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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4872 Enrolled Bill (ENR)]

        H.R.4872

                      One Hundred Eleventh Congress

                                 of the

                        United States of America

                          AT THE SECOND SESSION

          Begun and held at the City of Washington on Tuesday,
             the fifth day of January, two thousand and ten

                                 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.''; and
            (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) 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.''.
    (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''.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.
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