II 

Calendar No. 331 

111TH CONGRESS 

2D SESSION H. R. 4872 

IN THE SENATE OF THE UNITED STATES 

MARCH 23 (legislative day, MARCH 19), 2010 

Received and read the first time 

MARCH 23, 2010 

Read the second time and placed on the calendar 

AN ACT 

To provide for reconciliation pursuant to Title II of the 

concurrent resolution on the budget for fiscal year 2010 

(S. Con. Res. 13). 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Health Care and Education Reconciliation Act of 2010’’. 

4 (b) TABLE OF CONTENTS.—The table of contents of 

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—COVERAGE, MEDICARE, MEDICAID, AND REVENUES 

Subtitle A—Coverage 

Sec. 1001. Tax credits. 

Sec. 1002. Individual responsibility. 

Sec. 1003. Employer responsibility. 

Sec. 1004. Income definitions. 

Sec. 1005. Implementation funding. 

Subtitle B—Medicare 

Sec. 1101. Closing the medicare prescription drug ‘‘donut hole’’. 

Sec. 1102. Medicare Advantage payments. 

Sec. 1103. Savings from limits on MA plan administrative costs. 

Sec. 1104. Disproportionate share hospital (DSH) payments. 

Sec. 1105. Market basket updates. 

Sec. 1106. Physician ownership-referral. 

Sec. 1107. Payment for imaging services. 

Sec. 1108. PE GPCI adjustment for 2010. 

Sec. 1109. Payment for qualifying hospitals. 

Subtitle C—Medicaid 

Sec. 1201. Federal funding for States. 

Sec. 1202. Payments to primary care physicians. 

Sec. 1203. Disproportionate share hospital payments. 

Sec. 1204. Funding for the territories. 

Sec. 1205. Delay in Community First Choice option. 

Sec. 1206. Drug rebates for new formulations of existing drugs. 

Subtitle D—Reducing Fraud, Waste, and Abuse 

Sec. 1301. Community mental health centers. 

Sec. 1302. Medicare prepayment medical review limitations. 

Sec. 1303. Funding to fight fraud, waste, and abuse. 

Sec. 1304. 90-day period of enhanced oversight for initial claims of DME suppliers. 

Subtitle E—Provisions Relating to Revenue 

Sec. 1401. High-cost plan excise tax. 

Sec. 1402. Unearned income Medicare contribution. 

Sec. 1403. Delay of limitation on health flexible spending arrangements under 

cafeteria plans. 
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Sec. 1404. Brand name pharmaceuticals. 

Sec. 1405. Excise tax on medical device manufacturers. 

Sec. 1406. Health insurance providers. 

Sec. 1407. Delay of elimination of deduction for expenses allocable to medicare 

part D subsidy. 

Sec. 1408. Elimination of unintended application of cellulosic biofuel producer 

credit. 

Sec. 1409. Codification of economic substance doctrine and penalties. 

Sec. 1410. Time for payment of corporate estimated taxes. 

Subtitle F—Other Provisions 

Sec. 1501. Community college and career training grant program. 

TITLE II—EDUCATION AND HEALTH 

Subtitle A—Education 

Sec. 2001. Short title; references. 

PART I—INVESTING IN STUDENTS AND FAMILIES

Sec. 2101. Federal Pell Grants. 

Sec. 2102. College access challenge grant program. 

Sec. 2103. Investment in historically black colleges and universities and minority-serving institutions. 

PART II—STUDENT LOAN REFORM

Sec. 2201. Termination of Federal Family Education Loan appropriations. 

Sec. 2202. Termination of Federal loan insurance program. 

Sec. 2203. Termination of applicable interest rates. 

Sec. 2204. Termination of Federal payments to reduce student interest costs. 

Sec. 2205. Termination of FFEL PLUS Loans. 

Sec. 2206. Federal Consolidation Loans. 

Sec. 2207. Termination of Unsubsidized Stafford Loans for middle-income borrowers. 

Sec. 2208. Termination of special allowances. 

Sec. 2209. Origination of Direct Loans at institutions outside the United 

States. 

Sec. 2210. Conforming amendments. 

Sec. 2211. Terms and conditions of loans. 

Sec. 2212. Contracts; mandatory funds. 

Sec. 2213. Income-based repayment. 

Subtitle B—Health 

Sec. 2301. Insurance reforms. 

Sec. 2302. Drugs purchased by covered entities. 

Sec. 2303. Community health centers. 
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1 TITLE I—COVERAGE, MEDICARE, 

2 MEDICAID, AND REVENUES 

3 Subtitle A—Coverage 

4 SEC. 1001. TAX CREDITS. 

5 (a) PREMIUM TAX CREDITS.—Section 36B of the In6 ternal Revenue Code of 1986, as added by section 1401 

7 of the Patient Protection and Affordable Care Act and 

8 amended by section 10105 of such Act, is amended— 

9 (1) in subsection (b)(3)(A)— 

10 (A) in clause (i), by striking ‘‘with respect 

11 to any taxpayer’’ and all that follows up to the 

12 end period and inserting: ‘‘for any taxable year 

13 shall be the percentage such that the applicable 

14 percentage for any taxpayer whose household 

15 income is within an income tier specified in the 

16 following table shall increase, on a sliding scale 

17 in a linear manner, from the initial premium 

18 percentage to the final premium percentage 

19 specified in such table for such income tier: 

‘‘In the case of household income (expressed as a percent of 

poverty line) within the following income tier: 

The initial premium 

percentage is— 

The final premium 

percentage is— 

Up to 133% 2.0% 2.0% 

133% up to 150% 3.0% 4.0% 

150% up to 200% 4.0% 6.3% 

200% up to 250% 6.3% 8.05% 

250% up to 300% 8.05% 9.5% 

300% up to 400% 9.5% 9.5%’’; and 
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1 (B) by striking clauses (ii) and (iii), and 

2 inserting the following: 

3 ‘‘(ii) INDEXING.— 

4 ‘‘(I) IN GENERAL.—Subject to 

5 subclause (II), in the case of taxable 

6 years beginning in any calendar year 

7 after 2014, the initial and final appli8 cable percentages under clause (i) (as 

9 in effect for the preceding calendar 

10 year after application of this clause) 

11 shall be adjusted to reflect the excess 

12 of the rate of premium growth for the 

13 preceding calendar year over the rate 

14 of income growth for the preceding 

15 calendar year. 

16 ‘‘(II) ADDITIONAL ADJUST17 MENT.—Except as provided in sub18 clause (III), in the case of any cal19 endar year after 2018, the percent20 ages described in subclause (I) shall, 

21 in addition to the adjustment under 

22 subclause (I), be adjusted to reflect 

23 the excess (if any) of the rate of pre24 mium growth estimated under sub25 clause (I) for the preceding calendar 
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1 year over the rate of growth in the 

2 consumer price index for the pre3 ceding calendar year. 

4 ‘‘(III) FAILSAFE.—Subclause (II) 

5 shall apply for any calendar year only 

6 if the aggregate amount of premium 

7 tax credits under this section and 

8 cost-sharing reductions under section 

9 1402 of the Patient Protection and 

10 Affordable Care Act for the preceding 

11 calendar year exceeds an amount 

12 equal to 0.504 percent of the gross 

13 domestic product for the preceding 

14 calendar year.’’; and 

15 (2) in subsection (c)(2)(C)— 

16 (A) by striking ‘‘9.8 percent’’ in clauses 

17 (i)(II) and (iv) and inserting ‘‘9.5 percent’’; and 

18 (B) by striking ‘‘(b)(3)(A)(iii)’’ in clause 

19 (iv) and inserting ‘‘(b)(3)(A)(ii)’’. 

20 (b) COST SHARING.—Section 1402(c) of the Patient 

21 Protection and Affordable Care Act is amended— 

22 (1) in paragraph (1)(B)(i)— 

23 (A) in subclause (I), by striking ‘‘90’’ and 

24 inserting ‘‘94’’; 

25 (B) in subclause (II)— 
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1 (i) by striking ‘‘80’’ and inserting 

2 ‘‘87’’; and 

3 (ii) by striking ‘‘and’’; and 

4 (C) by striking subclause (III) and insert5 ing the following: 

6 ‘‘(III) 73 percent in the case of 

7 an eligible insured whose household 

8 income is more than 200 percent but 

9 not more than 250 percent of the pov10 erty line for a family of the size in11 volved; and 

12 ‘‘(IV) 70 percent in the case of 

13 an eligible insured whose household 

14 income is more than 250 percent but 

15 not more than 400 percent of the pov16 erty line for a family of the size in17 volved.’’; and 

18 (2) in paragraph (2)— 

19 (A) in subparagraph (A)— 

20 (i) by striking ‘‘90’’ and inserting 

21 ‘‘94’’; and 

22 (ii) by striking ‘‘and’’; 

23 (B) in subparagraph (B)— 

24 (i) by striking ‘‘80’’ and inserting 

25 ‘‘87’’; and 
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1 (ii) by striking the period and insert2 ing ‘‘; and’’; and 

3 (C) by inserting after subparagraph (B) 

4 the following new subparagraph: 

5 ‘‘(C) in the case of an eligible insured 

6 whose household income is more than 200 per7 cent but not more than 250 percent of the pov8 erty line for a family of the size involved, in9 crease the plan’s share of the total allowed 

10 costs of benefits provided under the plan to 73 

11 percent of such costs.’’. 

12 SEC. 1002. INDIVIDUAL RESPONSIBILITY. 

13 (a) AMOUNTS.—Section 5000A(c) of the Internal 

14 Revenue Code of 1986, as added by section 1501(b) of 

15 the Patient Protection and Affordable Care Act and 

16 amended by section 10106 of such Act, is amended— 

17 (1) in paragraph (2)(B)— 

18 (A) in the matter preceding clause (i), 

19 by— 

20 (i) inserting ‘‘the excess of’’ before 

21 ‘‘the taxpayer’s household income’’; and 

22 (ii) inserting ‘‘for the taxable year 

23 over the amount of gross income specified 

24 in section 6012(a)(1) with respect to the 

25 taxpayer’’ before ‘‘for the taxable year’’; 
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1 (B) in clause (i), by striking ‘‘0.5’’ and in2 serting ‘‘1.0’’; 

3 (C) in clause (ii), by striking ‘‘1.0’’ and in4 serting ‘‘2.0’’; and 

5 (D) in clause (iii), by striking ‘‘2.0’’ and 

6 inserting ‘‘2.5’’; and 

7 (2) in paragraph (3)— 

8 (A) in subparagraph (A), by striking 

9 ‘‘$750’’ and inserting ‘‘$695’’; 

10 (B) in subparagraph (B), by striking 

11 ‘‘$495’’ and inserting ‘‘$325’’; and 

12 (C) in subparagraph (D)— 

13 (i) in the matter preceding clause (i), 

14 by striking ‘‘$750’’ and inserting ‘‘$695’’; 

15 and 

16 (ii) in clause (i), by striking ‘‘$750’’ 

17 and inserting ‘‘$695’’. 

18 (b) THRESHOLD.—Section 5000A of such Code, as 

19 so added and amended, is amended— 

20 (1) by striking subsection (c)(4)(D); and 

21 (2) in subsection (e)(2)— 

22 (A) by striking ‘‘UNDER 100 PERCENT OF

23 POVERTY LINE’’ and inserting ‘‘BELOW FILING

24 THRESHOLD’’; and 
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1 (B) by striking all that follows ‘‘less than’’ 

2 and inserting ‘‘the amount of gross income 

3 specified in section 6012(a)(1) with respect to 

4 the taxpayer.’’. 

5 SEC. 1003. EMPLOYER RESPONSIBILITY. 

6 (a) PAYMENT CALCULATION.—Subparagraph (D) of 

7 subsection (d)(2) of section 4980H of the Internal Rev8 enue Code of 1986, as added by section 1513 of the Pa9 tient Protection and Affordable Care Act and amended by 

10 section 10106 of such Act, is amended to read as follows: 

11 ‘‘(D) APPLICATION OF EMPLOYER SIZE TO

12 ASSESSABLE PENALTIES.— 

13 ‘‘(i) IN GENERAL.—The number of in14 dividuals employed by an applicable large 

15 employer as full-time employees during any 

16 month shall be reduced by 30 solely for 

17 purposes of calculating— 

18 ‘‘(I) the assessable payment 

19 under subsection (a), or 

20 ‘‘(II) the overall limitation under 

21 subsection (b)(2). 

22 ‘‘(ii) AGGREGATION.—In the case of 

23 persons treated as 1 employer under sub24 paragraph (C)(i), only 1 reduction under 

25 subclause (I) or (II) shall be allowed with 
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1 respect to such persons and such reduction 

2 shall be allocated among such persons rat3 ably on the basis of the number of full4 time employees employed by each such per5 son.’’. 

6 (b) APPLICABLE PAYMENT AMOUNT.—Section 

7 4980H of such Code, as so added and amended, is amend8 ed— 

9 (1) in the flush text following subsection 

10 (c)(1)(B), by striking ‘‘400 percent of the applicable 

11 payment amount’’ and inserting ‘‘an amount equal 

to 1 12 ⁄12 of $3,000’’; 

13 (2) in subsection (d)(1), by striking ‘‘$750’’ 

14 and inserting ‘‘$2,000’’; and 

15 (3) in subsection (d)(5)(A), in the matter pre16 ceding clause (i), by striking ‘‘subsection (b)(2) and 

17 (d)(1)’’ and inserting ‘‘subsection (b) and paragraph 

18 (1)’’. 

19 (c) COUNTING PART-TIME WORKERS IN SETTING

20 THE THRESHOLD FOR EMPLOYER RESPONSIBILITY.— 

21 Section 4980H(d)(2) of such Code, as so added and 

22 amended and as amended by subsection (a), is amended 

23 by adding at the end the following new subparagraph: 

24 ‘‘(E) FULL-TIME EQUIVALENTS TREATED

25 AS FULL-TIME EMPLOYEES.—Solely for pur-
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1 poses of determining whether an employer is an 

2 applicable large employer under this paragraph, 

3 an employer shall, in addition to the number of 

4 full-time employees for any month otherwise de5 termined, include for such month a number of 

6 full-time employees determined by dividing the 

7 aggregate number of hours of service of employ8 ees who are not full-time employees for the 

9 month by 120.’’. 

10 (d) ELIMINATING WAITING PERIOD ASSESSMENT.— 

11 Section 4980H of such Code, as so added and amended 

12 and as amended by the preceding subsections, is amended 

13 by striking subsection (b) and redesignating subsections 

14 (c), (d), and (e) as subsections (b), (c), and (d), respec15 tively. 

16 SEC. 1004. INCOME DEFINITIONS. 

17 (a) MODIFIED ADJUSTED GROSS INCOME.— 

18 (1) IN GENERAL.—The following provisions of 

19 the Internal Revenue Code of 1986 are each amend20 ed by striking ‘‘modified gross’’ each place it ap21 pears and inserting ‘‘modified adjusted gross’’: 

22 (A) Clauses (i) and (ii) of section 

23 36B(d)(2)(A), as added by section 1401 of the 

24 Patient Protection and Affordable Care Act. 
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1 (B) Section 6103(l)(21)(A)(iv), as added 

2 by section 1414 of such Act. 

3 (C) Clauses (i) and (ii) of section 

4 5000A(c)(4), as added by section 1501(b) of 

5 such Act. 

6 (2) DEFINITION.— 

7 (A) Section 36B(d)(2)(B) of such Code, as 

8 so added, is amended to read as follows: 

9 ‘‘(B) MODIFIED ADJUSTED GROSS IN10 COME.—The term ‘modified adjusted gross in11 come’ means adjusted gross income increased 

12 by— 

13 ‘‘(i) any amount excluded from gross 

14 income under section 911, and 

15 ‘‘(ii) any amount of interest received 

16 or accrued by the taxpayer during the tax17 able year which is exempt from tax.’’. 

18 (B) Section 5000A(c)(4)(C) of such Code, 

19 as so added, is amended to read as follows: 

20 ‘‘(C) MODIFIED ADJUSTED GROSS IN21 COME.—The term ‘modified adjusted gross in22 come’ means adjusted gross income increased 

23 by— 

24 ‘‘(i) any amount excluded from gross 

25 income under section 911, and 
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1 ‘‘(ii) any amount of interest received 

2 or accrued by the taxpayer during the tax3 able year which is exempt from tax.’’. 

4 (b) MODIFIED ADJUSTED GROSS INCOME DEFINI5 TION.— 

6 (1) MEDICAID.—Section 1902 of the Social Se7 curity Act (42 U.S.C. 1396a) is amended by striking 

8 ‘‘modified gross income’’ each place it appears in the 

9 text and headings of the following provisions and in10 serting ‘‘modified adjusted gross income’’: 

11 (A) Paragraph (14) of subsection (e), as 

12 added by section 2002(a) of the Patient Protec13 tion and Affordable Care Act. 

14 (B) Subsection (gg)(4)(A), as added by 

15 section 2001(b) of such Act. 

16 (2) CHIP.— 

17 (A) STATE PLAN REQUIREMENTS.—Section 

18 2102(b)(1)(B)(v) of the Social Security Act (42 

19 U.S.C. 1397bb(b)(1)(B)(v)), as added by sec20 tion 2101(d)(1) of the Patient Protection and 

21 Affordable Care Act, is amended by striking 

22 ‘‘modified gross income’’ and inserting ‘‘modi23 fied adjusted gross income’’. 

24 (B) PLAN ADMINISTRATION.—Section 

25 2107(e)(1)(E) of the Social Security Act (42 
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1 U.S.C. 1397gg(e)(1)(E)), as added by section 

2 2101(d)(2) of the Patient Protection and Af3 fordable Care Act, is amended by striking 

4 ‘‘modified gross income’’ and inserting ‘‘modi5 fied adjusted gross income’’. 

6 (c) NO EXCESS PAYMENTS.—Section 36B(f) of the 

7 Internal Revenue Code of 1986, as added by section 

8 1401(a) of the Patient Protection and Affordable Care 

9 Act, is amended by adding at the end the following new 

10 paragraph: 

11 ‘‘(3) INFORMATION REQUIREMENT.—Each Ex12 change (or any person carrying out 1 or more re13 sponsibilities of an Exchange under section 

14 1311(f)(3) or 1321(c) of the Patient Protection and 

15 Affordable Care Act) shall provide the following in16 formation to the Secretary and to the taxpayer with 

17 respect to any health plan provided through the Ex18 change: 

19 ‘‘(A) The level of coverage described in sec20 tion 1302(d) of the Patient Protection and Af21 fordable Care Act and the period such coverage 

22 was in effect. 

23 ‘‘(B) The total premium for the coverage 

24 without regard to the credit under this section 
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1 or cost-sharing reductions under section 1402 

2 of such Act. 

3 ‘‘(C) The aggregate amount of any ad4 vance payment of such credit or reductions 

5 under section 1412 of such Act. 

6 ‘‘(D) The name, address, and TIN of the 

7 primary insured and the name and TIN of each 

8 other individual obtaining coverage under the 

9 policy. 

10 ‘‘(E) Any information provided to the Ex11 change, including any change of circumstances, 

12 necessary to determine eligibility for, and the 

13 amount of, such credit. 

14 ‘‘(F) Information necessary to determine 

15 whether a taxpayer has received excess advance 

16 payments.’’. 

17 (d) ADULT DEPENDENTS.— 

18 (1) EXCLUSION OF AMOUNTS EXPENDED FOR

19 MEDICAL CARE.—The first sentence of section 

20 105(b) of the Internal Revenue Code of 1986 (relat21 ing to amounts expended for medical care) is amend22 ed— 

23 (A) by striking ‘‘and his dependents’’ and 

24 inserting ‘‘his dependents’’; and 
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1 (B) by inserting before the period the fol2 lowing: ‘‘, and any child (as defined in section 

3 152(f)(1)) of the taxpayer who as of the end of 

4 the taxable year has not attained age 27’’. 

5 (2) SELF-EMPLOYED HEALTH INSURANCE DE6 DUCTION.—Section 162(l)(1) of such Code is 

7 amended to read as follows: 

8 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case 

9 of a taxpayer who is an employee within the mean10 ing of section 401(c)(1), there shall be allowed as a 

11 deduction under this section an amount equal to the 

12 amount paid during the taxable year for insurance 

13 which constitutes medical care for— 

14 ‘‘(A) the taxpayer, 

15 ‘‘(B) the taxpayer’s spouse, 

16 ‘‘(C) the taxpayer’s dependents, and 

17 ‘‘(D) any child (as defined in section 

18 152(f)(1)) of the taxpayer who as of the end of 

19 the taxable year has not attained age 27.’’. 

20 (3) COVERAGE UNDER SELF-EMPLOYED DEDUC21 TION.—Section 162(l)(2)(B) of such Code is amend22 ed by inserting ‘‘, or any dependent, or individual 

23 described in subparagraph (D) of paragraph (1) 

24 with respect to,’’ after ‘‘spouse of’’. 
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1 (4) SICK AND ACCIDENT BENEFITS PROVIDED

2 TO MEMBERS OF A VOLUNTARY EMPLOYEES’ BENE3 FICIARY ASSOCIATION AND THEIR DEPENDENTS.— 

4 Section 501(c)(9) of such Code is amended by add5 ing at the end the following new sentence: ‘‘For pur6 poses of providing for the payment of sick and acci7 dent benefits to members of such an association and 

8 their dependents, the term ‘dependent’ shall include 

9 any individual who is a child (as defined in section 

10 152(f)(1)) of a member who as of the end of the cal11 endar year has not attained age 27.’’. 

12 (5) MEDICAL AND OTHER BENEFITS FOR RE13 TIRED EMPLOYEES.—Section 401(h) of such Code is 

14 amended by adding at the end the following: ‘‘For 

15 purposes of this subsection, the term ‘dependent’ 

16 shall include any individual who is a child (as de17 fined in section 152(f)(1)) of a retired employee who 

18 as of the end of the calendar year has not attained 

19 age 27.’’. 

20 (e) FIVE PERCENT INCOME DISREGARD FOR CER21 TAIN INDIVIDUALS.—Section 1902(e)(14) of the Social 

22 Security Act (42 U.S.C. 1396a(e)(14)), as amended by 

23 subsection (b)(1), is further amended— 
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1 (1) in subparagraph (B), by striking ‘‘No type’’ 

2 and inserting ‘‘Subject to subparagraph (I), no 

3 type’’; and 

4 (2) by adding at the end the following new sub5 paragraph: 

6 ‘‘(I) TREATMENT OF PORTION OF MODI7 FIED ADJUSTED GROSS INCOME.—For purposes 

8 of determining the income eligibility of an indi9 vidual for medical assistance whose eligibility is 

10 determined based on the application of modified 

11 adjusted gross income under subparagraph (A), 

12 the State shall— 

13 ‘‘(i) determine the dollar equivalent of 

14 the difference between the upper income 

15 limit on eligibility for such an individual 

16 (expressed as a percentage of the poverty 

17 line) and such upper income limit in18 creased by 5 percentage points; and 

19 ‘‘(ii) notwithstanding the requirement 

20 in subparagraph (A) with respect to use of 

21 modified adjusted gross income, utilize as 

22 the applicable income of such individual, in 

23 determining such income eligibility, an 

24 amount equal to the modified adjusted 

25 gross income applicable to such individual 
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1 reduced by such dollar equivalent 

2 amount.’’. 

3 SEC. 1005. IMPLEMENTATION FUNDING. 

4 (a) IN GENERAL.—There is hereby established a 

5 Health Insurance Reform Implementation Fund (referred 

6 to in this section as the ‘‘Fund’’) within the Department 

7 of Health and Human Services to carry out the Patient 

8 Protection and Affordable Care Act and this Act (and the 

9 amendments made by such Acts). 

10 (b) FUNDING.—There is appropriated to the Fund, 

11 out of any funds in the Treasury not otherwise appro12 priated, $1,000,000,000 for Federal administrative ex13 penses to carry out such Act (and the amendments made 

14 by such Acts). 

15 Subtitle B—Medicare 

16 SEC. 1101. CLOSING THE MEDICARE PRESCRIPTION DRUG 

17 ‘‘DONUT HOLE’’. 

18 (a) COVERAGE GAP REBATE FOR 2010.— 

19 (1) IN GENERAL.—Section 1860D–42 of the 

20 Social Security Act (42 U.S.C. 1395w–152) is 

21 amended by adding at the end the following new 

22 subsection: 

23 ‘‘(c) COVERAGE GAP REBATE FOR 2010.— 

24 ‘‘(1) IN GENERAL.—In the case of an individual 

25 described in subparagraphs (A) through (D) of sec-
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1 tion 1860D–14A(g)(1) who as of the last day of a 

2 calendar quarter in 2010 has incurred costs for cov3 ered part D drugs so that the individual has exceed4 ed the initial coverage limit under section 1860D– 

5 2(b)(3) for 2010, the Secretary shall provide for 

6 payment from the Medicare Prescription Drug Ac7 count of $250 to the individual by not later than the 

8 15th day of the third month following the end of 

9 such quarter. 

10 ‘‘(2) LIMITATION.—The Secretary shall provide 

11 only 1 payment under this subsection with respect to 

12 any individual.’’. 

13 (2) REPEAL OF PROVISION.—Section 3315 of 

14 the Patient Protection and Affordable Care Act (in15 cluding the amendments made by such section) is re16 pealed, and any provision of law amended or re17 pealed by such sections is hereby restored or revived 

18 as if such section had not been enacted into law. 

19 (b) CLOSING THE DONUT HOLE.—Part D of title 

20 XVIII of the Social Security Act (42 U.S.C. 1395w–101 

21 et seq.), as amended by section 3301 of the Patient Pro22 tection and Affordable Care Act, is further amended— 

23 (1) in section 1860D–43— 

24 (A) in subsection (b), by striking ‘‘July 1, 

25 2010’’ and inserting ‘‘January 1, 2011’’; and 
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1 (B) in subsection (c)(2), by striking ‘‘July 

2 1, 2010, and ending on December 31, 2010,’’ 

3 and inserting ‘‘January 1, 2011, and December 

4 31, 2011,’’; 

5 (2) in section 1860D–14A— 

6 (A) in subsection (a)— 

7 (i) by striking ‘‘July 1, 2010’’ and in8 serting ‘‘January 1, 2011’’; and 

9 (ii) by striking ‘‘April 1, 2010’’ and 

10 inserting ‘‘180 days after the date of the 

11 enactment of this section’’; 

12 (B) in subsection (b)(1)(C)— 

13 (i) in the heading, by striking ‘‘2010

14 AND’’; 

15 (ii) by striking ‘‘July 1, 2010’’ and in16 serting ‘‘January 1, 2011’’; and 

17 (iii) by striking ‘‘May 1, 2010’’ and 

18 inserting ‘‘not later than 30 days after the 

19 date of the establishment of a model agree20 ment under subsection (a)’’; 

21 (C) in subsection (c)— 

22 (i) in paragraph (1)(A)(iii), by strik23 ing ‘‘July 1, 2010, and ending on Decem24 ber 31, 2011’’ and inserting ‘‘January 1, 
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1 2011, and ending on December 31, 2011’’; 

2 and 

3 (ii) in paragraph (2), by striking 

4 ‘‘2010’’ and inserting ‘‘2011’’; 

5 (D) in subsection (d)(2)(B), by striking 

6 ‘‘July 1, 2010, and ending on December 31, 

7 2010’’ and inserting ‘‘January 1, 2011, and 

8 ending on December 31, 2011’’; and 

9 (E) in subsection (g)(1)— 

10 (i) in the matter before subparagraph 

11 (A), by striking ‘‘an applicable drug’’ and 

12 inserting ‘‘a covered part D drug’’; 

13 (ii) by adding ‘‘and’’ at the end of 

14 subparagraph (C); 

15 (iii) by striking subparagraph (D); 

16 and 

17 (iv) by redesignating subparagraph 

18 (E) as subparagraph (D); and 

19 (3) in section 1860D–2(b)— 

20 (A) in paragraph (2)(A), by striking ‘‘The 

21 coverage’’ and inserting ‘‘Subject to subpara22 graphs (C) and (D), the coverage’’; 

23 (B) in paragraph (2)(B), by striking ‘‘sub24 paragraph (A)(ii)’’ and inserting ‘‘subpara25 graphs (A)(ii), (C), and (D)’’; 
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1 (C) by adding at the end of paragraph (2) 

2 the following new subparagraphs: 

3 ‘‘(C) COVERAGE FOR GENERIC DRUGS IN

4 COVERAGE GAP.— 

5 ‘‘(i) IN GENERAL.—Except as pro6 vided in paragraph (4), the coverage for an 

7 applicable beneficiary (as defined in section 

8 1860D–14A(g)(1)) has coinsurance (for 

9 costs above the initial coverage limit under 

10 paragraph (3) and below the out-of-pocket 

11 threshold) for covered part D drugs that 

12 are not applicable drugs under section 

13 1860D–14A(g)(2) that is— 

14 ‘‘(I) equal to the generic-gap co15 insurance percentage (specified in 

16 clause (ii)) for the year; or 

17 ‘‘(II) actuarially equivalent 

18 (using processes and methods estab19 lished under section 1860D–11(c)) to 

20 an average expected payment of such 

21 percentage of such costs for covered 

22 part D drugs that are not applicable 

23 drugs under section 1860D– 

24 14A(g)(2). 
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1 ‘‘(ii) GENERIC-GAP COINSURANCE

2 PERCENTAGE.—The generic-gap coinsur3 ance percentage specified in this clause 

4 for— 

5 ‘‘(I) 2011 is 93 percent; 

6 ‘‘(II) 2012 and each succeeding 

7 year before 2020 is the generic-gap 

8 coinsurance percentage under this 

9 clause for the previous year decreased 

10 by 7 percentage points; and 

11 ‘‘(III) 2020 and each subsequent 

12 year is 25 percent. 

13 ‘‘(D) COVERAGE FOR APPLICABLE DRUGS

14 IN COVERAGE GAP.— 

15 ‘‘(i) IN GENERAL.—Except as pro16 vided in paragraph (4), the coverage for an 

17 applicable beneficiary (as defined in section 

18 1860D–14A(g)(1)) has coinsurance (for 

19 costs above the initial coverage limit under 

20 paragraph (3) and below the out-of-pocket 

21 threshold) for the negotiated price (as de22 fined in section 1860D–14A(g)(6)) of cov23 ered part D drugs that are applicable 

24 drugs under section 1860D–14A(g)(2) that 

25 is— 
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1 ‘‘(I) equal to the difference be2 tween the applicable gap percentage 

3 (specified in clause (ii) for the year) 

4 and the discount percentage specified 

5 in section 1860D–14A(g)(4)(A) for 

6 such applicable drugs; or 

7 ‘‘(II) actuarially equivalent 

8 (using processes and methods estab9 lished under section 1860D–11(c)) to 

10 an average expected payment of such 

11 percentage of such costs, for covered 

12 part D drugs that are applicable 

13 drugs under section 1860D– 

14 14A(g)(2). 

15 ‘‘(ii) APPLICABLE GAP PERCENT16 AGE.—The applicable gap percentage spec17 ified in this clause for— 

18 ‘‘(I) 2013 and 2014 is 97.5 per19 cent; 

20 ‘‘(II) 2015 and 2016 is 95 per21 cent; 

22 ‘‘(III) 2017 is 90 percent; 

23 ‘‘(IV) 2018 is 85 percent; 

24 ‘‘(V) 2019 is 80 percent; and 
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1 ‘‘(VI) 2020 and each subsequent 

2 year is 75 percent.’’; 

3 (D) in paragraph (3)(A), as restored under 

4 subsection (a)(2), by striking ‘‘paragraph (4)’’ 

5 and inserting ‘‘paragraphs (2)(C), (2)(D), and 

6 (4)’’; and 

7 (E) in paragraph (4)(E), by inserting be8 fore the period at the end the following: ‘‘, ex9 cept that incurred costs shall not include the 

10 portion of the negotiated price that represents 

11 the reduction in coinsurance resulting from the 

12 application of paragraph (2)(D)’’; and 

13 (4) in section 1860D–22(a)(2)(A), by inserting 

14 before the period at the end the following: ‘‘, not 

15 taking into account the value of any discount or cov16 erage provided during the gap in prescription drug 

17 coverage that occurs between the initial coverage 

18 limit under section 1860D–2(b)(3) during the year 

19 and the out-of-pocket threshold specified in section 

20 1860D–2(b)(4)(B)’’. 

21 (c) CONFORMING AMENDMENT TO AMP UNDER

22 MEDICAID.—Section 1927(k)(1)(B)(i) of the Social Secu23 rity Act (42 U.S.C. 1396r–8(k)(1)(B)(i)), as amended by 

24 section 2503(a)(2)(B) of the Patient Protection and Af25 fordable Care Act, is amended— 
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1 (1) by striking ‘‘and’’ at the end of subclause 

2 (III); 

3 (2) by striking the period at the end of sub4 clause (IV); and 

5 (3) by adding at the end the following new sub6 clause: 

7 ‘‘(V) discounts provided by man8 ufacturers under section 1860D– 

9 14A.’’. 

10 (d) REDUCING GROWTH RATE OF OUT-OF-POCKET

11 COST THRESHOLD.—Section 1860D–2(b) of the Social 

12 Security Act (42 U.S.C. 1395w–102(b)) is amended— 

13 (1) in paragraph (4)(B)(i)— 

14 (A) in subclause (I), by striking ‘‘or’’ at 

15 the end; 

16 (B) by redesignating subclause (II) as sub17 clause (VI); and 

18 (C) by inserting after subclause (I) the fol19 lowing new subclauses: 

20 ‘‘(II) for each of years 2007 

21 through 2013, is equal to the amount 

22 specified in this subparagraph for the 

23 previous year, increased by the annual 

24 percentage increase described in para25 graph (6) for the year involved; 
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1 ‘‘(III) for 2014 and 2015, is 

2 equal to the amount specified in this 

3 subparagraph for the previous year, 

4 increased by the annual percentage in5 crease described in paragraph (6) for 

6 the year involved, minus 0.25 percent7 age point; 

8 ‘‘(IV) for each of years 2016 

9 through 2019, is equal to the amount 

10 specified in this subparagraph for the 

11 previous year, increased by the lesser 

12 of— 

13 ‘‘(aa) the annual percentage 

14 increase described in paragraph 

15 (7) for the year involved, plus 2 

16 percentage points; or 

17 ‘‘(bb) the annual percentage 

18 increase described in paragraph 

19 (6) for the year; 

20 ‘‘(V) for 2020, is equal to the 

21 amount that would have been applied 

22 under this subparagraph for 2020 if 

23 the amendments made by section 

24 1101(d)(1) of the Health Care and 
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1 Education Reconciliation Act of 2010 

2 had not been enacted; or’’; and 

3 (2) by adding at the end the following new 

4 paragraph: 

5 ‘‘(7) ADDITIONAL ANNUAL PERCENTAGE IN6 CREASE.—The annual percentage increase specified 

7 in this paragraph for a year is equal to the annual 

8 percentage increase in the consumer price index for 

9 all urban consumers (United States city average) for 

10 the 12-month period ending in July of the previous 

11 year.’’. 

12 SEC. 1102. MEDICARE ADVANTAGE PAYMENTS. 

13 (a) REPEAL.—Effective as if included in the enact14 ment of the Patient Protection and Affordable Care Act, 

15 sections 3201 and 3203 of such Act (and the amendments 

16 made by such sections) are repealed. 

17 (b) PHASE-IN OF MODIFIED BENCHMARKS.—Section 

18 1853 of the Social Security Act (42 U.S.C. 1395w–23) 

19 is amended— 

20 (1) in subsection (j)(1)(A), by striking ‘‘(or, beginning with 2007, 1 21 ⁄12 of the applicable amount de22 termined under subsection (k)(1)) for the area for 

23 the year’’ and inserting ‘‘for the area for the year 

(or, for 2007, 2008, 2009, and 2010, 1 24 ⁄12 of the ap25 plicable amount determined under subsection (k)(1) 
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for the area for the year; for 2011, 1 1 ⁄12 of the appli2 cable amount determined under subsection (k)(1) for 

the area for 2010; and, beginning with 2012, 1 3 ⁄12 of 

4 the blended benchmark amount determined under 

5 subsection (n)(1) for the area for the year)’’; and 

6 (2) by adding at the end the following new sub7 section: 

8 ‘‘(n) DETERMINATION OF BLENDED BENCHMARK

9 AMOUNT.— 

10 ‘‘(1) IN GENERAL.—For purposes of subsection 

11 (j), subject to paragraphs (3), (4), and (5), the term 

12 ‘blended benchmark amount’ means for an area— 

13 ‘‘(A) for 2012 the sum of— 

‘‘(i) 1 14 ⁄2 of the applicable amount for 

15 the area and year; and 

‘‘(ii) 1 16 ⁄2 of the amount specified in 

17 paragraph (2)(A) for the area and year; 

18 and 

19 ‘‘(B) for a subsequent year the amount 

20 specified in paragraph (2)(A) for the area and 

21 year. 

22 ‘‘(2) SPECIFIED AMOUNT.— 

23 ‘‘(A) IN GENERAL.—The amount specified 

24 in this subparagraph for an area and year is 

25 the product of— 
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1 ‘‘(i) the base payment amount speci2 fied in subparagraph (E) for the area and 

3 year adjusted to take into account the 

4 phase-out in the indirect costs of medical 

5 education from capitation rates described 

6 in subsection (k)(4); and 

7 ‘‘(ii) the applicable percentage for the 

8 area for the year specified under subpara9 graph (B). 

10 ‘‘(B) APPLICABLE PERCENTAGE.—Subject 

11 to subparagraph (D), the applicable percentage 

12 specified in this subparagraph for an area for 

13 a year in the case of an area that is ranked— 

14 ‘‘(i) in the highest quartile under sub15 paragraph (C) for the previous year is 95 

16 percent; 

17 ‘‘(ii) in the second highest quartile 

18 under such subparagraph for the previous 

19 year is 100 percent; 

20 ‘‘(iii) in the third highest quartile 

21 under such subparagraph for the previous 

22 year is 107.5 percent; or 

23 ‘‘(iv) in the lowest quartile under such 

24 subparagraph for the previous year is 115 

25 percent. 
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1 ‘‘(C) PERIODIC RANKING.—For purposes 

2 of this paragraph in the case of an area lo3 cated— 

4 ‘‘(i) in 1 of the 50 States or the Dis5 trict of Columbia, the Secretary shall rank 

6 such area in each year specified under sub7 section (c)(1)(D)(ii) based upon the level 

8 of the amount specified in subparagraph 

9 (A)(i) for such areas; or 

10 ‘‘(ii) in a territory, the Secretary shall 

11 rank such areas in each such year based 

12 upon the level of the amount specified in 

13 subparagraph (A)(i) for such area relative 

14 to quartile rankings computed under clause 

15 (i). 

16 ‘‘(D) 1-YEAR TRANSITION FOR CHANGES IN

17 APPLICABLE PERCENTAGE.—If, for a year after 

18 2012, there is a change in the quartile in which 

19 an area is ranked compared to the previous 

20 year, the applicable percentage for the area in 

21 the year shall be the average of— 

22 ‘‘(i) the applicable percentage for the 

23 area for the previous year; and 
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1 ‘‘(ii) the applicable percentage that 

2 would otherwise apply for the area for the 

3 year. 

4 ‘‘(E) BASE PAYMENT AMOUNT.—Subject 

5 to subparagraph (F), the base payment amount 

6 specified in this subparagraph— 

7 ‘‘(i) for 2012 is the amount specified 

8 in subsection (c)(1)(D) for the area for the 

9 year; or 

10 ‘‘(ii) for a subsequent year that— 

11 ‘‘(I) is not specified under sub12 section (c)(1)(D)(ii), is the base 

13 amount specified in this subparagraph 

14 for the area for the previous year, in15 creased by the national per capita MA 

16 growth percentage, described in sub17 section (c)(6) for that succeeding 

18 year, but not taking into account any 

19 adjustment under subparagraph (C) 

20 of such subsection for a year before 

21 2004; and 

22 ‘‘(II) is specified under sub23 section (c)(1)(D)(ii), is the amount 

24 specified in subsection (c)(1)(D) for 

25 the area for the year. 
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1 ‘‘(F) APPLICATION OF INDIRECT MEDICAL

2 EDUCATION PHASE-OUT.—The base payment 

3 amount specified in subparagraph (E) for a 

4 year shall be adjusted in the same manner 

5 under paragraph (4) of subsection (k) as the 

6 applicable amount is adjusted under such sub7 section. 

8 ‘‘(3) ALTERNATIVE PHASE-INS.— 

9 ‘‘(A) 4-YEAR PHASE-IN FOR CERTAIN

10 AREAS.—If the difference between the applica11 ble amount (as defined in subsection (k)) for an 

12 area for 2010 and the projected 2010 bench13 mark amount (as defined in subparagraph (C)) 

14 for the area is at least $30 but less than $50, 

15 the blended benchmark amount for the area 

16 is— 

17 ‘‘(i) for 2012 the sum of— 

‘‘(I) 3 18 ⁄4 of the applicable amount 

19 for the area and year; and 

‘‘(II) 1 20 ⁄4 of the amount specified 

21 in paragraph (2)(A) for the area and 

22 year; 

23 ‘‘(ii) for 2013 the sum of— 

‘‘(I) 1 24 ⁄2 of the applicable amount 

25 for the area and year; and 
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‘‘(II) 1 1 ⁄2 of the amount specified 

2 in paragraph (2)(A) for the area and 

3 year; 

4 ‘‘(iii) for 2014 the sum of— 

‘‘(I) 1 5 ⁄4 of the applicable amount 

6 for the area and year; and 

‘‘(II) 3 7 ⁄4 of the amount specified 

8 in paragraph (2)(A) for the area and 

9 year; and 

10 ‘‘(iv) for a subsequent year the 

11 amount specified in paragraph (2)(A) for 

12 the area and year. 

13 ‘‘(B) 6-YEAR PHASE-IN FOR CERTAIN

14 AREAS.—If the difference between the applica15 ble amount (as defined in subsection (k)) for an 

16 area for 2010 and the projected 2010 bench17 mark amount (as defined in subparagraph (C)) 

18 for the area is at least $50, the blended bench19 mark amount for the area is— 

20 ‘‘(i) for 2012 the sum of— 

‘‘(I) 5 21 ⁄6 of the applicable amount 

22 for the area and year; and 

‘‘(II) 1 23 ⁄6 of the amount specified 

24 in paragraph (2)(A) for the area and 

25 year; 
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1 ‘‘(ii) for 2013 the sum of— 

‘‘(I) 2 2 ⁄3 of the applicable amount 

3 for the area and year; and 

‘‘(II) 1 4 ⁄3 of the amount specified 

5 in paragraph (2)(A) for the area and 

6 year; 

7 ‘‘(iii) for 2014 the sum of— 

‘‘(I) 1 8 ⁄2 of the applicable amount 

9 for the area and year; and 

‘‘(II) 1 10 ⁄2 of the amount specified 

11 in paragraph (2)(A) for the area and 

12 year; 

13 ‘‘(iv) for 2015 the sum of— 

‘‘(I) 1 14 ⁄3 of the applicable amount 

15 for the area and year; and 

‘‘(II) 2 16 ⁄3 of the amount specified 

17 in paragraph (2)(A) for the area and 

18 year; and 

19 ‘‘(v) for 2016 the sum of— 

‘‘(I) 1 20 ⁄6 of the applicable amount 

21 for the area and year; and 

‘‘(II) 5 22 ⁄6 of the amount specified 

23 in paragraph (2)(A) for the area and 

24 year; and 
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1 ‘‘(vi) for a subsequent year the 

2 amount specified in paragraph (2)(A) for 

3 the area and year. 

4 ‘‘(C) PROJECTED 2010 BENCHMARK

5 AMOUNT.—The projected 2010 benchmark 

6 amount described in this subparagraph for an 

7 area is equal to the sum of— 

‘‘(i) 1 8 ⁄2 of the applicable amount (as 

9 defined in subsection (k)) for the area for 

10 2010; and 

‘‘(ii) 1 11 ⁄2 of the amount specified in 

12 paragraph (2)(A) for the area for 2010 but 

13 determined as if there were substituted for 

14 the applicable percentage specified in 

15 clause (ii) of such paragraph the sum of— 

16 ‘‘(I) the applicable percent that 

17 would be specified under subpara18 graph (B) of paragraph (2) (deter19 mined without regard to subpara20 graph (D) of such paragraph) for the 

21 area for 2010 if any reference in such 

22 paragraph to ‘the previous year’ were 

23 deemed a reference to 2010; and 

24 ‘‘(II) the applicable percentage 

25 increase that would apply to a quali-
39 

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1 fying plan in the area under sub2 section (o) as if any reference in such 

3 subsection to 2012 were deemed a ref4 erence to 2010 and as if the deter5 mination of a qualifying county under 

6 paragraph (3)(B) of such subsection 

7 were made for 2010. 

8 ‘‘(4) CAP ON BENCHMARK AMOUNT.—In no 

9 case shall the blended benchmark amount for an 

10 area for a year (determined taking into account sub11 section (o)) be greater than the applicable amount 

12 that would (but for the application of this sub13 section) be determined under subsection (k)(1) for 

14 the area for the year. 

15 ‘‘(5) NON-APPLICATION TO PACE PLANS.—This 

16 subsection shall not apply to payments to a PACE 

17 program under section 1894.’’. 

18 (c) APPLICABLE PERCENTAGE QUALITY IN19 CREASES.—Section 1853 of such Act (42 U.S.C. 1395w– 

20 23), as amended by subsection (b), is amended— 

21 (1) in subsection (j), by inserting ‘‘subject to 

22 subsection (o),’’ after ‘‘For purposes of this part,’’; 

23 (2) in subsection (n)(2)(B), as added by sub24 section (b), by inserting ‘‘, subject to subsection (o)’’ 

25 after ‘‘as follows’’; and 
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1 (3) by adding at the end the following new sub2 section: 

3 ‘‘(o) APPLICABLE PERCENTAGE QUALITY IN4 CREASES.— 

5 ‘‘(1) IN GENERAL.—Subject to the succeeding 

6 paragraphs, in the case of a qualifying plan with re7 spect to a year beginning with 2012, the applicable 

8 percentage under subsection (n)(2)(B) shall be in9 creased on a plan or contract level, as determined by 

10 the Secretary— 

11 ‘‘(A) for 2012, by 1.5 percentage points; 

12 ‘‘(B) for 2013, by 3.0 percentage points; 

13 and 

14 ‘‘(C) for 2014 or a subsequent year, by 5.0 

15 percentage points. 

16 ‘‘(2) INCREASE FOR QUALIFYING PLANS IN

17 QUALIFYING COUNTIES.—The increase applied under 

18 paragraph (1) for a qualifying plan located in a 

19 qualifying county for a year shall be doubled. 

20 ‘‘(3) QUALIFYING PLANS AND QUALIFYING

21 COUNTY DEFINED; APPLICATION OF INCREASES TO

22 LOW ENROLLMENT AND NEW PLANS.—For purposes 

23 of this subsection: 

24 ‘‘(A) QUALIFYING PLAN.— 
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1 ‘‘(i) IN GENERAL.—The term ‘quali2 fying plan’ means, for a year and subject 

3 to paragraph (4), a plan that had a quality 

4 rating under paragraph (4) of 4 stars or 

5 higher based on the most recent data avail6 able for such year. 

7 ‘‘(ii) APPLICATION OF INCREASES TO

8 LOW ENROLLMENT PLANS.— 

9 ‘‘(I) 2012.—For 2012, the term 

10 ‘qualifying plan’ includes an MA plan 

11 that the Secretary determines is not 

12 able to have a quality rating under 

13 paragraph (4) because of low enroll14 ment. 

15 ‘‘(II) 2013 AND SUBSEQUENT

16 YEARS.—For 2013 and subsequent 

17 years, for purposes of determining 

18 whether an MA plan with low enroll19 ment (as defined by the Secretary) is 

20 included as a qualifying plan, the Sec21 retary shall establish a method to 

22 apply to MA plans with low enroll23 ment (as defined by the Secretary) 

24 the computation of quality rating and 
42 

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1 the rating system under paragraph 

2 (4). 

3 ‘‘(iii) APPLICATION OF INCREASES TO

4 NEW PLANS.— 

5 ‘‘(I) IN GENERAL.—A new MA 

6 plan that meets criteria specified by 

7 the Secretary shall be treated as a 

8 qualifying plan, except that in apply9 ing paragraph (1), the applicable per10 centage under subsection (n)(2)(B) 

11 shall be increased— 

12 ‘‘(aa) for 2012, by 1.5 per13 centage points; 

14 ‘‘(bb) for 2013, by 2.5 per15 centage points; and 

16 ‘‘(cc) for 2014 or a subse17 quent year, by 3.5 percentage 

18 points. 

19 ‘‘(II) NEW MA PLAN DEFINED.— 

20 The term ‘new MA plan’ means, with 

21 respect to a year, a plan offered by an 

22 organization or sponsor that has not 

23 had a contract as a Medicare Advan24 tage organization in the preceding 3- 

25 year period. 
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1 ‘‘(B) QUALIFYING COUNTY.—The term 

2 ‘qualifying county’ means, for a year, a coun3 ty— 

4 ‘‘(i) that has an MA capitation rate 

5 that, in 2004, was based on the amount 

6 specified in subsection (c)(1)(B) for a Met7 ropolitan Statistical Area with a population 

8 of more than 250,000; 

9 ‘‘(ii) for which, as of December 2009, 

10 of the Medicare Advantage eligible individ11 uals residing in the county at least 25 per12 cent of such individuals were enrolled in 

13 Medicare Advantage plans; and 

14 ‘‘(iii) that has per capita fee-for-serv15 ice spending that is lower than the na16 tional monthly per capita cost for expendi17 tures for individuals enrolled under the 

18 original medicare fee-for-service program 

19 for the year. 

20 ‘‘(4) QUALITY DETERMINATIONS FOR APPLICA21 TION OF INCREASE.— 

22 ‘‘(A) QUALITY DETERMINATION.—The 

23 quality rating for a plan shall be determined ac24 cording to a 5-star rating system (based on the 

25 data collected under section 1852(e)). 
44 

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1 ‘‘(B) PLANS THAT FAILED TO REPORT.— 

2 An MA plan which does not report data that 

3 enables the Secretary to rate the plan for pur4 poses of this paragraph shall be counted as hav5 ing a rating of fewer than 3.5 stars. 

6 ‘‘(5) EXCEPTION FOR PACE PLANS.—This sub7 section shall not apply to payments to a PACE pro8 gram under section 1894.’’. 

9 (4) DETERMINATION OF MEDICARE PART D

10 LOW-INCOME BENCHMARK PREMIUM.—Section 

11 1860D–14(b)(2)(B)(iii) of the Social Security Act 

12 (42 U.S.C. 1395w–114(b)(2)(B)(iii)) as amended by 

13 section 3302 of the Patient Protection and Afford14 able Care Act, is amended by striking ‘‘, determined 

15 without regard to any reduction in such premium as 

16 a result of any beneficiary rebate under section 

17 1854(b)(1)(C) or bonus payment under section 

18 1853(n)’’ and inserting the following: ‘‘and deter19 mined before the application of the monthly rebate 

20 computed under section 1854(b)(1)(C)(i) for that 

21 plan and year involved and, in the case of a quali22 fying plan, before the application of the increase 

23 under section 1853(o) for that plan and year in24 volved’’. 
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1 (d) BENEFICIARY REBATES.—Section 1854(b)(1)(C) 

2 of such Act (42 U.S.C. 1395w–24(b)(1)(C)), as amended 

3 by section 3202(b) of the Patient Protection and Afford4 able Care Act, is further amended— 

5 (1) in clause (i), by inserting ‘‘(or the applica6 ble rebate percentage specified in clause (iii) in the 

7 case of plan years beginning on or after January 1, 

8 2012)’’ after ‘‘75 percent’’; and 

9 (2) by striking clause (iii), by redesignating 

10 clauses (iv) and (v) as clauses (vii) and (viii), respec11 tively, and by inserting after clause (ii) the following 

12 new clauses: 

13 ‘‘(iii) APPLICABLE REBATE PERCENT14 AGE.—The applicable rebate percentage 

15 specified in this clause for a plan for a 

16 year, based on the system under section 

17 1853(o)(4)(A), is the sum of— 

18 ‘‘(I) the product of the old phase19 in proportion for the year under 

20 clause (iv) and 75 percent; and 

21 ‘‘(II) the product of the new 

22 phase-in proportion for the year under 

23 clause (iv) and the final applicable re24 bate percentage under clause (v). 
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1 ‘‘(iv) OLD AND NEW PHASE-IN PRO2 PORTIONS.—For purposes of clause (iv)— 

3 ‘‘(I) for 2012, the old phase-in 

proportion is 2 4 ⁄3 and the new phase-in 

proportion is 1 5 ⁄3; 

6 ‘‘(II) for 2013, the old phase-in 

proportion is 1 7 ⁄3 and the new phase-in 

proportion is 2 8 ⁄3; and 

9 ‘‘(III) for 2014 and any subse10 quent year, the old phase-in propor11 tion is 0 and the new phase-in propor12 tion is 1. 

13 ‘‘(v) FINAL APPLICABLE REBATE PER14 CENTAGE.—Subject to clause (vi), the final 

15 applicable rebate percentage under this 

16 clause is— 

17 ‘‘(I) in the case of a plan with a 

18 quality rating under such system of at 

19 least 4.5 stars, 70 percent; 

20 ‘‘(II) in the case of a plan with 

21 a quality rating under such system of 

22 at least 3.5 stars and less than 4.5 

23 stars, 65 percent; and 
47 

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1 ‘‘(III) in the case of a plan with 

2 a quality rating under such system of 

3 less than 3.5 stars, 50 percent. 

4 ‘‘(vi) TREATMENT OF LOW ENROLL5 MENT AND NEW PLANS.—For purposes of 

6 clause (v)— 

7 ‘‘(I) for 2012, in the case of a 

8 plan described in subclause (I) of sub9 section (o)(3)(A)(ii), the plan shall be 

10 treated as having a rating of 4.5 

11 stars; and 

12 ‘‘(II) for 2012 or a subsequent 

13 year, in the case of a new MA plan 

14 (as defined under subclause (III) of 

15 subsection (o)(3)(A)(iii)) that is treat16 ed as a qualifying plan pursuant to 

17 subclause (I) of such subsection, the 

18 plan shall be treated as having a rat19 ing of 3.5 stars.’’. 

20 (e) CODING INTENSITY ADJUSTMENT.—Section 

21 1853(a)(1)(C)(ii) of such Act (42 U.S.C. 1395w– 

22 23(a)(1)(C)(ii)) is amended— 

23 (1) in the heading, by striking ‘‘DURING PHASE24 OUT OF BUDGET NEUTRALITY FACTOR’’ and insert25 ing ‘‘OF CODING ADJUSTMENT’’; 
48 

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1 (2) in the matter before subclause (I), by strik2 ing ‘‘through 2010’’ and inserting ‘‘and each subse3 quent year’’; and 

4 (3) in subclause (II)— 

5 (A) in the first sentence, by inserting ‘‘an6 nually’’ before ‘‘conduct an analysis’’; 

7 (B) in the second sentence— 

8 (i) by inserting ‘‘on a timely basis’’ 

9 after ‘‘are incorporated’’; and 

10 (ii) by striking ‘‘only for 2008, 2009, 

11 and 2010’’ and inserting ‘‘for 2008 and 

12 subsequent years’’; 

13 (C) in the third sentence, by inserting 

14 ‘‘and updated as appropriate’’ before the period 

15 at the end; and 

16 (D) by adding at the end the following new 

17 subclauses: 

18 ‘‘(III) In calculating each year’s 

19 adjustment, the adjustment factor 

20 shall be for 2014, not less than the 

21 adjustment factor applied for 2010, 

22 plus 1.3 percentage points; for each of 

23 years 2015 through 2018, not less 

24 than the adjustment factor applied for 

25 the previous year, plus 0.25 percent-
49 

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1 age point; and for 2019 and each sub2 sequent year, not less than 5.7 per3 cent. 

4 ‘‘(IV) Such adjustment shall be 

5 applied to risk scores until the Sec6 retary implements risk adjustment 

7 using Medicare Advantage diagnostic, 

8 cost, and use data.’’. 

9 (f) REPEAL OF COMPARATIVE COST ADJUSTMENT

10 PROGRAM.—Section 1860C–1 of the Social Security Act 

11 (42 U.S.C. 1395w–29), as added by section 241(a) of the 

12 Medicare Prescription Drug, Improvement, and Mod13 ernization Act of 2003 (Public Law 108–173), is repealed. 

14 SEC. 1103. SAVINGS FROM LIMITS ON MA PLAN ADMINIS15 TRATIVE COSTS. 

16 Section 1857(e) of the Social Security Act (42 U.S.C. 

17 1395w–27(e)) is amended by adding at the end the fol18 lowing new paragraph: 

19 ‘‘(4) REQUIREMENT FOR MINIMUM MEDICAL

20 LOSS RATIO.—If the Secretary determines for a con21 tract year (beginning with 2014) that an MA plan 

22 has failed to have a medical loss ratio of at least 

23 .85— 

24 ‘‘(A) the MA plan shall remit to the Sec25 retary an amount equal to the product of— 
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1 ‘‘(i) the total revenue of the MA plan 

2 under this part for the contract year; and 

3 ‘‘(ii) the difference between .85 and 

4 the medical loss ratio; 

5 ‘‘(B) for 3 consecutive contract years, the 

6 Secretary shall not permit the enrollment of 

7 new enrollees under the plan for coverage dur8 ing the second succeeding contract year; and 

9 ‘‘(C) the Secretary shall terminate the plan 

10 contract if the plan fails to have such a medical 

11 loss ratio for 5 consecutive contract years.’’. 

12 SEC. 1104. DISPROPORTIONATE SHARE HOSPITAL (DSH) 

13 PAYMENTS. 

14 Section 1886(r) of the Social Security Act (42 U.S.C. 

15 1395ww(r)), as added by section 3133 of the Patient Pro16 tection and Affordable Care Act and as amended by sec17 tion 10316 of such Act, is amended— 

18 (1) in paragraph (1), by striking ‘‘2015’’ and 

19 inserting ‘‘2014’’; and 

20 (2) in paragraph (2)— 

21 (A) in the matter preceding subparagraph 

22 (A), by striking ‘‘2015’’ and inserting ‘‘2014’’; 

23 (B) in subparagraph (B)(i)— 

24 (i) in the heading, by inserting ‘‘2014,’’ 

25 after ‘‘YEARS’’; 
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1 (ii) in the matter preceding subclause 

2 (I), by inserting ‘‘2014,’’ after ‘‘each of fis3 cal years’’; 

4 (iii) in subclause (I), by striking ‘‘on 

5 such Act’’ and inserting ‘‘on the Health 

6 Care and Education Reconciliation Act of 

7 2010’’; and 

8 (iv) in the matter following subclause 

9 (II), by striking ‘‘minus 1.5 percentage 

10 points’’ and inserting ‘‘minus 0.1 percent11 age points for fiscal year 2014 and minus 

12 0.2 percentage points for each of fiscal 

13 years 2015, 2016, and 2017’’; and 

14 (C) in subparagraph (B)(ii), in the matter 

15 following subclause (II), by striking ‘‘and, for 

16 each of 2018 and 2019, minus 1.5 percentage 

17 points’’ and inserting ‘‘minus 0.2 percentage 

18 points for each of fiscal years 2018 and 2019’’. 

19 SEC. 1105. MARKET BASKET UPDATES. 

20 (a) IPPS.—Section 1886(b)(3)(B) of the Social Se21 curity Act (42 U.S.C. 1395ww(b)(3)(B)), as amended by 

22 sections 3401(a)(4) and 10319(a) of the Patient Protec23 tion and Affordable Care Act, is amended— 

24 (1) in clause (xii)— 
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1 (A) by placing the subclause (II) (inserted 

2 by section 10319(a)(3) of the Patient Protec3 tion and Affordable Care Act) immediately after 

4 subclause (I) and, in such subclause (II), by 

5 striking ‘‘and’’ at the end; and 

6 (B) by striking subclause (III) and insert7 ing the following: 

8 ‘‘(III) for fiscal year 2014, by 0.3 percentage 

9 point; 

10 ‘‘(IV) for each of fiscal years 2015 and 2016, 

11 by 0.2 percentage point; and 

12 ‘‘(V) for each of fiscal years 2017, 2018, and 

13 2019, by 0.75 percentage point.’’; and 

14 (2) by striking clause (xiii). 

15 (b) LONG-TERM CARE HOSPITALS.—Section 

16 1886(m)(4) of the Social Security Act (42 U.S.C. 

17 1395ww(m)(4)), as added by section 3401(c) of the Pa18 tient Protection and Affordable Care Act and amended by 

19 section 10319(b) of such Act, is amended— 

20 (1) in subparagraph (A)— 

21 (A) in clause (iii), by striking ‘‘and’’ at the 

22 end; and 

23 (B) by striking clause (iv) and inserting 

24 the following: 
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1 ‘‘(iv) for rate year 2014, 0.3 percent2 age point; 

3 ‘‘(v) for each of rate years 2015 and 

4 2016, 0.2 percentage point; and 

5 ‘‘(vi) for each of rate years 2017, 

6 2018, and 2019, 0.75 percentage point.’’; 

7 (2) by striking subparagraph (B); and 

8 (3) by striking ‘‘(4) OTHER ADJUSTMENT.—’’ 

9 and all that follows through ‘‘For purposes’’ and in10 serting ‘‘(4) OTHER ADJUSTMENT.—For purposes’’ 

11 (and redesignating clauses (i) through (vi) as sub12 paragraphs (A) through (F), respectively, with ap13 propriate indentation). 

14 (c) INPATIENT REHABILITATION FACILITIES.—Sec15 tion 1886(j)(3)(D) of the Social Security Act (42 U.S.C. 

16 1395ww(j)(3)(D)), as added by section 3401(d)(2) of the 

17 Patient Protection and Affordable Care Act and amended 

18 by section 10319(c) of such Act, is amended— 

19 (1) in clause (i)— 

20 (A) by placing the subclause (II) (inserted 

21 by section 10319(c)(3) of the Patient Protec22 tion and Affordable Care Act) immediately after 

23 subclause (I) and, in such subclause (II), by 

24 striking ‘‘and’’ at the end; and 
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1 (B) by striking subclause (III) and insert2 ing the following: 

3 ‘‘(III) for fiscal year 2014, 0.3 

4 percentage point; 

5 ‘‘(IV) for each of fiscal years 

6 2015 and 2016, 0.2 percentage point; 

7 and 

8 ‘‘(V) for each of fiscal years 

9 2017, 2018, and 2019, 0.75 percent10 age point.’’; 

11 (2) by striking clause (ii); and 

12 (3) by striking ‘‘(D) OTHER ADJUSTMENT.—’’ 

13 and all that follows through ‘‘For purposes’’ and in14 serting ‘‘(D) OTHER ADJUSTMENT.—For purposes’’ 

15 (and redesignating subclauses (I) through (V) as 

16 clauses (i) through (v), respectively, with appropriate 

17 indentation). 

18 (d) PSYCHIATRIC HOSPITALS.—Section 1886(s)(3) of 

19 the Social Security Act, as added by section 3401(f) of 

20 the Patient Protection and Affordable Care Act and 

21 amended by section 10319(e) of such Act, is amended— 

22 (1) in subparagraph (A)— 

23 (A) by placing the clause (ii) (inserted by 

24 section 10319(e)(3) of the Patient Protection 

25 and Affordable Care Act) immediately after 
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1 clause (i) and, in such clause (ii), by striking 

2 ‘‘and’’ at the end; and 

3 (B) by striking clause (iii) and inserting 

4 the following: 

5 ‘‘(iii) for the rate year beginning in 

6 2014, 0.3 percentage point; 

7 ‘‘(iv) for each of the rate years begin8 ning in 2015 and 2016, 0.2 percentage 

9 point; and 

10 ‘‘(v) for each of the rate years begin11 ning in 2017, 2018, and 2019, 0.75 per12 centage point.’’; 

13 (2) by striking subparagraph (B); and 

14 (3) by striking ‘‘(3) OTHER ADJUSTMENT.—’’ 

15 and all that follows through ‘‘For purposes’’ and in16 serting ‘‘(3) OTHER ADJUSTMENT.—For purposes’’ 

17 (and redesignating clauses (i) through (v) as sub18 paragraphs (A) through (E), respectively, with ap19 propriate indentation). 

20 (e) OUTPATIENT HOSPITALS.—Section 

21 1833(t)(3)(G) of the Social Security Act (42 U.S.C. 

22 1395l(t)(3)(G)), as added by section 3401(i)(2) of the Pa23 tient Protection and Affordable Care Act and amended by 

24 section 10319(g) of such Act, is amended— 

25 (1) in clause (i)— 
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1 (A) by placing the subclause (II) (inserted 

2 by section 10319(g)(3) of the Patient Protec3 tion and Affordable Care Act) immediately after 

4 subclause (I) and, in such subclause (II), by 

5 striking ‘‘and’’ at the end; and 

6 (B) by striking subclause (III) and insert7 ing the following: 

8 ‘‘(III) for 2014, 0.3 percentage 

9 point; 

10 ‘‘(IV) for each of 2015 and 2016, 

11 0.2 percentage point; and 

12 ‘‘(V) for each of 2017, 2018, and 

13 2019, 0.75 percentage point.’’; 

14 (2) by striking clause (ii); and 

15 (3) by striking ‘‘(G) OTHER ADJUSTMENT.—’’ 

16 and all that follows through ‘‘For purposes’’ and in17 serting ‘‘(G) OTHER ADJUSTMENT.—For purposes’’ 

18 (and redesignating subclauses (I) through (V) as 

19 clauses (i) through (v), respectively, with appropriate 

20 indentation). 

21 SEC. 1106. PHYSICIAN OWNERSHIP-REFERRAL. 

22 Section 1877(i) of the Social Security Act (42 U.S.C. 

23 1395nn(i)), as added by section 6001(a)(3) of the Patient 

24 Protection and Affordable Care Act and as amended by 

25 section 10601(a) of such Act, is amended— 
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1 (1) in paragraph (1)(A)(i), by striking ‘‘August 

2 1, 2010’’ and inserting ‘‘December 31, 2010’’; and 

3 (2) in paragraph (3)— 

4 (A) in subparagraph (A)(i), by striking 

5 ‘‘an applicable hospital (as defined in subpara6 graph (E))’’ and inserting ‘‘a hospital that is an 

7 applicable hospital (as defined in subparagraph 

8 (E)) or is a high Medicaid facility described in 

9 subparagraph (F)’’; 

10 (B) in subparagraph (C)(iii), by inserting 

11 after ‘‘date of enactment of this subsection’’ the 

12 following: ‘‘(or, in the case of a hospital that 

13 did not have a provider agreement in effect as 

14 of such date but does have such an agreement 

15 in effect on December 31, 2010, the effective 

16 date of such provider agreement)’’; 

17 (C) by redesignating subparagraphs (F) 

18 through (H) as subparagraphs (G) through (I), 

19 respectively; and 

20 (D) by inserting after subparagraph (E) 

21 the following new subparagraph: 

22 ‘‘(F) HIGH MEDICAID FACILITY DE23 SCRIBED.—A high Medicaid facility described in 

24 this subparagraph is a hospital that— 
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1 ‘‘(i) is not the sole hospital in a coun2 ty; 

3 ‘‘(ii) with respect to each of the 3 

4 most recent years for which data are avail5 able, has an annual percent of total inpa6 tient admissions that represent inpatient 

7 admissions under title XIX that is esti8 mated to be greater than such percent with 

9 respect to such admissions for any other 

10 hospital located in the county in which the 

11 hospital is located; and 

12 ‘‘(iii) meets the conditions described 

13 in subparagraph (E)(iii).’’. 

14 SEC. 1107. PAYMENT FOR IMAGING SERVICES. 

15 Section 1848 of the Social Security Act (42 U.S.C. 

16 1395w–4), as amended by section 3135(a) of the Patient 

17 Protection and Affordable Care Act, is amended— 

18 (1) in subsection (b)(4)— 

19 (A) in subparagraph (B), by striking ‘‘this 

20 paragraph’’ and inserting ‘‘subparagraph (A)’’; 

21 and 

22 (B) by amending subparagraph (C) to read 

23 as follows: 

24 ‘‘(C) ADJUSTMENT IN IMAGING UTILIZA25 TION RATE.—With respect to fee schedules es-
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1 tablished for 2011 and subsequent years, in the 

2 methodology for determining practice expense 

3 relative value units for expensive diagnostic im4 aging equipment under the final rule published 

5 by the Secretary in the Federal Register on No6 vember 25, 2009 (42 CFR 410 et al.), the Sec7 retary shall use a 75 percent assumption in8 stead of the utilization rates otherwise estab9 lished in such final rule.’’; and 

10 (2) in subsection (c)(2)(B)(v), by striking sub11 clauses (III), (IV), and (V) and inserting the fol12 lowing new subclause: 

13 ‘‘(III) CHANGE IN UTILIZATION

14 RATE FOR CERTAIN IMAGING SERV15 ICES.—Effective for fee schedules es16 tablished beginning with 2011, re17 duced expenditures attributable to the 

18 change in the utilization rate applica19 ble to 2011, as described in subsection 

20 (b)(4)(C).’’. 

21 SEC. 1108. PE GPCI ADJUSTMENT FOR 2010. 

22 Effective as if included in the enactment of the Pa23 tient Protection and Affordable Care Act, section 

24 1848(e)(1)(H)(i) of the Social Security Act (42 U.S.C. 

25 1395w–4(e)(1)(H)(i)), as added by section 3102(b)(2) of 
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1 the Patient Protection and Affordable Care Act, is amended by striking ‘‘3⁄4’’ and inserting ‘‘1 2 ⁄2’’. 

3 SEC. 1109. PAYMENT FOR QUALIFYING HOSPITALS. 

4 (a) IN GENERAL.—From the amount available under 

5 subsection (b), the Secretary of Health and Human Serv6 ices shall provide for a payment to qualifying hospitals (as 

7 defined in subsection (d)) for fiscal years 2011 and 2012 

8 of the amount determined under subsection (c). 

9 (b) AMOUNTS AVAILABLE.—There shall be available 

10 from the Federal Hospital Insurance Trust Fund 

11 $400,000,000 for payments under this section for fiscal 

12 years 2011 and 2012. 

13 (c) PAYMENT AMOUNT.—The amount of payment 

14 under this section for a qualifying hospital shall be deter15 mined, in a manner consistent with the amount available 

16 under subsection (b), in proportion to the portion of the 

17 amount of the aggregate payments under section 1886(d) 

18 of the Social Security Act to the hospital for fiscal year 

19 2009 bears to the sum of all such payments to all quali20 fying hospitals for such fiscal year. 

21 (d) QUALIFYING HOSPITAL DEFINED.—In this sec22 tion, the term ‘‘qualifying hospital’’ means a subsection 

23 (d) hospital (as defined for purposes of section 1886(d) 

24 of the Social Security Act) that is located in a county that 

25 ranks, based upon its ranking in age, sex, and race ad-
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1 justed spending for benefits under parts A and B under 

2 title XVIII of such Act per enrollee, within the lowest 

3 quartile of such counties in the United States. 

4 Subtitle C—Medicaid 

5 SEC. 1201. FEDERAL FUNDING FOR STATES. 

6 Section 1905 of the Social Security Act (42 U.S.C. 

7 1396d), as amended by sections 2001(a)(3) and 10201(c) 

8 of the Patient Protection and Affordable Care Act, is 

9 amended— 

10 (1) in subsection (y)— 

11 (A) by redesignating subclause (II) of 

12 paragraph (1)(B)(ii) as paragraph (5) of sub13 section (z) and realigning the left margins ac14 cordingly; and 

15 (B) by striking paragraph (1) and insert16 ing the following: 

17 ‘‘(1) AMOUNT OF INCREASE.—Notwithstanding 

18 subsection (b), the Federal medical assistance per19 centage for a State that is one of the 50 States or 

20 the District of Columbia, with respect to amounts 

21 expended by such State for medical assistance for 

22 newly eligible individuals described in subclause 

23 (VIII) of section 1902(a)(10)(A)(i), shall be equal 

24 to— 
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1 ‘‘(A) 100 percent for calendar quarters in 

2 2014, 2015, and 2016; 

3 ‘‘(B) 95 percent for calendar quarters in 

4 2017; 

5 ‘‘(C) 94 percent for calendar quarters in 

6 2018; 

7 ‘‘(D) 93 percent for calendar quarters in 

8 2019; and 

9 ‘‘(E) 90 percent for calendar quarters in 

10 2020 and each year thereafter.’’; and 

11 (2) in subsection (z)— 

12 (A) in paragraph (1), by striking ‘‘Sep13 tember 30, 2019’’ and inserting ‘‘December 31, 

14 2015’’ and by striking ‘‘subsection 

15 (y)(1)(B)(ii)(II)’’ and inserting ‘‘paragraph 

16 (3)’’; 

17 (B) by striking paragraphs (2) through (4) 

18 and inserting the following: 

19 ‘‘(2)(A) For calendar quarters in 2014 and 

20 each year thereafter, the Federal medical assistance 

21 percentage otherwise determined under subsection 

22 (b) for an expansion State described in paragraph 

23 (3) with respect to medical assistance for individuals 

24 described in section 1902(a)(10)(A)(i)(VIII) who are 

25 nonpregnant childless adults with respect to whom 
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1 the State may require enrollment in benchmark cov2 erage under section 1937 shall be equal to the per3 cent specified in subparagraph (B)(i) for such year. 

4 ‘‘(B)(i) The percent specified in this subpara5 graph for a State for a year is equal to the Federal 

6 medical assistance percentage (as defined in the first 

7 sentence of subsection (b)) for the State increased 

8 by a number of percentage points equal to the tran9 sition percentage (specified in clause (ii) for the 

10 year) of the number of percentage points by which— 

11 ‘‘(I) such Federal medical assistance per12 centage for the State, is less than 

13 ‘‘(II) the percent specified in subsection 

14 (y)(1) for the year. 

15 ‘‘(ii) The transition percentage specified in this 

16 clause for— 

17 ‘‘(I) 2014 is 50 percent; 

18 ‘‘(II) 2015 is 60 percent; 

19 ‘‘(III) 2016 is 70 percent; 

20 ‘‘(IV) 2017 is 80 percent; 

21 ‘‘(V) 2018 is 90 percent; and 

22 ‘‘(VI) 2019 and each subsequent year is 

23 100 percent.’’; and 

24 (C) by redesignating paragraph (5) (as 

25 added by paragraph (1)(A) of this section) as 
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1 paragraph (3), realigning the left margins to 

2 align with paragraph (2), and striking the 

3 heading and all that follows through ‘‘a State 

4 is’’ and inserting ‘‘A State is’’. 

5 SEC. 1202. PAYMENTS TO PRIMARY CARE PHYSICIANS. 

6 (a) IN GENERAL.— 

7 (1) FEE-FOR-SERVICE PAYMENTS.—Section 

8 1902 of the Social Security Act (42 U.S.C. 1396a), 

9 as amended by section 2303(a)(2) of the Patient 

10 Protection and Affordable Care Act, is amended— 

11 (A) in subsection (a)(13)— 

12 (i) by striking ‘‘and’’ at the end of 

13 subparagraph (A); 

14 (ii) by adding ‘‘and’’ at the end of 

15 subparagraph (B); and 

16 (iii) by adding at the end the fol17 lowing new subparagraph: 

18 ‘‘(C) payment for primary care services (as 

19 defined in subsection (jj)) furnished in 2013 

20 and 2014 by a physician with a primary spe21 cialty designation of family medicine, general 

22 internal medicine, or pediatric medicine at a 

23 rate not less than 100 percent of the payment 

24 rate that applies to such services and physician 

25 under part B of title XVIII (or, if greater, the 
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1 payment rate that would be applicable under 

2 such part if the conversion factor under section 

3 1848(d) for the year involved were the conver4 sion factor under such section for 2009);’’; and 

5 (B) by adding at the end the following new 

6 subsection: 

7 ‘‘(jj) PRIMARY CARE SERVICES DEFINED.—For pur8 poses of subsection (a)(13)(C), the term ‘primary care 

9 services’ means— 

10 ‘‘(1) evaluation and management services that 

11 are procedure codes (for services covered under title 

12 XVIII) for services in the category designated Eval13 uation and Management in the Healthcare Common 

14 Procedure Coding System (established by the Sec15 retary under section 1848(c)(5) as of December 31, 

16 2009, and as subsequently modified); and 

17 ‘‘(2) services related to immunization adminis18 tration for vaccines and toxoids for which CPT codes 

19 90465, 90466, 90467, 90468, 90471, 90472, 90473, 

20 or 90474 (as subsequently modified) apply under 

21 such System.’’. 

22 (2) UNDER MEDICAID MANAGED CARE

23 PLANS.—Section 1932(f) of such Act (42 U.S.C. 

24 1396u–2(f)) is amended— 
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1 (A) in the heading, by adding at the end 

2 the following: ‘‘; ADEQUACY OF PAYMENT FOR

3 PRIMARY CARE SERVICES’’; and 

4 (B) by inserting before the period at the 

5 end the following: ‘‘and, in the case of primary 

6 care services described in section 

7 1902(a)(13)(C), consistent with the minimum 

8 payment rates specified in such section (regard9 less of the manner in which such payments are 

10 made, including in the form of capitation or 

11 partial capitation)’’. 

12 (b) INCREASE IN PAYMENT USING INCREASED

13 FMAP.—Section 1905 of the Social Security Act, as 

14 amended by section 1004(b) of this Act and section 

15 10201(c)(6) of the Patient Protection and Affordable Care 

16 Act, is amended by adding at the end the following new 

17 subsection: 

18 ‘‘(dd) INCREASED FMAP FOR ADDITIONAL EXPEND19 ITURES FOR PRIMARY CARE SERVICES.—Notwithstanding 

20 subsection (b), with respect to the portion of the amounts 

21 expended for medical assistance for services described in 

22 section 1902(a)(13)(C) furnished on or after January 1, 

23 2013, and before January 1, 2015, that is attributable to 

24 the amount by which the minimum payment rate required 

25 under such section (or, by application, section 1932(f)) ex-
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1 ceeds the payment rate applicable to such services under 

2 the State plan as of July 1, 2009, the Federal medical 

3 assistance percentage for a State that is one of the 50 

4 States or the District of Columbia shall be equal to 100 

5 percent. The preceding sentence does not prohibit the pay6 ment of Federal financial participation based on the Fed7 eral medical assistance percentage for amounts in excess 

8 of those specified in such sentence.’’. 

9 SEC. 1203. DISPROPORTIONATE SHARE HOSPITAL PAY10 MENTS. 

11 (a) IN GENERAL.—Section 1923(f) of the Social Se12 curity Act (42 U.S.C. 1396r–4(f)), as amended by sections 

13 2551(a)(4) and 10201(e)(1) of the Patient Protection and 

14 Affordable Care Act, is amended— 

15 (1) in paragraph (6)(B)(iii), in the matter pre16 ceding subclause (I), by striking ‘‘or paragraph (7)’’; 

17 and 

18 (2) by striking paragraph (7) and inserting the 

19 following: 

20 ‘‘(7) MEDICAID DSH REDUCTIONS.— 

21 ‘‘(A) REDUCTIONS.— 

22 ‘‘(i) IN GENERAL.—For each of fiscal 

23 years 2014 through 2020 the Secretary 

24 shall effect the following reductions: 
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1 ‘‘(I) REDUCTION IN DSH ALLOT2 MENTS.—The Secretary shall reduce 

3 DSH allotments to States in the 

4 amount specified under the DSH 

5 health reform methodology under sub6 paragraph (B) for the State for the 

7 fiscal year. 

8 ‘‘(II) REDUCTIONS IN PAY9 MENTS.—The Secretary shall reduce 

10 payments to States under section 

11 1903(a) for each calendar quarter in 

12 the fiscal year, in the manner speci13 fied in clause (iii), in an amount equal 

to 1 14 ⁄4 of the DSH allotment reduction 

15 under subclause (I) for the State for 

16 the fiscal year. 

17 ‘‘(ii) AGGREGATE REDUCTIONS.—The 

18 aggregate reductions in DSH allotments 

19 for all States under clause (i)(I) shall be 

20 equal to— 

21 ‘‘(I) $500,000,000 for fiscal year 

22 2014; 

23 ‘‘(II) $600,000,000 for fiscal 

24 year 2015; 
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1 ‘‘(III) $600,000,000 for fiscal 

2 year 2016; 

3 ‘‘(IV) $1,800,000,000 for fiscal 

4 year 2017; 

5 ‘‘(V) $5,000,000,000 for fiscal 

6 year 2018; 

7 ‘‘(VI) $5,600,000,000 for fiscal 

8 year 2019; and 

9 ‘‘(VII) $4,000,000,000 for fiscal 

10 year 2020. 

11 The Secretary shall distribute such aggre12 gate reductions among States in accord13 ance with subparagraph (B). 

14 ‘‘(iii) MANNER OF PAYMENT REDUC15 TION.—The amount of the payment reduc16 tion under clause (i)(II) for a State for a 

17 quarter shall be deemed an overpayment to 

18 the State under this title to be disallowed 

19 against the State’s regular quarterly draw 

20 for all spending under section 1903(d)(2). 

21 Such a disallowance is not subject to a re22 consideration under subsections (d) and (e) 

23 of section 1116. 
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1 ‘‘(iv) DEFINITION.—In this para2 graph, the term ‘State’ means the 50 

3 States and the District of Columbia. 

4 ‘‘(B) DSH HEALTH REFORM METHOD5 OLOGY.—The Secretary shall carry out sub6 paragraph (A) through use of a DSH Health 

7 Reform methodology that meets the following 

8 requirements: 

9 ‘‘(i) The methodology imposes the 

10 largest percentage reductions on the States 

11 that— 

12 ‘‘(I) have the lowest percentages 

13 of uninsured individuals (determined 

14 on the basis of data from the Bureau 

15 of the Census, audited hospital cost 

16 reports, and other information likely 

17 to yield accurate data) during the 

18 most recent year for which such data 

19 are available; or 

20 ‘‘(II) do not target their DSH 

21 payments on— 

22 ‘‘(aa) hospitals with high 

23 volumes of Medicaid inpatients 

24 (as defined in subsection 

25 (b)(1)(A)); and 
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1 ‘‘(bb) hospitals that have 

2 high levels of uncompensated 

3 care (excluding bad debt). 

4 ‘‘(ii) The methodology imposes a 

5 smaller percentage reduction on low DSH 

6 States described in paragraph (5)(B). 

7 ‘‘(iii) The methodology takes into ac8 count the extent to which the DSH allot9 ment for a State was included in the budg10 et neutrality calculation for a coverage ex11 pansion approved under section 1115 as of 

12 July 31, 2009.’’. 

13 (b) EXTENSION OF DSH ALLOTMENT.—Section 

14 1923(f)(6)(A) of the Social Security Act (42 U.S.C. 

15 1396r–4(f)(6)(A)) is amended by adding at the end the 

16 following: 

17 ‘‘(v) ALLOTMENT FOR 2D, 3RD, AND

18 4TH QUARTERS OF FISCAL YEAR 2012 AND

19 FOR FISCAL YEAR 2013.—Notwithstanding 

20 the table set forth in paragraph (2): 

21 ‘‘(I) 2D, 3RD, AND 4TH QUAR22 TERS OF FISCAL YEAR 2012.—In the 

23 case of a State that has a DSH allot24 ment of $0 for the 2d, 3rd, and 4th 

25 quarters of fiscal year 2012, the DSH 
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1 allotment shall be $47,200,000 for 

2 such quarters. 

3 ‘‘(II) FISCAL YEAR 2013.—In the 

4 case of a State that has a DSH allot5 ment of $0 for fiscal year 2013, the 

6 DSH allotment shall be $53,100,000 

7 for such fiscal year.’’. 

8 SEC. 1204. FUNDING FOR THE TERRITORIES. 

9 (a) IN GENERAL.—Part III of subtitle D of title I 

10 of the Patient Protection and Affordable Care Act, as 

11 amended by section 10104(m) of such Act, is amended 

12 by inserting after section 1322 the following section: 

13 ‘‘SEC. 1323. FUNDING FOR THE TERRITORIES. 

14 ‘‘(a) IN GENERAL.—A territory that— 

15 ‘‘(1) elects consistent with subsection (b) to es16 tablish an Exchange in accordance with part II of 

17 this subtitle and establishes such an Exchange in ac18 cordance with such part shall be treated as a State 

19 for purposes of such part and shall be entitled to 

20 payment from the amount allocated to the territory 

21 under subsection (c); or 

22 ‘‘(2) does not make such election shall be enti23 tled to an increase in the dollar limitation applicable 

24 to the territory under subsections (f) and (g) of sec25 tion 1108 of the Social Security Act (42 U.S.C. 
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1 1308) for such period in such amount for such terri2 tory and such increase shall not be taken into ac3 count in computing any other amount under such 

4 subsections. 

5 ‘‘(b) TERMS AND CONDITIONS.—An election under 

6 subsection (a)(1) shall— 

7 ‘‘(1) not be effective unless the election is con8 sistent with section 1321 and is received not later 

9 than October 1, 2013; and 

10 ‘‘(2) be contingent upon entering into an agree11 ment between the territory and the Secretary that 

12 requires that— 

13 ‘‘(A) funds provided under the agreement 

14 shall be used only to provide premium and cost15 sharing assistance to residents of the territory 

16 obtaining health insurance coverage through the 

17 Exchange; and 

18 ‘‘(B) the premium and cost-sharing assist19 ance provided under such agreement shall be 

20 structured in such a manner so as to prevent 

21 any gap in assistance for individuals between 

22 the income level at which medical assistance is 

23 available through the territory’s Medicaid plan 

24 under title XIX of the Social Security Act and 

25 the income level at which premium and cost- 
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1 sharing assistance is available under the agree2 ment. 

3 ‘‘(c) APPROPRIATION AND ALLOCATION.— 

4 ‘‘(1) APPROPRIATION.—Out of any funds in the 

5 Treasury not otherwise appropriated, there is appro6 priated for purposes of payment pursuant to sub7 section (a) $1,000,000,000, to be available during 

8 the period beginning with 2014 and ending with 

9 2019. 

10 ‘‘(2) ALLOCATION.—The Secretary shall allo11 cate the amount appropriated under paragraph (1) 

12 among the territories for purposes of carrying out 

13 this section as follows: 

14 ‘‘(A) For Puerto Rico, $925,000,000. 

15 ‘‘(B) For another territory, the portion of 

16 $75,000,000 specified by the Secretary.’’. 

17 (b) MEDICAID FUNDING.— 

18 (1) INCREASE IN FUNDING CAPS.—Section 

19 1108(g) of the Social Security Act (42 U.S.C. 

20 1308(g)), as amended by section 2005(a) of the Pa21 tient Protection and Affordable Care Act, is amend22 ed— 

23 (A) in paragraph (2), by inserting ‘‘and 

24 section 1323(a)(2) of the Patient Protection 
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1 and Affordable Care Act’’ after ‘‘subject to’’; 

2 and 

3 (B) by striking paragraph (5) and insert4 ing the following: 

5 ‘‘(5) ADDITIONAL INCREASE.—The Secretary 

6 shall increase the amounts otherwise determined 

7 under this subsection for Puerto Rico, the Virgin Is8 lands, Guam, the Northern Mariana Islands, and 

9 American Samoa (after the application of subsection 

10 (f) and the preceding paragraphs of this subsection) 

11 for the period beginning July 1, 2011, and ending 

12 on September 30, 2019, by such amounts that the 

13 total additional payments under title XIX to such 

14 territories equals $6,300,000,000 for such period. 

15 The Secretary shall increase such amounts in pro16 portion to the amounts applicable to such territories 

17 under this subsection and subsection (f) on the date 

18 of enactment of this paragraph.’’. 

19 (2) DISREGARD OF PAYMENTS; INCREASED

20 FMAP.—Section 2005 of the Patient Protection and 

21 Affordable Care Act is amended— 

22 (A) by repealing subsection (b) (and the 

23 amendments made by that subsection) and sec24 tion 1108(g)(4) of the Social Security Act shall 
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1 be applied as if such amendments had never 

2 been enacted; and 

3 (B) in subsection (c)(2), by striking ‘‘Jan4 uary’’ and inserting ‘‘July’’. 

5 SEC. 1205. DELAY IN COMMUNITY FIRST CHOICE OPTION. 

6 Section 1915(k)(1) of the Social Security Act (42 

7 U.S.C. 1396n(k)), as added by section 2401 of the Patient 

8 Protection and Affordable Care Act, is amended by strik9 ing ‘‘October 1, 2010’’ and inserting ‘‘October 1, 2011’’. 

10 SEC. 1206. DRUG REBATES FOR NEW FORMULATIONS OF 

11 EXISTING DRUGS. 

12 (a) TREATMENT OF NEW FORMULATIONS.—Sub13 paragraph (C) of section 1927(c)(2) of the Social Security 

14 Act (42 U.S.C. 1396r–8(c)(2)), as added by section 

15 2501(d) of the Patient Protection and Affordable Care 

16 Act, is amended to read as follows: 

17 ‘‘(C) TREATMENT OF NEW FORMULA18 TIONS.—In the case of a drug that is a line ex19 tension of a single source drug or an innovator 

20 multiple source drug that is an oral solid dos21 age form, the rebate obligation with respect to 

22 such drug under this section shall be the 

23 amount computed under this section for such 

24 new drug or, if greater, the product of— 
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1 ‘‘(i) the average manufacturer price of 

2 the line extension of a single source drug 

3 or an innovator multiple source drug that 

4 is an oral solid dosage form; 

5 ‘‘(ii) the highest additional rebate 

6 (calculated as a percentage of average 

7 manufacturer price) under this section for 

8 any strength of the original single source 

9 drug or innovator multiple source drug; 

10 and 

11 ‘‘(iii) the total number of units of 

12 each dosage form and strength of the line 

13 extension product paid for under the State 

14 plan in the rebate period (as reported by 

15 the State). 

16 In this subparagraph, the term ‘line extension’ 

17 means, with respect to a drug, a new formula18 tion of the drug, such as an extended release 

19 formulation.’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 subsection (a) shall take effect as if included in the enact22 ment of the Patient Protection and Affordable Care Act. 
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1 Subtitle D—Reducing Fraud, 

2 Waste, and Abuse 

3 SEC. 1301. COMMUNITY MENTAL HEALTH CENTERS. 

4 (a) IN GENERAL.—Section 1861(ff)(3)(B) of the So5 cial Security Act (42 U.S.C. 1395x(ff)(3)(B)) is amend6 ed— 

7 (1) in clause (ii), by striking ‘‘and’’ at the end; 

8 (2) by redesignating clause (iii) as clause (iv); 

9 and 

10 (3) by inserting after clause (ii) the following: 

11 ‘‘(iii) provides at least 40 percent of its services 

12 to individuals who are not eligible for benefits under 

13 this title; and’’. 

14 (b) RESTRICTION.—Section 1861(ff)(3)(A) of such 

15 Act (42 U.S.C. 1395x(ff)(3)(A)) is amended by inserting 

16 ‘‘other than in an individual’s home or in an inpatient or 

17 residential setting’’ before the period. 

18 (c) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to items and services furnished on 

20 or after the first day of the first calendar quarter that 

21 begins at least 12 months after the date of the enactment 

22 of this Act. 
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1 SEC. 1302. MEDICARE PREPAYMENT MEDICAL REVIEW LIM2 ITATIONS. 

3 Section 1874A(h) of the Social Security Act (42 

4 U.S.C. 1395w–3a(h)) is repealed. 

5 SEC. 1303. FUNDING TO FIGHT FRAUD, WASTE, AND ABUSE. 

6 (a) FUNDING TO FIGHT FRAUD, WASTE, AND

7 ABUSE.— 

8 (1) IN GENERAL.—Section 1817(k) of the So9 cial Security Act (42 U.S.C. 1395i(k)), as amended 

10 by section 6402(i) of the Patient Protection and Af11 fordable Care Act, is further amended— 

12 (A) by adding at the end the following new 

13 paragraph: 

14 ‘‘(8) ADDITIONAL FUNDING.— 

15 ‘‘(A) IN GENERAL.—In addition to the 

16 funds otherwise appropriated to the Account 

17 from the Trust Fund under paragraphs (3)(C) 

18 and (4)(A) and for purposes described in para19 graphs (3)(C) and (4)(A), there are hereby ap20 propriated to such Account from such Trust 

21 Fund the following additional amounts: 

22 ‘‘(i) For fiscal year 2011, 

23 $95,000,000. 

24 ‘‘(ii) For fiscal year 2012, 

25 $55,000,000. 
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1 ‘‘(iii) For each of fiscal years 2013 

2 and 2014, $30,000,000. 

3 ‘‘(iv) For each of fiscal years 2015 

4 and 2016, $20,000,000. 

5 ‘‘(B) ALLOCATION.—The funds appro6 priated under this paragraph shall be allocated 

7 in the same proportion as the total funding ap8 propriated with respect to paragraphs (3)(A) 

9 and (4)(A) was allocated with respect to fiscal 

10 year 2010, and shall be available without fur11 ther appropriation until expended.’’; and 

12 (B) in paragraph (4)(A), by inserting ‘‘for 

13 activities described in paragraph (3)(C) and’’ 

14 after ‘‘necessary’’. 

15 (b) MEDICAID INTEGRITY PROGRAM.—Section 

16 1936(e)(1) of such Act (42 U.S.C. 1396–u6(e)(1)) is 

17 amended— 

18 (1) in subparagraph (B), by striking at the end 

19 ‘‘and’’; 

20 (2) in subparagraph (C)— 

21 (A) by striking ‘‘for each fiscal year there22 after’’ and inserting ‘‘for each of fiscal years 

23 2009 and 2010’’; and 

24 (B) by striking the period and inserting ‘‘; 

25 and’’; and 
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1 (3) by adding at the end the following new sub2 paragraph: 

3 ‘‘(D) for each fiscal year after fiscal year 

4 2010, the amount appropriated under this para5 graph for the previous fiscal year, increased by 

6 the percentage increase in the consumer price 

7 index for all urban consumers (all items; United 

8 States city average) over the previous year.’’. 

9 SEC. 1304. 90-DAY PERIOD OF ENHANCED OVERSIGHT FOR 

10 INITIAL CLAIMS OF DME SUPPLIERS. 

11 Section 1866(j), as amended by section 6401 of the 

12 Patient Protection and Affordable Care Act, is further 

13 amended— 

14 (1) by redesignating paragraphs (4) through 

15 (7) as paragraphs (5) through (8), respectively; and 

16 (2) by inserting after paragraph (3) the fol17 lowing new paragraph: 

18 ‘‘(4) 90-DAY PERIOD OF ENHANCED OVERSIGHT

19 FOR INITIAL CLAIMS OF DME SUPPLIERS.—For peri20 ods beginning after January 1, 2011, if the Sec21 retary determines that there is a significant risk of 

22 fraudulent activity among suppliers of durable med23 ical equipment, in the case of a supplier of durable 

24 medical equipment who is within a category or geo25 graphic area under title XVIII identified pursuant to 
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1 such determination and who is initially enrolling 

2 under such title, the Secretary shall, notwith3 standing sections 1816(c), 1842(c), and 1869(a)(2), 

4 withhold payment under such title with respect to 

5 durable medical equipment furnished by such sup6 plier during the 90-day period beginning on the date 

7 of the first submission of a claim under such title 

8 for durable medical equipment furnished by such 

9 supplier.’’. 

10 Subtitle E—Provisions Relating to 

11 Revenue 

12 SEC. 1401. HIGH-COST PLAN EXCISE TAX. 

13 (a) IN GENERAL.—Section 4980I of the Internal 

14 Revenue Code of 1986, as added by section 9001 of the 

15 Patient Protection and Affordable Care Act and amended 

16 by section 10901 of such Act, is amended— 

17 (1) in subsection (b)(3)(B)— 

18 (A) by striking ‘‘The annual’’ and insert19 ing the following: 

20 ‘‘(i) IN GENERAL.—Except as pro21 vided in clause (ii), the annual’’; and 

22 (B) by adding at the end the following new 

23 clause: 

24 ‘‘(ii) MULTIEMPLOYER PLAN COV25 ERAGE.—Any coverage provided under a 
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1 multiemployer plan (as defined in section 

2 414(f)) shall be treated as coverage other 

3 than self-only coverage.’’; 

4 (2) in subsection (b)(3)(C)— 

5 (A) by striking ‘‘Except as provided in 

6 subparagraph (D)—’’; 

7 (B) in clause (i)— 

8 (i) by striking ‘‘2013’’ each place it 

9 appears in the heading and the text and 

10 inserting ‘‘2018’’; 

11 (ii) by striking ‘‘$8,500’’ in subclause 

12 (I) and inserting ‘‘$10,200 multiplied by 

13 the health cost adjustment percentage (de14 termined by only taking into account self15 only coverage)’’; and 

16 (iii) by striking ‘‘$23,000’’ in sub17 clause (II) and inserting ‘‘$27,500 multi18 plied by the health cost adjustment per19 centage (determined by only taking into 

20 account coverage other than self-only cov21 erage)’’; 

22 (C) by redesignating clauses (ii) and (iii) 

23 as clauses (iv) and (v), respectively, and by in24 serting after clause (i) the following new 

25 clauses: 
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1 ‘‘(ii) HEALTH COST ADJUSTMENT

2 PERCENTAGE.—For purposes of clause (i), 

3 the health cost adjustment percentage is 

4 equal to 100 percent plus the excess (if 

5 any) of— 

6 ‘‘(I) the percentage by which the 

7 per employee cost for providing cov8 erage under the Blue Cross/Blue 

9 Shield standard benefit option under 

10 the Federal Employees Health Bene11 fits Plan for plan year 2018 (deter12 mined by using the benefit package 

13 for such coverage in 2010) exceeds 

14 such cost for plan year 2010, over 

15 ‘‘(II) 55 percent. 

16 ‘‘(iii) AGE AND GENDER ADJUST17 MENT.— 

18 ‘‘(I) IN GENERAL.—The amount 

19 determined under subclause (I) or (II) 

20 of clause (i), whichever is applicable, 

21 for any taxable period shall be in22 creased by the amount determined 

23 under subclause (II). 

24 ‘‘(II) AMOUNT DETERMINED.— 

25 The amount determined under this 
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1 subclause is an amount equal to the 

2 excess (if any) of— 

3 ‘‘(aa) the premium cost of 

4 the Blue Cross/Blue Shield 

5 standard benefit option under the 

6 Federal Employees Health Bene7 fits Plan for the type of coverage 

8 provided such individual in such 

9 taxable period if priced for the 

10 age and gender characteristics of 

11 all employees of the individual’s 

12 employer, over 

13 ‘‘(bb) that premium cost for 

14 the provision of such coverage 

15 under such option in such taxable 

16 period if priced for the age and 

17 gender characteristics of the na18 tional workforce.’’. 

19 (D) in clause (iv), as redesignated by sub20 paragraph (C)— 

21 (i) by inserting ‘‘covered by the plan’’ 

22 after ‘‘whose employees’’; and 

23 (ii) by striking subclauses (I) and (II) 

24 and inserting the following: 
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1 ‘‘(I) the dollar amount in clause 

2 (i)(I) shall be increased by $1,650, 

3 and 

4 ‘‘(II) the dollar amount in clause 

5 (i)(II) shall be increased by $3,450,’’, 

6 and 

7 (E) in clause (v), as redesignated by sub8 paragraph (C)— 

9 (i) by striking ‘‘2013’’ and inserting 

10 ‘‘2018’’; 

11 (ii) by striking ‘‘clauses (i) and (ii)’’ 

12 and inserting ‘‘clauses (i) (after the appli13 cation of clause (ii)) and (iv)’’; and 

14 (iii) by inserting ‘‘in the case of deter15 minations for calendar years beginning be16 fore 2020’’ after ‘‘1 percentage point’’ in 

17 subclause (II) thereof; 

18 (3) by striking subparagraph (D) of subsection 

19 (b)(3); 

20 (4) in subsection (d)(1)(B), by redesignating 

21 clause (ii) as clause (iii) and by inserting after 

22 clause (i) the following new clause: 

23 ‘‘(ii) any coverage under a separate 

24 policy, certificate, or contract of insurance 

25 which provides benefits substantially all of 
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1 which are for treatment of the mouth (in2 cluding any organ or structure within the 

3 mouth) or for treatment of the eye, or’’; 

4 and 

5 (5) in subsection (d), by adding at the end the 

6 following new paragraph: 

7 ‘‘(3) EMPLOYEE.—The term ‘employee’ includes 

8 any former employee, surviving spouse, or other pri9 mary insured individual.’’. 

10 (b) EFFECTIVE DATES.— 

11 (1) Section 9001(c) of the Patient Protection 

12 and Affordable Care Act is amended by striking 

13 ‘‘2012’’ and inserting ‘‘2017’’. 

14 (2) Section 10901(c) of the Patient Protection 

15 and Affordable Care Act is amended by striking 

16 ‘‘2012’’ and inserting ‘‘2017’’. 

17 SEC. 1402. UNEARNED INCOME MEDICARE CONTRIBUTION. 

18 (a) INVESTMENT INCOME.— 

19 (1) IN GENERAL.—Subtitle A of the Internal 

20 Revenue Code of 1986 is amended by inserting after 

21 chapter 2 the following new chapter: 

22 ‘‘CHAPTER 2A—UNEARNED INCOME 

23 MEDICARE CONTRIBUTION 

‘‘Sec. 1411. Imposition of tax. 
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1 ‘‘SEC. 1411. IMPOSITION OF TAX. 

2 ‘‘(a) IN GENERAL.—Except as provided in subsection 

3 (e)— 

4 ‘‘(1) APPLICATION TO INDIVIDUALS.—In the 

5 case of an individual, there is hereby imposed (in ad6 dition to any other tax imposed by this subtitle) for 

7 each taxable year a tax equal to 3.8 percent of the 

8 lesser of— 

9 ‘‘(A) net investment income for such tax10 able year, or 

11 ‘‘(B) the excess (if any) of— 

12 ‘‘(i) the modified adjusted gross in13 come for such taxable year, over 

14 ‘‘(ii) the threshold amount. 

15 ‘‘(2) APPLICATION TO ESTATES AND TRUSTS.— 

16 In the case of an estate or trust, there is hereby im17 posed (in addition to any other tax imposed by this 

18 subtitle) for each taxable year a tax of 3.8 percent 

19 of the lesser of— 

20 ‘‘(A) the undistributed net investment in21 come for such taxable year, or 

22 ‘‘(B) the excess (if any) of— 

23 ‘‘(i) the adjusted gross income (as de24 fined in section 67(e)) for such taxable 

25 year, over 
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1 ‘‘(ii) the dollar amount at which the 

2 highest tax bracket in section 1(e) begins 

3 for such taxable year. 

4 ‘‘(b) THRESHOLD AMOUNT.—For purposes of this 

5 chapter, the term ‘threshold amount’ means— 

6 ‘‘(1) in the case of a taxpayer making a joint 

7 return under section 6013 or a surviving spouse (as 

8 defined in section 2(a)), $250,000, 

9 ‘‘(2) in the case of a married taxpayer (as defined in section 7703) filing a separate return, 1 10 ⁄2 of 

11 the dollar amount determined under paragraph (1), 

12 and 

13 ‘‘(3) in any other case, $200,000. 

14 ‘‘(c) NET INVESTMENT INCOME.—For purposes of 

15 this chapter— 

16 ‘‘(1) IN GENERAL.—The term ‘net investment 

17 income’ means the excess (if any) of— 

18 ‘‘(A) the sum of— 

19 ‘‘(i) gross income from interest, divi20 dends, annuities, royalties, and rents, other 

21 than such income which is derived in the 

22 ordinary course of a trade or business not 

23 described in paragraph (2), 
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1 ‘‘(ii) other gross income derived from 

2 a trade or business described in paragraph 

3 (2), and 

4 ‘‘(iii) net gain (to the extent taken 

5 into account in computing taxable income) 

6 attributable to the disposition of property 

7 other than property held in a trade or 

8 business not described in paragraph (2), 

9 over 

10 ‘‘(B) the deductions allowed by this sub11 title which are properly allocable to such gross 

12 income or net gain. 

13 ‘‘(2) TRADES AND BUSINESSES TO WHICH TAX

14 APPLIES.—A trade or business is described in this 

15 paragraph if such trade or business is— 

16 ‘‘(A) a passive activity (within the meaning 

17 of section 469) with respect to the taxpayer, or 

18 ‘‘(B) a trade or business of trading in fi19 nancial instruments or commodities (as defined 

20 in section 475(e)(2)). 

21 ‘‘(3) INCOME ON INVESTMENT OF WORKING

22 CAPITAL SUBJECT TO TAX.—A rule similar to the 

23 rule of section 469(e)(1)(B) shall apply for purposes 

24 of this subsection. 
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1 ‘‘(4) EXCEPTION FOR CERTAIN ACTIVE INTER2 ESTS IN PARTNERSHIPS AND S CORPORATIONS.—In 

3 the case of a disposition of an interest in a partner4 ship or S corporation— 

5 ‘‘(A) gain from such disposition shall be 

6 taken into account under clause (iii) of para7 graph (1)(A) only to the extent of the net gain 

8 which would be so taken into account by the 

9 transferor if all property of the partnership or 

10 S corporation were sold for fair market value 

11 immediately before the disposition of such inter12 est, and 

13 ‘‘(B) a rule similar to the rule of subpara14 graph (A) shall apply to a loss from such dis15 position. 

16 ‘‘(5) EXCEPTION FOR DISTRIBUTIONS FROM

17 QUALIFIED PLANS.—The term ‘net investment in18 come’ shall not include any distribution from a plan 

19 or arrangement described in section 401(a), 403(a), 

20 403(b), 408, 408A, or 457(b). 

21 ‘‘(6) SPECIAL RULE.—Net investment income 

22 shall not include any item taken into account in de23 termining self-employment income for such taxable 

24 year on which a tax is imposed by section 1401(b). 
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1 ‘‘(d) MODIFIED ADJUSTED GROSS INCOME.—For 

2 purposes of this chapter, the term ‘modified adjusted gross 

3 income’ means adjusted gross income increased by the ex4 cess of— 

5 ‘‘(1) the amount excluded from gross income 

6 under section 911(a)(1), over 

7 ‘‘(2) the amount of any deductions (taken into 

8 account in computing adjusted gross income) or ex9 clusions disallowed under section 911(d)(6) with re10 spect to the amounts described in paragraph (1). 

11 ‘‘(e) NONAPPLICATION OF SECTION.—This section 

12 shall not apply to— 

13 ‘‘(1) a nonresident alien, or 

14 ‘‘(2) a trust all of the unexpired interests in 

15 which are devoted to one or more of the purposes 

16 described in section 170(c)(2)(B).’’. 

17 (2) ESTIMATED TAXES.—Section 6654 of the 

18 Internal Revenue Code of 1986 is amended— 

19 (A) in subsection (a), by striking ‘‘and the 

20 tax under chapter 2’’ and inserting ‘‘the tax 

21 under chapter 2, and the tax under chapter 

22 2A’’; and 

23 (B) in subsection (f)— 

24 (i) by striking ‘‘minus’’ at the end of 

25 paragraph (2) and inserting ‘‘plus’’; and 
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1 (ii) by redesignating paragraph (3) as 

2 paragraph (4) and inserting after para3 graph (2) the following new paragraph: 

4 ‘‘(3) the taxes imposed by chapter 2A, minus’’. 

5 (3) CLERICAL AMENDMENT.—The table of 

6 chapters for subtitle A of chapter 1 of the Internal 

7 Revenue Code of 1986 is amended by inserting after 

8 the item relating to chapter 2 the following new 

9 item: 

‘‘CHAPTER 2A—UNEARNED INCOME MEDICARE CONTRIBUTION’’. 

10 (4) EFFECTIVE DATES.—The amendments 

11 made by this subsection shall apply to taxable years 

12 beginning after December 31, 2012. 

13 (b) EARNED INCOME.— 

14 (1) THRESHOLD.— 

15 (A) FICA.—Paragraph (2) of section 

16 3101(b) of the Internal Revenue Code of 1986, 

17 as added by section 9015 of the Patient Protec18 tion and Affordable Care Act and amended by 

19 section 10906 of such Act, is amended by strik20 ing ‘‘and’’ at the end of subparagraph (A), by 

21 redesignating subparagraph (B) as subpara22 graph (C), and by inserting after subparagraph 

23 (A) the following new subparagraph: 

24 ‘‘(B) in the case of a married taxpayer (as 

25 defined in section 7703) filing a separate re-
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turn, 1 1 ⁄2 of the dollar amount determined under 

2 subparagraph (A), and’’. 

3 (B) SECA.—Section 1401(b)(2) of the In4 ternal Revenue Code of 1986, as added by sec5 tion 9015 of the Patient Protection and Afford6 able Care Act and amended by section 10906 of 

7 such Act, is amended— 

8 (i) in subparagraph (A), by striking 

9 ‘‘and’’ at the end of clause (i), by redesig10 nating clause (ii) as clause (iii), and by in11 serting after clause (i) the following new 

12 clause: 

13 ‘‘(ii) in the case of a married taxpayer 

14 (as defined in section 7703) filing a separate return, 1 15 ⁄2 of the dollar amount deter16 mined under clause (i), and’’; and 

17 (ii) in subparagraph (B), by striking 

18 ‘‘under clauses (i) and (ii)’’ and inserting 

19 ‘‘under clause (i), (ii), or (iii) (whichever is 

20 applicable)’’. 

21 (2) ESTIMATED TAXES.—Section 6654 of the 

22 Internal Revenue Code of 1986 is amended by redes23 ignating subsection (m) as subsection (n) and by in24 serting after subsection (l) the following new sub25 section: 
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1 ‘‘(m) SPECIAL RULE FOR MEDICARE TAX.—For pur2 poses of this section, the tax imposed under section 

3 3101(b)(2) (to the extent not withheld) shall be treated 

4 as a tax imposed under chapter 2.’’. 

5 (3) EFFECTIVE DATE.—The amendments made 

6 by this subsection shall apply with respect to remu7 neration received, and taxable years beginning after, 

8 December 31, 2012. 

9 SEC. 1403. DELAY OF LIMITATION ON HEALTH FLEXIBLE 

10 SPENDING ARRANGEMENTS UNDER CAFE11 TERIA PLANS. 

12 (a) IN GENERAL.—Section 10902(b) of the Patient 

13 Protection and Affordable Care Act is amended by strik14 ing ‘‘December 31, 2010’’ and inserting ‘‘December 31, 

15 2012’’. 

16 (b) INFLATION ADJUSTMENT.—Paragraph (2) of sec17 tion 125(i) of the Internal Revenue Code of 1986, as 

18 added by section 9005 of the Patient Protection and Af19 fordable Care Act and amended by section 10902 of such 

20 Act, is amended— 

21 (1) in the matter preceding subparagraph (A), 

22 by striking ‘‘December 31, 2011’’ and inserting 

23 ‘‘December 31, 2013’’; and 

24 (2) in subparagraph (B), by striking ‘‘2010’’ 

25 and inserting ‘‘2012’’. 
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1 SEC. 1404. BRAND NAME PHARMACEUTICALS. 

2 (a) IN GENERAL.—Section 9008 of the Patient Pro3 tection and Affordable Care Act is amended— 

4 (1) in subsection (a)(1), by striking ‘‘2009’’ and 

5 inserting ‘‘2010’’; 

6 (2) in subsection (b)— 

7 (A) by striking ‘‘$2,300,000,000’’ in para8 graph (1) and inserting ‘‘the applicable 

9 amount’’; and 

10 (B) by adding at the end the following new 

11 paragraph: 

12 ‘‘(4) APPLICABLE AMOUNT.—For purposes of 

13 paragraph (1), the applicable amount shall be deter14 mined in accordance with the following table: 

‘‘Calendar year Applicable 

amount 

2011 ....................................................................... $2,500,000,000 

2012 ....................................................................... $2,800,000,000 

2013 ....................................................................... $2,800,000,000 

2014 ....................................................................... $3,000,000,000 

2015 ....................................................................... $3,000,000,000 

2016 ....................................................................... $3,000,000,000 

2017 ....................................................................... $4,000,000,000 

2018 ....................................................................... $4,100,000,000 

2019 and thereafter ............................................... $2,800,000,000.’’; 

15 (3) in subsection (d), by adding at the end the 

16 following new paragraph: 

17 ‘‘(3) JOINT AND SEVERAL LIABILITY.—If more 

18 than one person is liable for payment of the fee 

19 under subsection (a) with respect to a single covered 

20 entity by reason of the application of paragraph (2), 
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1 all such persons shall be jointly and severally liable 

2 for payment of such fee.’’; and 

3 (4) by striking subsection (j) and inserting the 

4 following new subsection: 

5 ‘‘(j) EFFECTIVE DATE.—This section shall apply to 

6 calendar years beginning after December 31, 2010.’’. 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 this section shall take effect as if included in section 9008 

9 of the Patient Protection and Affordable Care Act. 

10 SEC. 1405. EXCISE TAX ON MEDICAL DEVICE MANUFACTUR11 ERS. 

12 (a) IN GENERAL.—Chapter 32 of the Internal Rev13 enue Code of 1986 is amended— 

14 (1) by inserting after subchapter D the fol15 lowing new subchapter: 

16 ‘‘Subchapter E—Medical Devices 

‘‘Sec. 4191. Medical devices. 

17 ‘‘SEC. 4191. MEDICAL DEVICES. 

18 ‘‘(a) IN GENERAL.—There is hereby imposed on the 

19 sale of any taxable medical device by the manufacturer, 

20 producer, or importer a tax equal to 2.3 percent of the 

21 price for which so sold. 

22 ‘‘(b) TAXABLE MEDICAL DEVICE.—For purposes of 

23 this section— 
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1 ‘‘(1) IN GENERAL.—The term ‘taxable medical 

2 device’ means any device (as defined in section 

3 201(h) of the Federal Food, Drug, and Cosmetic 

4 Act) intended for humans. 

5 ‘‘(2) EXEMPTIONS.—Such term shall not in6 clude— 

7 ‘‘(A) eyeglasses, 

8 ‘‘(B) contact lenses, 

9 ‘‘(C) hearing aids, and 

10 ‘‘(D) any other medical device determined 

11 by the Secretary to be of a type which is gen12 erally purchased by the general public at retail 

13 for individual use.’’, and 

14 (2) by inserting after the item relating to sub15 chapter D in the table of subchapters for such chap16 ter the following new item: 

‘‘SUBCHAPTER E. MEDICAL DEVICES’’. 

17 (b) CERTAIN EXEMPTIONS NOT TO APPLY.— 

18 (1) Section 4221(a) of the Internal Revenue 

19 Code of 1986 is amended by adding at the end the 

20 following new sentence: ‘‘In the case of the tax im21 posed by section 4191, paragraphs (3), (4), (5), and 

22 (6) shall not apply.’’. 

23 (2) Section 6416(b)(2) of such Code is amend24 ed by adding at the end the following: ‘‘In the case 
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1 of the tax imposed by section 4191, subparagraphs 

2 (B), (C), (D), and (E) shall not apply.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to sales after December 31, 2012. 

5 (d) REPEAL OF SECTION 9009 OF THE PATIENT

6 PROTECTION AND AFFORDABLE CARE ACT.—Section 

7 9009 of the Patient Protection and Affordable Care Act, 

8 as amended by section 10904 of such Act, is repealed ef9 fective as of the date of enactment of that Act. 

10 SEC. 1406. HEALTH INSURANCE PROVIDERS. 

11 (a) IN GENERAL.—Section 9010 of the Patient Pro12 tection and Affordable Care Act, as amended by section 

13 10905 of such Act, is amended— 

14 (1) in subsection (a)(1), by striking ‘‘2010’’ and 

15 inserting ‘‘2013’’; 

16 (2) in subsection (b)(2)— 

17 (A) by striking ‘‘For purposes of para18 graph (1), the net premiums’’ and inserting 

19 ‘‘For purposes of paragraph (1)— 

20 ‘‘(A) IN GENERAL.—The net premiums’’; 

21 and 

22 (B) by adding at the end the following sub23 paragraph: 

24 ‘‘(B) PARTIAL EXCLUSION FOR CERTAIN

25 EXEMPT ACTIVITIES.—After the application of 
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1 subparagraph (A), only 50 percent of the re2 maining net premiums written with respect to 

3 health insurance for any United States health 

4 risk that are attributable to the activities (other 

5 than activities of an unrelated trade or business 

6 as defined in section 513 of the Internal Rev7 enue Code of 1986) of any covered entity quali8 fying under paragraph (3), (4), (26), or (29) of 

9 section 501(c) of such Code and exempt from 

10 tax under section 501(a) of such Code shall be 

11 taken into account.’’; 

12 (3) in subsection (c)— 

13 (A) by inserting ‘‘during the calendar year 

14 in which the fee under this section is due’’ in 

15 paragraph (1) after ‘‘risk’’; 

16 (B) in paragraph (2), by striking subpara17 graphs (C), (D), and (E) and inserting the fol18 lowing new subparagraphs: 

19 ‘‘(C) any entity— 

20 ‘‘(i) which is incorporated as a non21 profit corporation under a State law, 

22 ‘‘(ii) no part of the net earnings of 

23 which inures to the benefit of any private 

24 shareholder or individual, no substantial 

25 part of the activities of which is carrying 
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1 on propaganda, or otherwise attempting, to 

2 influence legislation (except as otherwise 

3 provided in section 501(h) of the Internal 

4 Revenue Code of 1986), and which does 

5 not participate in, or intervene in (includ6 ing the publishing or distributing of state7 ments), any political campaign on behalf of 

8 (or in opposition to) any candidate for 

9 public office, and 

10 ‘‘(iii) more than 80 percent of the 

11 gross revenues of which is received from 

12 government programs that target low-in13 come, elderly, or disabled populations 

14 under titles XVIII, XIX, and XXI of the 

15 Social Security Act, and 

16 ‘‘(D) any entity which is described in sec17 tion 501(c)(9) of such Code and which is estab18 lished by an entity (other than by an employer 

19 or employers) for purposes of providing health 

20 care benefits.’’; 

21 (C) in paragraph (3)(A), by striking ‘‘sub22 paragraph (C)(i)(I), (D)(i)(I), or (E)(i)’’ and 

23 inserting ‘‘subparagraph (C) or (D)’’; and 

24 (D) by adding at the end the following new 

25 paragraph: 
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1 ‘‘(4) JOINT AND SEVERAL LIABILITY.—If more 

2 than one person is liable for payment of the fee 

3 under subsection (a) with respect to a single covered 

4 entity by reason of the application of paragraph (3), 

5 all such persons shall be jointly and severally liable 

6 for payment of such fee.’’; 

7 (4) by striking subsection (e) and inserting the 

8 following: 

9 ‘‘(e) APPLICABLE AMOUNT.—For purposes of sub10 section (b)(1)— 

11 ‘‘(1) YEARS BEFORE 2019.—In the case of cal12 endar years beginning before 2019, the applicable 

13 amount shall be determined in accordance with the 

14 following table: 

‘‘Calendar year Applicable 

amount 

2014 ....................................................................... $8,000,000,000 

2015 ....................................................................... $11,300,000,000 

2016 ....................................................................... $11,300,000,000 

2017 ....................................................................... $13,900,000,000 

2018 ....................................................................... $14,300,000,000. 

15 ‘‘(2) YEARS AFTER 2018.—In the case of any 

16 calendar year beginning after 2018, the applicable 

17 amount shall be the applicable amount for the pre18 ceding calendar year increased by the rate of pre19 mium growth (within the meaning of section 

20 36B(b)(3)(A)(ii) of the Internal Revenue Code of 

21 1986) for such preceding calendar year.’’; 
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1 (5) in subsection (g), by adding at the end the 

2 following new paragraphs: 

3 ‘‘(3) ACCURACY-RELATED PENALTY.— 

4 ‘‘(A) IN GENERAL.—In the case of any un5 derstatement of a covered entity’s net premiums 

6 written with respect to health insurance for any 

7 United States health risk for any calendar year, 

8 there shall be paid by the covered entity making 

9 such understatement, an amount equal to the 

10 excess of— 

11 ‘‘(i) the amount of the covered entity’s 

12 fee under this section for the calendar year 

13 the Secretary determines should have been 

14 paid in the absence of any such under15 statement, over 

16 ‘‘(ii) the amount of such fee the Sec17 retary determined based on such under18 statement. 

19 ‘‘(B) UNDERSTATEMENT.—For purposes 

20 of this paragraph, an understatement of a cov21 ered entity’s net premiums written with respect 

22 to health insurance for any United States 

23 health risk for any calendar year is the dif24 ference between the amount of such net pre25 miums written as reported on the return filed 
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1 by the covered entity under paragraph (1) and 

2 the amount of such net premiums written that 

3 should have been reported on such return. 

4 ‘‘(C) TREATMENT OF PENALTY.—The pen5 alty imposed under subparagraph (A) shall be 

6 subject to the provisions of subtitle F of the In7 ternal Revenue Code of 1986 that apply to as8 sessable penalties imposed under chapter 68 of 

9 such Code. 

10 ‘‘(4) TREATMENT OF INFORMATION.—Section 

11 6103 of the Internal Revenue Code of 1986 shall not 

12 apply to any information reported under this sub13 section.’’; and 

14 (6) by striking subsection (j) and inserting the 

15 following new subsection: 

16 ‘‘(j) EFFECTIVE DATE.—This section shall apply to 

17 calendar years beginning after December 31, 2013.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall take effect as if included in section 9010 

20 of the Patient Protection and Affordable Care Act. 
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1 SEC. 1407. DELAY OF ELIMINATION OF DEDUCTION FOR EX2 PENSES ALLOCABLE TO MEDICARE PART D 

3 SUBSIDY. 

4 Section 9012(b) of the Patient Protection and Af5 fordable Care Act is amended by striking ‘‘2010’’ and in6 serting ‘‘2012’’. 

7 SEC. 1408. ELIMINATION OF UNINTENDED APPLICATION OF 

8 CELLULOSIC BIOFUEL PRODUCER CREDIT. 

9 (a) IN GENERAL.—Section 40(b)(6)(E) of the Inter10 nal Revenue Code of 1986 is amended by adding at the 

11 end the following new clause: 

12 ‘‘(iii) EXCLUSION OF UNPROCESSED

13 FUELS.—The term ‘cellulosic biofuel’ shall 

14 not include any fuel if— 

15 ‘‘(I) more than 4 percent of such 

16 fuel (determined by weight) is any 

17 combination of water and sediment, or 

18 ‘‘(II) the ash content of such fuel 

19 is more than 1 percent (determined by 

20 weight).’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to fuels sold or used on or after 

23 January 1, 2010. 
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1 SEC. 1409. CODIFICATION OF ECONOMIC SUBSTANCE DOC2 TRINE AND PENALTIES. 

3 (a) IN GENERAL.—Section 7701 of the Internal Rev4 enue Code of 1986 is amended by redesignating subsection 

5 (o) as subsection (p) and by inserting after subsection (n) 

6 the following new subsection: 

7 ‘‘(o) CLARIFICATION OF ECONOMIC SUBSTANCE

8 DOCTRINE.— 

9 ‘‘(1) APPLICATION OF DOCTRINE.—In the case 

10 of any transaction to which the economic substance 

11 doctrine is relevant, such transaction shall be treated 

12 as having economic substance only if— 

13 ‘‘(A) the transaction changes in a mean14 ingful way (apart from Federal income tax ef15 fects) the taxpayer’s economic position, and 

16 ‘‘(B) the taxpayer has a substantial pur17 pose (apart from Federal income tax effects) 

18 for entering into such transaction. 

19 ‘‘(2) SPECIAL RULE WHERE TAXPAYER RELIES

20 ON PROFIT POTENTIAL.— 

21 ‘‘(A) IN GENERAL.—The potential for 

22 profit of a transaction shall be taken into ac23 count in determining whether the requirements 

24 of subparagraphs (A) and (B) of paragraph (1) 

25 are met with respect to the transaction only if 

26 the present value of the reasonably expected 
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1 pre-tax profit from the transaction is substan2 tial in relation to the present value of the ex3 pected net tax benefits that would be allowed if 

4 the transaction were respected. 

5 ‘‘(B) TREATMENT OF FEES AND FOREIGN

6 TAXES.—Fees and other transaction expenses 

7 shall be taken into account as expenses in de8 termining pre-tax profit under subparagraph 

9 (A). The Secretary shall issue regulations re10 quiring foreign taxes to be treated as expenses 

11 in determining pre-tax profit in appropriate 

12 cases. 

13 ‘‘(3) STATE AND LOCAL TAX BENEFITS.—For 

14 purposes of paragraph (1), any State or local income 

15 tax effect which is related to a Federal income tax 

16 effect shall be treated in the same manner as a Fed17 eral income tax effect. 

18 ‘‘(4) FINANCIAL ACCOUNTING BENEFITS.—For 

19 purposes of paragraph (1)(B), achieving a financial 

20 accounting benefit shall not be taken into account as 

21 a purpose for entering into a transaction if the ori22 gin of such financial accounting benefit is a reduc23 tion of Federal income tax. 

24 ‘‘(5) DEFINITIONS AND SPECIAL RULES.—For 

25 purposes of this subsection— 
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1 ‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.— 

2 The term ‘economic substance doctrine’ means 

3 the common law doctrine under which tax bene4 fits under subtitle A with respect to a trans5 action are not allowable if the transaction does 

6 not have economic substance or lacks a business 

7 purpose. 

8 ‘‘(B) EXCEPTION FOR PERSONAL TRANS9 ACTIONS OF INDIVIDUALS.—In the case of an 

10 individual, paragraph (1) shall apply only to 

11 transactions entered into in connection with a 

12 trade or business or an activity engaged in for 

13 the production of income. 

14 ‘‘(C) DETERMINATION OF APPLICATION OF

15 DOCTRINE NOT AFFECTED.—The determination 

16 of whether the economic substance doctrine is 

17 relevant to a transaction shall be made in the 

18 same manner as if this subsection had never 

19 been enacted. 

20 ‘‘(D) TRANSACTION.—The term ‘trans21 action’ includes a series of transactions.’’. 

22 (b) PENALTY FOR UNDERPAYMENTS ATTRIBUTABLE

23 TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE.— 
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1 (1) IN GENERAL.—Subsection (b) of section 

2 6662 is amended by inserting after paragraph (5) 

3 the following new paragraph: 

4 ‘‘(6) Any disallowance of claimed tax benefits 

5 by reason of a transaction lacking economic sub6 stance (within the meaning of section 7701(o)) or 

7 failing to meet the requirements of any similar rule 

8 of law.’’. 

9 (2) INCREASED PENALTY FOR NONDISCLOSED

10 TRANSACTIONS.—Section 6662 is amended by add11 ing at the end the following new subsection: 

12 ‘‘(i) INCREASE IN PENALTY IN CASE OF NONDIS13 CLOSED NONECONOMIC SUBSTANCE TRANSACTIONS.— 

14 ‘‘(1) IN GENERAL.—In the case of any portion 

15 of an underpayment which is attributable to one or 

16 more nondisclosed noneconomic substance trans17 actions, subsection (a) shall be applied with respect 

18 to such portion by substituting ‘40 percent’ for ‘20 

19 percent’. 

20 ‘‘(2) NONDISCLOSED NONECONOMIC SUB21 STANCE TRANSACTIONS.—For purposes of this sub22 section, the term ‘nondisclosed noneconomic sub23 stance transaction’ means any portion of a trans24 action described in subsection (b)(6) with respect to 

25 which the relevant facts affecting the tax treatment 
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1 are not adequately disclosed in the return nor in a 

2 statement attached to the return. 

3 ‘‘(3) SPECIAL RULE FOR AMENDED RE4 TURNS.—In no event shall any amendment or sup5 plement to a return of tax be taken into account for 

6 purposes of this subsection if the amendment or sup7 plement is filed after the earlier of the date the tax8 payer is first contacted by the Secretary regarding 

9 the examination of the return or such other date as 

10 is specified by the Secretary.’’. 

11 (3) CONFORMING AMENDMENT.—Subparagraph 

12 (B) of section 6662A(e)(2) is amended— 

13 (A) by striking ‘‘section 6662(h)’’ and in14 serting ‘‘subsections (h) or (i) of section 6662’’; 

15 and 

16 (B) by striking ‘‘GROSS VALUATION

17 MISSTATEMENT PENALTY’’ in the heading and 

18 inserting ‘‘CERTAIN INCREASED UNDER19 PAYMENT PENALTIES’’. 

20 (c) REASONABLE CAUSE EXCEPTION NOT APPLICA21 BLE TO NONECONOMIC SUBSTANCE TRANSACTIONS.— 

22 (1) REASONABLE CAUSE EXCEPTION FOR UN23 DERPAYMENTS.—Subsection (c) of section 6664 is 

24 amended— 
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1 (A) by redesignating paragraphs (2) and 

2 (3) as paragraphs (3) and (4), respectively; 

3 (B) by striking ‘‘paragraph (2)’’ in para4 graph (4)(A), as so redesignated, and inserting 

5 ‘‘paragraph (3)’’; and 

6 (C) by inserting after paragraph (1) the 

7 following new paragraph: 

8 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

9 apply to any portion of an underpayment which is 

10 attributable to one or more transactions described in 

11 section 6662(b)(6).’’. 

12 (2) REASONABLE CAUSE EXCEPTION FOR RE13 PORTABLE TRANSACTION UNDERSTATEMENTS.— 

14 Subsection (d) of section 6664 is amended— 

15 (A) by redesignating paragraphs (2) and 

16 (3) as paragraphs (3) and (4), respectively; 

17 (B) by striking ‘‘paragraph (2)(C)’’ in 

18 paragraph (4), as so redesignated, and inserting 

19 ‘‘paragraph (3)(C)’’; and 

20 (C) by inserting after paragraph (1) the 

21 following new paragraph: 

22 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

23 apply to any portion of a reportable transaction un24 derstatement which is attributable to one or more 

25 transactions described in section 6662(b)(6).’’. 
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1 (d) APPLICATION OF PENALTY FOR ERRONEOUS

2 CLAIM FOR REFUND OR CREDIT TO NONECONOMIC SUB3 STANCE TRANSACTIONS.—Section 6676 is amended by re4 designating subsection (c) as subsection (d) and inserting 

5 after subsection (b) the following new subsection: 

6 ‘‘(c) NONECONOMIC SUBSTANCE TRANSACTIONS

7 TREATED AS LACKING REASONABLE BASIS.—For pur8 poses of this section, any excessive amount which is attrib9 utable to any transaction described in section 6662(b)(6) 

10 shall not be treated as having a reasonable basis.’’. 

11 (e) EFFECTIVE DATE.— 

12 (1) IN GENERAL.—Except as otherwise pro13 vided in this subsection, the amendments made by 

14 this section shall apply to transactions entered into 

15 after the date of the enactment of this Act. 

16 (2) UNDERPAYMENTS.—The amendments made 

17 by subsections (b) and (c)(1) shall apply to under18 payments attributable to transactions entered into 

19 after the date of the enactment of this Act. 

20 (3) UNDERSTATEMENTS.—The amendments 

21 made by subsection (c)(2) shall apply to understate22 ments attributable to transactions entered into after 

23 the date of the enactment of this Act. 

24 (4) REFUNDS AND CREDITS.—The amendment 

25 made by subsection (d) shall apply to refunds and 
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1 credits attributable to transactions entered into after 

2 the date of the enactment of this Act. 

3 SEC. 1410. TIME FOR PAYMENT OF CORPORATE ESTIMATED 

4 TAXES. 

5 The percentage under paragraph (1) of section 

6 202(b) of the Corporate Estimated Tax Shift Act of 2009 

7 in effect on the date of the enactment of this Act is in8 creased by 15.75 percentage points. 

9 Subtitle F—Other Provisions 

10 SEC. 1501. COMMUNITY COLLEGE AND CAREER TRAINING 

11 GRANT PROGRAM. 

12 Section 279(b) of the Trade Act of 1974 (19 U.S.C. 

13 2372a(b)) is amended by striking ‘‘SUPPLEMENT’’ and all 

14 that follows through ‘‘Funds’’ and inserting ‘‘There are’’ 

15 and by striking ‘‘pursuant’’ and all that follows and insert16 ing ‘‘$500,000,000 for each of fiscal years 2011, 2012, 

17 2013, and 2014 to carry out this subchapter, except that 

18 the limitations contained in section 278(a)(2) shall not 

19 apply to such funds and each State shall receive not less 

20 than 0.5 percent of the amount appropriated pursuant to 

21 this subsection for each such fiscal year.’’. 
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1 TITLE II—EDUCATION AND 

2 HEALTH 

3 Subtitle A—Education 

4 SEC. 2001. SHORT TITLE; REFERENCES. 

5 (a) SHORT TITLE.—This subtitle may be cited as the 

6 ‘‘SAFRA Act’’. 

7 (b) REFERENCES.—Except as otherwise expressly 

8 provided, whenever in this subtitle an amendment or re9 peal is expressed in terms of an amendment to, or repeal 

10 of, a section or other provision, the reference shall be con11 sidered to be made to a section or other provision of the 

12 Higher Education Act of 1965 (20 U.S.C. 1001 et seq.). 

13 PART I—INVESTING IN STUDENTS AND FAMILIES 

14 SEC. 2101. FEDERAL PELL GRANTS. 

15 (a) AMOUNT OF GRANTS.—Section 401(b) (20 

16 U.S.C. 1070a(b)) is amended— 

17 (1) by amending paragraph (2)(A) to read as 

18 follows: 

19 ‘‘(A) The amount of the Federal Pell 

20 Grant for a student eligible under this part 

21 shall be— 

22 ‘‘(i) the maximum Federal Pell Grant, 

23 as specified in the last enacted appropria24 tion Act applicable to that award year, 

25 plus 
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1 ‘‘(ii) the amount of the increase cal2 culated under paragraph (8)(B) for that 

3 year, less 

4 ‘‘(iii) an amount equal to the amount 

5 determined to be the expected family con6 tribution with respect to that student for 

7 that year.’’; and 

8 (2) in paragraph (8)— 

9 (A) in subparagraph (A)— 

10 (i) in the matter preceding clause (i), 

11 by striking ‘‘, to carry out subparagraph 

12 (B) of this paragraph’’; and 

13 (ii) by striking clauses (iii) through 

14 (x) and inserting the following: 

15 ‘‘(iii) to carry out subparagraph (B) 

16 of this paragraph, such sums as may be 

17 necessary for fiscal year 2010 and each 

18 subsequent fiscal year to provide the 

19 amount of increase of the maximum Fed20 eral Pell Grant required by clauses (ii) and 

21 (iii) of subparagraph (B); and 

22 ‘‘(iv) to carry out this section, 

23 $13,500,000,000 for fiscal year 2011.’’; 

24 (B) in subparagraph (B)— 
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1 (i) in the matter preceding clause (i), 

2 by striking ‘‘subparagraph (A)’’ and insert3 ing ‘‘clauses (i) through (iii) of subpara4 graph (A)’’; 

5 (ii) in clause (ii), by striking ‘‘and 

6 2011–2012’’ and inserting ‘‘, 2011–2012, 

7 and 2012–2013’’; and 

8 (iii) by striking clause (iii) and insert9 ing the following: 

10 ‘‘(iii) the amount determined under 

11 subparagraph (C) for each succeeding 

12 award year.’’; 

13 (C) by striking subparagraph (C) and in14 serting the following: 

15 ‘‘(C) ADJUSTMENT AMOUNTS.— 

16 ‘‘(i) AWARD YEAR 2013–2014.—For 

17 award year 2013–2014, the amount deter18 mined under this subparagraph for pur19 poses of subparagraph (B)(iii) shall be 

20 equal to— 

21 ‘‘(I) $5,550 or the total max22 imum Federal Pell Grant for the pre23 ceding award year (as determined 

24 under clause (v)(II)), whichever is 

25 greater, increased by a percentage 
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1 equal to the annual adjustment per2 centage for award year 2013–2014, 

3 reduced by 

4 ‘‘(II) $4,860 or the maximum 

5 Federal Pell Grant for which a stu6 dent was eligible for the preceding 

7 award year, as specified in the last en8 acted appropriation Act applicable to 

9 that year, whichever is greater; and 

10 ‘‘(III) rounded to the nearest $5. 

11 ‘‘(ii) AWARD YEARS 2014–2015

12 THROUGH 2017–2018.—For each of the 

13 award years 2014–2015 through 2017– 

14 2018, the amount determined under this 

15 subparagraph for purposes of subpara16 graph (B)(iii) shall be equal to— 

17 ‘‘(I) the total maximum Federal 

18 Pell Grant for the preceding award 

19 year (as determined under clause 

20 (v)(II)), increased by a percentage 

21 equal to the annual adjustment per22 centage for the award year for which 

23 the amount under this subparagraph 

24 is being determined, reduced by 
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1 ‘‘(II) $4,860 or the maximum 

2 Federal Pell Grant for which a stu3 dent was eligible for the preceding 

4 award year, as specified in the last en5 acted appropriation Act applicable to 

6 that year, whichever is greater; and 

7 ‘‘(III) rounded to the nearest $5. 

8 ‘‘(iii) SUBSEQUENT AWARD YEARS.— 

9 For award year 2018–2019 and each sub10 sequent award year, the amount deter11 mined under this subparagraph for pur12 poses of subparagraph (B)(iii) shall be 

13 equal to the amount determined under 

14 clause (ii) for award year 2017–2018. 

15 ‘‘(iv) LIMITATION ON DECREASES.— 

16 Notwithstanding clauses (i), (ii), and (iii), 

17 if the amount determined under clause (i), 

18 (ii), or (iii) for a particular award year is 

19 less than the amount determined under 

20 this paragraph for the award year pre21 ceding that particular award year, then the 

22 amount determined under such clause for 

23 that particular award year shall be the 

24 amount determined under this paragraph 

25 for the preceding award year. 
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1 ‘‘(v) DEFINITIONS.—For purposes of 

2 this subparagraph— 

3 ‘‘(I) the term ‘annual adjustment 

4 percentage’ as applied to an award 

5 year, is equal to the estimated per6 centage change in the Consumer Price 

7 Index (as determined by the Sec8 retary, using the definition in section 

9 478(f)) for the most recent calendar 

10 year ending prior to the beginning of 

11 that award year; and 

12 ‘‘(II) the term ‘total maximum 

13 Federal Pell Grant’ as applied to a 

14 preceding award year, is equal to the 

15 sum of— 

16 ‘‘(aa) the maximum Federal 

17 Pell Grant for which a student is 

18 eligible during an award year, as 

19 specified in the last enacted ap20 propriation Act applicable to that 

21 preceding award year; and 

22 ‘‘(bb) the amount of the in23 crease in the maximum Federal 

24 Pell Grant required by this para-
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1 graph for that preceding award 

2 year.’’; 

3 (D) by striking subparagraph (E); and 

4 (E) by redesignating subparagraph (F) as 

5 subparagraph (E). 

6 (b) CONFORMING AMENDMENTS.—Title IV (20 

7 U.S.C. 1070 et seq.) is further amended— 

8 (1) in section 401(b) (20 U.S.C. 1070a(b))— 

9 (A) in paragraph (4)— 

10 (i) by striking ‘‘maximum basic grant 

11 level specified in the appropriate appro12 priation Act’’ and inserting ‘‘maximum 

13 amount of a Federal Pell Grant award de14 termined under paragraph (2)(A)’’; and 

15 (ii) by striking ‘‘such level’’ each place 

16 it appears and inserting ‘‘such Federal Pell 

17 Grant amount’’ in each such place; and 

18 (B) in paragraph (6), by striking ‘‘the 

19 grant level specified in the appropriate Appro20 priation Act for this subpart for such year’’ and 

21 inserting ‘‘the maximum amount of a Federal 

22 Pell Grant award determined under paragraph 

23 (2)(A), for which a student is eligible during 

24 such award year’’; 
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1 (2) in section 402D(d)(1) (20 U.S.C. 1070a– 

2 14(d)(1)), by striking ‘‘exceed the maximum’’ and 

3 all that follows through ‘‘Grant, for’’ and inserting 

4 ‘‘exceed the Federal Pell Grant amount, determined 

5 under section 401(b)(2)(A), for which a student is 

6 eligible, or be less than the minimum Federal Pell 

7 Grant amount described in section 401(b)(4), for’’; 

8 (3) in section 435(a)(5)(A)(i)(I) (20 U.S.C. 

9 1085(a)(5)(A)(i)(I)), by striking ‘‘one-half the max10 imum Federal Pell Grant award for which a student 

11 would be eligible’’ and inserting ‘‘one-half the Fed12 eral Pell Grant amount, determined under section 

13 401(b)(2)(A), for which a student would be eligible’’; 

14 (4) in section 483(e)(3)(A)(ii) (20 U.S.C. 

15 1090(e)(3)(A)(ii)), by striking ‘‘based on the max16 imum Federal Pell Grant award at the time of appli17 cation’’ and inserting ‘‘based on the Federal Pell 

18 Grant amount, determined under section 

19 401(b)(2)(A), for which a student is eligible at the 

20 time of application’’; 

21 (5) in section 485E(b)(1)(A) (20 U.S.C. 

22 1092f(b)(1)(A)), by striking ‘‘of such students’ po23 tential eligibility for a maximum Federal Pell Grant 

24 under subpart 1 of part A’’ and inserting ‘‘of such 

25 students’ potential eligibility for the Federal Pell 
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1 Grant amount, determined under section 

2 401(b)(2)(A), for which the student would be eligi3 ble’’; and 

4 (6) in section 894(f)(2)(C)(ii)(I) (20 U.S.C. 

5 1161y(f)(2)(C)(ii)(I)), by striking ‘‘the maximum 

6 Federal Pell Grant for each award year’’ and insert7 ing ‘‘the Federal Pell Grant amount, determined 

8 under section 401(b)(2)(A), for which a student may 

9 be eligible for each award year’’. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 subsections (a) and (b) shall take effect on July 1, 2010. 

12 SEC. 2102. COLLEGE ACCESS CHALLENGE GRANT PRO13 GRAM. 

14 Section 781 (20 U.S.C. 1141) is amended— 

15 (1) in the first sentence of subsection (a), by 

16 striking ‘‘$66,000,000’’ and all that follows through 

17 the period and inserting ‘‘$150,000,000 for each of 

18 the fiscal years 2010 through 2014. The authority 

19 to award grants under this section shall expire at 

20 the end of fiscal year 2014.’’; and 

21 (2) in subsection (c)(2), by striking ‘‘0.5 per22 cent’’ and inserting ‘‘1.0 percent’’. 
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1 SEC. 2103. INVESTMENT IN HISTORICALLY BLACK COL2 LEGES AND UNIVERSITIES AND MINORITY3 SERVING INSTITUTIONS. 

4 Section 371(b)(1)(A) (20 U.S.C. 1067q(b)(1)(A)) is 

5 amended by striking ‘‘and 2009.’’ and all that follows and 

6 inserting ‘‘through 2019. The authority to award grants 

7 under this section shall expire at the end of fiscal year 

8 2019.’’. 

9 PART II—STUDENT LOAN REFORM 

10 SEC. 2201. TERMINATION OF FEDERAL FAMILY EDUCATION 

11 LOAN APPROPRIATIONS. 

12 Section 421 (20 U.S.C. 1071) is amended— 

13 (1) in subsection (b), in the first sentence of 

14 the matter following paragraph (6), by inserting ‘‘, 

15 except that no sums may be expended after June 30, 

16 2010, with respect to loans under this part for which 

17 the first disbursement is after such date’’ after ‘‘ex18 pended’’; and 

19 (2) by adding at the end the following new sub20 section: 

21 ‘‘(d) TERMINATION OF AUTHORITY TO MAKE OR IN22 SURE NEW LOANS.—Notwithstanding paragraphs (1) 

23 through (6) of subsection (b) or any other provision of 

24 law— 
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1 ‘‘(1) no new loans (including consolidation 

2 loans) may be made or insured under this part after 

3 June 30, 2010; and 

4 ‘‘(2) no funds are authorized to be appro5 priated, or may be expended, under this Act or any 

6 other Act to make or insure loans under this part 

7 (including consolidation loans) for which the first 

8 disbursement is after June 30, 2010, 

9 except as expressly authorized by an Act of Congress en10 acted after the date of enactment of the SAFRA Act.’’. 

11 SEC. 2202. TERMINATION OF FEDERAL LOAN INSURANCE 

12 PROGRAM. 

13 Section 424(a) (20 U.S.C. 1074(a)) is amended by 

14 striking ‘‘September 30, 1976,’’ and all that follows and 

15 inserting ‘‘September 30, 1976, for each of the succeeding 

16 fiscal years ending prior to October 1, 2009, and for the 

17 period from October 1, 2009, to June 30, 2010, for loans 

18 first disbursed on or before June 30, 2010.’’. 

19 SEC. 2203. TERMINATION OF APPLICABLE INTEREST 

20 RATES. 

21 Section 427A(l) (20 U.S.C. 1077a(l)) is amended— 

22 (1) in the subsection heading, by inserting 

23 ‘‘AND BEFORE JULY 1, 2010’’ after ‘‘2006’’; 

24 (2) in paragraph (1), by inserting ‘‘and before 

25 July 1, 2010,’’ after ‘‘July 1, 2006,’’; 
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1 (3) in paragraph (2), by inserting ‘‘and before 

2 July 1, 2010,’’ after ‘‘July 1, 2006,’’; 

3 (4) in paragraph (3), by inserting ‘‘and that 

4 was disbursed before July 1, 2010,’’ after ‘‘July 1, 

5 2006,’’; and 

6 (5) in paragraph (4)— 

7 (A) in the matter preceding subparagraph 

8 (A), by striking ‘‘July 1, 2012’’ and inserting 

9 ‘‘July 1, 2010’’; and 

10 (B) by repealing subparagraphs (D) and 

11 (E). 

12 SEC. 2204. TERMINATION OF FEDERAL PAYMENTS TO RE13 DUCE STUDENT INTEREST COSTS. 

14 (a) HIGHER EDUCATION ACT OF 1965.—Section 428 

15 (20 U.S.C. 1078) is amended— 

16 (1) in subsection (a)— 

17 (A) in paragraph (1), in the matter pre18 ceding subparagraph (A), by inserting ‘‘for 

19 which the first disbursement is made before 

20 July 1, 2010, and’’ after ‘‘eligible institution’’; 

21 and 

22 (B) in paragraph (5), by striking ‘‘Sep23 tember 30, 2014,’’ and all that follows through 

24 the period and inserting ‘‘June 30, 2010.’’; 

25 (2) in subsection (b)(1)— 
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1 (A) in subparagraph (G)(ii), by inserting 

2 ‘‘and before July 1, 2010,’’ after ‘‘July 1, 

3 2006,’’; and 

4 (B) in subparagraph (H)(ii), by inserting 

5 ‘‘and that are first disbursed before July 1, 

6 2010,’’ after ‘‘July 1, 2006,’’; 

7 (3) in subsection (f)(1)(A)(ii)— 

8 (A) by striking ‘‘during fiscal years begin9 ning’’; and 

10 (B) by inserting ‘‘and first disbursed be11 fore July 1, 2010,’’ after ‘‘October 1, 2003,’’; 

12 and 

13 (4) in subsection (j)(1), by inserting ‘‘, before 

14 July 1, 2010,’’ after ‘‘section 435(d)(1)(D) of this 

15 Act shall’’. 

16 (b) COLLEGE COST REDUCTION AND ACCESS ACT.— 

17 Section 303 of the College Cost Reduction and Access Act 

18 (Public Law 110–84) is repealed. 

19 SEC. 2205. TERMINATION OF FFEL PLUS LOANS. 

20 Section 428B(a)(1) (20 U.S.C. 1078–2(a)(1)) is 

21 amended by striking ‘‘A graduate’’ and inserting ‘‘Prior 

22 to July 1, 2010, a graduate’’. 

23 SEC. 2206. FEDERAL CONSOLIDATION LOANS. 

24 (a) IN GENERAL.—Section 428C (20 U.S.C. 1078– 

25 3) is amended— 
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1 (1) in subsection (a)(4)(A), by inserting ‘‘, and 

2 first disbursed before July 1, 2010’’ after ‘‘under 

3 this part’’; 

4 (2) in subsection (b)— 

5 (A) in paragraph (1)(E), by inserting be6 fore the semicolon ‘‘, and before July 1, 2010’’; 

7 and 

8 (B) in paragraph (5), by striking ‘‘In the 

9 event that’’ and inserting ‘‘If, before July 1, 

10 2010,’’; 

11 (3) in subsection (c)(1)— 

12 (A) in subparagraph (A)(ii), by inserting 

13 ‘‘and that is disbursed before July 1, 2010,’’ 

14 after ‘‘2006,’’; and 

15 (B) in subparagraph (C), by inserting 

16 ‘‘and disbursed before July 1, 2010,’’ after 

17 ‘‘1994,’’; and 

18 (4) in subsection (e), by striking ‘‘September 

19 30, 2014.’’ and inserting ‘‘June 30, 2010. No loan 

20 may be made under this section for which the dis21 bursement is on or after July 1, 2010.’’. 

22 (b) TEMPORARY LOAN CONSOLIDATION AUTHOR23 ITY.—Part D of title IV (20 U.S.C. 1087a et seq.) is 

24 amended by inserting after section 459A (20 U.S.C. 

25 1087i) the following: 
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1 ‘‘SEC. 459B. TEMPORARY LOAN CONSOLIDATION AUTHOR2 ITY. 

3 ‘‘(a) TEMPORARY LOAN CONSOLIDATION AUTHOR4 ITY.— 

5 ‘‘(1) IN GENERAL.—A borrower who has 1 or 

6 more loans in 2 or more of the categories described 

7 in paragraph (2), and who has not yet entered re8 payment on 1 or more of those loans in any of the 

9 categories, may consolidate all of the loans of the 

10 borrower that are described in paragraph (2) into a 

11 Federal Direct Consolidation Loan during the period 

12 described in paragraph (3). 

13 ‘‘(2) CATEGORIES OF LOANS THAT MAY BE

14 CONSOLIDATED.—The categories of loans that may 

15 be consolidated under paragraph (1) are— 

16 ‘‘(A) loans made under this part; 

17 ‘‘(B) loans purchased by the Secretary 

18 pursuant to section 459A; and 

19 ‘‘(C) loans made under part B that are 

20 held by an eligible lender, as such term is de21 fined in section 435(d). 

22 ‘‘(3) TIME PERIOD IN WHICH LOANS MAY BE

23 CONSOLIDATED.—The Secretary may make a Fed24 eral Direct Consolidation Loan under this section to 

25 a borrower whose application for such Federal Di-
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1 rect Consolidation Loan is received on or after July 

2 1, 2010, and before July 1, 2011. 

3 ‘‘(b) TERMS OF LOANS.—A Federal Direct Consoli4 dation Loan made under this section shall have the same 

5 terms and conditions as a Federal Direct Consolidation 

6 Loan made under section 455(g), except that— 

7 ‘‘(1) in determining the applicable rate of inter8 est on the Federal Direct Consolidation Loan made 

9 under this section (other than on a Federal Direct 

10 Consolidation Loan described in paragraph (2)), sec11 tion 427A(l)(3) shall be applied without rounding 

12 the weighted average of the interest rate on the 

13 loans consolidated to the nearest higher one-eighth 

14 of 1 percent as described in subparagraph (A) of 

15 section 427A(l)(3); and 

16 ‘‘(2) if a Federal Direct Consolidation Loan 

17 made under this section that repays a loan which is 

18 subject to an interest rate determined under section 

19 427A(g)(2), (j)(2), or (k)(2), then the interest rate 

20 for such Federal Direct Consolidation Loan shall be 

21 calculated— 

22 ‘‘(A) by using the applicable rate of inter23 est described in section 427A(g)(2), (j)(2), or 

24 (k)(2), respectively; and 
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1 ‘‘(B) in accordance with section 

2 427A(l)(3).’’. 

3 SEC. 2207. TERMINATION OF UNSUBSIDIZED STAFFORD 

4 LOANS FOR MIDDLE-INCOME BORROWERS. 

5 Section 428H (20 U.S.C. 1078–8) is amended— 

6 (1) in subsection (a), by inserting ‘‘that are 

7 first disbursed before July 1, 2010,’’ after ‘‘under 

8 this part’’; 

9 (2) in subsection (b)— 

10 (A) by striking ‘‘Any student’’ and insert11 ing ‘‘Prior to July 1, 2010, any student’’; and 

12 (B) by inserting ‘‘for which the first dis13 bursement is made before such date’’ after ‘‘un14 subsidized Federal Stafford Loan’’; and 

15 (3) in subsection (h), by inserting ‘‘and that are 

16 first disbursed before July 1, 2010,’’ after ‘‘July 1, 

17 2006,’’. 

18 SEC. 2208. TERMINATION OF SPECIAL ALLOWANCES. 

19 Section 438 (20 U.S.C. 1087–1) is amended— 

20 (1) in subsection (b)(2)(I)— 

21 (A) in the subclause heading, by inserting 

22 ‘‘, AND BEFORE JULY 1, 2010’’ after ‘‘2000’’; 

23 (B) in clause (i), by inserting ‘‘and before 

24 July 1, 2010,’’ after ‘‘2000,’’; 
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1 (C) in clause (ii)(II), by inserting ‘‘and be2 fore July 1, 2010,’’ after ‘‘2006,’’; 

3 (D) in clause (iii), by inserting ‘‘and before 

4 July 1, 2010,’’ after ‘‘2000,’’; 

5 (E) in clause (iv), by inserting ‘‘and that 

6 is disbursed before July 1, 2010,’’ after 

7 ‘‘2000,’’; 

8 (F) in clause (v)(I), by inserting ‘‘and be9 fore July 1, 2010,’’ after ‘‘2006,’’; and 

10 (G) in clause (vi)— 

11 (i) in the clause heading, by inserting 

12 ‘‘, AND BEFORE JULY 1, 2010’’ after ‘‘2007’’; 

13 and 

14 (ii) in the matter preceding subclause 

15 (I), by inserting ‘‘and before July 1, 

16 2010,’’ after ‘‘2007,’’; 

17 (2) in subsection (c)— 

18 (A) in paragraph (2)(B)— 

19 (i) in clause (iii), by inserting ‘‘and’’ 

20 after the semicolon; 

21 (ii) in clause (iv), by striking ‘‘; and’’ 

22 and inserting a period; and 

23 (iii) by striking clause (v); and 
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1 (B) in paragraph (6), by inserting ‘‘and 

2 first disbursed before July 1, 2010,’’ after 

3 ‘‘1992,’’; and 

4 (3) in subsection (d)(2)(B), by inserting ‘‘, and 

5 before July 1, 2010’’ after ‘‘2007’’. 

6 SEC. 2209. ORIGINATION OF DIRECT LOANS AT INSTITU7 TIONS OUTSIDE THE UNITED STATES. 

8 (a) LOANS FOR STUDENTS ATTENDING INSTITU9 TIONS OUTSIDE THE UNITED STATES.—Section 452 (20 

10 U.S.C. 1087b) is amended by adding at the end the fol11 lowing: 

12 ‘‘(d) INSTITUTIONS OUTSIDE THE UNITED

13 STATES.—Loan funds for students (and parents of stu14 dents) attending institutions outside the United States 

15 shall be disbursed through a financial institution located 

16 or operating in the United States and designated by the 

17 Secretary to serve as the agent of such institutions with 

18 respect to the receipt of the disbursements of such loan 

19 funds and the transfer of such funds to such institutions. 

20 To be eligible to receive funds under this part, an institu21 tion outside the United States shall make arrangements 

22 with the agent designated by the Secretary under this sub23 section to receive funds under this part.’’. 

24 (b) CONFORMING AMENDMENTS.— 
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1 (1) AMENDMENTS.—Section 102 (20 U.S.C. 

2 1002), as amended by section 102 of the Higher 

3 Education Opportunity Act (Public Law 110–315) 

4 and section 101 of Public Law 111–39, is amend5 ed— 

6 (A) by striking ‘‘part B’’ each place the 

7 term appears and inserting ‘‘part D’’; 

8 (B) in subsection (a)(1)(C), by inserting ‘‘, 

9 consistent with the requirements of section 

10 452(d)’’ before the period at the end; and 

11 (C) in subsection (a)(2)(A)— 

12 (i) in the second sentence of the mat13 ter preceding clause (i), by striking ‘‘made, 

14 insured, or guaranteed’’ and inserting 

15 ‘‘made’’; and 

16 (ii) in clause (iii)— 

17 (I) in subclause (III), by striking 

18 ‘‘only Federal Stafford’’ and all that 

19 follows through ‘‘section 428B’’ and 

20 inserting ‘‘only Federal Direct Staf21 ford Loans under section 

22 455(a)(2)(A), Federal Direct Unsub23 sidized Stafford Loans under section 

24 455(a)(2)(D), or Federal Direct 
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1 PLUS Loans under section 

2 455(a)(2)(B)’’; and 

3 (II) in subclause (V), by striking 

4 ‘‘a Federal Stafford’’ and all that fol5 lows through ‘‘section 428B’’ and in6 serting ‘‘a Federal Direct Stafford 

7 Loan under section 455(a)(2)(A), a 

8 Federal Direct Unsubsidized Stafford 

9 Loan under section 455(a)(2)(D), or a 

10 Federal Direct PLUS Loan under 

11 section 455(a)(2)(B)’’. 

12 (2) EFFECTIVE DATE.—The amendments made 

13 by subparagraph (C) of paragraph (1) shall be effec14 tive on July 1, 2010, as if enacted as part of section 

15 102(a)(1) of the Higher Education Opportunity Act 

16 (Public Law 110–315) and subject to section 102(e) 

17 of such Act as amended by section 101(a)(2) of 

18 Public Law 111–39 (20 U.S.C. 1002 note). 

19 SEC. 2210. CONFORMING AMENDMENTS. 

20 (a) AMENDMENTS.—Section 454 (20 U.S.C. 1087d) 

21 is amended— 

22 (1) in subsection (a)— 

23 (A) by striking paragraph (4); and 
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1 (B) by redesignating paragraphs (5) 

2 through (7) as paragraphs (4) through (6), re3 spectively; and 

4 (2) in subsection (b)(2), by striking ‘‘(5), (6), 

5 and (7)’’ and inserting ‘‘(5), and (6)’’. 

6 (b) EFFECTIVE DATE.—The amendments made by 

7 subsection (a) shall take effect on July 1, 2010. 

8 SEC. 2211. TERMS AND CONDITIONS OF LOANS. 

9 (a) IN GENERAL.—Section 455 (20 U.S.C. 1087e) is 

10 amended— 

11 (1) in subsection (a)(1), by inserting ‘‘, and 

12 first disbursed on June 30, 2010,’’ before ‘‘under 

13 sections 428’’; and 

14 (2) in subsection (g)— 

15 (A) by inserting ‘‘, including any loan 

16 made under part B and first disbursed before 

17 July 1, 2010’’ after ‘‘section 428C(a)(4)’’; and 

18 (B) by striking the third sentence. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 subsection (a)(1) shall apply with respect to loans first dis21 bursed under part D of title IV of the Higher Education 

22 Act of 1965 (20 U.S.C. 1087a et seq.) on or after July 

23 1, 2010. 
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1 SEC. 2212. CONTRACTS; MANDATORY FUNDS. 

2 (a) CONTRACTS.—Section 456 (20 U.S.C. 1087f) is 

3 amended— 

4 (1) in subsection (a)— 

5 (A) by inserting after paragraph (3) the 

6 following new paragraph: 

7 ‘‘(4) SERVICING BY ELIGIBLE NOT-FOR-PROFIT

8 SERVICERS.— 

9 ‘‘(A) SERVICING CONTRACTS.— 

10 ‘‘(i) IN GENERAL.—The Secretary 

11 shall contract with each eligible not-for12 profit servicer to service loans originated 

13 under this part, if the servicer— 

14 ‘‘(I) meets the standards for 

15 servicing Federal assets that apply to 

16 contracts awarded pursuant to para17 graph (1); and 

18 ‘‘(II) has the capacity to service 

19 the applicable loan volume allocation 

20 described in subparagraph (B). 

21 ‘‘(ii) COMPETITIVE MARKET RATE DE22 TERMINATION FOR FIRST 100,000 BOR23 ROWER ACCOUNTS.—The Secretary shall 

24 establish a separate pricing tier for each of 

25 the first 100,000 borrower loan accounts 

26 at a competitive market rate. 
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1 ‘‘(iii) INELIGIBILITY.—An eligible not2 for-profit servicer shall no longer be eligi3 ble for a contract under this paragraph 

4 after July 1, 2014, if— 

5 ‘‘(I) the servicer has not been 

6 awarded such a contract before that 

7 date; or 

8 ‘‘(II) the servicer’s contract was 

9 terminated, and the servicer had not 

10 reapplied for, and been awarded, a 

11 contract under this paragraph. 

12 ‘‘(B) ALLOCATIONS.— 

13 ‘‘(i) IN GENERAL.—The Secretary 

14 shall (except as provided in clause (ii)) al15 locate to an eligible not-for-profit servicer, 

16 subject to the contract of such servicer de17 scribed in subparagraph (A), the servicing 

18 rights for the loan accounts of 100,000 

19 borrowers (including borrowers who bor20 rowed loans in a prior year that were serv21 iced by the servicer). 

22 ‘‘(ii) SERVICER ALLOCATION.—The 

23 Secretary may reallocate, increase, reduce, 

24 or terminate an eligible not-for-profit 

25 servicer’s allocation of servicing rights 
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1 under clause (i) based on the performance 

2 of such servicer, on the same terms as loan 

3 allocations provided by contracts awarded 

4 pursuant to paragraph (1).’’; and 

5 (2) by adding at the end the following: 

6 ‘‘(c) DEFINITION OF ELIGIBLE NOT-FOR-PROFIT

7 SERVICER.—In this section: 

8 ‘‘(1) IN GENERAL.—The term ‘eligible not-for9 profit servicer’ means an entity— 

10 ‘‘(A) that is not owned or controlled in 

11 whole or in part by— 

12 ‘‘(i) a for-profit entity; or 

13 ‘‘(ii) a nonprofit entity having its 

14 principal place of business in another 

15 State; and 

16 ‘‘(B) that— 

17 ‘‘(i) as of July 1, 2009— 

18 ‘‘(I) meets the definition of an el19 igible not-for-profit holder under sec20 tion 435(p), except that such term 

21 does not include eligible lenders de22 scribed in paragraph (1)(D) of such 

23 section; and 

24 ‘‘(II) was performing, or had en25 tered into a contract with a third 
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1 party servicer (as such term is defined 

2 in section 481(c)) who was per3 forming, student loan servicing func4 tions for loans made under part B of 

5 this title; 

6 ‘‘(ii) notwithstanding clause (i), as of 

7 July 1, 2009— 

8 ‘‘(I) is the sole beneficial owner 

9 of a loan for which the special allow10 ance rate is calculated under section 

11 438(b)(2)(I)(vi)(II) because the loan 

12 is held by an eligible lender trustee 

13 that is an eligible not-for-profit holder 

14 as defined under section 

15 435(p)(1)(D); and 

16 ‘‘(II) was performing, or had en17 tered into a contract with a third 

18 party servicer (as such term is defined 

19 in section 481(c)) who was per20 forming, student loan servicing func21 tions for loans made under part B of 

22 this title; or 

23 ‘‘(iii) is an affiliated entity of an eligi24 ble not-for-profit servicer described in 

25 clause (i) or (ii) that— 
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1 ‘‘(I) directly employs, or will di2 rectly employ (on or before the date 

3 the entity begins servicing loans under 

4 a contract awarded by the Secretary 

5 pursuant to subsection (a)(3)(A)), the 

6 majority of individuals who perform 

7 borrower-specific student loan serv8 icing functions; and 

9 ‘‘(II) as of July 1, 2009, was 

10 performing, or had entered into a con11 tract with a third party servicer (as 

12 such term is defined in section 

13 481(c)) who was performing, student 

14 loan servicing functions for loans 

15 made under part B of this title. 

16 ‘‘(2) AFFILIATED ENTITY.—For the purposes of 

17 paragraph (1), the term ‘affiliated entity’— 

18 ‘‘(A) means an entity contracted to per19 form services for an eligible not-for-profit 

20 servicer that— 

21 ‘‘(i) is a nonprofit entity or is wholly 

22 owned by a nonprofit entity; and 

23 ‘‘(ii) is not owned or controlled, in 

24 whole or in part, by— 

25 ‘‘(I) a for-profit entity; or 
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1 ‘‘(II) an entity having its prin2 cipal place of business in another 

3 State; and 

4 ‘‘(B) may include an affiliated entity that 

5 is established by an eligible not-for-profit 

6 servicer after the date of enactment of the 

7 SAFRA Act, if such affiliated entity is other8 wise described in paragraph (1)(B)(iii)(I) and 

9 subparagraph (A) of this paragraph.’’. 

10 (b) MANDATORY FUNDS.— 

11 (1) AMENDMENTS.—Section 458(a) (20 U.S.C. 

12 1087h(a)) is amended— 

13 (A) by redesignating paragraph (5) as 

14 paragraph (8); 

15 (B) by redesignating paragraphs (2) 

16 through (4) as paragraphs (3) through (5), re17 spectively; 

18 (C) by inserting after paragraph (1) the 

19 following new paragraph: 

20 ‘‘(2) MANDATORY FUNDS FOR ELIGIBLE NOT21 FOR-PROFIT SERVICERS.—For fiscal years 2010 

22 through 2019, there shall be available to the Sec23 retary, in addition to any other amounts appro24 priated to carry out this paragraph and out of any 

25 money in the Treasury not otherwise appropriated, 
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1 funds to be obligated for administrative costs of 

2 servicing contracts with eligible not-for-profit 

3 servicers as described in section 456.’’; and 

4 (D) by inserting after paragraph (5), as 

5 redesignated by subparagraph (B) of this para6 graph, the following: 

7 ‘‘(6) TECHNICAL ASSISTANCE TO INSTITUTIONS

8 OF HIGHER EDUCATION.— 

9 ‘‘(A) PROVISION OF ASSISTANCE.—The 

10 Secretary shall provide institutions of higher 

11 education participating, or seeking to partici12 pate, in the loan programs under this part with 

13 technical assistance in establishing and admin14 istering such programs. 

15 ‘‘(B) FUNDS.—There are authorized to be 

16 appropriated, and there are appropriated, to 

17 carry out this paragraph (in addition to any 

18 other amounts appropriated to carry out this 

19 paragraph and out of any money in the Treas20 ury not otherwise appropriated), $50,000,000 

21 for fiscal year 2010. 

22 ‘‘(C) DEFINITION.—In this paragraph, the 

23 term ‘assistance’ means the provision of tech24 nical support, training, materials, technical as25 sistance, and financial assistance. 
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1 ‘‘(7) ADDITIONAL PAYMENTS.— 

2 ‘‘(A) PROVISION OF ASSISTANCE.—The 

3 Secretary shall provide payments to loan 

4 servicers for retaining jobs at locations in the 

5 United States where such servicers were oper6 ating under part B on January 1, 2010. 

7 ‘‘(B) FUNDS.—There are authorized to be 

8 appropriated, and there are appropriated, to 

9 carry out this paragraph (in addition to any 

10 other amounts appropriated to carry out this 

11 paragraph and out of any money in the Treas12 ury not otherwise appropriated), $25,000,000 

13 for each of the fiscal years 2010 and 2011.’’. 

14 (2) CONFORMING AMENDMENT.—Section 458 

15 (20 U.S.C. 1087h) is further amended by striking 

16 ‘‘subsection (a)(3)’’ in subsection (b) and inserting 

17 ‘‘subsection (a)(4)’’. 

18 SEC. 2213. INCOME-BASED REPAYMENT. 

19 Section 493C (20 U.S.C. 1098e) is amended by add20 ing at the end the following new subsection: 

21 ‘‘(e) SPECIAL TERMS FOR NEW BORROWERS ON AND

22 AFTER JULY 1, 2014.—With respect to any loan made 

23 to a new borrower on or after July 1, 2014— 

24 ‘‘(1) subsection (a)(3)(B) shall be applied by 

25 substituting ‘10 percent’ for ‘15 percent’; and 
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1 ‘‘(2) subsection (b)(7)(B) shall be applied by 

2 substituting ‘20 years’ for ‘25 years’.’’. 

3 Subtitle B—Health 

4 SEC. 2301. INSURANCE REFORMS. 

5 (a) EXTENDING CERTAIN INSURANCE REFORMS TO

6 GRANDFATHERED PLANS.—Section 1251(a) of the Pa7 tient Protection and Affordable Care Act, as added by sec8 tion 10103(d) of such Act, is amended by adding at the 

9 end the following: 

10 ‘‘(4) APPLICATION OF CERTAIN PROVISIONS.— 

11 ‘‘(A) IN GENERAL.—The following provi12 sions of the Public Health Service Act (as 

13 added by this title) shall apply to grandfathered 

14 health plans for plan years beginning with the 

15 first plan year to which such provisions would 

16 otherwise apply: 

17 ‘‘(i) Section 2708 (relating to exces18 sive waiting periods). 

19 ‘‘(ii) Those provisions of section 2711 

20 relating to lifetime limits. 

21 ‘‘(iii) Section 2712 (relating to rescis22 sions). 

23 ‘‘(iv) Section 2714 (relating to exten24 sion of dependent coverage). 
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1 ‘‘(B) PROVISIONS APPLICABLE ONLY TO

2 GROUP HEALTH PLANS.— 

3 ‘‘(i) PROVISIONS DESCRIBED.—Those 

4 provisions of section 2711 relating to an5 nual limits and the provisions of section 

6 2704 (relating to pre-existing condition ex7 clusions) of the Public Health Service Act 

8 (as added by this subtitle) shall apply to 

9 grandfathered health plans that are group 

10 health plans for plan years beginning with 

11 the first plan year to which such provisions 

12 otherwise apply. 

13 ‘‘(ii) ADULT CHILD COVERAGE.—For 

14 plan years beginning before January 1, 

15 2014, the provisions of section 2714 of the 

16 Public Health Service Act (as added by 

17 this subtitle) shall apply in the case of an 

18 adult child with respect to a grandfathered 

19 health plan that is a group health plan 

20 only if such adult child is not eligible to 

21 enroll in an eligible employer-sponsored 

22 health plan (as defined in section 

23 5000A(f)(2) of the Internal Revenue Code 

24 of 1986) other than such grandfathered 

25 health plan.’’. 
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1 (b) CLARIFICATION REGARDING DEPENDENT COV2 ERAGE.—Section 2714(a) of the Public Health Service 

3 Act, as added by section 1001(5) of the Patient Protection 

4 and Affordable Care Act, is amended by striking ‘‘(who 

5 is not married)’’. 

6 SEC. 2302. DRUGS PURCHASED BY COVERED ENTITIES. 

7 Section 340B of the Public Health Service Act (42 

8 U.S.C. 256b), as amended by sections 7101 and 7102 of 

9 the Patient Protection and Affordable Care Act, is amend10 ed— 

11 (1) in subsection (a)— 

12 (A) in paragraphs (1), (2), (5), (7), and 

13 (9), by striking the terms ‘‘covered drug’’ and 

14 ‘‘covered drugs’’ each place either term appears 

15 and inserting ‘‘covered outpatient drug’’ or 

16 ‘‘covered outpatient drugs’’, respectively; 

17 (B) in paragraph (4)(L)— 

18 (i) in clause (i), by striking ‘‘and’’ at 

19 the end; 

20 (ii) in clause (ii), by striking the pe21 riod and inserting ‘‘; and’’; and 

22 (iii) by inserting after clause (ii), the 

23 following: 

24 ‘‘(iii) does not obtain covered out25 patient drugs through a group purchasing 
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1 organization or other group purchasing ar2 rangement.’’; and 

3 (C) in paragraph (5)— 

4 (i) by striking subparagraph (C); 

5 (ii) by redesignating subparagraphs 

6 (D) and (E) as subparagraphs (C) and 

7 (D), respectively; and 

8 (iii) in subparagraph (D), as so redes9 ignated, by striking ‘‘subparagraph (D)’’ 

10 and inserting ‘‘subparagraph (C)’’; 

11 (2) by striking subsection (c); 

12 (3) in subsection (d)— 

13 (A) by striking ‘‘covered drugs’’ each place 

14 it appears and inserting ‘‘covered outpatient 

15 drugs’’; 

16 (B) by striking ‘‘(a)(5)(D)’’ each place it 

17 appears and inserting ‘‘(a)(5)(C)’’; and 

18 (C) by striking ‘‘(a)(5)(E)’’ each place it 

19 appears and inserting ‘‘(a)(5)(D)’’; and 

20 (4) by inserting after subsection (d) the fol21 lowing: 

22 ‘‘(e) EXCLUSION OF ORPHAN DRUGS FOR CERTAIN

23 COVERED ENTITIES.—For covered entities described in 

24 subparagraph (M), (N), or (O) of subsection (a)(4), the 

25 term ‘covered outpatient drug’ shall not include a drug 
148 

•HR 4872 PCS

1 designated by the Secretary under section 526 of the Fed2 eral Food, Drug, and Cosmetic Act for a rare disease or 

3 condition.’’. 

4 SEC. 2303. COMMUNITY HEALTH CENTERS. 

5 Section 10503(b)(1) of the Patient Protection and 

6 Affordable Care Act is amended— 

7 (1) in subparagraph (A), by striking 

8 ‘‘700,000,000’’ and inserting ‘‘1,000,000,000’’; 

9 (2) in subparagraph (B), by striking 

10 ‘‘800,000,000’’ and inserting ‘‘1,200,000,000’’; 

11 (3) in subparagraph (C), by striking 

12 ‘‘1,000,000,000’’ and inserting ‘‘1,500,000,000’’; 

13 (4) in subparagraph (D), by striking 

14 ‘‘1,600,000,000’’ and inserting ‘‘2,200,000,000’’; 

15 and 

16 (5) in subparagraph (E), by striking 

17 ‘‘2,900,000,000’’ and inserting ‘‘3,600,000,000’’. 

Passed the House of Representatives March 21, 

2010. 

Attest: 

Clerk. 

Calendar No. 331 

111TH CONGRESS 

2D SESSION H. R. 4872 

AN ACT 

To provide for reconciliation pursuant to Title II of 

year 2010 (S. Con. Res. 13). the concurrent resolution on the budget for fiscal