264 
fied 
by 
the 
Secretary 
under 
section 
1852(e)(3)(D)(iv)(I) for such plans. 
‘‘(3) ADDITIONAL
REQUIREMENTS
FOR
DUAL 
SNPS.—In the case of a specialized MA plan for spe-
cial needs individuals described in subsection 
(b)(6)(A)(ii)(II), the applicable requirements of this 
subsection are as follows: 
‘‘(A) The plan has an agreement with the 
State Medicaid agency that— 
‘‘(i) includes provisions regarding co-
operation on the coordination of the fi-
nancing of care for such individuals; 
‘‘(ii) includes a description of the 
manner that the State Medicaid program 
under title XIX will pay for the costs of 
cost-sharing and supplemental services for 
individuals enrolled in the plan eligible 
under such title for medical assistance for 
acute and long-term care services; and 
‘‘(iii) effective January 1, 2011, pro-
vides for capitation payments to cover 
costs of supplemental benefits for individ-
uals 
described 
in 
subsection 
(b)(6)(A)(ii)(II). 
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‘‘(B) The out-of-pocket costs for services 
under parts A and B that are charged to enroll-
ees may not exceed the out-of-pocket costs for 
same services permitted for such individuals 
under title XIX. 
‘‘(C) The plan reports to the Secretary in-
formation on additional quality measures speci-
fied 
by 
the 
Secretary 
under 
section 
1852(e)(3)(D)(iv)(II) for such plans.’’. 
(2) QUALITY
STANDARDS
AND
QUALITY
RE-
PORTING.—Section 1852(e)(3) of such Act (42 
U.S.C. 1395w–22(e)(3) is amended— 
(A) in subparagraph (A)(i), by adding at 
the end the following: ‘‘In the case of a special-
ized Medicare Part C plan for special needs in-
dividuals described in paragraph (2) or (3) of 
section 1859(f), the organization shall provide 
for the reporting on quality measures developed 
for the plan under subparagraph (D)(iii).’’; and 
(B) in subparagraph (D), as added by sec-
tion 422(a)(1), by adding at the end the fol-
lowing new clause: 
‘‘(iii) SPECIFICATION OF ADDITIONAL 
QUALITY
MEASUREMENTS
FOR
SPECIAL-
IZED PART C PLANS.—For implementation 
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for plan years beginning not later than 
January 1, 2010, the Secretary shall de-
velop new quality measures appropriate to 
meeting the needs of— 
‘‘(I) beneficiaries enrolled in spe-
cialized Medicare Part C plans for 
special needs individuals (described in 
section 
1859(b)(6)(A)(ii)(I)) 
that 
serve predominantly individuals who 
are dual-eligible individuals eligible for 
medical assistance under title XIX by 
measuring the special needs for care 
of individuals who are both Medicare 
and Medicaid beneficiaries; and 
‘‘(II) beneficiaries enrolled in 
specialized Medicare Part C plans for 
special needs individuals (described in 
section 
1859(b)(6)(A)(ii)(II)) 
that 
serve predominantly institutionalized 
individuals by measuring the special 
needs for care of individuals who are 
a resident in long-term care institu-
tion.’’. 
(3) EFFECTIVE
DATE; GRANDFATHER.—The 
amendments made by paragraph (1) shall take effect 
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267 
for enrollments occurring on or after January 1, 
2009, and shall not apply— 
(A) to plans with a contract with a State 
Medicaid agency to operate an integrated Med-
icaid-Medicare program, that had been ap-
proved by Centers for Medicare & Medicaid 
Services on January 1, 2004; and 
(B) to plans that are operational as of the 
date of the enactment of this Act as approved 
Medicare demonstration projects and that pro-
vide services predominantly to individuals with 
end-stage renal disease. 
(4) TRANSITION FOR NON-QUALIFYING SNPS.— 
(A) RESTRICTIONS IN 2008 FOR CHRONIC 
CARE SNPS.—In the case of a specialized MA 
plan for special needs individuals (as defined in 
section 1859(b)(6)(A) of the Social Security Act 
(42 U.S.C. 1395w–28(b)(6)(A)) that, as of De-
cember 31, 2007, is not described in either sub-
clause (I) or subclause (II) of clause (ii) of such 
section, as amended by paragraph (1), then as 
of January 1, 2008— 
(i) the plan may not be offered unless 
it was offered before such date; 
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(ii) no new members may be enrolled 
with the plan; and 
(iii) there may be no expansion of the 
service area of such plan. 
(B) TRANSITION
OF
ENROLLEES.—The 
Secretary of Health and Human Services shall 
provide for an orderly transition of those spe-
cialized MA plans for special needs individuals 
(as defined in section 1859(b)(6)(A) of the So-
cial 
Security 
Act 
(42 
U.S.C. 
1395w– 
28(b)(6)(A)), as of the date of the enactment of 
this Act), and their enrollees, that no longer 
qualify as such plans under such section, as 
amended by this subsection. 
SEC. 432. EXTENSION AND REVISION OF AUTHORITY FOR 
MEDICARE REASONABLE COST CONTRACTS. 
(a) EXTENSION FOR 3 YEARS OF PERIOD REASON-
ABLE COST PLANS CAN REMAIN IN THE MARKET.—Sec-
tion 1876(h)(5)(C)(ii) of the Social Security Act (42 
U.S.C. 1395mm(h)(5)(C)(ii)) is amended, in the matter 
preceding subclause (I), by striking ‘‘January 1, 2008’’ 
and inserting ‘‘January 1, 2011’’. 
(b) APPLICATION OF CERTAIN MEDICARE ADVAN-
TAGE REQUIREMENTS TO COST CONTRACTS EXTENDED 
OR RENEWED AFTER ENACTMENT.—Section 1876(h) of 
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269 
such Act (42 U.S.C. 1395mm(h)), as amended by sub-
section (a), is amended— 
(1) by redesignating paragraph (5) as para-
graph (6); and 
(2) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5)(A) Any reasonable cost reimbursement 
contract with an eligible organization under this sub-
section that is extended or renewed on or after the 
date of enactment of the Children’s Health and 
Medicare Protection Act of 2007 shall provide that 
the provisions of the Medicare Part C program de-
scribed in subparagraph (B) shall apply to such or-
ganization and such contract in a substantially simi-
lar manner as such provisions apply to Medicare 
Part C organizations and Medicare Part C plans 
under part C. 
‘‘(B) The provisions described in this sub-
paragraph are as follows: 
‘‘(i) Section 1851(h) (relating to the 
approval of marketing material and appli-
cation forms). 
‘‘(ii) Section 1852(e) (relating to the 
requirement of having an ongoing quality 
improvement program and treatment of ac-
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creditation in the same manner as such 
provisions apply to Medicare Part C local 
plans that are preferred provider organiza-
tion plans). 
‘‘(iii) Section 1852(f) (relating to 
grievance mechanisms). 
‘‘(iv) Section 1852(g) (relating to cov-
erage determinations, reconsiderations, and 
appeals). 
‘‘(v) Section 1852(j)(4) (relating to 
limitations on physician incentive plans). 
‘‘(vi) Section 1854(c) (relating to the 
requirement of uniform premiums among 
individuals enrolled in the plan). 
‘‘(vii) Section 1854(g) (relating to re-
strictions on imposition of premium taxes 
with respect to payments to organizations). 
‘‘(viii) Section 1856(b)(3) (relating to 
relation to State laws). 
‘‘(ix) The provisions of part C relating 
to timelines for contract renewal and bene-
ficiary notification.’’. 
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271 
TITLE 
V—PROVISIONS 
RELAT-
ING TO MEDICARE PART A 
SEC. 501. INPATIENT HOSPITAL PAYMENT UPDATES. 
(a) FOR ACUTE HOSPITALS.—Clause (i) of section 
1886(b)(3)(B) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)) is amended— 
(1) in subclause (XIX), by striking ‘‘and’’; 
(2) by redesignating subclause (XX) as sub-
clause (XXII); and 
(3) by inserting after subclause (XIX) the fol-
lowing new subclauses: 
‘‘(XX) for fiscal year 2007, 
subject to clause (viii), the mar-
ket basket percentage increase 
for hospitals in all areas, 
‘‘(XXI) for fiscal year 2008, 
subject to clause (viii), the mar-
ket basket percentage increase 
minus 0.25 percentage point for 
hospitals in all areas, and’’. 
(b) FOR OTHER HOSPITALS.—Clause (ii) of such sec-
tion is amended— 
(1) in subclause (VII) by striking ‘‘and’’; 
(2) by redesignating subclause (VIII) as sub-
clause (X); and 
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(3) by inserting after subclause (VII) the fol-
lowing new subclauses: 
‘‘(VIII) fiscal years 2003 
through 2007, is the market bas-
ket percentage increase, 
‘‘(IX) fiscal year 2008, is 
the market basket percentage in-
crease minus 0.25 percentage 
point, and’’. 
(c) DELAYED EFFECTIVE DATE.— 
(1) ACUTE
CARE
HOSPITALS.—The amend-
ments made by subsection (a) shall not apply to dis-
charges occurring before January 1, 2008. 
(2) 
OTHER
HOSPITALS.—The 
amendments 
made by subsection (b) shall be applied, only with 
respect to cost reporting periods beginning during 
fiscal year 2008 and not with respect to the com-
putation for any succeeding cost reporting period, by 
substituting ‘‘0.1875 percentage point’’ for ‘‘0.25 
percentage point’’. 
SEC. 502. PAYMENT FOR INPATIENT REHABILITATION FA-
CILITY (IRF) SERVICES. 
(a) PAYMENT UPDATE.— 
(1) IN GENERAL.—Section 1886(j)(3)(C) of the 
Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is 
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amended by adding at the end the following: ‘‘The 
increase factor to be applied under this subpara-
graph for fiscal year 2008 shall be 1 percent.’’ 
(2) DELAYED EFFECTIVE DATE.—The amend-
ment made by paragraph (1) shall not apply to pay-
ment units occurring before January 1, 2008. 
(b) INPATIENT REHABILITATION FACILITY CLASSI-
FICATION CRITERIA.— 
(1) IN GENERAL.—Section 5005 of the Deficit 
Reduction Act of 2005 (Public Law 109–171) is 
amended— 
(A) in subsection (a), by striking ‘‘apply 
the applicable percent specified in subsection 
(b)’’ and inserting ‘‘require a compliance rate 
that is no greater than the 60 percent compli-
ance rate that became effective for cost report-
ing periods beginning on or after July 1, 
2006,’’; and 
(B) by amending subsection (b) to read as 
follows: 
‘‘(b) CONTINUED USE OF COMORBIDITIES.—For por-
tions of cost reporting periods occurring on or after the 
date of the enactment of the Children’s Health and Medi-
care Protection Act of 2007, the Secretary shall include 
patients with comorbidities as described in section 
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412.23(b)(2)(i) of title 42, Code of Federal Regulations 
(as in effect as of January 1, 2007), in the inpatient popu-
lation that counts towards the percent specified in sub-
section (a).’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1)(A) shall apply to portions of cost 
reporting periods beginning on or after the date of 
the enactment of this Act. 
(c) PAYMENT FOR CERTAIN MEDICAL CONDITIONS 
TREATED IN INPATIENT REHABILITATION FACILITIES.— 
(1) IN GENERAL.—Section 1886(j) of the Social 
Security Act (42 U.S.C. 1395ww(j)) is amended— 
(A) by redesignating paragraph (7) as 
paragraph (8); 
(B) by inserting after paragraph (6) the 
following new paragraph: 
‘‘(7) SPECIAL
PAYMENT
RULE
FOR
CERTAIN 
MEDICAL CONDITIONS.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (H), in the case of discharges occurring 
on or after October 1, 2008, in lieu of the 
standardized payment amount (as determined 
pursuant to the preceding provisions of this 
subsection) that would otherwise be applicable 
under this subsection, the Secretary shall sub-
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stitute, for payment units with respect to an 
applicable medical condition (as defined in sub-
paragraph (G)(i)) that is treated in an inpa-
tient rehabilitation facility, the modified stand-
ardized payment amount determined under sub-
paragraph (B). 
‘‘(B) MODIFIED STANDARDIZED PAYMENT 
AMOUNT.—The modified standardized payment 
amount for an applicable medical condition 
shall be based on the amount determined under 
subparagraph (C) for such condition, as ad-
justed under subparagraphs (D), (E), and (F). 
‘‘(C) AMOUNT DETERMINED.— 
‘‘(i) IN GENERAL.—The amount de-
termined under this subparagraph for an 
applicable medical condition shall be based 
on the sum of the following: 
‘‘(I) An amount equal to the av-
erage per stay skilled nursing facility 
payment rate for the applicable med-
ical condition (as determined under 
clause (ii)). 
‘‘(II) An amount equal to 25 per-
cent of the difference between the 
overhead costs (as defined in subpara-
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graph (G)(ii)) component of the aver-
age inpatient rehabilitation facility per 
stay payment amount for the applica-
ble medical condition (as determined 
under the preceding paragraphs of 
this subsection) and the overhead 
costs component of the average per 
stay skilled nursing facility payment 
rate for such condition (as determined 
under clause (ii)). 
‘‘(III) An amount equal to 33 
percent of the difference between the 
patient care costs (as defined in sub-
paragraph (G)(iii)) component of the 
average inpatient rehabilitation facil-
ity per stay payment amount for the 
applicable medical condition (as deter-
mined under the preceding para-
graphs of this subsection) and the pa-
tient care costs component of the av-
erage per stay skilled nursing facility 
payment rate for such condition (as 
determined under clause (ii)). 
‘‘(ii) DETERMINATION
OF
AVERAGE 
PER
STAY
SKILLED
NURSING
FACILITY 
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PAYMENT RATE.—For purposes of clause 
(i), the Secretary shall convert skilled 
nursing facility payment rates for applica-
ble medical conditions, as determined 
under section 1888(e), to average per stay 
skilled nursing facility payment rates for 
each such condition. 
‘‘(D) ADJUSTMENTS.—The Secretary shall 
adjust the amount determined under subpara-
graph (C) for an applicable medical condition 
using the adjustments to the prospective pay-
ment rates for inpatient rehabilitation facilities 
described in paragraphs (2), (3), (4), and (6). 
‘‘(E) UPDATE FOR INFLATION.—Except in 
the case of a fiscal year for which the Secretary 
rebases the amounts determined under subpara-
graph (C) for applicable medical conditions pur-
suant to subparagraph (F), the Secretary shall 
annually update the amounts determined under 
subparagraph (C) for each applicable medical 
condition by the increase factor for inpatient re-
habilitation facilities (as described in paragraph 
(3)(C)). 
‘‘(F) REBASING.—The Secretary shall pe-
riodically (but in no case less than once every 
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5 years) rebase the amounts determined under 
subparagraph (C) for applicable medical condi-
tions using the methodology described in such 
subparagraph and the most recent and complete 
cost report and claims data available. 
‘‘(G) DEFINITIONS.—In this paragraph: 
‘‘(i) APPLICABLE
MEDICAL
CONDI-
TION.—The term ‘applicable medical condi-
tion’ means— 
‘‘(I) unilateral knee replacement; 
‘‘(II) unilateral hip replacement; 
and 
‘‘(III) unilateral hip fracture. 
‘‘(ii) OVERHEAD
COSTS.—The term 
‘overhead costs’ means those Medicare-al-
lowable costs that are contained in the 
General Service cost centers of the Medi-
care cost reports for inpatient rehabilita-
tion facilities and for skilled nursing facili-
ties, respectively, as determined by the 
Secretary. 
‘‘(iii) PATIENT
CARE
COSTS.—The 
term ‘patient care costs’ means total Medi-
care-allowable costs minus overhead costs. 
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‘‘(H) SUNSET.—The provisions of this 
paragraph shall cease to apply as of the date 
the Secretary implements an integrated, site- 
neutral payment methodology under this title 
for post-acute care.’’; and 
(C) in paragraph (8), as redesignated by 
paragraph (1)— 
(i) in subparagraph (C), by striking 
‘‘and’’ at the end; 
(ii) in subparagraph (D), by striking 
the period at the end and inserting ‘‘, 
and’’; and 
(iii) by adding at the end the fol-
lowing new subparagraph: 
‘‘(E) 
modified 
standardized 
payment 
amounts under paragraph (7).’’. 
(2) SPECIAL
RULE
FOR
DISCHARGES
OCCUR-
RING IN THE SECOND HALF OF FISCAL YEAR 2008.— 
(A) IN
GENERAL.—In the case of dis-
charges from an inpatient rehabilitation facility 
occurring during the period beginning on April 
1, 2008, and ending on September 30, 2008, 
for applicable medical conditions (as defined in 
paragraph (7)(G)(i) of section 1886(j) of the 
Social Security Act (42 U.S.C. 1395ww(j)), as 
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inserted by paragraph (1)(B), in lieu of the 
standardized payment amount determined pur-
suant to such section, the standardized payment 
amount shall be $9,507 for unilateral knee re-
placement, $10,398 for unilateral hip replace-
ment, and $10,958 for unilateral hip fracture. 
Such amounts are the amounts that are esti-
mated would be determined under paragraph 
(7)(C) of such section 1886(j) for such condi-
tions if such paragraph applied for such period. 
Such standardized payment amounts shall be 
multiplied by the relative weights for each case- 
mix group and tier, as published in the final 
rule of the Secretary of Health and Human 
Services for inpatient rehabilitation facility 
services prospective payment for fiscal year 
2008, 
to 
obtain 
the 
applicable 
payment 
amounts for each such condition for each case- 
mix group and tier. 
(B) IMPLEMENTATION.—Notwithstanding 
any other provision of law, the Secretary of 
Health and Human Services may implement 
this subsection by program instruction or other-
wise. Paragraph (8)(E) of such section 1886(j) 
of the Social Security Act, as added by para-
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