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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4872 Placed on Calendar Senate (PCS)]

                                                       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).

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Care and 
Education Reconciliation Act of 2010''.
    (b) Table of Contents.--The table of contents of 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.
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.

          TITLE I--COVERAGE, MEDICARE, MEDICAID, AND REVENUES

                          Subtitle A--Coverage

SEC. 1001. TAX CREDITS.

    (a) Premium Tax Credits.--Section 36B of the Internal Revenue Code 
of 1986, as added by section 1401 of the Patient Protection and 
Affordable Care Act and amended by section 10105 of such Act, is 
amended--
            (1) in subsection (b)(3)(A)--
                    (A) in clause (i), by striking ``with respect to 
                any taxpayer'' and all that follows up to the end 
                period and inserting: ``for any taxable year shall be 
                the percentage such that the applicable percentage for 
                any taxpayer whose household income is within an income 
                tier specified in the following table shall increase, 
                on a sliding scale in a linear manner, from the initial 
                premium percentage to the final premium percentage 
                specified in such table for such income tier:

 
 ``In the case of household
   income (expressed as a
  percent of poverty line)     The initial premium    The final premium
 within the following income     percentage is--       percentage is--
            tier:
 
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
 

                    (B) by striking clauses (ii) and (iii), and 
                inserting the following:
                            ``(ii) Indexing.--
                                    ``(I) In general.--Subject to 
                                subclause (II), in the case of taxable 
                                years beginning in any calendar year 
                                after 2014, the initial and final 
                                applicable percentages under clause (i) 
                                (as in effect for the preceding 
                                calendar year after application of this 
                                clause) shall be adjusted to reflect 
                                the excess of the rate of premium 
                                growth for the preceding calendar year 
                                over the rate of income growth for the 
                                preceding calendar year.
                                    ``(II) Additional adjustment.--
                                Except as provided in subclause (III), 
                                in the case of any calendar year after 
                                2018, the percentages described in 
                                subclause (I) shall, in addition to the 
                                adjustment under subclause (I), be 
                                adjusted to reflect the excess (if any) 
                                of the rate of premium growth estimated 
                                under subclause (I) for the preceding 
                                calendar year over the rate of growth 
                                in the consumer price index for the 
                                preceding calendar year.
                                    ``(III) Failsafe.--Subclause (II) 
                                shall apply for any calendar year only 
                                if the aggregate amount of premium tax 
                                credits under this section and cost-
                                sharing reductions under section 1402 
                                of the Patient Protection and 
                                Affordable Care Act for the preceding 
                                calendar year exceeds an amount equal 
                                to 0.504 percent of the gross domestic 
                                product for the preceding calendar 
                                year.''; and
            (2) in subsection (c)(2)(C)--
                    (A) by striking ``9.8 percent'' in clauses (i)(II) 
                and (iv) and inserting ``9.5 percent''; and
                    (B) by striking ``(b)(3)(A)(iii)'' in clause (iv) 
                and inserting ``(b)(3)(A)(ii)''.
    (b) Cost Sharing.--Section 1402(c) of the Patient Protection and 
Affordable Care Act is amended--
            (1) in paragraph (1)(B)(i)--
                    (A) in subclause (I), by striking ``90'' and 
                inserting ``94'';
                    (B) in subclause (II)--
                            (i) by striking ``80'' and inserting 
                        ``87''; and
                            (ii) by striking ``and''; and
                    (C) by striking subclause (III) and inserting the 
                following:
                                    ``(III) 73 percent in the case of 
                                an eligible insured whose household 
                                income is more than 200 percent but not 
                                more than 250 percent of the poverty 
                                line for a family of the size involved; 
                                and
                                    ``(IV) 70 percent in the case of an 
                                eligible insured whose household income 
                                is more than 250 percent but not more 
                                than 400 percent of the poverty line 
                                for a family of the size involved.''; 
                                and
            (2) in paragraph (2)--
                    (A) in subparagraph (A)--
                            (i) by striking ``90'' and inserting 
                        ``94''; and
                            (ii) by striking ``and'';
                    (B) in subparagraph (B)--
                            (i) by striking ``80'' and inserting 
                        ``87''; and
                            (ii) by striking the period and inserting 
                        ``; and''; and
                    (C) by inserting after subparagraph (B) the 
                following new subparagraph:
                    ``(C) in the case of an eligible insured whose 
                household income is more than 200 percent but not more 
                than 250 percent of the poverty line for a family of 
                the size involved, increase the plan's share of the 
                total allowed costs of benefits provided under the plan 
                to 73 percent of such costs.''.

SEC. 1002. INDIVIDUAL RESPONSIBILITY.

    (a) Amounts.--Section 5000A(c) of the Internal Revenue Code of 
1986, as added by section 1501(b) of the Patient Protection and 
Affordable Care Act and amended by section 10106 of such Act, is 
amended--
            (1) in paragraph (2)(B)--
                    (A) in the matter preceding clause (i), by--
                            (i) inserting ``the excess of'' before 
                        ``the taxpayer's household income''; and
                            (ii) inserting ``for the taxable year over 
                        the amount of gross income specified in section 
                        6012(a)(1) with respect to the taxpayer'' 
                        before ``for the taxable year'';
                    (B) in clause (i), by striking ``0.5'' and 
                inserting ``1.0'';
                    (C) in clause (ii), by striking ``1.0'' and 
                inserting ``2.0''; and
                    (D) in clause (iii), by striking ``2.0'' and 
                inserting ``2.5''; and
            (2) in paragraph (3)--
                    (A) in subparagraph (A), by striking ``$750'' and 
                inserting ``$695'';
                    (B) in subparagraph (B), by striking ``$495'' and 
                inserting ``$325''; and
                    (C) in subparagraph (D)--
                            (i) in the matter preceding clause (i), by 
                        striking ``$750'' and inserting ``$695''; and
                            (ii) in clause (i), by striking ``$750'' 
                        and inserting ``$695''.
    (b) Threshold.--Section 5000A of such Code, as so added and 
amended, is amended--
            (1) by striking subsection (c)(4)(D); and
            (2) in subsection (e)(2)--
                    (A) by striking ``under 100 percent of poverty 
                line'' and inserting ``below filing threshold''; and
                    (B) by striking all that follows ``less than'' and 
                inserting ``the amount of gross income specified in 
                section 6012(a)(1) with respect to the taxpayer.''.

SEC. 1003. EMPLOYER RESPONSIBILITY.

    (a) Payment Calculation.--Subparagraph (D) of subsection (d)(2) of 
section 4980H of the Internal Revenue Code of 1986, as added by section 
1513 of the Patient Protection and Affordable Care Act and amended by 
section 10106 of such Act, is amended to read as follows:
                    ``(D) Application of employer size to assessable 
                penalties.--
                            ``(i) In general.--The number of 
                        individuals employed by an applicable large 
                        employer as full-time employees during any 
                        month shall be reduced by 30 solely for 
                        purposes of calculating--
                                    ``(I) the assessable payment under 
                                subsection (a), or
                                    ``(II) the overall limitation under 
                                subsection (b)(2).
                            ``(ii) Aggregation.--In the case of persons 
                        treated as 1 employer under subparagraph 
                        (C)(i), only 1 reduction under subclause (I) or 
                        (II) shall be allowed with respect to such 
                        persons and such reduction shall be allocated 
                        among such persons ratably on the basis of the 
                        number of full-time employees employed by each 
                        such person.''.
    (b) Applicable Payment Amount.--Section 4980H of such Code, as so 
added and amended, is amended--
            (1) in the flush text following subsection (c)(1)(B), by 
        striking ``400 percent of the applicable payment amount'' and 
        inserting ``an amount equal to \1/12\ of $3,000'';
            (2) in subsection (d)(1), by striking ``$750'' and 
        inserting ``$2,000''; and
            (3) in subsection (d)(5)(A), in the matter preceding clause 
        (i), by striking ``subsection (b)(2) and (d)(1)'' and inserting 
        ``subsection (b) and paragraph (1)''.
    (c) Counting Part-time Workers in Setting the Threshold for 
Employer Responsibility.--Section 4980H(d)(2) of such Code, as so added 
and amended and as amended by subsection (a), is amended by adding at 
the end the following new subparagraph:
                    ``(E) Full-time equivalents treated as full-time 
                employees.--Solely for purposes of determining whether 
                an employer is an applicable large employer under this 
                paragraph, an employer shall, in addition to the number 
                of full-time employees for any month otherwise 
                determined, include for such month a number of full-
                time employees determined by dividing the aggregate 
                number of hours of service of employees who are not 
                full-time employees for the month by 120.''.
    (d) Eliminating Waiting Period Assessment.--Section 4980H of such 
Code, as so added and amended and as amended by the preceding 
subsections, is amended by striking subsection (b) and redesignating 
subsections (c), (d), and (e) as subsections (b), (c), and (d), 
respectively.

SEC. 1004. INCOME DEFINITIONS.

    (a) Modified Adjusted Gross Income.--
            (1) In general.--The following provisions of the Internal 
        Revenue Code of 1986 are each amended by striking ``modified 
        gross'' each place it appears and inserting ``modified adjusted 
        gross'':
                    (A) Clauses (i) and (ii) of section 36B(d)(2)(A), 
                as added by section 1401 of the Patient Protection and 
                Affordable Care Act.
                    (B) Section 6103(l)(21)(A)(iv), as added by section 
                1414 of such Act.
                    (C) Clauses (i) and (ii) of section 5000A(c)(4), as 
                added by section 1501(b) of such Act.
            (2) Definition.--
                    (A) Section 36B(d)(2)(B) of such Code, as so added, 
                is amended to read as follows:
                    ``(B) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income increased by--
                            ``(i) any amount excluded from gross income 
                        under section 911, and
                            ``(ii) any amount of interest received or 
                        accrued by the taxpayer during the taxable year 
                        which is exempt from tax.''.
                    (B) Section 5000A(c)(4)(C) of such Code, as so 
                added, is amended to read as follows:
                    ``(C) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income increased by--
                            ``(i) any amount excluded from gross income 
                        under section 911, and
                            ``(ii) any amount of interest received or 
                        accrued by the taxpayer during the taxable year 
                        which is exempt from tax.''.
    (b) Modified Adjusted Gross Income Definition.--
            (1) Medicaid.--Section 1902 of the Social Security Act (42 
        U.S.C. 1396a) is amended by striking ``modified gross income'' 
        each place it appears in the text and headings of the following 
        provisions and inserting ``modified adjusted gross income'':
                    (A) Paragraph (14) of subsection (e), as added by 
                section 2002(a) of the Patient Protection and 
                Affordable Care Act.
                    (B) Subsection (gg)(4)(A), as added by section 
                2001(b) of such Act.
            (2) Chip.--
                    (A) State plan requirements.--Section 
                2102(b)(1)(B)(v) of the Social Security Act (42 U.S.C. 
                1397bb(b)(1)(B)(v)), as added by section 2101(d)(1) of 
                the Patient Protection and Affordable Care Act, is 
                amended by striking ``modified gross income'' and 
                inserting ``modified adjusted gross income''.
                    (B) Plan administration.--Section 2107(e)(1)(E) of 
                the Social Security Act (42 U.S.C. 1397gg(e)(1)(E)), as 
                added by section 2101(d)(2) of the Patient Protection 
                and Affordable Care Act, is amended by striking 
                ``modified gross income'' and inserting ``modified 
                adjusted gross income''.
    (c) No Excess Payments.--Section 36B(f) of the Internal Revenue 
Code of 1986, as added by section 1401(a) of the Patient Protection and 
Affordable Care Act, is amended by adding at the end the following new 
paragraph:
            ``(3) Information requirement.--Each Exchange (or any 
        person carrying out 1 or more responsibilities of an Exchange 
        under section 1311(f)(3) or 1321(c) of the Patient Protection 
        and Affordable Care Act) shall provide the following 
        information to the Secretary and to the taxpayer with respect 
        to any health plan provided through the Exchange:
                    ``(A) The level of coverage described in section 
                1302(d) of the Patient Protection and Affordable Care 
                Act and the period such coverage was in effect.
                    ``(B) The total premium for the coverage without 
                regard to the credit under this section or cost-sharing 
                reductions under section 1402 of such Act.
                    ``(C) The aggregate amount of any advance payment 
                of such credit or reductions under section 1412 of such 
                Act.
                    ``(D) The name, address, and TIN of the primary 
                insured and the name and TIN of each other individual 
                obtaining coverage under the policy.
                    ``(E) Any information provided to the Exchange, 
                including any change of circumstances, necessary to 
                determine eligibility for, and the amount of, such 
                credit.
                    ``(F) Information necessary to determine whether a 
                taxpayer has received excess advance payments.''.
    (d) Adult Dependents.--
            (1) Exclusion of amounts expended for medical care.--The 
        first sentence of section 105(b) of the Internal Revenue Code 
        of 1986 (relating to amounts expended for medical care) is 
        amended--
                    (A) by striking ``and his dependents'' and 
                inserting ``his dependents''; and
                    (B) by inserting before the period the following: 
                ``, and any child (as defined in section 152(f)(1)) of 
                the taxpayer who as of the end of the taxable year has 
                not attained age 27''.
            (2) Self-employed health insurance deduction.--Section 
        162(l)(1) of such Code is amended to read as follows:
            ``(1) Allowance of deduction.--In the case of a taxpayer 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to the amount paid during the taxable year for 
        insurance which constitutes medical care for--
                    ``(A) the taxpayer,
                    ``(B) the taxpayer's spouse,
                    ``(C) the taxpayer's dependents, and
                    ``(D) any child (as defined in section 152(f)(1)) 
                of the taxpayer who as of the end of the taxable year 
                has not attained age 27.''.
            (3) Coverage under self-employed deduction.--Section 
        162(l)(2)(B) of such Code is amended by inserting ``, or any 
        dependent, or individual described in subparagraph (D) of 
        paragraph (1) with respect to,'' after ``spouse of''.
            (4) Sick and accident benefits provided to members of a 
        voluntary employees' beneficiary association and their 
        dependents.--Section 501(c)(9) of such Code is amended by 
        adding at the end the following new sentence: ``For purposes of 
        providing for the payment of sick and accident benefits to 
        members of such an association and their dependents, the term 
        `dependent' shall include any individual who is a child (as 
        defined in section 152(f)(1)) of a member who as of the end of 
        the calendar year has not attained age 27.''.
            (5) Medical and other benefits for retired employees.--
        Section 401(h) of such Code is amended by adding at the end the 
        following: ``For purposes of this subsection, the term 
        `dependent' shall include any individual who is a child (as 
        defined in section 152(f)(1)) of a retired employee who as of 
        the end of the calendar year has not attained age 27.''.
    (e) Five Percent Income Disregard for Certain Individuals.--Section 
1902(e)(14) of the Social Security Act (42 U.S.C. 1396a(e)(14)), as 
amended by subsection (b)(1), is further amended--
            (1) in subparagraph (B), by striking ``No type'' and 
        inserting ``Subject to subparagraph (I), no type''; and
            (2) by adding at the end the following new subparagraph:
                    ``(I) Treatment of portion of modified adjusted 
                gross income.--For purposes of determining the income 
                eligibility of an individual for medical assistance 
                whose eligibility is determined based on the 
                application of modified adjusted gross income under 
                subparagraph (A), the State shall--
                            ``(i) determine the dollar equivalent of 
                        the difference between the upper income limit 
                        on eligibility for such an individual 
                        (expressed as a percentage of the poverty line) 
                        and such upper income limit increased by 5 
                        percentage points; and
                            ``(ii) notwithstanding the requirement in 
                        subparagraph (A) with respect to use of 
                        modified adjusted gross income, utilize as the 
                        applicable income of such individual, in 
                        determining such income eligibility, an amount 
                        equal to the modified adjusted gross income 
                        applicable to such individual reduced by such 
                        dollar equivalent amount.''.

SEC. 1005. IMPLEMENTATION FUNDING.

    (a) In General.--There is hereby established a Health Insurance 
Reform Implementation Fund (referred to in this section as the 
``Fund'') within the Department of Health and Human Services to carry 
out the Patient Protection and Affordable Care Act and this Act (and 
the amendments made by such Acts).
    (b) Funding.--There is appropriated to the Fund, out of any funds 
in the Treasury not otherwise appropriated, $1,000,000,000 for Federal 
administrative expenses to carry out such Act (and the amendments made 
by such Acts).

                          Subtitle B--Medicare

SEC. 1101. CLOSING THE MEDICARE PRESCRIPTION DRUG ``DONUT HOLE''.

    (a) Coverage Gap Rebate for 2010.--
            (1) In general.--Section 1860D-42 of the Social Security 
        Act (42 U.S.C. 1395w-152) is amended by adding at the end the 
        following new subsection:
    ``(c) Coverage Gap Rebate for 2010.--
            ``(1) In general.--In the case of an individual described 
        in subparagraphs (A) through (D) of section 1860D-14A(g)(1) who 
        as of the last day of a calendar quarter in 2010 has incurred 
        costs for covered part D drugs so that the individual has 
        exceeded the initial coverage limit under section 1860D-2(b)(3) 
        for 2010, the Secretary shall provide for payment from the 
        Medicare Prescription Drug Account of $250 to the individual by 
        not later than the 15th day of the third month following the 
        end of such quarter.
            ``(2) Limitation.--The Secretary shall provide only 1 
        payment under this subsection with respect to any 
        individual.''.
            (2) Repeal of provision.--Section 3315 of the Patient 
        Protection and Affordable Care Act (including the amendments 
        made by such section) is repealed, and any provision of law 
        amended or repealed by such sections is hereby restored or 
        revived as if such section had not been enacted into law.
    (b) Closing the Donut Hole.--Part D of title XVIII of the Social 
Security Act (42 U.S.C. 1395w-101 et seq.), as amended by section 3301 
of the Patient Protection and Affordable Care Act, is further amended--
            (1) in section 1860D-43--
                    (A) in subsection (b), by striking ``July 1, 2010'' 
                and inserting ``January 1, 2011''; and
                    (B) in subsection (c)(2), by striking ``July 1, 
                2010, and ending on December 31, 2010,'' and inserting 
                ``January 1, 2011, and December 31, 2011,'';
            (2) in section 1860D-14A--
                    (A) in subsection (a)--
                            (i) by striking ``July 1, 2010'' and 
                        inserting ``January 1, 2011''; and
                            (ii) by striking ``April 1, 2010'' and 
                        inserting ``180 days after the date of the 
                        enactment of this section'';
                    (B) in subsection (b)(1)(C)--
                            (i) in the heading, by striking ``2010 
                        and'';
                            (ii) by striking ``July 1, 2010'' and 
                        inserting ``January 1, 2011''; and
                            (iii) by striking ``May 1, 2010'' and 
                        inserting ``not later than 30 days after the 
                        date of the establishment of a model agreement 
                        under subsection (a)'';
                    (C) in subsection (c)--
                            (i) in paragraph (1)(A)(iii), by striking 
                        ``July 1, 2010, and ending on December 31, 
                        2011'' and inserting ``January 1, 2011, and 
                        ending on December 31, 2011''; and
                            (ii) in paragraph (2), by striking ``2010'' 
                        and inserting ``2011'';
                    (D) in subsection (d)(2)(B), by striking ``July 1, 
                2010, and ending on December 31, 2010'' and inserting 
                ``January 1, 2011, and ending on December 31, 2011''; 
                and
                    (E) in subsection (g)(1)--
                            (i) in the matter before subparagraph (A), 
                        by striking ``an applicable drug'' and 
                        inserting ``a covered part D drug'';
                            (ii) by adding ``and'' at the end of 
                        subparagraph (C);
                            (iii) by striking subparagraph (D); and
                            (iv) by redesignating subparagraph (E) as 
                        subparagraph (D); and
            (3) in section 1860D-2(b)--
                    (A) in paragraph (2)(A), by striking ``The 
                coverage'' and inserting ``Subject to subparagraphs (C) 
                and (D), the coverage'';
                    (B) in paragraph (2)(B), by striking ``subparagraph 
                (A)(ii)'' and inserting ``subparagraphs (A)(ii), (C), 
                and (D)'';
                    (C) by adding at the end of paragraph (2) the 
                following new subparagraphs:
                    ``(C) Coverage for generic drugs in coverage gap.--
                            ``(i) In general.--Except as provided in 
                        paragraph (4), the coverage for an applicable 
                        beneficiary (as defined in section 1860D-
                        14A(g)(1)) has coinsurance (for costs above the 
                        initial coverage limit under paragraph (3) and 
                        below the out-of-pocket threshold) for covered 
                        part D drugs that are not applicable drugs 
                        under section 1860D-14A(g)(2) that is--
                                    ``(I) equal to the generic-gap 
                                coinsurance percentage (specified in 
                                clause (ii)) for the year; or
                                    ``(II) actuarially equivalent 
                                (using processes and methods 
                                established under section 1860D-11(c)) 
                                to an average expected payment of such 
                                percentage of such costs for covered 
                                part D drugs that are not applicable 
                                drugs under section 1860D-14A(g)(2).
                            ``(ii) Generic-gap coinsurance 
                        percentage.--The generic-gap coinsurance 
                        percentage specified in this clause for--
                                    ``(I) 2011 is 93 percent;
                                    ``(II) 2012 and each succeeding 
                                year before 2020 is the generic-gap 
                                coinsurance percentage under this 
                                clause for the previous year decreased 
                                by 7 percentage points; and
                                    ``(III) 2020 and each subsequent 
                                year is 25 percent.
                    ``(D) Coverage for applicable drugs in coverage 
                gap.--
                            ``(i) In general.--Except as provided in 
                        paragraph (4), the coverage for an applicable 
                        beneficiary (as defined in section 1860D-
                        14A(g)(1)) has coinsurance (for costs above the 
                        initial coverage limit under paragraph (3) and 
                        below the out-of-pocket threshold) for the 
                        negotiated price (as defined in section 1860D-
                        14A(g)(6)) of covered part D drugs that are 
                        applicable drugs under section 1860D-14A(g)(2) 
                        that is--
                                    ``(I) equal to the difference 
                                between the applicable gap percentage 
                                (specified in clause (ii) for the year) 
                                and the discount percentage specified 
                                in section 1860D-14A(g)(4)(A) for such 
                                applicable drugs; or
                                    ``(II) actuarially equivalent 
                                (using processes and methods 
                                established under section 1860D-11(c)) 
                                to an average expected payment of such 
                                percentage of such costs, for covered 
                                part D drugs that are applicable drugs 
                                under section 1860D-14A(g)(2).
                            ``(ii) Applicable gap percentage.--The 
                        applicable gap percentage specified in this 
                        clause for--
                                    ``(I) 2013 and 2014 is 97.5 
                                percent;
                                    ``(II) 2015 and 2016 is 95 percent;
                                    ``(III) 2017 is 90 percent;
                                    ``(IV) 2018 is 85 percent;
                                    ``(V) 2019 is 80 percent; and
                                    ``(VI) 2020 and each subsequent 
                                year is 75 percent.'';
                    (D) in paragraph (3)(A), as restored under 
                subsection (a)(2), by striking ``paragraph (4)'' and 
                inserting ``paragraphs (2)(C), (2)(D), and (4)''; and
                    (E) in paragraph (4)(E), by inserting before the 
                period at the end the following: ``, except that 
                incurred costs shall not include the portion of the 
                negotiated price that represents the reduction in 
                coinsurance resulting from the application of paragraph 
                (2)(D)''; and
            (4) in section 1860D-22(a)(2)(A), by inserting before the 
        period at the end the following: ``, not taking into account 
        the value of any discount or coverage provided during the gap 
        in prescription drug coverage that occurs between the initial 
        coverage limit under section 1860D-2(b)(3) during the year and 
        the out-of-pocket threshold specified in section 1860D-
        2(b)(4)(B)''.
    (c) Conforming Amendment to AMP Under Medicaid.--Section 
1927(k)(1)(B)(i) of the Social Security Act (42 U.S.C. 1396r-
8(k)(1)(B)(i)), as amended by section 2503(a)(2)(B) of the Patient 
Protection and Affordable Care Act, is amended--
            (1) by striking ``and'' at the end of subclause (III);
            (2) by striking the period at the end of subclause (IV); 
        and
            (3) by adding at the end the following new subclause:
                                    ``(V) discounts provided by 
                                manufacturers under section 1860D-
                                14A.''.
    (d) Reducing Growth Rate of Out-of-pocket Cost Threshold.--Section 
1860D-2(b) of the Social Security Act (42 U.S.C. 1395w-102(b)) is 
amended--
            (1) in paragraph (4)(B)(i)--
                    (A) in subclause (I), by striking ``or'' at the 
                end;
                    (B) by redesignating subclause (II) as subclause 
                (VI); and
                    (C) by inserting after subclause (I) the following 
                new subclauses:
                                    ``(II) for each of years 2007 
                                through 2013, is equal to the amount 
                                specified in this subparagraph for the 
                                previous year, increased by the annual 
                                percentage increase described in 
                                paragraph (6) for the year involved;
                                    ``(III) for 2014 and 2015, is equal 
                                to the amount specified in this 
                                subparagraph for the previous year, 
                                increased by the annual percentage 
                                increase described in paragraph (6) for 
                                the year involved, minus 0.25 
                                percentage point;
                                    ``(IV) for each of years 2016 
                                through 2019, is equal to the amount 
                                specified in this subparagraph for the 
                                previous year, increased by the lesser 
                                of--
                                            ``(aa) the annual 
                                        percentage increase described 
                                        in paragraph (7) for the year 
                                        involved, plus 2 percentage 
                                        points; or
                                            ``(bb) the annual 
                                        percentage increase described 
                                        in paragraph (6) for the year;
                                    ``(V) for 2020, is equal to the 
                                amount that would have been applied 
                                under this subparagraph for 2020 if the 
                                amendments made by section 1101(d)(1) 
                                of the Health Care and Education 
                                Reconciliation Act of 2010 had not been 
                                enacted; or''; and
            (2) by adding at the end the following new paragraph:
            ``(7) Additional annual percentage increase.--The annual 
        percentage increase specified in this paragraph for a year is 
        equal to the annual percentage increase in the consumer price 
        index for all urban consumers (United States city average) for 
        the 12-month period ending in July of the previous year.''.

SEC. 1102. MEDICARE ADVANTAGE PAYMENTS.

    (a) Repeal.--Effective as if included in the enactment of the 
Patient Protection and Affordable Care Act, sections 3201 and 3203 of 
such Act (and the amendments made by such sections) are repealed.
    (b) Phase-in of Modified Benchmarks.--Section 1853 of the Social 
Security Act (42 U.S.C. 1395w-23) is amended--
            (1) in subsection (j)(1)(A), by striking ``(or, beginning 
        with 2007, \1/12\ of the applicable amount determined under 
        subsection (k)(1)) for the area for the year'' and inserting 
        ``for the area for the year (or, for 2007, 2008, 2009, and 
        2010, \1/12\ of the applicable amount determined under 
        subsection (k)(1) for the area for the year; for 2011, \1/12\ 
        of the applicable amount determined under subsection (k)(1) for 
        the area for 2010; and, beginning with 2012, \1/12\ of the 
        blended benchmark amount determined under subsection (n)(1) for 
        the area for the year)''; and
            (2) by adding at the end the following new subsection:
    ``(n) Determination of Blended Benchmark Amount.--
            ``(1) In general.--For purposes of subsection (j), subject 
        to paragraphs (3), (4), and (5), the term `blended benchmark 
        amount' means for an area--
                    ``(A) for 2012 the sum of--
                            ``(i) \1/2\ of the applicable amount for 
                        the area and year; and
                            ``(ii) \1/2\ of the amount specified in 
                        paragraph (2)(A) for the area and year; and
                    ``(B) for a subsequent year the amount specified in 
                paragraph (2)(A) for the area and year.
            ``(2) Specified amount.--
                    ``(A) In general.--The amount specified in this 
                subparagraph for an area and year is the product of--
                            ``(i) the base payment amount specified in 
                        subparagraph (E) for the area and year adjusted 
                        to take into account the phase-out in the 
                        indirect costs of medical education from 
                        capitation rates described in subsection 
                        (k)(4); and
                            ``(ii) the applicable percentage for the 
                        area for the year specified under subparagraph 
                        (B).
                    ``(B) Applicable percentage.--Subject to 
                subparagraph (D), the applicable percentage specified 
                in this subparagraph for an area for a year in the case 
                of an area that is ranked--
                            ``(i) in the highest quartile under 
                        subparagraph (C) for the previous year is 95 
                        percent;
                            ``(ii) in the second highest quartile under 
                        such subparagraph for the previous year is 100 
                        percent;
                            ``(iii) in the third highest quartile under 
                        such subparagraph for the previous year is 
                        107.5 percent; or
                            ``(iv) in the lowest quartile under such 
                        subparagraph for the previous year is 115 
                        percent.
                    ``(C) Periodic ranking.--For purposes of this 
                paragraph in the case of an area located--
                            ``(i) in 1 of the 50 States or the District 
                        of Columbia, the Secretary shall rank such area 
                        in each year specified under subsection 
                        (c)(1)(D)(ii) based upon the level of the 
                        amount specified in subparagraph (A)(i) for 
                        such areas; or
                            ``(ii) in a territory, the Secretary shall 
                        rank such areas in each such year based upon 
                        the level of the amount specified in 
                        subparagraph (A)(i) for such area relative to 
                        quartile rankings computed under clause (i).
                    ``(D) 1-year transition for changes in applicable 
                percentage.--If, for a year after 2012, there is a 
                change in the quartile in which an area is ranked 
                compared to the previous year, the applicable 
                percentage for the area in the year shall be the 
                average of--
                            ``(i) the applicable percentage for the 
                        area for the previous year; and
                            ``(ii) the applicable percentage that would 
                        otherwise apply for the area for the year.
                    ``(E) Base payment amount.--Subject to subparagraph 
                (F), the base payment amount specified in this 
                subparagraph--
                            ``(i) for 2012 is the amount specified in 
                        subsection (c)(1)(D) for the area for the year; 
                        or
                            ``(ii) for a subsequent year that--
                                    ``(I) is not specified under 
                                subsection (c)(1)(D)(ii), is the base 
                                amount specified in this subparagraph 
                                for the area for the previous year, 
                                increased by the national per capita MA 
                                growth percentage, described in 
                                subsection (c)(6) for that succeeding 
                                year, but not taking into account any 
                                adjustment under subparagraph (C) of 
                                such subsection for a year before 2004; 
                                and
                                    ``(II) is specified under 
                                subsection (c)(1)(D)(ii), is the amount 
                                specified in subsection (c)(1)(D) for 
                                the area for the year.
                    ``(F) Application of indirect medical education 
                phase-out.--The base payment amount specified in 
                subparagraph (E) for a year shall be adjusted in the 
                same manner under paragraph (4) of subsection (k) as 
                the applicable amount is adjusted under such 
                subsection.
            ``(3) Alternative phase-ins.--
                    ``(A) 4-year phase-in for certain areas.--If the 
                difference between the applicable amount (as defined in 
                subsection (k)) for an area for 2010 and the projected 
                2010 benchmark amount (as defined in subparagraph (C)) 
                for the area is at least $30 but less than $50, the 
                blended benchmark amount for the area is--
                            ``(i) for 2012 the sum of--
                                    ``(I) \3/4\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \1/4\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year;
                            ``(ii) for 2013 the sum of--
                                    ``(I) \1/2\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \1/2\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year;
                            ``(iii) for 2014 the sum of--
                                    ``(I) \1/4\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \3/4\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year; and
                            ``(iv) for a subsequent year the amount 
                        specified in paragraph (2)(A) for the area and 
                        year.
                    ``(B) 6-year phase-in for certain areas.--If the 
                difference between the applicable amount (as defined in 
                subsection (k)) for an area for 2010 and the projected 
                2010 benchmark amount (as defined in subparagraph (C)) 
                for the area is at least $50, the blended benchmark 
                amount for the area is--
                            ``(i) for 2012 the sum of--
                                    ``(I) \5/6\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \1/6\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year;
                            ``(ii) for 2013 the sum of--
                                    ``(I) \2/3\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \1/3\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year;
                            ``(iii) for 2014 the sum of--
                                    ``(I) \1/2\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \1/2\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year;
                            ``(iv) for 2015 the sum of--
                                    ``(I) \1/3\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \2/3\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year; and
                            ``(v) for 2016 the sum of--
                                    ``(I) \1/6\ of the applicable 
                                amount for the area and year; and
                                    ``(II) \5/6\ of the amount 
                                specified in paragraph (2)(A) for the 
                                area and year; and
                            ``(vi) for a subsequent year the amount 
                        specified in paragraph (2)(A) for the area and 
                        year.
                    ``(C) Projected 2010 benchmark amount.--The 
                projected 2010 benchmark amount described in this 
                subparagraph for an area is equal to the sum of--
                            ``(i) \1/2\ of the applicable amount (as 
                        defined in subsection (k)) for the area for 
                        2010; and
                            ``(ii) \1/2\ of the amount specified in 
                        paragraph (2)(A) for the area for 2010 but 
                        determined as if there were substituted for the 
                        applicable percentage specified in clause (ii) 
                        of such paragraph the sum of--
                                    ``(I) the applicable percent that 
                                would be specified under subparagraph 
                                (B) of paragraph (2) (determined 
                                without regard to subparagraph (D) of 
                                such paragraph) for the area for 2010 
                                if any reference in such paragraph to 
                                `the previous year' were deemed a 
                                reference to 2010; and
                                    ``(II) the applicable percentage 
                                increase that would apply to a 
                                qualifying plan in the area under 
                                subsection (o) as if any reference in 
                                such subsection to 2012 were deemed a 
                                reference to 2010 and as if the 
                                determination of a qualifying county 
                                under paragraph (3)(B) of such 
                                subsection were made for 2010.
            ``(4) Cap on benchmark amount.--In no case shall the 
        blended benchmark amount for an area for a year (determined 
        taking into account subsection (o)) be greater than the 
        applicable amount that would (but for the application of this 
        subsection) be determined under subsection (k)(1) for the area 
        for the year.
            ``(5) Non-application to pace plans.--This subsection shall 
        not apply to payments to a PACE program under section 1894.''.
    (c) Applicable Percentage Quality Increases.--Section 1853 of such 
Act (42 U.S.C. 1395w-23), as amended by subsection (b), is amended--
            (1) in subsection (j), by inserting ``subject to subsection 
        (o),'' after ``For purposes of this part,'';
            (2) in subsection (n)(2)(B), as added by subsection (b), by 
        inserting ``, subject to subsection (o)'' after ``as follows''; 
        and
            (3) by adding at the end the following new subsection:
    ``(o) Applicable Percentage Quality Increases.--
            ``(1) In general.--Subject to the succeeding paragraphs, in 
        the case of a qualifying plan with respect to a year beginning 
        with 2012, the applicable percentage under subsection (n)(2)(B) 
        shall be increased on a plan or contract level, as determined 
        by the Secretary--
                    ``(A) for 2012, by 1.5 percentage points;
                    ``(B) for 2013, by 3.0 percentage points; and
                    ``(C) for 2014 or a subsequent year, by 5.0 
                percentage points.
            ``(2) Increase for qualifying plans in qualifying 
        counties.--The increase applied under paragraph (1) for a 
        qualifying plan located in a qualifying county for a year shall 
        be doubled.
            ``(3) Qualifying plans and qualifying county defined; 
        application of increases to low enrollment and new plans.--For 
        purposes of this subsection:
                    ``(A) Qualifying plan.--
                            ``(i) In general.--The term `qualifying 
                        plan' means, for a year and subject to 
                        paragraph (4), a plan that had a quality rating 
                        under paragraph (4) of 4 stars or higher based 
                        on the most recent data available for such 
                        year.
                            ``(ii) Application of increases to low 
                        enrollment plans.--
                                    ``(I) 2012.--For 2012, the term 
                                `qualifying plan' includes an MA plan 
                                that the Secretary determines is not 
                                able to have a quality rating under 
                                paragraph (4) because of low 
                                enrollment.
                                    ``(II) 2013 and subsequent years.--
                                For 2013 and subsequent years, for 
                                purposes of determining whether an MA 
                                plan with low enrollment (as defined by 
                                the Secretary) is included as a 
                                qualifying plan, the Secretary shall 
                                establish a method to apply to MA plans 
                                with low enrollment (as defined by the 
                                Secretary) the computation of quality 
                                rating and the rating system under 
                                paragraph (4).
                            ``(iii) Application of increases to new 
                        plans.--
                                    ``(I) In general.--A new MA plan 
                                that meets criteria specified by the 
                                Secretary shall be treated as a 
                                qualifying plan, except that in 
                                applying paragraph (1), the applicable 
                                percentage under subsection (n)(2)(B) 
                                shall be increased--
                                            ``(aa) for 2012, by 1.5 
                                        percentage points;
                                            ``(bb) for 2013, by 2.5 
                                        percentage points; and
                                            ``(cc) for 2014 or a 
                                        subsequent year, by 3.5 
                                        percentage points.
                                    ``(II) New ma plan defined.--The 
                                term `new MA plan' means, with respect 
                                to a year, a plan offered by an 
                                organization or sponsor that has not 
                                had a contract as a Medicare Advantage 
                                organization in the preceding 3-year 
                                period.
                    ``(B) Qualifying county.--The term `qualifying 
                county' means, for a year, a county--
                            ``(i) that has an MA capitation rate that, 
                        in 2004, was based on the amount specified in 
                        subsection (c)(1)(B) for a Metropolitan 
                        Statistical Area with a population of more than 
                        250,000;
                            ``(ii) for which, as of December 2009, of 
                        the Medicare Advantage eligible individuals 
                        residing in the county at least 25 percent of 
                        such individuals were enrolled in Medicare 
                        Advantage plans; and
                            ``(iii) that has per capita fee-for-service 
                        spending that is lower than the national 
                        monthly per capita cost for expenditures for 
                        individuals enrolled under the original 
                        medicare fee-for-service program for the year.
            ``(4) Quality determinations for application of increase.--
                    ``(A) Quality determination.--The quality rating 
                for a plan shall be determined according to a 5-star 
                rating system (based on the data collected under 
                section 1852(e)).
                    ``(B) Plans that failed to report.--An MA plan 
                which does not report data that enables the Secretary 
                to rate the plan for purposes of this paragraph shall 
                be counted as having a rating of fewer than 3.5 stars.
            ``(5) Exception for pace plans.--This subsection shall not 
        apply to payments to a PACE program under section 1894.''.
            (4) Determination of medicare part d low-income benchmark 
        premium.--Section 1860D-14(b)(2)(B)(iii) of the Social Security 
        Act (42 U.S.C. 1395w-114(b)(2)(B)(iii)) as amended by section 
        3302 of the Patient Protection and Affordable Care Act, is 
        amended by striking ``, determined without regard to any 
        reduction in such premium as a result of any beneficiary rebate 
        under section 1854(b)(1)(C) or bonus payment under section 
        1853(n)'' and inserting the following: ``and determined before 
        the application of the monthly rebate computed under section 
        1854(b)(1)(C)(i) for that plan and year involved and, in the 
        case of a qualifying plan, before the application of the 
        increase under section 1853(o) for that plan and year 
        involved''.
    (d) Beneficiary Rebates.--Section 1854(b)(1)(C) of such Act (42 
U.S.C. 1395w-24(b)(1)(C)), as amended by section 3202(b) of the Patient 
Protection and Affordable Care Act, is further amended--
            (1) in clause (i), by inserting ``(or the applicable rebate 
        percentage specified in clause (iii) in the case of plan years 
        beginning on or after January 1, 2012)'' after ``75 percent''; 
        and
            (2) by striking clause (iii), by redesignating clauses (iv) 
        and (v) as clauses (vii) and (viii), respectively, and by 
        inserting after clause (ii) the following new clauses:
                            ``(iii) Applicable rebate percentage.--The 
                        applicable rebate percentage specified in this 
                        clause for a plan for a year, based on the 
                        system under section 1853(o)(4)(A), is the sum 
                        of--
                                    ``(I) the product of the old phase-
                                in proportion for the year under clause 
                                (iv) and 75 percent; and
                                    ``(II) the product of the new 
                                phase-in proportion for the year under 
                                clause (iv) and the final applicable 
                                rebate percentage under clause (v).
                            ``(iv) Old and new phase-in proportions.--
                        For purposes of clause (iv)--
                                    ``(I) for 2012, the old phase-in 
                                proportion is \2/3\ and the new phase-
                                in proportion is \1/3\;
                                    ``(II) for 2013, the old phase-in 
                                proportion is \1/3\ and the new phase-
                                in proportion is \2/3\; and
                                    ``(III) for 2014 and any subsequent 
                                year, the old phase-in proportion is 0 
                                and the new phase-in proportion is 1.
                            ``(v) Final applicable rebate percentage.--
                        Subject to clause (vi), the final applicable 
                        rebate percentage under this clause is--
                                    ``(I) in the case of a plan with a 
                                quality rating under such system of at 
                                least 4.5 stars, 70 percent;
                                    ``(II) in the case of a plan with a 
                                quality rating under such system of at 
                                least 3.5 stars and less than 4.5 
                                stars, 65 percent; and
                                    ``(III) in the case of a plan with 
                                a quality rating under such system of 
                                less than 3.5 stars, 50 percent.
                            ``(vi) Treatment of low enrollment and new 
                        plans.--For purposes of clause (v)--
                                    ``(I) for 2012, in the case of a 
                                plan described in subclause (I) of 
                                subsection (o)(3)(A)(ii), the plan 
                                shall be treated as having a rating of 
                                4.5 stars; and
                                    ``(II) for 2012 or a subsequent 
                                year, in the case of a new MA plan (as 
                                defined under subclause (III) of 
                                subsection (o)(3)(A)(iii)) that is 
                                treated as a qualifying plan pursuant 
                                to subclause (I) of such subsection, 
                                the plan shall be treated as having a 
                                rating of 3.5 stars.''.
    (e) Coding Intensity Adjustment.--Section 1853(a)(1)(C)(ii) of such 
Act (42 U.S.C. 1395w-23(a)(1)(C)(ii)) is amended--
            (1) in the heading, by striking ``during phaseout of budget 
        neutrality factor'' and inserting ``of coding adjustment'';
            (2) in the matter before subclause (I), by striking 
        ``through 2010'' and inserting ``and each subsequent year''; 
        and
            (3) in subclause (II)--
                    (A) in the first sentence, by inserting 
                ``annually'' before ``conduct an analysis'';
                    (B) in the second sentence--
                            (i) by inserting ``on a timely basis'' 
                        after ``are incorporated''; and
                            (ii) by striking ``only for 2008, 2009, and 
                        2010'' and inserting ``for 2008 and subsequent 
                        years'';
                    (C) in the third sentence, by inserting ``and 
                updated as appropriate'' before the period at the end; 
                and
                    (D) by adding at the end the following new 
                subclauses:
                                    ``(III) In calculating each year's 
                                adjustment, the adjustment factor shall 
                                be for 2014, not less than the 
                                adjustment factor applied for 2010, 
                                plus 1.3 percentage points; for each of 
                                years 2015 through 2018, not less than 
                                the adjustment factor applied for the 
                                previous year, plus 0.25 percentage 
                                point; and for 2019 and each subsequent 
                                year, not less than 5.7 percent.
                                    ``(IV) Such adjustment shall be 
                                applied to risk scores until the 
                                Secretary implements risk adjustment 
                                using Medicare Advantage diagnostic, 
                                cost, and use data.''.
    (f) Repeal of Comparative Cost Adjustment Program.--Section 1860C-1 
of the Social Security Act (42 U.S.C. 1395w-29), as added by section 
241(a) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173), is repealed.

SEC. 1103. SAVINGS FROM LIMITS ON MA PLAN ADMINISTRATIVE COSTS.

    Section 1857(e) of the Social Security Act (42 U.S.C. 1395w-27(e)) 
is amended by adding at the end the following new paragraph:
            ``(4) Requirement for minimum medical loss ratio.--If the 
        Secretary determines for a contract year (beginning with 2014) 
        that an MA plan has failed to have a medical loss ratio of at 
        least .85--
                    ``(A) the MA plan shall remit to the Secretary an 
                amount equal to the product of--
                            ``(i) the total revenue of the MA plan 
                        under this part for the contract year; and
                            ``(ii) the difference between .85 and the 
                        medical loss ratio;
                    ``(B) for 3 consecutive contract years, the 
                Secretary shall not permit the enrollment of new 
                enrollees under the plan for coverage during the second 
                succeeding contract year; and
                    ``(C) the Secretary shall terminate the plan 
                contract if the plan fails to have such a medical loss 
                ratio for 5 consecutive contract years.''.

SEC. 1104. DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS.

    Section 1886(r) of the Social Security Act (42 U.S.C. 1395ww(r)), 
as added by section 3133 of the Patient Protection and Affordable Care 
Act and as amended by section 10316 of such Act, is amended--
            (1) in paragraph (1), by striking ``2015'' and inserting 
        ``2014''; and
            (2) in paragraph (2)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``2015'' and inserting ``2014'';
                    (B) in subparagraph (B)(i)--
                            (i) in the heading, by inserting ``2014,'' 
                        after ``years'';
                            (ii) in the matter preceding subclause (I), 
                        by inserting ``2014,'' after ``each of fiscal 
                        years'';
                            (iii) in subclause (I), by striking ``on 
                        such Act'' and inserting ``on the Health Care 
                        and Education Reconciliation Act of 2010''; and
                            (iv) in the matter following subclause 
                        (II), by striking ``minus 1.5 percentage 
                        points'' and inserting ``minus 0.1 percentage 
                        points for fiscal year 2014 and minus 0.2 
                        percentage points for each of fiscal years 
                        2015, 2016, and 2017''; and
                    (C) in subparagraph (B)(ii), in the matter 
                following subclause (II), by striking ``and, for each 
                of 2018 and 2019, minus 1.5 percentage points'' and 
                inserting ``minus 0.2 percentage points for each of 
                fiscal years 2018 and 2019''.

SEC. 1105. MARKET BASKET UPDATES.

    (a) IPPS.--Section 1886(b)(3)(B) of the Social Security Act (42 
U.S.C. 1395ww(b)(3)(B)), as amended by sections 3401(a)(4) and 10319(a) 
of the Patient Protection and Affordable Care Act, is amended--
            (1) in clause (xii)--
                    (A) by placing the subclause (II) (inserted by 
                section 10319(a)(3) of the Patient Protection and 
                Affordable Care Act) immediately after subclause (I) 
                and, in such subclause (II), by striking ``and'' at the 
                end; and
                    (B) by striking subclause (III) and inserting the 
                following:
            ``(III) for fiscal year 2014, by 0.3 percentage point;
            ``(IV) for each of fiscal years 2015 and 2016, by 0.2 
        percentage point; and
            ``(V) for each of fiscal years 2017, 2018, and 2019, by 
        0.75 percentage point.''; and
            (2) by striking clause (xiii).
    (b) Long-term Care Hospitals.--Section 1886(m)(4) of the Social 
Security Act (42 U.S.C. 1395ww(m)(4)), as added by section 3401(c) of 
the Patient Protection and Affordable Care Act and amended by section 
10319(b) of such Act, is amended--
            (1) in subparagraph (A)--
                    (A) in clause (iii), by striking ``and'' at the 
                end; and
                    (B) by striking clause (iv) and inserting the 
                following:
                            ``(iv) for rate year 2014, 0.3 percentage 
                        point;
                            ``(v) for each of rate years 2015 and 2016, 
                        0.2 percentage point; and
                            ``(vi) for each of rate years 2017, 2018, 
                        and 2019, 0.75 percentage point.'';
            (2) by striking subparagraph (B); and
            (3) by striking ``(4) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(4) Other 
        adjustment.--For purposes'' (and redesignating clauses (i) 
        through (vi) as subparagraphs (A) through (F), respectively, 
        with appropriate indentation).
    (c) Inpatient Rehabilitation Facilities.--Section 1886(j)(3)(D) of 
the Social Security Act (42 U.S.C. 1395ww(j)(3)(D)), as added by 
section 3401(d)(2) of the Patient Protection and Affordable Care Act 
and amended by section 10319(c) of such Act, is amended--
            (1) in clause (i)--
                    (A) by placing the subclause (II) (inserted by 
                section 10319(c)(3) of the Patient Protection and 
                Affordable Care Act) immediately after subclause (I) 
                and, in such subclause (II), by striking ``and'' at the 
                end; and
                    (B) by striking subclause (III) and inserting the 
                following:
                                    ``(III) for fiscal year 2014, 0.3 
                                percentage point;
                                    ``(IV) for each of fiscal years 
                                2015 and 2016, 0.2 percentage point; 
                                and
                                    ``(V) for each of fiscal years 
                                2017, 2018, and 2019, 0.75 percentage 
                                point.'';
            (2) by striking clause (ii); and
            (3) by striking ``(D) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(D) Other 
        adjustment.--For purposes'' (and redesignating subclauses (I) 
        through (V) as clauses (i) through (v), respectively, with 
        appropriate indentation).
    (d) Psychiatric Hospitals.--Section 1886(s)(3) of the Social 
Security Act, as added by section 3401(f) of the Patient Protection and 
Affordable Care Act and amended by section 10319(e) of such Act, is 
amended--
            (1) in subparagraph (A)--
                    (A) by placing the clause (ii) (inserted by section 
                10319(e)(3) of the Patient Protection and Affordable 
                Care Act) immediately after clause (i) and, in such 
                clause (ii), by striking ``and'' at the end; and
                    (B) by striking clause (iii) and inserting the 
                following:
                            ``(iii) for the rate year beginning in 
                        2014, 0.3 percentage point;
                            ``(iv) for each of the rate years beginning 
                        in 2015 and 2016, 0.2 percentage point; and
                            ``(v) for each of the rate years beginning 
                        in 2017, 2018, and 2019, 0.75 percentage 
                        point.'';
            (2) by striking subparagraph (B); and
            (3) by striking ``(3) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(3) Other 
        adjustment.--For purposes'' (and redesignating clauses (i) 
        through (v) as subparagraphs (A) through (E), respectively, 
        with appropriate indentation).
    (e) Outpatient Hospitals.--Section 1833(t)(3)(G) of the Social 
Security Act (42 U.S.C. 1395l(t)(3)(G)), as added by section 3401(i)(2) 
of the Patient Protection and Affordable Care Act and amended by 
section 10319(g) of such Act, is amended--
            (1) in clause (i)--
                    (A) by placing the subclause (II) (inserted by 
                section 10319(g)(3) of the Patient Protection and 
                Affordable Care Act) immediately after subclause (I) 
                and, in such subclause (II), by striking ``and'' at the 
                end; and
                    (B) by striking subclause (III) and inserting the 
                following:
                                    ``(III) for 2014, 0.3 percentage 
                                point;
                                    ``(IV) for each of 2015 and 2016, 
                                0.2 percentage point; and
                                    ``(V) for each of 2017, 2018, and 
                                2019, 0.75 percentage point.'';
            (2) by striking clause (ii); and
            (3) by striking ``(G) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(G) Other 
        adjustment.--For purposes'' (and redesignating subclauses (I) 
        through (V) as clauses (i) through (v), respectively, with 
        appropriate indentation).

SEC. 1106. PHYSICIAN OWNERSHIP-REFERRAL.

    Section 1877(i) of the Social Security Act (42 U.S.C. 1395nn(i)), 
as added by section 6001(a)(3) of the Patient Protection and Affordable 
Care Act and as amended by section 10601(a) of such Act, is amended--
            (1) in paragraph (1)(A)(i), by striking ``August 1, 2010'' 
        and inserting ``December 31, 2010''; and
            (2) in paragraph (3)--
                    (A) in subparagraph (A)(i), by striking ``an 
                applicable hospital (as defined in subparagraph (E))'' 
                and inserting ``a hospital that is an applicable 
                hospital (as defined in subparagraph (E)) or is a high 
                Medicaid facility described in subparagraph (F)'';
                    (B) in subparagraph (C)(iii), by inserting after 
                ``date of enactment of this subsection'' the following: 
                ``(or, in the case of a hospital that did not have a 
                provider agreement in effect as of such date but does 
                have such an agreement in effect on December 31, 2010, 
                the effective date of such provider agreement)'';
                    (C) by redesignating subparagraphs (F) through (H) 
                as subparagraphs (G) through (I), respectively; and
                    (D) by inserting after subparagraph (E) the 
                following new subparagraph:
                    ``(F) High medicaid facility described.--A high 
                Medicaid facility described in this subparagraph is a 
                hospital that--
                            ``(i) is not the sole hospital in a county;
                            ``(ii) with respect to each of the 3 most 
                        recent years for which data are available, has 
                        an annual percent of total inpatient admissions 
                        that represent inpatient admissions under title 
                        XIX that is estimated to be greater than such 
                        percent with respect to such admissions for any 
                        other hospital located in the county in which 
                        the hospital is located; and
                            ``(iii) meets the conditions described in 
                        subparagraph (E)(iii).''.

SEC. 1107. PAYMENT FOR IMAGING SERVICES.

    Section 1848 of the Social Security Act (42 U.S.C. 1395w-4), as 
amended by section 3135(a) of the Patient Protection and Affordable 
Care Act, is amended--
            (1) in subsection (b)(4)--
                    (A) in subparagraph (B), by striking ``this 
                paragraph'' and inserting ``subparagraph (A)''; and
                    (B) by amending subparagraph (C) to read as 
                follows:
                    ``(C) Adjustment in imaging utilization rate.--With 
                respect to fee schedules established for 2011 and 
                subsequent years, in the methodology for determining 
                practice expense relative value units for expensive 
                diagnostic imaging equipment under the final rule 
                published by the Secretary in the Federal Register on 
                November 25, 2009 (42 CFR 410 et al.), the Secretary 
                shall use a 75 percent assumption instead of the 
                utilization rates otherwise established in such final 
                rule.''; and
            (2) in subsection (c)(2)(B)(v), by striking subclauses 
        (III), (IV), and (V) and inserting the following new subclause:
                                    ``(III) Change in utilization rate 
                                for certain imaging services.--
                                Effective for fee schedules established 
                                beginning with 2011, reduced 
                                expenditures attributable to the change 
                                in the utilization rate applicable to 
                                2011, as described in subsection 
                                (b)(4)(C).''.

SEC. 1108. PE GPCI ADJUSTMENT FOR 2010.

    Effective as if included in the enactment of the Patient Protection 
and Affordable Care Act, section 1848(e)(1)(H)(i) of the Social 
Security Act (42 U.S.C. 1395w-4(e)(1)(H)(i)), as added by section 
3102(b)(2) of the Patient Protection and Affordable Care Act, is 
amended by striking ``\3/4\'' and inserting ``\1/2\''.

SEC. 1109. PAYMENT FOR QUALIFYING HOSPITALS.

    (a) In General.--From the amount available under subsection (b), 
the Secretary of Health and Human Services shall provide for a payment 
to qualifying hospitals (as defined in subsection (d)) for fiscal years 
2011 and 2012 of the amount determined under subsection (c).
    (b) Amounts Available.--There shall be available from the Federal 
Hospital Insurance Trust Fund $400,000,000 for payments under this 
section for fiscal years 2011 and 2012.
    (c) Payment Amount.--The amount of payment under this section for a 
qualifying hospital shall be determined, in a manner consistent with 
the amount available under subsection (b), in proportion to the portion 
of the amount of the aggregate payments under section 1886(d) of the 
Social Security Act to the hospital for fiscal year 2009 bears to the 
sum of all such payments to all qualifying hospitals for such fiscal 
year.
    (d) Qualifying Hospital Defined.--In this section, the term 
``qualifying hospital'' means a subsection (d) hospital (as defined for 
purposes of section 1886(d) of the Social Security Act) that is located 
in a county that ranks, based upon its ranking in age, sex, and race 
adjusted spending for benefits under parts A and B under title XVIII of 
such Act per enrollee, within the lowest quartile of such counties in 
the United States.

                          Subtitle C--Medicaid

SEC. 1201. FEDERAL FUNDING FOR STATES.

    Section 1905 of the Social Security Act (42 U.S.C. 1396d), as 
amended by sections 2001(a)(3) and 10201(c) of the Patient Protection 
and Affordable Care Act, is amended--
            (1) in subsection (y)--
                    (A) by redesignating subclause (II) of paragraph 
                (1)(B)(ii) as paragraph (5) of subsection (z) and 
                realigning the left margins accordingly; and
                    (B) by striking paragraph (1) and inserting the 
                following:
            ``(1) Amount of increase.--Notwithstanding subsection (b), 
        the Federal medical assistance percentage for a State that is 
        one of the 50 States or the District of Columbia, with respect 
        to amounts expended by such State for medical assistance for 
        newly eligible individuals described in subclause (VIII) of 
        section 1902(a)(10)(A)(i), shall be equal to--
                    ``(A) 100 percent for calendar quarters in 2014, 
                2015, and 2016;
                    ``(B) 95 percent for calendar quarters in 2017;
                    ``(C) 94 percent for calendar quarters in 2018;
                    ``(D) 93 percent for calendar quarters in 2019; and
                    ``(E) 90 percent for calendar quarters in 2020 and 
                each year thereafter.''; and
            (2) in subsection (z)--
                    (A) in paragraph (1), by striking ``September 30, 
                2019'' and inserting ``December 31, 2015'' and by 
                striking ``subsection (y)(1)(B)(ii)(II)'' and inserting 
                ``paragraph (3)'';
                    (B) by striking paragraphs (2) through (4) and 
                inserting the following:
            ``(2)(A) For calendar quarters in 2014 and each year 
        thereafter, the Federal medical assistance percentage otherwise 
        determined under subsection (b) for an expansion State 
        described in paragraph (3) with respect to medical assistance 
        for individuals described in section 1902(a)(10)(A)(i)(VIII) 
        who are nonpregnant childless adults with respect to whom the 
        State may require enrollment in benchmark coverage under 
        section 1937 shall be equal to the percent specified in 
        subparagraph (B)(i) for such year.
            ``(B)(i) The percent specified in this subparagraph for a 
        State for a year is equal to the Federal medical assistance 
        percentage (as defined in the first sentence of subsection (b)) 
        for the State increased by a number of percentage points equal 
        to the transition percentage (specified in clause (ii) for the 
        year) of the number of percentage points by which--
                    ``(I) such Federal medical assistance percentage 
                for the State, is less than
                    ``(II) the percent specified in subsection (y)(1) 
                for the year.
            ``(ii) The transition percentage specified in this clause 
        for--
                    ``(I) 2014 is 50 percent;
                    ``(II) 2015 is 60 percent;
                    ``(III) 2016 is 70 percent;
                    ``(IV) 2017 is 80 percent;
                    ``(V) 2018 is 90 percent; and
                    ``(VI) 2019 and each subsequent year is 100 
                percent.''; and
                    (C) by redesignating paragraph (5) (as added by 
                paragraph (1)(A) of this section) as paragraph (3), 
                realigning the left margins to align with paragraph 
                (2), and striking the heading and all that follows 
                through ``a State is'' and inserting ``A State is''.

SEC. 1202. PAYMENTS TO PRIMARY CARE PHYSICIANS.

    (a) In General.--
            (1) Fee-for-service payments.--Section 1902 of the Social 
        Security Act (42 U.S.C. 1396a), as amended by section 
        2303(a)(2) of the Patient Protection and Affordable Care Act, 
        is amended--
                    (A) in subsection (a)(13)--
                            (i) by striking ``and'' at the end of 
                        subparagraph (A);
                            (ii) by adding ``and'' at the end of 
                        subparagraph (B); and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(C) payment for primary care services (as defined 
                in subsection (jj)) furnished in 2013 and 2014 by a 
                physician with a primary specialty designation of 
                family medicine, general internal medicine, or 
                pediatric medicine at a rate not less than 100 percent 
                of the payment rate that applies to such services and 
                physician under part B of title XVIII (or, if greater, 
                the payment rate that would be applicable under such 
                part if the conversion factor under section 1848(d) for 
                the year involved were the conversion factor under such 
                section for 2009);''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(jj) Primary Care Services Defined.--For purposes of subsection 
(a)(13)(C), the term `primary care services' means--
            ``(1) evaluation and management services that are procedure 
        codes (for services covered under title XVIII) for services in 
        the category designated Evaluation and Management in the 
        Healthcare Common Procedure Coding System (established by the 
        Secretary under section 1848(c)(5) as of December 31, 2009, and 
        as subsequently modified); and
            ``(2) services related to immunization administration for 
        vaccines and toxoids for which CPT codes 90465, 90466, 90467, 
        90468, 90471, 90472, 90473, or 90474 (as subsequently modified) 
        apply under such System.''.
            (2) Under medicaid managed care plans.--Section 1932(f) of 
        such Act (42 U.S.C. 1396u-2(f)) is amended--
                    (A) in the heading, by adding at the end the 
                following: ``; Adequacy of Payment for Primary Care 
                Services''; and
                    (B) by inserting before the period at the end the 
                following: ``and, in the case of primary care services 
                described in section 1902(a)(13)(C), consistent with 
                the minimum payment rates specified in such section 
                (regardless of the manner in which such payments are 
                made, including in the form of capitation or partial 
                capitation)''.
    (b) Increase in Payment Using Increased FMAP.--Section 1905 of the 
Social Security Act, as amended by section 1004(b) of this Act and 
section 10201(c)(6) of the Patient Protection and Affordable Care Act, 
is amended by adding at the end the following new subsection:
    ``(dd) Increased FMAP for Additional Expenditures for Primary Care 
Services.--Notwithstanding subsection (b), with respect to the portion 
of the amounts expended for medical assistance for services described 
in section 1902(a)(13)(C) furnished on or after January 1, 2013, and 
before January 1, 2015, that is attributable to the amount by which the 
minimum payment rate required under such section (or, by application, 
section 1932(f)) exceeds the payment rate applicable to such services 
under the State plan as of July 1, 2009, the Federal medical assistance 
percentage for a State that is one of the 50 States or the District of 
Columbia shall be equal to 100 percent. The preceding sentence does not 
prohibit the payment of Federal financial participation based on the 
Federal medical assistance percentage for amounts in excess of those 
specified in such sentence.''.

SEC. 1203. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS.

    (a) In General.--Section 1923(f) of the Social Security Act (42 
U.S.C. 1396r-4(f)), as amended by sections 2551(a)(4) and 10201(e)(1) 
of the Patient Protection and Affordable Care Act, is amended--
            (1) in paragraph (6)(B)(iii), in the matter preceding 
        subclause (I), by striking ``or paragraph (7)''; and
            (2) by striking paragraph (7) and inserting the following:
            ``(7) Medicaid dsh reductions.--
                    ``(A) Reductions.--
                            ``(i) In general.--For each of fiscal years 
                        2014 through 2020 the Secretary shall effect 
                        the following reductions:
                                    ``(I) Reduction in dsh 
                                allotments.--The Secretary shall reduce 
                                DSH allotments to States in the amount 
                                specified under the DSH health reform 
                                methodology under subparagraph (B) for 
                                the State for the fiscal year.
                                    ``(II) Reductions in payments.--The 
                                Secretary shall reduce payments to 
                                States under section 1903(a) for each 
                                calendar quarter in the fiscal year, in 
                                the manner specified in clause (iii), 
                                in an amount equal to \1/4\ of the DSH 
                                allotment reduction under subclause (I) 
                                for the State for the fiscal year.
                            ``(ii) Aggregate reductions.--The aggregate 
                        reductions in DSH allotments for all States 
                        under clause (i)(I) shall be equal to--
                                    ``(I) $500,000,000 for fiscal year 
                                2014;
                                    ``(II) $600,000,000 for fiscal year 
                                2015;
                                    ``(III) $600,000,000 for fiscal 
                                year 2016;
                                    ``(IV) $1,800,000,000 for fiscal 
                                year 2017;
                                    ``(V) $5,000,000,000 for fiscal 
                                year 2018;
                                    ``(VI) $5,600,000,000 for fiscal 
                                year 2019; and
                                    ``(VII) $4,000,000,000 for fiscal 
                                year 2020.
                        The Secretary shall distribute such aggregate 
                        reductions among States in accordance with 
                        subparagraph (B).
                            ``(iii) Manner of payment reduction.--The 
                        amount of the payment reduction under clause 
                        (i)(II) for a State for a quarter shall be 
                        deemed an overpayment to the State under this 
                        title to be disallowed against the State's 
                        regular quarterly draw for all spending under 
                        section 1903(d)(2). Such a disallowance is not 
                        subject to a reconsideration under subsections 
                        (d) and (e) of section 1116.
                            ``(iv) Definition.--In this paragraph, the 
                        term `State' means the 50 States and the 
                        District of Columbia.
                    ``(B) DSH health reform methodology.--The Secretary 
                shall carry out subparagraph (A) through use of a DSH 
                Health Reform methodology that meets the following 
                requirements:
                            ``(i) The methodology imposes the largest 
                        percentage reductions on the States that--
                                    ``(I) have the lowest percentages 
                                of uninsured individuals (determined on 
                                the basis of data from the Bureau of 
                                the Census, audited hospital cost 
                                reports, and other information likely 
                                to yield accurate data) during the most 
                                recent year for which such data are 
                                available; or
                                    ``(II) do not target their DSH 
                                payments on--
                                            ``(aa) hospitals with high 
                                        volumes of Medicaid inpatients 
                                        (as defined in subsection 
                                        (b)(1)(A)); and
                                            ``(bb) hospitals that have 
                                        high levels of uncompensated 
                                        care (excluding bad debt).
                            ``(ii) The methodology imposes a smaller 
                        percentage reduction on low DSH States 
                        described in paragraph (5)(B).
                            ``(iii) The methodology takes into account 
                        the extent to which the DSH allotment for a 
                        State was included in the budget neutrality 
                        calculation for a coverage expansion approved 
                        under section 1115 as of July 31, 2009.''.
    (b) Extension of DSH Allotment.--Section 1923(f)(6)(A) of the 
Social Security Act (42 U.S.C. 1396r-4(f)(6)(A)) is amended by adding 
at the end the following:
                            ``(v) Allotment for 2d, 3rd, and 4th 
                        quarters of fiscal year 2012 and for fiscal 
                        year 2013.--Notwithstanding the table set forth 
                        in paragraph (2):
                                    ``(I) 2d, 3rd, and 4th quarters of 
                                fiscal year 2012.--In the case of a 
                                State that has a DSH allotment of $0 
                                for the 2d, 3rd, and 4th quarters of 
                                fiscal year 2012, the DSH allotment 
                                shall be $47,200,000 for such quarters.
                                    ``(II) Fiscal year 2013.--In the 
                                case of a State that has a DSH 
                                allotment of $0 for fiscal year 2013, 
                                the DSH allotment shall be $53,100,000 
                                for such fiscal year.''.

SEC. 1204. FUNDING FOR THE TERRITORIES.

    (a) In General.--Part III of subtitle D of title I of the Patient 
Protection and Affordable Care Act, as amended by section 10104(m) of 
such Act, is amended by inserting after section 1322 the following 
section:

``SEC. 1323. FUNDING FOR THE TERRITORIES.

    ``(a) In General.--A territory that--
            ``(1) elects consistent with subsection (b) to establish an 
        Exchange in accordance with part II of this subtitle and 
        establishes such an Exchange in accordance with such part shall 
        be treated as a State for purposes of such part and shall be 
        entitled to payment from the amount allocated to the territory 
        under subsection (c); or
            ``(2) does not make such election shall be entitled to an 
        increase in the dollar limitation applicable to the territory 
        under subsections (f) and (g) of section 1108 of the Social 
        Security Act (42 U.S.C. 1308) for such period in such amount 
        for such territory and such increase shall not be taken into 
        account in computing any other amount under such subsections.
    ``(b) Terms and Conditions.--An election under subsection (a)(1) 
shall--
            ``(1) not be effective unless the election is consistent 
        with section 1321 and is received not later than October 1, 
        2013; and
            ``(2) be contingent upon entering into an agreement between 
        the territory and the Secretary that requires that--
                    ``(A) funds provided under the agreement shall be 
                used only to provide premium and cost-sharing 
                assistance to residents of the territory obtaining 
                health insurance coverage through the Exchange; and
                    ``(B) the premium and cost-sharing assistance 
                provided under such agreement shall be structured in 
                such a manner so as to prevent any gap in assistance 
                for individuals between the income level at which 
                medical assistance is available through the territory's 
                Medicaid plan under title XIX of the Social Security 
                Act and the income level at which premium and cost-
                sharing assistance is available under the agreement.
    ``(c) Appropriation and Allocation.--
            ``(1) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated for purposes of 
        payment pursuant to subsection (a) $1,000,000,000, to be 
        available during the period beginning with 2014 and ending with 
        2019.
            ``(2) Allocation.--The Secretary shall allocate the amount 
        appropriated under paragraph (1) among the territories for 
        purposes of carrying out this section as follows:
                    ``(A) For Puerto Rico, $925,000,000.
                    ``(B) For another territory, the portion of 
                $75,000,000 specified by the Secretary.''.
    (b) Medicaid Funding.--
            (1) Increase in funding caps.--Section 1108(g) of the 
        Social Security Act (42 U.S.C. 1308(g)), as amended by section 
        2005(a) of the Patient Protection and Affordable Care Act, is 
        amended--
                    (A) in paragraph (2), by inserting ``and section 
                1323(a)(2) of the Patient Protection and Affordable 
                Care Act'' after ``subject to''; and
                    (B) by striking paragraph (5) and inserting the 
                following:
            ``(5) Additional increase.--The Secretary shall increase 
        the amounts otherwise determined under this subsection for 
        Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
        Islands, and American Samoa (after the application of 
        subsection (f) and the preceding paragraphs of this subsection) 
        for the period beginning July 1, 2011, and ending on September 
        30, 2019, by such amounts that the total additional payments 
        under title XIX to such territories equals $6,300,000,000 for 
        such period. The Secretary shall increase such amounts in 
        proportion to the amounts applicable to such territories under 
        this subsection and subsection (f) on the date of enactment of 
        this paragraph.''.
            (2) Disregard of payments; increased fmap.--Section 2005 of 
        the Patient Protection and Affordable Care Act is amended--
                    (A) by repealing subsection (b) (and the amendments 
                made by that subsection) and section 1108(g)(4) of the 
                Social Security Act shall be applied as if such 
                amendments had never been enacted; and
                    (B) in subsection (c)(2), by striking ``January'' 
                and inserting ``July''.

SEC. 1205. DELAY IN COMMUNITY FIRST CHOICE OPTION.

    Section 1915(k)(1) of the Social Security Act (42 U.S.C. 1396n(k)), 
as added by section 2401 of the Patient Protection and Affordable Care 
Act, is amended by striking ``October 1, 2010'' and inserting ``October 
1, 2011''.

SEC. 1206. DRUG REBATES FOR NEW FORMULATIONS OF EXISTING DRUGS.

    (a) Treatment of New Formulations.--Subparagraph (C) of section 
1927(c)(2) of the Social Security Act (42 U.S.C. 1396r-8(c)(2)), as 
added by section 2501(d) of the Patient Protection and Affordable Care 
Act, is amended to read as follows:
                    ``(C) Treatment of new formulations.--In the case 
                of a drug that is a line extension of a single source 
                drug or an innovator multiple source drug that is an 
                oral solid dosage form, the rebate obligation with 
                respect to such drug under this section shall be the 
                amount computed under this section for such new drug 
                or, if greater, the product of--
                            ``(i) the average manufacturer price of the 
                        line extension of a single source drug or an 
                        innovator multiple source drug that is an oral 
                        solid dosage form;
                            ``(ii) the highest additional rebate 
                        (calculated as a percentage of average 
                        manufacturer price) under this section for any 
                        strength of the original single source drug or 
                        innovator multiple source drug; and
                            ``(iii) the total number of units of each 
                        dosage form and strength of the line extension 
                        product paid for under the State plan in the 
                        rebate period (as reported by the State).
                In this subparagraph, the term `line extension' means, 
                with respect to a drug, a new formulation of the drug, 
                such as an extended release formulation.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the enactment of the Patient Protection 
and Affordable Care Act.

              Subtitle D--Reducing Fraud, Waste, and Abuse

SEC. 1301. COMMUNITY MENTAL HEALTH CENTERS.

    (a) In General.--Section 1861(ff)(3)(B) of the Social Security Act 
(42 U.S.C. 1395x(ff)(3)(B)) is amended--
            (1) in clause (ii), by striking ``and'' at the end;
            (2) by redesignating clause (iii) as clause (iv); and
            (3) by inserting after clause (ii) the following:
            ``(iii) provides at least 40 percent of its services to 
        individuals who are not eligible for benefits under this title; 
        and''.
    (b) Restriction.--Section 1861(ff)(3)(A) of such Act (42 U.S.C. 
1395x(ff)(3)(A)) is amended by inserting ``other than in an 
individual's home or in an inpatient or residential setting'' before 
the period.
    (c) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on or after the first day of the 
first calendar quarter that begins at least 12 months after the date of 
the enactment of this Act.

SEC. 1302. MEDICARE PREPAYMENT MEDICAL REVIEW LIMITATIONS.

    Section 1874A(h) of the Social Security Act (42 U.S.C. 1395w-3a(h)) 
is repealed.

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

    (a) Funding to Fight Fraud, Waste, and Abuse.--
            (1) In general.--Section 1817(k) of the Social Security Act 
        (42 U.S.C. 1395i(k)), as amended by section 6402(i) of the 
        Patient Protection and Affordable Care Act, is further 
        amended--
                    (A) by adding at the end the following new 
                paragraph:
            ``(8) Additional funding.--
                    ``(A) In general.--In addition to the funds 
                otherwise appropriated to the Account from the Trust 
                Fund under paragraphs (3)(C) and (4)(A) and for 
                purposes described in paragraphs (3)(C) and (4)(A), 
                there are hereby appropriated to such Account from such 
                Trust Fund the following additional amounts:
                            ``(i) For fiscal year 2011, $95,000,000.
                            ``(ii) For fiscal year 2012, $55,000,000.
                            ``(iii) For each of fiscal years 2013 and 
                        2014, $30,000,000.
                            ``(iv) For each of fiscal years 2015 and 
                        2016, $20,000,000.
                    ``(B) Allocation.--The funds appropriated under 
                this paragraph shall be allocated in the same 
                proportion as the total funding appropriated with 
                respect to paragraphs (3)(A) and (4)(A) was allocated 
                with respect to fiscal year 2010, and shall be 
                available without further appropriation until 
                expended.''; and
                    (B) in paragraph (4)(A), by inserting ``for 
                activities described in paragraph (3)(C) and'' after 
                ``necessary''.
    (b) Medicaid Integrity Program.--Section 1936(e)(1) of such Act (42 
U.S.C. 1396-u6(e)(1)) is amended--
            (1) in subparagraph (B), by striking at the end ``and'';
            (2) in subparagraph (C)--
                    (A) by striking ``for each fiscal year thereafter'' 
                and inserting ``for each of fiscal years 2009 and 
                2010''; and
                    (B) by striking the period and inserting ``; and''; 
                and
            (3) by adding at the end the following new subparagraph:
                    ``(D) for each fiscal year after fiscal year 2010, 
                the amount appropriated under this paragraph for the 
                previous fiscal year, increased by the percentage 
                increase in the consumer price index for all urban 
                consumers (all items; United States city average) over 
                the previous year.''.

SEC. 1304. 90-DAY PERIOD OF ENHANCED OVERSIGHT FOR INITIAL CLAIMS OF 
              DME SUPPLIERS.

    Section 1866(j), as amended by section 6401 of the Patient 
Protection and Affordable Care Act, is further amended--
            (1) by redesignating paragraphs (4) through (7) as 
        paragraphs (5) through (8), respectively; and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) 90-day period of enhanced oversight for initial 
        claims of dme suppliers.--For periods beginning after January 
        1, 2011, if the Secretary determines that there is a 
        significant risk of fraudulent activity among suppliers of 
        durable medical equipment, in the case of a supplier of durable 
        medical equipment who is within a category or geographic area 
        under title XVIII identified pursuant to such determination and 
        who is initially enrolling under such title, the Secretary 
        shall, notwithstanding sections 1816(c), 1842(c), and 
        1869(a)(2), withhold payment under such title with respect to 
        durable medical equipment furnished by such supplier during the 
        90-day period beginning on the date of the first submission of 
        a claim under such title for durable medical equipment 
        furnished by such supplier.''.

               Subtitle E--Provisions Relating to Revenue

SEC. 1401. HIGH-COST PLAN EXCISE TAX.

    (a) In General.--Section 4980I of the Internal Revenue Code of 
1986, as added by section 9001 of the Patient Protection and Affordable 
Care Act and amended by section 10901 of such Act, is amended--
            (1) in subsection (b)(3)(B)--
                    (A) by striking ``The annual'' and inserting the 
                following:
                            ``(i) In general.--Except as provided in 
                        clause (ii), the annual''; and
                    (B) by adding at the end the following new clause:
                            ``(ii) Multiemployer plan coverage.--Any 
                        coverage provided under a multiemployer plan 
                        (as defined in section 414(f)) shall be treated 
                        as coverage other than self-only coverage.'';
            (2) in subsection (b)(3)(C)--
                    (A) by striking ``Except as provided in 
                subparagraph (D)--'';
                    (B) in clause (i)--
                            (i) by striking ``2013'' each place it 
                        appears in the heading and the text and 
                        inserting ``2018'';
                            (ii) by striking ``$8,500'' in subclause 
                        (I) and inserting ``$10,200 multiplied by the 
                        health cost adjustment percentage (determined 
                        by only taking into account self-only 
                        coverage)''; and
                            (iii) by striking ``$23,000'' in subclause 
                        (II) and inserting ``$27,500 multiplied by the 
                        health cost adjustment percentage (determined 
                        by only taking into account coverage other than 
                        self-only coverage)'';
                    (C) by redesignating clauses (ii) and (iii) as 
                clauses (iv) and (v), respectively, and by inserting 
                after clause (i) the following new clauses:
                            ``(ii) Health cost adjustment percentage.--
                        For purposes of clause (i), the health cost 
                        adjustment percentage is equal to 100 percent 
                        plus the excess (if any) of--
                                    ``(I) the percentage by which the 
                                per employee cost for providing 
                                coverage under the Blue Cross/Blue 
                                Shield standard benefit option under 
                                the Federal Employees Health Benefits 
                                Plan for plan year 2018 (determined by 
                                using the benefit package for such 
                                coverage in 2010) exceeds such cost for 
                                plan year 2010, over
                                    ``(II) 55 percent.
                            ``(iii) Age and gender adjustment.--
                                    ``(I) In general.--The amount 
                                determined under subclause (I) or (II) 
                                of clause (i), whichever is applicable, 
                                for any taxable period shall be 
                                increased by the amount determined 
                                under subclause (II).
                                    ``(II) Amount determined.--The 
                                amount determined under this subclause 
                                is an amount equal to the excess (if 
                                any) of--
                                            ``(aa) the premium cost of 
                                        the Blue Cross/Blue Shield 
                                        standard benefit option under 
                                        the Federal Employees Health 
                                        Benefits Plan for the type of 
                                        coverage provided such 
                                        individual in such taxable 
                                        period if priced for the age 
                                        and gender characteristics of 
                                        all employees of the 
                                        individual's employer, over
                                            ``(bb) that premium cost 
                                        for the provision of such 
                                        coverage under such option in 
                                        such taxable period if priced 
                                        for the age and gender 
                                        characteristics of the national 
                                        workforce.''.
                    (D) in clause (iv), as redesignated by subparagraph 
                (C)--
                            (i) by inserting ``covered by the plan'' 
                        after ``whose employees''; and
                            (ii) by striking subclauses (I) and (II) 
                        and inserting the following:
                                    ``(I) the dollar amount in clause 
                                (i)(I) shall be increased by $1,650, 
                                and
                                    ``(II) the dollar amount in clause 
                                (i)(II) shall be increased by 
                                $3,450,'', and
                    (E) in clause (v), as redesignated by subparagraph 
                (C)--
                            (i) by striking ``2013'' and inserting 
                        ``2018'';
                            (ii) by striking ``clauses (i) and (ii)'' 
                        and inserting ``clauses (i) (after the 
                        application of clause (ii)) and (iv)''; and
                            (iii) by inserting ``in the case of 
                        determinations for calendar years beginning 
                        before 2020'' after ``1 percentage point'' in 
                        subclause (II) thereof;
            (3) by striking subparagraph (D) of subsection (b)(3);
            (4) in subsection (d)(1)(B), by redesignating clause (ii) 
        as clause (iii) and by inserting after clause (i) the following 
        new clause:
                            ``(ii) any coverage under a separate 
                        policy, certificate, or contract of insurance 
                        which provides benefits substantially all of 
                        which are for treatment of the mouth (including 
                        any organ or structure within the mouth) or for 
                        treatment of the eye, or''; and
            (5) in subsection (d), by adding at the end the following 
        new paragraph:
            ``(3) Employee.--The term `employee' includes any former 
        employee, surviving spouse, or other primary insured 
        individual.''.
    (b) Effective Dates.--
            (1) Section 9001(c) of the Patient Protection and 
        Affordable Care Act is amended by striking ``2012'' and 
        inserting ``2017''.
            (2) Section 10901(c) of the Patient Protection and 
        Affordable Care Act is amended by striking ``2012'' and 
        inserting ``2017''.

SEC. 1402. UNEARNED INCOME MEDICARE CONTRIBUTION.

    (a) Investment Income.--
            (1) In general.--Subtitle A of the Internal Revenue Code of 
        1986 is amended by inserting after chapter 2 the following new 
        chapter:

          ``CHAPTER 2A--UNEARNED INCOME MEDICARE CONTRIBUTION

``Sec. 1411. Imposition of tax.

``SEC. 1411. IMPOSITION OF TAX.

    ``(a) In General.--Except as provided in subsection (e)--
            ``(1) Application to individuals.--In the case of an 
        individual, there is hereby imposed (in addition to any other 
        tax imposed by this subtitle) for each taxable year a tax equal 
        to 3.8 percent of the lesser of--
                    ``(A) net investment income for such taxable year, 
                or
                    ``(B) the excess (if any) of--
                            ``(i) the modified adjusted gross income 
                        for such taxable year, over
                            ``(ii) the threshold amount.
            ``(2) Application to estates and trusts.--In the case of an 
        estate or trust, there is hereby imposed (in addition to any 
        other tax imposed by this subtitle) for each taxable year a tax 
        of 3.8 percent of the lesser of--
                    ``(A) the undistributed net investment income for 
                such taxable year, or
                    ``(B) the excess (if any) of--
                            ``(i) the adjusted gross income (as defined 
                        in section 67(e)) for such taxable year, over
                            ``(ii) the dollar amount at which the 
                        highest tax bracket in section 1(e) begins for 
                        such taxable year.
    ``(b) Threshold Amount.--For purposes of this chapter, the term 
`threshold amount' means--
            ``(1) in the case of a taxpayer making a joint return under 
        section 6013 or a surviving spouse (as defined in section 
        2(a)), $250,000,
            ``(2) in the case of a married taxpayer (as defined in 
        section 7703) filing a separate return, \1/2\ of the dollar 
        amount determined under paragraph (1), and
            ``(3) in any other case, $200,000.
    ``(c) Net Investment Income.--For purposes of this chapter--
            ``(1) In general.--The term `net investment income' means 
        the excess (if any) of--
                    ``(A) the sum of--
                            ``(i) gross income from interest, 
                        dividends, annuities, royalties, and rents, 
                        other than such income which is derived in the 
                        ordinary course of a trade or business not 
                        described in paragraph (2),
                            ``(ii) other gross income derived from a 
                        trade or business described in paragraph (2), 
                        and
                            ``(iii) net gain (to the extent taken into 
                        account in computing taxable income) 
                        attributable to the disposition of property 
                        other than property held in a trade or business 
                        not described in paragraph (2), over
                    ``(B) the deductions allowed by this subtitle which 
                are properly allocable to such gross income or net 
                gain.
            ``(2) Trades and businesses to which tax applies.--A trade 
        or business is described in this paragraph if such trade or 
        business is--
                    ``(A) a passive activity (within the meaning of 
                section 469) with respect to the taxpayer, or
                    ``(B) a trade or business of trading in financial 
                instruments or commodities (as defined in section 
                475(e)(2)).
            ``(3) Income on investment of working capital subject to 
        tax.--A rule similar to the rule of section 469(e)(1)(B) shall 
        apply for purposes of this subsection.
            ``(4) Exception for certain active interests in 
        partnerships and s corporations.--In the case of a disposition 
        of an interest in a partnership or S corporation--
                    ``(A) gain from such disposition shall be taken 
                into account under clause (iii) of paragraph (1)(A) 
                only to the extent of the net gain which would be so 
                taken into account by the transferor if all property of 
                the partnership or S corporation were sold for fair 
                market value immediately before the disposition of such 
                interest, and
                    ``(B) a rule similar to the rule of subparagraph 
                (A) shall apply to a loss from such disposition.
            ``(5) Exception for distributions from qualified plans.--
        The term `net investment income' shall not include any 
        distribution from a plan or arrangement described in section 
        401(a), 403(a), 403(b), 408, 408A, or 457(b).
            ``(6) Special rule.--Net investment income shall not 
        include any item taken into account in determining self-
        employment income for such taxable year on which a tax is 
        imposed by section 1401(b).
    ``(d) Modified Adjusted Gross Income.--For purposes of this 
chapter, the term `modified adjusted gross income' means adjusted gross 
income increased by the excess of--
            ``(1) the amount excluded from gross income under section 
        911(a)(1), over
            ``(2) the amount of any deductions (taken into account in 
        computing adjusted gross income) or exclusions disallowed under 
        section 911(d)(6) with respect to the amounts described in 
        paragraph (1).
    ``(e) Nonapplication of Section.--This section shall not apply to--
            ``(1) a nonresident alien, or
            ``(2) a trust all of the unexpired interests in which are 
        devoted to one or more of the purposes described in section 
        170(c)(2)(B).''.
            (2) Estimated taxes.--Section 6654 of the Internal Revenue 
        Code of 1986 is amended--
                    (A) in subsection (a), by striking ``and the tax 
                under chapter 2'' and inserting ``the tax under chapter 
                2, and the tax under chapter 2A''; and
                    (B) in subsection (f)--
                            (i) by striking ``minus'' at the end of 
                        paragraph (2) and inserting ``plus''; and
                            (ii) by redesignating paragraph (3) as 
                        paragraph (4) and inserting after paragraph (2) 
                        the following new paragraph:
            ``(3) the taxes imposed by chapter 2A, minus''.
            (3) Clerical amendment.--The table of chapters for subtitle 
        A of chapter 1 of the Internal Revenue Code of 1986 is amended 
        by inserting after the item relating to chapter 2 the following 
        new item:

         ``Chapter 2A--Unearned Income Medicare Contribution''.

            (4) Effective dates.--The amendments made by this 
        subsection shall apply to taxable years beginning after 
        December 31, 2012.
    (b) Earned Income.--
            (1) Threshold.--
                    (A) FICA.--Paragraph (2) of section 3101(b) of the 
                Internal Revenue Code of 1986, as added by section 9015 
                of the Patient Protection and Affordable Care Act and 
                amended by section 10906 of such Act, is amended by 
                striking ``and'' at the end of subparagraph (A), by 
                redesignating subparagraph (B) as subparagraph (C), and 
                by inserting after subparagraph (A) the following new 
                subparagraph:
                    ``(B) in the case of a married taxpayer (as defined 
                in section 7703) filing a separate return, \1/2\ of the 
                dollar amount determined under subparagraph (A), and''.
                    (B) SECA.--Section 1401(b)(2) of the Internal 
                Revenue Code of 1986, as added by section 9015 of the 
                Patient Protection and Affordable Care Act and amended 
                by section 10906 of such Act, is amended--
                            (i) in subparagraph (A), by striking 
                        ``and'' at the end of clause (i), by 
                        redesignating clause (ii) as clause (iii), and 
                        by inserting after clause (i) the following new 
                        clause:
                            ``(ii) in the case of a married taxpayer 
                        (as defined in section 7703) filing a separate 
                        return, \1/2\ of the dollar amount determined 
                        under clause (i), and''; and
                            (ii) in subparagraph (B), by striking 
                        ``under clauses (i) and (ii)'' and inserting 
                        ``under clause (i), (ii), or (iii) (whichever 
                        is applicable)''.
            (2) Estimated taxes.--Section 6654 of the Internal Revenue 
        Code of 1986 is amended by redesignating subsection (m) as 
        subsection (n) and by inserting after subsection (l) the 
        following new subsection:
    ``(m) Special Rule for Medicare Tax.--For purposes of this section, 
the tax imposed under section 3101(b)(2) (to the extent not withheld) 
shall be treated as a tax imposed under chapter 2.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply with respect to remuneration received, and taxable 
        years beginning after, December 31, 2012.

SEC. 1403. DELAY OF LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGEMENTS 
              UNDER CAFETERIA PLANS.

    (a) In General.--Section 10902(b) of the Patient Protection and 
Affordable Care Act is amended by striking ``December 31, 2010'' and 
inserting ``December 31, 2012''.
    (b) Inflation Adjustment.--Paragraph (2) of section 125(i) of the 
Internal Revenue Code of 1986, as added by section 9005 of the Patient 
Protection and Affordable Care Act and amended by section 10902 of such 
Act, is amended--
            (1) in the matter preceding subparagraph (A), by striking 
        ``December 31, 2011'' and inserting ``December 31, 2013''; and
            (2) in subparagraph (B), by striking ``2010'' and inserting 
        ``2012''.

SEC. 1404. BRAND NAME PHARMACEUTICALS.

    (a) In General.--Section 9008 of the Patient Protection and 
Affordable Care Act is amended--
            (1) in subsection (a)(1), by striking ``2009'' and 
        inserting ``2010'';
            (2) in subsection (b)--
                    (A) by striking ``$2,300,000,000'' in paragraph (1) 
                and inserting ``the applicable amount''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Applicable amount.--For purposes of paragraph (1), 
        the applicable amount shall be determined 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.'';
 

            (3) in subsection (d), by adding at the end the following 
        new paragraph:
            ``(3) Joint and several liability.--If more than one person 
        is liable for payment of the fee under subsection (a) with 
        respect to a single covered entity by reason of the application 
        of paragraph (2), all such persons shall be jointly and 
        severally liable for payment of such fee.''; and
            (4) by striking subsection (j) and inserting the following 
        new subsection:
    ``(j) Effective Date.--This section shall apply to calendar years 
beginning after December 31, 2010.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in section 9008 of the Patient Protection and 
Affordable Care Act.

SEC. 1405. EXCISE TAX ON MEDICAL DEVICE MANUFACTURERS.

    (a) In General.--Chapter 32 of the Internal Revenue Code of 1986 is 
amended--
            (1) by inserting after subchapter D the following new 
        subchapter:

                    ``Subchapter E--Medical Devices

``Sec. 4191. Medical devices.

``SEC. 4191. MEDICAL DEVICES.

    ``(a) In General.--There is hereby imposed on the sale of any 
taxable medical device by the manufacturer, producer, or importer a tax 
equal to 2.3 percent of the price for which so sold.
    ``(b) Taxable Medical Device.--For purposes of this section--
            ``(1) In general.--The term `taxable medical device' means 
        any device (as defined in section 201(h) of the Federal Food, 
        Drug, and Cosmetic Act) intended for humans.
            ``(2) Exemptions.--Such term shall not include--
                    ``(A) eyeglasses,
                    ``(B) contact lenses,
                    ``(C) hearing aids, and
                    ``(D) any other medical device determined by the 
                Secretary to be of a type which is generally purchased 
                by the general public at retail for individual use.'', 
                and
            (2) by inserting after the item relating to subchapter D in 
        the table of subchapters for such chapter the following new 
        item:

                   ``subchapter e. medical devices''.

    (b) Certain Exemptions Not to Apply.--
            (1) Section 4221(a) of the Internal Revenue Code of 1986 is 
        amended by adding at the end the following new sentence: ``In 
        the case of the tax imposed by section 4191, paragraphs (3), 
        (4), (5), and (6) shall not apply.''.
            (2) Section 6416(b)(2) of such Code is amended by adding at 
        the end the following: ``In the case of the tax imposed by 
        section 4191, subparagraphs (B), (C), (D), and (E) shall not 
        apply.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales after December 31, 2012.
    (d) Repeal of Section 9009 of the Patient Protection and Affordable 
Care Act.--Section 9009 of the Patient Protection and Affordable Care 
Act, as amended by section 10904 of such Act, is repealed effective as 
of the date of enactment of that Act.

SEC. 1406. HEALTH INSURANCE PROVIDERS.

    (a) In General.--Section 9010 of the Patient Protection and 
Affordable Care Act, as amended by section 10905 of such Act, is 
amended--
            (1) in subsection (a)(1), by striking ``2010'' and 
        inserting ``2013'';
            (2) in subsection (b)(2)--
                    (A) by striking ``For purposes of paragraph (1), 
                the net premiums'' and inserting ``For purposes of 
                paragraph (1)--
                    ``(A) In general.--The net premiums''; and
                    (B) by adding at the end the following 
                subparagraph:
                    ``(B) Partial exclusion for certain exempt 
                activities.--After the application of subparagraph (A), 
                only 50 percent of the remaining net premiums written 
                with respect to health insurance for any United States 
                health risk that are attributable to the activities 
                (other than activities of an unrelated trade or 
                business as defined in section 513 of the Internal 
                Revenue Code of 1986) of any covered entity qualifying 
                under paragraph (3), (4), (26), or (29) of section 
                501(c) of such Code and exempt from tax under section 
                501(a) of such Code shall be taken into account.'';
            (3) in subsection (c)--
                    (A) by inserting ``during the calendar year in 
                which the fee under this section is due'' in paragraph 
                (1) after ``risk'';
                    (B) in paragraph (2), by striking subparagraphs 
                (C), (D), and (E) and inserting the following new 
                subparagraphs:
                    ``(C) any entity--
                            ``(i) which is incorporated as a nonprofit 
                        corporation under a State law,
                            ``(ii) no part of the net earnings of which 
                        inures to the benefit of any private 
                        shareholder or individual, no substantial part 
                        of the activities of which is carrying on 
                        propaganda, or otherwise attempting, to 
                        influence legislation (except as otherwise 
                        provided in section 501(h) of the Internal 
                        Revenue Code of 1986), and which does not 
                        participate in, or intervene in (including the 
                        publishing or distributing of statements), any 
                        political campaign on behalf of (or in 
                        opposition to) any candidate for public office, 
                        and
                            ``(iii) more than 80 percent of the gross 
                        revenues of which is received from government 
                        programs that target low-income, elderly, or 
                        disabled populations under titles XVIII, XIX, 
                        and XXI of the Social Security Act, and
                    ``(D) any entity which is described in section 
                501(c)(9) of such Code and which is established by an 
                entity (other than by an employer or employers) for 
                purposes of providing health care benefits.'';
                    (C) in paragraph (3)(A), by striking ``subparagraph 
                (C)(i)(I), (D)(i)(I), or (E)(i)'' and inserting 
                ``subparagraph (C) or (D)''; and
                    (D) by adding at the end the following new 
                paragraph:
            ``(4) Joint and several liability.--If more than one person 
        is liable for payment of the fee under subsection (a) with 
        respect to a single covered entity by reason of the application 
        of paragraph (3), all such persons shall be jointly and 
        severally liable for payment of such fee.'';
            (4) by striking subsection (e) and inserting the following:
    ``(e) Applicable Amount.--For purposes of subsection (b)(1)--
            ``(1) Years before 2019.--In the case of calendar years 
        beginning before 2019, the applicable amount shall be 
        determined in accordance with the 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.
 

            ``(2) Years after 2018.--In the case of any calendar year 
        beginning after 2018, the applicable amount shall be the 
        applicable amount for the preceding calendar year increased by 
        the rate of premium growth (within the meaning of section 
        36B(b)(3)(A)(ii) of the Internal Revenue Code of 1986) for such 
        preceding calendar year.'';
            (5) in subsection (g), by adding at the end the following 
        new paragraphs:
            ``(3) Accuracy-related penalty.--
                    ``(A) In general.--In the case of any 
                understatement of a covered entity's net premiums 
                written with respect to health insurance for any United 
                States health risk for any calendar year, there shall 
                be paid by the covered entity making such 
                understatement, an amount equal to the excess of--
                            ``(i) the amount of the covered entity's 
                        fee under this section for the calendar year 
                        the Secretary determines should have been paid 
                        in the absence of any such understatement, over
                            ``(ii) the amount of such fee the Secretary 
                        determined based on such understatement.
                    ``(B) Understatement.--For purposes of this 
                paragraph, an understatement of a covered entity's net 
                premiums written with respect to health insurance for 
                any United States health risk for any calendar year is 
                the difference between the amount of such net premiums 
                written as reported on the return filed by the covered 
                entity under paragraph (1) and the amount of such net 
                premiums written that should have been reported on such 
                return.
                    ``(C) Treatment of penalty.--The penalty imposed 
                under subparagraph (A) shall be subject to the 
                provisions of subtitle F of the Internal Revenue Code 
                of 1986 that apply to assessable penalties imposed 
                under chapter 68 of such Code.
            ``(4) Treatment of information.--Section 6103 of the 
        Internal Revenue Code of 1986 shall not apply to any 
        information reported under this subsection.''; and
            (6) by striking subsection (j) and inserting the following 
        new subsection:
    ``(j) Effective Date.--This section shall apply to calendar years 
beginning after December 31, 2013.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in section 9010 of the Patient Protection and 
Affordable Care Act.

SEC. 1407. DELAY OF ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO 
              MEDICARE PART D SUBSIDY.

    Section 9012(b) of the Patient Protection and Affordable Care Act 
is amended by striking ``2010'' and inserting ``2012''.

SEC. 1408. ELIMINATION OF UNINTENDED APPLICATION OF CELLULOSIC BIOFUEL 
              PRODUCER CREDIT.

    (a) In General.--Section 40(b)(6)(E) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new clause:
                            ``(iii) Exclusion of unprocessed fuels.--
                        The term `cellulosic biofuel' shall not include 
                        any fuel if--
                                    ``(I) more than 4 percent of such 
                                fuel (determined by weight) is any 
                                combination of water and sediment, or
                                    ``(II) the ash content of such fuel 
                                is more than 1 percent (determined by 
                                weight).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuels sold or used on or after January 1, 2010.

SEC. 1409. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE AND PENALTIES.

    (a) In General.--Section 7701 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (o) as subsection (p) and by 
inserting after subsection (n) the following new subsection:
    ``(o) Clarification of Economic Substance Doctrine.--
            ``(1) Application of doctrine.--In the case of any 
        transaction to which the economic substance doctrine is 
        relevant, such transaction shall be treated as having economic 
        substance only if--
                    ``(A) the transaction changes in a meaningful way 
                (apart from Federal income tax effects) the taxpayer's 
                economic position, and
                    ``(B) the taxpayer has a substantial purpose (apart 
                from Federal income tax effects) for entering into such 
                transaction.
            ``(2) Special rule where taxpayer relies on profit 
        potential.--
                    ``(A) In general.--The potential for profit of a 
                transaction shall be taken into account in determining 
                whether the requirements of subparagraphs (A) and (B) 
                of paragraph (1) are met with respect to the 
                transaction only if the present value of the reasonably 
                expected pre-tax profit from the transaction is 
                substantial in relation to the present value of the 
                expected net tax benefits that would be allowed if the 
                transaction were respected.
                    ``(B) Treatment of fees and foreign taxes.--Fees 
                and other transaction expenses shall be taken into 
                account as expenses in determining pre-tax profit under 
                subparagraph (A). The Secretary shall issue regulations 
                requiring foreign taxes to be treated as expenses in 
                determining pre-tax profit in appropriate cases.
            ``(3) State and local tax benefits.--For purposes of 
        paragraph (1), any State or local income tax effect which is 
        related to a Federal income tax effect shall be treated in the 
        same manner as a Federal income tax effect.
            ``(4) Financial accounting benefits.--For purposes of 
        paragraph (1)(B), achieving a financial accounting benefit 
        shall not be taken into account as a purpose for entering into 
        a transaction if the origin of such financial accounting 
        benefit is a reduction of Federal income tax.
            ``(5) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Economic substance doctrine.--The term 
                `economic substance doctrine' means the common law 
                doctrine under which tax benefits under subtitle A with 
                respect to a transaction are not allowable if the 
                transaction does not have economic substance or lacks a 
                business purpose.
                    ``(B) Exception for personal transactions of 
                individuals.--In the case of an individual, paragraph 
                (1) shall apply only to transactions entered into in 
                connection with a trade or business or an activity 
                engaged in for the production of income.
                    ``(C) Determination of application of doctrine not 
                affected.--The determination of whether the economic 
                substance doctrine is relevant to a transaction shall 
                be made in the same manner as if this subsection had 
                never been enacted.
                    ``(D) Transaction.--The term `transaction' includes 
                a series of transactions.''.
    (b) Penalty for Underpayments Attributable to Transactions Lacking 
Economic Substance.--
            (1) In general.--Subsection (b) of section 6662 is amended 
        by inserting after paragraph (5) the following new paragraph:
            ``(6) Any disallowance of claimed tax benefits by reason of 
        a transaction lacking economic substance (within the meaning of 
        section 7701(o)) or failing to meet the requirements of any 
        similar rule of law.''.
            (2) Increased penalty for nondisclosed transactions.--
        Section 6662 is amended by adding at the end the following new 
        subsection:
    ``(i) Increase in Penalty in Case of Nondisclosed Noneconomic 
Substance Transactions.--
            ``(1) In general.--In the case of any portion of an 
        underpayment which is attributable to one or more nondisclosed 
        noneconomic substance transactions, subsection (a) shall be 
        applied with respect to such portion by substituting `40 
        percent' for `20 percent'.
            ``(2) Nondisclosed noneconomic substance transactions.--For 
        purposes of this subsection, the term `nondisclosed noneconomic 
        substance transaction' means any portion of a transaction 
        described in subsection (b)(6) with respect to which the 
        relevant facts affecting the tax treatment are not adequately 
        disclosed in the return nor in a statement attached to the 
        return.
            ``(3) Special rule for amended returns.--In no event shall 
        any amendment or supplement to a return of tax be taken into 
        account for purposes of this subsection if the amendment or 
        supplement is filed after the earlier of the date the taxpayer 
        is first contacted by the Secretary regarding the examination 
        of the return or such other date as is specified by the 
        Secretary.''.
            (3) Conforming amendment.--Subparagraph (B) of section 
        6662A(e)(2) is amended--
                    (A) by striking ``section 6662(h)'' and inserting 
                ``subsections (h) or (i) of section 6662''; and
                    (B) by striking ``gross valuation misstatement 
                penalty'' in the heading and inserting ``certain 
                increased underpayment penalties''.
    (c) Reasonable Cause Exception Not Applicable to Noneconomic 
Substance Transactions.--
            (1) Reasonable cause exception for underpayments.--
        Subsection (c) of section 6664 is amended--
                    (A) by redesignating paragraphs (2) and (3) as 
                paragraphs (3) and (4), respectively;
                    (B) by striking ``paragraph (2)'' in paragraph 
                (4)(A), as so redesignated, and inserting ``paragraph 
                (3)''; and
                    (C) by inserting after paragraph (1) the following 
                new paragraph:
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        portion of an underpayment which is attributable to one or more 
        transactions described in section 6662(b)(6).''.
            (2) Reasonable cause exception for reportable transaction 
        understatements.--Subsection (d) of section 6664 is amended--
                    (A) by redesignating paragraphs (2) and (3) as 
                paragraphs (3) and (4), respectively;
                    (B) by striking ``paragraph (2)(C)'' in paragraph 
                (4), as so redesignated, and inserting ``paragraph 
                (3)(C)''; and
                    (C) by inserting after paragraph (1) the following 
                new paragraph:
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        portion of a reportable transaction understatement which is 
        attributable to one or more transactions described in section 
        6662(b)(6).''.
    (d) Application of Penalty for Erroneous Claim for Refund or Credit 
to Noneconomic Substance Transactions.--Section 6676 is amended by 
redesignating subsection (c) as subsection (d) and inserting after 
subsection (b) the following new subsection:
    ``(c) Noneconomic Substance Transactions Treated as Lacking 
Reasonable Basis.--For purposes of this section, any excessive amount 
which is attributable to any transaction described in section 
6662(b)(6) shall not be treated as having a reasonable basis.''.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        transactions entered into after the date of the enactment of 
        this Act.
            (2) Underpayments.--The amendments made by subsections (b) 
        and (c)(1) shall apply to underpayments attributable to 
        transactions entered into after the date of the enactment of 
        this Act.
            (3) Understatements.--The amendments made by subsection 
        (c)(2) shall apply to understatements attributable to 
        transactions entered into after the date of the enactment of 
        this Act.
            (4) Refunds and credits.--The amendment made by subsection 
        (d) shall apply to refunds and credits attributable to 
        transactions entered into after the date of the enactment of 
        this Act.

SEC. 1410. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

    The percentage under paragraph (1) of section 202(b) of the 
Corporate Estimated Tax Shift Act of 2009 in effect on the date of the 
enactment of this Act is increased by 15.75 percentage points.

                      Subtitle F--Other Provisions

SEC. 1501. COMMUNITY COLLEGE AND CAREER TRAINING GRANT PROGRAM.

    Section 279(b) of the Trade Act of 1974 (19 U.S.C. 2372a(b)) is 
amended by striking ``Supplement'' and all that follows through 
``Funds'' and inserting ``There are'' and by striking ``pursuant'' and 
all that follows and inserting ``$500,000,000 for each of fiscal years 
2011, 2012, 2013, and 2014 to carry out this subchapter, except that 
the limitations contained in section 278(a)(2) shall not apply to such 
funds and each State shall receive not less than 0.5 percent of the 
amount appropriated pursuant to this subsection for each such fiscal 
year.''.

                     TITLE II--EDUCATION AND HEALTH

                         Subtitle A--Education

SEC. 2001. SHORT TITLE; REFERENCES.

    (a) Short Title.--This subtitle may be cited as the ``SAFRA Act''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this subtitle an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).

               PART I--INVESTING IN STUDENTS AND FAMILIES

SEC. 2101. FEDERAL PELL GRANTS.

    (a) Amount of Grants.--Section 401(b) (20 U.S.C. 1070a(b)) is 
amended--
            (1) by amending paragraph (2)(A) to read as follows:
                    ``(A) The amount of the Federal Pell Grant for a 
                student eligible under this part shall be--
                            ``(i) the maximum Federal Pell Grant, as 
                        specified in the last enacted appropriation Act 
                        applicable to that award year, plus
                            ``(ii) the amount of the increase 
                        calculated under paragraph (8)(B) for that 
                        year, less
                            ``(iii) an amount equal to the amount 
                        determined to be the expected family 
                        contribution with respect to that student for 
                        that year.''; and
            (2) in paragraph (8)--
                    (A) in subparagraph (A)--
                            (i) in the matter preceding clause (i), by 
                        striking ``, to carry out subparagraph (B) of 
                        this paragraph''; and
                            (ii) by striking clauses (iii) through (x) 
                        and inserting the following:
                            ``(iii) to carry out subparagraph (B) of 
                        this paragraph, such sums as may be necessary 
                        for fiscal year 2010 and each subsequent fiscal 
                        year to provide the amount of increase of the 
                        maximum Federal Pell Grant required by clauses 
                        (ii) and (iii) of subparagraph (B); and
                            ``(iv) to carry out this section, 
                        $13,500,000,000 for fiscal year 2011.'';
                    (B) in subparagraph (B)--
                            (i) in the matter preceding clause (i), by 
                        striking ``subparagraph (A)'' and inserting 
                        ``clauses (i) through (iii) of subparagraph 
                        (A)'';
                            (ii) in clause (ii), by striking ``and 
                        2011-2012'' and inserting ``, 2011-2012, and 
                        2012-2013''; and
                            (iii) by striking clause (iii) and 
                        inserting the following:
                            ``(iii) the amount determined under 
                        subparagraph (C) for each succeeding award 
                        year.'';
                    (C) by striking subparagraph (C) and inserting the 
                following:
                    ``(C) Adjustment amounts.--
                            ``(i) Award year 2013-2014.--For award year 
                        2013-2014, the amount determined under this 
                        subparagraph for purposes of subparagraph 
                        (B)(iii) shall be equal to--
                                    ``(I) $5,550 or the total maximum 
                                Federal Pell Grant for the preceding 
                                award year (as determined under clause 
                                (v)(II)), whichever is greater, 
                                increased by a percentage equal to the 
                                annual adjustment percentage for award 
                                year 2013-2014, reduced by
                                    ``(II) $4,860 or the maximum 
                                Federal Pell Grant for which a student 
                                was eligible for the preceding award 
                                year, as specified in the last enacted 
                                appropriation Act applicable to that 
                                year, whichever is greater; and
                                    ``(III) rounded to the nearest $5.
                            ``(ii) Award years 2014-2015 through 2017-
                        2018.--For each of the award years 2014-2015 
                        through 2017-2018, the amount determined under 
                        this subparagraph for purposes of subparagraph 
                        (B)(iii) shall be equal to--
                                    ``(I) the total maximum Federal 
                                Pell Grant for the preceding award year 
                                (as determined under clause (v)(II)), 
                                increased by a percentage equal to the 
                                annual adjustment percentage for the 
                                award year for which the amount under 
                                this subparagraph is being determined, 
                                reduced by
                                    ``(II) $4,860 or the maximum 
                                Federal Pell Grant for which a student 
                                was eligible for the preceding award 
                                year, as specified in the last enacted 
                                appropriation Act applicable to that 
                                year, whichever is greater; and
                                    ``(III) rounded to the nearest $5.
                            ``(iii) Subsequent award years.--For award 
                        year 2018-2019 and each subsequent award year, 
                        the amount determined under this subparagraph 
                        for purposes of subparagraph (B)(iii) shall be 
                        equal to the amount determined under clause 
                        (ii) for award year 2017-2018.
                            ``(iv) Limitation on decreases.--
                        Notwithstanding clauses (i), (ii), and (iii), 
                        if the amount determined under clause (i), 
                        (ii), or (iii) for a particular award year is 
                        less than the amount determined under this 
                        paragraph for the award year preceding that 
                        particular award year, then the amount 
                        determined under such clause for that 
                        particular award year shall be the amount 
                        determined under this paragraph for the 
                        preceding award year.
                            ``(v) Definitions.--For purposes of this 
                        subparagraph--
                                    ``(I) the term `annual adjustment 
                                percentage' as applied to an award 
                                year, is equal to the estimated 
                                percentage change in the Consumer Price 
                                Index (as determined by the Secretary, 
                                using the definition in section 478(f)) 
                                for the most recent calendar year 
                                ending prior to the beginning of that 
                                award year; and
                                    ``(II) the term `total maximum 
                                Federal Pell Grant' as applied to a 
                                preceding award year, is equal to the 
                                sum of--
                                            ``(aa) the maximum Federal 
                                        Pell Grant for which a student 
                                        is eligible during an award 
                                        year, as specified in the last 
                                        enacted appropriation Act 
                                        applicable to that preceding 
                                        award year; and
                                            ``(bb) the amount of the 
                                        increase in the maximum Federal 
                                        Pell Grant required by this 
                                        paragraph for that preceding 
                                        award year.'';
                    (D) by striking subparagraph (E); and
                    (E) by redesignating subparagraph (F) as 
                subparagraph (E).
    (b) Conforming Amendments.--Title IV (20 U.S.C. 1070 et seq.) is 
further amended--
            (1) in section 401(b) (20 U.S.C. 1070a(b))--
                    (A) in paragraph (4)--
                            (i) by striking ``maximum basic grant level 
                        specified in the appropriate appropriation 
                        Act'' and inserting ``maximum amount of a 
                        Federal Pell Grant award determined under 
                        paragraph (2)(A)''; and
                            (ii) by striking ``such level'' each place 
                        it appears and inserting ``such Federal Pell 
                        Grant amount'' in each such place; and
                    (B) in paragraph (6), by striking ``the grant level 
                specified in the appropriate Appropriation Act for this 
                subpart for such year'' and inserting ``the maximum 
                amount of a Federal Pell Grant award determined under 
                paragraph (2)(A), for which a student is eligible 
                during such award year'';
            (2) in section 402D(d)(1) (20 U.S.C. 1070a-14(d)(1)), by 
        striking ``exceed the maximum'' and all that follows through 
        ``Grant, for'' and inserting ``exceed the Federal Pell Grant 
        amount, determined under section 401(b)(2)(A), for which a 
        student is eligible, or be less than the minimum Federal Pell 
        Grant amount described in section 401(b)(4), for'';
            (3) in section 435(a)(5)(A)(i)(I) (20 U.S.C. 
        1085(a)(5)(A)(i)(I)), by striking ``one-half the maximum 
        Federal Pell Grant award for which a student would be 
        eligible'' and inserting ``one-half the Federal Pell Grant 
        amount, determined under section 401(b)(2)(A), for which a 
        student would be eligible'';
            (4) in section 483(e)(3)(A)(ii) (20 U.S.C. 
        1090(e)(3)(A)(ii)), by striking ``based on the maximum Federal 
        Pell Grant award at the time of application'' and inserting 
        ``based on the Federal Pell Grant amount, determined under 
        section 401(b)(2)(A), for which a student is eligible at the 
        time of application'';
            (5) in section 485E(b)(1)(A) (20 U.S.C. 1092f(b)(1)(A)), by 
        striking ``of such students' potential eligibility for a 
        maximum Federal Pell Grant under subpart 1 of part A'' and 
        inserting ``of such students' potential eligibility for the 
        Federal Pell Grant amount, determined under section 
        401(b)(2)(A), for which the student would be eligible''; and
            (6) in section 894(f)(2)(C)(ii)(I) (20 U.S.C. 
        1161y(f)(2)(C)(ii)(I)), by striking ``the maximum Federal Pell 
        Grant for each award year'' and inserting ``the Federal Pell 
        Grant amount, determined under section 401(b)(2)(A), for which 
        a student may be eligible for each award year''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on July 1, 2010.

SEC. 2102. COLLEGE ACCESS CHALLENGE GRANT PROGRAM.

    Section 781 (20 U.S.C. 1141) is amended--
            (1) in the first sentence of subsection (a), by striking 
        ``$66,000,000'' and all that follows through the period and 
        inserting ``$150,000,000 for each of the fiscal years 2010 
        through 2014. The authority to award grants under this section 
        shall expire at the end of fiscal year 2014.''; and
            (2) in subsection (c)(2), by striking ``0.5 percent'' and 
        inserting ``1.0 percent''.

SEC. 2103. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
              AND MINORITY-SERVING INSTITUTIONS.

    Section 371(b)(1)(A) (20 U.S.C. 1067q(b)(1)(A)) is amended by 
striking ``and 2009.'' and all that follows and inserting ``through 
2019. The authority to award grants under this section shall expire at 
the end of fiscal year 2019.''.

                      PART II--STUDENT LOAN REFORM

SEC. 2201. TERMINATION OF FEDERAL FAMILY EDUCATION LOAN APPROPRIATIONS.

    Section 421 (20 U.S.C. 1071) is amended--
            (1) in subsection (b), in the first sentence of the matter 
        following paragraph (6), by inserting ``, except that no sums 
        may be expended after June 30, 2010, with respect to loans 
        under this part for which the first disbursement is after such 
        date'' after ``expended''; and
            (2) by adding at the end the following new subsection:
    ``(d) Termination of Authority to Make or Insure New Loans.--
Notwithstanding paragraphs (1) through (6) of subsection (b) or any 
other provision of law--
            ``(1) no new loans (including consolidation loans) may be 
        made or insured under this part after June 30, 2010; and
            ``(2) no funds are authorized to be appropriated, or may be 
        expended, under this Act or any other Act to make or insure 
        loans under this part (including consolidation loans) for which 
        the first disbursement is after June 30, 2010,
except as expressly authorized by an Act of Congress enacted after the 
date of enactment of the SAFRA Act.''.

SEC. 2202. TERMINATION OF FEDERAL LOAN INSURANCE PROGRAM.

    Section 424(a) (20 U.S.C. 1074(a)) is amended by striking 
``September 30, 1976,'' and all that follows and inserting ``September 
30, 1976, for each of the succeeding fiscal years ending prior to 
October 1, 2009, and for the period from October 1, 2009, to June 30, 
2010, for loans first disbursed on or before June 30, 2010.''.

SEC. 2203. TERMINATION OF APPLICABLE INTEREST RATES.

    Section 427A(l) (20 U.S.C. 1077a(l)) is amended--
            (1) in the subsection heading, by inserting ``and Before 
        July 1, 2010'' after ``2006'';
            (2) in paragraph (1), by inserting ``and before July 1, 
        2010,'' after ``July 1, 2006,'';
            (3) in paragraph (2), by inserting ``and before July 1, 
        2010,'' after ``July 1, 2006,'';
            (4) in paragraph (3), by inserting ``and that was disbursed 
        before July 1, 2010,'' after ``July 1, 2006,''; and
            (5) in paragraph (4)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``July 1, 2012'' and inserting ``July 1, 
                2010''; and
                    (B) by repealing subparagraphs (D) and (E).

SEC. 2204. TERMINATION OF FEDERAL PAYMENTS TO REDUCE STUDENT INTEREST 
              COSTS.

    (a) Higher Education Act of 1965.--Section 428 (20 U.S.C. 1078) is 
amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), in the matter preceding 
                subparagraph (A), by inserting ``for which the first 
                disbursement is made before July 1, 2010, and'' after 
                ``eligible institution''; and
                    (B) in paragraph (5), by striking ``September 30, 
                2014,'' and all that follows through the period and 
                inserting ``June 30, 2010.'';
            (2) in subsection (b)(1)--
                    (A) in subparagraph (G)(ii), by inserting ``and 
                before July 1, 2010,'' after ``July 1, 2006,''; and
                    (B) in subparagraph (H)(ii), by inserting ``and 
                that are first disbursed before July 1, 2010,'' after 
                ``July 1, 2006,'';
            (3) in subsection (f)(1)(A)(ii)--
                    (A) by striking ``during fiscal years beginning''; 
                and
                    (B) by inserting ``and first disbursed before July 
                1, 2010,'' after ``October 1, 2003,''; and
            (4) in subsection (j)(1), by inserting ``, before July 1, 
        2010,'' after ``section 435(d)(1)(D) of this Act shall''.
    (b) College Cost Reduction and Access Act.--Section 303 of the 
College Cost Reduction and Access Act (Public Law 110-84) is repealed.

SEC. 2205. TERMINATION OF FFEL PLUS LOANS.

    Section 428B(a)(1) (20 U.S.C. 1078-2(a)(1)) is amended by striking 
``A graduate'' and inserting ``Prior to July 1, 2010, a graduate''.

SEC. 2206. FEDERAL CONSOLIDATION LOANS.

    (a) In General.--Section 428C (20 U.S.C. 1078-3) is amended--
            (1) in subsection (a)(4)(A), by inserting ``, and first 
        disbursed before July 1, 2010'' after ``under this part'';
            (2) in subsection (b)--
                    (A) in paragraph (1)(E), by inserting before the 
                semicolon ``, and before July 1, 2010''; and
                    (B) in paragraph (5), by striking ``In the event 
                that'' and inserting ``If, before July 1, 2010,'';
            (3) in subsection (c)(1)--
                    (A) in subparagraph (A)(ii), by inserting ``and 
                that is disbursed before July 1, 2010,'' after 
                ``2006,''; and
                    (B) in subparagraph (C), by inserting ``and 
                disbursed before July 1, 2010,'' after ``1994,''; and
            (4) in subsection (e), by striking ``September 30, 2014.'' 
        and inserting ``June 30, 2010. No loan may be made under this 
        section for which the disbursement is on or after July 1, 
        2010.''.
    (b) Temporary Loan Consolidation Authority.--Part D of title IV (20 
U.S.C. 1087a et seq.) is amended by inserting after section 459A (20 
U.S.C. 1087i) the following:

``SEC. 459B. TEMPORARY LOAN CONSOLIDATION AUTHORITY.

    ``(a) Temporary Loan Consolidation Authority.--
            ``(1) In general.--A borrower who has 1 or more loans in 2 
        or more of the categories described in paragraph (2), and who 
        has not yet entered repayment on 1 or more of those loans in 
        any of the categories, may consolidate all of the loans of the 
        borrower that are described in paragraph (2) into a Federal 
        Direct Consolidation Loan during the period described in 
        paragraph (3).
            ``(2) Categories of loans that may be consolidated.--The 
        categories of loans that may be consolidated under paragraph 
        (1) are--
                    ``(A) loans made under this part;
                    ``(B) loans purchased by the Secretary pursuant to 
                section 459A; and
                    ``(C) loans made under part B that are held by an 
                eligible lender, as such term is defined in section 
                435(d).
            ``(3) Time period in which loans may be consolidated.--The 
        Secretary may make a Federal Direct Consolidation Loan under 
        this section to a borrower whose application for such Federal 
        Direct Consolidation Loan is received on or after July 1, 2010, 
        and before July 1, 2011.
    ``(b) Terms of Loans.--A Federal Direct Consolidation Loan made 
under this section shall have the same terms and conditions as a 
Federal Direct Consolidation Loan made under section 455(g), except 
that--
            ``(1) in determining the applicable rate of interest on the 
        Federal Direct Consolidation Loan made under this section 
        (other than on a Federal Direct Consolidation Loan described in 
        paragraph (2)), section 427A(l)(3) shall be applied without 
        rounding the weighted average of the interest rate on the loans 
        consolidated to the nearest higher one-eighth of 1 percent as 
        described in subparagraph (A) of section 427A(l)(3); and
            ``(2) if a Federal Direct Consolidation Loan made under 
        this section that repays a loan which is subject to an interest 
        rate determined under section 427A(g)(2), (j)(2), or (k)(2), 
        then the interest rate for such Federal Direct Consolidation 
        Loan shall be calculated--
                    ``(A) by using the applicable rate of interest 
                described in section 427A(g)(2), (j)(2), or (k)(2), 
                respectively; and
                    ``(B) in accordance with section 427A(l)(3).''.

SEC. 2207. TERMINATION OF UNSUBSIDIZED STAFFORD LOANS FOR MIDDLE-INCOME 
              BORROWERS.

    Section 428H (20 U.S.C. 1078-8) is amended--
            (1) in subsection (a), by inserting ``that are first 
        disbursed before July 1, 2010,'' after ``under this part'';
            (2) in subsection (b)--
                    (A) by striking ``Any student'' and inserting 
                ``Prior to July 1, 2010, any student''; and
                    (B) by inserting ``for which the first disbursement 
                is made before such date'' after ``unsubsidized Federal 
                Stafford Loan''; and
            (3) in subsection (h), by inserting ``and that are first 
        disbursed before July 1, 2010,'' after ``July 1, 2006,''.

SEC. 2208. TERMINATION OF SPECIAL ALLOWANCES.

    Section 438 (20 U.S.C. 1087-1) is amended--
            (1) in subsection (b)(2)(I)--
                    (A) in the subclause heading, by inserting ``, and 
                before july 1, 2010'' after ``2000'';
                    (B) in clause (i), by inserting ``and before July 
                1, 2010,'' after ``2000,'';
                    (C) in clause (ii)(II), by inserting ``and before 
                July 1, 2010,'' after ``2006,'';
                    (D) in clause (iii), by inserting ``and before July 
                1, 2010,'' after ``2000,'';
                    (E) in clause (iv), by inserting ``and that is 
                disbursed before July 1, 2010,'' after ``2000,'';
                    (F) in clause (v)(I), by inserting ``and before 
                July 1, 2010,'' after ``2006,''; and
                    (G) in clause (vi)--
                            (i) in the clause heading, by inserting ``, 
                        and before july 1, 2010'' after ``2007''; and
                            (ii) in the matter preceding subclause (I), 
                        by inserting ``and before July 1, 2010,'' after 
                        ``2007,'';
            (2) in subsection (c)--
                    (A) in paragraph (2)(B)--
                            (i) in clause (iii), by inserting ``and'' 
                        after the semicolon;
                            (ii) in clause (iv), by striking ``; and'' 
                        and inserting a period; and
                            (iii) by striking clause (v); and
                    (B) in paragraph (6), by inserting ``and first 
                disbursed before July 1, 2010,'' after ``1992,''; and
            (3) in subsection (d)(2)(B), by inserting ``, and before 
        July 1, 2010'' after ``2007''.

SEC. 2209. ORIGINATION OF DIRECT LOANS AT INSTITUTIONS OUTSIDE THE 
              UNITED STATES.

    (a) Loans for Students Attending Institutions Outside the United 
States.--Section 452 (20 U.S.C. 1087b) is amended by adding at the end 
the following:
    ``(d) Institutions Outside the United States.--Loan funds for 
students (and parents of students) attending institutions outside the 
United States shall be disbursed through a financial institution 
located or operating in the United States and designated by the 
Secretary to serve as the agent of such institutions with respect to 
the receipt of the disbursements of such loan funds and the transfer of 
such funds to such institutions. To be eligible to receive funds under 
this part, an institution outside the United States shall make 
arrangements with the agent designated by the Secretary under this 
subsection to receive funds under this part.''.
    (b) Conforming Amendments.--
            (1) Amendments.--Section 102 (20 U.S.C. 1002), as amended 
        by section 102 of the Higher Education Opportunity Act (Public 
        Law 110-315) and section 101 of Public Law 111-39, is amended--
                    (A) by striking ``part B'' each place the term 
                appears and inserting ``part D'';
                    (B) in subsection (a)(1)(C), by inserting ``, 
                consistent with the requirements of section 452(d)'' 
                before the period at the end; and
                    (C) in subsection (a)(2)(A)--
                            (i) in the second sentence of the matter 
                        preceding clause (i), by striking ``made, 
                        insured, or guaranteed'' and inserting 
                        ``made''; and
                            (ii) in clause (iii)--
                                    (I) in subclause (III), by striking 
                                ``only Federal Stafford'' and all that 
                                follows through ``section 428B'' and 
                                inserting ``only Federal Direct 
                                Stafford Loans under section 
                                455(a)(2)(A), Federal Direct 
                                Unsubsidized Stafford Loans under 
                                section 455(a)(2)(D), or Federal Direct 
                                PLUS Loans under section 
                                455(a)(2)(B)''; and
                                    (II) in subclause (V), by striking 
                                ``a Federal Stafford'' and all that 
                                follows through ``section 428B'' and 
                                inserting ``a Federal Direct Stafford 
                                Loan under section 455(a)(2)(A), a 
                                Federal Direct Unsubsidized Stafford 
                                Loan under section 455(a)(2)(D), or a 
                                Federal Direct PLUS Loan under section 
                                455(a)(2)(B)''.
            (2) Effective date.--The amendments made by subparagraph 
        (C) of paragraph (1) shall be effective on July 1, 2010, as if 
        enacted as part of section 102(a)(1) of the Higher Education 
        Opportunity Act (Public Law 110-315) and subject to section 
        102(e) of such Act as amended by section 101(a)(2) of Public 
        Law 111-39 (20 U.S.C. 1002 note).

SEC. 2210. CONFORMING AMENDMENTS.

    (a) Amendments.--Section 454 (20 U.S.C. 1087d) is amended--
            (1) in subsection (a)--
                    (A) by striking paragraph (4); and
                    (B) by redesignating paragraphs (5) through (7) as 
                paragraphs (4) through (6), respectively; and
            (2) in subsection (b)(2), by striking ``(5), (6), and (7)'' 
        and inserting ``(5), and (6)''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on July 1, 2010.

SEC. 2211. TERMS AND CONDITIONS OF LOANS.

    (a) In General.--Section 455 (20 U.S.C. 1087e) is amended--
            (1) in subsection (a)(1), by inserting ``, and first 
        disbursed on June 30, 2010,'' before ``under sections 428''; 
        and
            (2) in subsection (g)--
                    (A) by inserting ``, including any loan made under 
                part B and first disbursed before July 1, 2010'' after 
                ``section 428C(a)(4)''; and
                    (B) by striking the third sentence.
    (b) Effective Date.--The amendment made by subsection (a)(1) shall 
apply with respect to loans first disbursed under part D of title IV of 
the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) on or after 
July 1, 2010.

SEC. 2212. CONTRACTS; MANDATORY FUNDS.

    (a) Contracts.--Section 456 (20 U.S.C. 1087f) is amended--
            (1) in subsection (a)--
                    (A) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) Servicing by eligible not-for-profit servicers.--
                    ``(A) Servicing contracts.--
                            ``(i) In general.--The Secretary shall 
                        contract with each eligible not-for-profit 
                        servicer to service loans originated under this 
                        part, if the servicer--
                                    ``(I) meets the standards for 
                                servicing Federal assets that apply to 
                                contracts awarded pursuant to paragraph 
                                (1); and
                                    ``(II) has the capacity to service 
                                the applicable loan volume allocation 
                                described in subparagraph (B).
                            ``(ii) Competitive market rate 
                        determination for first 100,000 borrower 
                        accounts.--The Secretary shall establish a 
                        separate pricing tier for each of the first 
                        100,000 borrower loan accounts at a competitive 
                        market rate.
                            ``(iii) Ineligibility.--An eligible not-
                        for-profit servicer shall no longer be eligible 
                        for a contract under this paragraph after July 
                        1, 2014, if--
                                    ``(I) the servicer has not been 
                                awarded such a contract before that 
                                date; or
                                    ``(II) the servicer's contract was 
                                terminated, and the servicer had not 
                                reapplied for, and been awarded, a 
                                contract under this paragraph.
                    ``(B) Allocations.--
                            ``(i) In general.--The Secretary shall 
                        (except as provided in clause (ii)) allocate to 
                        an eligible not-for-profit servicer, subject to 
                        the contract of such servicer described in 
                        subparagraph (A), the servicing rights for the 
                        loan accounts of 100,000 borrowers (including 
                        borrowers who borrowed loans in a prior year 
                        that were serviced by the servicer).
                            ``(ii) Servicer allocation.--The Secretary 
                        may reallocate, increase, reduce, or terminate 
                        an eligible not-for-profit servicer's 
                        allocation of servicing rights under clause (i) 
                        based on the performance of such servicer, on 
                        the same terms as loan allocations provided by 
                        contracts awarded pursuant to paragraph (1).''; 
                        and
            (2) by adding at the end the following:
    ``(c) Definition of Eligible Not-for-profit Servicer.--In this 
section:
            ``(1) In general.--The term `eligible not-for-profit 
        servicer' means an entity--
                    ``(A) that is not owned or controlled in whole or 
                in part by--
                            ``(i) a for-profit entity; or
                            ``(ii) a nonprofit entity having its 
                        principal place of business in another State; 
                        and
                    ``(B) that--
                            ``(i) as of July 1, 2009--
                                    ``(I) meets the definition of an 
                                eligible not-for-profit holder under 
                                section 435(p), except that such term 
                                does not include eligible lenders 
                                described in paragraph (1)(D) of such 
                                section; and
                                    ``(II) was performing, or had 
                                entered into a contract with a third 
                                party servicer (as such term is defined 
                                in section 481(c)) who was performing, 
                                student loan servicing functions for 
                                loans made under part B of this title;
                            ``(ii) notwithstanding clause (i), as of 
                        July 1, 2009--
                                    ``(I) is the sole beneficial owner 
                                of a loan for which the special 
                                allowance rate is calculated under 
                                section 438(b)(2)(I)(vi)(II) because 
                                the loan is held by an eligible lender 
                                trustee that is an eligible not-for-
                                profit holder as defined under section 
                                435(p)(1)(D); and
                                    ``(II) was performing, or had 
                                entered into a contract with a third 
                                party servicer (as such term is defined 
                                in section 481(c)) who was performing, 
                                student loan servicing functions for 
                                loans made under part B of this title; 
                                or
                            ``(iii) is an affiliated entity of an 
                        eligible not-for-profit servicer described in 
                        clause (i) or (ii) that--
                                    ``(I) directly employs, or will 
                                directly employ (on or before the date 
                                the entity begins servicing loans under 
                                a contract awarded by the Secretary 
                                pursuant to subsection (a)(3)(A)), the 
                                majority of individuals who perform 
                                borrower-specific student loan 
                                servicing functions; and
                                    ``(II) as of July 1, 2009, was 
                                performing, or had entered into a 
                                contract with a third party servicer 
                                (as such term is defined in section 
                                481(c)) who was performing, student 
                                loan servicing functions for loans made 
                                under part B of this title.
            ``(2) Affiliated entity.--For the purposes of paragraph 
        (1), the term `affiliated entity'--
                    ``(A) means an entity contracted to perform 
                services for an eligible not-for-profit servicer that--
                            ``(i) is a nonprofit entity or is wholly 
                        owned by a nonprofit entity; and
                            ``(ii) is not owned or controlled, in whole 
                        or in part, by--
                                    ``(I) a for-profit entity; or
                                    ``(II) an entity having its 
                                principal place of business in another 
                                State; and
                    ``(B) may include an affiliated entity that is 
                established by an eligible not-for-profit servicer 
                after the date of enactment of the SAFRA Act, if such 
                affiliated entity is otherwise described in paragraph 
                (1)(B)(iii)(I) and subparagraph (A) of this 
                paragraph.''.
    (b) Mandatory Funds.--
            (1) Amendments.--Section 458(a) (20 U.S.C. 1087h(a)) is 
        amended--
                    (A) by redesignating paragraph (5) as paragraph 
                (8);
                    (B) by redesignating paragraphs (2) through (4) as 
                paragraphs (3) through (5), respectively;
                    (C) by inserting after paragraph (1) the following 
                new paragraph:
            ``(2) Mandatory funds for eligible not-for-profit 
        servicers.--For fiscal years 2010 through 2019, there shall be 
        available to the Secretary, in addition to any other amounts 
        appropriated to carry out this paragraph and out of any money 
        in the Treasury not otherwise appropriated, funds to be 
        obligated for administrative costs of servicing contracts with 
        eligible not-for-profit servicers as described in section 
        456.''; and
                    (D) by inserting after paragraph (5), as 
                redesignated by subparagraph (B) of this paragraph, the 
                following:
            ``(6) Technical assistance to institutions of higher 
        education.--
                    ``(A) Provision of assistance.--The Secretary shall 
                provide institutions of higher education participating, 
                or seeking to participate, in the loan programs under 
                this part with technical assistance in establishing and 
                administering such programs.
                    ``(B) Funds.--There are authorized to be 
                appropriated, and there are appropriated, to carry out 
                this paragraph (in addition to any other amounts 
                appropriated to carry out this paragraph and out of any 
                money in the Treasury not otherwise appropriated), 
                $50,000,000 for fiscal year 2010.
                    ``(C) Definition.--In this paragraph, the term 
                `assistance' means the provision of technical support, 
                training, materials, technical assistance, and 
                financial assistance.
            ``(7) Additional payments.--
                    ``(A) Provision of assistance.--The Secretary shall 
                provide payments to loan servicers for retaining jobs 
                at locations in the United States where such servicers 
                were operating under part B on January 1, 2010.
                    ``(B) Funds.--There are authorized to be 
                appropriated, and there are appropriated, to carry out 
                this paragraph (in addition to any other amounts 
                appropriated to carry out this paragraph and out of any 
                money in the Treasury not otherwise appropriated), 
                $25,000,000 for each of the fiscal years 2010 and 
                2011.''.
            (2) Conforming amendment.--Section 458 (20 U.S.C. 1087h) is 
        further amended by striking ``subsection (a)(3)'' in subsection 
        (b) and inserting ``subsection (a)(4)''.

SEC. 2213. INCOME-BASED REPAYMENT.

    Section 493C (20 U.S.C. 1098e) is amended by adding at the end the 
following new subsection:
    ``(e) Special Terms for New Borrowers on and After July 1, 2014.--
With respect to any loan made to a new borrower on or after July 1, 
2014--
            ``(1) subsection (a)(3)(B) shall be applied by substituting 
        `10 percent' for `15 percent'; and
            ``(2) subsection (b)(7)(B) shall be applied by substituting 
        `20 years' for `25 years'.''.

                           Subtitle B--Health

SEC. 2301. INSURANCE REFORMS.

    (a) Extending Certain Insurance Reforms to Grandfathered Plans.--
Section 1251(a) of the Patient Protection and Affordable Care Act, as 
added by section 10103(d) of such Act, is amended by adding at the end 
the following:
            ``(4) Application of certain provisions.--
                    ``(A) In general.--The following provisions of the 
                Public Health Service Act (as added by this title) 
                shall apply to grandfathered health plans for plan 
                years beginning with the first plan year to which such 
                provisions would otherwise apply:
                            ``(i) Section 2708 (relating to excessive 
                        waiting periods).
                            ``(ii) Those provisions of section 2711 
                        relating to lifetime limits.
                            ``(iii) Section 2712 (relating to 
                        rescissions).
                            ``(iv) Section 2714 (relating to extension 
                        of dependent coverage).
                    ``(B) Provisions applicable only to group health 
                plans.--
                            ``(i) Provisions described.--Those 
                        provisions of section 2711 relating to annual 
                        limits and the provisions of section 2704 
                        (relating to pre-existing condition exclusions) 
                        of the Public Health Service Act (as added by 
                        this subtitle) shall apply to grandfathered 
                        health plans that are group health plans for 
                        plan years beginning with the first plan year 
                        to which such provisions otherwise apply.
                            ``(ii) Adult child coverage.--For plan 
                        years beginning before January 1, 2014, the 
                        provisions of section 2714 of the Public Health 
                        Service Act (as added by this subtitle) shall 
                        apply in the case of an adult child with 
                        respect to a grandfathered health plan that is 
                        a group health plan only if such adult child is 
                        not eligible to enroll in an eligible employer-
                        sponsored health plan (as defined in section 
                        5000A(f)(2) of the Internal Revenue Code of 
                        1986) other than such grandfathered health 
                        plan.''.
    (b) Clarification Regarding Dependent Coverage.--Section 2714(a) of 
the Public Health Service Act, as added by section 1001(5) of the 
Patient Protection and Affordable Care Act, is amended by striking 
``(who is not married)''.

SEC. 2302. DRUGS PURCHASED BY COVERED ENTITIES.

    Section 340B of the Public Health Service Act (42 U.S.C. 256b), as 
amended by sections 7101 and 7102 of the Patient Protection and 
Affordable Care Act, is amended--
            (1) in subsection (a)--
                    (A) in paragraphs (1), (2), (5), (7), and (9), by 
                striking the terms ``covered drug'' and ``covered 
                drugs'' each place either term appears and inserting 
                ``covered outpatient drug'' or ``covered outpatient 
                drugs'', respectively;
                    (B) in paragraph (4)(L)--
                            (i) in clause (i), by striking ``and'' at 
                        the end;
                            (ii) in clause (ii), by striking the period 
                        and inserting ``; and''; and
                            (iii) by inserting after clause (ii), the 
                        following:
                            ``(iii) does not obtain covered outpatient 
                        drugs through a group purchasing organization 
                        or other group purchasing arrangement.''; and
                    (C) in paragraph (5)--
                            (i) by striking subparagraph (C);
                            (ii) by redesignating subparagraphs (D) and 
                        (E) as subparagraphs (C) and (D), respectively; 
                        and
                            (iii) in subparagraph (D), as so 
                        redesignated, by striking ``subparagraph (D)'' 
                        and inserting ``subparagraph (C)'';
            (2) by striking subsection (c);
            (3) in subsection (d)--
                    (A) by striking ``covered drugs'' each place it 
                appears and inserting ``covered outpatient drugs'';
                    (B) by striking ``(a)(5)(D)'' each place it appears 
                and inserting ``(a)(5)(C)''; and
                    (C) by striking ``(a)(5)(E)'' each place it appears 
                and inserting ``(a)(5)(D)''; and
            (4) by inserting after subsection (d) the following:
    ``(e) Exclusion of Orphan Drugs for Certain Covered Entities.--For 
covered entities described in subparagraph (M), (N), or (O) of 
subsection (a)(4), the term `covered outpatient drug' shall not include 
a drug designated by the Secretary under section 526 of the Federal 
Food, Drug, and Cosmetic Act for a rare disease or condition.''.

SEC. 2303. COMMUNITY HEALTH CENTERS.

    Section 10503(b)(1) of the Patient Protection and Affordable Care 
Act is amended--
            (1) in subparagraph (A), by striking ``700,000,000'' and 
        inserting ``1,000,000,000'';
            (2) in subparagraph (B), by striking ``800,000,000'' and 
        inserting ``1,200,000,000'';
            (3) in subparagraph (C), by striking ``1,000,000,000'' and 
        inserting ``1,500,000,000'';
            (4) in subparagraph (D), by striking ``1,600,000,000'' and 
        inserting ``2,200,000,000''; and
            (5) in subparagraph (E), by striking ``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 the concurrent 
    resolution on the budget for fiscal year 2010 (S. Con. Res. 13).
```