than the cost sharing requirements 

imposed under the traditional Medicare program. The ‘‘actuarially 

equivalent’’ standard in the statute would be eliminated. Medicare 

private plans would not be prohibited from using flat co-payments 

or per diem rates in lieu of the cost sharing amounts imposed 

under Part A and B Medicare, as long as they did not exceed the 

level of cost sharing under traditional Medicare. This provision 

would also prohibit plans from imposing cost-sharing for dual-eligible individuals or qualified Medicare beneficiaries enrolled in an 


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MA plan that exceeds the cost-sharing amounts permitted under 

the Medicare and Medicaid statutes. 

Reason for Change 

Using a standard of actuarial equivalence across cost sharing for 

all services leaves an opportunity for MA plans to increase cost 

sharing for infrequently-used services that enrollees may not scrutinize—like home health or cancer drugs—while lowering cost sharing for more commonly used services, like physician visits. While 

this may be attractive for enrollees who are relatively healthy, it 

has potentially devastating out-of-pocket cost implications for those 

enrollees who fall sick. MA plans that receive a rebate, because 

their bid is below the county benchmark, can use this rebate to 

lower cost sharing for certain services, either to attract enrollment 

or to encourage use of certain services (e.g. visits to a primary care 

physician). Setting a maximum cost sharing that does not exceed 

cost sharing under traditional Medicare ensures that no beneficiary 

will have higher out-of-pocket costs just because they choose to receive Medicare services through a private plan. 

Effective Date 

January 1, 2011. 

Sec. 1172. Continuous Open Enrollment for Enrollees in Plans with 

Enrollment Suspension 

Current Law 

Special Election Periods (SEPs) allow beneficiaries the option to 

discontinue their enrollment in a MA plan and enroll in a different 

MA plan or traditional Medicare outside of the annual coordinated 

election period. The circumstances in which an enrollee can exercise this option include (1) an MA plan terminates its participation 

in the MA program or in a specific area, (2) an individual’s place 

of residence changes, (3) the MA plan violates a provision of its 

contract or misrepresents the plan’s provisions in marketing the 

plan, or (4) other exceptional conditions as provided by the Secretary. 

Proposed Law 

This provision would require the Secretary to take into account 

the health or well-being of an individual when determining what 

constitutes eligibility for a SEP. This provision would expand the 

categories of beneficiaries eligible to participate in a SEP to include 

beneficiaries enrolled in private plans that have been suspended for 

not meeting the terms of their contract. 

Reason for Change 

The Secretary has authority to suspend enrollment in MA plans 

that are not in compliance with various program requirements. The 

Committee believes that if an MA plan’s behavior is egregious 

enough that the Secretary would prohibit new enrollees, the current enrollees should be allowed an opportunity to disenroll, either 

for another MA plan or to traditional Medicare. Furthermore, the 

Secretary has wide latitude to establish additional SEPs, and the 


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Committee believes that the Secretary should consider the health 

and well-being of beneficiaries when establishing these SEPs. 

Effective Date 

Date of enactment. 

Sec. 1173. Information for Beneficiaries on MA Plan Administrative 

Costs 

Current Law 

The Secretary must provide for activities to disseminate information to current and prospective Medicare beneficiaries about MA 

plans, including, but not limited to benefits, cost sharing, service 

area, access, out-of-area coverage, emergency coverage, and supplemental benefits. 

By the first Monday in June, each local MA plan must submit 

to the Secretary an aggregate monthly bid amount (which includes 

separate bids for required services, any offered supplemental benefits, and any offered drug benefits) for each MA plan it intends to 

offer in the upcoming calendar year. The bid is based on the average revenue requirements in the payment area for an enrollee with 

a national average risk profile. The Secretary has the authority to 

evaluate and negotiate the plan’s bid amounts and its proposed 

benefit packages. 

Proposed Law 

This provision would require the publication of administrative 

cost information, including the medical loss ratio (MLR), for MA 

plans. Plans that fail to meet a minimum MLR would be subject 

to sanctions, such as enrollment suspension and potential termination. 

Beginning in 2011, the Secretary would be required to publish 

the MLR for the previous year by November 1st for each MA plan 

contract. MLRs would be defined by the Secretary, taking into account the definition adopted by the Health Choices Commissioner 

under section 116 of this Act. Each MA plan would be required to 

submit to the Secretary, in a manner and form specified by the 

Secretary, the necessary data for publishing MLR information on 

a timely basis. For 2010 and 2011, the data submitted would be required to be consistent in content with the data reported as part 

of the MA plan bid in June 2009 for 2010. 

For contract years beginning in 2010, the Secretary would be required to develop and implement standardized elements and definitions for reporting the data necessary to calculate a MLR. The elements and definitions would be developed in consultation with the 

Health Choices Commissioner, representatives of MA organizations, experts on health plan accounting systems, and representatives of the National Association of Insurance Commissioners. The 

Secretary would be required to publish a report describing the elements and definitions no later than December 31, 2010. 

Beginning in 2014, if the Secretary determines that a MA plan 

failed to have a MLR of at least 0.85, the Secretary would be required to mandate that the MA plan provide enrollees with a rebate of their Part C premiums (or Part B or D, if applicable) by 

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retary would also be required to restrict enrollment in the MA plan 

for 3 consecutive years and terminate the plan’s contract if the 

plan failed to meet the MLR requirements for 5 consecutive years. 

Reason for Change 

Medicare Advantage plans claim to provide significant extra benefits, but neither the plans nor CMS quantify whether any of the 

revenue plans receive from the government is actually spent on enhanced benefits. According to MedPAC, MA plans on average currently spend more than 13 percent of their Medicare payments on 

administrative costs and profits. 

The Medical Loss Ratio is the percentage of health plan revenue 

actually spent on direct patient care versus profit and administrative overhead. In the annual MA bidding process, plans report data 

on administrative costs and the other factors necessary for the calculation of a Medical Loss Ratio. Though currently unavailable, 

disclosure of these ratios will help beneficiaries choose efficient 

plans and will help the Congress make future program improvements. 

MA plans should provide care in an efficient manner. This section provides for a minimum MLR of 0.85 for MA plans beginning 

in 2014 so that beneficiaries and taxpayers would not pay more 

than 15 cents per dollar for administrative costs and profits. The 

Health Choices Commissioner will enact standards for minimum 

MLRs for qualifying plans in the Health Insurance Exchange. 

Effective Date 

Date of enactment. 

Sec. 1174. Strengthening Audit Authority 

Current Law 

The Secretary is required to provide for the annual auditing of 

the financial records of at least 1⁄3 of MA plans. Each contract with 

an MA plan is required to provide that the Secretary has the right 

to inspect or evaluate the quality, appropriateness and timeliness 

of services performed under the contract. Contracts must also provide the Secretary with the right to audit any plan’s books and 

records related to the plan’s ability to bear risk, the services delivered, or any amounts payable under the contract. 

Proposed Law 

Each contract with an MA plan would be required to include a 

provision that the Secretary have the authority to take necessary 

action, including the pursuit of financial recoveries, to address deficiencies identified during an annual audit. The provision would 

apply to Part D Prescription Drug Plans (PDPs) in the same manner as certain other MA contract provisions apply to PDP plans. 

The provision would apply to audits conducted for contract years 

beginning on or after January 1, 2011. 

Reason for Change 

The Committee believes that if the Secretary identifies deficiencies in MA plans or PDPs, the Secretary should have the authority to act to remedy those deficiencies. 


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Effective Date 

January 1, 2011. 

Sec. 1175. Authority to Deny Plan Bids 

Current Law 

By the first Monday in June, each local MA plan must submit 

to the Secretary an aggregate monthly bid amount (which includes 

separate bids for required services, any offered supplemental benefits, and any offered drug benefits) for each MA plan it intends to 

offer in the upcoming calendar year. The bid is based on the average revenue requirements in the payment area for an enrollee with 

a national average risk profile. The Secretary has the authority to 

evaluate and negotiate the plan’s bid amounts and its proposed 

benefit packages. 

Potential PDP sponsors are also required to submit bids by the 

first Monday in June of the year prior to the plan benefit year. The 

following information must be included with the bid: (1) coverage 

to be provided; (2) actuarial value of qualified prescription drug 

coverage in the region for a beneficiary with a national average 

risk profile; (3) information on the bid, including the basis for the 

actuarial value, the portion of the bid attributable to basic coverage 

and, if applicable, the portion attributable to enhanced coverage, 

and assumptions regarding the reinsurance subsidy; and (4) service 

area. The bid also includes costs (including administrative costs 

and return on investment/profit) for which the plan is responsible. 

The bid must exclude costs paid by enrollees, payments expected 

to be made by CMS for reinsurance, and any other costs for which 

the sponsor is not responsible. 

Proposed Law 

Beginning January 1, 2011, the Secretary would not be required 

to accept any or every bid submitted by an MA or PDP plan. 

Reason for Change 

Under current law, the Secretary has the authority to negotiate 

bids with most MA plans and PDPs. The Committee believes that 

this negotiation process can be an important part of the annual bid 

process, however the Committee also believes that the Secretary 

should have explicit authority to reject bids from plans with which 

it cannot negotiate satisfactorily, or for other reasons. The Secretary should hold private plans wishing to provide care to Medicare beneficiaries to a high standard and should be permitted to 

exclude plans that do not meet that standard. 

Effective Date 

January 1, 2011. 


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Part 3—Treatment of Special Needs Plans 

Sec. 1176. Limitation on Enrollment Outside Open Enrollment Period of Individuals into Chronic Care Specialized MA plans for 

Special Needs Individuals 

Current Law 

Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108–173), Congress created a 

new type of Medicare Advantage (MA) coordinated care plan focused on individuals with special needs. Special Needs Plans 

(SNPs) are allowed to target enrollment to one or more types of 

special needs individuals identified by Congress as 1) institutionalized; 2) dually eligible; and/or 3) individuals with severe or disabling chronic conditions. 

The number of SNPs has increased dramatically since 2004, the 

first year of operation. In 2004, CMS approved 11 SNPs, but by 

January 2008, CMS had approved 787 SNPs, including 442 dualeligible SNPs, 256 chronic care SNPs, and 89 institutional SNPs. 

In September 2008, there were 1.2 million beneficiaries in SNPs. 

Under current law, Medicare beneficiaries may enroll in or 

change their enrollment in MA plans from November 15th to December 31st each year. Changes go into effect January 1st of the 

next year. During the first three months of the year, beneficiaries 

can enroll in an MA plan, and individuals enrolled in an MA plan 

can either switch to a different MA plan or return to original Medicare. Beneficiaries may also enroll in MA or switch their enrollment if they qualify for a Special Election Period (SEP) as defined 

in statute or by the Secretary. One SEP specified by the Secretary 

in the Medicare Managed Care Manual allows individuals with severe or disabling chronic conditions to enroll in an SNP designed 

for individuals with those conditions. This SEP applies as long as 

the individual has the qualifying condition and ends once the beneficiary enrolls in an SNP. Once the SEP ends, that individual may 

make enrollment changes only during applicable MA election periods. 

Proposed Law 

This provision would require that beginning on January 1, 2011, 

SNPs serving beneficiaries with severe or disabling conditions 

could only enroll eligible individuals during an annual, coordinated 

open enrollment period or at the time of diagnosis of the disease 

or condition that would qualify an individual for a chronic care 

SNP. 

Reason for Change 

The Committee is concerned that the current SEP for beneficiaries eligible for a chronic condition SNP encourages aggressive 

marketing by plans and is confusing for beneficiaries accustomed 

to annual enrollment periods. The new SEP must be more narrowly 

targeted to the time around a beneficiary’s diagnosis, but the Committee gives authority to the Secretary to determine how long after 

a diagnosis the beneficiary is permitted to elect an SNP. The Committee intends that this be a length of time sufficient for the beneVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00380 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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ficiary to understand the consequences of a diagnosis and learn 

about options for specialized plans. 

Effective Date 

January 1, 2011. 

Sec. 1177. Extension of Authority of Special Needs Plans to Restrict 

Enrollment 

Current Law 

Prior to January 1, 2011, SNPs may restrict enrollment to those 

who are in one or more classes of special needs individuals. Starting January 1, 2010, new SNP enrollment must be limited exclusively to individuals that meet the criteria for which the SNP is 

designated: dual eligible, chronic care, and institutional care. Further, MIPPA required that dual eligible SNPs contract with state 

Medicaid agencies to provide medical assistance services (Medicaid), which may include long-term care services. If SNPs do not 

have contracts with Medicaid agencies by January 1, 2010, then 

they can continue to operate, but are prohibited from expanding 

their service areas. However, state Medicaid agencies are not required to enter into contracts with SNPs. 

Proposed Law 

This provision would extend the time period, from January 1, 

2011, to January 1, 2013, during which SNPs may restrict current 

enrollment to individuals who meet the definition of the respective 

SNP. In addition, selected SNPs that had contracts with states that 

had a state program to operate an integrated Medicaid-Medicare 

program that was approved by CMS as of January 1, 2004, would 

be allowed to restrict enrollment to beneficiaries who meet the definition of special needs individuals through January 1, 2016. 

Through a contract with an independent health services evaluation organization, the Secretary would be required to provide an 

analysis of the SNPs that were approved by CMS as of January 1, 

2004. The analysis of these grandfathered SNPs would include the 

impact of such plans on cost, quality of care, patient satisfaction, 

and other subjects as specified by the Secretary. By December 31, 

2011, the Secretary would be required to submit a report to Congress on the analysis of the grandfathered SNPs, which would include recommendations on the appropriate treatment of these 

plans. 

Reason for Change 

Congress and the Secretary have taken legislative and regulatory 

steps to ensure that SNPs truly offer specialized services for the 

populations enrolled. The Committee believes that SNP authority 

should be extended for a limited number of years in order to allow 

plans to meet these requirements. 

A small subset of SNPs that have fully integrated Medicare and 

Medicaid services for dually eligible beneficiaries would receive a 

longer extension, as these plans have demonstrated an ability to integrate care, as originally envisioned for the SNP program. 


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Effective Date 

Date of enactment. 

Subtitle E—Improvements to Medicare Part D 

Sec. 1181. Elimination of Coverage Gap 

Current Law 

Medicare law sets out a defined standard benefit structure under 

the Part D prescription drug benefit. In 2009, the standard benefit 

includes a $295 deductible and a 25% coinsurance until the enrollee reaches $2,700 in total covered drug spending. After this initial coverage limit is reached, there is a gap in coverage in which 

the enrollee is responsible for the full cost of the drugs until total 

costs hit the catastrophic threshold, $6,153.75 in 2009. Each year, 

the deductible, co-payments, and coverage thresholds are increased 

by the annual percentage increase in average per-capita aggregate 

expenditures for covered outpatient drugs for Medicare beneficiaries for the 12-month period ending in July of the previous 

year. 

Part D plan sponsors are allowed to offer plans that differ in benefit design, but are actuarially equivalent, or they may offer ‘‘enhanced’’ plans that offer more generous coverage. Currently, almost 

all plans include a coverage gap in their benefit designs. CMS estimates that 31.7% (8.3 million) Part D enrollees reached the initial 

coverage limit of their drug plans in 2007. 

Some beneficiaries with limited income and resources may qualify for assistance with a portion of their Part D premiums, costsharing, and other out-of-pocket expenses. Medicare beneficiaries 

who qualify for Medicaid based on their income and assets (dual 

eligibles) are automatically deemed eligible for the full low-income 

subsidy. Prior to the implementation of the Medicare Part D outpatient prescription drug benefit, established by the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA, 

P.L. 108–173), Medicaid was the primary payer for drugs for fullbenefit dual-eligible beneficiaries. 

The Omnibus Budget Reconciliation Act of 1990 (P.L. 101–508) 

requires drug manufacturers who wish to have their drugs available for Medicaid enrollees to enter into rebate agreements with 

the Secretary of HHS, on behalf of the states. Under the agreements, pharmaceutical manufacturers must provide state Medicaid 

programs with rebates on drugs paid for Medicaid beneficiaries. 

The formulas used to compute the rebates are intended to ensure 

that Medicaid pays the lowest price that the manufacturers offer 

for the drugs. In return for entering into agreements with the Secretary, state Medicaid programs are required to cover all of the 

drugs marketed by those manufacturers (with possible exceptions 

for the 11 categories of drugs that states are allowed to exclude 

from coverage). 

The rebates are computed and remitted by pharmaceutical manufacturers each quarter based on utilization information supplied 

by the state programs. States collect the rebates from the manufacturers. The federal share of the rebates are subtracted from states’ 

claims for their federal share of program costs. In setting the 

amount of required rebates, the law distinguishes between two 


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classes of drugs. The first includes single source drugs (generally, 

those still under patent) and ‘‘innovator’’ multiple source drugs 

(drugs originally marketed under a patent or original new drug application (NDA) but for which generic competition now exists). The 

second class includes all other, ‘‘non-innovator’’ multiple source 

drugs (generics). 

Manufacturers are required to pay state Medicaid programs a 

basic rebate for single source and innovator multiple source drugs. 

Basic rebate amounts are determined by comparing the Average 

Manufacturer Price (AMP) for a drug to the ‘‘best price,’’ which is 

the lowest price offered by the manufacturer in the same period to 

any wholesaler, retailer, nonprofit, or public entity. Under current 

law, the basic rebate is the greater of 15.1% of the AMP or the difference between the AMP and the best price. For non-innovator 

multiple source drugs, basic rebates are equal to 11% of the AMP. 

Manufacturers are also required to pay an additional Medicaid inflation rebate for single source drugs. This rebate is equal to the 

amount by which the increase in the AMP of the single source drug 

exceeds the increase in the consumer price index. 

Proposed Law 

Coverage Gap 

This provision would phase in an elimination of the coverage gap. 

For each year beginning with 2011, the Secretary would progressively increase the initial coverage limit and decrease the annual 

out-of-pocket threshold until there is a continuation of coverage 

from the initial coverage limit up to the expenditure threshold at 

which catastrophic coverage begins. Starting in 2011, the initial 

coverage limit for each year, as determined using current annual 

percentage increase methodology, would be increased by Y2 of the 

cumulative phase-in percentage (the sum of the annual phase-in 

percentage for the year and the annual phase-in percentages for 

each previous year) times the out-of-pocket gap amount (the 

amount by which the annual out-of-pocket threshold for the year 

exceeds the sum of the annual deductible for the year and 1⁄4 the 

amount by which the initial coverage limit for the year exceeds the 

annual deductible). Also beginning in 2011, the annual out-of-pocket threshold would be decreased by 1⁄2 of the cumulative phase-in 

percentage of the out-of pocket gap amount for the year multiplied 

by 1.75. 

The annual phase in percentage would be 13% for 2011; 5% for 

years 2012 through 2015; 7.5% for years 2016 through 2018, and 

10% for 2019 and each subsequent year. 

Requiring Drug Manufacturers to Provide Rebates for Full-Benefit 

Dual Eligibles 

Under this provision, drug manufacturers would be required to 

provide the Secretary a rebate for any covered Part D drug of the 

manufacturer dispensed after December 31, 2010 to any full-benefit 

dual eligible individual for which payment was made by a prescription drug plan (PDP) sponsor or a Medicare Advantage (MA) organization. 

The amount of the rebate for a rebate period would be equal to 

the product of the total number of units of such dosage form and 


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strength of the drug dispensed and the amount, if any, by which 

the Medicaid rebate, as modified by this statute, and including 

both the basic and inflation rebate, for such form, strength, and period, exceeds the average Medicare drug program full-benefit dual 

eligible rebate amount for such form, strength, and period. 

The average Medicare drug program full-benefit dual eligible rebate amount means, with respect to each dosage form and strength 

of a covered outpatient drug provided by a manufacturer for a rebate period, the sum for all PDP sponsors and MA organizations 

administering a Medicare Advantage drug plan (MA–PD), of the 

product for each such sponsor or organization of: the sum of all rebates, discounts, or other price concessions, calculated on a per unit 

basis (but only to the extent that any such rebate, discount, or 

other price concession applies equally to drugs dispensed to fullbenefit dual eligible Medicare drug plan enrollees and drugs dispensed to PDP and MA–PD enrollees who are not full-benefit dual 

eligible enrollees), and the number of units of such dosage and 

strength of the drug dispensed during the rebate period to full-benefit dual eligible enrollees, divided by the total number of units of 

the drug dispensed during the rebate period to all full-benefit dual 

eligible PDP and MA–PD enrollees. 

In general, a rebate agreement would be effective for an initial 

period of not less than 1 year and would be automatically renewed 

for a period of not less than 1 year. The Secretary would be required to establish other terms and conditions of the rebate agreement including terms and conditions related to compliance. 

For contract years beginning on or after January 1, 2011, each 

drug plan contract entered into with a PDP sponsor or a MA organization would require that the sponsor or organization report to 

each manufacturer not later than 60 days after the end of each rebate period, information on the total number of units of each dosage, form, and strength of each drug the manufacturer dispensed 

to full-benefit dual eligible Medicare drug plan enrollees under any 

PDPs or MA–PDs operated by the sponsor during the rebate period; information on the price discounts, price concessions, and rebates for such drugs for such form, strength, and period; information on the extent to which such price discounts, price concessions, 

and rebates apply equally to full-benefit dual eligible Medicare 

drug plan enrollees and enrollees who are not full-benefit dual eligible plan enrollees; and any additional information that the Secretary determines is necessary to enable the Secretary to calculate 

the average Medicare drug program full-benefit dual eligible rebate 

amount. The report would be in a form consistent with a standard 

reporting format established by the Secretary, and a copy of the information would be reported to the Secretary for the purpose of 

oversight and evaluation. The information submitted would be 

treated as confidential. The rebate would be paid by the manufacturer to the Secretary not later than 30 days after the date of receipt of this information. 

The provision would allow the Medicare Payment Advisory Commission, the Congressional Budget Office and the GAO access to 

the information, and the information reported may be used by the 

HHS Office of Inspector general for audits, investigations, and 

evaluations. Additional confidentiality provisions (with the exception of clause iv) from the Medicaid rebate section (1927(b)(3)) of 


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the Social Security Act also apply to the Medicare Part D rebate 

data reported under this section. 

In cases where information was not submitted timely or if false 

information is submitted, penalties would be imposed. PDP sponsors and MA organizations would be subject to a civil money penalty in the amount of $10,000 for each day in which such information has not been provided. If the sponsor or organization knowingly provides false information, the sponsor or organization would 

be subject to a civil money penalty in an amount not to exceed 

$100,000 for each item of false information. Such penalties would 

be in addition to any other civil money penalties as may be prescribed by law. 

The rebates for full-benefit dual eligible Medicare drug plan enrollees would be paid into the Medicare Prescription Drug Account 

in the Supplementary Medical Insurance Trust Fund and used to 

pay for all or part of the gradual elimination of the coverage gap. 

Reason for Change 

When prescription drug coverage for six million dually eligible 

beneficiaries was switched from Medicaid to Medicare Part D in 

2006, drug manufacturers received a windfall amounting to almost 

$4 billion in just the first two years of the program. While Medicaid 

rebates are statutorily required at a certain level, rebates in the 

Part D program are entirely negotiated between plans and manufacturers, giving the federal government and taxpayers who pay for 

the Part D program—no control over the level of rebate provided. 

Requiring that rebates from drug manufacturers in the Part D program match the rebates required under Medicaid ensures that for 

the same beneficiary, manufacturers are not permitted to charge 

higher prices to the government under Part D than under Medicaid. Manufacturers will continue to enter into rebate agreements 

with the Part D plans, however, if that rebate amount does not 

equal the Medicaid rebate amount for a particular drug, the manufacturer would be required to make up the difference in rebate payments directly to the federal government. With respect to GAO, the 

confidentiality provision that incorporates section 1927(b)(3) of the 

Social Security Act is intended to reflect and confirm GAO’s existing right to access Part D information in light of its broad authority at 31 U.S.C. 716. 

Funds received from the new rebate requirement will be used to 

pay for, in whole or in part, the elimination of the Part D coverage 

gap. Since the program’s inception, this mid-year gap in benefits 

has plagued millions of beneficiaries who continue to pay their 

monthly premium, yet also have to pay 100 percent of the cost of 

their drugs out-of-pocket. This section would eliminate the gap over 

time, ensuring that beneficiaries are insured against the full cost 

of drugs throughout the entire benefit year. 

Effective Date 

January 1, 2011. 


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Sec. 1182. Discounts for Certain Part D Drugs in Original Coverage 

Gap 

Current Law 

No provision. 

Proposed Law 

Manufacturers of prescription drugs would, as a condition of allowing any of the drugs they manufacture to be treated as covered 

drugs under Medicare Part D, be required to enter into agreements 

with Medicare Part D drug plan sponsors to provide discounts on 

covered Part D drugs provided to plan enrollees in the coverage 

gap period. This provision would be applicable to drugs dispensed 

after December 31, 2010. 

Under a discount agreement, a drug manufacturer would be required to provide to each PDP or MA–PD plan a discount for qualifying drugs of the manufacturer dispensed to a qualifying enrollee 

when in the original Part D coverage gap. A qualifying drug would 

be defined as drug that is produced under an original new drug application approved by the FDA, or a drug that was initially marketed under such an application, or a biological product approved 

under Section 351(a) of the Public Health Service Act, and that is 

covered under the plan’s formulary and is dispensed to an individual who is in the original coverage gap. 

The Secretary would establish the terms and conditions of the 

discount agreement, including those relating to compliance, similar 

to the terms and conditions for rebate agreements between states 

and drug manufacturers for drugs provided to Medicaid recipients. 

However, the discounts would be applied to PDPs and MA-PD 

plans rather than to states; PDP sponsors and MA organizations, 

instead of states, would be required to provide the necessary utilization information to drug manufacturers; and PDP sponsors and 

MA organizations would be responsible for reporting information 

on drug-component negotiated prices instead of other manufacturer 

prices used in calculating Medicaid rebates. 

The amount of the discount for a discount period for a plan 

would be equal to 50 percent of the amount of the negotiated price 

for qualifying drugs, excluding any dispensing fee for the period involved. The sponsor or plan would provide the discount to the enrollee at the time the enrollee pays for the drug if the enrollee is 

in the actual gap in coverage, and in such cases the amount of the 

discount, in addition to the amount actually paid by the enrollee, 

would count toward costs incurred by the plan enrollee. If the enrollee is in the portion of the original gap in coverage that is not 

in the actual gap in coverage, the discount shall not be applied 

against the negotiated price for the purpose of calculating the beneficiary payment. 

A qualifying enrollee is defined as an individual who is enrolled 

in a PDP or an MA-PD plan who is not a subsidy-eligible individual as defined in section 1860–D–14(a)(3). The original gap in 

coverage is defined as the gap that would occur between the initial 

coverage limit and the out-of-pocket threshold if the phase-out of 

the coverage gap described in Section 1181 did not apply. The actual gap in coverage refers to the gap between the initial coverage 

limit and the out-of-pocket threshold as modified by Section 1181. 


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With regard to payments to pharmacists, discounts under this 

section are to be treated in a similar fashion to any other discounts, rebates, or price concessions provided to PDP sponsors, and 

payments to pharmacists in conjunction with these discounts are to 

be made consistent with prompt payment requirements under Section 1860D–12(b)(4), with the pharmacist to be fully reimbursed for 

clean claims within 14 days. 

Reason for Change 

In June 2009, the trade association representing brand-name 

pharmaceutical manufacturers—PhRMA—pledged to provide a 50 

percent discount to seniors in the Part D coverage gap to alleviate 

the high costs that seniors currently faced. This section would 

enact that promise into law. All Medicare beneficiaries who would 

otherwise face 100 percent cost sharing in the coverage gap, would 

receive a 50 percent discount on brand-name drugs. While this discount is important and will provide immediate relief for millions of 

seniors, it will still leave many beneficiaries with high out-of-pocket 

costs in the gap. Simultaneously, the act gradually closes the coverage gap so seniors’ drug costs will be more consistent throughout 

the benefit year. 

Effective Date 

January 1, 2011. 

Sec. 1183. Repeal of Provision Relating To Submission of Claims by 

Pharmacies Located in or Contracting With Long-Term Care 

Facilities 

Current Law 

Section 172 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P.L. 110–275) provided for a new set 

of requirements for contracts between Part D drug plan sponsors 

and pharmacies located in or contracting with long-term care facilities for plan years beginning on or after January 1, 2010. Under 

this section, each contract entered into with a PDP sponsor or MAPD plan is required to provide that a pharmacy located in or having a contract with a longterm care facility would have between 30 

and 90 days to submit claims for reimbursement. 

Proposed Law 

Section 172 of MIPPA would be repealed. This provision would 

be applicable for contract years beginning with 2010. 

Reason for Change 

This provision is repealed to allow long-term pharmacies and 

nursing homes more time to coordinate with state Medicaid programs. 

Effective Date 

January 1, 2010. 


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Sec. 1184. Including Costs Incurred by AIDS Drug Assistance Programs and Indian Health Service in Providing Prescription 

Drugs Toward the Annual Out of Pocket Threshold Under Part 

D 

Current Law 

Under a standard Medicare Part D plan design, beneficiaries 

must incur a certain level of out-of-pocket costs ($4,350 in 2009) before catastrophic protection begins. These include costs that are incurred for the deductible, cost-sharing, or benefits not paid because 

they fall in the coverage gap. Costs are counted as incurred, and 

thus treated as true out-of-pocket (TrOOP) costs only if they are 

paid by the individual (or by another family member on behalf of 

the individual), paid on behalf of a low-income individual under the 

subsidy provisions, or paid under a State Pharmaceutical Assistance Program. Incurred costs do not include amounts for which no 

benefits are provided—for example, because a drug is excluded 

under a particular plan’s formulary. Additional payments that do 

not count toward TrOOP include Part D premiums and coverage by 

other insurance, including group health plans, workers’ compensation, Part D plans’ supplemental or enhanced benefits, or other 

third parties. 

Proposed Law 

The provision would treat as incurred those costs that are borne 

or paid by the Indian Health Service, Indian tribe or tribal organization or an urban Indian organization (as defined in Section 4 of 

the Indian Health Care Improvement Act) to count toward the outof-pocket threshold. Costs paid under an AIDS Drug Assistance 

Program under Part B of Title XXVI of the Public Health Service 

Act would also count toward the out-of-pocket threshold. The provision would apply costs incurred on or after January 1, 2011. 

Reason for Change 

This requires the Secretary to count contributions from other 

programs designed to help beneficiaries with their drug costs for 

the purpose of a beneficiary reaching the catastrophic cap. 

This change will lower costs for beneficiaries who receive assistance from other sources from continuing to paying higher costs for 

prescription drugs. 

Effective Date 

January 1, 2011. 

Sec. 1185. Permitting Mid-Year Changes in Enrollment for Formulary Changes That Adversely Impact an Enrollee 

Current Law 

Part D plans are permitted to operate formularies—lists of drugs 

that a plan chooses to cover and the terms under which they are 

covered. By law, Part D plans may not change the therapeutic categories and classes in a formulary other than at the beginning of 

each plan year except as the Secretary may permit, to take into account new therapeutic uses and newly-approved covered Part D 

drugs. The law further stipulates that any removal of a covered 


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Part D drug from a formulary and any change in the preferred or 

tiered cost-sharing status of such a drug shall take effect only after 

appropriate notice is made available to the Secretary, affected enrollees, physicians, pharmacies, and pharmacists. 

Under current regulations, a Part D sponsor may not remove a 

covered Part D drug from its Part D plan’s formulary or make any 

change in the preferred or tiered cost-sharing status of a covered 

Part D drug on its plan’s formulary between the beginning of the 

open enrollment period and 60 days after the beginning of the contract year associated with that open enrollment period except 

under certain circumstances, for example, when a covered drug has 

been deemed unsafe by the FDA or removed from the market by 

its manufacturer. After March 1 of a given plan year, Part D sponsors may make maintenance changes to their formularies, such as 

replacing brand name drugs with new generic drugs or modifying 

formularies as a result of new information on drug safety or effectiveness. According to CMS policy, if Part D sponsors remove Part 

D drugs for their formularies, move covered Part D drugs to a less 

preferred tier status, or add utilization management requirements, 

these changes must be approved by CMS and sponsors may make 

such changes only if enrollees currently taking the affected drug 

are exempt from the formulary change for the remainder of the 

contract year. 

Part D sponsors may expand formularies by adding drugs to 

their formularies, reducing copayments or coinsurance by placing a 

drug on a lower cost-sharing tier, or deleting utilization management requirements at any time during the year. 

Proposed Law 

The provision would establish a special open enrollment period 

for an individual to change plans during a period other than during 

the annual open enrollment period. The provision would apply to 

an individual enrolled in a prescription drug plan (or an MA-PD 

plan) who has been prescribed and is using a drug while enrolled 

in the plan in the case where the formulary of the plan materially 

changed (other than at the end of the contract year) such as to reduce coverage or increase the cost-sharing of the drug. The provision would not apply in cases where the drug was removed from 

the formulary because of a recall or withdrawal issued by the Food 

and Drug Administration or because the drug was replaced with a 

therapeutically equivalent generic drug. The provision would also 

not apply in instances where utilization management was applied 

for drugs for which FDA required a boxed warning or drugs subject 

to a Risk Evaluation and Management Strategy under subsection 

(f) of Section 505–1 of the Federal Food, Drug, and Cosmetic Act. 

The provision would apply to contract years beginning on or after 

January 1, 2011. 

Reason for Change 

Beneficiaries choose prescription drug plans based on a number 

of factors, not the least of which is whether a plan covers the drugs 

they are currently taking. Though CMS has imposed certain restrictions on plan formulary changes, there is no protection for 

beneficiaries who are nonetheless harmed by a mid-year formulary 

change. This provision will allow adversely affected beneficiaries to 


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choose a new plan, and will discourage plans from making midyear formulary changes for highly prescribed drugs. 

Effective Date 

January 1, 2011. 

Subtitle F—Medicare Rural Access Protections 

Sec. 1191. Telehealth Expansion and Enhancements 

Current Law 

Medicare covers certain services including professional consultations, office and other outpatient visits, individual psychotherapy, 

pharmacological management, psychiatric diagnostic interview examinations, neurobehavioral status exams, and end stage renal disease related services delivered via an eligible telecommunications 

system. An interactive telecommunications system is required as a 

condition of payment. The originating site (the location of the beneficiary receiving the telehealth service) can be a physician or practitioner’s office, a critical access hospital, a rural health clinic, a 

federally qualified health center, a hospital-based renal dialysis 

center, a skilled nursing facility, a community mental health center 

or a hospital. The originating site must be in a rural health professional shortage area or in a county that is not in a metropolitan 

statistical area or at an entity that participates in a specified federal telemedicine demonstration project. 

Proposed Law 

A renal dialysis facility would be included as a covered originating site for telehealth services effective for services starting 

January 1, 2011. 

The Secretary would appoint a Telehealth Advisory Committee to 

make policy recommendations concerning/regarding telehealth 

services including the appropriate addition or deletion of covered 

services and procedure codes for authorized payments. 

The Advisory Committee would be composed of 9 members: 5 

would be practicing physicians; 2 would be practicing nonphysician 

health care practitioners, and 2 shall be administrators of telehealth programs. In appointing the committee members, the Secretary would be required to ensure that each member has prior experience with the practice of telemedicine or telehealth; would give 

preference to individuals who are currently providing telemedicine 

or telehealth services or who are involved in telemedicine or telehealth programs; would ensure that committee membership represents a balance of specialties and geographic regions; and would 

take into account the recommendations of stakeholders. 

The Telehealth Advisory Committee would meet at least twice 

each calendar year and at other times provided by the Secretary. 

The committee members would serve for the term specified by the 

Secretary. An advisory committee member would not be able to 

participate in a particular matter considered in meeting if such a 

member (or an immediate family member) had a financial interest 

that could be affected by the advice given to the Secretary. Section 

14 of the Federal Advisory Committee Act governing termination, 

renewal and continuation of committees would not apply. The Secretary would establish this committee regardless of any limitation 


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that would apply to the number of advisory committees that may 

be established with the Department of Health and Human Services 

or otherwise. 

In making determinations with respect to covered services, the 

Secretary would be required to take into account the recommendations of the Telehealth Advisory Committee. If the Secretary does 

not implement a recommendation, the Secretary would publish a 

statement providing the reason for such decision in the Federal 

Register. 

A telemedicine practitioner that is credentialed by a hospital in 

compliance with the Joint Commission Standards for Telemedicine 

would be considered in compliance with conditions of participation 

and reimbursement credentialing requirements for Medicare. 

Reason for Change 

Telehealth services can be a valuable way of delivering high 

quality care to underserved and other areas. This provision expands Medicare’s telehealth benefit and ensures that CMS receives 

valuable outside expertise in the administration of the benefit. 

Effective Date 

January 1, 2011 for services provided by renal dialysis facilities; 

date of enactment for all other provisions. 

Sec. 1192. Extension of Outpatient Hold Harmless Provision 

Current Law 

Small rural hospitals (with no more than 100 beds) that are not 

sole community hospitals (SCHs) can receive additional Medicare 

payments if their outpatient payments under the prospective payment system are less than under the prior reimbursement system. 

For calendar year (CY) 2006, these hospitals received 95% of the 

difference between payments under the prospective payment system and those that would have been made under the prior reimbursement system. The hospitals receive 90% of the difference in 

CY2007 and 85% of the difference in CY2008 and CY2009. Sole 

community hospitals with not more than 100 beds receive 85% of 

the payment difference for covered HOPD services furnished on or 

after January 1, 2009, and before January 1, 2010. 

Proposed Law 

Small rural hospitals and sole community hospitals with not 

more than 100 beds would receive 85% of the payment difference 

for covered HOPD services furnished until January 1, 2012. 

Reason for Change 

This provision protects small rural hospitals from the financial 

losses they would face under the outpatient prospective payment 

system. Eligible hospitals will receive a partial hold harmless payment until the end of CY2011. 

Effective Date 

January 1, 2010. 


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Sec. 1193. Extension of Section 508 Hospital Reclassifications 

Current Law 

Section 508 of the Medicare Prescription Drug, Improvement and 

Modernization Act of 2003 (MMA, P.L. 108–173) provided $900 million for a one-time, 3-year geographic reclassification of certain hospitals that were otherwise unable to qualify for administrative reclassification to areas with higher wage index values. These reclassifications were extended from March 31, 2006 to September 30, 

2007 by the Tax Relief and Health Care Act of 2006 (P.L. 109–432). 

The Medicare, Medicaid and SCHIP Extension Act (P.L. 110–173) 

extended the reclassifications to September 30, 2008. The Medicare 

Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 

110–275) extended the reclassifications until September 30, 2009. 

These extensions are exempt from any budget neutrality requirements. 

Proposed Law 

The Section 508 reclassifications would be extended until September 30, 2011. 

Reason for Change 

This provision extends the MMA Section 508 geographic reclassification designations, and allows for other geographic reclassification designations, so that these hospitals may better compete with 

neighboring hospitals. The Committee notes that there are some 

hospitals that are eligible for reclassification both under the Medicare Geographic Classification Review Board (MGCRB) process as 

set forth at Section 1886(d)(10) of the Social Security Act and 

under Section 508. When publication of the final regulation for the 

Medicare inpatient prospective payment system precedes enactment of a Section 508 extension, these hospitals’ wages are included into the reclassified wage index of the area to which they 

are being reclassified. The Committee does not see the need to provide further adjustments to these hospitals as the reclassified wage 

index they receive in such a scenario reflects inclusion of their own 

wages. 

Effective Date 

October 1, 2010. 

Sec. 1194. Extension of Geographic Floor for Work 

Current Law 

The Medicare fee schedule is adjusted geographically for three 

factors to reflect differences in the cost of resources needed to 

produce physician services: physician work, practice expense, and 

medical malpractice insurance. The geographic adjustments are indices that reflect how each area compares to the national average 

in a ‘‘market basket’’ of goods. A geographic practice cost index 

(GPCI) with a value of 1.00 represents an average across all areas. 

A series of bills set a temporary floor value of 1.00 on the physician 

work index beginning January 2004; most recently, Section 134 of 

the MIPPA extended the application of this floor when calculating 

Medicare physician reimbursement through December 2009. The 


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other geographic indices (for practice expense and medical malpractice) were not modified by these Acts. 

Proposed Law 

The proposal would extend the 1.00 floor for the geographic index 

for physician work for an additional 2 years through December 

2011. 

Reason for Change 

Rural physicians put in as much time, skill, and intensity into 

their work as physicians in urban areas. This provision ensures 

that rural physicians are paid at least the average rate for their 

work. 

Effective Date 

January 1, 2010. 

Sec. 1195. Extension of Payment for Technical Component of Certain Physician Pathology Services 

Current Law 

Legislation enacted in 1997 specified that independent labs that 

had agreements with hospitals on July 22, 1999 to bill directly for 

the technical component of pathology services could continue to do 

so in 2001 and 2002. The provision has been periodically extended, 

most recently through December 31, 2009 by MIPPA. 

Proposed Law 

The bill would extend this provision through 2011. 

Reason for Change 

This provision is needed in order to continue allowing direct billing for the technical component for independent labs that have 

agreements with hospitals. Without this extension, hospitals will 

incur an additional cost that is not included in the payment rate 

under the prospective payment system. This provision protects 

rural beneficiaries’ access to laboratory services. 

Effective Date 

January 1, 2010. 

Sec. 1196. Extension of Ambulance Add-Ons 

Current Law 

Ambulance services are paid on the basis of a national fee schedule, which is being phased in. The fee schedule establishes seven 

categories of ground ambulance services and two categories of air 

ambulance services. The national fee schedule is fully phased in for 

air ambulance services. For ground ambulance services, payments 

through 2009 are equal to the greater of the national fee schedule 

or a blend of the national and regional fee schedule amounts. The 

portion of the blend based on national rates is 80% for 2007–2009. 

In 2010 and subsequently, the payments in all areas will be based 

on the national fee schedule amount. 

The fee schedule payment for an ambulance service equals a base 

rate for the level of service plus payment for mileage. Geographic 


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adjustments are made to a portion of the base rate. For the period 

July 2004 to December 2009, mileage payments are increased for 

ground ambulance services originating in rural low population density areas. For the period July 1, 2004 until December 31, 2008, 

there is a 25% bonus on the mileage rate for trips of 51 miles and 

more. Payments for ground transports originating in rural areas or 

rural census tracts are increased by 3% for the period of October 

1, 2008 through December 31, 2009. 

MIPPA specifies that any area designated as rural for the purposes of making payments for air ambulance services on December 

31, 2006, will be treated as rural for the purpose of making air ambulance payments during the period July 1, 2008 until December 

31, 2009. 

Proposed Law 

The provision would maintain the 3% higher payments for 

ground transports originating in rural areas or rural census tracts 

until December 31, 2011. The MIPPA provision maintaining the 

designation of certain areas as rural for the purposes of Medicare’s 

payments for air ambulance services would be maintained until December 31, 2011. 

Reason for Change 

This provision helps to cover the cost of providing ambulance 

services in rural areas. 

Effective Date 

January 1, 2010. 

TITLE II—MEDICARE BENEFICIARY IMPROVEMENTS 

Subtitle A—Improving and Simplifying Financial Assistance for 

Low-Income Medicare Beneficiaries 

Sec. 1201. Improving Assets Tests for Medicare Savings Program 

and Low-income Subsidy Program 

Current Law 

Federal assistance is provided to certain low-income persons to 

help them meet Medicare Part D premium and cost-sharing 

charges. To qualify for the Part D low-income subsidy, Medicare 

beneficiaries must have resources no greater than the income and 

resource limits established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (P.L.108–173, MMA). 

Individuals may qualify for the full subsidy in two ways: 1) if 

they are eligible for Medicaid or one of the Medicare Savings Programs (Qualified Medicare Beneficiary (QMB), Specified Low Income Medicare Beneficiary (SLMB), or Qualifying Individual (QI)), 

or are recipients of Supplemental Security Income (SSI) benefits, 

they are deemed automatically eligible; or 2) if they apply for the 

benefit, through their State Medicaid agency or through the Social 

Security Administration (SSA) and are determined to have an annual income below 135% of the federal poverty level (FPL) and 

have resources below a certain limit (in 2009, $6,600 for an individual or $9,910 if married). Beneficiaries may qualify for a partial 

subsidy if they apply and are determined to have an annual income 


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below 150% of the FPL and whose resources do not exceed a certain limit (in 2009, $11,010 for individuals or $22,010 if married). 

(When determining whether a beneficiary qualifies for the Medicare Part D low-income subsidy, $1,500 per person in resources are 

excluded from consideration if the beneficiary indicates that he/she 

expects to use resources for burial expenses; otherwise $1,500 

should be added to the above asset limits for an individual and 

$3,000 for a couple.) 

Proposed Law 

Under this provision, the maximum resources levels used to determine eligibility for the low income subsidy would be increased. 

In 2012, the level would be $17,000 for an individual and $34,000 

for a couple. In subsequent years, the asset level would be increased by the annual percent increase in the Consumer Price 

Index (all items, U.S. city average) as of September of the previous 

year. 

These maximum resources levels would also apply for determining eligibility for Medicare Savings Programs, beginning January 1, 2012. 

Reason for Change 

Millions of low-income Medicare beneficiaries do not qualify for 

financial assistance under the Part D low-income subsidy (LIS) or 

the Medicare Savings Program (MSP) because they have a small 

nest egg that exceeds the maximum resource limits permitted by 

the programs. Even the presence of an asset test can be a barrier 

to applicants because of the daunting application process. This section harmonizes the asset tests for eligibility for all LIS eligible individuals—full and partial Part D subsidy—and the MSP to simplify the test, and raises the maximum level to prevent seniors 

with nest eggs from being disqualified from receiving the subsidy. 

Effective Date 

January 1, 2012. 

Sec. 1202. Elimination of Part D) Cost-sharing for Certain Non-Institutionalized Full-Benefit Dual Eligible Individuals 

Current Law 

Cost-sharing subsidies for LIS enrollees are linked to the standard prescription drug coverage. Full-subsidy eligibles have no deductible, minimal cost sharing during the initial coverage period 

and coverage gap, and no cost-sharing over the catastrophic threshold. 

Full-benefit dual eligibles who are residents of medical institutions or nursing facilities have no cost-sharing. Other full-benefit 

dual-eligible individuals with incomes up to 100% of poverty have 

cost-sharing, for all costs up to the out-of-pocket threshold, of $1.10 

in 2009 for a generic drug prescription or preferred multiple source 

drug prescription and $3.20 in 2009 for any other drug prescription. All other full-subsidy-eligible individuals have cost-sharing for 

all costs up to the out-of-pocket threshold, of $2.40 in 2009 for a 

generic drug or preferred multiple source drug and $6.00 in 2009 

for any other drug. 


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Proposed Law 

Under this provision, cost-sharing would not apply to persons 

who were full benefit dual eligibles and for whom a determination 

was made that but for the provision of home and community based 

care, the individual would require the level of care provided in a 

hospital or a nursing facility or intermediate care facility for the 

mentally retarded and such care would be paid for by Medicaid. 

Such home and community based care would be that provided 

under Section 1915 or 1932 of the SSA or under a waiver under 

Section 1115 of the Act. The provision would apply to drugs dispensed on or after January 1, 2011. 

Reason for Change 

For decades, policymakers at the state and federal level have 

made efforts to eliminate the bias toward institutionalization for 

those needing long-term care services by providing benefits for 

needed health care services in community-based settings. Studies 

have shown that people needing long-term care prefer to receive 

benefits in the community and that often such benefits can be provided at less cost than similar benefits in an institution (e.g. a 

nursing home). 

The Medicare Modernization Act, for purposes of the Part D benefit, distinguished between beneficiaries who receive care in a community setting and those in an institution. Beneficiaries in institutions were exempted from Part D cost sharing, but those in the 

community—who were equally poor and needed an equivalent level 

of care—were not. This provision in the Medicare drug bill was a 

setback to decades of federal and state policy to encourage, or at 

least be neutral toward, beneficiaries receiving care in home or 

community settings. 

Extending the protection against cost-sharing to dually eligible 

beneficiaries who are eligible to be institutionalized in a hospital 

or facility for the mentally retarded ensures that these most vulnerable beneficiaries are not penalized for choosing to receive care 

in a home or community-based setting. 

Effective Date 

January 1, 2011. 

Sec. 1203. Eliminating Barriers to Enrollment 

Current Law 

In general, federal law stipulates few documentation requirements for Medicaid applicants, including persons who apply for 

coverage under the Medicare Savings Program (MSP). Although 

states have flexibility to collect income and asset information 

through self-declaration alone, they also have the ability to require 

supporting documentation. State policies on this issue vary based 

on the eligibility group, but a considerable amount of documentation may be required to determine whether an individual meets financial eligibility requirements for Medicaid. 

Under the Medicare Part D low-income subsidy program, fullbenefit dual eligibles, those receiving assistance through Medicare 

Savings Programs, and recipients of SSI are deemed subsidy-eligible individuals for up to one year; other persons, or their personal 


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representatives, have to apply for assistance. Applicants may apply 

either at state Medicaid offices or Social Security offices. Applicants 

are required to provide information from financial institutions, as 

requested, to support information in the application, and to certify 

as to the accuracy of the information provided. 

Proposed Law 

Medicare beneficiaries applying for a low-income subsidy under 

the prescription drug program would be permitted to apply on the 

basis of self-certification of income and resources. The information 

provided would be subject to verification; however, and except in 

extraordinary situations as determined by the Commissioner of 

SSA, the individual would not be required to provide additional 

documentation. Verification would be accomplished through datasharing between the SSA and the Internal Revenue Service described under existing authority. This provision would be effective 

beginning January 1, 2010. 

Reason for Change 

Administrative barriers often prevent low-income Medicare beneficiaries from accessing the Part D low-income subsidy (LIS) that 

they might be eligible for under the law. This section requires the 

Social Security Administration (SSA) to administratively verify a 

beneficiary’s income and assets, without requiring submission of 

burdensome paperwork or financial documentation. SSA already 

has authority to verify eligibility for the LIS through data it obtains directly from the Internal Revenue Service without requiring 

seniors, many of whom are frail or have limited mobility, to present 

financial documents. 

Effective Date 

January 1, 2010. 

Sec. 1204. Enhanced Oversight Relating to Reimbursements for Retroactive Low Income Subsidy Enrollment 

Current Law 

Certain groups of Medicare beneficiaries automatically qualify 

(and are deemed eligible) for the full low-income subsidy. Dual eligibles who qualify for Medicaid based on their income and assets 

are automatically deemed eligible for Medicare prescription drug 

low-income subsidies. Additionally, those who receive premium 

and/or cost-sharing assistance through the Medicare Savings Programs (MSP), plus those eligible for SSI cash assistance, are automatically deemed eligible for low-income subsidies and need not 

apply for them. CMS deems individuals automatically eligible for 

LIS effective as of the first day of the month that the individual 

attains the qualifying status (e.g., becomes eligible for Medicaid, 

MSP, or SSI). The end date is, at a minimum, through the end of 

the calendar year within which the individual becomes eligible. 

These individuals’ Medicaid prescription drug coverage ceases as 

soon as the individual is eligible for Part D, regardless of whether 

the individual is enrolled in a Part D plan. This creates the risk 

of gaps in coverage. To prevent gaps between the end of Medicaid 

prescription drug coverage and the start of Medicare prescription 


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drug coverage, CMS regulation specifies that auto-enrollment is effective the month in which the person becomes full-benefit dual eligible. Because Medicaid eligibility is often retroactive, CMS randomly auto-enrolls new full-benefit dual eligibles into Part D plans 

retroactive to the start of their full dual status. 

Other individuals with limited income and resources who do not 

automatically qualify may apply for the low-income subsidy and 

have their eligibility determined by either the SSA or their state 

Medicaid agency. An individual who applies and is determined eligible for the LIS is eligible effective the first day of the month in 

which the individual submitted an application. In most cases, this 

means that LIS status is applied retroactively. If a beneficiary is 

already enrolled in a Part D plan, the Part D sponsor must take 

steps to ensure that the beneficiary has been reimbursed for any 

premiums or cost-sharing the member had paid that should have 

been covered by the subsidy. 

The Centers for Medicare & Medicaid Services (CMS) issued a 

request for proposals (RFP) on February 17, 2009 to solicit a contractor (a national prescription drug plan sponsor) to cover Part D 

prescription drug claims for retroactive periods of coverage for fullbenefit dual eligible and SSI-eligible individuals, as well as pointof-sale coverage at a pharmacy for certain individuals with the Part 

D low-income subsidy who are not yet enrolled in a Part D plan. 

Beginning in 2010, CMS has the demonstration authority to test a 

revised approach for providing retroactive and immediate need coverage. Under the demonstration, CMS will contract with a single 

PDP sponsor to pay for all claims for retroactive auto-enrollment 

periods plus current and immediate need claims for all LIS eligibles. CMS will modify its auto and facilitated enrollment process 

so that all those with retroactive effective dates are assigned to the 

demonstration for those retroactive periods, but continue to be randomly assigned for prospective periods to standard LIS PDPs. 

Proposed Law 

In the case of a retroactive LIS enrollment, the beneficiary, or a 

third party that is owed payment on behalf of the beneficiary, 

would be entitled to be reimbursed for covered drug costs incurred 

by the beneficiary during the retroactive coverage period. The retroactive coverage period is defined as the period beginning on the 

effective date of LIS assistance for which the individual is eligible 

and ending on the date the plan effectuates the status of such individual as eligible. Covered drug costs would be defined as the 

amount by which the costs incurred by the beneficiary for covered 

part D drugs, premiums and cost sharing exceeds such costs that 

would have been incurred if the beneficiary had been receiving a 

low-income subsidy to which the individual was entitled. 

The reimbursement would be made automatically by the Part D 

plan sponsor upon appropriate notice that the beneficiary is eligible 

for assistance and no further information would need to be submitted to the plan by the beneficiary. For each such reimbursement, the PDP or MA-PD plan would be required to include a lineitem description of the items for which the reimbursement is made. 

Additionally, the provision would require that reimbursement be 

submitted not later than 45 days after the date on which the plan 

receives notice from the Secretary that the beneficiary is eligible 


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for assistance or the date on which the beneficiary files the claim 

with the plan. 

A retroactive LIS enrollment beneficiary would be defined as an 

individual who is enrolled in a PDP or an MA-PD plan and subsequently becomes eligible as a full-benefit dual eligible individual, 

Medicare Savings Program eligible, or eligible for SSI, or is a fullbenefit dual eligible individual who is automatically enrolled in 

such a plan. Beneficiaries who enrolled in a plan whose sponsor entered into a contract with the Secretary, pursuant to CMS’s request 

for proposals (RFP) issued on February 17, 2009 relating to Medicare Part D retroactive coverage for certain low-income beneficiaries, or a similar subsequent request for such proposals, would 

not be included in this definition. 

For each month, beginning with January 2011, each PDP and 

MA-PD plan would be required to report to the Secretary information on the number and value of claims the plan has re-adjudicated 

on behalf of a beneficiary due to the beneficiary becoming retroactively eligible for the subsidy, the affected beneficiaries’ Medicare 

identification number, and an attestation to the Administrator of 

CMS regarding the total amount of reimbursement the plan has 

provided to beneficiaries for premiums and cost-sharing that the 

beneficiary overpaid and for which the plan received payment. 

Reason for Change 

Through existing authority under current law, the Secretary has 

established a requirement that Part D plans make appropriate retroactive reimbursements to beneficiaries and third parties. This 

provision would enact and clarify that process. It also would implement oversight procedures of the retroactive reimbursement process to allow the Secretary to better determine whether the payments for this retroactive coverage from CMS to the Part D plans 

are accurately and consistently reimbursed to beneficiaries and 

third parties. 

Effective Date 

January 1, 2011. 

Sec. 1205. Intelligent Assignment in Enrollment 

Current Law 

Special enrollment rules apply to individuals eligible for the Part 

D low income subsidy. Generally, there is a two-step process for 

low-income persons to gain Part D coverage. First, a determination 

must be made that they qualify for the assistance; second, they 

must enroll, or be enrolled, in a specific Part D plan. 

According to Section 1860D–14 of the SSA, full-benefit dual-eligible individuals who have not elected a Part D plan are to be autoenrolled into one by CMS. If there is more than one plan available 

that has a monthly beneficiary premium that does not exceed the 

premium assistance amount under the low-income subsidy, the 

beneficiary is to be enrolled on a random basis among all such 

plans in the PDP region. The individual has the option of declining 

or changing such enrollment. 

Some dual eligibles may find that they are auto-enrolled in a 

plan that may not best meet their needs. For example, it is possible 


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that the specific drug(s) that a beneficiary is currently taking is not 

covered by the new plan. For this reason, beneficiaries are able to 

change enrollment at any time, with the new coverage effective the 

following month. 

Proposed Law 

The Secretary would be given the option to use an ‘‘intelligent assignment’’ process as an alternative to the random assignment 

process. The intelligent assignment process would be designed to 

maximize the access of full-benefit dual eligibles to necessary prescription drugs while minimizing costs to the individual and to the 

program to the greatest extent possible. The process would need to 

take into account the extent to which prescription drugs necessary 

for the individual are covered, the use of prior authorization or 

other restrictions on access to coverage of drugs, and the overall 

quality of a prescription drug plan. 

Reason for Change 

The Medicare Modernization Act prohibited CMS from using any 

methodology other than random assignment when automatically 

enrolling full benefit dual eligibles into Part D plans. While this 

process results in beneficiaries enrolled in the lowest cost plans 

based on monthly premium, it does not take into consideration 

whether this vulnerable population is enrolled in quality plans that 

cover the beneficiaries’ necessary medications. While dual eligibles 

have the option of enrolling in a different plan, this is a particularly frail population that may not have the capacity to evaluate 

and choose among all of the available plans. The Committee’s intention is that CMS evaluate methodologies for intelligently assigning dual eligibles to Part D plans based on cost—but also on formulary coverage for beneficiaries’ needed prescriptions, use of prior 

authorization and other restrictions, and quality measures—and to 

implement if the Secretary determines that a methodology could 

both minimize cost to the program and maximize access of dual eligibles to needed prescription drugs. 

Effective Date 

January 1, 2012. 

Sec. 1206. Special Enrollment Period and Automatic Enrollment 

Process for Certain Subsidy Eligible Individuals 

Current Law 

In general, a Medicare beneficiary who does not enroll in Part D 

during his or her initial enrollment period may enroll only during 

the annual open enrollment period, which occurs from November 

15 to December 31 each year. Coverage begins the following January 1. Beneficiaries already enrolled in a Part D plan may change 

their plans during the annual open enrollment period. 

There are a few additional, limited occasions when an individual 

may enroll in or disenroll from a Part D plan or switch from one 

Part D plan to another, called special enrollment periods (SEPs). 

For example, SEPs are allowed for individuals who involuntarily 

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ment, meet certain exceptional conditions as established by the 

Secretary, or are a full-benefit dual eligible individual. 

Proposed Law 

The provision would establish a new special enrollment period 

for persons deemed to be low-income subsidy eligible individuals. 

The provision would also require the Secretary to use an automatic 

assignment process to enroll low-income beneficiaries who failed to 

enroll in a prescription drug plan or MA-PD plan during the special 

enrollment period. This assignment process would be identical to 

that used for full-benefit dual eligibles. The individual would have 

the option of declining or changing such enrollment. 

Reason for Change 

Under current statutory authority, the Secretary has established 

a continuous SEP whereby upon becoming eligible for Part D, the 

Secretary automatically enrolls full benefit dual eligibles into a 

Part D plan; the individual retains the right to decline or change 

enrollment in any month. The Secretary has also expanded this 

SEP to include all individuals who are eligible for the Part D lowincome subsidy (LIS). This provision codifies CMS’ interpretation of 

current law with regard to allowing an SEP and automatic enrollment process for all LIS-eligible beneficiaries, and harmonizes the 

auto-enrollment process created in section 1205 of the Act for fullbenefit dual eligibles with other LIS-eligible beneficiaries (i.e. permitting CMS to use an intelligent assignment process). Although 

the MMA limited the statutory SEP to full-benefit dual eligibles, 

the Committee agrees with CMS that this SEP and subsequent 

automatic enrollment into a Part D plan should also apply to other 

LIS-eligible beneficiaries as a guarantee that individuals are properly enrolled in a Part D plan and able to access needed medications. 

Effective Date 

Subsidy determination made for months beginning with January 

2011. 

Sec. 1207. Application of MA Premiums Prior to Rebate in Calculation of Low Income Subsidy Benchmark 

Current Law 

The federal government pays up to 100% of the Part D premiums 

for LIS beneficiaries who are enrolled in ‘‘benchmark’’ plans. A Part 

D plan qualifies as a benchmark plan if it offers basic Part D coverage with premiums equal to or lower than the regional low-income premium subsidy amount. The regional low-income benchmark premium amount, calculated annually, is the weighted average of all premiums in each of the 34 prescription drug plan (PDP) 

regions for basic prescription drug coverage, or the actuarial value 

of basic prescription drug coverage for plans that offer enhanced 

coverage options, or for Medicare Advantage Prescription Drug 

(MA–PD) plans, the portion of the premium attributable to basic 

prescription drug benefits. 

Under the Medicare Advantage program (Part C), plans bid to 

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care payment for a MA plan on the relationship between its bid 

and a benchmark (different from the LIS benchmark). The MA 

benchmark represents the maximum amount the federal government will pay a plan for providing required Medicare benefits. If 

a plan’s bid is less than the benchmark, its payment equals its bid 

plus a rebate of 75% of the difference between the benchmark and 

the bid. The rebate must be used to provide additional benefits to 

enrollees, reduce Medicare cost sharing expenses, or reduce a beneficiary’s monthly Part B, prescription drug, or supplemental premium (for services beyond the required Medicare benefits). 

MA plans offering prescription drug coverage submit a separate 

bid for the Part D portion. Payment for the portion of the premium 

attributable to basic prescription drug benefits is calculated in the 

same way as that for stand-alone PDPs; however the MA plan may 

choose to apply some of its Part C rebate payments to lower the 

Part D premium. 

Proposed Law 

The statute would be modified to exclude the Part C rebate 

amounts from the MA-PD plan premiums when calculating the 

low-income regional benchmark for subsidy determinations made 

for months beginning with January 2011. 

Reason for Change 

CMS’ current methodology for determining which plans are eligible for automatic enrollment of LIS-eligible beneficiaries results in 

millions of beneficiaries being switched into different Part D plans 

each year. This is disruptive and confusing for beneficiaries. Excluding the rebate portion of the premium—which goes solely to 

providing extra benefits, like gym memberships—from the calculation of the LIS benchmark which determines the plans eligible for 

auto-enrollment, will lessen the number of beneficiaries who have 

to switch plans each year because their plan’s premium exceeds the 

LIS benchmark. This is one step toward ensuring that frail beneficiaries have continuity in their Part D plan from year-to-year and 

maintain adequate access to needed prescription drugs. 

Effective Date 

Subsidy determination made for months beginning with January 

2011. 

Subtitle B—Reducing Health Disparities 

Sec. 1221. Ensuring Effective Communication in Medicare 

Current Law 

Congress passed Title VI of the Civil Rights Act of 1964 to ensure that federal money is not used to support programs or activities that discriminate on the basis of race, color, or national origin. 

The United States Supreme Court has treated discrimination based 

on language as national origin discrimination. Therefore, recipients 

of federal funds (including hospitals, nursing homes, state Medicaid 

agencies, managed care organizations, home health agencies, 

health service providers, human service organizations, and any 

other health or human services federal fund recipient, as well as 

subcontractors, vendors, and subrecipients) are required to take 


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reasonable steps to ensure that persons with limited English proficiency have meaningful access to programs and activities. The Department of Health and Human Services has issued guidance, including a four-factor analysis, that implicates the ‘‘mix’’ of language 

services that should be offered, including oral and written interpretation services. 

Proposed Law 

The provision would require the Secretary of the Department of 

Health and Human Services to conduct a study to examine the extent to which Medicare providers utilize, offer, or make available 

language services for beneficiaries who are limited English proficient and ways that Medicare should develop payment systems for 

language services. The study would include an analysis of: ways to 

develop and structure appropriate payment systems for language 

services for Medicare providers; the feasibility of adopting a payment methodology for on-site interpreters; the feasibility of Medicare contracting directly with agencies that provide off-site interpretation, including telephonic and video interpretation; the feasibility of modifying the existing Medicare resource-based relative 

value scale (RBRVS) by using adjustments when a patient is LEP; 

and how each of these options would be funded. The study would 

also include an analysis of the extent to which providers under 

Medicare Parts A, B, C, and D utilize, offer, or make available language services for beneficiaries with LEP; and the nature and type 

of language services provided by states for Medicaid recipients, and 

the extent to which such services could be utilized by Medicare providers. 

The potential payment systems included in the analysis could 

allow variations based on types of service providers, available delivery methods, and costs for providing language services. Factors 

could include: the type of language service provided, such as the 

provision of health care or health care related services directly in 

a non-English language by a bilingual provider or use of an interpreter; the type of interpretation provided, such as in-person, telephonic, video interpretation; the methods and costs of providing 

language services, including the costs of providing language services with internal staff and/or through contract with external independent contractors or agencies; providing services for languages 

not frequently encountered in the United States; and providing 

services in rural areas. 

The Secretary would be required to submit a report to appropriate committees of Congress not later than 12 months after the 

date of enactment of this Act. The Paperwork Reduction Act would 

not apply for purposes of carrying out this study. The necessary 

funds to conduct the study would be authorized to be appropriated. 

This provision also would authorize the Secretary to apply sanctions, such as civil money penalties, suspension of enrollment, and 

suspension or payments, to Medicare Advantage organizations that 

substantially fail to provide required language services to LEP 

beneficiaries enrolled in their plans. 

Reason for Change 

Studies have shown that language barriers can have deleterious 

effects on patient care. Patients who face such barriers are less 


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likely than others to have a usual source of medical care; they receive preventive services at reduced rates; and they have an increased risk of nonadherence to medication. Ad hoc interpreters, including family members, friends, untrained members of the support 

staff, and strangers found in waiting rooms or on the street, are 

commonly used in clinical encounters. However, such interpreters 

are considerably more likely than professional interpreters to commit errors that may have adverse clinical consequences. This policy 

is intended to evaluate the effectiveness of culturally and linguistically appropriate care by directing the Secretary to conduct a 

study that examines the extent to which Medicare providers utilize, 

offer or make available language services for beneficiaries who are 

limited English proficient. The study will also evaluate ways that 

Medicare should develop payment systems for language services. 

Effective Date 

Date of enactment. 

Sec. 1222. Demonstration to Promote Access for Medicare Beneficiaries with Limited English Proficiency by Providing Reimbursement for Culturally and Linguistically Appropriate Services 

Current Law 

No provision. 

Proposed Law 

Not later than 6 months after the completion of the study described in section 1221, the Secretary, acting through the CMS, 

would be required to carry out a demonstration program under 

which the Secretary would award no fewer than 24 three-year 

grants to eligible Medicare providers to improve effective communication between providers and Medicare beneficiaries living in 

communities where racial and ethnic minorities, including populations that face language barriers, are underserved with respect to 

such services. Using the results of the completed study, the Secretary would adjust, as appropriate, the distribution of grants to 

target Medicare beneficiaries who are in the greatest need of language services. The Secretary would be required to not authorize 

a grant larger than $500,000 over three years for any grantee. 

To be eligible to receive a grant, an entity would be required to 

be a Medicare provider of services under Parts A or B, a Medicare 

Advantage organization offering a Medicare part C plan, or a sponsor of a part D prescription drug plan (PDP). To the extent feasible, 

the Secretary would award at least 6 grants each to part A providers, part B providers, part C organizations, and to prescription 

drug sponsors. The Secretary would be required to give priority to 

applicants that have developed partnerships with community organizations or agencies with experience in language access. The Secretary would also need to ensure that grantees represent variations 

in types of language services, languages needed and their frequency of use, urban and rural settings, at least two geographic regions as defined by the Secretary, and at least two large urban 

areas with diverse populations. 


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The grantee would be required to use the grant funds to pay for 

the provision of competent language services to LEP Medicare 

beneficiaries. Such services may be provided through on-site interpretation, telephonic interpretation, video interpretation, or direct 

provision of health care or health care-related services by a bilingual health care provider. The grantee may also use bilingual providers, staff, or contract interpreters. The grantee may use up to 

10% of the grant funds to pay for administrative costs associated 

with the provision of competent language services and for required 

reporting. Grantees that are part C organizations or PDP sponsors 

would be required to ensure that their network providers, including 

physicians and pharmacies, receive at least 50% of the grant funds 

to pay for the provision of language services. 

The payments to grantees would be calculated based on the estimated numbers of LEP Medicare beneficiaries in a grantee’s service area, using the most recently available data from the Bureau 

of Census or other state-based study on the number of individuals 

served by the grantee who speak English less than ‘‘very well’’, or 

using the grantee’s own data on Medicare beneficiaries primary 

language if the Secretary determines such data to be reliable. Payment would only be provided to grantees that report their costs of 

providing language services and may be modified annually at the 

discretion of the Secretary. If the grantee does not provide the reports for the first year of a grant, the Secretary would be able to 

terminate the grant and to solicit applications from new grantees 

to participate in the subsequent two years of the demonstration 

program. 

Payments would only be provided to grantees that utilize competent bilingual staff or competent interpreter or translation services which meet the state standards currently in effect if the grantee operates in a state that has statewide health care interpreter 

standards. For grantees operating in states without such standards, the grantee would be required to utilize interpreters who follow the National Council on Interpreting in Health Care’s Code of 

Ethics and Standards of Practice. This requirement would not 

apply if a beneficiary requests the use of family, friends, or other 

persons untrained in interpretation and the grantee documents the 

request in the beneficiary’s record. This requirement would also not 

apply in the case of a medical emergency where the delay associated with obtaining an interpreter would jeopardize the health of 

the patient. Emergency rooms and other entities that regularly provide health care services in medical emergencies, would, however 

not be exempt from the requirement to provide interpreter and 

translation services without undue delay. 

Grantees would also be required to: ensure that appropriate clinical and support staff receive ongoing education and training in linguistically appropriate service delivery; ensure the linguistic competence of bilingual providers; offer and provide appropriate language services at no additional charge to each LEP patient at all 

points of contact, in a timely manner during all hours of operation; 

notify Medicare beneficiaries of their right to receive language services in their primary language; post signage in the languages of the 

commonly encountered group or groups present in the organization’s service area; and ensure that primary language data are collected for recipients of language services (if the recipient of lanVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00405 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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guage services is a minor or is incapacitated, the primary language 

of the parent or legal guardian would be collected and utilized). 

Grantees would be required to provide the Secretary with reports 

at the end of each year of the grant. The report would include (1) 

the number of Medicare beneficiaries to whom language services 

are provided; (2) the languages of those Medicare beneficiaries; (3) 

the types of language services provided; (4) the type of interpretation; (5) the methods of providing language services; (6) the length 

of time for each interpretation encounter; and (7) the costs of providing language services. 

LEP Medicare beneficiaries would not be required to pay costsharing or co-pays for language services provided under this demonstration. 

The Secretary would be required to conduct an evaluation of the 

demonstration program and submit a report to the appropriate 

committees of Congress not later than 1 year after the completion 

of the program. The report would include an analysis of the patient 

outcomes and costs of furnishing care to the LEP Medicare beneficiaries participating in the project compared to those not participating; the effect of delivering culturally and linguistically appropriate services on beneficiary access to care, utilization of services, 

efficiency and cost-effectiveness of health care delivery, patient satisfaction, and health outcomes; and recommendations regarding the 

extension of the project to the entire Medicare program. 

This provision would not limit existing obligations of recipients 

of federal financial assistance under title VI of the Civil Rights Act 

of 1964. An amount of $16 million would be authorized to be appropriated for each fiscal year of the demonstration program. 

Reason for Change 

Although certain recipients of federal funds are required to offer 

language services, Medicare does not reimburse for these services. 

Testing alternative methods of delivering culturally and linguistically appropriate services will enable Medicare to apply best practices and vastly improve both access to and quality of services to 

beneficiaries with limited English proficiency. 

Effective Date 

The demonstration would begin not later than 6 months after the 

completion study described in section 1221. 

Sec. 1223. IOM report on Impact of Language Access Services 

Current Law 

No Provision. 

Proposed Law 

Under this provision, the Secretary of HHS would be required to 

enter into an arrangement with the Institute of Medicine (IOM) 

under which the IOM would prepare a report on the impact of language access services on the health and health care of limited 

English proficient populations. The report would be issued not later 

than 3 years after the date of the enactment of the Act. 

The report would include recommendations on the development 

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zations and providers for limited English proficient patient populations, a description of the effect of providing language access 

services on quality of health care and access to care and reduced 

medical error, and a description of the costs associated with, or 

savings related to, the provision of language access services. 

Sec. 1224. Definitions 

Current Law 

No provision. 

Proposed Law 

This provision provides the following definitions to be applied in 

sections 1221 through 1223. 

The term bilingual would mean a person who has a sufficient degree of proficiency in two languages and can ensure that effective 

communication can occur in both languages. 

The term competent interpreter services would be defined as a 

trans-language rendition of a spoken message in which the interpreter comprehends the source language and can speak comprehensively in the target language to convey the intended meaning. The 

interpreter would be required to know health and health-related 

terminology. 

The term competent translation services would mean a trans-language rendition of a written document in which the translator comprehends the source language and can write comprehensively in 

the target language to convey the meaning intended in the source 

language. The translator would be required to know health and 

health-related terminology. 

The term effective communication would mean an exchange of information between the provider of health care or health care-related services and the LEP recipient of such services that enables 

the LEP individual to access, understand, and benefit from health 

care or health care-related services. 

The terms interpreting/interpretation would be defined as the 

transmission of a spoken message from one language into another, 

faithfully, accurately, and objectively. 

The term health care services would mean services that address 

physical as well as mental health conditions in all care settings. 

The term health care-related services would be defined as human 

or social services programs or activities that provide access, referrals or links to health care. 

The term language access would mean the provision of language 

services to an LEP individual designed to enhance that individual’s 

access to, understanding of or benefit from health care or health 

care-related services. 

The term language services would be defined as the provision of 

health care services directly in a non-English language, interpretation, translation, and non-English signage. 

The term limited English proficient (LEP) would be defined as an 

individual who speaks a primary language other than English and 

who cannot speak, read, write or understand the English language 

at a level that permits the individual to effectively communicate 

with clinical or nonclinical staff at an entity providing health care 

or health care-related services. 


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The term Medicare beneficiary would mean an individual entitled to benefits under Medicare part A or enrolled in Medicare part 

B. 

The term Medicare program would mean the programs under 

parts A through D of title XVIII of the Social Security Act (SSA). 

The term service provider would be defined as all suppliers, providers of services, or entities under contract to provide coverage, 

items or services under any part of title XVIII of the SSA. 

Reason for Change 

To provide definitions for certain terms used in Subtitle B. 

Subtitle C—Miscellaneous Improvements 

Sec. 1231. Extension of Therapy Caps Exceptions Process 

Current Law 

Current law places two annual per beneficiary payment limits for 

all outpatient therapy services provided by non-hospital providers. 

For 2009, the annual limit on the allowed amount for outpatient 

physical therapy and speech-language pathology combined is 

$1,840, and there is a separate limit for occupational therapy of 

$1,840. The Secretary was required to implement an exceptions 

process for 2006, 2007, and the first half of 2008 for cases in which 

the provision of additional therapy services was determined to be 

medically necessary. Section 141 of the Medicare Improvements for 

Patients and Providers Act of 2008 (MIPPA, P.L. 110–275) extended the exceptions process for therapy caps through December 

31, 2009. 

Proposed Law 

The proposal would extend the exceptions process for therapy 

caps for 2 years, through December 31, 2011. 

Reason for Change 

There is wide consensus that the therapy cap created in the Balanced Budget Act of 1997 is not good health policy, yet to permanently repeal the cap is a very costly proposition. Extending the exceptions process for two additional years will provide Congress with 

an opportunity to consider alternative options to the current process. 

Effective Date 

January 1, 2010. 

Sec. 1232. Extended Months of Coverage of Immunosuppressive 

Drugs for Kidney Transplant Patients and Other Renal Dialysis Provisions 

Current Law 

To be eligible for Medicare, one must be (1) 65 years or older and 

eligible to receive Social Security; or (2) under 65, permanently disabled, and have received Social Security disability insurance payments for at least 2 years; or (3) have Amyotrophic Lateral Sclerosis (ALS-Lou Gehrig’s disease); or (4) have end-stage renal disease (ESRD). 


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Coverage for beneficiaries with ESRD generally begins in the 

fourth month of dialysis treatments or the month of a kidney transplant. After receiving a kidney transplant, individuals are prescribed immunosuppressive drugs to reduce the risk of their immune system rejecting the new organ. These drugs generally need 

to be taken for the rest of the individual’s life. 

Under Medicare Secondary Payer (MSP) rules, Medicare is prohibited from making payments for any item or service when payment has been made or can reasonably be expected to be made by 

a third party payer. For individuals with Medicare entitlement 

based solely on ESRD, MSP rules apply for those covered by an 

employer-sponsored group plan, regardless of the employer size or 

current employment status. Any group health plan coverage these 

beneficiaries receive through their employer or their spouse’s employer is the primary payer for the first 30 months of ESRD benefit 

eligibility. After 30 months, Medicare becomes the primary insurer. 

If a beneficiary already had Medicare because of age or disability 

before the onset of end-stage renal disease, or if an individual became eligible for Medicare because of age or disability after receiving a transplant paid for by Medicare, Medicare will continue to 

pay for immunosuppressive drugs with no time limit. However, if 

a beneficiary qualifies for Medicare only because of kidney failure, 

Medicare, together with coverage of the immunosuppressive drugs, 

ends 36 months after the month of the successful transplant. After 

that period, kidney recipients must pay for immunosuppressive 

drugs through private insurance, public or pharmaceutical programs, or pay out-of-pocket until they reach 65 and qualify for 

Medicare because of age. 

Individuals with ESRD are eligible for all Part B Services. Part 

B also covers their dialysis services, drugs, and biologicals, including erythropoiesis stimulating agents, diagnostic laboratory tests, 

and other items and services furnished to individuals for the treatment of ESRD. 

Dialysis services are offered in three outpatient settings: hospital-based facilities, independent facilities, and the patient’s home. 

There are two methods for payment. Under Method I, facilities are 

paid a prospectively set amount, known as the composite rate, for 

each dialysis session, regardless of whether services are provided 

at a facility or in the patient’s home. Beneficiaries electing home 

dialysis may choose not to be associated with a facility and may 

make independent arrangements with a supplier for equipment, 

supplies, and support services. Payment to these suppliers, known 

as Method II, is made on the basis of reasonable charges. 

The Medicare Improvements for Patients and Providers Act of 

2008 (MIPPA, P.L. 110–275) requires the Secretary to implement 

a bundled payment system, making a single payment for Medicare 

renal dialysis services, to be phased in over 4 years beginning January 1, 2011. The bundled payment will include (1) items and services included in the composite rate as of December 31, 2010; (2) 

erythropoiesis stimulating agents for the treatment of ESRD; (3) 

injectable biologicals and medications that were paid for separately 

under Part B, (before bundling) and any oral equivalent to such 

medications; and (4) diagnostic laboratory tests and other items 

and services furnished to individuals for the treatment of ESRD. 

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in and be paid under the new bundled system starting in 2011. The 

new law also creates a quality incentive payment program that ties 

payments to certain quality measures including anemia management, dialysis adequacy, patient satisfaction, and bone mineral metabolism. 

Proposed Law 

This provision would amend SSA title II (Old Age, Survivors and 

Disability Insurance) to (1) continue entitlement to prescription 

drugs used in immunosuppressive therapy furnished to an individual who receives a kidney transplant for which payment is made 

under Medicare, and (2) extend Medicare secondary payer requirements for ESRD beneficiaries. 

It would also amend title XVIII (Medicare) of SSA to apply special rules to kidney transplant recipients who receive additional 

coverage for immunosuppressive drugs whose eligibility for benefits 

would have ended on or after January 1, 2012, except for the coverage of immunosuppressive drugs. Such individuals would be 

deemed to be enrolled under Medicare Part B and would be responsible for the full amount of the applicable premiums, deductibles, 

and co-insurance payments that are not covered under the Medicare savings program. 

The provision makes several changes to Medicare coverage for 

ESRD patients under Section 1881 of SSA. The provision specifies 

that oral drugs that are not the oral equivalent of an intravenous 

drug would be included in the drugs and biologicals provided as 

part of the renal dialysis services covered by Medicare. The provision also would allow providers of renal dialysis services to make 

an election with respect to 2011, 2012, or 2013, prior to the first 

date of such year, to be excluded from the phase in of the prospective rate (or the remainder of the phase in) and be paid entirely 

based on the prospective rate. Additionally, the provision changes 

the performance standards of ESRD providers from the ‘‘lesser of’’ 

to the ‘‘greater of’’ the performance of such provider or facility or 

a performance standard based on the national performance rates 

for such measures in a period determined by the Secretary. 

Reason for Change 

Under current law, Medicare coverage for patients who have had 

a kidney transplant ends after 36 months, unless the patients are 

otherwise eligible for Medicare because of age or disability. The 

Committee believes this is a penny-wise, pound-foolish policy. Patients who receive a kidney transplant must continue taking immunosuppressive drugs for the rest of their lives in order to avoid 

rejecting the new organ. However, when Medicare coverage ends, 

beneficiaries must find another way to pay for immunosuppressive 

drugs, which cost $5,000 to $13,000 per year. A recent survey of 

professionals treating kidney transplant patients found that almost 

90 percent of patients have difficulty paying for these drugs once 

Medicare coverage ends, and 65 percent fail to take their drugs as 

prescribed. Once a patient stops taking the drugs, his or her body 

will almost immediately reject the transplanted kidney and the patient will either need another kidney transplant or require dialysis 

treatments for the rest of his or her life. These are costs that would 

also be incurred by the Medicare program. 


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A recent GAO study found that the Medicare cost for a beneficiary who has a failed transplant is five times greater per year 

($50,938) than a patient with a functioning transplant ($8,550). 

This cost, as well as quality of life for the patient, underscores the 

benefits to the Medicare program and kidney transplant patients 

from the extension of coverage of immunosuppressive drug coverage in this section. 

This section also includes a technical clarification that oral drugs 

furnished to individuals for treatment of ESRD are included in the 

bundled payment. This authority already exists under current law 

(see statement of Health Subcommittee Chairman Pete Stark in 

the Congressional Record on June 24, 2008), however, clarification 

of existing authority ensures that clinical and financial decisionmaking for dialysis patients are aligned, so that providers put patients before profits; advances better adherence to drug regimens; 

lowers beneficiary cost-sharing; and is consistent with statements 

made by MedPAC. 

As stated by MedPAC in questions submitted for the record to 

the Committee on Ways and Means, providers otherwise will have 

a financial incentive to shift patients to Part D drugs even though 

that may not be in the clinical best interest of the patient. Beneficiaries would then be subject to a double-payment, as they would 

have to pay coinsurance for the ESRD bundle and a second coinsurance for the drugs under Part D. Medicare would also be paying 

twice, once for drugs in the bundle and once for drugs under Part 

D. It is for this reason that CBO estimates savings for this provision: the Medicare program will successfully avoid a 

doublepayment. MedPAC also points out that including these oral 

drugs in the bundle may improve dialysis quality for patients by 

improving patient adherence to drug regimens. 

The Committee notes that some providers are concerned about 

their ability to provide these drugs. The Committee understands 

that the two large dialysis providers have in-house pharmacies, 

and thus dispensing these drugs is not a problem. Dialysis providers who do not have in-house pharmacies will already need to 

find a way to provide oral drugs since oral drugs that have IV 

equivalents are also in the bundle. They can do so by contracting 

out for pharmacy services, as they currently do for lab services. 

The original statute recognized the potential cost burden of this activity when it created a 10 percent adjustment for low-volume providers—the purpose of this adjustment is to help low-volume providers cover additional costs such as possible contracting out of 

services. 

This section also modifies the restriction around when facilities 

can decide to opt into receiving the bundled payment during the 

four years before it is fully implemented in 2014. Currently, facilities can only opt-in during the first year. The Committee believes 

that bundled payments encourage more efficient provision of care 

and will improve quality of care. To the extent that a provider decides after one year of phased-in payments that they would like to 

opt fully into the bundle, there is no reason to stop them from 

doing so. Therefore, this section would permit all facilities to optin during any year of the four year phase-in. The Committee understands from the CMS Office of the Actuary that this change will 

lower the budget neutrality adjustment needed because of the 


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phase-in, so any concerns about uncertainty in payment rates due 

to this change will only move in the direction of improving payment 

rates. 

The Committee believes that implementation of an ESRD bundle 

must be accompanied by a rigorous system of quality measurement 

and incentives in order to ensure patients receive appropriate levels of care. However, the Committee is concerned that the performance measure in the existing statute for the initial period for anemia management sets the bar so low that there is no requirement 

for facilities to improve performance. The Committee notes that by 

the time bundling is implemented, providers will have had several 

years to adjust practice patterns in response to FDA black box 

label changes that occurred in 2007 and 2008, and thus has 

strengthened the quality measurement in the initial period. 

Effective Date 

Subsection (a) is effective January 1, 2012. Subsection (b) is effective January 1, 2011. 

Sec. 1233. Advance Care Planning Consultation 

Current Law 

Section 1866(f) of Title XVIII of the SSA requires certain institutional providers and prepaid plans that participate in Medicare to 

follow specified policies and procedures in regard to advance directives. Specifically, it requires states to develop written descriptions 

of relevant state law concerning advance directives that would be 

distributed by Medicare participating institutional providers or organizations. Current law also mandates that Medicare participating providers distribute information about advance directives 

according to the timing of certain medical or health-related events. 

Hospitals and nursing homes must provide this information to individuals at the time of admission; home health agencies must provide it in advance of the individual coming under the care of such 

agencies; hospice providers must provide this information at the 

time of the initial receipt of hospice care; and prepaid health plans 

must provide it to individuals upon enrollment. Medicare-certified 

providers that do not comply with these requirements may have 

payments withheld by the Secretary. Furthermore, state laws that 

allow for an objection on the basis of conscience for any health care 

provider or any agent of such provider which, as a matter of conscience, cannot implement an advance directive, shall supersede 

these requirements. 

The Medicare Improvements for Patients and Providers Act of 

2008 (MIPPA, P.L. 110–275) added ‘‘end-of-life planning’’ to the initial preventive physical exam that Medicare beneficiaries receive 

upon enrollment in Medicare. MIPPA also defines ‘‘end-of-life planning’’ to mean verbal or written information regarding: an individual’s ability to prepare an advance directive in the case that an injury or illness causes the individual to be unable to make health 

care decisions; and whether or not the physician is willing to follow 

the individual’s wishes as expressed in an advance directive. 

The Physician Quality Reporting Initiative (PQRI), the voluntary 

individual reporting program that provides an incentive payment 

to eligible professionals (EPs) who satisfactorily report data on 


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quality measures for covered Medicare Physician Fee Schedule 

(PFS) services, was established by Section 1848(k)(1) of the SSA. 

PQRI requires eligible professionals to report on certain quality 

measures in order to receive an incentive payment equal to 2.0% 

of covered professional services. The payment incentives were established by Section 1848(m)(1)(A) and (B) of the SSA. Participation in PQRI is voluntary. The PQRI program is not specific to endof-life care, but it does include several geriatrics measures, including one measure which specifically addresses advance care plans. 

This measure aims to assess whether a patient has an advance 

care plan or surrogate decision maker documented in their medical 

record. 

CMS was mandated by the Balanced Budget Act of 1997 (P.L. 

105–33) to develop and organize activities to educate beneficiaries 

about the Medicare program. Specifically, the Act mandated that 

CMS establish a toll-free helpline, mail written information to 

beneficiaries on Medicare and their options to enroll in private 

plans, create a Medicare website, and support a community outreach program to help beneficiaries and their caregivers make informed health care decisions. CMS conducts these activities as part 

of its National Medicare and You Education Program (NMEP). The 

Medicare & You Handbook is one component of the agency’s NMEP 

program. 

The Handbook, which is produced in English and Spanish, is updated on an annual basis and mailed to beneficiaries every Fall. 

Handbooks are mailed monthly to newly eligible beneficiaries. 

Proposed Law 

The provision would amend Section 1861 of Title XVIII of the 

SSA under Medicare to add new language concerning an advance 

care planning consultation and add a new subsection describing 

these consultations. It would amend Section 1848(j)(3) to provide 

payment to physicians for an advance care planning consultation 

under Medicare. The provision would also expand the physician 

quality reporting initiative for end-of-life care. The Medicare & You 

Handbook would be updated to include an explanation of various 

end-of-life care planning terms and resources. 

The term ‘‘advance care planning consultation’’ would mean a 

consultation between the individual and an individual’s physician, 

nurse practitioner or physician assistant as specified regarding advance care planning if the individual involved has not had such 

consultation within the last 5 years. Medicare’s initial preventative 

physical examination would not be considered an advance care 

planning consultation for purposes of applying the 5-year limitation. Such consultation would be authorized to be conducted more 

frequently if there is a significant change in an individual’s health. 

Such a consultation would be required to include an explanation 

by the practitioner of advance care planning; advance directives 

and their uses; role and responsibilities of a health care proxy; the 

continuum of end-of-life care services and supports available and 

Medicare benefits that are available. Practitioners would be required to provide a list of national and State-specific resources to 

assist consumers and their families with advance care planning. 

The advance care planning consultation would also be required to 

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ment or similar orders as specified. The Secretary would be required to limit this requirement to consultations furnished in a 

State in which all legal barriers for such orders have been addressed and that has a program in effect as specified. Such consultation is authorized to include the formulation of an order regarding life-sustaining treatment or similar order. 

The term ‘‘order regarding life sustaining treatment’’ would 

mean, with respect to an individual, an actionable medical order 

relating to the treatment of that individual that (1) is signed and 

dated by a physician or another health care professional as specified and is in a form that permits it to stay with the individual and 

be followed by health care professionals and providers across the 

continuum of care; (2) effectively communicates the individual’s 

preferences regarding life sustaining treatment; (3) is uniquely 

identifiable and standardized within a given locality, region, or 

State (as identified by the Secretary); and (4) may incorporate any 

advance directive if executed by the individual. 

The level of life treatment indicated may range from an indication for full treatment to an indication to limit some or all or specified interventions. Such indicated levels of treatment may include 

indications respecting, among other items (1) the intensity of medical intervention if the patient is pulseless, apneic, or has serious 

cardiac or pulmonary problems; (2) the individual’s desire regarding transfer to a hospital or remaining at the current care setting; 

(3) the use of antibiotics; and (4) the use of artificially administered 

nutrition and hydration. 

The provision would modify Section 1848(j)(3) of the SSA (concerning definitions for physicians’ services) to include Medicare 

payment for physicians’ services with respect to an advance care 

planning consultation. It would amend Section 1862(a)(1) of the 

SSA (concerning exclusions from coverage and Medicare as secondary payer) to add that no Medicare payment would be authorized for expenses incurred in the case of an advance care planning 

consultation which is performed more frequently than covered 

under such section. It would also amend Section 1862(a)(7) to include an advance care planning consultation as an otherwise allowable expense, among the list of certain expenses excluded from coverage. The amendments would apply to advance care planning consultations furnished on or after January 1, 2011. 

The provision would amend Section 1848(k)(2) of the SSA to add 

new language that would require the Secretary, for the purposes of 

reporting data on quality measures for covered professional services furnished during 2011 and any subsequent year, to include 

quality measures on end of life care and advanced care planning 

that have been adopted or endorsed by a consensus-based organization, if available and appropriate. Such measures would be required to measure both creation and adherence to orders for lifesustaining treatment. The Secretary would be required to publish 

these proposed measures in the Federal Register and provide for a 

period of public comment before finalization. 

No later than 1 year after the date of enactment, the Secretary 

would be required to update the online version of the Medicare & 

You Handbook to include an explanation of advance care planning 

and advance directives, including living wills, durable power of attorney, orders of life-sustaining treatment, and health care proxies. 


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It would also be updated to include a description of Federal and 

State resources available to assist individuals and their families 

with advance care planning and advance directives, including 

available State legal service organizations to assist individuals 

with advance care planning, including those organizations that receive funding pursuant to the Older Americans Act of 1965; website 

links or addresses for State-specific advance directive forms; and 

any additional information, as determined by the Secretary. The 

Secretary would also be required to include the above information 

in all paper and electronic versions of the Medicare & You Handbook that are published on or after the date that is 1 year after 

the date of enactment. 

Reason for Change 

It is vitally important that physicians provide patient-centered 

care that follows the express wishes of each patient. Unfortunately, 

in some circumstances patient preferences may not be known by 

the treating physician and the patient is unable to express his or 

her wishes to that physician. Moreover, patients are often unaware 

of the different treatment options available in the event they need 

life sustaining treatment. 

Adding advanced care planning consultation to the list of Medicare covered services will help address those problems. These consultations are designed to assist patients to make informed decisions about the full range of life sustaining treatment options available and ensure that treating physicians are fully aware of patients’ wishes. The provision does not require any beneficiary to receive such consultations and does not prescribe or restrict the advanced care treatment options available to any beneficiary. 

Adding quality measures on advance care planning to Medicare’s 

quality reporting initiatives will provide important data about the 

use of such counseling. Adding information about advance care 

planning, living wills and advance directives to the Medicare & 

You Handbook will support efforts to ensure that patient wishes 

are followed regarding life sustaining treatment. 

Effective Date 

January 1, 2011, for advance care planning consultations and reporting data; one year after date of enactment for changes to Medicare & You Handbook. 

Sec. 1234. Part B Special Enrollment Period and Waiver of Limited 

Enrollment Penalty for TRICARE Beneficiaries 

Current Law 

TRICARE beneficiaries who are eligible for Medicare Part A 

must accept and pay for voluntary Medicare Part B in order to retain their TRICARE Coverage. Medicare functions as the primary 

payer and TRICARE serves as a supplement. This requirement is 

the result of many changes in the law the last of which came in 

the National Defense Authorization Act of 2001 (P.L. 106–386) 

which created the TRICARE for Life program. With the establishment of TRICARE for Life and the concomitant need to enroll in 

Medicare Part B, there became concern about coordination between 

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ment in Part B. To address this concern, section 625 of the Medicare Prescription Drug, Improvement, and Modernization Act of 

2003 (MMA, P.L. 108–173) waived the Part B enrollment penalty 

for eligible retirees who enrolled in Part B prior to December 31, 

2004. 

Explanation of Provision 

This provision creates a special 12 month enrollment period in 

which military retirees who are eligible for Medicare by reason of 

disability or End Stage Renal Disease (ESRD) who have not yet enrolled in Medicare Part B can enroll in Part B, thus becoming eligible for TRICARE for Life, without incurring a Medicare late enrollment penalty. The provision would apply to elections made on or 

after the date of enactment of the Act. 

This provision would also require the Secretary of HHS to establish a method for providing rebates for late enrollment penalties 

that were charged to certain disabled and End Stage Renal Disease 

(ESRD) beneficiaries who enrolled during or after January 2005 

and before the month of enactment of this Act. 

Reason for Change 

When beneficiaries refuse Medicare Part B coverage, they are 

quickly disenrolled from Medicare and TRICARE and are left without any insurance coverage except for Medicare Part A Hospital 

coverage. Often, beneficiaries refuse Medicare Part B without proper knowledge and understanding of the consequences and only realize that they do not have comprehensive health insurance when 

they present at the doctor’s office. Once beneficiaries have refused 

their Part B coverage, they must wait many months until the next 

Medicare general enrollment period to reenroll. This issue has become a particular concern for the severely disabled population who 

refuse Medicare Part B after receiving Medicare coverage retroactively because of a delayed disability determination. The provision is designed to provide a permanent grace period and allow certain service members to quickly reenroll in Medicare without penalty after initially refusing Part B to ensure that they have access 

to the vital medical services that they need. 

Effective Date 

The special enrollment period and waiver of penalty will be effective for elections made on or after the date of enactment of this 

Act. 

Sec. 1235. Exception for Use of More Recent Tax Year in Case of 

Gains From Sale of Primary Residence in Computing Part B 

Income-Related Premium 

Current Law 

Physician and outpatient services provided under Part B are financed through a combination of beneficiary premiums, 

deductibles, and federal general revenues. In general, Part B beneficiary premiums equal 25% of estimated program costs for the 

aged, with federal general revenues accounting for the remaining 

75%. Beginning in 2007, Part B premiums are income related, requiring higher-income enrollees to pay a higher percentage of Part 


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B costs. Beneficiaries experiencing major life events may apply to 

use a more recent tax year for determination of the income-related 

premium. Beginning in 2007, higher-income enrollees pay a higher 

percentage of Part B costs. 

Proposed Law 

This provision treats the sale of a primary residence as a major 

life event for purposes of qualifying for the use of a more recent 

tax year. This modification would apply to premiums and payments 

for years beginning with 2011. 

Reason for Change 

The Committee is aware of situations where Medicare beneficiaries are subject to the income related Part B premium due to 

a capital gain from the sale of a primary residence. These gains 

may be incurred after owning the home for several decades, and regardless of whether the beneficiary puts the proceeds into an annuity that pays them a monthly amount. This provision appropriately 

recognizes that sale of a primary residence should be treated as a 

major life changing event for purposes of determining whether a 

beneficiary is subject to the income related premium. 

Effective Date 

October 1, 2011. 

Sec. 1236. Demonstration Program on Use of Patient Decisions Aids 

Current Law 

Current law does not explicitly address patient decision aids, 

which are information tools to help patients understand health care 

options, and make informed choices that take into account their 

lifestyle, preferences, and beliefs. A related concept is shared decision making (referred to by many other names as well), meaning 

the cooperation of providers and patients in making health care decisions. 

Section 646 of the Medicare Prescription Drug, Improvement, 

and Modernization Act of 2003 (MMA, P.L. 108–173) requires the 

Secretary to carry out a Medicare quality demonstration program, 

which would, among other things, encourage shared decision making. Eligible entities include physician groups, integrated health 

systems, or regional coalitions of the same. Projects approved under 

this demonstration are expected to achieve significant improvements in safety, effectiveness, efficiency, patient-centeredness (i.e., 

shared decision making), timeliness, and equity, the six aims for 

quality improvement identified by the Institute of Medicine. Two 

demonstrations have been approved and will begin in 2009. Two 

others are in the final review process. 

In addition, under their general authorities, the Agency for 

Healthcare Research and Quality (AHRQ) and Centers for Disease 

Control and Prevention (CDC) conduct research on the application 

and use of shared decision making, including the use of patient decision aids. 


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Proposed Law 

This section would require the Secretary to conduct a Medicare 

demonstration program to determine if using patient decision aids 

would improve beneficiaries’ understanding of their medical treatment options. The program would enroll not more than 30 eligible 

providers, with preference given to providers that have documented 

experience in using patient decision aids, and that have the necessary information technology infrastructure. Eligible providers 

would be required to provide follow-up counseling visits after beneficiaries have viewed decision aids, to address questions about subsequent medical care and the beneficiary’s preferences. The Secretary would have to provide for the development of a code(s) and 

reimbursement amounts for the follow-up counseling. Eligible providers would be responsible for the costs of selecting, purchasing, 

and delivering patient decision aids, and reporting data on quality 

and outcome measures. 

To carry out the program, the Secretary would be required to use 

funds from the Federal Supplementary Medical Insurance Trust 

Fund, and would be authorized to waive requirements under SSA 

Titles XI (general and administrative provisions) and XVIII (Medicare). Within 12 months of program completion, the Secretary 

would be required to report to Congress regarding the effects of the 

program on health quality, utilization of health care services, and 

quality of life; and any recommendations for legislation and administrative action. 

Eligible providers would be: (A) a primary care practice; (B) a 

specialty practice; (C) a multispecialty group practice; (D) a hospital; (E) a rural health clinic; (F) a Federally Qualified Health 

Center; (G) an integrated delivery system; [or] (H) a State cooperative entity that includes the State government and at least one 

other health care provider which is set up for the purpose of testing 

shared decision making and patient decision aids. The provision 

would define ‘‘patient decision aid’’ to mean ‘‘an educational tool 

(such as the Internet, a video, or a pamphlet) that helps patients 

(or, if appropriate, the family caregiver of the patient) understand 

and communicate their beliefs and preferences related to their 

treatment options, and to decide with their health care provider 

what treatments are best for them based on their treatment options, scientific evidence, circumstances, beliefs, and preferences;’’ 

and ‘‘shared decision making’’ to mean ‘‘a collaborative process between patient and clinician that engages the patient in decision 

making, provides patients with information about trade-offs among 

treatment options, and facilitates the incorporation of patient preferences and values into the medical plan.’’ 

Reason for Change 

Studies have suggested that quality of care is improved and costs 

can be reduced when patients facing medical procedures use decision aids such as pamphlets and videos to receive information 

about treatment options available. The demonstration program 

under this section would test this approach within the Medicare 

population, with an emphasis on physician follow-up visits to discuss information disseminated by such decision aids. 


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Effective Date 

Date of enactment. 

TITLE III—PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES

AND COORDINATING CARE

Sec. 1301. Accountable Care Organization Pilot Program 

Current Law 

No current provision. In April 2005, the Centers for Medicare 

and Medicaid Services initiated the Physician Group Practice demonstration, which offers 10 large practices the opportunity to earn 

performance payments for improving the quality and cost-efficiency 

of health care delivered to Medicare fee-for-service beneficiaries. 

Proposed Law 

A new section 1866D would be added to the Social Security Act 

(SSA) to establish the accountable care organization pilot program. 

The Secretary would conduct a pilot program to test different payment incentive models intended to reduce Medicare’s expenditure 

growth and improve health outcomes. The pilot would promote accountability for services provided to a Medicare patient population, 

coordinate Medicare’s part A and B items and services, encourage 

investment in infrastructure and the redesign of care processes, 

and reward high quality, efficient physician practices. 

A qualifying accountable care organization (qualifying ACO) 

would be a group of physicians or other physician organizational 

model which is organized, at least in part, for the purpose of providing physician services and meet other specified standards. A 

qualifying ACO could include other practitioners such as nurse 

practitioners or physician assistants, a hospital or multiple hospitals or any other provider or supplier (furnishing Medicare covered services) that is affiliated with the ACO under an arrangement structured to coordinate care. A physician would include any 

individual who furnishes services for which payment may be made 

as physicians’ services except as otherwise determined by the Secretary. With respect to a qualifying ACO, other physician organizational model would mean any model of organization under which 

physicians enter into agreements with other providers for the purposes of participation in the pilot program in order to provide high 

quality, efficient health care services and share in the program’s incentive payments. No requirements under this section would prevent a qualifying ACO from furnishing items or services for which 

Medicare payment is not made in order to achieve performance 

goals under the pilot program. 

A qualifying ACO would meet the following requirements: (1) 

have a legal structure that would allow the group to receive and 

distribute incentive payments; (2) include a sufficient number of 

primary care physicians regardless of specialty for the applicable 

beneficiaries for whose care the group is accountable (as determined by the Secretary); (3) report on required quality measures 

in the specified form, manner, and frequency; (4) report required 

data to monitor and evaluate the pilot program; (5) provide notice 

to applicable beneficiaries regarding the pilot program; (6) contribute to a best practices network or website to share strategies 


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on quality improvement, care coordination, and efficiency; (7) utilize patient-centered processes of care, and (8) meet other criteria 

determined to be appropriate by the Secretary. 

Specific payment incentive models to be tested include: a performance target model, a partial capitation model, and other payment models. 

Under the performance target model, a qualifying ACO would receive an incentive payment if expenditures for applicable beneficiaries are less than a target spending level or a target rate of 

growth. The incentive payment would be made only if savings are 

greater than would result from normal variation in Medicare expenditures for Part A and B items and services. In general the Secretary would establish a base amount increased to the current year 

by an adjustment factor. The target may be established on a per 

capita basis. The base amount would equal the average total payments (or allowed charges) under parts A and B for applicable 

beneficiaries for whom the qualifying ACO furnishes items and 

services. The base amount may include Medicare Part D services 

if deemed appropriate. The adjustment factor would equal an annual per capita amount that reflects changes in expenditures from 

the base period to the current year. The factor could be determined 

as an amount or rate, determined on a national, regional, local or 

organization-specific basis, and may be determined on a per capita 

basis. It could also include an risk adjustment factor as determined 

by the Secretary. The base amount would be periodically recalculated. 

A qualifying ACO that meets or exceeds annual quality and performance targets for a year would receive an incentive payment 

equal to an appropriate portion of the amount by which Medicare 

payments are estimated to be below the performance target. The 

Secretary could establish a cap on incentive payments for a year 

for a qualifying ACO. Incentive payments to qualifying ACOs 

would be limited to ensure that the aggregate expenditures do not 

exceed the amount that the Secretary estimates would be expended 

for such ACO for such beneficiaries if the pilot program were not 

implemented. 

The Secretary would be able to incorporate reporting requirements, incentive payments, and penalties related to the physician 

quality reporting initiative (PQRI), electronic prescribing, electronic 

health records, and other similar physician payment initiatives 

under section 1848 of the SSA. Alternative criteria than would otherwise apply could be used when determining whether to make 

these payments so as to streamline administration of the overlapping monitoring and reporting requirements for ACOs and fee-forservice Medicare. Also, these incentive payments would not be included in the aggregate expenditure test described previously or in 

the performance target model. 

Under the partial capitation model, a qualifying ACO would be 

at financial risk for some, but not all, of the part A and B items 

and services. The Secretary would be able to limit a partial capitation model to ACOs that are highly integrated systems of care and 

to ACOs capable of bearing risk. Payments under the partial capitation model would be established in a manner that does not result 

in spending more for such ACO for such beneficiaries than would 

otherwise be expended if the pilot were not implemented. Partial 


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capitation would not constrain beneficiaries’ to seeing any particular provider; beneficiaries would retain the ability to choose 

their doctor or practitioner and could leave the ACO at any time. 

The Secretary may develop other payment models that meet the 

goals of this pilot program to improve quality and efficiency. Payments under these models would be established in a manner that 

does not result in spending more for such ACO for such beneficiaries than would otherwise be expended if the pilot were not implemented. 

An applicable beneficiary would be an individual who is enrolled 

under Part B and entitled to Part A benefits; is not enrolled in a 

Medicare Advantage plan under Part C or a PACE program under 

Section 1894 of the SSA; and meets other appropriate criteria. 

The Secretary would monitor data on Medicare expenditures and 

quality of services after an applicable beneficiary discontinues receiving services through a qualifying ACO. 

The pilot program would begin no later than January 1, 2012. An 

agreement with a qualifying ACO under this pilot would cover a 

multi-year period of between 3 and 5 years. The Secretary would 

be able to waive Medicare provisions and the general provisions established under Title XI of the SSA as necessary. 

The Secretary would be required to report performance results to 

qualifying ACOs under the pilot program at least annually. There 

would be no administrative or judicial review of the (1) elements, 

parameters, scope, and duration of the pilot program; (2) the selection of qualifying ACOs for the pilot program; (3) the establishment 

of targets, measurement of performance, determinations with respect to whether savings have been achieved and the amount of 

savings; (4) determinations regarding whether, to whom, and in 

what amounts incentive payments are paid; and (5) decisions about 

the extension of the program with successful ACOs, expansion of 

the program to additional ACOs or transitional extension of the existing physician group practice demonstration project. 

Also, Chapter 35 of Title 44 of the United States Code (concerning the coordination of Federal information policy) would not 

apply to this pilot. 

The Secretary would evaluate the payment incentive model for 

each qualifying ACO to assess the pilot’s impact on beneficiaries, 

providers of services, suppliers and the program. The evaluation 

would be publicly available within 60 days of the date of completion of such report. 

The OIG would be responsible for monitoring of the operation of 

ACOs under the pilot program with regard to violations of the 

Stark self referral prohibition (Section 1877 of the SSA). 

No later than 2 years after the date the first pilot agreement is 

established, and every 2 years thereafter for 6 years, the Secretary 

would report to Congress on the use of authorities under the pilot 

program and its impact on expenditures, access, and quality. Subject to monitoring of the qualifying ACO, the Secretary would be 

able to extend the duration of the agreement if (1) the ACO receives incentive payments with respect to any of the first 4 years 

of the pilot agreement and is consistently meeting quality standards or (2) the ACO is consistently exceeding quality standards and 

is not increasing spending under the program. The Secretary would 

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centive payments or consistently failed to meet quality standards 

in any of the first 3 years under the program. 

Subject to the evaluation of the pilot, the Secretary would be able 

to enter into agreements with additional qualifying ACOs to further test and refine payment incentive models. The Secretary 

would be able issue regulations to implement on a permanent basis 

1 or more models of the pilot program that are beneficial to Medicare. However, to do so, the Chief Actuary of the CMS would be 

required to certify that the expansion of the program’s components 

would result in estimated spending that would be less than what 

spending would otherwise be estimated to be in the absence of such 

expansion. 

The Secretary would be able to enter into an agreement with an 

organization participating in the physician group practice demonstration as a qualifying ACO. Participation as a qualifying ACO 

would be subject to rebasing and other appropriate modifications, 

until the pilot program under this section is operational. 

The Secretary would be able to create separate incentive arrangements (including using multiple years of data, varying 

thresholds, varying shared savings amounts, and varying shared 

savings limits) for different categories of qualifying ACOs to reflect 

natural variations in data availability, variation in average annual 

attributable expenditures, program integrity, and other matters the 

Secretary deems appropriate. 

The Secretary would be able to limit a qualifying ACO’s exposure 

to high cost patients in order to encourage the participation of 

smaller accountable care organizations in the pilot. 

Nothing in this section would be construed as preventing qualifying ACOs participating in the pilot program from negotiating 

similar contracts with private payers. The Secretary would not be 

able to enter into an agreement with an entity to provide health 

care items or services under the pilot program, or with an entity 

to administer the program, unless such entity guarantees that it 

will not deny, limit, or condition the coverage or provision of benefits under the program, for individuals eligible to be enrolled under 

such program, based on any health status-related factor described 

in section 2702(a)(1) of the Public Health Service Act, including 

health status, medical condition, claims experience, receipt of 

health care, medical history, genetic information, evidence of insurability and disability. 

Nothing in this section would be construed to compel an organization to use an organization-specific target growth rate for an accountable care organization under this section for purposes of 

Medicare’s physician fee schedule established under section 1848 of 

the SSA. 

The program management account of CMS would be appropriated $25 million for FY2010 through FY2014 and $20 million in 

FY2015. The funds would be in addition to those otherwise appropriated and would be for the purposes of administering and carrying out the pilot program, but not for payments for Medicare covered items and services or for incentive payments. 

Reason for Change 

The Physician Group Practice (PGP) demonstration program has 

shown promise in incentivizing physicians and other providers to 


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reduce health care costs and improve quality. The ACO pilot program will build on progress that has been made to date in the PGP 

demonstration and gives CMS a flexible platform on which to continue to test, adjust and expand the shared savings concept. 

Witnesses testified at an April hearing before the Committee 

that Medicare would be well served by rewarding providers who 

provide coordinated, efficient, high quality care by using the Accountable Care Organization shared savings model. Witnesses advised that by sharing a portion of spending reductions realized 

through efficient delivery of quality care, Medicare could move from 

simply paying physicians for the volume of care they provide toward paying for the value of care delivered. They expressed confidence that widespread use of ACOs, as facilitated by Medicare, 

would greatly improve the way care is organized and delivered 

throughout much of the health care system. 

The ACO pilot program is designed to be flexible enough that a 

variety of physicians and other providers can participate. Many 

large, multispecialty group practices are well positioned to participate in the pilot program since most already provide integrated, coordinated care for their patients. The ACO pilot will recognize and 

reward efforts already underway by such groups, often in conjunction with hospitals, to provide efficient, high quality care. It will 

also allow providers to be rewarded for using advances in health 

information technology such as electronic medical records, telemedicine, and home monitoring equipment in ways that improve 

patient care. The Secretary should allow for the use of such technologies in order to facilitate coordinated, patient-centered care. 

The Committee also recognizes that the majority of doctors in 

this country care for patients in practices of fewer than 10 physicians. The pilot is designed to allow physicians in small- and midsized practices to form an ACO without disrupting care for their 

patients. By joining together in ACOs, it is the Committee’s hope 

that physicians in independent practices will better coordinate care 

and reduce the amount of duplicative care that is sometimes provided under the current payment system. The Committee recognizes that smaller practices face unique challenges in forming and 

sustaining ACOs, and urges the Secretary to use authority granted 

under the legislation to mitigate such challenges. 

It is also the intent of the Committee that the Secretary should 

exercise flexibility in entering into participation agreements with a 

variety of ACO models to maximize the potential for innovation. 

The Committee believes that physicians, regardless of specialty, 

who play a central role in managing the care of their patient populations, and who are willing and able to be held accountable for the 

overall quality and costs of care for their patients across all care 

settings, should be allowed to form ACOs. 

For example, the Secretary could permit the formation of ACOs 

that are principally composed of primary care physicians whose 

specialties are oncology, cardiology, nephrology, or other specialties 

that serve beneficiaries being treated for chronic conditions; physicians in the ACO would be held accountable for the overall quality 

and costs of care for beneficiaries, including care not directly related to the beneficiaries’ principle diagnoses. The legislation also 

allows for physicians who are employed or otherwise affiliated with 

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countable for the preponderance of care furnished to a given patient population. The availability of such organizational models is 

especially important in regions where a large portion of physicians 

are employed by hospitals. 

In addition to sharing savings that accrue to the Medicare program, physicians who participate in ACOs could have their own set 

of spending targets under the reformed physician payment update 

system in section 1121 of the legislation. This option is intended to 

give physicians an additional reason to form and join ACOs, and 

give providers within each ACO even more incentive to provide efficient, high-value care. Physicians who do so are likely to receive 

payments under the shared savings program and see regular positive updates to payment rates for physician services. It is the Committee’s belief that this ‘‘virtuous cycle’’ has great potential to reduce the rate of spending growth in the Medicare program and result in better care for Medicare beneficiaries. 

The Committee is aware that concerns have been raised about 

the possibility that providers in ACOs will attempt to meet the savings targets by selecting against beneficiaries that are more likely 

to require expensive care or under-provide needed care. No evidence of this behavior has been observed under the PGP demonstration, and the legislation calls for the use of risk adjusted 

spending targets and rigorous use of quality measures to mitigate 

such problems. Nevertheless, the Committee expects that the Secretary will take all appropriate steps to ensure that providers do 

not engage in activities that are contrary to the interest of Medicare beneficiaries. It is important to emphasize that providers are 

not required to take part in the ACO pilot program and providers 

who do participate must notify their patients. 

Sec. 1302. Medical Home Pilot Program 

Current Law 

The Tax Relief and Health Care Act of 2006 (P.L. 109–432), as 

modified by the Medicare Improvements for Patients and Providers 

Act of 2008 (MIPPA), requires the Secretary to establish a threeyear demonstration in up to eight states with urban, rural and underserved areas, to redesign the health care delivery system to provide targeted, accessible, continuous, and coordinated family-centered care to high need Medicare populations with chronic or prolonged illnesses requiring regular medical monitoring, advising or 

treatment. 

Proposed Law 

A new section 1866E would be added to the SSA to establish the 

medical home pilot program for the purpose of evaluating the feasibility and advisability of reimbursing qualified patient-centered 

medical homes for furnishing medical home services to high need 

beneficiaries in urban, rural, and underserved areas. New subsection 1866E(a) would require the Secretary to establish pilot programs to evaluate two medical home models: (1) the independent 

patient-centered medical home model; and (2) the community-based 

medical home model. 

Subsection (b) of the new section would establish the following 

definitions. ‘‘Patient-centered medical home services’’ would be 


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those services that (1) provide beneficiaries with direct, ongoing access to primary care or principal care provided by a physician or 

nurse practitioner; (2) coordinate the care provided to a beneficiary 

by a team of individuals at the practice level across office, institutional and home settings; (3) provide for all the patient’s health 

care needs or take responsibility for appropriately arranging care 

with other qualified providers; (4) provide continuous access to care 

and communication with participating beneficiaries; (5) provide 

support for patient self-management, proactive and regular patient 

monitoring, support for family caregivers, and coordination with 

community resources; (6) integrate readily accessible, clinically useful information into the care plans for participating patients; and 

(7) implement evidence-based guidelines, applying them to the 

identified needs of beneficiaries over time and with the intensity 

needed by such beneficiaries. ‘‘Primary care’’ would mean health 

care that is provided by a physician, nurse practitioner, or physician assistant who practices in the field of family medicine, general 

internal medicine, geriatric medicine, or pediatric medicine. ‘‘Principal care’’ would mean integrated, accessible health care provided 

by a physician who is a medical subspecialist that addresses the 

majority of the personal health care needs of patients with chronic 

conditions, and for whom the subspecialist assumes care management. 

Subsection (c) of the new section establishes requirements for the 

independent patient-centered medical home pilot program. Under 

this program, the Secretary would be required to make payments 

for medical home services provided to targeted high need beneficiaries. An independent patient-centered medical home would be 

a physician-directed or nurse-practitioner-directed practice that is 

qualified to provide beneficiaries with patient-centered medical 

home services, and meets such other requirements as the Secretary 

may specify. A targeted high need beneficiary would be defined as 

a beneficiary who, based on a chronic disease risk score as specified 

by the Secretary, is generally within the upper 50th percentile of 

Medicare beneficiaries. 

The Secretary would be required to determine an appropriate 

method to ensure that beneficiaries in the independent patient-centered medical home pilot program have agreed to participate. The 

program would have to begin within 6 months of enactment. The 

Secretary would be required to review alternative models for standard setting and qualification, and to establish a process to develop 

standards (1) to enable medical practices to qualify as patient-centered medical homes; and (2) to provide for the review and certification of medical practices as meeting such standards. 

The Secretary would be required to establish a methodology for 

payment of services provided by independent patient-centered medical homes, and to adjust payments based on beneficiary risk scores 

to ensure that higher payments are made for higher risk beneficiaries. Moreover, the Secretary would be required to pay independent patient-centered medical homes a monthly fee, paid prospectively, for each targeted high need beneficiary who consents to 

receive services. In setting the fee amount, the Secretary would be 

required to: (1) consider the clinical work and practice expenses involved in providing the service (including services not currently reimbursable under Medicare, such as care coordination, population 


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disease management, and teaching self-care skills); (2) allow for 

differential monthly payments, depending on the capabilities of the 

independent patient-centered medical home; and (3) use appropriate risk-adjustment methods to ensure that higher payments are 

made for higher risk beneficiaries. 

The independent patient-centered medical home pilot program 

would have to be designed to include the participation of physicians 

in practices with fewer than 10 full-time equivalent physicians, as 

well as physicians in larger practices, particularly in underserved 

and rural areas, as well as federally qualified community health 

centers, and rural health centers. A physician in a group practice 

that participates in the Accountable Care Organization pilot program established in section 1866D of the SSA would not be eligible 

to participate in this pilot program, unless this program is ultimately made permanent. 

Subsection (d) of the new section would establish requirements 

for the community-based medical home (CBMH) model pilot program. Under this program, the Secretary would be required to 

make payments to a CBMH for providing medical home services to 

a high need beneficiary. A CBMH would mean an appropriately 

qualified nonprofit community-based or State-based organization 

that provides beneficiaries with medical home services under the 

supervision of and in close collaboration with the primary care or 

principal care physician, nurse practitioner or physician assistant 

designated by the beneficiary as his or her CBMH provider. A 

CBMH would employ community health workers, including nurses 

or other non-physician practitioners, lay health workers, or other 

appropriate persons (as determined by the Secretary) that assist 

the primary or principal care physician or nurse practitioner in 

chronic care management activities, such as teaching self-care 

skills for managing chronic illnesses, transitional care services, 

care plan setting, medication therapy management services for patients with multiple chronic conditions; or that help beneficiaries 

access health care or community-based services in their area. A 

CBMH would also have to meet other requirements as the Secretary may specify. In this section, the term ‘‘high need beneficiary’’ 

means an individual who requires regular medical monitoring, advising, or treatment. 

The Secretary would be required to establish a process: (1) to determine the necessary qualifications for community-based or Statebased organizations to function as CBMHs; and (2) to provide for 

the review and assessment of these qualifications pursuant to criteria to be established by the Secretary. 

The Secretary would be required to start CBMH pilot program 

within 2 years of enactment. Demonstration sites under the pilot 

program would operate for up to 5 years after the initial implementation phase. In selecting sites, the Secretary would be authorized 

to give preference to (1) applications from geographic areas that 

propose to coordinate health care services for chronically ill beneficiaries across a variety of health care settings, practices with 

fewer than 10 physicians, rural health clinics, and federally qualified health centers; (2) payors that provide medical homes for 

chronically ill patients; or (3) States that propose to use the medical home model to coordinate health care services for individuals 

with chronic diseases who are enrolled under Medicare, Medicaid, 


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or fully dual-eligible for Medicare and Medicaid, across a variety of 

health care settings. 

The Secretary would be required to establish a methodology for 

payment for medical home services furnished under the CBMH 

model, to include two separate prospective monthly payments for 

each high need beneficiary: one to a community-based or Statebased organization, and one to the primary or principal care practice. In determining the amount of the payment, the Secretary 

would be required to consider the clinical work and practice expenses involved in providing the service (including services not currently reimbursable under Medicare, such as care coordination, 

population disease management, and teaching self-care skills); and 

to use appropriate risk-adjustment. The Secretary would be authorized to provide initial implementation funding to a communitybased or State-based organization or a State participating in the 

CBMH pilot. 

Subsection (e) of the new section would require the Secretary to 

evaluate the dual pilot program regarding (1) the extent to which 

medical homes result in a number of specified improvements in the 

quality and coordination of health care services delivered to complex patients, including reductions in health care expenditures; and 

(2) the feasibility and advisability of reimbursing medical homes for 

medical home services under Medicare on a permanent basis. The 

Secretary would be required, within 60 days of its completion, to 

publish and submit to Congress a report on the findings of such 

evaluation. 

Subject to the results of the evaluation, the Secretary would be 

authorized to issue regulations to implement one or more models 

on a permanent basis, to the extent that such models are beneficial 

to Medicare, but only if the Chief Actuary of CMS were to first certify that the expansion would not result in higher estimated Medicare spending. 

Subsection (f) of the new section would prohibit the Secretary 

from making payments under more than one model, or through 

more than one medical home under any model, for the furnishing 

of medical home services to an individual. Also, payments made 

under this pilot are in addition to, and have no effect on the 

amount of, payment for evaluation and management services made 

under this title. Chapter 35 of Title 44 of the U.S. Code (regarding 

federal information policy) would not apply to this section. 

Subsection (g) of the new section would require the transfer of 

$6 million for each of fiscal years 2010 through 2014 from the Federal Supplementary Medical Insurance Trust Fund to the CMS 

Program Management Account, to carry out this section. In addition to funds otherwise available, $200 million for each of fiscal 

years 2010 through 2014 for payments for independent patient-centered medical home services, and $125 million for each of fiscal 

years 2012 through 2016 for CBMH services, would be available for 

CMS from the Federal Supplementary Medical Insurance Trust 

Fund. In addition to funds otherwise available, $2.5 million for 

each of fiscal years 2010 through 2012 would be available to CMS 

from the Federal Supplementary Medical Insurance Trust Fund for 

initial implementation costs. Any amounts made available under 

this subsection for a fiscal year would be available until expended. 


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Subsection (h) of the new section would provide that in addition 

to funds otherwise available for payment of medical home services, 

there would also be available, for the independent patient-centered 

medical home model, $100 million established by The Tax Relief 

and Health Care Act of 2006 (P.L. 109–432) for the existing Medicare Medical Home Demonstration, and authority for the Medicare 

Medical Home Demonstration project would be repealed. 

Amendments made by this section would apply to services furnished on or after the date of enactment. 

Reason for Change 

Over 83 percent of Medicare beneficiaries have a chronic illness 

and over 95 percent of total spending in Medicare is linked to 

chronically ill patients. The medical home concept envisions a 

health care system where patient care is coordinated and integrated through a provider guided multidisciplinary team. The medical home model promotes accessible, continuous, patient-oriented, 

team-based and comprehensive care delivered in the context of a 

patient’s family and community. The approach would manage care 

across a variety of settings according to the needs of the patient 

through the promotion of continuous care relationships as well as 

application of the chronic care model, use of evidence based-medicine, care coordination, and patient empowerment. The idea was 

described as early as 1967 by the American Academy of Pediatrics’ 

Council on Pediatric Practice. The model has shown to be successful in improving outcomes for patients with chronic illnesses 

through improved care coordination. Many local pilot programs 

such as North Carolina’s Community Care Program and Johns 

Hopkins’ Guided Care Program have shown improved outcomes 

and potential for long term cost-savings. Vermont’s Patient Centered Medical Home included payments to community entities for 

support of population-based health management. 

Recent research has shown that patient populations at risk for 

health disparities may particularly benefit from the accessible, coordinated, comprehensive care delivered through the patient-centered medical home. Transforming practices serving high risk and 

chronically ill populations is a major focus of the revised and expanded pilot. 

Systematic changes such as the use of evidence-based medicine 

and health-information technology offer new opportunities to 

achieve even better coordination, disease management, and patient 

empowerment. These goals would be achieved through practice 

transformation supported by new care-coordination payment models to the medical home to support the delivery of enhanced primary care services provided by a multidisciplinary team composed 

of care managers, pharmacists, physician assistants, mental health 

professionals, palliative care experts, clinical nurse educators, nutritionists or health educators. 

This pilot program builds on the medical home approach currently being developed by Medicare and allows for a broader application of the medical home model to meet the needs of different patient populations and provider arrangements. It directs the Secretary to establish a ‘‘community-based medical home model’’ in addition to the ‘‘independent patient-centered medical home model’’ 

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onstrations with payment reform in 17 States. This legislation will 

provide Medicare beneficiaries the ability to participate in locally 

based programs with an infrastructure that could facilitate practice 

transformation to become a medical home. Studies have indicated 

that such alternative models, that use community care teams within the medical home, can achieve cost savings and quality improvements. The independent patient-centered medical home model refers to the patient centered medical home demonstration program 

as legislated by MIPPA. 

Regardless of what model is used, the pilot program requires 

that to be eligible the personal provider must provide accessible, 

continuous, coordinated and comprehensive care. In most cases, 

primary care providers would be best suited to the role of leading 

a multidisciplinary team to manage the care coordination, but specialists who can perform the medical home functions set forth by 

the Secretary are not precluded. In giving the Secretary flexibility 

in developing the monthly medical home care management fee payment, the Secretary can expand this program if certain criteria 

such as budget neutrality and quality improvements are met. 

Effective Date 

Date of enactment. 

Sec. 1303. Payment Incentive for Selected Primary Care Services 

Current Law 

Section 1833(m) of the Social Security Act provides bonus payments for physicians who furnish medical care services in geographic areas that are designated by the Health Resources and 

Services Administration (HRSA) as primary medical care health 

professional shortage areas (HPSAs) under section 332 (a)(1)(A) of 

the Public Health Service (PHS) Act. In addition, for claims with 

dates of service on or after July 1, 2004, psychiatrists furnishing 

services in mental health HPSAs are also eligible to receive bonus 

payments. 

The bonus payment equals 10% of what would otherwise be paid 

under the fee schedule. HPSAs may be designated as having a 

shortage of primary medical care, dental or mental health providers. They may be urban or rural areas, population groups or 

medical or other public facilities 

Proposed Law 

The provision would establish payment incentives for primary 

care services furnished on or after January 1, 2011 by a primary 

care practitioner. The amount of the payment incentive would be 

5 percent (or 10 percent if the practitioner provides the services 

predominately in an area that is designated as a primary care 

health professional shortage area) and would be paid from the Part 

B trust fund. 

Primary care services would be defined as physicians’ services in 

section 1848(j)(5)(A) as well as services furnished by another health 

care professional that would be described above if furnished by a 

physician. A primary care practitioner would be defined as (1) a 

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cine, general pediatrics, geriatrics, or obstetrics and gynecology and 

has allowed charges for primary care services that account for at 

least 50 percent of the physician’s or practitioner’s total allowed 

charges under (Medicare Part B) section 1848, as determined by 

the Secretary for the most recent period for which data are available, or (2) a physician assistant who is under the supervision of 

a practitioner described above. 

There would be no administrative or judicial review respecting 

(1) any determination or designation of the primary care services 

payment incentive; (2) the identification of services as primary care 

services for the purpose of this payment incentive; or (3) the identification of a practitioner as a primary care practitioner for the purposes of this payment incentive. 

The primary care services incentive payments would not be 

taken into account in determining the additional payments for physicians in health professions shortage areas or in physician scarcity 

areas. Furthermore, any bonus payment to physicians in health 

professions shortage areas or physician scarcity areas would not be 

taken into account in computing incentive payments for primary 

care services, nor would the primary care incentive payments be 

taken into account in determining the amounts that would otherwise be paid to physicians providing outpatient critical access hospital (CAH) services. 

Reason for Change 

Studies show that health systems emphasizing primary care 

have lower costs and better quality. Access to health insurance 

does not ensure access to timely medical care, particularly in places 

where doctors are in short supply like rural and inner-city urban 

areas. Currently, primary care accounts for about one third of the 

physician workforce, but far fewer U.S. medical students are pursuing careers in adult primary care than a decade ago. This provision is intended to encourage primary care providers who are currently practicing to remain in practice and incentivize additional 

physicians to choose a career in primary care. The provision also 

recognizes the challenges that certain areas of the country face in 

attracting a sufficient primary care workforce by providing an additional incentive to physicians who practice in health professional 

shortage areas. 

Effective Date 

January 1, 2011. 

Sec. 1304. Increased Reimbursement Rate for Certified Nurse-Midwives 

Current law 

In general, Medicare pays 80% of the reasonable charges (the 

lesser of the actual charge for the services or the amount determined by the fee schedule) for provider services covered under 

Medicare Part B. However, Medicare payments for services performed by certified nurse-midwives to Medicare beneficiaries are 

currently limited to no more than 65% of the fee schedule amount 

for the same service performed by a physician. 


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Proposed Law 

The proposal would remove the 65% restriction for Medicare payments to certified nurse-midwives. The modification would apply to 

services furnished on or after January 1, 2011. 

Reason for Change 

Nurse midwives are currently one of the lowest paid non-providers in Medicare. Yet, they practice independently and provide 

access to needed services in communities where gynecologists or obstetricians may not be readily available. In order to increase access 

to women’s health services for Medicare beneficiaries, the provision 

increases the reimbursement for nurse midwife services from 65 

percent of the fee schedule to 100 percent. 

Effective Date 

January 1, 2011. 

Sec. 1305. Coverage and Waiver of Cost-Sharing for Preventive 

Services 

Current law 

In general, Medicare law authorizes the Secretary to cover services for the diagnosis and treatment of illness, while coverage of 

preventive services (i.e., services provided in the absence of illness) 

has generally required legislation. Section 1861 of the SSA requires 

coverage of a number of specified preventive services under Part B 

(often with specified conditions for coverage) in language interspersed throughout the section. There is no definition of ‘‘preventive services’’ in the law that refers to them collectively. Also, in 

Section 101 of the Medicare Improvements for Patients and Providers Act of 2008 (P.L. 110–275), Congress provided administrative authority for the Secretary to add coverage of new preventive 

services, under certain conditions. 

Section 1833(a) of the SSA establishes coinsurance for the beneficiary, requiring Medicare to cover 80% of the costs of covered 

services under Part B, with specified exceptions. Section 1833(b) establishes an annual deductible for which the beneficiary is responsible. These sections have been amended over the years to waive 

coinsurance and/or the deductible for many, but not all, covered 

preventive services. 

Proposed law 

Subsection (a) of this section would add a new subsection to SSA 

Section 1861, which would define ‘‘Medicare covered preventive 

services’’ to mean a specified list of currently covered services. The 

list would also include any new services that were covered under 

the Secretary’s administrative authority. Coverage would be subject 

to all conditions and limitations that apply to each listed service 

under current law. 

With respect to Medicare covered preventive services (as defined 

by this bill), subsection (b) of this section would amend Section 

1833(a) of the SSA to require Medicare to cover 100% of their costs. 

It would also amend several additional SSA sections to require the 

waiver of coinsurance for specified sigmoidoscopy and colonoscopy 

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mograms and Medicare clinical preventive services. This subsection 

would also amend Section 1833(b) of the SSA to waive the application of the deductible for Medicare covered preventive services. Finally, it would amend the SSA to remove the authority of providers 

to charge coinsurance when providing Medicare covered preventive 

services. 

The amendments made by this section would apply to services 

furnished on or after January 1, 2011. 

Reason for Change 

Preventive benefits are vital to early detection and treatment of 

diseases, which can reduce the need for more serious treatments 

later. 

However, utilization rates for Medicare’s preventive benefits are 

very low. To help address that problem, the provision eliminates 

both the coinsurance and application of the deductible for preventive services. By eliminating all beneficiary cost-sharing for these 

services, more people should utilize the services. 

Effective Date 

January 1, 2011. 

Sec. 1306. Waiver of Deductible for Colorectal Cancer Screening 

Tests Regardless of Coding, Subsequent Diagnosis, or Ancillary 

Tissue Removal 

Current Law 

Section 1833(a) of the SSA establishes coinsurance for the beneficiary, requiring Medicare to cover 80% of the costs of covered 

services under Part B, with specified exceptions. Section 1833(b) of 

the SSA requires the application of an annual deductible, for which 

the beneficiary is responsible, for some Part B services. Under current law, coinsurance is applied to colorectal cancer screening services, but the deductible is not. 

Proposed Law 

This section would amend Sections 1833(a) and 1833(b) of the 

SSA (as amended by Section 1305 of this bill) to clarify that coinsurance and the deductible would be waived for colorectal cancer 

screening services regardless of the code applied, of the establishment of a diagnosis, or of the removal of tissue or other matter or 

other procedure that is performed in connection with and as a result of the screening test. This provision would apply to items and 

services furnished on or after January 1, 2011. 

Reason for Change 

Current law prohibits the application of the Medicare Part B deductible for screening colonscopies. However, if a patient has a 

screening colonscopy and the physician finds polyps that need to be 

removed during the screening exam, it is relabeled a diagnostic 

procedure and the deductible is applied. This policy is unfair to 

beneficiaries who are told that the screening colonscopy would bypass the deductible. This provision would therefore ensure that a 

screening colonscopy avoids the deductible and the coinsurance regardless of whether the procedure becomes diagnostic. 


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Effective Date 

January 1, 2011. 

Sec. 1307. Excluding Clinical Social Worker Services From Coverage Under the Medicare Skilled Nursing Facility Prospective 

Payment System and Consolidated Payment 

Current Law 

The majority of services provided to beneficiaries in a Medicare 

covered skilled nursing facility (SNF) stay are included in the bundled prospective payment made to the SNF. Certain services have 

been specifically excluded from SNF consolidated billing. In these 

instances, Medicare will pay the entity providing the service directly. Currently, the items and services provided by a clinical social worker are included in the SNF consolidated billing. 

Proposed Law 

Items and services provided by clinical social workers to Medicare beneficiaries in a SNF would receive separate Medicare payment on or after July 1, 2011. 

Reason for Change 

Numerous reports suggest that mental illness is highly prevalent 

in nursing homes, with mental health problems affecting more 

than 80% of the residents. These mental disorders including major 

depression, anxiety, and severe cognitive impairment or Alzheimer’s disease interfere with a person’s ability to carry out activities of daily living. Furthermore, older people have the highest rate 

of suicide of any age group, accounting for 20% of all suicide 

deaths. Clinical social workers are fundamental providers who facilitate care-planning and care-coordination. The provision treats 

clinical social workers identically to psychologists and psychiatrists 

with regard to their treatment of Medicare beneficiaries in nursing 

homes. Making this change will ensure better access to mental 

health services for Medicare beneficiaries in nursing homes. 

Effective Date 

July 1, 2010. 

Sec. 1308. Coverage of Marriage and Family Therapist Services and 

Mental Health Counselor Services 

Current Law 

Section 1861(s)(2) of the SSA (42 U.S.C. 1395x(s)(2)) defines services covered under the term ‘‘medical and other health services.’’ 

These services include medical supplies, hospital services, diagnostic services, outpatient physical therapy services, rural health 

clinic services, home dialysis services and supplies, antigens and 

physician assistant and nurse practitioner services. Marriage and 

family therapists and mental health counselors are not included 

under current law. 


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Proposed Law 

The proposal would add two subcategories of services to be covered under the term ‘‘medical and health services.’’ These are (1) 

marriage and family therapists, and (2) mental health counselors. 

The proposal would stipulate the required qualifications for a 

marriage and family therapist, and mental health counselor. It 

would define these providers’ services as the diagnosis and treatment of mental illnesses, as permitted by his or her state license, 

if no other provider or facility is also paid for those services. The 

proposal would add a payment provision for marriage and family 

therapists, and mental health counselors. The amount paid would 

be 80% of the lesser of the actual charge for services or 75% of the 

amount that would be paid for a psychologist’s services. The proposal would require the Secretary to consider confidentiality issues 

while developing criteria allowing for direct payment of the therapist and medical information sharing with the patient’s primary 

care physician. The proposal would exclude marriage and family 

therapists and mental health counselors from the prospective payment system for skilled nursing facilities. The proposal would include marriage and family therapists and mental health counselors 

as providers in rural health clinics and federally qualified health 

centers. The proposed law would include marriage and family 

therapists and mental health counselors as one of the practitioner 

categories who can file claims for services provided. 

Reason for Change 

In states that have licensed or certified marriage and family 

therapists and mental health counselors, these practitioners provide mental health services to people under age 65. Few states did 

so when Medicare was first created in 1965. This provision updates 

Medicare coverage by allowing them to treat Medicare beneficiaries 

as well, subject to state law. 

Sec. 1309. Extension of Physician Fee Schedule Mental Health Addon 

Current Law 

By law, every five years CMS examines Medicare billing codes 

under the physician fee schedule to determine whether they are 

overvalued or undervalued. Subsequent to the most recent evaluation, Medicare increased the rates for the codes used by physicians 

to bill for ‘‘evaluation and management’’ (E/M) services (face-to-face 

visits with patients), effective January 1, 2007. To maintain budget 

neutrality, rates for certain other codes, including some used to bill 

for psychotherapy services, were reduced. 

The Medicare Improvements for Patients and Providers Act of 

2008 (MIPPA, P.L. 110–275) increased Medicare payments under 

the fee schedule for psychotherapy services by 5% beginning on 

July 1, 2008, and ending on December 31, 2009. Psychiatric therapeutic procedures that involve insight oriented, behavior modifying, 

or supportive psychotherapy or interactive psychotherapy furnished 

in an office or other outpatient facility setting or in an inpatient 

hospital or residential care facility are reimbursed at this higher 

amount. 


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Proposed Law 

This proposal would extend the increased payments provided by 

MIPPA for psychotherapy services for an additional two years (ending December 31, 2011). 

Reason for Change 

Studies reveal that between 15–25% of elderly people in the U.S. 

suffer from significant symptoms of mental illness. Of the direct 

costs for treating mental illness, less than 1.5% is spent on behalf 

of the elderly. The highest suicide rate in America is among those 

aged 65 and older. Access to mental health services is limited to 

Medicare beneficiaries in many areas. This provision is intended to 

provide mental health parity and increase much needed mental 

health services to the Medicare beneficiary. 

Effective Date 

January 1, 2011. 

Sec. 1310. Expanding Access to Vaccines 

Current Law 

Medicare Part B covers influenza, pneumococcal, and, for individuals at increased risk, hepatitis B vaccinations. This coverage includes both the costs of these vaccines and their administration by 

recognized providers. Medicare Part D covers all vaccines licensed 

by the FDA, and their administration, when prescribed by recognized providers. 

Proposed Law 

Under this provision, Medicare Part B would cover all federally 

recommended vaccines, defined as any licensed vaccine that is recommended by the Advisory Committee on Immunization Practices 

(an advisory committee established by the Secretary, acting 

through the Director of the Centers for Disease Control and Prevention). The provision would also include all federally recommended vaccines in the suite of Medicare covered preventive 

services defined under section 1305 of this Act, and make several 

conforming amendments. 

Reason for Change 

Currently, a limited number of vaccines are covered by Medicare 

Part B while the rest are covered by Medicare Part D. This is confusing for beneficiaries and providers. For vaccines covered by Part 

D, beneficiaries may have to fill the vaccine prescription at a pharmacy and carry it with them to a physician’s office for administration. This is burdensome for beneficiaries and providers alike and 

could lead beneficiaries to avoid getting needed immunizations. 

Moving coverage for all vaccines to Part B will simplify the vaccination process and improve access for beneficiaries. 

Effective Date 

January 1, 2010. 


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Sec. 1311. Expansion of Medicare-Covered Preventive Services at 

Federally Qualified Health Centers 

Current Law 

SSA Section 1861(aa)(3) establishes that Federally qualified 

health centers may receive Medicare reimbursement for providing 

specified services, namely: diabetes outpatient self-management 

training services (DSMT); medical nutrition therapy (MNT) services; and preventive services that community health centers must 

provide under Section 330 of the Public Health Service Act (PHS 

Act). The latter services are: prenatal and perinatal services; appropriate cancer screening; well-child services; immunizations 

against vaccine-preventable diseases; screenings for elevated blood 

lead levels, communicable diseases, and cholesterol; pediatric eye, 

ear, and dental screenings to determine the need for vision and 

hearing correction and dental care; voluntary family planning services; and preventive dental services. 

Proposed Law 

This provision would amend SSA Section 1861(aa)(3) to remove 

the reference to DSMT and MNT services, replacing it with a reference to the package of Medicare covered preventive services established in Section 1305 of this Act (which includes DSMT and 

MNT services, and others). The list of preventive services required 

under Section 330 of the PHS Act would continue to apply. 

Reason for Change 

Disease prevention plays a critical role in maintaining the health 

of Medicare beneficiaries and is also a core service delivered at 

Federally Qualified Health Centers (FQHCs). This provision would 

update the preventive benefits covered by Medicare in FQHCs to 

include the range of preventative services covered by the rest of the 

Medicare program. 

Effective Date 

Date of enactment. 

TITLE IV—QUALITY 

Subtitle A—Comparative Effectiveness Research 

Sec. 1401. Comparative Effectiveness Research 

Current Law 

The need for more and better information about which clinical 

strategies work best and under what conditions has been widely 

recognized by clinicians, patients, researchers and policy makers. 

Most recently, comparative effectiveness research was addressed in 

the Medicare Prescription Drug, Improvement, and Modernization 

Act of 2003 (MMA, P.L. 108–173) and the American Recovery and 

Reinvestment Act (ARRA, P.L. 111–5). Section 1013 of the MMA 

authorizes the Agency for Healthcare Research and Quality 

(AHRQ) to conduct and support research on the outcomes, comparative clinical effectiveness, and appropriateness of health care 

items and services. In ARRA Congress provided $1.1 billion for 

comparative effectiveness research, with $400 million going to the 


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National Institutes of Health and $300 million to the Agency for 

Health Care Research and Quality to support comparative effectiveness research efforts at those agencies and $400 million to the 

Office of the Secretary to 1) conduct, support, or synthesize research that compares the clinical outcomes, effectiveness, and appropriateness of items, services, and procedures that are used to 

prevent, diagnose, or treat diseases, disorders, and other health 

conditions; and (2) encourage the development and use of clinical 

registries, clinical data networks, and other forms of electronic 

health data that can be used to generate or obtain outcomes data. 

Proposed Law 

The provision would establish a Center for Comparative Effectiveness Research within the Agency for Healthcare Research and 

Quality under title XI of the Social Security Act. The Center would 

conduct, support, and synthesize research with respect to the outcomes, effectiveness, and appropriateness of health care services 

and procedures in order to identify the manner in which diseases, 

disorders, and other health conditions can most effectively and appropriately be prevented, diagnosed, treated, and managed clinically. 

The duties of the Center would be to (1) conduct, support, and 

synthesize research relevant to the comparative effectiveness of the 

full spectrum of health care items, services, and systems, including 

pharmaceuticals, medical devices, medical and surgical procedures, 

and other medical interventions; (2) conduct and support systematic reviews of clinical research, including original research conducted subsequent to the date of the enactment of this section; (3) 

continuously develop rigorous scientific methodologies for conducting comparative effectiveness studies, and use such methodologies appropriately; (4) submit to the Comparative Effectiveness Research Commission (see below), the Secretary, and Congress relevant reports produced by the Center or a grantee or contractor of 

the Center; and (5) encourage, as appropriate, the development and 

use of clinical registries and the development of clinical effectiveness research data networks from electronic health records, postmarketing drug and medical device surveillance efforts, and other 

forms of electronic health data. 

The Center could secure information necessary to enable it to 

carry out its duties directly from any department or agency of the 

United States. Upon request of the Center, the head of that department or agency would furnish the information to the Center on an 

agreed upon schedule. In order to carry out its functions, the Center would (i) utilize existing information, both published and unpublished, where possible, collected and assessed either by its own 

staff or under other arrangements; (ii) carry out, or award grants 

or contracts for, original research and experimentation, where existing information is inadequate; and (iii) adopt procedures allowing any interested party to submit information for the Center or 

the Commission to use in making reports and recommendations. 

The Comptroller General would have unrestricted access to all deliberations, records, and nonproprietary data of the Center and 

Commission, immediately upon request, and both the Center and 

the Commission would be subject to periodic audit by the Comptroller General. 


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The Secretary would establish an independent Comparative Effectiveness Research Commission to oversee and evaluate the activities carried out by the Center to ensure that the Center’s activities result in highly credible research and information produced 

from such research. The duties of the Commission would include 

the following: 

(1) determine national priorities for research to be conducted, supported or synthesized by the center, and in making 

such determinations consult with a broad array of public and 

private stakeholders, including patients and health care providers and payers; 

(2) monitor the appropriateness of use of the Comparative 

Effectiveness Research Trust Fund (CERTF) (described below) 

with respect to the timely production of comparative effectiveness research determined to be a national priority; 

(3) identify highly credible research methods and standards 

of evidence for such research to be considered by the Center; 

(4) review the methodologies developed by the Center 

(5) not later than one year after the date of the enactment, 

enter into an arrangement under which the Institute of Medicine 

of the National Academy of Sciences would conduct an evaluation 

and report on standards of evidence for such comparative effectiveness research; 

(6) support forums to increase stakeholder awareness and 

permit stakeholder feedback on the efforts of the Center to advance methods and standards that promote highly credible research; 

(7) make recommendations for policies that would allow for 

public access of data produced under this section, in accordance 

with appropriate privacy and proprietary practices, while ensuring that the information produced through such data is 

timely and credible; 

(8) appoint a clinical perspective advisory panel for each national research priority, which would consult with patients and 

advise the Center on research questions, methods and evidence 

gaps in terms of clinical outcomes for the specific research inquiry to be examined with respect to such priority to ensure 

that the information produced from such research is clinically 

relevant to decisions made by clinicians and patients at the 

point of care; 

(9) make recommendations for the priority for periodic reviews of previous comparative effectiveness research and studies conducted by the Center; 

(10) routinely review processes of the Center with respect to 

such research to confirm that the information produced by 

such research is objective, credible, consistent with standards 

of evidence established under this section, and developed 

through a transparent process that includes consultations with 

appropriate stakeholders; and 

(11) make recommendations to the Center for the broad dissemination of the findings of research conducted and supported 

under this section that enables clinicians, patients, consumers, 

and payers to make more informed health care decisions that 

improve quality and value. 


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The members of the Commission would consist of the Director of 

the Agency for Healthcare Research and Quality, the Chief Medical 

Officer of the Centers for Medicare & Medicaid Services, and 15 additional members who would represent broad constituencies of 

stakeholders, including clinicians, patients, researchers, third-party 

payers, and consumers of federal and state beneficiary programs. 

At least 9 of the 17 members would be practicing physicians, 

health care practitioners, consumers, or patients. The members of 

the Commission would represent a broad range of perspectives and 

collectively would have experience in epidemiology, health services 

research, bioethics, decision sciences, health disparities, and economics. To ensure a diverse representation of the health care community, at least one member would represent each of the following: 

(1) patients, (2) health care consumers, (3) practicing physicians, 

including surgeons, (4) other health care practitioners engaged in 

clinical care, (5) employers, (6) public payers, (7) insurance plans, 

and (8) clinical researchers who conduct research on behalf of pharmaceutical or device manufacturers. No more than 3 of the members of the Commission could be representatives of pharmaceutical 

or device manufacturers and these representatives could only be 

clinical researchers as described in (8). 

The Secretary would appoint the members of the Commission; in 

considering candidates for appointment to the Commission, the 

Secretary could consult with the Government Accountability Office 

and the Institute of Medicine of the National Academy of Sciences. 

The Secretary would designate a member of the Commission, at the 

time of appointment, as Chairman and a member as Vice Chairman for that term of appointment, except that in the case of vacancy of the Chairmanship or Vice Chairmanship, the Secretary 

could designate another member for the remainder of that member’s term. The Chairman would serve as an ex officio member of 

the National Advisory Council of the Agency for Healthcare Research and Quality. Of the members first appointed, 8 would be appointed for a term of 4 years, and 7 would be appointed for a term 

of three years. Subsequently, each member of the Commission 

would be appointed for a term of four years. 

To enhance effectiveness and coordination, the Secretary would 

be encouraged, to the greatest extent possible, to seek coordination 

between the Commission and the National Advisory Council of the 

Agency for Healthcare Research and Quality. 

The bill includes provisions to protect against potential conflicts 

of interest. In appointing the members of the Commission or a clinical perspective advisory panel, the Secretary or the Commission, 

respectively, would take into consideration any financial interest 

and develop a plan for managing any identified conflicts. When 

considering an appointment to the Commission or a clinical perspective advisory panel, the Secretary or the Commission would review the expertise of the individual and the financial disclosure report filed by the individual pursuant to the Ethics in Government 

Act of 1978 for each individual under consideration for the appointment, so as to reduce the likelihood that an appointed individual 

would later require any pertinent waivers. 

Prior to a meeting of the Commission or a clinical perspective advisory panel, each member of the Commission or the clinical perspective advisory panel who is a full-time government employee or 


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special government employee would disclose any relevant financial 

interests to the Secretary. A member of the Commission or a clinical perspective advisory panel could not participate with respect to 

a particular matter considered in a meeting of the Commission or 

the clinical perspective advisory panel if the member (or an immediate family member of the member) were to have a financial interest that could be affected by the advice given to the Secretary regarding the matter, excluding interests exempted in regulations 

issued by the Director of the Office of Government Ethics as too remote or inconsequential to affect the integrity of the services of the 

government officers or employees to which such regulations apply. 

The Secretary could grant a waiver if the Secretary were to determine it necessary to afford the Commission or a clinical perspective 

advisory panel the essential expertise of the member. The waiver 

would permit such a member to participate as a voting or nonvoting member with respect to a particular matter under consideration in a Commission or a clinical perspective advisory panel 

meeting. The number of waivers granted to members of the Commission could not exceed one-half of the total number of members 

for the Commission. However, no voting member of any clinical 

perspective advisory panel would be in receipt of a waiver, and no 

more than two nonvoting members of any clinical perspective advisory panel would be serving under waiver. For purposes of determining conflict of interest under this section, the term ‘‘financial 

interest’’ would mean a financial interest under section 208(a) of 

title 18, United States Code. 

While serving on the business of the Commission (including travel time), a member of the Commission would be entitled to compensation at the per diem equivalent of the rate provided for level 

IV of the Executive Schedule, and while serving away from home 

and the member’s regular place of business, a member could be allowed travel expenses, as authorized by the Director of the Commission. 

The Commission would transmit a copy of each report submitted 

to the Secretary and would make the reports available to the public. 

The Commission could (1) appoint an executive director (subject 

to the approval of the Secretary) and other personnel as Federal 

employees under section 2105 of title 5, United States Code as may 

be necessary to carry out its duties (without regard to the provisions of Title 5, United States Code, governing appointments in the 

competitive service); (2) seek assistance and support from appropriate federal departments and agencies as might be required in 

the performance of its duties; (3) enter into contracts or make other 

arrangements for the conduct of the work of the Commission, as 

may be necessary; (4) make advance payments, and other payments that relate to the work of the Commission; (5) provide transportation and subsistence for persons serving without compensation; and (6) prescribe such rules and regulations as it were to 

deem necessary with respect to the internal organization and operation of the Commission. 

Any research conducted, supported, or synthesized by the Center 

would (1) be required to meet certain transparency, credibility and 

access conditions; (2) consider advice given by clinical perspective 

advisory panels; (3) consider stakeholder input; and (4) take into 


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account potential differences across subgroups of populations. To 

ensure transparency, credibility, and access, the research would 

meet the following conditions: (a) the establishment of the agenda 

and the conduct of the research would be insulated from inappropriate political or stakeholder influence; (b) the methods of conducting the research would be scientifically based; (c) all aspects of 

the prioritization of research, conduct of the research, and development of conclusions based on the research would be transparent to 

all stakeholders; (d) the process and methods for conducting such 

research would be publicly documented and available to all stakeholders; and (e) throughout the process of the research, the Center 

would provide opportunities for all stakeholders involved to review 

and provide public comment on the methods and findings of such 

research. 

The research would meet a national research priority as determined above and would consider advice given to the Center by the 

clinical perspective advisory panel for the national research priority. 

The Commission would consult with patients, health care providers, health care consumer representatives, and other appropriate stakeholders with an interest in the research through a 

transparent process recommended by the Commission. Specifically, 

where deemed appropriate by the Commission, the consultation 

would include (1) recommending research priorities and questions, 

(2) recommending research methodologies, and (3) advising on and 

assisting with efforts to disseminate research findings. The Secretary would designate a patient ombudsman who would serve as 

an available point of contact for any patients with an interest in 

proposed comparative effectiveness studies by the Center and ensure that any comments from patients regarding proposed comparative effectiveness studies are reviewed by the Commission. 

Research falling under the activities of this Center would (1) be 

designed, as appropriate, to take into account the potential for differences in the effectiveness of health care items and services used 

with various subpopulations such as racial and ethnic minorities, 

women, different age groups (including children, adolescents, 

adults, and seniors), and individuals with different comorbidities; 

and (2) seek, as feasible and appropriate, to include members of 

such subpopulations as subjects in the research. 

The proposal would require public access to comparative effectiveness information. Not later than 90 days after receipt by the 

Center or Commission, as applicable, of a relevant report made by 

the Center, Commission, or clinical perspective advisory panel 

under this section, the appropriate information contained in the report would be posted on the official public Internet site of the Center and of the Commission, as applicable. For purposes of this section, a relevant report would be each of the following submitted by 

the Center or a grantee or contractor of the Center: (1) any interim 

progress report as deemed appropriate by the Secretary, (2) stakeholder comments, and (3) a final report. 

To disseminate and assist in the incorporation of comparative effectiveness information, the Center would provide for the dissemination of appropriate findings produced by research supported, conducted, or synthesized under this section to health care providers, 

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ical decision support, appropriate professional associations, and 

federal and private health plans, and other relevant stakeholders. 

In disseminating such findings the Center would (1) convey findings of research so that they are comprehensible and useful to patients and providers in making health care decisions; (2) discuss 

findings and other considerations specific to certain sub-populations, risk factors, and comorbidities as appropriate; (3) include 

considerations such as limitations of research and what further research may be needed, as appropriate; (4) not include any data the 

dissemination of which would violate the privacy of research participants or violate any confidentiality agreements made with respect to the use of data under this section; and (5) assist the users 

of health information technology focused on clinical decision support to promote the timely incorporation of such findings into clinical practices and promote the ease of use of such incorporation. 

The Center would develop protocols and strategies for the appropriate dissemination of research findings in order to ensure effective communication of the findings and the use and incorporation 

of the findings into relevant activities for the purpose of informing 

higher quality and more effective and efficient decisions regarding 

medical items and services. In developing and adopting the protocols and strategies, the Center would consult with stakeholders 

concerning the types of dissemination that would be most useful to 

the end users of information and could provide for the utilization 

of multiple formats for conveying findings to different audiences, 

including dissemination to individuals with limited English proficiency. 

The provision would establish a number of reporting requirements. (1) Beginning not later than one year after the date of the 

enactment, the Director of the Agency of Healthcare Research and 

Quality and the Commission would submit an annual report on the 

activities of the Center and the Commission and research conducted under this section to Congress. Each report would include 

a discussion of the Center’s compliance with the requirements for 

inclusion of subpopulations in research, including any reasons for 

lack of compliance. (2) Not later than December 31, 2011, the Secretary would submit to Congress an annual recommendation for a 

fair share per capita amount described below for purposes of funding the CERTF. (3) Not later than December 31, 2013, the Secretary, in consultation with the Commission, would submit to Congress a report on all activities conducted or supported under this 

section as of such date. The report would include an evaluation of 

the overall costs of such activities and an analysis of the backlog 

of any research proposals approved by the Commission but not 

funded. 

The proposal would establish the Health Care Comparative Effectiveness Research Trust Fund (‘‘CERTF’’) under the Internal 

Revenue Code (the ‘‘Code’’) to carry out the proposal’s provisions relating to comparative effectiveness research. For fiscal year 2010 

and in each subsequent fiscal year, amounts in the CERTF under 

section 9511 of the Internal Revenue Code of 1986 would be available to the Secretary to carry out this section without the need for 

further appropriations and without fiscal year limitation. 


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Nothing in this section would be construed to permit the Commission or the Center to mandate coverage, reimbursement, or 

other policies for any public or private payer. 

For information regarding the establishment and financing the 

Comparative Effectiveness Research Trust Fund, see section 1802. 

Reason for Change 

All too often physicians and patients struggle to understand 

when a new drug, diagnostic test, surgical procedure or method of 

care delivery will be most helpful compared to the existing one, or 

how to choose among existing courses of treatment. This lack of 

clear information can create great confusion when it comes to difficult medical decisions. Health policy experts, researchers, consumers, and physician groups advocate that comparative effectiveness information (CER) is a needed public good and that greater 

investment in CER is critical to assuring high-quality care. 

Better information about the relative strengths and weaknesses 

of various health care items, services and systems will help physicians and patients make more informed decisions regarding patient 

care. 

Great variation exists in patient outcomes after a particular 

treatment. Currently, clinicians do not have evidence of these differences in patient outcomes or the effectiveness of different interventions for the same condition until after patients have been 

treated. Original research, systematic reviews, and synthesis of evidence must be designed, as appropriate, to take into account the 

potential for differences in effectiveness of health care items, services and systems with various subpopulations of patients such as 

racial and ethnic minorities, women, different age groups and individuals with different comorbidities. CER should not be viewed as 

one-size-fits-all medicine; rather, research should be designed to increase the amount and quality of evidence regarding what works, 

for whom, in what situation and why. 

The dearth of knowledge about the comparative benefits of different interventions underscores the need for an objective entity to 

consider the evidence on all available interventions for a particular 

condition and their impact on different patient populations. Such 

an inquiry is a public good that could benefit all stakeholders and 

as such, there is a need for a sustained investment in comparative 

effectiveness research to improve the base of knowledge from which 

patients and physicians make important medical decisions. 

To accomplish this sustained investment, the legislation establishes a Center at the Agency for Healthcare Research and Quality 

to conduct, support and synthesize research relevant to the comparative effectiveness of the full spectrum of health care items, 

services and systems and to aid in the dissemination of such research. The center will build on infrastructure and expertise already in place and work with public and private entities to conduct 

CER. The legislation also creates a public/private stakeholder commission to oversee the activities of the center, determine national 

priorities for research, appoint advisory panels for specific national 

priorities, review methodologies and standards of evidence for research, conduct outreach to stakeholders and make recommendations for the dissemination of research findings. In order to ensure 

the integrity of the research process, the commission and advisory 


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panels it appoints will be subject to strict conflict of interest requirements. These requirements are designed to ensure that the 

process for setting research priorities and evaluating research 

questions and methodologies will be free from inappropriate political and industry influence. Proper dissemination of research findings is an integral aspect of future investments in CER. The legislation reflects the importance of dissemination efforts to ensure 

that the research is comprehensible and useful to patients and providers in making health care decisions. In order to provide a consistent stream of public and private funding for CER through a 

mechanism insulated from outside influence, the legislation creates 

the Comparative Effectiveness Research Trust Fund (CERTF). The 

monies in the fund are derived from fees assessed to Medicare and 

private health insurance plans. 

Effective Date 

Date of enactment. 

Subtitle B—Nursing Home Transparency 

Part 1—Improving Transparency of Information on Skilled Nursing 

Facilities and Nursing Facilities 

Sec. 1411. Required Disclosure of Ownership and Additional 

Disclosable Parties Information 

Current Law 

In general, Medicare and Medicaid require that skilled nursing 

facilities (SNF) and nursing facilities to be administered in a manner that maintains residents’ well-being and safety. SNFs and 

nursing facilities are also required to report certain changes in 

ownership or controlling interest; in those individuals who are officers, directors, agents or managing employees; in the corporation, 

association or other company responsible for facility management; 

or when a change occurs in the SNF or nursing facility administrator position. SNFs and nursing facilities also are required to disclose ownership and other information as a condition of participation, and of certification or re-certification. In general, administrators must meet standards established by the Secretary. 

Under Title XI of the Social Security Act, Section 1124, a person 

is considered to have an ownership or controlling interest, directly 

or indirectly, when (1) they own 5% or more of an entity, or they 

hold a whole or part of any mortgage, deed of trust, note or other 

obligation secured by the entity (nursing facility) or any property 

or assets that equal 5% of the total property; (2) are an officer or 

director of the entity, if the entity is organized as a corporation; or 

(3) are a partner in the entity if it is organized as a partnership. 

To a limited extent as determined feasible by the Secretary, nursing facility entities also are required to report other ownership and 

control interests for any persons named as owners or having a control interest. 

Proposed Law 

This provision would amend Section 1124 to require SNFs and 

nursing facilities to make available upon request by the Secretary, 

the Health and Human Services Office of the Inspector General 


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(OIG), the state where the entity is located, and the state long-term 

care ombudsman, information on ownership (including direct and 

indirect ownership), information on additional disclosable parties 

and information describing the governing body and organizational 

structure of the facility. SNFs and nursing facilities would be required to update disclosure information whenever changes occur. 

Information would need to be made available to the Secretary, 

OIG, the state where the entity is located, or the state long-term 

care ombudsman upon request until such time as this information 

became available publicly in accordance with final regulations promulgated by the Secretary. Facilities would not need to disclose 

and report vendors with which they do business on a routine basis 

that are independent third parties and do not have the ability to 

control the finances, operation, management or administration of a 

facility. 

In addition, SNFs and nursing facilities would be required to 

post prominent notices in facility lobbies that ownership and additional disclosable party information are available upon request. 

Facilities would be required to disclose the identity of and information on (1) each member of a facility’s governing body including 

their name, title, date of start, and period of service for each SNF 

or nursing facility; (2) each person or entity who is an officer, director, member, partner, trustee, or managing employee, including 

their name, title, and period of service; (3) each person or entity 

who is an additional disclosable party; and (4) the organizational 

structure and relationship of the organizational entities to each 

SNF or nursing facility and each other for each ownership and governing individual or entity. 

To the extent practicable, the Secretary may allow SNFs and 

nursing facilities in a manner specified by the Secretary to submit 

information using existing reporting mechanisms on ownership interest, governance, and organizational structure if they already report such information to other oversight agencies, such as to the 

Internal Revenue Service (IRS), using Form 990, the Securities and 

Exchange Commission, the Secretary, or through information otherwise submitted to any other federal agency. 

Ownership or controlling interest would include direct or indirect 

interests through any number of intermediate entities and would 

include owners of a whole or part interest in any mortgage, deed 

of trust, note, or other obligation secured (in whole or in part) by 

the entity or any of the property or assets, if the ownership interest 

is at least 5%. 

Not later than two years after enactment, the Secretary would 

promulgate final regulations requiring SNFs and nursing facilities 

to report, in a standardized format, information about ownership, 

governing board, and organizational structure. The final regulations would require that as a condition of participation and payment, SNFs and nursing facilities certify that reported information 

is current and accurate. These regulations would take effect 90 

days after the Secretary published the final regulations in the Federal Register. 

The Secretary would provide technical assistance and guidance 

to states on how to adopt and implement the reporting requirements in the standardized format. This provision would not reduce, 

diminish, or alter any existing facility reporting requirements. 


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The following definitions would apply to this provision: 

(1) ‘‘Additional disclosable party’’ would be any individual or entity who (a) exercises operational, financial, or managerial control 

over the facility or any part of the facility; (b) provides policies or 

procedures for any facility operations or provides financial or cash 

management services to the facility; (c) leases or subleases real 

property to the facility; or owns a whole or part interest of at least 

5% of the total value of such real property; (d) lends funds or provides a financial guarantee to the facility of at least $50,000; (e) 

provides management or administrative services, management or 

clinical consulting services, or accounting or financial services to 

the facility. 

(2) The facility is defined as a ‘‘disclosing entity,’’ which is a 

SNF operating under Medicare or a nursing facility operating 

under Medicaid. 

(3) ‘‘Managing employees’’ include any employees, such as a 

general manager, business manager, administrator, director, or 

consultant, who directly or indirectly manages, advises, or supervises any element of a SNF or nursing facility’s practices, finances, 

or operations. 

(4) ‘‘Organizational structure’’ consists of the following: (a) the 

corporations, the officers, directors, and shareholders of corporations, who own at least 5% of the corporation; (b) the limited liability companies, the ownership interest of members and managers of 

limited liability companies (including the percentage owned by each 

member and manager); (c) the general partnerships, the general 

partners, the limited partnerships, the general and limited partners who own at least 10% of the partnership; (d) a trust, the trustees of the trust; (e) an individual, contact information for the individual; (f) and any other person or entity, as the Secretary determines appropriate. 

Within one year of publication of the final regulations in the Federal Register, the Secretary shall make ownership disclosure and 

additional disclosable party information for SNF and nursing facilities available to the public as determined by the Secretary. 

Reason for Change 

Over the last 10 to 15 years, it has become clear that state and 

federal regulators are increasingly unable to effectively and quickly 

investigate complex webs of interlocking corporate relationships. 

When serious safety and quality problems become evident, sometimes in conjunction with financial irregularities, the response of 

regulators and law enforcement needs to be as swift as possible to 

protect the well-being of residents. However, under current law, 

regulators have increasingly encountered difficulties in identifying 

and holding accountable those persons and entities who are responsible for providing good resident care. 

This is illustrated in a case recently settled by the HHS Office 

of Inspector General under the False Claims Act for serious quality 

of care deficiencies involving a facility in the District of Columbia. 

During the OIG’s investigation, the nursing home fought hard to 

avoid disclosing both the intermediate companies linking the facility to its parent company, and the parent company itself. This information was not disclosed on the form that CMS requires to be 

submitted, and which informs the agency’s database known as the 


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Provider Enrollment Chain and Ownership System, or PECOs. 

Even after an extensive investigation, the HHS OIG was still not 

able to uncover all of the multiple layers of limited liability companies and other structures that hid the true owners and operators— 

those who were calling the shots when it came to making decisions 

about the resources available for resident care. 

State regulators have encountered similar problems. In 2008, the 

Connecticut Attorney General testified before the House Energy 

and Commerce Oversight and Investigations Subcommittee about a 

New England nursing home chain embroiled in a series of controversies and legal actions involving various allegations, including 

siphoning of Medicaid funds. The lack of transparency in the operations of the chain led to large legal expenditures by the State in 

order to try to identify the parties responsible for good resident 

care. Regrettably, issues of poor care and financial disarray continued even as investigators worked to try to identify those parties 

who should have been held accountable for providing good-quality 

services and overseeing proper management of fiscal resources, 

which include taxpayer funds, for those services. 

Such situations highlight the need for making improvements in 

disclosure and reporting requirements. Current disclosure and reporting rules for nursing homes to divulge key ownership and nonownership relationships with persons and entities that are in a position to control the resources and operations essential to good resident care are inadequate. This lack of transparency hinders the 

ability of regulators to enforce basic safety and quality standards, 

and obscures adequate disclosure about how public funds that are 

intended for resident care are actually being spent. The proposed 

provisions in Section 1411, which call for nursing homes to divulge 

those persons and entities that are in a position to make decisions 

about the operation, management and financing of services for resident care, will restore a measure of appropriate public accountability. 

Effective Date 

Date of enactment. 

Sec. 1412. Accountability Requirements 

Current Law 

There are no comparable requirements in current law for SNFs 

and nursing facilities to implement compliance and ethics training 

programs for their employees. 

Proposed Law 

(1) Thirty-six months after enactment of this provision, SNFs 

and nursing facilities would be required to have complied with regulations developed by the Secretary governing the operation of 

compliance and ethics programs. The compliance and ethics programs would need to be effective in preventing and detecting criminal, civil, and administrative violations and in promoting quality of 

care. Operating organizations (entities that operate SNFs and 

nursing facilities) would be required to comply with the compliance 

and ethics programs regulations, including corporate-level management of multi-unit nursing home chains. 


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Within two years of the effective date of this provision, the. Secretary, in consultation with the HHS OIG, would promulgate regulations for effective compliance and ethics programs for operating 

organizations. These regulations may include a model compliance 

program, and would permit the design of the compliance and ethics 

programs to vary depending on an organization’s size. Larger operating organizations would have more formal and rigorous programs 

with established written policies and procedures to guide employees. Regulations also would specifically address requirements for 

employees and managers of multi-nursing home chains. 

Within three years after promulgation of final regulations, the 

Secretary would be required to evaluate the compliance and ethics 

programs and submit a report to Congress to determine if the compliance and ethics programs led to changes in deficiency citations, 

quality performance, or other patient care quality metrics. The Secretary’s report to Congress would include recommendations to 

change the requirements of the compliance and ethics program, as 

the Secretary determined appropriate. 

Compliance and ethics programs would need to be reasonably designed, implemented, and enforced to be generally effective in preventing and detecting civil, criminal, and administrative violations 

under the Social Security Act as well as in promoting quality of 

care, and would include the following required components: 

(A) compliance standards and procedures that would guide 

employees and other agents and would reduce criminal, civil, 

and administrative violations. 

(B) responsibility by senior individuals within operating organizations for overseeing compliance with the standards and 

procedures the entity establishes for their compliance and ethics program. These individuals would have resources and authority to assure compliance. 

(C) diligence in ensuring that individuals who are at risk for 

engaging in criminal, civil, or administrative violations are not 

delegated responsibility for implementing or monitoring an organization’s compliance and ethics program. 

(D) effective communication of standards and procedures to 

employees (and other agents), through training programs or explanatory publications that practically illustrate what is required. 

(E) assurance that the standards for their compliance and 

ethics programs are met by using procedures to detect criminal, civil, and administrative violations. Organizations can use 

procedures such as monitoring and auditing systems as well as 

installing a reporting system that enables employees (and 

other agents) to report violations by others without fear of retribution. 

(F) appropriate disciplinary mechanisms that are consistently followed to enforce the compliance and ethics program 

standards. Operating organizations also must demonstrate 

that they have used, where appropriate, disciplinary measures 

for individuals failing to detect offenses. 

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tled, and modification of compliance and ethics programs to detect criminal, civil, and administrative violations. 

(H) periodic reassessment of their compliance and ethics 

program standards to ensure that the programs continue to be 

effective as the organization and facilities change. 

(2) Before December 31, 2011, the Secretary would be required 

to establish and implement a quality assurance and performance 

improvement (QAPI) program. The QAPI program would include 

multi-unit chains. Under the QAPI program, the Secretary would 

establish facility standards and provide technical assistance to 

SNFs and nursing facilities on the development of best practices to 

meet the QAPI standards through regulation. Within one year after 

the Secretary promulgates such regulations—SNFs and nursing facilities would be required to submit plans to the Secretary describing how they will meet the QAPI standards and implement best 

practices. 

(3) The Comptroller General of the Government Accountability 

Office (GAO) would be required to conduct a study that examined 

the following: (A) the extent to which corporations that operate 

large numbers of SNFs and nursing facilities are undercapitalized, 

taking into account ownership type (including private equity and 

control interests) are undercapitalized; (B) the effects of undercapitalization on quality of care, including staffing and food costs; 

and (C) options to address undercapitalization issues, such as requirements for surety bonds, liability insurance, or minimum capitalization. Within 18 months after this provision became effective, 

GAO would submit a report to Congress. 

Reason for Change 

For more than a decade, the HHS OIG and other Federal agencies charged with responsibility for enforcement of Federal law 

have emphasized the importance of compliance plans. In 1998, the 

OIG began offering guidance on the elements of a model compliance plan, noting in initial guidance for clinical labs that ‘‘compliance plans offer the health care provider an opportunity to participate in a nationwide effort to reduce fraud and abuse in our national health care programs.’’ 

Compliance program guidance for nursing homes was subsequently published in 2000, with supplemental guidance published 

in April 2008. In its supplemental guidance, the OIG observed that 

‘‘a successful compliance program addresses the public and private 

sectors’ common goals of reducing fraud and abuse, enhancing 

health care providers’ operations, improving the quality of health 

care services, and reducing their overall cost. Meeting these goals 

benefits the nursing facility industry, the government, and residents alike. Compliance programs help nursing facilities fulfill 

their legal duty to provide quality care; to refrain from submitting 

false or inaccurate claims or cost information to the Federal health 

care programs; and to avoid engaging in other illegal practices’’. 

Yet not all nursing homes have voluntarily implemented compliance and ethics programs. The OIG believes that the incidence of 

fraud and abuse in the nursing home industry, which costs the government tens of millions of dollars annually, will decrease if all facilities are required to develop and implement effective internal 


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programs that aim to achieve better control of claims submissions, 

while also reducing the risk of criminal and civil liabilities. 

Accordingly, and because the Federal government has a zero tolerance policy towards fraud and abuse, the proposed provisions in 

Section 1412 are designed to outline those elements of an effective 

and comprehensive compliance and ethics programs that nursing 

homes can use and adapt to fit the scale and scope of their operations. 

In addition, this Section proposes that nursing homes develop 

Quality Assurance and Performance Improvement (QAPI) programs, which are vital for health care providers of all types. QAPI 

programs are designed to make health care organizations recognize 

and establish comprehensive systems that aim to deliver patientcentered care encompassing all individuals in an organization, from 

board to bedside, in an environment that promotes and demonstrates measurable improved outcomes for patients and families. 

To achieve this, QAPI programs that have been developed to date 

involve a range of activities, including: setting expectations for patient safety; setting priorities for areas requiring improvement, and 

approving policies and procedures used to organize those efforts; 

collecting objective data to demonstrate actual improvements in 

care, safety, and prevention and reduction of medical errors; development of strategies for reviewing and acting on quality and safety 

indicators; and documentation of evidence that staff at all levels 

are involved in quality efforts. 

Finally, Section 1412 asks the Government Accountability Office 

to undertake a study to shed light on reports that some nursing 

homes lack sufficient cash to carry on daily business at a level that 

is adequate for good patient care, which may in part be due to complex arrangements in which homes that are owned or operated by 

publicly or privately-held companies are stripped of assets to shield 

them from liability. 

Sec. 1413. Nursing Home Compare Medicare Website 

Current Law 

There is no requirement in current law for Medicare’s Nursing 

Home Compare website. The Nursing Home Compare website was 

developed by the Centers for Medicare and Medicaid Services 

(CMS) and launched in November 2002. The website was intended 

to bolster the agency’s efforts to improve SNF and nursing facility 

quality of care and to make information on nursing home quality 

more accessible for long-term care consumers and their families. 

Since its launch, CMS has enhanced the website by adding or improving quality measures and website navigation. Medicare Nursing Home Compare includes national data on all nursing facilities 

that participate in Medicare and Medicaid. The data featured on 

Nursing Home Compare includes facility ratings, selected results 

from survey and certification inspections, and limited staffing information on SNFs and nursing facilities. 

Proposed Law 

The Secretary would ensure that the Nursing Home Compare 

website (or a successor website) contains additional information for 

SNFs and nursing facilities that is searchable and displayed in a 


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manner that is prominent, easily accessible, and clearly understandable for consumers, including: 

(1) information on ownership and affiliated parties as would 

be required under Sec. 1411 above, Required Disclosure of 

Ownership and Affiliated Parties Information, that identifies 

SNF and SNF facility chains’ ownership, governing boards, and 

organizational structure; 

(2) information on CMS’ Special Focus Facility facilities (or 

a successor program), including the names and locations of facilities that since the previous quarter that were, (a) newly enrolled in the program, (b) enrolled but failed to significantly 

improve, (c) enrolled and significantly improved, (d) graduated 

from the program, and (e) have closed voluntarily or been terminated by the Secretary; 

(3) staffing data for each facility, including resident census, 

hours of care provided per resident per day, staff turnover, and 

tenure. These data would need to be displayed in formats that 

are clearly understandable to consumers and would permit 

them to compare staffing differences between facilities. This 

staffing information also would need to assist consumers in 

comparing an individual facility’s staffing with state and national facility averages by providing: (a) concise explanations of 

how to interpret data (i.e., nursing home staff hours per resident day), (b) differences between staffing categories and, their 

associated training requirements, (c) the relationship between 

staff levels and quality of care, and (d) an explanation that 

residents with greater care needs can require greater staff levels or more staff training; 

(4) links to state websites where state survey and certification program information can be found, including Form 2567 

state inspection reports (or successor forms) and facility correction plans or other facility responses, along with information to 

guide consumers in interpreting and understanding survey and 

certification reports; 

(5) the standardized complaint form developed by the Secretary under Sec. 1415 (below), which includes an explanation 

of how complaint forms are used and how to file a complaint 

with states’ LTC ombudsman programs and survey and certification programs; 

(6) summary information on the number, type, severity, and 

outcome of substantiated complaints; and 

(7) the number of adjudicated criminal violations by the 

nursing facility or crimes committed by nursing facility employees (a) that were committed inside a facility; (b) for crimes 

or violations committed outside a facility, the instances where 

these were elder abuse, neglect, exploitation, criminal sexual 

abuse of an elder, or other violations that resulted in serious 

bodily injury; and (c) the number of civil monetary penalties 

levied against the facility, employees, contractors, and other 

agents. 

The Secretary is further directed to undertake a Nursing Home 

Compare review and modification process that would: (1) address 

the accuracy, clarity of presentation, timeliness, and comprehensiveness of the information reported on the website; and (2) within 

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vamp the website in accordance with the Secretary’s findings. In 

addition, this website review process would include consultation 

with the following organizations: (1) state LTC ombudsman programs, (2) consumer advocacy groups, (3) provider stakeholder 

groups, and (4) representatives of programs or groups the Secretary 

determines appropriate. 

To improve the public’s access to timely information on state survey and certification inspections, states would be required to submit information, including any enforcement actions, to the Secretary at the same time or before the state nursing home surveyors 

sent that information to facilities. Corrections to prior information 

submitted to the state also would need to be submitted to the Secretary in a timely manner. The Secretary is directed to update the 

Nursing Home Compare website with the information from states’ 

survey and certification inspections as expeditiously as practicable, 

but at least quarterly. This requirement would be required within 

one year after this provision became effective. 

The Secretary is also directed to conduct a Special Focus Facility 

program for enforcement of requirements for SNFs and nursing facilities that the Secretary identified as having substantially failed 

to meet applicable requirements of this provision. Under the Special Focus Facility program, the Secretary would conduct a survey 

of each facility in the program at least every six months. 

Within one year of the effective date of this provision, SNFs and 

nursing facilities would be required to make available for any individual’s review reports on surveys, certifications, and complaint investigations for the past three years and to post notices in prominent and accessible facility areas that these reports are available 

for inspection. These reports would need to exclude information 

identifying complainants or residents. 

The Secretary would be required to provide guidance to states on 

how to establish Internet links to Form 2567 state inspection reports (or successor forms), complaint investigation reports, and facilities’ correction plans or other responses to Form 2567. This information would be available on the state website for SNFs and 

nursing facilities. These reports also would be required to exclude 

information that identifies complainants or residents. 

States would be required to maintain a consumer-oriented 

website that provided useful information on all SNF and nursing 

facilities operating within that state. The information on each facility would include Form 2567 state inspection reports (or successor 

forms), complaint investigation reports, facilities’ plans of correction, and other information as determined useful by the Secretary 

or the state for consumers to use in assessing the quality of LTC 

options and the quality of care in individual facilities. 

Reason for Change 

The Federal website, Nursing Home Compare, is visited annually 

by tens of thousands of individuals looking for reliable, accurate information about a suitable facility for a loved one. While already 

a valuable resource, this website would greatly benefit from the addition of certain critical information—e.g., staffing levels in facilities based on real-time data; information about who the owners 

and affiliated business partners of nursing homes are; links to 

state websites where electronic copies of annual inspection reports 


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can be found; and information about any substantiated complaints 

filed against the facility, as well as criminal violations committed 

by staff. 

Consumers would also benefit from the proposal in this Section 

that calls for states to develop clear information about the quality 

and safety of nursing homes as part of their websites, including explanations of how to interpret State inspection reports and plans 

of correction submitted by facilities when inspectors find deficiencies in quality and safety. 

Effective Date 

The modifications of Nursing Home Compare described in this 

section would become effective within one year of enactment, except that the Secretary would ensure that Ownership and Affiliated 

Parties, and Accountability Information as described in Sec. 1411, 

would be included on the website within one year of the date when 

those requirements were implemented. 

Sec. 1414. Reporting of Expenditures 

Current Law 

There are no comparable provisions in current law that require 

SNFs or nursing facilities to report expenditures. 

Proposed Law 

Within one year of the effective date of this provision, the Secretary would consult with private sector accountants with knowledge of SNF cost reports to re-design cost report forms to separately capture wages and benefit expenditures for direct care staff. 

Beginning with cost reports submitted three years after the effective date of this provision, SNFs would need to separately report 

direct care staff wages and benefits including (at least breaking 

out) (1) registered nurses, (2) licensed professional nurses, (3) certified nurse assistants, and (4) other medical and therapy staff. 

Within 30 months (21⁄2 years) of the effective date of this provision, the Secretary, in consultation with OIG, Medicare Payment 

Advisory Commission (MedPAC), and other experts identified by 

the Secretary, would categorize SNF’s newly collected annual expenditure data for each facility, regardless of payment source, into 

the following functional accounts: spending on direct care services, 

including nursing, therapy, and medical services; spending on indirect care, including housekeeping and dietary services; capital assets, including building and land costs; and administrative services 

costs. The Secretary would establish procedures to make the expenditure data submitted under this provision, readily available to 

interested parties upon request, subject to requirements established by the Secretary. 

Reason for Change 

This provision would make it possible for policymakers and other 

interested parties to accurately determine and analyze how much 

funding a facility or chain dedicates to one of the most important 

aspects of resident care—staffing. Medicare cost reports do not currently capture this information, with the result that facilities may, 

if they wish, easily save money by making decisions to cut staff. 


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While research has established that staffing levels below a certain 

threshold are detrimental to good resident care, no consensus 

among policymakers has yet been achieved about the level of staffing that should be in place to assure good or optimal care. This 

new source of data on what facilities spend on staffing, in conjunction with Section 1416 below on reporting of staffing levels, would 

allow facilities to assess the amount of total funding that they dedicate to nurse aides with overall quality of care. 

Sec. 1415. Standardized Complaint Form 

Current Law 

There are no provisions in current law requiring use of a standardized complaint form. Oversight of nursing homes is a shared 

federal-state responsibility. Based on statutory requirements, CMS 

defines standards that nursing homes must meet to participate in 

the Medicare and Medicaid programs and contracts with states to 

assess whether homes meet these standards through annual surveys and complaint investigations. A range of statutorily defined 

sanctions is available to CMS and the states to help ensure that 

homes maintain compliance with federal quality requirements. 

CMS also is responsible for monitoring the adequacy of state survey activities. 

Every nursing home receiving Medicare or Medicaid payment 

must undergo a standard survey not less than once every 15 

months, and the statewide average interval for these surveys must 

not exceed 12 months. During a standard survey, separate teams 

of surveyors conduct a comprehensive assessment of federal quality-of-care and fire safety requirements. In contrast, complaint investigations generally focus on a specific allegation regarding resident care or safety. 

The quality-of-care component of a survey focuses on determining 

whether (1) the care and services provided meet the assessed needs 

of the residents and (2) the home is providing adequate quality 

care, including preventing avoidable pressure sores, weight loss, 

and accidents. Nursing homes that participate in Medicare and 

Medicaid are required to periodically assess residents’ care needs 

in 17 areas, such as mood and behavior, physical functioning, and 

skin conditions, in order to develop an appropriate plan of care. 

Such resident-assessment data are known as the minimum data 

set (MDS). To assess the care provided by SNF and nursing facilities, surveyors select a sample of residents and (1) review data derived from the residents’ MDS assessments and medical records; (2) 

interview nursing home staff, residents, and family members; and 

(3) observe care provided to residents during the course of the survey. CMS establishes specific investigative protocols for state survey teams—generally consisting of RNs, social workers, dieticians, 

and other specialists—to use in conducting surveys. These procedural instructions are intended to make the on-site surveys thorough and consistent across states. 

Complaint investigations provide an opportunity for state surveyors to intervene promptly if problems arise between standard 

surveys. Complaints may be filed against a home by a resident, the 

resident’s family, or a nursing home employee either verbally, via 

a complaint hotline, or in writing. Surveyors generally follow state 


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procedures when investigating complaints but must comply with 

certain federal guidelines and time frames. In cases involving resident abuse, such as pushing, slapping, beating, or otherwise assaulting a resident by individuals to whom their care has been entrusted, state survey agencies may notify state or local law enforcement agencies that can initiate criminal investigations. States 

must maintain a registry of qualified nurse aides, the primary 

caregivers in nursing homes, that includes any findings that an 

aide has been responsible for abuse, neglect, or theft of a resident’s 

property. The inclusion of such a finding constitutes a ban on nursing home employment. 

Proposed Law 

The Secretary would be required to develop a standardized complaint form for SNF and nursing facility residents or their representatives to use in filing complaints on SNFs and nursing facilities to state survey and certification agencies and state LTC ombudsman programs. States would be required to make the new 

standardized complaint form available on request to SNF residents, 

people acting on behalf of residents, and employees or representatives of SNF and nursing facility employees. 

States also would be required to establish a complaint resolution 

process that ensures that SNF and nursing facility residents, their 

representatives, or employees are not denied access to residents or 

retaliated against for complaining, in good faith, about quality of 

care or other issues in a facility, regardless of whether residents, 

their representatives or employees used the standardized form or 

some other method to submit their complaint. The state complaint 

resolution procedures would be required to include (a) procedures 

to ensure accurate tracking of complaints, (b) procedures to determine the likely severity of the complaint and procedures to investigate complaints, (c) deadlines for responding to complaints and 

procedures that would enable a complainant to track the complaint 

and investigation, and (d) procedures to ensure that the identity of 

complainants would be kept confidential. 

The complaint resolution process would be required to include 

prohibitions against retaliation to ensure that SNF and nursing facility employees would not be penalized, discriminated, or retaliated against because they or anyone they requested to act on their 

behalf, in good faith, complained about the quality of care, services 

provided, or other issues related to quality of care or service in a 

nursing facility. This retaliatory prohibition applies regardless 

whether employees used the new standard or some other complaint 

method. In addition, retaliatory actions would not affect any aspect 

of complainants’ employment, including discharge, promotion, compensation, terms, conditions, or employment privileges, or termination of a contract for services. SNFs would not be permitted to 

file complaints or reports with state professional disciplinary agencies against current or former employees because they (or their 

agents), acting in good faith, submitted complaints about quality of 

care or services in their employers’ facility. 

SNF and nursing facility employees who believed they were penalized, discriminated, or retaliated against, or lost service contracts because they submitted a quality-of-care complaint against a 

SNF, would be able to seek remedy in an appropriate U.S. district 


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court. U.S. district courts would have jurisdiction to grant complete 

relief, regardless of citizenship or amount in question, but not limited to injunction, such as reinstatement, compensatory damages 

(reimbursement of lost wages, compensation, and benefits), costs of 

litigation (including attorney’s and expert witnesses’ fees), exemplary damages, and other relief deemed proper by the court. 

SNF and nursing facility employees’ rights under this provision 

would not be diminished by contract or other agreement and would 

not diminish greater protection through other federal or state laws, 

contracts, or agreements. Nothing in this provision would prevent 

a resident, an agent acting on their behalf, or an employee from 

submitting a complaint in any manner and not necessarily by using 

the standardized complaint form. SNFs and nursing facilities 

would be required to conspicuously post in an appropriate location 

a sign as specified by the Secretary, that identifies employees’ 

rights to bring complaints against the facility. Individuals would be 

considered to be acting in ‘‘good faith’’ when submitting complaints 

if they believe (1) their complaint is true, and (2) a violation has 

or may have occurred related to Medicare provisions of the Social 

Security Act. These amendments would apply one year after the effective date of this provision. 

Reason for Change 

Currently, there is inadequate documentation by the Federal 

government and by states of the number and type of complaints 

that residents and families file, the processes used to examine 

these complaints, and how and if they are resolved. Section 1415 

is designed to address these flaws by requiring states to establish 

more standardized, uniform processes and procedures for handling 

and addressing complaints, and in so doing, to improve resident 

care. This Section also puts in place protections for nursing home 

employees who could—but who may in some instances today decide 

not to bring a serious quality or safety issue to the attention of supervisors or owners—for fear of facing discrimination, intimidation 

or threat of termination. 

Sec. 1416. Ensuring Staffing Accountability 

Current Law 

There are no comparable provisions in current law for SNF and 

nursing facilities to report staff levels that are derived from payroll 

data in a uniform format. 

Proposed Law 

Within two years after enactment SNFs and nursing facilities 

would be required to electronically submit to the Secretary direct 

care staffing information, including agency and contract staff. In 

developing specifications and direct care staffing data requirements, the Secretary would consult with state long-term care ombudsman programs, consumer advocacy groups, provider stakeholder groups, employees and their representatives, and other parties deemed appropriate by the Secretary. The direct care staffing 

specifications would be based on payroll and other verifiable data 

provided by SNFs and nursing facilities to the Secretary in a uniform format, and reporting on contract staff would be separate 


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from information on employees. Specifications would include (1) 

work categories of certified employees, including registered nurses, 

licensed practical nurses, licensed vocational nurses, certified nursing assistants, therapists, or other medical personnel; (2) resident 

census data and information on resident case mix; (3) an established reporting schedule; and (4) employee tenure and turnover, as 

well as hours of care provided by each certified employee category, 

per resident per day. 

Reason for Change 

Congress and the States have long debated the merits of instituting minimum staffing levels for nursing homes in order to provide a level of consistent care that cannot otherwise be maintained. 

However, such discussions have frequently been hampered by a 

lack of sound data on actual staffing levels in facilities across the 

country. By requiring CMS to develop an electronic system that facilities would use to report staffing data extracted from their payroll systems several times a year—and that is categorized to distinguish staff providing direct care from other types of work—Section 

1416 will make it possible to more precisely quantify and analyze 

what level of staffing correlates to high-quality services. The information from Section 1414 above on what facilities spend on staffing, as compared to other types of costs, will further inform policymakers and facilities about the costs associated with providing optimal staffing in different types of facilities with varying case mix. 

Part 2—Targeting Enforcement 

Sec. 1421. Civil Money Penalties 

Current Law 

Under Medicaid law, states have authority either by regulation 

or law to impose money penalties, deny payments, appoint temporary management to bring facilities into compliance, and close facilities if nursing facilities fail to meet state plan requirements or 

have deficiencies that jeopardize residents’ health or safety. State 

expenses for enforcement may be funded under the proper and efficient state plan administration provision of the Medicaid Statute 

(Title XIX of the Social Security Act). States also have authority to 

establish reward programs for nursing facilities that deliver the 

highest quality care to medical assistance patients and fund these 

incentive rewards programs under Medicaid’s proper and efficient 

administration provisions. 

Proposed Law 

For SNFs and nursing facilities, the Secretary—and for nursing 

facilities, states—would have the authority to impose per instance 

or per day civil money penalties (CMPs) for each instance or each 

day of noncompliance (as determined appropriate by the Secretary). 

The amounts of the per instance CMPs would be the following: (1) 

in the case where a deficiency is the direct proximate cause of a 

resident’s death, the penalty would not exceed $100,000; (2) in each 

case where a facility is cited for a resident’s actual harm or immediate jeopardy, an amount equal to or greater than $3,050, but not 

more than $25,000; and (3) in each case of any other deficiency, 

penalty amounts per deficiency would range from not less than 


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$250 to not more than $3,050. The amount of the applicable per 

day CMPs would be the following: (1) an amount equal to or greater than $3,050 up to $25,000 where facilities were cited for deficiencies that caused actual harm or immediate jeopardy to residents; and (2) an amount between $250 and $3,050 for each case 

of any other deficiency. 

Subject to limitations where reductions are prohibited if SNFs 

and nursing facilities self-report and promptly correct deficiencies 

within 10 calendar days after imposition of a CMP, the Secretary— 

or the state if applicable—may reduce the amount of the imposed 

CMP by up to 50%. The Secretary—or the state if applicable— 

would be prohibited from reducing CMPs for SNFs where the Secretary had previously reduced a penalty for that facility in the last 

year, with respect to a repeat deficiency. The Secretary—or the 

state if applicable—would be prohibited from reducing CMPs for 

other deficiencies: (1) where the deficiency was found to result in 

a pattern of harm or widespread harm that immediately jeopardizes residents’ safety or health; or (2) where a deficiency resulted 

in the death of a patient. 

Aggregate CMP reductions would not be permitted to exceed 35% 

on the basis of self-reporting, on the basis of a waiver or an appeal, 

or on the basis of both a waiver and an appeal. In collecting CMPs, 

the Secretary—or the state if applicable—must provide for the facility to participate in an independent informal dispute resolution 

process that generates a written record prior to penalty collection, 

and cannot impose additional per-day penalties during the pendency of the dispute resolution process; may provide an escrow account for fees to be held beginning on the earlier of 90 days after 

fees are imposed or the date the informal resolution process was 

completed; may provide that penalty fees are held in escrow accounts until appeals are resolved. 

In situations where appeals are resolved in favor of facilities, the 

Secretary—or the state if applicable—may provide, if escrow accounts are established, that penalty fees would be returned to facilities with interest; and may provide, when facility appeals are 

unsuccessful, that some portion of penalty amounts are used to 

support state LTC ombudsman activities and to protect residents, 

including residents who reside in facilities that voluntarily or involuntarily close or are decertified. 

The activities funded with CMPs may include using the penalty 

funds to offset costs of relocating residents to home- and community-based settings and other facilities, as well as projects to support resident and family councils and other consumer quality of 

care involvement (including joint training of staff and surveyors, 

technical assistance for facilities under quality assurance programs, the appointment of temporary management, and other activities approved by the Secretary). 

Provisions of the Social Security Act, Section 1128A (except subsections (a) and (b)) and provisions that require a hearing prior to 

imposing CMPs, also would apply to the CMPs described here. 

The CMP amendments would apply one year after the effective 

date of the provision. 


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Reason for Change 

Multiple reports issued by the Government Accountability Office 

have suggested that the penalties originally legislated as part of 

the 1987 Nursing Home Reform Act, and which took effect in 1994, 

may not be having a significant deterrent effect for several reasons. 

For example, a GAO report issued in December 2005, ‘‘Nursing 

Homes: Despite Increased Oversight, Challenges Remain in Ensuring High-Quality Care and Resident Safety,’’ noted that ‘‘state surveyors continue to understate serious deficiencies, as shown by the 

larger number of serious deficiencies identified in federal comparative surveys than in state surveys of the same homes.’’ 

Earlier GAO work found that the impact of monetary penalties 

was often weak due to large backlogs of appeals filed by providers. 

Those backlogs in turn had the effect of encouraging the federal 

government ‘‘to settle appealed cases, often reducing the size of the 

fine, and delay the imposition of the fine even if it is ultimately 

upheld after appeal. As a result,’’ the agency’s 1999 report concluded, ‘‘it is not surprising that some nursing home owners routinely appeal imposed penalties.’’ 

More recently, the HHS Office of Inspector General testified before the House Energy and Commerce Oversight and Investigations 

Subcommittee in May 2008 that CMPs ‘‘are an important element 

of an effective enforcement strategy, especially in cases when nursing homes are out of compliance for designated time periods or 

have deficiencies that put residents in immediate jeopardy,’’ but 

also noted that ‘‘this tool has not been used to its full potential. For 

example, in an April 2005 report, OIG found that although $81.7 

million in CMPs were imposed during 2000 and 2001, CMS had 

collected only $34.6 million (42 percent) by the end of 2002. We 

found that CMS did not utilize the full dollar range allowed for 

CMPs and that impositions were frequently at the lower end of the 

allowed ranges.’’ 

In addition, a 2009 analysis by the Center for Medicare Advocacy 

argued that fines for very serious deficiencies are too low to affect 

provider behavior. The Center’s study of all federal administrative 

decisions issued in 2007 for nursing home enforcement cases found 

that the fines levied were low in relation to the harm suffered: For 

example, in one case, a fine of only $4,050 was assigned for the 

strangulation death of a resident on a bedrail. In response, the 

Center notes, some states have enacted laws with far higher penalties: California, for example, has a penalty of up to $100,000 for 

causing the death of a resident. 

The provisions in this Section are designed to update and more 

effectively target CMP authority by focusing higher penalties only 

on serious quality of care and safety deficiencies that cause harm 

to residents, that put their health in immediate jeopardy, or that 

are life-threatening. Other modifications would allow facilities that 

self-report and promptly correct deficiencies to receive a reduction 

in their CMP of 50%. Finally, the Section aims to make collection 

of CMPs much more timely, by allowing the Federal government 

and States to collect fines following an initial independent dispute 

resolution process (IIDR) and to escrow these funds, pending the 

results of any further appeals. 

To implement IIDR, the Secretary shall promulgate regulations 

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tive Procedures Act. Such regulations shall allow IIDR to be conducted by an independent state agency (including an umbrella 

agency, such as the Health and Human Services Commission), a 

Quality Improvement Organization, or the state survey agency, so 

long as the participants in IIDR are not involved in the initial decision to cite the deficiency(ies) and impose the remedy(ies). Whoever 

is authorized to conduct IIDR must not have any conflicts of interest. The regulations may address the type of IIDR available to 

SNFs and NFs (desk review or in-person meeting) and the circumstances of each; may determine whether and when attorneys 

may represent the parties before IIDR; and may limit the duration 

of in-person meetings, depending on the scope and severity of deficiencies and other factors as determined by the Secretary. 

As under current informal dispute resolution (IDR) processes, facilities may challenge only the factual basis of the deficiency. They 

may not challenge issues related to surveyors’ compliance with the 

survey process or the scope and severity of the deficiencies. Also as 

under current IDR processes, states and the Secretary retain the 

right to reject the IIDR recommendations and to cite deficiencies 

and to impose remedies, as the states and the Secretary determine 

appropriate. Finally, as authorized by regulations governing informal review procedures of the Office of Surface Mining, 30 C.F.R. 

723,18(b)(2), any person shall have the right to attend and participate in the conference. 

Sec. 1422. National Independent Monitor Pilot Program 

Current Law 

No provision. 

Proposed Law 

Within one year of the effective date of this provision, the Secretary in consultation with CMG would establish a pilot program 

to develop, test, and implement use of an independent monitor to 

oversee interstate and large intrastate SNF and nursing facility 

chains. The Secretary would select SNF and nursing facility chains 

to participate in a pilot independent monitor program from among 

those chains that apply to participate. The pilot independent monitor program would be conducted over two years. The pilot independent monitor program would commence within one year of the 

effective date of this provision. 

The Secretary shall evaluate a chain to participate in the pilot 

program based on criteria selected by the Secretary, including 

chains with one or more facilities in CMS’ Special Focus Facility 

program (or a successor program) or one or more facilities with a 

record of repeated serious safety and quality of care deficiencies. 

An independent monitor that enters into a contract to participate 

in the pilot program would have the following responsibilities: conduct periodic reviews and root-cause deficiency analyses of chains 

to assess their compliance with state and federal laws and regulations; sustained oversight of chains (whether public or private) to 

involve chain owners and principal partners in facilitating compliance with state and federal laws and regulations applicable to facilities; analyze management structure, expenditure distribution, 

and nurse staff levels of facilities of the chain compared to resident 


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census, staff turnover rates, and tenure; report findings and recommendations with respect to reviews, analyses, and oversight to 

the chain and facilities in the chain, to the Secretary and to relevant states; and publish the results of these reviews, analyses, 

and oversight. 

Within 10 days of a chain receiving a finding (of deficiency) from 

the independent monitor, the chain would be required submit a report to the independent monitor (1) that outlines corrective actions 

the chain will take to address the independent monitor’s recommendations or (2) indicates that the chain will not implement 

the recommendations and why it will not do so. 

Within 10 days after receiving the chain’s response-report, the 

independent monitor would be required to submit a report containing the monitor’s final recommendations to: the chain, the 

chain’s facilities, the Secretary, and the state or states where the 

facilities in question operate. 

The chain would be responsible for a portion of the costs associated with the appointment of the pilot program independent monitors. The chain would pay their portion of the costs to the Secretary. The Secretary would determine the amount and procedures 

for collecting the independent pilot program costs. The Secretary 

would have authority to waive provisions of the Medicare and Medicaid statutes (Titles XVIII and XIX of the Social Security Act) if 

necessary to implement the independent monitor pilot program. 

Appropriations necessary to carry out the independent monitor 

pilot program would be authorized. 

The OIG would evaluate the independent monitor program within six months of completion of the program. The OIG would submit 

a report to Congress on the independent monitor program that included recommendations for legislative and administrative action. 

Reason for Change 

Promising work pioneered by the HHS OIG in the context of 

agreements with nursing home chains that have chronic, severe 

quality and safety problems, and which agree to a system of close 

monitoring by independent contractors with expertise to undertake 

‘‘root cause analyses’’ provide a model for CMS, as the principal 

regulatory agency, to develop a similar mechanism of oversight. 

Sec. 1423. Notification of Facility Closure 

Current Law 

Medicare and Medicaid law identifies patients’ rights and SNF 

and nursing home requirements in ensuring residents are aware of 

their rights. Residents have specific discharge and transfer rights, 

which include advance notification in cases where facilities close. 

Proposed Law 

SNF and nursing facility administrators would be required to 

issue written notification of intent to close to the Secretary, LTC 

Ombudsman programs in the state where facilities are located, facility residents, and facility residents’ legal representatives or other 

responsible parties. SNF and nursing facility administrators would 

need to provide 60 days’ notice of their pending closure or, if closed 

by the Secretary, within the time frame specified by the Secretary. 


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SNF and nursing facility administrators would be required not to 

admit new patients on or after written notice of planned closure; 

and to include in the closure notices the plans to transfer and adequately relocate facility residents by a specified date prior to closure that has been approved by the state, and which also would include assurances that residents will be transferred to the most appropriate facilities or settings in terms of quality, services, and location as determined by residents’ needs, best interests, and preferences. 

The state would ensure that before SNFs and nursing facilities 

close, all residents would be relocated to alternative settings, such 

as home- and community-based settings or other facilities, taking 

into consideration the needs and best interests of each resident. 

The Secretary may determine the appropriate payment and whether and for how long to continue payments to closing facilities during the period after the notification of impending closure is submitted and the date when residents are transferred to other facilities or alternative settings. 

Reason for Change 

When nursing homes close, residents and their families are left 

to quickly find an alternative setting for care, a task that can be 

challenging under a tight timeframe and if there is limited availability or variable quality in neighboring institutions. This provision ensures that residents and their families have proper advance 

notice of a closure, and that residents are relocated prior to closure. 

The Committee recognizes the importance of making sure that the 

needs and best interests of each resident are taken into account 

during the relocation process. 

Effective Date 

One year after the date of enactment of this Act. 

PART 3—IMPROVING STAFF TRAINING

Sec. 1431. Dementia and Abuse Prevention Training 

Current Law 

Under Medicare law, the Secretary establishes SNF requirements for nurse aide training and competency evaluation programs 

and requirements for states to follow in evaluating and reevaluating these training programs. Similarly under Medicaid law, the 

Secretary establishes nursing facility requirements for nurse aide 

training and competency evaluation programs and requirements for 

states to follow in evaluating and re-evaluating these training programs. 

Proposed Law 

This provision would add dementia and abuse prevention training to staff training requirements for SNF and nursing facilities. 

The Secretary would revise initial nurse aide training, competency, 

and evaluation program requirements to include dementia management and patient abuse prevention training. If determined to be 

appropriate, the Secretary also may include dementia management 

training and patient abuse prevention in ongoing nurse aide training, competency, and evaluation program requirements. 


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Reason for Change 

It has been reported that the majority of older nursing home 

residents have some form of psychiatric illness, with dementia affecting 1 out of 5 residents. Timely recognition and intervention are 

key to the optimal care of older adults with dementia, which may 

be attributable to a number of causes. Additionally, the frail elderly 

are some of the most vulnerable members of our society particularly when patients have co-morbid conditions that will prohibit 

them from articulating maltreatment by others. This provision will 

direct the Secretary to include dementia and abuse prevention 

training of nursing home staff. 

Effective Date 

One year after the date of enactment of this Act. 

Sec. 1432. Study and Report on Training Required for Certified 

Nurse Aides and Supervisory Staff 

Current Law 

Medicare and Medicaid law have provisions that govern training 

for nurse aides for both SNF and nursing facilities. These laws require the Secretary to establish requirements for nurse aide training and competency evaluation programs as well as parameters for 

states to use in monitoring these programs. 

Proposed Law 

The Secretary would be required to conduct a study within two 

years of the effective date of this provision on the content of certified nurse aide and supervisory staff training in SNFs and nursing facilities. The report shall include the following: whether the 75 

hours of initial nurse aide training required should be increased 

and if so, what the required number of recommended initial training hours should be (including dementia related training); and 

whether the 12 hours per year of ongoing nurse aide training 

should be increased and what content changes are recommended. 

In assessing the number of hours of initial nurse aide training required, the Secretary would consult with states that already have 

increased the number of hours of initial training above 75 hours. 

Within two years from the effective date of this provision, the Secretary would be required to submit a report to Congress on the certified nurse aide and supervisory training requirements. The report 

would include recommendations for legislative and administrative 

action. 

Reason for Change 

Certified Nurse Aides and supervisory staff are some of the primary caregivers in a skilled nursing facility. It is important to 

know whether existing training requirements are sufficient to ensure appropriate care for the patient population in these facilities. 


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Subtitle C—Quality Measurements 

Sec. 1441. Establishment of National Priorities for Quality Improvement 

Current Law 

There are no provisions in current law that require the development of national priorities for performance improvement (directed 

either at the Secretary of Health and Human Services or the Agency for Healthcare Research and Quality). 

However, Section 1890 of the Social Security Act requires the 

Secretary to identify and have in effect a contract with a consensus-based entity, such as the National Quality Forum, to perform the following duties: (1) synthesize evidence and convene 

stakeholders to make recommendations, with respect to activities 

conducted under this Act, on an integrated national strategy and 

priorities for health care performance measurement in all applicable settings; (2) provide for the endorsement of standardized health 

care performance measures; (3) establish and implement a process 

to ensure that endorsed measures are updated or retired based on 

new evidence; (4) promote the development of electronic health 

records that facilitate the collection of performance measurement 

data; and (5) report annually to Congress. 

The National Quality Forum has been awarded this contract and 

recently released its first report, Improving Healthcare Performance: Setting Priorities and Enhancing Measurement Capacity, in 

fulfillment of this statutory requirement. 

Proposed Law 

This provision would amend Title XI of the Social Security Act, 

as amended by section 1401(a), by adding a new Part E- Quality 

Improvement- Establishment of National Priorities for Performance 

Improvement. Specifically, it would add a new section 1191 to establish national priorities for performance improvement. 

This Section would require the Secretary to establish and periodically update (not less frequently than triennially) national priorities for performance improvement. Specifically, it would require 

the Secretary, when establishing and updating national priorities, 

to solicit and consider recommendations from multiple outside 

stakeholders. 

This provision would require, with respect to the national priorities for performance improvement, the Secretary to give priority to 

areas in the delivery of health care services that (1) address a large 

burden of disease, as specified; (2) have the greatest potential to 

decrease morbidity and mortality in the United States, as specified; 

(3) have the greatest potential for improving the performance, affordability, and patient-centeredness of health care; (4) address 

health disparities across groups and areas; and (5) have the potential for rapid improvement due to existing evidence or standards of 

care. 

For the purposes of this Section: (1) consensus-based entity 

would mean an entity with a contract with the Secretary under 

Section 1890 of the Social Security Act; and (2) quality measure 

would mean a national consensus standard for measuring the performance and improvement of population health, or of institutional 


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providers of services, physicians, and other health care practitioners in the delivery of health care services. 

This provision would require the Secretary to provide for the 

transfer, from the Federal Hospital Insurance Trust Fund and the 

Federal Supplementary Medical Insurance Trust Fund, of $2 million for each of the fiscal years 2010 through 2014. It would also 

authorize the appropriation of $2 million for each of the fiscal years 

2010 through 2014 from any funds in the Treasury not already appropriated. 

Reason for Change 

Currently, there is no coordinated effort at the national level for 

prioritizing efforts to improve performance of the care delivery system or to measure those efforts. Section 1890 of the Social Security 

Act establishes a process to prioritize performance improvement 

and measurement within the Medicare program. This provision 

would expand and build on those efforts by establishing priorities 

for health performance improvement at the national level. It is the 

Committee’s intent that the priorities established by the Secretary 

will have wide applicability and help direct health improvement activities across the nation’s health care system. 

Effective Date 

Date of enactment. 

Sec. 1442. Development of New Quality Measures; GAO Evaluation 

of Data Collection Process for Quality Measurement 

Current Law 

Section 1110(a)(1) of Title XI of the Social Security Act provides 

general authority to appropriate such sums as may be necessary 

for making grants to States and public and other organizations and 

agencies for research that will help improve the administration and 

effectiveness of the programs carried out under the Social Security 

Act, among other things. 

The Agency for Healthcare Research and Quality (AHRQ) has 

significant existing statutory authorities with respect to the development of quality measures. Specifically, the Agency’s mission, 

among other things, is to promote health care quality improvement 

by conducting and supporting research that develops and presents 

scientific evidence regarding all aspects of health care, including 

methods for measuring quality and strategies for improving quality 

(Sec. 901 of the PHSA). 

Section 912 of the PHSA requires AHRQ to provide support for 

public and private efforts to improve health care quality, and that 

the role of the Agency shall specifically include the ongoing development, testing, and dissemination of quality measures, including 

Measures of health and functional outcomes and the compilation 

and dissemination of health care quality measures developed in the 

private and public sector. To comply with this last requirement, the 

Agency has established the National Quality Measures Clearinghouse, an online resource that compiles and catalogues quality 

measures. 

Finally, Section 917 of the PHSA requires AHRQ to coordinate 

all research, evaluations, and demonstrations related to health 


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services research, quality measurement and quality improvement 

activities undertaken and supported by the Federal Government. 

Proposed Law 

This section would amend Part E of Title XI of the Social Security Act, as added by section 1441, by adding two new sections: Section 1192: development of new quality measures and Section 1193: 

GAO evaluation of data collection process for quality measurement. 

Section 1192 

This Section would require the Secretary to enter into agreements with qualified entities to develop quality measures for the 

delivery of health care services in the United States. The Secretary 

would be authorized to carry out these agreements by contract, 

grant, or otherwise. In addition, this Section would require the Secretary to seek public input and take into consideration recommendations of the consensus-based entity with a contract with 

the Secretary under Section 1890(a) of the Social Security Act. The 

Secretary would be required, as specified, to determine areas in 

which quality measures for assessing health care services in the 

United States are needed. 

Quality measures developed under these agreements would be 

required to be designed (1) to assess outcomes and functional status of patients; (2) to assess the continuity and coordination of care 

and care transitions, as specified; (3) to assess patient experience 

and patient engagement; (4) to assess the safety, effectiveness, and 

timeliness of care; (5) to assess health disparities as specified; (6) 

to assess the efficiency and resource use in the provision of care; 

(7) to the extent feasible, to be collected as part of health information technologies supporting better delivery of health care services; 

(8) to be available free of charge to users for the use of such measures; and (9) to assess delivery of health care service to individuals 

regardless of age. 

This provision would also require the Secretary to make proposed 

quality measures available to the public; would authorize the Secretary to use amounts made available under this Section to fund 

the testing of proposed quality measures by qualified entities, as 

specified; and would authorize the Secretary to use amounts made 

available under this Section to fund the updating, by consensusbased entities, of quality measures that have been previously endorsed by such an entity as new evidence is developed (consistent 

with Section 1890(b)(3) of the Social Security Act). 

Grants would be authorized to be made under this Section only 

if an application for the grant would be submitted to the Secretary 

as specified and the Secretary would be required to ensure, before 

entering into agreements with qualified entities, that the entity is 

a public, nonprofit or academic institution with technical expertise 

in the area of health quality measurement. 

For purposes of carrying out this section, the Secretary would be 

required to provide for the transfer, from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, of $25 million each year from fiscal years 2010 

through 2014. In addition, this section would authorize the appropriation of $25 million for each of the fiscal years 2010 through 

2014 from any funds in the Treasury not otherwise appropriated. 


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Section 1193 

This Section would require the Comptroller General of the 

United States to conduct periodic evaluations of the implementation of the data collection processes for quality measures used by 

the Secretary. 

It would require the Comptroller General to determine: (1) 

whether the system for the collection of data for quality measures 

provides for validation of data as relevant and scientifically credible; (2) whether data collection efforts under the system use the 

most efficient and cost-effective means in a manner that minimizes 

administrative burden on persons required to collect data and that 

adequately protects the privacy of patients’ personal health information and provides data security; (3) whether standards under 

the system provide for an opportunity for physicians and other clinicians and institutional providers of services to review and correct 

findings; and (4) the extent to which quality measures are consistent with requirements for quality measures developed under 

this Act, as specified, or result in direct or indirect costs to users 

of such measures. 

This section would require the Comptroller General to report to 

Congress and to the Secretary on the findings and conclusions of 

the results of each such evaluation. 

Reason for Change 

Robust, accurate, and appropriate measures of health care quality are a critical component of improving the delivery system and 

health outcomes. It is difficult to develop and implement strategies 

to improve patient health without such measures, but in many 

cases measures do not exist or have yet to be fully developed. In 

other cases, measures do exist but need to be updated or modernized. Putting additional resources into quality measure development will speed the development of new measures and address 

shortcomings of existing measures. The requirement that the 

Comptroller General monitor the development and application of 

health quality measures will help ensure that such measures are 

being used properly. 

Effective Date 

Date of enactment. 

Sec. 1443. Multi-Stakeholder Pre-Rulemaking Input Into Selection 

of Quality Measures 

Current Law 

No provision. 

Proposed Law 

This section would amend section 1808 of the Social Security Act 

by adding a new subsection (d): Multi-Stakeholder Pre-Rulemaking 

Input into Selection of Quality Measures. 

The new subsection would require the Secretary, not later than 

December 1 before each year (beginning with 2011), to publish a 

list of measures being considered for selection for quality measurement by the Secretary in rulemaking with respect to payment systems under Title XVIII of the Social Security Act, as specified. This 


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section would also require the consensus-based entity that has entered into a contract under section 1890 of the Social Security Act 

to convene multi-stakeholder groups to provide recommendations 

on the selection of individual or composite quality measures, for 

use in public reporting of performance information or in public 

health care programs. The section would also require the consensus-based entity, not later than February 1 of each year (beginning with 2011), to transmit to the Secretary the recommendations 

of these multi-stakeholder groups, as specified. 

This section would require the consensus-based entity, in convening multi-stakeholder groups, to provide for an open and transparent process for the activities conducted pursuant to such convening. This process would have to ensure that the selection of representatives of multi-stakeholder groups includes provision for public nominations for, and the opportunity for public comment on, 

such selection. This section would require the respective proposed 

rule to contain a summary of the recommendations made by the 

multi-stakeholder groups under this section, as well as other comments received regarding the proposed measures, and the extent to 

which such proposed rule follows such recommendations and the 

rationale for not following such recommendations. 

The provision would define the term ‘‘multi-stakeholder groups’’ 

to mean, with respect to a quality measure, a voluntary collaborative of organizations representing persons interested in or affected by the use of such quality measure, such as the following: 

(1) hospitals and other institutional providers; (2) physicians; (3) 

health care quality alliances; (4) nurses and other health care practitioners; (5) health plans; (6) patient advocates and consumer 

groups; (7) employers; (8) public and private purchasers of health 

care items and services; (9) labor organizations; (10) relevant departments or agencies of the United States; (11) biopharmaceutical 

companies and manufacturers of medical devices; (12) licensing, 

credentialing, and accrediting bodies. 

For purposes of carrying out this section, the Secretary would be 

required to provide for the transfer, from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund under, of $1 million each year from fiscal years 

2010 through 2014. In addition, this section would authorize the 

appropriation of $1 million for each of the fiscal years 2010 through 

2014 from any funds in the Treasury not otherwise appropriated. 

Reason for Change 

The Medicare program is increasingly making use of health care 

quality measures in administration of its payment systems. As the 

program continues to evolve, the Committee expects this trend will 

continue and that a larger portion of provider payments will eventually become linked to performance on such measures. For instance, the Accountable Care Organization pilot program in section 

1301 of this legislation will make extensive use of quality measures. 

Given the greater reliance on quality measures within Medicare, 

the process for selecting such measures should be an open and collaborative one. This section provides the Medicare program with a 

process for engaging with a wide array of stakeholders and interested parties, including patient advocacy organizations, employers, 


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private purchasers, and providers. Such engagement will help ensure that Medicare selects the most appropriate measures for each 

of its payment systems and promote consistent use of measures 

among other stakeholders. 

Effective Date 

Date of enactment. 

Sec. 1444. Application of Quality Measures 

Current Law 

Section 1886(b)(3)(B)(vii) of the Social Security Act requires hospitals to submit specified quality data to the Secretary in order to 

receive a full annual payment update. Section 1886(b)(3)(B)(viii)(V) 

provides that beginning with payments in fiscal year 2008, the Secretary shall add additional quality measures that reflect consensus 

among affected parties and, to the extent feasible and practicable, 

shall include measures set forth by one or more national consensus 

building entities. 

Section 1833(t)(17)(A)(i) of the Social Security Act requires hospitals to submit data on outpatient quality measures to the Secretary in order to receive a full outpatient department (OPD) fee 

schedule increase. In addition, section 1833(t)(17)(C)(i) requires the 

Secretary to 302 develop measures that reflect consensus among affected parties, and to the extent feasible and practicable, to include 

measures set forth by one or more national consensus building entities. 

Section 1848(k) of the Social Security Act requires the Secretary 

to implement a system for the reporting by eligible professionals of 

data on specified quality measures. Section 1848(k)(2)(C)(i) requires 

that for 2010 and subsequent years, the quality measures specified 

under this section will be such measures selected by the Secretary 

from measures that have been endorsed by the consensus-based entity with a contract under section 1890(a) of the Social Security 

Act. Section 1848(k)(2)(C)(ii) provides an exception in the case of a 

specified area or medical topic for which feasible and practical 

measures have not been endorsed, stipulating that such measures 

may be used as long as due consideration has been given to measures that have been endorsed or adopted by a consensus organization. 

Section 1881(h)(1) of the Social Security Act requires renal dialysis facilities to meet (or exceed) a total performance score, based on 

quality measures as specified, in order to receive full payment for 

services furnished on or after January 1, 2012. In addition, section 

1881(h)(2)(B) requires the Secretary to specify measures that have 

been endorsed by the consensus-based entity with a contract under 

section 1890(a), and authorizes the Secretary, where endorsed 

measures are not available, to use such measures provided that 

due consideration has been given to measures that have been endorsed or adopted by a consensus organization. 

Section 1890 of the Social Security Act requires the Secretary to 

identify and have in effect a contract with a consensus-based entity, such as the National Quality Forum, to perform certain duties. 

Included in these, at section 1890(b)(2) of the Social Security Act, 

is a requirement that the consensus-based entity provide for the 


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endorsement of standardized health care performance measures, as 

specified. 

Proposed Law 

Generally, this section places requirements on the Secretary 

when selecting quality measures for use in existing quality programs for inpatient, outpatient, physician and renal dialysis services. These requirements relate to the endorsement of quality 

measures. 

Specifically, this section would amend section 1886(b)(3)(B) of the 

Social Security Act to require the Secretary to select measures for 

purposes of reporting data for inpatient hospital services furnished 

during fiscal year 2012 and each subsequent year, that have been 

endorsed by the consensus-based entity with a contract with the 

Secretary under section 1890 of the Social Security Act. If feasible 

and practical measures were not available, the Secretary would be 

authorized to select a non-endorsed measure, providing the Secretary gives due consideration to endorsed or adopted measures. 

The Secretary would be required to submit non-endorsed measures 

to the entity for consideration for endorsement, and if the entity 

were to not endorse the measure, and the Secretary were to continue to use the measure, the Secretary would be required to include the rationale for its continued use in rulemaking. This section would also amend section 1833(t)(17) of the Social Security Act 

to require that the provisions added to section 1886 (above) would 

also apply to quality measures for covered outpatient department 

services. 

This section would also amend sections 1848(k)(2)(C)(ii) and 

1881(h)(2)(B)(ii) of the Social Security Act, to require the Secretary 

to submit non-endorsed measures for physicians’ services and renal 

dialysis services, respectively, to the consensus-based entity for 

consideration for endorsement. It would further require the Secretary, if the measure does not gain endorsement and if the Secretary continues to use the measure, to provide a rationale for continued use in rulemaking. 

This section would, by amending section 1890(b)(2) of the Social 

Security Act, require the consensus-based entity with a contract 

with the Secretary in section 1890 to explain the reasons underlying non-endorsement of a given measure, and to provide suggestions about changes to such measure that might make such a 

measure potentially endorsable. 

This section would apply to quality measures applied for payment years beginning with 2012 or fiscal year 2012, as the case 

may be. 

Reason for Change 

To the extent feasible, the Medicare program should use measures of health quality that have been endorsed by a consensusbased organization, such as the National Quality Forum. The use 

of endorsed measures will help ensure that Medicare is utilizing 

the most appropriate and robust measures, while also using measures that have widespread support among various health care 

stakeholders. However, the Committee recognizes it is critical that 

the Medicare program maintain its independence and retain the 

flexibility to use non-endorsed measures when it deems necessary. 


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Effective Date 

Date of enactment. 

Sec. 1445. Consensus-Based Entity Funding 

Current Law 

Section 1890 of the Social Security Act requires the Secretary to 

identify and have in effect a contract with a consensus-based entity, such as the National Quality Foram, to perform the following 

duties: (1) synthesize evidence and convene stakeholders to make 

recommendations, with respect to activities conducted under this 

Act, on an integrated national strategy and priorities for health 

care performance measurement in all applicable settings; (2) provide for the endorsement of standardized health care performance 

measures; (3) establish and implement a process to ensure that endorsed measures are updated or retired based on new evidence; (4) 

promote the development of electronic health records that facilitate 

the collection of performance measurement data; and (5) report annually to Congress. Section 1890(d) of the Social Security Act provides for $10 million 

to fund the activities of the consensus-based entity under contract 

in this section for each of fiscal years 2009 through 2012. 

Proposed Law 

This section would amend section 1890(d) of the Social Security Act to provide for $10 million only for fiscal year 2009, and $12 

million for each of the fiscal years 2010 through 2012. 

Reason for Change 

This provision is needed to provide funding available under 

CMS’s current contract with the National Quality Forum to cover 

additional expenses related to implementation of section 1441 of 

this legislation, regarding multi-stakeholder input on the selection 

of quality measures. 

Effective Date 

Date of enactment. 

Subtitle D—Physician Payments Sunshine Provision 

Sec. 1451. Reports on Financial Relationships Between Manufacturers and Distributors of Covered Drugs, Devices, Biologics, or 

Medical Supplies Under Medicare, Medicaid, or CHIP and Physicians and Other Health Care Entities and Between Physicians 

and Other Health Care Entities 

Current Law 

Under section 1128B(b) of the Social Security Act, referred to as 

the federal anti-kickback statute, it is a felony for a person to 

knowingly and willfully offer, pay, solicit, or receive anything of 

value (i.e., ‘‘remuneration’’) in return for a referral or to induce 

generation of business reimbursable under a federal health care 

program. The statute prohibits both the offer or payment of remuneration for patient referrals, as well as the offer or payment of 

anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or ordering of 


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any item or service that is reimbursable by a federal health care 

program. Persons found guilty of violating the anti-kickback statute may be subject to a fine of up to $25,000, imprisonment of up 

to five years, and exclusion from participation in federal health 

care programs for up to one year. However, a number of statutory 

and regulatory ‘‘safe harbors’’ to the anti-kickback statute protect 

various business arrangements from prosecution. Safe harbors include certain types of investment interests, personal services and 

management contracts, referral services, space rental or equipment 

rental arrangements, warranties, discounts, and employment arrangements. 

In 2003, OIG issued ‘‘Compliance Program Guidance for Pharmaceutical Manufacturers’’ (68 Federal Register 23731), which stated 

that pharmaceutical companies and their employees and agents 

often engage in a number of arrangements that offer benefits to 

physicians or others in a position to make or influence prohibited 

referrals under the anti-kickback statute. Examples of remunerative arrangements between pharmaceutical manufacturers and parties in a position to influence referrals that were cited by OIG included entertainment, recreation, travel, meals, or other benefits in 

association with information or marketing presentations, as well as 

gifts, gratuities, and other business courtesies. OIG indicated these 

arrangements potentially implicate the anti-kickback statute if any 

one purpose of the arrangement is to generate business for the 

pharmaceutical company. 

Under section 1877 of the Social Security Act, the federal prohibition on physician self-referrals, if a physician (or an immediate 

family member of a physician) has a ‘‘financial relationship’’ with 

an entity, the physician may not make a referral to the entity for 

the furnishing of designated health services (DHS) for which payment may be made under Medicare or Medicaid, and the entity 

may not present (or cause to be presented) a claim to the federal 

health care program or bill to any individual or entity for DHS furnished pursuant to a prohibited referral. ‘‘Financial relationship’’ is 

defined as either an ownership or investment interest or a compensation arrangement. An ownership or investment interest may 

be equity, debt, or other means; however, Section 1877(c) specifies 

that an ownership interest does not include certain investment securities which may be purchased on terms generally available to 

the public and meet additional requirements, or that are shares of 

certain regulated investment companies. A compensation arrangement means an arrangement involving remuneration between a 

physician or an immediate family member of such physician and an 

entity. Section 1877(f) requires an entity that provides covered 

services for which payment may be made under Medicare to report 

to the Secretary information on the entity’s ownership, investment, 

and compensation arrangements, including the covered items and 

services provided by the entity, and the names and unique physician identification numbers of all physicians who have an ownership or investment interest in, or a compensation arrangement 

with the entity, or whose immediate relatives have such an ownership or investment interest or compensation relationship with the 

entity. 

Multiple states and the District of Columbia have enacted legislation requiring pharmaceutical and other companies to disclose 


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gifts and payments made to physicians and other entities. These 

state laws generally require annual disclosures to the states of 

such gifts and payments. Certain categories of gifts and payments 

are exempted from reporting requirements under most of the state 

laws. For example, state laws may exempt product samples intended for free distribution to patients and gifts worth less than a 

certain amount. While companies may make a voluntary disclosure 

of these gifts and other payments, there are currently no similar 

federal reporting requirements. 

Proposed Law 

The bill would add a new Section 1128H of the Social Security 

Act to create certain reporting requirements applicable to manufacturers or distributors of a drug, device, biological, or medical supply 

for which payment may be made available under Medicare, Medicaid, or the State Children’s Health Insurance Program, as well as 

hospitals or other entities that bill Medicare. 

Under the section, beginning in 2011, a manufacturer or distributor that provides a payment or other transfer of value to a 

covered recipient (e.g., a physician, a pharmacist, a hospital, a 

medical school, or a group purchasing organization) or a recipient’s 

designee would be required to annually submit specified information to the Secretary regarding the recipients, any payments or 

other transfers of value, and information about a provided drug 

sample. Payments or transfers of value include, among other 

things, gifts, food, or entertainment, travel or trips, honoraria, research funding or grants, education or conference funding and consulting fees, profit distribution, stock or stock option grant, or any 

ownership or investment interest held by a physician in a manufacturer (subject to exclusion), but do not include payments or transfers of five dollars or less, a loan of a covered device for a shortterm trial period for evaluation purposes, items or services provided under a contractual warranty where the terms are specified 

in a purchase or lease agreement, items given to a patient who is 

not acting in a professional capacity, in-kind items for the provision 

of charity care, a dividend or other profit distribution from or ownership or investment interest in a publicly traded security and mutual fund, compensation paid by a manufacturer or distributor to 

an employee who works solely for a manufacturer or distributor, 

and any discount or cash rebate. The information submitted must 

include the aggregate amount of all payments or transfers of value 

from manufacturers to covered recipients, regardless of whether 

such payments or transfers were individually disclosed. If a manufacturer or distributor provides a payment to another entity or individual at the request of or designated on behalf of a covered recipient, the manufacturer or distributor must disclose the payment 

or transfer under the name of the covered recipient. 

Section 1128H would allow manufacturers and distributors to 

delay submission of their reports to the Secretary of payments and 

transfers of value made to covered recipients pursuant to certain 

services furnished as part of a product development agreement, or 

in connection with a clinical investigation of a new drug, device, biological, or medical supply. The information subject to delayed reporting would be considered confidential and would not be subject 

to disclosure under the Freedom of Information Actor other similar 


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federal, state, or local law until the date on which the information 

is reported. 

Manufacturers and distributors that fail to submit the required 

information in a timely manner in accordance with regulations 

would be subject to a civil monetary penalty of at least $1,000 but 

not more than $10,000 for each payment or transfer of value not 

reported, up to a maximum of $150,000 for each annual submission 

of information. Any manufacturer or distributor that knowingly 

fails to submit information would be subject to a civil monetary 

penalty of at least $10,000 but not more than $100,000 for each 

payment or transfer of value, and may not exceed $1 million or, if 

greater, 0.1 percent of the total annual revenue of the manufacturer or distributor. 

Each hospital or other health care entity, excluding a Medicare 

Advantage organization, that bills the Secretary under Medicare 

Part A or Part B would have to report on the ownership shares 

(other than shares generally available to the public or shares of 

certain regulated investment companies as described in Section 

1877(c) of the Social Security Act) of each physician and the physician’s immediate family members. Hospitals and other entities that 

fail to submit the required information in a timely manner in accordance with regulations would be subject to a civil monetary penalty of at least $1,000 but not more than $10,000 for each ownership or investment interest not reported. Any hospital or other entity that knowingly fails to submit information would be subject to 

a civil monetary penalty of at least $10,000, but not more than 

$100,000 for each ownership or investment interest not reported. 

All funds collected by the Secretary under section 1128H from the 

imposition of civil monetary penalties would be used to carry out 

the requirements of the section. 

The bill would require the Secretary to establish procedures no 

later than September 30, 2011 and on June 30 each year after to 

ensure public availability of the submitted information through an 

Internet web site that is searchable, has a clear and understandable format, and that meets various other requirements. Manufacturer and distributors would be responsible for the accuracy of the 

information that is submitted to the Secretary and made available 

on the web site, and the Secretary would be required to establish 

procedures to ensure that a covered recipient has an opportunity 

to submit corrections to the manufacturer with regard to information made public with respect to the covered recipient. Under such 

procedures, the corrections must be transmitted to the Secretary. 

Information relating to drug samples and provider identification 

numbers would not be made available to the public by the Secretary, but may be made available outside of the Department of 

Health and Human Services for research or legitimate business 

purposes pursuant to data use agreements. 

Under the bill, if a state attorney general has provided notice to 

the Secretary of the intent to proceed on a specific case and the 

Secretary has had an opportunity to bring an action and has declined to do so, the attorney general of a state would be permitted 

to bring an action against a manufacturer or distributor in the 

state for a violation of the section. 

Section 1128H would require the Secretary to submit a report to 

Congress no later than April 1 of each year, beginning in 2011, 


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that includes information submitted in the preceding year by manufacturers and distributors and a description of any enforcement 

actions taken to carry out the section (including penalties imposed 

during the preceding year). The Secretary would also be required 

to submit to Congress a report on the results of the Disclosure of 

Physician Financial Relationships surveys required pursuant to 

section 5006 of the Deficit Reduction Act of 2005. This report would 

be submitted to Congress not later than 6 months after the date 

such surveys are collected and would be made publicly available on 

an Internet web site of the Department of Health and Human 

Services. In addition, no later than April 1 of each year, beginning 

in 2011, the Secretary would be required to submit to states a report that includes information submitted by manufacturers and 

distributors in the preceding year, as well as other information. 

Additionally, beginning on January 1, 2011, Section 1128H would 

preempt any law or regulation of a state or its political subdivision 

that requires a manufacturer or distributor to disclose or report information regarding a payment or other transfer of value to a covered recipient, in accordance with the section. However, the section 

would not preempt state laws or regulations under which (A) the 

disclosure or reporting of information is not of the type required to 

be disclosed or reported under Section 1128H, (B) the information 

reported is required to be disclosed or reported to a Federal, State, 

or local governmental agency for public health surveillance, investigation, or other public health purposes or health oversight purposes, or (C) the state requires the discovery or admissibility of the 

information in a criminal, civil, or administrative proceeding. 

Subtitle E—Public Reporting on Health Care-Acquired Infections 

Sec. 1461. Requirement for public reporting by hospitals and ambulatory surgical centers on health care-associated infections 

Current Law 

Current law does not, in general, require the reporting of health 

care-associated infections (HAIs), although such reporting is required in a number of states. Several provisions in current federal 

law have established programs that are somewhat related. 

First, Section 5001(c) of the Deficit Reduction Act (P.L. 109–171) 

requires the Secretary, by regulation, to identify certain preventable conditions that are not present on admission, and that therefore are acquired in the health care facility. Medicare Part A reimbursement is not provided for the care of these secondary conditions. This provision is implemented in CMS’s annual Inpatient 

Prospective Payment System (IPPS) rule for hospitals. At this time, 

listed conditions include some that are unrelated to infection (such 

as incompatible blood transfusions, and trauma resulting from falls 

in the facility), as well as specific types of catheter-associated and 

surgical site infections. The rules explain that some other infections (such as infection with methicillin-resistant Staph. aureus, or 

MRSA) are not included because, among other things, it can be 

hard to determine, in an individual patient, whether an infection 

is associated with health care or was acquired previously. 

Also, two voluntary CMS reporting programs established under 

current law may capture information related to HAIs. The Physician Quality Reporting Initiative (PQRI), established under Section 


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101(b) of the Tax Relief and Healthcare Act of 2006 (P.L. 109–432), 

provides incentive payments to physicians who report certain quality measures, which include instances of catheter-associated or surgical site infection. Information from this program is not publicly 

reported. The Reporting Hospital Quality Data for Annual Payment 

Update (RHQDAPU) Program, originally established under Section 

501(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108–173), requires participating 

hospitals to report quality data to CMS in order to receive a full 

annual payment update. Selected measures are publicly reported 

on the CMS Hospital Compare website. However, regarding infections, this program uses process measures (e.g., antibiotics were 

used properly in surgical patients) rather than outcome measures 

(e.g., a patient developed a surgical site infection). 

The Health Information Technology for Economic and Clinical 

Health (HITECH) Act, which was incorporated into the American 

Recovery and Reinvestment Act of 2009 (P.L. 111–5), promotes the 

widespread adoption of health information technology (HIT). 

Among its provisions, the HITECH Act established a process for 

the development of interoperability standards that support the nationwide electronic exchange of health information among doctors, 

hospitals, patients, health plans, the federal government, and other 

health care stakeholders. 

Proposed Law 

This section would require the Secretary to provide, by regulation, that in order to participate in Medicare and Medicaid, hospitals and ambulatory surgical centers would have to report certain 

health care-associated infections (HAIs) that develop in the facility. 

The Secretary would specify the types of information that must be 

reported, and develop reporting protocols through the Centers for 

Disease Control and Prevention (CDC), assuring that such protocols are coordinated with systems established under the HITECH 

Act. The Secretary would be required: to establish procedures regarding the validity of reported data to assure appropriate comparisons between facilities; to promulgate, through the Director of 

CDC, regulations to carry out this section, within one year of enactment; and to post information from the system on the HHS website 

in a manner that permits comparisons by facility and by patient 

demographic characteristics. 

This section would also require the Secretary annually to report 

to Congress on specified aspects of the program, and would provide 

that this section should not be construed as preempting or otherwise affecting State laws relating to the disclosure of information 

on HAIs or patient safety procedures for a hospital or ambulatory 

surgical center. It would also define an HAI and its relationship to 

the receipt of care, and would clarify that for the purposes of this 

section, hospitals include critical access hospitals. 

For hospitals and ambulatory surgical centers, reporting requirements would take effect when specified by the Secretary, but not 

later than 2 years after enactment. Within 18 months of enactment, the Comptroller General would be required to report to Congress regarding the reporting program, and the Secretary would be 

required to report to Congress regarding the appropriateness of exVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00476 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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panding reporting requirements to include additional information, 

such as health care worker immunization rates. 

Reason for change 

Health care-associated infections (HAIs) are a result of treatment 

in a healthcare service setting such as a hospital or an ambulatory 

surgery center, but secondary to the patient’s original condition. 

Studies have shown that such infections have been increasing over 

the past few years due to factors such as increasing drug resistance 

of bacteria and improper infection control measures. Collection of 

data is critical as a public health measure so as to identify and respond to emerging threats. Over 20 States now have mandatory reporting for health facilities on health care-associated infections. 

This policy would require hospital, critical access hospitals and ambulatory surgery centers that participate in Medicare and Medicaid 

to report HAIs to the CDC to improve public health. The Secretary 

would determine what infections information would be collected 

and how it is collected. 

TITLE V—MEDICARE GRADUATE MEDICAL EDUCATION 

Sec. 1501. Distribution of Unused Residency Positions 

Current Law 

With certain exceptions, the Balanced Budget Act of 1997 (BBA, 

P.L. 105–33) limited the number of allopathic and osteopathic residents for which Medicare would reimburse a teaching hospital at 

the level reported in its cost report ending on or before December 

31, 1996. The limit does not include dental or podiatry residents. 

The Medicare Prescription Drug, Improvement and Modernization 

Act of 2003 (P.L. 108–173, MMA) authorized the redistribution of 

up to 75% of each teaching hospital’s unused resident positions to 

hospitals seeking to increase their medical residency training programs. Any adjustments made to teaching hospitals’ resident limits 

were permanent. Rural teaching hospitals with less than 250 beds 

were exempt from the redistribution of any of their unfilled positions. Under the redistribution program, teaching hospitals were 

allowed to request up to an additional 25 full time equivalent 

(FTE) positions for direct graduate medical education (DGME) and 

indirect medical education (IME) payments. Hospitals were required to demonstrate the likelihood that the redistributed positions would be filled within 3 cost reporting periods beginning July 

1, 2005. MMA required that the unused slots be redistributed according to specific priorities: rural hospitals, urban hospitals located in areas with a population of one million or less, specialty 

training programs that are the only specialty program in a state, 

and all other hospitals. The redistribution was effective for portions 

of cost reporting periods starting July 1, 2005. The redistributed 

resident slots have different IME and DGME payment formulas 

from those used to reimburse hospitals’ previous residents. 

Proposed Law 

The Secretary would reduce the otherwise applicable resident 

limit for a hospital that has residency positions that were unused. 

Unused positions would be established when a hospital’s reference 

residence level is less than its otherwise applicable resident limit. 


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The reduction would be effective for portions of cost reporting periods occurring on or after July 1, 2011. Hospitals that are members 

of the same affiliated group would be subject to redistribution. The 

Secretary would adjust the determination of available slots for affiliated hospitals depending upon the extent that these hospitals 

could demonstrate that they are filling any additional residents 

slots allocated to other hospitals through an affiliation agreement. 

Ninety percent of unused slots would be redistributed to qualifying 

hospitals. The increase in resident training positions would be distributed to qualifying hospitals not later than July 1, 2011. 

A hospital’s reference residence level would be established as the 

highest resident level of any of the 3 most recent cost reporting periods (ending before the date of enactment). Hospital cost reports 

that had been settled or those that had been submitted, subject to 

audit, would be used to establish the residence level. Also, upon 

timely request, a hospital’s reference resident level could be increased to reflect an expansion or planned expansion of an existing 

residency training program that is not reflected on the most recent 

settled or submitted cost report. The increase would occur after 

audit and would include the previous redistribution of unused resident positions that occurred under MMA. The Secretary would be 

authorized to determine an alternative resident reference level for 

hospitals that submit a timely request for an increase in their reference resident level due to a planned expansion before the start 

of the 2009–2010 academic year. A hospital’s resident reference 

level would reflect any increases in slots granted under the prior 

redistribution of resident slots under the MMA. 

The Secretary would be required to increase the otherwise applicable resident limit for each qualifying hospital that submits a 

timely application by such number for portions of cost reporting periods that occur on or after July 1, 2011. The aggregate number of 

increases in resident limits may not exceed the estimated aggregate reduction in resident limits. In no case would more than 20 

FTE additional residents be made available to a qualifying hospital. 

A hospital that qualifies for an increase in its otherwise applicable resident limit would be required to ensure that its base level 

of primary care residents is increased by the number of additional 

primary care residents provided to the hospital under this section. 

The hospital would have to assign all additional resident positions 

to primary care residents. The hospital’s residency programs would 

have to be fully accredited or, if not yet in operation as of the base 

year, the hospital would have to be actively applying for such accreditation for the program. A hospital’s base level of primary care 

residents is the level of such residents in a base period determined 

without regard to whether such positions were in excess of the otherwise applicable resident limits. Hospitals receiving positions 

would be required to maintain records and periodically report on 

the number of primary care residents in its training programs. As 

a condition of continuing payment for a cost reporting period, the 

hospitals would be required to maintain the base level of positions 

at not less than the sum of the level of primary care resident positions before receiving additional positions plus the number of additional positions. 


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When determining which qualifying hospitals would receive an 

increase in their otherwise applicable resident limit, the Secretary 

would take into account the demonstrated likelihood that a hospital would fill the positions within the first 3 cost reporting periods beginning on or after July 1, 2011. Also, the Secretary would 

distribute the resident slots based on the following criteria: (1) the 

hospital had a reduction in the resident training positions under 

this section; (2) the hospital has a 3-year primary care residency 

training program, such as family practice and general internal 

medicine; (3) the hospital has formal arrangements, as determined 

by the Secretary, that place greater emphasis upon training in federally qualified health centers, rural health clinics, and other nonprovider settings and to hospitals that receive additional disproportionate share hospital payments and emphasize training in an outpatient department; (4) the hospital has resident training positions 

in excess of its otherwise applicable resident level as of July 1, 

2009; (5) the hospital has formal arrangements that place greater 

emphasis on training in a health professional shortage area or 

health professions needs area; or (6) the hospital is in a State with 

a low resident-to-population ratio (including a greater preference 

for those States with lower resident-to-population ratios). 

The per resident amounts (PRAs) for the resident positions distributed under this provision would equal the hospitals’ PRAs for 

primary and nonprimary care positions for the purposes of calculating direct graduate medical payments. The indirect medical education adjustment for the resident positions distributed under this 

provision would be computed in the same fashion as the hospital’s 

existing resident positions. 

Reasons for change 

The healthcare system is increasingly uncoordinated and complex, but a solid primary care workforce can help to support a well 

coordinated and integrated delivery model. Despite clear advantages of a strong primary care workforce, the number of primary 

care slots and medical students choosing primary care as a specialty has decreased over the past decade. This is the case even 

though the total amount of the physician workforce has remained 

stable Studies have recently shown that while 35 percent of the 

current physician workforce is in primary care, 21 to 24 percent of 

graduating medical students choose primary care medicine as a career specialty. According to the Council of Graduate Medical Education (COGME), since the Graduate Medical Education (GME) cap 

was put in place in 1996, primary care internal medicine positions 

in the annual student match have fallen 57 percent, primary care 

pediatric positions have fallen by 34 percent, and family medicine 

positions have fallen by 18 percent. Over the past ten years, nearly 

all graduate medical expansion in teaching hospitals has been in 

subspecialty medicine. Family practice residency programs, and 

three year training programs that emphasize a generalist training 

have decreased or have shut down as well. 

In their May 2009 report, COGME stated that graduate medical 

education should be realigned to meet society’s evolving healthcare 

needs. COGME recommended an emphasis on training more primary care physicians, training residents capable of practicing in innovative delivery care models such as patient-centered medical 


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homes and accountable care organizations, and increasing the accountability of graduate medical education’s role in public health. 

Similarly, in its June 2009 report, MedPAC’s recognized that residents will best learn the skills needed to provide high-quality, efficient care when medical education occurs in settings where such 

care is actually performed and will explore policies in their future 

work that might link medical education incentives with delivery 

system reforms. This policy is intended to increase training of primary care physicians in a broader array of settings in order to 

meet the future healthcare needs of the American public. 

The Committee notes that some policymakers point to earlier 

COGME reports to argue for the need for more residency slots; 

however, COGME now recognizes that earlier calls for increased 

residency slots focused on the growth in medical schools, and failed 

to take into account the fact that GME positions already exceed 

allopathic medical school slots by 30 percent. For instance, in 

2007–2008, the U.S. graduated about 17,500 allopathic students, 

but had more than 25,000 first year residency positions. COGME 

points out that first year residency positions grew 8 percent from 

2002 and 2007 and that this expansion will accommodate increases 

in medical school production. The shortcoming is not in the number 

of medical residents being trained, but that nearly all of this expansion is in subspecialty training, resulting in a drop in primary 

care physicians. 

The legislation increases primary care physicians by directing 

the Secretary to redistribute residency positions that have been unfilled for the prior 3 cost reports and direct those slots for training 

of primary care physicians. Special preference will be given to programs that saw a reduction in their slots under this section, have 

formal arrangements to train residents in ambulatory settings or 

shortage areas, operate three year primary care residency programs, currently operate residency programs over their cap, or are 

located in states with low resident to population ratios. Primary 

physicians are trained via three year general medicine, pediatrics 

or family practice residency programs. Within this universe of residency programs are a select number of programs that place emphasis on a generalist curriculum (such as family practice programs) 

and referred to as ‘‘three-year primary care residency training programs, as compared to the ‘‘categorical’’ or basic programs where 

a resident will then go on to specialize. This provision directs the 

Secretary to give preference to these ‘‘three year primary care’’ programs in general internal medicine or family practice. The increase 

in resident training positions would be distributed to qualifying 

hospitals not later than July 1, 2011. 

Effective date 

Cost reporting periods beginning on or after July 1, 2011. 

Section 1502. Increasing Training in Non-Provider Settings 

Current Law 

Medicare reimburses the direct costs of graduate medical education (DGME) for approved residency training programs without 

regard for the setting where the residents’ activities relating to patient care are performed as long as the hospital incurs all, or subVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00480 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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stantially all, of the costs for the training program in that setting. 

Through regulation, CMS has defined all, or substantially all costs, 

as 90% of resident stipends and fringe benefits and costs associated 

with a supervising physician. However, as presently administered, 

a hospital cannot include the time spent by residents working at 

a non-hospital site if it incurs all, or substantially all, of the costs 

for only a portion of the residents in that program at the non-hospital site. 

Section 1886(k) provides for payment to qualified nonhospital 

providers, such as FQHCs and rural health clinics, for their direct 

costs of medical educations if those costs are incurred in the operation of an approved medical residency training program. 

Proposed Law 

Effective for cost reporting periods beginning on or after July 1, 

2009, all time spent by a resident would count towards the determination of a FTE resident with respect to Medicare’s direct graduate education payment, without regard to the setting where the 

activities are performed, if the hospital incurs the costs of the stipends and the fringe benefits of the resident during the time the 

resident spends in that setting. Any hospital claiming payment for 

the time spent in a non-provider setting would be required to maintain and make available necessary records regarding the amount of 

time and this amount in comparison to the amounts of time in a 

specified base year. 

Effective for discharges on or after July 1, 2009, all the time 

spent by a resident in patient care activities in a non-provider setting would be counted towards the determination of a FTE resident 

with respect to Medicare’s indirect medical education payment if 

the hospital incurs the costs of the stipends and fringe benefits of 

the resident during the time spent in that setting. 

The Office of the Inspector General (OIG) would be required to 

analyze the resident data to assess the extent to which there is an 

increase in time spent by medical residents training in non-provider settings. No later than 4 years after the date of enactment 

the OIG would submit a report to Congress its analysis and assessment. 

The Secretary would conduct a demonstration project where an 

approved teaching health center would be eligible for direct medical 

education payments for its own direct cost of graduate medical education activities for primary care residents as well as for the direct 

costs of such graduate medical education activities of its contracting hospital for such residents. Under the project, an approved 

teaching health center would contract with an accredited teaching 

hospital to carry out the inpatient responsibilities of the primary 

care residency program. The center would be responsible for payment of the hospital’s costs of the salary and fringe benefits for 

residents. The hospital’s full-time equivalent resident amount 

would not affect the contracting hospital’s resident limit. The contracting hospital would not reduce the number of residents in its 

primary care residency training program. An approved teaching 

health center would be a non-provider setting, such as a Federally 

qualified health center or rural health center that develops and operates an accredited primary care residency program for which 


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funding would be available if it were operated by a hospital in connection with a hospital. 

Reason for change 

MedPAC and COGME have recommended that physicians be 

trained at alternative care settings such as ambulatory settings. 

COGME called for a ‘‘broadening of the definition of the training 

venue’’ and emphasized preparing a physician workforce for outpatient care, where most of the health care takes place, and to consider placing physicians at rural and community health centers 

and physician offices. Residents should also be exposed to patient 

care coordination in a variety of health care settings. Teaching hospitals face considerable financial incentives and regulatory barriers 

that discourage them from rotating residents to nonhospital settings. 

The intent of this legislation is to decrease the regulatory barriers so that residents can increase their training in non-provider 

settings (i.e., outside the acute care hospital). This policy modifies 

the rules that govern when hospitals can receive indirect medical 

education (IME) and direct graduate medical education (DGME) 

funding for residents who train in non-provider settings so that any 

time spent by the resident in a non-provider setting shall be counted toward DGME and IME if the hospital incurs any costs such as 

fringe and benefits. A study by the Office of the Inspector General 

shall assess the impact of this policy on increasing physician training in non-provider settings. The changes are effective for discharges on or after July 1, 2009 and the OIG study is scheduled 

to report to Congress 4 years after the date of enactment. 

A demonstration project is established to allow community health 

centers to host an approved primary care residency program and 

receive DGME for itself and for the hospital that it will contract 

with to provide the inpatient training. This demonstration project 

will inform the Secretary and Congress on the feasibility of health 

centers hosting a residency program and inform possible alternative payment methodologies for nonhospital teaching sites. While 

the Committee recognizes the importance of training in non-provider settings, including Federally Qualified Health Centers, the 

Committee does not think it is appropriate for teaching health centers to receive a hospital’s IME payments since the payment methodology is based on Medicare patient activities that occur in the inpatient setting. The Committee also questions whether indirect 

medical education costs are incurred by an FQHC and notes that 

the average Medicare share for FQHCs is less than 10 percent. 

While the Committee supports the need for more training in the 

non-provider setting, this must be balanced against the competing 

priority of ensuring that Medicare dollars are spent on Medicare 

patients. 

Effective date 

Cost reporting periods beginning on or after July 1, 2009. 


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Sec. 1503. Rules for Counting Resident Time for Didactic and 

Scholarly Activities and Other Activities 

Current Law 

Medicare pays teaching hospitals the costs of approved medical 

residency training programs through two mechanisms: an indirect 

medical education (IME) adjustment within the inpatient prospective payment system (IPPS) and direct graduate medical education 

(DGME) payments made outside of IPPS. Certain non-patient care 

activities that are part of an approved training program are not allowable for DGME or IME payment purposes. With respect to 

training that occurs in hospital settings, Medicare does not include 

the time that residents spend in non-patient care activities, including didactic activities, when calculating IME payments. With respect to training that occurs in nonhospital settings, Medicare 

would not count the time that residents spend in non-patient care 

activities, including didactic activities, when calculating DGME or 

IME payments. 

Proposed Law 

When calculating DGME payments, Medicare would count the 

time that residents in approved training programs spend in certain 

non-direct patient care activities in a nonhospital setting that is 

primarily engaged in furnishing patient care. The term ‘‘nonprovider setting that is primarily engaged in furnishing patient care’’ 

would be a nonprovider setting in which the primary activity is the 

care and treatment of patients as defined by the Secretary. Reimbursable nonpatient care activities would include didactic conferences and seminars but would not include research that is not 

associated with the treatment or diagnosis of a particular patient. 

In addition, Medicare would count all the vacation, sick leave and 

other approved leave spent by resident in an approved training 

program as long as the leave time does not extend the program’s 

duration. 

When calculating IME payments, Medicare would adopt the 

same rules about counting residents’ leave time. Medicare would 

also include all the time spent by residents in approved training 

programs on certain nonpatient care activities (including didactic 

conferences and seminars, but not in certain research activities 

that are not associated with the treatment or diagnosis of an particular patient) if the hospital is an IPPS hospital, a hospital paid 

under the IPPS for Puerto Rico, is a hospital paid under a state 

specific hospital reimbursement system, or is a provider-based hospital outpatient department. 

Except as otherwise provided, these provisions would be effective 

for cost reporting periods beginning on or after January 1, 1983. 

The provisions affecting DGME would apply to cost reporting periods on or after July 1, 2008. The provisions affecting IME would 

apply to cost 317 reporting periods on or after October 1, 2001. 

This section would not affect the interpretation of the law in effect 

prior to that date. The provisions would not be implemented in a 

manner that would require reopening of any settled hospital cost 

reports where there is not a jurisdictionally proper appeal pending 

on IME and DGME payments as of the date of enactment. 


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Reason for change 

Physicians in training need to learn critical evidenced based 

medicine and participate in scholarly activities related to the management of their patients. They devote time during their residency 

training to participate in didactic and scholarly activities that 

broadens their clinical knowledge base. The policy is to modify the 

rules to allow for inclusion of didactic and scholarly activities and 

other activities such as research related to the care of their patients. The provisions affecting IME would apply to cost reporting 

periods on or after October 1, 2001 and the provisions affecting 

DGME would apply to cost reporting periods on or after July 1, 

2008. 

Effective date 

Subsection (a)(1)(B) pertaining to direct graduate medical education is effective for cost reporting periods beginning on or after 

July 1, 2008. Subsection (b), pertaining to indirect medical education is effective for cost reporting periods beginning on or after 

October 1, 2001. All other provisions are effective for cost reporting 

periods beginning on or after January 1, 1983. 

Sec. 1504. Preservation of Resident Cap Positions from Closed and 

Acquired Hospitals 

Current law 

With certain exceptions, the Balanced Budget Act (BBA) of 1997 

limited the number of allopathic and osteopathic residents for 

which Medicare would reimburse a teaching hospital at the level 

reported in its cost report ending on or before December 31, 1996. 

If a teaching hospital closes (defined as withdrawing participation 

in the Medicare program), CMS permits a temporary cap increase 

to other teaching hospitals to accommodate residents suddenly displaced from the closed hospital. Upon completion of their training, 

the residency slots cease to exist. 

A hospital with a newly established residency program may receive an adjustment to its FTE cap (which otherwise would be zero) 

if it establishes one or more new medical residency training programs, but only for new programs established within 3 academic 

years after residents begin training in the first new program. CMS 

recently put forth a final rule on July 31, 2009 that clarifies that 

a ‘‘newly established’’ residency program for Medicare GME purposes is not a program that existed previously at another hospital. 

In determining that a program is truly new, CMS will use certain 

‘‘supporting factors,’’ such as whether the program director, teaching staff, and residents are different. CMS will also consider 

whether the program relocated from a hospital that closed, and 

whether that program is part of any existing hospital’s FTE cap determination. If the program did relocate from a closed hospital and 

that program is not part of any existing hospital’s FTE cap determination, then even if there are significant similarities between the 

program in terms of the program director, teaching staff, or residents, CMS could consider the program that was transferred from 

the closed hospital to be new for Medicare direct GME and IME, 

since there would be no danger that an FTE cap adjustment to reflect a new program would result in duplicative FTE caps. CMS 


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also has established certain regulations governing Medicare’s provider enrollment requirements that determine under what circumstances providers can bill the Medicare program including 

those involved in change of ownership (CHOW) transactions. Very 

generally, in order to acquire a teaching hospital’s resident cap 

under a CHOW transaction, the acquiring entity must retain the 

original provider agreement of the provider it is acquiring. However, the acquiring entity would also assume all liabilities associated with that provider agreement. 

Starting August 29, 2005 (the day after Hurricane Katrina), hospitals were permitted to form emergency affiliation agreements if 

located in federally declared disaster areas starting the first day of 

a Section 1135 emergency period. Under 42 Code of Federal Regulations (CFR) 413.79, a home hospital located in such an area that 

experiences at least a 20% decline in inpatient occupancy can temporarily transfer its resident cap to a host hospital. 

Proposed Law 

The Secretary would promulgate regulations to establish a process where the FTE residency cap slots in a hospital with an approved medical residency program that closes on or after a date 

that is 2 years before the date of enactment could be used to increase the otherwise applicable residency limit for other hospitals 

in the State. The increase in residency programs would be distributed to one or more hospitals in the State in a manner specified 

by the Secretary. This process would be consistent with any recommendations submitted by the senior health official designated by 

the chief executive officer of the state in question provided that the 

recommendations are not submitted later than 180 days after the 

date of a hospital closure. In cases where a hospital closed before 

date of enactment, the time limit would be 180 days from the date 

of enactment. The aggregate number of increased residency limits 

in the state would equal the number of FTE resident cap slots from 

the hospital(s) that closed. These provisions would not affect any 

temporary adjustment to a hospital’s FTE resident cap established 

under 42 CFR 413.79 as in effect on the date of enactment. 

Reason for change 

When hospitals close, the residency slots previously associated 

with those hospitals are no longer eligible for further Medicare reimbursement once the existing residents complete their training. 

This occurs regardless of any continued need for those residency 

slots to meet current or future workforce needs in the community 

or state. This provision allows for continued funding of those slots 

at other hospitals within the state, taking into consideration recommendations from the senior health official in the state when determining which hospitals shall receive upward adjustments or 

new residency caps. 

Sec. 1505. Improving Accountability for Approved Medical Residency Training 

Current law 

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ited by an independent entity, such as the Accreditation Council for 

Graduate Medical Education or the American Osteopathic Association. Medicare has never linked its payments to promoting or fostering any goals in medical education. 

Proposed law 

Certain goals of medical residency training programs would be 

established. Specifically, resident training would be designed so 

that physicians would be able to: (1) work effectively in various 

non-provider settings; (2) coordinate patient care within and across 

settings; (3) understand the relevant cost and value of various diagnostic and treatment options; (4) work effectively in inter-professional and multi-disciplinary teams in provider and non-provider 

settings; (5) identify systematic errors in health care delivery and 

implement solutions for such errors; and (6) be meaningful electronic health record users. 

GAO would be required to evaluate the extent to which medical 

residency training programs are meeting the above workforce goals 

in a range of residency programs, including primary care and specialties; and have the appropriate faculty expertise to teach the 

topics required to achieve such goals. The study would be submitted to Congress no later than 18 months after the date of the 

enactment. The study would include recommendations with respect 

to the development of curriculum requirements and an assessment 

of the accreditation processes of the Accreditation Council for Graduate Medical Education and the American Osteopathic Association. 

Reason for change 

MedPAC recommends that the residency training experience 

should encourage physicians to increase care coordination and assume greater accountability for quality of care. Graduate medical 

education should train a future physician workforce exposed to innovative delivery models that would support more integration. A 

MedPAC sponsored study conducted by RAND pointed out that the 

curricula of residency training programs fall short of recommendations by the Institute of Medicine and other experts on items such 

as formal training or experience in multidisciplinary teamwork, 

cost-awareness in clinical decision-making, comprehensive health 

information technology, and patient care in nonhospital settings. 

Residents should be trained in innovation delivery systems that 

will support coordinated care and enhance an integrated approach. 

The Accreditation Council for Graduate Medical Education has also 

included similar goals for residency programs to improve the training of residents. The COGME report calls for ‘‘making accountability for the public’s health the driving force for graduate medical 

education.’’ The report further states that the $10 billion spent annually on GME should have parameters on how our physician 

workforce should be trained and the type of training residents 

should receive. 

This policy is intended to highlight broad goals for residency programs to improve their accountability. Such goals include: (1) work 

effectively in various non-provider settings; (2) coordinate patient 

care within and across settings; (3) understand the relevant cost 

and value of various diagnostic and treatment options; (4) work effectively in inter-professional and multidisciplinary teams in proVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00486 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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vider and non-provider settings; (5) identify systematic errors in 

health care delivery and implement solutions for such errors; and 

(6) be meaningful electronic health record users. 

The Comptroller General shall conduct a study to evaluate the 

extent to which residency training programs will meet the goals described in this provision and will report to Congress not later than 

18 months after the enactment of this legislation. 

TITLE VI—PROGRAM INTEGRITY 

Subtitle A—Increased Funding to Fight Fraud, Waste, and Abuse 

Sec. 1601. Increased Funding and Flexibility to Fight Fraud and 

Abuse 

Current Law 

The Health Care Fraud and Abuse Control (HCFAC) account 

funds activities to fight health care fraud. The HCFAC program 

along with the Medicare Integrity Program (MIP) were both established by the Health Insurance Portability and Accountability Act 

of 1996 (HIPAA, P.L. 104–191) which sought to increase and stabilize federal funding for health care anti-fraud activities. Specifically, HCFAC funds are directed to the enforcement and prosecution of health care fraud. MIP funding supports the program integrity activities undertaken by CMS contractors. 

For HCFAC, HIPAA appropriated funds to the Department of 

Health and Human Services (HHS), the Department of Justice 

(DOJ), and the Federal Bureau of Investigation (FBI) for antifraud 

activities undertaken for fiscal years 1997 through 2003. Funds are 

appropriated to the Account from the Medicare Part A Trust Fund 

in amounts as the Secretary and the Attorney General certify are 

necessary to support audits, investigations, evaluations, and prosecutions related to health care fraud. For HHS and DOJ, the legislation authorized an amount, beginning at $104 million for 

FY1997, equal to the limit for the preceding year increased by 15%. 

Within this amount, the legislation authorized minimum and maximum appropriations for the HHS OIG. The maximum OIG appropriation increased from $70 million in FY1997 to $160 million in 

FY2003. For each fiscal year after 2003, the amount was capped at 

the 2003 level. In December 2006, Congress passed the Tax Relief 

and Health Care Act of 2006 (TRHCA, P.L. 109–432) which extended the mandatory annual appropriation for HCFAC to 2010. 

For fiscal years 2007 through 2010, the mandatory annual appropriation is the limit for the preceding year plus the percentage increase in the consumer price index for all urban consumers (CPI– 

U). For years after FY2010, the annual appropriation remains at 

the FY2010 level. 

The MIP program authorizes the Secretary of HHS to enter into 

contracts with private organizations to conduct program integrity 

activities such as provider audits and medical review of claims. The 

largest share of the HIPAA appropriation was dedicated to the MIP 

program. Funding for MIP increased from $440 million in FY1997 

to $720 million in FY2003. For fiscal years 2004 and 2005, the annual MIP appropriation remained at the FY2003 level. In 2005, 

Congress passed the Deficit Reduction Act (DRA, P.L. 109–171) 

which raised funding for the MIP program by $112 million for 


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FY2006 to implement program integrity and oversight activities for 

the Medicare prescription drug benefit. This increased the annual 

MIP appropriation from $720 million to $832 million for FY2006 

only. Congress did not increase funding for MIP in TRHCA. Therefore the mandatory annual appropriation for MIP remains at $720 

million. 

Proposed Law 

The provision would increase funding for HCFAC by $100 million 

annually beginning with FY2011. Funding would be appropriated 

to HHS, the DOJ, and MIP in the same manner as is currently appropriated in statute. Funding allocated to MIP would be authorized for HCFAC activities as well as MIP activities and would not 

have to be distributed solely to private organizations to conduct 

program integrity activities. Funding for both HCFAC and MIP 

would be available without further appropriation until expended. 

Reason for Change 

According to the Congressional Budget Office, for every $1.00 

that the government spends in increased funding for HCFAC, there 

is a $1.75 return on that investment. This increased funding will 

allow for the implementation of the measures in this bill aimed at 

fighting waste, fraud, and abuse; and will result in an overall increase in program integrity. 

Effective Date 

January 1, 2010. 

Subtitle B—Enhanced Penalties for Fraud and Abuse 

Sec. 1611. Enhanced Penalties for False Statements on Provider or 

Supplier Enrollment Applications 

Current Law 

Medicare statute provides the Secretary with general authority 

to prescribe regulations for the efficient administration of the Medicare program. Under this authority, the Center for Medicare and 

Medicaid Services (CMS) has implemented regulations requiring 

Medicare providers and suppliers to submit an application to enroll 

in the Medicare program and receive billing privileges. Providers 

and suppliers must resubmit and recertify the accuracy of their enrollment information every 5 years. Medicare enrollment activities, 

such as processing and reviewing applications, are handled by private contractors. CMS may deny a provider or supplier’s enrollment in Medicare or revoke a provider’s billing privileges for the 

following reasons: noncompliance with enrollment requirements, 

exclusion from participation in Federal health care programs, conviction of a felony, or the submission of false or misleading information on the enrollment application. 

Medicaid statute delegates the administration of the Medicaid 

program to the states. There is considerable variation in how states 

administer their provider enrollment processes. State Medicaid 

agencies determine whether a provider or supplier is eligible to 

participate in the Medicaid program by providing for written agreements with providers and suppliers. Written agreements require 

that providers and suppliers maintain specific records, disclose cerVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00488 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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tain ownership information, and grant access to federal and state 

auditors to books and records. 

Section 1128A(a) of the Social Security Act (SSA) authorizes the 

imposition of Civil Monetary Penalties (CMPs) and assessments on 

a person, including an organization, agency, or other entity, who 

engages in various types of improper conduct with respect to federal health care programs. Under section 1128A(a)(1)(D) of the Act, 

a person who knowingly presents or causes to be presented a claim 

to federal or state agencies that the Secretary determines is for an 

item or service furnished during a period when the person was excluded from participation in the federal health care program under 

which the claim was made is subject to a civil monetary penalty 

of up to $10,000 for each item or service furnished, and an assessment of up to three times the amount claimed for each item or 

service. 

Proposed Law 

This provision would subject providers and suppliers applying to 

enroll or renewing enrollment in federal health care programs to 

CMPs for providing false information on an enrollment application. 

Medicaid managed care plans, MA plans, and PDP plans would 

also be subject to CMPs for providing false information on applications to participate in federal health care programs. 

Specifically, the provision would provide that a person who knowingly makes or causes to be made any false statement, omission, 

or misrepresentation of a material fact on an application, agreement, bid, or contract to participate or enroll as a provider of services or supplier under a federal health care program would be subject to a CMP of $50,000 for each violation. In addition to providers 

and suppliers, the provision would also apply to Medicaid managed 

care organizations, Medicare Advantage (MA) organizations and 

MA plans, Prescription Drug Plan (PDP) sponsors and plans, and 

providers and suppliers that participate in these Medicare or Medicaid plans. In addition, such a person may be subject to an assessment of not more than 3 times the amount claimed as the result 

of the false statement, omission, or misrepresentation. 

The provision would also eliminate the requirement for a determination by the Secretary when a person knowingly presents or 

causes to be presented a claim for an item or service furnished during a period when the person was excluded under federal law from 

the federal health care program under which the claim was made. 

Reason for Change 

The new provisions will increase the quality of data supplied on 

an application, agreement, bid, or contract when providers or suppliers enroll in a federal health care program. 

Effective Date 

These amendments would apply to acts committed on or after 

January 1, 2010. 


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Sec. 1612. Enhanced Penalties for Submission of False Statements 

Material to a False Claim 

Current Law 

Section 1128A (a) of the SSA authorizes the imposition of CMPs 

(CMPs) and assessments on a person, including an organization, 

agency, or other entity, who engages in various types of improper 

conduct with respect to federal health care programs, including the 

imposition of penalties against a person who knowingly presents or 

causes to be presented false or fraudulent claims. This section generally provides for CMPs of up to $10,000 for each item or service 

claimed, $15,000 or $50,000 under other circumstances, and an assessment of up to three times the amount claimed. 

Proposed Law 

The bill would create a new section 1128A (a) (9) of the SSA, providing that persons who knowingly make, use, or cause to be made 

or used any false statement or record material to a false or fraudulent claim submitted for payment to a federal health care program 

would be subject to a civil monetary penalty of $50,000 for each 

violation. 

Reason for Change 

The new provisions will increase the quality of data supplied on 

claims submitted for payment and will deter false or fraudulent 

claims. 

Effective Date 

These amendments would apply to violations committed on or 

after January 1, 2010. 

Sec. 1613. Enhanced Penalties for Delaying Investigations 

Current Law 

Section 1128A (a) of the SSA authorizes the imposition of CMPs 

and assessments on a person, including an organization, agency, or 

other entity, who engages in various types of improper conduct 

with respect to federal health care programs, including the imposition of penalties against a person who knowingly presents or 

causes to be presented false or fraudulent claims. This section generally provides for CMPs of up to $10,000 for each item or service 

claimed, $15,000 or $50,000 under other circumstances, and an assessment of up to three times the amount claimed. 

The Secretary is required to provide for the annual auditing of 

the financial records of at least 1⁄3 of MA plans. Each contract with 

a MA plan is required to provide that the Secretary have the right 

to inspect or evaluate the quality, appropriateness and timeliness 

of services performed under the contract. Contracts must also provide the Secretary with right to audit any plan’s books and records 

related to the plan’s ability to bear risk or to the services performed, including determinations of amounts payable under the 

contract. 


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Proposed Law 

The bill would create a new provision, section 1128A (a) (10), providing that persons who fail to grant timely access, upon reasonable request (as defined by the Secretary in regulations), to the Office of the Inspector General (OIG), for the purpose of audits, investigations, evaluations, or other statutory functions of the OIG, be 

subject to CMPs of $15,000 for each day of failure. The provision 

would also modify the contractual requirements for MA plans to 

allow the Secretary to conduct timely audits and inspections of MA 

plans. 

Reason for Change 

According to an October 2007 report by the Government Accountability Office (GAO), the Centers for Medicare and Medicaid Services (CMS) did not fulfill its statutory mandate to audit the financial records of 1⁄3 of MA plans for the years 2001–2006. Of the audits that were conducted, GAO found that CMS was limited in its 

ability to pursue financial recoveries based on the audits that were 

performed, because CMS did not use its statutory authority to include in contracts with MA plans an explanation of its audit authority and description of the steps to be taken to pursue deficiencies identified by these audits. This section requires that future 

contracts with MA plans contain this language, and imposes 

stronger daily penalties for the obstruction of audits, in order to facilitate more timely and efficient performance of this statutory duty 

by CMS in addition to audits, investigations or 

Effective Date 

These amendments would apply to violations committed on or 

after January 1, 2010. 

Sec. 1614. Enhanced Hospice Program Safeguards 

Current Law 

Medicare statute mandates the establishment of minimum 

health and safety standards that must be met by providers participating in the Medicare and Medicaid programs (i.e. hospitals, hospices, nursing homes, and home health agencies). In order to receive payment, providers and suppliers must meet these health and 

safety standards, often referred to as Conditions of Participation 

(CoPs). Generally, state agencies, under contract with CMS, survey 

providers to determine compliance with CoPs. Alternatively, a provider can be deemed to meet these requirements if it has been accredited by an approved national accreditation body. If a provider 

has been found to be non-compliant with its CoPs, CMS has the authority to impose certain sanctions, including revoking the provider’s participation agreement. States also have the authority to 

impose sanctions on Medicare and Medicaid participating facilities 

found to be noncompliant with CoPs. 

Proposed Law 

This provision would add a new section, Section 1819A, to the 

SSA that would require the Secretary to develop and implement intermediate sanctions to apply to hospices that, based on a determination by the Secretary, demonstrate a substandard quality of 


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care and fail to meet such other requirements as the Secretary may 

find necessary in the interest of the health and safety of the individuals provided care and services by the agency or organization 

involved. The sanctions may include CMPs of up to $10,000 for 

each day of non-compliance or in the case of a per instance penalty 

not more than $25,000, a denial of all or part of future Medicare 

or Medicaid payments to which the hospice is entitled (which would 

terminate upon the Secretary’s finding that the hospice program no 

longer demonstrated substandard quality and met other requirements as determined by the Secretary), requiring the appointment 

of managers to oversee the operation of the hospice program, correction plans, and staff training The sanctions could be imposed in 

addition to those imposed under State or Federal law and would 

not be construed as limiting other available remedies. The Secretary would have until January 1, 2012 to develop and implement 

the sanctions. 

By July 1, 2011, the Secretary would be required to create the 

specific procedures and conditions under which the relevant sanctions would apply, including the amount of any fines and severity 

of the sanctions. The conditions would be required to minimize the 

time between the identification of deficiencies and imposition of 

sanctions, and would provide for more severe fines for repeated deficiencies. The due process protections provided in the CMP law 

(SSA, Section 1128A), such as written notice and the right to a 

hearing, would apply in the same manner to the imposition of a 

CMP for hospices. 

This provision would also require the Secretary to take immediate action to correct any identified deficiencies that immediately 

jeopardize the health and safety of patients being cared for in a I 

hospice. The action would consist of either appointing managers to 

oversee the operations of the hospice or terminating the hospice’s 

participation in federal health care programs. The Secretary would 

be authorized to impose additional remedies if necessary. If the 

Secretary determines that identified deficiencies do not immediately jeopardize the patients’ health and safety, the Secretary, in 

lieu of terminating the providers’ participation in the program, may 

impose other intermediate sanctions. If after a period of intermediate sanctions, the deficiencies have not been corrected, the 

Secretary would be required to terminate the providers’ participation in federal health programs. The Secretary would also be authorized to impose CMPs on hospice providers for any former days 

of non-compliance with federal health and safety standards. 

These provisions would also apply to hospice programs participating in Medicaid and CHIP. 

Reason for Change 

The new provisions will enable CMS to take intermediate action 

in the case of poorly performing hospices, when previously the only 

option was exclusion. The section also instructs and authorizes the 

Secretary to take immediate action if deficiencies immediately jeopardize the health and safety of beneficiaries. 

Effective Date 

Date of enactment. 


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Sec. 1615. Enhanced Penalties for Individuals Excluded from Program Participation 

Current Law 

Section 1128A (a) of the SSA authorizes the imposition of CMPs 

and assessments on a person, including an organization, agency, or 

other entity, who engages in various types of improper conduct 

with respect to federal health care programs, including the imposition of penalties against a person who knowingly presents or 

causes to be presented false or fraudulent claims. This section generally provides for CMPs of up to $10,000 for each item or service 

claimed, $15,000 or $50,000 under other circumstances, and an assessment of up to three times the amount claimed. 

Proposed Law 

The bill would create a new provision, section 1128A(a)(11) of the 

SSA, providing that a person who orders or prescribes an item or 

service, including without limitation home health care, diagnostic 

and clinical lab tests, prescription drugs, durable medical equipment, ambulance services, physical or occupational therapy, or any 

other item or service, during a period when the person has been 

excluded from participation in a federal health care program, and 

the person knows or should know that a claim for such item or 

service will be presented to such a program, be subject to a civil 

monetary penalty of $50,000 for each order or prescription. This 

amendment would apply to violations committed on or after January 1, 2010. 

Reason for Change 

The new provision will create a disincentive for excluded persons 

to violate that exclusion by continuing to prescribe services payable 

by a federal health program. 

Effective Date 

These amendments apply to violations committed on or after 

January 1, 2010. 

Sec. 1616. Enhanced Penalties for Provision of False Information by 

Medicare Advantage and Part D Plans 

Current Law 

MA plans enter into contracts with the Secretary to participate 

in the Medicare program. The Secretary has the authority to impose sanctions and CMPs on MA plans that violate the terms of the 

contract. Among the violations are failing to provide medically necessary care; imposing excess beneficiary premiums; expelling or refusing to re-enroll beneficiaries; discouraging or denying enrollment 

among eligible individuals expected to require future medical services; misrepresenting or falsifying information; failing to comply 

with balance billing requirements; interfering with a provider’s advice to beneficiaries; and contracting with providers excluded from 

the Medicare program. For violations related to discouraging or denying enrollment or misrepresenting information provided to the 

Secretary, the Secretary can impose a maximum penalty of 

$100,000. For all other violations, the maximum penalty is $25,000. 


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The Secretary has the authority to impose additional penalties for 

imposing excess beneficiary premiums and engaging in activities 

that discourage enrollment. 

Proposed Law 

This provision would enhance penalties for MA and Part D plans 

that misrepresent or falsify information to include an assessment 

of up to three times the amount claimed by a plan or plan sponsor 

based on the misrepresentation or falsified information. The provision would apply to violations committed on or after January 1, 

2010. 

Reason for Change 

The new provision will improve the accuracy of information submitted by MA and Part D plans. 

Effective Date 

These amendments apply to violations committed on or after 

January 1, 2010. 

Sec. 1617. Enhanced Penalties for Medicare Advantage and Part D 

Marketing Violations 

Current Law 

MA plans enter into contracts with the Secretary to participate 

in the Medicare program. The Secretary has the authority to impose sanctions and CMPs on MA plans that violate the terms of the 

contract. Among the violations are failing to provide medically necessary care; imposing excess beneficiary premiums; expelling or refusing to re-enroll beneficiaries; discouraging or denying enrollment 

among eligible individuals expected to require future medical services; misrepresenting or falsifying information; failing to comply 

with balance billing requirements; interfering with a provider’s advice to beneficiaries; and contracting with providers excluded from 

the Medicare program. For violations related to discouraging or denying enrollment or misrepresenting information provided to the 

Secretary, the Secretary can impose a maximum penalty of 

$100,000. For all other violations, the maximum penalty is $25,000. 

The Secretary has the authority to impose additional penalties for 

imposing excess beneficiary premiums and engaging in activities 

that discourage enrollment. 

Proposed Law 

This provision would increase the number of violations that could 

be subject to the imposition of sanctions and CMPs by the Secretary. Beginning January 1, 2010, plans that: (1) enroll individuals in a MA or Part D plan without their consent (except Part D 

dual eligibles), (2) transfer an individual from one plan to another 

for the purpose of earning a commission, (3) fail to comply with 

marketing requirements, including CMS guidance, or (4) employ or 

contract with an individual or entity that commits a violation 

would be subject to sanctions imposed by the Secretary. Sanctions 

would apply to any employee or agent of a MA or Part D plan, or 

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Reason for Change 

The new provision will reduce the ‘‘churning’’ of beneficiaries by 

agents or brokers and clarifies that plans may be sanctioned for actions undertaken by their employees, agents, brokers. Providers, or 

suppliers. 

Effective Date 

These amendments apply to violations committed on or after 

January 1, 2010. 

Sec. 1618. Enhanced Penalties for Obstruction of Program Audits 

Current Law 

The OIG has permissive authority (i.e. discretion) to exclude an 

entity or individual from a federal health program for a conviction 

related to the obstruction of a health care fraud investigation. 

Proposed Law 

This provision would expand the OIG’s permissive exclusion authority to include a conviction related to the obstruction of an audit 

related to health care fraud as well as an investigation or audit related to the use of funds received from any health care program. 

The provision would apply to violations committed on or after January 1, 2010. 

Reason for Change 

The new provision will create a strong disincentive for the obstruction of program audits. 

Effective Date 

These amendments apply to violations committed on or after 

January 1, 2010. 

Sec. 1619. Exclusion of Certain Individuals and Entities from Participation in Medicare and State Health Care Programs 

Current Law 

Section 1128 of the Social Security Act provides that the Secretary (and through delegation, OIG) has the authority to exclude 

individuals and entities from participation in federal health care 

programs under a variety of circumstances. Exclusion is mandatory 

for those convicted of certain criminal offenses, and generally the 

exclusion cannot be for a period of less than five years. OIG also 

has permissive authority exclude an individual or entity from a federal health program, which includes the discretion to determine 

whether and for how long to impose an exclusion. A permissive exclusion may be imposed under numerous circumstances, including 

conviction of certain misdemeanors relating to fraud, theft, embezzlement, breach of fiduciary duty or other financial misconduct; a 

conviction based on an interference with or obstruction of an investigation into a criminal offense; and revocation or suspension of a 

health care practitioner’s license for reasons bearing on the individual’s or entity’s professional competence, professional performance, 

or financial integrity. 


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Under 42 C.F.R. § 1001.1901, unless and until an excluded individual or entity is reinstated into a federal health care program, no 

payment will be made by a program for any item or service furnished by the individual or entity, or at the medical direction or 

on the prescription of a physician or other authorized individual 

who is excluded when the person furnishing such item or service 

knew or had reason to know of the exclusion. 

Proposed Law 

The bill would amend section 1128(c) to clarify the effect of an 

exclusion of an individual or entity on payment made under a federal health care program. The section would provide that payment 

cannot be made from any federal health care program with respect 

to an item or service furnished (1) by an excluded individual or entity, or (2) at the medical direction, or on the prescription of an authorized individual (e.g., a physician) when the person submitting 

a claim for the item or service knew or had reason to know of an 

individual’s exclusion. Despite this prohibition, the bill would permit payment to be made for emergency items or services (not including items or services furnished in an emergency room of a hospital) that are furnished by these individuals and entities. For purposes of this section, as well as sections 1128A and 1128B (dealing 

with civil and criminal penalties in federal health care programs), 

an item or service would be considered ‘‘furnished’’ if the individual 

or entity directly or indirectly provided, ordered, manufactured, 

distributed, prescribed, or otherwise supplied the item or service 

regardless of how the item or service was paid for by a federal 

health care program or to whom such payment was made. 

Section 1128(c) would also provide that if a person eligible for 

benefits under Medicare or Medicaid submits a claim for payment 

for items or services furnished by an excluded individual or entity, 

and the eligible person did not know or have reason to know that 

such individual or entity was excluded, then payment must be 

made for the items or services. In this case, the Secretary must notify the eligible person of the exclusion of the individual or entity, 

and payment must not be made for items or services furnished by 

an excluded individual or entity to an eligible person after a reasonable time after this notification. 

The section would also provide that if claim for payment for 

items or services furnished by an excluded individual or entity is 

submitted by an individual or entity other than a person eligible 

for benefits under Medicare or Medicaid or that excluded individual 

or entity itself, and the Secretary determines that the individual or 

entity that submitted the claim took reasonable steps to learn of 

the exclusion and reasonably relied upon inaccurate or misleading 

information from the relevant federal health care program or its 

contractor, the Secretary may waive repayment of the amount paid 

in violation of the exclusion to the individual or entity that submitted the claim. If a federal health care program contractor provided inaccurate or misleading information resulting in the waiver 

of an overpayment under this section, the Secretary must take appropriate action to recover the improperly paid amount from the 

contractor. 


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Reason for Change 

The new provision clarifies current practice. 

Effective Date 

Date of enactment. 

Subtitle C—Enhanced Program and Provider Protections 

Sec. 1631. Enhanced CMS Program Protection Authority 

Current Law 

CMS has implemented regulations requiring providers and suppliers to complete an application to enroll in the Medicare program 

and receive billing privileges. As part of the enrollment process, 

providers and suppliers are required to submit information necessary to verify identity and state licensure. CMS reserves the 

right to perform on-site inspections of a provider or supplier to 

verify compliance with standards. If enrollment requirements are 

not met, CMS may revoke Medicare billing privileges. Providers 

and suppliers must resubmit and recertify the accuracy of their enrollment information every 5 years. CMS may deny a provider’s or 

supplier’s enrollment in Medicare or revoke a provider’s billing 

privileges for the following reasons: noncompliance with enrollment 

requirements, exclusion from participation in Federal health care 

programs, conviction of a felony, or the submission of false or misleading information on the enrollment application. 

CMS manual instructions require that Medicare contractors 

query the following databases prior to approving an application for 

enrollment in Medicare: Qualifier.net, the Medicare Exclusions 

Database (List of Excluded Individuals/Entities or LEIE), and the 

Government Services Administration (GSA) debarment list. All 

Medicare contractors are required to query these databases when 

enrolling providers in the program. 

Medicaid beneficiaries may obtain services from any Medicaid 

participating provider recognized by the state. In addition, Medicaid beneficiaries enrolled in primary care case management system, a Medicaid managed care organization, or similar entities 

must not restrict the choice of a qualified provider of family planning services and supplies (with some other exceptions). States are 

not required to provide Medicaid coverage for such services when 

offered by persons or entities convicted of felonies. 

Proposed Law 

This provision would add a new section to the SSA, section 

1128G that would authorize the Secretary, in cases where there is 

a significant risk of fraud, to subject providers and suppliers to enhanced screening, oversight, or a moratorium on enrollment. The 

provision would take effect on January 1, 2011. The Secretary 

would determine what constitutes a significant risk of fraud by reviewing complaints, reports, referrals from law enforcement or 

other sources, and the results from data analysis, trend information, or claims review. Risk could be determined with respect to a 

single category of providers or suppliers or a single category of providers or suppliers operating within a specific geographic area. 


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This provision would apply to providers or suppliers initially enrolling in Medicare, Medicaid, or CHIP as well as those renewing 

their enrollment. The Secretary would be authorized to require 

states to implement these program safeguards as a requirement in 

their Medicaid or CHIP state plans. State CHIP plans would also 

be required to include their procedures for enforcing these requirements. Any actions taken or determinations made by the Secretary 

in imposing these requirements would not be subject to judicial review. Additionally, states would be allowed to conduct enhanced 

oversight activities beyond those required by the Secretary. 

This provision would require the Secretary to establish procedures for screening and enhanced oversight. Screening procedures 

may include licensing board checks, reviews against the LEIE, 

background checks, and unannounced pre-enrollment or other site 

visits. During periods of enhanced oversight (between 30 days and 

one year) the Secretary would be authorized to take certain actions 

against providers, including required or unannounced site visits or 

inspections, prepayment review, enhanced review of claims, and 

other actions as specified by the Secretary. The Secretary would be 

allowed to extend these periods to more than one year if necessary. 

In instances where the Secretary determines that there is risk of 

serious ongoing fraud, the Secretary would have the authority to 

impose a moratorium on enrolling providers within a category of 

providers and suppliers, including a category within a specific geographic area. Moratoriums could not be imposed if the Secretary 

makes a determination that the moratorium would adversely impact access to care. Medicaid providers would be prohibited from 

providing coverage for services delivered by providers under a moratorium. 

Reason for Change 

The new provision will allow the Secretary to screen providers 

before they join the program to put in place additional safeguards 

when there is a heightened risk of waste, fraud, and abuse. 

Effective Date 

These amendments apply to applications submitted after January 1, 2011. 

Sec. 1632. Enhanced Medicare, Medicaid, and CHIP Program Disclosure Requirements Relating to Previous Affiliations 

Current Law 

In order to receive payment from Medicare, providers must enroll 

in the Medicare program CMS regulations mandate that enrollment applications contain information necessary to uniquely identify the provider (i.e. proof of business name, social security number, or Tax ID number) and include documentation necessary to 

verify licensure or eligibility to furnish Medicare covered items or 

services. Persons who sign the enrollment applications are required 

to have an ownership or control interest in the provider or supplier. 

Upon initial enrollment in the program, the signature on the enrollment application must be that of an authorized official. Renewal 

or updated applications may be signed by a delegated official. CMS 

has the authority to perform on-site inspections of a provider to 


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verify enrollment information and determine compliance with 

Medicare enrollment requirements. CMS has established an internet database called the Provider Enrollment, Chain and Ownership 

System (PECOS) for providers to submit enrollment information. 

Medicaid statute delegates the administration of the Medicaid 

program to the states. There is considerable variation in how 

states’ administer their provider enrollment processes. State Medicaid agencies determine whether a provider or supplier is eligible 

to participate in the Medicaid program by providing for written 

agreements with providers and suppliers. Written agreements require that providers and suppliers maintain specific records, disclose certain ownership information, and grant access to federal 

and state auditors to books and records. 

Proposed Law 

Providers or suppliers submitting applications for enrollment or 

renewing enrollment in Medicare, Medicaid, or CHIP after January 

1, 2011 would be required to disclose information related to any 

current or previous affiliation (within the last 10 years) with providers or suppliers that have uncollected debt, or with persons or 

entities that have been suspended or excluded, been placed on payment suspension, or had their billing privileges revoked. The Secretary would have the authority to apply program safeguards to 

providers and suppliers, such as enhanced screening of claims, required or unannounced site visits and inspections, additional reporting requirements, and surety bonds, if the Secretary determines that certain affiliations pose a risk of fraud, waste, and 

abuse. The provision would also provide the Secretary with the authority to deny enrollment in Medicare, Medicaid, or CHIP in instances when at least one affiliation or affiliations poses a serious 

risk of fraud, waste or abuse. 

Reason for Change 

The new provision will allow the Secretary to take into account 

past affiliations with persons or entities that owe or posed past risk 

to the program, and will allow the Secretary to take steps to protect the program. 

Effective Date 

These amendments apply to applications submitted after July 1, 

2011. 

Sec. 1633. Required Inclusion of Payment Modifier for Certain 

Evaluation and Management Services 

Current Law 

Evaluation and management services include certain primary 

care services, hospital inpatient medical services, consultations, 

other visits, preventive medicine visits, psychiatric services, emergency care facility services, and critical care services. 

Proposed Law 

The provision would require the Secretary to establish a payment 

modifier for evaluation and management services that result in the 

ordering of additional services (i.e. lab tests), prescription drugs, 


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durable medical equipment, or other services determined by the 

Secretary to be at high risk of fraud, waste, and abuse. The Secretary would be authorized to require providers and suppliers to report the payment modifier on claims. 

Reason for Change 

The new payment modifier will allow for greater analysis and 

data collection in areas at risk of fraud and abuse. 

Effective Date 

Date of enactment. 

Sec. 1634. Evaluations and Reports Required Under Medicare Integrity Program. 

Current Law 

Medicare statute authorizes the establishment of the MIP program. MIP requires the Secretary to enter into contracts with private entities to conduct a variety of program integrity activities for 

the Medicare program including auditing providers, reviewing 

claims for medical necessity, and identifying and investigating alleged fraud. MIP was established along with the HCFAC program 

by HIPAA, which sought to increase and stabilize federal funding 

for health care anti-fraud activities. 

Established by the DRA, the Medicaid Integrity Program is modeled after Medicare’s MIP program. The Medicaid Integrity Program provides HHS with dedicated resources to promote Medicaid 

integrity to contract with entities to reduce fraud, waste, and abuse 

and to add 100 full-time equivalent staff. Annual reports to Congress on program accomplishments and use of funds are required. 

In addition, the Secretary is required to develop comprehensive 5– 

year plans for the program. 

Proposed Law 

For the contract year beginning in 2011, this provision would require MIP contractors to assure the Secretary that they will conduct periodic evaluations of the effectiveness of their activities. Annual reports would be required to be submitted to the Secretary. 

A similar provision with respect to the Medicaid Integrity Program 

would be included in Section 1752 of this bill. 

Reason for Change 

The new provision will incease the accountability and effectiveness of MIP contractors. 

Effective Date 

Date of enactment. 

Sec. 1635. Require Providers and Suppliers to Adopt Programs to 

Reduce Waste, Fraud, and Abuse 

Current Law 

Since 1998, the OIG has been issuing a series of compliance guidance documents for providers participating in federal health care 

programs to assist in preventing fraud, waste, and abuse. The purpose of the documents is to encourage health care providers to 


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adopt compliance programs and internal control measures to monitor their adherence to applicable rules, regulations, and requirements. The adoption of these programs is not mandatory. There is 

no current law explicitly directing health care providers to adopt 

compliance programs. 

Proposed Law 

This provision would require providers and suppliers to establish 

compliance programs to reduce fraud, waste, and abuse. Providers 

and suppliers that do not meet requirements for establishing these 

programs would be subject to certain sanctions. The provision 

would also authorize the Secretary to conduct a pilot program, 

prior to mandating these requirements to all providers, to test the 

establishment of compliance programs for providers that the Secretary has determined to be a high risk for fraud, waste, and 

abuse. 

The Secretary, in consultation with the OIG, would be required 

to establish the core requirements for provider compliance programs. Requirements may include written policies, procedures, and 

standards of conduct; a designated compliance officer and compliance committee; training and education on fraud, waste and abuse 

for employees and contractors; a confidential mechanism (i.e. hotline) for receiving compliance questions and reports; guidelines for 

enforcing standards; internal monitoring and auditing procedures 

applicable to providers and contractors; and procedures for (1) ensuring prompt responses to detected and potential offenses, (2) developing corrective action initiatives, and (3) returning all identified Medicare, Medicaid, and CHIP overpayments. The Secretary 

would be required to develop a timeline for the establishment of 

these requirements and the date by which providers and suppliers 

would be required to have a compliance program in place. 

The CMS Administrator would have the authority to assess 

whether or not a provider or supplier has met these requirements 

and impose a CMP of up to $50,000 for each violation. The Secretary would have the authority to impose other intermediate sanctions, such as corrective action plans and additional monitoring, on 

providers and suppliers for failing to meet these requirements. The 

provision would also give the Secretary the authority to disenroll 

a Medicare provider or supplier or impose a CMP or intermediate 

sanction on any provider or supplier who fails to establish a compliance program. 

The provisions of this section would not apply to individual physicians or skilled nursing facilities, although skilled nursing facilities would be required to develop compliance programs under Section 1412 of this Act. 

Reason for Change 

The new provisions will improve compliance and accountability of 

Medicare providers and suppliers. 

Effective Date 

Date of enactment. 


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Sec. 1636. Maximum Period for Submission of Medicare Claims Reduced to Not More Than 12 Months 

Current Law 

Medicare statute requires that payments only be made, except in 

certain circumstances, to Medicare eligible providers and only if a 

written request for payment is filed within three calendar years 

after the year in which the services were provided. The Secretary 

is authorized to reduce this period to no less than one year if it 

deems it necessary for the efficient administration of the program. 

As established by CMS regulations, in general, the time limit on 

submitting a claim for payment is the close of the calendar year 

after the year in which the services were furnished. For services 

furnished in the first nine months of the year, claims must be submitted on or before December 31st of the following year. For services furnished in the last three months of a calendar year, claims 

must be submitted to the contractor on or before December 31st of 

the second year following the year services were furnished. 

Proposed Law 

The provision would reduce the time period for filing a written 

request for payment from three calendar years to one calendar year 

for services provided under Medicare Parts A and B. The Secretary 

would have the authority to specify exceptions to this one year period. The provision would eliminate the current statutory requirement that the Secretary must give Medicare Part A and B eligible 

providers at least one year to submit a claim for payment. The provision would also add a new requirement for MA and PDP plans. 

Contracts with MA organizations and PDP sponsors would be required to mandate that any provider under contract with, in partnership with, or affiliated with the MA organization or PDP sponsor ensure that a written request for payment be submitted no 

later than one calendar year after the date the services were furnished. The Secretary would have the authority to specify exceptions to this one year period. 

The provision would apply to services furnished on or after January 1, 2011. 

Reason for Change 

CMS has found that the current 36–month period for filing 

claims leads to fraudulent gaming of payment systems. Legitimate 

filers do not need this extended time to file claims—they prefer to 

receive payment sooner rather than later, while those persons and 

entities undertaking fraudulent filing will use the long period to 

watch to see which claims are approved and tailor their filings to 

reflect that. The reduced time for claims filing will reduce fraudulent claims. 

Effective Date 

These amendments apply to items and services furnished on or 

after January 1, 2011. 


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Sec. 1637. Physicians who Order Durable Medical Equipment or 

Home Health Services Required to be Medicare Enrolled Physicians or Eligible Professionals 

Current Law 

Medicare statute defines eligible professional as a physician, certain types of practitioners (i.e. physician assistant, nurse practitioner, clinical social worker, and others), a physical or occupational therapist, qualified speech language pathologist, or a qualified audiologist. 

CMS has implemented regulations requiring Medicare providers 

and suppliers to submit an application to enroll in the Medicare 

program in order to receive billing privileges. Providers and suppliers must resubmit and recertify the accuracy of their enrollment 

information every 5 years. CMS may deny a provider or supplier’s 

enrollment in Medicare or revoke a provider’s billing privileges for 

the following reasons: non-compliance with enrollment requirements, exclusion from participation in Federal health care programs, conviction of a felony, or the submission of false or misleading information on the enrollment application. 

In order to receive payment from Medicare, physicians are required to certify that specified services (i.e. inpatient psychiatric 

services, post-hospital extended care services, and home health 

services) meet certain conditions. In the case of home health services, physicians are required to certify that such services were required because the individual was confined to his home and needs 

skilled nursing care or physical, speech, or occupational therapy; a 

plan for furnishing services to the individual has been established; 

and such services were provided under the care of a physician. 

In the case of DME, the Secretary is authorized to require, for 

specified covered items, that payment be made for items and services only if a physician has communicated to the supplier a written 

order for the item. 

Proposed Law 

Beginning January 1, 2010, this provision would require physicians who order durable medical equipment or home health services to be a Medicare eligible professional or enrolled in the Medicare program. The Secretary would have the authority to extend 

these requirements to other Medicare items and services, including 

covered Part D drugs, based on a determination that such application would help to reduce the risk of fraud, waste, and abuse. 

Reason for Change 

The new requirement that physicians ordering DME or home 

health services be Medicare-enrolled will ensure that all physicians 

prescribing these services undergo the new screening requirements 

provided in this section, and will reduce waste, fraud, and abuse. 

Effective Date 

Date of enactment. 


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Sec. 1638. Requirement for Physicians to Provide Documentation on 

Referrals to Programs at High Risk of Waste and Abuse 

Current Law 

OIG has ‘‘permissive’’ authority to exclude an entity or an individual from a federal health program under numerous circumstances, including failing to supply documentation related to 

payment for items and services. 

Proposed Law 

Beginning January 1, 2010 the Secretary would have the authority to disenroll, for no more than one year, a Medicare enrolled 

physician or supplier that fails to maintain and provide access to 

written orders or requests for payment for DME, certification for 

home health services, or referrals for other items and services as 

specified by the Secretary. Medicare providers would be required to 

maintain and provide access to documentation relating to written 

orders or requests for payment for DME, certifications for home 

health services, or referrals for items and services as specified by 

the Secretary. The provision would also extend the OIG’s permissive exclusion authority to include individuals or entities that 

order, refer, or certify the need for health care services that fail to 

provide adequate documentation to the Secretary to verify payment. 

Reason for Change 

The new requirement will improve the quality of documentation 

provided for areas at risk for waste, fraud, and abuse. 

Effective Date 

These amendments apply to orders, certifications, and referrals 

made on or after January 1, 2010. 

Sec. 1639. Face to Face Encounter with Patient Required Before 

Physicians May Certify Eligibility for Home Health Services or 

Durable Medical Equipment under Medicare 

Current Law 

Home health services are covered under Medicare Parts A and 

B. In order to receive payment from Medicare, physicians are required to certify and re-certify that specified services (i.e. inpatient 

psychiatric services, post-hospital extended care services, and home 

health services) meet certain conditions. In the case of home health 

services, physicians are required to certify that such services were 

required because the individual was confined to his home and 

needs skilled nursing care or physical, speech, or occupational therapy; a plan for furnishing services to the individual has been established; and such services were provided under the care of a physician. 

In the case of DME, the Secretary is authorized to require, for 

specified covered items, that payment be made for items and services only if a physician has communicated to the supplier a written 

order for the item. 


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Proposed Law 

This provision would require that after January 1, 2010, physicians have a face-to-face encounter (including through telehealth 

and other than with respect to encounters that are incident to services involved) with the individual prior to issuing a certification or 

re-certification for home health services or durable medical equipment as a condition for payment under Medicare Parts A and B. 

The provision would also apply to physicians making home health 

certifications in Medicaid and CHIP. Physicians must document 

that they had the face-to-face encounter with the individual during 

the 6–month period preceding the certification, or other reasonable 

timeframe as determined by the Secretary. 

The Secretary would be authorized to apply the face-to-face encounter requirement to other Medicare items and services based 

upon a finding that doing so would reduce the risk of waste, fraud, 

and abuse. 

Reason for Change 

The new requirement will ensure that a physician oversees the 

prescription of services in areas of high risk. 

Effective Date 

These amendments apply to certifications or recertifications 

made after January 1, 2010. 

Sec. 1640. Extension of Testimonial Subpoena Authority to Program 

Exclusion Investigations 

Current Law 

Section 1128 of the SSA provides that the Secretary (and through 

delegation, OIG) has the authority to exclude individuals and entities from participation in federal health care programs under a variety of circumstances. Exclusion is mandatory for those convicted 

of certain criminal offenses, and generally the exclusion cannot be 

for a period of less than five years. OIG also has permissive authority under numerous circumstances to exclude an individual or entity from a federal health program, including the discretion to determine whether and for how long to impose an exclusion. 

Proposed Law 

The provisions of 205(d) and (e) of the SSA would apply with respect to the Secretary’s program exclusion authority. The Secretary 

would be able to issue subpoenas and require the attendance and 

testimony of witnesses and the production of any other evidence 

that relates to matters under investigation or in question by the 

Secretary. The Secretary would also have the ability to delegate 

this authority to the OIG and the Administrator of CMS for the 

purposes of a program exclusion investigation. Certain requirements regarding the serving of subpoenas and compensation for 

subpoenaed witnesses may apply. This section would also provide 

for judicial enforcement of subpoenas, including in cases where a 

person refuses to obey a properly served subpoena. This provision 

would apply to investigations beginning on or after January 1, 

2010. 


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Reason for Change 

The new provision will increase the ability of the Secretary to 

conduct investigations and reduce waste, fraud, and abuse. 

Effective Date 

These amendments apply to investigations beginning on or after 

January 1, 2010. 

Sec. 1641. Required Repayments of Medicare and Medicaid Overpayments 

Current Law 

The Secretary is authorized to enter into contracts with private 

entities to conduct administrative functions, including audits of 

Medicare participating providers and suppliers to identify alleged 

overpayments. These entities are generally referred to as Medicare 

program integrity or MIP contractors. 

Medicare statute specifies that identified overpayments to providers or suppliers that are not paid within 30 days of the date of 

the overpayment determination will accrue interest on the balance 

of the overpayment at the rate applicable to late payments established by the Secretary of the Treasury. The Secretary is required 

to enter into repayment plans with providers for which payment 

within 30 days would constitute a financial hardship. In the case 

of a provider or supplier for which an overpayment has been identified seeks a reconsideration (the 2nd level of the Medicare appeals 

process), the Secretary is prohibited from recouping the overpayment until a decision on the reconsideration has been rendered. 

Proposed Law 

This provision would require the repayment of overpayments 

identified through an internal audit by Medicare and Medicaid participating providers, including private health plans. The term 

‘‘overpayment’’ would be defined as any funds that a person receives or retains under Medicare or Medicaid of which they are not 

entitled. Person would be defined as any ‘‘person’’ including a provider of services, supplier, Medicaid managed care organization, 

MA organization, or PDP sponsor. Any person who knows of an 

overpayment would be required to report and return the overpayment, along with notification for the reason for the overpayment, 

to the Secretary, the State, an intermediary, a carrier, or a contractor. ‘‘Knows,’’ which is referred to as knowing and knowingly in 

the statute, means that a person with respect to information has 

actual knowledge of the information, acts in deliberate ignorance of 

the truth or falsity of the information, or acts in reckless disregard 

of the truth or falsity of the information. An overpayment is defined as any finally determined funds that a person receives or retains under Medicare, Medicaid, or CHIP to which the person, after 

applicable reconciliation is not entitled. The reference to applicable 

reconciliation in this definition refers to reconciliations procedures 

that may already be in place for the relevant programs and payments, and is not intended to create any new required reconciliation procedures or rights to reconciliation or appeal. Overpayments would be required to be reported and returned within 60 

days of the date of the overpayment determination. Overpayments 


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returned after the 60 days would create an obligation as defined in 

section 3729(b)(3) of title 31 of the U.S.C. If it is determined that 

the reason for the overpayment was related to fraud, repayment 

would not limit the provider or supplier’s liability for additional administrative obligations such as interest, fines, specialties, or civil 

and criminal sanctions. 

Reason for Change 

The new requirement will encourage the timely repayment of 

overpayments. 

Effective Date 

Date of enactment. 

Sec. 1642. Expanded Application of Hardship Waivers for OIG Exclusions to Beneficiaries of any Federal Health Care Program 

Current Law 

Under section 1128 of the SSA, the Secretary (and, through delegation, OIG) has the authority to exclude individuals and entities 

from participation in federal health care programs. Exclusions from 

federal health programs are mandatory under certain circumstances, and permissive in others (i.e., OIG has discretion in 

whether to exclude an entity or individual). For purposes of section 

1128, the term ‘‘federal health care program’’ means (1) any plan 

or program that provides health benefits, whether directly, through 

insurance, or otherwise, which is funded directly, in whole or in 

part, by the United States Government other than the health insurance program under chapter 89 of title 5, United States Code 

(governing health insurance for federal employees); or (2) any State 

health care program, as defined by the Social Security Act. 

Subject to exceptions, in the case of a mandatory exclusion, the 

minimum period of exclusion cannot be less than five years. However, under section 1128(c)(3)(B) of the Social Security Act, upon 

the request of a federal health care program administrator who determines that the exclusion would impose a hardship on individuals entitled to benefits under Medicare Part A or enrolled under 

Medicare Part B (or both), the Secretary may waive the exclusion 

under certain circumstances with respect to that program, in the 

case of an individual or entity that is the sole community physician 

or sole source of essential specialized services in a community. 

Proposed Law 

Under section 1128(c)(3)(B) of the SSA, the Secretary would, in 

accordance with the requirements of the section, be able to waive 

a mandatory exclusion period where a hardship is imposed on 

beneficiaries of federal health care programs, in addition to Medicare Part A and Part B beneficiaries. 

Reason for Change 

The new section increases the ability for the Secretary to use discretion to protect beneficiaries. 

Effective Date 

Date of enactment. 


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Sec. 1643. Access to Certain Information on Renal Dialysis Facilities 

Current Law 

No provision. 

Proposed Law 

This provision would require End State Renal Disease Facilities 

to provide the Secretary with access to information relating to any 

ownership or compensation arrangement between the facility and 

the medical director of such facility or between the facility and any 

physician for the purposes of an audit or evaluation. 

Reason for Change 

The Committee has been very concerned for several years about 

the financial relationships between medical directors and the dialysis organizations where they serve and the extent to which prescribing decisions are influenced by those financial arrangements 

or are independent of dosing guidelines, standards, protocols, and 

algorithms created by dialysis organizations. This authority is necessary so that the OIG may properly investigate these issues. 

Effective date 

Date of enactment. 

Sec. 1644. Billing Agents, Clearinghouses, or Other Alternate Payees 

Required to Register Under Medicare 

Current Law 

CMS has implemented regulations requiring Medicare providers 

and suppliers to submit an application to enroll in the Medicare 

program in order to receive billing privileges. Providers and suppliers must resubmit and recertify the accuracy of their enrollment 

information every 5 years. The enrollment application requires that 

providers and suppliers include the names, addresses, and tax ID 

numbers for billing agencies on their applications. 

Proposed Law 

Beginning January 1, 2012, this provision would require billing 

agencies, clearinghouses, or other payees that submit claims on behalf of a health care provider to register with the Secretary in a 

form and manner as determined by the Secretary. A similar provision is put in place with respect to the Medicaid program by section 

1759 of this Act. 

Reason for Change 

By requiring that payees under Medicare are enrolled in the program, these entities will be subject to the enhanced screening procedures established in this section, which will reduce waste, fraud, 

and abuse in the program. 

Effective date 

This section applies to claims submitted on or after January 

2012. 


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Sec. 1645. Conforming CMPs to False Claims Act Amendments 

Current Law 

Section 1128A(a) of the SSA authorizes the imposition of CMPs 

on any person, including an organization, agency, or other entity, 

who engages in various types of improper conduct with respect to 

federal health care programs. Under 1128A(a)(1), CMPs may be imposed on any person who knowingly presents or causes to be presented to certain government officers, employees, agents, or agencies certain false or fraudulent claims for items or services. As defined by section 1128A(i), an item or service is defined to include 

any particular item, device, medical supply, or service purportedly 

provided to a patient and listed in an itemized claim for payment. 

A claim is defined by this section as an application for payments 

for items and services under a federal health care program. 

Section 1128A generally provides for monetary penalties of up to 

$10,000 for each item or service claimed, and $15,000 or $50,000 

under other circumstances, as well as additional assessments. 

Under Section 1128(a)(4), certain persons excluded from participating in Medicare or a State health care program who retain a direct or indirect ownership or control interest in an entity that is 

participating in Medicare or a State health care program and know 

or should know of the action constituting the basis for the exclusion, or who are an officer or managing such an entity, may be subject to civil penalties. 

Section 1128A(c)(1) of the SSA provides that the Secretary may 

initiate a proceeding to determine whether to impose a civil monetary penalty, assessment, or exclusion under the section only as authorized by the Attorney General pursuant to procedures agreed 

upon by them. The Secretary may not initiate an action with respect to any claim, request for payment, or other occurrence described in this section later than six years after the date the claim 

was presented, the request for payment was made, or the occurrence took place. 

The federal False Claims Act (FCA), codified at 31 U.S.C. 

§ § 3729–3733, provides for judicial imposition of CMPs and damages for the knowing submission of false claims to the United 

States government. The recently enacted Fraud Enforcement and 

Recovery Act of 2009 (FERA), P.L. 111–21, made several amendments to the False Claims Act that, according to legislative history, 

were intended to clarify the meaning of several provisions of the 

FCA in light of judicial interpretations of the statute that were said 

to run contrary to congressional intent and limit the scope of the 

law. Among the changes made by FERA, the Act removed a requirement under 30 U.S.C. 3729(a)(1) that provided that in order 

for liability to attach, a false claim must be presented ‘‘to an officer 

or employee of the United States Government or a member of the 

Armed Forces of the United States.’’ In addition, FERA expanded 

the definition of the term ‘‘claim’’ to include ‘‘any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money 

or property, that . . . is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, 


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and if the Government provided or has provided any portion of the 

money or property requested or demanded . . .’’. 

Proposed Law 

Similar to FERA, the bill would amend section 1128A(a)(1) to remove the requirement for presentment of a claim to a government 

officer, employees, agents, or agencies in order to be liable for 

CMPs. The bill would also expand the reach of section 1128A(a)(4), 

under which a person excluded from participating in a federal 

health care program (in addition to Medicare or a State health care 

program) who retains ownership in an entity participating in the 

program, or is an officer or managing employee of such an entity, 

would be subject to CMPs. The bill would create a new section 

1128A(a)(12), which would impose CMPs on a person who conspires 

to commit a violation of section 1128A. Persons violating section 

1128A(a)(12) would be subject to a $50,000 penalty for violations 

of the section and an additional assessment of no more than three 

times the total amount that would otherwise apply. In addition, a 

new section 1128A(a)(13) would provide that a person who knowingly makes, uses, or causes to be made or used, a false record or 

statement material to an obligation to pay or transmit money or 

property to a federal health care program, or knowingly conceals or 

knowingly and improperly avoids or decreases an obligation to pay 

or transmit money or property to a federal health care program can 

be subject to CMPs. Penalties under this section would be $50,000 

for each false record or statement, concealment, avoidance, or decrease. Persons would also be subject to an assessment of no more 

than three times the total amount of the obligation under certain 

circumstances. 

Under section 1128A(c)(1), the Secretary could initiate a proceeding to determine whether to impose a civil monetary penalty, 

assessment, or exclusion for an occurrence up to ten years, instead 

of six, after the occurrence took place. 

The bill would also amend certain definitions in section 1128A(i). 

For example, under 1128(i)(2), the definition of a claim would be 

broadened to include any application, request, or demand, whether 

under contract, or otherwise, for money or property for items and 

services under a federal health care program, whether or not the 

United States or a State agency has title to the money or property, 

that is presented or caused to be presented to a government officer, 

employee, agent or agency. A claim under this section would also 

include applications, requests, or demands made to a contractor, 

grantee, or other recipient, if the money or property is to be spent 

or used on the federal health care program’s behalf or to advance 

a federal health care program interest, and if the federal health 

care program (1) provides or has provided any portion of the money 

or property requested or demanded; or (2) will reimburse such contractor, grantee, or other recipient for any portion of the money or 

property which is requested or demanded. In addition, an ‘‘item or 

service’’ would include, without limitation, any medical, social, 

management, administrative, or other item or service used in connection with or directly or indirectly related to a federal health 

care program. 


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Reason for Change 

The changes ensure consistency with amendments made recently 

to the False Calims Act. 

Effective date 

Date of enactment. 

Subtitle D—Access to Information Needed to Prevent Fraud and 

Abuse 

Sec. 1651. Access to Information Necessary to Identify Waste and 

Abuse 

Current Law 

Statutory offices of inspectors general (OIG) consolidate responsibility for audits and investigations within a federal agency. The Inspector General Act of 1978 and its amendments of 1988 granted 

inspectors general substantial independence and powers to carry 

out their mandate to combat waste, fraud, and abuse. In carrying 

out their functions, IGs have relatively unlimited authority, including subpoena power, to access all records and information of an 

agency. 

Every contract with a PDP or MA-PD (Medicare Advantage Prescription Drug Plan) is required to provide the Secretary with the 

right to inspect and audit any books and records of the plan related 

to costs. Information obtained or disclosed during an audit may be 

used by officers, employees, and HHS contractors for the purposes 

of conducting the audit only. 

Proposed Law 

The provision would establish that the Attorney General have access to all Medicare and Medicaid claims and payment databases 

facilitated by the OIG and in consultation with CMS or the owner 

of any such database. Access would be required to be carried out 

for the purposes of law enforcement activity and in a manner consistent with any applicable disclosure, privacy, and security laws, 

including the HIPAA and Privacy Act of 1974, and subject to any 

statutory information systems security requirements in statute or 

mandated by the Secretary. 

Reason for Change 

The provision clarifies access to Medicare and Medicaid claims 

and payment database in order to facilitate investigations and enforcement, and reduce waste, fraud, and abuse. 

Effective date 

Date of enactment. 

Sec. 1652. Elimination of Duplication Between the Healthcare Integrity and Protection Databank and the National Practitioner 

Databank 

Current Law 

Medicare statute requires the Secretary to develop and maintain 

a national health care fraud and abuse data collection program for 

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viders or suppliers. The OIG issues regulations implementing the 

Health Care Integrity and Protection Data Bank (HIPDB). The 

statute requires the following types of health care related adverse 

actions be reported—civil judgments, federal or state criminal convictions, actions taken by federal or state licensing agencies, and 

provider exclusions from Medicare and Medicaid. Only final adverse actions are reportable to the HIPDB. Administrative fines, citations, corrective action plans, and other personnel actions are not 

reportable except under certain circumstances. Settlements, in 

which a finding of liability has not been established, are also not 

reportable. Both federal and state government agencies as well as 

health plans are required to report to the HIPDB. Health plans 

that fail to report are subject to a civil monetary penalty of 

$25,000. The Secretary is authorized to charge fees to access information in the database. However, fees cannot apply to requests 

from federal entities. HIPDB cannot duplicate the reporting requirements established for the National Practitioner Data Bank. 

Title IV of the Health Care Quality Improvement Act of 1986, as 

amended, established the National Practitioner Data Bank 

(NPDB). The NPDB collects and releases data related to the professional competence of physicians, dentists, and certain healthcare 

practitioners. The types of information included in the NPDB are 

medical malpractice payments, certain adverse licensure actions, 

adverse clinical privileging actions, adverse professional society 

membership actions, and exclusions from Medicare and Medicaid. 

The statute defines the entities eligible to report and query the 

databank. Malpractice payers that fail to report are subject to a 

civil monetary penalty. Section 1921 of the Social Security Act expanded the scope of reporting requirements for the NPDB to encompass additional adverse licensure actions and actions taken by 

State licensing and certification agencies, peer review organizations, and private accreditation organizations. Section 1921 also required that actions taken against all health care practitioners be 

included in the databank. States are required to have a system for 

reporting adverse actions to the NPDB. Both databases are overseen by the Health Resources and Services Administration (HRSA) 

within HHS. 

Proposed Law 

Upon enactment of this Act, this provision would require the Secretary to establish a process to terminate the HIPDB. The Secretary would be required to ensure that the information that was 

formerly collected in the HIPDB is transferred to the NPDB. Requirements pertaining to the establishment of the HIPDB, such as 

rules for reporting information, the types of information that are 

reported, and rules for disclosure, would all apply to the NPDB 

upon termination of the HIPDB. The provision would eliminate the 

OIG’s responsibility for reporting adverse actions to the database. 

After the Secretary certifies that the transition of information from 

the HIPDB to the NIPD is complete, any fees charged by the Secretary for access to the database would apply to federal agencies. 

The Department of Veterans Affairs (VA) would be exempted from 

these charges for one year. The transition would be funded from 

the fees collected to access the database and from additional 

amounts as necessary from the annual HCFAC appropriation availVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00512 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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able to the Secretary and the OIG. Funding would be available for 

one year after the enactment date of this legislation. 

Reason for Change 

The section establishes a timeline for the process already underway of consolidating databases. This will ensure the efficient use 

of resources and greater access to data necessary for preserving 

program integrity. 

Effective date 

Upon certification by the Secretary according to the provision or 

the first day of the second year after enactment. 

Sec. 1653. Compliance with HIPAA Privacy and Security Standards 

Current Law 

The HIPAA Privacy and Security Rules were promulgated by 

HHS pursuant to sections 262(a) and 264 of the Health Insurance 

Portability and Accountability Act of 1996 (HIPAA) to establish national standards for the privacy and security of protected health information. 

The HIPAA Privacy and Security Rules apply primarily to covered entities—health plans, health care clearinghouses, and health 

care providers who transmit financial and administrative transactions electronically. Failure to comply with these regulations may 

result in civil or criminal penalties for covered entities. The 

HITECH Act, enacted as part of the American Recovery and Reinvestment Act, extends civil and criminal liability to business associates of covered entities for violations that occur on or after February 17, 2010. Business associates are defined as persons who perform, or assist in the performance of a function or activity involving 

the use or disclosure of individually identifiable health information 

on behalf of a covered entity. Examples of business associates include persons who perform legal, actuarial, accounting, consulting, 

data aggregation, management, administrative, accreditation, or financial services to or for such covered entity where the provision 

of the service involves the disclosure of individually identifiable 

health information from such covered entity or arrangement, or 

from another business associate of such covered entity or arrangement, to the person. 

The HIPAA Privacy Rule governs the disclosure of protected 

health information (PHI)—that is, individually identifiable health 

information ‘‘created or received by a [covered entity]’’ that 

‘‘[r]elates to the . . . health or condition of an individual’’ or to the 

provision of or payment for health care. A covered entity is permitted to use or disclose PHI without patient authorization for 

treatment, payment, or health care operations. For other purposes, 

a covered entity may only use or disclose PHI with patient authorization subject to certain exceptions. Exceptions permit the use or 

disclosure of PHI without patient authorization or prior agreement 

for public health, judicial, law enforcement, and other narrow purposes. The HIPAA Privacy Rule also requires covered entities and 

business associates to provide an accounting of certain disclosures; 

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sure; and to provide a notice of their privacy practices. Individuals 

also have a right to review and obtain copies of their PHI and to 

request corrections. 

The HIPAA Security Rule, applies only to PHI in electronic form 

(EPHI), and requires a covered entity or business associate to 

maintain administrative, technical, and physical safeguards to ensure the confidentiality, integrity, and availability of all EPHI the 

covered entity creates, receives, maintains, or transmits. 

The HITECH Act will also impose a breach notification requirement that is triggered when unsecured PHI or EPHI is compromised. This requirement is applicable to both covered entities 

and business associates and will become effective 30 days after 

HHS issues final regulations implementing this requirement. 

The Privacy Act of 1974 generally prohibits disclosures of records 

contained in a system of records maintained by a federal agency 

without the written request or consent of the individual to whom 

the record pertains. A system of records is a group of records under 

the control of an agency from which information is retrieved by the 

name of the individual or by some identifier assigned to the individual, such as a Social Security Number. The Privacy Act contains 

certain statutory exceptions, and a list of agency systems of 

records, including the routine uses of those records, is published in 

the Federal Register. 

Proposed Law 

The provision would mandate compliance with HIPAA privacy 

and security requirements and the Privacy Act of 1974 in carrying 

out the provisions of this subtitle. 

Reason for Change 

The provision clarifies that all provisions must protect privacy 

and security as outlined in HIPAA. 

Effective date 

Date of enactment. 

TITLE VII—MEDICAID AND CHIP 

(Not Within the Jurisdiction of the Committee on Ways and 

Means) 

TITLE VIII—REVENUE-RELATED PROVISIONS 

A. DISCLOSURES TO FACILITATE IDENTIFICATION OF INDIVIDUALS

LIKELY TO BE INELIGIBLE FOR LOW-INCOME SUBSIDIES UNDER THE

MEDICARE PRESCRIPTION DRUG PROGRAM TO ASSIST SOCIAL SECU- RITY ADMINISTRATION’S OUTREACH TO ELIGIBLE INDIVIDUALS

(Sec. 1801 of the bill and Sec. 6103(0(19) of the Code) 

PRESENT LAW

Outreach efforts to increase awareness of the availability of Part D 

subsidies for low-income individuals 

Under Medicare Part D (the prescription drug program), beneficiaries with incomes and assets below certain levels may be eligible for Low Income Subsidy (‘‘LIS’’) benefits. Section 1144 of the SoVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00514 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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174Documents which may be disclosed under this provision include but are not limited to: 

• Schedule C, Form 1040, Profit (or Loss) from Business or Profession 

• Schedule E, Form 1040, Supplemental Income Schedule-Part 111, Income or Loss from Partnerships • Schedule F, Form 1040, Farm Income and Expenses • Schedule SE, Form 1040, Computation of Social Security Self-Employment Tax • Form 1065, U.S. Partnership Return of Income • Form 941, Employer’s Quarterly Federal Tax Return • Form 942, Employer’s Quarterly Tax Return for Household Employees or portions Schedule 

H, Form 1040 • Form 943, Employer’s Annual Tax Return for Agricultural Employees • Form W–2, Wage and Tax Statement. 

See Internal Revenue Service, Internal Revenue Manual, sec. 11.3.29.3—Administration of the 

Social Security Act—Social Security Administration (May 27, 2005). 175The information returns that may be disclosed under section 6103(1)(5) are those filed 

under Part Subchapter A, Chapter 61 of the Code. These include, primarily, Form W–2, Form 

W–3, and Form 1099–R. See Internal Revenue Service, Internal Revenue Manual, sec. 

11.3.29.3.2—Disclosure of Information Returns to Social Security Administration (May 27, 

2005). 176Sec. 6103(1)(20). 

cial Security Act requires the Commissioner of Social Security to 

conduct outreach efforts to inform potential LIS beneficiaries about 

the additional premium and cost-sharing subsidies. The Social Security Administration (‘‘SSA’’), from its own records and other nontax records available to SSA, is able to determine a potential pool 

of LIS beneficiaries, but such pool includes many persons ineligible 

for the LIS benefits due to excess income or resources. 

For example, prior to the beginning of the Part D program, SSA 

identified and conducted outreach to 18.6 million potentially eligible individuals; of these, 6.2 million applied by March 2007 and 2.2 

million were found to be eligible. The Centers for Medicare and 

Medicaid Services (‘‘CMS’’) believes that some of the remaining 

12.4 million that did not apply could be eligible for LIS benefits. 

The SSA has contacted these individuals a number of times, but 

has had limited success identifying additional potentially eligible 

individuals and securing applications from them. 

Confidentiality of returns and return information 

Section 6103 provides that returns and return information are 

confidential and may not be disclosed by the IRS, other Federal 

employees, State employees, and certain others having access to 

such information except as provided in the Code. Section 6103 contains a number of exceptions to the general rule of nondisclosure 

that authorize disclosure in specifically identified circumstances. 

For example, the Code provides for the disclosure of returns and 

return information to the SSA for several nontax administration 

purposes. For purposes of administering the Social Security Act, 

section 6103(1)(1)(A) authorizes the disclosure to the SSA of returns and return information relating to self-employment taxes, 

Federal Insurance Contributions Act taxes, and taxes withheld at 

the source on wages.174 Section 6103(1)(5) provides for the disclosure to the SSA of certain information returns for purposes of carrying out an effective return processing program, the Combined 

Annual Wage Reporting Program, and for providing mortality status of individuals for certain epidemiological and similar research.175 In addition, the Code provides for the disclosure of certain return information for purposes of establishing the appropriate 

amount of any Medicare Part B Premium Subsidy Adjustment.176

A December 2008 Treasury study conducted jointly with the SSA 

found that certain income information in IRS’s possession, and, 


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177Department of the Treasury, Office of Tax Analysis, Value of IRS Information for Determining Eligibility for the Low Income Subsidy Program (LIS) of the Medicare Prescription Drug 

Program (Medicare Part D) (December 2008) at 1 and 3. 

through imputation, some asset information, could be used to narrow the pool of potentially eligible LIS beneficiaries identified by 

the SSA, thereby allowing the SSA to better target its outreach efforts. Specifically, tax information could be used to screen out some 

individuals whose income or resources make them likely to be ineligible for LIS benefits.177

REASONS FOR CHANGE

The Committee believes additional income and asset information 

will assist the SSA in narrowing the pool of identified individuals 

by excluding those persons likely to ineligible for LIS benefits. 

With a narrower pool, the SSA could better target its future efforts 

toward those individuals more likely to be eligible and not expend 

resources contacting persons that tax records indicate are probably 

ineligible for LIS benefits. 

EXPLANATION OF PROVISION

Under the provision, upon written request from the Commissioner of Social Security, officers and employees of the SSA will 

have access to the following information (including information 

available under sections 6103(l)(1) and (l)(5)) with respect to any 

individual identified by the Commissioner of Social Security: 

1. return information for the applicable year from returns 

with respect to wages and payments of retirement income; 

2. unearned income information and income information of 

the taxpayer from partnerships, trusts, estates, and subchapter 

S corporations for the applicable year; 

3. if the individual filed an income tax return for the applicable year, the filing status, number of dependents, income from 

farming, and income from self employment on such return; 

4. if the taxpayer’s return status was married filing separately, the social security number of the taxpayer’s spouse; 

5. if the taxpayer filed a joint return, the social security 

number, unearned income information, and income information 

from partnerships, trusts, estates, and Subchapter S corporations of the taxpayer’s spouse; and 

6. such other return information relating to the taxpayer 

(and, in the case of a joint return, the taxpayer’s spouse) as is 

prescribed by the Secretary by regulation as might indicate 

that the taxpayer is likely to be ineligible for a low-income prescription drug subsidy under section 1860D–14 of the Social 

Security Act. 

For purposes of the provision, ‘‘applicable year’’ means the most 

recent taxable year for which information is available in the IRS’s 

taxpayer information records. Under the provision, the SSA may 

only request tax information with respect to individuals the SSA 

has identified, through the use of all other reasonably available information, as likely to be eligible for a low-income prescription drug 

subsidy under section 1860D–14 of the Social Security Act and who 

have not applied for such subsidy. In the case of an identified individual whose return status was married filing separately and 


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whose spouse was not identified by the SSA as likely to be eligible 

for a low-income prescription drug subsidy, the SSA may make a 

separate request for information related to such spouse. 

The information disclosed under the provision can only be used 

by the SSA for purposes of identifying those individuals likely to 

be ineligible for a low-income prescription drug subsidy for purposes of its outreach efforts under section 1144 of the Social Security Act. 

EFFECTIVE DATE

The provision is effective for disclosures made after the date that 

is 12 months after the date of enactment. 

B. COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND; FINANCING

FOR TRUST FUND

(Sec. 1802 of the bill and new Secs. 4375, 4376, 4377, and 9511 of 

the Code) 

PRESENT LAW

No provision. 

REASONS FOR CHANGE

The Committee believes that comparative effectiveness research 

is a public good and that a sustained investment in such research 

is needed to improve the quality of information about the relative 

strengths and weaknesses of various health care items, services 

and systems to allow physicians and patients to make more informed health care decisions. To ensure that there are sufficient 

amounts of public and private funds dedicated to this purpose, and 

to insulate such funding from inappropriate outside influence, the 

Committee believes that it is appropriate to establish a trust fund, 

impose fees on health insurance plans and receive transfer payments from Medicare, and have such amounts in the fund dedicated to finance comparative effectiveness research. 

EXPLANATION OF PROVISION

In general 

The provision establishes the Health Care Comparative Effectiveness Research Trust Fund (‘‘CERTF’’) to carry out the provisions in 

the bill relating to comparative effectiveness research. 

The following amounts are appropriated to the CERTF: 

$90,000,000 for fiscal year 2010; $100,000,000 for fiscal year 2011; 

and $110,000,000 for fiscal year 2012. For each fiscal year beginning with fiscal year 2013, the amount appropriated to the CERTF 

is (1) an amount equal to the net revenues received in the Treasury 

from the fees imposed on health insurance and self-insured plans 

under new Code sections 4375, 4376 and 4377 for such fiscal year, 

and (2) amounts determined by the Secretary of Health and 

Human Services to be equivalent to the fair share per capita 

amount for the fiscal year multiplied by the average number of individuals entitled to benefits under Medicare part A, or enrolled 

under Medicare part B, for such fiscal year. The amount transferred under (2) is limited to $90,000,000. Net revenues means the 


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178 A specified health insurance policy does not include insurance if substantially all of the 

coverage provided under such policy consists of excepted benefits described in section 9832(c) 

of the Code. Examples of excepted benefits described in section 9832(c) are coverage for only 

accident, or disability insurance, or any combination thereof; liability insurance, including general liability insurance and automobile liability insurance; workers’ compensation or similar insurance; automobile medical payment insurance; coverage for on-site medical clinics; limited 

scope dental or vision benefits; benefits for long term care, nursing home care, community based 

care, or any combination thereof; coverage only for a specified disease or illness; hospital indemnity or other fixed indemnity insurance; and Medicare supplemental coverage. 179 Under the provision, the United States includes any possession of the United States. 

amount, as estimated by the Secretary of the Treasury, equaling 

the excess of the fees received in the Treasury on account of the 

new fee on health insurance and self-insured plans under new 

Code sections 4375, 4376 and 4377, over the decrease in tax imposed by chapter one of the Code relating to the fees imposed by 

such sections. 

The amounts appropriated for fiscal years 2011 through 2013, as 

well as the amounts transferred under (2), above, are to be transferred from the Federal Hospital Insurance Trust Fund and from 

the Federal Supplementary Medical Insurance Trust Fund, and 

from the Medicare Prescription Drug Account within such Trust 

Fund, in proportion to the total expenditures during such year that 

are made under Medicare for the respective trust fund or account. 

The fair share per capita amount is an amount computed by the 

Secretary of Health and Human Services for such fiscal year that 

will result in revenues to the CERTF of $375,000,000 for the fiscal 

year. If the Secretary is unable to compute the fair share per capita 

amount for a fiscal year, a default amount is used. The default 

amount is $2 for fiscal year 2013. For a subsequent year, the default amount is equal to the default amount for the preceding fiscal 

year increased by the annual percentage increase in the medical 

care component of the consumer price index for the 12–month period ending with April of the preceding fiscal year. Beginning not 

later than December 31, 2011, the Secretary of Health and Human 

Services must submit to Congress an annual recommendation for 

a fair share per capita amount for purposes of funding the CERTF. 

At least the following amounts in the CERTF must be available 

to carry out the activities of the Comparative Effectiveness Research Commission established under the bill: $7,000,000 for fiscal 

year 2010; $9,000,000 for fiscal year 2011; and $10,000,000 for each 

fiscal year beginning with 2012. 

Financing CERTF from fees on health plans 

As discussed above, the CERTF is funded in part from fees imposed on health plans under new Code sections 4375 through 4377. 

Under the provision, a fee is imposed on each specified health insurance policy equal to the fair share per capita amount multiplied 

by the average number of lives covered under the policy. The issuer 

of the policy is liable for payment of the fee. A specified health insurance policy includes any accident or health insurance policy 178

issued with respect to individuals residing in the United States.179

An arrangement under which fixed payments of premiums are received as consideration for a person’s agreement to provide or arrange for the provision of accident or health coverage to residents 

of the United States, regardless of how such coverage is provided 

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ance policy. The person agreeing to provide or arrange for the provision of coverage is treated as the issuer. 

In the case of an applicable self-insured health plan, a fee is imposed equal to the fair share per capita amount multiplied by the 

average number of lives covered under the plan. The plan sponsor 

is liable for payment of the fee. For purposes of the provision, the 

plan sponsor is: the employer in the case of a plan established or 

maintained by a single employer or the employee organization in 

the case of a plan established or maintained by an employee organization. In the case of (1) a plan established or maintained by two 

or more employers or jointly by one of more employers and one or 

more employee organizations, (2) a multiple employer welfare arrangement, or (3) a voluntary employees’ beneficiary association described in Code section 501(c)(9), the plan sponsor is the association, committee, joint board of trustees, or other similar group of 

representatives of the parties who establish or maintain the plan. 

In the case of a rural electric cooperative or a rural telephone cooperative, the plan sponsor is the cooperative or association. 

Under the provision, an applicable self-insured health plan is 

any plan providing accident or health coverage if any portion of 

such coverage is provided other than through an insurance policy 

if such plan is established or maintained (1) by one or more employers for the benefit of their employees or former employees, (2) 

by one or more employee organizations for the benefit of their 

members or former members, (3) jointly by one or more employers 

and one or more employee organizations for the benefit of employees or former employees, (4) by a voluntary employees’ beneficiary 

association described in section 501(c)(9) of the Code, (5) by any organization described in section 501(c)(6) of the Code, or (6) in the 

case of a plan not previously described, by a multiple employer welfare arrangement (as defined in section 3(40) of the Employee Retirement Income Security Act of 1974 (‘‘ERISA’’)), a rural electric 

cooperative (as defined in section 3(40) of ERISA), or a rural telephone cooperative association (as defined in section 3(40)(B)(v) of 

ERISA). 

Governmental entities are not exempt from the fees imposed 

under the provision except in the case of certain exempt governmental programs. Exempt governmental programs include Medicare, Medicaid, SCHIP, and any program established by Federal 

law for providing medical care (other than through insurance policies) to members of the Armed Forces, veterans, or members of Indian tribes. 

No amount collected from the fee on health insurance and self insurance plans is covered over to any possession of the United 

States. For purposes of the procedure and administration rules 

under the Code, the fee imposed under the provision is treated as 

a tax. 

EFFECTIVE DATE

The fee on health insurance and self-insured plans is effective 

with respect to policies and plans for portions of policy or plan 

years beginning on or after October 1, 2012. 


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TITLE IX—MISCELLANEOUS PROVISIONS 

Sec. 1901. Repeal of the Trigger Provision 

Current Law 

The Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds are overseen by a board of trustees which 

reports annually to Congress. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (P.L. 108–173, MMA), 

Subtitle A of title VIII requires the trustees’ report to include an 

expanded analysis of Medicare expenditures and revenues. Specifically, a determination must be made as to whether or not general 

revenue financing will exceed 45% of total Medicare outlays within 

the next seven years. General revenue financing is defined as total 

Medicare outlays minus dedicated financing sources (i.e., HI payroll taxes; income from taxation of Social Security benefits; state 

transfers for prescription drug benefits; premiums paid under Parts 

A, B, and D; and any gifts received by the trust funds). MMA requires that if an excess general revenue funding determination is 

made for two successive years, the President must submit a legislative proposal to respond to the warning. The Congress is required 

to consider the proposals on an expedited basis. However, passage 

of legislation within a specific time frame is not required. On January 6, 2009, the House approved a rules package (H.Res. 5) that 

nullifies the trigger provision in the House for the 111th Congress. 

Proposed Law 

The trigger provision would be repealed. 

Reason for Change 

The 45 percent threshold is an artificial and misleading measure 

of Medicare’s fiscal health. Its continuation builds a case for unnecessary and radical changes to the Medicare program and makes it 

more difficult to address any future funding shortfalls. 

Effective date 

Date of enactment. 

Sec. 1902. Repeal of the Comparative Cost Adjustment (CCA) Program 

Current Law 

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (P.L. 108–173, MMA) requires the Secretary to establish a program for the application of comparative cost adjustment (CCA) in CCA areas beginning in 2010. The six-year program 

will begin January 1, 2010, and end December 31, 2015. The program is designed to test direct competition among local MA plans, 

as well as competition between local MA plans and fee-for-service 

Medicare. This program will occur only in a limited number of 

statutorily qualifying areas in the country. 

The benchmark for MA local plans in a CCA area will be calculated using a formula that weights (1) the projected FFS spending in an area (with certain adjustments for demographics and 

health status) and (2) a weighted average of plan bids. 


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For Medicare beneficiaries in traditional Medicare, Part B premiums in CCA areas will be adjusted either up or down, depending 

on whether the FFS amount is more or less than the CCA area 

benchmark. If the FFS amount is greater than the benchmark, 

beneficiaries in traditional Medicare FFS will pay a higher Part B 

premium than other FFS beneficiaries in non-CCA areas. If the 

FFS amount is less than the benchmark, the Part B premium for 

FFS beneficiaries will be reduced by 75% of the difference. These 

increases and decreases are subject to a 5% limit; that is, adjustments to Part B premiums in CCA areas cannot exceed 5% of the 

national part B premium. Beneficiaries in traditional Medicare 

FFS with incomes below 150% of poverty, who qualify for low-income subsidies under the Medicare prescription drug program, will 

not have their Part B premium increased. 

Proposed Law 

The provision would repeal the comparative cost adjustment program. 

Reason for Change 

The CCA is an ideological attempt to fundamentally change 

Medicare from an entitlement to benefits to a defined contribution 

program. This concept was rejected by the Bipartisan Commission 

on the Future of Medicare in 1999. 

Effective date 

Date of enactment. 

Sec. 1903. Extension of Gainsharing Demonstration 

Current Law 

Section 5007 of the Deficit Reduction Act of 2005 (P.L.109–171; 

DRA) authorizes a gainsharing demonstration to evaluate arrangements between hospitals and physicians designed to improve the 

quality and the efficiency of care provided to beneficiaries. In the 

absence of this DRA authority, gainsharing arrangements are restricted by the Civil Monetary Penalty law. CMS is operating two 

projects, each consisting of one hospital in New York and West Virginia. Although authorized to begin on January 1, 2007, the project 

began on October 1, 2008 and will end as mandated on December 

31, 2009. The Secretary was required to submit a report on quality 

improvement and achieved savings as a result of the demonstration 

no later than December 1, 2009. The final report on these issues 

was due on May 1, 2010. The project was appropriated $6 million 

in FY2006 to be available for expenditure through FY2010. 

Proposed Law 

The authority to conduct the gainsharing demonstration would 

be extended until September 30, 2011. The due date of the quality 

improvement and achieved savings report would be extended from 

December 1, 2009, to March 31, 2011. The final report would be 

due March 31, 2013, instead of May 1, 2010. An additional $1.6 

million would be appropriated in FY2010. All appropriations would 

be available for expenditure through FY201. 


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Reason for change 

A key issue with many hospital-focused pay-for-performance initiatives is that physicians—crucial to generating changes in hospital care—often do not participate in the financial rewards of a 

hospital’s quality improvement efforts. The hospitals can increase 

quality improvement with close collaboration of physicians by reducing adverse events and reducing length of stay. The gainsharing 

demonstration project authorized in the DRA was delayed in its 

start by 21 months. This provision allows for completion of the 

project so Congress can have a full evaluation report on the arrangements between hospitals and physicians in the context of 

quality improvement and cost-control. 

Sec. 1904. Grants to States for Quality Home Visitation Programs 

for Families with Young Children and Families Expecting Children 

HOME VISITATION

Current Law 

Title IV–B of the Social Security Act authorizes formula grants 

to states, territories and tribes for the provision of a range of child 

and family services. Those services are generally intended to improve children’s safety, ensure them a permanent home, and, overall, support the well-being of children and their families. Subpart 

1 authorizes the Stephanie Tubbs Jones Child Welfare Services 

program. Subpart 2 authorizes the Promoting Safe and Stable 

Families program. Both programs are administered at the federal 

level by the Administration for Children and Families (ACF), within the U.S. Department of Health and Human Services (HHS). To 

receive funds under these programs states are required to submit 

state plans and to meet multiple requirements related to how the 

funds are used, including provision of certain protections for children in foster care (Subpart 1); expenditures of ‘‘significant’’ portions of funds for each of four broad categories of services to children and families: family support, family preservation, time-limited 

reunification, and adoption promotion and support (Subpart 2), and 

limits on spending for administrative purposes (both subparts). 

States must provide no less than 25% of the total program funding 

for child and family services under both of these programs. 

Title IV–B of the Social Security Act also authorizes funds for 

competitive grants to eligible entities to support child welfare related research and demonstration activities and Family Connections grants (Subpart 1) as well as Mentoring Children of Prisoners 

grants (Subpart 2). Funds appropriated for these purposes are also 

administered by HHS/ACF. 

Proposed Law 

Would create a new Subpart 3 of Title IV–B of the Social Security Act to provide funds to states, territories and tribes for the establishment and expansion of voluntary home visitation programs 

for families with young children (under school age) and families expecting children. The purpose of this support would be to improve 

the well-being, health, and development of children. The bill would 

appropriate a total of $750 million for this purpose over five years, 


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as follows: $50 million for FY2010; $100 million for FY2011; $150 

million for FY2012; $200 million for FY2013; and $250 million for 

FY2014. 

State Application and Reporting Requirements: To receive 

a grant, states, territories, and tribes would be required to submit 

an application containing: • A description of the programs to be supported, outcomes 

intended to be achieved and evidence to support effectiveness 

of the programs; • Results of a statewide needs assessment detailing currentservices, sources and amount of funding provided to these programs, capacity of home visitation programs, gaps in services, 

and training and technical assistance offered to support goals 

of current program; • An assurance that the state will identify and give priority 

to funding home visitation programs serving high-need communities; • An assurance that the state will reserve 5% of funding for 

training and technical assistance; • An assurance that the state will promote coordination and 

collaboration with other home visitation programs, child and 

family services, health services, and income supports, and 

other related assistance; and will support programs that provide referrals to other programs serving children and families, 

as appropriate; • An assurance that the state will submit an annual report 

to HHS describing services delivered by programs funded 

under this grant; and • An assurance that the state will cooperate with a national 

independent evaluation of the home visitation program conducted by HHS (or by another entity under contract with or via 

a grant from HHS). 

Maintenance of Effort: Beginning with FY2011, a state would 

not be eligible for these funds unless HHS determines that the 

state’s spending (i.e., aggregate expenditures from state and local 

sources) for home visitation programs serving families with young 

children or those expecting children was no less in the immediately 

preceding fiscal year than in the second preceding fiscal year. (For 

example, for a state to receive FY2011 funding, HHS would need 

to find that the state’s spending for home visitation in FY2010 was 

no less than it had been in FY2009; for a state to receive this home 

visitation funding in FY2012 funding, HHS must find that the 

state’s home visitation spending in FY2011 was no less than it had 

been in FY2010, etc.) 

Payments to States and Territories and State Match: HHS 

must make a grant to each state, territory, or tribe that submits 

an application meeting the specified requirements, provided that 

the state also meets the applicable maintenance of effort requirement. A state is entitled to an annual allotment of funds under this 

program that is equal to the amount appropriated for the home visitation program in a given year (minus funds reserved for training 

and technical assistance and for tribal home visitation programs) 

multiplied by the state’s relative share of all children in the nation 

who are living in families with income at or below 200% of the federal poverty line. From the available allotments for a given year, 


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the Secretary would award grants in an amount equal to the reimbursable percentage of the eligible expenditures for the state in a 

given year. The reimbursable percentage would be equal to 85% for 

FY2010; 80% for FY2011, 75% for FY2010 and any succeeding fiscal year. 

States may not use any federal funds to meet the state share of 

total spending. Any federal funds that a state certifies to HHS that 

it will not use may be re-allotted to other states. 

Eligible Expenditures: To be eligible for federal reimbursement, a state’s home visitation expenditures would need to be used 

only in support of voluntary home visitation programs for families 

with children under the age of entry to school or for families expecting children—provided those programs met certain criteria— 

and for training, technical assistance, and evaluations related to 

those programs. Also if a state had claimed reimbursement for a 

home visitation expenditure under another provision of federal law 

it could not also claim that expenditure for reimbursement under 

the home visitation program. 

Finally the bill provides that a declining share of expenditures 

for home visitation programs that do not meet the ‘‘strongest evidence of effectiveness’’ may be claimed as eligible expenditures. 

Specifically no more than 60% of a state’s total eligible home visitation expenditures in FY2010 may be for programs that do not meet 

the strongest level of evidence and this share declines by 5 percentage points each year until it reaches 40% in FY2014. 

Evaluation, Training and Technical Assistance: Five percent of federal funding for the program ($2.5 million, FY2010; $5.0 

million, FY2011; $7.5 million, FY2012; $10.0 million, FY2013; and 

$12.5 million, FY2014) must be reserved by HHS for— 

• training and technical assistance to states, including dissemination of best practices in early childhood home visitation; 

and 

• an independent evaluation (conducted by HHS, or by another entity under grant or contract with HHS) of the effectiveness of home visitation programs funded under this program. 

Tribal home visitation programs: After making reservation 

for evaluation, training and technical assistance, 3% of remaining 

funds are to be reserved for tribal home visitation programs 

($1.425 million, FY2010; $2.850 million, FY2011; $4.275 million, 

FY2012; $5.700 million, FY2013; $7.125 million, FY2014). The 

amount appropriated for tribal home visitation programs in a given 

year would be distributed based on a formula that takes into account the tribe’s relative share of all children in all Indian tribes 

who are living in families with income at or below 200% of the federal poverty line. Tribes must meet all of the grant application requirements and eligible expenditure rules made of states. However, 

HHS, generally, may waive or modify any other requirement for receipt of these home visitation funds, including the maintenance of 

effort requirement. For purposes of this program Indian tribes are 

defined to include any tribe, band, nation, or organized group or 

community of Indians that is federally recognized and for which 

there is a reservation (including Indian reservations, former Indian 

reservations in Oklahoma, and public domain Indian allotments), 

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eral program under the Indian Self-Determination and Education 

Assistance Act. 

State Reports and Reports to Congress: State’s receiving 

grants for nurse home visitation programs under this provision 

would be required to submit an annual report to the Secretary of 

HHS on the progress made by State in improving the well-being, 

health, and development of children through nurse home visitation 

programs. HHS would be required to provide an interim report on 

the independent evaluation of the home visitation program within 

three years of enactment of the home visitation program and a 

final report on the evaluation within five years. Further, HHS 

would be required to submit a report to Congress, annually, on activities carried out with funds provided under the home visitation 

program. 

Sec. 1905. Improved Coordination and Protection for Dual Eligibles 

Current Law 

There are no specific provisions in current law for coordination 

and protection of dual eligibles. 

Proposed Law 

The Secretary would be required to create an identifiable office 

or program within the Centers for Medicare and Medicaid Services 

(CMS) to improve coordination between Medicare and Medicaid 

and to improve protections for dual eligibles. Dual eligibles would 

be defined as individuals eligible for both Medicare and Medicaid 

and would include those individuals who are eligible for benefits 

under the Medicare Savings Program (MSP). The CMS office or 

program would: (1) review Medicare (Parts A, B, and C) and Medicaid policies on enrollment, benefits, service delivery, payment, 

and grievance and appeals processes; (2) identify areas of Medicare 

and Medicaid policies where better coordination or protection could 

improve care and reduce costs for duals; (3) issue guidance to 

states on how to improve coordination and protection for dual eligibles. 

The elements of improved coordination and protection would include efforts (1) to simplify dual eligibles’ access to benefits and 

services under Medicare and Medicaid, (2) to improve care continuity for dual eligibles and ensure safe and effective care transitions, (3) to harmonize regulatory conflicts between Medicare and 

Medicaid rules affecting dual eligibles, and (4) to improve Medicare 

and Medicaid’s combined total cost and quality performance for 

dual eligibles. 

The Secretary’s responsibilities for implementing the CMS office 

or program for coordination and protection for dual eligibles would 

include: (1) examination of Medicare and Medicaid payment systems to develop strategies to foster more integrated and higher 

quality care; (2) development of methods to facilitate dual eligibles’ 

access to post-acute and community-based services and to identify 

actions to improve coordination of community-based care; (3) a 

study of enrollment in MSP (for both Medicare and Medicaid) to 

identify methods to more efficiently and effectively reach and enroll 

dual eligibles; (4) an assessment of communication strategies aimed 

at dual eligibles, including the Medicare website, 1–800–MEDIVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00525 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

jbell on DSKDVH8Z91PROD with REPORTS
520 

CARE, and the Medicare handbook; (5) research and evaluation of 

areas where service utilization, quality, and access to cost sharing 

protection could be improved and an assessment of factors relating 

to enrollee satisfaction with services and delivery; (6) collection and 

dissemination to the public of data and a database that describes 

eligibility, benefits, and cost-sharing assistance available to dual 

eligibles by state; (7) monitoring total combined Medicare and Medicaid program expenditures in serving dual eligibles and making 

recommendations to optimize total quality and cost performance 

across both programs; and (8) coordination of Medicare Advantage 

plan activities under Medicare and Medicaid. 

Within one year after enactment of this provision and then every 

three years thereafter, the Secretary would be required to submit 

a report to Congress on the progress in improving coordination and 

protection for dual eligibles as described in this provision. 

Reason for Change 

Individuals who become dually eligible for Medicare and Medicaid—through age, disability or low income—are among the 

frailest and sickest beneficiaries. These nearly 9 million individuals 

are more likely than other Medicare beneficiaries to have low incomes, be disabled or in poor health, lack a high school diploma 

and live in an institution. Dual eligibles are more likely than nondually eligible Medicare beneficiaries to have a mental illness— 

33% of duals compared with 15% of non-duals are living with a 

mental illness—and have higher rates of diabetes, pulmonary disease, stroke and Alzheimer’s disease. These characteristics lead to 

high utilization and spending; in a year, 26% of dual eligibles had 

an inpatient hospital visit, compared with 16% of non-duals, and 

per capita spending on dual eligibles’ medical care is nearly five 

times higher than spending on non-dual eligibles. 

Medicare is the primary payer for dual eligibles’ health care and 

Medicaid fills in the gaps, including paying for Medicare premiums 

and cost sharing, and covering certain services not included in the 

Medicare benefit (e.g., long-term care). Though dual eligibles are 

served by both programs, there is very little coordination between 

Medicare and the 50 state Medicaid programs to ensure that individuals’ health needs are covered and services are coordinated. 

Furthermore, policy discussions around Medicare and Medicaid 

often occur in isolation, with little regard for coordinating the two 

programs. The Committee is concerned about this lack of coordination because of the serious implications it can have both for dual 

eligibles’ access to quality health care, and on spending in both programs. MedPAC has found that the current arrangement creates 

incentives for cost shifting between the programs and may be detrimental to quality care and access. 

The Committee believes that a dedicated office or program within 

CMS will allow for true program coordination between policymakers. The act specifies many areas which the Committee expects 

that coordination between programs would improve dual eligibles’ 

quality of care and may decrease costs to both programs, including 

outreach and communication policies, access to post-acute and community-based care and increased data collection and dissemination. 

Regular reports to the Congress will ensure that the Congress is 


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informed as to the progress made under this section and can take 

appropriate legislative actions. 

Effective Date 

Date of enactment. 

Sec. 1906. Assessment of Medicare Cost-Intensive Diseases and Conditions 

Current Law 

No provision. 

Proposed Law 

The CMS Administrator would conduct an assessment of the diseases and conditions that are the most cost-intensive for the Medicare program. The assessment would inform research priorities 

within HHS in order to improve the prevention, or treatment or 

cure, of such diseases and conditions. Not later than January 1, 

2011, the Administrator would submit the report to the Secretary 

of Health and Human Services and the Secretary would transmit 

the report to the Congress. 

Not later than January 1, 2013, and biennially thereafter, the 

CMS Administrator would review and update the assessment described above and make such recommendations to the Secretary on 

changes in research priorities as appropriate. The Secretary would 

submit a report on such recommendations to the Congress. 

A new fund would be established in the Treasury of the United 

States, to be known as the Medicare Cost-Intensive Research Fund. 

The Fund would consist of such amounts as may be appropriated 

or credited to the Fund for research priorities identified as a result 

of the assessments conducted under this section. 

Reason for Change 

This provision will help to identify the most cost-intensive diseases and conditions in the Medicare program with the goal of informing research priorities throughout the Department of Health 

and Human Services to improve the quality of care the Medicare 

beneficiaries receive and enhance the prevention, or treatment or 

cure of such diseases and conditions. 

DIVISION C—PUBLIC HEALTH AND WORKFORCE 

DEVELOPMENT 

(Not Within the Jurisdiction of the Committee on Ways and 

Means) 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statements are made concerning the votes of the Committee on Ways and Means in its consideration of H.R. 3200, ‘‘America’s Affordable Health Choices Act.’’ 

MOTION TO REPORT RECOMMENDATIONS

The Chairman’s Amendment in the Nature of a Substitute, as 

amended, was ordered favorably reported by a rollcall vote of 23 


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522 

yeas to 18 nays (with a quorum being present). The vote was as 

follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ X ........... ............. Mr. Camp ............................. ........... X .............

Mr. Stark ............................... X ........... ............. Mr. Herger ............................ ........... X .............

Mr. Levin ............................... X ........... ............. Mr. Johnson .......................... ........... X .............

Mr. McDermott ...................... X ........... ............. Mr. Brady ............................. ........... X .............

Mr. Lewis (GA) ...................... X ........... ............. Mr. Ryan ............................... ........... X .............

Mr. Neal ................................ X ........... ............. Mr. Cantor ............................ ........... X .............

Mr. Tanner ............................ ........... X ............. Mr. Linder ............................. ........... X .............

Mr. Becerra ........................... X ........... ............. Mr. Nunes ............................. ........... X .............

Mr. Doggett ........................... X ........... ............. Mr. Tiberi .............................. ........... X .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. ........... X .............

Mr. Thompson ....................... X ........... ............. Mr. Davis (KY) ...................... ........... X .............

Mr. Larson ............................. X ........... ............. Mr. Reichert ......................... ........... X .............

Mr. Blumenauer .................... X ........... ............. Mr. Boustany ........................ ........... X .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. ........... X .............

Mr. Pascrell ........................... X ........... ............. Mr. Roskam .......................... ........... X .............

Ms. Berkley ........................... X ........... .............

Mr. Van Hollen ...................... X ........... .............

Mr. Meek ............................... X ........... .............

Ms. Schwartz ........................ X ........... .............

Mr. Davis (AL) ....................... X ........... .............

Mr. Etheridge ........................ X ........... .............

Ms. Sanchez .......................... X ........... .............

Mr. Higgins ........................... X ........... .............

Mr. Yarmuth .......................... X ........... .............

VOTES ON AMENDMENTS

A rollcall vote was conducted on the following amendments to the 

Chairman’s Amendment in the Nature of a Substitute. 

A motion offered by Mr. Stark to table the motion offered by Mr. 

Camp to postpone proceedings was agreed to by a rollcall vote of 

24 yeas to 14 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ X ........... ............. Mr. Camp ............................. ........... X .............

Mr. Stark ............................... X ........... ............. Mr. Herger ............................ ........... X .............

Mr. Levin ............................... X ........... ............. Mr. Johnson .......................... ........... X .............

Mr. McDermott ...................... X ........... ............. Mr. Brady ............................. ........... X .............

Mr. Lewis (GA) ...................... X ........... ............. Mr. Ryan ............................... ........... X .............

Mr. Neal ................................ X ........... ............. Mr. Cantor ............................ ........... X .............

Mr. Tanner ............................ X ........... ............. Mr. Linder ............................. ........... X .............

Mr. Becerra ........................... X ........... ............. Mr. Nunes ............................. ........... X .............

Mr. Doggett ........................... X ........... ............. Mr. Tiberi .............................. ........... X .............

Mr. Pomeroy .......................... X ........... ............. Ms. Brown-Waite .................. ........... X .............

Mr. Thompson ....................... X ........... ............. Mr. Davis (KY) ...................... ........... X .............

Mr. Larson ............................. X ........... ............. Mr. Reichert ......................... ........... X .............

Mr. Blumenauer .................... X ........... ............. Mr. Boustany ........................ ........... X .............

Mr. Kind ................................ X ........... ............. Mr. Heller ............................. ........... X .............

Mr. Pascrell ........................... X ........... ............. Mr. Roskam .......................... ........... X .............

Ms. Berkley ........................... X ........... .............

Mr. Crowley ........................... X ........... .............

Mr. Van Hollen ...................... X ........... .............

Mr. Meek ............................... X ........... .............

Ms. Schwartz ........................ X ........... .............

Mr. Davis (AL) ....................... X ........... .............

Mr. Davis (IL) ........................ X ........... .............

Mr. Etheridge ........................ X ........... .............

Ms. Sanchez .......................... X ........... .............

Mr. Higgins ........................... X ........... .............

Mr. Yarmuth .......................... X ........... .............


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An amendment was offered by Mr. Ryan which would eliminate 

the public health insurance option which was defeated by a rollcall 

vote of 15 yeas to 25 nays. the vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... ........... .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Heller which would require 

Members of Congress and their dependents who are exchange-eligible and who enroll in health coverage to enroll in the public health 

insurance option which was defeated by a rollcall vote of 18 yeas 

to 21 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... X ........... .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... X ........... .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... X ........... .............


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An amendment was offered by Mr. Herger and Mr. Boustany 

which would prohibit CMS from making coverage determinations 

using comparative effectiveness research on the basis of cost was 

defeated by a rollcall vote of 15 yeas to 26 nays. The vote was as 

follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ ........... X ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Brady which would eliminate 

the public health insurance option if the Secretary of Health and 

Human Services determines that the public plan option’s average 

wait time for obtaining appointments with physicians exceeds the 

average private insurance plan wait time was defeated by a rollcall 

vote of 15 yeas to 26 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ ........... X ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Brady and Mr. Johnson which 

would strike the employer responsibility requirement was defeated 

by a rollcall vote of 15 yeas to 25 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ ........... ........... ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Linder, Mr. Brady, and Mr. 

Heller which would prohibit the Health Insurance Exchange from 

operating in states that do not have malpractice rules similar to 

malpractice rules in the State of California was defeated by a rollcall vote of 15 yeas and 26 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ ........... X ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... ........... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Heller which would require 

that an individual’s eligibility for the affordability credit requires 

the individual’s approval under the Income and Eligibility 

Verification System and the Systematic Alien Verification for Entitlements programs under Section 1137 of the Social Security Act 

was defeated by a rollcall vote of 15 yeas to 26 nays. The vote was 

as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ ........... X ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Mr. Berkley ............................ ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Mr. Schwartz ......................... ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Johnson and Mr. Ryan which 

would prohibit abortions from being a mandated benefit in the essential benefit standard, except in the cases of rape, incest or to 

save the life of the mother was defeated by a rollcall vote of 18 

yeas to 23 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ X ........... ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... X ........... ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Pascrell ........................... X ........... ............. Mr. Roskam .......................... X ........... .............

Mr. Berkley ............................ ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Mr. Schwartz ......................... ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Boustany which would prohibit the Secretary from requiring that health care providers participate in the public health insurance option was defeated by a 

rollcall vote of 19 yeas to 22 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ X ........... ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... X ........... ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ X ........... ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Mr. Berkley ............................ X ........... .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Mr. Schwartz ......................... ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Boustany which would prohibit the use of Federal funds in maintaining reserves for the public health insurance option and require that the public health insurance option maintain reserves consistent with the National Association of Insurance Commissioners standards was defeated by a 

rollcall vote of 16 yeas to 25 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ X ........... ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Mr. Berkley ............................ ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Mr. Schwartz ......................... ........... X .............

Mr. Davis (AL) ....................... ........... ........... .............

Mr. Davis (IL) ........................ ........... ........... .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Reichert which would allow 

the sale of individual insurance policies without the protections afforded by the bill which was defeated by a rollcall vote of 15 yeas 

to 26 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Camp which would delay the 

effective date of additional revenue offsets until the GAO certifies 

that the Medicare fraud rate has been reduced to below 1% of total 

claims and which was defeated by a rollcall vote of 15 yeas to 25 

nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... ........... .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Herger which would strike 

section 1121 of the bill (relating to Medicare physicians payment 

reform) and substitutes an identical provision and provides student 

loan forgiveness for certain primary care physicians and which was 

defeated by a rollcall vote of 18 yeas to 22 nays. The vote was as 

follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... X ........... ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... X ........... ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... X ........... ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... ........... .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Brady which would eliminate 

the following provisions in the subtitle containing the non-health 

related revenue offsets: the healthcare surcharge, delay of the implementation of the worldwide interest allocation rules, limitation 

on treaty benefits for certain deductible payments, codification of 

economic substance doctrine, and penalties for underpayments was 


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530 

defeated by a rollcall vote of 15 yeas to 26 nays. The vote was as 

follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Ryan which would eliminate 

the Medicare solvency trigger, require the GAO to report an assessment of the impact of the Act on the Federal government’s financial position, and require CBO to issue an annual report with a 75 

year cost estimate on the act and which was defeated by a rollcall 

vote of 14 yeas to 26 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............


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531 

An amendment was offered by Mr. Cantor which would prohibit 

funds from this bill to be used to pay for abortion or plans that 

cover abortion, except in the case of rape, incest, or if there exists 

a danger to the life of the mother was defeated by a rollcall vote 

of 19 yeas to 22 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ X ........... ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... X ........... ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... X ........... ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... X ........... .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Ms. Brown-Waite which would 

prohibit the Health Choices Commissioner or any other government employee from automatically enrolling any individual or family in the public health insurance option was defeated by a rollcall 

vote of 16 yeas to 25 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ X ........... ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Davis of Kentucky which 

would eliminate the provision that requires an employer to pay a 

penalty if that employer offers creditable health insurance and the 

employee declines that insurance and obtains coverage from the 

Health Insurance Exchange was defeated by a rollcall vote of 17 

yeas to 24 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ X ........... ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ X ........... .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Boustany which would require CMS to seek a recommendation of the Medicare Coverage Advisory Committee with respect to certain Medicare national coverage decisions was defeated by a rollcall vote of 15 yeas to 26 

nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ............................ ........... X ............. Mr. Camp ............................. X ........... .............

Mr. Stark ............................... ........... X ............. Mr. Herger ............................ X ........... .............

Mr. Levin ............................... ........... X ............. Mr. Johnson .......................... X ........... .............

Mr. McDermott ...................... ........... X ............. Mr. Brady ............................. X ........... .............

Mr. Lewis (GA) ...................... ........... X ............. Mr. Ryan ............................... X ........... .............

Mr. Neal ................................ ........... X ............. Mr. Cantor ............................ X ........... .............

Mr. Tanner ............................ ........... X ............. Mr. Linder ............................. X ........... .............

Mr. Becerra ........................... ........... X ............. Mr. Nunes ............................. X ........... .............

Mr. Doggett ........................... ........... X ............. Mr. Tiberi .............................. X ........... .............

Mr. Pomeroy .......................... ........... X ............. Ms. Brown-Waite .................. X ........... .............

Mr. Thompson ....................... ........... X ............. Mr. Davis (KY) ...................... X ........... .............

Mr. Larson ............................. ........... X ............. Mr. Reichert ......................... X ........... .............

Mr. Blumenauer .................... ........... X ............. Mr. Boustany ........................ X ........... .............

Mr. Kind ................................ ........... X ............. Mr. Heller ............................. X ........... .............

Mr. Pascrell ........................... ........... X ............. Mr. Roskam .......................... X ........... .............

Ms. Berkley ........................... ........... X .............

Mr. Crowley ........................... ........... X .............

Mr. Van Hollen ...................... ........... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Meek ............................... ........... X .............

Ms. Schwartz ........................ ........... X .............

Mr. Davis (AL) ....................... ........... X .............

Mr. Davis (IL) ........................ ........... X .............

Mr. Etheridge ........................ ........... X .............

Ms. Sanchez .......................... ........... X .............

Mr. Higgins ........................... ........... X .............

Mr. Yarmuth .......................... ........... X .............

An amendment was offered by Mr. Roskam which would require 

the public health insurance option to base payment rates on fairmarket rates was defeated by a rollcall vote of 19 yeas to 21 nays. 

The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... X ........... ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... X ........... ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... X ........... ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... X ........... .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Brady which would repeal the 

public health insurance option if enrollees in the option have poorer 5-year cancer survival rates than those enrolled in private 

health insurance offered through the Health Insurance Exchange 

was defeated by a rollcall vote of 15 yeas to 25 nays. The vote was 

as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... ........... ........... .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Ryan which would exempt the 

first $200,000 ($250,000 for joint filers) in adjusted gross income 

from the individual responsibility payment that applies to uninsured individuals and exempt the first $250,000 of each employee’s 

wages from the employer responsibility payment that applies to 

employers that do not provide health coverage was defeated by a 

rollcall vote of 15 yeas to 26 nays. The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... ........... X .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

An amendment was offered by Mr. Cantor which would prohibit 

the Secretary of Health and Human Services from implementing 

rules or regulations that would restrict individuals from enrolling 

or purchasing a high deductible health plan that includes a health 

savings account, and eliminate the provision that would limit excludable reimbursements from a health savings account or an Archer Medical savings account, or under a health reimbursement or 

flexible spending arrangement, to prescribed drugs or insulin was 

defeated by a rollcall vote of 16 yeas to 25 nays. The vote was as 

follows: 


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Rangel ........................... ........... X ............. Mr. Camp ............................ X ............. .............

Mr. Stark .............................. ........... X ............. Mr. Herger ........................... X ............. .............

Mr. Levin .............................. ........... X ............. Mr. Johnson ......................... X ............. .............

Mr. McDermott ..................... ........... X ............. Mr. Brady ............................ X ............. .............

Mr. Lewis (GA) ..................... ........... X ............. Mr. Ryan .............................. X ............. .............

Mr. Neal ............................... ........... X ............. Mr. Cantor ........................... X ............. .............

Mr. Tanner ........................... ........... X ............. Mr. Linder ............................ X ............. .............

Mr. Becerra .......................... ........... X ............. Mr. Nunes ............................ X ............. .............

Mr. Doggett .......................... ........... X ............. Mr. Tiberi ............................. X ............. .............

Mr. Pomeroy ......................... ........... X ............. Ms. Brown-Waite ................. X ............. .............

Mr. Thompson ...................... ........... X ............. Mr. Davis (KY) ..................... X ............. .............

Mr. Larson ............................ ........... X ............. Mr. Reichert ........................ X ............. .............

Mr. Blumenauer ................... ........... X ............. Mr. Boustany ....................... X ............. .............

Mr. Kind ............................... ........... X ............. Mr. Heller ............................ X ............. .............

Mr. Pascrell .......................... ........... X ............. Mr. Roskam ......................... X ............. .............

Ms. Berkley .......................... X ........... .............

Mr. Crowley .......................... ........... X .............

Mr. Van Hollen ..................... ........... X .............

Mr. Meek .............................. ........... X .............

Ms. Schwartz ....................... ........... X .............

Mr. Davis (AL) ...................... ........... X .............

Mr. Davis (IL) ....................... ........... X .............

Mr. Etheridge ....................... ........... X .............

Ms. Sanchez ......................... ........... X .............

Mr. Higgins .......................... ........... X .............

Mr. Yarmuth ......................... ........... X .............

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the revenue provisions of the 

bill, H.R. 3200 as reported. The Committee anticipates that a CBO 

cost estimate letter will address these issues when the bill proceeds 

to consideration on the House floor. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

With respect to the requirements of clause 3(c)(2) of House rule 

XIII and section 308(a) of the Congressional Budget Act of 1974, 

the Committee anticipates that a CBO cost estimate letter on H.R. 

3200 will address these issues when the bill proceeds to consideration on the House floor. CBO is unable to provide a cost estimate 

prior to the reconciliation of the versions of the bill as amended 

and reported by the three committees of jurisdiction. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

With respect to the requirements of 3(c)(3) of rule XIII of the 

House of Representatives and section 402 of the Congressional 

Budget Act of 1974, the Committee anticipates that a CBO cost estimate will address these issues when the bill proceeds to consideration on the House floor. 

D. MACROECONOMIC IMPACT ANALYSIS

In compliance with clause 3(h)(2) of rule XIII of the Rules of the 

House of Representatives, the staff of the Joint Committee on Taxation provides the following macroeconomic analysis of H.R. 3200, 


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536 

180Descriptions of the macroeconomic equilibrium growth model and other models used by the 

Joint Committee staff may be found in Joint Committee on Taxation, Overview of the Work of 

the Staff of the Joint Committee on Taxation to Model the Macroeconomic Effects of Proposed 

Tax Legislation to Comply with House Rule XIII.3(h)(2), JCX–105–03, December 22, 2003, and 

Background Information about the Dynamic Stochastic General Equilibrium Model Used by the 

staff of the Joint Committee on Taxation in the Macroeconomic Analysis of Tax Policy, JCX–52– 

06, December 14, 2006. 181For a thorough discussion of the issues and empirical evidence of the likely impacts of reforms similar to those in this bill, see Congressional Budget Office, Key Issues in Analyzing 

Major Health Insurance Proposals, December, 2008, and Effects of Changes to the Health Insurance System on Labor Markets, Economic and Budget Issue Brief, July 13, 2009. 

‘‘America’s Affordable Choices Act of 2009,’’ as reported by the 

Ways and Means Committee. 

Summary 

The analysis examines the effects of the different parts of the bill 

on incentives that could affect either long-run growth or short-term 

fluctuations in economic activity, progressively incorporating three 

aspects of the bill in the analysis. All of the analysis is of expected 

effects within the standard Federal ten-year budget period. The 

first section looks at changes to the Internal Revenue Code in Title 

IV of the bill. Next, the effects of low income subsidies for the purchase of health insurance are added to the analysis. Finally, net 

changes in spending on Medicare and Medicaid are incorporated to 

provide a picture of the fiscal impacts of the bill as a whole. This 

analysis uses the Joint Committee staff’s Macroeconomic Equilibrium Growth (‘‘MEG’’) model to evaluate these effects.180 The 

Joint Committee staff does not have a model designed to analyze 

possible efficiency, productivity, or labor market impacts of changes 

in the health sector of the economy, and thus this analysis will not 

include consideration of such impacts.181

Tax and expenditure policy can affect economic growth through 

several different channels. Long-term growth is determined by the 

availability of labor, capital and materials for the production process. In addition, in the short-run, during periods when available resources are not being fully used, growth can also be affected by 

changes in demand for goods and services. Changes in taxes and 

government spending can affect the availability of labor and capital 

by influencing peoples’ incentives to work, save, and invest. Fiscal 

policy, or net changes in Federal debt, can influence long-run 

growth to the extent that it constrains the amount of capital available for private investment; and, it can influence short-run demand 

by affecting the amount of after-tax income people have to spend. 

In terms of the tax policy effects of the bill, H.R. 3200 contains provisions that slightly reduce incentives to work, save, and invest, resulting in a projected slight decline in GDP due to these incentives. 

From a fiscal policy standpoint, the bill would also result in a 

slight increase in Federal government debt, which may further reduce, or crowd out, the availability of funds for private investment. 

Models and data 

The primary focus of Joint Committee staff macroeconomic analysis is to determine the effects of changes in tax policy on the economy. In order to determine the effects of tax policy on average and 

marginal tax rates, the Joint Committee staff uses large microsimulation models based on large samples of individual, corporate, 


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182These models are described in Joint Committee on Taxation, Overview of Revenue Estimating Procedures and Methodologies Used by the Staff of the Joint Committee on Taxation, 

JCX–1–05, February 2, 2005. 183To get a more complete picture of the range of possible macroeconomic effects from policy 

changes, it would generally be optimal to use additional models that are designed to examine 

the long-term growth effects of tax policy in a computable, general equilibrium framework, with 

either partial or perfect foresight. The Joint Committee staff has used such models in past analyses. But given the current size and projected present-law growth of deficits, the use of such 

models would require making very strong counterfactual assumptions about present law fiscal 

policy that may distort the analysis. That is, there would have to be an assumption that the 

Federal debt is reduced to sustainable levels in the foreseeable future in a computable general 

equilibrium framework. Because the policy being implemented either reduces the debt (in the 

case of the revenue provisions analyzed by themselves) or is close to deficit neutral (in the case 

of the revenue items combined with the spending provisions), in a simulation that assumed 

some additional provision that would reduce Federal government debt by the required amount, 

the effects of the debt-closing policy would overwhelm the effects of the provision being analyzed. 

and other income tax returns provided by the Statistics of Income 

division of the Internal Revenue Service.182

To analyze the effects of these tax policy changes on the economy, the current analysis relies on the Joint Committee’s Macroeconomic Equilibrium Growth model.183 The MEG model is a reduced form macroeconomic model with neoclassical foundations and 

myopic expectations. Peoples’ willingness to work is determined by 

their after-tax wages and by the after-tax rate of return on additional hours of work. Changes in average and marginal tax rates 

affect these decisions. These labor supply decisions are modeled 

separately for four groups: low income primary workers, low- income secondary workers, high income primary workers, and high 

income secondary workers. Investment is determined by the aftertax return to capital, which is affected by changes in taxes on business and investment income. The taxation of corporate profits, proprietors’ income, dividends, capital gains, and rents are each separately modeled in the MEG model. 

The MEG model can be operated in an equilibrium mode, or used 

to simulate disequilibrium growth paths, by varying monetary policy assumptions. The equilibrium mode assumes the Federal Reserve Board omnisciently counteracts any short-term demand effects of fiscal policy to maintain the existing equilibrium. The disequilibrium growth path reflects the effects of short-term fluctuations in demand. An increase in government spending or reduction 

in tax rates, all else equal, would increase the amount of disposable 

income available to consumers, and would generally be expected to 

increase consumer demand. In contrast, an increase in taxes or decrease in spending or transfer payments would reduce disposable 

income, and thus would be likely to decrease consumer demand. 

Often, the Federal Reserve Board (‘‘Fed’’) influences the interaction 

between fiscal policy and fluctuations in demand for goods and 

services by managing interest rates and the money supply. 

The following analysis is presented using alternate assumptions 

about whether the Federal Reserve Board intervenes to influence 

the demand consequences of the policy. In the first case, the Federal Reserve Board is assumed to swiftly counteract any demand 

effects of the policy. In the second case, the Federal Reserve Board 

is assumed not to change its monetary policy at all. Generally, the 

Federal Reserve Board would be expected to counter the demand 

effects of a policy if the policy were likely to accelerate a swing in 

the business cycle. If the policy is counter-cyclical, or neutral, the 

Federal Reserve Board would be less likely to intervene. Because 

of current economic conditions, with the economy in a recession 


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538 

and the Federal Reserve Board actively engaged in providing liquidity to the economy to encourage economy expansion, it is difficult to predict how much flexibility it would have in reacting to 

major fiscal policy initiatives in the near future. However, since 

most of the provisions of H.R. 3200 would not take effect until 

2013, this consideration should be of less relevance than it would 

be in the current year. 

Analysis 

Effects of the revenue provisions.—Title IV of H.R. 3200 includes 

several provisions to provide incentives to increase health insurance coverage, and several provisions to raise revenues to finance 

the increases in health insurance coverage. The coverage-related 

revenue provisions include taxes on certain individuals who fail to 

obtain coverage, and taxes on employers who fail to offer health insurance to their employees or who offer insurance that is not 

deemed ‘‘affordable’’ and whose employees obtain subsidized coverage through the new health insurance exchange. The following 

analysis first examines the macroeconomic effects of these revenue 

provisions. The provisions are projected to result in a net increase 

in Federal revenues of approximately $790 billion between 2010 

and 2019. Figure 1 illustrates the effects of these provisions on aggregate average and marginal tax rates on various sources of income. While the average and marginal tax rates of four different 

labor groups are separately modeled, for ease of exposition, Figure 

1 shows combined wage tax effects. These rates are calculated including some of the behavioral responses to tax changes (such as 

timing, portfolio effects, and other shifting of income to minimize 

taxation) that are included in conventional Joint Committee staff 

revenue estimates. 

The most significant of the revenue provisions in this bill is the 

imposition of a surcharge on adjusted gross incomes (‘‘AGI’’) above 

$350,000 for joint filers and $280,000 for single filers, and heads 

of households. The surcharge is graduated. In 2011, the surtax begins at a rate of one percent on amounts up to $500,000 for joint 

filers, and $400,000 for individual filers, and increases to 5.4 percent on amounts above $1 million and $800,000 respectively. In 

2013, the surtax rates range from two percent to 5.4 percent. Average and marginal tax rates on wages of high income earners are 

increased by roughly equivalent amounts due to this provision. The 

increase in average tax rates reduces disposable income, providing 

some incentive to increase labor supply, while the increase in marVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00544 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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539 

ginal tax rates on wages reduces the after-tax earnings of additional labor; on net the tax changes provide an incentive for affected taxpayers to reduce their labor supply. Because the surtax 

applies to all income above the AGI threshold, it also taxes income 

generated from business activities of sole proprietors, partners, SCorporation shareholders, and other individuals receiving income 

from capital. The increased tax on business income reduces the return to business activities, thus reducing incentives to invest in 

business activities. 

Additional provisions affecting individual taxpayers include a 

penalty on individuals with income above the income tax filing 

threshold who fail to purchase health insurance, a provision to conform the definition of qualified medical expenditures for Flexible 

Spending Arrangements, Individual Health Arrangements, Health 

Savings Accounts, and Medical Savings Accounts to the definition 

provided under Code section 223, and a provision to provide for certain health benefits currently applicable to a taxpayer’s spouse and 

dependents to certain other beneficiaries. The net effect of these 

provisions is to slightly increase average and marginal tax rates on 

individual income. 

Additional business-related provisions that are part of health reform include employer responsibility payments assessed on employers with payrolls above $250,000 in 2013 that fail to provide health 

insurance for their employees, and tax credits for up to 50 percent 

of the cost of employee health insurance by businesses with fewer 

than 26 employees and average wages less than $40,000. Additional business tax provisions that contribute to raising revenues 

include delaying the implementation of worldwide interest allocation for multinational firms until 2020, limiting eligibility for reduced withholding under certain treaties, and codification of the 

economic substance doctrine for assessing whether certain transactions should generate tax liabilities. The net effect of these additional business tax provisions is to slightly increase average and 

marginal tax rates on businesses with more than 25 employees. 

Table 1 shows the effects of the revenue provisions contained in 

Title W of H.R. 3200 on economic growth, measured as percent 

changes in Gross Domestic Product (‘‘GDP’’) relative to present-law 

baseline projections, and other key macroeconomic aggregates. 

TABLE 1.—EFFECTS OF REVENUE PROVISIONS PERCENT CHANGE RELATIVE TO PROJECTED 

PRESENT LAW LEVELS 

Fed Counters Demand Response 

[Percent] 

No Fed Reaction [Percent] 

2010–14 2015–19 2010–14 2015–19 

Nominal GDP .................................................................................. ¥0.1 ¥0.4 ¥0.4 ¥1.5 

Real GDP ........................................................................................ ¥0.1 ¥0.2 ¥0.2 ¥0.3 

Real producers’ capital stock ........................................................ ¥0.2 ¥0.6 ¥0.2 ¥0.7 

Labor force participation ............................................................... ¥0.1 ¥0.1 ¥0.1 ¥0.1 

Employment .................................................................................... ¥0.1 ¥0.2 ¥0.2 ¥0.3 

Real consumption .......................................................................... ¥0.3 ¥0.5 ¥0.4 ¥0.7 

Change in long-term interest rates (basis points) ....................... ¥3 ¥32 ¥5 ¥39 

Receipts feedback (percent change in receipts due to change in 

GDP) ........................................................................................... ¥0.1 ¥0.4 ¥0.2 ¥0.6 


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Consistent with the negative incentives for both labor supply and 

business investment described above, relative to present law, labor 

force participation is projected to fall by about 0.1 percent relative 

to the baseline, and business capital stock is projected to fall by 0.2 

percent in the early years, and by up to 0.7 percent in the longer 

run. Because the policy reduces disposable income, it also exerts a 

downward pressure on demand. Nominal GDP is projected to fall 

by 0.1 to 0.4 percent in the 2010–2014 and by 0.4 percent to 1.5 

percent in 2015–2019, depending on whether the Federal Reserve 

Board counteracts the downward pressure on demand. Real (inflation-adjusted) GDP would decline by 0.1 to 0.4 percent in 2010–14 

and 0.2 to 0.3 percent in 2015–19. Consumption is also projected 

to fall relative to the baseline by 0.3 to 0.4 percent in 2010–14 and 

0.5 to 0.7 percent in 2015–19. One positive effect of these provisions on the economy is a decline in long-term interest rates by up 

to 39 basis points in the long run due to the reduction in Federal 

debt. Because of the decline in GDP relative to the baseline, the 

taxable income base is reduced, and receipts would be 0.1 percent 

to 0.6 percent lower taking growth effects into account. 

Effects of revenue provisions and health insurance subsidies combined.—Beginning in 2013, Title II of H.R. 3200 also provides for 

subsidies for the purchase of certain qualified health insurance 

through new health insurance exchanges. These subsidies, referred 

to as ‘‘affordability credits,’’ along with out-of-pocket cost sharing 

assistance are available to individuals and families with adjusted 

gross incomes below 400 percent of the Federal poverty level. The 

affordability credits and subsidies, cost approximately $840 billion 

from 2010–2019. On net, the subsidies and tax provisions together 

increase Federal government debt by approximately $50 billion 

from 2010–2019. 

Because of the way the affordability credits are structured, they 

have incentive effects similar to those of refundable tax credits. 

The subsidies themselves increase disposable income, just as reductions in average tax rates would for eligible individuals, reducing 

incentives to work. Because the credits are phased out by income 

levels, they have the same incentive effect with respect to incomeproducing activities as increasing marginal tax rates for eligible individuals reducing the return to additional income generation, and 

thus reducing incentives to work and invest. The affordability credits are designed to assist low-income individuals in purchasing 

qualified health insurance in compliance with a requirement that 

everyone have health insurance coverage. The increased health coverage could lead to increased consumption of medical services, 

which could in turn lead both to changes in individual health status and productivity. In addition, changes in demand for health 

care services within the context of the health market reforms included in the bill could produce significant changes in the health 

service delivery system, which could impact the efficiency of the 

health sector and/or the productivity of the population. The availability of subsidized, risk-pooled health insurance outside of the 

employment context could also affect people’s decisions regarding 

job changes and retirement. Such effects are beyond the scope of 

this analysis. 

Figure 2 shows the combined effects of the revenue provisions of 

Title IV and the subsidy provisions of Title II of H.R. 3200. Overall, 


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the effective marginal rate on aggregate wage income continues to 

increase, while the aggregate average rate declines. In particular, 

effective marginal tax rates increase for individuals qualifying for 

the subsidy (whose income is below 400 percent of the Federal poverty level), and for those subject to the surtax (whose adjusted 

gross income is above $350,000). While the average rate for those 

subject to the surtax increases, effective average rates (accounting 

for the subsidy) for subsidy-eligible individuals decrease by a greater amount. 

Similarly, Table 2 shows the combined macroeconomic effects of 

these two Titles of H.R. 3200. Relative to the present law baseline, 

real GDP is projected to decrease by slightly more from 2015–19, 

0.4 percent under the combined tax and subsidy proposal than the 

with the revenue provisions alone. The combination of tax increases and affordability credits is projected to reduce labor force 

participation by 0.3 percent between 2015–2019, more than the effects of the revenue provisions alone. Employment is also projected 

to be reduced relative to what it would be under present law. Because Federal debt is only slightly increased under this scenario, 

there is little change in long-term interest rates; thus more private 

investment is displaced by public debt in this scenario relative to 

the tax provisions alone, and producers’ capital stock falls by 0.2 

percent in 2010–14 and 1.3 percent in 2015–2019. Conversely, because disposable income is not being contracted, there is little 

short-run demand effect, with little difference between the effects 

of the proposal on nominal versus real GDP. The decline in GDP 

and associated macroeconomic aggregates relative to the present 

law baseline would result in receipts decreasing by 0.1 to 0.5 percent. 

TABLE 2.—EFFECTS OF TAX PROVISIONS AND EXCHANGE SUBSIDIES PERCENT CHANGE RELATIVE 

TO PROJECTED PRESENT LAW LEVELS 

Fed Counters Demand Response 

[Percent] 

No Fed Reaction [Percent] 

2010–14 2015–19 2010–14 2015–19 

Nominal GDP .................................................................................. ¥0.1 ¥0.4 ¥0.3 ¥0.3 

Real GDP ........................................................................................ ¥0.1 ¥0.4 ¥0.2 ¥0.2 

Real producers’ capital stock ........................................................ ¥0.2 ¥1.3 ¥0.2 ¥1.2 

Labor force participation ............................................................... ¥0.1 ¥0.3 ¥0.1 ¥0.3 

Employment .................................................................................... ¥0.1 ¥0.3 ¥0.2 ¥0.1 

Real consumption .......................................................................... ¥0.2 ¥0.3 ¥0.2 ¥0.3 


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TABLE 2.—EFFECTS OF TAX PROVISIONS AND EXCHANGE SUBSIDIES PERCENT CHANGE RELATIVE 

TO PROJECTED PRESENT LAW LEVELS—Continued 

Fed Counters Demand Response 

[Percent] 

No Fed Reaction [Percent] 

2010–14 2015–19 2010–14 2015–19 

Change in long-term interest rates (basis points) ....................... ¥1 ¥3 ¥5 ¥2 

Receipts feedback (percent change in receipts due to change in 

GDP) ........................................................................................... ¥0.1 ¥0.5 ¥0.2 ¥0.4 

Fiscal effects of the entire bill.—Finally, H.R. 3200 makes many 

changes to the Medicare and Medicaid programs. The net effect of 

these changes, in combination with the revenue provisions and the 

exchange subsidies, is to increase the Federal deficit by approximately $220 billion from 2010–2019. The Joint Committee staff 

models the Medicaid and Medicare changes as changes in untaxed 

transfer payments received by taxpayers. As with the affordability 

subsidies for the purchase of health insurance, these program 

changes could have effects on the health care delivery system, but 

these effects are not incorporated in this analysis. 

Because any income phase-outs associated with the changes to 

Medicare and Medicaid have not been modeled, the changes in effective marginal tax rates and average tax rates in this scenario 

are the same as in the second scenario, shown in Figure 2 above. 

Only the net effects of these changes on personal disposable income 

and Federal government debt are considered in this analysis. Table 

3 shows the growth effects of the combined revenue provisions, affordability subsidies, and changes to Medicare and Medicaid. 

TABLE 3.—EFFECTS OF TAX PROVISIONS, SUBSIDIES, AND CHANGES IN OTHER OUTLAYS PERCENT 

CHANGE RELATIVE TO PROJECTED PRESENT LAW LEVELS 

Fed Counters Demand Response 

[Percent] 

No Fed Reaction [Percent] 

2010–14 2015–19 2010–14 2015–19 

Nominal GDP .................................................................................. ¥0.1 ¥0.4 ¥0.2 0.1 

Real GDP ........................................................................................ ¥0.1 ¥0.4 ¥0.1 ¥0.1 

Real producers’ capital stock ........................................................ ¥0.2 ¥1.5 ¥0.2 ¥1.4 

Labor force participation ............................................................... ¥0.1 ¥0.3 ¥0.1 ¥0.3 

Employment .................................................................................... ¥0.1 ¥0.3 ¥0.1 0.0 

Real consumption .......................................................................... ¥0.2 ¥0.2 ¥0.3 0.0 

Change in long-term interest rates (basis points) ....................... 1 8 ¥1 11 

Receipts feedback (percent change in receipts due to change in 

GDP) ........................................................................................... ¥0.1 ¥0.6 ¥0.2 ¥0.3 

Because effective tax rates are the same in this scenario as in 

the one above, incentives for work remain the same, and labor force 

participation is again projected to decline relative to the present 

law baseline by 0.1 percent from 2010–14 and by 0.3 percent in 

2015–19. One noticeable difference between this scenario and the 

others is the increase in long-term interest rates that results from 

the increase in Federal government debt. The increased debt 

crowds out more private investment, reducing business capital 

stock by up to 1.5 percent in 2015–19. The increase in disposable 

income also leads to more short-term demand pressure, resulting in 

smaller declines from the baseline in GDP in the case where the 


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Fed does not attempt to counteract the demand effect. Changes in 

GDP continue to reduce Federal receipts by modest amounts, by 

0.1 to 0.2 percent in 2010–14 and 0.3 to 0.6 percent in 2015–19. 

Conclusion.—The revenue, subsidy, and overall fiscal effects of 

H.R. 3200 create moderately negative growth incentives through 

raising marginal tax rates on labor and capital and through the interest-rate increase owing to increased deficits. When the revenue 

provisions are considered alone, the negative incentive effects are 

somewhat offset by the reduction in long run interest rates. 

E. PAY-GO RULE

In compliance with clause 10 of rule XXI of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the revenue provisions of the 

bill, H.R. 3200 as reported: the Committee anticipates that a CBO 

cost estimate letter on H.R. 3200 will address these issues when 

the bill proceeds to consideration on the House floor. CBO is unable 

to provide a cost estimate prior to the reconciliation of the versions 

of the bill as amended and reported by the three committees of jurisdiction. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES 

OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was a result of the Committee’s oversight review concerning the tax burden on taxpayers that the Committee 

concluded that it is appropriate and timely to enact the revenue 

provision included in the bill as reported. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the goal of H.R. 3200, America’s Affordable Health Choices Act of 2009 is to provide affordable, quality 

health care for all Americans and reduce the rate of growth in 

health care spending. 

C. CONSTITUTIONAL AUTHORITY STATEMENT

With respect to clause 3(d)(1) of the rule XIII of the Rules of the 

House of Representatives (relating to Constitutional Authority), the 

Committee states that the Committee’s action in reporting this bill 

is derived from Article I of the Constitution, Section 8 (‘‘The Congress shall have Power To lay and collect Taxes, Duties, Imposts 

and Excises. . . ’’), and from the 16th Amendment to the Constitution. 

D. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the bill contains nine private sector mandates: (i) Tax on individual without acceptable 

health care coverage; (ii) Election to satisfy health coverage particiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00549 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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pation requirements; (iii) Responsibilities of nonelecting employers; 

(iv) Comparative effectiveness research trust fund; financing for 

trust fund; (v) Impose a surcharge for certain AGI; (vi) Modify the 

definition of qualified medical expenses for purposes of HRAs, 

health FSAs, HSAs, and Archer MSAs; (vii) Delay implementation 

of worldwide interest allocation until 2020; (viii) Limit eligibility 

for reduced treaty withholding rates based on residency of foreign 

parent; and (ix) Codification of economic substance doctrine and 

penalties for underpayments. 

The Committee has determined that the bill contains one intergovernmental mandate on State, local, or tribal governments: Responsibilities of nonelecting employers. 

E. APPLICABILITY OF HOUSE RULE XXI 5(B)

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

involve any Federal income tax rate increases within the meaning 

of the rule. 

F. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Reform and Restructuring Act of 1998 (the ‘‘IRS Reform Act’’) requires the staff 

of the Joint Committee on Taxation (in consultation with the Internal Revenue Service and the Treasury Department) to provide a 

tax complexity analysis. The complexity analysis is required for all 

legislation reported by the Senate Committee on Finance, the 

House Committee on Ways and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. For each such provision identified by the staff of the Joint Committee on Taxation a 

summary description of the provision is provided along with an estimate of the number and type of affected taxpayers, and a discussion regarding the relevant complexity and administrative issues. 

Following the analysis of the staff of the Joint Committee on 

Taxation are the comments of the IRS and Treasury regarding each 

of the provisions included in the complexity analysis. 

1. Tax on individuals without acceptable health care coverage 

Summary description of the provision 

The provision taxes individuals who do not maintain coverage 

under acceptable health insurance for themselves and their qualifying children. The tax is equal to the lesser of (a) the national average premium for single or family coverage, as applicable, or (b) 

2.5 percent of the excess of the taxpayer’s adjusted gross income 

(‘‘AGI’’) over the threshold filing amount. Acceptable coverage includes a health plan that covers at least an essential benefits package and that includes certain specified limits on required cost sharVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00550 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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ing, no annual or lifetime limit on covered health care items or 

services, certain specified minimum services, and certain requirements as to network adequacy as determined by the newly appointed Health Choices Commissioner. Acceptable coverage also includes a grandfathered plan, Medicare, Medicaid, Tricare (and 

other Armed Services coverage), Veterans Administration coverage, 

and certain other coverage. Those exempt from the penalty include: 

nonresident aliens, U.S. citizens and residents living abroad, those 

who can claim health insurance would cause financial hardship, 

those whose income is below the threshold for filing a Federal income tax return, and those who are properly claimed as dependents 

on the income tax return of another taxpayer for the taxable year. 

Individuals maintaining health insurance for part of the year are 

required to pay a pro-rated tax. 

The new additional tax for failure to maintain health insurance 

is accompanied by new reporting requirements for insurance providers. Any insurance provider is required to provide information 

to the Department of Treasury and the primary insured individual. 

The return is required to supply the name, address, and taxpayer 

identification numbers of all individuals receiving. insurance under 

the policy by January 31 of the year following the calendar year 

the insurance was provided. Failure to file the required information 

return or to include complete and correct information on the required return is subject to the failure to file correct information returns penalty of section 6721. 

Number of affected taxpayers 

It is estimated that the provision will affect more than 10 percent of individual or small business tax returns. 

Discussion 

The provision creates a reporting requirement for providers of insurance coverage. The reporting requirement obliges the provision 

of the following information to both the insured individual and the 

Department of Treasury directly: the name of all insured on the 

policy, the dates of insurance coverage during the tax year, the 

Taxpayer Identification Numbers (‘‘TINs’’) and any other information required by the Secretary. In addition, the insurer will have 

the added responsibility of determining which insurance plan offerings meet the standard of ‘‘qualified coverage.’’ 

For individuals for whom there is no additional tax, while the 

statute creates no requirement for the filing of insurance information by the taxpayer, the taxpayer will receive this information and 

discretion is left to the Secretary of Treasury for prescribing regulations to carry out the statute, which could include a supplemental 

reporting requirement from the individual. The 1040, 1040A and 

1040–EZ must be amended to add a new line to reflect any additional tax. Individuals owing additional tax will be required to include the amount of the tax owed both on a new form and on the 

1040, 1040A or 1040–EZ. 

The Internal Revenue Service (‘‘IRS’’) will be required to reprogram computers to reflect the additional rules, forms and information from employers, insurers and individuals. In addition, regulations would be needed to reflect statutory exemptions from the additional tax and resources needed to resolve disputes regarding 


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maintenance of acceptable coverage and eligibility for exemption 

from additional tax. 

2. Election to satisfy health coverage participation requirements and responsibilities of nonelecting employers 

Summary description of the provision 

The provisions create a system under which employers must 

elect whether to offer health benefits to employees. For employers 

that elect not to offer health benefits to their employees, the provisions establish a payroll tax equal to eight percent of the wages 

paid to employees. 

Employers that elect to offer health benefits are not required to 

pay the payroll tax. However, employers that elect to offer health 

benefits but fail to comply with the rules governing offers of coverage are subject to an excise tax. In addition, beginning in the second year after enactment of the provisions, employers that elect to 

offer health benefits are required to make contributions, in the 

amount of eight percent of the average wages paid to employees, 

to the Health Insurance Exchange for employees who decline employer-provided coverage and instead enroll in an Exchange-participating plan. Finally, employers that elect to offer health benefits 

to their employees must file an additional return with the IRS containing information about the insured, the period for which coverage was provided, and such other information as the Secretary 

of the Treasury may require. Similar returns must be filed with the 

insured employees as well. 

Special rules apply for certain small businesses. An employer 

with an annual payroll that does not exceed $250,000 is exempt 

from the requirement to offer health benefits or pay a payroll tax 

and the requirement to make contributions to the Health Insurance 

Exchange for employees who decline employer-provided coverage in 

the event that such coverage is offered. For an employer with an 

annual payroll from $250,000 through $400,000, the eight-percent 

payroll tax applicable to nonelecting employers, or the eight-percent of wages contribution to the Health Exchange Fund for coverage-declining employees, phases in ratably. 

Number of affected taxpayers 

It is estimated that the provision will affect more than 10 percent of small business tax returns. 

Discussion 

It is anticipated that small businesses will have to keep additional records and perform additional analysis to comply with the 

new election and coverage requirements. Small businesses will 

need to make an affirmative election regarding whether to be subject to the national health coverage participation requirements. 

Small businesses that elect to offer health benefits will be required 

to set up provisions for auto-enrolling their employees in one of the 

employer-offered health plans, and must develop and disseminate 

written notices informing employees of their rights and obligations 

relating to the automatic enrollment, including the ability to optout of enrollment in the employer-provided plan. Small businesses 

that elect to provide health coverage to their employees will be reVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00552 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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quired to file an additional return with the IRS containing information about the insured, the period for which coverage was provided, 

and such other information as the Secretary of the Treasury may 

require. Similar returns must be filed with the insured employees 

as well. Small businesses will have to maintain records documenting their election, which employees were provided coverage, 

whether appropriate taxes for non-covered employees were paid, 

and that the business filed all necessary reports with the IRS. 

It is anticipated that the IRS will have to develop new forms to 

capture the election by employers whether to provide qualifying 

health care coverage. The IRS will also have to amend existing 

forms to implement the provision imposing a tax on employers who 

fail to satisfy the health coverage participation requirement, and 

revise several publications to explain the election, participation requirements, and tax imposed by the provisions. 

It is anticipated that the IRS will be required to make numerous 

computer programming changes to tax systems that support employment and excise tax forms required to be filed by employers. 

The computer systems will also need to be changed to accommodate 

the new payroll tax and excise taxes requirements. Computer programming changes will be required to accommodate the new information return that will be filed with the IRS by employers. 

The Department of the Treasury will have to issue regulations 

or other guidance regarding employers’ elections, the application of 

the new tax, and the exceptions for failure to comply with the applicable coverage rules and the new reporting requirements (including details as to content and how to report). 

The Secretary of the Treasury will be required to coordinate enforcement of the provision with the Secretaries of Labor and Health 

and Human Services and the Health Choices Commissioner to ensure uniform interpretation and enforcement of the provision. The 

four agencies will be required to execute an interagency memorandum of understanding. 

3. Distribution for medicine qualified only if for prescribed 

drug or insulin 

Summary description of the provision 

Under the provision, the cost of over-the-counter medicines may 

not be reimbursed with excludible income through health flexible 

spending arrangements under a cafeteria plan (‘‘Health FSAs’’), 

health reimbursement arrangements (‘‘HRAs’’), Health Savings Accounts (‘‘HSAs’’), or Archer MSAs. 

Number of affected taxpayers 

It is estimated that the provision will affect more than 10 percent of individual tax returns. 

Discussion 

Many taxpayers currently use account balances in Health FSAs, 

HRAs, HSAs, and Archer MSAs to purchase over-the-counter medicine such as ibuprofen, acetaminophen, cold medicine, and suntan 

lotion with pre-tax dollars. Some taxpayers make these purchases 

at the end of the year, or the end of the grace period, to avoid forfeiting amounts in Health FSAs. Taxpayers will no longer be able 


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to use these amounts in these accounts for this purpose. As a result, less money will be allocated to these accounts and more 

money will be allocated to taxable wages. This change will also increase the amount of compensation subject to payroll taxes. 

It is anticipated that the IRS will be required to revise the instructions to several forms and to revise several publications to reflect the changes to present law made by the provision. In addition, 

guidance will need to be issued withdrawing at least one Revenue 

Ruling and guidance may need to be issued on substantiation rules 

for reimbursement arrangements. 

G. LIMITED TAX BENEFITS

Pursuant to clause 9 of rule XXI of the Rules of the House of 

Representatives, the Ways and Means Committee has determined 

that the bill as reported contains no congressional earmarks, limited tax benefits or limited tariff benefits within the meaning of 

that rule. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with clause 3(e) of rule XIII of the Rule of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

SOCIAL SECURITY ACT 

TITLE II—FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY 

INSURANCE BENEFITS 

* * * * * * * 

SPECIAL PROVISIONS RELATING TO COVERAGE UNDER MEDICARE

PROGRAM FOR END STAGE RENAL DISEASE

SEC. 226A. (a) * * * 

(b) Subject to subsection (c), entitlement of an individual to benefits under part A and eligibility to enroll under part B of title XVIII 

by reasons of this section on the basis of end stage renal disease— 

(1) * * * 

(2) shall end, in the case of an individual who receives a kidney transplant (except for coverage of immunosuppressive drugs 

under section 1861(s)(2)(J)), with the thirty-sixth month after 

the month in which such individual receives such transplant 

or, in the case of an individual who has not received a kidney 

transplant and no longer requires a regular course of dialysis, 

with the twelfth month after the month in which such course 

of dialysis is terminated. 

* * * * * * * 

ø(c)¿ (d) For purposes of this section, each person whose monthly 

insurance benefit for any month is terminated or is otherwise not 

payable solely by reason of paragraph (1) or (7) of section 225(c) 

shall be treated as entitled to such benefit for such month. 

* * * * * * * 


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TITLE IV—GRANTS TO STATES FOR AID AND SERVICES TO 

NEEDY FAMILIES WITH CHILDREN AND FOR CHILD-WELFARE SERVICES 

* * * * * * * 

PART B—CHILD AND FAMILY SERVICES

* * * * * * * 

Subpart 3—Support for Quality Home Visitation 

Programs 

SEC. 440. HOME VISITATION PROGRAMS FOR FAMILIES WITH YOUNG 

CHILDREN AND FAMILIES EXPECTING CHILDREN. 

(a) PURPOSE.—The purpose of this section is to improve the wellbeing, health, and development of children by enabling the establishment and expansion of high quality programs providing voluntary home visitation for families with young children and families expecting children. 

(b) GRANT APPLICATION.—A State that desires to receive a grant 

under this section shall submit to the Secretary for approval, at 

such time and in such manner as the Secretary may require, an application for the grant that includes the following: 

(1) DESCRIPTION OF HOME VISITATION PROGRAMS.—A description of the high quality programs of home visitation for families 

with young children and families expecting children that will 

be supported by a grant made to the State under this section, 

the outcomes the programs are intended to achieve, and the evidence supporting the effectiveness of the programs. 

(2) RESULTS OF NEEDS ASSESSMENT.—The results of a statewide needs assessment that describes— 

(A) the number, quality, and capacity of home visitation 

programs for families with young children and families expecting children in the State; 

(B) the number and types of families who are receiving 

services under the programs; 

(C) the sources and amount of funding provided to the 

programs; 

(D) the gaps in home visitation in the State, including 

identification of communities that are in high need of the 

services; and 

(E) training and technical assistance activities designed 

to achieve or support the goals of the programs. 

(3) ASSURANCES.—Assurances from the State that— 

(A) in supporting home visitation programs using funds 

provided under this section, the State shall identify and 

prioritize serving communities that are in high need of 

such services, especially communities with a high proportion of low-income families or a high incidence of child 

maltreatment; 

(B) the State will reserve 5 percent of the grant funds for 

training and technical assistance to the home visitation 

programs using such funds; 

(C) in supporting home visitation programs using funds 

provided under this section, the State will promote coordiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00555 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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nation and collaboration with other home visitation programs (including programs funded under title XIX) and 

with other child and family services, health services, income supports, and other related assistance; 

(D) home visitation programs supported using such funds 

will, when appropriate, provide referrals to other programs 

serving children and families; and 

(E) the State will comply with subsection (i), and cooperate with any evaluation conducted under subsection (j). 

(4) OTHER INFORMATION.—Such other information as the Secretary may require. 

(c) ALLOTMENTS.— 

(1) INDIAN TRIBES.—From the amount reserved under subsection (l)(2) for a fiscal year, the Secretary shall allot to each 

Indian tribe that meets the requirement of subsection (d), if applicable, for the fiscal year the amount that bears the same 

ratio to the amount so reserved as the number of children in the 

Indian tribe whose families have income that does not exceed 

200 percent of the poverty line bears to the total number of children in such Indian tribes whose families have income that 

does not exceed 200 percent of the poverty line. 

(2) STATES AND TERRITORIES.—From the amount appropriated under subsection (m) for a fiscal year that remains after 

making the reservations required by subsection (l), the Secretary 

shall allot to each State that is not an Indian tribe and that 

meets the requirement of subsection (d), if applicable, for the fiscal year the amount that bears the same ratio to the remainder 

of the amount so appropriated as the number of children in the 

State whose families have income that does not exceed 200 percent of the poverty line bears to the total number of children in 

such States whose families have income that does not exceed 

200 percent of the poverty line. 

(3) REALLOTMENTS.—The amount of any allotment to a State 

under a paragraph of this subsection for any fiscal year that 

the State certifies to the Secretary will not be expended by the 

State pursuant to this section shall be available for reallotment 

using the allotment methodology specified in that paragraph. 

Any amount so reallotted to a State is deemed part of the allotment of the State under this subsection. 

(d) MAINTENANCE OF EFFORT.—Beginning with fiscal year 2011, 

a State meets the requirement of this subsection for a fiscal year if 

the Secretary finds that the aggregate expenditures by the State 

from State and local sources for programs of home visitation for 

families with young children and families expecting children for the 

then preceding fiscal year was not less than 100 percent of such aggregate expenditures for the then 2nd preceding fiscal year. 

(e) PAYMENT OF GRANT.— 

(1) IN GENERAL.—The Secretary shall make a grant to each 

State that meets the requirements of subsections (b) and (d), if 

applicable, for a fiscal year for which funds are appropriated 

under subsection (m), in an amount equal to the reimbursable 

percentage of the eligible expenditures of the State for the fiscal 

year, but not more than the amount allotted to the State under 

subsection (c) for the fiscal year. 


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(2) REIMBURSABLE PERCENTAGE DEFINED.—In paragraph (1), 

the term ‘‘reimbursable percentage’’ means, with respect to a fiscal year— 

(A) 85 percent, in the case of fiscal year 2010; 

(B) 80 percent, in the case of fiscal year 2011; or 

(C) 75 percent, in the case of fiscal year 2012 and any 

succeeding fiscal year. 

(f) ELIGIBLE EXPENDITURES.— 

(1) IN GENERAL.—In this section, the term ‘‘eligible expenditures’’— 

(A) means expenditures to provide voluntary home visitation for as many families with young children (under the 

age of school entry) and families expecting children as 

practicable, through the implementation or expansion of 

high quality home visitation programs that— 

(i) adhere to clear evidence-based models of home visitation that have demonstrated positive effects on important program-determined child and parenting outcomes, such as reducing abuse and neglect and improving child health and development; 

(ii) employ well-trained and competent staff, maintain high quality supervision, provide for ongoing 

training and professional development, and show 

strong organizational capacity to implement such a 

program; 

(iii) establish appropriate linkages and referrals to 

other community resources and supports; 

(iv) monitor fidelity of program implementation to 

ensure that services are delivered according to the specified model; and 

(v) provide parents with— 

(I) knowledge of age-appropriate child development in cognitive, language, social, emotional, and 

motor domains (including knowledge of second 

language acquisition, in the case of English language learners); 

(II) knowledge of realistic expectations of age-appropriate child behaviors; 

(III) knowledge of health and wellness issues for 

children and parents; 

(IV) modeling, consulting, and coaching on parenting practices; 

(V) skills to interact with their child to enhance 

age-appropriate development; 

(VI) skills to recognize and seek help for issues 

related to health, developmental delays, and social, 

emotional, and behavioral skills; and 

(VII) activities designed to help parents become 

full partners in the education of their children; 

(B) includes expenditures for training, technical assistance, and evaluations related to the programs; and 

(C) does not include any expenditure with respect to 

which a State has submitted a claim for payment under 

any other provision of Federal law. 


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(2) PRIORITY FUNDING FOR PROGRAMS WITH STRONGEST EVIDENCE.— 

(A) IN GENERAL.—The expenditures, described in paragraph (1), of a State for a fiscal year that are attributable 

to the cost of programs that do not adhere to a model of 

home visitation with the strongest evidence of effectiveness 

shall not be considered eligible expenditures for the fiscal 

year to the extent that the total of the expenditures exceeds 

the applicable percentage for the fiscal year of the allotment 

of the State under subsection (c) for the fiscal year. 

(B) APPLICABLE PERCENTAGE DEFINED.—In subparagraph 

(A), the term ‘‘applicable percentage’’ means, with respect to 

a fiscal year— 

(i) 60 percent for fiscal year 2010; 

(ii) 55 percent for fiscal year 2011; 

(iii) 50 percent for fiscal year 2012; 

(iv) 45 percent for fiscal year 2013; or 

(v) 40 percent for fiscal year 2014. 

(g) NO USE OF OTHER FEDERAL FUNDS FOR STATE MATCH.—A 

State to which a grant is made under this section may not expend 

any Federal funds to meet the State share of the cost of an eligible 

expenditure for which the State receives a payment under this section. 

(h) WAIVER AUTHORITY.— 

(1) IN GENERAL.—The Secretary may waive or modify the application of any provision of this section, other than subsection 

(b) or (f), to an Indian tribe if the failure to do so would impose 

an undue burden on the Indian tribe. 

(2) SPECIAL RULE.—An Indian tribe is deemed to meet the requirement of subsection (d) for purposes of subsections (c) and 

(e) if— 

(A) the Secretary waives the requirement; or 

(B) the Secretary modifies the requirement, and the Indian tribe meets the modified requirement. 

(i) STATE REPORTS.—Each State to which a grant is made under 

this section shall submit to the Secretary an annual report on the 

progress made by the State in addressing the purposes of this section. Each such report shall include a description of— 

(1) the services delivered by the programs that received funds 

from the grant; 

(2) the characteristics of each such program, including information on the service model used by the program and the performance of the program; 

(3) the characteristics of the providers of services through the 

program, including staff qualifications, work experience, and 

demographic characteristics; 

(4) the characteristics of the recipients of services provided 

through the program, including the number of the recipients, 

the demographic characteristics of the recipients, and family retention; 

(5) the annual cost of implementing the program, including 

the cost per family served under the program; 

(6) the outcomes experienced by recipients of services through 

the program; 


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(7) the training and technical assistance provided to aid implementation of the program, and how the training and technical assistance contributed to the outcomes achieved through 

the program; 

(8) the indicators and methods used to monitor whether the 

program is being implemented as designed; and 

(9) other information as determined necessary by the Secretary. 

(j) EVALUATION.— (1) IN GENERAL.—The Secretary shall, by grant or contract, 

provide for the conduct of an independent evaluation of the effectiveness of home visitation programs receiving funds provided under this section, which shall examine the following: 

(A) The effect of home visitation programs on child and 

parent outcomes, including child maltreatment, child 

health and development, school readiness, and links to 

community services. 

(B) The effectiveness of home visitation programs on different populations, including the extent to which the ability 

of programs to improve outcomes varies across programs 

and populations. 

(2) REPORTS TO THE CONGRESS.— (A) INTERIM REPORT.—Within 3 years after the date of 

the enactment of this section, the Secretary shall submit to 

the Congress an interim report on the evaluation conducted 

pursuant to paragraph (1). 

(B) FINAL REPORT.—Within 5 years after the date of the 

enactment of this section, the Secretary shall submit to the 

Congress a final report on the evaluation conducted pursuant to paragraph (1). 

(k) ANNUAL REPORTS TO THE CONGRESS.—The Secretary shall 

submit annually to the Congress a report on the activities carried 

out using funds made available under this section, which shall include a description of the following: 

(1) The high need communities targeted by States for programs carried out under this section. 

(2) The service delivery models used in the programs receiving funds provided under this section. 

(3) The characteristics of the programs, including— 

(A) the qualifications and demographic characteristics of 

program staff; and 

(B) recipient characteristics including the number of families served, the demographic characteristics of the families 

served, and family retention and duration of services. 

(4) The outcomes reported by the programs. 

(5) The research-based instruction, materials, and activities 

being used in the activities funded under the grant. 

(6) The training and technical activities, including on-going 

professional development, provided to the programs. 

(7) The annual costs of implementing the programs, including 

the cost per family served under the programs. 

(8) The indicators and methods used by States to monitor 

whether the programs are being been implemented as designed. 

(l) RESERVATIONS OF FUNDS.—From the amounts appropriated 

for a fiscal year under subsection (m), the Secretary shall reserve— 


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(1) an amount equal to 5 percent of the amounts to pay the 

cost of the evaluation provided for in subsection (j), and the provision to States of training and technical assistance, including 

the dissemination of best practices in early childhood home visitation; and 

(2) after making the reservation required by paragraph (1), 

an amount equal to 3 percent of the amount so appropriated, 

to pay for grants to Indian tribes under this section. 

(m) APPROPRIATIONS.—Out of any money in the Treasury of the 

United States not otherwise appropriated, there is appropriated to 

the Secretary to carry out this section— (1) $50,000,000 for fiscal year 2010; 

(2) $100,000,000 for fiscal year 2011; 

(3) $150,000,000 for fiscal year 2012; 

(4) $200,000,000 for fiscal year 2013; and 

(5) $250,000,000 for fiscal year 2014. 

(n) INDIAN TRIBES TREATED AS STATES.—In this section, paragraphs (4), (5), and (6) of section 431(a) shall apply. 

* * * * * * * 

TITLE XI—GENERAL PROVISIONS, PEER REVIEW, AND 

ADMINISTRATIVE SIMPLIFICATION 

PART A—GENERAL PROVISIONS

* * * * * * * 

DISCLOSURE OF OWNERSHIP AND RELATED INFORMATION

SEC. 1124. (a) * * * 

* * * * * * * 

(c) REQUIRED DISCLOSURE OF OWNERSHIP AND ADDITIONAL

DISCLOSABLE PARTIES INFORMATION.— (1) DISCLOSURE.—A facility (as defined in paragraph (7)(B)) 

shall have the information described in paragraph (3) available— 

(A) during the period beginning on the date of the enactment of this subsection and ending on the date such information is made available to the public under section 

1411(b) of the America’s Affordable Health Choices Act of 

2009, for submission to the Secretary, the Inspector General 

of the Department of Health and Human Services, the State 

in which the facility is located, and the State long-term 

care ombudsman in the case where the Secretary, the Inspector General, the State, or the State long-term care ombudsman requests such information; and 

(B) beginning on the effective date of the final regulations 

promulgated under paragraph (4)(A), for reporting such information in accordance with such final regulations. 

Nothing in subparagraph (A) shall be construed as authorizing 

a facility to dispose of or delete information described in such 

subparagraph after the effective date of the final regulations 

promulgated under paragraph (4)(A). 

(2) PUBLIC AVAILABILITY OF INFORMATION.—During the period 

described in paragraph (1)(A), a facility shall— 


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(A) make the information described in paragraph (3) 

available to the public upon request and update such information as may be necessary to reflect changes in such information; and 

(B) post a notice of the availability of such information 

in the lobby of the facility in a prominent manner. 

(3) INFORMATION DESCRIBED.— (A) IN GENERAL.—The following information is described 

in this paragraph: 

(i) The information described in subsections (a) and 

(b), subject to subparagraph (C). 

(ii) The identity of and information on— 

(I) each member of the governing body of the facility, including the name, title, and period of service of each such member; 

(II) each person or entity who is an officer, director, member, partner, trustee, or managing employee of the facility, including the name, title, and 

date of start of service of each such person or entity; and 

(III) each person or entity who is an additional 

disclosable party of the facility. 

(iii) The organizational structure of each person and 

entity described in subclauses (II) and (III) of clause 

(ii) and a description of the relationship of each such 

person or entity to the facility and to one another. 

(B) SPECIAL RULE WHERE INFORMATION IS ALREADY RE- PORTED OR SUBMITTED.—To the extent that information reported by a facility to the Internal Revenue Service on 

Form 990, information submitted by a facility to the Securities and Exchange Commission, or information otherwise 

submitted to the Secretary or any other Federal agency contains the information described in clauses (i), (ii), or (iii) of 

subparagraph (A), the Secretary may allow, to the extent 

practicable, such Form or such information to meet the requirements of paragraph (1) and to be submitted in a manner specified by the Secretary. 

(C) SPECIAL RULE.—In applying subparagraph (A)(i)— 

(i) with respect to subsections (a) and (b), ‘‘ownership 

or control interest’’ shall include direct or indirect interests, including such interests in intermediate entities; and 

(ii) subsection (a)(3)(A)(ii) shall include the owner of 

a whole or part interest in any mortgage, deed of trust, 

note, or other obligation secured, in whole or in part, 

by the entity or any of the property or assets thereof, if 

the interest is equal to or exceeds 5 percent of the total 

property or assets of the entirety. 

(4) REPORTING.— (A) IN GENERAL.—Not later than the date that is 2 years 

after the date of the enactment of this subsection, the Secretary shall promulgate regulations requiring, effective on 

the date that is 90 days after the date on which such final 

regulations are published in the Federal Register, a facility 

to report the information described in paragraph (3) to the 


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Secretary in a standardized format, and such other regulations as are necessary to carry out this subsection. Such 

final regulations shall ensure that the facility certifies, as 

a condition of participation and payment under the program under title XVIII or XIX, that the information reported by the facility in accordance with such final regulations is accurate and current. 

(B) GUIDANCE.—The Secretary shall provide guidance 

and technical assistance to States on how to adopt the 

standardized format under subparagraph (A). 

(5) NO EFFECT ON EXISTING REPORTING REQUIREMENTS.— 

Nothing in this subsection shall reduce, diminish, or alter any 

reporting requirement for a facility that is in effect as of the 

date of the enactment of this subsection. 

(6) DEFINITIONS.—In this subsection: 

(A) ADDITIONAL DISCLOSABLE PARTY.—The term ‘‘additional disclosable party’’ means, with respect to a facility, 

any person or entity who— 

(i) exercises operational, financial, or managerial 

control over the facility or a part thereof, or provides 

policies or procedures for any of the operations of the 

facility, or provides financial or cash management 

services to the facility; 

(ii) leases or subleases real property to the facility, or 

owns a whole or part interest equal to or exceeding 5 

percent of the total value of such real property; 

(iii) lends funds or provides a financial guarantee to 

the facility in an amount which is equal to or exceeds 

$50,000; or 

(iv) provides management or administrative services, 

clinical consulting services, or accounting or financial 

services to the facility. 

(B) FACILITY.—The term ‘‘facility’’ means a disclosing entity which is— 

(i) a skilled nursing facility (as defined in section 

1819(a)); or 

(ii) a nursing facility (as defined in section 1919(a)). 

(C) MANAGING EMPLOYEE.—The term ‘‘managing employee’’ means, with respect to a facility, an individual (including a general manager, business manager, administrator, director, or consultant) who directly or indirectly 

manages, advises, or supervises any element of the practices, finances, or operations of the facility. 

(D) ORGANIZATIONAL STRUCTURE.—The term ‘‘organizational structure’’ means, in the case of— 

(i) a corporation, the officers, directors, and shareholders of the corporation who have an ownership interest in the corporation which is equal to or exceeds 5 

percent; 

(ii) a limited liability company, the members and 

managers of the limited liability company (including, 

as applicable, what percentage each member and manager has of the ownership interest in the limited liability company); 


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(iii) a general partnership, the partners of the general partnership; 

(iv) a limited partnership, the general partners and 

any limited partners of the limited partnership who 

have an ownership interest in the limited partnership 

which is equal to or exceeds 10 percent; 

(v) a trust, the trustees of the trust; 

(vi) an individual, contact information for the individual; and 

(vii) any other person or entity, such information as 

the Secretary determines appropriate. 

* * * * * * * 

EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM

PARTICIPATION IN MEDICARE AND STATE HEALTH CARE PROGRAMS

SEC. 1128. (a) * * * 

(b) PERMISSIVE EXCLUSION.—The Secretary may exclude the following individuals and entities from participation in any Federal 

health care program (as defined in section 1128B(f)): 

(1) * * * 

(2) CONVICTION RELATING TO OBSTRUCTION OF AN INVESTIGA- TION OR AUDIT.—Any individual or entity that has been convicted, under Federal or State law, in connection with the interference with or obstruction of any øinvestigation into any 

criminal offense described in paragraph (1) or in subsection 

(a).¿ investigation or audit related to— 

(i) any offense described in paragraph (1) or in subsection (a); or 

(ii) the use of funds received, directly or indirectly, 

from any Federal health care program (as defined in 

section 1128B(f)). 

* * * * * * * 

(11) FAILURE TO SUPPLY PAYMENT INFORMATION.—Any individual or entity furnishing, ordering, referring for furnishing, 

or certifying the need for items or services for which payment 

may be made under title XVIII or a State health care program 

that fails to provide such information as the Secretary or the 

appropriate State agency finds necessary to determine whether 

such payments are or were due and the amounts thereof, or 

has refused to permit such examination of its records by or on 

behalf of the Secretary or that agency as may be necessary to 

verify such information. 

* * * * * * * 

(c) NOTICE, EFFECTIVE DATE, øAND PERIOD¿ PERIOD, AND EFFECT

OF EXCLUSION.—(1) * * * 

* * * * * * * 

(3)(A) * * * 

(B) Subject to subparagraph (G), in the case of an exclusion 

under subsection (a), the minimum period of exclusion shall be not 

less than five years, except that, upon the request of the administrator of a Federal health care program (as defined in section 

1128B(f)) who determines that the exclusion would impose a hardship on øindividuals entitled to benefits under part A of title XVIII 


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or enrolled under part B of such title, or both¿ beneficiaries (as defined in section 1128A(i)(5)) of that program, the Secretary may, 

after consulting with the Inspector General of the Department of 

Health and Human Services, waive the exclusion under subsection 

(a)(1), (a)(3), or (a)(4) with respect to that program in the case of 

an individual or entity that is the sole community physician or sole 

source of essential specialized services in a community. The Secretary’s decision whether to waive the exclusion shall not be reviewable. 

* * * * * * * 

(4)(A) For purposes of this Act, subject to subparagraph (C), the 

effect of exclusion is that no payment may be made by any Federal 

health care program (as defined in section 1128B(f)) with respect to 

any item or service furnished— 

(i) by an excluded individual or entity; or 

(ii) at the medical direction or on the prescription of a physician or other authorized individual when the person submitting 

a claim for such item or service knew or had reason to know 

of the exclusion of such individual. 

(B) For purposes of this section and sections 1128A and 1128B, 

subject to subparagraph (C), an item or service has been furnished 

by an individual or entity if the individual or entity directly or indirectly provided, ordered, manufactured, distributed, prescribed, or 

otherwise supplied the item or service regardless of how the item or 

service was paid for by a Federal health care program or to whom 

such payment was made. 

(C)(i) Payment may be made under a Federal health care program for emergency items or services (not including items or services furnished in an emergency room of a hospital) furnished by an 

excluded individual or entity, or at the medical direction or on the 

prescription of an excluded physician or other authorized individual 

during the period of such individual’s exclusion. 

(ii) In the case that an individual eligible for benefits under title 

XVIII or XIX submits a claim for payment for items or services furnished by an excluded individual or entity, and such individual eligible for such benefits did not know or have reason to know that 

such excluded individual or entity was so excluded, then, notwithstanding such exclusion, payment shall be made for such items or 

services. In such case the Secretary shall notify such individual eligible for such benefits of the exclusion of the individual or entity 

furnishing the items or services. Payment shall not be made for 

items or services furnished by an excluded individual or entity to an 

individual eligible for such benefits after a reasonable time (as determined by the Secretary in regulations) after the Secretary has notified the individual eligible for such benefits of the exclusion of the 

individual or entity furnishing the items or services. 

(iii) In the case that a claim for payment for items or services furnished by an excluded individual or entity is submitted by an individual or entity other than an individual eligible for benefits under 

title XVIII or XIX or the excluded individual or entity, and the Secretary determines that the individual or entity that submitted the 

claim took reasonable steps to learn of the exclusion and reasonably 

relied upon inaccurate or misleading information from the relevant 

Federal health care program or its contractor, the Secretary may 

waive repayment of the amount paid in violation of the exclusion to 


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559 

the individual or entity that submitted the claim for the items or 

services furnished by the excluded individual or entity. If a Federal 

health care program contractor provided inaccurate or misleading 

information that resulted in the waiver of an overpayment under 

this clause, the Secretary shall take appropriate action to recover 

the improperly paid amount from the contractor. 

* * * * * * * 

(f) NOTICE, HEARING, AND JUDICIAL REVIEW.—(1) * * * 

* * * * * * * 

(4) The provisions of subsections (d) and (e) of section 205 shall 

apply with respect to this section to the same extent as they are applicable with respect to title II. The Secretary may delegate the authority granted by section 205(d) (as made applicable to this section) 

to the Inspector General of the Department of Health and Human 

Services or the Administrator of the Centers for Medicare & Medicaid Services for purposes of any investigation under this section. 

* * * * * * * 

CIVIL MONETARY PENALTIES

SEC. 1128A. (a) Any person (including an organization, agency, 

or other entity, but excluding a beneficiary, as defined in subsection (i)(5)) that— 

(1) knowingly presents or causes to be presented øto an officer, employee, or agent of the United States, or of any department or agency thereof, or of any State agency (as defined in 

subsection (i)(1))¿, a claim (as defined in subsection (i)(2)) that 

the Secretary determines— 

(A) * * * 

* * * * * * * 

(D) is for a medical or other item or service furnished 

during a period in which the person was excluded øfrom 

the program under which the claim was made pursuant to 

a determination by the Secretary under this section or 

under section 1128, 1156, 1160(b) (as in effect on September 2, 1982), 1862(d) (as in effect on the date of the enactment of the Medicare and Medicaid Patient and Program Protection Act of 1987), or 1866(b) or as a result of 

the application of the provisions of section 1842(j)(2), or¿ 

under Federal law from the Federal health care program 

under which the claim was made, or 

* * * * * * * 

(4) in the case of a person who is not an organization, agency, or other entity, is excluded from øparticipating in a program under title XVIII or a State health care program¿ participating in a Federal health care program (as defined in section 

1128B(f)) in accordance with this subsection or under section 

1128 and who, at the time of a violation of this subsection— 

(A) retains a direct or indirect ownership or control interest in an entity that is participating in a program under 

øtitle XVIII or a State health care program¿ a Federal 

health care program (as defined in section 1128B(f)), and 


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who knows or should know of the action constituting the 

basis for the exclusion; or 

* * * * * * * 

(6) arranges or contracts (by employment or otherwise) with 

an individual or entity that the person knows or should know 

is excluded from participation in a Federal health care program (as defined in section 1128B(f)), for the provision of items 

or services for which payment may be made under such a program; øor¿ 

(7) commits an act described in paragraph (1) or (2) of section 1128B(b); 

(8) knowingly makes or causes to be made any false statement, omission, or misrepresentation of a material fact in any 

application, agreement, bid, or contract to participate or enroll 

as a provider of services or supplier under a Federal health care 

program, including managed care organizations under title 

XIX, Medicare Advantage organizations under part C of title 

XVIII, prescription drug plan sponsors under part D of title 

XVIII, and entities that apply to participate as providers of 

services or suppliers in such managed care organizations and 

such plans; 

(9) knowingly makes, uses, or causes to be made or used, a 

false record or statement material to a false or fraudulent claim 

for payment for items and services furnished under a Federal 

health care program; 

(10) fails to grant timely access, upon reasonable request (as 

defined by the Secretary in regulations), to the Inspector General of the Department of Health and Human Services, for the 

purpose of audits, investigations, evaluations, or other statutory 

functions of the Inspector General of the Department of Health 

and Human Services; 

(11) orders or prescribes an item or service, including without 

limitation home health care, diagnostic and clinical lab tests, 

prescription drugs, durable medical equipment, ambulance 

services, physical or occupational therapy, or any other item or 

service, during a period when the person has been excluded 

from participation in a Federal health care program, and the 

person knows or should know that a claim for such item or 

service will be presented to such a program; 

(12) conspires to commit a violation of this section; or 

(13) knowingly makes, uses, or causes to be made or used, a 

false record or statement material to an obligation to pay or 

transmit money or property to a Federal health care program, 

or knowingly conceals or knowingly and improperly avoids or 

decreases an obligation to pay or transmit money or property to 

a Federal health care program; 

shall be subject, in addition to any other penalties that may be prescribed by law, to a civil money penalty of not more than $10,000 

for each item or service (or, in cases under paragraph (3), $15,000 

for each individual with respect to whom false or misleading information was given; in cases under paragraph (4), $10,000 for each 

day the prohibited relationship occurs; øor in cases under para- graph (7), $50,000 for each such act)¿ in cases under paragraph (7), $50,000 for each such act, øor in cases under paragraph (8)¿ in 

cases under paragraph (8), $50,000 for each false statement, omisVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00566 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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sion, or misrepresentation of a ømaterial fact)¿ a material fact, in cases under paragraph (9), $50,000 for each false record or statement, or in cases under paragraph (10), $15,000 for each day of the 

failure described in such paragraph, in cases under paragraph (11), 

$50,000 for each order or prescription for an item or service by an 

excluded individual, in cases under paragraph (12), $50,000 for any 

violation described in this section committed in furtherance of the 

conspiracy involved; or in cases under paragraph (13), $50,000 for 

each false record or statement, or concealment, avoidance, or decrease). In addition, such a person shall be subject to an assessment of not more than 3 times the amount claimed for each such 

item or service in lieu of damages sustained by the United States 

or a State agency because of such claim (or, in cases under paragraph (7), damages of not more than 3 times the total amount of 

remuneration offered, paid, solicited, or received, without regard to 

whether a portion of such remuneration was offered, paid, solicited, 

or received øfor a lawful purpose)¿ for a lawful purpose, in cases 

under paragraph (8), an assessment of not more than 3 times the 

amount claimed as the result of the false statement, omission, or 

misrepresentation of material fact claimed by a provider of services 

or supplier whose application to participate contained such false 

statement or misrepresentation, in cases under paragraph (12), an 

assessment of not more than 3 times the total amount that would 

otherwise apply for any violation described in this section committed in furtherance of the conspiracy involved, or in cases under 

paragraph (13), an assessment of not more than 3 times the total 

amount of the obligation to which the false record or statement was 

material or that was avoided or decreased). In addition the Secretary may make a determination in the same proceeding to exclude the person from participation in the Federal health care programs (as defined in section 1128B(f)(1)) and to direct the appropriate State agency to exclude the person from participation in any 

State health care program. 

* * * * * * * 

(c)(1) The Secretary may initiate a proceeding to determine 

whether to impose a civil money penalty, assessment, or exclusion 

under subsection (a) or (b) only as authorized by the Attorney General pursuant to procedures agreed upon by them. The Secretary 

may not initiate an action under this section with respect to any 

claim, request for payment, or other occurrence described in this 

section later than øsix years¿ 10 years after the date the claim was 

presented, the request for payment was made, or the occurrence 

took place. The Secretary may initiate an action under this section 

by serving notice of the action in any manner authorized by Rule 

4 of the Federal Rules of Civil Procedure. 

* * * * * * * 

(i) For the purposes of this section: 

(1) * * * 

ø(2) The term ‘‘claim’’ means an application for payments for 

items and services under a Federal health care program (as defined in section 1128B(f)). 

ø(3) The term ‘‘item or service’’ includes (A) any particular 

item, device, medical supply, or service claimed to have been 

provided to a patient and listed in an itemized claim for payVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00567 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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ment, and (B) in the case of a claim based on costs, any entry 

in the cost report, books of account or other documents supporting such claim.¿ 

(2) The term ‘‘claim’’ means any application, request, or demand, whether under contract, or otherwise, for money or property for items and services under a Federal health care program 

(as defined in section 1128B(f)), whether or not the United 

States or a State agency has title to the money or property, 

that— 

(A) is presented or caused to be presented to an officer, 

employee, or agent of the United States, or of any department or agency thereof, or of any State agency (as defined 

in subsection (i)(1)); or 

(B) is made to a contractor, grantee, or other recipient if 

the money or property is to be spent or used on the Federal 

health care program’s behalf or to advance a Federal 

health care program interest, and if the Federal health care 

program— 

(i) provides or has provided any portion of the money 

or property requested or demanded; or 

(ii) will reimburse such contractor, grantee, or other 

recipient for any portion of the money or property 

which is requested or demanded. 

(3) The term ‘‘item or service’’ means, without limitation, any 

medical, social, management, administrative, or other item or 

service used in connection with or directly or indirectly related 

to a Federal health care program. 

* * * * * * * 

(6) The term ‘‘remuneration’’ includes the waiver of coinsurance and deductible amounts (or any part thereof), and transfers of items or services for free or for other than fair market 

value. The term ‘‘remuneration’’ does not include— 

(A) * * * 

* * * * * * * 

(C) differentials in coinsurance and deductible amounts 

as part of a benefit plan design as long as the differentials 

have been disclosed in writing to all beneficiaries, third 

party payers, and providers, to whom claims are presented 

and as long as the differentials meet the standards as defined in regulations promulgated by the Secretary not later 

than 180 days after the date of the enactment of the 

Health Insurance Portability and Accountability Act of 

1996; øor¿ 

(D) incentives given to individuals to promote the delivery of preventive care as determined by the Secretary in 

regulations so promulgatedø.¿; or 

ø(D)¿ (E) a reduction in the copayment amount for covered OPD services under section 1833(t)(5)(B). 

ø(7) The term ‘‘should know’’ means that a person, with respect to information— 

ø(A) acts in deliberate ignorance of the truth or falsity 

of the information; or 

ø(B) acts in reckless disregard of the truth or falsity of 

the information, 


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and no proof of specific intent to defraud is required.¿ 

(7) The terms ‘‘knowing’’, ‘‘knowingly’’, and ‘‘should know’’ 

mean that a person, with respect to information— 

(A) has actual knowledge of the information; 

(B) acts in deliberate ignorance of the truth or falsity of 

the information; or 

(C) acts in reckless disregard of the truth or falsity of the 

information; 

and require no proof of specific intent to defraud. 

(8) The term ‘‘obligation’’ means an established duty, whether 

or not fixed, arising from an express or implied contractual, 

grantor-grantee, or licensor-licensee relationship, from a feebased or similar relationship, from statute or regulation, or 

from the retention of any overpayment. 

(9) The term ‘‘material’’ means having a natural tendency to 

influence, or be capable of influencing, the payment or receipt 

of money or property. 

* * * * * * * 

FRAUD AND ABUSE CONTROL PROGRAM

SEC. 1128C. (a) ESTABLISHMENT OF PROGRAM.— 

(1) IN GENERAL.—Not later than January 1, 1997, the Secretary, acting through the Office of the Inspector General of 

the Department of Health and Human Services, and the Attorney General shall establish a program— 

(A) * * * 

* * * * * * * 

(C) to facilitate the enforcement of the provisions of sections 1128, 1128A, and 1128B and other statutes applicable to health care fraud and abuse, and 

(D) to provide for the modification and establishment of 

safe harbors and to issue advisory opinions and special 

fraud alerts pursuant to section 1128Dø, and¿. 

ø(E) to provide for the reporting and disclosure of certain 

final adverse actions against health care providers, suppliers, or practitioners pursuant to the data collection system established under section 1128E.¿ 

* * * * * * * 

HEALTH CARE FRAUD AND ABUSE DATA COLLECTION PROGRAM

SEC. 1128E. (a) GENERAL PURPOSE.—øNot later than¿ Subject to 

subsection (h), not later than January 1, 1997, the Secretary shall 

establish a national health care fraud and abuse data collection 

program for the reporting of final adverse actions (not including 

settlements in which no findings of liability have been made) 

against health care providers, suppliers, or practitioners as required by subsection (b), with access as set forth in subsection (c), 

and shall maintain a database of the information collected under 

this section. 

* * * * * * * 

(d) ACCESS TO REPORTED INFORMATION.— 

(1) * * * 


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(2) FEES FOR DISCLOSURE.—The Secretary may establish or 

approve reasonable fees for the disclosure of information in 

such database ø(other than with respect to requests by Federal 

agencies)¿. The amount of such a fee shall be sufficient to recover the full costs of operating the database. Such fees shall 

be available to the Secretary or, in the Secretary’s discretion 

to the agency designated under this section to cover such costs. 

* * * * * * * 

(h) SUNSET OF THE HEALTHCARE INTEGRITY AND PROTECTION

DATA BANK; TRANSITION PROCESS.—Effective upon the enactment of 

this subsection, the Secretary shall implement a process to eliminate 

duplication between the Healthcare Integrity and Protection Data 

Bank (in this subsection referred to as the ‘‘HIPDB’’ established pursuant to subsection (a) and the National Practitioner Data Bank (in 

this subsection referred to as the ‘‘NPDB’’) as implemented under 

the Health Care Quality Improvement Act of 1986 and section 1921 

of this Act, including systems testing necessary to ensure that information formerly collected in the HIPDB will be accessible through 

the NPDB, and other activities necessary to eliminate duplication 

between the two data banks. Upon the completion of such process, 

notwithstanding any other provision of law, the Secretary shall 

cease the operation of the HIPDB and shall collect information required to be reported under the preceding provisions of this section 

in the NPDB. Except as otherwise provided in this subsection, the 

provisions of subsections (a) through (g) shall continue to apply 

with respect to the reporting of (or failure to report), access to, and 

other treatment of the information specified in this section. 

* * * * * * * 

SEC. 1128G. ENHANCED PROGRAM AND PROVIDER PROTECTIONS IN 

THE MEDICARE, MEDICAID, AND CHIP PROGRAMS. 

(a) CERTAIN AUTHORIZED SCREENING, ENHANCED OVERSIGHT PE- RIODS, AND ENROLLMENT MORATORIA.— (1) IN GENERAL.—For periods beginning after January 1, 

2011, in the case that the Secretary determines there is a significant risk of fraudulent activity (as determined by the Secretary based on relevant complaints, reports, referrals by law 

enforcement or other sources, data analysis, trending information, or claims submissions by providers of services and suppliers) with respect to a category of provider of services or supplier of items or services, including a category within a geographic area, under title XVIII, XIX, or XXI, the Secretary may 

impose any of the following requirements with respect to a provider of services or a supplier (whether such provider or supplier is initially enrolling in the program or is renewing such 

enrollment): 

(A) Screening under paragraph (2). 

(B) Enhanced oversight periods under paragraph (3). 

(C) Enrollment moratoria under paragraph (4). 

In applying this subsection for purposes of title XIX and XXI 

the Secretary may require a State to carry out the provisions of 

this subsection as a requirement of the State plan under title 

XIX or the child health plan under title XXI. Actions taken and 

determinations made under this subsection shall not be subject 

to review by a judicial tribunal. 


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(2) SCREENING.—For purposes of paragraph (1), the Secretary 

shall establish procedures under which screening is conducted 

with respect to providers of services and suppliers described in 

such paragraph. Such screening may include— 

(A) licensing board checks; 

(B) screening against the list of individuals and entities 

excluded from the program under title XVIII, XIX, or XXI; 

(C) the excluded provider list system; 

(D) background checks; and 

(E) unannounced pre-enrollment or other site visits. 

(3) ENHANCED OVERSIGHT PERIOD.—For purposes of paragraph (1), the Secretary shall establish procedures to provide 

for a period of not less than 30 days and not more than 365 

days during which providers of services and suppliers described 

in such paragraph, as the Secretary determines appropriate, 

would be subject to enhanced oversight, such as required or unannounced (or required and unannounced) site visits or inspections, prepayment review, enhanced review of claims, and such 

other actions as specified by the Secretary, under the programs 

under titles XVIII, XIX, and XXI. Under such procedures, the 

Secretary may extend such period for more than 365 days if the 

Secretary determines that after the initial period such additional period of oversight is necessary. 

(4) MORATORIUM ON ENROLLMENT OF PROVIDERS AND SUP- PLIERS.—For purposes of paragraph (1), the Secretary, based 

upon a finding of a risk of serious ongoing fraud within a program under title XVIII, XIX, or XXI, may impose a moratorium 

on the enrollment of providers of services and suppliers within 

a category of providers of services and suppliers (including a 

category within a specific geographic area) under such title. 

Such a moratorium may only be imposed if the Secretary makes 

a determination that the moratorium would not adversely impact access of individuals to care under such program. 

(5) CLARIFICATION.—Nothing in this subsection shall be interpreted to preclude or limit the ability of a State to engage in 

provider screening or enhanced provider oversight activities beyond those required by the Secretary. 

(b) ENHANCED PROGRAM DISCLOSURE REQUIREMENTS.— (1) DISCLOSURE.—A provider of services or supplier who submits on or after July 1, 2011, an application for enrollment and 

renewing enrollment in a program under title XVIII, XIX, or 

XXI shall disclose (in a form and manner determined by the 

Secretary) any current affiliation or affiliation within the previous 10-year period with a provider of services or supplier that 

has uncollected debt or with a person or entity that has been 

suspended or excluded under such program, subject to a payment suspension, or has had its billing privileges revoked. 

(2) ENHANCED SAFEGUARDS.—If the Secretary determines that 

such previous affiliation of such provider or supplier poses a 

risk of fraud, waste, or abuse, the Secretary may apply such enhanced safeguards as the Secretary determines necessary to reduce such risk associated with such provider or supplier enrolling or participating in the program under title XVIII, XIX, or 

XXI. Such safeguards may include enhanced oversight, such as 

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quired and unannounced) site visits or inspections, additional 

information reporting requirements, and conditioning such enrollment on the provision of a surety bond. 

(3) AUTHORITY TO DENY PARTICIPATION.—If the Secretary determines that there has been at least one such affiliation and 

that such affiliation or affiliations, as applicable, of such provider or supplier poses a serious risk of fraud, waste, or abuse, 

the Secretary may deny the application of such provider or supplier. 

(c) REPORTS ON AND REPAYMENT OF OVERPAYMENTS IDENTIFIED

THROUGH INTERNAL AUDITS AND REVIEWS.— (1) REPORTING AND RETURNING OVERPAYMENTS.—If a person 

knows of an overpayment, the person must— 

(A) report and return the overpayment to the Secretary, 

the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address, and 

(B) notify the Secretary, the State, intermediary, carrier, 

or contractor to whom the overpayment was returned in 

writing of the reason for the overpayment. 

(2) TIMING.—An overpayment must be reported and returned 

under paragraph (1)(A) by not later than the date that is 60 

days after the date the person knows of the overpayment. 

Any known overpayment retained later than the applicable date 

specified in this paragraph creates an obligation as defined in 

section 3729(b)(3) of title 31 of the United States Code. 

(3) CLARIFICATION.—Repayment of any overpayments (or refunding by withholding of future payments) by a provider of 

services or supplier does not otherwise limit the provider or supplier’s potential liability for administrative obligations such as 

applicable interests, fines, and specialties or civil or criminal 

sanctions involving the same claim if it is determined later that 

the reason for the overpayment was related to fraud by the provider or supplier or the employees or agents of such provider or 

supplier. 

(4) DEFINITIONS.—In this subsection: 

(A) KNOWS.—The term ‘‘knows’’ has the meaning given 

the terms ‘‘knowing’’ and ‘‘knowingly’’ in section 3729(b) of 

title 31 of the United States Code. 

(B) OVERPAYMENT.—The term ‘‘overpayment’’ means any 

finally determined funds that a person receives or retains 

under title XVIII, XIX, or XXI to which the person, after 

applicable reconciliation, is not entitled under such title. 

(C) PERSON.—The term ‘‘person’’ means a provider of 

services, supplier, Medicaid managed care organization (as 

defined in section 1903(m)(1)(A)), Medicare Advantage organization (as defined in section 1859(a)(1)), or PDP sponsor (as defined in section 1860D–41(a)(13)), but excluding 

a beneficiary. 

(d) ACCESS TO INFORMATION NECESSARY TO IDENTIFY FRAUD, WASTE, AND ABUSE.—For purposes of law enforcement activity, and 

to the extent consistent with applicable disclosure, privacy, and security laws, including the Health Insurance Portability and Accountability Act of 1996 and the Privacy Act of 1974, and subject 

to any information systems security requirements enacted by law or 

otherwise required by the Secretary, the Attorney General shall have 


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access, facilitation by the Inspector General of the Department of 

Health and Human Services, to claims and payment data relating 

to titles XVIII and XIX, in consultation with the Centers for Medicare & Medicaid Services or the owner of such data. 

SEC. 1128H. FINANCIAL REPORTS ON PHYSICIANS’ FINANCIAL RELATIONSHIPS WITH MANUFACTURERS AND DISTRIBUTORS 

OF COVERED DRUGS, DEVICES, BIOLOGICALS, OR MEDICAL SUPPLIES UNDER MEDICARE, MEDICAID, OR CHIP 

AND WITH ENTITIES THAT BILL FOR SERVICES UNDER 

MEDICARE. 

(a) REPORTING OF PAYMENTS OR OTHER TRANSFERS OF VALUE.— (1) IN GENERAL.—Except as provided in this subsection, not 

later than March 31, 2011 and annually thereafter, each applicable manufacturer or distributor that provides a payment or 

other transfer of value to a covered recipient, or to an entity or 

individual at the request of or designated on behalf of a covered 

recipient, shall submit to the Secretary, in such electronic form 

as the Secretary shall require, the following information with 

respect to the preceding calendar year: 

(A) With respect to the covered recipient, the recipient’s 

name, business address, physician specialty, and national 

provider identifier. 

(B) With respect to the payment or other transfer of value, 

other than a drug sample— 

(i) its value and date; 

(ii) the name of the related drug, device, or supply, 

if available; and 

(iii) a description of its form, indicated (as appropriate for all that apply) as— 

(I) cash or a cash equivalent; 

(II) in-kind items or services; 

(III) stock, a stock option, or any other ownership interest, dividend, profit, or other return on 

investment; or 

(IV) any other form (as defined by the Secretary). 

(C) With respect to a drug sample, the name, number, 

date, and dosage units of the sample. 

(2) AGGREGATE REPORTING.—Information submitted by an 

applicable manufacturer or distributor under paragraph (1) 

shall include the aggregate amount of all payments or other 

transfers of value provided by the manufacturer or distributor 

to covered recipients (and to entities or individuals at the request of or designated on behalf of a covered recipient) during 

the year involved, including all payments and transfers of value 

regardless of whether such payments or transfer of value were 

individually disclosed. 

(3) SPECIAL RULE FOR CERTAIN PAYMENTS OR OTHER TRANSFERS OF VALUE.—In the case where an applicable manufacturer 

or distributor provides a payment or other transfer of value to 

an entity or individual at the request of or designated on behalf 

of a covered recipient, the manufacturer or distributor shall disclose that payment or other transfer of value under the name 

of the covered recipient. 

(4) DELAYED REPORTING FOR PAYMENTS MADE PURSUANT TO

PRODUCT DEVELOPMENT AGREEMENTS.—In the case of a payment or other transfer of value made to a covered recipient by 


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an applicable manufacturer or distributor pursuant to a product development agreement for services furnished in connection 

with the development of a new drug, device, biological, or medical supply, the applicable manufacturer or distributor may report the value and recipient of such payment or other transfer 

of value in the first reporting period under this subsection in 

the next reporting deadline after the earlier of the following: 

(A) The date of the approval or clearance of the covered 

drug, device, biological, or medical supply by the Food and 

Drug Administration. 

(B) Two calendar years after the date such payment or 

other transfer of value was made. 

(5) DELAYED REPORTING FOR PAYMENTS MADE PURSUANT TO

CLINICAL INVESTIGATIONS.—In the case of a payment or other 

transfer of value made to a covered recipient by an applicable 

manufacturer or distributor in connection with a clinical investigation regarding a new drug, device, biological, or medical 

supply, the applicable manufacturer or distributor may report 

as required under this section in the next reporting period 

under this subsection after the earlier of the following: 

(A) The date that the clinical investigation is registered 

on the website maintained by the National Institutes of 

Health pursuant to section 671 of the Food and Drug Administration Amendments Act of 2007. 

(B) Two calendar years after the date such payment or 

other transfer of value was made. 

(6) CONFIDENTIALITY.—Information described in paragraph 

(4) or (5) shall be considered confidential and shall not be subject to disclosure under section 552 of title 5, United States 

Code, or any other similar Federal, State, or local law, until or 

after the date on which the information is made available to the 

public under such paragraph. 

(b) REPORTING OF OWNERSHIP INTEREST BY PHYSICIANS IN HOS- PITALS AND OTHER ENTITIES THAT BILL MEDICARE.—Not later than 

March 31 of each year (beginning with 2011), each hospital or other 

health care entity (not including a Medicare Advantage organization) that bills the Secretary under part A or part B of title XVIII 

for services shall report on the ownership shares (other than ownership shares described in section 1877(c)) of each physician who, directly or indirectly, owns an interest in the entity. In this subsection, 

the term ‘‘physician’’ includes a physician’s immediate family members (as defined for purposes of section 1877(a)). 

(c) PUBLIC AVAILABILITY.— 

(1) IN GENERAL.—The Secretary shall establish procedures to 

ensure that, not later than September 30, 2011, and on June 30 

of each year beginning thereafter, the information submitted 

under subsections (a) and (b), other than information regard 

drug samples, with respect to the preceding calendar year is 

made available through an Internet website that— 

(A) is searchable and is in a format that is clear and understandable; 

(B) contains information that is presented by the name of 

the applicable manufacturer or distributor, the name of the 

covered recipient, the business address of the covered recipient, the specialty (if applicable) of the covered recipient, the 


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value of the payment or other transfer of value, the date on 

which the payment or other transfer of value was provided 

to the covered recipient, the form of the payment or other 

transfer of value, indicated (as appropriate) under subsection (a)(1)(B)(ii), the nature of the payment or other 

transfer of value, indicated (as appropriate) under subsection (a)(1)(B)(iii), and the name of the covered drug, device, biological, or medical supply, as applicable; 

(C) contains information that is able to be easily aggregated and downloaded; 

(D) contains a description of any enforcement actions 

taken to carry out this section, including any penalties imposed under subsection (d), during the preceding year; 

(E) contains background information on industry-physician relationships; 

(F) in the case of information submitted with respect to 

a payment or other transfer of value described in subsection 

(a)(5), lists such information separately from the other information submitted under subsection (a) and designates 

such separately listed information as funding for clinical 

research; 

(G) contains any other information the Secretary determines would be helpful to the average consumer; and 

(H) provides the covered recipient an opportunity to submit corrections to the information made available to the 

public with respect to the covered recipient. 

(2) ACCURACY OF REPORTING.—The accuracy of the information that is submitted under subsections (a) and (b) and made 

available under paragraph (1) shall be the responsibility of the 

applicable manufacturer or distributor of a covered drug, device, biological, or medical supply reporting under subsection 

(a) or hospital or other health care entity reporting physician 

ownership under subsection (b). The Secretary shall establish 

procedures to ensure that the covered recipient is provided with 

an opportunity to submit corrections to the manufacturer, distributor, hospital, or other entity reporting under subsection (a) 

or (b) with regard to information made public with respect to 

the covered recipient and, under such procedures, the corrections shall be transmitted to the Secretary. 

(3) SPECIAL RULE FOR DRUG SAMPLES.—Information relating 

to drug samples provided under subsection (a) shall not be 

made available to the public by the Secretary but may be made 

available outside the Department of Health and Human Services by the Secretary for research or legitimate business purposes pursuant to data use agreements. 

(4) SPECIAL RULE FOR NATIONAL PROVIDER IDENTIFIERS.—Information relating to national provider identifiers provided 

under subsection (a) shall not be made available to the public 

by the Secretary but may be made available outside the Department of Health and Human Services by the Secretary for research or legitimate business purposes pursuant to data use 

agreements. 

(d) PENALTIES FOR NONCOMPLIANCE.— 

(1) FAILURE TO REPORT.— 


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(A) IN GENERAL.—Subject to subparagraph (B), except as 

provided in paragraph (2), any applicable manufacturer or 

distributor that fails to submit information required under 

subsection (a) in a timely manner in accordance with regulations promulgated to carry out such subsection, and any 

hospital or other entity that fails to submit information required under subsection (b) in a timely manner in accordance with regulations promulgated to carry out such subsection shall be subject to a civil money penalty of not less 

than $1,000, but not more than $10,000, for each payment 

or other transfer of value or ownership or investment interest not reported as required under such subsection. Such 

penalty shall be imposed and collected in the same manner 

as civil money penalties under subsection (a) of section 

1128A are imposed and collected under that section. 

(B) LIMITATION.—The total amount of civil money penalties imposed under subparagraph (A) with respect to each 

annual submission of information under subsection (a) by 

an applicable manufacturer or distributor or other entity 

shall not exceed $150,000. 

(2) KNOWING FAILURE TO REPORT.— 

(A) IN GENERAL.—Subject to subparagraph (B), any applicable manufacturer or distributor that knowingly fails to 

submit information required under subsection (a) in a timely manner in accordance with regulations promulgated to 

carry out such subsection and any hospital or other entity 

that fails to submit information required under subsection 

(b) in a timely manner in accordance with regulations promulgated to carry out such subsection, shall be subject to 

a civil money penalty of not less than $10,000, but not more 

than $100,000, for each payment or other transfer of value 

or ownership or investment interest not reported as required under such subsection. Such penalty shall be imposed and collected in the same manner as civil money penalties under subsection (a) of section 1128A are imposed 

and collected under that section. 

(B) LIMITATION.—The total amount of civil money penalties imposed under subparagraph (A) with respect to each 

annual submission of information under subsection (a) or 

(b) by an applicable manufacturer, distributor, or entity 

shall not exceed $1,000,000, or, if greater, 0.1 percentage of 

the total annual revenues of the manufacturer, distributor, 

or entity. 

(3) USE OF FUNDS.—Funds collected by the Secretary as a result of the imposition of a civil money penalty under this subsection shall be used to carry out this section. 

(4) ENFORCEMENT THROUGH STATE ATTORNEYS GENERAL.— 

The attorney general of a State, after providing notice to the 

Secretary of an intent to proceed under this paragraph in a specific case and providing the Secretary with an opportunity to 

bring an action under this subsection and the Secretary declining such opportunity, may proceed under this subsection 

against a manufacturer or distributor in the State. 


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(e) ANNUAL REPORT TO CONGRESS.—Not later than April 1 of 

each year beginning with 2011, the Secretary shall submit to Congress a report that includes the following: 

(1) The information submitted under this section during the 

preceding year, aggregated for each applicable manufacturer or 

distributor of a covered drug, device, biological, or medical supply that submitted such information during such year. 

(2) A description of any enforcement actions taken to carry 

out this section, including any penalties imposed under subsection (d), during the preceding year. 

(f) DEFINITIONS.—In this section: 

(1) APPLICABLE MANUFACTURER; APPLICABLE DISTRIBUTOR.— 

The term ‘‘applicable manufacturer’’ means a manufacturer of 

a covered drug, device, biological, or medical supply, and the 

term ‘‘applicable distributor’’ means a distributor of a covered 

drug, device, or medical supply. 

(2) CLINICAL INVESTIGATION.—The term ‘‘clinical investigation’’ means any experiment involving one or more human subjects, or materials derived from human subjects, in which a 

drug or device is administered, dispensed, or used. 

(3) COVERED DRUG, DEVICE, BIOLOGICAL, OR MEDICAL SUPPLY.—The term ‘‘covered’’ means, with respect to a drug, device, 

biological, or medical supply, such a drug, device, biological, or 

medical supply for which payment is available under title 

XVIII or a State plan under title XIX or XXI (or a waiver of 

such a plan). 

(4) COVERED RECIPIENT.—The term ‘‘covered recipient’’ means 

the following: 

(A) A physician. 

(B) A physician group practice. 

(C) Any other prescriber of a covered drug, device, biological, or medical supply. 

(D) A pharmacy or pharmacist. 

(E) A health insurance issuer, group health plan, or other 

entity offering a health benefits plan, including any employee of such an issuer, plan, or entity. 

(F) A pharmacy benefit manager, including any employee 

of such a manager. 

(G) A hospital. 

(H) A medical school. 

(I) A sponsor of a continuing medical education program. 

(J) A patient advocacy or disease specific group. 

(K) A organization of health care professionals. 

(L) A biomedical researcher. 

(M) A group purchasing organization. 

(5) DISTRIBUTOR OF A COVERED DRUG, DEVICE, OR MEDICAL

SUPPLY.—The term ‘‘distributor of a covered drug, device, or 

medical supply’’ means any entity which is engaged in the marketing or distribution of a covered drug, device, or medical supply (or any subsidiary of or entity affiliated with such entity), 

but does not include a wholesale pharmaceutical distributor. 

(6) EMPLOYEE.—The term ‘‘employee’’ has the meaning given 

such term in section 1877(h)(2). 


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(7) KNOWINGLY.—The term ‘‘knowingly’’ has the meaning 

given such term in section 3729(b) of title 31, United States 

Code. 

(8) MANUFACTURER OF A COVERED DRUG, DEVICE, BIOLOGICAL, OR MEDICAL SUPPLY.—The term ‘‘manufacturer of a covered 

drug, device, biological, or medical supply’’ means any entity 

which is engaged in the production, preparation, propagation, 

compounding, conversion, processing, marketing, or distribution 

of a covered drug, device, biological, or medical supply (or any 

subsidiary of or entity affiliated with such entity). 

(9) PAYMENT OR OTHER TRANSFER OF VALUE.— (A) IN GENERAL.—The term ‘‘payment or other transfer of 

value’’ means a transfer of anything of value for or of any 

of the following: 

(i) Gift, food, or entertainment. 

(ii) Travel or trip. 

(iii) Honoraria. 

(iv) Research funding or grant. 

(v) Education or conference funding. 

(vi) Consulting fees. 

(vii) Ownership or investment interest and royalties 

or license fee. 

(B) INCLUSIONS.—Subject to subparagraph (C), the term 

‘‘payment or other transfer of value’’ includes any compensation, gift, honorarium, speaking fee, consulting fee, 

travel, services, dividend, profit distribution, stock or stock 

option grant, or any ownership or investment interest held 

by a physician in a manufacturer (excluding a dividend or 

other profit distribution from, or ownership or investment 

interest in, a publicly traded security or mutual fund (as 

described in section 1877(c))). 

(C) EXCLUSIONS.—The term ‘‘payment or other transfer of 

value’’ does not include the following: 

(i) Any payment or other transfer of value provided 

by an applicable manufacturer or distributor to a covered recipient where the amount transferred to, requested by, or designated on behalf of the covered recipient does not exceed $5. 

(ii) The loan of a covered device for a short-term trial 

period, not to exceed 90 days, to permit evaluation of 

the covered device by the covered recipient. 

(iii) Items or services provided under a contractual 

warranty, including the replacement of a covered device, where the terms of the warranty are set forth in 

the purchase or lease agreement for the covered device. 

(iv) A transfer of anything of value to a covered recipient when the covered recipient is a patient and not 

acting in the professional capacity of a covered recipient. 

(v) In-kind items used for the provision of charity 

care. 

(vi) A dividend or other profit distribution from, or 

ownership or investment interest in, a publicly traded 

security and mutual fund (as described in section 

1877(c)). 


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(vii) Compensation paid by a manufacturer or distributor of a covered drug, device, biological, or medical supply to a covered recipient who is directly employed by and works solely for such manufacturer or 

distributor. 

(viii) Any discount or cash rebate. 

(10) PHYSICIAN.—The term ‘‘physician’’ has the meaning 

given that term in section 1861(r). For purposes of this section, 

such term does not include a physician who is an employee of 

the applicable manufacturer that is required to submit information under subsection (a). 

(g) ANNUAL REPORTS TO STATES.—Not later than April 1 of each 

year beginning with 2011, the Secretary shall submit to States a report that includes a summary of the information submitted under 

subsections (a) and (d) during the preceding year with respect to 

covered recipients or other hospitals and entities in the State. 

(h) RELATION TO STATE LAWS.— (1) IN GENERAL.—Effective on January 1, 2011, subject to 

paragraph (2), the provisions of this section shall preempt any 

law or regulation of a State or of a political subdivision of a 

State that requires an applicable manufacturer and applicable 

distributor (as such terms are defined in subsection (f)) to disclose or report, in any format, the type of information (described 

in subsection (a)) regarding a payment or other transfer of 

value provided by the manufacturer to a covered recipient (as 

so defined). 

(2) NO PREEMPTION OF ADDITIONAL REQUIREMENTS.—Paragraph (1) shall not preempt any law or regulation of a State or 

of a political subdivision of a State that requires any of the following: 

(A) The disclosure or reporting of information not of the 

type required to be disclosed or reported under this section. 

(B) The disclosure or reporting, in any format, of the type 

of information required to be disclosed or reported under 

this section to a Federal, State, or local governmental agency for public health surveillance, investigation, or other 

public health purposes or health oversight purposes. 

(C) The discovery or admissibility of information described in this section in a criminal, civil, or administrative proceeding. 

* * * * * * * 

SEC. 1138A. REQUIREMENT FOR PUBLIC REPORTING BY HOSPITALS 

AND AMBULATORY SURGICAL CENTERS ON HEALTH CAREASSOCIATED INFECTIONS. 

(a) REPORTING REQUIREMENT.— (1) IN GENERAL.—The Secretary shall provide that a hospital 

(as defined in subsection (g)) or ambulatory surgical center 

meeting the requirements of titles XVIII or XIX may participate 

in the programs established under such titles (pursuant to the 

applicable provisions of law, including sections 1866(a)(1) and 

1832(a)(1)(F)(i)) only if, in accordance with this section, the hospital or center reports such information on health care-associated infections that develop in the hospital or center (and such 

demographic information associated with such infections) as 

the Secretary specifies. 


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(2) REPORTING PROTOCOLS.— Such information shall be reported in accordance with reporting protocols established by the 

Secretary through the Director of the Centers for Disease Control and Prevention (in this section referred to as the ‘‘CDC’’) 

and to the National Healthcare Safety Network of the CDC or 

under such another reporting system of such Centers as determined appropriate by the Secretary in consultation with such 

Director. 

(3) COORDINATION WITH HIT.—The Secretary, through the Director of the CDC and the Office of the National Coordinator 

for Health Information Technology, shall ensure that the transmission of information under this subsection is coordinated 

with systems established under the HITECH Act, where appropriate. 

(4) PROCEDURES TO ENSURE THE VALIDITY OF INFORMATION.— The Secretary shall establish procedures regarding the validity 

of the information submitted under this subsection in order to 

ensure that such information is appropriately compared across 

hospitals and centers. Such procedures shall address failures to 

report as well as errors in reporting. 

(5) IMPLEMENTATION.—Not later than 1 year after the date of 

enactment of this section, the Secretary, through the Director of 

CDC, shall promulgate regulations to carry out this section. 

(b) PUBLIC POSTING OF INFORMATION.—The Secretary shall 

promptly post, on the official public Internet site of the Department 

of Health and Human Services, the information reported under subsection (a). Such information shall be set forth in a manner that allows for the comparison of information on health care-associated infections— 

(1) among hospitals and ambulatory surgical centers; and 

(2) by demographic information. 

(c) ANNUAL REPORT TO CONGRESS.—On an annual basis the Secretary shall submit to the Congress a report that summarizes each 

of the following: 

(1) The number and types of health care-associated infections 

reported under subsection (a) in hospitals and ambulatory surgical centers during such year. 

(2) Factors that contribute to the occurrence of such infections, including health care worker immunization rates. 

(3) Based on the most recent information available to the Secretary on the composition of the professional staff of hospitals 

and ambulatory surgical centers, the number of certified infection control professionals on the staff of hospitals and ambulatory surgical centers. 

(4) The total increases or decreases in health care costs that 

resulted from increases or decreases in the rates of occurrence 

of each such type of infection during such year. 

(5) Recommendations, in coordination with the Center for 

Quality Improvement established under section 931 of the Public Health Service Act, for best practices to eliminate the rates 

of occurrence of each such type of infection in hospitals and ambulatory surgical centers. 

(d) NON-PREEMPTION OF STATE LAWS.—Nothing in this section 

shall be construed as preempting or otherwise affecting any provision of State law relating to the disclosure of information on health 


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care-associated infections or patient safety procedures for a hospital 

or ambulatory surgical center. 

(e) HEALTH CARE-ASSOCIATED INFECTION.—For purposes of this 

section: 

(1) IN GENERAL.—The term ‘‘health care-associated infection’’ 

means an infection that develops in a patient who has received 

care in any institutional setting where health care is delivered 

and is related to receiving health care. 

(2) RELATED TO RECEIVING HEALTH CARE.—The term ‘‘related 

to receiving health care’’, with respect to an infection, means 

that the infection was not incubating or present at the time 

health care was provided. 

(f) APPLICATION TO CRITICAL ACCESS HOSPITALS.—For purposes 

of this section, the term ‘‘hospital’’ includes a critical access hospital, 

as defined in section 1861(mm)(1). 

* * * * * * * 

IMPROVED COORDINATION AND PROTECTION FOR DUAL ELIGIBLES

SEC. 1150A. (a) IN GENERAL.—The Secretary shall provide, 

through an identifiable office or program within the Centers for 

Medicare & Medicaid Services, for a focused effort to provide for improved coordination between Medicare and Medicaid and protection 

in the case of dual eligibles (as defined in subsection (e)). The office 

or program shall— 

(1) review Medicare and Medicaid policies related to enrollment, benefits, service delivery, payment, and grievance and appeals processes under parts A and B of title XVIII, under the 

Medicare Advantage program under part C of such title, and 

under title XIX; 

(2) identify areas of such policies where better coordination 

and protection could improve care and costs; and 

(3) issue guidance to States regarding improving such coordination and protection. 

(b) ELEMENTS.—The improved coordination and protection under 

this section shall include efforts— 

(1) to simplify access of dual eligibles to benefits and services 

under Medicare and Medicaid; 

(2) to improve care continuity for dual eligibles and ensure 

safe and effective care transitions; 

(3) to harmonize regulatory conflicts between Medicare and 

Medicaid rules with regard to dual eligibles; and 

(4) to improve total cost and quality performance under Medicare and Medicaid for dual eligibles. 

(c) RESPONSIBILITIES.—In carrying out this section, the Secretary 

shall provide for the following: 

(1) An examination of Medicare and Medicaid payment systems to develop strategies to foster more integrated and higher 

quality care. 

(2) Development of methods to facilitate access to post-acute 

and community-based services and to identify actions that 

could lead to better coordination of community-based care. 

(3) A study of enrollment of dual eligibles in the Medicare 

Savings Program (as defined in section 1144(c)(7)), under Medicaid, and in the low-income subsidy program under section 


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1860D–14 to identify methods to more efficiently and effectively 

reach and enroll dual eligibles. 

(4) An assessment of communication strategies for dual eligibles to determine whether additional informational materials or 

outreach is needed, including an assessment of the Medicare 

website, 1–800–MEDICARE, and the Medicare handbook. 

(5) Research and evaluation of areas where service utilization, quality, and access to cost sharing protection could be improved and an assessment of factors related to enrollee satisfaction with services and care delivery. 

(6) Collection (and making available to the public) of data 

and a database that describe the eligibility, benefit and costsharing assistance available to dual eligibles by State. 

(7) Monitoring total combined Medicare and Medicaid program costs in serving dual eligibles and making recommendations for optimizing total quality and cost performance across 

both programs. 

(8) Coordination of activities relating to Medicare Advantage 

plans under 1859(b)(6)(B)(ii) and Medicaid. 

(d) PERIODIC REPORTS.—Not later than 1 year after the date of 

the enactment of this section and every 3 years thereafter the Secretary shall submit to Congress a report on progress in activities 

conducted under this section. 

(e) DEFINITIONS.—In this section: 

(1) DUAL ELIGIBLE.—The term ‘‘dual eligible’’ means an individual who is dually eligible for benefits under title XVIII, and 

medical assistance under title XIX, including such individuals 

who are eligible for benefits under the Medicare Savings Program (as defined in section 1144(c)(7)). 

(2) MEDICARE; MEDICAID.—The terms ‘‘Medicare’’ and ‘‘Medicaid’’ mean the programs under titles XVIII and XIX, respectively. 

* * * * * * * 

PART C—ADMINISTRATIVE SIMPLIFICATION

DEFINITIONS

SEC. 1171. For purposes of this part: 

(1) * * * 

* * * * * * * 

(7) STANDARD.—The term ‘‘standard’’, when used øwith reference to a data element of health information or a transaction 

referred to in section 1173(a)(1), means any such data element 

or transaction that meets each of the standards and implementation specifications adopted or established by the Secretary 

with respect to the data element or transaction under sections 

1172 through 1174.¿ with reference to a transaction or data element of health information in section 1173 means implementation specifications, certification criteria, operating rules, messaging formats, codes, and code sets adopted or established by 

the Secretary for the electronic exchange and use of information. 

* * * * * * * 


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(9) OPERATING RULES.—The term ‘‘operating rules’’ means 

business rules for using and processing transactions. Operating 

rules should address the following: 

(A) Requirements for data content using available and 

established national standards. 

(B) Infrastructure requirements that establish best practices for streamlining data flow to yield timely execution of 

transactions. 

(C) Policies defining the transaction related rights and 

responsibilities for entities that are transmitting or receiving data. 

* * * * * * * 

SEC. 1173A. STANDARDIZE ELECTRONIC ADMINISTRATIVE TRANSACTIONS. 

(a) STANDARDS FOR FINANCIAL AND ADMINISTRATIVE TRANSACTIONS.— 

(1) IN GENERAL.—The Secretary shall adopt and regularly 

update standards consistent with the goals described in paragraph (2). 

(2) GOALS FOR FINANCIAL AND ADMINISTRATIVE TRANSACTIONS.—The goals for standards under paragraph (1) are 

that such standards shall— 

(A) be unique with no conflicting or redundant standards; 

(B) be authoritative, permitting no additions or constraints for electronic transactions, including companion 

guides; 

(C) be comprehensive, efficient and robust, requiring 

minimal augmentation by paper transactions or clarification by further communications; 

(D) enable the real-time (or near real-time) determination 

of an individual’s financial responsibility at the point of 

service and, to the extent possible, prior to service, including whether the individual is eligible for a specific service 

with a specific physician at a specific facility, which may 

include utilization of a machine-readable health plan beneficiary identification card; 

(E) enable, where feasible, near real-time adjudication of 

claims; 

(F) provide for timely acknowledgment, response, and 

status reporting applicable to any electronic transaction 

deemed appropriate by the Secretary; 

(G) describe all data elements (such as reason and remark codes) in unambiguous terms, not permit optional 

fields, require that data elements be either required or conditioned upon set values in other fields, and prohibit additional conditions; and 

(H) harmonize all common data elements across administrative and clinical transaction standards. 

(3) TIME FOR ADOPTION.—Not later than 2 years after the 

date of implementation of the X12 Version 5010 transaction 

standards implemented under this part, the Secretary shall 

adopt standards under this section. 


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(4) REQUIREMENTS FOR SPECIFIC STANDARDS.—The standards 

under this section shall be developed, adopted, and enforced so 

as to— 

(A) clarify, refine, complete, and expand, as needed, the 

standards required under section 1173; 

(B) require paper versions of standardized transactions to 

comply with the same standards as to data content such 

that a fully compliant, equivalent electronic transaction can 

be populated from the data from a paper version; 

(C) enable electronic funds transfers, in order to allow 

automated reconciliation with the related health care payment and remittance advice; 

(D) require timely and transparent claim and denial 

management processes, including tracking, adjudication, 

and appeal processing ; 

(E) require the use of a standard electronic transaction 

with which health care providers may quickly and efficiently enroll with a health plan to conduct the other electronic transactions provided for in this part; and 

(F) provide for other requirements relating to administrative simplification as identified by the Secretary, in consultation with stakeholders. 

(5) BUILDING ON EXISTING STANDARDS.—In developing the 

standards under this section, the Secretary shall build upon existing and planned standards. 

(6) IMPLEMENTATION AND ENFORCEMENT.—Not later than 6 

months after the date of the enactment of this section, the Secretary shall submit to the appropriate committees of Congress 

a plan for the implementation and enforcement, by not later 

than 5 years after such date of enactment, of the standards 

under this section. Such plan shall include— 

(A) a process and timeframe with milestones for developing the complete set of standards; 

(B) an expedited upgrade program for continually developing and approving additions and modifications to the 

standards as often as annually to improve their quality 

and extend their functionality to meet evolving requirements in health care; 

(C) programs to provide incentives for, and ease the burden of, implementation for certain health care providers, 

with special consideration given to such providers serving 

rural or underserved areas and ensure coordination with 

standards, implementation specifications, and certification 

criteria being adopted under the HITECH Act; 

(D) programs to provide incentives for, and ease the burden of, health care providers who volunteer to participate 

in the process of setting standards for electronic transactions; 

(E) an estimate of total funds needed to ensure timely 

completion of the implementation plan; and 

(F) an enforcement process that includes timely investigation of complaints, random audits to ensure compliance, 

civil monetary and programmatic penalties for non-compliance consistent with existing laws and regulations, and a 


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fair and reasonable appeals process building off of enforcement provisions under this part. 

(b) LIMITATIONS ON USE OF DATA.—Nothing in this section shall 

be construed to permit the use of information collected under this 

section in a manner that would adversely affect any individual. 

(c) PROTECTION OF DATA.—The Secretary shall ensure (through 

the promulgation of regulations or otherwise) that all data collected 

pursuant to subsection (a) are— 

(1) used and disclosed in a manner that meets the HIPAA 

privacy and security law (as defined in section 3009(a)(2) of the 

Public Health Service Act), including any privacy or security 

standard adopted under section 3004 of such Act; and 

(2) protected from all inappropriate internal use by any entity 

that collects, stores, or receives the data, including use of such 

data in determinations of eligibility (or continued eligibility) in 

health plans, and from other inappropriate uses, as defined by 

the Secretary. 

* * * * * * * 

PROCESSING PAYMENT TRANSACTIONS BY FINANCIAL INSTITUTIONS

SEC. 1179. To the extent that an entity is engaged in activities 

of a financial institution (as defined in section 1101 of the Right 

to Financial Privacy Act of 1978) on behalf of an individual, øor is 

engaged¿ and is engaged in authorizing, processing, clearing, settling, billing, transferring, reconciling, or collecting payments, for a 

financial institution on behalf of an individual (other than as a 

business associate for a covered entity), this part, and any standard 

adopted under this part, shall not apply to the entity with respect 

to such activities, including the following: 

(1) The use or disclosure of information by the entity for authorizing, processing, clearing, settling, billing, transferring, 

reconciling or collecting, a payment for, or related to, health 

plan premiums or health care, where such payment is made by 

any means, including a credit, debit, or other payment card, an 

account, check, or electronic funds transfer. 

* * * * * * * 

PART D—COMPARATIVE EFFECTIVENESS RESEARCH

COMPARATIVE EFFECTIVENESS RESEARCH

SEC. 1181. (a) CENTER FOR COMPARATIVE EFFECTIVENESS RESEARCH ESTABLISHED.— 

(1) IN GENERAL.—The Secretary shall establish within the 

Agency for Healthcare Research and Quality a Center for Comparative Effectiveness Research (in this section referred to as 

the ‘‘Center’’) to conduct, support, and synthesize research (including research conducted or supported under section 1013 of 

the Medicare Prescription Drug, Improvement, and Modernization Act of 2003) with respect to the outcomes, effectiveness, and 

appropriateness of health care services and procedures in order 

to identify the manner in which diseases, disorders, and other 

health conditions can most effectively and appropriately be prevented, diagnosed, treated, and managed clinically. 

(2) DUTIES.—The Center shall— 


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(A) conduct, support, and synthesize research relevant to 

the comparative effectiveness of the full spectrum of health 

care items, services and systems, including pharmaceuticals, medical devices, medical and surgical procedures, 

and other medical interventions; 

(B) conduct and support systematic reviews of clinical research, including original research conducted subsequent to 

the date of the enactment of this section; 

(C) continuously develop rigorous scientific methodologies 

for conducting comparative effectiveness studies, and use 

such methodologies appropriately; 

(D) submit to the Comparative Effectiveness Research 

Commission, the Secretary, and Congress appropriate relevant reports described in subsection (d)(2); and 

(E) encourage, as appropriate, the development and use 

of clinical registries and the development of clinical effectiveness research data networks from electronic health 

records, post marketing drug and medical device surveillance efforts, and other forms of electronic health data. 

(3) POWERS.— (A) OBTAINING OFFICIAL DATA.—The Center may secure 

directly from any department or agency of the United 

States information necessary to enable it to carry out this 

section. Upon request of the Center, the head of that department or agency shall furnish that information to the Center 

on an agreed upon schedule. 

(B) DATA COLLECTION.—In order to carry out its functions, the Center shall— 

(i) utilize existing information, both published and 

unpublished, where possible, collected and assessed either by its own staff or under other arrangements 

made in accordance with this section, 

(ii) carry out, or award grants or contracts for, original research and experimentation, where existing information is inadequate, and 

(iii) adopt procedures allowing any interested party 

to submit information for the use by the Center and 

Commission under subsection (b) in making reports 

and recommendations. 

(C) ACCESS OF GAO TO INFORMATION.—The Comptroller 

General shall have unrestricted access to all deliberations, 

records, and nonproprietary data of the Center and Commission under subsection (b), immediately upon request. 

(D) PERIODIC AUDIT.—The Center and Commission under 

subsection (b) shall be subject to periodic audit by the 

Comptroller General. 

(b) OVERSIGHT BY COMPARATIVE EFFECTIVENESS RESEARCH COM- MISSION.— 

(1) IN GENERAL.—The Secretary shall establish an independent Comparative Effectiveness Research Commission (in 

this section referred to as the ‘‘Commission’’) to oversee and 

evaluate the activities carried out by the Center under subsection (a), subject to the authority of the Secretary, to ensure 

such activities result in highly credible research and information resulting from such research. 


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(2) DUTIES.—The Commission shall— 

(A) determine national priorities for research described in 

subsection (a) and in making such determinations consult 

with a broad array of public and private stakeholders, including patients and health care providers and payers; 

(B) monitor the appropriateness of use of the CERTF described in subsection (g) with respect to the timely production of comparative effectiveness research determined to be 

a national priority under subparagraph (A); 

(C) identify highly credible research methods and standards of evidence for such research to be considered by the 

Center; 

(D) review the methodologies developed by the center 

under subsection (a)(2)(C); 

(E) not later than one year after the date of the enactment 

of this section, enter into an arrangement under which the 

Institute of Medicine of the National Academy of Sciences 

shall conduct an evaluation and report on standards of evidence for such research; 

(F) support forums to increase stakeholder awareness 

and permit stakeholder feedback on the efforts of the Center 

to advance methods and standards that promote highly 

credible research; 

(G) make recommendations for policies that would allow 

for public access of data produced under this section, in accordance with appropriate privacy and proprietary practices, while ensuring that the information produced 

through such data is timely and credible; 

(H) appoint a clinical perspective advisory panel for each 

research priority determined under subparagraph (A), 

which shall consult with patients and advise the Center on 

research questions, methods, and evidence gaps in terms of 

clinical outcomes for the specific research inquiry to be examined with respect to such priority to ensure that the information produced from such research is clinically relevant to decisions made by clinicians and patients at the 

point of care; 

(I) make recommendations for the priority for periodic reviews of previous comparative effectiveness research and 

studies conducted by the Center under subsection (a); 

(J) routinely review processes of the Center with respect 

to such research to confirm that the information produced 

by such research is objective, credible, consistent with 

standards of evidence established under this section, and 

developed through a transparent process that includes consultations with appropriate stakeholders; and 

(K) make recommendations to the center for the broad 

dissemination of the findings of research conducted and 

supported under this section that enables clinicians, patients, consumers, and payers to make more informed 

health care decisions that improve quality and value. 

(3) COMPOSITION OF COMMISSION.— 

(A) IN GENERAL.—The members of the Commission shall 

consist of— 


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(i) the Director of the Agency for Healthcare Research 

and Quality; 

(ii) the Chief Medical Officer of the Centers for Medicare & Medicaid Services; and 

(iii) 15 additional members who shall represent 

broad constituencies of stakeholders including clinicians, patients, researchers, third-party payers, consumers of Federal and State beneficiary programs. 

Of such members, at least 9 shall be practicing physicians, 

health care practitioners, consumers, or patients. 

(B) QUALIFICATIONS.— (i) DIVERSE REPRESENTATION OF PERSPECTIVES.— The members of the Commission shall represent a 

broad range of perspectives and shall collectively have 

experience in the following areas: 

(I) Epidemiology. 

(II) Health services research. 

(III) Bioethics. 

(IV) Decision sciences. 

(V) Health disparities. 

(VI) Economics. 

(ii) DIVERSE REPRESENTATION OF HEALTH CARE COM- MUNITY.—At least one member shall represent each of 

the following health care communities: 

(I) Patients. 

(II) Health care consumers. 

(III) Practicing Physicians, including surgeons. 

(IV) Other health care practitioners engaged in 

clinical care. 

(V) Employers. 

(VI) Public payers. 

(VII) Insurance plans. 

(VIII) Clinical researchers who conduct research 

on behalf of pharmaceutical or device manufacturers. 

(C) LIMITATION.—No more than 3 of the Members of the 

Commission may be representatives of pharmaceutical or 

device manufacturers and such representatives shall be 

clinical researchers described under subparagraph 

(B)(ii)(VIII). 

(4) APPOINTMENT.— 

(A) IN GENERAL.—The Secretary shall appoint the members of the Commission. 

(B) CONSULTATION.—In considering candidates for appointment to the Commission, the Secretary may consult 

with the Government Accountability Office and the Institute 

of Medicine of the National Academy of Sciences. 

(5) CHAIRMAN; VICE CHAIRMAN.—The Secretary shall designate a member of the Commission, at the time of appointment 

of the member, as Chairman and a member as Vice Chairman 

for that term of appointment, except that in the case of vacancy 

of the Chairmanship or Vice Chairmanship, the Secretary may 

designate another member for the remainder of that member’s 

term. The Chairman shall serve as an ex officio member of the 

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search and Quality under section 931(c)(3)(B) of the Public 

Health Service Act. 

(6) TERMS.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), each member of the Commission shall be appointed for 

a term of 4 years. 

(B) TERMS OF INITIAL APPOINTEES.—Of the members first 

appointed— 

(i) 8 shall be appointed for a term of 4 years; and 

(ii) 7 shall be appointed for a term of 3 years. 

(7) COORDINATION.—To enhance effectiveness and coordination, the Secretary is encouraged, to the greatest extent possible, 

to seek coordination between the Commission and the National 

Advisory Council of the Agency for Healthcare Research and 

Quality. 

(8) CONFLICTS OF INTEREST.— (A) IN GENERAL.—In appointing the members of the Commission or a clinical perspective advisory panel described 

in paragraph (2)(H), the Secretary or the Commission, respectively, shall take into consideration any financial interest (as defined in subparagraph (D)), consistent with this 

paragraph, and develop a plan for managing any identified 

conflicts. 

(B) EVALUATION AND CRITERIA.—When considering an 

appointment to the Commission or a clinical perspective 

advisory panel described paragraph (2)(H) the Secretary or 

the Commission shall review the expertise of the individual 

and the financial disclosure report filed by the individual 

pursuant to the Ethics in Government Act of 1978 for each 

individual under consideration for the appointment, so as 

to reduce the likelihood that an appointed individual will 

later require a written determination as referred to in section 208(b)(1) of title 18, United States Code, a written certification as referred to in section 208(b)(3) of title 18, 

United States Code, or a waiver as referred to in subparagraph (D)(iii) for service on the Commission at a meeting 

of the Commission. 

(C) DISCLOSURES; PROHIBITIONS ON PARTICIPATION; WAIV- ERS.— (i) DISCLOSURE OF FINANCIAL INTEREST.—Prior to a 

meeting of the Commission or a clinical perspective advisory panel described in paragraph (2)(H) regarding a 

‘‘particular matter’’ (as that term is used in section 208 

of title 18, United States Code), each member of the 

Commission or the clinical perspective advisory panel 

who is a full-time Government employee or special Government employee shall disclose to the Secretary financial interests in accordance with subsection (b) of such 

section 208. 

(ii) PROHIBITIONS ON PARTICIPATION.—Except as provided under clause (iii), a member of the Commission 

or a clinical perspective advisory panel described in 

paragraph (2)(H) may not participate with respect to a 

particular matter considered in meeting of the Commission or the clinical perspective advisory panel if 


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such member (or an immediate family member of such 

member) has a financial interest that could be affected 

by the advice given to the Secretary with respect to 

such matter, excluding interests exempted in regulations issued by the Director of the Office of Government 

Ethics as too remote or inconsequential to affect the integrity of the services of the Government officers or employees to which such regulations apply. 

(iii) WAIVER.—If the Secretary determines it necessary to afford the Commission or a clinical perspective advisory panel described in paragraph 2(H) essential expertise, the Secretary may grant a waiver of the 

prohibition in clause (ii) to permit a member described 

in such subparagraph to— 

(I) participate as a non-voting member with respect to a particular matter considered in a Commission or a clinical perspective advisory panel 

meeting; or 

(II) participate as a voting member with respect 

to a particular matter considered in a Commission 

or a clinical perspective advisory panel meeting. 

(iv) LIMITATION ON WAIVERS AND OTHER EXCEP- TIONS.— 

(I) DETERMINATION OF ALLOWABLE EXCEPTIONS

FOR THE COMMISSION.—The number of waivers 

granted to members of the Commission cannot exceed one-half of the total number of members for 

the Commission. 

(II) PROHIBITION ON VOTING STATUS ON CLINICAL

PERSPECTIVE ADVISORY PANELS.—No voting member of any clinical perspective advisory panel shall 

be in receipt of a waiver. No more than two nonvoting members of any clinical perspective advisory panel shall receive a waiver. 

(D) FINANCIAL INTEREST DEFINED.—For purposes of this 

paragraph, the term ‘‘financial interest’’ means a financial 

interest under section 208(a) of title 18, United States Code. 

(9) COMPENSATION.—While serving on the business of the 

Commission (including travel time), a member of the Commission shall be entitled to compensation at the per diem equivalent of the rate provided for level IV of the Executive Schedule 

under section 5315 of title 5, United States Code; and while so 

serving away from home and the member’s regular place of 

business, a member may be allowed travel expenses, as authorized by the Director of the Commission. 

(10) AVAILABILITY OF REPORTS.—The Commission shall transmit to the Secretary a copy of each report submitted under this 

subsection and shall make such reports available to the public. 

(11) DIRECTOR AND STAFF; EXPERTS AND CONSULTANTS.— Subject to such review as the Secretary deems necessary to assure the efficient administration of the Commission, the Commission may— 

(A) appoint an Executive Director (subject to the approval 

of the Secretary) and such other personnel as Federal employees under section 2105 of title 5, United States Code, as 


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may be necessary to carry out its duties (without regard to 

the provisions of title 5, United States Code, governing appointments in the competitive service); 

(B) seek such assistance and support as may be required 

in the performance of its duties from appropriate Federal 

departments and agencies; 

(C) enter into contracts or make other arrangements, as 

may be necessary for the conduct of the work of the Commission (without regard to section 3709 of the Revised Statutes (41 U.S.C. 5)); 

(D) make advance, progress, and other payments which 

relate to the work of the Commission; 

(E) provide transportation and subsistence for persons 

serving without compensation; and 

(F) prescribe such rules and regulations as it deems necessary with respect to the internal organization and operation of the Commission. 

(c) RESEARCH REQUIREMENTS.—Any research conducted, supported, or synthesized under this section shall meet the following requirements: 

(1) ENSURING TRANSPARENCY, CREDIBILITY, AND ACCESS.— 

(A) The establishment of the agenda and conduct of the 

research shall be insulated from inappropriate political or 

stakeholder influence. 

(B) Methods of conducting such research shall be scientifically based. 

(C) All aspects of the prioritization of research, conduct 

of the research, and development of conclusions based on 

the research shall be transparent to all stakeholders. 

(D) The process and methods for conducting such research shall be publicly documented and available to all 

stakeholders. 

(E) Throughout the process of such research, the Center 

shall provide opportunities for all stakeholders involved to 

review and provide public comment on the methods and 

findings of such research. 

(2) USE OF CLINICAL PERSPECTIVE ADVISORY PANELS.—The research shall meet a national research priority determined under 

subsection (b)(2)(A) and shall consider advice given to the Center by the clinical perspective advisory panel for the national research priority. 

(3) STAKEHOLDER INPUT.— 

(A) IN GENERAL.—The Commission shall consult with patients, health care providers, health care consumer representatives, and other appropriate stakeholders with an 

interest in the research through a transparent process recommended by the Commission. 

(B) SPECIFIC AREAS OF CONSULTATION.—Consultation 

shall include where deemed appropriate by the Commission— 

(i) recommending research priorities and questions; 

(ii) recommending research methodologies; and 

(iii) advising on and assisting with efforts to disseminate research findings. 


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(C) OMBUDSMAN.—The Secretary shall designate a patient ombudsman. The ombudsman shall— 

(i) serve as an available point of contact for any patients with an interest in proposed comparative effectiveness studies by the Center; and 

(ii) ensure that any comments from patients regarding proposed comparative effectiveness studies are reviewed by the Commission. 

(4) TAKING INTO ACCOUNT POTENTIAL DIFFERENCES.—Research shall— 

(A) be designed, as appropriate, to take into account the 

potential for differences in the effectiveness of health care 

items and services used with various subpopulations such 

as racial and ethnic minorities, women, different age 

groups (including children, adolescents, adults, and seniors), and individuals with different comorbidities; and— 

(B) seek, as feasible and appropriate, to include members 

of such subpopulations as subjects in the research. 

(d) PUBLIC ACCESS TO COMPARATIVE EFFECTIVENESS INFORMATION.— 

(1) IN GENERAL.—Not later than 90 days after receipt by the 

Center or Commission, as applicable, of a relevant report described in paragraph (2) made by the Center, Commission, or 

clinical perspective advisory panel under this section, appropriate information contained in such report shall be posted on 

the official public Internet site of the Center and of the Commission, as applicable. 

(2) RELEVANT REPORTS DESCRIBED.—For purposes of this section, a relevant report is each of the following submitted by the 

Center or a grantee or contractor of the Center: 

(A) Any interim or progress reports as deemed appropriate by the Secretary. 

(B) Stakeholder comments. 

(C) A final report. 

(e) DISSEMINATION AND INCORPORATION OF COMPARATIVE EFFECTIVENESS INFORMATION.— 

(1) DISSEMINATION.—The Center shall provide for the dissemination of appropriate findings produced by research supported, conducted, or synthesized under this section to health 

care providers, patients, vendors of health information technology focused on clinical decision support, appropriate professional associations, and Federal and private health plans, and 

other relevant stakeholders. In disseminating such findings the 

Center shall— 

(A) convey findings of research so that they are comprehensible and useful to patients and providers in making 

health care decisions; 

(B) discuss findings and other considerations specific to 

certain sub-populations, risk factors, and comorbidities as 

appropriate; 

(C) include considerations such as limitations of research 

and what further research may be needed, as appropriate; 

(D) not include any data that the dissemination of which 

would violate the privacy of research participants or violate 


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any confidentiality agreements made with respect to the use 

of data under this section; and 

(E) assist the users of health information technology focused on clinical decision support to promote the timely incorporation of such findings into clinical practices and promote the ease of use of such incorporation. 

(2) DISSEMINATION PROTOCOLS AND STRATEGIES.—The Center 

shall develop protocols and strategies for the appropriate dissemination of research findings in order to ensure effective communication of findings and the use and incorporation of such 

findings into relevant activities for the purpose of informing 

higher quality and more effective and efficient decisions regarding medical items and services. In developing and adopting 

such protocols and strategies, the Center shall consult with 

stakeholders concerning the types of dissemination that will be 

most useful to the end users of information and may provide for 

the utilization of multiple formats for conveying findings to different audiences, including dissemination to individuals with 

limited English proficiency. 

(f) REPORTS TO CONGRESS.— 

(1) ANNUAL REPORTS.—Beginning not later than one year 

after the date of the enactment of this section, the Director of 

the Agency of Healthcare Research and Quality and the Commission shall submit to Congress an annual report on the activities of the Center and the Commission, as well as the research, conducted under this section. Each such report shall include a discussion of the Center’s compliance with subsection 

(c)(4)(B), including any reasons for lack of compliance with 

such subsection. 

(2) RECOMMENDATION FOR FAIR SHARE PER CAPITA AMOUNT

FOR ALL-PAYER FINANCING.—Beginning not later than December 

31, 2011, the Secretary shall submit to Congress an annual recommendation for a fair share per capita amount described in 

subsection (c)(1) of section 9511 of the Internal Revenue Code 

of 1986 for purposes of funding the CERTF under such section. 

(3) ANALYSIS AND REVIEW.—Not later than December 31, 

2013, the Secretary, in consultation with the Commission, shall 

submit to Congress a report on all activities conducted or supported under this section as of such date. Such report shall include an evaluation of the overall costs of such activities and 

an analysis of the backlog of any research proposals approved 

by the Commission but not funded. 

(g) FUNDING OF COMPARATIVE EFFECTIVENESS RESEARCH.—For 

fiscal year 2010 and each subsequent fiscal year, amounts in the 

Comparative Effectiveness Research Trust Fund (referred to in this 

section as the ‘‘CERTF’’) under section 9511 of the Internal Revenue 

Code of 1986 shall be available, without the need for further appropriations and without fiscal year limitation, to the Secretary to 

carry out this section. 

(h) CONSTRUCTION.—Nothing in this section shall be construed to 

permit the Commission or the Center to mandate coverage, reimbursement, or other policies for any public or private payer. 


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PART E—QUALITY IMPROVEMENT

ESTABLISHMENT OF NATIONAL PRIORITIES FOR PERFORMANCE

IMPROVEMENT

SEC. 1191. (a) ESTABLISHMENT OF NATIONAL PRIORITIES BY THE

SECRETARY.—The Secretary shall establish and periodically update, 

not less frequently than triennially, national priorities for performance improvement. 

(b) RECOMMENDATIONS FOR NATIONAL PRIORITIES.—In establishing and updating national priorities under subsection (a), the 

Secretary shall solicit and consider recommendations from multiple 

outside stakeholders. 

(c) CONSIDERATIONS IN SETTING NATIONAL PRIORITIES.—With respect to such priorities, the Secretary shall ensure that priority is 

given to areas in the delivery of health care services in the United 

States that— 

(1) contribute to a large burden of disease, including those 

that address the health care provided to patients with prevalent, high-cost chronic diseases; 

(2) have the greatest potential to decrease morbidity and mortality in this country, including those that are designed to 

eliminate harm to patients; 

(3) have the greatest potential for improving the performance, 

affordability, and patient-centeredness of health care, including 

those due to variations in care; 

(4) address health disparities across groups and areas; and 

(5) have the potential for rapid improvement due to existing 

evidence, standards of care or other reasons. 

(d) DEFINITIONS.—In this part: 

(1) CONSENSUS-BASED ENTITY.—The term ‘‘consensus-based 

entity’’ means an entity with a contract with the Secretary 

under section 1890. 

(2) QUALITY MEASURE.—The term ‘‘quality measure’’ means a 

national consensus standard for measuring the performance 

and improvement of population health, or of institutional providers of services, physicians, and other health care practitioners in the delivery of health care services. 

(e) FUNDING.— 

(1) IN GENERAL.—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 under section 1841 (in such proportion as the Secretary 

determines appropriate), of $2,000,000, for the activities under 

this section for each of the fiscal years 2010 through 2014. 

(2) AUTHORIZATION OF APPROPRIATIONS.—For purposes of 

carrying out the provisions of this section, in addition to funds 

otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary of 

Health and Human Services $2,000,000 for each of the fiscal 

years 2010 through 2014. 

SEC. 1192. DEVELOPMENT OF NEW QUALITY MEASURES. 

(a) AGREEMENTS WITH QUALIFIED ENTITIES.— 


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(1) IN GENERAL.—The Secretary shall enter into agreements 

with qualified entities to develop quality measures for the delivery of health care services in the United States. 

(2) FORM OF AGREEMENTS.—The Secretary may carry out 

paragraph (1) by contract, grant, or otherwise. 

(3) RECOMMENDATIONS OF CONSENSUS-BASED ENTITY.—In 

carrying out this section, the Secretary shall— 

(A) seek public input; and 

(B) take into consideration recommendations of the consensus-based entity with a contract with the Secretary 

under section 1890(a). 

(b) DETERMINATION OF AREAS WHERE QUALITY MEASURES ARE

REQUIRED.—Consistent with the national priorities established 

under this part and with the programs administered by the Centers 

for Medicare & Medicaid Services and in consultation with other 

relevant Federal agencies, the Secretary shall determine areas in 

which quality measures for assessing health care services in the 

United States are needed. 

(c) DEVELOPMENT OF QUALITY MEASURES.— (1) PATIENT-CENTERED AND POPULATION-BASED MEASURES.— Quality measures developed under agreements under subsection 

(a) shall be designed— 

(A) to assess outcomes and functional status of patients; 

(B) to assess the continuity and coordination of care and 

care transitions for patients across providers and health 

care settings, including end of life care; 

(C) to assess patient experience and patient engagement; 

(D) to assess the safety, effectiveness, and timeliness of 

care; 

(E) to assess health disparities including those associated 

with individual race, ethnicity, age, gender, place of residence or language; 

(F) to assess the efficiency and resource use in the provision of care; 

(G) to the extent feasible, to be collected as part of health 

information technologies supporting better delivery of 

health care services; 

(H) to be available free of charge to users for the use of 

such measures; and 

(I) to assess delivery of health care services to individuals 

regardless of age. 

(2) AVAILABILITY OF MEASURES.—The Secretary shall make 

quality measures developed under this section available to the 

public. 

(3) TESTING OF PROPOSED MEASURES.—The Secretary may 

use amounts made available under subsection (f) to fund the 

testing of proposed quality measures by qualified entities. Testing funded under this paragraph shall include testing of the 

feasibility and usability of proposed measures. 

(4) UPDATING OF ENDORSED MEASURES.—The Secretary may 

use amounts made available under subsection (f) to fund the 

updating (and testing, if applicable) by consensus-based entities 

of quality measures that have been previously endorsed by such 

an entity as new evidence is developed, in a manner consistent 

with section 1890(b)(3). 


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(d) QUALIFIED ENTITIES.—Before entering into agreements with a 

qualified entity, the Secretary shall ensure that the entity is a public, nonprofit or academic institution with technical expertise in the 

area of health quality measurement. 

(e) APPLICATION FOR GRANT.—A grant may be made under this 

section only if an application for the grant is submitted to the Secretary and the application is in such form, is made in such manner, 

and contains such agreements, assurances, and information as the 

Secretary determines to be necessary to carry out this section. 

(f) FUNDING.— (1) IN GENERAL.—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 under section 1841 (in such proportion as the Secretary 

determines appropriate), of $25,000,000, to the Secretary for 

purposes of carrying out this section for each of the fiscal years 

2010 through 2014. 

(2) AUTHORIZATION OF APPROPRIATIONS.—For purposes of 

carrying out the provisions of this section, in addition to funds 

otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary of 

Health and Human Services $25,000,000 for each of the fiscal 

years 2010 through 2014. 

SEC. 1193. GAO EVALUATION OF DATA COLLECTION PROCESS FOR 

QUALITY MEASUREMENT. 

(a) GAO EVALUATIONS.—The Comptroller General of the United 

States shall conduct periodic evaluations of the implementation of 

the data collection processes for quality measures used by the Secretary. 

(b) CONSIDERATIONS.—In carrying out the evaluation under subsection (a), the Comptroller General shall determine— 

(1) whether the system for the collection of data for quality 

measures provides for validation of data as relevant and scientifically credible; 

(2) whether data collection efforts under the system use the 

most efficient and cost-effective means in a manner that minimizes administrative burden on persons required to collect data 

and that adequately protects the privacy of patients’ personal 

health information and provides data security; 

(3) whether standards under the system provide for an appropriate opportunity for physicians and other clinicians and institutional providers of services to review and correct findings; 

and 

(4) the extent to which quality measures are consistent with 

section 1192(c)(1) or result in direct or indirect costs to users of 

such measures. 

(c) REPORT.—The Comptroller General shall submit reports to 

Congress and to the Secretary containing a description of the findings and conclusions of the results of each such evaluation. 

* * * * * * * 

TITLE XVIII—HEALTH INSURANCE FOR THE AGED AND 

DISABLED 

* * * * * * * 


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PROVISIONS RELATING TO ADMINISTRATION

SEC. 1808. (a) * * * 

* * * * * * * 

(d) MULTI-STAKEHOLDER PRE-RULEMAKING INPUT INTO SELEC- TION OF QUALITY MEASURES.— (1) LIST OF MEASURES.—Not later than December 1 before 

each year (beginning with 2011), the Secretary shall make public a list of measures being considered for selection for quality 

measurement by the Secretary in rulemaking with respect to 

payment systems under this title beginning in the payment year 

beginning in such year and for payment systems beginning in 

the calendar year following such year, as the case may be. 

(2) CONSULTATION ON SELECTION OF ENDORSED QUALITY

MEASURES.—A consensus-based entity that has entered into a 

contract under section 1890 shall, as part of such contract, convene multi-stakeholder groups to provide recommendations on 

the selection of individual or composite quality measures, for 

use in reporting performance information to the public or for 

use in public health care programs. 

(3) MULTI-STAKEHOLDER INPUT.—Not later than February 1 

of each year (beginning with 2011), the consensus-based entity 

described in paragraph (2) shall transmit to the Secretary the 

recommendations of multi-stakeholder groups provided under 

paragraph (2). Such recommendations shall be included in the 

transmissions the consensus-based entity makes to the Secretary 

under the contract provided for under section 1890. 

(4) REQUIREMENT FOR TRANSPARENCY IN PROCESS.— (A) IN GENERAL.—In convening multi-stakeholder groups 

under paragraph (2) with respect to the selection of quality 

measures, the consensus-based entity described in such 

paragraph shall provide for an open and transparent process for the activities conducted pursuant to such convening. 

(B) SELECTION OF ORGANIZATIONS PARTICIPATING IN

MULTI-STAKEHOLDER GROUPS.—The process under paragraph (2) shall ensure that the selection of representatives 

of multi-stakeholder groups includes provision for public 

nominations for, and the opportunity for public comment 

on, such selection. 

(5) USE OF INPUT.—The respective proposed rule shall contain 

a summary of the recommendations made by the multi-stakeholder groups under paragraph (2), as well as other comments 

received regarding the proposed measures, and the extent to 

which such proposed rule follows such recommendations and 

the rationale for not following such recommendations. 

(6) MULTI-STAKEHOLDER GROUPS.—For purposes of this subsection, the term ‘‘multi-stakeholder groups’’ means, with respect 

to a quality measure, a voluntary collaborative of organizations 

representing persons interested in or affected by the use of such 

quality measure, such as the following: 

(A) Hospitals and other institutional providers. 

(B) Physicians. 

(C) Health care quality alliances. 

(D) Nurses and other health care practitioners. 

(E) Health plans. 


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(F) Patient advocates and consumer groups. 

(G) Employers. 

(H) Public and private purchasers of health care items 

and services. 

(I) Labor organizations. 

(J) Relevant departments or agencies of the United 

States. 

(K) Biopharmaceutical companies and manufacturers of 

medical devices. 

(L) Licensing, credentialing, and accrediting bodies. 

(7) FUNDING.— (A) IN GENERAL.—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 under section 1841 (in such proportion as the Secretary determines appropriate), of 

$1,000,000, to the Secretary for purposes of carrying out 

this subsection for each of the fiscal years 2010 through 

2014. 

(B) AUTHORIZATION OF APPROPRIATIONS.—For purposes 

of carrying out the provisions of this subsection, in addition 

to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to 

the Secretary of Health and Human Services $1,000,000 for 

each of the fiscal years 2010 through 2014. 

* * * * * * * 

PART A—HOSPITAL INSURANCE BENEFITS FOR THE AGED AND

DISABLED

* * * * * * * 

CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES

SEC. 1814. (a) REQUIREMENT OF REQUESTS AND CERTIFICATIONS.—Except as provided in subsections (d) and (g) and in section 1876, payment for services furnished an individual may be 

made only to providers of services which are eligible therefor under 

section 1866 and only if— 

(1) written request, signed by such individual, except in 

cases in which the Secretary finds it impracticable for the individual to do so, is filed for such payment in such form, in such 

manner, and by such person or persons as the Secretary may 

by regulation prescribe, no later than the close of the øperiod 

of 3 calendar years following the year in which such services 

are furnished (deeming any services furnished in the last 3 calendar months of any calendar year to have been furnished in 

the succeeding calendar year) except that where the Secretary 

deems that efficient administration so requires, such period 

may be reduced to not less than 1 calendar year;¿ period of 1 

calendar year from which such services are furnished; and 

(2) a physician, in the case of services described in subparagraph (C), a physician enrolled under section 1866(j) or an eligible professional under section 1848(k)(3)(B), or, in the case of 

services described in subparagraph (B), a physician, or a nurse 

practitioner or clinical nurse specialist who does not have a diVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00598 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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rect or indirect employment relationship with the facility but 

is working in collaboration with a physician, certifies (and recertifies, where such services are furnished over a period of 

time, in such cases, with such frequency, and accompanied by 

such supporting material, appropriate to the case involved, as 

may be provided by regulations, except that the first of such 

recertifications shall be required in each case of inpatient hospital services not later than the 20th day of such period) that— 

(A) * * * 

* * * * * * * 

(C) in the case of home health services, such services are 

or were required because the individual is or was confined 

to his home (except when receiving items and services referred to in section 1861(m)(7)) and needs or needed skilled 

nursing care (other than solely venipuncture for the purpose of obtaining a blood sample) on an intermittent basis 

or physical or speech therapy or, in the case of an individual who has been furnished home health services based 

on such a need and who no longer has such a need for 

such care or therapy, continues or continued to need occupational therapy; a plan for furnishing such services to 

such individual has been established and is periodically reviewed by a physician; øand such services¿ such services 

are or were furnished while the individual was under the 

care of a physician, and, in the case of a certification or recertification made by a physician after January 1, 2010, 

prior to making such certification the physician must document that the physician has had a face-to-face encounter 

(including through use of telehealth and other than with 

respect to encounters that are incident to services involved) 

with the individual during the 6-month period preceding 

such certification, or other reasonable timeframe as determined by the Secretary; or 

* * * * * * * 

To the extent provided by regulations, the certification and recertification requirements of paragraph (2) shall be deemed satisfied 

where, at a later date, a physician, nurse practitioner, or clinical 

nurse specialist (as the case may be) makes certification of the kind 

provided in subparagraph (A), (B), (C), or (D) of paragraph (2) 

(whichever would have applied), but only where such certification 

is accompanied by such medical and other evidence as may be required by such regulations. With respect to the physician certification required by paragraph (2) for home health services furnished 

to any individual by a home health agency (other than an agency 

which is a governmental entity) and with respect to the establishment and review of a plan for such services, the Secretary shall 

prescribe regulations which shall become effective no later than 

July 1, 1981, and which prohibit a physician who has a significant 

ownership interest in, or a significant financial or contractual relationship with, such home health agency from performing such certification and from establishing or reviewing such plan, except that 

such prohibition shall not apply with respect to a home health 

agency which is a sole community home health agency (as determined by the Secretary). For purposes of the preceding sentence, 


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service by a physician as an uncompensated officer or director of 

a home health agency shall not constitute having a significant ownership interest in, or a significant financial or contractual relationship with, such agency. For purposes of paragraph (2)(C), an individual shall be considered to be ‘‘confined to his home’’ if the individual has a condition, due to an illness or injury, that restricts the 

ability of the individual to leave his or her home except with the 

assistance of another individual or the aid of a supportive device 

(such as crutches, a cane, a wheelchair, or a walker), or if the individual has a condition such that leaving his or her home is medically contraindicated. While an individual does not have to be bedridden to be considered ‘‘confined to his home’’, the condition of the 

individual should be such that there exists a normal inability to 

leave home and that leaving home requires a considerable and taxing effort by the individual. Any absence of an individual from the 

home attributable to the need to receive health care treatment, including regular absences for the purpose of participating in therapeutic, psychosocial, or medical treatment in an adult day-care program that is licensed or certified by a State, or accredited, to furnish adult day-care services in the State shall not disqualify an individual from being considered to be ‘‘confined to his home’’. Any 

other absence of an individual from the home shall not so disqualify an individual if the absence is of infrequent or of relatively 

short duration. For purposes of the preceding sentence, any absence for the purpose of attending a religious service shall be 

deemed to be an absence of infrequent or short duration. In applying paragraph (1), the Secretary may specify exceptions to the 1 calendar year period specified in such paragraph. 

* * * * * * * 

(i) PAYMENT FOR HOSPICE CARE.—(1)(A) * * * 

* * * * * * * 

(C)(i) * * * 

(ii) With respect to routine home care and other services included 

in hospice care furnished during a subsequent fiscal year, the payment rates for such care and services shall be the payment rates 

in effect under this subparagraph during the previous fiscal year 

increased by— 

(I) * * * 

* * * * * * * 

(VII) for a subsequent fiscal year, the market basket percentage increase (which is subject to the productivity adjustment 

described in section 1886(b)(3)(B)(iii)(II)) for the fiscal year. 

* * * * * * * 

(l) PAYMENT FOR INPATIENT CRITICAL ACCESS HOSPITAL SERV- ICES.—(1) * * * 

* * * * * * * 

(5) The adjustment factor described in section 1886(p)(3) shall 

apply to payments with respect to a critical access hospital with respect to a cost reporting period beginning in fiscal year 2012 and 

each subsequent fiscal year (after application of paragraph (4) of 

this subsection) in a manner similar to the manner in which such 


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section applies with respect to a fiscal year to an applicable hospital 

as described in section 1886(p)(2). 

ø(5)¿ (6) There shall be no administrative or judicial review 

under section 1869, section 1878, or otherwise, of— 

(A) * * * 

* * * * * * * 

(C) the specification of EHR reporting periods under section 

1886(n)(6)(B) as applied under paragraphs (3) and (4); øand¿ 

(D) the identification of costs for purposes of paragraph 

(3)(C)ø.¿; and 

(E) the methodology for determining the adjustment factor 

under paragraph (5), including the determination of aggregate 

payments for actual and expected readmissions, applicable periods, applicable conditions and measures of readmissions. 

* * * * * * * 

FEDERAL HOSPITAL INSURANCE TRUST FUND

SEC. 1817. (a) * * * 

* * * * * * * 

(k) HEALTH CARE FRAUD AND ABUSE CONTROL ACCOUNT.— 

(1) * * * 

* * * * * * * 

(4) APPROPRIATED AMOUNTS TO ACCOUNT FOR MEDICARE IN- TEGRITY PROGRAM.— (A) IN GENERAL.—There are hereby appropriated to the 

Account from the Trust Fund for each fiscal year such 

amounts as are necessary for activities described in paragraph (3)(C) and to carry out the Medicare Integrity Program under section 1893, subject to subparagraphs (B), 

(C), and (D) and to be available without further appropriation until expended. 

* * * * * * * 

(7) ADDITIONAL FUNDING.—In addition to the funds otherwise 

appropriated to the Account from the Trust Fund under paragraphs (3) and (4) and for purposes described in paragraphs 

(3)(C) and (4)(A), there are hereby appropriated an additional 

$100,000,000 to such Account from such Trust Fund for each 

fiscal year beginning with 2011. The funds appropriated under 

this paragraph shall be allocated in the same proportion as the 

total funding appropriated with respect to paragraphs (3)(A) 

and (4)(A) was allocated with respect to fiscal year 2010, and 

shall be available without further appropriation until expended. 

* * * * * * * 

REQUIREMENTS FOR, AND ASSURING QUALITY OF CARE IN, SKILLED

NURSING FACILITIES

SEC. 1819. (a) * * * 

(b) REQUIREMENTS RELATING TO PROVISION OF SERVICES.— 

(1) QUALITY OF LIFE.— 

(A) * * * 


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(B) QUALITY ASSESSMENT AND øASSURANCE¿ ASSURANCE

AND QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT

PROGRAM.— (i) IN GENERAL.—A skilled nursing facility must 

maintain a quality assessment and assurance committee, consisting of the director of nursing services, a 

physician designated by the facility, and at least 3 

other members of the facility’s staff, which ø(i)¿ (I) 

meets at least quarterly to identify issues with respect 

to which quality assessment and assurance activities 

are necessary and ø(ii)¿ (II) develops and implements 

appropriate plans of action to correct identified quality 

deficiencies. A State or the Secretary may not require 

disclosure of the records of such committee except insofar as such disclosure is related to the compliance of 

such committee with the requirements of this subparagraph. 

(ii) QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT PROGRAM.— 

(I) IN GENERAL.—Not later than December 31, 

2011, the Secretary shall establish and implement 

a quality assurance and performance improvement 

program (in this clause referred to as the ‘‘QAPI 

program’’) for skilled nursing facilities, including 

multi-unit chains of such facilities. Under the 

QAPI program, the Secretary shall establish 

standards relating to such facilities and provide 

technical assistance to such facilities on the development of best practices in order to meet such 

standards. Not later than 1 year after the date on 

which the regulations are promulgated under subclause (II), a skilled nursing facility must submit 

to the Secretary a plan for the facility to meet such 

standards and implement such best practices, including how to coordinate the implementation of 

such plan with quality assessment and assurance 

activities conducted under clause (i). 

(II) REGULATIONS.—The Secretary shall promulgate regulations to carry out this clause. 

* * * * * * * 

(8) INFORMATION ON NURSE STAFFING.— 

(A) * * * 

* * * * * * * 

(C) SUBMISSION OF STAFFING INFORMATION BASED ON

PAYROLL DATA IN A UNIFORM FORMAT.—Beginning not later 

than 2 years after the date of the enactment of this subparagraph, and after consulting with State long-term care 

ombudsman programs, consumer advocacy groups, provider stakeholder groups, employees and their representatives, and other parties the Secretary deems appropriate, 

the Secretary shall require a skilled nursing facility to electronically submit to the Secretary direct care staffing information (including information with respect to agency and 

contract staff) based on payroll and other verifiable and 


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auditable data in a uniform format (according to specifications established by the Secretary in consultation with such 

programs, groups, and parties). Such specifications shall 

require that the information submitted under the preceding 

sentence— 

(i) specify the category of work a certified employee 

performs (such as whether the employee is a registered 

nurse, licensed practical nurse, licensed vocational 

nurse, certified nursing assistant, therapist, or other 

medical personnel); 

(ii) include resident census data and information on 

resident case mix; 

(iii) include a regular reporting schedule; and 

(iv) include information on employee turnover and 

tenure and on the hours of care provided by each category of certified employees referenced in clause (i) per 

resident per day. 

Nothing in this subparagraph shall be construed as preventing the Secretary from requiring submission of such information with respect to specific categories, such as nursing staff, before other categories of certified employees. Information under this subparagraph with respect to agency 

and contract staff shall be kept separate from information 

on employee staffing. 

(c) REQUIREMENTS RELATING TO RESIDENTS’ RIGHTS.— (1) * * * 

* * * * * * * 

(7) NOTIFICATION OF FACILITY CLOSURE.— (A) IN GENERAL.—Any individual who is the administrator of a skilled nursing facility must— 

(i) submit to the Secretary, the State long-term care 

ombudsman, residents of the facility, and the legal representatives of such residents or other responsible parties, written notification of an impending closure— 

(I) subject to subclause (II), not later than the 

date that is 60 days prior to the date of such closure; and 

(II) in the case of a facility where the Secretary 

terminates the facility’s participation under this 

title, not later than the date that the Secretary determines appropriate; 

(ii) ensure that the facility does not admit any new 

residents on or after the date on which such written notification is submitted; and 

(iii) include in the notice a plan for the transfer and 

adequate relocation of the residents of the facility by a 

specified date prior to closure that has been approved 

by the State, including assurances that the residents 

will be transferred to the most appropriate facility or 

other setting in terms of quality, services, and location, 

taking into consideration the needs and best interests 

of each resident. 

(B) RELOCATION.— (i) IN GENERAL.—The State shall ensure that, before 

a facility closes, all residents of the facility have been 


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successfully relocated to another facility or an alternative home and community-based setting. 

(ii) CONTINUATION OF PAYMENTS UNTIL RESIDENTS

RELOCATED.—The Secretary may, as the Secretary determines appropriate, continue to make payments 

under this title with respect to residents of a facility 

that has submitted a notification under subparagraph 

(A) during the period beginning on the date such notification is submitted and ending on the date on which 

the resident is successfully relocated. 

(d) REQUIREMENTS RELATING TO ADMINISTRATION AND OTHER

MATTERS.— (1) ADMINISTRATION.— (A) * * * 

ø(B) REQUIRED NOTICES.—If a change occurs in— 

ø(i) the persons with an ownership or control interest (as defined in section 1124(a)(3)) in the facility, 

ø(ii) the persons who are officers, directors, agents, 

or managing employees (as defined in section 1126(b)) 

of the facility, 

ø(iii) the corporation, association, or other company 

responsible for the management of the facility, or 

ø(iv) the individual who is the administrator or director of nursing of the facility,—the skilled nursing 

facility must provide notice to the State agency responsible for the licensing of the facility, at the time 

of the change, of the change and of the identity of each 

new person, company, or individual described in the 

respective clause.¿ 

ø(C)¿ (B) SKILLED NURSING FACILITY ADMINISTRATOR.— The administrator of a skilled nursing facility must meet 

standards established by the Secretary under subsection 

(f)(4). 

(C) COMPLIANCE AND ETHICS PROGRAMS.— 

(i) REQUIREMENT.—On or after the date that is 36 

months after the date of the enactment of this subparagraph, a skilled nursing facility shall, with respect to 

the entity that operates the facility (in this subparagraph referred to as the ‘‘operating organization’’ or 

‘‘organization’’), have in operation a compliance and 

ethics program that is effective in preventing and detecting criminal, civil, and administrative violations 

under this Act and in promoting quality of care consistent with regulations developed under clause (ii). 

(ii) DEVELOPMENT OF REGULATIONS.— 

(I) IN GENERAL.—Not later than the date that is 

2 years after such date of the enactment, the Secretary, in consultation with the Inspector General 

of the Department of Health and Human Services, 

shall promulgate regulations for an effective compliance and ethics program for operating organizations, which may include a model compliance program. 

(II) DESIGN OF REGULATIONS.—Such regulations 

with respect to specific elements or formality of a 


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program may vary with the size of the organization, such that larger organizations should have a 

more formal and rigorous program and include established written policies defining the standards 

and procedures to be followed by its employees. 

Such requirements shall specifically apply to the 

corporate level management of multi-unit nursing 

home chains. 

(III) EVALUATION.—Not later than 3 years after 

the date of promulgation of regulations under this 

clause, the Secretary shall complete an evaluation 

of the compliance and ethics programs required to 

be established under this subparagraph. Such 

evaluation shall determine if such programs led to 

changes in deficiency citations, changes in quality 

performance, or changes in other metrics of resident quality of care. The Secretary shall submit to 

Congress a report on such evaluation and shall include in such report such recommendations regarding changes in the requirements for such programs as the Secretary determines appropriate. 

(iii) REQUIREMENTS FOR COMPLIANCE AND ETHICS

PROGRAMS.—In this subparagraph, the term ‘‘compliance and ethics program’’ means, with respect to a 

skilled nursing facility, a program of the operating organization that— 

(I) has been reasonably designed, implemented, 

and enforced so that it generally will be effective in 

preventing and detecting criminal, civil, and administrative violations under this Act and in promoting quality of care; and 

(II) includes at least the required components 

specified in clause (iv). 

(iv) REQUIRED COMPONENTS OF PROGRAM.—The required components of a compliance and ethics program 

of an organization are the following: 

(I) The organization must have established compliance standards and procedures to be followed by 

its employees, contractors, and other agents that 

are reasonably capable of reducing the prospect of 

criminal, civil, and administrative violations 

under this Act. 

(II) Specific individuals within high-level personnel of the organization must have been assigned overall responsibility to oversee compliance 

with such standards and procedures and have sufficient resources and authority to assure such compliance. 

(III) The organization must have used due care 

not to delegate substantial discretionary authority 

to individuals whom the organization knew, or 

should have known through the exercise of due 

diligence, had a propensity to engage in criminal, 

civil, and administrative violations under this Act. 


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(IV) The organization must have taken steps to 

communicate effectively its standards and procedures to all employees and other agents, such as by 

requiring participation in training programs or by 

disseminating publications that explain in a practical manner what is required. 

(V) The organization must have taken reasonable steps to achieve compliance with its standards, such as by utilizing monitoring and auditing 

systems reasonably designed to detect criminal, 

civil, and administrative violations under this Act 

by its employees and other agents and by having 

in place and publicizing a reporting system whereby employees and other agents could report violations by others within the organization without 

fear of retribution. 

(VI) The standards must have been consistently 

enforced through appropriate disciplinary mechanisms, including, as appropriate, discipline of individuals responsible for the failure to detect an offense. 

(VII) After an offense has been detected, the organization must have taken all reasonable steps to 

respond appropriately to the offense and to prevent 

further similar offenses, including repayment of 

any funds to which it was not entitled and any 

necessary modification to its program to prevent 

and detect criminal, civil, and administrative violations under this Act. 

(VIII) The organization must periodically undertake reassessment of its compliance program to 

identify changes necessary to reflect changes within the organization and its facilities. 

(v) COORDINATION.—The provisions of this subparagraph shall apply with respect to a skilled nursing facility in lieu of section 1874(d). 

(D) AVAILABILITY OF SURVEY, CERTIFICATION, AND COMPLAINT INVESTIGATION REPORTS.—A skilled nursing facility 

must— 

(i) have reports with respect to any surveys, certifications, and complaint investigations made respecting 

the facility during the 3 preceding years available for 

any individual to review upon request; and 

(ii) post notice of the availability of such reports in 

areas of the facility that are prominent and accessible 

to the public. 

The facility shall not make available under clause (i) identifying information about complainants or residents. 

* * * * * * * 

(e) STATE REQUIREMENTS RELATING TO SKILLED NURSING FACILITY REQUIREMENTS.—The requirements, referred to in section 

1864(d), with respect to a State are as follows: 

(1) * * * 

* * * * * * * 


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(6) COMPLAINT PROCESSES AND WHISTLE-BLOWER PROTECTION.— 

(A) COMPLAINT FORMS.—The State must make the standardized complaint form developed under subsection (f)(9) 

available upon request to— 

(i) a resident of a skilled nursing facility; 

(ii) any person acting on the resident’s behalf; and 

(iii) any person who works at a skilled nursing facility or is a representative of such a worker. 

(B) COMPLAINT RESOLUTION PROCESS.—The State must 

establish a complaint resolution process in order to ensure 

that a resident, the legal representative of a resident of a 

skilled nursing facility, or other responsible party is not retaliated against if the resident, legal representative, or responsible party has complained, in good faith, about the 

quality of care or other issues relating to the skilled nursing facility, that the legal representative of a resident of a 

skilled nursing facility or other responsible party is not denied access to such resident or otherwise retaliated against 

if such representative party has complained, in good faith, 

about the quality of care provided by the facility or other 

issues relating to the facility, and that a person who works 

at a skilled nursing facility is not retaliated against if the 

worker has complained, in good faith, about quality of care 

or services or an issue relating to the quality of care or 

services provided at the facility, whether the resident, legal 

representative, other responsible party, or worker used the 

form developed under subsection (f)(9) or some other method for submitting the complaint. Such complaint resolution 

process shall include— 

(i) procedures to assure accurate tracking of complaints received, including notification to the complainant that a complaint has been received; 

(ii) procedures to determine the likely severity of a 

complaint and for the investigation of the complaint; 

(iii) deadlines for responding to a complaint and for 

notifying the complainant of the outcome of the investigation; and 

(iv) procedures to ensure that the identity of the complainant will be kept confidential. 

(C) WHISTLEBLOWER PROTECTION.— 

(i) PROHIBITION AGAINST RETALIATION.—No person 

who works at a skilled nursing facility may be penalized, discriminated, or retaliated against with respect 

to any aspect of employment, including discharge, promotion, compensation, terms, conditions, or privileges 

of employment, or have a contract for services terminated, because the person (or anyone acting at the person’s request) complained, in good faith, about the 

quality of care or services provided by a nursing facility or about other issues relating to quality of care or 

services, whether using the form developed under subsection (f)(9) or some other method for submitting the 

complaint. 


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(ii) RETALIATORY REPORTING.—A skilled nursing facility may not file a complaint or a report against a 

person who works (or has worked at the facility with 

the appropriate State professional disciplinary agency 

because the person (or anyone acting at the person’s request) complained in good faith, as described in clause 

(i). 

(iii) COMMENCEMENT OF ACTION.—Any person who 

believes the person has been penalized, discriminated , 

or retaliated against or had a contract for services terminated in violation of clause (i) or against whom a 

complaint has been filed in violation of clause (ii) may 

bring an action at law or equity in the appropriate district court of the United States, which shall have jurisdiction over such action without regard to the amount 

in controversy or the citizenship of the parties, and 

which shall have jurisdiction to grant complete relief, 

including, but not limited to, injunctive relief (such as 

reinstatement, compensatory damages (which may include reimbursement of lost wages, compensation, and 

benefits), costs of litigation (including reasonable attorney and expert witness fees), exemplary damages where 

appropriate, and such other relief as the court deems 

just and proper. 

(iv) RIGHTS NOT WAIVABLE.—The rights protected by 

this paragraph may not be diminished by contract or 

other agreement, and nothing in this paragraph shall 

be construed to diminish any greater or additional protection provided by Federal or State law or by contract 

or other agreement. 

(v) REQUIREMENT TO POST NOTICE OF EMPLOYEE

RIGHTS.—Each skilled nursing facility shall post conspicuously in an appropriate location a sign (in a form 

specified by the Secretary) specifying the rights of persons under this paragraph and including a statement 

that an employee may file a complaint with the Secretary against a skilled nursing facility that violates 

the provisions of this paragraph and information with 

respect to the manner of filing such a complaint. 

(D) RULE OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed as preventing a resident of a skilled 

nursing facility (or a person acting on the resident’s behalf) 

from submitting a complaint in a manner or format other 

than by using the standardized complaint form developed 

under subsection (f)(9) (including submitting a complaint 

orally). 

(E) GOOD FAITH DEFINED.—For purposes of this paragraph, an individual shall be deemed to be acting in good 

faith with respect to the filing of a complaint if the individual reasonably believes— 

(i) the information reported or disclosed in the complaint is true; and 

(ii) the violation of this title has occurred or may 

occur in relation to such information. 


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(f) RESPONSIBILITIES OF SECRETARY RELATING TO SKILLED NURS- ING FACILITY REQUIREMENTS.— (1) * * * 

(2) REQUIREMENTS FOR NURSE AIDE TRAINING AND COM- PETENCY EVALUATION PROGRAMS AND FOR NURSE AIDE COM- PETENCY EVALUATION PROGRAMS.— (A) IN GENERAL.—For purposes of subsections (b)(5) and 

(e)(1)(A), the Secretary shall establish, by not later than 

September 1, 1988— 

(i) requirements for the approval of nurse aide training and competency evaluation programs, including requirements relating to (I) the areas to be covered in 

such a program (including at least basic nursing skills, 

personal care skills, recognition of mental health and 

social service needs, care of cognitively impaired residents, basic restorative services, and residents’ rights) 

and content of the curriculum (including, in the case 

of initial training and, if the Secretary determines appropriate, in the case of ongoing training, dementia 

management training and resident abuse prevention 

training), (II) minimum hours of initial and ongoing 

training and retraining (including not less than 75 

hours in the case of initial training), (III) qualifications of instructors, and (IV) procedures for determination of competency; 

* * * * * * * 

(8) SPECIAL FOCUS FACILITY PROGRAM.— 

(A) IN GENERAL.—The Secretary shall conduct a special 

focus facility program for enforcement of requirements for 

skilled nursing facilities that the Secretary has identified 

as having substantially failed to meet applicable requirement of this Act. 

(B) PERIODIC SURVEYS.—Under such program the Secretary shall conduct surveys of each facility in the program 

not less than once every 6 months. 

(9) STANDARDIZED COMPLAINT FORM.—The Secretary shall develop a standardized complaint form for use by a resident (or 

a person acting on the resident’s behalf) in filing a complaint 

with a State survey and certification agency and a State longterm care ombudsman program with respect to a skilled nursing facility. 

(g) SURVEY AND CERTIFICATION PROCESS.— 

(1) * * * 

* * * * * * * 

(5) DISCLOSURE OF RESULTS OF INSPECTIONS AND ACTIVITIES.— 

(A) * * * 

* * * * * * * 

(E) SUBMISSION OF SURVEY AND CERTIFICATION INFORMATION TO THE SECRETARY.—In order to improve the timeliness of information made available to the public under subparagraph (A) and provided on the Nursing Home Compare Medicare website under subsection (i), each State shall 


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submit information respecting any survey or certification 

made respecting a skilled nursing facility (including any 

enforcement actions taken by the State) to the Secretary not 

later than the date on which the State sends such information to the facility. The Secretary shall use the information 

submitted under the preceding sentence to update the information provided on the Nursing Home Compare Medicare 

website as expeditiously as practicable but not less frequently than quarterly. 

(h) ENFORCEMENT PROCESS.— 

(1) * * * 

(2) SECRETARIAL AUTHORITY.— 

(A) * * * 

(B) SPECIFIED REMEDIES.—The Secretary may take the 

following actions with respect to a finding that a facility 

has not met an applicable requirement: 

(i) * * * 

ø(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PENALTIES.—The Secretary may impose a civil money penalty in an amount not to exceed $10,000 for each day 

of noncompliance. The provisions of section 1128A 

(other than subsections (a) and (b)) shall apply to a 

civil money penalty under the previous sentence in the 

same manner as such provisions apply to a penalty or 

proceeding under section 1128A(a).¿ 

(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PENALTIES.— 

(I) AMOUNT.—The Secretary may impose a civil 

money penalty in the applicable per instance or per 

day amount (as defined in subclause (II) and (III)) 

for each day or instance, respectively, of noncompliance (as determined appropriate by the Secretary). 

(II) APPLICABLE PER INSTANCE AMOUNT.—In this 

clause, the term ‘‘applicable per instance amount’’ 

means— 

(aa) in the case where the deficiency is found 

to be a direct proximate cause of death of a 

resident of the facility, an amount not to exceed $100,000. 

(bb) in each case of a deficiency where the 

facility is cited for actual harm or immediate 

jeopardy, an amount not less than $3,050 and 

not more than $25,000; and 

(cc) in each case of any other deficiency, an 

amount not less than $250 and not to exceed 

$3050. 

(III) APPLICABLE PER DAY AMOUNT.—In this 

clause, the term ‘‘applicable per day amount’’ 

means— 

(aa) in each case of a deficiency where the 

facility is cited for actual harm or immediate 

jeopardy, an amount not less than $3,050 and 

not more than $25,000 and 


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(bb) in each case of any other deficiency, an amount not less than $250 and not to exceed 

$3,050. 

(IV) REDUCTION OF CIVIL MONEY PENALTIES IN

CERTAIN CIRCUMSTANCES.—Subject to subclauses 

(V) and (VI), in the case where a facility self-reports and promptly corrects a deficiency for which 

a penalty was imposed under this clause not later 

than 10 calendar days after the date of such imposition, the Secretary may reduce the amount of the 

penalty imposed by not more than 50 percent. 

(V) PROHIBITION ON REDUCTION FOR CERTAIN

DEFICIENCIES.— (aa) REPEAT DEFICIENCIES.—The Secretary 

may not reduce under subclause (IV) the 

amount of a penalty if the deficiency is a repeat deficiency. 

(bb) CERTAIN OTHER DEFICIENCIES.—The 

Secretary may not reduce under subclause (IV) 

the amount of a penalty if the penalty is imposed for a deficiency described in subclause 

(II)(aa) or (III)(aa) and the actual harm or 

widespread harm immediately jeopardizes the 

health or safety of a resident or residents of 

the facility, or if the penalty is imposed for a 

deficiency described in subclause (II)(bb). 

(VI) LIMITATION ON AGGREGATE REDUCTIONS.— The aggregate reduction in a penalty under subclause (IV) may not exceed 35 percent on the basis 

of self-reporting, on the basis of a waiver or an appeal (as provided for under regulations under section 488.436 of title 42, Code of Federal Regulations), or on the basis of both. 

(VII) COLLECTION OF CIVIL MONEY PENALTIES.— 

In the case of a civil money penalty imposed under 

this clause, the Secretary— 

(aa) subject to item (cc), shall, not later than 

30 days after the date of imposition of the penalty, provide the opportunity for the facility to 

participate in an independent informal dispute resolution process which generates a written record prior to the collection of such penalty, but such opportunity shall not affect the 

responsibility of the State survey agency for 

making final recommendations for such penalties; 

(bb) in the case where the penalty is imposed 

for each day of noncompliance, shall not impose a penalty for any day during the period 

beginning on the initial day of the imposition 

of the penalty and ending on the day on which 

the informal dispute resolution process under 

item (aa) is completed; 

(cc) may provide for the collection of such 

civil money penalty and the placement of such 


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amounts collected in an escrow account under 

the direction of the Secretary on the earlier of 

the date on which the informal dispute resolution process under item (aa) is completed or 

the date that is 90 days after the date of the 

imposition of the penalty; 

(dd) may provide that such amounts collected are kept in such account pending the 

resolution of any subsequent appeals; 

(ee) in the case where the facility successfully appeals the penalty, may provide for the 

return of such amounts collected (plus interest) 

to the facility; and 

(ff) in the case where all such appeals are 

unsuccessful, may provide that some portion of 

such amounts collected may be used to support 

activities that benefit residents, including assistance to support and protect residents of a 

facility that closes (voluntarily or involuntarily) or is decertified (including offsetting 

costs of relocating residents to home and community-based settings or another facility), 

projects that support resident and family 

councils and other consumer involvement in 

assuring quality care in facilities, and facility 

improvement initiatives approved by the Secretary (including joint training of facility staff 

and surveyors, technical assistance for facilities under quality assurance programs, the appointment of temporary management, and 

other activities approved by the Secretary). 

(VIII) PROCEDURE.—The provisions of section 

1128A (other than subsections (a) and (b) and except to the extent that such provisions require a 

hearing prior to the imposition of a civil money 

penalty) shall apply to a civil money penalty under 

this clause in the same manner as such provisions 

apply to a penalty or proceeding under section 

1128A(a). 

* * * * * * * 

(4) IMMEDIATE TERMINATION OF PARTICIPATION FOR FACILITY

WHERE SECRETARY FINDS NONCOMPLIANCE AND IMMEDIATE

JEOPARDY.—If the Secretary finds that a skilled nursing facility 

has not met a requirement of subsection (b), (c), or (d), and 

finds that the failure immediately jeopardizes the health or 

safety of its residents, the Secretary shall take immediate action to remove the jeopardy and correct the deficiencies 

through the remedy specified in paragraph (2)(B)(iii), or øthe 

Secretary shall terminate¿ the Secretary, subject to subsection 

(c)(7), shall terminate the facility’s participation under this 

title. If the facility’s participation under this title is terminated, the State shall provide for the safe and orderly transfer 

of the residents eligible under this title consistent with the requirements of øsubsection (c)(2)¿ paragraphs (2) and (7) of subsection (c). 


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(5) CONSTRUCTION.—The remedies provided under this subsection are in addition to those otherwise available under State 

or Federal law and shall not be construed as limiting such 

other remedies, including any remedy available to an individual at common law. The remedies described in clauses (i), 

(ii), and (iii) of paragraph (2)(B) may be imposed during the 

pendency of any hearing. 

* * * * * * * 

(i) NURSING HOME COMPARE WEBSITE.— (1) INCLUSION OF ADDITIONAL INFORMATION.— (A) IN GENERAL.—The Secretary shall ensure that the Department of Health and Human Services includes, as part 

of the information provided for comparison of nursing 

homes on the official Internet website of the Federal Government for Medicare beneficiaries (commonly referred to 

as the ‘‘Nursing Home Compare’’ Medicare website) (or a 

successor website), the following information in a manner 

that is prominent, easily accessible, readily understandable 

to consumers of long-term care services, and searchable: 

(i) Information that is reported to the Secretary 

under section 1124(c)(4). 

(ii) Information on the ‘‘Special Focus Facility program’’ (or a successor program) established by the Centers for Medicare and Medicaid Services, according to 

procedures established by the Secretary. Such procedures shall provide for the inclusion of information 

with respect to, and the names and locations of, those 

facilities that, since the previous quarter— 

(I) were newly enrolled in the program; 

(II) are enrolled in the program and have failed 

to significantly improve; 

(III) are enrolled in the program and have significantly improved; 

(IV) have graduated from the program; and 

(V) have closed voluntarily or no longer participate under this title. 

(iii) Staffing data for each facility (including resident census data and data on the hours of care provided per resident per day) based on data submitted 

under subsection (b)(8)(C), including information on 

staffing turnover and tenure, in a format that is clearly 

understandable to consumers of long-term care services 

and allows such consumers to compare differences in 

staffing between facilities and State and national averages for the facilities. Such format shall include— 

(I) concise explanations of how to interpret the 

data (such as a plain English explanation of data 

reflecting ‘‘nursing home staff hours per resident 

day’’); 

(II) differences in types of staff (such as training 

associated with different categories of staff); 

(III) the relationship between nurse staffing levels and quality of care; and 

(IV) an explanation that appropriate staffing levels vary based on patient case mix. 


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(iv) Links to State Internet websites with information 

regarding State survey and certification programs, 

links to Form 2567 State inspection reports (or a successor form) on such websites, information to guide 

consumers in how to interpret and understand such reports, and the facility plan of correction or other response to such report. 

(v) The standardized complaint form developed 

under subsection (f)(8), including explanatory material 

on what complaint forms are, how they are used, and 

how to file a complaint with the State survey and certification program and the State long-term care ombudsman program. 

(vi) Summary information on the number, type, severity, and outcome of substantiated complaints. 

(vii) The number of adjudicated instances of criminal violations by employees of a nursing facility— 

(I) that were committed inside the facility; 

(II) with respect to such instances of violations 

or crimes committed inside of the facility that were 

the violations or crimes of abuse, neglect, and exploitation, criminal sexual abuse, or other violations or crimes that resulted in serious bodily injury; and 

(III) the number of civil monetary penalties levied against the facility, employees, contractors, and 

other agents. 

(B) DEADLINE FOR PROVISION OF INFORMATION.— (i) IN GENERAL.—Except as provided in clause (ii), 

the Secretary shall ensure that the information described in subparagraph (A) is included on such 

website (or a successor website) not later than 1 year 

after the date of the enactment of this subsection. 

(ii) EXCEPTION.—The Secretary shall ensure that the 

information described in subparagraph (A)(i) and 

(A)(iii) is included on such website (or a successor 

website) not later than the date on which the requirements under section 1124(c)(4) and subsection 

(b)(8)(C)(ii) are implemented. 

(2) REVIEW AND MODIFICATION OF WEBSITE.— 

(A) IN GENERAL.—The Secretary shall establish a process— 

(i) to review the accuracy, clarity of presentation, 

timeliness, and comprehensiveness of information reported on such website as of the day before the date of 

the enactment of this subsection; and 

(ii) not later than 1 year after the date of the enactment of this subsection, to modify or revamp such 

website in accordance with the review conducted under 

clause (i). 

(B) CONSULTATION.—In conducting the review under subparagraph (A)(i), the Secretary shall consult with— 

(i) State long-term care ombudsman programs; 

(ii) consumer advocacy groups; 

(iii) provider stakeholder groups; and 


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(iv) any other representatives of programs or groups 

the Secretary determines appropriate. 

ø(i)¿ (j) CONSTRUCTION.—Where requirements or obligations 

under this section are identical to those provided under section 

1919 of this Act, the fulfillment of those requirements or obligations under section 1919 shall be considered to be the fulfillment 

of the corresponding requirements or obligations under this section. 

SEC. 1819A. ASSURING QUALITY OF CARE IN HOSPICE CARE. 

(a) IN GENERAL.—If the Secretary determines on the basis of a 

survey or otherwise, that a hospice program that is certified for participation under this title has demonstrated a substandard quality 

of care and failed to meet such other requirements as the Secretary 

may find necessary in the interest of the health and safety of the individuals who are provided care and services by the agency or organization involved and determines— 

(1) that the deficiencies involved immediately jeopardize the 

health and safety of the individuals to whom the program furnishes items and services, the Secretary shall take immediate 

action to remove the jeopardy and correct the deficiencies 

through the remedy specified in subsection (b)(2)(A)(iii) or terminate the certification of the program, and may provide, in 

addition, for 1 or more of the other remedies described in subsection (b)(2)(A); or 

(2) that the deficiencies involved do not immediately jeopardize the health and safety of the individuals to whom the program furnishes items and services, the Secretary may— 

(A) impose intermediate sanctions developed pursuant to 

subsection (b), in lieu of terminating the certification of the 

program; and 

(B) if, after such a period of intermediate sanctions, the 

program is still not in compliance with such requirements, 

the Secretary shall terminate the certification of the program. 

If the Secretary determines that a hospice program that is certified for participation under this title is in compliance with 

such requirements but, as of a previous period, was not in compliance with such requirements, the Secretary may provide for 

a civil money penalty under subsection (b)(2)(A)(i) for the days 

in which it finds that the program was not in compliance with 

such requirements. 

(b) INTERMEDIATE SANCTIONS.— 

(1) DEVELOPMENT AND IMPLEMENTATION.—The Secretary 

shall develop and implement, by not later than July 1, 2012— 

(A) a range of intermediate sanctions to apply to hospice 

programs under the conditions described in subsection (a), 

and 

(B) appropriate procedures for appealing determinations 

relating to the imposition of such sanctions. 

(2) SPECIFIED SANCTIONS.— 

(A) IN GENERAL.—The intermediate sanctions developed 

under paragraph (1) may include— 

(i) civil money penalties in an amount not to exceed 

$10,000 for each day of noncompliance or, in the case 

of a per instance penalty applied by the Secretary, not 

to exceed $25,000, 


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(ii) denial of all or part of the payments to which a 

hospice program would otherwise be entitled under this 

title with respect to items and services furnished by a 

hospice program on or after the date on which the Secretary determines that intermediate sanctions should 

be imposed pursuant to subsection (a)(2), 

(iii) the appointment of temporary management to 

oversee the operation of the hospice program and to 

protect and assure the health and safety of the individuals under the care of the program while improvements 

are made, 

(iv) corrective action plans, and 

(v) in-service training for staff. 

The provisions of section 1128A (other than subsections (a) 

and (b)) shall apply to a civil money penalty under clause 

(i) in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). The temporary 

management under clause (iii) shall not be terminated 

until the Secretary has determined that the program has 

the management capability to ensure continued compliance 

with all requirements referred to in that clause. 

(B) CLARIFICATION.—The sanctions specified in subparagraph (A) are in addition to sanctions otherwise available 

under State or Federal law and shall not be construed as 

limiting other remedies, including any remedy available to 

an individual at common law. 

(C) COMMENCEMENT OF PAYMENT.—A denial of payment 

under subparagraph (A)(ii) shall terminate when the Secretary determines that the hospice program no longer demonstrates a substandard quality of care and meets such 

other requirements as the Secretary may find necessary in 

the interest of the health and safety of the individuals who 

are provided care and services by the agency or organization involved. 

(3) SECRETARIAL AUTHORITY.—The Secretary shall develop 

and implement, by not later than July 1, 2011, specific procedures with respect to the conditions under which each of the intermediate sanctions developed under paragraph (1) is to be applied, including the amount of any fines and the severity of 

each of these sanctions. Such procedures shall be designed so as 

to minimize the time between identification of deficiencies and 

imposition of these sanctions and shall provide for the imposition of incrementally more severe fines for repeated or uncorrected deficiencies. 

* * * * * * * 

PART B—SUPPLEMENTARY MEDICAL INSURANCE BENEFITS FOR THE

AGED AND DISABLED

* * * * * * * 

SCOPE OF BENEFITS

SEC. 1832. (a) The benefits provided to an individual by the insurance program established by this part shall consist of— 

(1) * * * 


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(2) entitlement to have payment made on his behalf (subject 

to the provisions of this part) for— 

(A) * * * 

(B) medical and other health services (other than items 

described in subparagraph (G) or subparagraph (I)) furnished by a provider of services or by others under arrangement with them made by a provider of services, excluding— 

(i) * * * 

* * * * * * * 

(iv) services of a nurse practitioner or clinical nurse 

specialist but only if no facility or other provider 

charges or is paid any amounts with respect to the 

furnishing of such services; øand¿ 

(v) marriage and family therapist services; and 

(vi) mental health counselor services; 

* * * * * * * 

PAYMENT OF BENEFITS

SEC. 1833. (a) Except as provided in section 1876, and subject to 

the succeeding provisions of this section, there shall be paid from 

the Federal Supplementary Medical Insurance Trust Fund, in the 

case of each individual who is covered under the insurance program established by this part and incurs expenses for services with 

respect to which benefits are payable under this part, amounts 

equal to— 

(1) in the case of services described in section 1832(a)(1)—80 

percent of the reasonable charges for the services; except that 

(A) an organization which provides medical and other health 

services (or arranges for their availability) on a prepayment 

basis (and either is sponsored by a union or employer, or does 

not provide, or arrange for the provision of, any inpatient hospital services) may elect to be paid 80 percent of the reasonable 

cost of services for which payment may be made under this 

part on behalf of individuals enrolled in such organization in 

lieu of 80 percent of the reasonable charges for such services 

if the organization undertakes to charge such individuals no 

more than 20 percent of such reasonable cost plus any 

amounts payable by them as a result of subsection (b), (B) with 

respect to items and services described in section 

ø1861(s)(10)(A)¿ 1861(s)(10), the amounts paid shall be 100 

percent of the reasonable charges for such items and services, 

(C) with respect to expenses incurred for those physicians’ 

services for which payment may be made under this part that 

are described in section 1862(a)(4), the amounts paid shall be 

subject to such limitations as may be prescribed by regulations, 

(D) with respect to clinical diagnostic laboratory tests for which 

payment is made under this part (i) on the basis of a fee schedule under subsection (h)(1) or section 1834(d)(1), the amount 

paid shall be equal to 80 percent (or 100 percent, in the case 

of such tests for which payment is made on an assignment-related basis) of the lesser of the amount determined under such 

fee schedule, the limitation amount for that test determined 

under subsection (h)(4)(B), or the amount of the charges billed 


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612 

for the tests, or (ii) on the basis of a negotiated rate established under subsection (h)(6), the amount paid shall be equal 

to 100 percent of such negotiated rate,, (E) with respect to 

services furnished to individuals who have been determined to 

have end stage renal disease, the amounts paid shall be determined subject to the provisions of section 1881, (F) with respect to clinical social worker services under section 

1861(s)(2)(N), the amounts paid shall be 80 percent of the lesser of (i) the actual charge for the services or (ii) 75 percent of 

the amount determined for payment of a psychologist under 

clause (L), 

(G) * * * 

(H) with respect to services of a certified registered nurse anesthetist under section 1861(s)(11), the amounts paid shall be 

80 percent of the least of the actual charge, the prevailing 

charge that would be recognized (or, for services furnished on 

or after January 1, 1992, the fee schedule amount provided 

under section 1848) if the services had been performed by an 

anesthesiologist, or the fee schedule for such services established by the Secretary in accordance with subsection (l), (I) 

with respect to covered items (described in section 1834(a)(13)), 

the amounts paid shall be the amounts described in section 

1834(a)(1), and (J) with respect to expenses incurred for radiologist services (as defined in section 1834(b)(6)), subject to section 1848, the amounts paid shall be 80 percent of the lesser 

of the actual charge for the services or the amount provided 

under the fee schedule established under section 1834(b), (K) 

with respect to certified nurse-midwife services under section 

1861(s)(2)(L), the amounts paid shall be 80 percent of the lesser of the actual charge for the services or the amount determined by a fee schedule established by the Secretary for the 

purposes of this subparagraph ø(but in no event shall such fee 

schedule exceed 65 percent of the prevailing charge that would 

be allowed for the same service performed by a physician, or, 

for services furnished on or after January 1, 1992, 65 percent 

of the fee schedule amount provided under section 1848 for the 

same service performed by a physician)¿, (L) with respect to 

qualified psychologist services under section 1861(s)(2)(M), the 

amounts paid shall be 80 percent of the lesser of the actual 

charge for the services or the amount determined by a fee 

schedule established by the Secretary for the purposes of this 

subparagraph, (M) with respect to prosthetic devices and 

orthotics and prosthetics (as defined in section 1834(h)(4)), the 

amounts paid shall be the amounts described in section 

1834(h)(1), (N) with respect to expenses incurred for physicians’ services (as defined in section 1848(j)(3)), the amounts 

paid shall be 80 percent of the payment basis determined 

under section 1848(a)(1), (O) with respect to services described 

in section 1861(s)(2)(K) (relating to services furnished by physician assistants, nurse practitioners, or clinic nurse specialists), 

the amounts paid shall be equal to 80 percent of (i) the lesser 

of the actual charge or 85 percent of the fee schedule amount 

provided under section 1848, or (ii) in the case of services as 

an assistant at surgery, the lesser of the actual charge or 85 

percent of the amount that would otherwise be recognized if 


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performed by a physician who is serving as an assistant at surgery, (P) with respect to surgical dressings, the amounts paid 

shall be the amounts determined under section 1834(i), (Q) 

with respect to items or services for which fee schedules are established pursuant to section 1842(s), the amounts paid shall 

be 80 percent of the lesser of the actual charge or the fee 

schedule established in such section, (R) with respect to ambulance services, (i) the amounts paid shall be 80 percent of the 

lesser of the actual charge for the services or the amount determined by a fee schedule established by the Secretary under 

section 1834(l) and (ii) with respect to ambulance services described in section 1834(l)(8), the amounts paid shall be the 

amounts determined under section 1834(g) for outpatient critical access hospital services, (S) with respect to drugs and 

biologicals (including intravenous immune globulin (as defined 

in section 1861(zz))) not paid on a cost or prospective payment 

basis as otherwise provided in this part (other than items and 

services described in subparagraph (B)), the amounts paid 

shall be 80 percent of the lesser of the actual charge or the 

payment amount established in section 1842(o) (or, if applicable, under section 1847, 1847A, or 1847B), (T) with respect to 

medical nutrition therapy services (as defined in section 

1861(vv)), the amount paid shall be 80 percent of the lesser of 

the actual charge for the services or 85 percent of the amount 

determined under the fee schedule established under section 

1848(b) for the same services if furnished by a physician, (U) 

with respect to facility fees described in section 1834(m)(2)(B), 

the amounts paid shall be 80 percent of the lesser of the actual 

charge or the amounts specified in such section, (V) notwithstanding subparagraphs (I) (relating to durable medical equipment), (M) (relating to prosthetic devices and orthotics and 

prosthetics), and (Q) (relating to 1842(s) items), with respect to 

competitively priced items and services (described in section 

1847(a)(2)) that are furnished in a competitive area, the 

amounts paid shall be the amounts described in section 

1847(b)(5), øand¿ (W) with respect to additional preventive 

services (as defined in section 1861(ddd)(1)), the amount paid 

shall be (i) in the case of such services which are clinical diagnostic laboratory tests, the amount determined under subparagraph (D), and (ii) in the case of all other such services, 80 percent of the lesser of the actual charge for the service or the 

amount determined under a fee schedule established by the 

Secretary for purposes of this subparagraph, (X) with respect to 

marriage and family therapist services under section 

1861(s)(2)(GG), the amounts paid shall be 80 percent of the lesser of the actual charge for the services or 75 percent of the 

amount determined for payment of a psychologist under clause 

(L), and (Y), with respect to mental health counselor services 

under section 1861(s)(2)(HH), the amounts paid shall be 80 percent of the lesser of the actual charge for the services or 75 percent of the amount determined for payment of a psychologist 

under clause (L); 

(2) in the case of services described in section 1832(a)(2) (except those services described in subparagraphs (C), (D), (E), 


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(F), (G), (H), and (I) of such section and unless otherwise specified in section 1881)— 

(A) * * * 

* * * * * * * 

(F) with respect to a covered osteoporosis drug (as defined in section 1861(kk)) furnished by a home health 

agency, 80 percent of the reasonable cost of such service, 

as determined under section 1861(v); øand¿ 

(G) with respect to items and services described in section ø1861(s)(10)(A)¿ 1861(s)(10), the lesser of— 

(i) * * * 

(ii) the customary charges with respect to such services, 

or, if such services are furnished by a public provider of 

services, or by another provider which demonstrates to the 

satisfaction of the Secretary that a significant portion of its 

patients are low-income (and requests that payment be 

made under this provision), free of charge or at nominal 

charges to the public, the amount determined in accordance with section 1814(b)(2); and 

(H) with respect to additional preventive services (as defined in section 1861(ddd)) furnished by an outpatient department of a hospital, the amount determined under paragraph (1)(W); 

(3) in the case of services described in section 1832(a)(2)(D)— 

(A) except as provided in subparagraph (B), the costs 

which are reasonable and related to the cost of furnishing 

such services or which are based on such other tests of 

reasonableness as the Secretary may prescribe in regulations, including those authorized under section 

1861(v)(1)(A), less the amount a provider may charge as 

described in clause (ii) of section 1866(a)(2)(A), but in no 

case may the payment for such services (other than for 

items and services described in section ø1861(s)(10)(A)¿ 

1861(s)(10)) exceed 80 percent of such costs; or 

* * * * * * * 

With respect to Medicare covered preventive services (including services described in the last sentence of section 1833(b)), in any case 

in which the payment rate otherwise provided under this part is 

computed as a percent of less than 100 percent of an actual charge, 

fee schedule rate, or other rate, such percentage shall be increased 

to 100 percent. 

(b) Before applying subsection (a) with respect to expenses incurred by an individual during any calendar year, the total amount 

of the expenses incurred by such individual during such year 

(which would, except for this subsection, constitute incurred expenses from which benefits payable under subsection (a) are determinable) shall be reduced by a deductible of $75 for calendar years 

before 1991, $100 for 1991 through 2004, $110 for 2005, and for a 

subsequent year the amount of such deductible for the previous 

year increased by the annual percentage increase in the monthly 

actuarial rate under section 1839(a)(1) ending with such subsequent year (rounded to the nearest $1); except that (1) such total 

amount shall not include expenses incurred for øitems and services 


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615 

described in section 1861(s)(10)(A)¿ Medicare covered preventive 

services (as defined in section 1861(iii)), (2) such deductible shall 

not apply with respect to home health services (other than a covered osteoporosis drug (as defined in section 1861(kk))), (3) such deductible shall not apply with respect to clinical diagnostic laboratory tests for which payment is made under this part (A) under 

subsection (a)(1)(D)(i) or (a)(2)(D)(i) on an assignment-related basis, 

or to a provider having an agreement under section 1866, or (B) on 

the basis of a negotiated rate determined under subsection (h)(6), 

and (4) such deductible shall not apply to Federally qualified 

health center services, ø(5) such deductible shall not apply with respect to screening mammography (as described in section 1861(jj)), 

(6) such deductible shall not apply with respect to screening pap 

smear and screening pelvic exam (as described in section 1861(nn)), 

(7) such deductible shall not apply with respect to ultrasound 

screening for abdominal aortic aneurysm (as defined in section 

1861(bbb)), (8) such deductible shall not apply with respect to 

colorectal cancer screening tests (as described in section 

1861(pp)(1)), and¿ (9) such deductible shall not apply with respect 

to an initial preventive physical examination (as defined in section 

1861(ww)). The stotal amount of the expenses incurred by an individual as determined under the preceding sentence shall, after the 

reduction specified in such sentence, be further reduced by an 

amount equal to the expenses incurred for the first three pints of 

whole blood (or equivalent quantities of packed red blood cells, as 

defined under regulations) furnished to the individual during the 

calendar year, except that such deductible for such blood shall in 

accordance with regulations be appropriately reduced to the extent 

that there has been a replacement of such blood (or equivalent 

quantities of packed red blood cells, as so defined); and for such 

purposes blood (or equivalent quantities of packed red blood cells, 

as so defined) furnished such individual shall be deemed replaced 

when the institution or other person furnishing such blood (or such 

equivalent quantities of packed red blood cells, as so defined) is 

given one pint of blood for each pint of blood (or equivalent quantities of packed red blood cells, as so defined) furnished such individual with respect to which a deduction is made under this sentence. The deductible under the previous sentence for blood or 

blood cells furnished an individual in a year shall be reduced to the 

extent that a deductible has been imposed under section 1813(a)(2) 

to blood or blood cells furnished the individual in the year. Clause 

(1) of the first sentence of this subsection shall apply with respect 

to a colorectal cancer screening test regardless of the code that is 

billed for the establishment of a diagnosis as a result of the test, or 

for the removal of tissue or other matter or other procedure that is 

furnished in connection with, as a result of, and in the same clinical 

encounter as, the screening test. 

* * * * * * * 

(g)(1) * * * 

* * * * * * * 

(5) With respect to expenses incurred during the period beginning on January 1, 2006, and ending on øDecember 31, 2009¿ December 31, 2011, for services, the Secretary shall implement a process under which an individual enrolled under this part may, upon 


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request of the individual or a person on behalf of the individual, 

obtain an exception from the uniform dollar limitation specified in 

paragraph (2), for services described in paragraphs (1) and (3) if 

the provision of such services is determined to be medically necessary. Under such process, if the Secretary does not make a decision on such a request for an exception within 10 business days of 

the date of the Secretary’s receipt of the request, the Secretary 

shall be deemed to have found the services to be medically necessary. 

(h)(1) * * * 

(2)(A)(i) Except as provided in paragraph (4), the Secretary shall 

set the fee schedules at 60 percent (or, in the case of a test performed by a qualified hospital laboratory (as defined in paragraph 

(1)(D)) for outpatients of such hospital, 62 percent) of the prevailing 

charge level determined pursuant to the third and fourth sentences 

of section 1842(b)(3) for similar clinical diagnostic laboratory tests 

for the applicable region, State, or area for the 12-month period beginning July 1, 1984, adjusted annually (to become effective on 

January 1 of each year) by a percentage increase or decrease equal 

to the percentage increase or decrease in the Consumer Price Index 

for All Urban Consumers (United States city average) minus, øfor 

each of the years 2009 through 2013¿ for 2009, 0.5 percentage 

points, and subject to such other adjustments as the Secretary determines are justified by technological changes. 

(ii) Notwithstanding clause (i)— 

(I) * * * 

* * * * * * * 

(III) the annual adjustment in the fee schedules determined 

under clause (i) for each of the years 1991, 1992, and 1993 

shall be 2 percent, øand¿ 

(IV) the annual adjustment in the fee schedules determined 

under clause (i) for each of the years 1994 and 1995, 1998 

through 2002, and 2004 through 2008 shall be 0 percentø.¿; 

and 

(V) the annual adjustment in the fee schedules determined 

under clause (i) for years beginning with 2010 shall be subject 

to the productivity adjustment described in section 

1886(b)(3)(B)(iii)(II). 

* * * * * * * 

(i)(1) * * * 

(2)(A) * * * 

* * * * * * * 

(D)(i) * * * 

* * * * * * * 

(v) In implementing the system described in clause (i), for services 

furnished during 2010 or any subsequent year, to the extent that an 

annual percentage change factor applies, such factor shall be subject 

to the productivity adjustment described in section 

1886(b)(3)(B)(iii)(II). 

ø(v)¿ (vi) There shall be no administrative or judicial review 

under section 1869, 1878, or otherwise, of the classification system, 


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the relative weights, payment amounts, and the geographic adjustment factor, if any, under this subparagraph. 

* * * * * * * 

(7)(A) * * * 

(B) Except as the Secretary may otherwise provide, subject to 

subparagraph (C), the provisions of subparagraphs (B), (C), (D), 

and (E) of paragraph (17) of section 1833(t) shall apply with respect 

to services of ambulatory surgical centers under this paragraph in 

a similar manner to the manner in which they apply under such 

paragraph and, for purposes of this subparagraph, any reference to 

a hospital, outpatient setting, or outpatient hospital services is 

deemed a reference to an ambulatory surgical center, the setting of 

such a center, or services of such a center, respectively. 

(C) Under subparagraph (B) the Secretary shall require the reporting of such additional data relating to quality of services furnished in an ambulatory surgical facility, including data on health 

care associated infections, as the Secretary may specify. 

(8) The Secretary shall require, as a condition of the agreement 

described in section 1832(a)(2)(F)(i), the submission of such cost report as the Secretary may specify, taking into account the requirements for such reports under section 1815 in the case of a hospital. 

* * * * * * * 

(m)(1) * * * 

* * * * * * * 

(4) The provisions of this subsection shall not be taken into account in applying subsections (m) or (u) and any payment under 

such subsections shall not be taken into account in computing payments under this subsection. 

ø(4)¿ (5) There shall be no administrative or judicial review 

under section 1869, section 1878, or otherwise, respecting— 

(A) * * * 

* * * * * * * 

(p) PRIMARY CARE PAYMENT INCENTIVES.— 

(1) IN GENERAL.—In the case of primary care services (as defined in paragraph (2)) furnished on or after January 1, 2011, 

by a primary care practitioner (as defined in paragraph (3)) for 

which amounts are payable under section 1848, in addition to 

the amount otherwise paid under this part there shall also be 

paid to the practitioner (or to an employer or facility in the 

cases described in clause (A) of section 1842(b)(6)) (on a monthly or quarterly basis) from the Federal Supplementary Medical 

Insurance Trust Fund an amount equal 5 percent (or 10 percent 

if the practitioner predominately furnishes such services in an 

area that is designated (under section 332(a)(1)(A) of the Public 

Health Service Act) as a primary care health professional shortage area. 

(2) PRIMARY CARE SERVICES DEFINED.—In this subsection, the 

term ‘‘primary care services’’— 

(A) means services which are evaluation and management services as defined in section 1848(j)(5)(A); and 

(B) includes services furnished by another health care 

professional that would be described in subparagraph (A) 

if furnished by a physician. 


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(3) PRIMARY CARE PRACTITIONER DEFINED.—In this subsection, the term ‘‘primary care practitioner’’— 

(A) means a physician or other health care practitioner 

(including a nurse practitioner) who— 

(i) specializes in family medicine, general internal 

medicine, general pediatrics, geriatrics, or obstetrics 

and gynecology; and 

(ii) has allowed charges for primary care services 

that account for at least 50 percent of the physician’s 

or practitioner’s total allowed charges under section 

1848, as determined by the Secretary for the most recent period for which data are available; and 

(B) includes a physician assistant who is under the supervision of a physician described in subparagraph (A). 

(4) LIMITATION ON REVIEW.—There shall be no administrative 

or judicial review under section 1869, section 1878, or otherwise, respecting— 

(A) any determination or designation under this subsection; 

(B) the identification of services as primary care services 

under this subsection; and 

(C) the identification of a practitioner as a primary care 

practitioner under this subsection. 

(5) COORDINATION WITH OTHER PAYMENTS.— (A) WITH OTHER PRIMARY CARE INCENTIVES.—The provisions of this subsection shall not be taken into account in 

applying subsections (m) and (u) and any payment under 

such subsections shall not be taken into account in computing payments under this subsection. 

(B) WITH QUALITY INCENTIVES.—Payments under this 

subsection shall not be taken into account in determining 

the amounts that would otherwise be paid under this part 

for purposes of section 1834(g)(2)(B). 

* * * * * * * 

(t) PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT

DEPARTMENT SERVICES.— 

(1) AMOUNT OF PAYMENT.— 

(A) * * * 

(B) DEFINITION OF COVERED OPD SERVICES.—For purposes of this subsection, the term ‘‘covered OPD services’’— 

(i) * * * 

* * * * * * * 

(iv) does not include any therapy services described 

in subsection (a)(8) or ambulance services, for which 

payment is made under a fee schedule described in 

section 1834(k) or section 1834(l) and does not include 

øscreening mammography (as defined in section 

1861(jj)) and diagnostic mammography¿ diagnostic 

mammograms and Medicare covered preventive services (as defined in section 1861(iii)(1)). 

* * * * * * * 

(3) CALCULATION OF BASE AMOUNTS.— 


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(A) * * * 

* * * * * * * 

(C) CALCULATION OF CONVERSION FACTORS.— (i) * * * 

* * * * * * * 

(iv) OPD FEE SCHEDULE INCREASE FACTOR.—For purposes of this subparagraph, subject to paragraph (17), 

the ‘‘OPD fee schedule increase factor’’ for services furnished in a year is equal to the market basket percentage increase applicable under section 

1886(b)(3)(B)(iii) (which is subject to the productivity 

adjustment described in subclause (II) of such section) 

to hospital discharges occurring during the fiscal year 

ending in such year, reduced (but not below 0) by 1 

percentage point for such factor for services furnished 

in each of 2000 and 2002. In applying the previous 

sentence for years beginning with 2000, the Secretary 

may substitute for the market basket percentage increase an annual percentage increase that is computed 

and applied with respect to covered OPD services furnished in a year in the same manner as the market 

basket percentage increase is determined and applied 

to inpatient hospital services for discharges occurring 

in a fiscal year. 

* * * * * * * 

(7) TRANSITIONAL ADJUSTMENT TO LIMIT DECLINE IN PAY- MENT.— 

(A) * * * 

* * * * * * * 

(D) HOLD HARMLESS PROVISIONS.— 

(i) TEMPORARY TREATMENT FOR CERTAIN RURAL HOSPITALS.—(I) * * * 

(II) In the case of a hospital located in a rural area 

and that has not more than 100 beds and that is not 

a sole community hospital (as defined in section 

1886(d)(5)(D)(iii)), for covered OPD services furnished 

on or after January 1, 2006, and before January 1, 

ø2010¿ 2012, for which the PPS amount is less than 

the pre-BBA amount, the amount of payment under 

this subsection shall be increased by the applicable 

percentage of the amount of such difference. For purposes of the preceding sentence, the applicable percentage shall be 95 percent with respect to covered 

OPD services furnished in 2006, 90 percent with respect to such services furnished in 2007, and 85 percent with respect to such services furnished in 2008 

øor 2009¿, 2009, 2010, or 2011. 

(III) In the case of a sole community hospital (as defined in section 1886(d)(5)(D)(iii)) that has not more 

than 100 beds, for covered OPD services furnished on 

or after January 1, 2009, and before øJanuary 1, 

2010¿ January 1, 2012, for which the PPS amount is 

less than the pre-BBA amount, the amount of payVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00625 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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ment under this subsection shall be increased by 85 

percent of the amount of such difference. 

* * * * * * * 

(16) MISCELLANEOUS PROVISIONS.— (A) * * * 

* * * * * * * 

(C) PAYMENT FOR DEVICES OF BRACHYTHERAPY AND

THERAPEUTIC RADIOPHARMACEUTICALS AT CHARGES AD- JUSTED TO COST.—Notwithstanding the preceding provisions of this subsection, for a device of brachytherapy consisting of a seed or seeds (or radioactive source) furnished 

on or after January 1, 2004, and before øJanuary 1, 2010¿ 

January 1, 2012, and for therapeutic radiopharmaceuticals 

furnished on or after January 1, 2008, and before January 

1, 2010, the payment basis for the device or therapeutic 

radiopharmaceutical under this subsection shall be equal 

to the hospital’s charges for each device or therapeutic 

radiopharmaceutical furnished, adjusted to cost. Charges 

for such devices or therapeutic radiopharmaceuticals shall 

not be included in determining any outlier payment under 

this subsection. 

(17) QUALITY REPORTING.— 

(A) * * * 

* * * * * * * 

(F) USE OF ENDORSED QUALITY MEASURES.—The provisions of clause (x) of section 1886(b)(3)(C) shall apply to 

quality measures for covered OPD services under this paragraph in the same manner as such provisions apply to 

quality measures for inpatient hospital services. 

(18) AUTHORIZATION OF ADJUSTMENT FOR CANCER HOS- PITALS.— 

(A) STUDY.—The Secretary shall conduct a study to determine if, under the system under this subsection, costs incurred by hospitals described in section 1886(d)(1)(B)(v) 

with respect to ambulatory payment classification groups 

exceed those costs incurred by other hospitals furnishing 

services under this subsection (as determined appropriate 

by the Secretary). 

(B) AUTHORIZATION OF ADJUSTMENT.—Insofar as the Secretary determines under subparagraph (A) that costs incurred by hospitals described in section 1886(d)(1)(B)(v) exceed those costs incurred by other hospitals furnishing services under this subsection, the Secretary shall provide for 

an appropriate adjustment under paragraph (2)(E) to reflect those higher costs effective for services furnished on or 

after January 1, 2011. 

* * * * * * * 

(x) INCENTIVE PAYMENTS FOR EFFICIENT AREAS.— 

(1) IN GENERAL.—In the case of services furnished under the 

physician fee schedule under section 1848 on or after January 

1, 2011, and before January 1, 2013, by a supplier that is paid 

under such fee schedule in an efficient area (as identified under 

paragraph (2)), in addition to the amount of payment that 


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would otherwise be made for such services under this part, 

there also shall be paid (on a monthly or quarterly basis) an 

amount equal to 5 percent of the payment amount for the services under this part. 

(2) IDENTIFICATION OF EFFICIENT AREAS.— (A) IN GENERAL.—Based upon available data, the Secretary shall identify those counties or equivalent areas in 

the United States in the lowest fifth percentile of utilization 

based on per capita spending under this part and part A 

for services provided in the most recent year for which data 

are available as of the date of the enactment of this subsection, as standardized to eliminate the effect of geographic adjustments in payment rates. 

(B) IDENTIFICATION OF COUNTIES WHERE SERVICE IS FUR- NISHED.—For purposes of paying the additional amount 

specified in paragraph (1), if the Secretary uses the 5-digit 

postal ZIP Code where the service is furnished, the dominant county of the postal ZIP Code (as determined by the 

United States Postal Service, or otherwise) shall be used to 

determine whether the postal ZIP Code is in a county described in subparagraph (A). 

(C) LIMITATION ON REVIEW.—There shall be no administrative or judicial review under section 1869, 1878, or otherwise, respecting— 

(i) the identification of a county or other area under 

subparagraph (A); or 

(ii) the assignment of a postal ZIP Code to a county 

or other area under subparagraph (B). 

(D) PUBLICATION OF LIST OF COUNTIES; POSTING ON

WEBSITE.—With respect to a year for which a county or 

area is identified under this paragraph, the Secretary shall 

identify such counties or areas as part of the proposed and 

final rule to implement the physician fee schedule under 

section 1848 for the applicable year. The Secretary shall 

post the list of counties identified under this paragraph on 

the Internet website of the Centers for Medicare & Medicaid 

Services. 

SPECIAL PAYMENT RULES FOR PARTICULAR ITEMS AND SERVICES

SEC. 1834. (a) PAYMENT FOR DURABLE MEDICAL EQUIPMENT.— 

(1) * * * 

* * * * * * * 

(5) PAYMENT FOR OXYGEN AND OXYGEN EQUIPMENT.— 

(A) * * * 

* * * * * * * 

(F) RENTAL CAP.— 

(i) * * * 

(ii) PAYMENTS AND RULES AFTER RENTAL CAP.— 

øAfter the¿ Except as provided in clause (iii), after the 

36th continuous month during which payment is made 

for the equipment under this paragraph— 

(I) * * * 

* * * * * * * 


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(iii) CONTINUATION OF SUPPLY.—In the case of a supplier furnishing such equipment to an individual 

under this subsection as of the 27th month of the 36 

months described in clause (i), the supplier furnishing 

such equipment as of such month shall continue to furnish such equipment to such individual (either directly 

or though arrangements with other suppliers of such 

equipment) during any subsequent period of medical 

need for the remainder of the reasonable useful lifetime 

of the equipment, as determined by the Secretary, regardless of the location of the individual, unless another supplier has accepted responsibility for continuing to furnish such equipment during the remainder of such period. 

(iv) EXCEPTION FOR BANKRUPTCY.—If a supplier who 

furnishes oxygen and oxygen equipment to an individual is declared bankrupt and its assets are liquidated and at the time of such declaration and liquidation more than 24 months of rental payments have 

been made, such individual may begin a new 36-month 

rental period under this subparagraph with another 

supplier of oxygen. 

* * * * * * * 

(7) PAYMENT FOR OTHER ITEMS OF DURABLE MEDICAL EQUIPMENT.— 

(A) PAYMENT.—In the case of an item of durable medical 

equipment not described in paragraphs (2) through (6), the 

following rules shall apply: 

(i) * * * 

* * * * * * * 

(iii) PURCHASE AGREEMENT OPTION FOR CERTAIN

COMPLEX REHABILITATIVE POWER-DRIVEN WHEELCHAIRS.—In the case of a øpower-driven wheelchair¿ 

complex rehabilitative power-driven wheelchair recognized by the Secretary as classified within group 3 or 

higher, at the time the supplier furnishes the item, the 

supplier shall offer the individual the option to purchase the item, and payment for such item shall be 

made on a lump-sum basis if the individual exercises 

such option. 

* * * * * * * 

(11) IMPROPER BILLING AND REQUIREMENT OF PHYSICIAN

ORDER.— 

(A) * * * 

(B) REQUIREMENT OF PHYSICIAN ORDER.—The Secretary 

is authorized to require, for specified covered items, that 

payment may be made under this subsection with respect 

to the item only if a øphysician¿ physician enrolled under 

section 1866(j) or an eligible professional under section 

1848(k)(3)(B) has communicated to the supplier, before delivery of the item, a written order for the item and shall 

require that such an order be written pursuant to the physician documenting that the physician has had a face-to-face 


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encounter (including through use of telehealth and other 

than with respect to encounters that are incident to services 

involved) with the individual involved during the 6-month 

period preceding such written order, or other reasonable 

timeframe as determined by the Secretary. 

* * * * * * * 

(14) COVERED ITEM UPDATE.—In this subsection, the term 

‘‘covered item update’’ means, with respect to a year— 

(A) * * * 

* * * * * * * 

(K) for 2010, 2011, 2012, and 2013, the percentage increase in the consumer price index for all urban consumers 

(U.S. urban average) for the 12-month period ending with 

June of the previous year, subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II); 

(L) for 2014— 

(i) in the case of items and services described in subparagraph (J)(i) for which a payment adjustment has 

not been made under subsection (a)(1)(F)(ii) in any 

previous year, the percentage increase in the consumer price index for all urban consumers (U.S. urban 

average) for the 12-month period ending with June 

2013, subject to the productivity adjustment described 

in section 1886(b)(3)(B)(iii)(II), plus 2.0 percentage 

points; or 

(ii) in the case of other items and services, the percentage increase in the consumer price index for all 

urban consumers (U.S. urban average) for the 12- 

month period ending with June 2013, subject to the 

productivity adjustment described in section 

1886(b)(3)(B)(iii)(II); and 

(M) for a subsequent year, the percentage increase in the 

consumer price index for all urban consumers (U.S. urban 

average) for the 12-month period ending with June of the 

previous year, subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II). 

* * * * * * * 

(16) DISCLOSURE OF INFORMATION AND SURETY BOND.—The 

Secretary shall not provide for the issuance (or renewal) of a 

provider number for a supplier of durable medical equipment, 

for purposes of payment under this part for durable medical 

equipment furnished by the supplier, unless the supplier provides the Secretary on a continuing basis— 

(A) * * * 

* * * * * * * 

The Secretary may waive the requirement of a bond under subparagraph (B) in the case of a supplier that provides a comparable surety bond under State law. The Secretary, at the 

Secretary’s discretion, may impose the requirements of the 

first sentence with respect to some or all providers of items or 

services under part A or some or all suppliers or other persons 

(other than physicians or other practitioners, as defined in section 1842(b)(18)(C)) who furnish items or services under this 


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part. The requirement for a surety bond described in subparagraph (B) shall not apply in the case of a pharmacy (i) that has 

been enrolled under section 1866(j) as a supplier of durable 

medical equipment, prosthetics, orthotics, and supplies and has 

been issued (which may include renewal of) a provider number 

(as described in the first sentence of this paragraph) for at least 

5 years, and (ii) for which a final adverse action (as defined in 

section 424.57(a) of title 42, Code of Federal Regulations) has 

never been imposed. 

* * * * * * * 

(20) IDENTIFICATION OF QUALITY STANDARDS.— 

(A) * * * 

* * * * * * * 

(F) APPLICATION OF ACCREDITATION REQUIREMENT.—In 

implementing quality standards under this paragraph— 

(i) subject to øclause (ii)¿ clauses (ii) and (iii), the 

Secretary shall require suppliers furnishing items and 

services described in subparagraph (D) on or after October 1, 2009, directly or as a subcontractor for another entity, to have submitted to the Secretary evidence of accreditation by an accreditation organization 

designated under subparagraph (B) as meeting applicable quality standards; øand¿ 

(ii) in applying such standards and the accreditation 

requirement of clause (i) with respect to eligible professionals (as defined in section 1848(k)(3)(B)), and including such other persons, such as orthotists and 

prosthetists, as specified by the Secretary, furnishing 

such items and services— 

(I) * * * 

(II) the Secretary may exempt such professionals and persons from such standards and requirement if the Secretary determines that licensing, accreditation, or other mandatory quality requirements apply to such professionals and persons with respect to the furnishing of such items 

and servicesø.¿; and 

(iii) the requirement for accreditation described in 

clause (i) shall not apply for purposes of supplying diabetic testing supplies, canes, and crutches in the case 

of a pharmacy that is enrolled under section 1866(j) as 

a supplier of durable medical equipment, prosthetics, 

orthotics, and supplies. 

Any supplier that has submitted an application for accreditation before August 1, 2009, shall be deemed as meeting 

applicable standards and accreditation requirement under 

this subparagraph until such time as the independent accreditation organization takes action on the supplier’s application. 

* * * * * * * 

(d) FREQUENCY LIMITS AND PAYMENT FOR COLORECTAL CANCER

SCREENING TESTS.— 

(1) * * * 


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(2) SCREENING FLEXIBLE SIGMOIDOSCOPIES.— (A) * * * 

* * * * * * * 

(C) FACILITY PAYMENT LIMIT.— 

(i) * * * 

ø(ii) LIMITATION ON COINSURANCE.—Notwithstanding any other provision of this title, in the case 

of a beneficiary who receives the services described in 

clause (i)— 

ø(I) in computing the amount of any applicable 

copayment, the computation of such coinsurance 

shall be based upon the fee schedule under which 

payment is made for the services, and 

ø(II) the amount of such coinsurance is equal to 

25 percent of the payment amount under the fee 

schedule described in subclause (I).¿ 

(ii) NO COINSURANCE.—In the case of a beneficiary 

who receives services described in clause (i), there shall 

be no coinsurance applied. 

* * * * * * * 

(3) SCREENING COLONOSCOPY.— 

(A) * * * 

* * * * * * * 

(C) FACILITY PAYMENT LIMIT.— 

(i) * * * 

ø(ii) LIMITATION ON COINSURANCE.—Notwithstanding any other provision of this title, in the case 

of a beneficiary who receives the services described in 

clause (i)— 

ø(I) in computing the amount of any applicable 

coinsurance, the computation of such coinsurance 

shall be based upon the fee schedule under which 

payment is made for the services, and 

ø(II) the amount of such coinsurance is equal to 

25 percent of the payment amount under the fee 

schedule described in subclause (I).¿ 

(ii) NO COINSURANCE.—In the case of a beneficiary 

who receives services described in clause (i), there shall 

be no coinsurance applied. 

* * * * * * * 

(l) ESTABLISHMENT OF FEE SCHEDULE FOR AMBULANCE SERVICES.— 

(1) * * * 

* * * * * * * 

(3) SAVINGS.—In establishing such fee schedule, the Secretary shall— 

(A) * * * 

(B) set the payment amounts provided under the fee 

schedule for services furnished in 2001 and each subsequent year at amounts equal to the payment amounts 

under the fee schedule for services furnished during the 

previous year, increased by the percentage increase in the 


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consumer price index for all urban consumers (U.S. city 

average) for the 12-month period ending with June of the 

previous year reduced in the case of 2002 by 1.0 percentage points and, in the case of years beginning with 2010, 

subject to the productivity adjustment described in section 

1886(b)(3)(B)(iii)(II). 

* * * * * * * 

(13) TEMPORARY INCREASE FOR GROUND AMBULANCE SERVICES.— 

(A) IN GENERAL.—After computing the rates with respect 

to ground ambulance services under the other applicable 

provisions of this subsection, in the case of such services 

furnished on or after July 1, 2004, and before January 1, 

2007, and for such services furnished on or after July 1, 

2008, and øbefore January 1, 2010¿ before January 1, 2012 

for which the transportation originates in— 

(i) a rural area described in paragraph (9) or in a 

rural census tract described in such paragraph, the fee 

schedule established under this section shall provide 

that the rate for the service otherwise established, 

after the application of any increase under paragraphs 

(11) and (12), shall be increased by 2 percent (or 3 percent if such service is furnished on or after July 1, 

2008, and øbefore January 1, 2010¿ before January 1, 

2012); and 

(ii) an area not described in clause (i), the fee schedule established under this subsection shall provide 

that the rate for the service otherwise established, 

after the application of any increase under paragraph 

(11), shall be increased by 1 percent (or 2 percent if 

such service is furnished on or after July 1, 2008, and 

øbefore January 1, 2010¿ before January 1, 2012). 

* * * * * * * 

(m) PAYMENT FOR TELEHEALTH SERVICES.— 

(1) * * * 

* * * * * * * 

(4) DEFINITIONS.—For purposes of this subsection: 

(A) * * * 

* * * * * * * 

(C) ORIGINATING SITE.— (i) * * * 

(ii) SITES DESCRIBED.—The sites referred to in clause 

(i) are the following sites: 

(I) * * * 

* * * * * * * 

(IX) A renal dialysis facility. 

* * * * * * * 

(F) TELEHEALTH SERVICE.— 

(i) * * * 

* * * * * * * 


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(iii) RECOMMENDATIONS OF THE TELEHEALTH ADVI- SORY COMMITTEE.—In making determinations under 

clauses (i) and (ii), the Secretary shall take into account the recommendations of the Telehealth Advisory 

Committee (established under section 1868(c)) when 

adding or deleting services (and HCPCS codes) and in 

establishing policies of the Centers for Medicare & 

Medicaid Services regarding the delivery of telehealth 

services. If the Secretary does not implement such a 

recommendation, the Secretary shall publish in the 

Federal Register a statement regarding the reason such 

recommendation was not implemented. 

(5) HOSPITAL CREDENTIALING OF TELEMEDICINE PRACTI- TIONERS.—A telemedicine practitioner that is credentialed by a 

hospital in compliance with the Joint Commission Standards 

for Telemedicine shall be considered in compliance with conditions of participation and reimbursement credentialing requirements under this title for telemedicine services. 

PROCEDURE FOR PAYMENT OF CLAIMS OF PROVIDERS OF SERVICES

SEC. 1835. (a) Except as provided in subsections (b), (c), and (e), 

payment for services described in section 1832(a)(2) furnished an 

individual may be made only to providers of services which are eligible therefor under section 1866(a), and only if— 

(1) written request, signed by such individual, except in 

cases in which the Secretary finds it impracticable for the individual to do so, is filed for such payment in such form, in such 

manner and by such person or persons as the Secretary may 

by regulation prescribe, no later than the close of the øperiod 

of 3 calendar years following the year in which such services 

are furnished (deeming any services furnished in the last 3 calendar months of any calendar year to have been furnished in 

the succeeding calendar year) except that, where the Secretary 

deems that efficient administration so requires, such period 

may be reduced to not less than 1 calendar year; and¿ period 

of 1 calendar year from which such services are furnished; and 

(2) a physician, or in the case of services described in subparagraph (A), a physician enrolled under section 1866(j) or an 

eligible professional under section 1848(k)(3)(B), certifies (and 

recertifies, where such services are furnished over a period of 

time, in such cases, with such frequency, and accompanied by 

such supporting material, appropriate to the case involved, as 

may be provided by regulations) that— 

(A) in the case of home health services (i) such services 

are or were required because the individual is or was confined to his home (except when receiving items and services referred to in section 1861(m)(7)) and needs or needed 

skilled nursing care (other than solely venipuncture for the 

purpose of obtaining a blood sample) on an intermittent 

basis or physical or speech therapy or, in the case of an individual who has been furnished home health services 

based on such a need and who no longer has such a need 

for such care or therapy, continues or continued to need occupational therapy, (ii) a plan for furnishing such services 

to such individual has been established and is periodically 


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reviewed by a physician, øand¿ (iii) such services are or 

were furnished while the individual is or was under the 

care of a physician, and (iv) in the case of a certification 

or recertification after January 1, 2010, prior to making 

such certification the physician must document that the 

physician has had a face-to-face encounter (including 

through use of telehealth and other than with respect to encounters that are incident to services involved) with the individual during the 6-month period preceding such certification or recertification, or other reasonable timeframe as 

determined by the Secretary; 

* * * * * * * 

To the extent provided by regulations, the certification and recertification requirements of paragraph (2) shall be deemed satisfied 

where, at a later date, a physician makes a certification of the kind 

provided in subparagraph (A) or (B) of paragraph (2) (whichever 

would have applied), but only where such certification is accompanied by such medical and other evidence as may be required by 

such regulations. With respect to the physician certification required by paragraph (2) for home health services furnished to any 

individual by a home health agency (other than an agency which 

is a governmental entity) and with respect to the establishment 

and review of a plan for such services, the Secretary shall prescribe 

regulations which shall become effective no later than July 1, 1981, 

and which prohibit a physician who has a significant ownership interest in, or a significant financial or contractual relationship with, 

such home health agency from performing such certification and 

from establishing or reviewing such plan, except that such prohibition shall not apply with respect to a home health agency which 

is a sole community home health agency (as determined by the Secretary). For purposes of the preceding sentence, service by a physician as an uncompensated officer or director of a home health agency shall not constitute having a significant ownership interest in, 

or a significant financial or contractual relationship with, such 

agency. For purposes of paragraph (2)(A), an individual shall be 

considered to be ‘‘confined to his home’’ if the individual has a condition, due to an illness or injury, that restricts the ability of the 

individual to leave his or her home except with the assistance of 

another individual or the aid of a supportive device (such as crutches, a cane, a wheelchair, or a walker), or if the individual has a 

condition such that leaving his or her home is medically contraindicated. While an individual does not have to be bedridden to be 

considered ‘‘confined to his home’’, the condition of the individual 

should be such that there exists a normal inability to leave home 

and that leaving home requires a considerable and taxing effort by 

the individual. Any absence of an individual from the home attributable to the need to receive health care treatment, including regular absences for the purpose of participating in therapeutic, psychosocial, or medical treatment in an adult day-care program that 

is licensed or certified by a State, or accredited, to furnish adult 

day-care services in the State shall not disqualify an individual 

from being considered to be ‘‘confined to his home’’. Any other absence of an individual from the home shall not so disqualify an individual if the absence is of infrequent or of relatively short duration. For purposes of the preceding sentence, any absence for the 


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purpose of attending a religious service shall be deemed to be an 

absence of infrequent or short duration. In applying paragraph (1), 

the Secretary may specify exceptions to the 1 calendar year period 

specified in such paragraph. 

* * * * * * * 

ELIGIBLE INDIVIDUALS

SEC. 1836. øEvery individual who¿ (a) IN GENERAL.—Every individual who— (1) * * * 

* * * * * * * 

(b) SPECIAL RULES APPLICABLE TO INDIVIDUALS ONLY ELIGIBLE

FOR COVERAGE OF IMMUNOSUPPRESSIVE DRUGS.— 

(1) IN GENERAL.—In the case of an individual whose eligibility for benefits under this title has ended on or after January 

1, 2012, except for the coverage of immunosuppressive drugs by 

reason of section 226A(b)(2), the following rules shall apply: 

(A) The individual shall be deemed to be enrolled under 

this part for purposes of receiving coverage of such drugs. 

(B) The individual shall be responsible for providing for 

payment of the portion of the premium under section 1839 

which is not covered under the Medicare savings program 

(as defined in section 1144(c)(7)) in order to receive such 

coverage. 

(C) The provision of such drugs shall be subject to the 

application of— 

(i) the deductible under section 1833(b); and 

(ii) the coinsurance amount applicable for such 

drugs (as determined under this part). 

(D) If the individual is an inpatient of a hospital or other 

entity, the individual is entitled to receive coverage of such 

drugs under this part. 

(2) ESTABLISHMENT OF PROCEDURES IN ORDER TO IMPLEMENT

COVERAGE.—The Secretary shall establish procedures for— 

(A) identifying individuals that are entitled to coverage of 

immunosuppressive drugs by reason of section 226A(b)(2); 

and 

(B) distinguishing such individuals from individuals 

that are enrolled under this part for the complete package 

of benefits under this part. 

ENROLLMENT PERIODS

SEC. 1837. (a) * * * 

* * * * * * * 

(l)(1) In the case of any individual who is a covered beneficiary 

(as defined in section 1072(5) of title 10, United States Code) at the 

time the individual is entitled to hospital insurance benefits under 

part A under section 226(b) or section 226A and who is eligible to 

enroll but who has elected not to enroll (or to be deemed enrolled) 

during the individual’s initial enrollment period, there shall be a 

special enrollment period described in paragraph (2). 

(2) The special enrollment period described in this paragraph, 

with respect to an individual, is the 12-month period beginning on 


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the day after the last day of the initial enrollment period of the individual or, if later, the 12-month period beginning with the month 

the individual is notified of enrollment under this section. 

(3) In the case of an individual who enrolls during the special enrollment period provided under paragraph (1), the coverage period 

under this part shall begin on the first day of the month in which 

the individual enrolls or, at the option of the individual, on the first 

day of the second month following the last month of the individual’s 

initial enrollment period. 

(4) The Secretary of Defense shall establish a method for identifying individuals described in paragraph (1) and providing notice 

to them of their eligibility for enrollment during the special enrollment period described in paragraph (2). 

* * * * * * * 

AMOUNTS OF PREMIUMS

SEC. 1839. (a) * * * 

(b) In the case of an individual whose coverage period began pursuant to an enrollment after his initial enrollment period (determined pursuant to subsection (c) or (d) of section 1837) and not 

pursuant to a special enrollment period under øsection 1837(i)(4)¿ 

subsection (i)(4) or (l) of section 1837, the monthly premium determined under subsection (a) (without regard to any adjustment 

under subsection (i)) shall be increased by 10 percent of the monthly premium so determined for each full 12 months (in the same 

continuous period of eligibility) in which he could have been but 

was not enrolled. For purposes of the preceding sentence, there 

shall be taken into account (1) the months which elapsed between 

the close of his initial enrollment period and the close of the enrollment period in which he enrolled, plus (in the case of an individual 

who reenrolls) (2) the months which elapsed between the date of 

termination of a previous coverage period and the close of the enrollment period in which he reenrolled, but there shall not be taken 

into account months for which the individual can demonstrate that 

the individual was enrolled in a group health plan described in section 1862(b)(1)(A)(v) by reason of the individual’s (or the individual’s spouse’s) current employment or months during which the individual has not attained the age of 65 and for which the individual can demonstrate that the individual was enrolled in a large 

group health plan as an active individual (as those terms are defined in section 1862(b)(1)(B)(iii)) or months for which the individual can demonstrate that the individual was an individual described in section 1837(k)(3). Any increase in an individual’s 

monthly premium under the first sentence of this subsection with 

respect to a particular continuous period of eligibility shall not be 

applicable with respect to any other continuous period of eligibility 

which such individual may have. No increase in the premium shall 

be effected for a month in the case of an individual who enrolls 

under this part during 2001, 2002, 2003, or 2004 and who demonstrates to the Secretary before December 31, 2004, that the individual is a covered beneficiary (as defined in section 1072(5) of title 

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ices shall consult with the Secretary of Defense in identifying individuals described in the previous sentence. 

* * * * * * * 

(i) REDUCTION IN PREMIUM SUBSIDY BASED ON INCOME.— (1) * * * 

* * * * * * * 

(4) MODIFIED ADJUSTED GROSS INCOME.— (A) * * * 

* * * * * * * 

(C) USE OF MORE RECENT TAXABLE YEAR.— 

(i) * * * 

(ii) STANDARD FOR GRANTING REQUESTS.—A request 

under clause (i)(I) to use a more recent taxable year 

may be granted only if— 

(I) * * * 

(II) the individual’s modified adjusted gross income for such year is significantly less than such 

income for the taxable year determined under subparagraph (B) by reason of the death of such individual’s spouse, the marriage or divorce of such 

individual, sale of primary residence, or other 

major life changing events specified in regulations 

prescribed by the Commissioner in consultation 

with the Secretary. 

* * * * * * * 

PROVISIONS RELATING TO THE ADMINISTRATION OF PART B

SEC. 1842. (a) * * * 

(b) 

(2) * * * 

* * * * * * * 

(18)(A) * * * 

* * * * * * * 

(C) A practitioner described in this subparagraph is any of the 

following: 

(i) * * * 

* * * * * * * 

(vii) A marriage and family therapist (as defined in section 

1861(jjj)(2)). 

(viii) A mental health counselor (as defined in section 

1861(kkk)(2)). 

* * * * * * * 

(h)(1) * * * 

* * * * * * * 

(10) The Secretary may disenroll, for a period of not more than 

one year for each act, a physician or supplier under section 1866(j) 

if such physician or supplier fails to maintain and, upon request of 

the Secretary, provide access to documentation relating to written 

orders or requests for payment for durable medical equipment, certifications for home health services, or referrals for other items or 


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services written or ordered by such physician or supplier under this 

title, as specified by the Secretary. 

* * * * * * * 

(o)(1) If a physician’s, supplier’s, or any other person’s bill or request for payment for services includes a charge for a drug or biological for which payment may be made under this part and the 

drug or biological is not paid on a cost or prospective payment basis 

as otherwise provided in this part, the amount payable for the drug 

or biological is equal to the following: 

(A) In the case of any of the following drugs or biologicals, 

95 percent of the average wholesale price: 

(i) * * * 

* * * * * * * 

(iv) A vaccine described in øsubparagraph (A) or (B) of¿ 

section 1861(s)(10) furnished on or after January 1, 2004 

and before January 1, 2011, and influenza vaccines furnished on or after January 1, 2011. 

* * * * * * * 

USE OF AVERAGE SALES PRICE PAYMENT METHODOLOGY

SEC. 1847A. (a) * * * 

* * * * * * * 

(c) MANUFACTURER’S AVERAGE SALES PRICE.— (1) * * * 

* * * * * * * 

(6) DEFINITIONS AND OTHER RULES.—In this section: 

(A) * * * 

* * * * * * * 

ø(G) INCLUSION OF VACCINES.—In applying provisions of 

section 1927 under this section, ‘‘other than a vaccine’’ is 

deemed deleted from section 1927(k)(2)(B).¿ 

(G) IMPLEMENTATION.—Chapter 35 of title 44, United 

States Code shall not apply to manufacturer provision of 

information pursuant to section 1927(b)(3)(A)(iii) for purposes of implementation of this section. 

* * * * * * * 

PAYMENT FOR PHYSICIANS’ SERVICES

SEC. 1848. (a) * * * 

(b) ESTABLISHMENT OF FEE SCHEDULES.— 

(1) * * * 

* * * * * * * 

(4) SPECIAL RULE FOR IMAGING SERVICES.— 

(A) * * * 

(B) IMAGING SERVICES DESCRIBED.—For purposes of 

øsubparagraph (A)¿ this paragraph, imaging services described in this subparagraph are imaging and computerassisted imaging services, including X-ray, ultrasound (including echocardiography), nuclear medicine (including 

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ing, computed tomography, and fluoroscopy, but excluding 

diagnostic and screening mammography. 

(C) ADJUSTMENT IN PRACTICE EXPENSE TO REFLECT HIGH- ER PRESUMED UTILIZATION.—In computing the number of 

practice expense relative value units under subsection 

(c)(2)(C)(ii) with respect to advanced diagnostic imaging 

services (as defined in section 1834(e)(1)(B)) , the Secretary 

shall adjust such number of units so it reflects a 75 percent 

(rather than 50 percent) presumed rate of utilization of imaging equipment. 

(D) ADJUSTMENT IN TECHNICAL COMPONENT DISCOUNT

ON SINGLE-SESSION IMAGING INVOLVING CONSECUTIVE BODY

PARTS.—The Secretary shall increase the reduction in expenditures attributable to the multiple procedure payment 

reduction applicable to the technical component for imaging under the final rule published by the Secretary in the 

Federal Register on November 21, 2005 (part 405 of title 

42, Code of Federal Regulations) from 25 percent to 50 percent. 

* * * * * * * 

(c) DETERMINATION OF RELATIVE VALUES FOR PHYSICIANS’ SERVICES.— 

(1) * * * 

(2) DETERMINATION OF RELATIVE VALUES.— 

(A) * * * 

(B) PERIODIC REVIEW AND ADJUSTMENTS IN RELATIVE

VALUES.— 

(i) * * * 

* * * * * * * 

(v) EXEMPTION OF CERTAIN REDUCED EXPENDITURES

FROM BUDGET-NEUTRALITY CALCULATION.—The following reduced expenditures, as estimated by the Secretary, shall not be taken into account in applying 

clause (ii)(II): 

(I) * * * 

(II) OPD PAYMENT CAP AND OTHER PROVISIONS

FOR IMAGING SERVICES.—Effective for fee schedules established beginning with 2007, reduced expenditures attributable to subsection (b)(4). 

* * * * * * * 

(K) POTENTIALLY MISVALUED CODES.— 

(i) IN GENERAL.—The Secretary shall— 

(I) periodically identify services as being potentially misvalued using criteria specified in clause 

(ii); and 

(II) review and make appropriate adjustments to 

the relative values established under this paragraph for services identified as being potentially 

misvalued under subclause (I). 

(ii) IDENTIFICATION OF POTENTIALLY MISVALUED

CODES.—For purposes of identifying potentially 

misvalued services pursuant to clause (i)(I), the Secretary shall examine (as the Secretary determines to be 


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appropriate) codes (and families of codes as appropriate) for which there has been the fastest growth; 

codes (and families of codes as appropriate) that have 

experienced substantial changes in practice expenses; 

codes for new technologies or services within an appropriate period (such as three years) after the relative 

values are initially established for such codes; multiple 

codes that are frequently billed in conjunction with furnishing a single service; codes with low relative values, 

particularly those that are often billed multiple times 

for a single treatment; codes which have not been subject to review since the implementation of the RBRVS 

(the so-called ‘‘Harvard-valued codes’’); and such other 

codes determined to be appropriate by the Secretary. 

(iii) REVIEW AND ADJUSTMENTS.— (I) The Secretary may use existing processes to 

receive recommendations on the review and appropriate adjustment of potentially misvalued services 

described clause (i)(II). 

(II) The Secretary may conduct surveys, other 

data collection activities, studies, or other analyses 

as the Secretary determines to be appropriate to facilitate the review and appropriate adjustment described in clause (i)(II). 

(III) The Secretary may use analytic contractors 

to identify and analyze services identified under 

clause (i)(I), conduct surveys or collect data, and 

make recommendations on the review and appropriate adjustment of services described in clause 

(i)(II). 

(IV) The Secretary may coordinate the review 

and appropriate adjustment described in clause 

(i)(II) with the periodic review described in subparagraph (B). 

(V) As part of the review and adjustment described in clause (i)(II), including with respect to 

codes with low relative values described in clause 

(ii), the Secretary may make appropriate coding revisions (including using existing processes for consideration of coding changes) which may include 

consolidation of individual services into bundled 

codes for payment under the fee schedule under 

subsection (b). 

(VI) The provisions of subparagraph (B)(ii)(II) 

shall apply to adjustments to relative value units 

made pursuant to this subparagraph in the same 

manner as such provisions apply to adjustments 

under subparagraph (B)(ii)(II). 

(L) VALIDATING RELATIVE VALUE UNITS.— (i) IN GENERAL.—The Secretary shall establish a 

process to validate relative value units under the fee 

schedule under subsection (b). 

(ii) COMPONENTS AND ELEMENTS OF WORK.—The 

process described in clause (i) may include validation 

of work elements (such as time, mental effort and proVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00640 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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fessional judgment, technical skill and physical effort, 

and stress due to risk) involved with furnishing a service and may include validation of the pre, post, and 

intra-service components of work. 

(iii) SCOPE OF CODES.—The validation of work relative value units shall include a sampling of codes for 

services that is the same as the codes listed under subparagraph (K)(ii) 

(iv) METHODS.—The Secretary may conduct the validation under this subparagraph using methods described in subclauses (I) through (V) of subparagraph 

(K)(iii) as the Secretary determines to be appropriate. 

(v) ADJUSTMENTS.—The Secretary shall make appropriate adjustments to the work relative value units 

under the fee schedule under subsection (b). The provisions of subparagraph (B)(ii)(II) shall apply to adjustments to relative value units made pursuant to this 

subparagraph in the same manner as such provisions 

apply to adjustments under subparagraph (B)(ii)(II). 

* * * * * * * 

(d) CONVERSION FACTORS.— 

(1) ESTABLISHMENT.— 

(A) IN GENERAL.— 

øThe conversion factor¿ (i) APPLICATION OF SINGLE

CONVERSION FACTOR.—Subject to clause (ii), the conversion factor for each year shall be the conversion factor established under this subsection for the previous 

year (or, in the case of 1992, specified in subparagraph 

(B)) adjusted by the update (established under paragraph (3)) for the year involved (for years before 2001) 

and, for years beginning with 2001, multiplied by the 

update (established under paragraph (4)) for the year 

involved. 

(ii) APPLICATION OF MULTIPLE CONVERSION FACTORS

BEGINNING WITH 2011.— 

(I) IN GENERAL.—In applying clause (i) for years 

beginning with 2011, separate conversion factors 

shall be established for each service category of 

physicians’ services (as defined in subsection (j)(5)) 

and any reference in this section to a conversion 

factor for such years shall be deemed to be a reference to the conversion factor for each of such categories. 

(II) INITIAL CONVERSION FACTORS.—Such factors 

for 2011 shall be based upon the single conversion 

factor for the previous year multiplied by the update established under paragraph (11) for such 

category for 2011. 

(III) UPDATING OF CONVERSION FACTORS.—Such 

factor for a service category for a subsequent year 

shall be based upon the conversion factor for such 

category for the previous year and adjusted by the 


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update established for such category under paragraph (11) for the year involved. 

* * * * * * * 

(D) SPECIAL RULES FOR ANESTHESIA SERVICES.—The separate conversion factor for anesthesia services for a year 

shall be equal to 46 percent of the single conversion factor 

established for øother physicians’ services¿ for physicians’ 

services described in the service category described in subsection (j)(5)(B), except as adjusted for changes in work, 

practice expense, or malpractice relative value units. 

(E) PUBLICATION AND DISSEMINATION OF INFORMATION.— 

The Secretary shall— 

(i) * * * 

(ii) make available to the Medicare Payment Advisory Commission and the public by March 1 of each 

year (beginning with 2000) an estimate of the sustainable or target growth rate and of the conversion factor 

which will apply to physicians’ services for the succeeding year and data used in making such estimate. 

* * * * * * * 

(4) UPDATE FOR YEARS BEGINNING WITH 2001.— 

(A) * * * 

(B) UPDATE ADJUSTMENT FACTOR.—For purposes of subparagraph (A)(ii), subject to øsubparagraph (D)¿ subparagraphs (D) and (G) and the succeeding paragraphs of this 

subsection, the ‘‘update adjustment factor’’ for a year is 

equal (as estimated by the Secretary) to the sum of the following: 

(i) * * * 

(ii) CUMULATIVE ADJUSTMENT COMPONENT.—An 

amount determined by— 

(I) * * * 

(II) dividing that difference by actual expenditures for such services for the prior year as increased by the sustainable or target growth rate 

under subsection (f) for the year for which the update adjustment factor is to be determined; and 

* * * * * * * 

(C) DETERMINATION OF ALLOWED EXPENDITURES.—For 

purposes of this paragraph: 

(i) * * * 

* * * * * * * 

(iii) YEARS BEGINNING WITH 2000.—øThe allowed¿ 

Subject to paragraph (11)(B), the allowed expenditures 

for a year (beginning with 2000) is equal to the allowed expenditures for physicians’ services for the previous year, increased by the sustainable growth rate 

under subsection (f) for the year involved. 

* * * * * * * 

(G) REBASING USING 2009 FOR FUTURE UPDATE ADJUSTMENTS.—In determining the update adjustment factor 

under subparagraph (B) for 2011 and subsequent years— 


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(i) the allowed expenditures for 2009 shall be equal 

to the amount of the actual expenditures for physicians’ 

services during 2009; and 

(ii) the reference in subparagraph (B)(ii)(I) to ‘‘April 

1, 1996’’ shall be treated as a reference to ‘‘January 1, 

2009 (or, if later, the first day of the fifth year before 

the year involved)’’. 

* * * * * * * 

(10) UPDATE FOR 2010.—The update to the single conversion 

factor established in paragraph (1)(C) for 2010 shall be the percentage increase in the MEI (as defined in section 1842(i)(3)) for 

that year. 

(11) UPDATES FOR SERVICE CATEGORIES BEGINNING WITH

2011.— (A) IN GENERAL.—In applying paragraph (4) for a year 

beginning with 2011, the following rules apply: 

(i) APPLICATION OF SEPARATE UPDATE ADJUSTMENTS

FOR EACH SERVICE CATEGORY.—Pursuant to paragraph 

(1)(A)(ii)(I), the update shall be made to the conversion 

factor for each service category (as defined in subsection (j)(5)) based upon an update adjustment factor 

for the respective category and year and the update adjustment factor shall be computed, for a year, separately for each service category. 

(ii) COMPUTATION OF ALLOWED AND ACTUAL EXPENDI- TURES BASED ON SERVICE CATEGORIES.—In computing 

the prior year adjustment component and the cumulative adjustment component under clauses (i) and (ii) 

of paragraph (4)(B), the following rules apply: 

(I) APPLICATION BASED ON SERVICE CAT- EGORIES.—The allowed expenditures and actual 

expenditures shall be the allowed and actual expenditures for the service category, as determined 

under subparagraph (B). 

(II) APPLICATION OF CATEGORY SPECIFIC TARGET

GROWTH RATE.—The growth rate applied under 

clause (ii)(II) of such paragraph shall be the target 

growth rate for the service category involved under 

subsection (f)(5). 

(B) DETERMINATION OF ALLOWED EXPENDITURES.—In applying paragraph (4) for a year beginning with 2010, notwithstanding subparagraph (C)(iii) of such paragraph, the 

allowed expenditures for a service category for a year is an 

amount computed by the Secretary as follows: 

(i) FOR 2010.—For 2010: 

(I) TOTAL 2009 ACTUAL EXPENDITURES FOR ALL

SERVICES INCLUDED IN SGR COMPUTATION FOR

EACH SERVICE CATEGORY.—Compute total actual 

expenditures for physicians’ services (as defined in 

subsection (f)(4)(A)) for 2009 for each service category. 

(II) INCREASE BY GROWTH RATE TO OBTAIN 2010

ALLOWED EXPENDITURES FOR SERVICE CATEGORY.— Compute allowed expenditures for the service category for 2010 by increasing the allowed expendiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00643 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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tures for the service category for 2009 computed 

under subclause (I) by the target growth rate for 

such service category under subsection (f) for 2010. 

(ii) FOR SUBSEQUENT YEARS.—For a subsequent year, 

take the amount of allowed expenditures for such category for the preceding year (under clause (i) or this 

clause) and increase it by the target growth rate determined under subsection (f) for such category and year. 

(e) GEOGRAPHIC ADJUSTMENT FACTORS.— (1) ESTABLISHMENT OF GEOGRAPHIC INDICES.— (A) * * * 

* * * * * * * 

(E) FLOOR AT 1.0 ON WORK GEOGRAPHIC INDEX.—After 

calculating the work geographic index in subparagraph 

(A)(iii), for purposes of payment for services furnished on 

or after January 1, 2004, and øbefore January 1, 2010¿ before January 1, 2012, the Secretary shall increase the work 

geographic index to 1.00 for any locality for which such 

work geographic index is less than 1.00. 

* * * * * * * 

(6) TRANSITION TO USE OF MSAS AS FEE SCHEDULE AREAS IN

CALIFORNIA.— (A) IN GENERAL.— (i) REVISION.—Subject to clause (ii) and notwithstanding the previous provisions of this subsection, for 

services furnished on or after January 1, 2011, the Secretary shall revise the fee schedule areas used for payment under this section applicable to the State of California using the Metropolitan Statistical Area (MSA) 

iterative Geographic Adjustment Factor methodology as 

follows: 

(I) The Secretary shall configure the physician 

fee schedule areas using the Core-Based Statistical 

Areas-Metropolitan Statistical Areas (each in this 

paragraph referred to as an ‘‘MSA’’), as defined by 

the Director of the Office of Management and 

Budget, as the basis for the fee schedule areas. The 

Secretary shall employ an iterative process to transition fee schedule areas. First, the Secretary shall 

list all MSAs within the State by Geographic Adjustment Factor described in paragraph (2) (in this 

paragraph referred to as a ‘‘GAF’’) in descending 

order. In the first iteration, the Secretary shall 

compare the GAF of the highest cost MSA in the 

State to the weighted-average GAF of the group of 

remaining MSAs in the State. If the ratio of the 

GAF of the highest cost MSA to the weighted-average GAF of the rest of State is 1.05 or greater then 

the highest cost MSA becomes a separate fee schedule area. 

(II) In the next iteration, the Secretary shall 

compare the MSA of the second-highest GAF to the 

weighted-average GAF of the group of remaining 

MSAs. If the ratio of the second-highest MSA’s 


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GAF to the weighted-average of the remaining 

lower cost MSAs is 1.05 or greater, the secondhighest MSA becomes a separate fee schedule area. 

The iterative process continues until the ratio of 

the GAF of the highest-cost remaining MSA to the 

weighted-average of the remaining lower-cost 

MSAs is less than 1.05, and the remaining group 

of lower cost MSAs form a single fee schedule area, 

If two MSAs have identical GAFs, they shall be 

combined in the iterative comparison. 

(ii) TRANSITION.—For services furnished on or after 

January 1, 2011, and before January 1, 2016, in the 

State of California, after calculating the work, practice 

expense, and malpractice geographic indices described 

in clauses (i), (ii), and (iii) of paragraph (1)(A) that 

would otherwise apply through application of this 

paragraph, the Secretary shall increase any such index 

to the county-based fee schedule area value on December 31, 2009, if such index would otherwise be less 

than the value on January 1, 2010. 

(B) SUBSEQUENT REVISIONS.— (i) PERIODIC REVIEW AND ADJUSTMENTS IN FEE

SCHEDULE AREAS.—Subsequent to the process outlined 

in paragraph (1)(C), not less often than every three 

years, the Secretary shall review and update the California Rest-of-State fee schedule area using MSAs as 

defined by the Director of the Office of Management 

and Budget and the iterative methodology described in 

subparagraph (A)(i). 

(ii) LINK WITH GEOGRAPHIC INDEX DATA REVISION.— The revision described in clause (i) shall be made effective concurrently with the application of the periodic 

review of the adjustment factors required under paragraph (1)(C) for California for 2012 and subsequent periods. Upon request, the Secretary shall make available 

to the public any county-level or MSA derived data 

used to calculate the geographic practice cost index. 

(C) REFERENCES TO FEE SCHEDULE AREAS.—Effective for 

services furnished on or after January 1, 2010, for the State 

of California, any reference in this section to a fee schedule 

area shall be deemed a reference to an MSA in the State. 

(f) SUSTAINABLE GROWTH RATE AND TARGET GROWTH RATE.— 

(1) PUBLICATION.—The Secretary shall cause to have published in the Federal Register not later than— 

(A) November 1, 2000, the sustainable growth rate for 

2000 and 2001; øand¿ 

(B) November 1 of each succeeding year before 2010 the 

sustainable growth rate for such succeeding year and each 

of the preceding 2 yearsø.¿; and 

(C) November 1 of each succeeding year the target growth 

rate for such succeeding year and each of the 2 preceding 

years. 

(2) SPECIFICATION OF GROWTH RATE.—The sustainable 

growth rate for all physicians’ services for a fiscal year (beginning with fiscal year 1998 and ending with fiscal year 2000) 


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and a year beginning with 2000 and ending with 2009 shall be 

equal to the product of— 

(A) * * * 

* * * * * * * 

(4) DEFINITIONS.—In this subsection: 

(A) SERVICES INCLUDED IN PHYSICIANS’ SERVICES.—The 

term ‘‘physicians’ services’’ includes other items and services ø(such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician’s office¿ for which payment under this part is made 

under the fee schedule under this section, for services for 

practitioners described in section 1842(b)(18)(C) on a basis 

related to such fee schedule, or for services described in section 1861(p) (other than such services when furnished in 

the facility of a provider of services), but does not include 

services furnished to a Medicare+Choice plan enrollee. 

* * * * * * * 

(5) APPLICATION OF SEPARATE TARGET GROWTH RATES FOR

EACH SERVICE CATEGORY BEGINNING WITH 2010.—The target 

growth rate for a year beginning with 2010 shall be computed 

and applied separately under this subsection for each service 

category (as defined in subsection (j)(5)) and shall be computed 

using the same method for computing the target growth rate except that the factor described in paragraph (2)(C) for— 

(A) the service category described in subsection (j)(5)(A) 

shall be increased by 0.02; and 

(B) the service category described in subsection (j)(5)(B) 

shall be increased by 0.01. 

* * * * * * * 

(j) DEFINITIONS.—In this section: 

(1) * * * 

(2) FEE SCHEDULE AREA.—øThe term¿ Except as provided in 

subsection (e)(6)(C), the term ‘‘fee schedule area’’ means a locality used under section 1842(b) for purposes of computing payment amounts for physicians’ services. 

(3) PHYSICIANS’ SERVICES.—The term ‘‘physicians’ services’’ 

includes items and services described in paragraphs (1), (2)(A), 

(2)(D), (2)(G), (2)(P) (with respect to services described in subparagraphs (A) and (C) of section 1861(oo)(2)), (2)(R) (with respect to services described in suparagraphs (B), (C), and (D) of 

section 1861(pp)(1)), (2)(S), (2)(W), (2)(AA), (2)(DD), (2)(EE), 

(2)(FF), (3), (4), (13), (14) (with respect to services described in 

section 1861(nn)(2)), and (15) of section 1861(s) (other than 

clinical diagnostic laboratory tests and, except for purposes of 

subsection (a)(3), (g), and (h) such other items and services as 

the Secretary may specify). 

* * * * * * * 

(5) SERVICE CATEGORIES.—For services furnished on or after 

January 1, 2009, each of the following categories of physicians’ 

services (as defined in paragraph (3)) shall be treated as a separate ‘‘service category’’: 


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(A) Evaluation and management services that are procedure codes (for services covered under this title) for— 

(i) services in the category designated Evaluation 

and Management in the Health Care Common Procedure Coding System (established by the Secretary 

under subsection (c)(5) as of December 31, 2009, and as 

subsequently modified by the Secretary); and 

(ii) preventive services (as defined in section 

1861(iii)) for which payment is made under this section. 

(B) All other services not described in subparagraph (A). 

Service categories established under this paragraph shall apply 

without regard to the specialty of the physician furnishing the 

service. 

(k) QUALITY REPORTING SYSTEM.— 

(1) * * * 

(2) USE OF CONSENSUS-BASED QUALITY MEASURES.— 

(A) * * * 

* * * * * * * 

(C) FOR 2010 AND SUBSEQUENT YEARS.— (i) * * * 

(ii) EXCEPTION.—In the case of a specified area or 

medical topic determined appropriate by the Secretary 

for which a feasible and practical measure has not 

been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that 

is not so endorsed as long as due consideration is 

given to measures that have been endorsed or adopted 

by a consensus organization identified by the Secretary, such as the AQA alliance. The Secretary shall 

submit such a non-endorsed measure to the entity for 

consideration for endorsement. If the entity considers 

but does not endorse such a measure and if the Secretary does not phase-out use of such measure, the Secretary shall include the rationale for continued use of 

such a measure in rulemaking. 

* * * * * * * 

(E) PHYSICIAN’S QUALITY REPORTING INITIATIVE.— 

(i) IN GENERAL.—For purposes of reporting data on 

quality measures for covered professional services furnished during 2011 and any subsequent year, to the extent that measures are available, the Secretary shall 

include quality measures on end of life care and advanced care planning that have been adopted or endorsed by a consensus-based organization, if appropriate. Such measures shall measure both the creation 

of and adherence to orders for life-sustaining treatment. 

(ii) PROPOSED SET OF MEASURES.—The Secretary 

shall publish in the Federal Register proposed quality 

measures on end of life care and advanced care planning that the Secretary determines are described in 

subparagraph (A) and would be appropriate for eligible 

professionals to use to submit data to the Secretary. 


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The Secretary shall provide for a period of public comment on such set of measures before finalizing such 

proposed measures. 

* * * * * * * 

(m) INCENTIVE PAYMENTS FOR QUALITY REPORTING.— (1) INCENTIVE PAYMENTS.— (A) IN GENERAL.—For 2007 through ø2010¿ 2012, with 

respect to covered professional services furnished during a 

reporting period by an eligible professional, if— 

(i) * * * 

* * * * * * * 

(B) APPLICABLE QUALITY PERCENT.—For purposes of subparagraph (A), the term ‘‘applicable quality percent’’ 

means— 

(i) * * * 

(ii) for ø2009 and 2010¿ for each of the years 2009 

through 2012, 2.0 percent. 

* * * * * * * 

(5) APPLICATION.— 

(A) * * * 

(B) COORDINATION WITH OTHER BONUS PAYMENTS.—The 

provisions of this subsection shall not be taken into account in applying subsections (m), (p), and (u) of section 

1833 and any payment under such subsections shall not be 

taken into account in computing allowable charges under 

this subsection. 

* * * * * * * 

(E) LIMITATIONS ON REVIEW.— 

øThere shall be¿ Subject to subparagraph (I), there 

shall be no administrative or judicial review under 

1869, section 1878, or otherwise of 

(i) * * * 

* * * * * * * 

(H) FEEDBACK.—The Secretary shall provide timely feedback to eligible professionals on the performance of the eligible professional with respect to satisfactorily submitting 

data on quality measures under this subsection. 

(I) INFORMAL APPEALS PROCESS.—Notwithstanding subparagraph (E), by not later than January 1, 2011, the Secretary shall establish and have in place an informal process for eligible professionals to appeal the determination 

that an eligible professional did not satisfactorily submit 

data on quality measures under this subsection. 

* * * * * * * 

(7) INTEGRATION OF PHYSICIAN QUALITY REPORTING AND EHR

REPORTING.—Not later than January 1, 2012, the Secretary 

shall develop a plan to integrate clinical reporting on quality 

measures under this subsection with reporting requirements 

under subsection (o) relating to the meaningful use of electronic 

health records. Such integration shall consist of the following: 

(A) The development of measures, the reporting of which 

would both demonstrate— 


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(i) meaningful use of an electronic health record for 

purposes of subsection (o); and 

(ii) clinical quality of care furnished to an individual. 

(B) The collection of health data to identify deficiencies 

in the quality and coordination of care for individuals eligible for benefits under this part. 

(C) Such other activities as specified by the Secretary. 

* * * * * * * 

(o) INCENTIVES FOR ADOPTION AND MEANINGFUL USE OF CERTIFIED EHR TECHNOLOGY.— 

(1) INCENTIVE PAYMENTS.— 

(A) * * * 

(B) LIMITATIONS ON AMOUNTS OF INCENTIVE PAYMENTS.— 

(i) * * * 

* * * * * * * 

(iv) INCREASE FOR CERTAIN ELIGIBLE PROFESSIONALS.—In the case of an eligible professional who 

predominantly furnishes services under this part in an 

area that is designated by the Secretary (under section 

332(a)(1)(A) of the Public Health Service Act) as a primary care health professional shortage area, the 

amount that would otherwise apply for a payment 

year for such professional under subclauses (I) 

through (V) of clause (ii) shall be increased by 10 percent. In implementing the preceding sentence, the Secretary may, as determined appropriate, apply provisions of subsections (m) and (u) of section 1833 in a 

similar manner as such provisions apply under such 

subsection. 

* * * * * * * 

(p) PAYMENT MODIFIER FOR CERTAIN EVALUATION AND MANAGEMENT SERVICES.—The Secretary shall establish a payment modifier 

under the fee schedule under this section for evaluation and management services (as specified in section 1842(b)(16)(B)(ii)) that result in the ordering of additional services (such as lab tests), the 

prescription of drugs, the furnishing or ordering of durable medical 

equipment in order to enable better monitoring of claims for payment for such additional services under this title, or the ordering, 

furnishing, or prescribing of other items and services determined by 

the Secretary to pose a high risk of waste, fraud, and abuse. The 

Secretary may require providers of services or suppliers to report 

such modifier in claims submitted for payment. 

PART C—MEDICARE+CHOICE PROGRAM

ELIGIBILITY, ELECTION, AND ENROLLMENT

SEC. 1851. (a) * * * 

* * * * * * * 

(e) COVERAGE ELECTION PERIODS.— (1) * * * 

(2) OPEN ENROLLMENT AND DISENROLLMENT OPPORTUNITIES.—Subject to paragraph (5)— 


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(A) * * * 

* * * * * * * 

ø(C) CONTINUOUS OPEN ENROLLMENT AND

DISENROLLMENT FOR FIRST 3 MONTHS IN SUBSEQUENT

YEARS.— 

ø(i) IN GENERAL.—Subject to clauses (ii) and (iii) and 

subparagraph (D), at any time during the first 3 

months of a year after 2006, or, if the individual first 

becomes a Medicare+Choice eligible individual during 

a year after 2006, during the first 3 months of such 

year in which the individual is a Medicare+Choice eligible individual, a Medicare+Choice eligible individual 

may change the election under subsection (a)(1). 

ø(ii) LIMITATION OF ONE CHANGE DURING OPEN ENROLLMENT PERIOD EACH YEAR.—An individual may exercise the right under clause (i) only once during the 

applicable 3-month period described in such clause in 

each year. The limitation under this clause shall not 

apply to changes in elections effected during an annual, coordinated election period under paragraph (3) 

or during a special enrollment period under paragraph 

(4). 

ø(iii) LIMITATION ON EXERCISE OF RIGHT WITH RESPECT TO PRESCRIPTION DRUG COVERAGE.—Effective for 

plan years beginning on or after January 1, 2006, in 

applying clause (i) (and clause (i) of subparagraph (B)) 

in the case of an individual who— 

ø(I) is enrolled in an MA plan that does provide 

qualified prescription drug coverage, the individual may exercise the right under such clause 

only with respect to coverage under the original 

fee-for-service plan or coverage under another MA 

plan that does not provide such coverage and may 

not exercise such right to obtain coverage under 

an MA–PD plan or under a prescription drug plan 

under part D; or 

ø(II) is enrolled in an MA–PD plan, the individual may exercise the right under such clause 

only with respect to coverage under another MA– 

PD plan (and not an MA plan that does not provide qualified prescription drug coverage) or under 

the original fee-for-service plan and coverage 

under a prescription drug plan under part D.¿ 

* * * * * * * 

(3) ANNUAL, COORDINATED ELECTION PERIOD.— 

(A) * * * 

(B) ANNUAL, COORDINATED ELECTION PERIOD.—For purposes of this section, the term ‘‘annual, coordinated election period’’ means— 

(i) * * * 

* * * * * * * 


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(iii) with respect to 2006, the period beginning on 

November 15, 2005, and ending on May 15, 2006; 

øand¿ 

(iv) with respect to 2007 øand succeeding years¿, 2008, 2009, and 2010, the period beginning on November 15 and ending on December 31 of the year before 

such yearø.¿; and 

(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. 

* * * * * * * 

(4) SPECIAL ELECTION PERIODS.—Effective as of January 1, 

2006, an individual may discontinue an election of a 

Medicare+Choice plan offered by a Medicare+Choice organization other than during an annual, coordinated election period 

and make a new election under this section if— 

(A) * * * 

* * * * * * * 

(C) the individual demonstrates (in accordance with 

guidelines established by the Secretary) that— 

(i) * * * 

(ii) the organization (or an agent or other entity acting on the organization’s behalf) materially misrepresented the plan’s provisions in marketing the plan to 

the individual; øor¿ 

(D) the individual is enrolled in an MA plan and enrollment in the plan is suspended under paragraph (2)(B) or 

(3)(C) of section 1857(g) because of a failure of the plan to 

meet applicable requirements; or 

ø(D)¿ (E) the individual meets such other exceptional 

conditions as the Secretary may provide, taking into account the health or well-being of the individual. 

* * * * * * * 

(p) PUBLICATION OF MEDICAL LOSS RATIOS AND OTHER COST-RELATED INFORMATION.— 

(1) IN GENERAL.—The Secretary shall publish, not later than 

November 1 of each year (beginning with 2011), for each MA 

plan contract, the medical loss ratio of the plan in the previous 

year. 

(2) SUBMISSION OF DATA.— 

(A) IN GENERAL.—Each MA organization shall submit to 

the Secretary, in a form and manner specified by the Secretary, data necessary for the Secretary to publish the medical loss ratio on a timely basis. 

(B) DATA FOR 2010 AND 2011.—The data submitted under 

subparagraph (A) for 2010 and for 2011 shall be consistent 

in content with the data reported as part of the MA plan 

bid in June 2009 for 2010. 

(C) USE OF STANDARDIZED ELEMENTS AND DEFINITIONS.— 

The data to be submitted under subparagraph (A) relating 

to medical loss ratio for a year, beginning with 2012, shall 

be submitted based on the standardized elements and definitions developed under paragraph (3). 


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(3) DEVELOPMENT OF DATA REPORTING STANDARDS.— (A) IN GENERAL.—The Secretary shall develop and implement standardized data elements and definitions for reporting under this subsection, for contract years beginning 

with 2012, of data necessary for the calculation of the medical loss ratio for MA plans. Not later than December 31, 

2010, the Secretary shall publish a report describing the 

elements and definitions so developed. 

(B) CONSULTATION.—The Secretary shall consult with the 

Health Choices Commissioner, representatives of MA organizations, experts on health plan accounting systems, and 

representatives of the National Association of Insurance 

Commissioners, in the development of such data elements 

and definitions. 

(4) MEDICAL LOSS RATIO TO BE DEFINED.—For purposes of 

this part, the term ‘‘medical loss ratio’’ has the meaning given 

such term by the Secretary, taking into account the meaning 

given such term by the Health Choices Commissioner under section 116 of the America’s Affordable Health Choices Act of 2009. 

BENEFITS AND BENEFICIARY PROTECTIONS

SEC. 1852. (a) BASIC BENEFITS.— (1) REQUIREMENT.— (A) IN GENERAL.—Except as provided in section 

1859(b)(3) for MSA plans and except as provided in paragraph (6) for MA regional plans, each Medicare+Choice 

plan shall provide to members enrolled under this part, 

through providers and other persons that meet the applicable requirements of this title and part A of title XI, benefits under the original medicare fee-for-service program option (and, for plan years before 2006, additional benefits 

required under section 1854(f)(1)(A)) with cost-sharing that 

is no greater (and may be less) than the cost-sharing that 

would otherwise be imposed under such program option. 

(B) BENEFITS UNDER THE ORIGINAL MEDICARE FEE-FORSERVICE PROGRAM OPTION DEFINED.— 

(i) IN GENERAL.—For purposes of this part, the term 

‘‘benefits under the original medicare fee-for-service 

program option’’ means those items and services (other 

than hospice care) for which benefits are available 

under parts A and B to individuals entitled to benefits 

under part A and enrolled under part B, with costsharing for those services as required under parts A 

and B øor an actuarially equivalent level of cost-sharing as determined in this part¿. 

ø(ii) SPECIAL RULE FOR REGIONAL PLANS.—In the 

case of an MA regional plan in determining an actuarially equivalent level of cost-sharing with respect to 

benefits under the original medicare fee-for-service 

program option, there shall only be taken into account, 

with respect to the application of section 1858(b)(2), 

such expenses only with respect to subparagraph (A) 

of such section.¿ 

(ii) PERMITTING USE OF FLAT COPAYMENT OR PER

DIEM RATE.—Nothing in clause (i) shall be construed 


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as prohibiting a Medicare Advantage plan from using 

a flat copayment or per diem rate, in lieu of the costsharing that would be imposed under part A or B, so 

long as the amount of the cost-sharing imposed does 

not exceed the amount of the cost-sharing that would 

be imposed under the respective part if the individual 

were not enrolled in a plan under this part. 

* * * * * * * 

ø(7) LIMITATION ON COST-SHARING FOR DUAL ELIGIBLES AND

QUALIFIED MEDICARE BENEFICIARIES.—In the case of an individual who is a full-benefit dual eligible individual (as defined 

in section 1935(c)(6)) or a qualified medicare beneficiary (as defined in section 1905(p)(1)) and who is enrolled in a specialized 

Medicare Advantage plan for special needs individuals described in section 1859(b)(6)(B)(ii), the plan may not impose 

cost-sharing that exceeds the amount of cost-sharing that 

would be permitted with respect to the individual under title 

XIX if the individual were not enrolled in such plan.¿ 

(7) LIMITATION ON COST-SHARING FOR DUAL ELIGIBLES AND

QUALIFIED MEDICARE BENEFICIARIES.—In the case of a individual who is a full-benefit dual eligible individual (as defined 

in section 1935(c)(6)) or a qualified medicare beneficiary (as defined in section 1905(p)(1)) who is enrolled in a Medicare Advantage plan, the plan may not impose cost-sharing that exceeds the amount of cost-sharing that would be permitted with 

respect to the individual under this title and title XIX if the individual were not enrolled with such plan. 

* * * * * * * 

PAYMENTS TO MEDICARE+CHOICE ORGANIZATIONS

SEC. 1853. (a) PAYMENTS TO ORGANIZATIONS.— (1) MONTHLY PAYMENTS.— 

(A) * * * 

* * * * * * * 

(C) DEMOGRAPHIC ADJUSTMENT, INCLUDING ADJUSTMENT

FOR HEALTH STATUS.— 

(i) * * * 

(ii) APPLICATION DURING PHASE-OUT OF BUDGET NEUTRALITY FACTOR.—For 2006 øthrough 2010¿ and each 

subsequent year: 

(I) * * * 

(II) In order to ensure payment accuracy, the 

Secretary shall periodically conduct an analysis of 

the differences described in subclause (I). The Secretary shall complete such analysis by a date necessary to ensure that the results of such analysis 

are incorporated on a timely basis into the risk 

scores øonly for 2008, 2009, and 2010¿ for 2008 

and subsequent years. In conducting such analysis, the Secretary shall use data submitted with 

respect to 2004 and subsequent years, as available. 

* * * * * * * 


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(j) COMPUTATION OF BENCHMARK AMOUNTS.—For purposes of this 

part, subject to subsection (o), the term ‘‘MA area-specific non-drug 

monthly benchmark amount’’ means for a month in a year— 

(1) with respect to— 

(A) a service area that is entirely within an MA local 

area, subject to section 1860C–1(d)(2)(A), an amount equal 

to 1⁄12 of the annual MA capitation rate under section 

1853(c)(1) (or, øbeginning with 2007¿ for 2007, 2008, 2009, 

and 2010, 1⁄12 of the applicable amount determined under 

subsection (k)(1), or, beginning with 2011, 1⁄12 of the blended benchmark amount determined under subsection (n)(1)) 

for the area for the year, adjusted as appropriate (for years 

before 2007) for the purpose of risk adjustment; or 

* * * * * * * 

(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. 

(o) QUALITY BASED PAYMENT ADJUSTMENT.— (1) IN GENERAL.—In the case of a qualifying plan in a qualifying county with respect to a year beginning with 2011, the 

blended benchmark amount under subsection (n)(1) shall be increased— 

(A) for 2011, by 2.6 percent; 

(B) for 2012, by 5.3 percent; and 

(C) for a subsequent year, by 8.0 percent. 

(2) QUALIFYING PLAN AND QUALIFYING COUNTY DEFINED.—For 

purposes of this subsection: 

(A) QUALIFYING PLAN.—The term ‘‘qualifying plan’’ 

means, for a year and subject to paragraph (4), a plan that, 

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lished by the Centers for Medicare & Medicaid Services for 

Medicare Advantage plans) of 4 stars or higher. 

(B) QUALIFYING COUNTY.—The term ‘‘qualifying county’’ 

means, for a year, a county— 

(i) that ranked within the lowest quartile of counties 

in the amount specified in subsection (n)(2) for the year 

specified by the Secretary under subparagraph (A); and 

(ii) for which, as of June of such specified year, of the 

Medicare Advantage eligible individuals residing in 

the county— 

(I) at least 50 percent of such individuals were 

enrolled in Medicare Advantage plans; and 

(II) of the residents so enrolled at least 50 percent of such individuals were enrolled in such 

plans with a quality ranking (based on the quality 

ranking system established by the Centers for 

Medicare & Medicaid Services for Medicare Advantage plans) of 4 stars or higher. 

(3) NOTIFICATION.—The Secretary, in the annual announcement required under subsection (b)(1)(B) in 2010 and each succeeding year, shall notify the Medicare Advantage organization 

that is offering a qualifying plan in a qualifying county of such 

identification for the year. The Secretary shall provide for publication on the website for the Medicare program of the information described in the previous sentence. 

(4) AUTHORITY TO DISQUALIFY DEFICIENT PLANS.—The Secretary may determine that a Medicare Advantage plan is not a 

qualifying plan if the Secretary has identified deficiencies in the 

plan’s compliance with rules for Medicare Advantage plans 

under this part. 

PREMIUMS AND BID AMOUNTS

SEC. 1854. (a) SUBMISSION OF PROPOSED PREMIUMS, BID

AMOUNTS, AND RELATED INFORMATION.— 

(1) * * * 

* * * * * * * 

(5) REVIEW.— 

(A) * * * 

* * * * * * * 

(C) REJECTION OF BIDS.—Nothing in this section shall be 

construed as requiring the Secretary to accept any or every 

bid by an MA organization under this subsection. 

* * * * * * * 

CONTRACTS WITH MEDICARE+CHOICE ORGANIZATIONS

SEC. 1857. (a) * * * 

* * * * * * * 

(d) PROTECTIONS AGAINST FRAUD AND BENEFICIARY PROTECTIONS.— 

(1) PERIODIC AUDITING.—The Secretary shall provide for the 

annual auditing of the financial records (including data relating to medicare utilization and costs, including allowable costs 


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under section 1858(c)), and data submitted with respect to risk 

adjustment under section 1853(a)(3) of at least one-third of the 

Medicare+Choice organizations offering Medicare+Choice plans 

under this part. The Comptroller General shall monitor auditing activities conducted under this subsection. 

(2) INSPECTION AND AUDIT.—Each contract under this section 

shall provide that the Secretary, or any person or organization 

designated by the Secretary— 

(A) shall have the right to timely inspect or otherwise 

evaluate (i) the quality, appropriateness, and timeliness of 

services performed under the contract, and (ii) the facilities of the organization when there is reasonable evidence 

of some need for such inspection, and 

(B) shall have the right to timely audit and inspect any 

books and records of the Medicare+Choice organization 

that pertain (i) to the ability of the organization to bear 

the risk of potential financial losses, or (ii) to services performed or determinations of amounts payable under the 

contract. 

* * * * * * * 

(7) PERIOD FOR SUBMISSION OF CLAIMS.—The contract shall 

require an MA organization or PDP sponsor to require any provider of services under contract with, in partnership with, or affiliated with such organization or sponsor to ensure that, with 

respect to items and services furnished by such provider to an 

enrollee of such organization, written request, signed by such 

enrollee, except in cases in which the Secretary finds it impracticable for the enrollee to do so, is filed for payment for such 

items and services in such form, in such manner, and by such 

person or persons as the Secretary may by regulation prescribe, 

no later than the close of the 1 calendar year period after such 

items and services are furnished. In applying the previous sentence, the Secretary may specify exceptions to the 1 calendar 

year period specified. 

(e) ADDITIONAL CONTRACT TERMS.— 

(1) * * * 

* * * * * * * 

(4) REQUIREMENT FOR MINIMUM MEDICAL LOSS RATIO.—If the 

Secretary determines for a contract year (beginning with 2014) 

that an MA plan has failed to have a medical loss ratio (as defined in section 1851(p)(4)) of at least .85— 

(A) the Secretary shall require the Medicare Advantage 

organization offering the plan to give enrollees a rebate (in 

the second succeeding contract year) of premiums under 

this part (or part B or part D, if applicable) by such 

amount as would provide for a benefits ratio of at least .85; 

(B) for 3 consecutive contract years, the Secretary shall 

not permit the enrollment of new enrollees under the plan 

for coverage during the second succeeding contract year; 

and 

(C) the Secretary shall terminate the plan contract if the 

plan fails to have such a medical loss ratio for 5 consecutive contract years. 

(5) ENFORCEMENT OF AUDITS AND DEFICIENCIES.— 


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(A) INFORMATION IN CONTRACT.—The Secretary shall require that each contract with an MA organization under 

this section shall include terms that inform the organization of the provisions in subsection (d). 

(B) ENFORCEMENT AUTHORITY.—The Secretary is authorized, in connection with conducting audits and other activities under subsection (d), to take such actions, including 

pursuit of financial recoveries, necessary to address deficiencies identified in such audits or other activities. 

(f) PROMPT PAYMENT BY MEDICARE+CHOICE ORGANIZATION.— 

(1) * * * 

* * * * * * * 

(3) INCORPORATION OF CERTAIN PRESCRIPTION DRUG PLAN

CONTRACT REQUIREMENTS.—The following provisions shall 

apply to contracts with a Medicare Advantage organization offering an MA–PD plan in the same manner as they apply to 

contracts with a PDP sponsor offering a prescription drug plan 

under part D: 

(A) * * * 

ø(B) SUBMISSION OF CLAIMS BY PHARMACIES LOCATED IN

OR CONTRACTING WITH LONG-TERM CARE FACILITIES.—Section 1860D–12(b)(5).¿ 

ø(C)¿ (B) REGULAR UPDATE OF PRESCRIPTION DRUG PRICING STANDARD.—Section 1860D–12(b)(6). 

(C) REPORTING REQUIREMENT RELATED TO REBATE FOR

FULL-BENEFIT DUAL ELIGIBLE MEDICARE DRUG PLAN EN- ROLLEES.—Section 1860D–12(b)(7). 

(g) INTERMEDIATE SANCTIONS.— (1) IN GENERAL.—If the Secretary determines that a 

Medicare+Choice organization with a contract under this section— 

(A) * * * 

* * * * * * * 

(F) fails to comply with the applicable requirements of 

section 1852(j)(3) or 1852(k)(2)(A)(ii); øor¿ 

(G) employs or contracts with any individual or entity 

that is excluded from participation under this title under 

section 1128 or 1128A for the provision of health care, utilization review, medical social work, or administrative 

services or employs or contracts with any entity for the 

provision (directly or indirectly) through such an excluded 

individual or entity of such services; 

(H) fails substantially to provide language services to 

limited English proficient beneficiaries enrolled in the plan 

that are required under law; 

(I) except as provided under subparagraph (C) or (D) of 

section 1860D–1(b)(1), enrolls an individual in any plan 

under this part without the prior consent of the individual 

or the designee of the individual; 

(J) transfers an individual enrolled under this part from 

one plan to another without the prior consent of the individual or the designee of the individual or solely for the 

purpose of earning a commission; 


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(K) fails to comply with marketing restrictions described 

in subsections (h) and (j) of section 1851 or applicable implementing regulations or guidance; or 

(L) employs or contracts with any individual or entity 

who engages in the conduct described in subparagraphs (A) 

through (K) of this paragraph; 

the Secretary may provide, in addition to any other remedies 

authorized by law, for any of the remedies described in paragraph (2). The Secretary may provide, in addition to any other 

remedies authorized by law, for any of the remedies described 

in paragraph (2), if the Secretary determines that any employee 

or agent of such organization, or any provider or supplier who 

contracts with such organization, has engaged in any conduct 

described in subparagraphs (A) through (L) of this paragraph. 

(2) REMEDIES.—The remedies described in this paragraph 

are— 

(A) civil money penalties of not more than $25,000 for 

each determination under paragraph (1) or, with respect to 

a determination under subparagraph (D) or (E)(i) of such 

paragraph, of not more than $100,000 for each such determination, except with respect to a determination under subparagraph (E), an assessment of not more than 3 times the 

amount claimed by such plan or plan sponsor based upon 

the misrepresentation or falsified information involved, 

plus, with respect to a determination under paragraph 

(1)(B), double the excess amount charged in violation of 

such paragraph (and the excess amount charged shall be 

deducted from the penalty and returned to the individual 

concerned), and plus, with respect to a determination 

under paragraph (1)(D), $15,000 for each individual not 

enrolled as a result of the practice involved, 

* * * * * * * 

(i) MEDICARE+CHOICE PROGRAM COMPATIBILITY WITH EMPLOYER

OR UNION GROUP HEALTH PLANS.— (1) * * * 

(2) EMPLOYER SPONSORED MA PLANS.—To facilitate the offering of MA plans by employers, labor organizations, or the 

trustees of a fund established by one or more employers or 

labor organizations (or combination thereof) to furnish benefits 

to the entity’s employees, former employees (or combination 

thereof) or members or former members (or combination thereof) of the labor organizations, the Secretary may waive or modify requirements that hinder the design of, the offering of, or 

the enrollment in such MA plans, 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. Notwithstanding section 1851(g), an MA plan 

described in the previous sentence may restrict the enrollment 

of individuals under this part to individuals who are beneficiaries and participants in such plan. 

SPECIAL RULES FOR MA REGIONAL PLANS

SEC. 1858. (a) * * * 

* * * * * * * 


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ø(e) STABILIZATION FUND.— ø(1) ESTABLISHMENT.—The Secretary shall establish under 

this subsection an MA Regional Plan Stabilization Fund (in 

this subsection referred to as the ‘‘Fund’’) which shall be available for two purposes: 

ø(A) PLAN ENTRY.—To provide incentives to have MA regional plans offered in each MA region under paragraph 

(3). 

ø(B) PLAN RETENTION.—To provide incentives to retain 

MA regional plans in certain MA regions with below-national-average MA market penetration under paragraph 

(4). 

ø(2) FUNDING.— ø(A) INITIAL FUNDING.— ø(i) IN GENERAL.—There shall be available to the 

Fund, for expenditures from the Fund during 2014, $1. 

ø(ii) PAYMENT FROM TRUST FUNDS.—Such amount 

shall be available to the Fund, as expenditures are 

made from the Fund, from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund in the proportion specified 

in section 1853(f). 

ø(B) ADDITIONAL FUNDING FROM SAVINGS.— ø(i) IN GENERAL.—There shall also be made available to the Fund, 50 percent of savings described in 

clause (ii). 

ø(ii) SAVINGS.—The savings described in this clause 

are 25 percent of the average per capita savings described in section 1854(b)(4)(C) for which monthly rebates are provided under section 1854(b)(1)(C) in the 

fiscal year involved that are attributable to MA regional plans. 

ø(iii) AVAILABILITY.—Funds made available under 

this subparagraph shall be transferred into a special 

account in the Treasury from the Federal Hospital Insurance Trust Fund and the Federal Supplementary 

Medical Insurance Trust Fund in the proportion specified in section 1853(f) on a monthly basis. 

ø(C) OBLIGATIONS.—Amounts in the Fund shall be available in advance of appropriations to MA regional plans in 

qualifying MA regions only in accordance with paragraph 

(5). 

ø(D) ORDERING.—Expenditures from the Fund shall first 

be made from amounts made available under subparagraph (A). 

ø(3) PLAN ENTRY FUNDING.— 

ø(A) IN GENERAL.—Funding is available under this paragraph for a year only as follows: 

ø(i) NATIONAL PLAN.—For a national bonus payment 

described in subparagraph (B) for the offering by a 

single MA organization of an MA regional plan in each 

MA region in the year, but only if there was not such 

a plan offered in each such region in the previous 

year. Funding under this clause is only available with 

respect to any individual MA organization for a single 


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year, but may be made available to more than one 

such organization in the same year. 

ø(ii) REGIONAL PLANS.—Subject to clause (iii), for an 

increased amount under subparagraph (C) for an MA 

regional plan offered in an MA region which did not 

have any MA regional plan offered in the prior year. 

ø(iii) LIMITATION ON REGIONAL PLAN FUNDING IN

CASE OF NATIONAL PLAN.—In no case shall there be 

any payment adjustment under subparagraph (C) for 

a year for which a national payment adjustment is 

made under subparagraph (B). 

ø(B) NATIONAL BONUS PAYMENT.—The national bonus 

payment under this subparagraph shall— 

ø(i) be available to an MA organization only if the 

organization offers MA regional plans in every MA region; 

ø(ii) be available with respect to all MA regional 

plans of the organization regardless of whether any 

other MA regional plan is offered in any region; and 

ø(iii) subject to amounts available under paragraph 

(5) for a year, be equal to 3 percent of the benchmark 

amount otherwise applicable for each MA regional 

plan offered by the organization. 

ø(C) REGIONAL PAYMENT ADJUSTMENT.— ø(i) IN GENERAL.—The increased amount under this 

subparagraph for an MA regional plan in an MA region for a year shall be an amount, determined by the 

Secretary, based on the bid submitted for such plan 

(or plans) and shall be available to all MA regional 

plans offered in such region and year. Such amount 

may be based on the mean, mode, or median, or other 

measure of such bids and may vary from region to region. The Secretary may not limit the number of plans 

or bids in a region. 

ø(ii) MULTI-YEAR FUNDING.— ø(I) IN GENERAL.—Subject to amounts available 

under paragraph (5), funding under this subparagraph shall be available for a period determined 

by the Secretary. 

ø(II) REPORT.—If the Secretary determines that 

funding will be provided for a second consecutive 

year with respect to an MA region, the Secretary 

shall submit to the Congress a report that describes the underlying market dynamics in the region and that includes recommendations concerning changes in the payment methodology otherwise provided for MA regional plans under this 

part. 

ø(iii) APPLICATION TO ALL PLANS IN A REGION.— Funding under this subparagraph with respect to an 

MA region shall be made available with respect to all 

MA regional plans offered in the region. 

ø(iv) LIMITATION ON AVAILABILITY OF PLAN RETEN- TION FUNDING IN NEXT YEAR.—If an increased amount 

is made available under this subparagraph with reVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00660 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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spect to an MA region for a period determined by the 

Secretary under clause (ii)(I), in no case shall funding 

be available under paragraph (4) with respect to MA 

regional plans offered in the region in the year following such period. 

ø(D) APPLICATION.—Any additional payment under this 

paragraph provided for an MA regional plan for a year 

shall be treated as if it were an addition to the benchmark 

amount otherwise applicable to such plan and year, but 

shall not be taken into account in the computation of any 

benchmark amount for any subsequent year. 

ø(4) PLAN RETENTION FUNDING.— ø(A) IN GENERAL.—Funding is available under this paragraph for a year with respect to MA regional plans offered 

in an MA region for the increased amount specified in subparagraph (B) but only if the region meets the requirements of subparagraphs (C) and (E). 

ø(B) PAYMENT INCREASE.—The increased amount under 

this subparagraph for an MA regional plan in an MA region for a year shall be an amount, determined by the Secretary, that does not exceed the greater of— 

ø(i) 3 percent of the benchmark amount applicable 

in the region; or 

ø(ii) such amount as (when added to the benchmark 

amount applicable to the region) will result in the 

ratio of— 

ø(I) such additional amount plus the benchmark 

amount computed under section 1854(b)(4)(B)(i) 

for the region and year, to the adjusted average 

per capita cost for the region and year, as estimated by the Secretary under section 1876(a)(4) 

and adjusted as appropriate for the purpose of 

risk adjustment; being equal to 

ø(II) the weighted average of such benchmark 

amounts for all the regions and such year, to the 

average per capita cost for the United States and 

such year, as estimated by the Secretary under 

section 1876(a)(4) and adjusted as appropriate for 

the purpose of risk adjustment. 

ø(C) REGIONAL REQUIREMENTS.—The requirements of 

this subparagraph for an MA region for a year are as follows: 

ø(i) NOTIFICATION OF PLAN EXIT.—The Secretary has 

received notice (in such form and manner as the Secretary specifies) before a year that one or more MA regional plans that were offered in the region in the previous year will not be offered in the succeeding year. 

ø(ii) REGIONAL PLANS AVAILABLE FROM FEWER THAN

2 MA ORGANIZATIONS IN THE REGION.—The Secretary 

determines that if the plans referred to in clause (i) 

are not offered in the year, fewer than 2 MA organizations will be offering MA regional plans in the region 

in the year involved. 

ø(iii) PERCENTAGE ENROLLMENT IN MA REGIONAL

PLANS BELOW NATIONAL AVERAGE.—For the previous 


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year, the Secretary determines that the average percentage of MA eligible individuals residing in the region who are enrolled in MA regional plans is less 

than the average percentage of such individuals in the 

United States enrolled in such plans. 

ø(D) APPLICATION.—Any additional payment under this 

paragraph provided for an MA regional plan for a year 

shall be treated as if it were an addition to the benchmark 

amount otherwise applicable to such plan and year, but 

shall not be taken into account in the computation of any 

benchmark amount for any subsequent year. 

ø(E) 2-CONSECUTIVE-YEAR LIMITATION.— ø(i) IN GENERAL.—In no case shall any funding be 

available under this paragraph in an MA region in a 

period of consecutive years that exceeds 2 years. 

ø(ii) REPORT.—If the Secretary determines that 

funding will be provided under this paragraph for a 

second consecutive year with respect to an MA region, 

the Secretary shall submit to the Congress a report 

that describes the underlying market dynamics in the 

region and that includes recommendations concerning 

changes in the payment methodology otherwise provided for MA regional plans under this part. 

ø(5) FUNDING LIMITATION.— ø(A) IN GENERAL.—The total amount expended from the 

Fund as a result of the application of this subsection 

through the end of a calendar year may not exceed the 

amount available to the Fund as of the first day of such 

year. For purposes of this subsection, amounts that are expended under this title insofar as such amounts would not 

have been expended but for the application of this subsection shall be counted as amounts expended as a result 

of such application. 

ø(B) APPLICATION OF LIMITATION.—The Secretary may 

obligate funds from the Fund for a year only if the Secretary determines (and the Chief Actuary of the Centers 

for Medicare & Medicaid Services and the appropriate 

budget officer certify) that there are available in the Fund 

at the beginning of the year sufficient amounts to cover all 

such obligations incurred during the year consistent with 

subparagraph (A). The Secretary shall take such steps, in 

connection with computing additional payment amounts 

under paragraphs (3) and (4) and including limitations on 

enrollment in MA regional plans receiving such payments, 

as will ensure that sufficient funds are available to make 

such payments for the entire year. Funds shall only be 

made available from the Fund pursuant to an apportionment made in accordance with applicable procedures. 

ø(6) SECRETARY REPORTS.—Not later than April 1 of each 

year (beginning in 2008), the Secretary shall submit a report 

to Congress and the Comptroller General of the United States 

that includes— 

ø(A) a detailed description of— 

ø(i) the total amount expended as a result of the application of this subsection in the previous year comVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00662 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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pared to the total amount that would have been expended under this title in the year if this subsection 

had not been enacted; 

ø(ii) the projections of the total amount that will be 

expended as a result of the application of this subsection in the year in which the report is submitted 

compared to the total amount that would have been 

expended under this title in the year if this subsection 

had not been enacted; 

ø(iii) amounts remaining within the funding limitation specified in paragraph (5); and 

ø(iv) the steps that the Secretary will take under 

paragraph (5)(B) to ensure that the application of this 

subsection will not cause expenditures to exceed the 

amount available in the Fund; and 

ø(B) a certification from the Chief Actuary of the Centers for Medicare & Medicaid Services that the description 

provided under subparagraph (A) is reasonable, accurate, 

and based on generally accepted actuarial principles and 

methodologies.¿ 

* * * * * * * 

DEFINITIONS; MISCELLANEOUS PROVISIONS

SEC. 1859. (a) * * * 

* * * * * * * 

(f) REQUIREMENTS REGARDING ENROLLMENT IN SPECIALIZED MA 

PLANS FOR SPECIAL NEEDS INDIVIDUALS.— 

(1) REQUIREMENTS FOR ENROLLMENT.—In the case of a specialized MA plan for special needs individuals (as defined in 

subsection (b)(6)), notwithstanding any other provision of this 

part and in accordance with regulations of the Secretary and 

for periods before øJanuary 1, 2011¿ January 1, 2013 (or January 1, 2016, in the case of a plan described in section 

1177(b)(1) of the America’s Affordable Health Choices Act of 

2009), the plan may restrict the enrollment of individuals 

under the plan to individuals who are within one or more 

classes of special needs individuals. 

* * * * * * * 

(4) ADDITIONAL REQUIREMENTS FOR SEVERE OR DISABLING

CHRONIC CONDITION SNPS.—In the case of a specialized MA 

plan for special needs individuals described in subsection 

(b)(6)(B)(iii), the applicable requirements described in this 

paragraph are as follows: 

(A) * * * 

* * * * * * * 

(C) The plan does not enroll an individual on or after 

January 1, 2011, other than during an annual, coordinated 

open enrollment period or when at the time of the diagnosis 

of the disease or condition that qualifies the individual as 

an individual described in subsection (b)(6)(B)(iii). 

* * * * * * * 


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øCOMPARATIVE COST ADJUSTMENT (CCA) PROGRAM

øSEC. 1860C–1. (a) ESTABLISHMENT OF PROGRAM.— 

ø(1) IN GENERAL.—The Secretary shall establish a program 

under this section (in this section referred to as the ‘‘CCA program’’) for the application of comparative cost adjustment in 

CCA areas selected under this section. 

ø(2) DURATION.—The CCA program shall begin January 1, 

2010, and shall extend over a period of 6 years, and end on December 31, 2015. 

ø(3) REPORT.—Upon the completion of the CCA program, the 

Secretary shall submit a report to Congress. Such report shall 

include the following, with respect to both this part and the 

original medicare fee-for-service program: 

ø(A) An evaluation of the financial impact of the CCA 

program. 

ø(B) An evaluation of changes in access to physicians 

and other health care providers. 

ø(C) Beneficiary satisfaction. 

ø(D) Recommendations regarding any extension or expansion of the CCA program. 

ø(b) REQUIREMENTS FOR SELECTION OF CCA AREAS.— 

ø(1) CCA AREA DEFINED.— 

ø(A) IN GENERAL.—For purposes of this section, the term 

‘‘CCA area’’ means an MSA that meets the requirements 

of paragraph (2) and is selected by the Secretary under 

subsection (c). 

ø(B) MSA DEFINED.—For purposes of this section, the 

term ‘‘MSA’’ means a Metropolitan Statistical Area (or 

such similar area as the Secretary recognizes). 

ø(2) REQUIREMENTS FOR CCA AREAS.—The requirements of 

this paragraph for an MSA to be a CCA area are as follows: 

ø(A) MA ENROLLMENT REQUIREMENT.—For the reference 

month (as defined under section 1858(f)(4)(B)) with respect 

to 2010, at least 25 percent of the total number of MA eligible individuals who reside in the MSA were enrolled in 

an MA local plan described in section 1851(a)(2)(A)(i). 

ø(B) 2 PLAN REQUIREMENT.—There will be offered in the 

MSA during the annual, coordinated election period under 

section 1851(e)(3)(B) before the beginning of 2010 at least 

2 MA local plans described in section 1851(a)(2)(A)(i) (in 

addition to the fee-for-service program under parts A and 

B), each offered by a different MA organization and each 

of which met the minimum enrollment requirements of 

paragraph (1) of section 1857(b) (as applied without regard 

to paragraph (3) thereof) as of the reference month. 

ø(c) SELECTION OF CCA AREAS.— 

ø(1) GENERAL SELECTION CRITERIA.—The Secretary shall select CCA areas from among those MSAs qualifying under subsection (b) in a manner that— 

ø(A) seeks to maximize the opportunity to test the application of comparative cost adjustment under this title; 

ø(B) does not seek to maximize the number of MA eligible individuals who reside in such areas; and 


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ø(C) provides for geographic diversity consistent with the 

criteria specified in paragraph (2). 

ø(2) SELECTION CRITERIA.—With respect to the selection of 

MSAs that qualify to be CCA areas under subsection (b), the 

following rules apply, to the maximum extent feasible: 

ø(A) MAXIMUM NUMBER.—The number of such MSAs selected may not exceed the lesser of (i) 6, or (ii) 25 percent 

of the number of MSAs that meet the requirement of subsection (b)(2)(A). 

ø(B) ONE OF 4 LARGEST AREAS BY POPULATION.—At least 

one such qualifying MSA shall be selected from among the 

4 such qualifying MSAs with the largest total population 

of MA eligible individuals. 

ø(C) ONE OF 4 AREAS WITH LOWEST POPULATION DENSITY.—At least one such qualifying MSA shall be selected 

from among the 4 such qualifying MSAs with the lowest 

population density (as measured by residents per square 

mile or similar measure of density). 

ø(D) MULTISTATE AREA.—At least one such qualifying 

MSA shall be selected that includes a multi-State area. 

Such an MSA may be an MSA described in subparagraph 

(B) or (C). 

ø(E) LIMITATION WITHIN SAME GEOGRAPHIC REGION.—No 

more than 2 such MSAs shall be selected that are, in 

whole or in part, within the same geographic region (as 

specified by the Secretary) of the United States. 

ø(F) PRIORITY TO AREAS NOT WITHIN CERTAIN DEMONSTRATION PROJECTS.—Priority shall be provided for 

those qualifying MSAs that do not have a demonstration 

project in effect as of the date of the enactment of this section for medicare preferred provider organization plans 

under this part. 

ø(d) APPLICATION OF COMPARATIVE COST ADJUSTMENT.— 

ø(1) IN GENERAL.—In the case of a CCA area for a year— 

ø(A) for purposes of applying this part with respect to 

payment for MA local plans, any reference to an MA areaspecific non-drug monthly benchmark amount shall be 

treated as a reference to such benchmark computed as if 

the CCA area-specific non-drug monthly benchmark 

amount (as defined in subsection (e)(1)) were substituted 

for the amount described in section 1853(j)(1)(A) for the 

CCA area and year involved, as phased in under paragraph (3); and 

ø(B) with respect to months in the year for individuals 

residing in the CCA area who are not enrolled in an MA 

plan, the amount of the monthly premium under section 

1839 is subject to adjustment under subsection (f). 

ø(2) EXCLUSION OF MA LOCAL AREAS WITH FEWER THAN 2 ORGANIZATIONS OFFERING MA PLANS.— 

ø(A) IN GENERAL.—In no case shall an MA local area 

that is within an MSA be included as part of a CCA area 

unless for 2010 (and, except as provided in subparagraph 

(B), for a subsequent year) there is offered in each part of 

such MA local area at least 2 MA local plans described in 


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660 

section 1851(a)(2)(A)(i) each of which is offered by a different MA organization. 

ø(B) CONTINUATION.—If an MA local area meets the requirement of subparagraph (A) and is included in a CCA 

area for 2010, such local area shall continue to be included 

in such CCA area for a subsequent year notwithstanding 

that it no longer meets such requirement so long as there 

is at least one MA local plan described in section 

1851(a)(2)(A)(i) that is offered in such local area. 

ø(3) PHASE-IN OF CCA BENCHMARK.— ø(A) IN GENERAL.—In applying this section for a year before 2013, paragraph (1)(A) shall be applied as if the 

phase-in fraction under subparagraph (B) of the CCA nondrug monthly benchmark amount for the year were substituted for such fraction of the MA area-specific non-drug 

monthly benchmark amount. 

ø(B) PHASE-IN FRACTION.—The phase-in fraction under 

this subparagraph is— 

ø(i) for 2010 1⁄4; and 

ø(ii) for a subsequent year is the phase-in fraction 

under this subparagraph for the previous year increased by 1⁄4, but in no case more than 1. 

ø(e) COMPUTATION OF CCA BENCHMARK AMOUNT.— ø(1) CCA NON-DRUG MONTHLY BENCHMARK AMOUNT.—For 

purposes of this section, the term ‘‘CCA non-drug monthly 

benchmark amount’’ means, with respect to a CCA area for a 

month in a year, the sum of the 2 components described in 

paragraph (2) for the area and year. The Secretary shall compute such benchmark amount for each such CCA area before 

the beginning of each annual, coordinated election period 

under section 1851(e)(3)(B) for each year (beginning with 2010) 

in which the CCA area is so selected. 

ø(2) 2 COMPONENTS.—For purposes of paragraph (1), the 2 

components described in this paragraph for a CCA area and a 

year are the following: 

ø(A) MA LOCAL COMPONENT.—The product of the following: 

ø(i) WEIGHTED AVERAGE OF MEDICARE ADVANTAGE

PLAN BIDS IN AREA.—The weighted average of the plan 

bids for the area and year (as determined under paragraph (3)(A)). 

ø(ii) NON-FFS MARKET SHARE.—One minus the feefor-service market share percentage, determined under 

paragraph (4) for the area and year. 

ø(B) FEE-FOR-SERVICE COMPONENT.—The product of the 

following: 

ø(i) FEE-FOR-SERVICE AREA-SPECIFIC NON-DRUG

AMOUNT.—The fee-for-service area-specific non-drug 

amount (as defined in paragraph (5)) for the area and 

year. 

ø(ii) FEE-FOR-SERVICE MARKET SHARE.—The fee-forservice market share percentage, determined under 

paragraph (4) for the area and year. 

ø(3) DETERMINATION OF WEIGHTED AVERAGE MA BIDS FOR A

CCA AREA.— 


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ø(A) IN GENERAL.—For purposes of paragraph (2)(A)(i), 

the weighted average of plan bids for a CCA area and a 

year is, subject to subparagraph (D), the sum of the following products for MA local plans described in subparagraph (C) in the area and year: 

ø(i) MONTHLY MEDICARE ADVANTAGE STATUTORY

NON-DRUG BID AMOUNT.—The accepted unadjusted MA 

statutory non-drug monthly bid amount. 

ø(ii) PLAN’S SHARE OF MEDICARE ADVANTAGE ENROLL- MENT IN AREA.—The number of individuals described 

in subparagraph (B), divided by the total number of 

such individuals for all MA plans described in subparagraph (C) for that area and year. 

ø(B) COUNTING OF INDIVIDUALS.—The Secretary shall 

count, for each MA local plan described in subparagraph 

(C) for an area and year, the number of individuals who 

reside in the area and who were enrolled under such plan 

under this part during the reference month for that year. 

ø(C) EXCLUSION OF PLANS NOT OFFERED IN PREVIOUS

YEAR.—For an area and year, the MA local plans described 

in this subparagraph are MA local plans described in section 1851(a)(2)(A)(i) that are offered in the area and year 

and were offered in the CCA area in the reference month. 

ø(D) COMPUTATION OF WEIGHTED AVERAGE OF PLAN

BIDS.—In calculating the weighted average of plan bids for 

a CCA area under subparagraph (A)— 

ø(i) in the case of an MA local plan that has a service area only part of which is within such CCA area, 

the MA organization offering such plan shall submit a 

separate bid for such plan for the portion within such 

CCA area; and 

ø(ii) the Secretary shall adjust such separate bid (or, 

in the case of an MA local plan that has a service area 

entirely within such CCA area, the plan bid) as may 

be necessary to take into account differences between 

the service area of such plan within the CCA area and 

the entire CCA area and the distribution of plan enrollees of all MA local plans offered within the CCA 

area. 

ø(4) COMPUTATION OF FEE-FOR-SERVICE MARKET SHARE PERCENTAGE.—The Secretary shall determine, for a year and a 

CCA area, the proportion (in this subsection referred to as the 

‘‘fee-for-service market share percentage’’) equal to— 

ø(A) the total number of MA eligible individuals residing 

in such area who during the reference month for the year 

were not enrolled in any MA plan; divided by 

ø(B) the sum of such number and the total number of 

MA eligible individuals residing in such area who during 

such reference month were enrolled in an MA local plan 

described in section 1851(a)(2)(A)(i), 

or, if greater, such proportion determined for individuals nationally. 

ø(5) FEE-FOR-SERVICE AREA-SPECIFIC NON-DRUG AMOUNT.— 

ø(A) IN GENERAL.—For purposes of paragraph (2)(B)(i) 

and subsection (f)(2)(A), subject to subparagraph (C), the 


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term ‘‘fee-for-service area-specific non-drug amount’’ 

means, for a CCA area and a year, the adjusted average 

per capita cost for such area and year involved, determined under section 1876(a)(4) and adjusted as appropriate for the purpose of risk adjustment for benefits under 

the original medicare fee-for-service program option for individuals entitled to benefits under part A and enrolled 

under part B who are not enrolled in an MA plan for the 

year, but adjusted to exclude costs attributable to payments under section 1886(h). 

ø(B) USE OF FULL RISK ADJUSTMENT TO STANDARDIZE

FEE-FOR-SERVICE COSTS TO TYPICAL BENEFICIARY.—In determining the adjusted average per capita cost for an area 

and year under subparagraph (A), such costs shall be adjusted to fully take into account the demographic and 

health status risk factors established under section 

1853(a)(1)(A)(iv) so that such per capita costs reflect the 

average costs for a typical beneficiary residing in the CCA 

area. 

ø(C) INCLUSION OF COSTS OF VA AND DOD MILITARY FA- CILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES.—In 

determining the adjusted average per capita cost under 

subparagraph (A) for a year, such cost shall be adjusted to 

include the Secretary’s estimate, on a per capita basis, of 

the amount of additional payments that would have been 

made in the area involved under this title if individuals 

entitled to benefits under this title had not received services from facilities of the Department of Veterans Affairs 

or the Department of Defense. 

ø(f) PREMIUM ADJUSTMENT.— ø(1) APPLICATION.— ø(A) IN GENERAL.—Except as provided in subparagraph 

(B), in the case of an individual who is enrolled under part 

B, who resides in a CCA area, and who is not enrolled in 

an MA plan under this part, the monthly premium otherwise applied under part B (determined without regard to 

subsections (b), (f), and (i) of section 1839 or any adjustment under this subsection) shall be adjusted in accordance with paragraph (2), but only in the case of premiums 

for months during the period in which the CCA program 

under this section for such area is in effect. 

ø(B) NO PREMIUM ADJUSTMENT FOR SUBSIDY ELIGIBLE

BENEFICIARIES.—No premium adjustment shall be made 

under this subsection for a premium for a month if the individual is determined to be a subsidy eligible individual 

(as defined in section 1860D–14(a)(3)(A)) for the month. 

ø(2) AMOUNT OF ADJUSTMENT.— 

ø(A) IN GENERAL.—Under this paragraph, subject to the 

exemption under paragraph (1)(B) and the limitation 

under subparagraph (B), if the fee-for-service area-specific 

non-drug amount (as defined in section (e)(5)) for a CCA 

area in which an individual resides for a month— 

ø(i) does not exceed the CCA non-drug monthly 

benchmark amount (as determined under subsection 

(e)(1)) for such area and month, the amount of the preVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00668 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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mium for the individual for the month shall be reduced, by an amount equal to 75 percent of the 

amount by which such CCA benchmark exceeds such 

fee-for-service area-specific non-drug amount; or 

ø(ii) exceeds such CCA non-drug benchmark, the 

amount of the premium for the individual for the 

month shall be adjusted to ensure, that— 

ø(I) the sum of the amount of the adjusted premium and the CCA non-drug benchmark for the 

area; is equal to 

ø(II) the sum of the unadjusted premium plus 

the amount of such fee-for-service area-specific 

non-drug amount for the area. 

ø(B) LIMITATION.—In no case shall the actual amount of 

an adjustment under subparagraph (A) for an area and 

month in a year result in an adjustment that exceeds the 

maximum adjustment permitted under subparagraph (C) 

for the area and year, or, if less, the maximum annual adjustment permitted under subparagraph (D) for the area 

and year. 

ø(C) PHASE-IN OF ADJUSTMENT.—The amount of an adjustment under subparagraph (A) for a CCA area and year 

may not exceed the product of the phase-in fraction for the 

year under subsection (d)(3)(B) multiplied by the amount 

of the adjustment otherwise computed under subparagraph 

(A) for the area and year, determined without regard to 

this subparagraph and subparagraph (D). 

ø(D) 5-PERCENT LIMITATION ON ADJUSTMENT.—The 

amount of the adjustment under this subsection for 

months in a year shall not exceed 5 percent of the amount 

of the monthly premium amount determined for months in 

the year under section 1839 without regard to subsections 

(b), (f), and (i) of such section and this subsection.¿ 

PART D—VOLUNTARY PRESCRIPTION DRUG BENEFIT PROGRAM

Subpart 1—Part D Eligible Individuals and Prescription Drug 

Benefits 

ELIGIBILITY, ENROLLMENT, AND INFORMATION

SEC. 1860D–1. (a) * * * 

(b) ENROLLMENT PROCESS FOR PRESCRIPTION DRUG PLANS.— 

(1) ESTABLISHMENT OF PROCESS.— 

(A) * * * 

* * * * * * * 

(C) SPECIAL RULE.—The process established under subparagraph (A) shall include, in the case of a part D eligible 

individual who is a full-benefit dual eligible individual (as 

defined in section 1935(c)(6)) who has failed to enroll in a 

prescription drug plan or an MA–PD plan, for the enrollment in a prescription drug plan that has a monthly beneficiary premium that does not exceed the premium assistance available under section 1860D–14(a)(1)(A)). If there is 

more than one such plan available, the Secretary shall enroll such an individual on a random basis among all such 


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plans in the PDP region or through use of an intelligent assignment process that is designed to maximize the access of 

such individual to necessary prescription drugs while minimizing costs to such individual and to the program under 

this part to the greatest extent possible. In the case the Secretary enrolls such individuals through use of an intelligent 

assignment process, such process shall take into account 

the extent to which prescription drugs necessary for the individual are covered in the case of a PDP sponsor of a prescription drug plan that uses a formulary, the use of prior 

authorization or other restrictions on access to coverage of 

such prescription drugs by such a sponsor, and the overall 

quality of a prescription drug plan as measured by quality 

ratings established by the Secretary. Nothing in the previous sentence shall prevent such an individual from declining or changing such enrollment. 

(D) SPECIAL RULE FOR SUBSIDY ELIGIBLE INDIVIDUALS.— 

The process established under subparagraph (A) shall include, in the case of an individual described in section 

1860D–1(b)(3)(D) who fails to enroll in a prescription drug 

plan or an MA–PD plan during the special enrollment established under such section applicable to such individual, 

the application of the assignment process described in subparagraph (C) to such individual in the same manner as 

such assignment process applies to a part D eligible individual described in such subparagraph (C). Nothing in the 

previous sentence shall prevent an individual described in 

such sentence from declining enrollment in a plan determined appropriate by the Secretary (or in the program 

under this part) or from changing such enrollment. 

* * * * * * * 

(3) ADDITIONAL SPECIAL ENROLLMENT PERIODS.—The Secretary shall establish special enrollment periods, including the 

following: 

(A) * * * 

* * * * * * * 

ø(D) MEDICAID COVERAGE.—In the case of an individual 

(as determined by the Secretary) who is a full-benefit dual 

eligible individual (as defined in section 1935(c)(6)).¿ 

(D) SUBSIDY ELIGIBLE INDIVIDUALS.—In the case of an individual (as determined by the Secretary) who is determined under subparagraph (B) of section 1860D–14(a)(3) to 

be a subsidy eligible individual. 

* * * * * * * 

(F) CHANGE IN FORMULARY RESULTING IN INCREASE IN

COST-SHARING.— (i) IN GENERAL.—Except as provided in clause (ii), in 

the case of an individual enrolled in a prescription 

drug plan (or MA–PD plan) who has been prescribed 

and is using a covered part D drug while so enrolled, 

if the formulary of the plan is materially changed 

(other than at the end of a contract year) so to reduce 


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the coverage (or increase the cost-sharing) of the drug 

under the plan. 

(ii) EXCEPTION.—Clause (i) shall not apply in the 

case that a drug is removed from the formulary of a 

plan because of a recall or withdrawal of the drug 

issued by the Food and Drug Administration, because 

the drug is replaced with a generic drug that is a 

therapeutic equivalent, or because of utilization management applied to— 

(I) a drug whose labeling includes a boxed warning required by the Food and Drug Administration 

under section 210.57(c)(1) of title 21, Code of Federal Regulations (or a successor regulation); or 

(II) a drug required under subsection (c)(2) of 

section 505–1 of the Federal Food, Drug, and Cosmetic Act to have a Risk Evaluation and Management Strategy that includes elements under subsection (f) of such section. 

* * * * * * * 

PRESCRIPTION DRUG BENEFITS

SEC. 1860D–2. (a) * * * 

(b) STANDARD PRESCRIPTION DRUG COVERAGE.—For purposes of 

this part and part C, the term ‘‘standard prescription drug coverage’’ means coverage of covered part D drugs that meets the following requirements: 

(1) * * * 

* * * * * * * 

(3) INITIAL COVERAGE LIMIT.— 

(A) IN GENERAL.—Except as provided in øparagraph (4)¿ 

paragraphs (4) and (7), the coverage has an initial coverage limit on the maximum costs that may be recognized 

for payment purposes (including the annual deductible)— 

(i) * * * 

* * * * * * * 

(4) PROTECTION AGAINST HIGH OUT-OF-POCKET EXPENDI- TURES.— 

(A) * * * 

(B) ANNUAL OUT-OF-POCKET THRESHOLD.— (i) IN GENERAL.—For purposes of this part subject to 

paragraph (7), the ‘‘annual out-of-pocket threshold’’ 

specified in this subparagraph— 

(I) * * * 

* * * * * * * 

(C) APPLICATION.—In applying subparagraph (A)— 

(i) incurred costs shall only include costs incurred 

with respect to covered part D drugs for the annual 

deductible described in paragraph (1), for cost-sharing 

described in paragraph (2), and for amounts for which 

benefits are not provided because of the application of 

the initial coverage limit described in paragraph (3), 

but does not include any costs incurred for covered 


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part D drugs which are not included (or treated as 

being included) in the plan’s formulary; øand¿ 

(ii) øsuch costs shall be treated as incurred only if¿ 

subject to subsection (g)(2)(C), subject to clause (iii), 

such costs shall be treated as incurred only if they are 

paid by the part D eligible individual (or by another 

person, such as a family member, on behalf of the individual)ø, under section 1860D–14, or under a State 

Pharmaceutical Assistance Program¿ and the part D 

eligible individual (or other person) is not reimbursed 

through insurance or otherwise, a group health plan, 

or other third-party payment arrangement (other than 

under such section or such a Program) for such 

costsø.¿; and 

(iii) such costs shall be treated as incurred and shall 

not be considered to be reimbursed under clause (ii) if 

such costs are borne or paid— 

(I) under section 1860D–14; 

(II) under a State Pharmaceutical Assistance 

Program; 

(III) by the Indian Health Service, an Indian 

tribe or tribal organization, or an urban Indian organization (as defined in section 4 of the Indian 

Health Care Improvement Act); or 

(IV) under an AIDS Drug Assistance Program 

under part B of title XXVI of the Public Health 

Service Act. 

* * * * * * * 

(7) PHASED-IN ELIMINATION OF COVERAGE GAP.— (A) IN GENERAL.—For each year beginning with 2011, the 

Secretary shall consistent with this paragraph progressively 

increase the initial coverage limit (described in subsection 

(b)(3)) and decrease the annual out-of-pocket threshold from 

the amounts otherwise computed until there is a continuation of coverage from the initial coverage limit for expenditures incurred through the total amount of expenditures at 

which benefits are available under paragraph (4). 

(B) INCREASE IN INITIAL COVERAGE LIMIT.—For a year beginning with 2011, the initial coverage limit otherwise computed without regard to this paragraph shall be increased 

by 1⁄2 of the cumulative phase-in percentage (as defined in 

subparagraph (D)(ii) for the year) times the out-of-pocket 

gap amount (as defined in subparagraph (E)) for the year. 

(C) DECREASE IN ANNUAL OUT-OF-POCKET THRESHOLD.— For a year beginning with 2011, the annual out-of-pocket 

threshold otherwise computed without regard to this paragraph shall be decreased by 1⁄2 of the cumulative phase-in 

percentage of the out-of-pocket gap amount for the year 

multiplied by 1.75. 

(D) PHASE–IN.—For purposes of this paragraph: 

(i) ANNUAL PHASE-IN PERCENTAGE.—The term ‘‘annual phase-in percentage’’ means— 

(I) for 2011, 13 percent; 

(II) for 2012, 2013, 2014, and 2015, 5 percent; 

(III) for 2016 through 2018, 7.5 percent; and 


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(IV) for 2019 and each subsequent year, 10 percent. 

(ii) CUMULATIVE PHASE-IN PERCENTAGE.—The term 

‘‘cumulative phase-in percentage’’ means for a year the 

sum of the annual phase-in percentage for the year and 

the annual phase-in percentages for each previous year 

beginning with 2011, but in no case more than 100 

percent. 

(E) OUT-OF-POCKET GAP AMOUNT.—For purposes of this 

paragraph, the term ‘‘out-of-pocket gap amount’’ means for 

a year the amount by which— 

(i) the annual out-of-pocket threshold specified in 

paragraph (4)(B) for the year (as determined as if this 

paragraph did not apply), exceeds 

(ii) the sum of— 

(I) the annual deductible under paragraph (1) 

for the year; and 

(II) 1⁄4 of the amount by which the initial coverage limit under paragraph (3) for the year (as 

determined as if this paragraph did not apply) exceeds such annual deductible. 

* * * * * * * 

(e) COVERED PART D DRUG DEFINED.— (1) IN GENERAL.—Except as provided in this subsection and 

subsections (f) and (g), for purposes of this part, the term ‘‘covered part D drug’’ means— 

(A) * * * 

(B) a biological product described in clauses (i) through 

(iii) of subparagraph (B) of such section or insulin described in subparagraph (C) of such section and medical 

supplies associated with the injection of insulin (as defined 

in regulations of the Secretary), 

and øsuch term includes a vaccine licensed under section 351 

of the Public Health Service Act (and, for vaccines administered on or after January 1, 2008, its administration) and¿ any 

use of a covered part D drug for a medically accepted indication (as defined in paragraph (4)). 

* * * * * * * 

(f) PRESCRIPTION DRUG REBATE AGREEMENT FOR FULL-BENEFIT

DUAL ELIGIBLE INDIVIDUALS.— 

(1) IN GENERAL.—In this part, the term ‘‘covered part D drug’’ 

does not include any drug or biologic that is manufactured by 

a manufacturer that has not entered into and have in effect a 

rebate agreement described in paragraph (2). 

(2) REBATE AGREEMENT.—A rebate agreement under this subsection shall require the manufacturer to provide to the Secretary a rebate for each rebate period (as defined in paragraph 

(6)(B)) ending after December 31, 2010, in the amount specified 

in paragraph (3) for any covered part D drug of the manufacturer dispensed after December 31, 2010, to any full-benefit 

dual eligible individual (as defined in paragraph (6)(A)) for 

which payment was made by a PDP sponsor under part D or 

a MA organization under part C for such period. Such rebate 

shall be paid by the manufacturer to the Secretary not later 


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than 30 days after the date of receipt of the information described in section 1860D–12(b)(7), including as such section is 

applied under section 1857(f)(3). 

(3) REBATE FOR FULL-BENEFIT DUAL ELIGIBLE MEDICARE DRUG

PLAN ENROLLEES.— (A) IN GENERAL.—The amount of the rebate specified 

under this paragraph for a manufacturer for a rebate period, with respect to each dosage form and strength of any 

covered part D drug provided by such manufacturer and 

dispensed to a full-benefit dual eligible individual, shall be 

equal to the product of— 

(i) the total number of units of such dosage form and 

strength of the drug so provided and dispensed for 

which payment was made by a PDP sponsor under 

part D or a MA organization under part C for the rebate period (as reported under section 1860D–12(b)(7), 

including as such section is applied under section 

1857(f)(3)); and 

(ii) the amount (if any) by which— 

(I) the Medicaid rebate amount (as defined in 

subparagraph (B)) for such form, strength, and period, exceeds 

(II) the average Medicare drug program full-benefit dual eligible rebate amount (as defined in subparagraph (C)) for such form, strength, and period. 

(B) MEDICAID REBATE AMOUNT.—For purposes of this 

paragraph, the term ‘‘Medicaid rebate amount’’ means, 

with respect to each dosage form and strength of a covered 

part D drug provided by the manufacturer for a rebate period— 

(i) in the case of a single source drug or an innovator 

multiple source drug, the amount specified in paragraph (1)(A)(ii) of section 1927(b) plus the amount, if 

any, specified in paragraph (2)(A)(ii) of such section, 

for such form, strength, and period; or 

(ii) in the case of any other covered outpatient drug, 

the amount specified in paragraph (3)(A)(i) of such section for such form, strength, and period. 

(C) AVERAGE MEDICARE DRUG PROGRAM FULL-BENEFIT

DUAL ELIGIBLE REBATE AMOUNT.—For purposes of this subsection, the term ‘‘average Medicare drug program full-benefit dual eligible rebate amount’’ means, with respect to 

each dosage form and strength of a covered part D drug 

provided by a manufacturer for a rebate period, the sum, 

for all PDP sponsors under part D and MA organizations 

administering a MA–PD plan under part C, of— 

(i) the product, for each such sponsor or organization, of— 

(I) the sum of all rebates, discounts, or other 

price concessions (not taking into account any rebate provided under paragraph (2) for such dosage 

form and strength of the drug dispensed, calculated on a per-unit basis, but only to the extent 

that any such rebate, discount, or other price conVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00674 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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cession applies equally to drugs dispensed to fullbenefit dual eligible Medicare drug plan enrollees 

and drugs dispensed to PDP and MA–PD enrollees 

who are not full-benefit dual eligible individuals; 

and 

(II) the number of the units of such dosage and 

strength of the drug dispensed during the rebate 

period to full-benefit dual eligible individuals enrolled in the prescription drug plans administered 

by the PDP sponsor or the MA–PD plans administered by the MA–PD organization; divided by 

(ii) the total number of units of such dosage and 

strength of the drug dispensed during the rebate period 

to full-benefit dual eligible individuals enrolled in all 

prescription drug plans administered by PDP sponsors 

and all MA–PD plans administered by MA–PD organizations. 

(4) LENGTH OF AGREEMENT.—The provisions of paragraph (4) 

of section 1927(b) (other than clauses (iv) and (v) of subparagraph (B)) shall apply to rebate agreements under this subsection in the same manner as such paragraph applies to a rebate agreement under such section. 

(5) OTHER TERMS AND CONDITIONS.—The Secretary shall establish other terms and conditions of the rebate agreement 

under this subsection, including terms and conditions related to 

compliance, that are consistent with this subsection. 

(6) DEFINITIONS.—In this subsection and section 1860D– 

12(b)(7): 

(A) FULL-BENEFIT DUAL ELIGIBLE INDIVIDUAL.—The term 

‘‘full-benefit dual eligible individual’’ has the meaning 

given such term in section 1935(c)(6). 

(B) REBATE PERIOD.—The term ‘‘rebate period’’ has the 

meaning given such term in section 1927(k)(8). 

(g) REQUIREMENT FOR MANUFACTURER DISCOUNT AGREEMENT

FOR CERTAIN QUALIFYING DRUGS.— (1) IN GENERAL.—In this part, the term ‘‘covered part D drug’’ 

does not include any drug or biologic that is manufactured by 

a manufacturer that has not entered into and have in effect for 

all qualifying drugs (as defined in paragraph (5)(A)) a discount 

agreement described in paragraph (2). 

(2) DISCOUNT AGREEMENT.— 

(A) PERIODIC DISCOUNTS.—A discount agreement under 

this paragraph shall require the manufacturer involved to 

provide, to each PDP sponsor with respect to a prescription 

drug plan or each MA organization with respect to each 

MA–PD plan, a discount in an amount specified in paragraph (3) for qualifying drugs (as defined in paragraph 

(5)(A)) of the manufacturer dispensed to a qualifying enrollee after December 31, 2010, insofar as the individual is 

in the original gap in coverage (as defined in paragraph 

(5)(E)). 

(B) DISCOUNT AGREEMENT.—Insofar as not inconsistent 

with this subsection, the Secretary shall establish terms 

and conditions of such agreement, including terms and 

conditions relating to compliance, similar to the terms and 


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670 

conditions for rebate agreements under paragraphs (2), (3), 

and (4) of section 1927(b), except that— 

(i) discounts shall be applied under this subsection to 

prescription drug plans and MA–PD plans instead of 

State plans under title XIX; 

(ii) PDP sponsors and MA organizations shall be responsible, instead of States, for provision of necessary 

utilization information to drug manufacturers; and 

(iii) sponsors and MA organizations shall be responsible for reporting information on drug-component negotiated price, instead of other manufacturer prices. 

(C) COUNTING DISCOUNT TOWARD TRUE OUT-OF-POCKET

COSTS.—Under the discount agreement, in applying subsection (b)(4), with regard to subparagraph (C)(i) of such 

subsection, if a qualified enrollee purchases the qualified 

drug insofar as the enrollee is in an actual gap of coverage 

(as defined in paragraph (5)(D)), the amount of the discount under the agreement shall be treated and counted as 

costs incurred by the plan enrollee. 

(3) DISCOUNT AMOUNT.—The amount of the discount specified 

in this paragraph for a discount period for a plan is equal to 

50 percent of the amount of the drug-component negotiated 

price (as defined in paragraph (5)(C)) for qualifying drugs for 

the period involved. 

(4) ADDITIONAL TERMS.—In the case of a discount provided 

under this subsection with respect to a prescription drug plan 

offered by a PDP sponsor or an MA–PD plan offered by an MA 

organization, if a qualified enrollee purchases the qualified 

drug— 

(A) insofar as the enrollee is in an actual gap of coverage 

(as defined in paragraph (5)(D)), the sponsor or plan shall 

provide the discount to the enrollee at the time the enrollee 

pays for the drug; and 

(B) insofar as the enrollee is in the portion of the original 

gap in coverage (as defined in paragraph (5)(E)) that is not 

in the actual gap in coverage, the discount shall not be applied against the negotiated price (as defined in subsection 

(d)(1)(B)) for the purpose of calculating the beneficiary payment. 

(5) DEFINITIONS.—In this subsection: 

(A) QUALIFYING DRUG.—The term ‘‘qualifying drug’’ 

means, with respect to a prescription drug plan or MA–PD 

plan, a drug or biological product that— 

(i)(I) is a drug produced or distributed under an 

original new drug application approved by the Food 

and Drug Administration, including a drug product 

marketed by any cross-licensed producers or distributors operating under the new drug application; 

(II) is a drug that was originally marketed under an 

original new drug application approved by the Food 

and Drug Administration; or 

(III) is a biological product as approved under Section 351(a) of the Public Health Services Act; 

(ii) is covered under the formulary of the plan; and 


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671 

(iii) is dispensed to an individual who is in the original gap in coverage. 

(B) QUALIFYING ENROLLEE.—The term ‘‘qualifying enrollee’’ means an individual enrolled in a prescription drug 

plan or MA–PD plan other than such an individual who is 

a subsidy-eligible individual (as defined in section 1860D– 

14(a)(3)). 

(C) DRUG-COMPONENT NEGOTIATED PRICE.—The term 

‘‘drug-component negotiated price’’ means, with respect to a 

qualifying drug, the negotiated price (as defined in subsection (d)(1)(B)), as determined without regard to any dispensing fee, of the drug under the prescription drug plan 

or MA–PD plan involved. 

(D) ACTUAL GAP IN COVERAGE.—The term ‘‘actual gap in 

coverage’’ means the gap in prescription drug coverage that 

occurs between the initial coverage limit (as modified under 

subparagraph (B) of subsection (b)(7)) and the annual outof-pocket threshold (as modified under subparagraph (C) of 

such subsection). 

(E) ORIGINAL GAP IN COVERAGE.—The term ‘‘original in 

gap coverage’’ means the gap in prescription drug coverage 

that would occur between the initial coverage limit (described in subsection (b)(3)) and the out-of-pocket threshold 

(as defined in subsection (b)(4))(B) if subsection (b)(7) did 

not apply. 

* * * * * * * 

Subpart 2—Prescription Drug Plans; PDP Sponsors; Financing 

PDP REGIONS; SUBMISSION OF BIDS; PLAN APPROVAL

SEC. 1860D–11. (a) * * * 

* * * * * * * 

(d) REVIEW OF INFORMATION AND NEGOTIATION.— 

(1) * * * 

* * * * * * * 

(3) REJECTION OF BIDS.—Paragraph (5)(C) of section 1854(a) 

shall apply with respect to bids under this section in the same 

manner as it applies to bids by an MA organization under such 

section. 

* * * * * * * 

REQUIREMENTS FOR AND CONTRACTS WITH PRESCRIPTION DRUG PLAN

(PDP) SPONSORS

SEC. 1860D–12. (a) * * * 

(b) CONTRACT REQUIREMENTS.— (1) * * * 

* * * * * * * 

ø(5) SUBMISSION OF CLAIMS BY PHARMACIES LOCATED IN OR

CONTRACTING WITH LONG-TERM CARE FACILITIES.—Each contract entered into with a PDP sponsor under this part with respect to a prescription drug plan offered by such sponsor shall 

provide that a pharmacy located in, or having a contract with, 


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a long-term care facility shall have not less than 30 days (but 

not more than 90 days) to submit claims to the sponsor for reimbursement under the plan.¿ 

ø(6)¿ (5) REGULAR UPDATE OF PRESCRIPTION DRUG PRICING

STANDARD.—If the PDP sponsor of a prescription drug plan 

uses a standard for reimbursement of pharmacies based on the 

cost of a drug, each contract entered into with such sponsor 

under this part with respect to the plan shall provide that the 

sponsor shall update such standard not less frequently than 

once every 7 days, beginning with an initial update on January 

1 of each year, to accurately reflect the market price of acquiring the drug. 

(6) REPORTING REQUIREMENT FOR THE DETERMINATION AND

PAYMENT OF REBATES BY MANUFACTURERS RELATED TO REBATE

FOR FULL-BENEFIT DUAL ELIGIBLE MEDICARE DRUG PLAN ENROLLEES.— 

(A) IN GENERAL.—For purposes of the rebate under section 1860D–2(f) for contract years beginning on or after 

January 1, 2011, each contract entered into with a PDP 

sponsor under this part with respect to a prescription drug 

plan shall require that the sponsor comply with subparagraphs (B) and (C). 

(B) REPORT FORM AND CONTENTS.—Not later than 60 

days after the end of each rebate period (as defined in section 1860D–2(f)(6)(B)) within such a contract year to which 

such section applies, a PDP sponsor of a prescription drug 

plan under this part shall report to each manufacturer— 

(i) information (by National Drug Code number) on 

the total number of units of each dosage, form, and 

strength of each drug of such manufacturer dispensed 

to full-benefit dual eligible Medicare drug plan enrollees under any prescription drug plan operated by the 

PDP sponsor during the rebate period; 

(ii) information on the price discounts, price concessions, and rebates for such drugs for such form, 

strength, and period; 

(iii) information on the extent to which such price 

discounts, price concessions, and rebates apply equally 

to full-benefit dual eligible Medicare drug plan enrollees and PDP enrollees who are not full-benefit dual eligible Medicare drug plan enrollees; and 

(iv) any additional information that the Secretary 

determines is necessary to enable the Secretary to calculate the average Medicare drug program full-benefit 

dual eligible rebate amount (as defined in paragraph 

(3)(C) of such section), and to determine the amount of 

the rebate required under this section, for such form, 

strength, and period. 

Such report shall be in a form consistent with a standard 

reporting format established by the Secretary. 

(C) SUBMISSION TO SECRETARY.—Each PDP sponsor 

shall promptly transmit a copy of the information reported 

under subparagraph (B) to the Secretary for the purpose of 

audit oversight and evaluation. 


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(D) CONFIDENTIALITY OF INFORMATION.—The provisions 

of subparagraph (D) of section 1927(b)(3), relating to confidentiality of information, shall apply to information reported by PDP sponsors under this paragraph in the same 

manner that such provisions apply to information disclosed 

by manufacturers or wholesalers under such section, except— 

(i) that any reference to ‘‘this section’’ in clause (i) of 

such subparagraph shall be treated as being a reference to this section; 

(ii) the reference to the Director of the Congressional 

Budget Office in clause (iii) of such subparagraph shall 

be treated as including a reference to the Medicare 

Payment Advisory Commission; and 

(iii) clause (iv) of such subparagraph shall not apply. 

(E) OVERSIGHT.—Information reported under this paragraph may be used by the Inspector General of the Department of Health and Human Services for the statutorily authorized purposes of audit, investigation, and evaluations. 

(F) PENALTIES FOR FAILURE TO PROVIDE TIMELY INFORMATION AND PROVISION OF FALSE INFORMATION.—In the 

case of a PDP sponsor— 

(i) that fails to provide information required under 

subparagraph (B) on a timely basis, the sponsor is subject to a civil money penalty in the amount of $10,000 

for each day in which such information has not been 

provided; or 

(ii) that knowingly (as defined in section 1128A(i)) 

provides false information under such subparagraph, 

the sponsor is subject to a civil money penalty in an 

amount not to exceed $100,000 for each item of false 

information. 

Such civil money penalties are in addition to other penalties as may be prescribed by law. The provisions of section 1128A (other than subsections (a) and (b)) shall apply 

to a civil money penalty under this subparagraph in the 

same manner as such provisions apply to a penalty or proceeding under section 1128A(a). 

* * * * * * * 

PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME

INDIVIDUALS

SEC. 1860D–14. (a) INCOME-RELATED SUBSIDIES FOR INDIVIDUALS

WITH INCOME UP TO 150 PERCENT OF POVERTY LINE.— 

(1) INDIVIDUALS WITH INCOME BELOW 135 PERCENT OF POVERTY LINE.—In the case of a subsidy eligible individual (as defined in paragraph (3)) who is determined to have income that 

is below 135 percent of the poverty line applicable to a family 

of the size involved and who meets the resources requirement 

described in paragraph (3)(D) (or, beginning with 2012, paragraph (3)(E)) or who is covered under this paragraph under 

paragraph (3)(B)(i), the individual is entitled under this section 

to the following: 


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(A) * * * 

* * * * * * * 

(D) REDUCTION IN COST-SHARING BELOW OUT-OF-POCKET

THRESHOLD.— 

(i) øINSTITUTIONALIZED INDIVIDUALS.—In¿ ELIMINATION OF COST-SHARING FOR CERTAIN FULL-BENEFIT

DUAL ELIGIBLE INDIVIDUALS.— 

(I) INSTITUTIONALIZED INDIVIDUALS.—In the 

case of an individual who is a full-benefit dual eligible individual and who is an institutionalized individual or couple (as defined in section 

1902(q)(1)(B)), the elimination of any beneficiary 

coinsurance described in section 1860D–2(b)(2) 

(for all amounts through the total amount of expenditures at which benefits are available under 

section 1860D–2(b)(4)). 

(II) CERTAIN OTHER INDIVIDUALS.—In the case of 

an individual who is a full-benefit dual eligible individual and with respect to whom there has been 

a determination that but for the provision of home 

and community based care (whether under section 

1915, 1932, or under a waiver under section 1115) 

the individual would require the level of care provided in a hospital or a nursing facility or intermediate care facility for the mentally retarded the 

cost of which could be reimbursed under the State 

plan under title XIX, the elimination of any beneficiary coinsurance described in section 1860D– 

2(b)(2) (for all amounts through the total amount 

of expenditures at which benefits are available 

under section 1860D–2(b)(4)). 

* * * * * * * 

(3) DETERMINATION OF ELIGIBILITY.— 

(A) * * * 

* * * * * * * 

(E) ALTERNATIVE RESOURCE STANDARD.— 

(i) IN GENERAL.—The resources requirement of this 

subparagraph is that an individual’s resources (as determined under section 1613 for purposes of the supplemental security income program subject to the life 

insurance policy exclusion provided under subparagraph (G)) do not exceed— 

(I) for 2006, $10,000 (or $20,000 in the case of 

the combined value of the individual’s assets or 

resources and the assets or resources of the individual’s spouse); øand¿ 

(II) for a subsequent year (before 2012) the dollar amounts specified in this subclause (or subclause (I)) for the previous year increased by the 

annual percentage increase in the consumer price 

index (all items; U.S. city average) as of September of such previous yearø.¿; 


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(III) for 2012, $17,000 (or $34,000 in the case of 

the combined value of the individual’s assets or resources and the assets or resources of the individual’s spouse); and 

(IV) for a subsequent year, the dollar amounts 

specified in this subclause (or subclause (III)) for 

the previous year increased by the annual percentage increase in the consumer price index (all items; 

U.S. city average) as of September of such previous 

year. 

Any dollar amount established under subclause (II) or 

(IV) that is not a multiple of $10 shall be rounded to 

the nearest multiple of $10. 

* * * * * * * 

ø(iii) DOCUMENTATION AND SAFEGUARDS.—Under 

such process— 

ø(I) the application form shall consist of an attestation under penalty of perjury regarding the 

level of assets or resources (or combined assets 

and resources in the case of a married part D eligible individual) and valuations of general classes 

of assets or resources; 

ø(II) such form shall be accompanied by copies 

of recent statements (if any) from financial institutions in support of the application; and 

ø(III) matters attested to in the application 

shall be subject to appropriate methods of 

verification.¿ 

(iii) CERTIFICATION OF INCOME AND RESOURCES.— 

For purposes of applying this section— 

(I) an individual shall be permitted to apply on 

the basis of self-certification of income and resources; and 

(II) matters attested to in the application shall 

be subject to appropriate methods of verification 

without the need of the individual to provide additional documentation, except in extraordinary situations as determined by the Commissioner. 

* * * * * * * 

(b) PREMIUM SUBSIDY AMOUNT.— 

(1) * * * 

(2) LOW-INCOME BENCHMARK PREMIUM AMOUNT DEFINED.— 

(A) * * * 

(B) PREMIUM AMOUNTS DESCRIBED.—The premium 

amounts described in this subparagraph are, in the case 

of— 

(i) * * * 

* * * * * * * 

(iii) an MA–PD plan, the portion of the MA monthly 

prescription drug beneficiary premium that is attributable to basic prescription drug benefits (described in 

section 1852(a)(6)(B)(ii)) before the application of the 


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monthly rebate computed under section 1854(b)(1)(C)(i) 

for that plan and year involved. 

* * * * * * * 

MEDICARE PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL

SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND

SEC. 1860D–16. (a) * * * 

* * * * * * * 

(c) DEPOSITS INTO ACCOUNT.— 

(1) * * * 

* * * * * * * 

(6) REBATE FOR FULL-BENEFIT DUAL ELIGIBLE MEDICARE DRUG

PLAN ENROLLEES.—Amounts paid under a rebate agreement 

under section 1860D–2(f) shall be deposited into the Account 

and shall be used to pay for all or part of the gradual elimination of the coverage gap under section 1860D–2(b)(7). 

* * * * * * * 

PART E—MISCELLANEOUS PROVISIONS

DEFINITIONS OF SERVICES, INSTITUTIONS, ETC. 

SEC. 1861. For purposes of this title— 

(a) * * * 

* * * * * * * 

(s) MEDICAL AND OTHER HEALTH SERVICES.—The term ‘‘medical 

and other health services’’ means any of the following items or 

services: 

(1) * * * 

(2)(A) * * * 

* * * * * * * 

(DD) items and services furnished under an intensive cardiac 

rehabilitation program (as defined in subsection (eee)(4)); 

øand¿ 

(EE) kidney disease education services (as defined in subsection (ggg)); 

(FF) advance care planning consultation (as defined in subsection (hhh)(1)); 

(GG) marriage and family therapist services (as defined in 

subsection (jjj)); and 

(HH) mental health counselor services (as defined in subsection (kkk)(1)); 

* * * * * * * 

ø(10)(A) pneumococcal vaccine and its administration and, 

subject to section 4071(b) of the Omnibus Budget Reconciliation Act of 1987, influenza vaccine and its administration; 

and 

ø(B) hepatitis B vaccine and its administration, furnished to 

an individual who is at high or intermediate risk of contracting 

hepatitis B (as determined by the Secretary under regulations);¿ 


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677 

(10) federally recommended vaccines (as defined in subsection 

(lll)) and their respective administration; 

* * * * * * * 

(aa) RURAL HEALTH CLINIC SERVICES AND FEDERALLY QUALIFIED

HEALTH CENTER SERVICES.—(1) The term ‘‘rural health clinic services’’ means — 

(A) * * * 

(B) such services furnished by a physician assistant or a 

nurse practitioner (as defined in paragraph (5)), by a clinical 

psychologist (as defined by the Secretary) øor by a clinical social worker (as defined in subsection (hh)(1)),¿, by a clinical social worker (as defined in subsection (hh)(1)), by a marriage 

and family therapist (as defined in subsection (jjj)(2)), or a 

mental health counselor (as defined in subsection (kkk)(2)), and 

such services and supplies furnished as an incident to his service as would otherwise be covered if furnished by a physician 

or as an incident to a physician’s service, and 

* * * * * * * 

(3) The term ‘‘Federally qualified health center services’’ means— 

ø(A) services of the type described in subparagraphs (A) 

through (C) of paragraph (1) and services described in subsections (qq) and (vv); and¿ 

(A) services of the type described subparagraphs (A) through 

(C) of paragraph (1) and services described in section 1861(iii); 

and 

* * * * * * * 

(hh) CLINICAL SOCIAL WORKER; CLINICAL SOCIAL WORKER SERVICES.—(1) * * * 

(2) The term ‘‘clinical social worker services’’ means services performed by a clinical social worker (as defined in paragraph (1)) for 

the diagnosis and treatment of mental illnesses (other than services furnished to an inpatient of a hospital øand other than services furnished to an inpatient of a skilled nursing facility which the 

facility is required to provide as a requirement for participation¿) 

which the clinical social worker is legally authorized to perform 

under State law (or the State regulatory mechanism provided by 

State law) of the State in which such services are performed as 

would otherwise be covered if furnished by a physician or as an incident to a physician’s professional service. 

* * * * * * * 

(ww) INITIAL PREVENTIVE PHYSICAL EXAMINATION.—(1) * * * 

(2) The screening and other preventive services described in this 

paragraph include the following: 

(A) øPneumococcal, influenza, and hepatitis B vaccine and 

administration¿ Federally recommended vaccines (as defined in 

subsection (lll)) and their respective administration under subsection (s)(10). 

* * * * * * * 

Advance Care Planning Consultation 

(hhh)(1) Subject to paragraphs (3) and (4), the term ‘‘advance care 

planning consultation’’ means a consultation between the individual 


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and a practitioner described in paragraph (2) regarding advance 

care planning, if, subject to paragraph (3), the individual involved 

has not had such a consultation within the last 5 years. Such consultation shall include the following: 

(A) An explanation by the practitioner of advance care planning, including key questions and considerations, important 

steps, and suggested people to talk to. 

(B) An explanation by the practitioner of advance directives, 

including living wills and durable powers of attorney, and their 

uses. 

(C) An explanation by the practitioner of the role and responsibilities of a health care proxy. 

(D) The provision by the practitioner of a list of national and 

State-specific resources to assist consumers and their families 

with advance care planning, including the national toll-free 

hotline, the advance care planning clearinghouses, and State 

legal service organizations (including those funded through the 

Older Americans Act of 1965). 

(E) An explanation by the practitioner of the continuum of 

end-of-life services and supports available, including palliative 

care and hospice, and benefits for such services and supports 

that are available under this title. 

(F)(i) Subject to clause (ii), an explanation of orders regarding life sustaining treatment or similar orders, which shall include— 

(I) the reasons why the development of such an order 

is beneficial to the individual and the individual’s family and the reasons why such an order should be updated periodically as the health of the individual 

changes; 

(II) the information needed for an individual or legal 

surrogate to make informed decisions regarding the 

completion of such an order; and 

(III) the identification of resources that an individual 

may use to determine the requirements of the State in 

which such individual resides so that the treatment 

wishes of that individual will be carried out if the individual is unable to communicate those wishes, including requirements regarding the designation of a surrogate decisionmaker (also known as a health care 

proxy). 

(ii) The Secretary shall limit the requirement for explanations 

under clause (i) to consultations furnished in a State— 

(I) in which all legal barriers have been addressed for enabling orders for life sustaining treatment to constitute a 

set of medical orders respected across all care settings; and 

(II) that has in effect a program for orders for life sustaining treatment described in clause (iii). 

(iii) A program for orders for life sustaining treatment for a 

States described in this clause is a program that— 

(I) ensures such orders are standardized and uniquely 

identifiable throughout the State; 

(II) distributes or makes accessible such orders to physicians and other health professionals that (acting within the 


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scope of the professional’s authority under State law) may 

sign orders for life sustaining treatment; 

(III) provides training for health care professionals across 

the continuum of care about the goals and use of orders for 

life sustaining treatment; and 

(IV) is guided by a coalition of stakeholders includes representatives from emergency medical services, emergency 

department physicians or nurses, state long-term care association, state medical association, state surveyors, agency 

responsible for senior services, state department of health, 

state hospital association, home health association, state 

bar association, and state hospice association. 

(2) A practitioner described in this paragraph is— 

(A) a physician (as defined in subsection (r)(1)); and 

(B) a nurse practitioner or physician assistant who has the 

authority under State law to sign orders for life sustaining 

treatments. 

(3)(A) An initial preventive physical examination under subsection 

(WW), including any related discussion during such examination, 

shall not be considered an advance care planning consultation for 

purposes of applying the 5-year limitation under paragraph (1). 

(B) An advance care planning consultation with respect to an individual may be conducted more frequently than provided under 

paragraph (1) if there is a significant change in the health condition 

of the individual, including diagnosis of a chronic, progressive, lifelimiting disease, a life-threatening or terminal diagnosis or lifethreatening injury, or upon admission to a skilled nursing facility, 

a long-term care facility (as defined by the Secretary), or a hospice 

program. 

(4) A consultation under this subsection may include the formulation of an order regarding life sustaining treatment or a similar 

order. 

(5)(A) For purposes of this section, the term ‘‘order regarding life 

sustaining treatment’’ means, with respect to an individual, an actionable medical order relating to the treatment of that individual 

that— 

(i) is signed and dated by a physician (as defined in subsection (r)(1)) or another health care professional (as specified by the Secretary and who is acting within the scope of 

the professional’s authority under State law in signing such 

an order, including a nurse practitioner or physician assistant) and is in a form that permits it to stay with the individual and be followed by health care professionals and 

providers across the continuum of care; 

(ii) effectively communicates the individual’s preferences 

regarding life sustaining treatment, including an indication of the treatment and care desired by the individual; 

(iii) is uniquely identifiable and standardized within a 

given locality, region, or State (as identified by the Secretary); and 

(iv) may incorporate any advance directive (as defined in 

section 1866(f)(3)) if executed by the individual. 

(B) The level of treatment indicated under subparagraph (A)(ii) 

may range from an indication for full treatment to an indication to 


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limit some or all or specified interventions. Such indicated levels of 

treatment may include indications respecting, among other items— 

(i) the intensity of medical intervention if the patient is pulse 

less, apneic, or has serious cardiac or pulmonary problems; 

(ii) the individual’s desire regarding transfer to a hospital or 

remaining at the current care setting; 

(iii) the use of antibiotics; and 

(iv) the use of artificially administered nutrition and hydration. 

Medicare Covered Preventive Services 

(iii)(1) Subject to the succeeding provisions of this subsection, the 

term ‘‘Medicare covered preventive services’’ means the following: 

(A) Prostate cancer screening tests (as defined in subsection 

(oo)). 

(B) Colorectal cancer screening tests (as defined in subsection 

(pp). 

(C) Diabetes outpatient self-management training services (as 

defined in subsection (qq)). 

(D) Screening for glaucoma for certain individuals (as described in subsection (s)(2)(U)). 

(E) Medical nutrition therapy services for certain individuals 

(as described in subsection (s)(2)(V)). 

(F) An initial preventive physical examination (as defined in 

subsection (ww)). 

(G) Cardiovascular screening blood tests (as defined in subsection (xx)(1)). 

(H) Diabetes screening tests (as defined in subsection (yy)). 

(I) Ultrasound screening for abdominal aortic aneurysm for 

certain individuals (as described in subsection (s)(2)(AA)). 

(J) Federally recommended vaccines (as defined in subsection 

(lll)) and their respective administration. 

(K) Screening mammography (as defined in subsection (jj)). 

(L) Screening pap smear and screening pelvic exam (as defined in subsection (nn)). 

(M) Bone mass measurement (as defined in subsection (rr)). 

(N) Kidney disease education services (as defined in subsection (ggg)). 

(O) Additional preventive services (as defined in subsection 

(ddd)). 

(2) With respect to specific Medicare covered preventive services, 

the limitations and conditions described in the provisions referenced 

in paragraph (1) with respect to such services shall apply. 

Marriage and Family Therapist Services 

(jjj)(1) The term ‘‘marriage and family therapist services’’ means 

services performed by a marriage and family therapist (as defined 

in paragraph (2)) for the diagnosis and treatment of mental illnesses, which the marriage and family therapist is legally authorized to perform under State law (or the State regulatory mechanism 

provided by State law) of the State in which such services are performed, as would otherwise be covered if furnished by a physician 

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cility or other provider charges or is paid any amounts with respect 

to the furnishing of such services. 

(2) The term ‘‘marriage and family therapist’’ means an individual who— 

(A) possesses a master’s or doctoral degree which qualifies for 

licensure or certification as a marriage and family therapist 

pursuant to State law; 

(B) after obtaining such degree has performed at least 2 years 

of clinical supervised experience in marriage and family therapy; and 

(C) is licensed or certified as a marriage and family therapist 

in the State in which marriage and family therapist services 

are performed. 

Mental Health Counselor Services 

(kkk)(1) The term ‘‘mental health counselor services’’ means services performed by a mental health counselor (as defined in paragraph (2)) for the diagnosis and treatment of mental illnesses which 

the mental health counselor is legally authorized to perform under 

State law (or the State regulatory mechanism provided by the State 

law) of the State in which such services are performed, as would 

otherwise be covered if furnished by a physician or as incident to 

a physician’s professional service, but only if no facility or other provider charges or is paid any amounts with respect to the furnishing 

of such services. 

(2) The term ‘‘mental health counselor’’ means an individual 

who— 

(A) possesses a master’s or doctor’s degree which qualifies the 

individual for licensure or certification for the practice of mental health counseling in the State in which the services are performed; 

(B) after obtaining such a degree has performed at least 2 

years of supervised mental health counselor practice; and 

(C) is licensed or certified as a mental health counselor or 

professional counselor by the State in which the services are 

performed. 

Federally Recommended Vaccines 

(lll) The term ‘‘federally recommended vaccine’’ means an approved vaccine recommended by the Advisory Committee on Immunization Practices (an advisory committee established by the Secretary, acting through the Director of the Centers for Disease Control and Prevention). 

EXCLUSIONS FROM COVERAGE AND MEDICARE AS SECONDARY PAYER

SEC. 1862. (a) Notwithstanding any other provision of this title, 

no payment may be made under part A or part B for any expenses 

incurred for items or services— 

(1)(A) * * * 

* * * * * * * 

(N) in the case of ultrasound screening for abdominal aortic 

aneurysm which is performed more frequently than is provided 

for under section 1861(s)(2)(AA), øand¿ 


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(O) in the case of kidney disease education services (as defined in paragraph (1) of section 1861(ggg)), which are furnished in excess of the number of sessions covered under paragraph (4) of such sectionø;¿, and 

(P) in the case of advance care planning consultations (as defined in section 1861(hhh)(1)), which are performed more frequently than is covered under such section; 

* * * * * * * 

(7) where such expenses are for routine physical checkups, 

eyeglasses (other than eyewear described in section 1861(s)(8)) 

or eye examinations for the purpose of prescribing, fitting, or 

changing eyeglasses, procedures performed (during the course 

of any eye examination) to determine the refractive state of the 

eyes, hearing aids or examinations therefor, or immunizations 

(except as otherwise allowed under section 1861(s)(10) and subparagraph (B), (F), (G), (H), øor (K)¿ (K), or (P) of paragraph 

(1)); 

* * * * * * * 

(b) MEDICARE AS SECONDARY PAYER.— 

(1) REQUIREMENTS OF GROUP HEALTH PLANS.— 

(A) * * * 

* * * * * * * 

(C) INDIVIDUALS WITH END STAGE RENAL DISEASE.—A 

group health plan (as defined in subparagraph (A)(v))— 

(i) * * * 

* * * * * * * 

except that clause (ii) shall not prohibit a plan from paying 

benefits secondary to this title when an individual is entitled to or eligible for benefits under this title under section 

226A after the end of the 12-month period described in 

clause (i). Effective for items and services furnished on or 

after February 1, 1991, and before the date of enactment 

of the Balanced Budget Act of 1997 (with respect to periods beginning on or after February 1, 1990), this subparagraph shall be applied by substituting ‘‘18- month’’ for ‘‘12- 

month’’ each place it appears. Effective for items and services furnished on or after the date of enactment of the Balanced Budget Act of 1997, (with respect to periods beginning on or after the date that is 18 months prior to such 

date), clauses (i) and (ii) shall be applied by substituting 

‘‘30-month’’ for ‘‘12-month’’ each place it appears. With regard to immunosuppressive drugs furnished on or after the 

date of the enactment of the America’s Affordable Health 

Choices Act of 2009, this subparagraph shall be applied 

without regard to any time limitation. 

* * * * * * * 

AGREEMENTS WITH PROVIDERS OF SERVICES; ENROLLMENT

PROCESSES

SEC. 1866. (a)(1) Any provider of services (except a fund designated for purposes of section 1814(g) and section 1835(e)) shall be 


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qualified to participate under this title and shall be eligible for payments under this title if it files with the Secretary an agreement— 

(A) * * * 

* * * * * * * 

(U) in the case of hospitals which furnish inpatient hospital 

services for which payment may be made under this title, to 

be a participating provider of medical care both— 

(i) * * * 

* * * * * * * 

in accordance with regulations promulgated by the Secretary 

regarding admission practices, payment methodology, and 

rates of payment (including the acceptance of no more than 

such payment rate as payment in full for such items and services, øand¿ 

(V) in the case of hospitals that are not otherwise subject to 

the Occupational Safety and Health Act of 1970 (or a State occupational safety and health plan that is approved under 18(b) 

of such Act), to comply with the Bloodborne Pathogens standard under section 1910.1030 of title 29 of the Code of Federal 

Regulations (or as subsequently redesignated)ø.¿; and 

* * * * * * * 

(W) maintain and, upon request of the Secretary, provide access to documentation relating to written orders or requests for 

payment for durable medical equipment, certifications for home 

health services, or referrals for other items or services written 

or ordered by the provider under this title, as specified by the 

Secretary. 

* * * * * * * 

(2)(A) A provider of services may charge such individual or other 

person (i) the amount of any deduction or coinsurance amount imposed pursuant to section 1813(a)(1), (a)(3), or (a)(4), section 

1833(b), or section 1861(y)(3) with respect to such items and services (not in excess of the amount customarily charged for such 

items and services by such provider), and (ii) an amount equal to 

20 per centum of the reasonable charges for such items and services (other than for Medicare covered preventive services and not in 

excess of 20 per centum of the amount customarily charged for 

such items and services by such provider) for which payment is 

made under part B or which are durable medical equipment furnished as home health services (but in the case of items and services furnished to individuals with end-stage renal disease, an 

amount equal to 20 percent of the estimated amounts for such 

items and services calculated on the basis established by the Secretary). In the case of items and services described in section 

1833(c), clause (ii) of the preceding sentence shall be applied by 

substituting for 20 percent the proportion which is appropriate 

under such section. A provider of services may not impose a charge 

under clause (ii) of the first sentence of this subparagraph with respect to items and services described in section 1861(s)(10)(A) and 

with respect to clinical diagnostic laboratory tests for which payment is made under part B. Notwithstanding the first sentence of 

this subparagraph, a home health agency may charge such an individual or person, with respect to covered items subject to payment 


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under section 1834(a), the amount of any deduction imposed under 

section 1833(b) and 20 percent of the payment basis described in 

section 1834(a)(1)(B). In the case of items and services for which 

payment is made under part B under the prospective payment system established under section 1833(t), clause (ii) of the first sentence shall be applied by substituting for 20 percent of the reasonable charge, the applicable copayment amount established under 

section 1833(t)(5). In the case of services described in section 

1833(a)(8) or section 1833(a)(9) for which payment is made under 

part B under section 1834(k), clause (ii) of the first sentence shall 

be applied by substituting for 20 percent of the reasonable charge 

for such services 20 percent of the lesser of the actual charge or 

the applicable fee schedule amount (as defined in such section) for 

such services. 

* * * * * * * 

(j) ENROLLMENT PROCESS FOR PROVIDERS OF SERVICES AND SUPPLIERS.— 

(1) ENROLLMENT PROCESS.— 

(A) * * * 

* * * * * * * 

(D) BILLING AGENTS AND CLEARINGHOUSES REQUIRED TO

BE REGISTERED UNDER MEDICARE.—Any agent, clearinghouse, or other alternate payee that submits claims on behalf of a health care provider must be registered with the 

Secretary in a form and manner specified by the Secretary. 

* * * * * * * 

(3) PROGRAM INTEGRITY.—The provisions of section 1128G(a) 

apply to enrollments and renewals of enrollments of providers 

of services and suppliers under this title. 

* * * * * * * 

HEALTH CARE QUALITY DEMONSTRATION PROGRAM

SEC. 1866C. (a) * * * 

(b) DEMONSTRATION PROJECTS.—øThe Secretary¿ Subject to section 1866D, the Secretary shall establish a 5-year demonstration 

program under which the Secretary shall approve demonstration 

projects that examine health delivery factors that encourage the 

delivery of improved quality in patient care, including— 

(1) * * * 

* * * * * * * 

CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION TO PILOT

PROGRAM AND EXPANSION TO INCLUDE POST ACUTE SERVICES

SEC. 1866D. (a) CONVERSION AND EXPANSION.— 

(1) IN GENERAL.—By not later than January 1, 2011, the Secretary shall, for the purpose of promoting the use of bundled 

payments to promote efficient and high quality delivery of 

care— 

(A) convert the acute care episode demonstration program 

conducted under section 1866C to a pilot program; and 

(B) subject to subsection (c), expand such program as so 

converted to include post acute services and such other 


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services the Secretary determines to be appropriate, which 

may include transitional services. 

(2) BUNDLED PAYMENT STRUCTURES.— (A) IN GENERAL.—In carrying out paragraph (1), the Secretary may apply bundled payments with respect to— 

(i) hospitals and physicians; 

(ii) hospitals and post-acute care providers; 

(iii) hospitals, physicians, and post-acute care providers; or 

(iv) combinations of post-acute providers. 

(B) FURTHER APPLICATION.— (i) IN GENERAL.—In carrying out paragraph (1), the 

Secretary shall apply bundled payments in a manner 

so as to include collaborative care networks and continuing care hospitals. 

(ii) COLLABORATIVE CARE NETWORK DEFINED.—For 

purposes of this subparagraph, the term ‘‘collaborative 

care network’’ means a consortium of health care providers that provides a comprehensive range of coordinated and integrated health care services to low-income 

patient populations (including the uninsured) which 

may include coordinated and comprehensive care by 

safety net providers to reduce any unnecessary use of 

items and services furnished in emergency departments, manage chronic conditions, improve quality and 

efficiency of care, increase preventive services, and promote adherence to post-acute and follow-up care plans. 

(iii) CONTINUING CARE HOSPITAL DEFINED.—For purposes of this subparagraph, the term ‘‘continuing care 

hospital’’ means an entity that has demonstrated the 

ability to meet patient care and patient safety standards and that provides under common management 

the medical and rehabilitation services provided in inpatient rehabilitation hospitals and units (as defined 

in section 1886(d)(1)(B)(ii)), long-term care hospitals 

(as defined in section 1886(d)(1)(B)(iv)(I)), and skilled 

nursing facilities (as defined in section 1819(a)) that 

are located in a hospital described in section 1886(d). 

(b) SCOPE.—The pilot program under subsection (a) may include 

additional geographic areas and additional conditions which account for significant program spending, as defined by the Secretary. 

Nothing in this subsection shall be construed as limiting the number of hospital and physician groups or the number of hospital and 

post-acute provider groups that may participate in the pilot program. 

(c) LIMITATION.—The Secretary shall only expand the pilot program under subsection (a) if the Secretary finds that— 

(1) the demonstration program under section 1866C and pilot 

program under this section maintain or increase the quality of 

care received by individuals enrolled under this title; and 

(2) such demonstration program and pilot program reduce 

program expenditures and, based on the certification under subsection (d), that the expansion of such pilot program would result in estimated spending that would be less than what spending would otherwise be in the absence of this section. 


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(d) CERTIFICATION.—For purposes of subsection (c), the Chief Actuary of the Centers for Medicare & Medicaid Services shall certify 

whether expansion of the pilot program under this section would result in estimated spending that would be less than what spending 

would otherwise be in the absence of this section. 

(e) VOLUNTARY PARTICIPATION.—Nothing in this paragraph shall 

be construed as requiring the participation of an entity in the pilot 

program under this section. 

(f) EVALUATION ON COST AND QUALITY OF CARE.—The Secretary 

shall conduct an evaluation of the pilot program under subsection 

(a) to study the effect of such program on costs and quality of care. 

The findings of such evaluation shall be included in the final report 

required under section 1152(e)(2) of America’s Affordable Health 

Choices Act of 2009. 

(g) STUDY OF ADDITIONAL BUNDLING AND EPISODE-BASED PAYMENT FOR PHYSICIANS’ SERVICES.— 

(1) IN GENERAL.—The Secretary shall provide for a study of 

and development of a plan for testing additional ways to increase bundling of payments for physicians in connection with 

an episode of care, such as in connection with outpatient hospital services or services rendered in physicians’ offices, other 

than those provided under the pilot program. 

(2) APPLICATION.—The Secretary may implement such a plan 

through a demonstration program. 

ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM

SEC. 1866E. (a) IN GENERAL.—The Secretary shall conduct a pilot 

program (in this section referred to as the ‘‘pilot program’’) to test 

different payment incentive models, including (to the extent practicable) the specific payment incentive models described in subsection (c), designed to reduce the growth of expenditures and improve health outcomes in the provision of items and services under 

this title to applicable beneficiaries (as defined in subsection (d)) by 

qualifying accountable care organizations (as defined in subsection 

(b)(1)) in order to— 

(1) promote accountability for a patient population and coordinate items and services under parts A and B; 

(2) encourage investment in infrastructure and redesigned 

care processes for high quality and efficient service delivery; 

and 

(3) reward physician practices and other physician organizational models for the provision of high quality and efficient 

health care services. 

(b) QUALIFYING ACCOUNTABLE CARE ORGANIZATIONS (ACOS).— 

(1) QUALIFYING ACO DEFINED.—In this section: 

(A) IN GENERAL.—The terms ‘‘qualifying accountable care 

organization’’ and ‘‘qualifying ACO’’ mean a group of physicians or other physician organizational model (as defined 

in subparagraph (D)) that— 

(i) is organized at least in part for the purpose of 

providing physicians’ services; and 

(ii) meets such criteria as the Secretary determines to 

be appropriate to participate in the pilot program, including the criteria specified in paragraph (2). 


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(B) INCLUSION OF OTHER PROVIDERS.—Nothing in this 

subsection shall be construed as preventing a qualifying 

ACO from including a hospital or any other provider of 

services or supplier furnishing items or services for which 

payment may be made under this title that is affiliated 

with the ACO under an arrangement structured so that 

such provider or supplier participates in the pilot program 

and shares in any incentive payments under the pilot program. 

(C) PHYSICIAN.—The term ‘‘physician’’ includes, except as 

the Secretary may otherwise provide, any individual who 

furnishes services for which payment may be made as physicians’ services. 

(D) OTHER PHYSICIAN ORGANIZATIONAL MODEL.—The 

term ‘‘other physician organization model’’ means, with respect to a qualifying ACO any model of organization under 

which physicians enter into agreements with other providers for the purposes of participation in the pilot program 

in order to provide high quality and efficient health care 

services and share in any incentive payments under such 

program 

(E) OTHER SERVICES.—Nothing in this paragraph shall 

be construed as preventing a qualifying ACO from furnishing items or services, for which payment may not be 

made under this title, for purposes of achieving performance goals under the pilot program. 

(2) QUALIFYING CRITERIA.—The following are criteria described in this paragraph for an organized group of physicians 

to be a qualifying ACO: 

(A) The group has a legal structure that would allow the 

group to receive and distribute incentive payments under 

this section. 

(B) The group includes a sufficient number of primary 

care physicians (regardless of specialty) for the applicable 

beneficiaries for whose care the group is accountable (as determined by the Secretary). 

(C) The group reports on quality measures in such form, 

manner, and frequency as specified by the Secretary (which 

may be for the group, for providers of services and suppliers, or both). 

(D) The group reports to the Secretary (in a form, manner 

and frequency as specified by the Secretary) such data as 

the Secretary determines appropriate to monitor and evaluate the pilot program. 

(E) The group provides notice to applicable beneficiaries 

regarding the pilot program (as determined appropriate by 

the Secretary). 

(F) The group contributes to a best practices network or 

website, that shall be maintained by the Secretary for the 

purpose of sharing strategies on quality improvement, care 

coordination, and efficiency that the groups believe are effective. 

(G) The group utilizes patient-centered processes of care, 

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volvement in planning and monitoring of ongoing care 

management plan. 

(H) The group meets other criteria determined to be appropriate by the Secretary. 

(c) SPECIFIC PAYMENT INCENTIVE MODELS.—The specific payment 

incentive models described in this subsection are the following: 

(1) PERFORMANCE TARGET MODEL.—Under the performance 

target model under this paragraph (in this paragraph referred 

to as the ‘‘performance target model’’): 

(A) IN GENERAL.—A qualifying ACO qualifies to receive 

an incentive payment if expenditures for applicable beneficiaries are less than a target spending level or a target 

rate of growth. The incentive payment shall be made only 

if savings are greater than would result from normal variation in expenditures for items and services covered under 

parts A and B. 

(B) COMPUTATION OF PERFORMANCE TARGET.— (i) IN GENERAL.—The Secretary shall establish a performance target for each qualifying ACO comprised of 

a base amount (described in clause (ii)) increased to 

the current year by an adjustment factor (described in 

clause (iii)). Such a target may be established on a per 

capita basis, as the Secretary determines to be appropriate. 

(ii) BASE AMOUNT.—For purposes of clause (i), the 

base amount in this subparagraph is equal to the average total payments (or allowed charges) under parts A 

and B (and may include part D, if the Secretary determines appropriate) for applicable beneficiaries for 

whom the qualifying ACO furnishes items and services 

in a base period determined by the Secretary. Such 

base amount may be determined on a per capita basis. 

(iii) ADJUSTMENT FACTOR.—For purposes of clause 

(i), the adjustment factor in this clause may equal an 

annual per capita amount that reflects changes in expenditures from the period of the base amount to the 

current year that would represent an appropriate performance target for applicable beneficiaries (as determined by the Secretary). Such adjustment factor may 

be determined as an amount or rate, may be determined on a national, regional, local, or organizationspecific basis, and may be determined on a per capita 

basis. Such adjustment factor also may be adjusted for 

risk as determined appropriate by the Secretary. 

(iv) REBASING.—Under this model the Secretary 

shall periodically rebase the base expenditure amount 

described in clause (ii). 

(C) MEETING TARGET.— 

(i) IN GENERAL.—Subject to clause (ii), a qualifying 

ACO that meet or exceeds annual quality and performance targets for a year shall receive an incentive payment for such year equal to a portion (as determined 

appropriate by the Secretary) of the amount by which 

payments under this title for such year relative are estimated to be below the performance target for such year, 


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as determined by the Secretary. The Secretary may establish a cap on incentive payments for a year for a 

qualifying ACO. 

(ii) LIMITATION.— The Secretary shall limit incentive 

payments to each qualifying ACO under this paragraph as necessary to ensure that the aggregate expenditures with respect to applicable beneficiaries for 

such ACOs under this title (inclusive of incentive payments described in this subparagraph) do not exceed 

the amount that the Secretary estimates would be expended for such ACO for such beneficiaries if the pilot 

program under this section were not implemented. 

(D) REPORTING AND OTHER REQUIREMENTS.—In carrying 

out such model, the Secretary may (as the Secretary determines to be appropriate) incorporate reporting requirements, incentive payments, and penalties related to the physician quality reporting initiative (PQRI), electronic prescribing, electronic health records, and other similar initiatives under section 1848, and may use alternative criteria 

than would otherwise apply under such section for determining whether to make such payments. The incentive payments described in this subparagraph shall not be included 

in the limit described in subparagraph (C)(ii) or in the performance target model described in this paragraph. 

(2) PARTIAL CAPITATION MODEL.— (A) IN GENERAL.—Subject to subparagraph (B), a partial 

capitation model described in this paragraph (in this paragraph referred to as a ‘‘partial capitation model’’) is a 

model in which a qualifying ACO would be at financial 

risk for some, but not all, of the items and services covered 

under parts A and B, such as at risk for some or all physicians’ services or all items and services under part B. The 

Secretary may limit a partial capitation model to ACOs 

that are highly integrated systems of care and to ACOs capable of bearing risk, as determined to be appropriate by 

the Secretary. 

(B) NO ADDITIONAL PROGRAM EXPENDITURES.—Payments 

to a qualifying ACO for applicable beneficiaries for a year 

under the partial capitation model shall be established in 

a manner that does not result in spending more for such 

ACO for such beneficiaries than would otherwise be expended for such ACO for such beneficiaries for such year 

if the pilot program were not implemented, as estimated by 

the Secretary. 

(3) OTHER PAYMENT MODELS.— 

(A) IN GENERAL.—Subject to subparagraph (B), the Secretary may develop other payment models that meet the 

goals of this pilot program to improve quality and efficiency. 

(B) NO ADDITIONAL PROGRAM EXPENDITURES.—Subparagraph (B) of paragraph (2) shall apply to a payment model 

under subparagraph (A) in a similar manner as such subparagraph (B) applies to the payment model under paragraph (2). 

(d) APPLICABLE BENEFICIARIES.— 


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(1) IN GENERAL.—In this section, the term ‘‘applicable beneficiary’’ means, with respect to a qualifying ACO, an individual 

who— 

(A) is enrolled under part B and entitled to benefits 

under part A; 

(B) is not enrolled in a Medicare Advantage plan under 

part C or a PACE program under section 1894; and 

(C) meets such other criteria as the Secretary determines 

appropriate, which may include criteria relating to frequency of contact with physicians in the ACO 

(2) FOLLOWING APPLICABLE BENEFICIARIES.—The Secretary 

may monitor data on expenditures and quality of services under 

this title after an applicable beneficiary discontinues receiving 

services under this title through a qualifying ACO. 

(e) IMPLEMENTATION.— 

(1) STARTING DATE.—The pilot program shall begin no later 

than January 1, 2012. An agreement with a qualifying ACO 

under the pilot program may cover a multi-year period of between 3 and 5 years. 

(2) WAIVER.—The Secretary may waive such provisions of this 

title (including section 1877) and title XI in the manner the 

Secretary determines necessary in order implement the pilot 

program. 

(3) PERFORMANCE RESULTS REPORTS.—The Secretary shall report performance results to qualifying ACOs under the pilot 

program at least annually. 

(4) LIMITATIONS ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of— 

(A) the elements, parameters, scope, and duration of the 

pilot program; 

(B) the selection of qualifying ACOs for the pilot program; 

(C) the establishment of targets, measurement of performance, determinations with respect to whether savings have 

been achieved and the amount of savings; 

(D) determinations regarding whether, to whom, and in 

what amounts incentive payments are paid; and 

(E) decisions about the extension of the program under 

subsection (g), expansion of the program under subsection 

(h) or extensions under subsection (i). 

(5) ADMINISTRATION.—Chapter 35 of title 44, United States 

Code shall not apply to this section. 

(f) EVALUATION; MONITORING.— 

(1) IN GENERAL.—The Secretary shall evaluate the payment 

incentive model for each qualifying ACO under the pilot program to assess impacts on beneficiaries, providers of services, 

suppliers and the program under this title. The Secretary shall 

make such evaluation publicly available within 60 days of the 

date of completion of such report. 

(2) MONITORING.—The Inspector General of the Department 

of Health and Human Services shall provide for monitoring of 

the operation of ACOs under the pilot program with regard to 

violations of section 1877 (popularly known as the ‘‘Stark law’’). 


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(g) EXTENSION OF PILOT AGREEMENT WITH SUCCESSFUL ORGANI- ZATIONS.— 

(1) REPORTS TO CONGRESS.—Not later than 2 years after the 

date the first agreement is entered into under this section, and 

biennially thereafter for six years, the Secretary shall submit to 

Congress and make publicly available a report on the use of authorities under the pilot program. Each report shall address the 

impact of the use of those authorities on expenditures, access, 

and quality under this title. 

(2) EXTENSION.—Subject to the report provided under paragraph (1), with respect to a qualifying ACO, the Secretary may 

extend the duration of the agreement for such ACO under the 

pilot program as the Secretary determines appropriate if— 

(A) the ACO receives incentive payments with respect to 

any of the first 4 years of the pilot agreement and is consistently meeting quality standards or 

(B) the ACO is consistently exceeding quality standards 

and is not increasing spending under the program. 

(3) TERMINATION.—The Secretary may terminate an agreement with a qualifying ACO under the pilot program if such 

ACO did not receive incentive payments or consistently failed to 

meet quality standards in any of the first 3 years under the program. 

(h) EXPANSION TO ADDITIONAL ACOS.— (1) TESTING AND REFINEMENT OF PAYMENT INCENTIVE MOD- ELS.—Subject to the evaluation described in subsection (f), the 

Secretary may enter into agreements under the pilot program 

with additional qualifying ACOs to further test and refine payment incentive models with respect to qualifying ACOs. 

(2) EXPANDING USE OF SUCCESSFUL MODELS TO PROGRAM IM- PLEMENTATION.— (A) IN GENERAL.—Subject to subparagraph (B), the Secretary may issue regulations to implement, on a permanent 

basis, 1 or more models if, and to the extent that, such 

models are beneficial to the program under this title, as determined by the Secretary. 

(B) CERTIFICATION.—The Chief Actuary of the Centers for 

Medicare & Medicaid Services shall certify that 1 or more 

of such models described in subparagraph (A) would result 

in estimated spending that would be less than what spending would otherwise be estimated to be in the absence of 

such expansion. 

(i) TREATMENT OF PHYSICIAN GROUP PRACTICE DEMONSTRATION.— 

(1) EXTENSION.—The Secretary may enter in to an agreement 

with a qualifying ACO under the demonstration under section 

1866A, subject to rebasing and other modifications deemed appropriate by the Secretary, until the pilot program under this 

section is operational. 

(2) TRANSITION.—For purposes of extension of an agreement 

with a qualifying ACO under subsection (g)(2), the Secretary 

shall treat receipt of an incentive payment for a year by an organization under the physician group practice demonstration 

pursuant to section 1866A as a year for which an incentive payment is made under such subsection, as long as such practice 


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group practice organization meets the criteria under subsection 

(b)(2). 

(j) ADDITIONAL PROVISIONS.— 

(1) AUTHORITY FOR SEPARATE INCENTIVE ARRANGEMENTS.— 

The Secretary may create separate incentive arrangements (including using multiple years of data, varying thresholds, varying shared savings amounts, and varying shared savings limits) for different categories of qualifying ACOs to reflect natural 

variations in data availability, variation in average annual attributable expenditures, program integrity, and other matters 

the Secretary deems appropriate. 

(2) ENCOURAGEMENT OF PARTICIPATION OF SMALLER ORGANIZATIONS.—In order to encourage the participation of smaller accountable care organizations under the pilot program, the Secretary may limit a qualifying ACO’s exposure to high cost patients under the program. 

(3) INVOLVEMENT IN PRIVATE PAYER ARRANGEMENTS.—Nothing in this section shall be construed as preventing qualifying 

ACOs participating in the pilot program from negotiating similar contracts with private payers. 

(4) ANTIDISCRIMINATION LIMITATION.—The Secretary shall 

not enter into an agreement with an entity to provide health 

care items or services under the pilot program, or with an entity 

to administer the program, unless such entity guarantees that 

it will not deny, limit, or condition the coverage or provision of 

benefits under the program, for individuals eligible to be enrolled under such program, based on any health status-related 

factor described in section 2702(a)(1) of the Public Health Service Act. 

(5) CONSTRUCTION.—Nothing in this section shall be construed to compel or require an organization to use an organization-specific target growth rate for an accountable care organization under this section for purposes of section 1848. 

(6) FUNDING.—For purposes of administering and carrying 

out the pilot program, other than for payments for items and 

services furnished under this title and incentive payments 

under subsection (c)(1), in addition to funds otherwise appropriated, there are appropriated to the Secretary for the Center 

for Medicare & Medicaid Services Program Management Account $25,000,000 for each of fiscal years 2010 through 2014 

and $20,000,000 for fiscal year 2015. Amounts appropriated 

under this paragraph for a fiscal year shall be available until 

expended. 

MEDICAL HOME PILOT PROGRAM

SEC. 1866F. (a) ESTABLISHMENT AND MEDICAL HOME MODELS.— 

(1) ESTABLISHMENT OF PILOT PROGRAM.—The Secretary shall 

establish a medical home pilot program (in this section referred 

to as the ‘‘pilot program’’) for the purpose of evaluating the feasibility and advisability of reimbursing qualified patient-centered medical homes for furnishing medical home services (as 

defined under subsection (b)(1)) to high need beneficiaries (as 

defined in subsection (d)(1)(C)) and to targeted high need beneficiaries (as defined in subsection (c)(1)(C)). 


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(2) SCOPE.—Subject to subsection (g), the pilot program shall 

include urban, rural, and underserved areas. 

(3) MODELS OF MEDICAL HOMES IN THE PILOT PROGRAM.—The 

pilot program shall evaluate each of the following medical 

home models: 

(A) INDEPENDENT PATIENT-CENTERED MEDICAL HOME

MODEL.—Independent patient-centered medical home model 

under subsection (c). 

(B) COMMUNITY-BASED MEDICAL HOME MODEL.—Community-based medical home model under subsection (d). 

(4) PARTICIPATION OF NURSE PRACTITIONERS AND PHYSICIAN

ASSISTANTS.— (A) Nothing in this section shall be construed as preventing a nurse practitioner from leading a patient centered 

medical home so long as— 

(i) all the requirements of this section are met; and 

(ii) the nurse practitioner is acting consistently with 

State law. 

(B) Nothing in this section shall be construed as preventing a physician assistant from participating in a patient centered medical home so long as— 

(i) all the requirements of this section are met; and 

(ii) the physician assistant is acting consistently with 

State law. 

(b) DEFINITIONS.—For purposes of this section: 

(1) PATIENT-CENTERED MEDICAL HOME SERVICES.—The term 

‘‘patient-centered medical home services’’ means services that— 

(A) provide beneficiaries with direct and ongoing access 

to a primary care or principal care by a physician or nurse 

practitioner who accepts responsibility for providing first 

contact, continuous and comprehensive care to such beneficiary; 

(B) coordinate the care provided to a beneficiary by a 

team of individuals at the practice level across office, institutional and home settings led by a primary care or principal care physician or nurse practitioner, as needed and 

appropriate; 

(C) provide for all the patient’s health care needs or take 

responsibility for appropriately arranging care with other 

qualified providers for all stages of life; 

(D) provide continuous access to care and communication 

with participating beneficiaries; 

(E) provide support for patient self-management, 

proactive and regular patient monitoring, support for family caregivers, use patient-centered processes, and coordination with community resources; 

(F) integrate readily accessible, clinically useful information on participating patients that enables the practice to 

treat such patients comprehensively and systematically; 

and 

(G) implement evidence-based guidelines and apply such 

guidelines to the identified needs of beneficiaries over time 

and with the intensity needed by such beneficiaries. 

(2) PRIMARY CARE.—The term ‘‘primary care’’ means health 

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sician assistant who practices in the field of family medicine, 

general internal medicine, geriatric medicine, or pediatric medicine. 

(3) PRINCIPAL CARE.—The term ‘‘principal care’’ means integrated, accessible health care that is provided by a physician 

who is a medical subspecialist that addresses the majority of 

the personal health care needs of patients with chronic conditions requiring the subspecialist’s expertise, and for whom the 

subspecialist assumes care management. 

(c) INDEPENDENT PATIENT-CENTERED MEDICAL HOME MODEL.— (1) IN GENERAL.— (A) PAYMENT AUTHORITY.—Under the independent patient-centered medical home model under this subsection, 

the Secretary shall make payments for medical home services furnished by an independent patient-centered medical 

home (as defined in subparagraph (B)) pursuant to paragraph (3)(B) for a targeted high need beneficiaries (as defined in subparagraph (C)). 

(B) INDEPENDENT PATIENT-CENTERED MEDICAL HOME DE- FINED.—In this section, the term ‘‘independent patient-centered medical home’’ means a physician-directed or nursepractitioner-directed practice that is qualified under paragraph (2) as— 

(i) providing beneficiaries with patient-centered medical home services; and 

(ii) meets such other requirements as the Secretary 

may specify. 

(C) TARGETED HIGH NEED BENEFICIARY DEFINED.—For 

purposes of this subsection, the term ‘‘targeted high need 

beneficiary’’ means a high need beneficiary who, based on 

a risk score as specified by the Secretary, is generally within the upper 50th percentile of Medicare beneficiaries. 

(D) BENEFICIARY ELECTION TO PARTICIPATE.—The Secretary shall determine an appropriate method of ensuring 

that beneficiaries have agreed to participate in the pilot 

program. 

(E) IMPLEMENTATION.—The pilot program under this 

subsection shall begin no later than 6 months after the date 

of the enactment of this section. 

(2) STANDARD SETTING AND QUALIFICATION PROCESS FOR PATIENT-CENTERED MEDICAL HOMES.—The Secretary shall review 

alternative models for standard setting and qualification, and 

shall establish a process— 

(A) to establish standards to enable medical practices to 

qualify as patient-centered medical homes; and 

(B) to initially provide for the review and certification of 

medical practices as meeting such standards. 

(3) PAYMENT.— 

(A) ESTABLISHMENT OF METHODOLOGY.—The Secretary 

shall establish a methodology for the payment for medical 

home services furnished by independent patient-centered 

medical homes. Under such methodology, the Secretary 

shall adjust payments to medical homes based on beneficiary risk scores to ensure that higher payments are made 

for higher risk beneficiaries. 


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(B) PER BENEFICIARY PER MONTH PAYMENTS.—Under 

such payment methodology, the Secretary shall pay independent patient-centered medical homes a monthly fee for 

each targeted high need beneficiary who consents to receive 

medical home services through such medical home. 

(C) PROSPECTIVE PAYMENT.—The fee under subparagraph (B) shall be paid on a prospective basis. 

(D) AMOUNT OF PAYMENT.—In determining the amount of 

such fee, the Secretary shall consider the following: 

(i) The clinical work and practice expenses involved 

in providing the medical home services provided by the 

independent patient-centered medical home (such as 

providing increased access, care coordination, population disease management, and teaching self-care 

skills for managing chronic illnesses) for which payment is not made under this title as of the date of the 

enactment of this section. 

(ii) Allow for differential payments based on capabilities of the independent patient-centered medical 

home. 

(iii) Use appropriate risk-adjustment in determining 

the amount of the per beneficiary per month payment 

under this paragraph in a manner that ensures that 

higher payments are made for higher risk beneficiaries. 

(4) ENCOURAGING PARTICIPATION OF VARIETY OF PRACTICES.— The pilot program under this subsection shall be designed to include the participation of physicians in practices with fewer 

than 10 full-time equivalent physicians, as well as physicians 

in larger practices, particularly in underserved and rural areas, 

as well as federally qualified community health centers, and 

rural health centers. 

(5) NO DUPLICATION IN PILOT PARTICIPATION.—A physician in 

a group practice that participates in the accountable care organization pilot program under section 1866D shall not be eligible 

to participate in the pilot program under this subsection, unless 

the pilot program under this section has been implemented on 

a permanent basis under subsection (e)(3). 

(d) COMMUNITY-BASED MEDICAL HOME MODEL.— (1) IN GENERAL.— (A) AUTHORITY FOR PAYMENTS.—Under the communitybased medical home model under this subsection (in this 

section referred to as the ‘‘CBMH model’’), the Secretary 

shall make payments for the furnishing of medical home 

services by a community-based medical home (as defined in 

subparagraph (B)) pursuant to paragraph (5)(B) for high 

need beneficiaries. 

(B) COMMUNITY-BASED MEDICAL HOME DEFINED.—In this 

section, the term ‘‘community-based medical home’’ means 

a nonprofit community-based or State-based organization 

that is certified under paragraph (2) as meeting the following requirements: 

(i) The organization provides beneficiaries with medical home services. 

(ii) The organization provides medical home services 

under the supervision of and in close collaboration 


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with the primary care or principal care physician, 

nurse practitioner, or physician assistant designated by 

the beneficiary as his or her community-based medical 

home provider. 

(iii) The organization employs community health 

workers, including nurses or other non-physician practitioners, lay health workers, or other persons as determined appropriate by the Secretary, that assist the primary or principal care physician, nurse practitioner, or 

physician assistant in chronic care management activities such as teaching self-care skills for managing 

chronic illnesses, transitional care services, care plan 

setting, medication therapy management services for 

patients with multiple chronic diseases, or help beneficiaries access the health care and community-based 

resources in their local geographic area. 

(iv) The organization meets such other requirements 

as the Secretary may specify. 

(C) HIGH NEED BENEFICIARY.—In this section, the term 

‘‘high need beneficiary’’ means an individual who requires 

regular medical monitoring, advising, or treatment. 

(2) QUALIFICATION PROCESS FOR COMMUNITY-BASED MEDICAL

HOMES.—The Secretary shall establish a process— 

(A) for the initial qualification of community-based or 

State-based organizations as community-based medical 

homes; and 

(B) to provide for the review and qualification of such 

community-based and State-based organizations pursuant 

to criteria established by the Secretary. 

(3) DURATION.—The pilot program for community-based medical homes under this subsection shall start no later than 2 

years after the date of the enactment of this section. Each demonstration site under the pilot program shall operate for a period of up to 5 years after the initial implementation phase, 

without regard to the receipt of a initial implementation funding under subsection (i). 

(4) PREFERENCE.—In selecting sites for the CBMH model, the 

Secretary may give preference to— 

(A) applications from geographic areas that propose to coordinate health care services for chronically ill beneficiaries 

across a variety of health care settings, such as primary 

care physician practices with fewer than 10 physicians, specialty physicians, nurse practitioner practices, Federally 

qualified health centers, rural health clinics, and other settings; 

(B) applications that include other payors that furnish 

medical home services for chronically ill patients covered by 

such payors; and 

(C) applications from States that propose to use the medical home model to coordinate health care services for individuals enrolled under this title, individuals enrolled under 

title XIX, and full-benefit dual eligible individuals (as defined in section 1935(c)(6)) with chronic diseases across a 

variety of health care settings. 

(5) PAYMENTS.— 


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(A) ESTABLISHMENT OF METHODOLOGY.—The Secretary 

shall establish a methodology for the payment for medical 

home services furnished under the CBMH model. 

(B) PER BENEFICIARY PER MONTH PAYMENTS.—Under 

such payment methodology, the Secretary shall make two 

separate monthly payments for each high need beneficiary 

who consents to receive medical home services through such 

medical home, as follows: 

(i) PAYMENT TO COMMUNITY-BASED ORGANIZATION.— One monthly payment to a community-based or Statebased organization. 

(ii) PAYMENT TO PRIMARY OR PRINCIPAL CARE PRAC- TICE.—One monthly payment to the primary or principal care practice for such beneficiary. 

(C) PROSPECTIVE PAYMENT.—The payments under subparagraph (B) shall be paid on a prospective basis. 

(D) AMOUNT OF PAYMENT.—In determining the amount of 

such payment, the Secretary shall consider the following: 

(i) The clinical work and practice expenses involved 

in providing the medical home services provided by the 

community-based medical home (such as providing increased access, care coordination, care plan setting, 

population disease management, and teaching self-care 

skills for managing chronic illnesses) for which payment is not made under this title as of the date of the 

enactment of this section. 

(ii) Use appropriate risk-adjustment in determining 

the amount of the per beneficiary per month payment 

under this paragraph. 

(6) INITIAL IMPLEMENTATION FUNDING.—The Secretary may 

make available initial implementation funding to a community 

based or State-based organization or a State that is participating in the pilot program under this subsection. Such organization shall provide the Secretary with a detailed implementation plan that includes how such funds will be used. 

(e) EXPANSION OF PROGRAM.— (1) EVALUATION OF COST AND QUALITY.—The Secretary shall 

evaluate the pilot program to determine— 

(A) the extent to which medical homes result in— 

(i) improvement in the quality and coordination of 

health care services, particularly with regard to the 

care of complex patients; 

(ii) improvement in reducing health disparities; 

(iii) reductions in preventable hospitalizations; 

(iv) prevention of readmissions; 

(v) reductions in emergency room visits; 

(vi) improvement in health outcomes, including patient functional status where applicable; 

(vii) improvement in patient satisfaction; 

(viii) improved efficiency of care such as reducing 

duplicative diagnostic tests and laboratory tests; and 

(ix) reductions in health care expenditures; and 

(B) the feasability and advisability of reimbursing medical homes for medical home services under this title on a 

permanent basis. 


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(2) REPORT.—Not later than 60 days after the date of completion of the evaluation under paragraph (1), the Secretary shall 

submit to Congress and make available to the public a report 

on the findings of the evaluation under paragraph (1). 

(3) EXPANSION OF PROGRAM.— (A) IN GENERAL.—Subject to the results of the evaluation 

under paragraph (1) and subparagraph (B), the Secretary 

may issue regulations to implement, on a permanent basis, 

one or more models, if, and to the extent that such model 

or models, are beneficial to the program under this title, including that such implementation will improve quality of 

care, as determined by the Secretary. 

(B) CERTIFICATION REQUIREMENT.—The Secretary may 

not issue such regulations unless the Chief Actuary of the 

Centers for Medicare & Medicaid Services certifies that the 

expansion of the components of the pilot program described 

in subparagraph (A) would result in estimated spending 

under this title that would be no more than the level of 

spending that the Secretary estimates would otherwise be 

spent under this title in the absence of such expansion. 

(f) ADMINISTRATIVE PROVISIONS.— (1) NO DUPLICATION IN PAYMENTS.—During any month, the 

Secretary may not make payments under this section under 

more than one model or through more than one medical home 

under any model for the furnishing of medical home services to 

an individual. 

(2) NO EFFECT ON PAYMENT FOR EVALUATION AND MANAGE- MENT SERVICES.—Payments made under this section are in addition to, and have no effect on the amount of, payment for 

evaluation and management services made under this title 

(3) ADMINISTRATION.—Chapter 35 of title 44, United States 

Code shall not apply to this section. 

(g) FUNDING.— (1) OPERATIONAL COSTS.—For purposes of administering and 

carrying out the pilot program (including the design, implementation, technical assistance for and evaluation of such program), in addition to funds otherwise available, there shall be 

transferred from the Federal Supplementary Medical Insurance 

Trust Fund under section 1841 to the Secretary for the Centers 

for Medicare & Medicaid Services Program Management Account $6,000,000 for each of fiscal years 2010 through 2014. 

Amounts appropriated under this paragraph for a fiscal year 

shall be available until expended. 

(2) PATIENT-CENTERED MEDICAL HOME SERVICES.—In addition to funds otherwise available, there shall be available to the 

Secretary for the Centers for Medicare & Medicaid Services, 

from the Federal Supplementary Medical Insurance Trust Fund 

under section 1841— 

(A) $200,000,000 for each of fiscal years 2010 through 

2014 for payments for medical home services under subsection (c)(3); and 

(B) $125,000,000 for each of fiscal years 2012 through 

2016, for payments under subsection (d)(5). 

Amounts available under this paragraph for a fiscal year shall 

be available until expended. 


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(3) INITIAL IMPLEMENTATION.—In addition to funds otherwise 

available, there shall be available to the Secretary for the Centers for Medicare & Medicaid Services, from the Federal Supplementary Medical Insurance Trust Fund under section 1841, 

$2,500,000 for each of fiscal years 2010 through 2012, under 

subsection (d)(6). Amounts available under this paragraph for 

a fiscal year shall be available until expended. 

(h) TREATMENT OF TRHCA MEDICARE MEDICAL HOME DEM- ONSTRATION FUNDING.— (1) In addition to funds otherwise available for payment of 

medical home services under subsection (c)(3), there shall also 

be available the amount provided in subsection (g) of section 

204 of division B of the Tax Relief and Health Care Act of 2006 

(42 U.S.C. 1395b–1 note). 

(2) Notwithstanding section 1302(c) of the America’s Affordable Health Choices Act of 2009, in addition to funds provided 

in paragraph (1) and subsection (g)(2)(A), the funding for medical home services that would otherwise have been available if 

such section 204 medical home demonstration had been implemented (without regard to subsection (g) of such section) shall 

be available to the independent patient-centered medical home 

model described in subsection (c). 

* * * * * * * 

PRACTICING PHYSICIANS ADVISORY COUNCIL; COUNCIL FOR

TECHNOLOGY AND INNOVATION TELEHEALTH ADVISORY COMMITTEE

SEC. 1868. ø(a) PRACTICING PHYSICIANS ADVISORY COUNCIL.—(1) 

The Secretary shall appoint, based upon nominations submitted by 

medical organizations representing physicians, a Practicing Physicians Advisory Council (in this subsection referred to as the ‘‘Council’’) to be composed of 15 physicians, each of whom has submitted 

at least 250 claims for physicians’ services under this title in the 

previous year. At least 11 of the members of the Council shall be 

physicians described in section 1861(r)(1) and the members of the 

Council shall include both participating and nonparticipating physicians and physicians practicing in rural areas and underserved 

urban areas. 

ø(2) The Council shall meet once during each calendar quarter 

to discuss certain proposed changes in regulations and carrier manual instructions related to physician services identified by the Secretary. To the extent feasible and consistent with statutory deadlines, such consultation shall occur before the publication of such 

proposed changes. 

ø(3) Members of the Council shall be entitled to receive reimbursement of expenses and per diem in lieu of subsistence in the 

same manner as other members of advisory councils appointed by 

the Secretary are provided such reimbursement and per diem 

under this title.¿ 

* * * * * * * 

(c) TELEHEALTH ADVISORY COMMITTEE.— 

(1) IN GENERAL.—The Secretary shall appoint a Telehealth 

Advisory Committee (in this subsection referred to as the ‘‘Advisory Committee’’) to make recommendations to the Secretary on 

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garding telehealth services as established under section 

1834(m), including the appropriate addition or deletion of services (and HCPCS codes) to those specified in paragraphs 

(4)(F)(i) and (4)(F)(ii) of such section and for authorized payment under paragraph (1) of such section. 

(2) MEMBERSHIP; TERMS.— (A) MEMBERSHIP.— (i) IN GENERAL.—The Advisory Committee shall be 

composed of 9 members, to be appointed by the Secretary, of whom— 

(I) 5 shall be practicing physicians; 

(II) 2 shall be practicing non-physician health 

care practitioners; and 

(III) 2 shall be administrators of telehealth programs. 

(ii) REQUIREMENTS FOR APPOINTING MEMBERS.—In 

appointing members of the Advisory Committee, the 

Secretary shall— 

(I) ensure that each member has prior experience 

with the practice of telemedicine or telehealth; 

(II) give preference to individuals who are currently providing telemedicine or telehealth services 

or who are involved in telemedicine or telehealth 

programs; 

(III) ensure that the membership of the Advisory 

Committee represents a balance of specialties and 

geographic regions; and 

(IV) take into account the recommendations of 

stakeholders. 

(B) TERMS.—The members of the Advisory Committee 

shall serve for such term as the Secretary may specify. 

(C) CONFLICTS OF INTEREST.—An advisory committee 

member may not participate with respect to a particular 

matter considered in an advisory committee meeting if such 

member (or an immediate family member of such member) 

has a financial interest that could be affected by the advice 

given to the Secretary with respect to such matter. 

(3) MEETINGS.—The Advisory Committee shall meet twice 

each calendar year and at such other times as the Secretary 

may provide. 

(4) PERMANENT COMMITTEE.—Section 14 of the Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to the Advisory Committee. 

* * * * * * * 

ADMINISTRATION

SEC. 1874. (a) * * * 

* * * * * * * 

(e) COMPLIANCE PROGRAMS FOR PROVIDERS OF SERVICES AND

SUPPLIERS.— 

(1) IN GENERAL.—The Secretary may disenroll a provider of 

services or a supplier (other than a physician or a skilled nursing facility) under this title (or may impose any civil monetary 

penalty or other intermediate sanction under paragraph (4)) if 


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such provider of services or supplier fails to, subject to paragraph (5), establish a compliance program that contains the 

core elements established under paragraph (2). 

(2) ESTABLISHMENT OF CORE ELEMENTS.—The Secretary, in 

consultation with the Inspector General of the Department of 

Health and Human Services, shall establish core elements for 

a compliance program under paragraph (1). Such elements may 

include written policies, procedures, and standards of conduct, 

a designated compliance officer and a compliance committee; effective training and education pertaining to fraud, waste, and 

abuse for the organization’s employees and contractors; a confidential or anonymous mechanism, such as a hotline, to receive 

compliance questions and reports of fraud, waste, or abuse; disciplinary guidelines for enforcement of standards; internal monitoring and auditing procedures, including monitoring and auditing of contractors; procedures for ensuring prompt responses 

to detected offenses and development of corrective action initiatives, including responses to potential offenses; and procedures 

to return all identified overpayments to the programs under this 

title, title XIX, and title XXI. 

(3) TIMELINE FOR IMPLEMENTATION.—The Secretary shall determine a timeline for the establishment of the core elements 

under paragraph (2) and the date on which a provider of services and suppliers (other than physicians) shall be required to 

have established such a program for purposes of this subsection. 

(4) CMS ENFORCEMENT AUTHORITY.—The Administrator for 

the Centers of Medicare & Medicaid Services shall have the authority to determine whether a provider of services or supplier 

described in subparagraph (3) has met the requirement of this 

subsection and to impose a civil monetary penalty not to exceed 

$50,000 for each violation. The Secretary may also impose other 

intermediate sanctions, including corrective action plans and 

additional monitoring in the case of a violation of this subsection. 

(5) PILOT PROGRAM.—The Secretary may conduct a pilot program on the application of this subsection with respect to a category of providers of services or suppliers (other than physicians) that the Secretary determines to be a category which is 

at high risk for waste, fraud, and abuse before implementing 

the requirements of this subsection to all providers of services 

and suppliers described in paragraph (3). 

* * * * * * * 

PAYMENTS TO HEALTH MAINTENANCE ORGANIZATIONS AND

COMPETITIVE MEDICAL PLANS

SEC. 1876. (a) * * * 

* * * * * * * 

(h)(1) * * * 

* * * * * * * 

(5)(A) * * * 

* * * * * * * 

(C)(i) * * * 


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(ii) For any period beginning on or after øJanuary 1, 2010¿ January 1, 2012, a reasonable cost reimbursement contract under this 

subsection may not be extended or renewed for a service area insofar as such area during the entire previous year was within the 

service area of— 

(I) * * * 

* * * * * * * 

(iii) A plan described in this clause for a year for a service area 

is a plan described in section 1851(a)(2)(A)(i) if øthe service area 

for the year¿ the portion of the plan’s service area for the year that 

is within the service area of a reasonable cost reimbursement contract meets the following minimum enrollment requirements: 

(I) * * * 

* * * * * * * 

LIMITATION ON CERTAIN PHYSICIAN REFERRALS

SEC. 1877. (a) * * * 

* * * * * * * 

(d) ADDITIONAL EXCEPTIONS RELATED ONLY TO OWNERSHIP OR

INVESTMENT PROHIBITION.—The following, if not otherwise excepted under subsection (b), shall not be considered to be an ownership or investment interest described in subsection (a)(2)(A): 

(1) * * * 

(2) RURAL PROVIDERS.—In the case of designated health services furnished in a rural area (as defined in section 

1886(d)(2)(D)) by an entity, if— 

(A) substantially all of the designated health services 

furnished by the entity are furnished to individuals residing in such a rural area; øand¿ 

(B) effective for the 18-month period beginning on the 

date of the enactment of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003, the entity is 

not a specialty hospital (as defined in subsection (h)(7))ø.¿; 

and 

(C) in the case where the entity is a hospital, the hospital 

meets the requirements of paragraph (3)(D). 

(3) HOSPITAL OWNERSHIP.—In the case of designated health 

services provided by a hospital (other than a hospital described 

in paragraph (1)) if— 

(A) * * * 

(B) effective for the 18-month period beginning on the 

date of the enactment of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003, the hospital 

is not a specialty hospital (as defined in subsection (h)(7)); 

øand¿ 

(C) the ownership or investment interest is in the hospital itself (and not merely in a subdivision of the hospital)ø.¿; and 

(D) the hospital meets the requirements described in subsection (i)(1). 

* * * * * * * 

ø(f) REPORTING REQUIREMENTS.—Each entity providing covered 

items or services for which payment may be made under this title 


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shall provide the Secretary with the information concerning the entity’s ownership, investment, and compensation arrangements, including— 

ø(1) the covered items and services provided by the entity, 

and 

ø(2) the names and unique physician identification numbers 

of all physicians with an ownership or investment interest (as 

described in subsection (a)(2)(A)), or with a compensation arrangement (as described in subsection (a)(2)(B)), in the entity, 

or whose immediate relatives have such an ownership or investment interest or who have such a compensation relationship with the entity. 

Such information shall be provided in such form, manner, and at 

such times as the Secretary shall specify. The requirement of this 

subsection shall not apply to designated health services provided 

outside the United States or to entities which the Secretary determines provides services for which payment may be made under 

this title very infrequently.¿ 

(f) REPORTING AND DISCLOSURE REQUIREMENTS.— 

(1) IN GENERAL.—Each entity providing covered items or services for which payment may be made under this title shall provide the Secretary with the information concerning the entity’s 

ownership, investment, and compensation arrangements, including— 

(A) the covered items and services provided by the entity, 

and 

(B) the names and unique physician identification numbers of all physicians with an ownership or investment interest (as described in subsection (a)(2)(A)), or with a compensation arrangement (as described in subsection 

(a)(2)(B)), in the entity, or whose immediate relatives have 

such an ownership or investment interest or who have such 

a compensation relationship with the entity. 

Such information shall be provided in such form, manner, and 

at such times as the Secretary shall specify. The requirement of 

this subsection shall not apply to designated health services 

provided outside the United States or to entities which the Secretary determines provide services for which payment may be 

made under this title very infrequently. 

(2) REQUIREMENTS FOR HOSPITALS WITH PHYSICIAN OWNERSHIP OR INVESTMENT.—In the case of a hospital that meets the 

requirements described in subsection (i)(1), the hospital shall— 

(A) submit to the Secretary an initial report, and periodic 

updates at a frequency determined by the Secretary, containing a detailed description of the identity of each physician owner and physician investor and any other owners or 

investors of the hospital; 

(B) require that any referring physician owner or investor 

discloses to the individual being referred, by a time that 

permits the individual to make a meaningful decision regarding the receipt of services, as determined by the Secretary, the ownership or investment interest, as applicable, 

of such referring physician in the hospital; and 


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(C) disclose the fact that the hospital is partially or wholly owned by one or more physicians or has one or more physician investors— 

(i) on any public website for the hospital; and 

(ii) in any public advertising for the hospital. 

The information to be reported or disclosed under this paragraph shall be provided in such form, manner, and at such 

times as the Secretary shall specify. The requirements of this 

paragraph shall not apply to designated health services furnished outside the United States or to entities which the Secretary determines provide services for which payment may be 

made under this title very infrequently. 

(3) PUBLICATION OF INFORMATION.—The Secretary shall publish, and periodically update, the information submitted by hospitals under paragraph (2)(A) on the public Internet website of 

the Centers for Medicare & Medicaid Services. 

(g) SANCTIONS.— 

(1) * * * 

* * * * * * * 

ø(5) FAILURE TO REPORT INFORMATION.—Any person who is 

required, but fails, to meet a reporting requirement of subsection (f) is subject to a civil money penalty of not more than 

$10,000 for each day for which reporting is required to have 

been made. The provisions of section 1128A (other than the 

first sentence of subsection (a) and other than subsection (b)) 

shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).¿ 

(5) FAILURE TO REPORT OR DISCLOSE INFORMATION.— (A) REPORTING.—Any person who is required, but fails, 

to meet a reporting requirement of paragraphs (1) and 

(2)(A) of subsection (f) is subject to a civil money penalty of 

not more than $10,000 for each day for which reporting is 

required to have been made. 

(B) DISCLOSURE.—Any physician who is required, but 

fails, to meet a disclosure requirement of subsection 

(f)(2)(B) or a hospital that is required, but fails, to meet a 

disclosure requirement of subsection (f)(2)(C) is subject to a 

civil money penalty of not more than $10,000 for each case 

in which disclosure is required to have been made. 

(C) APPLICATION.—The provisions of section 1128A (other 

than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under subparagraphs (A) and (B) in the same manner as such provisions apply to a penalty or proceeding under section 

1128A(a). 

* * * * * * * 

(i) REQUIREMENTS TO QUALIFY FOR RURAL PROVIDER AND HOSPITAL OWNERSHIP EXCEPTIONS TO SELF-REFERRAL PROHIBITION.— 

(1) REQUIREMENTS DESCRIBED.—For purposes of subsection 

(d)(3)(D), the requirements described in this paragraph are as 

follows: 

(A) PROVIDER AGREEMENT.—The hospital had— 


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(i) physician ownership or investment on January 1, 

2009; and 

(ii) a provider agreement under section 1866 in effect 

on such date. 

(B) PROHIBITION ON PHYSICIAN OWNERSHIP OR INVEST- MENT.—The percentage of the total value of the ownership 

or investment interests held in the hospital, or in an entity 

whose assets include the hospital, by physician owners or 

investors in the aggregate does not exceed such percentage 

as of the date of enactment of this subsection. 

(C) PROHIBITION ON EXPANSION OF FACILITY CAPACITY.— Except as provided in paragraph (2), the number of operating rooms, procedure rooms, or beds of the hospital at 

any time on or after the date of the enactment of this subsection are no greater than the number of operating rooms, 

procedure rooms, or beds, respectively, as of such date. 

(D) ENSURING BONA FIDE OWNERSHIP AND INVESTMENT.— (i) Any ownership or investment interests that the 

hospital offers to a physician are not offered on more 

favorable terms than the terms offered to a person who 

is not in a position to refer patients or otherwise generate business for the hospital. 

(ii) The hospital (or any investors in the hospital) 

does not directly or indirectly provide loans or financing for any physician owner or investor in the hospital. 

(iii) The hospital (or any investors in the hospital) 

does not directly or indirectly guarantee a loan, make 

a payment toward a loan, or otherwise subsidize a 

loan, for any physician owner or investor or group of 

physician owners or investors that is related to acquiring any ownership or investment interest in the hospital. 

(iv) Ownership or investment returns are distributed 

to each owner or investor in the hospital in an amount 

that is directly proportional to the ownership or investment interest of such owner or investor in the hospital. 

(v) The investment interest of the owner or investor 

is directly proportional to the owner’s or investor’s capital contributions made at the time the ownership or 

investment interest is obtained. 

(vi) Physician owners and investors do not receive, 

directly or indirectly, any guaranteed receipt of or right 

to purchase other business interests related to the hospital, including the purchase or lease of any property 

under the control of other owners or investors in the 

hospital or located near the premises of the hospital. 

(vii) The hospital does not offer a physician owner or 

investor the opportunity to purchase or lease any property under the control of the hospital or any other 

owner or investor in the hospital on more favorable 

terms than the terms offered to a person that is not a 

physician owner or investor. 

(viii) The hospital does not condition any physician 

ownership or investment interests either directly or indirectly on the physician owner or investor making or 


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706 

influencing referrals to the hospital or otherwise generating business for the hospital. 

(E) PATIENT SAFETY.—In the case of a hospital that does 

not offer emergency services, the hospital has the capacity 

to— 

(i) provide assessment and initial treatment for medical emergencies; and 

(ii) if the hospital lacks additional capabilities required to treat the emergency involved, refer and transfer the patient with the medical emergency to a hospital with the required capability. 

(F) LIMITATION ON APPLICATION TO CERTAIN CONVERTED

FACILITIES.—The hospital was not converted from an ambulatory surgical center to a hospital on or after the date 

of enactment of this subsection. 

(2) EXCEPTION TO PROHIBITION ON EXPANSION OF FACILITY

CAPACITY.— (A) PROCESS.— (i) ESTABLISHMENT.—The Secretary shall establish 

and implement a process under which a hospital may 

apply for an exception from the requirement under 

paragraph (1)(C). 

(ii) OPPORTUNITY FOR COMMUNITY INPUT.—The process under clause (i) shall provide persons and entities 

in the community in which the hospital applying for an 

exception is located with the opportunity to provide 

input with respect to the application. 

(iii) TIMING FOR IMPLEMENTATION.—The Secretary 

shall implement the process under clause (i) on the 

date that is one month after the promulgation of regulations described in clause (iv). 

(iv) REGULATIONS.—Not later than the first day of 

the month beginning 18 months after the date of the 

enactment of this subsection, the Secretary shall promulgate regulations to carry out the process under 

clause (i). The Secretary may issue such regulations as 

interim final regulations. 

(B) FREQUENCY.—The process described in subparagraph 

(A) shall permit a hospital to apply for an exception up to 

once every 2 years. 

(C) PERMITTED INCREASE.— 

(i) IN GENERAL.—Subject to clause (ii) and subparagraph (D), a hospital granted an exception under the 

process described in subparagraph (A) may increase 

the number of operating rooms, procedure rooms, or 

beds of the hospital above the baseline number of operating rooms, procedure rooms, or beds, respectively, of 

the hospital (or, if the hospital has been granted a previous exception under this paragraph, above the number of operating rooms, procedure rooms, or beds, respectively, of the hospital after the application of the 

most recent increase under such an exception). 

(ii) 100 PERCENT INCREASE LIMITATION.—The Secretary shall not permit an increase in the number of 

operating rooms, procedure rooms, or beds of a hospital 


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707 

under clause (i) to the extent such increase would result in the number of operating rooms, procedure 

rooms, or beds of the hospital exceeding 200 percent of 

the baseline number of operating rooms, procedure 

rooms, or beds of the hospital. 

(iii) BASELINE NUMBER OF OPERATING ROOMS, PROCE- DURE ROOMS, OR BEDS.—In this paragraph, the term 

‘‘baseline number of operating rooms, procedure rooms, 

or beds’’ means the number of operating rooms, procedure rooms, or beds of a hospital as of the date of enactment of this subsection. 

(D) INCREASE LIMITED TO FACILITIES ON THE MAIN CAM- PUS OF THE HOSPITAL.—Any increase in the number of operating rooms, procedure rooms, or beds of a hospital pursuant to this paragraph may only occur in facilities on the 

main campus of the hospital. 

(E) CONDITIONS FOR APPROVAL OF AN INCREASE IN FACIL- ITY CAPACITY.—The Secretary may grant an exception 

under the process described in subparagraph (A) only to a 

hospital— 

(i) that is located in a county in which the percentage 

increase in the population during the most recent 5- 

year period for which data are available is estimated 

to be at least 150 percent of the percentage increase in 

the population growth of the State in which the hospital is located during that period, as estimated by Bureau of the Census and available to the Secretary; 

(ii) whose annual percent of total inpatient admissions that represent inpatient admissions under the 

program under title XIX is estimated to be equal to or 

greater than the average percent with respect to such 

admissions for all hospitals located in the county in 

which the hospital is located; 

(iii) that does not discriminate against beneficiaries 

of Federal health care programs and does not permit 

physicians practicing at the hospital to discriminate 

against such beneficiaries; 

(iv) that is located in a State in which the average 

bed capacity in the State is estimated to be less than 

the national average bed capacity; 

(v) that has an average bed occupancy rate that is estimated to be greater than the average bed occupancy 

rate in the State in which the hospital is located; and 

(vi) that meets other conditions as determined by the 

Secretary. 

(F) PROCEDURE ROOMS.—In this subsection, the term 

‘‘procedure rooms’’ includes rooms in which catheterizations, angiographies, angiograms, and endoscopies are furnished, but such term shall not include emergency rooms or 

departments (except for rooms in which catheterizations, 

angiographies, angiograms, and endoscopies are furnished). 

(G) PUBLICATION OF FINAL DECISIONS.—Not later than 

120 days after receiving a complete application under this 

paragraph, the Secretary shall publish on the public InterVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00713 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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net website of the Centers for Medicare & Medicaid Services the final decision with respect to such application. 

(H) LIMITATION ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, 

or otherwise of the exception process under this paragraph, 

including the establishment of such process, and any determination made under such process. 

(3) PHYSICIAN OWNER OR INVESTOR DEFINED.—For purposes 

of this subsection and subsection (f)(2), the term ‘‘physician 

owner or investor’’ means a physician (or an immediate family 

member of such physician) with a direct or an indirect ownership or investment interest in the hospital. 

(4) PATIENT SAFETY REQUIREMENT.—In the case of a hospital 

to which the requirements of paragraph (1) apply, insofar as 

the hospital admits a patient and does not have any physician 

available on the premises 24 hours per day, 7 days per week, 

before admitting the patient— 

(A) the hospital shall disclose such fact to the patient; 

and 

(B) following such disclosure, the hospital shall receive 

from the patient a signed acknowledgment that the patient 

understands such fact. 

(5) CLARIFICATION.—Nothing in this subsection shall be construed as preventing the Secretary from terminating a hospital’s 

provider agreement if the hospital is not in compliance with 

regulations pursuant to section 1866. 

* * * * * * * 

MEDICARE COVERAGE FOR END STAGE RENAL DISEASE PATIENTS

SEC. 1881. (a) * * * 

(b)(1) * * * 

* * * * * * * 

(14)(A) * * * 

(B) For purposes of this paragraph, the term ‘‘renal dialysis services’’ includes— 

(i) * * * 

* * * * * * * 

(iii) other drugs and biologicals, including oral drugs 

that are not the oral equivalent of an intravenous drug 

(such as oral phosphate binders and calcimimetics), that 

are furnished to individuals for the treatment of end stage 

renal disease and for which payment was (before the application of this paragraph) made separately under this title, 

and any oral equivalent form of such drug or biological; 

and 

* * * * * * * 

(E)(i) * * * 

(ii) A provider of services or renal dialysis facility may make øa 

one-time election to be excluded from the phase-in¿ an election, 

with respect to 2011, 2012, or 2013, to be excluded from the phasein (or the remainder of the phase-in) under clause (i) and be paid 

entirely based on the payment amount under the payment system 

under this paragraph for such year and for each subsequent year 


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during the phase-in described in clause (i). Such an election shall 

be made prior to øJanuary 1, 2011¿ the first date of such year, in 

a form and manner and at a time specified by the Secretary, and 

is final and may not be rescinded. 

* * * * * * * 

(15) For purposes of evaluating or auditing payments made to 

renal dialysis facilities for items and services under this section 

under paragraph (1), each such renal dialysis facility, upon the request of the Secretary, shall provide to the Secretary access to information relating to any ownership or compensation arrangement between such facility and the medical director of such facility or between such facility and any physician. 

* * * * * * * 

(h) QUALITY INCENTIVES IN THE END-STAGE RENAL DISEASE PRO- GRAM.— 

(1) * * * 

(2) MEASURES.— (A) * * * 

(B) USE OF ENDORSED MEASURES.— (i) * * * 

(ii) EXCEPTION.—In the case of a specified area or 

medical topic determined appropriate by the Secretary 

for which a feasible and practical measure has not 

been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that 

is not so endorsed as long as due consideration is 

given to measures that have been endorsed or adopted 

by a consensus organization identified by the Secretary. The Secretary shall submit such a non-endorsed measure to the entity for consideration for endorsement. If the entity considers but does not endorse 

such a measure and if the Secretary does not phase-out 

use of such measure, the Secretary shall include the rationale for continued use of such a measure in rulemaking. 

* * * * * * * 

(4) PERFORMANCE STANDARDS.— 

(A) * * * 

* * * * * * * 

(E) SPECIAL RULE.—The Secretary shall initially use as 

the performance standard for the measures specified under 

paragraph (2)(A)(i) for a provider of services or a renal dialysis facility the ølesser¿ greater of— 

(i) * * * 

* * * * * * * 

PAYMENT TO HOSPITALS FOR INPATIENT HOSPITAL SERVICES

SEC. 1886. (a) * * * 

(b)(1) * * * 

* * * * * * * 

(3)(A) * * * 


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(B)(i) * * * 

* * * * * * * 

ø(iii) For purposes of this subparagraph,¿ (iii)(I) For purposes of 

this subparagraph, subject to the productivity adjustment described 

in subclause (II), the term ‘‘market basket percentage increase’’ 

means, with respect to cost reporting periods and discharges occurring in a fiscal year, the percentage, estimated by the Secretary before the beginning of the period or fiscal year, by which the cost 

of the mix of goods and services (including personnel costs but excluding nonoperating costs) comprising routine, ancillary, and special care unit inpatient hospital services, based on an index of appropriately weighted indicators of changes in wages and prices 

which are representative of the mix of goods and services included 

in such inpatient hospital services, for the period or fiscal year will 

exceed the cost of such mix of goods and services for the preceding 

12-month cost reporting period or fiscal year. 

(II) The productivity adjustment described in this subclause, with 

respect to an increase or change for a fiscal year or year or cost reporting period, or other annual period, is a productivity offset equal 

to the percentage change in the 10-year moving average of annual 

economy-wide private nonfarm business multi-factor productivity 

(as recently published before the promulgation of such increase for 

the year or period involved). Except as otherwise provided, any reference to the increase described in this clause shall be a reference 

to the percentage increase described in subclause (I) minus the percentage change under this subclause. 

* * * * * * * 

(viii)(I) For purposes of clause (i) for fiscal year 2007 and each 

subsequent fiscal year, in the case of a subsection (d) hospital that 

does not submit, to the Secretary in accordance with this clause, 

data required to be submitted on measures selected under this 

clause with respect to such a fiscal year, the applicable percentage 

increase under clause (i) for such fiscal year shall be reduced (but 

not below zero) by 2.0 percentage points (or, beginning with fiscal 

year 2015, by one-quarter). Such reduction shall apply only with 

respect to the fiscal year involved and the Secretary shall not take 

into account such reduction in computing the applicable percentage 

increase under clause (i) for a subsequent fiscal year, and the Secretary and the Medicare Payment Advisory Commission shall carry 

out the requirements under section 5001(b) of the Deficit Reduction 

Act of 2005. 

* * * * * * * 

(ix)(I) For purposes of clause (i) for fiscal year 2015 and each subsequent fiscal year, in the case of an eligible hospital (as defined 

in subsection (n)(6)(A)) that is not a meaningful EHR user (as defined in subsection (n)(3)) for an EHR reporting period for such fiscal year, three-quarters of the applicable percentage increase otherwise applicable under clause (i) (determined without regard to 

clause (iii)(II) for such fiscal year shall be reduced (but not below 

zero) by 331⁄3 percent for fiscal year 2015, 662⁄3 percent for fiscal 

year 2016, and 100 percent for fiscal year 2017 and each subsequent fiscal year. Such reduction shall apply only with respect to 

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count such reduction in computing the applicable percentage increase under clause (i) for a subsequent fiscal year. 

* * * * * * * 

(x)(I) Subject to subclause (II), for purposes of reporting data on 

quality measures for inpatient hospital services furnished during 

fiscal year 2012 and each subsequent fiscal year, the quality measures specified under clause (viii) shall be measures selected by the 

Secretary from measures that have been endorsed by the entity with 

a contract with the Secretary under section 1890(a). 

(II) In the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical quality 

measure has not been endorsed by the entity with a contract under 

section 1890(a), the Secretary may specify a measure that is not so 

endorsed as long as due consideration is given to measures that 

have been endorsed or adopted by a consensus organization identified by the Secretary. The Secretary shall submit such a non-endorsed measure to the entity for consideration for endorsement. If 

the entity considers but does not endorse such a measure and if the 

Secretary does not phase-out use of such measure, the Secretary 

shall include the rationale for continued use of such a measure in 

rulemaking. 

* * * * * * * 

(d)(1) * * * 

* * * * * * * 

(5)(A) * * * 

(B) The Secretary shall provide for an additional payment 

amount for subsection (d) hospitals with indirect costs of medical 

education, in an amount computed in the same manner as the adjustment for such costs under regulations (in effect as of January 

1, 1983) under subsection (a)(2), except as follows: 

(i) * * * 

* * * * * * * 

ø(iv) Effective for discharges occurring on or after October 1, 

1997¿ (iv)(I) Effective for discharges occurring on or after October 1, 1997, and before July 1, 2009, all the time spent by an 

intern or resident in patient care activities under an approved 

medical residency training program at an entity in a nonhospital setting shall be counted towards the determination of fulltime equivalency if the hospital incurs all, or substantially all, 

of the costs for the training program in that setting. 

(II) Effective for discharges occurring on or after July 1, 

2009, all the time spent by an intern or resident in patient care 

activities at an entity in a nonprovider setting shall be counted 

towards the determination of full-time equivalency if the hospital incurs the costs of the stipends and fringe benefits of the 

intern or resident during the time the intern or resident spends 

in that setting. 

(v) In determining the adjustment with respect to a hospital 

for discharges occurring on or after October 1, 1997, the total 

number of full-time equivalent interns and residents in the 

fields of allopathic and osteopathic medicine in either a hospital or nonhospital setting may not exceed the number (or, 

130 percent of such number in the case of a hospital located 


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in a rural area) of such full-time equivalent interns and residents in the hospital with respect to the hospital’s most recent 

cost reporting period ending on or before December 31, 1996. 

Rules similar to the rules of subsection (h)(4)(F)(ii) shall apply 

for purposes of this clause. The provisions of øsubsection 

(h)(7)¿ subsections (h)(7) and (h)(8) shall apply with respect to 

the first sentence of this clause in the same manner as øit applies¿ they apply with respect to subsection (h)(4)(F)(i). 

* * * * * * * 

(x) For discharges occurring on or after July 1, 2011, insofar as 

an additional payment amount under this subparagraph is attributable to resident positions distributed to a hospital under subsection (h)(8)(B), the indirect teaching adjustment factor shall be 

computed in the same manner as provided under clause (ii) with respect to such resident positions. 

(xi)(I) The provisions of subparagraph (I) of subsection (h)(4) shall 

apply under this subparagraph in the same manner as they apply 

under such subsection. 

(II) In determining the hospital’s number of full-time equivalent 

residents for purposes of this subparagraph, all the time spent by 

an intern or resident in an approved medical residency training 

program in nonpatient care activities, such as didactic conferences 

and seminars, as such time and activities are defined by the Secretary, that occurs in the hospital shall be counted toward the determination of full-time equivalency if the hospital— 

(aa) is recognized as a subsection (d) hospital; 

(bb) is recognized as a subsection (d) Puerto Rico hospital; 

(cc) is reimbursed under a reimbursement system authorized 

under section 1814(b)(3); or 

(dd) is a provider-based hospital outpatient department. 

(III) In determining the hospital’s number of full-time equivalent 

residents for purposes of this subparagraph, all the time spent by 

an intern or resident in an approved medical residency training 

program in research activities that are not associated with the treatment or diagnosis of a particular patient, as such time and activities are defined by the Secretary, shall not be counted toward the 

determination of full-time equivalency. 

* * * * * * * 

(h) PAYMENTS FOR DIRECT GRADUATE MEDICAL EDUCATION

COSTS.— 

(1) SUBSTITUTION OF SPECIAL PAYMENT RULES.— 

(A) IN GENERAL.—Notwithstanding section 1861(v), instead of any amounts that are otherwise payable under 

this title with respect to the reasonable costs of hospitals 

for direct graduate medical education costs, the Secretary 

shall provide for payments for such costs in accordance 

with paragraph (3) of this subsection. 

(B) GOALS AND ACCOUNTABILITY FOR APPROVED MEDICAL

RESIDENCY TRAINING PROGRAMS.—The goals of medical 

residency training programs are to foster a physician workforce so that physicians are trained to be able to do the following: 

(i) Work effectively in various health care delivery 

settings, such as nonprovider settings. 


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(ii) Coordinate patient care within and across settings relevant to their specialties. 

(iii) Understand the relevant cost and value of various diagnostic and treatment options. 

(iv) Work in inter-professional teams and multi-disciplinary team-based models in provider and nonprovider settings to enhance safety and improve quality of 

patient care. 

(v) Be knowledgeable in methods of identifying systematic errors in health care delivery and in implementing systematic solutions in case of such errors, including experience and participation in continuous 

quality improvement projects to improve health outcomes of the population the physicians serve. 

(vi) Be meaningful EHR users (as determined under 

section 1848(o)(2)) in the delivery of care and in improving the quality of the health of the community and 

the individuals that the hospital serves. 

* * * * * * * 

(4) DETERMINATION OF FULL-TIME-EQUIVALENT RESIDENTS.— (A) * * * 

* * * * * * * 

(E) COUNTING TIME SPENT IN OUTPATIENT SETTINGS.— øSuch rules¿ (i) IN GENERAL.—Subject to clause (ii), 

such rules shall provide that only time spent in activities relating to patient care øshall be counted and that 

all the time¿ shall be counted and that— 

(I) effective for cost reporting periods beginning 

before July 1, 2009, all the time so spent by a resident under an approved medical residency training program shall be counted towards the determination of full-time equivalency, without regard 

to the setting in which the activities are performed, if the hospital incurs all, or substantially 

all, of the costs for the training program in that 

settingø.¿; and 

(II) effective for cost reporting periods beginning 

on or after July 1, 2009, all the time so spent by 

a resident shall be counted towards the determination of full-time equivalency, without regard to the 

setting in which the activities are performed, if the 

hospital incurs the costs of the stipends and fringe 

benefits of the resident during the time the resident 

spends in that setting. 

Any hospital claiming under this subparagraph for 

time spent in a nonprovider setting shall maintain and 

make available to the Secretary records regarding the 

amount of such time and such amount in comparison 

with amounts of such time in such base year as the 

Secretary shall specify. 

(ii) TREATMENT OF CERTAIN NONPROVIDER AND DIDACTIC ACTIVITIES.—Such rules shall provide that all 

time spent by an intern or resident in an approved 

medical residency training program in a nonprovider 


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714 

setting that is primarily engaged in furnishing patient 

care (as defined in paragraph (5)(K)) in nonpatient 

care activities, such as didactic conferences and seminars, but not including research not associated with 

the treatment or diagnosis of a particular patient, as 

such time and activities are defined by the Secretary, 

shall be counted toward the determination of full-time 

equivalency. 

(F) LIMITATION ON NUMBER OF RESIDENTS IN ALLOPATHIC

AND OSTEOPATHIC MEDICINE.— (i) IN GENERAL.—Such rules shall provide that for 

purposes of a cost reporting period beginning on or 

after October 1, 1997, subject to øparagraph (7)¿ paragraphs (7) and (8), the total number of full-time equivalent residents before application of weighting factors 

(as determined under this paragraph) with respect to 

a hospital’s approved medical residency training program in the fields of allopathic medicine and osteopathic medicine may not exceed the number (or, 130 

percent of such number in the case of a hospital located in a rural area) of such full-time equivalent residents for the hospital’s most recent cost reporting period ending on or before December 31, 1996. 

* * * * * * * 

(H) SPECIAL RULES FOR APPLICATION OF SUBPARAGRAPHS

(F) AND (G).— 

(i) NEW FACILITIES.—The Secretary shall, consistent 

with the principles of subparagraphs (F) and (G) and 

subject to øparagraph (7)¿ paragraphs (7) and (8), prescribe rules for the application of such subparagraphs 

in the case of medical residency training programs established on or after January 1, 1995. In promulgating 

such rules for purposes of subparagraph (F), the Secretary shall give special consideration to facilities that 

meet the needs of underserved rural areas. 

* * * * * * * 

(vi) REDISTRIBUTION OF RESIDENCY SLOTS AFTER A

HOSPITAL CLOSES.— 

(I) IN GENERAL.—The Secretary shall, by regulation, establish a process consistent with subclauses 

(II) and (III) under which, in the case where a hospital (other than a hospital described in clause (v)) 

with an approved medical residency program in a 

State closes on or after the date that is 2 years before the date of the enactment of this clause, the 

Secretary shall increase the otherwise applicable 

resident limit under this paragraph for other hospitals in the State in accordance with this clause. 

(II) PROCESS FOR HOSPITALS IN CERTAIN

AREAS.—In determining for which hospitals the increase in the otherwise applicable resident limit 

described in subclause (I) is provided, the Secretary shall establish a process to provide for such 

increase to one or more hospitals located in the 


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State. Such process shall take into consideration 

the recommendations submitted to the Secretary by 

the senior health official (as designated by the 

chief executive officer of such State) if such recommendations are submitted not later than 180 

days after the date of the hospital closure involved 

(or, in the case of a hospital that closed after the 

date that is 2 years before the date of the enactment of this clause, 180 days after such date of enactment). 

(III) LIMITATION.—The estimated aggregate 

number of increases in the otherwise applicable 

resident limits for hospitals under this clause shall 

be equal to the estimated number of resident positions in the approved medical residency programs 

that closed on or after the date described in subclause (I). 

(I) TREATMENT OF CERTAIN TIME IN APPROVED MEDICAL

RESIDENCY TRAINING PROGRAMING.—In determining the 

hospital’s number of full-time equivalent residents for purposes of this subsection, all the time that is spent by an intern or resident in an approved medical residency training 

program on vacation, sick leave, or other approved leave, as 

such time is defined by the Secretary, and that does not 

prolong the total time the resident is participating in the 

approved program beyond the normal duration of the program shall be counted toward the determination of fulltime equivalency. 

(5) DEFINITIONS AND SPECIAL RULES.—As used in this subsection: 

(A) * * * 

* * * * * * * 

(K) NONPROVIDER SETTING THAT IS PRIMARILY ENGAGED

IN FURNISHING PATIENT CARE.—The term ‘‘nonprovider setting that is primarily engaged in furnishing patient care’’ 

means a nonprovider setting in which the primary activity 

is the care and treatment of patients, as defined by the Secretary. 

* * * * * * * 

(7) REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.— 

(A) * * * 

* * * * * * * 

(E) JUDICIAL REVIEW.—There shall be no administrative 

or judicial review under section 1869, 1878, or otherwise, 

with respect to determinations made under this paragraph 

or under paragraph (4)(H)(vi) and paragraph (8). 

(8) ADDITIONAL REDISTRIBUTION OF UNUSED RESIDENCY POSI- TIONS.— 

(A) REDUCTIONS IN LIMIT BASED ON UNUSED POSITIONS.— 

(i) PROGRAMS SUBJECT TO REDUCTION.—If a hospital’s reference resident level (specified in clause (ii)) 

is less than the otherwise applicable resident limit (as 


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defined in subparagraph (C)(ii)), effective for portions 

of cost reporting periods occurring on or after July 1, 

2011, the otherwise applicable resident limit shall be 

reduced by 90 percent of the difference between such 

otherwise applicable resident limit and such reference 

resident level. 

(ii) REFERENCE RESIDENT LEVEL.— (I) IN GENERAL.—Except as otherwise provided 

in a subsequent subclause, the reference resident 

level specified in this clause for a hospital is the 

highest resident level for any of the 3 most recent 

cost reporting periods (ending before the date of the 

enactment of this paragraph) of the hospital for 

which a cost report has been settled (or, if not, submitted (subject to audit)), as determined by the 

Secretary. 

(II) USE OF MOST RECENT ACCOUNTING PERIOD

TO RECOGNIZE EXPANSION OF EXISTING PRO- GRAMS.—If a hospital submits a timely request to 

increase its resident level due to an expansion, or 

planned expansion, of an existing residency training program that is not reflected on the most recent settled or submitted cost report, after audit 

and subject to the discretion of the Secretary, subject to subclause (IV), the reference resident level 

for such hospital is the resident level that includes 

the additional residents attributable to such expansion or establishment, as determined by the 

Secretary. The Secretary is authorized to determine 

an alternative reference resident level for a hospital that submitted to the Secretary a timely request, before the start of the 2009–2010 academic 

year, for an increase in its reference resident level 

due to a planned expansion. 

(III) SPECIAL PROVIDER AGREEMENT.—In the 

case of a hospital described in paragraph (4)(H)(v), 

the reference resident level specified in this clause 

is the limitation applicable under subclause (I) of 

such paragraph. 

(IV) PREVIOUS REDISTRIBUTION.—The reference 

resident level specified in this clause for a hospital 

shall be increased to the extent required to take 

into account an increase in resident positions made 

available to the hospital under paragraph (7)(B) 

that are not otherwise taken into account under a 

previous subclause. 

(iii) AFFILIATION.—The provisions of clause (i) shall 

be applied to hospitals which are members of the same 

affiliated group (as defined by the Secretary under 

paragraph (4)(H)(ii)) and to the extent the hospitals 

can demonstrate that they are filling any additional 

resident slots allocated to other hospitals through an 

affiliation agreement, the Secretary shall adjust the determination of available slots accordingly, or which the 

Secretary otherwise has permitted the resident posiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00722 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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717 

tions (under section 402 of the Social Security Amendments of 1967) to be aggregated for purposes of applying the resident position limitations under this subsection. 

(B) REDISTRIBUTION.— (i) IN GENERAL.—The Secretary shall increase the 

otherwise applicable resident limit for each qualifying 

hospital that submits an application under this subparagraph by such number as the Secretary may approve for portions of cost reporting periods occurring on 

or after July 1, 2011. The estimated aggregate number 

of increases in the otherwise applicable resident limit 

under this subparagraph may not exceed the Secretary’s estimate of the aggregate reduction in such 

limits attributable to subparagraph (A). 

(ii) REQUIREMENTS FOR QUALIFYING HOSPITALS.—A 

hospital is not a qualifying hospital for purposes of 

this paragraph unless the following requirements are 

met: 

(I) MAINTENANCE OF PRIMARY CARE RESIDENT

LEVEL.—The hospital maintains the number of primary care residents at a level that is not less than 

the base level of primary care residents increased 

by the number of additional primary care resident 

positions provided to the hospital under this subparagraph. For purposes of this subparagraph, the 

‘‘base level of primary care residents’’ for a hospital 

is the level of such residents as of a base period 

(specified by the Secretary), determined without regard to whether such positions were in excess of 

the otherwise applicable resident limit for such period but taking into account the application of subclauses (II) and (III) of subparagraph (A)(ii). 

(II) DEDICATED ASSIGNMENT OF ADDITIONAL

RESIDENT POSITIONS TO PRIMARY CARE.—The hospital assigns all such additional resident positions 

for primary care residents. 

(III) ACCREDITATION.—The hospital’s residency 

programs in primary care are fully accredited or, 

in the case of a residency training program not in 

operation as of the base year, the hospital is actively applying for such accreditation for the program for such additional resident positions (as determined by the Secretary). 

(iii) CONSIDERATIONS IN REDISTRIBUTION.—In determining for which qualifying hospitals the increase in 

the otherwise applicable resident limit is provided 

under this subparagraph, the Secretary shall take into 

account the demonstrated likelihood of the hospital filling the positions within the first 3 cost reporting periods beginning on or after July 1, 2011, made available 

under this subparagraph, as determined by the Secretary. 

(iv) PRIORITY FOR CERTAIN HOSPITALS.—In determining for which qualifying hospitals the increase in 


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the otherwise applicable resident limit is provided 

under this subparagraph, the Secretary shall distribute 

the increase to qualifying hospitals based on the following criteria: 

(I) The Secretary shall give preference to hospitals that had a reduction in resident training positions under subparagraph (A). 

(II) The Secretary shall give preference to hospitals with 3-year primary care residency training 

programs, such as family practice and general internal medicine. 

(III) The Secretary shall give preference to hospitals insofar as they have in effect formal arrangements (as determined by the Secretary) that 

place greater emphasis upon training in Federally 

qualified health centers, rural health clinics, and 

other nonprovider settings, and to hospitals that 

receive additional payments under subsection 

(d)(5)(F) and emphasize training in an outpatient 

department. 

(IV) The Secretary shall give preference to hospitals with a number of positions (as of July 1, 

2009) in excess of the otherwise applicable resident 

limit for such period. 

(V) The Secretary shall give preference to hospitals that place greater emphasis upon training in 

a health professional shortage area (designated 

under section 332 of the Public Health Service Act) 

or a health professional needs area (designated 

under section 2211 of such Act). 

(VI) The Secretary shall give preference to hospitals in States that have low resident-to-population ratios (including a greater preference for 

those States with lower resident-to-population ratios). 

(v) LIMITATION.—In no case shall more than 20 fulltime equivalent additional residency positions be made 

available under this subparagraph with respect to any 

hospital. 

(vi) APPLICATION OF PER RESIDENT AMOUNTS FOR

PRIMARY CARE.—With respect to additional residency 

positions in a hospital attributable to the increase provided under this subparagraph, the approved FTE resident amounts are deemed to be equal to the hospital 

per resident amounts for primary care and nonprimary 

care computed under paragraph (2)(D) for that hospital. 

(vii) DISTRIBUTION.—The Secretary shall distribute 

the increase in resident training positions to qualifying 

hospitals under this subparagraph not later than July 

1, 2011. 

(C) RESIDENT LEVEL AND LIMIT DEFINED.—In this paragraph: 

(i) The term ‘‘resident level’’ has the meaning given 

such term in paragraph (7)(C)(i). 


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(ii) The term ‘‘otherwise applicable resident limit’’ 

means, with respect to a hospital, the limit otherwise 

applicable under subparagraphs (F)(i) and (H) of paragraph (4) on the resident level for the hospital determined without regard to this paragraph but taking 

into account paragraph (7)(A). 

(D) MAINTENANCE OF PRIMARY CARE RESIDENT LEVEL.— 

In carrying out this paragraph, the Secretary shall require 

hospitals that receive additional resident positions under 

subparagraph (B)— 

(i) to maintain records, and periodically report to the 

Secretary, on the number of primary care residents in 

its residency training programs; and 

(ii) as a condition of payment for a cost reporting period under this subsection for such positions, to maintain the level of such positions at not less than the sum 

of— 

(I) the base level of primary care resident positions (as determined under subparagraph (B)(ii)(I)) 

before receiving such additional positions; and 

(II) the number of such additional positions. 

* * * * * * * 

(j) PROSPECTIVE PAYMENT FOR INPATIENT REHABILITATION SERVICES.— 

(1) * * * 

* * * * * * * 

(3) PAYMENT RATE.— 

(A) * * * 

* * * * * * * 

(C) INCREASE FACTOR.—For purposes of this subsection 

for payment units in each fiscal year (beginning with fiscal 

year 2001), the Secretary shall establish an increase factor. Such factor shall be based on an appropriate percentage increase (subject to the productivity adjustment described in subsection (b)(3)(B)(iii)(II)) in a market basket of 

goods and services comprising services for which payment 

is made under this subsection, which may be the market 

basket percentage increase described in subsection 

(b)(3)(B)(iii). The increase factor to be applied under this 

subparagraph for each of fiscal years 2008 øand 2009¿ 

through 2010 shall be 0 percent. 

* * * * * * * 

(m) PROSPECTIVE PAYMENT FOR LONG-TERM CARE HOSPITALS.— 

(1) * * * 

* * * * * * * 

(3) PRODUCTIVITY ADJUSTMENT.—In implementing the system 

described in paragraph (1) for discharges occurring during the 

rate year ending in 2010 or any subsequent rate year for a hospital, to the extent that an annual percentage increase factor 

applies to a base rate for such discharges for the hospital, such 


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720 

factor shall be subject to the productivity adjustment described 

in subsection (b)(3)(B)(iii)(II). 

* * * * * * * 

(o) PROSPECTIVE PAYMENT FOR PSYCHIATRIC HOSPITALS.— (1) REFERENCE TO ESTABLISHMENT AND IMPLEMENTATION OF

SYSTEM.—For provisions related to the establishment and implementation of a prospective payment system for payments 

under this title for inpatient hospital services furnished by psychiatric hospitals (as described in clause (i) of subsection 

(d)(1)(B) and psychiatric units (as described in the matter following clause (v) of such subsection), see section 124 of the 

Medicare, Medicaid, and SCHIP Balanced Budget Refinement 

Act of 1999. 

(2) PRODUCTIVITY ADJUSTMENT.—In implementing the system 

described in paragraph (1) for discharges occurring during the 

rate year ending in 2011 or any subsequent rate year for a psychiatric hospital or unit described in such paragraph, to the extent that an annual percentage increase factor applies to a base 

rate for such discharges for the hospital or unit, respectively, 

such factor shall be subject to the productivity adjustment described in subsection (b)(3)(B)(iii)(II). 

(p) ADJUSTMENT TO HOSPITAL PAYMENTS FOR EXCESS READMIS- SIONS.— 

(1) IN GENERAL.—With respect to payment for discharges 

from an applicable hospital (as defined in paragraph (5)(C)) occurring during a fiscal year beginning on or after October 1, 

2011, in order to account for excess readmissions in the hospital, the Secretary shall reduce the payments that would otherwise be made to such hospital under subsection (d) (or section 

1814(b)(3), as the case may be) for such a discharge by an 

amount equal to the product of— 

(A) the base operating DRG payment amount (as defined 

in paragraph (2)) for the discharge; and 

(B) the adjustment factor (described in paragraph (3)(A)) 

for the hospital for the fiscal year. 

(2) BASE OPERATING DRG PAYMENT AMOUNT.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), for purposes of this subsection, the term ‘‘base operating DRG payment amount’’ means, with respect to a hospital for a fiscal year, the payment amount that would otherwise be made under subsection (d) for a discharge if this 

subsection did not apply, reduced by any portion of such 

amount that is attributable to payments under subparagraphs (B) and (F) of paragraph (5). 

(B) ADJUSTMENTS.—For purposes of subparagraph (A), 

in the case of a hospital that is paid under section 

1814(b)(3), the term ‘‘base operating DRG payment amount’’ 

means the payment amount under such section. 

(3) ADJUSTMENT FACTOR.— (A) IN GENERAL.—For purposes of paragraph (1), the adjustment factor under this paragraph for an applicable hospital for a fiscal year is equal to the greater of— 

(i) the ratio described in subparagraph (B) for the 

hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or 


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721 

(ii) the floor adjustment factor specified in subparagraph (C). 

(B) RATIO.—The ratio described in this subparagraph for 

a hospital for an applicable period is equal to 1 minus the 

ratio of— 

(i) the aggregate payments for excess readmissions 

(as defined in paragraph (4)(A)) with respect to an applicable hospital for the applicable period; and 

(ii) the aggregate payments for all discharges (as defined in paragraph (4)(B)) with respect to such applicable hospital for such applicable period. 

(C) FLOOR ADJUSTMENT FACTOR.—For purposes of subparagraph (A), the floor adjustment factor specified in this 

subparagraph for— 

(i) fiscal year 2012 is 0.99; 

(ii) fiscal year 2013 is 0.98; 

(iii) fiscal year 2014 is 0.97; or 

(iv) a subsequent fiscal year is 0.95. 

(4) AGGREGATE PAYMENTS, EXCESS READMISSION RATIO DE- FINED.—For purposes of this subsection: 

(A) AGGREGATE PAYMENTS FOR EXCESS READMISSIONS.— The term ‘‘aggregate payments for excess readmissions’’ 

means, for a hospital for a fiscal year, the sum, for applicable conditions (as defined in paragraph (5)(A)), of the product, for each applicable condition, of— 

(i) the base operating DRG payment amount for such 

hospital for such fiscal year for such condition; 

(ii) the number of admissions for such condition for 

such hospital for such fiscal year; and 

(iii) the excess readmissions ratio (as defined in subparagraph (C)) for such hospital for the applicable period for such fiscal year minus 1. 

(B) AGGREGATE PAYMENTS FOR ALL DISCHARGES.—The 

term ‘‘aggregate payments for all discharges’’ means, for a 

hospital for a fiscal year, the sum of the base operating 

DRG payment amounts for all discharges for all conditions 

from such hospital for such fiscal year. 

(C) EXCESS READMISSION RATIO.— (i) IN GENERAL.—Subject to clauses (ii) and (iii), the 

term ‘‘excess readmissions ratio’’ means, with respect to 

an applicable condition for a hospital for an applicable 

period, the ratio (but not less than 1.0) of— 

(I) the risk adjusted readmissions based on actual readmissions, as determined consistent with a 

readmission measure methodology that has been 

endorsed under paragraph (5)(A)(ii)(I), for an applicable hospital for such condition with respect to 

the applicable period; to 

(II) the risk adjusted expected readmissions (as 

determined consistent with such a methodology) 

for such hospital for such condition with respect to 

such applicable period. 

(ii) EXCLUSION OF CERTAIN READMISSIONS.—For purposes of clause (i), with respect to a hospital, excess readmissions shall not include readmissions for an apVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00727 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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plicable condition for which there are fewer than a 

minimum number (as determined by the Secretary) of 

discharges for such applicable condition for the applicable period and such hospital. 

(iii) ADJUSTMENT.—In order to promote a reduction 

over time in the overall rate of readmissions for applicable conditions, the Secretary may provide, beginning 

with discharges for fiscal year 2014, for the determination of the excess readmissions ratio under subparagraph (C) to be based on a ranking of hospitals by readmission ratios (from lower to higher readmission ratios) normalized to a benchmark that is lower than the 

50th percentile. 

(5) DEFINITIONS.—For purposes of this subsection: 

(A) APPLICABLE CONDITION.—The term ‘‘applicable condition’’ means, subject to subparagraph (B), a condition or 

procedure selected by the Secretary among conditions and 

procedures for which— 

(i) readmissions (as defined in subparagraph (E)) 

that represent conditions or procedures that are high 

volume or high expenditures under this title (or other 

criteria specified by the Secretary); and 

(ii) measures of such readmissions— 

(I) have been endorsed by the entity with a contract under section 1890(a); and 

(II) such endorsed measures have appropriate exclusions for readmissions that are unrelated to the 

prior discharge (such as a planned readmission or 

transfer to another applicable hospital). 

(B) EXPANSION OF APPLICABLE CONDITIONS.—Beginning 

with fiscal year 2013, the Secretary shall expand the applicable conditions beyond the 3 conditions for which measures have been endorsed as described in subparagraph 

(A)(ii)(I) as of the date of the enactment of this subsection 

to the additional 4 conditions that have been so identified 

by the Medicare Payment Advisory Commission in its report to Congress in June 2007 and to other conditions and 

procedures which may include an all-condition measure of 

readmissions, as determined appropriate by the Secretary. 

In expanding such applicable conditions, the Secretary 

shall seek the endorsement described in subparagraph 

(A)(ii)(I) but may apply such measures without such an endorsement. 

(C) APPLICABLE HOSPITAL.—The term ‘‘applicable hospital’’ means a subsection (d) hospital or a hospital that is 

paid under section 1814(b)(3). 

(D) APPLICABLE PERIOD.—The term ‘‘applicable period’’ 

means, with respect to a fiscal year, such period as the Secretary shall specify for purposes of determining excess readmissions. 

(E) READMISSION.—The term ‘‘readmission’’ means, in the 

case of an individual who is discharged from an applicable 

hospital, the admission of the individual to the same or another applicable hospital within a time period specified by 

the Secretary from the date of such discharge. Insofar as 


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the discharge relates to an applicable condition for which 

there is an endorsed measure described in subparagraph 

(A)(ii)(I), such time period (such as 30 days) shall be consistent with the time period specified for such measure. 

(6) LIMITATIONS ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of— 

(A) the determination of base operating DRG payment 

amounts; 

(B) the methodology for determining the adjustment factor under paragraph (3), including excess readmissions 

ratio under paragraph (4)(C), aggregate payments for excess readmissions under paragraph (4)(A), and aggregate 

payments for all discharges under paragraph (4)(B), and 

applicable periods and applicable conditions under paragraph (5); 

(C) the measures of readmissions as described in paragraph (5)(A)(ii); and 

(D) the determination of a targeted hospital under paragraph (8)(B)(i), the increase in payment under paragraph 

(8)(B)(ii), the aggregate cap under paragraph (8)(C)(i), the 

hospital-specific limit under paragraph (8)(C)(ii), and the 

form of payment made by the Secretary under paragraph 

(8)(D). 

(7) MONITORING INAPPROPRIATE CHANGES IN ADMISSIONS

PRACTICES.—The Secretary shall monitor the activities of applicable hospitals to determine if such hospitals have taken steps 

to avoid patients at risk in order to reduce the likelihood of increasing readmissions for applicable conditions. If the Secretary 

determines that such a hospital has taken such a step, after notice to the hospital and opportunity for the hospital to undertake action to alleviate such steps, the Secretary may impose an 

appropriate sanction. 

(8) ASSISTANCE TO CERTAIN HOSPITALS.— 

(A) IN GENERAL.—For purposes of providing funds to applicable hospitals to take steps described in subparagraph 

(E) to address factors that may impact readmissions of individuals who are discharged from such a hospital, for fiscal years beginning on or after October 1, 2011, the Secretary shall make a payment adjustment for a hospital described in subparagraph (B), with respect to each such fiscal year, by a percent estimated by the Secretary to be consistent with subparagraph (C). 

(B) TARGETED HOSPITALS.—Subparagraph (A) shall 

apply to an applicable hospital that— 

(i) received (or, in the case of an 1814(b)(3) hospital, 

otherwise would have been eligible to receive) 

$10,000,000 or more in disproportionate share payments using the latest available data as estimated by 

the Secretary; and 

(ii) provides assurances satisfactory to the Secretary 

that the increase in payment under this paragraph 

shall be used for purposes described in subparagraph 

(E). 

(C) CAPS.— 


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(i) AGGREGATE CAP.—The aggregate amount of the 

payment adjustment under this paragraph for a fiscal 

year shall not exceed 5 percent of the estimated difference in the spending that would occur for such fiscal 

year with and without application of the adjustment 

factor described in paragraph (3) and applied pursuant to paragraph (1). 

(ii) HOSPITAL-SPECIFIC LIMIT.—The aggregate 

amount of the payment adjustment for a hospital 

under this paragraph shall not exceed the estimated 

difference in spending that would occur for such fiscal 

year for such hospital with and without application of 

the adjustment factor described in paragraph (3) and 

applied pursuant to paragraph (1). 

(D) FORM OF PAYMENT.—The Secretary may make the additional payments under this paragraph on a lump sum 

basis, a periodic basis, a claim by claim basis, or otherwise. 

(E) USE OF ADDITIONAL PAYMENT.—Funding under this 

paragraph shall be used by targeted hospitals for transitional care activities designed to address the patient noncompliance issues that result in higher than normal readmission rates, such as one or more of the following: 

(i) Providing care coordination services to assist in 

transitions from the targeted hospital to other settings. 

(ii) Hiring translators and interpreters. 

(iii) Increasing services offered by discharge planners. 

(iv) Ensuring that individuals receive a summary of 

care and medication orders upon discharge. 

(v) Developing a quality improvement plan to assess 

and remedy preventable readmission rates. 

(vi) Assigning discharged individuals to a medical 

home. 

(vii) Doing other activities as determined appropriate 

by the Secretary. 

(F) GAO REPORT ON USE OF FUNDS.—Not later than 3 

years after the date on which funds are first made available under this paragraph, the Comptroller General of the 

United States shall submit to Congress a report on the use 

of such funds. 

(G) DISPROPORTIONATE SHARE HOSPITAL PAYMENT.—In 

this paragraph, the term ‘‘disproportionate share hospital 

payment’’ means an additional payment amount under subsection (d)(5)(F). 

* * * * * * * 

PAYMENT TO SKILLED NURSING FACILITIES FOR ROUTINE SERVICE

COSTS

SEC. 1888. (a) * * * 

* * * * * * * 

(e) PROSPECTIVE PAYMENT.— (1) * * * 

(2) DEFINITIONS.—For purposes of this subsection: 

(A) COVERED SKILLED NURSING FACILITY SERVICES.— 


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(i) * * * 

(ii) SERVICES EXCLUDED.—Services described in this 

clause are physicians’ services, services described by 

clauses (i) and (ii) of section 1861(s)(2)(K), certified 

nurse-midwife services, qualified psychologist services, 

clinical social worker services, marriage and family 

therapist services (as defined in subsection (jjj)(1)), 

mental health counselor services (as defined in section 

1861(kkk)(1)), services of a certified registered nurse 

anesthetist, items and services described in subparagraphs (F) and (O) of section 1861(s)(2), telehealth 

services furnished under section 1834(m)(4)(C)(ii)(VII), 

and, only with respect to services furnished during 

1998, the transportation costs of electrocardiogram 

equipment for electrocardiogram test services (HCPCS 

Code R0076). Services described in this clause do not 

include any physical, occupational, or speech-language 

therapy services regardless of whether or not the services are furnished by, or under the supervision of, a 

physician or other health care professional. 

* * * * * * * 

(4) FEDERAL PER DIEM RATE.— 

(A) * * * 

* * * * * * * 

(E) UPDATING.— 

(i) * * * 

(ii) SUBSEQUENT FISCAL YEARS.—The Secretary shall 

compute an unadjusted Federal per diem rate equal to 

the Federal per diem rate computed under this subparagraph— 

(I) * * * 

* * * * * * * 

(III) for each of fiscal years 2002 and 2003, the 

rate computed for the previous fiscal year increased by the skilled nursing facility market basket percentage change for the fiscal year involved 

minus 0.5 percentage points; øand¿ 

(IV) for each of fiscal years 2004 through 2009, 

the rate computed for the previous fiscal year increased by the skilled nursing facility market basket percentage change for the fiscal year involved; 

(V) for fiscal year 2010, the rate computed for 

the previous fiscal year; and 

ø(IV)¿ (VI) for each subsequent fiscal year, the 

rate computed for the previous fiscal year increased by the skilled nursing facility market basket percentage change for the fiscal year involved. 

* * * * * * * 

(5) SKILLED NURSING FACILITY MARKET BASKET INDEX AND

PERCENTAGE.—For purposes of this subsection: 

(A) * * * 

(B) SKILLED NURSING FACILITY MARKET BASKET PERCENTAGE.—The term ‘‘skilled nursing facility market basket 


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percentage’’ means, for a fiscal year or other annual period 

and as calculated by the Secretary subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II), the percentage change in the skilled nursing facility market basket index (established under subparagraph (A)) 

from the midpoint of the prior fiscal year (or period) to the 

midpoint of the fiscal year (or other period) involved. 

* * * * * * * 

(8) LIMITATION ON REVIEW.—There shall be no administrative or judicial review under section 1869, 1878, or otherwise 

of— 

(A) the establishment of Federal per diem rates under 

paragraph (4), including the computation of the standardized per diem rates under paragraph (4)(C), adjustments 

and corrections for case mix under paragraphs (4)(F) and 

(4)(G)(i), adjustments for variations in labor-related costs 

under paragraph (4)(G)(ii), øand¿ adjustments under paragraph (4)(G)(iii), and adjustment under section 1111(b) of 

the America’s Affordable Health Choices Act of 2009; 

(B) the establishment of facility specific rates before July 

1, 1999 (except any determination of costs paid under part 

A of this title); øand¿ 

(C) the establishment of transitional amounts under 

paragraph (7)ø.¿; and 

(D) the establishment of outliers under paragraph (13). 

* * * * * * * 

(13) OUTLIERS FOR NTA AND THERAPY.— (A) IN GENERAL.—With respect to outliers because of unusual variations in the type or amount of medically necessary care, beginning with October 1, 2010, the Secretary— 

(i) shall provide for an addition or adjustment to the 

payment amount otherwise made under this section 

with respect to non-therapy ancillary services in the 

case of such outliers; and 

(ii) may provide for such an addition or adjustment 

to the payment amount otherwise made under this section with respect to therapy services in the case of such 

outliers. 

(B) OUTLIERS BASED ON AGGREGATE COSTS.—Outlier adjustments or additional payments described in subparagraph (A) shall be based on aggregate costs during a stay 

in a skilled nursing facility and not on the number of days 

in such stay. 

(C) BUDGET NEUTRALITY.—The Secretary shall reduce estimated payments that would otherwise be made under the 

prospective payment system under this subsection with respect to a fiscal year by 2 percent. The total amount of the 

additional payments or payment adjustments for outliers 

made under this paragraph with respect to a fiscal year 

may not exceed 2 percent of the total payments projected or 

estimated to be made based on the prospective payment system under this subsection for the fiscal year. 

(f) REPORTING OF DIRECT CARE EXPENDITURES.— 


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(1) IN GENERAL.—For cost reports submitted under this title 

for cost reporting periods beginning on or after the date that is 

3 years after the date of the enactment of this subsection, skilled 

nursing facilities shall separately report expenditures for wages 

and benefits for direct care staff (breaking out (at a minimum) 

registered nurses, licensed professional nurses, certified nurse 

assistants, and other medical and therapy staff). 

(2) MODIFICATION OF FORM.—The Secretary, in consultation 

with private sector accountants experienced with skilled nursing 

facility cost reports, shall redesign such reports to meet the requirement of paragraph (1) not later than 1 year after the date 

of the enactment of this subsection. 

(3) CATEGORIZATION BY FUNCTIONAL ACCOUNTS.—Not later 

than 30 months after the date of the enactment of this subsection, the Secretary, working in consultation with the Medicare Payment Advisory Commission, the Inspector General of 

the Department of Health and Human Services, and other expert parties the Secretary determines appropriate, shall take the 

expenditures listed on cost reports, as modified under paragraph (1), submitted by skilled nursing facilities and categorize 

such expenditures, regardless of any source of payment for such 

expenditures, for each skilled nursing facility into the following 

functional accounts on an annual basis: 

(A) Spending on direct care services (including nursing, 

therapy, and medical services). 

(B) Spending on indirect care (including housekeeping 

and dietary services). 

(C) Capital assets (including building and land costs). 

(D) Administrative services costs. 

(4) AVAILABILITY OF INFORMATION SUBMITTED.—The Secretary shall establish procedures to make information on expenditures submitted under this subsection readily available to 

interested parties upon request, subject to such requirements as 

the Secretary may specify under the procedures established 

under this paragraph. 

* * * * * * * 

CONTRACT WITH A CONSENSUS-BASED ENTITY REGARDING

PERFORMANCE MEASUREMENT

SEC. 1890. (a) * * * 

(b) DUTIES.—The duties described in this subsection are the following: 

(1) * * * 

(2) ENDORSEMENT OF MEASURES.—The entity shall provide 

for the endorsement of standardized health care performance 

measures. The endorsement process under the preceding sentence shall consider whether a measure— 

(A) * * * 

* * * * * * * 

If the entity does not endorse a measure, such entity shall explain the reasons and provide suggestions about changes to 


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such measure that might make it a potentially endorsable 

measure. 

* * * * * * * 

(d) FUNDING.—For purposes of carrying out this section, 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 under section 1841 (in such 

proportion as the Secretary determines appropriate), of $10,000,000 

to the Centers for Medicare & Medicaid Services Program Management Account øfor each of fiscal years 2009 through 2012¿ for fiscal year 2009, and $12,000,000 for each of the fiscal years 2010 

through 2012. 

* * * * * * * 

MEDICARE INTEGRITY PROGRAM

SEC. 1893. (a) ESTABLISHMENT OF PROGRAM.—There is hereby established the Medicare Integrity Program (in this section referred 

to as the ‘‘Program’’) under which the Secretary shall promote the 

integrity of the medicare program by entering into contracts in accordance with this section with eligible entities, or otherwise, to 

carry out the activities described in subsection (b). 

* * * * * * * 

(c) ELIGIBILITY OF ENTITIES.—An entity is eligible to enter into 

a contract under the Program to carry out any of the activities described in subsection (b) if— 

(1) * * * 

* * * * * * * 

(3) the entity complies with such conflict of interest standards as are generally applicable to Federal acquisition and procurement; øand¿ 

(4) for the contract year beginning in 2011 and each subsequent contract year, the entity provides assurances to the satisfaction of the Secretary that the entity will conduct periodic 

evaluations of the effectiveness of the activities carried out by 

such entity under the Program and will submit to the Secretary 

an annual report on such activities; and 

ø(4)¿ (5) the entity meets such other requirements as the 

Secretary may impose. 

* * * * * * * 

PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES

SEC. 1895. (a) * * * 

(b) SYSTEM OF PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.— 

(1) * * * 

* * * * * * * 

(3) PAYMENT BASIS.— 

(A) INITIAL BASIS.— 

(i) IN GENERAL.—Under such system the Secretary 

shall provide for computation of a standard prospective payment amount (or amounts) as follows: 


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729 

(I) * * * 

* * * * * * * 

(III) For periods beginning after the period described in subclause (II) and before 2011, such 

amount (or amounts) shall be equal to the amount 

(or amounts) that would have been determined 

under subclause (I) that would have been made 

for fiscal year 2001 if the system had not been in 

effect and if section 1861(v)(1)(L)(ix) had not been 

enacted but if the reduction in limits described in 

clause (ii) had been in effect, updated under subparagraph (B). 

(IV) Subject to clause (iii)(I), for 2011, such 

amount (or amounts) shall be adjusted by a uniform percentage determined to be appropriate by 

the Secretary based on analysis of factors such as 

changes in the average number and types of visits 

in an episode, the change in intensity of visits in 

an episode, growth in cost per episode, and other 

factors that the Secretary considers to be relevant. 

(V) Subject to clause (iii)(II), for a year after 

2011, such a amount (or amounts) shall be equal 

to the amount (or amounts) determined under this 

clause for the previous year, updated under subparagraph (B). 

* * * * * * * 

(iii) SPECIAL RULE IN CASE OF INABILITY TO EFFECT

TIMELY REBASING.— 

(I) APPLICATION OF PROXY AMOUNT FOR 2011.—If 

the Secretary is not able to compute the amount (or 

amounts) under clause (i)(IV) so as to permit, on 

a timely basis, the application of such clause for 

2011, the Secretary shall substitute for such 

amount (or amounts) 95 percent of the amount (or 

amounts) that would otherwise be specified under 

clause (i)(III) if it applied for 2011. 

(II) ADJUSTMENT FOR SUBSEQUENT YEARS BASED

ON DATA.—If the Secretary applies subclause (I), 

the Secretary before July 1, 2011, shall compare 

the amount (or amounts) applied under such subclause with the amount (or amounts) that should 

have been applied under clause (i)(IV). The Secretary shall decrease or increase the prospective 

payment amount (or amounts) under clause (i)(V) 

for 2012 (or, at the Secretary’s discretion, over a 

period of several years beginning with 2012) by the 

amount (if any) by which the amount (or amounts) 

applied under subclause (I) is greater or less, respectively, than the amount (or amounts) that 

should have been applied under clause (i)(IV). 

(B) ANNUAL UPDATE.— 

(i) * * * 

(ii) HOME HEALTH APPLICABLE INCREASE PERCENTAGE.—For purposes of this subparagraph, the term 


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‘‘home health applicable increase percentage’’ means, 

with respect to— 

(I) * * * 

* * * * * * * 

(IV) 2006, 0 percent; øand¿ 

(V) 2007, 2008, and 2009, subject to clause (v), 

the home health market basket percentage increase; 

(VI) 2010, subject to clause (v), 0 percent; and 

ø(V)¿ (VII) any subsequent year, subject to 

clause (v), the home health market basket percentage increase. 

(iii) HOME HEALTH MARKET BASKET PERCENTAGE INCREASE.—For purposes of this subsection, the term 

‘‘home health market basket percentage increase’’ 

means, with respect to a fiscal year or year, a percentage (estimated by the Secretary before the beginning 

of the fiscal year or year) determined and applied with 

respect to the mix of goods and services included in 

home health services in the same manner (including 

being subject to the productivity adjustment described 

in section 1886(b)(3)(B)(iii)(II)) as the market basket 

percentage increase under section 1886(b)(3)(B)(iii) is 

determined and applied to the mix of goods and services comprising inpatient hospital services for the fiscal year or year. 

(iv) ADJUSTMENT FOR CASE MIX CHANGES.—øInsofar 

as¿ Subject to clause (vi), insofar as the Secretary determines that the adjustments under paragraph 

(4)(A)(i) for a previous fiscal year or year (or estimates 

that such adjustments for a future fiscal year or year) 

did (or are likely to) result in a change in aggregate 

payments under this subsection during the fiscal year 

or year that are a result of changes in the coding or 

classification of different units of services that do not 

reflect real changes in case mix, the Secretary may adjust the standard prospective payment amount (or 

amounts) under paragraph (3) for subsequent fiscal 

years or years so as to eliminate the effect of such coding or classification changes. 

(v) ADJUSTMENT IF QUALITY DATA NOT SUBMITTED.— (I) ADJUSTMENT.—For purposes of clause (ii)(V), 

for 2007 and each subsequent year, in the case of 

a home health agency that does not submit data 

to the Secretary in accordance with subclause (II) 

with respect to such a year, the home health market basket percentage increase applicable under 

such clause for such year shall be reduced (but not 

below 0) by 2 percentage points. Such reduction 

shall apply only with respect to the year involved, 

and the Secretary shall not take into account such 

reduction in computing the prospective payment 

amount under this section for a subsequent year, 

and the Medicare Payment Advisory Commission 


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731 

shall carry out the requirements under section 

5201(d) of the Deficit Reduction Act of 2005. 

* * * * * * * 

(vi) SPECIAL RULE FOR CASE MIX CHANGES FOR

2011.— (I) IN GENERAL.—With respect to the case mix 

adjustments established in section 484.220(a) of 

title 42, Code of Federal Regulations, the Secretary 

shall apply, in 2010, the adjustment established in 

paragraph (3) of such section for 2011, in addition 

to applying the adjustment established in paragraph (2) for 2010. 

(II) CONSTRUCTION.—Nothing in this clause 

shall be construed as limiting the amount of adjustment for case mix for 2010 or 2011 if more recent data indicate an appropriate adjustment that 

is greater than the amount established in the section described in subclause (I). 

* * * * * * * 

MEDICARE IMPROVEMENT FUND

SEC. 1898. (a) * * * 

(b) FUNDING.— 

(1) IN GENERAL.—There shall be available to the Fund, for 

expenditures from the Fund for services furnished during— 

ø(A) fiscal year 2014, $22,290,000,000; and¿ 

(A) the period beginning with fiscal year 2011 and ending with fiscal year 2019, $8,000,000,000; and 

* * * * * * * 

TITLE XIX—GRANTS TO STATES FOR MEDICAL ASSISTANCE 

PROGRAMS 

* * * * * * * 

STATE PLANS FOR MEDICAL ASSISTANCE

SEC. 1902. (a) A State plan for medical assistance must— 

(1) * * * 

* * * * * * * 

(9) provide— 

(A) * * * 

(B) for the establishment or designation of a State authority or authorities which shall be responsible for establishing and maintaining standards, other than those relating to health, for such institutions, øand¿ 

(C) that any laboratory services paid for under such plan 

must be provided by a laboratory which meets the applicable requirements of section 1861(e)(9) or paragraphs (16) 

and (17) of section 1861(s), or, in the case of a laboratory 

which is in a rural health clinic, of section 

1861(aa)(2)(G)ø;¿, and 

(D) that the State maintain a consumer-oriented website 

providing useful information to consumers regarding all 


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732 

skilled nursing facilities and all nursing facilities in the 

State, including for each facility, Form 2567 State inspection reports (or a successor form), complaint investigation 

reports, the facility’s plan of correction, and such other information that the State or the Secretary considers useful 

in assisting the public to assess the quality of long term 

care options and the quality of care provided by individual 

facilities; 

* * * * * * * 

(23) provide that (A) any individual eligible for medical assistance (including drugs) may obtain such assistance from any 

institution, agency, community pharmacy, or person, qualified 

to perform the service or services required (including an organization which provides such services, or arranges for their 

availability, on a prepayment basis), who undertakes to provide him such services, and (B) an enrollment of an individual 

eligible for medical assistance in a primary care case-management system (described in section 1915(b)(1)), a medicaid managed care organization, or a similar entity shall not restrict the 

choice of the qualified person from whom the individual may 

receive services under section 1905(a)(4)(C), except as provided 

in subsection (g) and in section 1915, except that this paragraph shall not apply in the case of Puerto Rico, the Virgin Islands, and Guam, and except that nothing in this paragraph 

shall be construed as requiring a State to provide medical assistance for such services furnished by a person or entity convicted of a felony under Federal or State law for an offense 

which the State agency determines is inconsistent with the 

best interests of beneficiaries under the State plan or by a person to whom or entity to which a moratorium under section 

1128G(a)(4) is applied during the period of such moratorium; 

* * * * * * * 

(72) provide that the State will not prevent a Federallyqualified health center from entering into contractual relationships with private practice dental providers in the provision of 

Federally-qualified health center services; øand¿ 

(73) in the case of any State in which 1 or more Indian 

Health Programs or Urban Indian Organizations furnishes 

health care services, provide for a process under which the 

State seeks advice on a regular, ongoing basis from designees 

of such Indian Health Programs and Urban Indian Organizations on matters relating to the application of this title that 

are likely to have a direct effect on such Indian Health Programs and Urban Indian Organizations and that— 

(A) * * * 

(B) may include appointment of an advisory committee 

and of a designee of such Indian Health Programs and 

Urban Indian Organizations to the medical care advisory 

committee advising the State on its State plan under this 

titleø.¿; and 

(74) provide that the State will enforce any determination 

made by the Secretary under subsection (a) of section 1128G 

(relating to a significant risk of fraudulent activity with respect 

to a category of provider or supplier described in such subVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00738 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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section (a) through use of the appropriate procedures described 

in such subsection (a)) or subsection (b) of such section (relating 

to disclosure requirements), and that the State will carry out 

any activities as required by the Secretary for purposes of such 

subsection (a) and apply any enhanced safeguards, with respect 

to a provider or supplier described in such subsection (b), as the 

Secretary determines necessary under such subsection (b). 

* * * * * * * 

DEFINITIONS

SEC. 1905. For purposes of this title— 

(a) * * * 

* * * * * * * 

(o)(1) * * * 

* * * * * * * 

(4) The provisions of section 1819A shall apply to a hospice program providing hospice care under this title in the same manner as 

such provisions apply to a hospice program providing hospice care 

under title XVIII. 

(p)(1) The term ‘‘qualified medicare beneficiary’’ means an individual— 

(A) * * * 

* * * * * * * 

(C) whose resources (as determined under section 1613 for 

purposes of the supplemental security income program) do not 

exceed twice the maximum amount of resources that an individual may have and obtain benefits under that program or, 

øeffective beginning with January 1, 2010¿ effective for the period beginning with January 1, 2010, and ending with December 31, 2011, whose resources (as so determined) do not exceed 

the maximum resource level applied for the year under subparagraph (D) of section 1860D–14(a)(3) (determined without 

regard to the life insurance policy exclusion provided under 

subparagraph (G) of such section) applicable to an individual 

or to the individual and the individual’s spouse (as the case 

may be) or, effective beginning with January 1, 2012, whose resources (as so determined) do not exceed the maximum resource 

level applied for the year under subparagraph (E) of section 

1860D–14(a)(3) (determined without regard to the life insurance 

policy exclusion provided under subparagraph (G) of such section) applicable to an individual or to the individual and the 

individual’s spouse (as the case may be). 

* * * * * * * 

REQUIREMENTS FOR NURSING FACILITIES

SEC. 1919. (a) * * * 

(b) REQUIREMENTS RELATING TO PROVISION OF SERVICES.— (1) QUALITY OF LIFE.— 

(A) * * * 

(B) QUALITY ASSESSMENT AND øASSURANCE¿ ASSURANCE

AND QUALITY ASSURANCE AND PERFORMANCE IMPROVEMENT

PROGRAM.— 


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(i) IN GENERAL.—A nursing facility must maintain a 

quality assessment and assurance committee, consisting of the director of nursing services, a physician 

designated by the facility, and at least 3 other members of the facility’s staff, which (i) meets at least 

quarterly to identify issues with respect to which quality assessment and assurance activities are necessary 

and (ii) develops and implements appropriate plans of 

action to correct identified quality deficiencies. 

(ii) QUALITY ASSURANCE AND PERFORMANCE IM- PROVEMENT PROGRAM.— (I) IN GENERAL.—Not later than December 31, 

2011, the Secretary shall establish and implement 

a quality assurance and performance improvement 

program (in this clause referred to as the ‘‘QAPI 

program’’) for nursing facilities, including multiunit chains of such facilities. Under the QAPI program, the Secretary shall establish standards relating to such facilities and provide technical assistance to such facilities on the development of 

best practices in order to meet such standards. Not 

later than 1 year after the date on which the regulations are promulgated under subclause (II), a 

nursing facility must submit to the Secretary a 

plan for the facility to meet such standards and 

implement such best practices, including how to 

coordinate the implementation of such plan with 

quality assessment and assurance activities conducted under clause (i). 

(II) REGULATIONS.—The Secretary shall promulgate regulations to carry out this clause. 

* * * * * * * 

(8) INFORMATION ON NURSE STAFFING.— 

(A) * * * 

* * * * * * * 

(C) SUBMISSION OF STAFFING INFORMATION BASED ON

PAYROLL DATA IN A UNIFORM FORMAT.—Beginning not later 

than 2 years after the date of the enactment of this subparagraph, and after consulting with State long-term care 

ombudsman programs, consumer advocacy groups, provider stakeholder groups, employees and their representatives, and other parties the Secretary deems appropriate, 

the Secretary shall require a nursing facility to electronically submit to the Secretary direct care staffing information (including information with respect to agency and contract staff) based on payroll and other verifiable and 

auditable data in a uniform format (according to specifications established by the Secretary in consultation with such 

programs, groups, and parties). Such specifications shall 

require that the information submitted under the preceding 

sentence— 

(i) specify the category of work a certified employee 

performs (such as whether the employee is a registered 

nurse, licensed practical nurse, licensed vocational 


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nurse, certified nursing assistant, therapist, or other 

medical personnel); 

(ii) include resident census data and information on 

resident case mix; 

(iii) include a regular reporting schedule; and 

(iv) include information on employee turnover and 

tenure and on the hours of care provided by each category of certified employees referenced in clause (i) per 

resident per day. 

Nothing in this subparagraph shall be construed as preventing the Secretary from requiring submission of such information with respect to specific categories, such as nursing staff, before other categories of certified employees. Information under this subparagraph with respect to agency 

and contract staff shall be kept separate from information 

on employee staffing. 

(c) REQUIREMENTS RELATING TO RESIDENTS’ RIGHTS.— (1) * * * 

* * * * * * * 

(9) NOTIFICATION OF FACILITY CLOSURE.— (A) IN GENERAL.—Any individual who is an administrator of a nursing facility must— 

(i) submit to the Secretary, the State long-term care 

ombudsman, residents of the facility, and the legal representatives of such residents or other responsible parties, written notification of an impending closure— 

(I) subject to subclause (II), not later than the 

date that is 60 days prior to the date of such closure; and 

(II) in the case of a facility where the Secretary 

terminates the facility’s participation under this 

title, not later than the date that the Secretary determines appropriate; 

(ii) ensure that the facility does not admit any new 

residents on or after the date on which such written notification is submitted; and 

(iii) include in the notice a plan for the transfer and 

adequate relocation of the residents of the facility by a 

specified date prior to closure that has been approved 

by the State, including assurances that the residents 

will be transferred to the most appropriate facility or 

other setting in terms of quality, services, and location, 

taking into consideration the needs and best interests 

of each resident. 

(B) RELOCATION.— (i) IN GENERAL.—The State shall ensure that, before 

a facility closes, all residents of the facility have been 

successfully relocated to another facility or an alternative home and community-based setting. 

(ii) CONTINUATION OF PAYMENTS UNTIL RESIDENTS

RELOCATED.—The Secretary may, as the Secretary determines appropriate, continue to make payments 

under this title with respect to residents of a facility 

that has submitted a notification under subparagraph 

(A) during the period beginning on the date such notifiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00741 Fmt 6659 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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cation is submitted and ending on the date on which 

the resident is successfully relocated. 

(d) REQUIREMENTS RELATING TO ADMINISTRATION AND OTHER

MATTERS.— 

(1) ADMINISTRATION.— 

(A) * * * 

ø(B) REQUIRED NOTICES.—If a change occurs in— 

ø(i) the persons with an ownership or control interest (as defined in section 1124(a)(3)) in the facility, 

ø(ii) the persons who are officers, directors, agents, 

or managing employees (as defined in section 1126(b)) 

of the facility, 

ø(iii) the corporation, association, or other company 

responsible for the management of the facility, or 

ø(iv) the individual who is the administrator or director of nursing of the facility, 

nursing facility must provide notice to the State agency responsible for the licensing of the facility, at the time of the 

change, of the change and of the identity of each new person, company, or individual described in the respective 

clause.¿ 

ø(C)¿ (B) NURSING FACILITY ADMINISTRATOR.—The administrator of a nursing facility must meet standards established by the Secretary under subsection (f)(4). 

(C) COMPLIANCE AND ETHICS PROGRAM.— 

(i) REQUIREMENT.—On or after the date that is 36 

months after the date of the enactment of this subparagraph, a nursing facility shall, with respect to the entity that operates the facility (in this subparagraph referred to as the ‘‘operating organization’’ or ‘‘organization’’), have in operation a compliance and ethics program that is effective in preventing and detecting 

criminal, civil, and administrative violations under 

this Act and in promoting quality of care consistent 

with regulations developed under clause (ii). 

(ii) DEVELOPMENT OF REGULATIONS.— 

(I) IN GENERAL.—Not later than the date that is 

2 years after such date of the enactment, the Secretary, in consultation with the Inspector General 

of the Department of Health and Human Services, 

shall develop regulations for an effective compliance and ethics program for operating organizations, which may include a model compliance program. 

(II) DESIGN OF REGULATIONS.—Such regulations 

with respect to specific elements or formality of a 

program may vary with the size of the organization, such that larger organizations should have a 

more formal and rigorous program and include established written policies defining the standards 

and procedures to be followed by its employees. 

Such requirements may specifically apply to the 

corporate level management of multi-unit nursing 

home chains. 


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(III) EVALUATION.—Not later than 3 years after 

the date of promulgation of regulations under this 

clause the Secretary shall complete an evaluation 

of the compliance and ethics programs required to 

be established under this subparagraph. Such 

evaluation shall determine if such programs led to 

changes in deficiency citations, changes in quality 

performance, or changes in other metrics of resident quality of care. The Secretary shall submit to 

Congress a report on such evaluation and shall include in such report such recommendations regarding changes in the requirements for such programs as the Secretary determines appropriate. 

(iii) REQUIREMENTS FOR COMPLIANCE AND ETHICS

PROGRAMS.—In this subparagraph, the term ‘‘compliance and ethics program’’ means, with respect to a 

nursing facility, a program of the operating organization that— 

(I) has been reasonably designed, implemented, 

and enforced so that it generally will be effective in 

preventing and detecting criminal, civil, and administrative violations under this Act and in promoting quality of care; and 

(II) includes at least the required components 

specified in clause (iv). 

(iv) REQUIRED COMPONENTS OF PROGRAM.—The required components of a compliance and ethics program 

of an organization are the following: 

(I) The organization must have established compliance standards and procedures to be followed by 

its employees and other agents that are reasonably 

capable of reducing the prospect of criminal, civil, 

and administrative violations under this Act. 

(II) Specific individuals within high-level personnel of the organization must have been assigned overall responsibility to oversee compliance 

with such standards and procedures and has sufficient resources and authority to assure such compliance. 

(III) The organization must have used due care 

not to delegate substantial discretionary authority 

to individuals whom the organization knew, or 

should have known through the exercise of due 

diligence, had a propensity to engage in criminal, 

civil, and administrative violations under this Act. 

(IV) The organization must have taken steps to 

communicate effectively its standards and procedures to all employees and other agents, such as by 

requiring participation in training programs or by 

disseminating publications that explain in a practical manner what is required. 

(V) The organization must have taken reasonable steps to achieve compliance with its standards, such as by utilizing monitoring and auditing 

systems reasonably designed to detect criminal, 


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738 

civil, and administrative violations under this Act 

by its employees and other agents and by having 

in place and publicizing a reporting system whereby employees and other agents could report violations by others within the organization without 

fear of retribution. 

(VI) The standards must have been consistently 

enforced through appropriate disciplinary mechanisms, including, as appropriate, discipline of individuals responsible for the failure to detect an offense. 

(VII) After an offense has been detected, the organization must have taken all reasonable steps to 

respond appropriately to the offense and to prevent 

further similar offenses, including repayment of 

any funds to which it was not entitled and any 

necessary modification to its program to prevent 

and detect criminal, civil, and administrative violations under this Act. 

(VIII) The organization must periodically undertake reassessment of its compliance program to 

identify changes necessary to reflect changes within the organization and its facilities. 

(v) COORDINATION.—The provisions of this subparagraph shall apply with respect to a nursing facility in 

lieu of section 1902(a)(77). 

(D) AVAILABILITY OF SURVEY, CERTIFICATION, AND COMPLAINT INVESTIGATION REPORTS.—A nursing facility must— 

(i) have reports with respect to any surveys, certifications, and complaint investigations made respecting 

the facility during the 3 preceding years available for 

any individual to review upon request; and 

(ii) post notice of the availability of such reports in 

areas of the facility that are prominent and accessible 

to the public. 

The facility shall not make available under clause (i) identifying information about complainants or residents. 

* * * * * * * 

(e) STATE REQUIREMENTS RELATING TO NURSING FACILITY REQUIREMENTS.—As a condition of approval of its plan under this 

title, a State must provide for the following: 

(1) * * * 

* * * * * * * 

(8) COMPLAINT PROCESSES AND WHISTLEBLOWER PROTECTION.— 

(A) COMPLAINT FORMS.—The State must make the standardized complaint form developed under subsection (f)(11) 

available upon request to— 

(i) a resident of a nursing facility; 

(ii) any person acting on the resident’s behalf; and 

(iii) any person who works at a nursing facility or a 

representative of such a worker. 

(B) COMPLAINT RESOLUTION PROCESS.—The State must 

establish a complaint resolution process in order to ensure 


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739 

that a resident, the legal representative of a resident of a 

nursing facility, or other responsible party is not retaliated 

against if the resident, legal representative, or responsible 

party has complained, in good faith, about the quality of 

care or other issues relating to the nursing facility, that the 

legal representative of a resident of a nursing facility or 

other responsible party is not denied access to such resident 

or otherwise retaliated against if such representative party 

has complained, in good faith, about the quality of care 

provided by the facility or other issues relating to the facility, and that a person who works at a nursing facility is 

not retaliated against if the worker has complained, in 

good faith, about quality of care or services or an issue relating to the quality of care or services provided at the facility, whether the resident, legal representative, other responsible party, or worker used the form developed under 

subsection (f)(11) or some other method for submitting the 

complaint. Such complaint resolution process shall include— 

(i) procedures to assure accurate tracking of complaints received, including notification to the complainant that a complaint has been received; 

(ii) procedures to determine the likely severity of a 

complaint and for the investigation of the complaint; 

(iii) deadlines for responding to a complaint and for 

notifying the complainant of the outcome of the investigation; and 

(iv) procedures to ensure that the identity of the complainant will be kept confidential. 

(C) WHISTLEBLOWER PROTECTION.— (i) PROHIBITION AGAINST RETALIATION.—No person 

who works at a nursing facility may be penalized, discriminated, or retaliated against with respect to any 

aspect of employment, including discharge, promotion, 

compensation, terms, conditions, or privileges of employment, or have a contract for services terminated, 

because the person (or anyone acting at the person’s request) complained, in good faith, about the quality of 

care or services provided by a nursing facility or about 

other issues relating to quality of care or services, 

whether using the form developed under subsection 

(f)(11) or some other method for submitting the complaint. 

(ii) RETALIATORY REPORTING.—A nursing facility 

may not file a complaint or a report against a person 

who works (or has worked at the facility with the appropriate State professional disciplinary agency because the person (or anyone acting at the person’s request) complained in good faith, as described in clause 

(i). 

(iii) COMMENCEMENT OF ACTION.—Any person who 

believes the person has been penalized, discriminated, 

or retaliated against or had a contract for services terminated in violation of clause (i) or against whom a 

complaint has been filed in violation of clause (ii) may 


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bring an action at law or equity in the appropriate district court of the United States, which shall have jurisdiction over such action without regard to the amount 

in controversy or the citizenship of the parties, and 

which shall have jurisdiction to grant complete relief, 

including, but not limited to, injunctive relief (such as 

reinstatement, compensatory damages (which may include reimbursement of lost wages, compensation, and 

benefits), costs of litigation (including reasonable attorney and expert witness fees), exemplary damages where 

appropriate, and such other relief as the court deems 

just and proper. 

(iv) RIGHTS NOT WAIVABLE.—The rights protected by 

this paragraph may not be diminished by contract or 

other agreement, and nothing in this paragraph shall 

be construed to diminish any greater or additional protection provided by Federal or State law or by contract 

or other agreement. 

(v) REQUIREMENT TO POST NOTICE OF EMPLOYEE

RIGHTS.—Each nursing facility shall post conspicuously in an appropriate location a sign (in a form specified by the Secretary) specifying the rights of persons 

under this paragraph and including a statement that 

an employee may file a complaint with the Secretary 

against a nursing facility that violates the provisions of 

this paragraph and information with respect to the 

manner of filing such a complaint. 

(D) RULE OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed as preventing a resident of a nursing facility (or a person acting on the resident’s behalf) from submitting a complaint in a manner or format other than by 

using the standardized complaint form developed under 

subsection (f)(11) (including submitting a complaint orally). 

(E) GOOD FAITH DEFINED.—For purposes of this paragraph, an individual shall be deemed to be acting in good 

faith with respect to the filing of a complaint if the individual reasonably believes— 

(i) the information reported or disclosed in the complaint is true; and 

(ii) the violation of this title has occurred or may 

occur in relation to such information. 

(f) RESPONSIBILITIES OF SECRETARY RELATING TO NURSING FACILITY REQUIREMENTS.— 

(1) * * * 

(2) REQUIREMENTS FOR NURSE AIDE TRAINING AND COMPETENCY EVALUATION PROGRAMS AND FOR NURSE AIDE COMPETENCY EVALUATION PROGRAMS.— 

(A) IN GENERAL.—For purposes of subsections (b)(5) and 

(e)(1)(A), the Secretary shall establish, by not later than 

September 1, 1988— 

(i) requirements for the approval of nurse aide training and competency evaluation programs, including requirements relating to (I) the areas to be covered in 

such a program (including at least basic nursing skills, 

personal care skills, recognition of mental health and 


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741 

social service needs, care of cognitively impaired residents, basic restorative services, and residents’ rights) 

and content of the curriculum (including, in the case 

of initial training and, if the Secretary determines appropriate, in the case of ongoing training, dementia 

management training and resident abuse prevention 

training), (II) minimum hours of initial and ongoing 

training and retraining (including not less than 75 

hours in the case of initial training), (III) qualifications of instructors, and (IV) procedures for determination of competency; 

* * * * * * * 

(10) SPECIAL FOCUS FACILITY PROGRAM.— 

(A) IN GENERAL.—The Secretary shall conduct a special 

focus facility program for enforcement of requirements for 

nursing facilities that the Secretary has identified as having substantially failed to meet applicable requirements of 

this Act. 

(B) PERIODIC SURVEYS.—Under such program the Secretary shall conduct surveys of each facility in the program 

not less often than once every 6 months. 

(11) STANDARDIZED COMPLAINT FORM.—The Secretary shall 

develop a standardized complaint form for use by a resident (or 

a person acting on the resident’s behalf) in filing a complaint 

with a State survey and certification agency and a State longterm care ombudsman program with respect to a nursing facility. 

(g) SURVEY AND CERTIFICATION PROCESS.— 

(1) * * * 

* * * * * * * 

(5) DISCLOSURE OF RESULTS OF INSPECTIONS AND ACTIVITIES.— 

(A) * * * 

* * * * * * * 

(E) SUBMISSION OF SURVEY AND CERTIFICATION INFORMATION TO THE SECRETARY.—In order to improve the timeliness of information made available to the public under subparagraph (A) and provided on the Nursing Home Compare Medicare website under subsection (i), each State shall 

submit information respecting any survey or certification 

made respecting a nursing facility (including any enforcement actions taken by the State) to the Secretary not later 

than the date on which the State sends such information 

to the facility. The Secretary shall use the information submitted under the preceding sentence to update the information provided on the Nursing Home Compare Medicare 

website as expeditiously as practicable but not less frequently than quarterly. 

(h) ENFORCEMENT PROCESS.— 

(1) * * * 

(2) SPECIFIED REMEDIES.— 


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(A) LISTING.—Except as provided in subparagraph 

(B)(ii), each State shall establish by law (whether statute 

or regulation) at least the following remedies: 

(i) * * * 

(ii) øA civil money penalty assessed and collected, 

with interest, for each day in which the facility is or 

was out of compliance with a requirement of subsection (b), (c), or (d).¿ A civil money penalty in accordance with subparagraph (G). Funds collected by a 

State as a result of imposition of such a penalty (or as 

a result of the imposition by the State of a civil money 

penalty for activities described in subsections 

(b)(3)(B)(ii)(I), (b)(3)(B)(ii)(II), or (g)(2)(A)(i)) shall be 

applied to the protection of the health or property of 

residents of nursing facilities that the State or the 

Secretary finds deficient, including payment for the 

costs of relocation of residents to other facilities, maintenance of operation of a facility pending correction of 

deficiencies or closure, and reimbursement of residents 

for personal funds lost, and some portion of such funds 

may be used to support activities that benefit residents, 

including assistance to support and protect residents of 

a facility that closes (voluntarily or involuntarily) or is 

decertified (including offsetting costs of relocating residents to home and community-based settings or another facility), projects that support resident and family councils and other consumer involvement in assuring quality care in facilities, and facility improvement 

initiatives approved by the Secretary (including joint 

training of facility staff and surveyors, providing technical assistance to facilities under quality assurance 

programs, the appointment of temporary management, 

and other activities approved by the Secretary). 

* * * * * * * 

(G) CIVIL MONEY PENALTIES.— 

(i) IN GENERAL.—The State may impose a civil 

money penalty under subparagraph (A)(ii) in the applicable per instance or per day amount (as defined in 

subclause (II) and (III)) for each day or instance, respectively, of noncompliance (as determined appropriate by the Secretary). 

(ii) APPLICABLE PER INSTANCE AMOUNT.—In this subparagraph, the term ‘‘applicable per instance amount’’ 

means— 

(I) in the case where the deficiency is found to be 

a direct proximate cause of death of a resident of 

the facility, an amount not to exceed $100,000. 

(II) in each case of a deficiency where the facility 

is cited for actual harm or immediate jeopardy, an 

amount not less than $3,050 and not more than 

$25,000; and 

(III) in each case of any other deficiency, an 

amount not less than $250 and not to exceed 

$3050. 


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(iii) APPLICABLE PER DAY AMOUNT.—In this subparagraph, the term ‘‘applicable per day amount’’ means— 

(I) in each case of a deficiency where the facility 

is cited for actual harm or immediate jeopardy, an 

amount not less than $3,050 and not more than 

$25,000 and 

(II) in each case of any other deficiency, an amount not less than $250 and not to exceed 

$3,050. 

(iv) REDUCTION OF CIVIL MONEY PENALTIES IN CER- TAIN CIRCUMSTANCES.—Subject to clauses (v) and (vi), 

in the case where a facility self-reports and promptly 

corrects a deficiency for which a penalty was imposed 

under subparagraph (A)(ii) not later than 10 calendar 

days after the date of such imposition, the State may 

reduce the amount of the penalty imposed by not more 

than 50 percent. 

(v) PROHIBITION ON REDUCTION FOR CERTAIN DEFI- CIENCIES.— (I) REPEAT DEFICIENCIES.—The State may not 

reduce under clause (iv) the amount of a penalty if 

the State had reduced a penalty imposed on the facility in the preceding year under such clause with 

respect to a repeat deficiency. 

(II) CERTAIN OTHER DEFICIENCIES.—The State 

may not reduce under clause (iv) the amount of a 

penalty if the penalty is imposed for a deficiency 

described in clause (ii)(II) or (iii)(I) and the actual 

harm or widespread harm that immediately jeopardizes the health or safety of a resident or residents of the facility, or if the penalty is imposed for 

a deficiency described in clause (ii)(I). 

(III) LIMITATION ON AGGREGATE REDUCTIONS.— The aggregate reduction in a penalty under clause 

(iv) may not exceed 35 percent on the basis of selfreporting, on the basis of a waiver or an appeal (as 

provided for under regulations under section 

488.436 of title 42, Code of Federal Regulations), 

or on the basis of both. 

(vi) COLLECTION OF CIVIL MONEY PENALTIES.—In the 

case of a civil money penalty imposed under subparagraph (A)(ii), the State— 

(I) subject to subclause (III), shall, not later than 

30 days after the date of imposition of the penalty, 

provide the opportunity for the facility to participate in an independent informal dispute resolution 

process which generates a written record prior to 

the collection of such penalty, but such opportunity 

shall not affect the responsibility of the State survey agency for making final recommendations for 

such penalties; 

(II) in the case where the penalty is imposed for 

each day of noncompliance, shall not impose a 

penalty for any day during the period beginning 

on the initial day of the imposition of the penalty 


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and ending on the day on which the informal dispute resolution process under subclause (I) is completed; 

(III) may provide for the collection of such civil 

money penalty and the placement of such amounts 

collected in an escrow account under the direction 

of the State on the earlier of the date on which the 

informal dispute resolution process under subclause (I) is completed or the date that is 90 days 

after the date of the imposition of the penalty; 

(IV) may provide that such amounts collected 

are kept in such account pending the resolution of 

any subsequent appeals; 

(V) in the case where the facility successfully appeals the penalty, may provide for the return of 

such amounts collected (plus interest) to the facility; and 

(VI) in the case where all such appeals are unsuccessful, may provide that such funds collected 

shall be used for the purposes described in the second sentence of subparagraph (A)(ii). 

(3) SECRETARIAL AUTHORITY.— (A) * * * 

* * * * * * * 

(C) SPECIFIED REMEDIES.—The Secretary may take the 

following actions with respect to a finding that a facility 

has not met an applicable requirement: 

(i) * * * 

ø(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PEN- ALTIES.—The Secretary may impose a civil money pen- alty in an amount not to exceed $10,000 for each day 

of noncompliance. The provisions of section 1128A 

(other than subsections (a) and (b)) shall apply to a 

civil money penalty under the previous sentence in the 

same manner as such provisions apply to a penalty or 

proceeding under section 1128A(a).¿ 

(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PEN- ALTIES.— 

(I) AMOUNT.—Subject to subclause (II), the Secretary may impose a civil money penalty in an 

amount not to exceed $10,000 for each day or each 

instance of noncompliance (as determined appropriate by the Secretary). 

(II) REDUCTION OF CIVIL MONEY PENALTIES IN

CERTAIN CIRCUMSTANCES.—Subject to subclause 

(III), in the case where a facility self-reports and 

promptly corrects a deficiency for which a penalty 

was imposed under this clause not later than 10 

calendar days after the date of such imposition, 

the Secretary may reduce the amount of the penalty imposed by not more than 50 percent. 

(III) PROHIBITION ON REDUCTION FOR REPEAT

DEFICIENCIES.—The Secretary may not reduce the 

amount of a penalty under subclause (II) if the 

Secretary had reduced a penalty imposed on the 


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facility in the preceding year under such subclause 

with respect to a repeat deficiency. 

(IV) COLLECTION OF CIVIL MONEY PENALTIES.— In the case of a civil money penalty imposed under 

this clause, the Secretary— 

(aa) subject to item (bb), shall, not later 

than 30 days after the date of imposition of 

the penalty, provide the opportunity for the facility to participate in an independent informal dispute resolution process which generates 

a written record prior to the collection of such 

penalty; 

(bb) in the case where the penalty is imposed 

for each day of noncompliance, shall not impose a penalty for any day during the period 

beginning on the initial day of the imposition 

of the penalty and ending on the day on which 

the informal dispute resolution process under 

item (aa) is completed; 

(cc) may provide for the collection of such 

civil money penalty and the placement of such 

amounts collected in an escrow account under 

the direction of the Secretary on the earlier of 

the date on which the informal dispute resolution process under item (aa) is completed or 

the date that is 90 days after the date of the 

imposition of the penalty; 

(dd) may provide that such amounts collected are kept in such account pending the 

resolution of any subsequent appeals; 

(ee) in the case where the facility successfully appeals the penalty, may provide for the 

return of such amounts collected (plus interest) 

to the facility; and 

(ff) in the case where all such appeals are 

unsuccessful, may provide that some portion of 

such amounts collected may be used to support 

activities that benefit residents, including assistance to support and protect residents of a 

facility that closes (voluntarily or involuntarily) or is decertified (including offsetting 

costs of relocating residents to home and community-based settings or another facility), 

projects that support resident and family 

councils and other consumer involvement in 

assuring quality care in facilities, and facility 

improvement initiatives approved by the Secretary (including joint training of facility staff 

and surveyors, technical assistance for facilities under quality assurance programs, the appointment of temporary management, and 

other activities approved by the Secretary). 

(V) PROCEDURE.—The provisions of section 

1128A (other than subsections (a) and (b) and except to the extent that such provisions require a 


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hearing prior to the imposition of a civil money 

penalty) shall apply to a civil money penalty under 

this clause in the same manner as such provisions 

apply to a penalty or proceeding under section 

1128A(a). 

* * * * * * * 

(8) CONSTRUCTION.—The remedies provided under this subsection are in addition to those otherwise available under State 

or Federal law and shall not be construed as limiting such 

other remedies, including any remedy available to an individual at common law. The remedies described in clauses (i), 

(iii), and (iv) of paragraph (2)(A) and in paragraph (3)(C)(ii) 

may be imposed during the pendency of any hearing. The provisions of this subsection shall apply to a nursing facility (or 

portion thereof) notwithstanding that the facility (or portion 

thereof) also is a skilled nursing facility for purposes of title 

XVIII. 

* * * * * * * 

(i) NURSING HOME COMPARE WEBSITE.— 

(1) INCLUSION OF ADDITIONAL INFORMATION.— 

(A) IN GENERAL.—The Secretary shall ensure that the Department of Health and Human Services includes, as part 

of the information provided for comparison of nursing 

homes on the official Internet website of the Federal Government for Medicare beneficiaries (commonly referred to 

as the ‘‘Nursing Home Compare’’ Medicare website) (or a 

successor website), the following information in a manner 

that is prominent, easily accessible, readily understandable 

to consumers of long-term care services, and searchable: 

(i) Staffing data for each facility (including resident 

census data and data on the hours of care provided per 

resident per day) based on data submitted under subsection (b)(8)(C)(ii), including information on staffing 

turnover and tenure, in a format that is clearly understandable to consumers of long-term care services and 

allows such consumers to compare differences in staffing between facilities and State and national averages 

for the facilities. Such format shall include— 

(I) concise explanations of how to interpret the 

data (such as plain English explanation of data reflecting ‘‘nursing home staff hours per resident 

day’’); 

(II) differences in types of staff (such as training 

associated with different categories of staff); 

(III) the relationship between nurse staffing levels and quality of care; and 

(IV) an explanation that appropriate staffing levels vary based on patient case mix. 

(ii) Links to State Internet websites with information 

regarding State survey and certification programs, 

links to Form 2567 State inspection reports (or a successor form) on such websites, information to guide 

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747 

ports, and the facility plan of correction or other response to such report. 

(iii) The standardized complaint form developed 

under subsection (f)(10), including explanatory material on what complaint forms are, how they are used, 

and how to file a complaint with the State survey and 

certification program and the State long-term care ombudsman program. 

(iv) Summary information on the number, type, severity, and outcome of substantiated complaints. 

(v) The number of adjudicated instances of criminal 

violations by employees of a nursing facility— 

(I) that were committed inside of the facility; 

and 

(II) with respect to such instances of violations 

or crimes committed outside of the facility, that 

were the violations or crimes that resulted in the 

serious bodily injury of an elder. 

(B) DEADLINE FOR PROVISION OF INFORMATION.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

the Secretary shall ensure that the information described in subparagraph (A) is included on such 

website (or a successor website) not later than 1 year 

after the date of the enactment of this subsection. 

(ii) EXCEPTION.—The Secretary shall ensure that the 

information described in subparagraph (A)(i) and 

(A)(iii) is included on such website (or a successor 

website) not later than the date on which the requirements under section 1124(c)(4) and subsection 

(b)(8)(C)(ii) are implemented. 

(2) REVIEW AND MODIFICATION OF WEBSITE.— 

(A) IN GENERAL.—The Secretary shall establish a process— 

(i) to review the accuracy, clarity of presentation, 

timeliness, and comprehensiveness of information reported on such website as of the day before the date of 

the enactment of this subsection; and 

(ii) not later than 1 year after the date of the enactment of this subsection, to modify or revamp such 

website in accordance with the review conducted under 

clause (i). 

(B) CONSULTATION.—In conducting the review under subparagraph (A)(i), the Secretary shall consult with— 

(i) State long-term care ombudsman programs; 

(ii) consumer advocacy groups; 

(iii) provider stakeholder groups; 

(iv) skilled nursing facility employees and their representatives; and 

(v) any other representatives of programs or groups 

the Secretary determines appropriate. 

ø(i)¿ (j) CONSTRUCTION.—Where requirements or obligations 

under this section are identical to those provided under section 

1819 of this Act, the fulfillment of those requirements or obligaVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00753 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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tions under section 1819 shall be considered to be the fulfillment 

of the corresponding requirements or obligations under this section. 

* * * * * * * 

PAYMENT FOR COVERED OUTPATIENT DRUGS

SEC. 1927. (a) * * * 

(b) TERMS OF REBATE AGREEMENT.— 

(1) * * * 

* * * * * * * 

(3) MANUFACTURER PROVISION OF PRICE INFORMATION.— (A) IN GENERAL.—Each manufacturer with an agreement 

in effect under this section shall report to the Secretary— 

(i) * * * 

* * * * * * * 

(iii) for calendar quarters beginning on or after January 1, 2004, in conjunction with reporting required 

under clause (i) and by National Drug Code (including 

package size)— 

(I) * * * 

* * * * * * * 

(III) information on those sales that were made 

at a nominal price or otherwise described in section 1847A(c)(2)(B); 

for a drug or biological described in subparagraph 

(A)(iv) (including influenza vaccines furnished on or 

after January 1, 2011), (C), (D), (E), or (G) of section 

1842(o)(1) or section 1881(b)(13)(A)(ii), and, for calendar quarters beginning on or after January 1, 2007 

and only with respect to the information described in 

subclause (III), for covered outpatient drugs. 

* * * * * * * 

TITLE XXI—STATE CHILDREN’S HEALTH INSURANCE 

PROGRAM 

* * * * * * * 

SEC. 2102. GENERAL CONTENTS OF STATE CHILD HEALTH PLAN; ELIGIBILITY; OUTREACH. 

(a) * * * 

* * * * * * * 

(d) PROGRAM INTEGRITY.—A State child health plan shall include 

a description of the procedures to be used by the State— 

(1) to enforce any determination made by the Secretary under 

subsection (a) of section 1128G (relating to a significant risk of 

fraudulent activity with respect to a category of provider or supplier described in such subsection through use of the appropriate procedures described in such subsection); 

(2) to carry out any activities as required by the Secretary for 

purposes of such subsection; and 

(3) to enforce any determination made by the Secretary under 

subsection (b) of section 1128G (relating to disclosure requirements) and to apply any enhanced safeguards, with respect to 


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a provider or supplier described in such subsection, as the Secretary determines necessary under such subsection. 

* * * * * * * 

SEC. 2114. ASSURING QUALITY OF CARE IN HOSPICE CARE. 

The provisions of section 1819A shall apply to a hospice program 

providing hospice care under this title in the same manner such 

provisions apply to a hospice program providing hospice care under 

title XVIII. 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle A—Income Taxes 

* * * * * * * 

CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 

Subchapter A—Determination of Tax Liability 

PART I—TAX ON INDIVIDUALS 

* * * * * * * 

Part VIII. Health Care Related Taxes. 

* * * * * * * 

PART IV—CREDITS AGAINST TAX 

* * * * * * * 

Subpart D—Business Related Credits 

Sec. 38. General business credit. 

* * * * * * * 

Sec. 45R. Small business employee health coverage credit. 

* * * * * * * 

SEC. 38. GENERAL BUSINESS CREDIT. 

(a) * * * 

(b) CURRENT YEAR BUSINESS CREDIT.—For purposes of this subpart, the amount of the current year business credit is the sum of 

the following credits determined for the taxable year: 

(1) * * * 

* * * * * * * 

(34) the carbon dioxide sequestration credit determined 

under section 45Q(a) øplus¿ 

(35) the portion of the new qualified plug-in electric drive 

motor vehicle credit to which section 30D(c)(1) appliesø.¿, plus 


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(36) in the case of a qualified small employer (as defined in 

section 45R(e)), the small business employee health coverage 

credit determined under section 45R(a). 

* * * * * * * 

SEC. 45R. SMALL BUSINESS EMPLOYEE HEALTH COVERAGE CREDIT. 

(a) IN GENERAL.—For purposes of section 38, in the case of a 

qualified small employer, the small business employee health coverage credit determined under this section for the taxable year is an 

amount equal to the applicable percentage of the qualified employee 

health coverage expenses of such employer for such taxable year. 

(b) APPLICABLE PERCENTAGE.— (1) IN GENERAL.—For purposes of this section, the applicable 

percentage is 50 percent. 

(2) PHASEOUT BASED ON AVERAGE COMPENSATION OF EMPLOY- EES.—In the case of an employer whose average annual em- ployee compensation for the taxable year exceeds $20,000, the 

percentage specified in paragraph (1) shall be reduced by a 

number of percentage points which bears the same ratio to 50 

as such excess bears to $20,000. 

(c) LIMITATIONS.— (1) PHASEOUT BASED ON EMPLOYER SIZE.—In the case of an 

employer who employs more than 10 qualified employees during 

the taxable year, the credit determined under subsection (a) 

shall be reduced by an amount which bears the same ratio to 

the amount of such credit (determined without regard to this 

paragraph and after the application of the other provisions of 

this section) as— 

(A) the excess of— 

(i) the number of qualified employees employed by 

the employer during the taxable year, over 

(ii) 10, bears to 

(B) 15. 

(2) CREDIT NOT ALLOWED WITH RESPECT TO CERTAIN HIGHLY

COMPENSATED EMPLOYEES.—No credit shall be allowed under 

subsection (a) with respect to qualified employee health coverage 

expenses paid or incurred with respect to any employee for any 

taxable year if the aggregate compensation paid by the employer 

to such employee during such taxable year exceeds $80,000. 

(d) QUALIFIED EMPLOYEE HEALTH COVERAGE EXPENSES.—For 

purposes of this section— 

(1) IN GENERAL.—The term ‘‘qualified employee health coverage expenses’’ means, with respect to any employer for any 

taxable year, the aggregate amount paid or incurred by such 

employer during such taxable year for coverage of any qualified 

employee of the employer (including any family coverage which 

covers such employee) under qualified health coverage. 

(2) QUALIFIED HEALTH COVERAGE.—The term ‘‘qualified 

health coverage’’ means acceptable coverage (as defined in section 59B(d)) which— 

(A) is provided pursuant to an election under section 

4980H(a), and 

(B) satisfies the requirements referred to in section 

4980H(c). 

(e) OTHER DEFINITIONS.—For purposes of this section— 


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(1) QUALIFIED SMALL EMPLOYER.—For purposes of this section, the term ‘‘qualified small employer’’ means any employer 

for any taxable year if— 

(A) the number of qualified employees employed by such 

employer during the taxable year does not exceed 25, and 

(B) the average annual employee compensation of such 

employer for such taxable year does not exceed the sum of 

the dollar amounts in effect under subsection (b)(2). 

(2) QUALIFIED EMPLOYEE.—The term ‘‘qualified employee’’ 

means any employee of an employer for any taxable year of the 

employer if such employee received at least $5,000 of compensation from such employer for services performed in the trade or 

business of such employer during such taxable year. 

(3) AVERAGE ANNUAL EMPLOYEE COMPENSATION.—The term 

‘‘average annual employee compensation’’ means, with respect to 

any employer for any taxable year, the average amount of compensation paid by such employer to qualified employees of such 

employer during such taxable year. 

(4) COMPENSATION.—The term ‘‘compensation’’ has the meaning given such term in section 408(p)(6)(A). 

(5) FAMILY COVERAGE.—The term ‘‘family coverage’’ means 

any coverage other than self-only coverage. 

(f) SPECIAL RULES.—For purposes of this section— 

(1) SPECIAL RULE FOR PARTNERSHIPS AND SELF-EMPLOYED.— 

In the case of a partnership (or a trade or business carried on 

by an individual) which has one or more qualified employees 

(determined without regard to this paragraph) with respect to 

whom the election under 4980H(a) applies, each partner (or, in 

the case of a trade or business carried on by an individual, 

such individual) shall be treated as an employee. 

(2) AGGREGATION RULE.—All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall 

be treated as 1 employer. 

(3) DENIAL OF DOUBLE BENEFIT.—Any deduction otherwise allowable with respect to amounts paid or incurred for health insurance coverage to which subsection (a) applies shall be reduced by the amount of the credit determined under this section. 

(4) INFLATION ADJUSTMENT.—In the case of any taxable year 

beginning after 2013, each of the dollar amounts in subsections 

(b)(2), (c)(2), and (e)(2) shall be increased by an amount equal 

to— 

(A) such dollar amount, multiplied by 

(B) the cost of living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year 

begins determined by substituting ‘‘calendar year 2012’’ for 

‘‘calendar year 1992’’ in subparagraph (B) thereof. 

If any increase determined under this paragraph is not a multiple of $50, such increase shall be rounded to the next lowest 

multiple of $50. 

* * * * * * * 


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PART VIII—HEALTH CARE RELATED TAXES 

SUBPART A. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE. 

SUBPART B. SURCHARGE ON HIGH INCOME INDIVIDUALS. 

Subpart A—Tax on Individuals Without 

Acceptable Health Care Coverage 

Sec. 59B. Tax on individuals without acceptable health care coverage. 

SEC. 59B. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE 

COVERAGE. 

(a) TAX IMPOSED.—In the case of any individual who does not 

meet the requirements of subsection (d) at any time during the taxable year, there is hereby imposed a tax equal to 2.5 percent of the 

excess of— 

(1) the taxpayer’s modified adjusted gross income for the taxable year, over 

(2) the amount of gross income specified in section 6012(a)(1) 

with respect to the taxpayer. 

(b) LIMITATIONS.— (1) TAX LIMITED TO AVERAGE PREMIUM.— (A) IN GENERAL.—The tax imposed under subsection (a) 

with respect to any taxpayer for any taxable year shall not 

exceed the applicable national average premium for such 

taxable year. 

(B) APPLICABLE NATIONAL AVERAGE PREMIUM.— 

(i) IN GENERAL.—For purposes of subparagraph (A), 

the ‘‘applicable national average premium’’ means, 

with respect to any taxable year, the average premium 

(as determined by the Secretary, in coordination with 

the Health Choices Commissioner) for self-only coverage under a basic plan which is offered in a Health 

Insurance Exchange for the calendar year in which 

such taxable year begins. 

(ii) FAILURE TO PROVIDE COVERAGE FOR MORE THAN

ONE INDIVIDUAL.—In the case of any taxpayer who fails 

to meet the requirements of subsection (e) with respect 

to more than one individual during the taxable year, 

clause (i) shall be applied by substituting ‘‘family coverage’’ for ‘‘self-only coverage’’. 

(2) PRORATION FOR PART YEAR FAILURES.—The tax imposed 

under subsection (a) with respect to any taxpayer for any taxable year shall not exceed the amount which bears the same 

ratio to the amount of tax so imposed (determined without regard to this paragraph and after application of paragraph (1)) 

as— 

(A) the aggregate periods during such taxable year for 

which such individual failed to meet the requirements of 

subsection (d), bears to 

(B) the entire taxable year. 

(c) EXCEPTIONS.— 

(1) DEPENDENTS.—Subsection (a) shall not apply to any individual for any taxable year if a deduction is allowable under 

section 151 with respect to such individual to another taxpayer 


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for any taxable year beginning in the same calendar year as 

such taxable year. 

(2) NONRESIDENT ALIENS.—Subsection (a) shall not apply to 

any individual who is a nonresident alien. 

(3) INDIVIDUALS RESIDING OUTSIDE UNITED STATES.—Any 

qualified individual (as defined in section 911(d)) (and any 

qualifying child residing with such individual) shall be treated 

for purposes of this section as covered by acceptable coverage 

during the period described in subparagraph (A) or (B) of section 911(d)(1), whichever is applicable. 

(4) INDIVIDUALS RESIDING IN POSSESSIONS OF THE UNITED

STATES.—Any individual who is a bona fide resident of any 

possession of the United States (as determined under section 

937(a)) for any taxable year (and any qualifying child residing 

with such individual) shall be treated for purposes of this section as covered by acceptable coverage during such taxable year. 

(5) RELIGIOUS CONSCIENCE EXEMPTION.— (A) IN GENERAL.—Subsection (a) shall not apply to any 

individual (and any qualifying child residing with such individual) for any period if such individual has in effect an 

exemption which certifies that such individual is a member 

of a recognized religious sect or division thereof described 

in section 1402(g)(1) and an adherent of established tenets 

or teachings of such sect or division as described in such 

section. 

(B) EXEMPTION.—An application for the exemption described in subparagraph (A) shall be filed with the Secretary at such time and in such form and manner as the 

Secretary may prescribe. Any such exemption granted by 

the Secretary shall be effective for such period as the Secretary determines appropriate. 

(d) ACCEPTABLE COVERAGE REQUIREMENT.— 

(1) IN GENERAL.—The requirements of this subsection are met 

with respect to any individual for any period if such individual 

(and each qualifying child of such individual) is covered by acceptable coverage at all times during such period. 

(2) ACCEPTABLE COVERAGE.—For purposes of this section, the 

term ‘‘acceptable coverage’’ means any of the following: 

(A) QUALIFIED HEALTH BENEFITS PLAN COVERAGE.—Coverage under a qualified health benefits plan (as defined in 

section 100(c) of the America’s Affordable Health Choices 

Act of 2009). 

(B) GRANDFATHERED HEALTH INSURANCE COVERAGE; COVERAGE UNDER GRANDFATHERED EMPLOYMENT-BASED

HEALTH PLAN.—Coverage under a grandfathered health insurance coverage (as defined in subsection (a) of section 102 

of the America’s Affordable Health Choices Act of 2009) or 

under a current employment-based health plan (within the 

meaning of subsection (b) of such section). 

(C) MEDICARE.—Coverage under part A of title XVIII of 

the Social Security Act. 

(D) MEDICAID.—Coverage for medical assistance under 

title XIX of the Social Security Act. 

(E) MEMBERS OF THE ARMED FORCES AND DEPENDENTS

(INCLUDING TRICARE).—Coverage under chapter 55 of title 


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10, United States Code, including similar coverage furnished under section 1781 of title 38 of such Code. 

(F) VA.—Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code, but 

only if the coverage for the individual involved is determined by the Secretary in coordination with the Health 

Choices Commissioner to be not less than the level specified 

by the Secretary of the Treasury, in coordination with the 

Secretary of Veteran’s Affairs and the Health Choices Commissioner, based on the individual’s priority for services as 

provided under section 1705(a) of such title. 

(G) OTHER COVERAGE.—Such other health benefits coverage as the Secretary, in coordination with the Health 

Choices Commissioner, recognizes for purposes of this subsection. 

(e) OTHER DEFINITIONS AND SPECIAL RULES.— 

(1) QUALIFYING CHILD.—For purposes of this section, the term 

‘‘qualifying child’’ has the meaning given such term by section 

152(c). With respect to any period during which health coverage 

for a child must be provided by an individual pursuant to a 

child support order, such child shall be treated as a qualifying 

child of such individual (and not as a qualifying child of any 

other individual). 

(2) BASIC PLAN.—For purposes of this section, the term ‘‘basic 

plan’’ has the meaning given such term under section 100(c) of 

the America’s Affordable Health Choices Act of 2009. 

(3) HEALTH INSURANCE EXCHANGE.—For purposes of this section, the term ‘‘Health Insurance Exchange’’ has the meaning 

given such term under section 100(c) of the America’s Affordable Health Choices Act of 2009, including any State-based 

health insurance exchange approved for operation under section 

208 of such Act. 

(4) FAMILY COVERAGE.—For purposes of this section, the term 

‘‘family coverage’’ means any coverage other than self-only coverage. 

(5) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this 

section, the term ‘‘modified adjusted gross income’’ means adjusted gross income— 

(A) determined without regard to section 911, and 

(B) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax. 

(6) NOT TREATED AS TAX IMPOSED BY THIS CHAPTER FOR CERTAIN PURPOSES.—The tax imposed under this section shall not 

be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55. 

(f) REGULATIONS.—The Secretary shall prescribe such regulations 

or other guidance as may be necessary or appropriate to carry out 

the purposes of this section, including regulations or other guidance 

(developed in coordination with the Health Choices Commissioner) 

which provide— 

(1) exemption from the tax imposed under subsection (a) in 

cases of de minimis lapses of acceptable coverage, and 


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(2) a process for applying for a waiver of the application of 

subsection (a) in cases of hardship. 

Subpart B—Surcharge on High Income Individuals 

Sec. 59C. Surcharge on high income individuals. 

SEC. 59C. SURCHARGE ON HIGH INCOME INDIVIDUALS. 

(a) GENERAL RULE.—In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to— 

(1) 1 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $350,000 but does not exceed 

$500,000, 

(2) 1.5 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $500,000 but does not exceed 

$1,000,000, and 

(3) 5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000. 

(b) TAXPAYERS NOT MAKING A JOINT RETURN.—In the case of any 

taxpayer other than a taxpayer making a joint return under section 

6013 or a surviving spouse (as defined in section 2(a)), subsection 

(a) shall be applied by substituting for each of the dollar amounts 

therein (after any increase determined under subsection (e)) a dollar 

amount equal to— 

(1) 50 percent of the dollar amount so in effect in the case of 

a married individual filing a separate return, and 

(2) 80 percent of the dollar amount so in effect in any other 

case. 

(c) ADJUSTMENTS BASED ON FEDERAL HEALTH REFORM SAVINGS.— 

(1) IN GENERAL.—Except as provided in paragraph (2), in the 

case of any taxable year beginning after December 31, 2012, 

subsection (a) shall be applied— 

(A) by substituting ‘‘2 percent’’ for ‘‘1 percent’’, and 

(B) by substituting ‘‘3 percent’’ for ‘‘1.5 percent’’. 

(2) ADJUSTMENTS BASED ON EXCESS FEDERAL HEALTH REFORM SAVINGS.— 

(A) EXCEPTION IF FEDERAL HEALTH REFORM SAVINGS SIGNIFICANTLY EXCEEDS BASE AMOUNT.—If the excess Federal 

health reform savings is more than $150,000,000,000 but 

not more than $175,000,000,000, paragraph (1) shall not 

apply. 

(B) FURTHER ADJUSTMENT FOR ADDITIONAL FEDERAL

HEALTH REFORM SAVINGS.—If the excess Federal health reform savings is more than $175,000,000,000, paragraphs 

(1) and (2) of subsection (a) (and paragraph (1) of this subsection) shall not apply to any taxable year beginning after 

December 31, 2012. 

(C) EXCESS FEDERAL HEALTH REFORM SAVINGS.—For purposes of this subsection, the term ‘‘excess Federal health reform savings’’ means the excess of— 

(i) the Federal health reform savings, over 

(ii) $525,000,000,000. 


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(D) FEDERAL HEALTH REFORM SAVINGS.—The term ‘‘Federal health reform savings’’ means the sum of the amounts 

described in subparagraphs (A) and (B) of paragraph (3). 

(3) DETERMINATION OF FEDERAL HEALTH REFORM SAVINGS.— Not later than December 1, 2012, the Director of the Office of 

Management and Budget shall— 

(A) determine, on the basis of the study conducted under 

paragraph (4), the aggregate reductions in Federal expenditures which have been achieved as a result of the provisions 

of, and amendments made by, division B of the America’s 

Affordable Health Choices Act of 2009 during the period beginning on October 1, 2009, and ending with the latest date 

with respect to which the Director has sufficient data to 

make such determination, and 

(B) estimate, on the basis of such study and the determination under subparagraph (A), the aggregate reductions 

in Federal expenditures which will be achieved as a result 

of such provisions and amendments during so much of the 

period beginning with fiscal year 2010 and ending with fiscal year 2019 as is not taken into account under subparagraph (A). 

(4) STUDY OF FEDERAL HEALTH REFORM SAVINGS.—The Director of the Office of Management and Budget shall conduct a 

study of the reductions in Federal expenditures during fiscal 

years 2010 through 2019 which are attributable to the provisions of, and amendments made by, division B of the America’s 

Affordable Health Choices Act of 2009. The Director shall complete such study not later than December 1, 2012. 

(5) REDUCTIONS IN FEDERAL EXPENDITURES DETERMINED

WITHOUT REGARD TO PROGRAM INVESTMENTS.—For purposes of 

paragraphs (3) and (4), reductions in Federal expenditures 

shall be determined without regard to section 1121 of the America’s Affordable Health Choices Act of 2009 and other program 

investments under division B thereof. 

(d) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this 

section, the term ‘‘modified adjusted gross income’’ means adjusted 

gross income reduced by any deduction (not taken into account in 

determining adjusted gross income) allowed for investment interest 

(as defined in section 163(d)). In the case of an estate or trust, adjusted gross income shall be determined as provided in section 67(e). 

(e) INFLATION ADJUSTMENTS.— 

(1) IN GENERAL.—In the case of taxable years beginning after 

2011, the dollar amounts in subsection (a) shall be increased by 

an amount equal to— 

(A) such dollar amount, multiplied by 

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year 

begins, by substituting ‘‘calendar year 2010’’ for ‘‘calendar 

year 1992’’ in subparagraph (B) thereof. 

(2) ROUNDING.—If any amount as adjusted under paragraph (1) is not a multiple of $5,000, such amount shall be rounded 

to the next lowest multiple of $5,000. 

(f) SPECIAL RULES.— 

(1) NONRESIDENT ALIEN.—In the case of a nonresident alien 

individual, only amounts taken into account in connection with 


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the tax imposed under section 871(b) shall be taken into account under this section. 

(2) CITIZENS AND RESIDENTS LIVING ABROAD.—The dollar 

amounts in effect under subsection (a) (after the application of 

subsections (b) and (e)) shall be decreased by the excess of— 

(A) the amounts excluded from the taxpayer’s gross income under section 911, over 

(B) the amounts of any deductions or exclusions disallowed under section 911(d)(6) with respect to the amounts 

described in subparagraph (A). 

(3) CHARITABLE TRUSTS.—Subsection (a) shall not apply to a 

trust all the unexpired interests in which are devoted to one or 

more of the purposes described in section 170(c)(2)(B). 

(4) NOT TREATED AS TAX IMPOSED BY THIS CHAPTER FOR CER- TAIN PURPOSES.—The tax imposed under this section shall not 

be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55. 

* * * * * * * 

Subchapter B—Computation of Taxable Income 

* * * * * * * 

PART III—ITEMS SPECIFICALLY EXCLUDED FROM 

GROSS INCOME 

* * * * * * * 

SEC. 105. AMOUNTS RECEIVED UNDER ACCIDENT AND HEALTH 

PLANS. 

(a) * * * 

(b) AMOUNTS EXPENDED FOR MEDICAL CARE.—Except in the case 

of amounts attributable to (and not in excess of) deductions allowed 

under section 213 (relating to medical, etc., expenses) for any prior 

taxable year, gross income does not include amounts referred to in 

subsection (a) if such amounts are paid, directly or indirectly, to 

the taxpayer to reimburse the taxpayer for expenses incurred by 

him for the medical care (as defined in section 213(d)) of the taxpayer, his spouse, øand his dependents¿ his dependents (as defined 

in section 152, determined without regard to subsections (b)(1), 

(b)(2), and (d)(1)(B) thereof) and any eligible beneficiary (within the 

meaning of section 106(f)) with respect to the taxpayer. Any child to 

whom section 152(e) applies shall be treated as a dependent of both 

parents for purposes of this subsection. 

* * * * * * * 

SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH 

PLANS. 

(a) * * * 

* * * * * * * 

(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED

DRUGS AND INSULIN.—For purposes of this section and section 105, 

reimbursement for expenses incurred for a medicine or a drug shall 

be treated as a reimbursement for medical expenses only if such 

medicine or drug is a prescribed drug or is insulin. 


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(g) COVERAGE PROVIDED FOR ELIGIBLE BENEFICIARIES OF EM- PLOYEES.— 

(1) IN GENERAL.—Subsection (a) shall apply with respect to 

any eligible beneficiary of the employee. 

(2) ELIGIBLE BENEFICIARY.—For purposes of this subsection, 

the term ‘‘eligible beneficiary’’ means any individual who is eligible to receive benefits or coverage under an accident or health 

plan. 

* * * * * * * 

PART VI—ITEMIZED DEDUCTIONS FOR INDIVIDUALS 

AND CORPORATIONS 

* * * * * * * 

SEC. 162. TRADE OR BUSINESS EXPENSES. 

(a) * * * 

* * * * * * * 

(l) SPECIAL RULES FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.— 

ø(1) ALLOWANCE OF DEDUCTION.— 

ø(A) IN GENERAL.—In the case of an individual who is an 

employee within the meaning of section 401(c)(1), there 

shall be allowed as a deduction under this section an 

amount equal to the applicable percentage of the amount 

paid during the taxable year for insurance which constitutes medical care for the taxpayer, his spouse, and dependents. 

ø(B) APPLICABLE PERCENTAGE.—For purposes of subparagraph (A), the applicable percentage shall be determined under the following table: 

øFor taxable years beginning in calendar year - The applicable percentage is - 

1999 through 2001 60

2002 70

2003 and thereafter 100.¿ 

(1) ALLOWANCE OF DEDUCTION.—In the case of a taxpayer 

who is an employee within the meaning of section 401(c)(1), 

there shall be allowed as a deduction under this section an 

amount equal to the amount paid during the taxable year for 

insurance which constitutes medical care for— 

(A) the taxpayer, 

(B) the taxpayer’s spouse, 

(C) the taxpayer’s dependents, and 

(D) any individual who— 

(i) satisfies the age requirements of section 

152(c)(3)(A), 

(ii) bears a relationship to the taxpayer described in 

section 152(d)(2)(H), and 

(iii) meets the requirements of section 152(d)(1)(C), 

and 

(E) one individual who— 


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(i) does not satisfy the age requirements of section 

152(c)(3)(A), 

(ii) bears a relationship to the taxpayer described in 

section 152(d)(2)(H), 

(iii) meets the requirements of section 152(d)(1)(D), 

and 

(iv) is not the spouse of the taxpayer and does not 

bear any relationship to the taxpayer described in subparagraphs (A) through (G) of section 152(d)(2). 

(2) LIMITATIONS.— (A) * * * 

(B) OTHER COVERAGE.—Paragraph (1) shall not apply to 

any taxpayer for any calendar month for which the taxpayer is eligible to participate in any subsidized health 

plan maintained by any employer of the taxpayer or of the 

spouse, any dependent, or individual described in subparagraph (D) or (E) of paragraph (1) with respect to of the taxpayer. The preceding sentence shall be applied separately 

with respect to— 

(i) * * * 

* * * * * * * 

PART VII—ADDITIONAL ITEMIZED DEDUCTIONS FOR 

INDIVIDUALS 

* * * * * * * 

SEC. 220. ARCHER MSAS. 

(a) * * * 

* * * * * * * 

(d) ARCHER MSA.—For purposes of this section— 

(1) * * * 

(2) QUALIFIED MEDICAL EXPENSES.— 

(A) IN GENERAL.—The term ‘‘qualified medical expenses’’ 

means, with respect to an account holder, amounts paid by 

such holder for medical care (as defined in section 213(d)) 

for such individual, the spouse of such individual, and any 

dependent (as defined in section 152, determined without 

regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of 

such individual, but only to the extent such amounts are 

not compensated for by insurance or otherwise. Such term 

shall include an amount paid for medicine or a drug only 

if such medicine or drug is a prescribed drug or is insulin. 

* * * * * * * 

SEC. 223. HEALTH SAVINGS ACCOUNTS. 

(a) * * * 

* * * * * * * 

(d) HEALTH SAVINGS ACCOUNT.—For purposes of this section— 

(1) * * * 

(2) QUALIFIED MEDICAL EXPENSES.— 

(A) IN GENERAL.—The term ‘‘qualified medical expenses’’ 

means, with respect to an account beneficiary, amounts 

paid by such beneficiary for medical care (as defined in 

section 213(d) for such individual, the spouse of such indiVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00765 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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vidual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and 

(d)(1)(B) thereof) of such individual, but only to the extent 

such amounts are not compensated for by insurance or 

otherwise. Such term shall include an amount paid for 

medicine or a drug only if such medicine or drug is a prescribed drug or is insulin. 

* * * * * * * 

Subchapter F—Exempt Organizations 

* * * * * * * 

PART I—GENERAL RULE 

* * * * * * * 

SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN 

TRUSTS, ETC. 

(a) * * * 

* * * * * * * 

(c) LIST OF EXEMPT ORGANIZATIONS.—The following organizations 

are referred to in subsection (a): 

(1) * * * 

* * * * * * * 

(9) Voluntary employees’ beneficiary associations providing 

for the payment of life, sick, accident, or other benefits to the 

members of such association or their dependents or designated 

beneficiaries, if no part of the net earnings of such association 

inures (other than through such payments) to the benefit of 

any private shareholder or individual. For purposes of providing for the payment of sick and accident benefits to members 

of such an association and their dependents, the term ‘‘dependents’’ shall include any individual who is an eligible beneficiary 

(within the meaning of section 106(f)), as determined under the 

terms of a medical benefit, health insurance, or other program 

under which members and their dependents are entitled to sick 

and accident benefits. 

* * * * * * * 

Subchapter N—Tax Based on Income From 

Sources Within or Without the United States 

* * * * * * * 

PART I—SOURCE RULES AND OTHER GENERAL RULES 

RELATING TO FOREIGN INCOME 

* * * * * * * 

SEC. 864. DEFINITIONS AND SPECIAL RULES. 

(a) * * * 

* * * * * * * 


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(f) ELECTION TO ALLOCATE INTEREST, ETC. ON WORLDWIDE

BASIS.—For purposes of this subchapter, at the election of the 

worldwide affiliated group— 

(1) * * * 

* * * * * * * 

(5) ELECTION TO EXPAND FINANCIAL INSTITUTION GROUP OF

WORLDWIDE.—group (A) * * * 

* * * * * * * 

(D) ELECTION.—An election under this paragraph with 

respect to any financial institution group may be made 

only by the common parent of the pre-election worldwide 

affiliated group and may be made only for the first taxable 

year beginning after øDecember 31, 2010¿ December 31, 

2019, in which such affiliated group includes 1 or more financial corporations. Such an election, once made, shall 

apply to all financial corporations which are members of 

the electing financial institution group for such taxable 

year and all subsequent years unless revoked with the consent of the Secretary. 

* * * * * * * 

(6) ELECTION.—An election to have this subsection apply 

with respect to any worldwide affiliated group may be made 

only by the common parent of the domestic affiliated group referred to in paragraph (1)(C) and may be made only for the 

first taxable year beginning after øDecember 31, 2010¿ December 31, 2019, in which a worldwide affiliated group exists 

which includes such affiliated group and at least 1 foreign corporation. Such an election, once made, shall apply to such common parent and all other corporations which are members of 

such worldwide affiliated group for such taxable year and all 

subsequent years unless revoked with the consent of the Secretary. 

ø(7) TRANSITION.—In the case of the first taxable year to 

which this subsection applies, the increase (if any) in the 

amount of the interest expense allocable to sources within the 

United States by reason of the application of this subsection 

shall be 30 percent of the amount of such increase determined 

without regard to this paragraph.¿ 

* * * * * * * 

PART II—NONRESIDENT ALIENS AND FOREIGN 

CORPORATIONS 

* * * * * * * 

Subpart D—Miscellaneous Provisions 

* * * * * * * 

SEC. 894. INCOME AFFECTED BY TREATY. 

(a) * * * 

* * * * * * * 

(d) LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE

PAYMENTS.— 


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(1) IN GENERAL.—In the case of any deductible related-party 

payment, any withholding tax imposed under chapter 3 (and 

any tax imposed under subpart A or B of this part) with respect 

to such payment may not be reduced under any treaty of the 

United States unless any such withholding tax would be reduced under a treaty of the United States if such payment were 

made directly to the foreign parent corporation. 

(2) DEDUCTIBLE RELATED-PARTY PAYMENT.—For purposes of 

this subsection, the term ‘‘deductible related-party payment’’ 

means any payment made, directly or indirectly, by any person 

to any other person if the payment is allowable as a deduction 

under this chapter and both persons are members of the same 

foreign controlled group of entities. 

(3) FOREIGN CONTROLLED GROUP OF ENTITIES.—For purposes 

of this subsection— 

(A) IN GENERAL.—The term ‘‘foreign controlled group of 

entities’’ means a controlled group of entities the common 

parent of which is a foreign corporation. 

(B) CONTROLLED GROUP OF ENTITIES.—The term ‘‘controlled group of entities’’ means a controlled group of corporations as defined in section 1563(a)(1), except that— 

(i) ‘‘more than 50 percent’’ shall be substituted for ‘‘at 

least 80 percent’’ each place it appears therein, and 

(ii) the determination shall be made without regard 

to subsections (a)(4) and (b)(2) of section 1563. 

A partnership or any other entity (other than a corporation) 

shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any 

entity treated as a member of such group by reason of this 

sentence). 

(4) FOREIGN PARENT CORPORATION.—For purposes of this subsection, the term ‘‘foreign parent corporation’’ means, with respect to any deductible related-party payment, the common parent of the foreign controlled group of entities referred to in paragraph (3)(A). 

(5) REGULATIONS.—The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry 

out the purposes of this subsection, including regulations or 

other guidance which provide for— 

(A) the treatment of two or more persons as members of 

a foreign controlled group of entities if such persons would 

be the common parent of such group if treated as one corporation, and 

(B) the treatment of any member of a foreign controlled 

group of entities as the common parent of such group if 

such treatment is appropriate taking into account the economic relationships among such entities. 

* * * * * * * 

Subtitle C—Employment Taxes 

* * * * * * * 


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CHAPTER 21—FEDERAL INSURANCE 

CONTRIBUTIONS ACT 

* * * * * * * 

Subchapter B—Tax on Employers 

* * * * * * * 

SEC. 3111. RATE OF TAX. 

(a) * * * 

* * * * * * * 

(c) EMPLOYERS ELECTING TO NOT PROVIDE HEALTH BENEFITS.— 

(1) IN GENERAL.—In addition to other taxes, there is hereby 

imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of 

the wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121(b)). 

(2) SPECIAL RULES FOR SMALL EMPLOYERS.— 

(A) IN GENERAL.—In the case of any employer who is 

small employer for any calendar year, paragraph (1) shall 

be applied by substituting the applicable percentage determined in accordance with the following table for ‘‘8 percent’’: 

If the annual payroll of such employer for the preceding calendar year: The applicable percentage is: 

Does not exceed $250,000 .............................................. 0 percent 

Exceeds $250,000, but does not exceed $300,000 ........ 2 percent 

Exceeds $300,000, but does not exceed $350,000 ........ 4 percent 

Exceeds $350,000, but does not exceed $400,000 ........ 6 percent 

(B) SMALL EMPLOYER.—For purposes of this paragraph, 

the term ‘‘small employer’’ means any employer for any calendar year if the annual payroll of such employer for the 

preceding calendar year does not exceed $400,000. 

(C) ANNUAL PAYROLL.—For purposes of this paragraph, 

the term ‘‘annual payroll’’ means, with respect to any employer for any calendar year, the aggregate wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121(b)) during such calendar year. 

(3) NONELECTING EMPLOYER.—For purposes of paragraph (1), 

the term ‘‘nonelecting employer’’ means any employer for any period with respect to which such employer does not have an election under section 4980H(a) in effect. 

(4) SPECIAL RULE FOR SEPARATE ELECTIONS.—In the case of 

an employer who makes a separate election described in section 

4980H(a)(4) for any period, paragraph (1) shall be applied for 

such period by taking into account only the wages paid to employees who are not subject to such election. 

(5) AGGREGATION; PREDECESSORS.—For purposes of this subsection— 


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(A) all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 

1 employer, and 

(B) any reference to any person shall be treated as including a reference to any predecessor of such person. 

ø(c)¿ (d) RELIEF FROM TAXES IN CASES COVERED BY CERTAIN

INTERNATIONAL AGREEMENTS.—During any period in which there is 

in effect an agreement entered into pursuant to section 233 of the 

Social Security Act with any foreign country, wages received by or 

paid to an individual shall be exempt from the taxes imposed by 

øthis section¿ subsections (a) and (b) to the extent that such wages 

are subject under such agreement exclusively to the laws applicable 

to the social security system of such foreign country. 

* * * * * * * 

Subchapter C—General Provisions 

* * * * * * * 

SEC. 3121. DEFINITIONS. 

(a) WAGES.—For purposes of this chapter, the term ‘‘wages’’ 

means all remuneration for employment, including the cash value 

of all remuneration (including benefits) paid in any medium other 

than cash; except that such term shall not include— 

(1) * * * 

(2) the amount of any payment (including any amount paid 

by an employer for insurance or annuities, or into a fund, to 

provide for any such payment) made to, or on behalf of, an employee øor any of his dependents¿, any of his dependents, or 

any eligible beneficiary (within the meaning of section 106(g)) 

with respect to the employee under a plan or system established 

by an employer which makes provision for his employees generally (or for his employees generally øand their dependents¿ 

and such employees’ dependents and eligible beneficiaries (within the meaning of section 106(g))) or for a class or classes of his 

employees (or for a class or classes of his employees øand their 

dependents¿ and such employees’ dependents and eligible beneficiaries (within the meaning of section 106(g))), on account of— 

(A) sickness or accident disability (but, in the case of 

payments made to an employee øor any of his dependents,¿, any of his dependents, or any eligible beneficiary 

(within the meaning of section 106(g)) with respect to the 

employee, this subparagraph shall exclude from the term 

‘‘wages’’ only payments which are received under a workman’s compensation law), or 

* * * * * * * 

(aa) SPECIAL RULES FOR TAX ON EMPLOYERS ELECTING NOT TO

PROVIDE HEALTH BENEFITS.—For purposes of section 3111(c)— 

(1) Paragraphs (1), (5), and (19) of subsection (b) shall not 

apply. 

(2) Paragraph (7) of subsection (b) shall apply by treating all 

services as not covered by the retirement systems referred to in 

subparagraphs (C) and (F) thereof. 


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(3) Subsection (e) shall not apply and the term ‘‘State’’ shall 

include the District of Columbia. 

* * * * * * * 

CHAPTER 22—RAILROAD RETIREMENT TAX 

ACT 

* * * * * * * 

Subchapter C—Tax on Employers 

* * * * * * * 

SEC. 3221. RATE OF TAX. 

(a) * * * 

* * * * * * * 

(c) EMPLOYERS ELECTING TO NOT PROVIDE HEALTH BENEFITS.— 

(1) IN GENERAL.—In addition to other taxes, there is hereby 

imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of 

the compensation paid during any calendar year by such employer for services rendered to such employer. 

(2) EXCEPTION FOR SMALL EMPLOYERS.—Rules similar to the 

rules of section 3111(c)(2) shall apply for purposes of this subsection. 

(3) NONELECTING EMPLOYER.—For purposes of paragraph (1), 

the term ‘‘nonelecting employer’’ means any employer for any period with respect to which such employer does not have an election under section 4980H(a) in effect. 

(4) SPECIAL RULE FOR SEPARATE ELECTIONS.—In the case of 

an employer who makes a separate election described in section 

4980H(a)(4) for any period, subsection (a) shall be applied for 

such period by taking into account only the wages paid to employees who are not subject to such election. 

ø(c)¿ (d) CROSS REFERENCE.—For application of different contribution bases with respect to the taxes imposed by øsubsections 

(a) and (b), see section 3231(e)(2)¿ this section, see paragraphs (2) 

and (13)(B) of section 3231(e). 

* * * * * * * 

Subchapter D—General Provisions 

* * * * * * * 

SEC. 3231. DEFINITIONS. 

(a) * * * 

* * * * * * * 

(e) COMPENSATION.—For purposes of this chapter— 

(1) The term ‘‘compensation’’ means any form of money remuneration paid to an individual for services rendered as an 

employee to one or more employers. Such term does not include (i) the amount of any payment (including any amount 

paid by an employer for insurance or annuities, or into a fund, 


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to provide for any such payment) made to, or on behalf of, an 

employee øor any of his dependents¿, any of his dependents, or 

any eligible beneficiary (within the meaning of section 106(g)) 

with respect to the employee, under a plan or system established by an employer which makes provision for his employees 

generally (or for his employees generally øand their dependents¿ and such employees’ dependents and eligible beneficiaries 

(within the meaning of section 106(g))) or for a class or classes 

of his employees (or for a class or classes of his employees øand 

their dependents¿ and such employees’ dependents and eligible 

beneficiaries (within the meaning of section 106(g))), on account 

of sickness or accident disability or medical or hospitalization 

expenses in connection with sickness or accident disability or 

death, except that this clause does not apply to a payment for 

group-term life insurance to the extent that such payment is 

includible in the gross income of the employee, (ii) tips (except 

as is provided under paragraph (3)), (iii) an amount paid specifically - either as an advance, as reimbursement or allowance 

- for traveling or other bona fide and necessary expenses incurred or reasonably expected to be incurred in the business of 

the employer provided any such payment is identified by the 

employer either by a separate payment or by specifically indicating the separate amounts where both wages and expense reimbursement or allowance are combined in a single payment, 

or (iv) any remuneration which would not (if chapter 21 applied to such remuneration) be treated as wages (as defined in 

section 3121(a)) by reason of section 3121(a)(5). Such term does 

not include remuneration for service which is performed by a 

nonresident alien individual for the period he is temporarily 

present in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act, as amended, and which is performed to carry out the purpose specified in subparagraph (F), 

(J), (M), or (Q), as the case may be. For the purpose of determining the amount of taxes under sections 3201 and 3221, 

compensation earned in the service of a local lodge or division 

of a railway-labor-organization employer shall be disregarded 

with respect to any calendar month if the amount thereof is 

less than $25. Compensation for service as a delegate to a national or international convention of a railway labor organization defined as an ‘‘employer’’ in subsection (a) of this section 

shall be disregarded for purposes of determining the amount of 

taxes due pursuant to this chapter if the individual rendering 

such service has not previously rendered service, other than as 

such a delegate, which may be included in his ‘‘years of service’’ for purposes of the Railroad Retirement Act. Nothing in 

the regulations prescribed for purposes of chapter 24 (relating 

to wage withholding) which provides an exclusion from ‘‘wages’’ 

as used in such chapter shall be construed to require a similar 

exclusion from ‘‘compensation’’ in regulations prescribed for 

purposes of this chapter. 

* * * * * * * 

(13) SPECIAL RULES FOR TAX ON EMPLOYERS ELECTING NOT TO

PROVIDE HEALTH BENEFITS.—For purposes of section 3221(c)— 


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(A) Paragraph (1) shall be applied without regard to the 

third sentence thereof. 

(B) Paragraph (2) shall not apply. 

* * * * * * * 

CHAPTER 23—FEDERAL UNEMPLOYMENT TAX 

ACT 

* * * * * * * 

SEC. 3306. DEFINITIONS. 

(a) * * * 

(b) WAGES.—For purposes of this chapter, the term ‘‘wages’’ 

means all remuneration for employment, including the cash value 

of all remuneration (including benefits) paid in any medium other 

than cash; except that such term shall not include— 

(1) * * * 

(2) the amount of any payment (including any amount paid 

by an employer for insurance or annuities, or into a fund, to 

provide for any such payment) made to, or on behalf of, an employee øor any of his dependents¿, any of his dependents, or 

any eligible beneficiary (within the meaning of section 106(f)) 

with respect to the employee, under a plan or system established by an employer which makes provision for his employees 

generally (or for his employees generally øand their dependents¿ and such employees’ dependents and eligible beneficiaries 

(within the meaning of section 106(g))) or for a class or classes 

of his employees (or for a class or classes of his employees øand 

their dependents¿ and such employees’ dependents and eligible 

beneficiaries (within the meaning of section 106(g))), on account 

of— 

(A) sickness or accident disability (but, in the case of 

payments made to an employee øor any of his dependents¿, any of his dependents, or any eligible beneficiary 

(within the meaning of section 106(g)) with respect to the 

employee,, this subparagraph shall exclude from the term 

‘‘wages’’ only payments which are received under a workmen’s compensation law), or 

* * * * * * * 

CHAPTER 24—COLLECTION OF INCOME TAX 

AT SOURCE ON WAGES 

* * * * * * * 

SEC. 3401. DEFINITIONS. 

(a) WAGES.—For purposes of this chapter, the term ‘‘wages’’ 

means all remuneration (other than fees paid to a public official) 

for services performed by an employee for his employer, including 

the cash value of all remuneration (including benefits) paid in any 

medium other than cash; except that such term shall not include 

remuneration paid— 

(1) * * * 

* * * * * * * 


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(22) any payment made to or for the benefit of an employee 

if at the time of such payment it is reasonable to believe that 

the employee will be able to exclude such payment from income 

under section 106(d); øor¿ 

(23) for any benefit or payment which is excludable from the 

gross income of the employee under section 139B(b)ø.¿; or 

(24) for any payment made to or for the benefit of an employee or any eligible beneficiary (within the meaning of section 

106(f)) if at the time of such payment it is reasonable to believe 

that the employee will be able to exclude such payment from income under section 106 or under section 105 by reference in section 105(b) to section 106(f). 

* * * * * * * 

Subtitle D—Miscellaneous Excise Taxes 

CHAPTER 31—RETAIL EXCISE TAXES. 

* * * * * * * 

øCHAPTER 34—POLICIES ISSUED BY FOREIGN INSURERS¿ 

CHAPTER 34—TAXES ON CERTAIN INSURANCE POLICIES

* * * * * * * 

øCHAPTER 34—POLICIES ISSUED BY FOREIGN 

INSURERS¿ 

CHAPTER 34—TAXES ON CERTAIN INSURANCE 

POLICIES 

SUBCHAPTER A. POLICIES ISSUED BY FOREIGN INSURERS

SUBCHAPTER B. INSURED AND SELF-INSURED HEALTH PLANS

Subchapter A—Policies Issued By Foreign Insurers 

* * * * * * * 

Subchapter B—Insured and Self-Insured Health 

Plans 

Sec. 4375. Health insurance. 

Sec. 4376. Self-insured health plans. 

Sec. 4377. Definitions and special rules. 

SEC. 4375. HEALTH INSURANCE. 

(a) IMPOSITION OF FEE.—There is hereby imposed on each specified health insurance policy for each policy year a fee equal to the 

fair share per capita amount determined under section 9511(c)(1) 

multiplied by the average number of lives covered under the policy. 

(b) LIABILITY FOR FEE.—The fee imposed by subsection (a) shall 

be paid by the issuer of the policy. 

(c) SPECIFIED HEALTH INSURANCE POLICY.—For purposes of this 

section: 


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(1) IN GENERAL.—Except as otherwise provided in this section, the term ‘‘specified health insurance policy’’ means any accident or health insurance policy issued with respect to individuals residing in the United States. 

(2) EXEMPTION FOR CERTAIN POLICIES.—The term ‘‘specified 

health insurance policy’’ does not include any insurance if substantially all of its coverage is of excepted benefits described in 

section 9832(c). 

(3) TREATMENT OF PREPAID HEALTH COVERAGE ARRANGEMENTS.— 

(A) IN GENERAL.—In the case of any arrangement described in subparagraph (B)— 

(i) such arrangement shall be treated as a specified 

health insurance policy, and 

(ii) the person referred to in such subparagraph shall 

be treated as the issuer. 

(B) DESCRIPTION OF ARRANGEMENTS.—An arrangement is 

described in this subparagraph if under such arrangement 

fixed payments or premiums are received as consideration 

for any person’s agreement to provide or arrange for the 

provision of accident or health coverage to residents of the 

United States, regardless of how such coverage is provided 

or arranged to be provided. 

SEC. 4376. SELF-INSURED HEALTH PLANS. 

(a) IMPOSITION OF FEE.—In the case of any applicable self-insured 

health plan for each plan year, there is hereby imposed a fee equal 

to the fair share per capita amount determined under section 

9511(c)(1) multiplied by the average number of lives covered under 

the plan. 

(b) LIABILITY FOR FEE.— 

(1) IN GENERAL.—The fee imposed by subsection (a) shall be 

paid by the plan sponsor. 

(2) PLAN SPONSOR.—For purposes of paragraph (1) the term 

‘‘plan sponsor’’ means— 

(A) the employer in the case of a plan established or 

maintained by a single employer, 

(B) the employee organization in the case of a plan established or maintained by an employee organization, 

(C) in the case of— 

(i) a plan established or maintained by 2 or more 

employers or jointly by 1 or more employers and 1 or 

more employee organizations, 

(ii) a multiple employer welfare arrangement, or 

(iii) a voluntary employees’ beneficiary association 

described in section 501(c)(9), 

the association, committee, joint board of trustees, or other 

similar group of representatives of the parties who establish 

or maintain the plan, or 

(D) the cooperative or association described in subsection 

(c)(2)(F) in the case of a plan established or maintained by 

such a cooperative or association. 

(c) APPLICABLE SELF-INSURED HEALTH PLAN.—For purposes of 

this section, the term ‘‘applicable self-insured health plan’’ means 

any plan for providing accident or health coverage if— 


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(1) any portion of such coverage is provided other than 

through an insurance policy, and 

(2) such plan is established or maintained— 

(A) by one or more employers for the benefit of their employees or former employees, 

(B) by one or more employee organizations for the benefit 

of their members or former members, 

(C) jointly by 1 or more employers and 1 or more employee organizations for the benefit of employees or former 

employees, 

(D) by a voluntary employees’ beneficiary association described in section 501(c)(9), 

(E) by any organization described in section 501(c)(6), or 

(F) in the case of a plan not described in the preceding 

subparagraphs, by a multiple employer welfare arrangement (as defined in section 3(40) of Employee Retirement 

Income Security Act of 1974 ), a rural electric cooperative 

(as defined in section 3(40)(B)(iv) of such Act), or a rural 

telephone cooperative association (as defined in section 

3(40)(B)(v) of such Act). 

SEC. 4377. DEFINITIONS AND SPECIAL RULES. 

(a) DEFINITIONS.—For purposes of this subchapter— 

(1) ACCIDENT AND HEALTH COVERAGE.—The term ‘‘accident 

and health coverage’’ means any coverage which, if provided by 

an insurance policy, would cause such policy to be a specified 

health insurance policy (as defined in section 4375(c)). 

(2) INSURANCE POLICY.—The term ‘‘insurance policy’’ means 

any policy or other instrument whereby a contract of insurance 

is issued, renewed, or extended. 

(3) UNITED STATES.—The term ‘‘United States’’ includes any 

possession of the United States. 

(b) TREATMENT OF GOVERNMENTAL ENTITIES.— (1) IN GENERAL.—For purposes of this subchapter— 

(A) the term ‘‘person’’ includes any governmental entity, 

and 

(B) notwithstanding any other law or rule of law, governmental entities shall not be exempt from the fees imposed 

by this subchapter except as provided in paragraph (2). 

(2) TREATMENT OF EXEMPT GOVERNMENTAL PROGRAMS.—In 

the case of an exempt governmental program, no fee shall be 

imposed under section 4375 or section 4376 on any covered life 

under such program. 

(3) EXEMPT GOVERNMENTAL PROGRAM DEFINED.—For purposes of this subchapter, the term ‘‘exempt governmental program’’ means— 

(A) any insurance program established under title XVIII 

of the Social Security Act, 

(B) the medical assistance program established by title 

XIX or XXI of the Social Security Act, 

(C) any program established by Federal law for providing medical care (other than through insurance policies) 

to individuals (or the spouses and dependents thereof) by 

reason of such individuals being— 

(i) members of the Armed Forces of the United 

States, or 


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(ii) veterans, and 

(D) any program established by Federal law for providing medical care (other than through insurance policies) 

to members of Indian tribes (as defined in section 4(d) of 

the Indian Health Care Improvement Act). 

(c) TREATMENT AS TAX.—For purposes of subtitle F, the fees imposed by this subchapter shall be treated as if they were taxes. 

(d) NO COVER OVER TO POSSESSIONS.—Notwithstanding any 

other provision of law, no amount collected under this subchapter 

shall be covered over to any possession of the United States. 

* * * * * * * 

CHAPTER 43—QUALIFIED PENSION, ETC., 

PLANS 

Sec. 4971. Taxes on failure to meet minimum funding standards 

* * * * * * * 

Sec. 4980H. Election with respect to health coverage participation requirements. 

* * * * * * * 

SEC. 4980H. ELECTION WITH RESPECT TO HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

(a) ELECTION OF EMPLOYER RESPONSIBILITY TO PROVIDE HEALTH

COVERAGE.— 

(1) IN GENERAL.—Subsection (b) shall apply to any employer 

with respect to whom an election under paragraph (2) is in effect. 

(2) TIME AND MANNER.—An employer may make an election 

under this paragraph at such time and in such form and manner as the Secretary may prescribe. 

(3) AFFILIATED GROUPS.—In the case of any employer which 

is part of a group of employers who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414, the 

election under paragraph (2) shall be made by such person as 

the Secretary may provide. Any such election, once made, shall 

apply to all members of such group. 

(4) SEPARATE ELECTIONS.—Under regulations prescribed by 

the Secretary, separate elections may be made under paragraph 

(2) with respect to— 

(A) separate lines of business, and 

(B) full-time employees and employees who are not fulltime employees. 

(5) TERMINATION OF ELECTION IN CASES OF SUBSTANTIAL

NONCOMPLIANCE.—The Secretary may terminate the election of 

any employer under paragraph (2) if the Secretary (in coordination with the Health Choices Commissioner) determines that 

such employer is in substantial noncompliance with the health 

coverage participation requirements. 

(b) EXCISE TAX WITH RESPECT TO FAILURE TO MEET HEALTH

COVERAGE PARTICIPATION REQUIREMENTS.— 

(1) IN GENERAL.—In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee to whom such 


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election applies, there is hereby imposed on each such failure 

with respect to each such employee a tax of $100 for each day 

in the period beginning on the date such failure first occurs and 

ending on the date such failure is corrected. 

(2) LIMITATIONS ON AMOUNT OF TAX.— 

(A) TAX NOT TO APPLY WHERE FAILURE NOT DISCOVERED

EXERCISING REASONABLE DILIGENCE.—No tax shall be imposed by paragraph (1) on any failure during any period 

for which it is established to the satisfaction of the Secretary that the employer neither knew, nor exercising reasonable diligence would have known, that such failure existed. 

(B) TAX NOT TO APPLY TO FAILURES CORRECTED WITHIN

30 DAYS.—No tax shall be imposed by paragraph (1) on any 

failure if— 

(i) such failure was due to reasonable cause and not 

to willful neglect, and 

(ii) such failure is corrected during the 30-day period 

beginning on the 1st date that the employer knew, or 

exercising reasonable diligence would have known, that 

such failure existed. 

(C) OVERALL LIMITATION FOR UNINTENTIONAL FAILURES.—In the case of failures which are due to reasonable 

cause and not to willful neglect, the tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of— 

(i) 10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for employment-based 

health plans, or 

(ii) $500,000. 

(D) COORDINATION WITH OTHER ENFORCEMENT PROVISIONS.—The tax imposed under paragraph (1) with respect 

to any failure shall be reduced (but not below zero) by the 

amount of any civil penalty collected under section 

502(c)(11) of the Employee Retirement Income Security Act 

of 1974 or section 2793(g) of the Public Health Service Act 

with respect to such failure. 

(c) HEALTH COVERAGE PARTICIPATION REQUIREMENTS.—For purposes of this section, the term ‘‘health coverage participation requirements’’ means the requirements of part I of subtitle B of title III of 

the America’s Affordable Health Choices Act of 2009 (as in effect on 

the date of the enactment of this section). 

* * * * * * * 

Subtitle F—Procedure and Administration 

* * * * * * * 

CHAPTER 61—INFORMATION AND RETURNS 

* * * * * * * 


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Subchapter A—Returns and Records 

* * * * * * * 

PART II—TAX RETURNS OR STATEMENTS 

* * * * * * * 

Subpart B—Income Tax Returns 

* * * * * * * 

SEC. 6012. PERSONS REQUIRED TO MAKE RETURNS OF INCOME. 

(a) GENERAL RULE.—Returns with respect to income taxes under 

subtitle A shall be made by the following: 

(1) * * * 

* * * * * * * 

(10) Every individual to whom section 59B(a) applies and 

who fails to meet the requirements of section 59B(d) with respect to such individual or any qualifying child (as defined in 

section 152(c)) of such individual. 

* * * * * * * 

PART III—INFORMATION RETURNS 

* * * * * * * 

Subpart B—Information Concerning Transactions With 

Other Persons 

Sec. 6041. Information at source. 

* * * * * * * 

Sec. 6050X. Returns relating to health insurance coverage. 

* * * * * * * 

SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE COVERAGE. 

(a) REQUIREMENT OF REPORTING.—Every person who provides acceptable coverage (as defined in section 59B(d)) to any individual 

during any calendar year shall, at such time as the Secretary may 

prescribe, make the return described in subsection (b) with respect 

to such individual. 

(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 primary insured 

and the name of each other individual obtaining coverage 

under the policy, 

(B) the period for which each such individual was provided with the coverage referred to in subsection (a), and 

(C) such other information as the Secretary may require. 

(c) 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 

primary insured whose name is required to be set forth in such return a written statement showing— 


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(1) the name and address of the person required to make such 

return and the phone number of the information contact for 

such person, and 

(2) the information required to be shown on the return with 

respect to such individual. 

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. 

(d) COVERAGE PROVIDED BY GOVERNMENTAL UNITS.—In the case 

of coverage provided by any governmental unit or any agency or instrumentality thereof, the officer or employee who enters into the 

agreement to provide such coverage (or the person appropriately designated for purposes of this section) shall make the returns and 

statements required by this section. 

* * * * * * * 

Subchapter B—Miscellaneous Provisions 

* * * * * * * 

SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN INFORMATION. 

(a) GENERAL RULE.—Returns and return information shall be 

confidential, and except as authorized by this title— 

(1) * * * 

* * * * * * * 

(3) no other person (or officer or employee thereof) who has 

or had access to returns or return information under subsection (e)(1)(D)(iii), paragraph (6), (10), (12), (16), ø(19),¿ or 

(20) of subsection (l), paragraph (2) or (4)(B) of subsection (m), 

or subsection (n), 

* * * * * * * 

(l) DISCLOSURE OF RETURNS AND RETURN INFORMATION FOR PUR- POSES OTHER THAN TAX ADMINISTRATION.— (1) * * * 

* * * * * * * 

ø(19) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF

PROVIDING TRANSITIONAL ASSISTANCE UNDER MEDICARE DIS- COUNT CARD PROGRAM.— ø(A) IN GENERAL.—The Secretary, upon written request 

from the Secretary of Health and Human Services pursuant to carrying out section 1860D-31 of the Social Security 

Act, shall disclose to officers, employees, and contractors of 

the Department of Health and Human Services with respect to a taxpayer for the applicable year— 

ø(i)(I) whether the adjusted gross income, as modified in accordance with specifications of the Secretary 

of Health and Human Services for purposes of carrying out such section, of such taxpayer and, if applicable, such taxpayer’s spouse, for the applicable year, 

exceeds the amounts specified by the Secretary of 

Health and Human Services in order to apply the 100 

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tion, (II) whether the return was a joint return, and 

(III) the applicable year, or 

ø(ii) if applicable, the fact that there is no return 

filed for such taxpayer for the applicable year. 

ø(B) DEFINITION OF APPLICABLE YEAR.—For the purposes 

of this subsection, the term ‘‘applicable year’’ means the 

most recent taxable year for which information is available 

in the Internal Revenue Service’s taxpayer data information systems, or, if there is no return filed for such taxpayer for such year, the prior taxable year. 

ø(C) RESTRICTION ON USE OF DISCLOSED INFORMATION.— 

Return information disclosed under this paragraph may be 

used only for the purposes of determining eligibility for 

and administering transitional assistance under section 

1860D-31 of the Social Security Act.¿ 

(19) DISCLOSURES TO FACILITATE IDENTIFICATION OF INDIVIDUALS LIKELY TO BE INELIGIBLE FOR LOW-INCOME SUBSIDIES

UNDER MEDICARE PRESCRIPTION DRUG PROGRAM TO ASSIST SOCIAL SECURITY ADMINISTRATION’S OUTREACH TO ELIGIBLE INDIVIDUALS.— 

(A) IN GENERAL.—Upon written request from the Commissioner of Social Security, the following return information (including such information disclosed to the Social Security Administration under paragraph (1) or (5)) shall be 

disclosed to officers and employees of the Social Security 

Administration, with respect to any taxpayer identified by 

the Commissioner of Social Security— 

(i) return information for the applicable year from returns with respect to wages (as defined in section 

3121(a) or 3401(a)) and payments of retirement income 

(as described in paragraph (1) of this subsection), 

(ii) unearned income information and income information of the taxpayer from partnerships, trusts, estates, and subchapter S corporations for the applicable 

year, 

(iii) if the individual filed an income tax return for 

the applicable year, the filing status, number of dependents, income from farming, and income from selfemployment, on such return, 

(iv) if the individual is a married individual filing 

a separate return for the applicable year, the social security number (if reasonably available) of the spouse on 

such return, 

(v) if the individual files a joint return for the applicable year, the social security number, unearned income information, and income information from partnerships, trusts, estates, and subchapter S corporations 

of the individual’s spouse on such return, and 

(vi) such other return information relating to the individual (or the individual’s spouse in the case of a 

joint return) as is prescribed by the Secretary by regulation as might indicate that the individual is likely to 

be ineligible for a low-income prescription drug subsidy 

under section 1860D–14 of the Social Security Act. 


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(B) APPLICABLE YEAR.—For the purposes of this paragraph, the term ‘‘applicable year’’ means the most recent 

taxable year for which information is available in the Internal Revenue Service’s taxpayer information records. 

(C) RESTRICTION ON INDIVIDUALS FOR WHOM DISCLOSURE

MAY BE REQUESTED.—The Commissioner of Social Security 

shall request information under this paragraph only with 

respect to— 

(i) individuals the Social Security Administration 

has identified, using all other reasonably available information, as likely to be eligible for a low-income prescription drug subsidy under section 1860D–14 of the 

Social Security Act and who have not applied for such 

subsidy, and 

(ii) any individual the Social Security Administration has identified as a spouse of an individual described in clause (i). 

(D) RESTRICTION ON USE OF DISCLOSED INFORMATION.— Return information disclosed under this paragraph may be 

used only by officers and employees of the Social Security 

Administration solely for purposes of identifying individuals likely to be ineligible for a low-income prescription 

drug subsidy under section 1860D–14 of the Social Security 

Act for use in outreach efforts under section 1144 of the Social Security Act. 

* * * * * * * 

(21) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT

HEALTH INSURANCE EXCHANGE SUBSIDIES.— (A) IN GENERAL.—The Secretary, upon written request 

from the Health Choices Commissioner or the head of a 

State-based health insurance exchange approved for operation under section 208 of the America’s Affordable Health 

Choices Act of 2009, shall disclose to officers and employees 

of the Health Choices Administration or such State-based 

health insurance exchange, as the case may be, return information of any taxpayer whose income is relevant in determining any affordability credit described in subtitle C of 

title II of the America’s Affordable Health Choices Act of 

2009. Such return information shall be limited to— 

(i) taxpayer identity information with respect to such 

taxpayer, 

(ii) the filing status of such taxpayer, 

(iii) the modified adjusted gross income of such taxpayer (as defined in section 59B(e)(5)), 

(iv) the number of dependents of the taxpayer, 

(v) such other information as is prescribed by the 

Secretary by regulation as might indicate whether the 

taxpayer is eligible for such affordability credits (and 

the amount thereof), and 

(vi) the taxable year with respect to which the preceding information relates or, if applicable, the fact 

that such information is not available. 

(B) RESTRICTION ON USE OF DISCLOSED INFORMATION.— Return information disclosed under subparagraph (A) may 

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ministration or such State-based health insurance exchange, as the case may be, only for the purposes of, and 

to the extent necessary in, establishing and verifying the 

appropriate amount of any affordability credit described in 

subtitle C of title II of the America’s Affordable Health 

Choices Act of 2009 and providing for the repayment of any 

such credit which was in excess of such appropriate 

amount. 

* * * * * * * 

(p) PROCEDURE AND RECORDKEEPING.— 

(1) * * * 

* * * * * * * 

(4) SAFEGUARDS.—Any Federal agency described in subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or (7), (j)(1), (2), or (5), 

(k)(8) or (10), (l)(1), (2), (3), (5), (10), (11), (13), (14), øor (17)¿ 

(17), or (19) or (o)(1)(A), the Government Accountability Office, 

the Congressional Budget Office, or any agency, body, or commission described in subsection (d), (i)(3)(B)(i) or 7(A)(ii), or 

(l)(6), (7), (8), (9), (12), (15), or (16), any appropriate State officer (as defined in section 6104(c)), or any other person described in subsection (l)(10), (16), (18), ø(19),¿ or (20), or any 

entity described in subsection (l)(21), shall, as a condition for 

receiving returns or return information— 

(A) * * * 

* * * * * * * 

(F) upon completion of use of such returns or return information— 

(i) in the case of an agency, body, or commission described in subsection (d), (i)(3)(B)(i), or (l)(6), (7), (8), 

(9), or (16), any appropriate State officer (as defined in 

section 6104(c)), or any other person described in subsection (l)(10), (16), (18), ø(19),¿ or (20) or any entity 

described in subsection (l)(21), return to the Secretary 

such returns or return information (along with any 

copies made therefrom) or make such returns or return information undisclosable in any manner and furnish a written report to the Secretary describing such 

manner, 

(ii) in the case of an agency described in subsections 

(h)(2), (h)(5), (i)(1), (2), (3), (5) or (7), (j)(1), (2), or (5), 

(k)(8) or (10), (l)(1), (2), (3), (5), (10), (11), (12), (13), 

(14), (15), øor (17)¿ (17), or (19), or (o)(1)(A), or any entity described in subsection (l)(21), the Government Accountability Office, or the Congressional Budget Office, 

either— 

(I) * * * 

* * * * * * * 

except that the conditions of subparagraphs (A), (B), (C), (D), 

and (E) shall cease to apply with respect to any return or return information if, and to the extent that, such return or return information is disclosed in the course of any judicial or 

administrative proceeding and made a part of the public record 

thereof. If the Secretary determines that any such agency, 


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body, or commission, including an agency, an appropriate State 

officer (as defined in section 6104(c)), or any other person described in subsection (l)(10), (16), (18), ø(19),¿ or (20), or any 

entity described in subsection (l)(21), or the Government Accountability Office or the Congressional Budget Office, has 

failed to, or does not, meet the requirements of this paragraph, 

he may, after any proceedings for review established under 

paragraph (7), take such actions as are necessary to ensure 

such requirements are met, including refusing to disclose returns or return information to such agency, body, or commission, including an agency, an appropriate State officer (as defined in section 6104(c)), or any other person described in subsection (l)(10), (16), (18), ø(19),¿ or (20) or any entity described 

in subsection (l)(21),, or the Government Accountability Office 

or the Congressional Budget Office, until he determines that 

such requirements have been or will be met. In the case of any 

agency which receives any mailing address under paragraph 

(2), (4), (6), or (7) of subsection (m) and which discloses any 

such mailing address to any agent or which receives any information under paragraph (6)(A), (10), (12)(B), or (16) of subsection (l) and which discloses any such information to any 

agent, or any person including an agent described in subsection (l)(10) or (16), this paragraph shall apply to such agency and each such agent or other person (except that, in the 

case of an agent, or any person including an agent described 

in subsection (l)(10) or (16), any report to the Secretary or 

other action with respect to the Secretary shall be made or 

taken through such agency). For purposes of applying this 

paragraph in any case to which subsection (m)(6) applies, the 

term ‘‘return information’’ includes related blood donor records 

(as defined in section 1141(h)(2) of the Social Security Act). 

* * * * * * * 

CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES 

* * * * * * * 

Subchapter A—Additions to the Tax and 

Additional Amounts 

* * * * * * * 

PART II—ACCURACY-RELATED AND FRAUD PENALTIES 

* * * * * * * 

SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERPAYMENTS. 

(a) * * * 

(b) PORTION OF UNDERPAYMENT TO WHICH SECTION APPLIES.— 

This section shall apply to the portion of any underpayment which 

is attributable to 1 or more of the following: 


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(1) * * * 

* * * * * * * 

(6) Any disallowance of claimed tax benefits by reason of a 

transaction lacking economic substance (within the meaning of 

section 7701(o)) or failing to meet the requirements of any similar rule of law. 

This section shall not apply to any portion of an underpayment on 

which a penalty is imposed under section 6663. Except as provided 

in paragraph (1) or (2)(B) of section 6662A(e), this section shall not 

apply to the portion of any underpayment which is attributable to 

a reportable transaction understatement on which a penalty is imposed under section 6662A. 

* * * * * * * 

(d) SUBSTANTIAL UNDERSTATEMENT OF INCOME TAX.— 

(1) * * * 

(2) UNDERSTATEMENT.— 

(A) * * * 

* * * * * * * 

(C) REDUCTION NOT TO APPLY TO TAX SHELTERS.— 

(i) IN GENERAL.—øSubparagraph (B)¿ Subparagraphs (B) and (D)(i)(II) shall not apply to any item 

attributable to a tax shelter. 

* * * * * * * 

(D) SPECIAL REDUCTION RULE FOR CERTAIN LARGE OR

PUBLICLY TRADED PERSONS.— 

(i) IN GENERAL.—In the case of any specified person— 

(I) subparagraph (B) shall not apply, and 

(II) the amount of the understatement under 

subparagraph (A) shall be reduced by that portion 

of the understatement which is attributable to any 

item with respect to which the taxpayer has a reasonable belief that the tax treatment of such item 

by the taxpayer is more likely than not the proper 

tax treatment of such item. 

(ii) SPECIFIED PERSON.—For purposes of this subparagraph, the term ‘‘specified person’’ means— 

(I) any person required to file periodic or other 

reports under section 13 of the Securities Exchange 

Act of 1934, and 

(II) any corporation with gross receipts in excess 

of $100,000,000 for the taxable year involved. 

All persons treated as a single employer under section 

52(a) shall be treated as one person for purposes of 

subclause (II). 

* * * * * * * 

(i) INCREASE IN PENALTY IN CASE OF NONDISCLOSED NONECONOMIC SUBSTANCE TRANSACTIONS.— 

(1) IN GENERAL.—In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied 


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with respect to such portion by substituting ‘‘40 percent’’ for ‘‘20 

percent’’. 

(2) NONDISCLOSED NONECONOMIC SUBSTANCE TRANS- ACTIONS.—For purposes of this subsection, the term ‘‘nondisclosed noneconomic substance transaction’’ means any portion 

of a transaction described in subsection (b)(6) with respect to 

which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to 

the return. 

(3) SPECIAL RULE FOR AMENDED RETURNS.—Except as provided in regulations, in no event shall any amendment or supplement to a return of tax be taken into account for purposes 

of this subsection if the amendment or supplement is filed after 

the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other 

date as is specified by the Secretary. 

SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERSTATEMENTS WITH RESPECT TO REPORTABLE 

TRANSACTIONS. 

(a) * * * 

* * * * * * * 

(e) SPECIAL RULES.— (1) * * * 

(2) COORDINATION WITH OTHER PENALTIES.— (A) * * * 

(B) COORDINATION WITH øGROSS VALUATION

MISSTATEMENT PENALTY¿ CERTAIN INCREASED UNDER- PAYMENT PENALTIES.—This section shall not apply to any 

portion of an understatement on which a penalty is imposed under section 6662 if the rate of the penalty is determined under øsection 6662(h)¿ subsections (h) or (i) of section 6662. 

* * * * * * * 

SEC. 6664. DEFINITIONS AND SPECIAL RULES. 

(a) * * * 

* * * * * * * 

(c) REASONABLE CAUSE EXCEPTION FOR UNDERPAYMENTS.— (1) * * * 

(2) EXCEPTION.—Paragraph (1) shall not apply to— 

(A) to any portion of an underpayment which is attributable to one or more tax shelters (as defined in section 

6662(d)(2)(C)) or transactions described in section 

6662(b)(6), and 

(B) to any taxpayer if such taxpayer is a specified person 

(as defined in section 6662(d)(2)(D)(ii)). 

ø(2)¿ (3) SPECIAL RULE FOR CERTAIN VALUATION OVERSTATE- MENTS.—In the case of any underpayment attributable to a 

substantial or gross valuation overstatement under chapter 1 

with respect to charitable deduction property, paragraph (1) 

shall not apply. The preceding sentence shall not apply to a 

substantial valuation overstatement under chapter 1 if— 

(A) * * * 

* * * * * * * 


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ø(3)¿ (4) DEFINITIONS.—For purposes of this subsection— 

(A) CHARITABLE DEDUCTION PROPERTY.—The term ‘‘charitable deduction property’’ means any property contributed 

by the taxpayer in a contribution for which a deduction 

was claimed under section 170. For purposes of øparagraph (2)¿ paragraph (3), such term shall not include any 

securities for which (as of the date of the contribution) 

market quotations are readily available on an established 

securities market. 

* * * * * * * 

Subchapter B—Assessable Penalties 

* * * * * * * 

PART I—GENERAL PROVISIONS 

* * * * * * * 

SEC. 6676. ERRONEOUS CLAIM FOR REFUND OR CREDIT. 

(a) * * * 

* * * * * * * 

(c) NONECONOMIC SUBSTANCE TRANSACTIONS TREATED AS LACKING REASONABLE BASIS.—For purposes of this section, any excessive 

amount which is attributable to any transaction described in section 

6662(b)(6) shall not be treated as having a reasonable basis. 

ø(c)¿ (d) COORDINATION WITH OTHER PENALTIES.—This section 

shall not apply to any portion of the excessive amount of a claim 

for refund or credit which is subject to a penalty imposed under 

part II of subchapter A of chapter 68. 

* * * * * * * 

PART II—FAILURE TO COMPLY WITH CERTAIN 

INFORMATION REPORTING REQUIREMENTS 

* * * * * * * 

SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES. 

(a) * * * 

* * * * * * * 

(d) DEFINITIONS.—For purposes of this part— 

(1) INFORMATION RETURN.—The term ‘‘information return’’ 

means— 

(A) * * * 

(B) any return required by— 

(i) * * * 

* * * * * * * 

(xxii) section 6039(a) (relating to returns required 

with respect to certain options), øor¿ 

(xxiii) section 6050W (relating to returns to payments made in settlement of payment card transactions), øand¿ or 


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(xxiv) section 6050X (relating to returns relating to 

health insurance coverage), and 

* * * * * * * 

(2) PAYEE STATEMENT.—The term ‘‘payee statement’’ means 

any statement required to be furnished under— 

(A) * * * 

* * * * * * * 

(EE) section 6050U (relating to charges or payments for 

qualified long-term care insurance contracts under combined arrangements), øor¿ 

(FF) section 6050W(c) (relating to returns relating to 

payments made in settlement of payment card transactions)ø.¿, or 

(GG) section 6050X (relating to returns relating to health 

insurance coverage). 

* * * * * * * 

CHAPTER 75—CRIMES, OTHER OFFENSES, AND 

FORFEITURES 

* * * * * * * 

Subchapter A—Crimes 

* * * * * * * 

PART I—GENERAL PROVISIONS 

* * * * * * * 

SEC. 7213. UNAUTHORIZED DISCLOSURE OF INFORMATION. 

(a) RETURNS AND RETURN INFORMATION.— 

(1) * * * 

(2) STATE AND OTHER EMPLOYEES.—It shall be unlawful for 

any person (not described in paragraph (1)) willfully to disclose 

to any person, except as authorized in this title, any return or 

return information (as defined in section 6103(b)) acquired by 

him or another person under subsection (d), (i)(3)(B)(i) or 

(7)(A)(ii), (l)(6), (7), (8), (9), (10), (12), (15), (16), (19), øor (20)¿ 

(20), or (21) or (m)(2), (4), (5), (6), or (7) of section 6103 or 

under section 6104(c). Any violation of this paragraph shall be 

a felony punishable by a fine in any amount not exceeding 

$5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution. 

* * * * * * * 

CHAPTER 79—DEFINITIONS 

* * * * * * * 

SEC. 7701. DEFINITIONS. 

(a) * * * 

* * * * * * * 


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(o) CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.— (1) APPLICATION OF DOCTRINE.—In the case of any transaction to which the economic substance doctrine is relevant, 

such transaction shall be treated as having economic substance 

only if— 

(A) the transaction changes in a meaningful way (apart 

from Federal income tax effects) the taxpayer’s economic position, and 

(B) the taxpayer has a substantial purpose (apart from 

Federal income tax effects) for entering into such transaction. 

(2) SPECIAL RULE WHERE TAXPAYER RELIES ON PROFIT POTEN- TIAL.— (A) IN GENERAL.—The potential for profit of a transaction 

shall be taken into account in determining whether the requirements of subparagraphs (A) and (B) of paragraph (1) 

are met with respect to the transaction only if the present 

value of the reasonably expected pre-tax profit from the 

transaction is substantial in relation to the present value of 

the expected net tax benefits that would be allowed if the 

transaction were respected. 

(B) TREATMENT OF FEES AND FOREIGN TAXES.—Fees and 

other transaction expenses and foreign taxes shall be taken 

into account as expenses in determining pre-tax profit 

under subparagraph (A). 

(3) STATE AND LOCAL TAX BENEFITS.—For purposes of paragraph (1), any State or local income tax effect which is related 

to a Federal income tax effect shall be treated in the same manner as a Federal income tax effect. 

(4) FINANCIAL ACCOUNTING BENEFITS.—For purposes of paragraph (1)(B), achieving a financial accounting benefit shall not 

be taken into account as a purpose for entering into a transaction if the origin of such financial accounting benefit is a reduction of Federal income tax. 

(5) DEFINITIONS AND SPECIAL RULES.—For purposes of this 

subsection— 

(A) ECONOMIC SUBSTANCE DOCTRINE.—The term ‘‘economic substance doctrine’’ means the common law doctrine 

under which tax benefits under subtitle A with respect to 

a transaction are not allowable if the transaction does not 

have economic substance or lacks a business purpose. 

(B) EXCEPTION FOR PERSONAL TRANSACTIONS OF INDIVIDUALS.—In the case of an individual, paragraph (1) shall 

apply only to transactions entered into in connection with 

a trade or business or an activity engaged in for the production of income. 

(C) OTHER COMMON LAW DOCTRINES NOT AFFECTED.—Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering 

or supplanting any other rule of law, and the requirements 

of this subsection shall be construed as being in addition 

to any such other rule of law. 

(D) DETERMINATION OF APPLICATION OF DOCTRINE NOT

AFFECTED.—The determination of whether the economic 

substance doctrine is relevant to a transaction (or series of 


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transactions) shall be made in the same manner as if this 

subsection had never been enacted. 

(6) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. 

ø(o)¿ (p) CROSS REFERENCES.— (1) * * * 

* * * * * * * 

Subtitle I—Trust Fund Code 

* * * * * * * 

CHAPTER 98 TRUST FUND CODE 

* * * * * * * 

Subchapter A—Establishment of Trust Funds 

Sec. 9501. Black Lung Disability Trust Fund. 

* * * * * * * 

Sec. 9511. Health Care Comparative Effectiveness Research Trust Fund. 

* * * * * * * 

SEC. 9511. HEALTH CARE COMPARATIVE EFFECTIVENESS RESEARCH 

TRUST FUND. 

(a) CREATION OF TRUST FUND.—There is established in the Treasury of the United States a trust fund to be known as the ‘‘Health 

Care Comparative Effectiveness Research Trust Fund’’ (hereinafter 

in this section referred to as the ‘‘CERTF’’), consisting of such 

amounts as may be appropriated or credited to such Trust Fund as 

provided in this section and section 9602(b). 

(b) TRANSFERS TO FUND.—There are hereby appropriated to the 

Trust Fund the following: 

(1) For fiscal year 2010, $90,000,000. 

(2) For fiscal year 2011, $100,000,000. 

(3) For fiscal year 2012, $110,000,000. 

(4) For each fiscal year beginning with fiscal year 2013— 

(A) an amount equivalent to the net revenues received in 

the Treasury from the fees imposed under subchapter B of 

chapter 34 (relating to fees on health insurance and self-insured plans) for such fiscal year; and 

(B) subject to subsection (c)(2), amounts determined by 

the Secretary of Health and Human Services to be equivalent to the fair share per capita amount computed under 

subsection (c)(1) for the fiscal year multiplied by the average number of individuals entitled to benefits under part A, 

or enrolled under part B, of title XVIII of the Social Security Act during such fiscal year. 

The amounts appropriated under paragraphs (1), (2), (3), and (4)(B) 

shall be transferred from the Federal Hospital Insurance Trust 

Fund and from the Federal Supplementary Medical Insurance 

Trust Fund (established under section 1841 of such Act), and from 

the Medicare Prescription Drug Account within such Trust Fund, in 


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proportion (as estimated by the Secretary) to the total expenditures 

during such fiscal year that are made under title XVIII of such Act 

from the respective trust fund or account. 

(c) FAIR SHARE PER CAPITA AMOUNT.— 

(1) COMPUTATION.— 

(A) IN GENERAL.—Subject to subparagraph (B), the fair 

share per capita amount under this paragraph for a fiscal 

year (beginning with fiscal year 2013) is an amount computed by the Secretary of Health and Human Services for 

such fiscal year that, when applied under this section and 

subchapter B of chapter 34 of the Internal Revenue Code of 

1986, will result in revenues to the CERTF of $375,000,000 

for the fiscal year. 

(B) ALTERNATIVE COMPUTATION.— 

(i) IN GENERAL.—If the Secretary is unable to compute the fair share per capita amount under subparagraph (A) for a fiscal year, the fair share per capita 

amount under this paragraph for the fiscal year shall 

be the default amount determined under clause (ii) for 

the fiscal year. 

(ii) DEFAULT AMOUNT.—The default amount under 

this clause for— 

(I) fiscal year 2013 is equal to $2; or 

(II) a subsequent year is equal to the default 

amount under this clause for the preceding fiscal 

year increased by the annual percentage increase 

in the medical care component of the consumer 

price index (United States city average) for the 12- 

month period ending with April of the preceding 

fiscal year. 

Any amount determined under subclause (II) shall be 

rounded to the nearest penny. 

(2) LIMITATION ON MEDICARE FUNDING.—In no case shall the 

amount transferred under subsection (b)(4)(B) for any fiscal 

year exceed $90,000,000. 

(d) EXPENDITURES FROM FUND.— 

(1) IN GENERAL.—Subject to paragraph (2), amounts in the 

CERTF are available, without the need for further appropriations and without fiscal year limitation, to the Secretary of 

Health and Human Services for carrying out section 1181 of the 

Social Security Act. 

(2) ALLOCATION FOR COMMISSION.—Not less than the following amounts in the CERTF for a fiscal year shall be available to carry out the activities of the Comparative Effectiveness 

Research Commission established under section 1181(b) of the 

Social Security Act for such fiscal year: 

(A) For fiscal year 2010, $7,000,000. 

(B) For fiscal year 2011, $9,000,000. 

(C) For each fiscal year beginning with 2012, 

$10,000,000. 

Nothing in this paragraph shall be construed as preventing additional amounts in the CERTF from being made available to 

the Comparative Effectiveness Research Commission for such 

activities. 


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(e) NET REVENUES.—For purposes of this section, the term ‘‘net 

revenues’’ means the amount estimated by the Secretary based on 

the excess of— 

(1) the fees received in the Treasury under subchapter B of 

chapter 34, over 

(2) the decrease in the tax imposed by chapter 1 resulting 

from the fees imposed by such subchapter. 

* * * * * * * 

AMERICAN RECOVERY AND REINVESTMENT ACT OF 

2009 

* * * * * * * 

DIVISION B—TAX, UNEMPLOYMENT, 

HEALTH, STATE FISCAL RELIEF, AND 

OTHER PROVISIONS 

* * * * * * * 

TITLE IV—MEDICARE AND MEDICAID 

HEALTH INFORMATION TECHNOLOGY; MISCELLANEOUS MEDICARE 

PROVISIONS 

* * * * * * * 

Subtitle C—Miscellaneous Medicare 

Provisions 

SEC. 4301. MORATORIA ON CERTAIN MEDICARE REGULATIONS. 

(a) DELAY IN PHASE OUT OF MEDICARE HOSPICE BUDGET NEUTRALITY ADJUSTMENT FACTOR DURING FISCAL YEAR 2009.—Notwithstanding any other provision of law, including the final rule 

published on August 8, 2008, 73 Federal Register 46464 et seq., relating to Medicare Program; Hospice Wage Index for Fiscal Year 

2009, the Secretary of Health and Human Services shall not phase 

out or eliminate the budget neutrality adjustment factor in the 

Medicare hospice wage index before øOctober 1, 2009¿ October 1, 

2010, and the Secretary shall recompute and apply the final Medicare hospice wage index øfor fiscal year 2009¿ for fiscal years 2009 

and 2010 as if there had been no reduction in the budget neutrality 

adjustment factor. 

* * * * * * * 


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SECTION 4505 OF THE BALANCED BUDGET ACT OF 1997 

SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES. 

(a) * * * 

* * * * * * * 

ø(d) REQUIREMENTS FOR DEVELOPING NEW RESOURCE-BASED

PRACTICE EXPENSE RELATIVE VALUE UNITS.— 

ø(1) DEVELOPMENT.—For purposes of section 1848(c)(2)(C)(ii) 

of the Social Security Act, the Secretary of Health and Human 

Services shall develop new resource-based relative value units. 

In developing such units the Secretary shall— 

ø(A) utilize, to the maximum extent practicable, generally accepted cost accounting principles which (i) recognize all staff, equipment, supplies, and expenses, not just 

those which can be tied to specific procedures, and (ii) use 

actual data on equipment utilization and other key assumptions; 

ø(B) consult with organizations representing physicians 

regarding methodology and data to be used; and 

ø(C) develop a refinement process to be used during each 

of the 4 years of the transition period. 

ø(2) REPORT.—The Secretary shall transmit a report by 

March 1, 1998, on the development of resource-based relative 

value units under paragraph (1) to the Committee on Ways 

and Means and the Committee on Commerce of the House of 

Representatives and the Committee on Finance of the Senate. 

The report shall include a presentation of data to be used in 

developing the value units and an explanation of the methodology. 

ø(3) NOTICE OF PROPOSED RULEMAKING.—The Secretary shall 

publish a notice of proposed rulemaking with the new resourcebased relative value units on or before May 1, 1998, and shall 

allow for a 90-day public comment period. 

ø(4) ITEMS INCLUDED.—The new proposed rule shall consider 

the following: 

ø(A) Impact projections which compare new proposed 

payment amounts on data on actual physician practice expenses. 

ø(B) Impact projections for hospital-based and other specialties, geographic payment localities, and urban versus 

rural localities.¿ 

* * * * * * * 

TAX RELIEF AND HEALTH CARE ACT OF 2006 

* * * * * * * 

DIVISION B—MEDICARE AND OTHER 

HEALTH PROVISIONS 

* * * * * * * 


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TITLE I—MEDICARE IMPROVED 

QUALITY AND PROVIDER PAYMENTS 

* * * * * * * 

SEC. 106. HOSPITAL MEDICARE REPORTS AND CLARIFICATIONS. 

(a) CORRECTION OF MID-YEAR RECLASSIFICATION EXPIRATION.— 

Notwithstanding any other provision of law, in the case of a subsection (d) hospital (as defined for purposes of section 1886 of the 

Social Security Act (42 U.S.C. 1395ww)) with respect to which a reclassification of its wage index for purposes of such section would 

(but for this subsection) expire on March 31, 2007, such reclassification of such hospital shall be extended through øSeptember 30, 

2009¿ September 30, 2011. The previous sentence shall not be effected in a budget-neutral manner. 

* * * * * * * 

TITLE II—MEDICARE BENEFICIARY 

PROTECTIONS 

* * * * * * * 

øSEC. 204. MEDICARE MEDICAL HOME DEMONSTRATION PROJECT. 

ø(a) IN GENERAL.—The Secretary of Health and Human Services 

(in this section referred to as the ‘‘Secretary’’) shall establish under 

title XVIII of the Social Security Act a medical home demonstration 

project (in this section referred to as the ‘‘project’’) to redesign the 

health care delivery system to provide targeted, accessible, continuous and coordinated, family-centered care to high-need populations and under which— 

ø(1) care management fees are paid to persons performing 

services as personal physicians; and 

ø(2) incentive payments are paid to physicians participating 

in practices that provide services as a medical home under subsection (d). 

For purposes of this subsection, the term ‘‘high-need population’’ 

means individuals with multiple chronic illnesses that require regular medical monitoring, advising, or treatment. 

ø(b) DETAILS.— 

ø(1) DURATION; SCOPE.—Subject to paragraph (3), the project 

shall operate during a period of three years and shall include 

urban, rural, and underserved areas in a total of no more than 

8 States. 

ø(2) ENCOURAGING PARTICIPATION OF SMALL PHYSICIAN PRACTICES.—The project shall be designed to include the participation of physicians in practices with fewer than three full-time 

equivalent physicians, as well as physicians in larger practices 

particularly in rural and underserved areas. 

ø(3) EXPANSION.—The Secretary may expand the duration 

and the scope of the project under paragraph (1), to an extent 

determined appropriate by the Secretary, if the Secretary determines that such expansion will result in any of the following 

conditions being met: 


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ø(A) The expansion of the project is expected to improve 

the quality of patient care without increasing spending 

under the Medicare program (not taking into account 

amounts available under subsection (g)). 

ø(B) The expansion of the project is expected to reduce 

spending under the Medicare program (not taking into account amounts available under subsection (g)) without reducing the quality of patient care. 

ø(c) PERSONAL PHYSICIAN DEFINED.— ø(1) IN GENERAL.—For purposes of this section, the term 

‘‘personal physician’’ means a physician (as defined in section 

1861(r)(1) of the Social Security Act (42 U.S.C. 1395x(r)(1)) 

who— 

ø(A) meets the requirements described in paragraph (2); 

and 

ø(B) performs the services described in paragraph (3). 

Nothing in this paragraph shall be construed as preventing 

such a physician from being a specialist or subspecialist for an 

individual requiring ongoing care for a specific chronic condition or multiple chronic conditions (such as severe asthma, 

complex diabetes, cardiovascular disease, rheumatologic disorder) or for an individual with a prolonged illness. 

ø(2) REQUIREMENTS.—The requirements described in this 

paragraph for a personal physician are as follows: 

ø(A) The physician is a board certified physician who 

provides first contact and continuous care for individuals 

under the physician’s care. 

ø(B) The physician has the staff and resources to manage the comprehensive and coordinated health care of each 

such individual. 

ø(3) SERVICES PERFORMED.—A personal physician shall perform or provide for the performance of at least the following 

services: 

ø(A) Advocates for and provides ongoing support, oversight, and guidance to implement a plan of care that provides an integrated, coherent, cross-discipline plan for ongoing medical care developed in partnership with patients 

and including all other physicians furnishing care to the 

patient involved and other appropriate medical personnel 

or agencies (such as home health agencies). 

ø(B) Uses evidence-based medicine and clinical decision 

support tools to guide decision-making at the point-of-care 

based on patient-specific factors. 

ø(C) Uses health information technology, that may include remote monitoring and patient registries, to monitor 

and track the health status of patients and to provide patients with enhanced and convenient access to health care 

services. 

ø(D) Encourages patients to engage in the management 

of their own health through education and support systems. 

ø(d) MEDICAL HOME DEFINED.—For purposes of this section, the 

term ‘‘medical home’’ means a physician practice that— 

ø(1) is in charge of targeting beneficiaries for participation in 

the project; and 


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ø(2) is responsible for— 

ø(A) providing safe and secure technology to promote patient access to personal health information; 

ø(B) developing a health assessment tool for the individuals targeted; and 

ø(C) providing training programs for personnel involved 

in the coordination of care. 

ø(e) PAYMENT MECHANISMS.— 

ø(1) PERSONAL PHYSICIAN CARE MANAGEMENT FEE.—Under 

the project, the Secretary shall provide for payment under section 1848 of the Social Security Act (42 U.S.C. 1395w–4) of a 

care management fee to personal physicians providing care 

management under the project. Under such section and using 

the relative value scale update committee (RUC) process under 

such section, the Secretary shall develop a care management 

fee code for such payments and a value for such code. 

ø(2) MEDICAL HOME SHARING IN SAVINGS.—The Secretary 

shall provide for payment under the project of a medical home 

based on the payment methodology applied to physician group 

practices under section 1866A of the Social Security Act (42 

U.S.C. 1395cc–1). Under such methodology, 80 percent of the 

reductions in expenditures under title XVIII of the Social Security Act resulting from participation of individuals that are attributable to the medical home (as reduced by the total care 

managements fees paid to the medical home under the project) 

shall be paid to the medical home. The amount of such reductions in expenditures shall be determined by using assumptions with respect to reductions in the occurrence of health 

complications, hospitalization rates, medical errors, and adverse drug reactions. 

ø(3) SOURCE.—Payments paid under the project shall be 

made from the Federal Supplementary Medical Insurance 

Trust Fund under section 1841 of the Social Security Act (42 

U.S.C. 1395t). 

ø(f) EVALUATIONS AND REPORTS.— 

ø(1) ANNUAL INTERIM EVALUATIONS AND REPORTS.—For each 

year of the project, the Secretary shall provide for an evaluation of the project and shall submit to Congress, by a date 

specified by the Secretary, a report on the project and on the 

evaluation of the project for each such year. 

ø(2) FINAL EVALUATION AND REPORT.—The Secretary shall 

provide for an evaluation of the project and shall submit to 

Congress, not later than one year after completion of the 

project, a report on the project and on the evaluation of the 

project. 

ø(g) FUNDING FROM SMI TRUST FUND.—There shall be available, 

from the Federal Supplementary Medical Insurance Trust Fund 

(under section 1841 of the Social Security Act (42 U.S.C. 1395t)), 

the amount of $100,000,000 to carry out the project. 

ø(h) APPLICATION.—Chapter 35 of title 44, United States Code, 

shall not apply to the conduct of the project.¿ 

* * * * * * * 


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SECTION 542 OF THE MEDICARE, MEDICAID, AND SCHIP 

BENEFITS IMPROVEMENT AND PROTECTION ACT OF 

2000 

SEC. 542. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES 

UNDER MEDICARE. 

(a) * * * 

* * * * * * * 

(c) EFFECTIVE DATE.—This section shall apply to services furnished during the 2-year period beginning on January 1, 2001, and 

for services furnished during 2005, 2006, 2007, 2008, øand 2009¿ 

2009, 2010, and 2011. 

MEDICARE IMPROVEMENTS FOR PATIENTS AND 

PROVIDERS ACT OF 2008 

* * * * * * * 

TITLE I—MEDICARE 

* * * * * * * 

Subtitle C—Provisions Relating to Part B 

PART I—PHYSICIANS’ SERVICES 

* * * * * * * 

SEC. 138. ADJUSTMENT FOR MEDICARE MENTAL HEALTH SERVICES. 

(a) PAYMENT ADJUSTMENT.— (1) IN GENERAL.—For purposes of payment for services furnished under the physician fee schedule under section 1848 of 

the Social Security Act (42 U.S.C. 1395w–4) during the period 

beginning on July 1, 2008, and ending on øDecember 31, 2009¿ 

December 31, 2011, the Secretary of Health and Human Services shall increase the fee schedule otherwise applicable for 

specified services by 5 percent. 

* * * * * * * 

PART II—OTHER PAYMENT AND COVERAGE 

IMPROVEMENTS 

* * * * * * * 

SEC. 146. IMPROVED ACCESS TO AMBULANCE SERVICES. 

(a) * * * 

* * * * * * * 

(b) AIR AMBULANCE PAYMENT IMPROVEMENTS.— (1) TREATMENT OF CERTAIN AREAS FOR PAYMENT FOR AIR AM- BULANCE SERVICES UNDER THE AMBULANCE FEE SCHEDULE.— 

Notwithstanding any other provision of law, for purposes of 

making payments under section 1834(l) of the Social Security 

Act (42 U.S.C. 1395m(l)) for air ambulance services furnished 

during the period beginning on July 1, 2008, and øending on 


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December 31, 2009¿ ending on December 31, 2011, any area 

that was designated as a rural area for purposes of making 

payments under such section for air ambulance services furnished on December 31, 2006, shall be treated as a rural area 

for purposes of making payments under such section for air 

ambulance services furnished during such period. 

* * * * * * * 

MEDICARE PRESCRIPTION DRUG, IMPROVEMENT, AND 

MODERNIZATION ACT OF 2003 

* * * * * * * 

TITLE IV—RURAL PROVISIONS 

* * * * * * * 

Subtitle C—Provisions Relating to Parts A 

and B 

* * * * * * * 

SEC. 422. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS. 

(a) * * * 

(b) CONFORMING PROVISIONS.—(1) * * * 

(2) Chapter 35 of title 44, United States Code, shall not apply 

with respect to applications under øsection 1886(h)(7) of the Social 

Security Act, as added by subsection (a)(3).¿ paragraphs (4)(H)(vi), 

(7), and (8) of subsection (h) of section 1886 of the Social Security 

Act. 

* * * * * * * 

TITLE VIII—COST CONTAINMENT 

øSubtitle A—Cost Containment 

øSEC. 801. INCLUSION IN ANNUAL REPORT OF MEDICARE TRUSTEES 

OF INFORMATION ON STATUS OF MEDICARE TRUST 

FUNDS. 

ø(a) DETERMINATIONS OF EXCESS GENERAL REVENUE MEDICARE

FUNDING.— 

ø(1) IN GENERAL.—The Board of Trustees of each medicare 

trust fund shall include in the annual reports submitted under 

subsection (b)(2) of sections 1817 and 1841 of the Social Security Act (42 U.S.C. 1395i and 1395t)— 

ø(A) the information described in subsection (b); and 

ø(B) a determination as to whether there is projected to 

be excess general revenue medicare funding (as defined in 

subsection (c)) for the fiscal year in which the report is 

submitted or for any of the succeeding 6 fiscal years. 

ø(2) MEDICARE FUNDING WARNING.—For purposes of section 

1105(h) of title 31, United States Code, and this subtitle, an afVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00798 Fmt 6659 Sfmt 6601 E:\HR\OC\HR443P1.XXX HR443P1

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firmative determination under paragraph (1)(B) in 2 consecutive annual reports shall be treated as a medicare funding 

warning in the year in which the second such report is made. 

ø(3) 7-FISCAL-YEAR REPORTING PERIOD.—For purposes of this 

subtitle, the term ‘‘7-fiscal-year reporting period’’ means, with 

respect to a year in which an annual report described in paragraph (1) is made, the period of 7 consecutive fiscal years beginning with the fiscal year in which the report is submitted. 

ø(b) INFORMATION.—The information described in this subsection 

for an annual report in a year is as follows: 

ø(1) PROJECTIONS OF GROWTH OF GENERAL REVENUE SPEND- ING.—A statement of the general revenue medicare funding as 

a percentage of the total medicare outlays for each of the following: 

ø(A) Each fiscal year within the 7-fiscal-year reporting 

period. 

ø(B) Previous fiscal years and as of 10, 50, and 75 years 

after such year. 

ø(2) COMPARISON WITH OTHER GROWTH TRENDS.—A comparison of the trend of such percentages with the annual growth 

rate in the following: 

ø(A) The gross domestic product. 

ø(B) Private health costs. 

ø(C) National health expenditures. 

ø(D) Other appropriate measures. 

ø(3) PART D SPENDING.—Expenditures, including trends in 

expenditures, under part D of title XVIII of the Social Security 

Act, as added by section 101. 

ø(4) COMBINED MEDICARE TRUST FUND ANALYSIS.—A financial 

analysis of the combined medicare trust funds if general revenue medicare funding were limited to the percentage specified 

in subsection (c)(1)(B) of total medicare outlays. 

ø(c) DEFINITIONS.—For purposes of this section: 

ø(1) EXCESS GENERAL REVENUE MEDICARE FUNDING.—The 

term ‘‘excess general revenue medicare funding’’ means, with 

respect to a fiscal year, that— 

ø(A) general revenue medicare funding (as defined in 

paragraph (2)), expressed as a percentage of total medicare 

outlays (as defined in paragraph (4)) for the fiscal year; exceeds 

ø(B) 45 percent. 

ø(2) GENERAL REVENUE MEDICARE FUNDING.—The term ‘‘general revenue medicare funding’’ means for a year— 

ø(A) the total medicare outlays (as defined in paragraph 

(4)) for the year; minus 

ø(B) the dedicated medicare financing sources (as defined in paragraph (3)) for the year. 

ø(3) DEDICATED MEDICARE FINANCING SOURCES.—The term 

‘‘dedicated medicare financing sources’’ means the following: 

ø(A) HOSPITAL INSURANCE TAX.—Amounts appropriated 

to the Hospital Insurance Trust Fund under the third sentence of section 1817(a) of the Social Security Act (42 

U.S.C. 1395i(a)) and amounts transferred to such Trust 

Fund under section 7(c)(2) of the Railroad Retirement Act 

of 1974 (45 U.S.C. 231f(c)(2)). 


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ø(B) TAXATION OF CERTAIN OASDI BENEFITS.—Amounts 

appropriated to the Hospital Insurance Trust Fund under 

section 121(e)(1)(B) of the Social Security Amendments of 

1983 (Public Law 98–21), as inserted by section 13215(c) 

of the Omnibus Budget Reconciliation Act of 1993 (Public 

Law 103–66). 

ø(C) STATE TRANSFERS.—The State share of amounts 

paid to the Federal Government by a State under section 

1843 of the Social Security Act (42 U.S.C. 1395v) or pursuant to section 1935(c) of such Act. 

ø(D) PREMIUMS.—The following premiums: 

ø(i) PART A.—Premiums paid by non-Federal sources 

under sections 1818 and section 1818A (42 U.S.C. 

1395i–2 and 1395i–2a) of such Act. 

ø(ii) PART B.—Premiums paid by non-Federal 

sources under section 1839 of such Act (42 U.S.C. 

1395r), including any adjustments in premiums under 

such section. 

ø(iii) PART D.—Monthly beneficiary premiums paid 

under part D of title XVIII of such Act, as added by 

section 101, and MA monthly prescription drug beneficiary premiums paid under part C of such title insofar as they are attributable to basic prescription drug 

coverage. 

Premiums under clauses (ii) and (iii) shall be determined without regard to any reduction in such premiums attributable to 

a beneficiary rebate under section 1854(b)(1)(C) of such title, as 

amended by section 222(b)(1), and premiums under clause (iii) 

are deemed to include any amounts paid under section 1860D– 

13(b) of such title, as added by section 101. 

ø(E) GIFTS.—Amounts received by the medicare trust 

funds under section 201(i) of the Social Security Act (42 

U.S.C. 401(i)). 

ø(4) TOTAL MEDICARE OUTLAYS.—The term ‘‘total medicare 

outlays’’ means total outlays from the medicare trust funds and 

shall— 

ø(A) include payments made to plans under part C of 

title XVIII of the Social Security Act that are attributable 

to any rebates under section 1854(b)(1)(C) of such Act (42 

U.S.C. 1395w–24(b)(1)(C)), as amended by section 

222(b)(1); 

ø(B) include administrative expenditures made in carrying out title XVIII of such Act and Federal outlays under 

section 1935(b) of such Act, as added by section 103(a)(2); 

and 

ø(C) offset outlays by the amount of fraud and abuse collections insofar as they are applied or deposited into a 

medicare trust fund. 

ø(5) MEDICARE TRUST FUND.—The term ‘‘medicare trust 

fund’’ means— 

ø(A) the Federal Hospital Insurance Trust Fund established under section 1817 of the Social Security Act (42 

U.S.C. 1395i); and 

ø(B) the Federal Supplementary Medical Insurance 

Trust Fund established under section 1841 of such Act (42 


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795 

U.S.C. 1395t), including the Medicare Prescription Drug 

Account under such Trust Fund. 

ø(d) CONFORMING AMENDMENTS.— 

ø(1) FEDERAL HOSPITAL INSURANCE TRUST FUND.—Section 

1817(b)(2) (42 U.S.C. 1395i(b)(2)) is amended by adding at the 

end the following: ‘‘Each report provided under paragraph (2) 

beginning with the report in 2005 shall include the information 

specified in section 801(a) of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003.’’. 

ø(2) FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST

FUND.—Section 1841(b)(2) (42 U.S.C. 1395t(b)(2)) is amended 

by adding at the end the following: ‘‘Each report provided 

under paragraph (2) beginning with the report in 2005 shall 

include the information specified in section 801(a) of the Medicare Prescription Drug, Improvement, and Modernization Act 

of 2003.’’. 

ø(e) NOTICE OF MEDICARE FUNDING WARNING.—Whenever any 

report described in subsection (a) contains a determination that for 

any fiscal year within the 7-fiscal-year reporting period there will 

be excess general revenue medicare funding, Congress and the 

President should address the matter under existing rules and procedures. 

øSEC. 802. PRESIDENTIAL SUBMISSION OF LEGISLATION. 

ø(a) IN GENERAL.—Section 1105 of title 31, United States Code, 

is amended by adding at the end the following new subsection: 

ø‘‘(h)(1) If there is a medicare funding warning under section 

801(a)(2) of the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 made in a year, the President shall submit to Congress, within the 15-day period beginning on the date of 

the budget submission to Congress under subsection (a) for the succeeding year, proposed legislation to respond to such warning. 

ø‘‘(2) Paragraph (1) does not apply if, during the year in which 

the warning is made, legislation is enacted which eliminates excess 

general revenue medicare funding (as defined in section 801(c) of 

the Medicare Prescription Drug, Improvement, and Modernization 

Act of 2003) for the 7-fiscal-year reporting period, as certified by 

the Board of Trustees of each medicare trust fund (as defined in 

section 801(c)(5) of such Act) not later than 30 days after the date 

of the enactment of such legislation.’’. 

ø(b) SENSE OF CONGRESS.—It is the sense of Congress that legislation submitted pursuant to section 1105(h) of title 31, United 

States Code, in a year should be designed to eliminate excess general revenue medicare funding (as defined in section 801(c)) for the 

7-fiscal-year period that begins in such year. 

øSEC. 803. PROCEDURES IN THE HOUSE OF REPRESENTATIVES. 

ø(a) INTRODUCTION AND REFERRAL OF PRESIDENT’S LEGISLATIVE

PROPOSAL.— 

ø(1) INTRODUCTION.—In the case of a legislative proposal 

submitted by the President pursuant to section 1105(h) of title 

31, United States Code, within the 15-day period specified in 

paragraph (1) of such section, the Majority Leader of the House 

of Representatives (or his designee) and the Minority Leader of 

the House of Representatives (or his designee) shall introduce 

such proposal (by request), the title of which is as follows: ‘‘A 


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bill to respond to a medicare funding warning.’’ Such bill shall 

be introduced within 3 legislative days after Congress receives 

such proposal. 

ø(2) REFERRAL.—Any legislation introduced pursuant to 

paragraph (1) shall be referred to the appropriate committees 

of the House of Representatives. 

ø(b) DIRECTION TO THE APPROPRIATE HOUSE COMMITTEES.— 

ø(1) IN GENERAL.—In the House, in any year during which 

the President is required to submit proposed legislation to Congress under section 1105(h) of title 31, United States Code, the 

appropriate committees shall report medicare funding legislation by not later than June 30 of such year. 

ø(2) MEDICARE FUNDING LEGISLATION.—For purposes of this 

section, the term ‘‘medicare funding legislation’’ means— 

ø(A) legislation introduced pursuant to subsection (a)(1), 

but only if the legislative proposal upon which the legislation is based was submitted within the 15-day period referred to in such subsection; or 

ø(B) any bill the title of which is as follows: ‘‘A bill to 

respond to a medicare funding warning.’’. 

ø(3) CERTIFICATION.—With respect to any medicare funding 

legislation or any amendment to such legislation to respond to 

a medicare funding warning, the chairman of the Committee 

on the Budget of the House shall certify— 

ø(A) whether or not such legislation eliminates excess 

general revenue medicare funding (as defined in section 

801(c)) for each fiscal year in the 7-fiscal-year reporting period; and 

ø(B) with respect to such an amendment, whether the 

legislation, as amended, would eliminate excess general 

revenue medicare funding (as defined in section 801(c)) for 

each fiscal year in such 7-fiscal-year reporting period. 

ø(c) FALLBACK PROCEDURE FOR FLOOR CONSIDERATION IF THE

HOUSE FAILS TO VOTE ON FINAL PASSAGE BY JULY 30.— 

ø(1) After July 30 of any year during which the President is 

required to submit proposed legislation to Congress under section 1105(h) of title 31, United States Code, unless the House 

of Representatives has voted on final passage of any medicare 

funding legislation for which there is an affirmative certification under subsection (b)(3)(A), then, after the expiration of 

not less than 30 calendar days (and concurrently 5 legislative 

days), it is in order to move to discharge any committee to 

which medicare funding legislation which has such a certification and which has been referred to such committee for 30 

calendar days from further consideration of the legislation. 

ø(2) A motion to discharge may be made only by an individual favoring the legislation, may be made only if supported 

by one-fifth of the total membership of the House (a quorum 

being present), and is highly privileged in the House. Debate 

thereon shall be limited to not more than one hour, the time 

to be divided in the House equally between those favoring and 

those opposing the motion. An amendment to the motion is not 

in order, and it is not in order to move to reconsider the vote 

by which the motion is agreed to or disagreed to. 


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ø(3) Only one motion to discharge a particular committee 

may be adopted under this subsection in any session of a Congress. 

ø(4) Notwithstanding paragraph (1), it shall not be in order 

to move to discharge a committee from further consideration of 

medicare funding legislation pursuant to this subsection during a session of a Congress if, during the previous session of 

the Congress, the House passed medicare funding legislation 

for which there is an affirmative certification under subsection 

(b)(3)(A). 

ø(d) FLOOR CONSIDERATION IN THE HOUSE OF DISCHARGED LEGIS- LATION.— 

ø(1) In the House, not later than 3 legislative days after any 

committee has been discharged from further consideration of 

legislation under subsection (c), the Speaker shall resolve the 

House into the Committee of the Whole for consideration of the 

legislation. 

ø(2) The first reading of the legislation shall be dispensed 

with. All points of order against consideration of the legislation 

are waived. General debate shall be confined to the legislation 

and shall not exceed five hours, which shall be divided equally 

between those favoring and those opposing the legislation. 

After general debate the legislation shall be considered for 

amendment under the five-minute rule. During consideration 

of the legislation, no amendments shall be in order in the 

House or in the Committee of the Whole except those for which 

there has been an affirmative certification under subsection 

(b)(3)(B). All points of order against consideration of any such 

amendment in the Committee of the Whole are waived. The 

legislation, together with any amendments which shall be in 

order, shall be considered as read. During the consideration of 

the bill for amendment, the Chairman of the Committee of the 

Whole may accord priority in recognition on the basis of whether the Member offering an amendment has caused it to be 

printed in the portion of the Congressional Record designated 

for that purpose in clause 8 of Rule XVIII of the Rules of the 

House of Representatives. Debate on any amendment shall not 

exceed one hour, which shall be divided equally between those 

favoring and those opposing the amendment, and no pro forma 

amendments shall be offered during the debate. The total time 

for debate on all amendments shall not exceed 10 hours. At the 

conclusion of consideration of the legislation for amendment, 

the Committee shall rise and report the legislation to the 

House with such amendments as may have been adopted. The 

previous question shall be considered as ordered on the legislation and amendments thereto to final passage without intervening motion except one motion to recommit with or without 

instructions. If the Committee of the Whole rises and reports 

that it has come to no resolution on the bill, then on the next 

legislative day the House shall, immediately after the third 

daily order of business under clause 1 of Rule XIV of the Rules 

of the House of Representatives, resolve into the Committee of 

the Whole for further consideration of the bill. 

ø(3) All appeals from the decisions of the Chair relating to 

the application of the Rules of the House of Representatives to 


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the procedure relating to any such legislation shall be decided 

without debate. 

ø(4) Except to the extent specifically provided in the preceding provisions of this subsection, consideration of any such 

legislation and amendments thereto (or any conference report 

thereon) shall be governed by the Rules of the House of Representatives applicable to other bills and resolutions, amendments, and conference reports in similar circumstances. 

ø(e) LEGISLATIVE DAY DEFINED.—As used in this section, the 

term ‘‘legislative day’’ means a day on which the House of Representatives is in session. 

ø(f) RESTRICTION ON WAIVER.—In the House, the provisions of 

this section may be waived only by a rule or order proposing only 

to waive such provisions. 

ø(g) RULEMAKING POWER.—The provisions of this section are enacted by the Congress— 

ø(1) as an exercise of the rulemaking power of the House of 

Representatives and, as such, shall be considered as part of the 

rules of that House and shall supersede other rules only to the 

extent that they are inconsistent therewith; and 

ø(2) with full recognition of the constitutional right of that 

House to change the rules (so far as they relate to the procedures of that House) at any time, in the same manner, and to 

the same extent as in the case of any other rule of that House. 

øSEC. 804. PROCEDURES IN THE SENATE. 

ø(a) INTRODUCTION AND REFERRAL OF PRESIDENT’S LEGISLATIVE

PROPOSAL.— 

ø(1) INTRODUCTION.—In the case of a legislative proposal 

submitted by the President pursuant to section 1105(h) of title 

31, United States Code, within the 15-day period specified in 

paragraph (1) of such section, the Majority Leader and Minority Leader of the Senate (or their designees) shall introduce 

such proposal (by request), the title of which is as follows: ‘‘A 

bill to respond to a medicare funding warning.’’ Such bill shall 

be introduced within 3 days of session after Congress receives 

such proposal. 

ø(2) REFERRAL.—Any legislation introduced pursuant to 

paragraph (1) shall be referred to the Committee on Finance. 

ø(b) MEDICARE FUNDING LEGISLATION.—For purposes of this section, the term ‘‘medicare funding legislation’’ means— 

ø(1) legislation introduced pursuant to subsection (a)(1), but 

only if the legislative proposal upon which the legislation is 

based was submitted within the 15-day period referred to in 

such subsection; or 

ø(2) any bill the title of which is as follows: ‘‘A bill to respond 

to a medicare funding warning.’’. 

ø(c) QUALIFICATION FOR SPECIAL PROCEDURES.— 

ø(1) IN GENERAL.—The special procedures set forth in subsections (d) and (e) shall apply to medicare funding legislation, 

as described in subsection (b), only if the legislation— 

ø(A) is medicare funding legislation that is passed by the 

House of Representatives; or 

ø(B) contains matter within the jurisdiction of the Committee on Finance in the Senate. 


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ø(2) FAILURE TO QUALIFY FOR SPECIAL PROCEDURES.—If the 

medicare funding legislation does not satisfy paragraph (1), 

then the legislation shall be considered under the ordinary procedures of the Standing Rules of the Senate. 

ø(d) DISCHARGE.— 

ø(1) IN GENERAL.—If the Committee on Finance has not reported medicare funding legislation described in subsection 

(c)(1) by June 30 of a year in which the President is required 

to submit medicare funding legislation to Congress under section 1105(h) of title 31, United States Code, then any Senator 

may move to discharge the Committee of any single medicare 

funding legislation measure. Only one such motion shall be in 

order in any session of Congress. 

ø(2) DEBATE LIMITS.—Debate in the Senate on any such motion to discharge, and all appeals in connection therewith, shall 

be limited to not more than 2 hours. The time shall be equally 

divided between, and controlled by, the maker of the motion 

and the Majority Leader, or their designees, except that in the 

event the Majority Leader is in favor of such motion, the time 

in opposition thereto shall be controlled by the Minority Leader 

or the Minority Leader’s designee. A point of order under this 

subsection may be made at any time. It is not in order to move 

to proceed to another measure or matter while such motion (or 

the motion to reconsider such motion) is pending. 

ø(3) AMENDMENTS.—No amendment to the motion to discharge shall be in order. 

ø(4) EXCEPTION IF CERTIFIED LEGISLATION ENACTED.—Notwithstanding paragraph (1), it shall not be in order to discharge the Committee from further consideration of medicare 

funding legislation pursuant to this subsection during a session 

of a Congress if the chairman of the Committee on the Budget 

of the Senate certifies that medicare funding legislation has 

been enacted that eliminates excess general revenue medicare 

funding (as defined in section 801(c)) for each fiscal year in the 

7-fiscal-year reporting period. 

ø(e) CONSIDERATION.—After the date on which the Committee on 

Finance has reported medicare funding legislation described in subsection (c)(1), or has been discharged (under subsection (d)) from 

further consideration of, such legislation, it is in order (even though 

a previous motion to the same effect has been disagreed to) for any 

Member of the Senate to move to proceed to the consideration of 

such legislation. 

ø(f) RULES OF THE SENATE.—This section is enacted by the Senate— 

ø(1) as an exercise of the rulemaking power of the Senate 

and as such it is deemed a part of the rules of the Senate, but 

applicable only with respect to the procedure to be followed in 

the Senate in the case of a bill described in this paragraph, 

and it supersedes other rules only to the extent that it is inconsistent with such rules; and 

ø(2) with full recognition of the constitutional right of the 

Senate to change the rules (so far as relating to the procedure 


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of the Senate) at any time, in the same manner, and to the 

same extent as in the case of any other rule of the Senate.¿ 

* * * * * * * 

SECTION 5007 OF THE DEFICIT REDUCTION ACT OF 2005 

SEC. 5007. MEDICARE DEMONSTRATION PROJECTS TO PERMIT 

GAINSHARING ARRANGEMENTS. 

(a) * * * 

* * * * * * * 

(d) PROGRAM ADMINISTRATION.— 

(1) * * * 

* * * * * * * 

(3) DURATION.—The qualified gainsharing demonstration 

program under this section shall be conducted for the period 

beginning on January 1, 2007, and ending on December 31, 

2009 (or September 30, 2011, in the case of a demonstration 

project in operation as of October 1, 2008). (e) REPORTS.— (1) * * * 

* * * * * * * 

(3) QUALITY IMPROVEMENT AND SAVINGS.—By not later than 

øDecember 1, 2008¿ March 31, 2011, the Secretary shall submit to Congress a report on quality improvement and savings 

achieved as a result of the qualified gainsharing demonstration 

program established under subsection (a). 

(4) FINAL REPORT.—By not later than øMay 1, 2010¿ March 

31, 2013, the Secretary shall submit to Congress a final report 

on the information described in paragraph (3). 

(f) FUNDING.— (1) IN GENERAL.—Out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary 

for fiscal year 2006 $6,000,000, and for fiscal year 2010, 

$1,600,000, to carry out this section. 

(2) AVAILABILITY.—Funds appropriated under paragraph (1) 

shall remain available for expenditure through fiscal year 

ø2010¿ 2014 or until expended. 

* * * * * * * 


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VII. DISSENTING VIEWS 

DISSENTING VIEWS

OVERVIEW

H.R. 3200 is fundamentally flawed legislation that threatens to 

simultaneously do irreparable harm to the health delivery system 

and add mountains of additional debt on our children and grandchildren. Long before those bills come due, though, Americans with 

health insurance would pay thousands of dollars more per year for 

coverage, and a host of new taxes on individuals and businesses 

would further hamper efforts to revive an already struggling economy if this bill becomes law. 

The bill violates oft-repeated promises by the President and others that health care reform won’t cause people to lose coverage they 

like, that taxes won’t increase on families with income less than 

$250,000 and that tax rates won’t increase above what they were 

during the 1990s. 

The minority was united in opposition to the bill for five main 

reasons: 

1. It was unnecessarily rushed through the Committee without 

proper understanding or even a reading of the bill by Members; 

2. The massive spending and tax increases will damage an already reeling economy; 

3. Americans will lose coverage they have and like; 

4. The bill gives the government control over Americans’ personal 

health decisions; and 

5. Numerous specific improvements we proposed to the bill were 

all rejected. 

I. BILL SHOULD NOT HAVE BEEN RUSHED INTO AND OUT OF

COMMITTEE

While we share the majority’s goal of improving the nation’s 

health care system, the issues are too important and the decisions 

too difficult to act in haste and without the full range of information necessary to make such critical policy choices. 

We held only one hearing on the discussion draft released in 

June, however not one of the witnesses spoke knowledgably about 

all of the provisions in the bill because they were only given a couple of days to digest it. 

The measure approved by the Committee was substantially 

changed from the June draft, with the last round of edits coming 

out just after midnight on Thursday, July 16th, a few hours before 

the one-day markup of the legislation that began at 9 a.m. that 

morning. 


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This contrasts starkly with the health care reform debate in 

1994. That year, the full Ways and Means Committee spent 17 

days over six weeks conducting our markup. And that was only 

after holding a dozen hearings (eight at Subcommittee, four at full 

Committee) on the bill after its introduction. 

It is also worth pointing out that the Committee refused to act 

on the Clinton bill in 1994 until nearly three months after the Congressional Budget Office (CBO) released a comprehensive, 104-page 

analysis and score. We had no such analysis of H.R. 3200 or the 

Chairman’s mark. What we had instead was a very rough estimate 

on only a portion of the bill based on specifications as outlined by 

the Majority to CBO, not on actual legislative text. As Director Elmendorf wrote to Chairman Rangel: 

‘‘It is important to note, however, that [those] estimates are 

based on specifications provided by the tri-committee group rather 

than an analysis of the language released [this week]. For that reason and others outlined below, those figures do not represent a formal or complete cost estimate for the coverage provisions of the 

draft legislation.’’ 

Quite simply, that is not adequate for a bill as important as this, 

one that will have such far-reaching impacts on every family and 

business in America. We cannot afford to guess and hope we got 

it right. This Committee had no business marking up a bill of 

which CBO cannot tell us its cost or impacts. That view was further confirmed by testimony during the day by Director Elmendorf 

about the long-term budget impact of this legislation. 

II. MASSIVE SPENDING AND TAX INCREASES WILL HURT ECONOMY

What we do know about the bill is that it matches more than a 

trillion dollars in new spending that grows even faster than the 

revenues being generated to pay for it, creating a massive, longterm unfunded federal mandate that imperils the fiscal future of 

this nation. Ironically, despite claims that the United States is already ‘‘spending too much on health care,’’ the bill finances even 

higher spending with more than $820 billion in new taxes that will 

be paid for by families making as little as $20,000, small businesses, and manufacturers—all while we are in the midst of a recession and with unemployment moving quickly toward 10 percent. 

Section 412 of the bill includes a mandate that employers provide 

health coverage deemed acceptable by the Federal Government or 

else pay a new payroll tax of eight percent of total payroll (a socalled ‘‘pay-or-play’’ scheme) that will bring the total U.S. federal 

payroll tax to more than 23 percent. Only the smallest of businesses would get any relief from this job-killing tax. Economists 

across the political spectrum agree that workers suffer the economic burden of payroll taxes. In a July 13, 2009 report entitled, 

‘‘Effects of Changes to the Health Insurance System on Labor Markets,’’ the Congressional Budget Office concluded that an employer 

mandate ‘‘is likely to reduce employment,’’ with the effect being 

most severe for low-wage workers. It is therefore disappointing that 

the Majority chose to ignore the warnings of leading groups representing businesses in America about the damage this will do to 

employment and wages in America. 


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Section 441 of the bill attempts to plug part of the fiscal hole it 

creates with a new surtax on individuals and small businesses. The 

5.4-percent surtax rate, combined with the already scheduled increase in the top marginal rate to 39.6 percent, would result in an 

increase in the top Federal income tax rate from 35 percent in 2010 

to 45 percent in 2011. Adding in the 2.9-percent Medicare payroll 

tax and hidden marginal rate increases that operate by phasing out 

certain deductions, the proposed top Federal rate would jump to 

about 48 percent, and the average top Federal-State marginal tax 

rate would be over 52 percent. 

While nominally aimed at individuals, the surtax will fall heavily 

on small businesses, the engine of job creation. According to a Joint 

Committee on Taxation data projection for 2011, 42 percent of 

small business income (including the income of sole proprietorships, partnerships, and S Corporations) would be subject to the 

surtax. 

Not content to just tax ‘‘the wealthy,’’ the bill also imposes large 

taxes on some of America’s poorest families. Effective in 2013, section 401 would impose a tax on individuals without ‘‘acceptable coverage’’, which would hit single filers with incomes as low as $9,350 

and married couples with incomes as low as $18,700 (in 2009 dollars). This undermines President Obama’s ongoing promise not to 

raise taxes on families with incomes under $250,000. 

Section 442 would prohibit the use of tax-free distributions from 

Health Savings Accounts (HSAs), Flexible Spending Arrangements 

(FSAs), and Health Reimbursement Arrangements (HRAs) to purchase medicine or drugs other than prescription drugs or insulin. 

By imposing this restriction on the estimated 47 to 50 million individuals who currently carry coverage that includes either an HSA, 

FSA, or HRA, the bill violates another of President Obama’s 

pledges: to allow families to keep the coverage they have and like. 

In addition, the Majority would impose several unwise tax increases that bear no relationship to the purpose of the legislation 

other than to fund the move toward nationalization of health care 

in this country. These tax increases include a provision that appears to violate our tax treaties with our trading partners; a multiyear delay in rules that would allow worldwide American businesses to calculate their interest expense more accurately; and 

codification of the economic substance doctrine. The delay of the interest expense allocation rules is especially troubling. By terminating this tax increase at the end of the budget window, the Majority seems to be subtly acknowledging that the revenues generated by the bill will further fail to keep pace with its spending 

in the long-run. 

III. AMERICANS WILL LOSE THE COVERAGE THEY HAVE AND LIKE

Independent analysis demonstrates that under H.R. 3200, two 

out of three Americans will lose the coverage they currently enjoy 

because it establishes a government-run health plan. It will, over 

time, force other coverage out of the market, eventually turning the 

government option into a federal monopoly. 

This starts with the creation of a federally subsidized government-run insurance plan that would pay hospitals and doctors at 

set Medicare rates for services. As Medicare significantly underVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00809 Fmt 6604 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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pays providers, the government-run plan will force private plans to 

pick up the slack. As a result, the average cost of private coverage 

for a family of four would be $3,628 more expensive because of the 

new and existing cost-shift, according to analysis by Milliman and 

the Lewin Group. Because it is unlikely that providers will willingly accept the government-run plan’s low reimbursements, the 

Secretary of HHS would have the authority to force providers to 

participate in this plan. 

The government-run plan will not have to pay state or federal 

taxes. It would be exempt from complying with state benefit and 

provider mandates, which have been shown to increase the cost of 

health insurance. The plan provides a $2 billion interest free loan 

from taxpayers. Unlike private insurance plans, who can be sued 

in state courts, the government-run plan could only be sued in federal court. And finally it will have the full backing of the United 

States government. Regardless of any assurances to the contrary, 

the government-run insurance plan will be ‘‘too big to fail,’’ almost 

ensuring that taxpayers will be responsible for any funding shortfalls. This affords the government plan further significant advantage over the plans it is supposed to ‘‘compete’’ against. 

To further guarantee that result, all private health plans would 

be required to conform to benefit mandates, as determined by the 

federal government. Any employer offering coverage that wasn’t approved by the government would be forced to pay a steep tax penalty. Further, individual market plans would be prohibited from 

enrolling new members and would be prohibited from updating 

their benefits or cost-sharing arrangements for those currently enrolled. This prohibition on new enrollment will result in a death 

spiral where insurance costs for a plan climb at an unsustainable 

rate for all existing health insurance plans. By guaranteeing adverse selection will occur, the bill will ultimately force these plans 

to close down completely. 

The bill further prohibits any new insurance plan from creating 

health coverage that does not conform to the federal government’s 

requirements, and that insurance plan will not be allowed to exist 

outside of the government established super-structure, referred to 

in H.R. 3200 as the Exchange. By prohibiting new insurance plans 

that don’t comply with various new federal requirements, the bill 

effectively limits choice in the insurance market. 

IV. GIVES THE GOVERNMENT CONTROL OVER PERSONAL HEALTH CARE

DECISIONS

H.R. 3200 will create a system by which health care decisions 

will be made in Washington that should be made in doctor’s offices 

by patients and their physicians and at kitchen tables by families. 

House Democrats would establish a new government-run ‘‘Exchange’’ run by a new ‘‘Health Choices Commissioner’’ nominated 

by the President and confirmed by the Senate. As the Commissioner is serving at the pleasure of the President, some may be concerned about the lack of independence of this individual. The Commissioner would also be required to work with the Secretary of 

Health and Human Services, who oversees the government-run insurance plan described above, creating the potential for a serious 


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conflict of interest that could significantly disadvantage the private 

coverage that insures more than 170 million Americans today. 

Aside from the will of the President, the Commissioner’s power 

would be unchecked. This is extremely troubling given the large 

scope of responsibility given to the Commissioner. In fact, the Commissioner is so powerful that the title is referenced almost 200 

times in H.R. 3200. This government official would have: • The power to decide which treatments patients could receive and at what cost; • The power to decide which private plans would be allowed 

to participate in the Exchange; • The power to regulate all insurance plans, both in and out 

of the Exchange; • The power to determine which employers would be allowed 

to participate in the Exchange; • The power to determine how many Americans will be allowed to choose health coverage through the Exchange; • The power to form and control which physicians and hospitals participate in the government-run plan and in private 

plan provider networks; • The power to determine which states are allowed to operate their own Exchange and terminate a previously-approved 

State Exchange at any time; • The power to override state laws regarding covered health 

benefits; • The power to determine how trillions of taxpayer and employer dollars would be spent within the Exchange; • The power to determine who qualifies for premium assistance; and • The power to automatically enroll Americans into the Exchange if they don’t have coverage, including potentially forcing these individuals into the government-run plan. 

Also troubling is the fact the Secretary of Health and Human 

Services would decide which prescription drugs are made available 

in the government plan. Evidence has shown that government officials in other countries have used this power to deny access to 

needed treatments on the basis of cost. 

The bill also contains a new initiative on Comparative Effectiveness Research (CER). This board and its research will significantly 

harm the patient-doctor relationship if government-run health care 

uses the research to restrict treatments deemed too expensive. The 

bill reported by the Committee contains a provision expressly prohibiting the CER board from using its research to make coverage 

determinations. That may be the biggest of many fig leaves in the 

bill; in this case, the joke is on us, since the CER board would 

never make a coverage determination—it doesn’t issue health insurance or pay claims, or have to decide what is covered and what 

is not. 

But those who would make such coverage decisions, like the Centers for Medicare and Medicaid Services (CMS), face no such restrictions on their use of CER data. Peter Orszag, Director of the 

Office of Management and Budget, has publicly affirmed the Administration’s desire to use CER to ‘‘bend the cost curve.’’ As it relates to CER, this means that CMS and the Health Choices ComVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00811 Fmt 6604 Sfmt 6602 E:\HR\OC\HR443P1.XXX HR443P1

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missioner will be able to deny coverage based on the cost of treatment, or ration access to health care services, for people in Medicare and every American enrolled in insurance plans offered 

through the Exchange. 

V. ATTEMPTS TO IMPROVE THE LEGISLATION WERE REJECTED

Sadly, the foregoing does not constitute a complete review of the 

flaws of this legislation. During the Committee mark-up, these and 

other concerns were identified. Republicans attempted to address 

them through more than three dozen amendments. Those included 

amendments to: eliminate the government-run health insurance 

plan that could result in two out of three Americans losing their 

current coverage; ensure that comparative effectiveness research 

isn’t used to ration care based on cost; terminate the governmentrun plan if wait times for care become too long; prevent the government from requiring health care providers to serve patients enrolled in the government-run health plan; ensure the Health 

Choices Commissioner could not deem abortion to be a required 

benefit; reverse cuts to Medicare Advantage plans, which give seniors access to benefits not found in the government-run Medicare 

program; and promote medical liability reform, which would help 

address the impact that the practice of defensive medicine has on 

health care spending. 

Sadly, not a single one of these or the other amendments offered 

was accepted, reinforcing the widely held belief that this effort is 

a purely partisan exercise in which additional views and suggestions simply are not welcome. 

CONCLUSION

At the outset of the mark-up, the Majority rejected a motion by 

the Ranking Member to delay consideration of the bill by one week, 

notwithstanding the fact the bill had been available for only a few 

hours and that the Committee did not even have a Congressional 

Budget Office estimate about the short and long-term impact of the 

package. 

We suppose that should have been an indication about what was 

to come and the futility of trying to improve this deeply flawed 

product. 

Hours after the mark-up ended, the Congressional Budget Office 

did release a further partial score of the bill (still based on descriptions of what is in the bill rather than on the legislative text itself). 

The overall conclusion is that the bill adds nearly $240 billion to 

the deficit this decade, with the bulk of those costs occurring at the 

end of the budget window. In 2015 alone, the bill will add $40 billion to the federal deficit. By 2019, that figure will rise to $65 billion and the deepening debt impact shows no signs of slowing down 

in future years. In short, the $240 billion that this adds to the deficit this decade is just the tip of the fiscal iceberg. 

We would like to hope that the Majority’s mad dash for an arbitrary finish line, regardless of the consequences, will be called off 

before real and lasting damage is done to our health care system 

and our economy. But as we write this, the prognosis is not good. 

DAVE CAMP, Michigan, 


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WALLY HERGER, California, 

SAM JOHNSON, Texas, 

KEVIN BRADY, Texas, 

PAUL RYAN, Wisconsin, 

ERIC CANTOR, Virginia, 

JOHN LINDER, Georgia, 

DEVIN NUNES, California, 

PATRICK J. TIBERI, Ohio, 

GINNY BROWN-WAITE, Florida, 

GEOFF DAVIS, Kentucky, 

DAVID G. REICHERT, Washington, 

CHARLES W. BOUSTANY, JR., Louisiana, 

DEAN HELLER, Nevada, 

PETER J. ROSKAM, Illinois. 


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VIII. ADDITIONAL VIEWS 

RESTRICTS CURRENT PHYSICIAN OWNED HOSPITALS, PROHIBITS

ONES UNDER CONSTRUCTION

Section 1156 of H.R. 3200 contains provisions that would devastate physician-owned hospitals across this country in two ways. 

First, it contains a retroactive effective date. Section 1156 states 

that in order for a physician-owned facility to have the ability to 

bill Medicare for services, it needs to have received a Medicare provider number by January 1, 2009, a date that came and went over 

6 months ago. 

This language would prevent 104 hospitals that are under development in over 20 states from ever receiving their Medicare provider number. This includes hospitals that have opened their doors 

and are already seeing patients, but have not received a provider 

number through no fault of their own. This means that hospitals, 

which were relying on current law, would be prohibited from ever 

becoming a Medicare provider, because of some arbitrary and retroactive deadline set forth in this legislation. Over $5 billion of investments have been made towards these 104 projects; this provision threatens not only those investments but also the 21,000 jobs 

that stand to be created by these hospitals. This legislation should 

not threaten this boost in economic growth for our communities 

and our states at a time our country desperately needs them the 

most. 

Second, this provision restricts the 222 physician-owned hospitals currently operating in 32 states from growing and responding to the needs of the patients and communities they serve. Section 1156 sets forth qualifications that a physician-owned hospital 

must meet to just be able to apply for permission to grow from the 

Secretary of Health and Human Services. Besides the policy implications of a hospital needing to petition the federal government for 

permission to add a hospital bed if their community needs it, the 

qualifications listed are so restrictive that only 3 of the current 222 

facilities meet them. 

We are disheartened that these provisions seek to legislate away 

hospitals in our districts that provide much needed quality and efficient healthcare for our constituents. As this bill continues through 

the legislative process at such a rapid speed, it is our hope these 


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restrictions are changed so that our constituents can continue to 

have access to the great care they are currently receiving. 

SAM JOHNSON

WALLY HERGER

PAUL RYAN

DAVE CAMP

KEVIN BRADY

JOHN LINDER

DEAN HELLER


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H.R. 3200 

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 DIVISIONS, TITLES, AND SUBTITLES. 

(a) TABLE OF DIVISIONS, TITLES, AND SUBTITLES.—This Act is divided into divisions, titles, and subtitles as follows: 

DIVISION A—AFFORDABLE HEALTH CARE CHOICES 

TITLE I—PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH BENEFITS PLANS 

Subtitle A—General Standards 

Subtitle B—Standards Guaranteeing Access to Affordable Coverage 

Subtitle C—Standards Guaranteeing Access to Essential Benefits 

Subtitle D—Additional Consumer Protections 

Subtitle E—Governance 

Subtitle F—Relation to other requirements; Miscellaneous 

Subtitle G—Early Investments 

TITLE II—HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS 

Subtitle A—Health Insurance Exchange 

Subtitle B—Public health insurance option 

Subtitle C—Individual Affordability Credits 

Subtitle D—State innovation 

TITLE III—SHARED RESPONSIBILITY 

Subtitle A—Individual responsibility 

Subtitle B—Employer Responsibility 

[FOR DIVISION B—SEE TEXT OF INTRODUCED BILL] 

DIVISION C—PUBLIC HEALTH AND WORKFORCE DEVELOPMENT 

[For titles I through IV of division C, see text of introduced bill.] 

TITLE V—OTHER PROVISIONS 

[For subtitles A , B, and C of title V, see text of introduced bill.] 

Subtitle D—Grants for comprehensive programs to provide education to nurses and 

create a pipeline to nursing 

[For subtitle E of title V, see text of introduced bill.] 

Subtitle F—Standards for accessibility to medical equipment for individuals with 

disabilities. 

Subtitle G—Other grant programs 

Subtitle H—Long-term care and family caregiver support 

Subtitle I—Online resources 

(b) SHORT TITLE.—This Act may be cited as the ‘‘America’s Affordable Health Choices Act of 2009’’. 

DIVISION A—AFFORDABLE HEALTH 

CARE CHOICES 

SEC. 100. PURPOSE; TABLE OF CONTENTS OF DIVISION; GENERAL 

DEFINITIONS. 

(a) PURPOSE.— 

(1) IN GENERAL.—The purpose of this division is to provide 

affordable, quality health care for all Americans and reduce the 

growth in health care spending. 


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(2) BUILDING ON CURRENT SYSTEM.—This division achieves 

this purpose by building on what works in today’s health care 

system, while repairing the aspects that are broken. 

(3) INSURANCE REFORMS.—This division— 

(A) enacts strong insurance market reforms; 

(B) creates a new Health Insurance Exchange, with a 

public health insurance option alongside private plans; 

(C) includes sliding scale affordability credits; and 

(D) initiates shared responsibility among workers, employers, and the government; 

so that all Americans have coverage of essential health benefits. 

(4) HEALTH DELIVERY REFORM.—This division institutes 

health delivery system reforms both to increase quality and to 

reduce growth in health spending so that health care becomes 

more affordable for businesses, families, and government. 

(b) TABLE OF CONTENTS OF DIVISION.—The table of contents of 

this division is as follows: 

Sec. 100. Purpose; table of contents of division; general definitions. 

TITLE I—PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH 

BENEFITS PLANS 

Subtitle A—General Standards 

Sec. 101. Requirements reforming health insurance marketplace. 

Sec. 102. Protecting the choice to keep current coverage. 

Subtitle B—Standards Guaranteeing Access to Affordable Coverage 

Sec. 111. Prohibiting pre-existing condition exclusions. 

Sec. 112. Guaranteed issue and renewal for insured plans. 

Sec. 113. Insurance rating rules. 

Sec. 114. Nondiscrimination in benefits; parity in mental health and substance 

abuse disorder benefits. 

Sec. 115. Ensuring adequacy of provider networks. 

Sec. 116. Ensuring value and lower premiums. 

Sec. 117. Consistency of costs and coverage under qualified health benefits plans 

during plan year. 

Subtitle C—Standards Guaranteeing Access to Essential Benefits 

Sec. 121. Coverage of essential benefits package. 

Sec. 122. Essential benefits package defined. 

Sec. 123. Health Benefits Advisory Committee. 

Sec. 124. Process for adoption of recommendations; adoption of benefit standards. 

Sec. 125. Prohibition of discrimination in health care services based on religious or 

spiritual content. 

Subtitle D—Additional Consumer Protections 

Sec. 131. Requiring fair marketing practices by health insurers. 

Sec. 132. Requiring fair grievance and appeals mechanisms. 

Sec. 133. Requiring information transparency and plan disclosure. 

Sec. 134. Application to qualified health benefits plans not offered through the 

Health Insurance Exchange. 

Sec. 135. Timely payment of claims. 

Sec. 136. Standardized rules for coordination and subrogation of benefits. 

Sec. 137. Application of administrative simplification. 

Sec. 138. Records relative to prescription information. 

Subtitle E—Governance 

Sec. 141. Health Choices Administration; Health Choices Commissioner. 

Sec. 142. Duties and authority of Commissioner. 

Sec. 143. Consultation and coordination. 

Sec. 144. Health Insurance Ombudsman. 


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Subtitle F—Relation to Other Requirements; Miscellaneous 

Sec. 151. Relation to other requirements. 

Sec. 152. Prohibiting discrimination in health care. 

Sec. 153. Whistleblower protection. 

Sec. 154. Construction regarding collective bargaining. 

Sec. 155. Severability. 

Sec. 156. Rule of construction regarding Hawaii Prepaid Health Care Act. 

Sec. 157. Increasing meaningful use of electronic health records. 

Sec. 158. Private right of contract with health care providers. 

Subtitle G—Early Investments 

[For sections 161-163. See text of introduced bill.] 

Sec. 164. Reinsurance program for retirees. 

Sec. 165. Prohibition against post-retirement reductions of retiree health benefits by 

group health plans. 

Sec. 166. Limitations on preexisting condition exclusions in group health plans in 

advance of applicability of new prohibition of preexisting condition exclusions. 

Sec. 167. Extension of COBRA continuation coverage. 

TITLE II—HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS 

Subtitle A—Health Insurance Exchange 

Sec. 201. Establishment of Health Insurance Exchange; outline of duties; definitions. 

Sec. 202. Exchange-eligible individuals and employers. 

Sec. 203. Benefits package levels. 

Sec. 204. Contracts for the offering of Exchange-participating health benefits plans. 

Sec. 205. Outreach and enrollment of Exchange-eligible individuals and employers 

in Exchange-participating health benefits plan. 

Sec. 206. Other functions. 

Sec. 207. Health Insurance Exchange Trust Fund. 

Sec. 208. Optional operation of State-based health insurance exchanges. 

Sec. 209. Participation of small employer benefit arrangements. 

Subtitle B—Public Health Insurance Option 

Sec. 221. Establishment and administration of a public health insurance option as 

an Exchange-qualified health benefits plan. 

Sec. 222. Premiums and financing. 

Sec. 223. Payment rates for items and services. 

Sec. 224. Modernized payment initiatives and delivery system reform. 

Sec. 225. Provider participation. 

Sec. 226. Application of fraud and abuse provisions. 

Sec. 227. Sense of the House regarding enrollment of Members in the public option. 

Subtitle C—Individual Affordability Credits 

Sec. 241. Availability through Health Insurance Exchange. 

Sec. 242. Affordable credit eligible individual. 

Sec. 243. Affordable premium credit. 

Sec. 244. Affordability cost-sharing credit. 

Sec. 245. Income determinations. 

Sec. 246. No Federal payment for undocumented aliens. 

Subtitle D—State Innovation 

Sec. 251. Waiver of ERISA limitation; application instead of state single payer system. 

Sec. 252. Requirements. 

Sec. 253. Definitions. 

TITLE III—SHARED RESPONSIBILITY 

Subtitle A—Individual Responsibility 

Sec. 301. Individual responsibility. 


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Subtitle B—Employer Responsibility 

PART 1—HEALTH COVERAGE PARTICIPATION REQUIREMENTS

Sec. 311. Health coverage participation requirements. 

Sec. 312. Employer responsibility to contribute towards employee and dependent coverage. 

Sec. 313. Employer contributions in lieu of coverage. 

Sec. 314. Authority related to improper steering. 

PART 2—SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS

Sec. 321. Satisfaction of health coverage participation requirements under the Employee Retirement Income Security Act of 1974. 

Sec. 324. Additional rules relating to health coverage participation requirements. 

[FOR TITLE IV, SEE TEXT OF INTRODUCED BILL.] 

(c) GENERAL DEFINITIONS.—Except as otherwise provided, in this 

division: 

(1) ACCEPTABLE COVERAGE.—The term ‘‘acceptable coverage’’ 

has the meaning given such term in section 202(d)(2). 

(2) BASIC PLAN.—The term ‘‘basic plan’’ has the meaning 

given such term in section 203(c). 

(3) COMMISSIONER.—The term ‘‘Commissioner’’ means the 

Health Choices Commissioner established under section 141. 

(4) COST-SHARING.—The term ‘‘cost-sharing’’ includes 

deductibles, coinsurance, copayments, and similar charges but 

does not include premiums or any network payment differential 

for covered services or spending for non-covered services. 

(5) DEPENDENT.—The term ‘‘dependent’’ has the meaning 

given such term by the Commissioner and includes a spouse. 

(6) EMPLOYMENT-BASED HEALTH PLAN.—The term ‘‘employment-based health plan’’— 

(A) means a group health plan (as defined in section 

733(a)(1) of the Employee Retirement Income Security Act 

of 1974); 

(B) includes such a plan that is the following: 

(i) FEDERAL, STATE, AND TRIBAL GOVERNMENTAL

PLANS.—A governmental plan (as defined in section 

3(32) of the Employee Retirement Income Security Act 

of 1974), including a health benefits plan offered under 

chapter 89 of title 5, United States Code; or 

(ii) CHURCH PLANS.—A church plan (as defined in 

section 3(33) of the Employee Retirement Income Security Act of 1974); and 

(C) excludes coverage described in section 202(d)(2)(E) 

(relating to TRICARE). 

(7) ENHANCED PLAN.—The term ‘‘enhanced plan’’ has the 

meaning given such term in section 203(c). 

(8) ESSENTIAL BENEFITS PACKAGE.—The term ‘‘essential benefits package’’ is defined in section 122(a). 

(9) FAMILY.—The term ‘‘family’’ means an individual and includes the individual’s dependents. 

(10) FEDERAL POVERTY LEVEL; FPL.—The terms ‘‘Federal poverty level’’ and ‘‘FPL’’ have the meaning given the term ‘‘poverty 

line’’ in section 673(2) of the Community Services Block Grant 

Act (42 U.S.C. 9902(2)), including any revision required by such 

section. 


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(11) HEALTH BENEFITS PLAN.—The terms ‘‘health benefits 

plan’’ means health insurance coverage and an employmentbased health plan and includes the public health insurance option. 

(12) HEALTH INSURANCE COVERAGE; HEALTH INSURANCE

ISSUER.—The terms ‘‘health insurance coverage’’ and ‘‘health insurance issuer’’ have the meanings given such terms in section 

2791 of the Public Health Service Act. 

(13) HEALTH INSURANCE EXCHANGE.—The term ‘‘Health Insurance Exchange’’ means the Health Insurance Exchange established under section 201. 

(14) MEDICAID.—The term ‘‘Medicaid’’ means a State plan 

under title XIX of the Social Security Act (whether or not the 

plan is operating under a waiver under section 1115 of such 

Act). 

(15) MEDICARE.—The term ‘‘Medicare’’ means the health insurance programs under title XVIII of the Social Security Act. 

(16) PLAN SPONSOR.—The term ‘‘plan sponsor’’ has the meaning given such term in section 3(16)(B) of the Employee Retirement Income Security Act of 1974. 

(17) PLAN YEAR.—The term ‘‘plan year’’ means— 

(A) with respect to an employment-based health plan, a 

plan year as specified under such plan; or 

(B) with respect to a health benefits plan other than an 

employment-based health plan, a 12-month period as specified by the Commissioner. 

(18) PREMIUM PLAN; PREMIUM-PLUS PLAN.—The terms ‘‘premium plan’’ and ‘‘premium-plus plan’’ have the meanings given 

such terms in section 203(c). 

(19) QHBP OFFERING ENTITY.—The terms ‘‘QHBP offering entity’’ means, with respect to a health benefits plan that is— 

(A) a group health plan (as defined, subject to subsection 

(d), in section 733(a)(1) of the Employee Retirement Income 

Security Act of 1974), the plan sponsor in relation to such 

group health plan, except that, in the case of a plan maintained jointly by 1 or more employers and 1 or more employee organizations and with respect to which an employer 

is the primary source of financing, such term means such 

employer; 

(B) health insurance coverage, the health insurance 

issuer offering the coverage; 

(C) the public health insurance option, the Secretary of 

Health and Human Services; 

(D) a non-Federal governmental plan (as defined in section 2791(d) of the Public Health Service Act), the State or 

political subdivision of a State (or agency or instrumentality of such State or subdivision) which establishes or 

maintains such plan; or 

(E) a Federal governmental plan (as defined in section 

2791(d) of the Public Health Service Act), the appropriate 

Federal official. 

(20) QUALIFIED HEALTH BENEFITS PLAN.—The term ‘‘qualified 

health benefits plan’’ means a health benefits plan that meets 


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the requirements for such a plan under title I and includes the 

public health insurance option. 

(21) PUBLIC HEALTH INSURANCE OPTION.—The term ‘‘public 

health insurance option’’ means the public health insurance option as provided under subtitle B of title II. 

(22) SERVICE AREA; PREMIUM RATING AREA.—The terms ‘‘service area’’ and ‘‘premium rating area’’ mean with respect to 

health insurance coverage— 

(A) offered other than through the Health Insurance Exchange, such an area as established by the QHBP offering 

entity of such coverage in accordance with applicable State 

law; and 

(B) offered through the Health Insurance Exchange, such 

an area as established by such entity in accordance with 

applicable State law and applicable rules of the Commissioner for Exchange-participating health benefits plans. 

(23) STATE.—The term ‘‘State’’ means the 50 States and the 

District of Columbia. 

(24) STATE MEDICAID AGENCY.—The term ‘‘State Medicaid 

agency’’ means, with respect to a Medicaid plan, the single 

State agency responsible for administering such plan under title 

XIX of the Social Security Act. 

(25) Y1, Y2, ETC..—The terms ‘‘Y1’’ , ‘‘Y2’’, ‘‘Y3’’, ‘‘Y4’’, ‘‘Y5’’, 

and similar subsequently numbered terms, mean 2013 and subsequent years, respectively. 

(26) EMPLOYEE PREMIUM.—The term ‘‘employee premium’’ 

does not include a collectively bargained premium in the case 

of a group health plan (as defined in section 733(a)(1) of the 

Employee Retirement Income Security Act of 1974) that is a 

multiemployer plan (as defined in section 3(37) of such Act). 

TITLE I—PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH BENEFITS PLANS 

Subtitle A—General Standards 

SEC. 101. REQUIREMENTS REFORMING HEALTH INSURANCE MARKETPLACE. 

(a) PURPOSE.—The purpose of this title is to establish standards 

to ensure that new health insurance coverage and employmentbased health plans that are offered meet standards guaranteeing access to affordable coverage, essential benefits, and other consumer 

protections. 

(b) REQUIREMENTS FOR QUALIFIED HEALTH BENEFITS PLANS.— 

On or after the first day of Y1, a health benefits plan shall not be 

a qualified health benefits plan under this division unless the plan 

meets the applicable requirements of the following subtitles for the 

type of plan and plan year involved: 

(1) Subtitle B (relating to affordable coverage). 

(2) Subtitle C (relating to essential benefits). 

(3) Subtitle D (relating to consumer protection). 


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(c) TERMINOLOGY.—In this division: 

(1) ENROLLMENT IN EMPLOYMENT-BASED HEALTH PLANS.—An 

individual shall be treated as being ‘‘enrolled’’ in an employment-based health plan if the individual is a participant or 

beneficiary (as such terms are defined in section 3(7) and 3(8), 

respectively, of the Employee Retirement Income Security Act of 

1974) in such plan. 

(2) INDIVIDUAL AND GROUP HEALTH INSURANCE COVERAGE.— 

The terms ‘‘individual health insurance coverage’’ and ‘‘group 

health insurance coverage’’ mean health insurance coverage offered in the individual market or large or small group market, 

respectively, as defined in section 2791 of the Public Health 

Service Act. 

(d) SENSE OF CONGRESS ON HEALTH CARE NEEDS OF UNITED

STATES TERRITORIES.—It is the sense of the Congress that the reforms made by H.R. 3200, as introduced, must be strengthened to 

meaningfully address the health care needs of residents of American 

Samoa, the Commonwealth of the Northern Mariana Islands, 

Guam, Puerto Rico, and the United States Virgin Islands and Congress is committed to working with the representatives of these territories to ensure that residents of these territories have access to 

high-quality and affordable health care in such a way that best 

serves their unique needs. 

SEC. 102. PROTECTING THE CHOICE TO KEEP CURRENT COVERAGE. 

(a) GRANDFATHERED HEALTH INSURANCE COVERAGE DEFINED.— 

Subject to the succeeding provisions of this section, for purposes of 

establishing acceptable coverage under this division, the term 

‘‘grandfathered health insurance coverage’’ means individual health 

insurance coverage that is offered and in force and effect before the 

first day of Y1 if the following conditions are met: 

(1) LIMITATION ON NEW ENROLLMENT.— 

(A) IN GENERAL.—Except as provided in this paragraph, 

the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the 

first effective date of coverage is on or after the first day of 

Y1. 

(B) DEPENDENT COVERAGE PERMITTED.—Subparagraph 

(A) shall not affect the subsequent enrollment of a dependent of an individual who is covered as of such first day. 

(2) LIMITATION ON CHANGES IN TERMS OR CONDITIONS.—Subject to paragraph (3) and except as required by law, the issuer 

does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before 

the first day of Y1. 

(3) RESTRICTIONS ON PREMIUM INCREASES.—The issuer cannot vary the percentage increase in the premium for a risk 

group of enrollees in specific grandfathered health insurance 

coverage without changing the premium for all enrollees in the 

same risk group at the same rate, as specified by the Commissioner. 

(b) GRACE PERIOD FOR CURRENT EMPLOYMENT-BASED HEALTH

PLANS.— 

(1) GRACE PERIOD.— 


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(A) IN GENERAL.—The Commissioner shall establish a 

grace period whereby, for plan years beginning after the 

end of the 5-year period beginning with Y1, an employment-based health plan in operation as of the day before 

the first day of Y1 must meet the same requirements as 

apply to a qualified health benefits plan under section 101, 

including the essential benefit package requirement under 

section 121. 

(B) EXCEPTION FOR LIMITED BENEFITS PLANS.—Subparagraph (A) shall not apply to an employment-based health 

plan in which the coverage consists only of one or more of 

the following: 

(i) Any coverage described in section 

3001(a)(1)(B)(ii)(IV) of division B of the American Recovery and Reinvestment Act of 2009 (PL 111–5). 

(ii) Excepted benefits (as defined in section 733(c) of 

the Employee Retirement Income Security Act of 1974), 

including coverage under a specified disease or illness 

policy described in paragraph (3)(A) of such section. 

(iii) Such other limited benefits as the Commissioner 

may specify. 

In no case shall an employment-based health plan in which 

the coverage consists only of one or more of the coverage or 

benefits described in clauses (i) through (iii) be treated as 

acceptable coverage under this division 

(2) TRANSITIONAL TREATMENT AS ACCEPTABLE COVERAGE.— 

During the grace period specified in paragraph (1)(A), an employment-based health plan that is described in such paragraph 

shall be treated as acceptable coverage under this division. 

(3) EXCEPTION FOR CONSUMER-DIRECTED HEALTH PLANS AND

ARRANGEMENTS.—In the case of a group health plan which consists of a consumer-directed health plan or arrangement (including a high deductible health plan, within the meaning of 

section 223(c)(2) of the Internal Revenue Code of 1986), such 

group health plan shall be treated as acceptable coverage under 

a current group health plan for purposes of this division. 

(c) LIMITATION ON INDIVIDUAL HEALTH INSURANCE COVERAGE.— 

(1) IN GENERAL.—Individual health insurance coverage that 

is not grandfathered health insurance coverage under subsection (a) may only be offered on or after the first day of Y1 

as an Exchange-participating health benefits plan. 

(2) SEPARATE, EXCEPTED COVERAGE PERMITTED.—Excepted 

benefits (as defined in section 2791(c) of the Public Health Service Act) are not included within the definition of health insurance coverage. Nothing in paragraph (1) shall prevent the offering, other than through the Health Insurance Exchange, of excepted benefits so long as it is offered and priced separately 

from health insurance coverage. 


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Subtitle B—Standards Guaranteeing 

Access to Affordable Coverage 

SEC. 111. PROHIBITING PRE-EXISTING CONDITION EXCLUSIONS. 

A qualified health benefits plan may not impose any pre-existing 

condition exclusion (as defined in section 2701(b)(1)(A) of the Public 

Health Service Act) or otherwise impose any limit or condition on 

the coverage under the plan with respect to an individual or dependent based on any health status-related factors (as defined in 

section 2791(d)(9) of the Public Health Service Act) in relation to the 

individual or dependent. 

SEC. 112. GUARANTEED ISSUE AND RENEWAL FOR INSURED PLANS. 

The requirements of sections 2711 (other than subsections (c) and 

(e)) and 2712 (other than paragraphs (3), and (6) of subsection (b) 

and subsection (e)) of the Public Health Service Act, relating to 

guaranteed availability and renewability of health insurance coverage, shall apply to individuals and employers in all individual 

and group health insurance coverage, whether offered to individuals 

or employers through the Health Insurance Exchange, through any 

employment-based health plan, or otherwise, in the same manner as 

such sections apply to employers and health insurance coverage offered in the small group market, except that such section 2712(b)(1) 

shall apply only if, before nonrenewal or discontinuation of coverage, the issuer has provided the enrollee with notice of non-payment of premiums and there is a grace period during which the enrollees has an opportunity to correct such nonpayment. Rescissions 

of such coverage shall be prohibited except in cases of fraud as defined in sections 2712(b)(2) of such Act. 

SEC. 113. INSURANCE RATING RULES. 

(a) IN GENERAL.—The premium rate charged for an insured 

qualified health benefits plan may not vary except as follows: 

(1) LIMITED AGE VARIATION PERMITTED.—By age (within such 

age categories as the Commissioner shall specify) so long as the 

ratio of the highest such premium to the lowest such premium 

does not exceed the ratio of 2 to 1. 

(2) BY AREA.—By premium rating area (as permitted by State 

insurance regulators or, in the case of Exchange-participating 

health benefits plans, as specified by the Commissioner in consultation with such regulators). 

(3) BY FAMILY ENROLLMENT.—By family enrollment (such as 

variations within categories and compositions of families) so 

long as the ratio of the premium for family enrollment (or enrollments) to the premium for individual enrollment is uniform, 

as specified under State law and consistent with rules of the 

Commissioner. 

(b) STUDY AND REPORTS.— 

(1) STUDY.—The Commissioner, in coordination with the Secretary of Health and Human Services and the Secretary of 

Labor, shall conduct a study of the large group insured and 

self-insured employer health care markets. Such study shall examine the following: 


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(A) The types of employers by key characteristics, including size, that purchase insured products versus those that 

self-insure. 

(B) The similarities and differences between typical insured and self-insured health plans. 

(C) The financial solvency and capital reserve levels of 

employers that self-insure by employer size. 

(D) The risk of self-insured employers not being able to 

pay obligations or otherwise becoming financially insolvent. 

(E) The extent to which rating rules are likely to cause 

adverse selection in the large group market or to encourage 

small and mid size employers to self-insure 

(2) REPORTS.—Not later than 18 months after the date of the 

enactment of this Act, the Commissioner shall submit to Congress and the applicable agencies a report on the study conducted under paragraph (1). Such report shall include any recommendations the Commissioner deems appropriate to ensure 

that the law does not provide incentives for small and mid-size 

employers to self-insure or create adverse selection in the risk 

pools of large group insurers and self-insured employers. Not 

later than 18 months after the first day of Y1, the Commissioner shall submit to Congress and the applicable agencies an 

updated report on such study, including updates on such recommendations. 

SEC. 114. NONDISCRIMINATION IN BENEFITS; PARITY IN MENTAL 

HEALTH AND SUBSTANCE ABUSE DISORDER BENEFITS. 

(a) NONDISCRIMINATION IN BENEFITS.—A qualified health benefits 

plan shall comply with standards established by the Commissioner 

to prohibit discrimination in health benefits or benefit structures for 

qualified health benefits plans, building from sections 702 of Employee Retirement Income Security Act of 1974, 2702 of the Public 

Health Service Act, and section 9802 of the Internal Revenue Code 

of 1986. 

(b) PARITY IN MENTAL HEALTH AND SUBSTANCE ABUSE DISORDER

BENEFITS.—To the extent such provisions are not superceded by or 

inconsistent with subtitle C, the provisions of section 2705 (other 

than subsections (a)(1), (a)(2), and (c)) of section 2705 of the Public 

Health Service Act shall apply to a qualified health benefits plan, 

regardless of whether it is offered in the individual or group market, 

in the same manner as such provisions apply to health insurance 

coverage offered in the large group market. 

SEC. 115. ENSURING ADEQUACY OF PROVIDER NETWORKS. 

(a) IN GENERAL.—A qualified health benefits plan that uses a provider network for items and services shall meet such standards respecting provider networks as the Commissioner may establish to 

assure the adequacy of such networks in ensuring enrollee access to 

such items and services and transparency in the cost-sharing differentials between in-network coverage and out-of-network coverage. 

(b) INTERNET ACCESS TO INFORMATION.—A qualified health benefits plan that uses a provider network shall provide a current listing 

of all providers in its network on its website and such data shall 

be available on the Health Insurance Exchange website as a ‘click 

through’ from the basic information on that plan. The CommisVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00826 Fmt 6601 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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sioner shall also establish an on-line system whereby an individual 

may select by name any medical provider (as defined by the Commissioner) and be informed of the plan or plans with which that 

provider is contracting. 

(c) PROVIDER NETWORK DEFINED.—In this division, the term ‘‘provider network’’ means the providers with respect to which covered 

benefits, treatments, and services are available under a health benefits plan. 

SEC. 116. ENSURING VALUE AND LOWER PREMIUMS. 

The QHBP offering entity shall provide that for any plan year in 

which a qualified health benefits plan that the entity offers has a 

medical loss ratio (expressed as a percentage) that is less than a 

percentage (not less than 85 percent) specified by the Commissioner, 

the QHBP offering entity offering such plan shall provide for rebates to enrollees of payment sufficient to meet such loss ratio. The 

Commissioner shall establish a uniform definition of medical loss 

ratio and methodology for determining how to calculate the medical 

loss ratio. Such methodology shall be designed to take into account 

the special circumstances of smaller and newer plans. 

SEC. 117. CONSISTENCY OF COSTS AND COVERAGE UNDER QUALIFIED 

HEALTH BENEFITS PLANS DURING PLAN YEAR. 

In the case of health insurance coverage offered under a qualified 

health benefits plan, the coverage and cost of coverage may not be 

changed during the course of a plan year except to increase coverage 

to the enrollee or to lower costs to the enrollee. 

Subtitle C—Standards Guaranteeing 

Access to Essential Benefits 

SEC. 121. COVERAGE OF ESSENTIAL BENEFITS PACKAGE. 

(a) IN GENERAL.—A qualified health benefits plan shall provide 

coverage that at least meets the benefit standards adopted under 

section 124 for the essential benefits package described in section 

122 for the plan year involved. 

(b) CHOICE OF COVERAGE.— 

(1) NON-EXCHANGE-PARTICIPATING HEALTH BENEFITS PLANS.— 

In the case of a qualified health benefits plan that is not an Exchange-participating health benefits plan, such plan may offer 

such coverage in addition to the essential benefits package as 

the QHBP offering entity may specify. 

(2) EXCHANGE-PARTICIPATING HEALTH BENEFITS PLANS.—In 

the case of an Exchange-participating health benefits plan, such 

plan is required under section 203 to provide specified levels of 

benefits and, in the case of a plan offering a premium-plus level 

of benefits, provide additional benefits. 

(3) CONTINUATION OF OFFERING OF SEPARATE EXCEPTED BENEFITS COVERAGE.—Nothing in this division shall be construed 

as affecting the offering of health benefits in the form of excepted benefits (described in section 102(b)(1)(B)(ii)) if such benefits are offered under a separate policy, contract, or certificate 

of insurance. 


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(c) NO RESTRICTIONS ON COVERAGE UNRELATED TO CLINICAL AP- PROPRIATENESS.—A qualified health benefits plan may not impose 

any restriction (other than cost-sharing) unrelated to clinical appropriateness on the coverage of the health care items and services. 

SEC. 122. ESSENTIAL BENEFITS PACKAGE DEFINED. 

(a) IN GENERAL.—In this division, the term ‘‘essential benefits 

package’’ means health benefits coverage, consistent with standards 

adopted under section 124 to ensure the provision of quality health 

care and financial security, that— 

(1) provides payment for the items and services described in 

subsection (b) in accordance with generally accepted standards 

of medical or other appropriate clinical or professional practice; 

(2) limits cost-sharing for such covered health care items and 

services in accordance with such benefit standards, consistent 

with subsection (c); 

(3) does not impose any annual or lifetime limit on the coverage of covered health care items and services; 

(4) complies with section 115(a) (relating to network adequacy); and 

(5) is equivalent, as certified by Office of the Actuary of the 

Centers for Medicare & Medicaid Services, to the average prevailing employer-sponsored coverage. 

(b) MINIMUM SERVICES TO BE COVERED.—The items and services 

described in this subsection are the following: 

(1) Hospitalization. 

(2) Outpatient hospital and outpatient clinic services, including emergency department services. 

(3) Professional services of physicians and other health professionals. 

(4) Such services, equipment, and supplies incident to the 

services of a physician’s or a health professional’s delivery of 

care in institutional settings, physician offices, patients’ homes 

or place of residence, or other settings, as appropriate. 

(5) Prescription drugs. 

(6) Rehabilitative and habilitative services. 

(7) Mental health and substance use disorder services. 

(8) Preventive services, including those services recommended 

with a grade of A or B by the Task Force on Clinical Preventive 

Services and including mental health and substance abuse 

services recommended by the Task Force on Clinical Preventive 

Services and those mental health and substance abuse services 

with compelling research or evidence, including Screening, 

Brief Intervention and Referral to Treatment (SBIRT), and 

those vaccines recommended for use by the Director of the Centers for Disease Control and Prevention. 

(9) Maternity care. 

(10) Well baby and well child care and early and periodic 

screening, diagnostic, and treatment services (as defined in section 1905(r) of the Social Security Act) at least for children 

under 21 years of age. 

(11) Durable medical equipment, prosthetics, orthotics and related supplies. 

(c) REQUIREMENTS RELATING TO COST-SHARING AND MINIMUM

ACTUARIAL VALUE.— 


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(1) NO COST-SHARING FOR PREVENTIVE SERVICES.—There 

shall be no cost-sharing under the essential benefits package for 

preventive items and services (as specified under the benefit 

standards), including well baby and well child care. 

(2) ANNUAL LIMITATION.— 

(A) ANNUAL LIMITATION.—The cost-sharing incurred 

under the essential benefits package with respect to an individual (or family) for a year does not exceed the applicable 

level specified in subparagraph (B). 

(B) APPLICABLE LEVEL.—The applicable level specified in 

this subparagraph for Y1 is $5,000 for an individual and 

$10,000 for a family. Such levels shall be increased (rounded to the nearest $100) for each subsequent year by the annual percentage increase in the Consumer Price Index 

(United States city average) applicable to such year. 

(C) USE OF COPAYMENTS.—In establishing cost-sharing 

levels for basic, enhanced, and premium plans under this 

subsection, the Secretary shall, to the maximum extent possible, use only copayments and not coinsurance. 

(3) MINIMUM ACTUARIAL VALUE.— 

(A) IN GENERAL.—The cost-sharing under the essential 

benefits package shall be designed to provide a level of coverage that is designed to provide benefits that are actuarially equivalent to approximately 70 percent of the full actuarial value of the benefits provided under the reference benefits package described in subparagraph (B). 

(B) REFERENCE BENEFITS PACKAGE DESCRIBED.—The reference benefits package described in this subparagraph is 

the essential benefits package if there were no cost-sharing 

imposed. 

SEC. 123. HEALTH BENEFITS ADVISORY COMMITTEE. 

(a) ESTABLISHMENT.— 

(1) IN GENERAL.—There is established a private-public advisory committee which shall be a panel of medical and other experts to be known as the Health Benefits Advisory Committee 

to recommend covered benefits and essential, enhanced, and 

premium plans. 

(2) CHAIR.—The Surgeon General shall be a member and the 

chair of the Health Benefits Advisory Committee. 

(3) MEMBERSHIP.—The Health Benefits Advisory Committee 

shall be composed of the following members, in addition to the 

Surgeon General: 

(A) 9 members who are not Federal employees or officers 

and who are appointed by the President. 

(B) 9 members who are not Federal employees or officers 

and who are appointed by the Comptroller General of the 

United States in a manner similar to the manner in which 

the Comptroller General appoints members to the Medicare 

Payment Advisory Commission under section 1805(c) of the 

Social Security Act. 

(C) Such even number of members (not to exceed 8) who 

are Federal employees and officers, as the President may 

appoint. 


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The membership of the Committee shall include one or more experts in scientific evidence and clinical practice of integrative 

health care services. Such initial appointments shall be made 

not later than 60 days after the date of the enactment of this 

Act. 

(4) TERMS.—Each member of the Health Benefits Advisory 

Committee shall serve a 3-year term on the Committee, except 

that the terms of the initial members shall be adjusted in order 

to provide for a staggered term of appointment for all such 

members. 

(5) PARTICIPATION.—The membership of the Health Benefits 

Advisory Committee shall at least reflect providers, employers, 

labor, health insurance issuers, experts in health care financing 

and delivery, experts in racial and ethnic disparities, experts in 

care for those with disabilities, representatives of relevant governmental agencies. and at least one practicing physician or 

other health professional and an expert on children’s health 

and shall represent a balance among various sectors of the 

health care system so that no single sector unduly influences the 

recommendations of such Committee. The membership of the 

Committee shall also include educated patients, consumer advocates, or both, who shall include persons who represent individuals affected by a specific disease or medical condition, are 

knowledgeable about the health care system, and have received 

training regarding health, medical, and scientific matters. 

(b) DUTIES.— 

(1) RECOMMENDATIONS ON BENEFIT STANDARDS.—The Health 

Benefits Advisory Committee shall recommend to the Secretary 

of Health and Human Services (in this subtitle referred to as 

the ‘‘Secretary’’) benefit standards (as defined in paragraph (4)), 

and periodic updates to such standards. In developing such recommendations, the Committee shall— 

(A) take into account innovation in health care, 

(B) consider how such standards could reduce health disparities, 

(C) take into account integrative health care services, and 

(D) take into account typical multiemployer plan benefit 

structures and the impact of the essential benefit package 

on such plans. 

(2) DEADLINE.—The Health Benefits Advisory Committee 

shall recommend initial benefit standards to the Secretary not 

later than 1 year after the date of the enactment of this Act. 

(3) STATE INPUT.—The Health Benefits Advisory Committee 

shall examine the health coverage laws and benefits of each 

State in developing recommendations under this subsection and 

may incorporate such coverage and benefits as the Committee 

determines to be appropriate and consistent with this Act. The 

Health Benefits Advisory Committee shall also seek input from 

the States and consider recommendations on how to ensure that 

the quality of health coverage does not decline in any State. 

(4) PUBLIC INPUT.—The Health Benefits Advisory Committee 

shall allow for public input as a part of developing recommendations under this subsection. 


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(5) BENEFIT STANDARDS DEFINED.—In this subtitle, the term 

‘‘benefit standards’’ means standards respecting— 

(A) the essential benefits package described in section 

122, including categories of covered treatments, items and 

services within benefit classes, and cost-sharing; and 

(B) the cost-sharing levels for enhanced plans and premium plans (as provided under section 203(c)) consistent 

with paragraph (5). 

(6) LEVELS OF COST-SHARING FOR ENHANCED AND PREMIUM

PLANS.— 

(A) ENHANCED PLAN.—The level of cost-sharing for enhanced plans shall be designed so that such plans have 

benefits that are actuarially equivalent to approximately 85 

percent of the actuarial value of the benefits provided under 

the reference benefits package described in section 

122(c)(3)(B). 

(B) PREMIUM PLAN.—The level of cost-sharing for premium plans shall be designed so that such plans have benefits that are actuarially equivalent to approximately 95 

percent of the actuarial value of the benefits provided under 

the reference benefits package described in section 

122(c)(3)(B). 

(7) RECOMMENDATIONS OF INTEGRATIVE HEALTH CARE SERVICES TASK FORCE.— 

(A) INCLUSION IN COMMITTEE’S RECOMMENDATIONS.—The 

Health Benefits Advisory Committee shall include in its 

recommendations under paragraph (1) the recommendations made by the Integrative Health Care Services Task 

Force established under subparagraph (B). 

(B) ESTABLISHMENT OF TASK FORCE.—The Health Benefits Advisory Committee shall establish an Integrative 

Health Care Services Task Force. Such Task Force shall 

consist of 5 experts with expertise in research in, and practice of, integrative health care. Such experts shall be appointed by the Committee from among experts nominated 

by the Secretary, in consultation with the National Center 

for Complementary and Alternative Medicine at the National Institutes of Health. The duty of the Task Force shall 

be to make recommendations to the Committee on evidencebased, clinically effective, and safe integrative care services. 

(c) OPERATIONS.— 

(1) PER DIEM PAY.—Each member of the Health Benefits Advisory Committee shall receive travel expenses, including per 

diem in accordance with applicable provisions under subchapter I of chapter 57 of title 5, United States Code, and shall 

otherwise serve without additional pay. 

(2) MEMBERS NOT TREATED AS FEDERAL EMPLOYEES.—Members of the Health Benefits Advisory Committee shall not be 

considered employees of the Federal government solely by reason of any service on the Committee. 

(3) APPLICATION OF FACA.—The Federal Advisory Committee 

Act (5 U.S.C. App.), other than section 14, shall apply to the 

Health Benefits Advisory Committee. 


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(d) PUBLICATION.—The Secretary shall provide for publication in 

the Federal Register and the posting on the Internet website of the 

Department of Health and Human Services of all recommendations 

made by the Health Benefits Advisory Committee under this section. 

SEC. 124. PROCESS FOR ADOPTION OF RECOMMENDATIONS; ADOPTION OF BENEFIT STANDARDS. 

(a) PROCESS FOR ADOPTION OF RECOMMENDATIONS.— 

(1) REVIEW OF RECOMMENDED STANDARDS.—Not later than 45 

days after the date of receipt of benefit standards recommended 

under section 123 (including such standards as modified under 

paragraph (2)(B)), the Secretary shall review such standards 

and shall determine whether to propose adoption of such standards as a package. 

(2) DETERMINATION TO ADOPT STANDARDS.—If the Secretary 

determines— 

(A) to propose adoption of benefit standards so recommended as a package, the Secretary shall, by regulation 

under section 553 of title 5, United States Code, propose 

adoption such standards; or 

(B) not to propose adoption of such standards as a package, the Secretary shall notify the Health Benefits Advisory 

Committee in writing of such determination and the reasons for not proposing the adoption of such recommendation and provide the Committee with a further opportunity 

to modify its previous recommendations and submit new 

recommendations to the Secretary on a timely basis. 

(3) CONTINGENCY.—If, because of the application of paragraph (2)(B), the Secretary would otherwise be unable to propose initial adoption of such recommended standards by the 

deadline specified in subsection (b)(1), the Secretary shall, by 

regulation under section 553 of title 5, United States Code, propose adoption of initial benefit standards by such deadline. 

(4) PUBLICATION.—The Secretary shall provide for publication 

in the Federal Register of all determinations made by the Secretary under this subsection. 

(b) ADOPTION OF STANDARDS.— 

(1) INITIAL STANDARDS.—Not later than 18 months after the 

date of the enactment of this Act, the Secretary shall, through 

the rulemaking process consistent with subsection (a), adopt an 

initial set of benefit standards. 

(2) PERIODIC UPDATING STANDARDS.—Under subsection (a), 

the Secretary shall provide for the periodic updating of the benefit standards previously adopted under this section. 

(3) REQUIREMENT.—The Secretary may not adopt any benefit 

standards for an essential benefits package or for level of costsharing that are inconsistent with the requirements for such a 

package or level under sections 122 and 123(b)(5). 

SEC. 125 PROHIBITION OF DISCRIMINATION IN HEALTH CARE SERVICES BASED ON RELIGIOUS OR SPIRITUAL CONTENT. 

Neither the Commissioner nor any health insurance issuer offering health insurance coverage through the Exchange shall discriminate in approving or covering a health care service on the basis of 

its religious or spiritual content if expenditures for such a health 


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care service are allowable as a deduction under 213(d) of the Internal Revenue Code of 1986, as in effect on January 1, 2009. 

Subtitle D—Additional Consumer 

Protections 

SEC. 131. REQUIRING FAIR MARKETING PRACTICES BY HEALTH INSURERS. 

The Commissioner shall establish uniform marketing standards 

that all insured QHBP offering entities shall meet. 

SEC. 132. REQUIRING FAIR GRIEVANCE AND APPEALS MECHANISMS. 

(a) IN GENERAL.—A QHBP offering entity shall provide for timely 

grievance and appeals mechanisms that the Commissioner shall establish. 

(b) INTERNAL CLAIMS AND APPEALS PROCESS.—Under a qualified 

health benefits plan the QHBP offering entity shall provide an internal claims and appeals process that initially incorporates the claims 

and appeals procedures (including urgent claims) set forth at section 2560.503–1 of title 29, Code of Federal Regulations, as published on November 21, 2000 (65 Fed. Reg. 70246) and shall update 

such process in accordance with any standards that the Commissioner may establish. 

(c) EXTERNAL REVIEW PROCESS.— 

(1) IN GENERAL.—The Commissioner shall establish an external review process (including procedures for expedited reviews 

of urgent claims) that provides for an impartial, independent, 

and de novo review of denied claims under this division. 

(2) REQUIRING FAIR GRIEVANCE AND APPEALS MECHANISMS.— 

A determination made, with respect to a qualified health benefits plan offered by a QHBP offering entity, under the external 

review process established under this subsection shall be binding on the plan and the entity. 

(d) CONSTRUCTION.—Nothing in this section shall be construed as 

affecting the availability of judicial review under State law for adverse decisions under subsection (b) or (c), subject to section 151. 

SEC. 133. REQUIRING INFORMATION TRANSPARENCY AND PLAN DISCLOSURE. 

(a) ACCURATE AND TIMELY DISCLOSURE.— 

(1) IN GENERAL.—A qualified health benefits plan shall comply with standards established by the Commissioner for the accurate and timely disclosure of plan documents, plan terms and 

conditions, claims payment policies and practices, periodic financial disclosure, data on enrollment, data on disenrollment, 

data on the number of claims denials, data on rating practices, 

information on cost-sharing and payments with respect to any 

out-of-network coverage, and other information as determined 

appropriate by the Commissioner. The Commissioner shall require that such disclosure be provided in plain language. 

(2) PLAIN LANGUAGE.—In this subsection, the term ‘‘plain language’’ means language that the intended audience, including 

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ganized, and follows other best practices of plain language writing. 

(3) GUIDANCE.—The Commissioner shall develop and issue 

guidance on best practices of plain language writing. 

(b) CONTRACTING REIMBURSEMENT.—A qualified health benefits 

plan shall comply with standards established by the Commissioner 

to ensure transparency to each health care provider relating to reimbursement arrangements between such plan and such provider. 

(c) ADVANCE NOTICE OF PLAN CHANGES.—A change in a qualified 

health benefits plan shall not be made without such reasonable and 

timely advance notice to enrollees of such change. 

(d) IDENTIFICATION OF PROVIDERS TRAINED AND ACCREDITED IN

INTEGRATIVE MEDICINE.—A qualified health benefit plan shall include in the disclosure required under subsection (a) identification 

to enrollees of any providers of services under the plan that are 

trained and accredited in integrative health medicine. 

SEC. 134. APPLICATION TO QUALIFIED HEALTH BENEFITS PLANS NOT 

OFFERED THROUGH THE HEALTH INSURANCE EXCHANGE. 

The requirements of the previous provisions of this subtitle shall 

apply to qualified health benefits plans that are not being offered 

through the Health Insurance Exchange only to the extent specified 

by the Commissioner. 

SEC. 135. TIMELY PAYMENT OF CLAIMS. 

A QHBP offering entity shall comply with the requirements of section 1857(f) of the Social Security Act with respect to a qualified 

health benefits plan it offers in the same manner an Medicare Advantage organization is required to comply with such requirements 

with respect to a Medicare Advantage plan it offers under part C 

of Medicare. 

SEC. 136. STANDARDIZED RULES FOR COORDINATION AND SUBROGATION OF BENEFITS. 

The Commissioner shall establish standards for the coordination 

and subrogation of benefits and reimbursement of payments in cases 

involving individuals and multiple plan coverage. 

SEC. 137. APPLICATION OF ADMINISTRATIVE SIMPLIFICATION. 

A QHBP offering entity is required to comply with standards for 

electronic financial and administrative transactions under section 

1173A of the Social Security Act, added by section 163(a). 

SEC. 138. RECORDS RELATIVE TO PRESCRIPTION INFORMATION. 

(a) IN GENERAL.—A qualified health benefits plan shall ensure 

that its records relative to prescription information containing patient identifiable and prescriber-identifiable data are maintained in 

accordance with this section.’’ 

(b) REQUIREMENTS.— 

(1) IN GENERAL.—Records described in subsection (a) may not 

be licensed, transferred, used, or sold by any pharmacy benefits 

manager, insurance company, electronic transmission intermediary, retail, mail order, or Internet pharmacy or other similar entity, for any commercial purpose, except for the limited 

purposes of— 

(A) pharmacy reimbursement; 

(B) formulary compliance; 


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(C) care management; 

(D) utilization review by a health care provider, the patient’s insurance provider or the agent of either; 

(E) health care research; or 

(F) as otherwise provided by law. 

(2) COMMERCIAL PURPOSE.—For purposes of paragraph (1), 

the term ‘‘commercial purpose’’ includes, but is not limited to, 

advertising, marketing, promotion, or any activity that could be 

used to influence sales or market share of a pharmaceutical 

product, influence or evaluate the prescribing behavior of an individual health care professional, or evaluate the effectiveness 

of a professional pharmaceutical detailing sales force. 

(c) CONSTRUCTION.— 

(1) PERMITTED PRACTICES.—Nothing in this section shall prohibit— 

(A) the dispensing of prescription medications to a patient or to the patient’s authorized representative; 

(B) the transmission of prescription information between 

an authorized prescriber and a licensed pharmacy; 

(C) the transfer of prescription information between licensed pharmacies; 

(D) the transfer of prescription records that may occur in 

the event a pharmacy ownership is changed or transferred; 

(E) care management educational communications provided to a patient about the patient’s health condition, adherence to a prescribed course of therapy, or other information about the drug being dispensed, treatment options, or 

clinical trials. 

(2) DE-IDENTIFIED DATA.—Nothing in this section shall prohibit the collection, use, transfer, or sale of patient and prescriber de-identified data by zip code, geographic region, or 

medical specialty for commercial purposes. 

Subtitle E—Governance 

SEC. 141. HEALTH CHOICES ADMINISTRATION; HEALTH CHOICES COMMISSIONER. 

(a) IN GENERAL.—There is hereby established, as an independent 

agency in the executive branch of the Government, a Health Choices 

Administration (in this division referred to as the ‘‘Administration’’). 

(b) COMMISSIONER.— 

(1) IN GENERAL.—The Administration shall be headed by a 

Health Choices Commissioner (in this division referred to as the 

‘‘Commissioner’’) who shall be appointed by the President, by 

and with the advice and consent of the Senate. 

(2) COMPENSATION; ETC.—The provisions of paragraphs (2), 

(5) and (7) of subsection (a) (relating to compensation, terms, 

general powers, rulemaking, and delegation) of section 702 of 

the Social Security Act (42 U.S.C. 902) shall apply to the Commissioner and the Administration in the same manner as such 

provisions apply to the Commissioner of Social Security and the 

Social Security Administration. 


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SEC. 142. DUTIES AND AUTHORITY OF COMMISSIONER. 

(a) DUTIES.—The Commissioner is responsible for carrying out the 

following functions under this division: 

(1) QUALIFIED PLAN STANDARDS.—The establishment of qualified health benefits plan standards under this title, including 

the enforcement of such standards in coordination with State 

insurance regulators and the Secretaries of Labor and the 

Treasury. 

(2) HEALTH INSURANCE EXCHANGE.—The establishment and 

operation of a Health Insurance Exchange under subtitle A of 

title II. 

(3) INDIVIDUAL AFFORDABILITY CREDITS.—The administration 

of individual affordability credits under subtitle C of title II, including determination of eligibility for such credits. 

(4) ADDITIONAL FUNCTIONS.—Such additional functions as 

may be specified in this division. 

(b) PROMOTING ACCOUNTABILITY.— 

(1) IN GENERAL.—The Commissioner shall undertake activities in accordance with this subtitle to promote accountability 

of QHBP offering entities in meeting Federal health insurance 

requirements, regardless of whether such accountability is with 

respect to qualified health benefits plans offered through the 

Health Insurance Exchange or outside of such Exchange. 

(2) COMPLIANCE EXAMINATION AND AUDITS.— 

(A) IN GENERAL.—The commissioner shall, in coordination with States, conduct audits of qualified health benefits 

plan compliance with Federal requirements. Such audits 

may include random compliance audits and targeted audits in response to complaints or other suspected non-compliance. 

(B) RECOUPMENT OF COSTS IN CONNECTION WITH EXAMINATION AND AUDITS.—The Commissioner is authorized to 

recoup from qualified health benefits plans reimbursement 

for the costs of such examinations and audit of such QHBP 

offering entities. 

(c) DATA COLLECTION.—The Commissioner shall collect data for 

purposes of carrying out the Commissioner’s duties, including for 

purposes of promoting quality and value, protecting consumers, and 

addressing disparities in health and health care and may share 

such data with the Secretary of Health and Human Services. 

(d) SANCTIONS AUTHORITY.— (1) IN GENERAL.—In the case that the Commissioner determines that a QHBP offering entity violates a requirement of 

this title, the Commissioner may, in coordination with State insurance regulators and the Secretary of Labor, provide, in addition to any other remedies authorized by law, for any of the 

remedies described in paragraph (2). 

(2) REMEDIES.—The remedies described in this paragraph, 

with respect to a qualified health benefits plan offered by a 

QHBP offering entity, are— 

(A) civil money penalties of not more than the amount 

that would be applicable under similar circumstances for 

similar violations under section 1857(g) of the Social Security Act; 


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(B) suspension of enrollment of individuals under such 

plan after the date the Commissioner notifies the entity of 

a determination under paragraph (1) and until the Commissioner is satisfied that the basis for such determination 

has been corrected and is not likely to recur; 

(C) in the case of an Exchange-participating health benefits plan, suspension of payment to the entity under the 

Health Insurance Exchange for individuals enrolled in 

such plan after the date the Commissioner notifies the entity of a determination under paragraph (1) and until the 

Secretary is satisfied that the basis for such determination 

has been corrected and is not likely to recur; or 

(D) working with State insurance regulators to terminate 

plans for repeated failure by the offering entity to meet the 

requirements of this title. 

(e) STANDARD DEFINITIONS OF INSURANCE AND MEDICAL

TERMS.—The Commissioner shall provide for the development of 

standards for the definitions of terms used in health insurance coverage, including insurance-related terms. 

(f) EFFICIENCY IN ADMINISTRATION.—The Commissioner shall 

issue regulations for the effective and efficient administration of the 

Health Insurance Exchange and affordability credits under subtitle 

C, including, with respect to the determination of eligibility for affordability credits, the use of personnel who are employed in accordance with the requirements of title 5, United States Code, to carry 

out the duties of the Commissioner or, in the case of sections 208 

and 241(b)(2), the use of State personnel who are employed in accordance with standards prescribed by the Office of Personnel Management pursuant to section 208 of the Intergovernmental Personnel 

Act of 1970 (42 U.S.C. 4728). 

SEC. 143. CONSULTATION AND COORDINATION. 

(a) CONSULTATION.—In carrying out the Commissioner’s duties 

under this division, the Commissioner, as appropriate, shall consult 

with at least with the following: 

(1) The National Association of Insurance Commissioners, 

State attorneys general, and State insurance regulators, including concerning the standards for insured qualified health benefits plans under this title and enforcement of such standards. 

(2) Appropriate State agencies, specifically concerning the administration of individual affordability credits under subtitle C 

of title II and the offering of Exchange-participating health benefits plans, to Medicaid eligible individuals under subtitle A of 

such title. 

(3) Other appropriate Federal agencies. 

(4) Indian tribes and tribal organizations. 

(5) The National Association of Insurance Commissioners for 

purposes of using model guidelines established by such association for purposes of subtitles B and D. 

(b) COORDINATION.— 

(1) IN GENERAL.—In carrying out the functions of the Commissioner, including with respect to the enforcement of the provisions of this division, the Commissioner shall work in coordination with existing Federal and State entities to the maximum 

extent feasible consistent with this division and in a manner 


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that prevents conflicts of interest in duties and ensures effective 

enforcement. 

(2) UNIFORM STANDARDS.—The Commissioner, in coordination with such entities, shall seek to achieve uniform standards 

that adequately protect consumers in a manner that does not 

unreasonably affect employers and insurers. 

SEC. 144. HEALTH INSURANCE OMBUDSMAN. 

(a) IN GENERAL.—The Commissioner shall appoint within the 

Health Choices Administration a Qualified Health Benefits Plan 

Ombudsman who shall have expertise and experience in the fields 

of health care and education of (and assistance to) individuals. 

(b) DUTIES.—The Qualified Health Benefits Plan Ombudsman 

shall, in a linguistically appropriate manner— 

(1) receive complaints, grievances, and requests for information submitted by individuals; 

(2) provide assistance with respect to complaints, grievances, 

and requests referred to in paragraph (1), including— 

(A) helping individuals determine the relevant information needed to seek an appeal of a decision or determination; 

(B) assistance to such individuals with any problems 

arising from disenrollment from such a plan; 

(C) assistance to such individuals in choosing a qualified 

health benefits plan in which to enroll; and 

(D) assistance to such individuals in presenting information under subtitle C (relating to affordability credits); 

(3) consult with educated patients and consumer advocates 

(described in section 123(a)(5)); and 

(4) submit annual reports to Congress and the Commissioner 

that describe the activities of the Ombudsman and that include 

such recommendations for improvement in the administration 

of this division as the Ombudsman determines appropriate. The 

Ombudsman shall not serve as an advocate for any increases 

in payments or new coverage of services, but may identify issues 

and problems in payment or coverage policies. 

Subtitle F—Relation to Other 

Requirements; Miscellaneous 

SEC. 151. RELATION TO OTHER REQUIREMENTS. 

(a) COVERAGE NOT OFFERED THROUGH EXCHANGE.— 

(1) IN GENERAL.—In the case of health insurance coverage not 

offered through the Health Insurance Exchange (whether or not 

offered in connection with an employment-based health plan), 

and in the case of employment-based health plans, the requirements of this title do not supercede any requirements applicable 

under titles XXII and XXVII of the Public Health Service Act, 

parts 6 and 7 of subtitle B of title I of the Employee Retirement 

Income Security Act of 1974, or State law, except insofar as 

such requirements prevent the application of a requirement of 

this division, as determined by the Commissioner. 


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(2) CONSTRUCTION.—Nothing in paragraph (1) shall be construed as affecting the application of section 514 of the Employee Retirement Income Security Act of 1974. 

(b) COVERAGE OFFERED THROUGH EXCHANGE.— 

(1) IN GENERAL.—In the case of health insurance coverage offered through the Health Insurance Exchange— 

(A) the requirements of this title do not supercede any requirements (including requirements relating to genetic information nondiscrimination and mental health) applicable 

under title XXVII of the Public Health Service Act or under 

State law, except insofar as such requirements prevent the 

application of a requirement of this division, as determined 

by the Commissioner; and 

(B) individual rights and remedies under State laws 

shall apply. 

(2) CONSTRUCTION.—In the case of coverage described in 

paragraph (1), nothing in such paragraph shall be construed as 

preventing the application of rights and remedies under State 

laws with respect to any requirement referred to in paragraph 

(1)(A). 

SEC. 152. PROHIBITING DISCRIMINATION IN HEALTH CARE. 

(a) IN GENERAL.—Except as otherwise explicitly permitted by this 

Act and by subsequent regulations consistent with this Act, all 

health care and related services (including insurance coverage and 

public health activities) covered by this Act shall be provided without regard to personal characteristics extraneous to the provision of 

high quality health care or related services. 

(b) IMPLEMENTATION.—To implement the requirement set forth in 

subsection (a), the Secretary of Health and Human Services shall, 

not later than 18 months after the date of the enactment of this Act, 

promulgate such regulations as are necessary or appropriate to insure that all health care and related services (including insurance 

coverage and public health activities) covered by this Act are provided (whether directly or through contractual, licensing, or other 

arrangements) without regard to personal characteristics extraneous 

to the provision of high quality health care or related services. 

SEC. 153. WHISTLEBLOWER PROTECTION. 

(a) RETALIATION PROHIBITED.—No employer may discharge any 

employee or otherwise discriminate against any employee with respect to his compensation, terms, conditions, or other privileges of 

employment because the employee (or any person acting pursuant to 

a request of the employee)— 

(1) provided, caused to be provided, or is about to provide or 

cause to be provided to the employer, the Federal Government, 

or the attorney general of a State information relating to any 

violation of, or any act or omission the employee reasonably believes to be a violation of any provision of this Act or any order, 

rule, or regulation promulgated under this Act; 

(2) testified or is about to testify in a proceeding concerning 

such violation; 

(3) assisted or participated or is about to assist or participate 

in such a proceeding; or 


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(4) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such 

person) reasonably believed to be in violation of any provision 

of this Act or any order, rule, or regulation promulgated under 

this Act. 

(b) ENFORCEMENT ACTION.—An employee covered by this section 

who alleges discrimination by an employer in violation of subsection 

(a) may bring an action governed by the rules, procedures, legal 

burdens of proof, and remedies set forth in section 40(b) of the Consumer Product Safety Act (15 U.S.C. 2087(b)). 

(c) EMPLOYER DEFINED.—As used in this section, the term ‘‘employer’’ means any person (including one or more individuals, partnerships, associations, corporations, trusts, professional membership 

organization including a certification, disciplinary, or other professional body, unincorporated organizations, nongovernmental organizations, or trustees) engaged in profit or nonprofit business or industry whose activities are governed by this Act, and any agent, 

contractor, subcontractor, grantee, or consultant of such person. 

(d) RULE OF CONSTRUCTION.—The rule of construction set forth in 

section 20109(h) of title 49, United States Code, shall also apply to 

this section. 

SEC. 154. CONSTRUCTION REGARDING COLLECTIVE BARGAINING. 

Nothing in this division shall be construed to alter or supercede 

any statutory or other obligation to engage in collective bargaining 

over the terms and conditions of employment related to health care. 

SEC. 155. SEVERABILITY. 

If any provision of this Act, or any application of such provision 

to any person or circumstance, is held to be unconstitutional, the remainder of the provisions of this Act and the application of the provision to any other person or circumstance shall not be affected. 

SEC. 156. RULE OF CONSTRUCTION REGARDING HAWAII PREPAID 

HEALTH CARE ACT. 

(a) IN GENERAL.—Subject to this section— 

(1) nothing in this division (or an amendment made by this 

division) shall be construed to modify or limit the application 

of the exemption for the Hawaii Prepaid Health Care Act (Haw. 

Rev. Stat. §§ 393-1 et seq.) as provided for under section 

514(b)(5) of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1144(b)(5)), and such exemption shall also 

apply with respect to the provisions of this division, and 

(2) for purposes of this division (and the amendments made 

by this division), coverage provided pursuant to the Hawaii Prepaid Health Care Act shall be treated as a qualified health benefits plan providing acceptable coverage so long as the Secretary 

of Labor determines that such coverage for employees (taking 

into account the benefits and the cost to employees for such benefits) is substantially equivalent to or greater than the coverage 

provided for employees pursuant to the essential benefits package. 

(b) COORDINATION WITH STATE LAW OF HAWAII.—The Commissioner shall, based on ongoing consultation with the appropriate officials of the State of Hawaii, make adjustments to rules and regulations of the Commissioner under this division as may be necVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00840 Fmt 6601 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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essary, as determined by the Commissioner, to most effectively coordinate the provisions of this division with the provisions of the 

Hawaii Prepaid Health Care Act, taking into account any changes 

made from time to time to the Hawaii Prepaid Health Care Act and 

related laws of such State. 

SEC. 157. INCREASING MEANINGFUL USE OF ELECTRONIC HEALTH 

RECORDS. 

(a) STUDY.—The Commissioner shall conduct a study on methods 

that QHBP offering entities can use to encourage increased meaningful use of electronic health records by health care providers, including— 

(1) qualified health benefits plans offering higher reimbursement rates for such meaningful use; and 

(2) promoting the use by health care providers of low-cost 

available electronic health record software packages, such as 

software made available to health care providers by the Veterans Administration. 

(b) REPORT.—Not later than 2 years after the date of the enactment of this Act, the Commissioner shall submit to the Congress a 

report containing— 

(1) the results of the study under subsection (a); and 

(2) recommendations concerning whether qualified health 

benefits plans should increase reimbursement rates to health 

care providers to increase meaningful use of electronic health 

records by such providers. 

(c) REQUIREMENTS.— (1) IN GENERAL.—Not later than one year after the date the 

report is submitted to the Congress under subsection (b), if, 

under subsection (b)(2), the Commissioner recommends increased reimbursement rates, the Commissioner shall require 

that qualified health benefits plans increase reimbursement 

rates for health care providers that show meaningful use of electronic health records. 

(2) COST LIMITATION.—An increase in rates under paragraph 

(1) shall not result in any increase in affordability premium or 

cost-sharing credits under subtitle C of title II of this division. 

SEC. 158. PRIVATE RIGHT OF CONTRACT WITH HEALTH CARE PROVIDERS. 

Nothing in this Act shall be construed to preclude any participant 

or beneficiary in a group health plan from entering into any contract or arrangement for health care with any health care provider. 

Subtitle G—Early Investments 

SEC. 161-163. ƒFor sections 161 through 163, see the text of H.R.3200, as introduced.≈ 

SEC. 164. REINSURANCE PROGRAM FOR RETIREES. 

(a) ESTABLISHMENT.— (1) IN GENERAL.—Not later than 90 days after the date of the 

enactment of this Act, the Secretary of Health and Human Services shall establish a temporary reinsurance program (in this 

section referred to as the ‘‘reinsurance program’’) to provide reimbursement to assist participating employment-based plans 


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with the cost of providing health benefits to retirees and to eligible spouses, surviving spouses and dependents of such retirees. 

(2) DEFINITIONS.—For purposes of this section: 

(A) The term ‘‘eligible employment-based plan’’ means a 

group health benefits plan that— 

(i) is maintained by one or more employers, former 

employers or employee associations, or a voluntary employees’ beneficiary association, or a committee or 

board of individuals appointed to administer such 

plan, and 

(ii) provides health benefits to retirees. 

(B) The term ‘‘health benefits’’ means medical, surgical, 

hospital, prescription drug, and such other benefits as shall 

be determined by the Secretary, whether self-funded or delivered through the purchase of insurance or otherwise. 

(C) The term ‘‘participating employment-based plan’’ 

means an eligible employment-based plan that is participating in the reinsurance program. 

(D) The term ‘‘retiree’’ means, with respect to a participating employment-benefit plan, an individual who— 

(i) is 55 years of age or older; 

(ii) is not eligible for coverage under title XVIII of the 

Social Security Act; and 

(iii) is not an active employee of an employer maintaining the plan or of any employer that makes or has 

made substantial contributions to fund such plan. 

(E) The term ‘‘Secretary’’ means Secretary of Health and 

Human Services. 

(b) PARTICIPATION.—To be eligible to participate in the reinsurance program, an eligible employment-based plan shall submit to 

the Secretary an application for participation in the program, at 

such time, in such manner, and containing such information as the 

Secretary shall require. 

(c) PAYMENT.— 

(1) SUBMISSION OF CLAIMS.— (A) IN GENERAL.—Under the reinsurance program, a participating employment-based plan shall submit claims for 

reimbursement to the Secretary which shall contain documentation of the actual costs of the items and services for 

which each claim is being submitted. 

(B) BASIS FOR CLAIMS.—Each claim submitted under 

subparagraph (A) shall be based on the actual amount expended by the participating employment-based plan involved within the plan year for the appropriate employment 

based health benefits provided to a retiree or to the spouse, 

surviving spouse, or dependent of a retiree. In determining 

the amount of any claim for purposes of this subsection, the 

participating employment-based plan shall take into account any negotiated price concessions (such as discounts, 

direct or indirect subsidies, rebates, and direct or indirect 

remunerations) obtained by such plan with respect to such 

health benefits. For purposes of calculating the amount of 

any claim, the costs paid by the retiree or by the spouse, 

surviving spouse, or dependent of the retiree in the form of 


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deductibles, co-payments, and co-insurance shall be included along with the amounts paid by the participating 

employment-based plan. 

(2) PROGRAM PAYMENTS AND LIMIT.—If the Secretary determines that a participating employment-based plan has submitted a valid claim under paragraph (1), the Secretary shall 

reimburse such plan for 80 percent of that portion of the costs 

attributable to such claim that exceeds $15,000, but is less than 

$90,000. Such amounts shall be adjusted each year based on 

the percentage increase in the medical care component of the 

Consumer Price Index (rounded to the nearest multiple of 

$1,000) for the year involved. 

(3) USE OF PAYMENTS.—Amounts paid to a participating employment-based plan under this subsection shall be used to 

lower the costs borne directly by the participants and beneficiaries for health benefits provided under such plan in the 

form of premiums, co-payments, deductibles, co-insurance, or 

other out-of-pocket costs. Such payments shall not be used to reduce the costs of an employer maintaining the participating employment-based plan. The Secretary shall develop a mechanism 

to monitor the appropriate use of such payments by such plans. 

(4) APPEALS AND PROGRAM PROTECTIONS.—The Secretary 

shall establish— 

(A) an appeals process to permit participating employment-based plans to appeal a determination of the Secretary with respect to claims submitted under this section; 

and 

(B) procedures to protect against fraud, waste, and abuse 

under the program. 

(5) AUDITS.—The Secretary shall conduct annual audits of 

claims data submitted by participating employment-based 

plans under this section to ensure that they are in compliance 

with the requirements of this section. 

(d) RETIREE RESERVE TRUST FUND.— 

(1) ESTABLISHMENT.— (A) IN GENERAL.—There is established in the Treasury of 

the United States a trust fund to be known as the ‘‘Retiree 

Reserve Trust Fund’’ (referred to in this section as the 

‘‘Trust Fund’’), that shall consist of such amounts as may 

be appropriated or credited to the Trust Fund as provided 

for in this subsection to enable the Secretary to carry out 

the reinsurance program. Such amounts shall remain 

available until expended. 

(B) FUNDING.—There are hereby appropriated to the 

Trust Fund, out of any moneys in the Treasury not otherwise appropriated, an amount requested by the Secretary as 

necessary to carry out this section, except that the total of 

all such amounts requested shall not exceed 

$10,000,000,000. 

(C) APPROPRIATIONS FROM THE TRUST FUND.— (i) IN GENERAL.—Amounts in the Trust Fund are appropriated to provide funding to carry out the reinsurance program and shall be used to carry out such program. 


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(ii) BUDGETARY IMPLICATIONS.—Amounts appropriated under clause (i), and outlays flowing from such 

appropriations, shall not be taken into account for purposes of any budget enforcement procedures including 

allocations under section 302(a) and (b) of the Balanced Budget and Emergency Deficit Control Act and 

budget resolutions for fiscal years during which appropriations are made from the Trust Fund. 

(iii) LIMITATION TO AVAILABLE FUNDS.—The Secretary has the authority to stop taking applications for 

participation in the program or take such other steps 

in reducing expenditures under the reinsurance program in order to ensure that expenditures under the reinsurance program do not exceed the funds available 

under this subsection. 

SEC. 165. PROHIBITION AGAINST POST-RETIREMENT REDUCTIONS OF 

RETIREE HEALTH BENEFITS BY GROUP HEALTH PLANS. 

(a) IN GENERAL.—Part 7 of subtitle B of title I of the Employee 

Retirement Income Security Act of 1974 is amended by inserting 

after section 714 the following new section: 

‘‘SEC. 715. PROTECTION AGAINST POST-RETIREMENT REDUCTION OF 

RETIREE HEALTH BENEFITS. 

‘‘(a) IN GENERAL.—Every group health plan shall contain a provision which expressly bars the plan, or any fiduciary of the plan, 

from reducing the benefits provided under the plan to a retired participant, or beneficiary of such participant, if such reduction affects 

the benefits provided to the participant or beneficiary as of the date 

the participant retired for purposes of the plan and such reduction 

occurs after the participant’s retirement unless such reduction is 

also made with respect to active participants. 

‘‘(b) NO REDUCTION.—Notwithstanding that a group health plan 

described in subsection (a) may contain a provision reserving the 

general power to amend or terminate the plan or a provision specifically authorizing the plan to make post-retirement reductions in retiree health benefits, it shall be prohibited for any group health 

plan, whether through amendment or otherwise, to reduce the benefits provided to a retired participant or his or her beneficiary under 

the terms of the plan if such reduction of benefits occurs after the 

date the participant retired for purposes of the plan and reduces 

benefits that were provided to the participant, or his or her beneficiary, as of the date the participant retired unless such reduction 

is also made with respect to active participants.’’. 

(b) CONFORMING AMENDMENT.—The table of contents in section 1 

of such Act is amended by inserting after the item relating to section 

714 the following new item: 

‘‘Sec. 715. Protection against post-retirement reduction of retiree health benefits.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall 

take effect on the date of the enactment of this Act. 

SEC. 166. LIMITATIONS ON PREEXISTING CONDITION EXCLUSIONS IN 

GROUP HEALTH PLANS IN ADVANCE OF APPLICABILITY 

OF NEW PROHIBITION OF PREEXISTING CONDITION EXCLUSIONS. 

(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.— 


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(1) REDUCTION IN LOOK-BACK PERIOD.—Section 701(a)(1) of 

the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1181(a)(1)) is amended by striking ‘‘6-month period’’ and 

inserting ‘‘30-day period’’. 

(2) REDUCTION IN PERMITTED PREEXISTING CONDITION LIMITA- TION PERIOD.—Section 701(a)(2) of such Act (29 U.S.C. 

1181(a)(2)) is amended by striking ‘‘12 months’’ and inserting 

‘‘3 months’’, and by striking ‘‘18 months’’ and inserting ‘‘9 

months’’. 

(3) INAPPLICABILITY OF INTERIM LIMITATIONS UPON APPLICA- BILITY OF TOTAL PROHIBITION OF EXCLUSION.—Section 701 of 

such Act shall cease to be effective in the case of any group 

health plan as of the date on which such plan becomes subject 

to the requirements of section 111 of this Act (relating to prohibiting preexisting condition exclusions). 

(b) EFFECTIVE DATE.— (1) IN GENERAL.—Except as provided in subparagraph (B), 

the amendments made by paragraphs (1) and (2) of subsection 

(a) shall apply with respect to group health plans for plan years 

beginning after the end of the 6th calendar month following the 

date of the enactment of this Act. 

(2) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREE- MENTS.—In the case of a group health plan maintained pursuant to one or more collective bargaining agreements between 

employee representatives and one or more employers ratified before the date of the enactment of this Act, the amendments 

made by paragraphs (1) and (2) of subsection (a) shall not 

apply to plan years beginning before the earlier of— 

(A) the date on which the last of the collective bargaining 

agreements relating to the plan terminates (determined 

without regard to any extension thereof agreed to after the 

date of the enactment of this Act), or 

(B) 3 years after the date of the enactment of this Act. 

For purposes of subparagraph (A), any plan amendment made 

pursuant to a collective bargaining agreement relating to the 

plan which amends the plan solely to conform to any requirement added by the amendments made by paragraphs (1) and 

(2) of subsection (a) shall not be treated as a termination of 

such collective bargaining agreement. 

SEC. 167. EXTENSION OF COBRA CONTINUATION COVERAGE. 

(a) EXTENSION OF CURRENT PERIODS OF CONTINUATION COVERAGE.— 

(1) IN GENERAL.—In the case of any individual who is, under 

a COBRA continuation coverage provision, covered under 

COBRA continuation coverage on or after the date of the enactment of this Act, the required period of any such coverage which 

has not subsequently terminated under the terms of such provision for any reason other than the expiration of a period of a 

specified number of months shall, notwithstanding such provision and subject to subsection (b), extend to the earlier of the 

date on which such individual becomes eligible for coverage 

under an employment-based health plan or the date on which 

such individual becomes eligible for health insurance coverage 

through the Health Insurance Exchange (or a State-based 


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Health Insurance Exchange operating in a State or group of 

States). 

(2) NOTICE.—As soon as practicable after the date of the enactment of this Act, the Secretary of Labor, in consultation with 

the Secretary of the Treasury and the Secretary of Health and 

Human Services, shall, in consultation with administrators of 

the group health plans (or other entities) that provide or administer the COBRA continuation coverage involved, provide rules 

setting forth the form and manner in which prompt notice to individuals of the continued availability of COBRA continuation 

coverage to such individuals under paragraph (1). 

(b) CONTINUED EFFECT OF OTHER TERMINATING EVENTS.—Notwithstanding subsection (a), any required period of COBRA continuation coverage which is extended under such subsection shall 

terminate upon the occurrence, prior to the date of termination otherwise provided in such subsection, of any terminating event specified in the applicable continuation coverage provision other than the 

expiration of a period of a specified number of months. 

(c) ACCESS TO STATE HEALTH BENEFITS RISK POOLS.—This section shall supersede any provision of the law of a State or political 

subdivision thereof to the extent that such provision has the effect 

of limiting or precluding access by a qualified beneficiary whose 

COBRA continuation coverage has been extended under this section 

to a State health benefits risk pool recognized by the Commissioner 

for purposes of this section solely by reason of the extension of such 

coverage beyond the date on which such coverage otherwise would 

have expired. 

(d) DEFINITIONS.—For purposes of this section— 

(1) COBRA CONTINUATION COVERAGE.—The term ‘‘COBRA 

continuation coverage’’ means continuation coverage provided 

pursuant to part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (other than under section 

609), title XXII of the Public Health Service Act, section 4980B 

of the Internal Revenue Code of 1986 (other than subsection 

(f)(1) of such section insofar as it relates to pediatric vaccines), 

or section 905a of title 5, United States Code, or under a State 

program that provides comparable continuation coverage. Such 

term does not include coverage under a health flexible spending 

arrangement under a cafeteria plan within the meaning of section 125 of the Internal Revenue Code of 1986. 

(2) COBRA CONTINUATION PROVISION.—The term ‘‘COBRA 

continuation provision’’ means the provisions of law described 

in paragraph (1). 

TITLE II—HEALTH INSURANCE 

EXCHANGE AND RELATED PROVISIONS 

Subtitle A—Health Insurance Exchange 

SEC. 201. ESTABLISHMENT OF HEALTH INSURANCE EXCHANGE; OUTLINE OF DUTIES; DEFINITIONS. 

(a) ESTABLISHMENT.—There is established within the Health 

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sioner a Health Insurance Exchange in order to facilitate access of 

individuals and employers, through a transparent process, to a variety of choices of affordable, quality health insurance coverage, including a public health insurance option. 

(b) OUTLINE OF DUTIES OF COMMISSIONER.—In accordance with 

this subtitle and in coordination with appropriate Federal and 

State officials as provided under section 143(b), the Commissioner 

shall— 

(1) under section 204 establish standards for, accept bids 

from, and negotiate and enter into contracts with, QHBP offering entities for the offering of health benefits plans through the 

Health Insurance Exchange, with different levels of benefits required under section 203, and including with respect to oversight and enforcement; 

(2) under section 205 facilitate outreach and enrollment in 

such plans of Exchange-eligible individuals and employers described in section 202; and 

(3) conduct such activities related to the Health Insurance Exchange as required, including establishment of a risk pooling 

mechanism under section 206 and consumer protections under 

subtitle D of title I. 

(c) EXCHANGE-PARTICIPATING HEALTH BENEFITS PLAN DEFINED.— In this division, the term ‘‘Exchange-participating health benefits 

plan’’ means a qualified health benefits plan that is offered through 

the Health Insurance Exchange. 

SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS. 

(a) ACCESS TO COVERAGE.—In accordance with this section, all 

individuals are eligible to obtain coverage through enrollment in an 

Exchange-participating health benefits plan offered through the 

Health Insurance Exchange unless such individuals are enrolled in 

another qualified health benefits plan or other acceptable coverage. 

(b) DEFINITIONS.—In this division: 

(1) EXCHANGE-ELIGIBLE INDIVIDUAL.—The term ‘‘Exchange-eligible individual’’ means an individual who is eligible under 

this section to be enrolled through the Health Insurance Exchange in an Exchange-participating health benefits plan and, 

with respect to family coverage, includes dependents of such individual. 

(2) EXCHANGE-ELIGIBLE EMPLOYER.—The term ‘‘Exchange-eligible employer’’ means an employer that is eligible under this 

section to enroll through the Health Insurance Exchange employees of the employer (and their dependents) in Exchange-eligible health benefits plans. 

(3) EMPLOYMENT-RELATED DEFINITIONS.—The terms ‘‘employer’’, ‘‘employee’’, ‘‘full-time employee’’, and ‘‘part-time employee’’ have the meanings given such terms by the Commissioner for purposes of this division. 

(c) TRANSITION.—Individuals and employers shall only be eligible 

to enroll or participate in the Health Insurance Exchange in accordance with the following transition schedule: 

(1) FIRST YEAR.—In Y1 (as defined in section 100(c))— 

(A) individuals described in subsection (d)(1), including 

individuals described in paragraphs (3), (4), and (5) of subsection (d); and 


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(B) smallest employers described in subsection (e)(1). 

(2) SECOND YEAR.—In Y2— 

(A) individuals and employers described in paragraph 

(1); and 

(B) smaller employers described in subsection (e)(2). 

(3) THIRD YEAR.—In Y3— 

(A) individuals and employers described in paragraph 

(2); 

(B) larger employers described in subsection (e)(3); and 

(C) largest employers as permitted by the Commissioner 

under subsection (e)(4). 

(4) FOURTH AND SUBSEQUENT YEARS.—In Y4 and subsequent 

years— 

(A) individuals and employers described in paragraph 

(3); and 

(B) largest employers as permitted by the Commissioner 

under subsection (e)(4). 

(d) INDIVIDUALS.— (1) INDIVIDUAL DESCRIBED.—Subject to the succeeding provisions of this subsection, an individual described in this paragraph is an individual who— 

(A) is not enrolled in coverage described in subparagraphs (C) through (F) of paragraph (2); and 

(B) is not enrolled in coverage as a full-time employee (or 

as a dependent of such an employee) under a group health 

plan if the coverage and an employer contribution under 

the plan meet the requirements of section 312. 

For purposes of subparagraph (B), in the case of an individual 

who is self-employed, who has at least 1 employee, and who 

meets the requirements of section 312, such individual shall be 

deemed a full-time employee described in such subparagraph. 

(2) ACCEPTABLE COVERAGE.—For purposes of this division, 

the term ‘‘acceptable coverage’’ means any of the following: 

(A) QUALIFIED HEALTH BENEFITS PLAN COVERAGE.—Coverage under a qualified health benefits plan. 

(B) GRANDFATHERED HEALTH INSURANCE COVERAGE; COV- ERAGE UNDER CURRENT GROUP HEALTH PLAN.—Coverage 

under a grandfathered health insurance coverage (as defined in subsection (a) of section 102) or under a current 

group health plan (described in subsection (b) of such section). 

(C) MEDICARE.—Coverage under part A of title XVIII of 

the Social Security Act. 

(D) MEDICAID.—Coverage for medical assistance under 

title XIX of the Social Security Act, excluding such coverage 

that is only available because of the application of subsection (u), (z), or (aa) of section 1902 of such Act 

(E) MEMBERS OF THE ARMED FORCES AND DEPENDENTS

(INCLUDING TRICARE).—Coverage under chapter 55 of title 

10, United States Code, including similar coverage furnished under section 1781 of title 38 of such Code. 

(F) VA.—Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code, but 

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mined by the Commissioner in coordination with the Secretary of Treasury to be not less than a level specified by 

the Commissioner and Secretary of Veteran’s Affairs, in coordination with the Secretary of Treasury, based on the individual’s priority for services as provided under section 

1705(a) of such title. 

(G) OTHER COVERAGE.—Such other health benefits coverage, such as a State health benefits risk pool, as the Commissioner, in coordination with the Secretary of the Treasury, recognizes for purposes of this paragraph. 

The Commissioner shall make determinations under this paragraph in coordination with the Secretary of the Treasury. 

(3) TREATMENT OF CERTAIN NON-TRADITIONAL MEDICAID ELI- GIBLE INDIVIDUALS.—An individual who is a non-traditional 

Medicaid eligible individual (as defined in section 205(e)(4)(C)) 

in a State may be an Exchange-eligible individual if the individual was enrolled in a qualified health benefits plan, grandfathered health insurance coverage, or current group health 

plan during the 6 months before the individual became a nontraditional Medicaid eligible individual. During the period in 

which such an individual has chosen to enroll in an Exchangeparticipating health benefits plan, the individual is not also eligible for medical assistance under Medicaid. 

(4) CONTINUING ELIGIBILITY PERMITTED.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), once an individual qualifies as an Exchange-eligible 

individual under this subsection (including as an employee 

or dependent of an employee of an Exchange-eligible employer) and enrolls under an Exchange-participating health 

benefits plan through the Health Insurance Exchange, the 

individual shall continue to be treated as an Exchange-eligible individual until the individual is no longer enrolled 

with an Exchange-participating health benefits plan. 

(B) EXCEPTIONS.— 

(i) IN GENERAL.—Subparagraph (A) shall not apply 

to an individual once the individual becomes eligible 

for coverage— 

(I) under part A of the Medicare program; 

(II) under the Medicaid program as a Medicaid 

eligible individual, except as permitted under 

paragraph (3) or clause (ii); or 

(III) in such other circumstances as the Commissioner may provide. 

(ii) TRANSITION PERIOD.—In the case described in 

clause (i)(II), the Commissioner shall permit the individual to continue treatment under subparagraph (A) 

until such limited time as the Commissioner determines it is administratively feasible, consistent with 

minimizing disruption in the individual’s access to 

health care. 

(5) ADVERSELY AFFECTED RETIREE HEALTH BENEFITS GROUP

PARTICIPANTS AND BENEFICIARIES.— (A) IN GENERAL.—Beginning in Y1, an individual who is 

a participant or beneficiary in an adversely affected retiree 


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health benefits group who does not have coverage described 

in paragraph (2)(C) is an Exchange eligible individual, 

whether or not such an individual has other acceptable coverage. 

(B) ADVERAGE AFFECTED RETIREE HEALTH BENEFIT

GROUP DEFINED.—In this paragraph, the term ‘‘adversely 

affected retiree health benefits group’’ means the retired 

participants and their beneficiaries of a group health plan 

that cancelled or substantially reduced the amount, type, 

level, or form of health benefit or option provided prior 

January 1, 2008. 

(e) EMPLOYERS.— (1) SMALLEST EMPLOYERS.—Subject to paragraph (5), smallest employers described in this paragraph are employers with 

15 or fewer employees. 

(2) SMALLER EMPLOYERS.—Subject to paragraph (5), smaller 

employers described in this paragraph are employers that are 

not smallest employers described in paragraph (1) and that 

have 25 or fewer employees. 

(3) LARGER EMPLOYERS.—Subject to paragraph (5), larger employers described in this paragraph are employers that are not 

smallest employers described in paragraph (1) or smaller employers described in paragraph (2) and that have 50 or fewer 

employees. 

(4) LARGEST EMPLOYERS.— (A) IN GENERAL.—Beginning with Y3, the Commissioner 

may permit employers not described in paragraphs (1) (2), 

or (3) to be Exchange-eligible employers. 

(B) PHASE-IN.—In applying subparagraph (A), the Commissioner may phase-in the application of such subparagraph based on the number of full-time employees of an employer and such other considerations as the Commissioner 

deems appropriate. 

(5) CONTINUING ELIGIBILITY.—Once an employer is permitted 

to be an Exchange-eligible employer under this subsection and 

enrolls employees through the Health Insurance Exchange, the 

employer shall continue to be treated as an Exchange-eligible 

employer for each subsequent plan year regardless of the number of employees involved unless and until the employer meets 

the requirement of section 311(a) through paragraph (1) of such 

section by offering a group health plan and not through offering 

Exchange-participating health benefits plan. 

(6) EMPLOYER PARTICIPATION AND CONTRIBUTIONS.— 

(A) SATISFACTION OF EMPLOYER RESPONSIBILITY.—For 

any year in which an employer is an Exchange-eligible employer, such employer may meet the requirements of section 

312 with respect to employees of such employer by offering 

such employees the option of enrolling with Exchange-participating health benefits plans through the Health Insurance Exchange consistent with the provisions of subtitle B 

of title III. 

(B) EMPLOYEE CHOICE.—Any employee offered Exchangeparticipating health benefits plans by the employer of such 

employee under subparagraph (A) may choose coverage 


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under any such plan. That choice includes, with respect to 

family coverage, coverage of the dependents of such employee. 

(7) AFFILIATED GROUPS.—Any employer which is part of a 

group of employers who are treated as a single employer under 

subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated, for purposes of this subtitle, 

as a single employer. 

(8) OTHER COUNTING RULES.—The Commissioner shall establish rules relating to how employees are counted for purposes of 

carrying out this subsection. 

(9) TREATMENT OF MULTIEMPLOYER PLANS.—The plan sponsor of a group health plan (as defined in section 733(a) of the 

Employee Retirement Income Security Act of 1974) that is multiemployer plan (as defined in section 3(37) of such Act) may obtain health insurance coverage with respect to participants in 

the plan through the Exchange to the same extent as an employer not described in paragraph (1) or (2) is permitted by the 

Commissioner to obtain health insurance coverage through the 

Exchange as an Exchange-eligible employer 

(f) SPECIAL SITUATION AUTHORITY.—The Commissioner shall 

have the authority to establish such rules as may be necessary to 

deal with special situations with regard to uninsured individuals 

and employers participating as Exchange-eligible individuals and 

employers, such as transition periods for individuals and employers 

who gain, or lose, Exchange-eligible participation status, and to establish grace periods for premium payment. 

(g) SURVEYS OF INDIVIDUALS AND EMPLOYERS.—The Commissioner shall provide for periodic surveys of Exchange-eligible individuals and employers concerning satisfaction of such individuals 

and employers with the Health Insurance Exchange and Exchangeparticipating health benefits plans. 

(h) EXCHANGE ACCESS STUDY.— (1) IN GENERAL.—The Commissioner shall conduct a study of 

access to the Health Insurance Exchange for individuals and 

for employers, including individuals and employers who are not 

eligible and enrolled in Exchange-participating health benefits 

plans. The goal of the study is to determine if there are significant groups and types of individuals and employers who are 

not Exchange eligible individuals or employers, but who would 

have improved benefits and affordability if made eligible for 

coverage in the Exchange. 

(2) ITEMS INCLUDED IN STUDY.—Such study also shall examine— 

(A) the terms, conditions, and affordability of group 

health coverage offered by employers and QHBP offering 

entities outside of the Exchange compared to Exchange-participating health benefits plans; and 

(B) the affordability-test standard for access of certain 

employed individuals to coverage in the Health Insurance 

Exchange. 

(3) REPORT.—Not later than January 1 of Y3, in Y6, and 

thereafter, the Commissioner shall submit to Congress on the 

study conducted under this subsection and shall include in 


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such report recommendations regarding changes in standards 

for Exchange eligibility for for individuals and employers. 

SEC. 203. BENEFITS PACKAGE LEVELS. 

(a) IN GENERAL.—The Commissioner shall specify the benefits to 

be made available under Exchange-participating health benefits 

plans during each plan year, consistent with subtitle C of title I and 

this section. 

(b) LIMITATION ON HEALTH BENEFITS PLANS OFFERED BY OFFER- ING ENTITIES.—The Commissioner may not enter into a contract 

with a QHBP offering entity under section 204(c) for the offering of 

an Exchange-participating health benefits plan in a service area unless the following requirements are met: 

(1) REQUIRED OFFERING OF BASIC PLAN.—The entity offers 

only one basic plan for such service area. 

(2) OPTIONAL OFFERING OF ENHANCED PLAN.—If and only if 

the entity offers a basic plan for such service area, the entity 

may offer one enhanced plan for such area. 

(3) OPTIONAL OFFERING OF PREMIUM PLAN.—If and only if the 

entity offers an enhanced plan for such service area, the entity 

may offer one premium plan for such area. 

(4) OPTIONAL OFFERING OF PREMIUM-PLUS PLANS.—If and 

only if the entity offers a premium plan for such service area, 

the entity may offer one or more premium-plus plans for such 

area. 

All such plans may be offered under a single contract with the Commissioner. 

(c) SPECIFICATION OF BENEFIT LEVELS FOR PLANS.— (1) IN GENERAL.—The Commissioner shall establish the following standards consistent with this subsection and title I: 

(A) BASIC, ENHANCED, AND PREMIUM PLANS.—Standards 

for 3 levels of Exchange-participating health benefits plans: 

basic, enhanced, and premium (in this division referred to 

as a ‘‘basic plan’’, ‘‘enhanced plan’’, and ‘‘premium plan’’, 

respectively). 

(B) PREMIUM-PLUS PLAN BENEFITS.—Standards for additional benefits that may be offered, consistent with this subsection and subtitle C of title I, under a premium plan 

(such a plan with additional benefits referred to in this division as a ‘‘premium-plus plan’’) . 

(2) BASIC PLAN.— (A) IN GENERAL.—A basic plan shall offer the essential 

benefits package required under title I for a qualified 

health benefits plan. 

(B) TIERED COST-SHARING FOR AFFORDABLE CREDIT ELIGIBLE INDIVIDUALS.—In the case of an affordable credit eligible individual (as defined in section 242(a)(1)) enrolled in 

an Exchange-participating health benefits plan, the benefits 

under a basic plan are modified to provide for the reduced 

cost-sharing for the income tier applicable to the individual 

under section 244(c). 

(3) ENHANCED PLAN.—A enhanced plan shall offer, in addition to the level of benefits under the basic plan, a lower level 

of cost-sharing as provided under title I consistent with section 

123(b)(5)(A). 


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(4) PREMIUM PLAN.—A premium plan shall offer, in addition 

to the level of benefits under the basic plan, a lower level of 

cost-sharing as provided under title I consistent with section 

123(b)(5)(B). 

(5) PREMIUM-PLUS PLAN.—A premium-plus plan is a premium plan that also provides additional benefits, such as adult 

oral health and vision care, approved by the Commissioner. The 

portion of the premium that is attributable to such additional 

benefits shall be separately specified. 

(6) RANGE OF PERMISSIBLE VARIATION IN COST-SHARING.—The 

Commissioner shall establish a permissible range of variation 

of cost-sharing for each basic, enhanced, and premium plan, except with respect to any benefit for which there is no cost-sharing permitted under the essential benefits package. Such variation shall permit a variation of not more than plus (or minus) 

10 percent in cost-sharing with respect to each benefit category 

specified under section 122. 

(d) TREATMENT OF STATE BENEFIT MANDATES.—Insofar as a 

State requires a health insurance issuer offering health insurance 

coverage to include benefits beyond the essential benefits package, 

such requirement shall continue to apply to an Exchange-participating health benefits plan, if the State has entered into an arrangement satisfactory to the Commissioner to reimburse the Commissioner for the amount of any net increase in affordability premium 

credits under subtitle C as a result of an increase in premium in 

basic plans as a result of application of such requirement. 

SEC. 204. CONTRACTS FOR THE OFFERING OF EXCHANGE-PARTICIPATING HEALTH BENEFITS PLANS. 

(a) CONTRACTING DUTIES.—In carrying out section 201(b)(1) and 

consistent with this subtitle: 

(1) OFFERING ENTITY AND PLAN STANDARDS.—The Commissioner shall— 

(A) establish standards necessary to implement the requirements of this title and title I for— 

(i) QHBP offering entities for the offering of an Exchange-participating health benefits plan; and 

(ii) for Exchange-participating health benefits plans; 

and 

(B) certify QHBP offering entities and qualified health 

benefits plans as meeting such standards and requirements 

of this title and title I for purposes of this subtitle. 

(2) SOLICITING AND NEGOTIATING BIDS; CONTRACTS.—The 

Commissioner shall— 

(A) solicit bids from QHBP offering entities for the offering of Exchange-participating health benefits plans; 

(B) based upon a review of such bids, negotiate with such 

entities for the offering of such plans; and 

(C) enter into contracts with such entities for the offering 

of such plans through the Health Insurance Exchange 

under terms (consistent with this title) negotiated between 

the Commissioner and such entities. 

(3) FAR NOT APPLICABLE.—The provisions of the Federal Acquisition Regulation shall not apply to contracts between the 


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Commissioner and QHBP offering entities for the offering of Exchange-participating health benefits plans under this title. 

(b) STANDARDS FOR QHBP OFFERING ENTITIES TO OFFER EX- CHANGE-PARTICIPATING HEALTH BENEFITS PLANS.—The standards 

established under subsection (a)(1)(A) shall require that, in order 

for a QHBP offering entity to offer an Exchange-participating health 

benefits plan, the entity must meet the following requirements: 

(1) LICENSED.—The entity shall be licensed to offer health insurance coverage under State law for each State in which it is 

offering such coverage. 

(2) DATA REPORTING.—The entity shall provide for the reporting of such information as the Commissioner may specify, including information necessary to administer the risk pooling 

mechanism described in section 206(b) and information to address disparities in health and health care. 

(3) IMPLEMENTING AFFORDABILITY CREDITS.—The entity shall 

provide for implementation of the affordability credits provided 

for enrollees under subtitle C, including the reduction in costsharing under section 244(c). 

(4) ENROLLMENT.—The entity shall accept all enrollments 

under this subtitle, subject to such exceptions (such as capacity 

limitations) in accordance with the requirements under title I 

for a qualified health benefits plan. The entity shall notify the 

Commissioner if the entity projects or anticipates reaching such 

a capacity limitation that would result in a limitation in enrollment. 

(5) RISK POOLING PARTICIPATION.—The entity shall participate in such risk pooling mechanism as the Commissioner establishes under section 206(b). 

(6) ESSENTIAL COMMUNITY PROVIDERS.—With respect to the 

basic plan offered by the entity, the entity shall contract for outpatient services with covered entities (as defined in section 

340B(a)(4) of the Public Health Service Act, as in effect as of 

July 1, 2009). The Commissioner shall specify the extent to 

which and manner in which the previous sentence shall apply 

in the case of a basic plan with respect to which the Commissioner determines provides substantially all benefits through a 

health maintenance organization, as defined in section 

2791(b)(3) of the Public Health Service Act. 

(7) CULTURALLY AND LINGUISTICALLY APPROPRIATE SERVICES

AND COMMUNICATIONS.—The entity shall provide for culturally 

and linguistically appropriate communication and health services. 

(8) ADDITIONAL REQUIREMENTS.—The entity shall comply 

with other applicable requirements of this title, as specified by 

the Commissioner, which shall include standards regarding 

billing and collection practices for premiums and related grace 

periods and which may include standards to ensure that the entity does not use coercive practices to force providers not to contract with other entities offering coverage through the Health 

Insurance Exchange. 

(c) CONTRACTS.— (1) BID APPLICATION.—To be eligible to enter into a contract 

under this section, a QHBP offering entity shall submit to the 


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Commissioner a bid at such time, in such manner, and containing such information as the Commissioner may require. 

(2) TERM.—Each contract with a QHBP offering entity under 

this section shall be for a term of not less than one year, but 

may be made automatically renewable from term to term in the 

absence of notice of termination by either party. 

(3) ENFORCEMENT OF NETWORK ADEQUACY.—In the case of a 

health benefits plan of a QHBP offering entity that uses a provider network, the contract under this section with the entity 

shall provide that if— 

(A) the Commissioner determines that such provider network does not meet such standards as the Commissioner 

shall establish under section 115; and 

(B) an individual enrolled in such plan receives an item 

or service from a provider that is not within such network; 

then any cost-sharing for such item or service shall be equal to 

the amount of such cost-sharing that would be imposed if such 

item or service was furnished by a provider within such network. 

(4) OVERSIGHT AND ENFORCEMENT RESPONSIBILITIES.—The 

Commissioner shall establish processes, in coordination with 

State insurance regulators, to oversee, monitor, and enforce applicable requirements of this title with respect to QHBP offering 

entities offering Exchange-participating health benefits plans 

and such plans, including the marketing of such plans. Such 

processes shall include the following: 

(A) GRIEVANCE AND COMPLAINT MECHANISMS.—The Commissioner shall establish, in coordination with State insurance regulators, a process under which Exchange-eligible 

individuals and employers may file complaints concerning 

violations of such standards. 

(B) ENFORCEMENT.—In carrying out authorities under 

this division relating to the Health Insurance Exchange, 

the Commissioner may impose one or more of the intermediate sanctions described in section 142(c). 

(C) TERMINATION.— (i) IN GENERAL.—The Commissioner may terminate a 

contract with a QHBP offering entity under this section 

for the offering of an Exchange-participating health 

benefits plan if such entity fails to comply with the applicable requirements of this title. Any determination 

by the Commissioner to terminate a contract shall be 

made in accordance with formal investigation and 

compliance procedures established by the Commissioner under which— 

(I) the Commissioner provides the entity with the 

reasonable opportunity to develop and implement a 

corrective action plan to correct the deficiencies 

that were the basis of the Commissioner’s determination; and 

(II) the Commissioner provides the entity with 

reasonable notice and opportunity for hearing (including the right to appeal an initial decision) before terminating the contract. 


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(ii) EXCEPTION FOR IMMINENT AND SERIOUS RISK TO

HEALTH.—Clause (i) shall not apply if the Commissioner determines that a delay in termination, resulting 

from compliance with the procedures specified in such 

clause prior to termination, would pose an imminent 

and serious risk to the health of individuals enrolled 

under the qualified health benefits plan of the QHBP 

offering entity. 

(D) CONSTRUCTION.—Nothing in this subsection shall be 

construed as preventing the application of other sanctions 

under subtitle E of title I with respect to an entity for a violation of such a requirement. 

SEC. 205. OUTREACH AND ENROLLMENT OF EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS IN EXCHANGE-PARTICIPATING HEALTH BENEFITS PLAN. 

(a) IN GENERAL.— (1) OUTREACH.—The Commissioner shall conduct outreach 

activities consistent with subsection (c), including through use 

of appropriate entities as described in paragraph (4) of such 

subsection, to inform and educate individuals and employers 

about the Health Insurance Exchange and Exchange-participating health benefits plan options. Such outreach shall include 

outreach specific to vulnerable populations, such as children, 

individuals with disabilities, individuals with mental illness, 

and individuals with other cognitive impairments. 

(2) ELIGIBILITY.—The Commissioner shall make timely determinations of whether individuals and employers are Exchangeeligible individuals and employers (as defined in section 202). 

(3) ENROLLMENT.—The Commissioner shall establish and 

carry out an enrollment process for Exchange-eligible individuals and employers, including at community locations, in accordance with subsection (b). 

(b) ENROLLMENT PROCESS.— (1) IN GENERAL.—The Commissioner shall establish a process 

consistent with this title for enrollments in Exchange-participating health benefits plans. Such process shall provide for enrollment through means such as the mail, by telephone, electronically, and in person. 

(2) ENROLLMENT PERIODS.— (A) OPEN ENROLLMENT PERIOD.—The Commissioner shall 

establish an annual open enrollment period during which 

an Exchange-eligible individual or employer may elect to 

enroll in an Exchange-participating health benefits plan for 

the following plan year and an enrollment period for affordability credits under subtitle C. Such periods shall be 

during September through November of each year, or such 

other time that would maximize timeliness of income 

verification for purposes of such subtitle. The open enrollment period shall not be less than 30 days. 

(B) SPECIAL ENROLLMENT.—The Commissioner shall also 

provide for special enrollment periods to take into account 

special circumstances of individuals and employers, such 

as an individual who— 

(i) loses acceptable coverage; 


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(ii) experiences a change in marital or other dependent status; 

(iii) moves outside the service area of the Exchangeparticipating health benefits plan in which the individual is enrolled; or 

(iv) experiences a significant change in income. 

(C) ENROLLMENT INFORMATION.—The Commissioner 

shall provide for the broad dissemination of information to 

prospective enrollees on the enrollment process, including 

before each open enrollment period. In carrying out the previous sentence, the Commissioner may work with other appropriate entities to facilitate such provision of information. 

(3) AUTOMATIC ENROLLMENT FOR NON-MEDICAID ELIGIBLE INDIVIDUALS.— 

(A) IN GENERAL.—The Commissioner shall provide for a 

process under which individuals who are Exchange-eligible 

individuals described in subparagraph (B) are automatically enrolled under an appropriate Exchange-participating 

health benefits plan. Such process may involve a random 

assignment or some other form of assignment that takes 

into account the health care providers used by the individual involved or such other relevant factors as the Commissioner may specify. 

(B) SUBSIDIZED INDIVIDUALS DESCRIBED.—An individual 

described in this subparagraph is an Exchange-eligible individual who is either of the following: 

(i) AFFORDABILITY CREDIT ELIGIBLE INDIVIDUALS.— 

The individual— 

(I) has applied for, and been determined eligible 

for, affordability credits under subtitle C; 

(II) has not opted out from receiving such affordability credit; and 

(III) does not otherwise enroll in another Exchange-participating health benefits plan. 

(ii) INDIVIDUALS ENROLLED IN A TERMINATED PLAN.— 

The individual is enrolled in an Exchange-participating health benefits plan that is terminated (during 

or at the end of a plan year) and who does not otherwise enroll in another Exchange-participating health 

benefits plan. 

(4) DIRECT PAYMENT OF PREMIUMS TO PLANS.—Under the enrollment process, individuals enrolled in an Exchangepartcipating health benefits plan shall pay such plans directly, 

and not through the Commissioner or the Health Insurance Exchange. 

(c) COVERAGE INFORMATION AND ASSISTANCE.— 

(1) COVERAGE INFORMATION.—The Commissioner shall provide for the broad dissemination of information on Exchangeparticipating health benefits plans offered under this title. Such 

information shall be provided in a comparative manner, and 

shall include information on benefits, premiums, cost-sharing, 

quality, provider networks, and consumer satisfaction. 


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(2) CONSUMER ASSISTANCE WITH CHOICE.—To provide assistance to Exchange-eligible individuals and employers, the Commissioner shall— 

(A) provide for the operation of a toll-free telephone hotline to respond to requests for assistance and maintain an 

Internet website through which individuals may obtain information on coverage under Exchange-participating health 

benefits plans and file complaints; 

(B) develop and disseminate information to Exchange-eligible enrollees on their rights and responsibilities; 

(C) assist Exchange-eligible individuals in selecting Exchange-participating health benefits plans and obtaining 

benefits through such plans; and 

(D) ensure that the Internet website described in subparagraph (A) and the information described in subparagraph 

(B) is developed using plain language (as defined in section 

133(a)(2)). 

(3) USE OF OTHER ENTITIES.—In carrying out this subsection, 

the Commissioner may work with other appropriate entities to 

facilitate the dissemination of information under this subsection 

and to provide assistance as described in paragraph (2). 

(d) SPECIAL DUTIES RELATED TO MEDICAID AND CHIP.— 

(1) COVERAGE FOR CERTAIN NEWBORNS.— (A) IN GENERAL.—In the case of a child born in the 

United States who at the time of birth is not otherwise covered under acceptable coverage, for the period of time beginning on the date of birth and ending on the date the 

child otherwise is covered under acceptable coverage (or, if 

earlier, the end of the month in which the 60-day period, 

beginning on the date of birth, ends), the child shall be 

deemed— 

(i) to be a non-traditional Medicaid eligible individual (as defined in subsection (e)(5)) for purposes of 

this division and Medicaid; and 

(ii) to have elected to enroll in Medicaid through the 

application of paragraph (3). 

(B) EXTENDED TREATMENT AS TRADITIONAL MEDICAID ELI- GIBLE INDIVIDUAL.—In the case of a child described in subparagraph (A) who at the end of the period referred to in 

such subparagraph is not otherwise covered under acceptable coverage, the child shall be deemed (until such time as 

the child obtains such coverage or the State otherwise 

makes a determination of the child’s eligibility for medical 

assistance under its Medicaid plan pursuant to section 

1943(c)(1) of the Social Security Act) to be a traditional 

Medicaid eligible individual described in section 

1902(l)(1)(B) of such Act. 

(2) CHIP TRANSITION.—A child who, as of the day before the 

first day of Y1, is eligible for child health assistance under title 

XXI of the Social Security Act (including a child receiving coverage under an arrangement described in section 2101(a)(2) of 

such Act) is deemed as of such first day to be an Exchange-eligible individual unless the individual is a traditional Medicaid 

eligible individual as of such day. 


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(3) AUTOMATIC ENROLLMENT OF MEDICAID ELIGIBLE INDIVID- UALS INTO MEDICAID.—The Commissioner shall provide for a 

process under which an individual who is described in section 

202(d)(3) and has not elected to enroll in an Exchange-participating health benefits plan is automatically enrolled under 

Medicaid. 

(4) NOTIFICATIONS.—The Commissioner shall notify each 

State in Y1 and for purposes of section 1902(gg)(1) of the Social 

Security Act (as added by section 1703(a)) whether the Health 

Insurance Exchange can support enrollment of children described in paragraph (2) in such State in such year. 

(e) MEDICAID COVERAGE FOR MEDICAID ELIGIBLE INDIVIDUALS.— (1) IN GENERAL.— (A) CHOICE FOR LIMITED EXCHANGE-ELIGIBLE INDIVID- UALS.—As part of the enrollment process under subsection 

(b), the Commissioner shall provide the option, in the case 

of an Exchange-eligible individual described in section 

202(d)(3), for the individual to elect to enroll under Medicaid instead of under an Exchange-participating health 

benefits plan. Such an individual may change such election 

during an enrollment period under subsection (b)(2). 

(B) MEDICAID ENROLLMENT OBLIGATION.—An Exchange 

eligible individual may apply, in the manner described in 

section 241(b)(1), for a determination of whether the individual is a Medicaid-eligible individual. If the individual 

is determined to be so eligible, the Commissioner, through 

the Medicaid memorandum of understanding, shall provide 

for the enrollment of the individual under the State Medicaid plan in accordance with the Medicaid memorandum 

of understanding under paragraph (4). In the case of such 

an enrollment, the State shall provide for the same periodic 

redetermination of eligibility under Medicaid as would otherwise apply if the individual had directly applied for medical assistance to the State Medicaid agency. 

(2) NON-TRADITIONAL MEDICAID ELIGIBLE INDIVIDUALS.—In 

the case of a non-traditional Medicaid eligible individual described in section 202(d)(3) who elects to enroll under Medicaid 

under paragraph (1)(A), the Commissioner shall provide for the 

enrollment of the individual under the State Medicaid plan in 

accordance with the Medicaid memorandum of understanding 

under paragraph (4). 

(3) COORDINATED ENROLLMENT WITH STATE THROUGH MEMORANDUM OF UNDERSTANDING.—The Commissioner, in consultation with the Secretary of Health and Human Services, shall 

enter into a memorandum of understanding with each State 

(each in this division referred to as a ‘‘Medicaid memorandum 

of understanding’’) with respect to coordinating enrollment of 

individuals in Exchange-participating health benefits plans 

and under the State’s Medicaid program consistent with this 

section and to otherwise coordinate the implementation of the 

provisions of this division with respect to the Medicaid program. Such memorandum shall permit the exchange of information consistent with the limitations described in section 

1902(a)(7) of the Social Security Act. Nothing in this section 


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shall be construed as permitting such memorandum to modify 

or vitiate any requirement of a State Medicaid plan. 

(4) MEDICAID ELIGIBLE INDIVIDUALS.—For purposes of this division: 

(A) MEDICAID ELIGIBLE INDIVIDUAL.—The term ‘‘Medicaid 

eligible individual’’ means an individual who is eligible for 

medical assistance under Medicaid. 

(B) TRADITIONAL MEDICAID ELIGIBLE INDIVIDUAL.—The 

term ‘‘traditional Medicaid eligible individual’’ means a 

Medicaid eligible individual other than an individual who 

is— 

(i) a Medicaid eligible individual by reason of the 

application of subclause (VIII) of section 

1902(a)(10)(A)(i) of the Social Security Act; or 

(ii) a childless adult not described in section 

1902(a)(10)(A) or (C) of such Act (as in effect as of the 

day before the date of the enactment of this Act). 

(C) NON-TRADITIONAL MEDICAID ELIGIBLE INDIVIDUAL.— The term ‘‘non-traditional Medicaid eligible individual’’ 

means a Medicaid eligible individual who is not a traditional Medicaid eligible individual. 

(f) EFFECTIVE CULTURALLY AND LINGUISTICALLY APPROPRIATE

COMMUNICATION.—In carrying out this section, the Commissioner 

shall establish effective methods for communicating in plain language and a culturally and linguistically appropriate manner. 

SEC. 206. OTHER FUNCTIONS. 

(a) COORDINATION OF AFFORDABILITY CREDITS.—The Commissioner shall coordinate the distribution of affordability premium 

and cost-sharing credits under subtitle C to QHBP offering entities 

offering Exchange-participating health benefits plans. 

(b) COORDINATION OF RISK POOLING.—The Commissioner shall 

establish a mechanism whereby there is an adjustment made of the 

premium amounts payable among QHBP offering entities offering 

Exchange-participating health benefits plans of premiums collected 

for such plans that takes into account (in a manner specified by the 

Commissioner) the differences in the risk characteristics of individuals and employers enrolled under the different Exchange-participating health benefits plans offered by such entities so as to minimize the impact of adverse selection of enrollees among the plans offered by such entities. 

(c) SPECIAL INSPECTOR GENERAL FOR THE HEALTH INSURANCE

EXCHANGE.— 

(1) ESTABLISHMENT; APPOINTMENT.—There is hereby established the Office of the Special Inspector General for the Health 

Insurance Exchange, to be headed by a Special Inspector General for the Health Insurance Exchange (in this subsection referred to as the ‘‘Special Inspector General’’) to be appointed by 

the President, by and with the advice and consent of the Senate. 

The nomination of an individual as Special Inspector General 

shall be made as soon as practicable after the establishment of 

the program under this subtitle. 

(2) DUTIES.—The Special Inspector General shall— 

(A) conduct, supervise, and coordinate audits, evaluations and investigations of the Health Insurance Exchange 


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to protect the integrity of the Health Insurance Exchange, 

as well as the health and welfare of participants in the Exchange; 

(B) report both to the Commissioner and to the Congress 

regarding program and management problems and recommendations to correct them; 

(C) have other duties (described in paragraphs (2) and 

(3) of section 121 of division A of Public Law 110–343) in 

relation to the duties described in the previous subparagraphs; and 

(D) have the authorities provided in section 6 of the Inspector General Act of 1978 in carrying out duties under 

this paragraph. 

(3) APPLICATION OF OTHER SPECIAL INSPECTOR GENERAL PROVISIONS.—The provisions of subsections (b) (other than paragraphs (1) and (3)), (d) (other than paragraph (1)), and (e) of 

section 121 of division A of the Emergency Economic Stabilization Act of 2009 (Public Law 110–343) shall apply to the Special Inspector General under this subsection in the same manner as such provisions apply to the Special Inspector General 

under such section. 

(4) REPORTS.—Not later than one year after the confirmation 

of the Special Inspector General, and annually thereafter, the 

Special Inspector General shall submit to the appropriate committees of Congress a report summarizing the activities of the 

Special Inspector General during the one year period ending on 

the date such report is submitted. 

(5) TERMINATION.—The Office of the Special Inspector General shall terminate five years after the date of the enactment 

of this Act. 

(d) ASSISTANCE FOR SMALL EMPLOYERS.— 

(1) IN GENERAL.—The Commissioner, in consultation with the 

Small Business Administration, shall establish and carry out a 

program to provide to small employers counseling and technical 

assistance with respect to the provision of health insurance to 

employees of such employers through the Health Insurance Exchange. 

(2) DUTIES.—The program established under paragraph (1) 

shall include the following services: 

(A) Educational activities to increase awareness of the 

Health Insurance Exchange and available small employer 

health plan options. 

(B) Distribution of information to small employers with 

respect to the enrollment and selection process for health 

plans available under the Health Insurance Exchange, including standardized comparative information on the 

health plans available under the Health Insurance Exchange. 

(C) Distribution of information to small employers with 

respect to available affordability credits or other financial 

assistance. 

(D) Referrals to appropriate entities of complaints and 

questions relating to the Health Insurance Exchange. 


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(E) Enrollment and plan selection assistance for employers with respect to the Health Insurance Exchange. 

(F) Responses to questions relating to the Health Insurance Exchange and the program established under paragraph (1). 

(3) AUTHORITY TO PROVIDE SERVICES DIRECTLY OR BY CONTRACT.—The Commissioner may provide services under paragraph (2) directly or by contract with nonprofit entities that the 

Commissioner determines capable of carrying out such services. 

(4) SMALL EMPLOYER DEFINED.—In this subsection, the term 

‘‘small employer’’ means an employer with less than 100 employees. 

SEC. 207. HEALTH INSURANCE EXCHANGE TRUST FUND. 

(a) ESTABLISHMENT OF HEALTH INSURANCE EXCHANGE TRUST

FUND.—There is created within the Treasury of the United States 

a trust fund to be known as the ‘‘Health Insurance Exchange Trust 

Fund’’ (in this section referred to as the ‘‘Trust Fund’’), consisting 

of such amounts as may be appropriated or credited to the Trust 

Fund under this section or any other provision of law. 

(b) PAYMENTS FROM TRUST FUND.—The Commissioner shall pay 

from time to time from the Trust Fund such amounts as the Commissioner determines are necessary to make payments to operate the 

Health Insurance Exchange, including payments under subtitle C 

(relating to affordability credits). 

(c) TRANSFERS TO TRUST FUND.— 

(1) DEDICATED PAYMENTS.—There is hereby appropriated to 

the Trust Fund amounts equivalent to the following: 

(A) TAXES ON INDIVIDUALS NOT OBTAINING ACCEPTABLE

COVERAGE.—The amounts received in the Treasury under 

section 59B of the Internal Revenue Code of 1986 (relating 

to requirement of health insurance coverage for individuals). 

(B) EMPLOYMENT TAXES ON EMPLOYERS NOT PROVIDING

ACCEPTABLE COVERAGE.—The amounts received in the 

Treasury under section 3111(c) of the Internal Revenue 

Code of 1986 (relating to employers electing to not provide 

health benefits). 

(C) EXCISE TAX ON FAILURES TO MEET CERTAIN HEALTH

COVERAGE REQUIREMENTS.—The amounts received in the 

Treasury under section 4980H(b) (relating to excise tax 

with respect to failure to meet health coverage participation 

requirements). 

(2) APPROPRIATIONS TO COVER GOVERNMENT CONTRIBUTIONS.—There are hereby appropriated, out of any moneys in 

the Treasury not otherwise appropriated, to the Trust Fund, an 

amount equivalent to the amount of payments made from the 

Trust Fund under subsection (b) plus such amounts as are necessary reduced by the amounts deposited under paragraph (1). 

(d) APPLICATION OF CERTAIN RULES.—Rules similar to the rules 

of subchapter B of chapter 98 of the Internal Revenue Code of 1986 

shall apply with respect to the Trust Fund. 


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SEC. 208. OPTIONAL OPERATION OF STATE-BASED HEALTH INSURANCE EXCHANGES. 

(a) IN GENERAL.—If— 

(1) a State (or group of States, subject to the approval of the 

Commissioner) applies to the Commissioner for approval of a 

State-based Health Insurance Exchange to operate in the State 

(or group of States); and 

(2) the Commissioner approves such State-based Health Insurance Exchange, 

then, subject to subsections (c) and (d), the State-based Health Insurance Exchange shall operate, instead of the Health Insurance Exchange, with respect to such State (or group of States). The Commissioner shall approve a State-based Health Insurance Exchange if it 

meets the requirements for approval under subsection (b). 

(b) REQUIREMENTS FOR APPROVAL.—The Commissioner may not 

approve a State-based Health Insurance Exchange under this section unless the following requirements are met: 

(1) The State-based Health Insurance Exchange must demonstrate the capacity to and provide assurances satisfactory to 

the Commissioner that the State-based Health Insurance Exchange will carry out the functions specified for the Health Insurance Exchange in the State (or States) involved, including— 

(A) negotiating and contracting with QHBP offering entities for the offering of Exchange-participating health benefits plan, which satisfy the standards and requirements of 

this title and title I; 

(B) enrolling Exchange-eligible individuals and employers in such State in such plans; 

(C) the establishment of sufficient local offices to meet the 

needs of Exchange-eligible individuals and employers; 

(D) administering affordability credits under subtitle B 

using the same methodologies (and at least the same income verification methods) as would otherwise apply under 

such subtitle and at a cost to the Federal Government 

which does exceed the cost to the Federal Government if 

this section did not apply; and 

(E) enforcement activities consistent with federal requirements. 

(2) There is no more than one Health Insurance Exchange operating with respect to any one State. 

(3) The State provides assurances satisfactory to the Commissioner that approval of such an Exchange will not result in any 

net increase in expenditures to the Federal Government. 

(4) The State provides for reporting of such information as 

the Commissioner determines and assurances satisfactory to the 

Commissioner that it will vigorously enforce violations of applicable requirements. 

(5) Such other requirements as the Commissioner may specify. 

(c) CEASING OPERATION.— 

(1) IN GENERAL.—A State-based Health Insurance Exchange 

may, at the option of each State involved, and only after providing timely and reasonable notice to the Commissioner, cease 

operation as such an Exchange, in which case the Health InsurVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00863 Fmt 6601 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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ance Exchange shall operate, instead of such State-based 

Health Insurance Exchange, with respect to such State (or 

States). 

(2) TERMINATION; HEALTH INSURANCE EXCHANGE RESUMPTION

OF FUNCTIONS.—The Commissioner may terminate the approval 

(for some or all functions) of a State-based Health Insurance 

Exchange under this section if the Commissioner determines 

that such Exchange no longer meets the requirements of subsection (b) or is no longer capable of carrying out such functions 

in accordance with the requirements of this subtitle. In lieu of 

terminating such approval, the Commissioner may temporarily 

assume some or all functions of the State-based Health Insurance Exchange until such time as the Commissioner determines 

the State-based Health Insurance Exchange meets such requirements of subsection (b) and is capable of carrying out such 

functions in accordance with the requirements of this subtitle. 

(3) EFFECTIVENESS.—The ceasing or termination of a Statebased Health Insurance Exchange under this subsection shall 

be effective in such time and manner as the Commissioner shall 

specify. 

(d) RETENTION OF AUTHORITY.— 

(1) AUTHORITY RETAINED.—Enforcement authorities of the 

Commissioner shall be retained by the Commissioner. 

(2) DISCRETION TO RETAIN ADDITIONAL AUTHORITY.—The 

Commissioner may specify functions of the Health Insurance 

Exchange that— 

(A) may not be performed by a State-based Health Insurance Exchange under this section; or 

(B) may be performed by the Commissioner and by such 

a State-based Health Insurance Exchange. 

(e) REFERENCES.—In the case of a State-based Health Insurance 

Exchange, except as the Commissioner may otherwise specify under 

subsection (d), any references in this subtitle to the Health Insurance Exchange or to the Commissioner in the area in which the 

State-based Health Insurance Exchange operates shall be deemed a 

reference to the State-based Health Insurance Exchange and the 

head of such Exchange, respectively. 

(f) FUNDING.—In the case of a State-based Health Insurance Exchange, there shall be assistance provided for the operation of such 

Exchange in the form of a matching grant with a State share of expenditures required. 

SEC. 209. PARTICIPATION OF SMALL EMPLOYER BENEFIT ARRANGEMENTS. 

(a) IN GENERAL.—The Commissioner may enter into contracts 

with small employer benefit arrangements to provide consumer information, outreach, and assistance in the enrollment of small employers (and their employees) who are members of such an arrangement under Exchange participating health benefits plans. 

(b) SMALL EMPLOYER BENEFIT ARRANGEMENT DEFINED.—In this 

section, the term ‘‘small employer benefit arrangement’’ means a notfor-profit agricultural or other cooperative that— 

(1) consists solely of its members and is operated for the primary purpose of providing affordable employee benefits to its 

members; 


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(2) only has as members small employers in the same industry or line of business; 

(3) has no member that has more than a 5 percent voting interest in the cooperative; and 

(4) is governed by a board of directors elected by its members. 

Subtitle B—Public Health Insurance 

Option 

SEC. 221. ESTABLISHMENT AND ADMINISTRATION OF A PUBLIC 

HEALTH INSURANCE OPTION AS AN EXCHANGE-QUALIFIED HEALTH BENEFITS PLAN. 

(a) ESTABLISHMENT.—For years beginning with Y1, the Secretary 

of Health and Human Services (in this subtitle referred to as the 

‘‘Secretary’’) shall provide for the offering of an Exchange-participating health benefits plan (in this division referred to as the ‘‘public health insurance option’’) that ensures choice, competition, and 

stability of affordable, high quality coverage throughout the United 

States in accordance with this subtitle. In designing the option, the 

Secretary’s primary responsibility is to create a low-cost plan without comprimising quality or access to care. 

(b) OFFERING AS AN EXCHANGE-PARTICIPATING HEALTH BENEFITS

PLAN.— 

(1) EXCLUSIVE TO THE EXCHANGE.—The public health insurance option shall only be made available through the Health 

Insurance Exchange. 

(2) ENSURING A LEVEL PLAYING FIELD.—Consistent with this 

subtitle, the public health insurance option shall comply with 

requirements that are applicable under this title to an Exchange-participating health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost sharing. 

(3) PROVISION OF BENEFIT LEVELS.—The public health insurance option— 

(A) shall offer basic, enhanced, and premium plans; and 

(B) may offer premium-plus plans. 

(c) ADMINISTRATIVE CONTRACTING.—The Secretary may enter into 

contracts for the purpose of performing administrative functions (including functions described in subsection (a)(4) of section 1874A of 

the Social Security Act) with respect to the public health insurance 

option in the same manner as the Secretary may enter into contracts 

under subsection (a)(1) of such section. The Secretary has the same 

authority with respect to the public health insurance option as the 

Secretary has under subsections (a)(1) and (b) of section 1874A of 

the Social Security Act with respect to title XVIII of such Act. Contracts under this subsection shall not involve the transfer of insurance risk to such entity. 

(d) OMBUDSMAN.—The Secretary shall establish an office of the 

ombudsman for the public health insurance option which shall have 

duties with respect to the public health insurance option similar to 

the duties of the Medicare Beneficiary Ombudsman under section 

1808(c)(2) of the Social Security Act. 


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(e) DATA COLLECTION.—The Secretary shall collect such data as 

may be required to establish premiums and payment rates for the 

public health insurance option and for other purposes under this 

subtitle, including to improve quality and to reduce disparities in 

health and health care based on race, ethnicity, primary language, 

sex, sexual orientation, gender identity, disability, socioeconomic 

status, rural, urban, or other geographic setting, and any other population or subpopulation as determined appropriate by the Secretary, but only if the data collection is conducted on a voluntary 

basis and consistent with the standards, including privacy protections, established pursuant to section 1709 of the Public Health 

Service Act. 

(f) TREATMENT OF PUBLIC HEALTH INSURANCE OPTION.—With respect to the public health insurance option, the Secretary shall be 

treated as a QHBP offering entity offering an Exchange-participating health benefits plan. 

(g) ACCESS TO FEDERAL COURTS.—The provisions of Medicare 

(and related provisions of title II of the Social Security Act) relating 

to access of Medicare beneficiaries to Federal courts for the enforcement of rights under Medicare, including with respect to amounts 

in controversy, shall apply to the public health insurance option and 

individuals enrolled under such option under this title in the same 

manner as such provisions apply to Medicare and Medicare beneficiaries. 

SEC. 222. PREMIUMS AND FINANCING. 

(a) ESTABLISHMENT OF PREMIUMS.— (1) IN GENERAL.—The Secretary shall establish geographically-adjusted premium rates for the public health insurance 

option in a manner— 

(A) that complies with the premium rules established by 

the Commissioner under section 113 for Exchange-participating health benefit plans; and 

(B) at a level sufficient to fully finance the costs of— 

(i) health benefits provided by the public health insurance option; and 

(ii) administrative costs related to operating the public health insurance option. 

(2) CONTINGENCY MARGIN.—In establishing premium rates 

under paragraph (1), the Secretary shall include an appropriate 

amount for a contingency margin. 

(b) ACCOUNT.— 

(1) ESTABLISHMENT.—There is established in the Treasury of 

the United States an Account for the receipts and disbursements attributable to the operation of the public health insurance option, including the start-up funding under paragraph 

(2). Section 1854(g) of the Social Security Act shall apply to receipts described in the previous sentence in the same manner as 

such section applies to payments or premiums described in such 

section. 

(2) START-UP FUNDING.— 

(A) IN GENERAL.—In order to provide for the establishment of the public health insurance option there is hereby 

appropriated to the Secretary, out of any funds in the 

Treasury not otherwise appropriated, $2,000,000,000. In 


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order to provide for initial claims reserves before the collection of premiums, there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, such sums as necessary to cover 90 days worth 

of claims reserves based on projected enrollment. 

(B) AMORTIZATION OF START-UP FUNDING.—The Secretary 

shall provide for the repayment of the startup funding provided under subparagraph (A) to the Treasury in an amortized manner over the 10-year period beginning with Y1. 

(C) LIMITATION ON FUNDING.—Nothing in this section 

shall be construed as authorizing any additional appropriations to the Account, other than such amounts as are 

otherwise provided with respect to other Exchange-participating health benefits plans. 

SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES. 

(a) RATES ESTABLISHED BY SECRETARY.— 

(1) IN GENERAL.—The Secretary shall establish payment rates 

for the public health insurance option for services and health 

care providers consistent with this section and may change such 

payment rates in accordance with section 224. 

(2) INITIAL PAYMENT RULES.— 

(A) IN GENERAL.—Except as provided in subparagraph 

(B) and subsection (b)(1), during Y1, Y2, and Y3, the Secretary shall base the payment rates under this section for 

services and providers described in paragraph (1) on the 

payment rates for similar services and providers under 

parts A and B of Medicare. 

(B) EXCEPTIONS.— 

(i) PRACTITIONERS’ SERVICES.—Payment rates for 

practitioners’ services otherwise established under the 

fee schedule under section 1848 of the Social Security 

Act shall be applied without regard to the provisions 

under subsection (f) of such section and the update 

under subsection (d)(4) under such section for a year as 

applied under this paragraph shall be not less than 1 

percent. 

(ii) ADJUSTMENTS.—The Secretary may determine 

the extent to which Medicare adjustments applicable to 

base payment rates under parts A and B of Medicare 

shall apply under this subtitle. 

(3) FOR NEW SERVICES.—The Secretary shall modify payment 

rates described in paragraph (2) in order to accommodate payments for services, such as well-child visits, that are not otherwise covered under Medicare. 

(4) PRESCRIPTION DRUGS.—Payment rates under this section 

for prescription drugs that are not paid for under part A or 

part B of Medicare shall be at rates negotiated by the Secretary. 

(b) INCENTIVES FOR PARTICIPATING PROVIDERS.— 

(1) INITIAL INCENTIVE PERIOD.— 

(A) IN GENERAL.—The Secretary shall provide, in the case 

of services described in subparagraph (B) furnished during 

Y1, Y2, and Y3, for payment rates that are 5 percent greater than the rates established under subsection (a). 


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(B) SERVICES DESCRIBED.—The services described in this 

subparagraph are items and professional services, under 

the public health insurance option by a physician or other 

health care practitioner who participates in both Medicare 

and the public health insurance option. 

(C) SPECIAL RULES.—A pediatrician and any other health 

care practitioner who is a type of practitioner that does not 

typically participate in Medicare (as determined by the Secretary) shall also be eligible for the increased payment rates 

under subparagraph (A). 

(2) SUBSEQUENT PERIODS.— Beginning with Y4 and for subsequent years, the Secretary shall continue to use an administrative process to set such rates in order to promote payment accuracy, to ensure adequate beneficiary access to providers, and 

to promote affordablility and the efficient delivery of medical 

care consistent with section 221(a). Such rates shall not be set 

at levels expected to increase overall medical costs under the option beyond what would be expected if the process under subsection (a)(2) and paragraph (1) of this subsection were continued. 

(3) ESTABLISHMENT OF A PROVIDER NETWORK.—Health care 

providers participating under Medicare are participating providers in the public health insurance option unless they opt out 

in a process established by the Secretary. 

(c) ADMINISTRATIVE PROCESS FOR SETTING RATES.—Chapter 5 of 

title 5, United States Code shall apply to the process for the initial 

establishment of payment rates under this section but not to the specific methodology for establishing such rates or the calculation of 

such rates. 

(d) CONSTRUCTION.—Nothing in this subtitle shall be construed 

as limiting the Secretary’s authority to correct for payments that are 

excessive or deficient, taking into account the provisions of section 

221(a) and the amounts paid for similar health care providers and 

services under other Exchange-participating health benefits plans. 

(e) CONSTRUCTION.—Nothing in this subtitle shall be construed as 

affecting the authority of the Secretary to establish payment rates, 

including payments to provide for the more efficient delivery of services, such as the initiatives provided for under section 224. 

(f) LIMITATIONS ON REVIEW.—There shall be no administrative or 

judicial review of a payment rate or methodology established under 

this section or under section 224. 

SEC. 224. MODERNIZED PAYMENT INITIATIVES AND DELIVERY SYSTEM 

REFORM. 

(a) IN GENERAL.—For plan years beginning with Y1, the Secretary may utilize innovative payment mechanisms and policies to 

determine payments for items and services under the public health 

insurance option. The payment mechanisms and policies under this 

section may include patient-centered medical home and other care 

management payments, accountable care organizations, value-based 

purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers. 


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(b) REQUIREMENTS FOR INNOVATIVE PAYMENTS.—The Secretary 

shall design and implement the payment mechanisms and policies 

under this section in a manner that— 

(1) seeks to— 

(A) improve health outcomes; 

(B) reduce health disparities (including racial, ethnic, 

and other disparities); 

(C) provide efficent and affordable care; 

(D) address geographic variation in the provision of 

health services; or 

(E) prevent or manage chronic illness; and 

(2) promotes care that is integrated, patient-centered, quality, 

and efficient. 

(c) ENCOURAGING THE USE OF HIGH VALUE SERVICES.—To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option 

may modify cost sharing and payment rates to encourage the use of 

services that promote health and value. 

(d) NON-UNIFORMITY PERMITTED.—Nothing in this subtitle shall 

prevent the Secretary from varying payments based on different payment structure models (such as accountable care organizations and 

medical homes) under the public health insurance option for different geographic areas. 

SEC. 225. PROVIDER PARTICIPATION. 

(a) IN GENERAL.—The Secretary shall establish conditions of participation for health care providers under the public health insurance option. 

(b) LICENSURE OR CERTIFICATION.—The Secretary shall not allow 

a health care provider to participate in the public health insurance 

option unless such provider is appropriately licensed, certified, or 

otherwise permitted to practice under State law. 

(c) PAYMENT TERMS FOR PROVIDERS.— (1) PHYSICIANS.—The Secretary shall provide for the annual 

participation of physicians under the public health insurance 

option, for which payment may be made for services furnished 

during the year, in one of 2 classes: 

(A) PREFERRED PHYSICIANS.—Those physicians who agree 

to accept the payment rate established under section 223 

(without regard to cost-sharing) as the payment in full. 

(B) PARTICIPATING, NON-PREFERRED PHYSICIANS.—Those 

physicians who agree not to impose charges (in relation to 

the payment rate described in section 223 for such physicians) that exceed the ratio permitted under section 

1848(g)(2)(C) of the Social Security Act. 

(2) OTHER PROVIDERS.—The Secretary shall provide for the 

participation (on an annual or other basis specified by the Secretary) of health care providers (other than physicians) under 

the public health insurance option under which payment shall 

only be available if the provider agrees to accept the payment 

rate established under section 223 (without regard to cost-sharing) as the payment in full. 

(d) EXCLUSION OF CERTAIN PROVIDERS.—The Secretary shall exclude from participation under the public health insurance option 

a health care provider that is excluded from participation in a FedVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00869 Fmt 6601 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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eral health care program (as defined in section 1128B(f) of the Social Security Act). 

SEC. 226. APPLICATION OF FRAUD AND ABUSE PROVISIONS. 

Provisions of law (other than criminal law provisions) identified 

by the Secretary by regulation, in consultation with the Inspector 

General of the Department of Health and Human Services, that impose sanctions with respect to waste, fraud, and abuse under Medicare, such as the False Claims Act (31 U.S.C. 3729 et seq.), shall 

also apply to the public health insurance option. 

SEC. 227. SENSE OF THE HOUSE REGARDING ENROLLMENT OF MEMBERS IN THE PUBLIC OPTION. 

It is the sense of the House of Representatives that Members who 

vote in favor of the establishment of a public, Federal Government 

run health insurance option, and senior members of the President’s 

administration, are urged to forgo their right to participate in the 

Federal Employees Health Benefits Program (FEHBP) and agree to 

enroll under that public option. 

Subtitle C—Individual Affordability 

Credits 

SEC. 241. AVAILABILITY THROUGH HEALTH INSURANCE EXCHANGE. 

(a) IN GENERAL.—Subject to the succeeding provisions of this subtitle, in the case of an affordable credit eligible individual enrolled 

in an Exchange-participating health benefits plan— 

(1) the individual shall be eligible for, in accordance with 

this subtitle, affordability credits consisting of— 

(A) an affordability premium credit under section 243 to 

be applied against the premium for the Exchange-participating health benefits plan in which the individual is enrolled; and 

(B) an affordability cost-sharing credit under section 244 

to be applied as a reduction of the cost-sharing otherwise 

applicable to such plan; and 

(2) the Commissioner shall pay the QHBP offering entity that 

offers such plan from the Health Insurance Exchange Trust 

Fund the aggregate amount of affordability credits for all affordable credit eligible individuals enrolled in such plan. 

(b) APPLICATION.— 

(1) IN GENERAL.—An Exchange eligible individual may apply 

to the Commissioner through the Health Insurance Exchange or 

through another entity under an arrangement made with the 

Commissioner, in a form and manner specified by the Commissioner. The Commissioner through the Health Insurance Exchange or through another public entity under an arrangement 

made with the Commissioner shall make a determination as to 

eligibility of an individual for affordability credits under this 

subtitle.The Commissioner shall establish a process whereby, on 

the basis of information otherwise available, individuals may 

be deemed to be affordable credit eligible individuals. In carrying this subtitle, the Commissioner shall establish effective 


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methods that ensure that individuals with limited English proficiency are able to apply for affordability credits. 

(2) USE OF STATE MEDICAID AGENCIES.—If the Commissioner 

determines that a State Medicaid agency has the capacity to 

make a determination of eligibility for affordability credits 

under this subtitle and under the same standards as used by 

the Commissioner, under the Medicaid memorandum of understanding (as defined in section 205(c)(4))— 

(A) the State Medicaid agency is authorized to conduct 

such determinations for any Exchange-eligible individual 

who requests such a determination; and 

(B) the Commissioner shall reimburse the State Medicaid 

agency for the costs of conducting such determinations. 

(3) MEDICAID SCREEN AND ENROLL OBLIGATION.—In the case 

of an application made under paragraph (1), there shall be a 

determination of whether the individual is a Medicaid-eligible 

individual. If the individual is determined to be so eligible, the 

Commissioner, through the Medicaid memorandum of understanding, shall provide for the enrollment of the individual 

under the State Medicaid plan in accordance with the Medicaid 

memorandum of understanding. In the case of such an enrollment, the State shall provide for the same periodic redetermination of eligibility under Medicaid as would otherwise apply if 

the individual had directly applied for medical assistance to the 

State Medicaid agency. 

(c) USE OF AFFORDABILITY CREDITS.— 

(1) IN GENERAL.—In Y1 and Y2 an affordable credit eligible 

individual may use an affordability credit only with respect to 

a basic plan. 

(2) FLEXIBILITY IN PLAN ENROLLMENT AUTHORIZED.—Beginning with Y3, the Commissioner shall establish a process to 

allow an affordability credit to be used for enrollees in enhanced or premium plans. In the case of an affordable credit 

eligible individual who enrolls in an enhanced or premium 

plan, the individual shall be responsible for any difference between the premium for such plan and the affordable credit 

amount otherwise applicable if the individual had enrolled in 

a basic plan. 

(d) ACCESS TO DATA.—In carrying out this subtitle, the Commissioner shall request from the Secretary of the Treasury consistent 

with section 6103 of the Internal Revenue Code of 1986 such information as may be required to carry out this subtitle. 

(e) NO CASH REBATES.—In no case shall an affordable credit eligible individual receive any cash payment as a result of the application of this subtitle. 

SEC. 242. AFFORDABLE CREDIT ELIGIBLE INDIVIDUAL. 

(a) DEFINITION.— 

(1) IN GENERAL.—For purposes of this division, the term ‘‘affordable credit eligible individual’’ means, subject to subsection 

(b), an individual who is lawfully present in a State in the 

United States (other than as a nonimmigrant described in a 

subparagraph (excluding subparagraphs (K), (T), (U), and (V)) 

of section 101(a)(15) of the Immigration and Nationality Act)— 


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(A) who is enrolled under an Exchange-participating 

health benefits plan and is not enrolled under such plan as 

an employee (or dependent of an employee) through an employer qualified health benefits plan that meets the requirements of section 312; 

(B) with family income below 400 percent of the Federal 

poverty level for a family of the size involved; and 

(C) who is not a Medicaid eligible individual, other than 

an individual described in section 202(d)(3) or an individual during a transition period under section 

202(d)(4)(B)(ii). 

(2) TREATMENT OF FAMILY.—Except as the Commissioner may 

otherwise provide, members of the same family who are affordable credit eligible individuals shall be treated as a single affordable credit individual eligible for the applicable credit for 

such a family under this subtitle. 

(b) LIMITATIONS ON EMPLOYEE AND DEPENDENT DISQUALIFICATION.— 

(1) IN GENERAL.—Subject to paragraph (2), the term ‘‘affordable credit eligible individual’’ does not include a full-time employee of an employer if the employer offers the employee coverage (for the employee and dependents) as a full-time employee 

under a group health plan if the coverage and employer contribution under the plan meet the requirements of section 312. 

(2) EXCEPTIONS.— 

(A) FOR CERTAIN FAMILY CIRCUMSTANCES.—The Commissioner shall establish such exceptions and special rules in 

the case described in paragraph (1) as may be appropriate 

in the case of a divorced or separated individual or such 

a dependent of an employee who would otherwise be an affordable credit eligible individual. 

(B) FOR UNAFFORDABLE EMPLOYER COVERAGE.—For years 

beginning with Y2, in the case of full-time employees for 

which the cost of the employee premium (plus, to the extent 

specified by the Commissioner, out-of-pocket cost-sharing 

for such year or the preceding year) for coverage under a 

group health plan would exceed 11 percent of current family income (determined by the Commissioner on the basis of 

verifiable documentation and without regard to section 

245), paragraph (1) shall not apply. 

(c) INCOME DEFINED.— 

(1) IN GENERAL.—In this title, the term ‘‘income’’ means modified adjusted gross income (as defined in section 59B of the Internal Revenue Code of 1986). 

(2) STUDY OF INCOME DISREGARDS.—The Commissioner shall 

conduct a study that examines the application of income disregards for purposes of this subtitle. Not later than the first day 

of Y2, the Commissioner shall submit to Congress a report on 

such study and shall include such recommendations as the 

Commissioner determines appropriate. 

(d) CLARIFICATION OF TREATMENT OF AFFORDABILITY CREDITS.— 

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tunity Reconciliation Act of 1996, to be a benefit provided under section 403 of such title. 

SEC. 243. AFFORDABLE PREMIUM CREDIT. 

(a) IN GENERAL.—The affordability premium credit under this 

section for an affordable credit eligible individual enrolled in an 

Exchange-participating health benefits plan is in an amount equal 

to the amount (if any) by which the premium for the plan (or, if less, 

the reference premium amount specified in subsection (c)), exceeds 

the affordable premium amount specified in subsection (b) for the 

individual. 

(b) AFFORDABLE PREMIUM AMOUNT.— 

(1) IN GENERAL.—The affordable premium amount specified 

in this subsection for an individual for monthly premium in a 

plan year shall be equal to 1⁄12 of the product of— 

(A) the premium percentage limit specified in paragraph 

(2) for the individual based upon the individual’s family 

income for the plan year; and 

(B) the individual’s family income for such plan year. 

(2) PREMIUM PERCENTAGE LIMITS BASED ON TABLE.—The 

Commissioner shall establish premium percentage limits so 

that for individuals whose family income is within an income 

tier specified in the table in subsection (d) such percentage limits shall increase, on a sliding scale in a linear manner, from 

the initial premium percentage to the final premium percentage 

specified in such table for such income tier. 

(c) REFERENCE PREMIUM AMOUNT.—The reference premium 

amount specified in this subsection for a plan year for an individual 

in a premium rating area is equal to the average premium for the 

3 basic plans in the area for the plan year with the lowest premium 

levels. In computing such amount the Commissioner may exclude 

plans with extremely limited enrollments. 

(d) TABLE OF PREMIUM PERCENTAGE LIMITS AND ACTUARIAL

VALUE PERCENTAGES BASED ON INCOME TIER.— 

(1) IN GENERAL.—For purposes of this subtitle, the table specified in this subsection is as follows: 

In the case of family income (expressed as a 

percent of FPL) within the following income 

tier: 

The initial premium percentage is— The final premium percentage 

is— 

The actuarial value percentage is— 

133% through 150% 1.5% 3% 97% 

150% through 200% 3% 5% 93% 

200% through 250% 5% 7% 85% 

250% through 300% 7% 9% 78% 

300% through 350% 9% 10% 72% 

350% through 400% 10% 11% 70% 

(2) SPECIAL RULES.—For purposes of applying the table under 

paragraph (1)— 

(A) FOR LOWEST LEVEL OF INCOME.—In the case of an individual with income that does not exceed 133 percent of 

FPL, the individual shall be considered to have income 

that is 133% of FPL. 

(B) APPLICATION OF HIGHER ACTUARIAL VALUE PERCENTAGE AT TIER TRANSITION POINTS.—If two actuarial value 

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vidual, the actuarial value percentage shall be the higher 

of such percentages. 

SEC. 244. AFFORDABILITY COST-SHARING CREDIT. 

(a) IN GENERAL.—The affordability cost-sharing credit under this 

section for an affordable credit eligible individual enrolled in an 

Exchange-participating health benefits plan is in the form of the 

cost-sharing reduction described in subsection (b) provided under 

this section for the income tier in which the individual is classified 

based on the individual’s family income. 

(b) COST-SHARING REDUCTIONS.—The Commissioner shall specify 

a reduction in cost-sharing amounts and the annual limitation on 

cost-sharing specified in section 122(c)(2)(B) under a basic plan for 

each income tier specified in the table under section 243(d), with respect to a year, in a manner so that, as estimated by the Commissioner, the actuarial value of the coverage with such reduced costsharing amounts (and the reduced annual cost-sharing limit) is 

equal to the actuarial value percentage (specified in the table under 

section 243(d) for the income tier involved) of the full actuarial 

value if there were no cost-sharing imposed under the plan. 

(c) DETERMINATION AND PAYMENT OF COST-SHARING AFFORDABILITY CREDIT.—In the case of an affordable credit eligible individual in a tier enrolled in an Exchange-participating health benefits plan offered by a QHBP offering entity, the Commissioner shall 

provide for payment to the offering entity of an amount equivalent 

to the increased actuarial value of the benefits under the plan provided under section 203(c)(2)(B) resulting from the reduction in costsharing described in subsection (b). 

SEC. 245. INCOME DETERMINATIONS. 

(a) IN GENERAL.—In applying this subtitle for an affordability 

credit for an individual for a plan year, the individual’s income 

shall be the income (as defined in section 242(c)) for the individual 

for the most recent taxable year (as determined in accordance with 

rules of the Commissioner). The Federal poverty level applied shall 

be such level in effect as of the date of the application. 

(b) PROGRAM INTEGRITY; INCOME VERIFICATION PROCEDURES.— 

(1) PROGRAM INTEGRITY.—The Commissioner shall take such 

steps as may be appropriate to ensure the accuracy of determinations and redeterminations under this subtitle. 

(2) INCOME VERIFICATION.— 

(A) IN GENERAL.—Upon an initial application of an individual for an affordability credit under this subtitle (or in 

applying section 242(b)) or upon an application for a 

change in the affordability credit based upon a significant 

change in family income described in subparagraph (A)— 

(i) the Commissioner shall request from the Secretary 

of the Treasury the disclosure to the Commissioner of 

such information as may be permitted to verify the information contained in such application; and 

(ii) the Commissioner shall use the information so 

disclosed to verify such information. 

(B) ALTERNATIVE PROCEDURES.—The Commissioner shall 

establish procedures for the verification of income for purVerDate Nov 24 2008 02:21 Mar 18, 2010 Jkt 055104 PO 00000 Frm 00874 Fmt 6601 Sfmt 6603 E:\HR\OC\HR443P1.XXX HR443P1

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poses of this subtitle if no income tax return is available for 

the most recent completed tax year. 

(c) SPECIAL RULES.— (1) CHANGES IN INCOME AS A PERCENT OF FPL.—In the case 

that an individual’s income (expressed as a percentage of the 

Federal poverty level for a family of the size involved) for a plan 

year is expected (in a manner specified by the Commissioner) to 

be significantly different from the income (as so expressed) used 

under subsection (a), the Commissioner shall establish rules requiring an individual to report, consistent with the mechanism 

established under paragraph (2), significant changes in such 

income (including a significant change in family composition) 

to the Commissioner and requiring the substitution of such income for the income otherwise applicable. 

(2) REPORTING OF SIGNIFICANT CHANGES IN INCOME.—The 

Commissioner shall establish rules under which an individual 

determined to be an affordable credit eligible individual would 

be required to inform the Commissioner when there is a significant change in the family income of the individual (expressed 

as a percentage of the FPL for a family of the size involved) and 

of the information regarding such change. Such mechanism 

shall provide for guidelines that specify the circumstances that 

qualify as a significant change, the verifiable information required to document such a change, and the process for submission of such information. If the Commissioner receives new information from an individual regarding the family income of 

the individual,the Commissioner shall provide for a redetermination of the individual’s eligibility to be an affordable credit 

eligible individual. 

(3) TRANSITION FOR CHIP.—In the case of a child described in 

section 202(d)(2), the Commissioner shall establish rules under 

which the family income of the child is deemed to be no greater 

than the family income of the child as most recently determined 

before Y1 by the State under title XXI of the Social Security Act. 

(4) STUDY OF GEOGRAPHIC VARIATION IN APPLICATION OF

FPL.—The Commissioner shall examine the feasibility and implication of adjusting the application of the Federal poverty 

level under this subtitle for different geographic areas so as to 

reflect the variations in cost-of-living among different areas 

within the United States. If the Commissioner determines that 

an adjustment is feasible, the study should include a methodology to make such an adjustment. Not later than the first day 

of Y2, the Commissioner shall submit to Congress a report on 

such study and shall include such recommendations as the 

Commissioner determines appropriate. 

(d) PENALTIES FOR MISREPRESENTATION.—In the case of an individual intentionally misrepresents family income or the individual 

fails (without regard to intent) to disclose to the Commissioner a 

significant change in family income under subsection (c) in a manner that results in the individual becoming an affordable credit eligible individual when the individual is not or in the amount of the 

affordability credit exceeding the correct amount— 

(1) the individual is liable for repayment of the amount of the 

improper affordability credit; ;and 


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(2) in the case of such an intentional misrepresentation or 

other egregious circumstances specified by the Commissioner, 

the Commissioner may impose an additional penalty. 

SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED ALIENS. 

Nothing in this subtitle shall allow Federal payments for affordability credits on behalf of individuals who are not lawfully present 

in the United States. 

Subtitle D—State Innovation 

SEC. 251. WAIVER OF ERISA LIMITATION; APPLICATION INSTEAD OF 

STATE SINGLE PAYER SYSTEM. 

(a) IN GENERAL.—A State may request from the Secretary, and 

the Secretary must grant except under extraordinary circumstances, 

a waiver of application of section 514 of the Employee Retirement 

Income Security Act of 1974 with respect to a state single payer system enacted into law by such State that would be structured and 

operate in a manner consistent with this subtitle. The Secretary 

shall provide for the revocation of any waiver granted under this 

section upon a determination made by the Secretary that the requirements of the preceding sentence are no longer being met. 

(b) EFFECT OF WAIVER.—During any period for which a waiver 

under subsection (a) is in effect— 

(1) the provisions of section 514 of the Employee Retirement 

Income Security Act of 1974 shall not apply with respect to the 

State single payer system; and 

(2) the State single payer system shall operate in the State instead of the public health insurance option or the National 

Health Exchange. 

(c) CONSTRUCTION.—Nothing in this subtitle shall be construed to 

limit or otherwise affect the transfer and allocation under this Act 

of funds to States with single payer systems. 

SEC. 252. REQUIREMENTS. 

A State single payer system shall— 

(1) ) provide benefits that meet or exceed the standards of coverage and quality of care set forth in this Act; and 

(2) ensure that the cost to the Federal Government resulting 

from the waiver granted under section 261 is neither substantially greater nor substantially less than would have been the 

case in the absence of such waiver, except that: 

(A) the State may seek and benefit from planning and 

start-up funds with respect to the system; and 

(B) nothing in this paragraph shall be construed to preclude allowance for normal variations in population demographics, health status, and other factors exogenous to the 

health care system that may affect differences in costs. 

SEC. 253. DEFINITIONS. 

(a) STATE SINGLE PAYER SYSTEM.—The term ‘‘State single payer 

system’’ means, in connection with a State, a non-profit program of 

the State for providing health care— 

(1) in which a single agency of the State is responsible for financing health care benefits for all residents of the State and 


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for the administration or supervision of the administration of 

the program; 

(2) under which private insurance duplicating the benefits 

provided in the single payer program is prohibited; 

(3) which provides comprehensive health benefits to all residents of the State, and provides measures to assure free choice 

of providers for covered services, to promote quality, and to help 

resolve complaints and disputes between consumers and providers; and 

(4) under which participation by health maintenance organizations is limited to non-profit health maintenance organizations that own their own delivery facilities and employ physicians on salary, and funding is limited to services that the 

health maintenance organizations actually deliver; and 

(5) which may be maintained by such State together one or 

more other States in a geographic region. 

(b) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of 

Labor, acting in consultation with the Secretary of Health and 

Human Services. 

TITLE III—SHARED RESPONSIBILITY 

Subtitle A—Individual Responsibility 

SEC. 301. INDIVIDUAL RESPONSIBILITY. 

For an individual’s responsibility to obtain acceptable coverage, 

see section 59B of the Internal Revenue Code of 1986 (as added by 

section 401 of this Act). 

Subtitle B—Employer Responsibility 

PART 1—HEALTH COVERAGE PARTICIPATION 

REQUIREMENTS 

SEC. 311. HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

(a) IN GENERAL.—An employer meets the requirements of this section if such employer does all of the following: 

(1) OFFER OF COVERAGE.—The employer offers each employee 

individual and family coverage under a qualified health benefits plan (or under a current employment-based health plan 

(within the meaning of section 102(b))) in accordance with section 312. 

(2) CONTRIBUTION TOWARDS COVERAGE.—If an employee accepts such offer of coverage, the employer makes timely contributions towards such coverage in accordance with section 

312. 

(3) CONTRIBUTION IN LIEU OF COVERAGE.—Beginning with 

Y2, if an employee declines such offer but otherwise obtains coverage in an Exchange-participating health benefits plan (other 

than by reason of being covered by family coverage as a spouse 

or dependent of the primary insured), the employer shall make 


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a timely contribution to the Health Insurance Exchange with respect to each such employee in accordance with section 313. 

(b) HARDSHIP EXEMPTION.—Notwithstanding any other provision 

of this part, an employer may, in a form and manner which shall 

be prescribed by the Secretary, apply to the Secretary for a waiver 

from the health coverage participation requirements of this part for 

any 2-year period. The Secretary shall grant the waiver within 30 

days after submission of the application if the application reasonably demonstrates to the Secretary that meeting the requirements of 

this part would result in job losses that would negatively impact the 

employer or the community in which the employer is located. 

SEC. 312. EMPLOYER RESPONSIBILITY TO CONTRIBUTE TOWARDS EMPLOYEE AND DEPENDENT COVERAGE. 

(a) IN GENERAL.—An employer meets the requirements of this section with respect to an employee if the following requirements are 

met: 

(1) OFFERING OF COVERAGE.—The employer offers the coverage described in section 311(1) either through an Exchangeparticipating health benefits plan or other than through such a 

plan. 

(2) EMPLOYER REQUIRED CONTRIBUTION.—The employer timely pays to the issuer of such coverage an amount not less than 

the employer required contribution specified in subsection (b) 

for such coverage. 

(3) PROVISION OF INFORMATION.—The employer provides the 

Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the 

Treasury, as applicable, with such information as the Commissioner may require to ascertain compliance with the requirements of this section. 

(4) AUTOENROLLMENT OF EMPLOYEES.—The employer provides for autoenrollment of the employee in accordance with 

subsection (c). 

(b) REDUCTION OF EMPLOYEE PREMIUMS THROUGH MINIMUM EMPLOYER CONTRIBUTION.— 

(1) FULL-TIME EMPLOYEES.—The minimum employer contribution described in this subsection for coverage of a full-time 

employee (and, if any, the employee’s spouse and qualifying 

children (as defined in section 152(c) of the Internal Revenue 

Code of 1986) under a qualified health benefits plan (or current 

employment-based health plan) is equal to— 

(A) in case of individual coverage, not less than 72.5 percent of the applicable premium (as defined in section 

4980B(f)(4) of such Code, subject to paragraph (2)) of the 

lowest cost plan offered by the employer that is a qualified 

health benefits plan (or is such current employment-based 

health plan); and 

(B) in the case of family coverage which includes coverage of such spouse and children, not less 65 percent of 

such applicable premium of such lowest cost plan. 

(2) APPLICABLE PREMIUM FOR EXCHANGE COVERAGE.—In this 

subtitle, the amount of the applicable premium of the lowest 

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mium amount under section 243(c) for individual coverage (or, 

if elected, family coverage) for the premium rating area in 

which the individual or family resides. 

(3) MINIMUM EMPLOYER CONTRIBUTION FOR EMPLOYEES

OTHER THAN FULL-TIME EMPLOYEES.—In the case of coverage for 

an employee who is not a full-time employee, the amount of the 

minimum employer contribution under this subsection shall be 

a proportion (as determined in accordance with rules of the 

Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the 

Treasury, as applicable) of the minimum employer contribution 

under this subsection with respect to a full-time employee that 

reflects the proportion of— 

(A) the average weekly hours of employment of the employee by the employer, to 

(B) the minimum weekly hours specified by the Commissioner for an employee to be a full-time employee. 

(4) SALARY REDUCTIONS NOT TREATED AS EMPLOYER CON- TRIBUTIONS.—For purposes of this section, any contribution on 

behalf of an employee with respect to which there is a corresponding reduction in the compensation of the employee shall 

not be treated as an amount paid by the employer. 

(c) AUTOMATIC ENROLLMENT FOR EMPLOYER SPONSORED HEALTH

BENEFITS.— (1) IN GENERAL.—The requirement of this subsection with respect to an employer and an employee is that the employer automatically enroll suchs employee into the employment-based 

health benefits plan for individual coverage under the plan option with the lowest applicable employee premium. 

(2) OPT-OUT.—In no case may an employer automatically enroll an employee in a plan under paragraph (1) if such employee makes an affirmative election to opt out of such plan or 

to elect coverage under an employment-based health benefits 

plan offered by such employer. An employer shall provide an 

employee with a 30-day period to make such an affirmative 

election before the employer may automatically enroll the employee in such a plan. 

(3) NOTICE REQUIREMENTS.— (A) IN GENERAL.—Each employer described in paragraph 

(1) who automatically enrolls an employee into a plan as 

described in such paragraph shall provide the employees, 

within a reasonable period before the beginning of each 

plan year (or, in the case of new employees, within a reasonable period before the end of the enrollment period for 

such a new employee), written notice of the employees’ 

rights and obligations relating to the automatic enrollment 

requirement under such paragraph. Such notice must be 

comprehensive and understood by the average employee to 

whom the automatic enrollment requirement applies. 

(B) INCLUSION OF SPECIFIC INFORMATION.—The written 

notice under subparagraph (A) must explain an employee’s 

right to opt out of being automatically enrolled in a plan 

and in the case that more than one level of benefits or employee premium level is offered by the employer involved, 


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the notice must explain which level of benefits and employee premium level the employee will be automatically enrolled in the absence of an affirmative election by the employee. 

SEC. 313. EMPLOYER CONTRIBUTIONS IN LIEU OF COVERAGE. 

(a) IN GENERAL.—A contribution is made in accordance with this 

section with respect to an employee if such contribution is equal to 

an amount equal to 8 percent of the average wages paid by the employer during the period of enrollment (determined by taking into 

account all employees of the employer and in such manner as the 

Commissioner provides, including rules providing for the appropriate aggregation of related employers). Any such contribution— 

(1) shall be paid to the Health Choices Commissioner for deposit into the Health Insurance Exchange Trust Fund, and 

(2) shall not be applied against the premium of the employee 

under the Exchange-participating health benefits plan in which 

the employee is enrolled. 

(b) SPECIAL RULES FOR SMALL EMPLOYERS.— 

(1) IN GENERAL.—In the case of any employer who is a small 

employer for any calendar year, subsection (a) shall be applied 

by substituting the applicable percentage determined in accordance with the following table for ‘‘8 percent’’: 

IF THE ANNUAL PAYROLL OF SUCH EMPLOYER FOR THE PRECEDING CALENDAR

YEAR: 

THE APPLICABLE

PERCENTAGE IS: 

Does not exceed $250,000 .......................................... 0 percent 

Exceeds $250,000, but does not exceed $300,000 .... 2 percent 

Exceeds $300,000, but does not exceed $350,000 .... 4 percent 

Exceeds $350,000, but does not exceed $400,000 .... 6 percent 

(2) SMALL EMPLOYER.—For purposes of this subsection, the 

term ‘‘small employer’’ means any employer for any calendar 

year if the annual payroll of such employer for the preceding 

calendar year does not exceed $400,000. 

(3) ANNUAL PAYROLL.—For purposes of this paragraph, the 

term ‘‘annual payroll’’ means, with respect to any employer for 

any calendar year, the aggregate wages paid by the employer 

during such calendar year. 

(4) AGGREGATION RULES.—Related employers and predecessors shall be treated as a single employer for purposes of this 

subsection. 

SEC. 314. AUTHORITY RELATED TO IMPROPER STEERING. 

The Health Choices Commissioner (in coordination with the Secretary of Labor, the Secretary of Health and Human Services, and 

the Secretary of the Treasury) shall have authority to set standards 

for determining whether employers or insurers are undertaking any 

actions to affect the risk pool within the Health Insurance Exchange 

by inducing individuals to decline coverage under a qualified health 

benefits plan (or current employment-based health plan (within the 

meaning of section 102(b)) offered by the employer and instead to 

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ployer violating such standards shall be treated as not meeting the 

requirements of this section. 

PART 2—SATISFACTION OF HEALTH 

COVERAGE PARTICIPATION REQUIREMENTS 

SEC. 321. SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. 

(a) IN GENERAL.—Subtitle B of title I of the Employee Retirement 

Income Security Act of 1974 is amended by adding at the end the 

following new part: 

‘‘PART 8—NATIONAL HEALTH COVERAGE 

PARTICIPATION REQUIREMENTS 

‘‘SEC. 801. ELECTION OF EMPLOYER TO BE SUBJECT TO NATIONAL 

HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

‘‘(a) IN GENERAL.—An employer may make an election with the 

Secretary to be subject to the health coverage participation requirements. 

‘‘(b) TIME AND MANNER.—An election under subsection (a) may be 

made at such time and in such form and manner as the Secretary 

may prescribe. 

‘‘SEC. 802. TREATMENT OF COVERAGE RESULTING FROM ELECTION. 

‘‘(a) IN GENERAL.—If an employer makes an election to the Secretary under section 801— 

‘‘(1) such election shall be treated as the establishment and 

maintenance of a group health plan (as defined in section 

733(a)) for purposes of this title, subject to section 151 of the 

America’s Affordable Health Choices Act of 2009, and 

‘‘(2) the health coverage participation requirements shall be 

deemed to be included as terms and conditions of such plan. 

‘‘(b) PERIODIC INVESTIGATIONS TO DISCOVER NONCOMPLIANCE.— 

The Secretary shall regularly audit a representative sampling of 

employers and group health plans and conduct investigations and 

other activities under section 504 with respect to such sampling of 

plans so as to discover noncompliance with the health coverage participation requirements in connection with such plans. The Secretary shall communicate findings of noncompliance made by the 

Secretary under this subsection to the Secretary of the Treasury and 

the Health Choices Commissioner. The Secretary shall take such 

timely enforcement action as appropriate to achieve compliance. 

‘‘(c) RECORDKEEPING.—To facilitate the audits described in subsection (b), the Secretary shall promulgate recordkeeping requirements for employers to account for both employees of the employer 

and individuals whom the employer has not treated as employees of 

the employer but with whom the employer, in the course of the trade 

or business in which the employer is engaged, has engaged for the 

performance of labor or services. 

‘‘SEC. 803. HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

‘‘For purposes of this part, the term ‘health coverage participation 

requirements’ means the requirements of part 1 of subtitle B of title 


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III of division A of America’s Affordable Health Choices Act of 2009 

(as in effect on the date of the enactment of such Act). 

‘‘SEC. 804. RULES FOR APPLYING REQUIREMENTS. 

‘‘(a) AFFILIATED GROUPS.—In the case of any employer which is 

part of a group of employers who are treated as a single employer 

under subsection (b), (c), (m), or (o) of section 414 of the Internal 

Revenue Code of 1986, the election under section 801 shall be made 

by such employer as the Secretary may provide. Any such election, 

once made, shall apply to all members of such group. 

‘‘(b) SEPARATE ELECTIONS.—Under regulations prescribed by the 

Secretary, separate elections may be made under section 801 with 

respect to— 

‘‘(1) separate lines of business, and 

‘‘(2) full-time employees and employees who are not full-time 

employees. 

‘‘SEC. 805. TERMINATION OF ELECTION IN CASES OF SUBSTANTIAL 

NONCOMPLIANCE. 

‘‘The Secretary may terminate the election of any employer under 

section 801 if the Secretary (in coordination with the Health Choices 

Commissioner) determines that such employer is in substantial noncompliance with the health coverage participation requirements and 

shall refer any such determination to the Secretary of the Treasury 

as appropriate. 

‘‘SEC. 806. REGULATIONS. 

‘‘The Secretary may promulgate such regulations as may be necessary or appropriate to carry out the provisions of this part, in accordance with section 324(a) of the America’s Affordable Health 

Choices Act of 2009. The Secretary may promulgate any interim 

final rules as the Secretary determines are appropriate to carry out 

this part.’’. 

(b) ENFORCEMENT OF HEALTH COVERAGE PARTICIPATION RE- QUIREMENTS.—Section 502 of such Act (29 U.S.C. 1132) is amended— 

(1) in subsection (a)(6), by striking ‘‘paragraph’’ and all that 

follows through ‘‘subsection (c)’’ and inserting ‘‘paragraph (2), 

(4), (5), (6), (7), (8), (9), (10), or (11) of subsection (c)’’; and 

(2) in subsection (c), by redesignating the second paragraph 

(10) as paragraph (12) and by inserting after the first paragraph (10) the following new paragraph: 

‘‘(11) HEALTH COVERAGE PARTICIPATION REQUIREMENTS.— 

‘‘(A) CIVIL PENALTIES.—In the case of any employer who 

fails (during any period with respect to which an election 

under section 801(a) is in effect) to satisfy the health coverage participation requirements with respect to any employee, the Secretary may assess a civil penalty against the 

employer of $100 for each day in the period beginning on 

the date such failure first occurs and ending on the date 

such failure is corrected. 

‘‘(B) HEALTH COVERAGE PARTICIPATION REQUIREMENTS.— For purposes of this paragraph, the term ‘health coverage 

participation requirements’ has the meaning provided in 

section 803. 

‘‘(C) LIMITATIONS ON AMOUNT OF PENALTY.— 


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‘‘(i) PENALTY NOT TO APPLY WHERE FAILURE NOT DISCOVERED EXERCISING REASONABLE DILIGENCE.—No 

penalty shall be assessed under subparagraph (A) with 

respect to any failure during any period for which it is 

established to the satisfaction of the Secretary that the 

employer did not know, or exercising reasonable diligence would not have known, that such failure existed. 

‘‘(ii) PENALTY NOT TO APPLY TO FAILURES CORRECTED

WITHIN 30 DAYS.—No penalty shall be assessed under 

subparagraph (A) with respect to any failure if— 

‘‘(I) such failure was due to reasonable cause 

and not to willful neglect, and 

‘‘(II) such failure is corrected during the 30-day 

period beginning on the 1st date that the employer 

knew, or exercising reasonable diligence would 

have known, that such failure existed. 

‘‘(iii) OVERALL LIMITATION FOR UNINTENTIONAL FAILURES.—In the case of failures which are due to reasonable cause and not to willful neglect, the penalty assessed under subparagraph (A) for failures during any 

1-year period shall not exceed the amount equal to the 

lesser of— 

‘‘(I) 10 percent of the aggregate amount paid or 

incurred by the employer (or predecessor employer) 

during the preceding 1-year period for group 

health plans, or 

‘‘(II) $500,000. 

‘‘(D) ADVANCE NOTIFICATION OF FAILURE PRIOR TO ASSESSMENT.—Before a reasonable time prior to the assessment of any penalty under this paragraph with respect to 

any failure by an employer, the Secretary shall inform the 

employer in writing of such failure and shall provide the 

employer information regarding efforts and procedures 

which may be undertaken by the employer to correct such 

failure. 

‘‘(E) COORDINATION WITH EXCISE TAX.—Under regulations prescribed in accordance with section 324 of the 

America’s Affordable Health Choices Act of 2009, the Secretary and the Secretary of the Treasury shall coordinate 

the assessment of penalties under this section in connection 

with failures to satisfy health coverage participation requirements with the imposition of excise taxes on such failures under section 4980H(b) of the Internal Revenue Code 

of 1986 so as to avoid duplication of penalties with respect 

to such failures. 

‘‘(F) DEPOSIT OF PENALTY COLLECTED.—Any amount of 

penalty collected under this paragraph shall be deposited 

as miscellaneous receipts in the Treasury of the United 

States.’’. 

(c) CLERICAL AMENDMENTS.—The table of contents in section 1 of 

such Act is amended by inserting after the item relating to section 

734 the following new items: 


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‘‘PART 8—NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS

‘‘Sec. 801. Election of employer to be subject to national health coverage participation requirements. 

‘‘Sec. 802. Treatment of coverage resulting from election. 

‘‘Sec. 803. Health coverage participation requirements. 

‘‘Sec. 804. Rules for applying requirements. 

‘‘Sec. 805. Termination of election in cases of substantial noncompliance. 

‘‘Sec. 806. Regulations.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to periods beginning after December 31, 2012. 

[For sections 322 and 323, see text of bill as introduced on June 

14, 2009.] 

SEC. 324. ADDITIONAL RULES RELATING TO HEALTH COVERAGE PARTICIPATION REQUIREMENTS. 

(a) ASSURING COORDINATION.—The officers consisting of the Secretary of Labor, the Secretary of the Treasury, the Secretary of 

Health and Human Services, and the Health Choices Commissioner 

shall ensure, through the execution of an interagency memorandum 

of understanding among such officers, that— 

(1) regulations, rulings, and interpretations issued by such officers relating to the same matter over which two or more of 

such officers have responsibility under subpart B of part 6 of 

subtitle B of title I of the Employee Retirement Income Security 

Act of 1974, section 4980H of the Internal Revenue Code of 

1986, and section 2793 of the Public Health Service Act are administered so as to have the same effect at all times; and 

(2) coordination of policies relating to enforcing the same requirements through such officers in order to have a coordinated 

enforcement strategy that avoids duplication of enforcement efforts and assigns priorities in enforcement. 

(b) MULTIEMPLOYER PLANS.—In the case of a group health plan 

that is a multiemployer plan (as defined in section 3(37) of the Employee Retirement Income Security Act of 1974), the regulations prescribed in accordance with subsection (a) by the officers referred to 

in subsection (a) shall provide for the application of the health coverage participation requirements to the plan sponsor and contributing sponsors of such plan. 

DIVISION B—MEDICARE AND MEDICAID 

IMPROVEMENTS 

ƒFor division B, see text of bill as introduced on July 14, 2009.≈ 

DIVISION C—PUBLIC HEALTH AND 

WORKFORCE DEVELOPMENT 

SEC. 2001. TABLE OF CONTENTS; REFERENCES. 

(a) TABLE OF CONTENTS.—The table of contents of this division is 

as follows: 

Sec. 2001. Table of contents; references. 

[For section 2002, see text of introduced bill.] 


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[FOR TEXT OF TITLES I THROUGH IV, SEE TEXT OF INTRODUCED BILL.] 

TITLE V—OTHER PROVISIONS 

[For Subtitles A, B, and C, See Text of Introduced Bill.] 

Subtitle D—Grants for Comprehensive Programs to Provide Education to Nurses and 

Create a Pipeline to Nursing 

[For Subtitle E, See Text of Introduced Bill.] 

Sec. 2531. Establishment of grant program. 

Subtitle F—Standards for Accessibility to Medical Equipment for Individuals With 

Disabilities. 

Sec. 2541. Access for individuals with disabilities. 

Subtitle G—Other Grant Programs 

Sec. 2551. Reducing student-to-school nurse ratios. 

Sec. 2552. Wellness program grants. 

Sec. 2553. Health professions training for diversity programs. 

Subtitle H—Long-term Care and Family Caregiver Support 

Sec. 2561. Long-term care and family caregiver support. 

Subtitle I—Online Resources 

Sec. 2571. Web site on health care labor market and related educational and training opportunities. 

Sec. 2572. Online health workforce training programs. 

(b) REFERENCES.—Except as otherwise specified, whenever in this 

division an amendment is expressed in terms of an amendment to 

a section or other provision, the reference shall be considered to be 

made to a section or other provision of the Public Health Service Act 

(42 U.S.C. 201 et seq.). 

[For section 2002 and titles I through IV of division C, see text 

of bill as introduced on July 14, 2009.] 

TITLE V—OTHER PROVISIONS 

[For subtitles A through C of title V of division C, see text of bill 

as introduced on July 14, 2009.] 

Subtitle D—Grants for Comprehensive Programs to Provide Education to Nurses 

and Create a Pipeline to Nursing 

SEC. 2531. ESTABLISHMENT OF GRANT PROGRAM. 

(a) PURPOSES.—It is the purpose of this section to authorize 

grants to— 

(1) address the projected shortage of nurses by funding comprehensive programs to create a career ladder to nursing (including Certified Nurse Assistants, Licensed Practical Nurses, 

Licensed Vocational Nurses, and Registered Nurses) for incumbent ancillary health care workers; 

(2) increase the capacity for educating nurses by increasing 

both nurse faculty and clinical opportunities through collaborative programs between staff nurse organizations, health care 

providers, and accredited schools of nursing; and 


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(3) provide training programs through education and training organizations jointly administered by health care providers 

and health care labor organizations or other organizations representing staff nurses and frontline health care workers, working in collaboration with accredited schools of nursing and academic institutions. 

(b) GRANTS.—Not later than 6 months after the date of the enactment of this Act, the Secretary of Labor (referred to in this section 

as the ‘‘Secretary’’) shall establish a partnership grant program to 

award grants to eligible entities to carry out comprehensive programs to provide education to nurses and create a pipeline to nursing for incumbent ancillary health care workers who wish to advance their careers, and to otherwise carry out the purposes of this 

section. 

(c) ELIGIBILITY.—To be eligible for a grant under this section, an 

entity shall be— 

(1) a health care entity that is jointly administered by a 

health care employer and a labor union representing the health 

care employees of the employer and that carries out activities 

using labor management training funds as provided for under 

section 302(c)(6) of the Labor Management Relations Act, 1947 

(29 U.S.C. 186(c)(6)); 

(2) an entity that operates a training program that is jointly 

administered by— 

(A) one or more health care providers or facilities, or a 

trade association of health care providers; and 

(B) one or more organizations which represent the interests of direct care health care workers or staff nurses and 

in which the direct care health care workers or staff nurses 

have direct input as to the leadership of the organization; 

(3) a State training partnership program that consists of nonprofit organizations that include equal participation from industry, including public or private employers, and labor organizations including joint labor-management training programs, 

and which may include representatives from local governments, 

worker investment agency one-stop career centers, communitybased organizations, community colleges, and accredited 

schools of nursing; or 

(4) a school of nursing (as defined in section 801 of the Public 

Health Service Act (42 U.S.C. 296)). 

(d) ADDITIONAL REQUIREMENTS FOR HEALTH CARE EMPLOYER DESCRIBED IN SUBSECTION (c).—To be eligible for a grant under this 

section, a health care employer described in subsection (c) shall 

demonstrate that it— 

(1) has an established program within their facility to encourage the retention of existing nurses; 

(2) provides wages and benefits to its nurses that are competitive for its market or that have been collectively bargained with 

a labor organization; and 

(3) supports programs funded under this section through 1 or 

more of the following: 

(A) The provision of paid leave time and continued 

health coverage to incumbent health care workers to allow 

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cluding certified nurse assistants, licensed practical nurses, 

licensed vocational nurses, and registered nurses. 

(B) Contributions to a joint labor-management training 

fund which administers the program involved. 

(C) The provision of paid release time, incentive compensation, or continued health coverage to staff nurses who 

desire to work full- or part-time in a faculty position. 

(D) The provision of paid release time for staff nurses to 

enable them to obtain a bachelor of science in nursing degree, other advanced nursing degrees, specialty training, or 

certification program. 

(E) The payment of tuition assistance which is managed 

by a joint labor-management training fund or other jointly 

administered program. 

(e) OTHER REQUIREMENTS.— (1) MATCHING REQUIREMENT.— (A) IN GENERAL.—The Secretary may not make a grant 

under this section unless the applicant involved agrees, 

with respect to the costs to be incurred by the applicant in 

carrying out the program under the grant, to make available non-Federal contributions (in cash or in kind under 

subparagraph (B)) toward such costs in an amount equal 

to not less than $1 for each $1 of Federal funds provided 

in the grant. Such contributions may be made directly or 

through donations from public or private entities, or may 

be provided through the cash equivalent of paid release 

time provided to incumbent worker students. 

(B) DETERMINATION OF AMOUNT OF NON-FEDERAL CON- TRIBUTION.—Non-Federal contributions required in subparagraph (A) may be in cash or in kind (including paid 

release time), fairly evaluated, including equipment or services (and excluding indirect or overhead costs). Amounts 

provided by the Federal Government, or services assisted or 

subsidized to any significant extent by the Federal Government, may not be included in determining the amount of 

such non-Federal contributions. 

(2) REQUIRED COLLABORATION.—Entities carrying out or overseeing programs carried out with assistance provided under 

this section shall demonstrate collaboration with accredited 

schools of nursing which may include community colleges and 

other academic institutions providing associate, bachelor’s, or 

advanced nursing degree programs or specialty training or certification programs. 

(f) USE OF FUNDS.—Amounts awarded to an entity under a grant 

under this section shall be used for the following: 

(1) To carry out programs that provide education and training to establish nursing career ladders to educate incumbent 

health care workers to become nurses (including certified nurse 

assistants, licensed practical nurses, licensed vocational nurses, 

and registered nurses). Such programs shall include one or 

more of the following: 

(A) Preparing incumbent workers to return to the classroom through English -as-a-second language education, 

GED education, pre-college counseling, college preparation 


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classes, and support with entry level college classes that are 

a prerequisite to nursing. 

(B) Providing tuition assistance with preference for dedicated cohort classes in community colleges, universities, accredited schools of nursing with supportive services including tutoring and counseling. 

(C) Providing assistance in preparing for and meeting all 

nursing licensure tests and requirements. 

(D) Carrying out orientation and mentorship programs 

that assist newly graduated nurses in adjusting to working 

at the bedside to ensure their retention postgraduation, and 

ongoing programs to support nurse retention. 

(E) Providing stipends for release time and continued 

health care coverage to enable incumbent health care workers to participate in these programs. 

(2) To carry out programs that assist nurses in obtaining advanced degrees and completing specialty training or certification programs and to establish incentives for nurses to assume nurse faculty positions on a part-time or full-time basis. 

Such programs shall include one or more of the following: 

(A) Increasing the pool of nurses with advanced degrees 

who are interested in teaching by funding programs that 

enable incumbent nurses to return to school. 

(B) Establishing incentives for advanced degree bedside 

nurses who wish to teach in nursing programs so they can 

obtain a leave from their bedside position to assume a fullor part-time position as adjunct or full-time faculty without 

the loss of salary or benefits. 

(C) Collaboration with accredited schools of nursing 

which may include community colleges and other academic 

institutions providing associate, bachelor’s, or advanced 

nursing degree programs, or specialty training or certification programs, for nurses to carry out innovative nursing 

programs which meet the needs of bedside nursing and 

health care providers. 

(g) PREFERENCE.—In awarding grants under this section the Secretary shall give preference to programs that— 

(1) provide for improving nurse retention; 

(2) provide for improving the diversity of the new nurse graduates to reflect changes in the demographics of the patient population; 

(3) provide for improving the quality of nursing education to 

improve patient care and safety; 

(4) have demonstrated success in upgrading incumbent health 

care workers to become nurses or which have established effective programs or pilots to increase nurse faculty; or 

(5) are modeled after or affiliated with such programs described in paragraph (4). 

(h) EVALUATION.— (1) PROGRAM EVALUATIONS.—An entity that receives a grant 

under this section shall annually evaluate, and submit to the 

Secretary a report on, the activities carried out under the grant 

and the outcomes of such activities. Such outcomes may include— 


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(A) an increased number of incumbent workers entering 

an accredited school of nursing and in the pipeline for 

nursing programs; 

(B) an increasing number of graduating nurses and improved nurse graduation and licensure rates; 

(C) improved nurse retention; 

(D) an increase in the number of staff nurses at the 

health care facility involved; 

(E) an increase in the number of nurses with advanced 

degrees in nursing; 

(F) an increase in the number of nurse faculty; 

(G) improved measures of patient quality (which may include staffing ratios of nurses, patient satisfaction rates, 

patient safety measures); and 

(H) an increase in the diversity of new nurse graduates 

relative to the patient population. 

(2) GENERAL REPORT.—Not later than 2 years after the date 

of the enactment of this Act, and annually thereafter, the Secretary of Labor shall, using data and information from the reports received under paragraph (1), submit to the Congress a 

report concerning the overall effectiveness of the grant program 

carried out under this section. 

(i) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to 

be appropriated to carry out this section such sums as may be necessary. 

[For subtitle E of title V of division C, see text of bill as introduced on July 14, 2009.] 

Subtitle F—Standards for Accessibility to 

Medical Equipment for Individuals With 

Disabilities. 

SEC. 2541. ACCESS FOR INDIVIDUALS WITH DISABILITIES. 

Title V of the Rehabilitation Act of 1973 (29 U.S.C. 791 et seq.) 

is amended by adding at the end of the following: 

‘‘SEC. 510. STANDARDS FOR ACCESSIBILITY OF MEDICAL DIAGNOSTIC 

EQUIPMENT. 

‘‘(a) STANDARDS.—Not later than 9 months after the date of enactment of the America’s Affordable Health Choices Act of 2009, the 

Architectural and Transportation Barriers Compliance Board shall 

issue guidelines setting forth the minimum technical criteria for 

medical diagnostic equipment used in (or in conjunction with) physician’s offices, clinics, emergency rooms, hospitals, and other medical settings. The guidelines shall ensure that such equipment is accessible to, and usable by, individuals with disabilities, including 

provisions to ensure independent entry to, use of, and exit from the 

equipment by such individuals to the maximum extent possible. 

‘‘(b) MEDICAL DIAGNOSTIC EQUIPMENT COVERED.—The guidelines 

issued under subsection (a) for medical diagnostic equipment shall 

apply to equipment that includes examination tables, examination 

chairs (including chairs used for eye examinations or procedures, 

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raphy equipment, x-ray machines, and other equipment commonly 

used for diagnostic or examination purposes by health professionals. 

‘‘(c) INTERIM STANDARDS.—Until the date on which final regulations are issued under subsection (d), purchases of examination tables, weight scales, and mammography equipment and used in (or 

in conjunction with) medical settings described in subsection (a), 

shall adhere to the following interim accessibility requirements: 

‘‘(1) Examination tables shall be height-adjustable between a 

range of at least 18 inches to 37 inches. 

‘‘(2) Weight scales shall be capable of weighing individuals 

who remain seated in a wheelchair or other personal mobility 

aid. 

‘‘(3) Mammography machines and equipment shall be capable 

of being used by individuals in a standing, seated, or recumbent position, including individuals who remain seated in a 

wheelchair or other personal mobility aid. 

‘‘(d) REGULATIONS.—Not later than 6 months after the date of the 

issuance of the guidelines under subsection (a), each appropriate 

Federal agency authorized to promulgate regulations under this Act 

or under the Americans with Disabilities Act shall— 

‘‘(1) prescribe regulations in an accessible format as necessary 

to carry out the provisions of such Act and section 504 of this 

Act that include accessibility standards that are consistent with 

the guidelines issued under subsection (a); and 

‘‘(2) ensure that health care providers and health care plans 

covered by the America’s Affordable Health Choices Act of 2009 

meet the requirements of the Americans with Disabilities Act 

and section 504, including provisions ensuring that individuals 

with disabilities receive equal access to all aspects of the health 

care delivery system. 

‘‘(e) REVIEW AND AMEND.—The Architectural and Transportation 

Barriers Compliance Board shall periodically review and, as appropriate, amend the guidelines as prescribed under subsection (a). Not 

later than 6 months after the date of the issuance of such revised 

guidelines, revised regulations consistent with such guidelines shall 

be promulgated in an accessible format by the appropriate Federal 

agencies described in subsection (d).’’. 

Subtitle G—Other Grant Programs 

SEC. 2551. REDUCING STUDENT-TO-SCHOOL NURSE RATIOS. 

(a) DEMONSTRATION GRANTS.— 

(1) IN GENERAL.—The Secretary of Education, in consultation 

with the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention, may 

make demonstration grants to eligible local education agencies 

for the purpose of reducing the student-to-school nurse ratio in 

public elementary and secondary schools. 

(2) SPECIAL CONSIDERATION.—In awarding grants under this 

section, the Secretary of Education shall give special consideration to applications submitted by high-need local educational 

agencies that demonstrate the greatest need for new or additional nursing services among children in the public elementary 


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and secondary schools served by the agency, in part by providing information on current ratios of students to school 

nurses. 

(3) MATCHING FUNDS.—The Secretary of Education may require recipients of grants under this subsection to provide 

matching funds from non-Federal sources, and shall permit the 

recipients to match funds in whole or in part with in-kind contributions. 

(b) REPORT.—Not later than 24 months after the date on which 

assistance is first made available to local educational agencies 

under this section, the Secretary of Education shall submit to the 

Congress a report on the results of the demonstration grant program 

carried out under this section, including an evaluation of the effectiveness of the program in improving the student-to-school nurse ratios described in subsection (a) and an evaluation of the impact of 

any resulting enhanced health of students on learning. 

(c) DEFINITIONS.—For purposes of this section: 

(1) The terms ‘‘elementary school’’, ‘‘local educational agency’’, 

and ‘‘secondary school’’ have the meanings given to those terms 

in section 9101 of the Elementary and Secondary Education Act 

of 1965 (20 U.S.C. 7801). 

(2) The term ‘‘eligible local educational agency’’ means a local 

educational agency in which the student-to-school nurse ratio in 

the public elementary and secondary schools served by the agency is 750 or more students to every school nurse. 

(3) The term ‘‘high-need local educational agency’’ means a 

local educational agency— 

(A) that serves not fewer than 10,000 children from families with incomes below the poverty line; or 

(B) for which not less than 20 percent of the children 

served by the agency are from families with incomes below 

the poverty line. 

(4) The term ‘‘nurse’’ means a licensed nurse, as defined 

under State law. 

(d) AUTHORIZATION OF APPROPRIATIONS.—To carry out this section, there are authorized to be appropriated such sums as may be 

necessary for each of the fiscal years 2010 through 2014. 

SEC. 2552. WELLNESS PROGRAM GRANTS. 

(a) ALLOWANCE OF GRANT.— 

(1) IN GENERAL.—For purposes of this section, the Secretary 

of Labor shall award wellness grants as determined under this 

section. Wellness program grants shall be awarded to qualified 

employers for any plan year in an amount equal to 50 percent 

of the costs paid or incurred by the employer in connection with 

a qualified wellness program during the plan year. For purposes of the preceding sentence, in the case of any qualified 

wellness program offered as part of an employment-based 

health plan, only costs attributable to the qualified wellness 

program and not to the health plan, or health insurance coverage offered in connection with such a plan, may be taken into 

account. 

(2) LIMITATION.—The amount of the grant allowed under 

paragraph (1) for any plan year shall not exceed the sum of— 


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(A) the product of $200 and the number of employees of 

the employer not in excess of 200 employees; plus (B) the product of $100 and the number of employees of 

the employer in excess of 200 employees. 

The wellness grants awarded to an employer under this section 

shall be for up to 3 years and shall not exceed $50,000. 

(b) QUALIFIED WELLNESS PROGRAM.—For purposes of this section: 

(1) QUALIFIED WELLNESS PROGRAM.—The term ‘‘qualified 

wellness program’’ means a program that — 

(A) includes any 3 wellness components described in subsection (c); and 

(B) is be certified by the Secretary of Labor, in coordination with the Health Choices Commissioner and the Director of the Center for Disease Control and Prevention, as a 

qualified wellness program under this section. 

(2) PROGRAMS MUST BE CONSISTENT WITH RESEARCH AND

BEST PRACTICES.— (A) IN GENERAL.—The Secretary of Labor shall not certify 

a program as a qualified wellness program unless the program— 

(i) is newly established or in existence on the date of 

enactment of this Act but not yet meeting the requirements of this section; 

(ii) is consistent with evidenced-based researched 

and best practices, as identified by persons with expertise in employer health promotion and wellness programs; 

(iii) includes multiple, evidenced-based strategies 

which are based on the existing and emerging research 

and careful scientific reviews, including the Guide to 

Community Preventative Services, the Guide to Clinical Preventative Services, and the National Registry 

for Effective Programs, and 

(iv) includes strategies which focus on prevention 

and support for employee populations at risk of poor 

health outcomes. 

(B) PERIODIC UPDATING AND REVIEW.—The Secretary of 

Labor, in consultation with other appropriate agencies 

shall establish procedures for periodic review, evaluation, 

and update of the programs under this subsection. 

(3) HEALTH LITERACY/ACCESSIBILITY.—The Secretary of 

Labor shall, as part of the certification process: — 

(A) ensure that employers make the programs culturally 

competent. physically and programmatically accessible (including for individuals with disabilities), and appropriate 

to the health literacy needs of the employees covered by the 

programs; 

(B) require a health literacy component to provide special 

assistance and materials to employees with low literacy 

skills, limited English and from under-served populations; 

and 

(C) require the Secretary of Labor, in consultation with 

Secretary of Health and Human Services, to compile and 

disseminate to employer health plans info on model health 


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literacy curricula, instructional programs, and effective 

intervention strategies. 

(c) WELLNESS PROGRAM COMPONENTS.—For purposes of this section, the wellness program components described in this subsection 

are the following: 

(1) HEALTH AWARENESS COMPONENT.—A health awareness 

component which provides for the following: 

(A) HEALTH EDUCATION.—The dissemination of health information which addresses the specific needs and health 

risks of employees. 

(B) HEALTH SCREENINGS.—The opportunity for periodic 

screenings for health problems and referrals for appropriate follow up measures. 

(2) EMPLOYEE ENGAGEMENT COMPONENT.—An employee engagement component which provides for the active engagement 

of employees in worksite wellness programs through worksite 

assessments and program planning, onsite delivery, evaluation, 

and improvement efforts. 

(3) BEHAVIORAL CHANGE COMPONENT.—A behavioral change 

component which provides for altering employee lifestyles to encourage healthy living through counseling, seminars, on-line 

programs, or self-help materials which provide technical assistance and problem solving skills. such component may include 

programs relating to— 

(A) tobacco use; 

(B) obesity; 

(C) stress management; 

(D) physical fitness; 

(E) nutrition; 

(F) substance abuse; 

(G) depression; and 

(H) mental health promotion (including anxiety). 

(4) SUPPORTIVE ENVIRONMENT COMPONENT.—A supportive environment component which includes the following: 

(A) ON-SITE POLICIES.—Policies and services at the worksite which promote a healthy lifestyle, including policies relating to— 

(i) tobacco use at the worksite; 

(ii) the nutrition of food available at the worksite 

through cafeterias and vending options; 

(iii) minimizing stress and promoting positive mental 

health in the workplace; and 

(iv) the encouragement of physical activity before, 

during, and after work hours. 

(d) PARTICIPATION REQUIREMENT.—No grant shall be allowed 

under subsection (a) unless the Secretary of Labor in consultation 

with other appropriate agencies, certifies, as a part of any certification described in subsection (b), that each wellness program component of the qualified wellness program— 

(1) shall be available to all employees of the employer; 

(2) shall not mandate participation by employees; and 

(3) shall not require participation by individual employees as 

a condition to obtain a premium discount, rebate, deductible reduction, or other financial reward. 


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(e) PRIVACY PROTECTIONS.—Any employee health information collected through participation in an employer wellness program shall 

be confidential and available only to appropriately trained health 

professions as defined by the Secretary of Labor. Employers or employees of the employer sponsoring a wellness program shall have 

no access to employee health data. All entities offering employersponsored wellness programs shall be considered ‘‘business associates’’ pursuant to the American Reinvestment and Recovery Act and 

must comply with privacy protections restricting the release of personal medical information. 

(f) DEFINITIONS AND SPECIAL RULES.—For purposes of this section: 

(1) QUALIFIED EMPLOYER.—The term ‘‘qualified employer’’ 

means an employer that offers a qualified health benefits plan 

to every employee (including each employee required to be offered coverage under a qualified health benefits plan under subtitle B of title III of division A), and meets the health coverage 

participation requirements as defined in section 312. 

(2) CERTAIN COSTS NOT INCLUDED.—Costs paid or incurred 

by an employer for food or health insurance shall not be taken 

into account under subsection (a). 

(g) OUTREACH.— 

(1) IN GENERAL.—The Secretary of the Labor, in conjunction 

with other appropriate agencies and members of the business 

community, shall institute an outreach program to inform businesses about the availability of the wellness program grant as 

well as to educate businesses on how to develop programs according to recognized and promising practices and on how to 

measure the success of implemented programs. 

(h) EFFECTIVE DATE.—This section shall take effect on January 1, 

2013. 

(i) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to 

be appropriated such sums as are necessary to carry out this section. 

SEC. 2553. HEALTH PROFESSIONS TRAINING FOR DIVERSITY PROGRAMS. 

Section 171 of the Workforce Investment Act of 1998 (29 U.S.C. 

2916) is amended by adding at the end the following: 

‘‘(f) HEALTH PROFESSIONS TRAINING FOR DIVERSITY PROGRAM.— 

‘‘(1) IN GENERAL.—The Secretary shall make available 20 

grants of no more than $1,000,000 annually to nonprofit organizations for the purposes of providing workforce development 

training program for those who are currently employed in the 

health care workforce. 

‘‘(2) ELIGIBILITY.—For the purposes of providing assistance 

and services under the program established in this subsection, 

grants are to be awarded to Area Health Education Centers or 

similar nonprofit organizations involved in the development 

and implementation of health care workforce development programs and that— 

‘‘(A) have a formal affiliation with a hospital or community health center, and institution of higher education as 

defined by section 101 of the Higher Education Act of 1965; 


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‘‘(B) have a history of providing program services to minority populations; and 

‘‘(C) provide workforce development programs to low-income persons, veterans, or urban and rural underserved 

communities.’’. 

Subtitle H—Long-term Care and Family 

Caregiver Support 

SEC. 2561. LONG-TERM CARE AND FAMILY CAREGIVER SUPPORT. 

(a) AMENDMENTS TO THE OLDER AMERICANS ACT OF 1965.— 

(1) PROMOTION OF DIRECT CARE WORKFORCE.—Section 

202(b)(1) of the Older Americans Act of 1965 (42 U.S.C. 

3012(b)(1)) is amended by inserting before the semicolon the following: ‘‘, and, in carrying out the purposes of this paragraph, 

shall make recommendations to other Federal entities regarding 

appropriate and effective means of identifying, promoting, and 

implementing investments in the direct care workforce necessary 

to meet the growing demand for long-term health services and 

supports and assisting States in developing a comprehensive 

state workforce development plans with respect to such workforce including efforts to systematically assess, track, and report 

on workforce adequacy and capacity’’. 

(2) PERSONAL CARE ATTENDANT WORKFORCE ADVISORY

PANEL.—Section 202 of such Act (42 U.S.C. 3012) is amended 

by adding at the end the following new subsection: 

‘‘(g)(1) The Assistant Secretary shall establish a Personal Care Attendant Workforce Advisory Panel and pilot program to improve 

working conditions and training for long term care workers, including home health aides, certified nurse aides, and personal care attendants. 

‘‘(2) The Panel shall include representatives from— 

‘‘(A) relevant health care agencies and facilities (including 

personal or home care agencies, home health care agencies, 

nursing homes and residential care facilities); 

‘‘(B) the disability community; 

‘‘(C) the nursing community; 

‘‘(D) direct care workers (which may include unions and national organizations); 

‘‘(E) older individuals and family caregivers; 

‘‘(F) State and federal health care entities; and 

‘‘(G) experts in workforce development and adult learning. 

‘‘(3) Within one year after the establishment of the Panel, the 

Panel shall submit a report to the Assistant Secretary articulating 

core competencies for eligible personal or home care aides necessary 

to successfully provide long-term services and supports to eligible 

consumers, as well as recommended training curricula and resources. 

‘‘(4) Within 180 days after receipt by the Assistant Secretary of the 

report under paragraph (3), the Assistant Secretary shall establish 

a 3-year demonstration program in 4 states to pilot and evaluate the 

effectiveness of the competencies articulated by the Panel and the 


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training curricula and training methods recommended by the 

Panel. 

‘‘(5) Not later than 1 year after the completion of the demonstration program under paragraph (4), the Assistant Secretary shall 

submit to each House of the Congress a report containing the results 

of the evaluations by the Assistant Secretary pursuant to paragraph 

(4), together with such recommendations for legislation or administrative action as the Assistant Secretary determines appropriate.’’. 

(b) AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR THE

FAMILY CAREGIVER SUPPORT PROGRAM UNDER THE OLDER AMERI- CANS ACT OF 1965.—Section 303(e)(2) of the Older Americans Act 

of 1965 (42 U.S.C. 3023(e)(2)) is amended by striking 

‘‘$173,000,000’’ and all that follows through ‘‘2011’’, and inserting 

‘‘and $250,000,000 for each of the fiscal years 2010, 2011, and 

2012’’. 

(c) AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR THE NA- TIONAL CLEARINGHOUSE FOR LONG-TERM CARE INFORMATION.— There is authorized to be appropriated $10,000,000 for each of the 

fiscal years 2010, 2011, and 2012 for the operation of the National 

Clearinghouse for Long-Term Care Information established by the 

Secretary of Health and Human Services under section 6021(d) of 

Public Law 109-171. 

Subtitle I—Online Resources 

SEC. 2571. WEB SITE ON HEALTH CARE LABOR MARKET AND RELATED 

EDUCATIONAL AND TRAINING OPPORTUNITIES. 

(a) IN GENERAL.—The Secretary of Labor, in consultation with 

the National Center for Health Workforce Analysis, shall establish 

and maintain a Web site to serve as a comprehensive source of information, searchable by workforce region, on the health care labor 

market and related educational and training opportunities. 

(b) CONTENTS.—The Web site maintained under this section shall 

include the following: 

(1) Information on the types of jobs that are currently or are 

projected to be in high demand in the health care field, including— 

(A) salary information; and 

(B) training requirements, such as requirements for educational credentials, licensure, or certification. 

(2) Information on training and educational opportunities 

within each region for the type jobs described in paragraph (1), 

including by— 

(A) type of provider or program (such as public, private 

nonprofit, or private for-profit); 

(B) duration; 

(C) cost (such as tuition, fees, books, laboratory expenses, 

and other mandatory costs); 

(D) performance outcomes (such as graduation rates, job 

placement, average salary, job retention, and wage progression); 

(E) Federal financial aid participation; 

(F) average graduate loan debt; 

(G) student loan default rates; 


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(H) average institutional grant aid provided; 

(I) Federal and State accreditation information; and 

(J) other information determined by the Secretary. 

(3) A mechanism for searching and comparing training and 

educational options for specific health care occupations to facilitate informed career and education choices. 

(4) Financial aid information, including with respect to loan 

forgiveness, loan cancellation, loan repayment, stipends, scholarships, and grants or other assistance authorized by this Act 

or other Federal or State programs. 

(c) PUBLIC ACCESSIBILITY.—The Web site maintained under this 

section shall— 

(1) be publicly accessible; 

(2) be user friendly and convey information in a manner that 

is easily understandable; and 

(3) be in English and the second most prevalent language 

spoken based on the latest Census information. 

SEC. 2572. ONLINE HEALTH WORKFORCE TRAINING PROGRAMS. 

Section 171 of the Workforce Investment Act of 1998 (29 U.S.C. 

2916) (as amended by section 2553) is further amended by adding 

at the end the following: 

‘‘(g) ONLINE HEALTH WORKFORCE TRAINING PROGRAM.— ‘‘(1) GRANT PROGRAM.— ‘‘(A) IN GENERAL.—The Secretary shall award National 

Health Workforce Online Training Grants on a competitive 

basis to eligible entities to enable such entities to carry out 

training for individuals to attain or advance in health care 

occupations. An entity may leverage such grant with other 

Federal, State, local, and private resources, in order to expand the participation of businesses, employees, and individuals in such training programs. 

‘‘(B) ELIGIBILITY.—In order to receive a grant under the 

program established under this paragraph— 

‘‘(i) an entity shall be an educational institution, 

community-based organization, non-profit organization, workforce investment board, or local or county 

government; and 

‘‘(ii) an entity shall provide online workforce training 

for individuals seeking to attain or advance in health 

care occupations, including nursing, nursing assistants, dentistry, pharmacy, health care management 

and administration, public health, health information 

systems analysis, medical assistants, and other health 

care practitioner and support occupations. 

‘‘(C) PRIORITY.—Priority in awarding grants under this 

paragraph shall be given to entities that— 

‘‘(i) have demonstrated experience in implementing 

and operating online worker skills training and education programs; 

‘‘(ii) have demonstrated experience coordinating activities, where appropriate, with the workforce investment system; and 

‘‘(iii) conduct training for occupations with national 

or local shortages. 


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‘‘(D) DATA COLLECTION.—Grantees under this paragraph 

shall collect and report information on— 

‘‘(i) the number of participants; 

‘‘(ii) the services received by the participants; 

‘‘(iii) program completion rates; 

‘‘(iv) factors determined as significantly interfering 

with program participation or completion; 

‘‘(v) the rate of job placement; and 

‘‘(vi) other information as determined as needed by 

the Secretary. 

‘‘(E) OUTREACH.—Grantees under this paragraph shall 

conduct outreach activities to disseminate information 

about their program and results to workforce investment 

boards, local governments, educational institutions, and 

other workforce training organizations. 

‘‘(F) PERFORMANCE LEVELS.—The Secretary shall establish indicators of performance that will be used to evaluate 

the performance of grantees under this paragraph in carrying out the activities described in this paragraph. The 

Secretary shall negotiate and reach agreement with each 

grantee regarding the levels of performance expected to be 

achieved by the grantee on the indicators of performance. 

‘‘(G) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to the Secretary to carry out 

this subsection $50,000,000 for fiscal years 2011 through 

2020. 

‘‘(2) ONLINE HEALTH PROFESSIONS TRAINING PROGRAM CLEARINGHOUSE.— 

‘‘(A) DESCRIPTION OF GRANT.—The Secretary shall award 

one grant to an eligible postsecondary educational institution to provide the services described in this paragraph. 

‘‘(B) ELIGIBILITY.—To be eligible to receive a grant under 

this paragraph, a postsecondary educational institution 

shall— 

‘‘(i) have demonstrated the ability to disseminate research on best practices for implementing workforce investment programs; and 

‘‘(ii) be a national leader in producing cutting-edge 

research on technology related to workforce investment 

systems under subtitle B. 

‘‘(C) SERVICES.—The postsecondary educational institution that receives a grant under this paragraph shall use 

such grant— 

‘‘(i) to provide technical assistance to entities that receive grants under paragraph (1); 

‘‘(ii) to collect and nationally disseminate the data 

gathered by entities that receive grants under paragraph (1); and 

‘‘(iii) to disseminate the best practices identified by 

the National Health Workforce Online Training Grant 

Program to other workforce training organizations. 

‘‘(D) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to the Secretary to carry out 


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this subsection $1,000,000 for fiscal years 2011 through 

2020.’’. 


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