418 
‘‘(III) The Secretary shall list all 
MSAs within the State by Geographic 
Adjustment Factor described in para-
graph (2) (in this paragraph referred 
to as a ‘GAF’) in descending order. 
‘‘(IV) In the first iteration, the 
Secretary shall compare the GAF of 
the highest cost MSA in the State to 
the weighted-average GAF of all the 
remaining MSAs in the State (includ-
ing the rest of State MSA described 
in subclause (II)). If the ratio of the 
GAF of the highest cost MSA to the 
weighted-average of the GAF of re-
maining lower cost MSAs is 1.05 or 
greater, the highest cost MSA shall be 
a separate fee schedule area. 
‘‘(V) In the next iteration, the 
Secretary shall compare the GAF of 
the MSA with the second-highest 
GAF to the weighted-average GAF of 
the all the remaining MSAs (excluding 
MSAs that become separate fee sched-
ule areas). If the ratio of the second- 
highest MSA’s GAF to the weighted-
419 
average of the remaining lower cost 
MSAs is 1.05 or greater, the second- 
highest MSA shall be a separate fee 
schedule area. 
‘‘(VI) The iterative process shall 
continue until the ratio of the GAF of 
the MSA with highest remaining GAF 
to the weighted-average of the remain-
ing MSAs with lower GAFS is less 
than 1.05, and the remaining group of 
MSAs with lower GAFS shall be 
treated as a single fee schedule area. 
‘‘(VII) For purposes of the 
iterative process described in this 
clause, if two MSAs have identical 
GAFs, they shall be combined. 
‘‘(ii) TRANSITION.—For services fur-
nished on or after January 1, 2011, and 
before January 1, 2016, in the State of 
California, after calculating the work, prac-
tice expense, and malpractice geographic 
indices that would otherwise be determined 
under clauses (i), (ii), and (iii) of para-
graph (1)(A) for a fee schedule area deter-
mined under clause (i), if the index for a
420 
county within a fee schedule area is less 
than the index in effect for such county on 
December 31, 2010, the Secretary shall in-
stead apply the index in effect for such 
county on such date. 
‘‘(B) SUBSEQUENT REVISIONS.—After the 
transition described in subparagraph (A)(ii), 
not less than every 3 years the Secretary shall 
review and update the fee schedule areas using 
the methodology described in subparagraph 
(A)(i) and any updated MSAs as defined by the 
Director of the Office of Management and 
Budget and published in the Federal Register. 
The Secretary shall review and make any 
changes pursuant to such reviews concurrent 
with the application of the periodic review of 
the adjustment factors required under para-
graph (1)(C) for California. 
‘‘(C) REFERENCES
TO
FEE
SCHEDULE 
AREAS.—Effective for services furnished on or 
after January 1, 2011, for the State of Cali-
fornia, any reference in this section to a fee 
schedule area shall be deemed a reference to an 
MSA in the State (including the single rest of
421 
state 
MSA 
described 
in 
subparagraph 
(A)(i)(II)).’’. 
(b) CONFORMING AMENDMENT TO DEFINITION OF 
FEE SCHEDULE AREA.—Section 1848(j)(2) of the Social 
Security Act (42 U.S.C. 1395w(j)(2)) is amended by strik-
ing ‘‘The term’’ and inserting ‘‘Except as provided in sub-
section (e)(6)(C), the term’’. 
PART 2—MARKET BASKET UPDATES 
SEC. 
1131. 
INCORPORATING 
PRODUCTIVITY 
IMPROVE-
MENTS 
INTO 
MARKET 
BASKET 
UPDATES 
THAT DO NOT ALREADY INCORPORATE SUCH 
IMPROVEMENTS. 
(a) OUTPATIENT HOSPITALS.— 
(1) IN GENERAL.—Section 1833(t)(3)(C)(iv) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395l(t)(3)(C)(iv)) is amended— 
(A) in the first sentence— 
(i) by inserting ‘‘(which is subject to 
the productivity adjustment described in 
subclause (II) of such section)’’ after 
‘‘1886(b)(3)(B)(iii)’’; and 
(ii) by inserting ‘‘(but not below 0)’’ 
after ‘‘reduced’’; and 
(B) in the second sentence, by inserting 
‘‘and which is subject, beginning with 2010, to
422 
the productivity adjustment described in section 
1886(b)(3)(B)(iii)(II)’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to increase factors for 
services furnished in years beginning with 2010. 
(b) AMBULANCE SERVICES.—Section 1834(l)(3)(B) 
of such Act (42 U.S.C. 1395m(l)(3)(B))) is amended by 
inserting before the period at the end the following: ‘‘and, 
in the case of years beginning with 2010, subject to the 
productivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’. 
(c) AMBULATORY SURGICAL CENTER SERVICES.— 
Section 
1833(i)(2)(D) 
of 
such 
Act 
(42 
U.S.C. 
1395l(i)(2)(D)) is amended— 
(1) by redesignating clause (v) as clause (vi); 
and 
(2) by inserting after clause (iv) the following 
new clause: 
‘‘(v) In implementing the system described in clause 
(i), for services furnished during 2010 or any subsequent 
year, to the extent that an annual percentage change fac-
tor applies, such factor shall be subject to the productivity 
adjustment described in section 1886(b)(3)(B)(iii)(II).’’. 
(d) LABORATORY SERVICES.—Section 1833(h)(2)(A) 
of such Act (42 U.S.C. 1395l(h)(2)(A)) is amended—
423 
(1) in clause (i), by striking ‘‘for each of the 
years 2009 through 2013’’ and inserting ‘‘for 
2009’’; and 
(2) clause (ii)— 
(A) by striking ‘‘and’’ at the end of sub-
clause (III); 
(B) by striking the period at the end of 
subclause (IV) and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subclause: 
‘‘(V) the annual adjustment in the fee schedules 
determined under clause (i) for years beginning with 
2010 shall be subject to the productivity adjustment 
described in section 1886(b)(3)(B)(iii)(II).’’. 
(e) CERTAIN DURABLE MEDICAL EQUIPMENT.—Sec-
tion 1834(a)(14) of such Act (42 U.S.C. 1395m(a)(14)) 
is amended— 
(1) in subparagraph (K), by inserting before 
the semicolon at the end the following: ‘‘, subject to 
the productivity adjustment described in section 
1886(b)(3)(B)(iii)(II)’’; 
(2) in subparagraph (L)(i), by inserting after 
‘‘June 2013,’’ the following: ‘‘subject to the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II),’’;
424 
(3) in subparagraph (L)(ii), by inserting after 
‘‘June 2013’’ the following: ‘‘, subject to the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’; and 
(4) in subparagraph (M), by inserting before 
the period at the end the following: ‘‘, subject to the 
productivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’. 
PART 3—OTHER PROVISIONS 
SEC. 1141. RENTAL AND PURCHASE OF POWER-DRIVEN 
WHEELCHAIRS. 
(a) IN GENERAL.—Section 1834(a)(7)(A)(iii) of the 
Social Security Act (42 U.S.C. 1395m(a)(7)(A)(iii)) is 
amended— 
(1) in the heading, by inserting ‘‘CERTAIN COM-
PLEX REHABILITATIVE’’ after ‘‘OPTION FOR’’; and 
(2) by striking ‘‘power-driven wheelchair’’ and 
inserting ‘‘complex rehabilitative power-driven wheel-
chair recognized by the Secretary as classified within 
group 3 or higher’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on January 1, 2011, and 
shall apply to power-driven wheelchairs furnished on or 
after such date. Such amendments shall not apply to con-
tracts entered into under section 1847 of the Social Secu-
425 
rity Act (42 U.S.C. 1395w–3) pursuant to a bid submitted 
under such section before October 1, 2010, under sub-
section (a)(1)(B)(i)(I) of such section. 
SEC. 1141A. ELECTION TO TAKE OWNERSHIP, OR TO DE-
CLINE OWNERSHIP, OF A CERTAIN ITEM OF 
COMPLEX DURABLE MEDICAL EQUIPMENT 
AFTER THE 13-MONTH CAPPED RENTAL PE-
RIOD ENDS. 
(a) IN GENERAL.—Section 1834(a)(7)(A) of the So-
cial Security Act (42 U.S.C. 1395m(a)(7)(A)) is amend-
ed— 
(1) in clause (ii)— 
(A) by striking ‘‘RENTAL.—On’’ and in-
serting ‘‘RENTAL.— 
‘‘(I) IN
GENERAL.—Except as 
provided in subclause (II), on’’; and 
(B) by adding at the end the following new 
subclause: 
‘‘(II) OPTION TO ACCEPT OR RE-
JECT TRANSFER OF TITLE TO GROUP 
3 SUPPORT SURFACE.— 
‘‘(aa) IN GENERAL.—During 
the 10th continuous month dur-
ing which payment is made for 
the rental of a Group 3 Support
426 
Surface under clause (i), the sup-
plier of such item shall offer the 
individual the option to accept or 
reject transfer of title to a Group 
3 Support Surface after the 13th 
continuous month during which 
payment is made for the rental of 
the Group 3 Support Surface 
under clause (i). Such title shall 
be transferred to the individual 
only if the individual notifies the 
supplier not later than 1 month 
after the supplier makes such 
offer that the individual agrees to 
accept transfer of the title to the 
Group 3 Support Surface. Unless 
the individual accepts transfer of 
title to the Group 3 Support Sur-
face in the manner set forth in 
this subclause, the individual 
shall be deemed to have rejected 
transfer of title. If the individual 
agrees to accept the transfer of 
the title to the Group 3 Support 
Surface, the supplier shall trans-
427 
fer such title to the individual on 
the first day that begins after the 
13th continuous month during 
which payment is made for the 
rental of the Group 3 Support 
Surface under clause (i). 
‘‘(bb) SPECIAL
RULE.—If, 
on the effective date of this sub-
clause, an individual’s rental pe-
riod for a Group 3 Support Sur-
face has exceeded 10 continuous 
months, but the first day that be-
gins after the 13th continuous 
month during which payment is 
made for the rental under clause 
(i) has not been reached, the sup-
plier shall, within 1 month fol-
lowing such effective date, offer 
the individual the option to ac-
cept or reject transfer of title to 
a Group 3 Support Surface. Such 
title shall be transferred to the 
individual only if the individual 
notifies the supplier not later 
than 1 month after the supplier
428 
makes such offer that the indi-
vidual agrees to accept transfer 
of title to the Group 3 Support 
Surface. Unless the individual ac-
cepts transfer of title to the 
Group 3 Support Surface in the 
manner set forth in this sub-
clause, the individual shall be 
deemed to have rejected transfer 
of title. If the individual agrees 
to accept the transfer of the title 
to the Group 3 Support Surface, 
the supplier shall transfer such 
title to the individual on the first 
day that begins after the 13th 
continuous month during which 
payment is made for the rental of 
the Group 3 Support Surface 
under clause (i) unless that day 
has passed, in which case the 
supplier shall transfer such title 
to the individual not later than 1 
month after notification that the 
individual accepts transfer of 
title.
430 
individual had accepted title to 
such equipment. The previous 
sentence shall not affect the pay-
ment of amounts under this part 
for such equipment after the end 
of such period of the reasonable 
useful lifetime of the equipment. 
‘‘(dd) PAYMENTS.—Mainte-
nance and servicing payments 
shall be made in accordance with 
clause (iv), in the case of a sup-
plier that transfers title to the 
Group 3 Support Surface under 
this subclause, after such trans-
fer and, in the case of an indi-
vidual who rejects transfer of 
title under this subclause, after 
the end of the period of medical 
need during which payment is 
made under clause (i).’’; and 
(2) in clause (iv), by inserting ‘‘or, in the case 
of an individual who rejects transfer of title to a 
Group 3 Support Surface under clause (ii), after the 
end of the period of medical need during which pay-
431 
ment is made under clause (i),’’ after ‘‘under clause 
(ii)’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to durable medical 
equipment not later than January 1, 2011. 
SEC. 
1142. 
EXTENSION 
OF 
PAYMENT 
RULE 
FOR 
BRACHYTHERAPY. 
Section 1833(t)(16)(C) of the Social Security Act (42 
U.S.C. 1395l(t)(16)(C)), as amended by section 142 of the 
Medicare Improvements for Patients and Providers Act of 
2008 (Public Law 110–275), is amended by striking, the 
first place it appears, ‘‘January 1, 2010’’ and inserting 
‘‘January 1, 2012’’. 
SEC. 1143. HOME INFUSION THERAPY REPORT TO CON-
GRESS. 
Not later than July 1, 2011, the Medicare Payment 
Advisory Commission shall submit to Congress a report 
on the following: 
(1) The scope of coverage for home infusion 
therapy in the fee-for-service Medicare program 
under title XVIII of the Social Security Act, Medi-
care Advantage under part C of such title, the vet-
eran’s health care program under chapter 17 of title 
38, United States Code, and among private payers, 
including an analysis of the scope of services pro-
432 
vided by home infusion therapy providers to their 
patients in such programs. 
(2) The benefits and costs of providing such 
coverage under the Medicare program, including a 
calculation of the potential savings achieved through 
avoided or shortened hospital and nursing home 
stays as a result of Medicare coverage of home infu-
sion therapy. 
(3) An assessment of sources of data on the 
costs of home infusion therapy that might be used 
to construct payment mechanisms in the Medicare 
program. 
(4) Recommendations, if any, on the structure 
of a payment system under the Medicare program 
for home infusion therapy, including an analysis of 
the payment methodologies used under Medicare Ad-
vantage plans and private health plans for the provi-
sion of home infusion therapy and their applicability 
to the Medicare program. 
SEC. 1144. REQUIRE AMBULATORY SURGICAL CENTERS 
(ASCS) TO SUBMIT COST DATA AND OTHER 
DATA. 
(a) COST REPORTING.—
433 
(1) IN GENERAL.—Section 1833(i) of the Social 
Security Act (42 U.S.C. 1395l(i)) is amended by 
adding at the end the following new paragraph: 
‘‘(8) The Secretary shall require, as a condition of 
the agreement described in section 1832(a)(2)(F)(i), the 
submission of such cost report as the Secretary may speci-
fy, taking into account the requirements for such reports 
under section 1815 in the case of a hospital.’’. 
(2) DEVELOPMENT
OF
COST
REPORT.—Not 
later than 3 years after the date of the enactment 
of this Act, the Secretary of Health and Human 
Services shall develop a cost report form for use 
under section 1833(i)(8) of the Social Security Act, 
as added by paragraph (1). 
(3) AUDIT REQUIREMENT.—The Secretary shall 
provide for periodic auditing of cost reports sub-
mitted under section 1833(i)(8) of the Social Secu-
rity Act, as added by paragraph (1). 
(4) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to agreements applica-
ble to cost reporting periods beginning 18 months 
after the date the Secretary develops the cost report 
form under paragraph (2). 
(b) ADDITIONAL DATA ON QUALITY.—
434 
(1) IN GENERAL.—Section 1833(i)(7) of such 
Act (42 U.S.C. 1395l(i)(7)) is amended— 
(A) in subparagraph (B), by inserting 
‘‘subject to subparagraph (C),’’ after ‘‘may oth-
erwise provide,’’; and 
(B) by adding at the end the following new 
subparagraph: 
‘‘(C) Under subparagraph (B) the Secretary shall re-
quire the reporting of such additional data relating to 
quality of services furnished in an ambulatory surgical fa-
cility, including data on health care associated infections, 
as the Secretary may specify.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall to reporting for years begin-
ning with 2012. 
SEC. 1145. TREATMENT OF CERTAIN CANCER HOSPITALS. 
Section 1833(t) of the Social Security Act (42 U.S.C. 
1395l(t)) is amended by adding at the end the following 
new paragraph: 
‘‘(18) AUTHORIZATION
OF
ADJUSTMENT
FOR 
CANCER HOSPITALS.— 
‘‘(A) STUDY.—The Secretary shall conduct 
a study to determine if, under the system under 
this subsection, costs incurred by hospitals de-
scribed in section 1886(d)(1)(B)(v) with respect
435 
to ambulatory payment classification groups ex-
ceed those costs incurred by other hospitals fur-
nishing services under this subsection (as deter-
mined appropriate by the Secretary). 
‘‘(B) AUTHORIZATION OF ADJUSTMENT.— 
Insofar as the Secretary determines under sub-
paragraph (A) that costs incurred by hospitals 
described in section 1886(d)(1)(B)(v) exceed 
those costs incurred by other hospitals fur-
nishing services under this subsection, the Sec-
retary shall provide for an appropriate adjust-
ment under paragraph (2)(E) to reflect those 
higher costs effective for services furnished on 
or after January 1, 2011.’’. 
SEC. 1146. PAYMENT FOR IMAGING SERVICES. 
(a) ADJUSTMENT IN PRACTICE EXPENSE TO RE-
FLECT A PRESUMED LEVEL OF UTILIZATION.—Section 
1848 of the Social Security Act (42 U.S.C. 1395w–4) is 
amended— 
(1) in subsection (b)(4)— 
(A) in subparagraph (B), by striking ‘‘sub-
paragraph (A)’’ and inserting ‘‘this paragraph’’; 
and 
(B) by adding at the end the following new 
subparagraph:
436 
‘‘(C) ADJUSTMENT IN PRACTICE EXPENSE 
TO REFLECT A PRESUMED LEVEL OF UTILIZA-
TION.—Consistent with the methodology for 
computing the number of practice expense rel-
ative value units under subsection (c)(2)(C)(ii) 
with respect to advanced diagnostic imaging 
services (as defined in section 1834(e)(1)(B)) 
furnished on or after January 1, 2011, the Sec-
retary shall adjust such number of units so it 
reflects a presumed rate of utilization of imag-
ing equipment of 75 percent.’’; and 
(2) in subsection (c)(2)(B)(v)), by adding at the 
end the following new subclause: 
‘‘(III) CHANGE
IN
PRESUMED 
UTILIZATION LEVEL OF CERTAIN AD-
VANCED DIAGNOSTIC IMAGING SERV-
ICES.—Effective for fee schedules es-
tablished beginning with 2011, re-
duced expenditures attributable to the 
presumed utilization of 75 percent 
under subsection (b)(4)(C) instead of 
a presumed utilization of imaging 
equipment of 50 percent.’’. 
(b) ADJUSTMENT IN TECHNICAL COMPONENT ‘‘DIS-
COUNT’’ ON SINGLE-SESSION IMAGING TO CONSECUTIVE
437 
BODY PARTS.—Section 1848 of such Act (42 U.S.C. 
1395w–4) is further amended— 
(1) in subsection (b)(4), by adding at the end 
the following new subparagraph: 
‘‘(D) ADJUSTMENT IN TECHNICAL COMPO-
NENT DISCOUNT ON SINGLE-SESSION IMAGING 
INVOLVING
CONSECUTIVE
BODY
PARTS.—For 
services furnished on or after January 1, 2011, 
the Secretary shall increase the reduction in ex-
penditures attributable to the multiple proce-
dure payment reduction applicable to the tech-
nical component for imaging under the final 
rule published by the Secretary in the Federal 
Register on November 21, 2005 (part 405 of 
title 42, Code of Federal Regulations) from 25 
percent to 50 percent.’’; and 
(2) in subsection (c)(2)(B)(v), by adding at the 
end the following new subclause: 
‘‘(III) 
ADDITIONAL
REDUCED 
PAYMENT
FOR
MULTIPLE
IMAGING 
PROCEDURES.—Effective 
for 
fee 
schedules established beginning with 
2011, reduced expenditures attrib-
utable to the increase in the multiple 
procedure payment reduction from 25
438 
percent to 50 percent as described in 
subsection (b)(4)(D).’’. 
SEC. 1147. DURABLE MEDICAL EQUIPMENT PROGRAM IM-
PROVEMENTS. 
(a) WAIVER OF SURETY BOND REQUIREMENT.—Sec-
tion 1834(a)(16) of the Social Security Act (42 U.S.C. 
1395m(a)(16)) is amended by adding at the end the fol-
lowing sentence: ‘‘The requirement for a surety bond de-
scribed in subparagraph (B) shall not apply in the case 
of a pharmacy or supplier that exclusively furnishes eye-
glasses or contact lenses described in section 1861(s)(8) 
if the pharmacy or supply has been enrolled under section 
1866(j) as a supplier of durable medical equipment, pros-
thetics, orthotics, and supplies and has been issued (which 
may include renewal of) a supplier number (as described 
in the first sentence of this paragraph) for at least 5 years, 
and if a final adverse action (as defined in section 
424.57(a) of title 42, Code of Federal Regulations) has 
never been imposed for such pharmacy or supplier.’’. 
(b) ENSURING SUPPLY OF OXYGEN EQUIPMENT .— 
(1) IN GENERAL.—Section 1834(a)(5)(F) of the 
Social Security Act (42 U.S.C. 1395m(a)(5)(F)) is 
amended—
439 
(A) in clause (ii), by striking ‘‘After the’’ 
and inserting ‘‘Except as provided in clause 
(iii), after the’’; and 
(B) by adding at the end the following new 
clause: 
‘‘(iii) CONTINUATION OF SUPPLY.—In 
the case of a supplier furnishing such 
equipment to an individual under this sub-
section as of the 27th month of the 36 
months described in clause (i), the supplier 
furnishing such equipment as of such 
month shall continue to furnish such 
equipment to such individual (either di-
rectly or though arrangements with other 
suppliers of such equipment) during any 
subsequent period of medical need for the 
remainder of the reasonable useful lifetime 
of the equipment, as determined by the 
Secretary, regardless of the location of the 
individual, unless another supplier has ac-
cepted responsibility for continuing to fur-
nish such equipment during the remainder 
of such period.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall take effect as of the date of
440 
the enactment of this Act and shall apply to the fur-
nishing of equipment to individuals for whom the 
27th month of a continuous period of use of oxygen 
equipment described in section 1834(a)(5)(F) of the 
Social Security Act occurs on or after July 1, 2010. 
(c) TREATMENT OF CURRENT ACCREDITATION AP-
PLICATIONS.—Section 1834(a)(20)(F) of such Act (42 
U.S.C. 1395m(a)(20)(F)) is amended— 
(1) in clause (i)— 
(A) by striking ‘‘clause (ii)’’ and inserting 
‘‘clauses (ii) and (iii)’’; and 
(B) by striking ‘‘and’’ at the end; 
(2) by striking the period at the end of clause 
(ii)(II) and by inserting a semicolon; 
(3) by inserting after clause (ii) the following 
new clauses: 
‘‘(iii) the requirement for accredita-
tion described in clause (i) shall not apply 
for purposes of supplying diabetic testing 
supplies, canes, and crutches in the case of 
a pharmacy that is enrolled under section 
1866(j) as a supplier of durable medical 
equipment, prosthetics, orthotics, and sup-
plies; and
441 
‘‘(iv) a supplier that has submitted an 
application for accreditation before August 
1, 2009, shall retain the supplier’s provider 
or supplier number until an independent 
accreditation organization determines if 
such supplier complies with requirements 
under this paragraph.’’; and 
(4) by adding at the end the following new sen-
tence: ‘‘Nothing in clauses (iii) and (iv) shall be con-
strued as affecting the application of an accredita-
tion requirement for suppliers to qualify for bidding 
in a competitive acquisition area under section 
1847,’’. 
(d) RESTORING 36-MONTH OXYGEN RENTAL PERIOD 
IN CASE OF SUPPLIER BANKRUPTCY FOR CERTAIN INDI-
VIDUALS.—Section 1834(a)(5)(F) of such Act (42 U.S.C. 
1395m(a)(5)(F)), as amended by subsection (b), is further 
amended by adding at the end the following new clause: 
‘‘(iv) 
EXCEPTION
FOR
BANK-
RUPTCY.—If a supplier who furnishes oxy-
gen and oxygen equipment to an individual 
is declared bankrupt and its assets are liq-
uidated and at the time of such declaration 
and liquidation more than 24 months of 
rental payments have been made, such in-
442 
dividual may begin a new 36-month rental 
period under this subparagraph with an-
other supplier of oxygen.’’. 
SEC. 1148. MEDPAC STUDY AND REPORT ON BONE MASS 
MEASUREMENT. 
(a) IN GENERAL.—The Medicare Payment Advisory 
Commission shall conduct a study regarding bone mass 
measurement, including computed tomography, duel-en-
ergy x-ray absorptriometry, and vertebral fracture assess-
ment. The study shall focus on the following: 
(1) An assessment of the adequacy of Medicare 
payment rates for such services, taking into account 
costs of acquiring the necessary equipment, profes-
sional work time, and practice expense costs. 
(2) The impact of Medicare payment changes 
since 2006 on beneficiary access to bone mass meas-
urement benefits in general and in rural and minor-
ity communities specifically. 
(3) A review of the clinically appropriate and 
recommended use among Medicare beneficiaries and 
how usage rates among such beneficiaries compares 
to such recommendations. 
(4) In conjunction with the findings under (3), 
recommendations, if necessary, regarding methods
443 
for reaching appropriate use of bone mass measure-
ment studies among Medicare beneficiaries. 
(b) REPORT.—The Commission shall submit a report 
to the Congress, not later than 9 months after the date 
of the enactment of this Act, containing a description of 
the results of the study conducted under subsection (a) 
and the conclusions and recommendations, if any, regard-
ing each of the issues described in paragraphs (1), (2) (3) 
and (4) of such subsection. 
SEC. 1149. TIMELY ACCESS TO POST-MASTECTOMY ITEMS. 
(a) IN GENERAL.—Section 1834(h)(1) of the Social 
Security Act (42 U.S.C. 1395m) is amended— 
(1) by redesignating subparagraph (H) as sub-
paragraph (I); and 
(2) by inserting after subparagraph (G) the fol-
lowing new subparagraph: 
‘‘(H) SPECIAL PAYMENT RULE FOR POST- 
MASTECTOMY EXTERNAL BREAST PROSTHESIS 
GARMENTS.—Payment for post-mastectomy ex-
ternal breast prosthesis garments shall be made 
regardless of whether such items are supplied to 
the beneficiary prior to or after the mastectomy 
procedure or other breast cancer surgical proce-
dure. The Secretary shall develop policies to en-
sure appropriate beneficiary access and utiliza-
444 
tion safeguards for such items supplied to a 
beneficiary prior to the mastectomy or other 
breast cancer surgical procedure.’’. 
(b) EFFECTIVE DATE.—This amendment shall apply 
not later than January 1, 2011. 
SEC. 1149A. PAYMENT FOR BIOSIMILAR BIOLOGICAL PROD-
UCTS. 
(a) IN GENERAL.—Section 1847A of the Social Secu-
rity Act (42 U.S.C. 1395w–3a) is amended— 
(1) in subsection (b)(1)— 
(A) in subparagraph (A), by striking ‘‘or’’ 
at the end; 
(B) in subparagraph (B), by striking the 
period at the end and inserting ‘‘; or’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) in the case of one or more inter-
changeable biological products (as defined in 
subsection (c)(6)(I)) and their reference biologi-
cal product (as defined in subsection (c)(6)(J)), 
which shall be included in the same billing and 
payment code, the sum of— 
‘‘(i) the average sales price as deter-
mined using the methodology described in 
paragraph (6) applied to such interchange-
445 
able and reference products for all Na-
tional Drug Codes assigned to such prod-
ucts in the same manner as such para-
graph (6) is applied to multiple source 
drugs; and 
‘‘(ii) 6 percent of the amount deter-
mined under clause (i); 
‘‘(D) in the case of a biosimilar biological 
product (as defined in subsection (c)(6)(H)), 
the sum of— 
‘‘(i) the average sales price as deter-
mined using the methodology described in 
paragraph (4) applied to such biosimilar 
biological product for all National Drug 
Codes assigned to such product in the 
same manner as such paragraph (4) is ap-
plied to a single source drug; and 
‘‘(ii) 6 percent of the amount deter-
mined under paragraph (4) or the amount 
determined under subparagraph (C)(ii), as 
the case may be, for the reference biologi-
cal product (as defined in subsection 
(c)(6)(J)); or 
‘‘(E) in the case of a reference biological 
product for both an interchangeable biological
446 
product and a biosimilar product, the amount 
determined in subparagraph (C).’’; and 
(2) in subsection (c)(6)— 
(A) by amending subparagraph (D)(i) to 
read as follows: 
‘‘(i) a biological, including a reference 
biological product for a biosimilar product, 
but excluding— 
‘‘(I) a biosimilar biological prod-
uct; 
‘‘(II) an interchangeable biologi-
cal product; 
‘‘(III) a reference biological prod-
uct for an interchangeable biological 
product; and 
‘‘(IV) a reference biological prod-
uct for both an interchangeable bio-
logical product and a biosimilar prod-
uct; or’’; and 
(B) by adding at the end the following new 
subparagraphs: 
‘‘(H) BIOSIMILAR BIOLOGICAL PRODUCT.— 
The term ‘biosimilar biological product’ means 
a biological product licensed as a biosimilar bio-
447 
logical product under section 351(k) of the 
Public Health Service Act. 
‘‘(I) 
INTERCHANGEABLE
BIOLOGICAL 
PRODUCT.—The term ‘interchangeable biologi-
cal product’ means a biological product licensed 
as an interchangeable biological product under 
section 351(k) of the Public Health Service Act 
‘‘(J) REFERENCE BIOLOGICAL PRODUCT.— 
The term ‘reference biological product’ means 
the biological product that is referred to in the 
application for a biosimilar or interchangeable 
biological product licensed under section 351(k) 
of the Public Health Service Act.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to payments for biosimilar bio-
logical products, interchangeable biological products, and 
reference biological products beginning with the first day 
of the second calendar quarter after the date of the enact-
ment of this Act. 
SEC. 1149B. STUDY AND REPORT ON DME COMPETITIVE 
BIDDING PROCESS. 
(a) STUDY.—The Comptroller General of the United 
States shall conduct a study to evaluate the potential es-
tablishment of a program under Medicare under title 
XVIII of the Social Security Act to acquire durable med-
449 
(7) Any other consideration relevant to the ac-
quisition, supply, and service of durable medical 
equipment and supplies that is deemed appropriate 
by the Comptroller General. 
(b) REPORT.—Not later than 12 months after the 
date of the enactment of this Act, the Comptroller General 
of the United States shall submit to Congress a report 
on the findings of the study under subsection (a). 
Subtitle C—Provisions Related to 
Medicare Parts A and B 
SEC. 1151. REDUCING POTENTIALLY PREVENTABLE HOS-
PITAL READMISSIONS. 
(a) HOSPITALS.— 
(1) IN GENERAL.—Section 1886 of the Social 
Security Act (42 U.S.C. 1395ww), as amended by 
section 1103(a), is amended by adding at the end 
the following new subsection: 
‘‘(p) ADJUSTMENT
TO HOSPITAL PAYMENTS
FOR 
EXCESS READMISSIONS.— 
‘‘(1) IN GENERAL.—With respect to payment 
for discharges from an applicable hospital (as de-
fined in paragraph (5)(C)) occurring during a fiscal 
year beginning on or after October 1, 2011, in order 
to account for excess readmissions in the hospital, 
the Secretary shall reduce the payments that would
450 
otherwise be made to such hospital under subsection 
(d) (or section 1814(b)(3), as the case may be) for 
such a discharge by an amount equal to the product 
of— 
‘‘(A) the base operating DRG payment 
amount (as defined in paragraph (2)) for the 
discharge; and 
‘‘(B) the adjustment factor (described in 
paragraph (3)(A)) for the hospital for the fiscal 
year. 
‘‘(2) 
BASE
OPERATING
DRG
PAYMENT 
AMOUNT.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), for purposes of this sub-
section, the term ‘base operating DRG payment 
amount’ means, with respect to a hospital for a 
fiscal year, the payment amount that would 
otherwise be made under subsection (d) for a 
discharge if this subsection did not apply, re-
duced by any portion of such amount that is at-
tributable to payments under subparagraphs 
(B) and (F) of paragraph (5). 
‘‘(B) ADJUSTMENTS.—For purposes of 
subparagraph (A), in the case of a hospital that 
is paid under section 1814(b)(3), the term ‘base
451 
operating DRG payment amount’ means the 
payment amount under such section. 
‘‘(3) ADJUSTMENT FACTOR.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the adjustment factor under this 
paragraph for an applicable hospital for a fiscal 
year is equal to the greater of— 
‘‘(i) the ratio described in subpara-
graph (B) for the hospital for the applica-
ble period (as defined in paragraph (5)(D)) 
for such fiscal year; or 
‘‘(ii) the floor adjustment factor speci-
fied in subparagraph (C). 
‘‘(B) RATIO.—The ratio described in this 
subparagraph for a hospital for an applicable 
period is equal to 1 minus the ratio of— 
‘‘(i) the aggregate payments for ex-
cess readmissions (as defined in paragraph 
(4)(A)) with respect to an applicable hos-
pital for the applicable period; and 
‘‘(ii) the aggregate payments for all 
discharges 
(as 
defined 
in 
paragraph 
(4)(B)) with respect to such applicable 
hospital for such applicable period.
452 
‘‘(C) FLOOR ADJUSTMENT FACTOR.—For 
purposes of subparagraph (A), the floor adjust-
ment factor specified in this subparagraph 
for— 
‘‘(i) fiscal year 2012 is 0.99; 
‘‘(ii) fiscal year 2013 is 0.98; 
‘‘(iii) fiscal year 2014 is 0.97; or 
‘‘(iv) a subsequent fiscal year is 0.95. 
‘‘(4) AGGREGATE PAYMENTS, EXCESS READMIS-
SION RATIO DEFINED.—For purposes of this sub-
section: 
‘‘(A) AGGREGATE PAYMENTS FOR EXCESS 
READMISSIONS.—The term ‘aggregate payments 
for excess readmissions’ means, for a hospital 
for a fiscal year, the sum, for applicable condi-
tions (as defined in paragraph (5)(A)), of the 
product, for each applicable condition, of— 
‘‘(i) the base operating DRG payment 
amount for such hospital for such fiscal 
year for such condition; 
‘‘(ii) the number of admissions for 
such condition for such hospital for such 
fiscal year; and 
‘‘(iii) the excess readmissions ratio (as 
defined in subparagraph (C)) for such hos-
453 
pital for the applicable period for such fis-
cal year minus 1. 
‘‘(B) AGGREGATE PAYMENTS FOR ALL DIS-
CHARGES.—The term ‘aggregate payments for 
all discharges’ means, for a hospital for a fiscal 
year, the sum of the base operating DRG pay-
ment amounts for all discharges for all condi-
tions from such hospital for such fiscal year. 
‘‘(C) EXCESS READMISSION RATIO.— 
‘‘(i) IN GENERAL.—Subject to clauses 
(ii) and (iii), the term ‘excess readmissions 
ratio’ means, with respect to an applicable 
condition for a hospital for an applicable 
period, the ratio (but not less than 1.0) 
of— 
‘‘(I) the risk adjusted readmis-
sions based on actual readmissions, as 
determined consistent with a readmis-
sion measure methodology that has 
been 
endorsed 
under 
paragraph 
(5)(A)(ii)(I), for an applicable hospital 
for such condition with respect to the 
applicable period; to 
‘‘(II) the risk adjusted expected 
readmissions 
(as 
determined 
con-
454 
sistent with such a methodology) for 
such hospital for such condition with 
respect to such applicable period. 
‘‘(ii) EXCLUSION
OF
CERTAIN
RE-
ADMISSIONS.—For purposes of clause (i), 
with respect to a hospital, excess readmis-
sions shall not include readmissions for an 
applicable condition for which there are 
fewer than a minimum number (as deter-
mined by the Secretary) of discharges for 
such applicable condition for the applicable 
period and such hospital. 
‘‘(iii) ADJUSTMENT.—In order to pro-
mote a reduction over time in the overall 
rate of readmissions for applicable condi-
tions, the Secretary may provide, beginning 
with discharges for fiscal year 2014, for 
the determination of the excess readmis-
sions ratio under subparagraph (C) to be 
based on a ranking of hospitals by read-
mission ratios (from lower to higher read-
mission ratios) normalized to a benchmark 
that is lower than the 50th percentile. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section:
455 
‘‘(A) APPLICABLE CONDITION.—The term 
‘applicable condition’ means, subject to sub-
paragraph (B), a condition or procedure se-
lected by the Secretary among conditions and 
procedures for which— 
‘‘(i) readmissions (as defined in sub-
paragraph (E)) that represent conditions 
or procedures that are high volume or high 
expenditures under this title (or other cri-
teria specified by the Secretary); and 
‘‘(ii) measures of such readmissions— 
‘‘(I) have been endorsed by the 
entity with a contract under section 
1890(a); and 
‘‘(II) such endorsed measures 
have appropriate exclusions for re-
admissions that are unrelated to the 
prior discharge (such as a planned re-
admission or transfer to another ap-
plicable hospital). 
‘‘(B) EXPANSION OF APPLICABLE CONDI-
TIONS.—Beginning with fiscal year 2013, the 
Secretary shall expand the applicable conditions 
beyond the 3 conditions for which measures 
have been endorsed as described in subpara-
456 
graph (A)(ii)(I) as of the date of the enactment 
of this subsection to the additional 4 conditions 
that have been so identified by the Medicare 
Payment Advisory Commission in its report to 
Congress in June 2007 and to other conditions 
and procedures which may include an all-condi-
tion measure of readmissions, as determined 
appropriate by the Secretary. In expanding 
such applicable conditions, the Secretary shall 
seek the endorsement described in subpara-
graph (A)(ii)(I) but may apply such measures 
without such an endorsement. 
‘‘(C) APPLICABLE
HOSPITAL.—The term 
‘applicable hospital’ means a subsection (d) hos-
pital or a hospital that is paid under section 
1814(b)(3). 
‘‘(D) APPLICABLE PERIOD.—The term ‘ap-
plicable period’ means, with respect to a fiscal 
year, such period as the Secretary shall specify 
for purposes of determining excess readmis-
sions. 
‘‘(E) READMISSION.—The term ‘readmis-
sion’ means, in the case of an individual who is 
discharged from an applicable hospital, the ad-
mission of the individual to the same or another
457 
applicable hospital within a time period speci-
fied by the Secretary from the date of such dis-
charge. Insofar as the discharge relates to an 
applicable condition for which there is an en-
dorsed measure described in subparagraph 
(A)(ii)(I), such time period (such as 30 days) 
shall be consistent with the time period speci-
fied for such measure. 
‘‘(6) LIMITATIONS ON REVIEW.—There shall be 
no administrative or judicial review under section 
1869, section 1878, or otherwise of— 
‘‘(A) the determination of base operating 
DRG payment amounts; 
‘‘(B) the methodology for determining the 
adjustment factor under paragraph (3), includ-
ing excess readmissions ratio under paragraph 
(4)(C), aggregate payments for excess readmis-
sions under paragraph (4)(A), and aggregate 
payments for all discharges under paragraph 
(4)(B), and applicable periods and applicable 
conditions under paragraph (5); 
‘‘(C) the measures of readmissions as de-
scribed in paragraph (5)(A)(ii); and 
‘‘(D) the determination of a targeted hos-
pital under paragraph (8)(B)(i), the increase in
458 
payment under paragraph (8)(B)(ii), the aggre-
gate cap under paragraph (8)(C)(i), the hos-
pital-specific limit under paragraph (8)(C)(ii), 
and the form of payment made by the Secretary 
under paragraph (8)(D). 
‘‘(7) MONITORING INAPPROPRIATE CHANGES IN 
ADMISSIONS PRACTICES.—The Secretary shall mon-
itor the activities of applicable hospitals to determine 
if such hospitals have taken steps to avoid patients 
at risk in order to reduce the likelihood of increasing 
readmissions for applicable conditions or taken other 
inappropriate steps involving readmissions or trans-
fers. If the Secretary determines that such a hos-
pital has taken such a step, after notice to the hos-
pital and opportunity for the hospital to undertake 
action to alleviate such steps, the Secretary may im-
pose an appropriate sanction. 
‘‘(8) ASSISTANCE TO CERTAIN HOSPITALS.— 
‘‘(A) IN GENERAL.—For purposes of pro-
viding funds to applicable hospitals to take 
steps described in subparagraph (E) to address 
factors that may impact readmissions of indi-
viduals who are discharged from such a hos-
pital, for fiscal years beginning on or after Oc-
tober 1, 2011, the Secretary shall make a pay-
459 
ment adjustment for a hospital described in 
subparagraph (B), with respect to each such 
fiscal year, by a percent estimated by the Sec-
retary to be consistent with subparagraph (C). 
The Secretary shall provide priority to hospitals 
that serve Medicare beneficiaries at highest risk 
for readmission or for a poor transition from 
such a hospital to a post-hospital site of care. 
‘‘(B) TARGETED
HOSPITALS.—Subpara-
graph (A) shall apply to an applicable hospital 
that— 
‘‘(i) had (or, in the case of an 
1814(b)(3) hospital, otherwise would have 
had) a disproportionate patient percentage 
(as defined in section 1886(d)(5)(F)) of at 
least 30 percent, using the latest available 
data as estimated by the Secretary; and 
‘‘(ii) provides assurances satisfactory 
to the Secretary that the increase in pay-
ment under this paragraph shall be used 
for purposes described in subparagraph 
(E). 
‘‘(C) CAPS.— 
‘‘(i) AGGREGATE CAP.—The aggregate 
amount of the payment adjustment under
460 
this paragraph for a fiscal year shall not 
exceed 5 percent of the estimated dif-
ference in the spending that would occur 
for such fiscal year with and without appli-
cation of the adjustment factor described 
in paragraph (3) and applied pursuant to 
paragraph (1). 
‘‘(ii) HOSPITAL-SPECIFIC LIMIT.—The 
aggregate amount of the payment adjust-
ment for a hospital under this paragraph 
shall not exceed the estimated difference in 
spending that would occur for such fiscal 
year for such hospital with and without ap-
plication of the adjustment factor de-
scribed in paragraph (3) and applied pur-
suant to paragraph (1). 
‘‘(D) FORM OF PAYMENT.—The Secretary 
may make the additional payments under this 
paragraph on a lump sum basis, a periodic 
basis, a claim by claim basis, or otherwise. 
‘‘(E) USE OF ADDITIONAL PAYMENT.— 
‘‘(i) IN
GENERAL.—Funding under 
this paragraph shall be used by targeted 
hospitals for activities designed to address 
the patient noncompliance issues that re-
461 
sult in higher than normal readmission 
rates, including transitional care services 
described in clause (ii) and any or all of 
the other activities described in clause (iii). 
‘‘(ii) 
TRANSITIONAL
CARE
SERV-
ICES.—The transitional care services de-
scribed in this clause are transitional care 
services furnished by a qualified transi-
tional care provider, such as a nurse or 
other health professional, who meets rel-
evant experience and training requirements 
as specified by the Secretary that support 
a beneficiary under this section beginning 
on the date of an individual’s admission to 
a hospital for inpatient hospital services 
and ending at the latest on the last day of 
the 90-day period beginning on the date of 
the individual’s discharge from the applica-
ble hospital. The Secretary shall determine 
and update services to be included in tran-
sitional care services under this clause as 
appropriate, based on evidence of their ef-
fectiveness in reducing hospital readmis-
sions and improving health outcomes. Such 
services shall include the following:
462 
‘‘(I) Conduct of an assessment 
prior to discharge, which assessment 
may include an assessment of the in-
dividual’s physical and mental condi-
tion, cognitive and functional capac-
ities, medication regimen and adher-
ence, social and environmental needs, 
and primary caregiver needs and re-
sources. 
‘‘(II) Development of a evidence- 
based plan of transitional care for the 
individual developed after consultation 
with the individual and the individ-
ual’s primary caregiver and other 
health team members, as appropriate. 
Such plan shall include a list of cur-
rent therapies prescribed, treatment 
goals and may include other items or 
elements as determined by the Sec-
retary, such as identifying list of po-
tential health risks and future services 
for both the individual and any pri-
mary caregiver.
463 
‘‘(iii) OTHER ACTIVITIES.—The other 
activities described in this clause are the 
following: 
‘‘(I) Providing other care coordi-
nation services not described under 
clause (ii). 
‘‘(II) Hiring translators and in-
terpreters. 
‘‘(III) Increasing services offered 
by discharge planners. 
‘‘(IV) Ensuring that individuals 
receive a summary of care and medi-
cation orders upon discharge. 
‘‘(V) Developing a quality im-
provement plan to assess and remedy 
preventable readmission rates. 
‘‘(VI) Assigning appropriate fol-
low-up care for discharged individuals. 
‘‘(VII) Doing other activities as 
determined appropriate by the Sec-
retary. 
‘‘(F) GAO REPORT ON USE OF FUNDS.— 
Not later than 3 years after the date on which 
funds are first made available under this para-
graph, the Comptroller General of the United
464 
States shall submit to Congress a report on the 
use of such funds. Such report shall consider 
information on the effective uses of such funds, 
how the uses of such funds affected hospital re-
admission rates (including at 6 months post- 
discharge), health outcomes and quality, reduc-
tions in expenditures under this title and the 
experiences of beneficiaries, primary caregivers, 
and providers, as well as any appropriate rec-
ommendations.’’. 
(b) APPLICATION
TO
CRITICAL
ACCESS
HOS-
PITALS.—Section 1814(l) of the Social Security Act (42 
U.S.C. 1395f(l)) is amended— 
(1) in paragraph (5)— 
(A) by striking ‘‘and’’ at the end of sub-
paragraph (C); 
(B) by striking the period at the end of 
subparagraph (D) and inserting ‘‘; and’’; 
(C) by inserting at the end the following 
new subparagraph: 
‘‘(E) the methodology for determining the ad-
justment factor under paragraph (5), including the 
determination of aggregate payments for actual and 
expected readmissions, applicable periods, applicable 
conditions and measures of readmissions.’’; and
465 
(D) by redesignating such paragraph as 
paragraph (6); and 
(2) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5) The adjustment factor described in section 
1886(p)(3) shall apply to payments with respect to a crit-
ical access hospital with respect to a cost reporting period 
beginning in fiscal year 2012 and each subsequent fiscal 
year (after application of paragraph (4) of this subsection) 
in a manner similar to the manner in which such section 
applies with respect to a fiscal year to an applicable hos-
pital as described in section 1886(p)(2).’’. 
(c) POST ACUTE CARE PROVIDERS.— 
(1) INTERIM POLICY.— 
(A) IN GENERAL.—With respect to a read-
mission to an applicable hospital or a critical 
access hospital (as described in section 1814(l) 
of the Social Security Act) from a post acute 
care provider (as defined in paragraph (3)) and 
such a readmission is not governed by section 
412.531 of title 42, Code of Federal Regula-
tions, if the claim submitted by such a post- 
acute care provider under title XVIII of the So-
cial Security Act indicates that the individual 
was readmitted to a hospital from such a post-
468 
applicable hospitals and critical access hospitals 
under the amendments made by subsection (a). 
The provisions of paragraph (1) shall apply 
with respect to any period on or after October 
1, 2014, and before such application date de-
scribed in the previous sentence in the same 
manner as such provisions apply with respect to 
fiscal or rate year 2014. 
(C) MONITORING
AND
PENALTIES.—The 
provisions of paragraph (7) of such section 
1886(p) shall apply to providers under this 
paragraph in the same manner as they apply to 
hospitals under such section. 
(3) DEFINITIONS.—For purposes of this sub-
section: 
(A) POST
ACUTE
CARE
PROVIDER.—The 
term ‘‘post acute care provider’’ means— 
(i) a skilled nursing facility (as de-
fined in section 1819(a) of the Social Secu-
rity Act); 
(ii) an inpatient rehabilitation facility 
(described in section 1886(h)(1)(A) of such 
Act); 
(iii) a home health agency (as defined 
in section 1861(o) of such Act); and
469 
(iv) a long term care hospital (as de-
fined in section 1861(ccc) of such Act). 
(B) OTHER TERMS .—The terms ‘‘applica-
ble condition’’, ‘‘applicable hospital’’, and ‘‘re-
admission’’ have the meanings given such terms 
in section 1886(p)(5) of the Social Security 
Act, as added by subsection (a)(1). 
(d) PHYSICIANS.— 
(1) STUDY.—The Secretary of Health and 
Human Services shall conduct a study to determine 
how the readmissions policy described in the pre-
vious subsections could be applied to physicians. 
(2) 
CONSIDERATIONS.—In 
conducting 
the 
study, the Secretary shall consider approaches such 
as— 
(A) creating a new code (or codes) and 
payment amount (or amounts) under the fee 
schedule in section 1848 of the Social Security 
Act (in a budget neutral manner) for services 
furnished by an appropriate physician who sees 
an individual within the first week after dis-
charge from a hospital or critical access hos-
pital; 
(B) developing measures of rates of read-
mission for individuals treated by physicians;
470 
(C) applying a payment reduction for phy-
sicians who treat the patient during the initial 
admission that results in a readmission; and 
(D) methods for attributing payments or 
payment reductions to the appropriate physi-
cian or physicians. 
(3) REPORT.—The Secretary shall issue a pub-
lic report on such study not later than the date that 
is one year after the date of the enactment of this 
Act. 
(e) FUNDING.—For purposes of carrying out the pro-
visions of this section, in addition to funds otherwise avail-
able, out of any funds in the Treasury not otherwise ap-
propriated, there are appropriated to the Secretary of 
Health and Human Services for the Center for Medicare 
& Medicaid Services Program Management Account 
$25,000,000 for each fiscal year beginning with 2010. 
Amounts appropriated under this subsection for a fiscal 
year shall be available until expended. 
SEC. 1152. POST ACUTE CARE SERVICES PAYMENT REFORM 
PLAN AND BUNDLING PILOT PROGRAM. 
(a) PLAN.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the 
‘‘Secretary’’) shall develop a detailed plan to reform
471 
payment for post acute care (PAC) services under 
the Medicare program under title XVIII of the So-
cial Security Act (in this section referred to as the 
‘‘Medicare program)’’. The goals of such payment 
reform are to— 
(A) improve the coordination, quality, and 
efficiency of such services; and 
(B) improve outcomes for individuals such 
as reducing the need for readmission to hos-
pitals from providers of such services. 
(2) BUNDLING
POST
ACUTE
SERVICES.—The 
plan described in paragraph (1) shall include de-
tailed specifications for a bundled payment for post 
acute services (in this section referred to as the 
‘‘post acute care bundle’’), and may include other 
approaches determined appropriate by the Secretary. 
(3) POST ACUTE SERVICES.—For purposes of 
this section, the term ‘‘post acute services’’ means 
services for which payment may be made under the 
Medicare program that are furnished by skilled 
nursing facilities, inpatient rehabilitation facilities, 
long term care hospitals, hospital based outpatient 
rehabilitation facilities and home health agencies to 
an individual after discharge of such individual from
472 
a hospital, and such other services determined ap-
propriate by the Secretary. 
(b) DETAILS.—The plan described in subsection 
(a)(1) shall include consideration of the following issues: 
(1) The nature of payments under a post acute 
care bundle, including the type of provider or entity 
to whom payment should be made, the scope of ac-
tivities and services included in the bundle, whether 
payment for physicians’ services should be included 
in the bundle, and the period covered by the bundle. 
(2) Whether the payment should be consoli-
dated with the payment under the inpatient prospec-
tive system under section 1886 of the Social Secu-
rity Act (in this section referred to as MS–DRGs) 
or a separate payment should be established for such 
bundle, and if a separate payment is established, 
whether it should be made only upon use of post 
acute care services or for every discharge. 
(3) Whether the bundle should be applied 
across all categories of providers of inpatient serv-
ices (including critical access hospitals) and post 
acute care services or whether it should be limited 
to certain categories of providers, services, or dis-
charges, such as high volume or high cost MS– 
DRGs.
473 
(4) The extent to which payment rates could be 
established to achieve offsets for efficiencies that 
could be expected to be achieved with a bundle pay-
ment, whether such rates should be established on a 
national basis or for different geographic areas, 
should vary according to discharge, case mix, 
outliers, and geographic differences in wages or 
other appropriate adjustments, and how to update 
such rates. 
(5) The nature of protections needed for indi-
viduals under a system of bundled payments to en-
sure that individuals receive quality care, are fur-
nished the level and amount of services needed as 
determined by an appropriate assessment instru-
ment, are offered choice of provider, and the extent 
to which transitional care services would improve 
quality of care for individuals and the functioning of 
a bundled post-acute system. 
(6) The nature of relationships that may be re-
quired between hospitals and providers of post acute 
care services to facilitate bundled payments, includ-
ing the application of gainsharing, anti-referral, 
anti-kickback, and anti-trust laws. 
(7) Quality measures that would be appropriate 
for reporting by hospitals and post acute providers
474 
(such as measures that assess changes in functional 
status and quality measures appropriate for each 
type of post acute services provider including how 
the reporting of such quality measures could be co-
ordinated with other reporting of such quality meas-
ures by such providers otherwise required). 
(8) How cost-sharing for a post acute care bun-
dle should be treated relative to current rules for 
cost-sharing for inpatient hospital, home health, 
skilled nursing facility, and other services. 
(9) How other programmatic issues should be 
treated in a post acute care bundle, including rules 
specific to various types of post-acute providers such 
as the post-acute transfer policy, 3-day hospital stay 
to qualify for services furnished by skilled nursing 
facilities, and the coordination of payments and care 
under the Medicare program and the Medicaid pro-
gram. 
(10) Such other issues as the Secretary deems 
appropriate. 
(c) CONSULTATIONS AND ANALYSIS.— 
(1) CONSULTATION WITH STAKEHOLDERS.—In 
developing the plan under subsection (a)(1), the Sec-
retary shall consult with relevant stakeholders and 
shall consider experience with such research studies
475 
and demonstrations that the Secretary determines 
appropriate. 
(2) ANALYSIS AND DATA COLLECTION.—In de-
veloping such plan, the Secretary shall— 
(A) analyze the issues described in sub-
section (b) and other issues that the Secretary 
determines appropriate; 
(B) analyze the impacts (including geo-
graphic impacts) of post acute service reform 
approaches, including bundling of such services 
on individuals, hospitals, post acute care pro-
viders, and physicians; 
(C) use existing data (such as data sub-
mitted on claims) and collect such data as the 
Secretary determines are appropriate to develop 
such plan required in this section; and 
(D) if patient functional status measures 
are appropriate for the analysis, to the extent 
practical, build upon the CARE tool being de-
veloped pursuant to section 5008 of the Deficit 
Reduction Act of 2005. 
(d) ADMINISTRATION.— 
(1) FUNDING.—For purposes of carrying out 
the provisions of this section, in addition to funds 
otherwise available, out of any funds in the Treasury
476 
not otherwise appropriated, there are appropriated 
to the Secretary for the Center for Medicare & Med-
icaid 
Services 
Program 
Management 
Account 
$15,000,000 for each of the fiscal years 2010 
through 2012. Amounts appropriated under this 
paragraph for a fiscal year shall be available until 
expended. 
(2) EXPEDITED
DATA
COLLECTION.—Chapter 
35 of title 44, United States Code, shall not apply 
to this section. 
(e) PUBLIC REPORTS.— 
(1) INTERIM
REPORTS.—The Secretary shall 
issue interim public reports on a periodic basis on 
the plan described in subsection (a)(1), the issues 
described in subsection (b), and impact analyses as 
the Secretary determines appropriate. 
(2) FINAL REPORT.—Not later than the date 
that is 3 years after the date of the enactment of 
this Act, the Secretary shall issue a final public re-
port on such plan, including analysis of issues de-
scribed in subsection (b) and impact analyses. 
(f) CONVERSION OF ACUTE CARE EPISODE DEM-
ONSTRATION TO PILOT PROGRAM AND EXPANSION TO IN-
CLUDE POST ACUTE SERVICES.—
477 
(1) IN GENERAL.—Part E of title XVIII of the 
Social Security Act is amended by inserting after 
section 1866C the following new section: 
‘‘CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION 
TO PILOT PROGRAM AND EXPANSION TO INCLUDE 
POST ACUTE SERVICES 
‘‘SEC. 1866D. (a) CONVERSION AND EXPANSION.— 
‘‘(1) IN GENERAL.—By not later than January 
1, 2011, the Secretary shall, for the purpose of pro-
moting the use of bundled payments to promote effi-
cient, coordinated, and high quality delivery of 
care— 
‘‘(A) convert the acute care episode dem-
onstration program conducted under section 
1866C to a pilot program; and 
‘‘(B) subject to subsection (c), expand such 
program as so converted to include post acute 
services and such other services the Secretary 
determines to be appropriate, which may in-
clude transitional services. 
‘‘(2) BUNDLED PAYMENT STRUCTURES.— 
‘‘(A) IN GENERAL.—In carrying out para-
graph (1), the Secretary may apply bundled 
payments with respect to— 
‘‘(i) hospitals and physicians;
478 
‘‘(ii) hospitals and post-acute care 
providers; 
‘‘(iii) hospitals, physicians, and post- 
acute care providers; or 
‘‘(iv) combinations of post-acute pro-
viders. 
‘‘(B) FURTHER APPLICATION.— 
‘‘(i) IN
GENERAL.—In carrying out 
paragraph (1), the Secretary shall apply 
bundled payments in a manner so as to in-
clude collaborative care networks and con-
tinuing care hospitals. 
‘‘(ii) COLLABORATIVE CARE NETWORK 
DEFINED.—For purposes of this subpara-
graph, the term ‘collaborative care net-
work’ means a consortium of health care 
providers that provides a comprehensive 
range of coordinated and integrated health 
care services to low-income patient popu-
lations (including the uninsured) which 
may include coordinated and comprehen-
sive care by safety net providers to reduce 
any unnecessary use of items and services 
furnished in emergency departments, man-
age chronic conditions, improve quality and
479 
efficiency of care, increase preventive serv-
ices, and promote adherence to post-acute 
and follow-up care plans. 
‘‘(iii) CONTINUING
CARE
HOSPITAL 
DEFINED.—For purposes of this subpara-
graph, the term ‘continuing care hospital’ 
means an entity that has demonstrated the 
ability to meet patient care and patient 
safety standards and that provides under 
common management the medical and re-
habilitation services provided in inpatient 
rehabilitation hospitals and units (as de-
fined in section 1886(d)(1)(B)(ii)), long- 
term care hospitals (as defined in section 
1886(d)(1)(B)(iv)(I)), and skilled nursing 
facilities (as defined in section 1819(a)) 
that are located in a hospital described in 
section 1886(d). 
‘‘(b) SCOPE.—The Secretary shall set specific goals 
for the number of acute and post-acute bundling test sites 
under the pilot program to ensure that over time the pilot 
program is of sufficient size and scope to— 
‘‘(1) test the approaches under the pilot pro-
gram in a variety of settings, including urban, rural, 
and underserved areas;
480 
‘‘(2) include geographic areas and additional 
conditions that account for significant program 
spending, as defined by the Secretary; and 
‘‘(3) subject to subsection (d), disseminate the 
pilot program rapidly on a national basis. 
To the extent that the Secretary finds inpatient and post 
acute care bundling to be successful in improving quality 
and reducing costs, the Secretary shall implement such 
mechanisms and reforms under the pilot program on as 
large a geographic scale as practical and economical, con-
sistent with subsection (e). Nothing in this subsection 
shall be construed as limiting the number of hospital and 
physician groups or the number of hospital and post-acute 
provider groups that may participate in the pilot program. 
‘‘(c) LIMITATION.—The Secretary shall only expand 
the pilot program under subsection (a) if the Secretary 
finds that— 
‘‘(1) the demonstration program under section 
1866C and pilot program under this section main-
tain or increase the quality of care received by indi-
viduals enrolled under this title; and 
‘‘(2) such demonstration program and pilot pro-
gram reduce program expenditures and, based on 
the certification under subsection (d), that the ex-
pansion of such pilot program would result in esti-
481 
mated spending that would be less than what spend-
ing would otherwise be in the absence of this section. 
‘‘(d) CERTIFICATION.—For purposes of subsection 
(c), the Chief Actuary of the Centers for Medicare & Med-
icaid Services shall certify whether expansion of the pilot 
program under this section would result in estimated 
spending that would be less than what spending would 
otherwise be in the absence of this section. 
‘‘(e) VOLUNTARY PARTICIPATION.—Nothing in this 
paragraph shall be construed as requiring the participa-
tion of an entity in the pilot program under this section. 
‘‘(f) EVALUATION
ON
COST
AND
QUALITY
OF 
CARE.—The Secretary shall conduct an evaluation of the 
pilot program under subsection (a) to study the effect of 
such program on costs and quality of care. The findings 
of such evaluation shall be included in the final report re-
quired under section 1152(e)(2) of the Affordable Health 
Care for America Act. 
‘‘(g) STUDY OF ADDITIONAL BUNDLING AND EPI-
SODE-BASED PAYMENT FOR PHYSICIANS’ SERVICES.— 
‘‘(1) IN GENERAL.—The Secretary shall provide 
for a study of and development of a plan for testing 
additional ways to increase bundling of payments for 
physicians in connection with an episode of care, 
such as in connection with outpatient hospital serv-
482 
ices or services rendered in physicians’ offices, other 
than those provided under the pilot program. 
‘‘(2) APPLICATION.—The Secretary may imple-
ment such a plan through a demonstration pro-
gram.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
1866C(b) of the Social Security Act (42 U.S.C. 
1395cc–3(b)) is amended by striking ‘‘The Sec-
retary’’ and inserting ‘‘Subject to section 1866D, the 
Secretary’’. 
SEC. 1153. HOME HEALTH PAYMENT UPDATE FOR 2010. 
Section 1895(b)(3)(B)(ii) of the Social Security Act 
(42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended— 
(1) in subclause (IV), by striking ‘‘and’’; 
(2) by redesignating subclause (V) as subclause 
(VII); and 
(3) by inserting after subclause (IV) the fol-
lowing new subclauses: 
‘‘(V) 2007, 2008, and 2009, sub-
ject to clause (v), the home health 
market basket percentage increase; 
‘‘(VI) 2010, subject to clause (v), 
0 percent; and’’.
483 
SEC. 1154. PAYMENT ADJUSTMENTS FOR HOME HEALTH 
CARE. 
(a) ACCELERATION OF ADJUSTMENT FOR CASE MIX 
CHANGES.—Section 1895(b)(3)(B) of the Social Security 
Act (42 U.S.C. 1395fff(b)(3)(B)) is amended— 
(1) in clause (iv), by striking ‘‘Insofar as’’ and 
inserting ‘‘Subject to clause (vi), insofar as’’; and 
(2) by adding at the end the following new 
clause: 
‘‘(vi) SPECIAL RULE FOR CASE MIX 
CHANGES FOR 2011.— 
‘‘(I) IN GENERAL.—With respect 
to the case mix adjustments estab-
lished in section 484.220(a) of title 
42, Code of Federal Regulations, the 
Secretary shall apply, in 2010, the ad-
justment established in paragraph (3) 
of such section for 2011, in addition 
to applying the adjustment established 
in paragraph (2) for 2010. 
‘‘(II) CONSTRUCTION.—Nothing 
in this clause shall be construed as 
limiting the amount of adjustment for 
case mix for 2010 or 2011 if more re-
cent data indicate an appropriate ad-
justment that is greater than the
484 
amount established in the section de-
scribed in subclause (I).’’. 
(b) REBASING HOME HEALTH PROSPECTIVE PAY-
MENT AMOUNT.—Section 1895(b)(3)(A) of the Social Se-
curity Act (42 U.S.C. 1395fff(b)(3)(A)) is amended— 
(1) in clause (i)— 
(A) in subclause (III), by inserting ‘‘and 
before 2011’’ after ‘‘after the period described 
in subclause (II)’’; and 
(B) by inserting after subclause (III) the 
following new subclauses: 
‘‘(IV) Subject to clause (iii)(I), 
for 2011, such amount (or amounts) 
shall be adjusted by a uniform per-
centage determined to be appropriate 
by the Secretary based on analysis of 
factors such as changes in the average 
number and types of visits in an epi-
sode, the change in intensity of visits 
in an episode, growth in cost per epi-
sode, and other factors that the Sec-
retary considers to be relevant. 
‘‘(V) Subject to clause (iii)(II), 
for a year after 2011, such a amount 
(or amounts) shall be equal to the
485 
amount 
(or 
amounts) 
determined 
under this clause for the previous 
year, updated under subparagraph 
(B).’’; and 
(2) by adding at the end the following new 
clause: 
‘‘(iii) SPECIAL RULE IN CASE OF IN-
ABILITY TO EFFECT TIMELY REBASING.— 
‘‘(I) APPLICATION
OF
PROXY 
AMOUNT FOR 2011.—If the Secretary 
is not able to compute the amount (or 
amounts) under clause (i)(IV) so as to 
permit, on a timely basis, the applica-
tion of such clause for 2011, the Sec-
retary 
shall 
substitute 
for 
such 
amount (or amounts) 95 percent of 
the amount (or amounts) that would 
otherwise be specified under clause 
(i)(III) if it applied for 2011. 
‘‘(II) ADJUSTMENT FOR SUBSE-
QUENT
YEARS
BASED
ON
DATA.—If 
the Secretary applies subclause (I), 
the Secretary before July 1, 2011, 
shall 
compare 
the 
amount 
(or 
amounts) applied under such sub-
486 
clause with the amount (or amounts) 
that should have been applied under 
clause (i)(IV). The Secretary shall de-
crease or increase the prospective pay-
ment amount (or amounts) under 
clause (i)(V) for 2012 (or, at the Sec-
retary’s discretion, over a period of 
several years beginning with 2012) by 
the amount (if any) by which the 
amount (or amounts) applied under 
subclause (I) is greater or less, re-
spectively, 
than 
the 
amount 
(or 
amounts) that should have been ap-
plied under clause (i)(IV).’’. 
SEC. 
1155. 
INCORPORATING 
PRODUCTIVITY 
IMPROVE-
MENTS INTO MARKET BASKET UPDATE FOR 
HOME HEALTH SERVICES. 
(a) IN GENERAL.—Section 1895(b)(3)(B) of the So-
cial Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amend-
ed— 
(1) in clause (iii), by inserting ‘‘(including being 
subject to the productivity adjustment described in 
section 1886(b)(3)(B)(iii)(II))’’ after ‘‘in the same 
manner’’; and
487 
(2) in clause (v)(I), by inserting ‘‘(but not 
below 0)’’ after ‘‘reduced’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to home health market basket 
percentage increases for years beginning with 2011. 
SEC. 1155A. MEDPAC STUDY ON VARIATION IN HOME 
HEALTH MARGINS. 
(a) IN GENERAL.—The Medicare Payment Advisory 
Commission shall conduct a study regarding variation in 
performance of home health agencies in an effort to ex-
plain variation in Medicare margins for such agencies. 
Such study shall include an examination of at least the 
following issues: 
(1) The demographic characteristics of individ-
uals served and the geographic distribution associ-
ated with transportation costs. 
(2) The characteristics of such agencies, such 
as whether such agencies operate 24 hours each day, 
provide charity care, or are part of an integrated 
health system. 
(3) The socio-economic status of individuals 
served, such as the proportion of such individuals 
who are dually eligible for Medicare and Medicaid 
benefits.
488 
(4) The presence of severe and or chronic dis-
ease or disability in individuals served, as evidenced 
by multiple discontinuous home health episodes with 
a high number of visits per episode. 
(5) The differences in services provided, such as 
therapy and non-therapy services. 
(b) REPORT.—Not later than June 1, 2011, the Com-
mission shall submit a report to the Congress on the re-
sults of the study conducted under subsection (a) and shall 
include in the report the Commission’s conclusions and 
recommendations, if appropriate, regarding each of the 
issues described in paragraphs (1), (2) and (3) of such 
subsection. 
SEC. 1155B. PERMITTING HOME HEALTH AGENCIES TO AS-
SIGN 
THE 
MOST 
APPROPRIATE 
SKILLED 
SERVICE TO MAKE THE INITIAL ASSESSMENT 
VISIT UNDER A MEDICARE HOME HEALTH 
PLAN OF CARE FOR REHABILITATION CASES. 
(a) 
IN
GENERAL.—Notwithstanding 
section 
484.55(a)(2) of title 42 of the Code of Federal Regula-
tions or any other provision of law, a home health agency 
may determine the most appropriate skilled therapist to 
make the initial assessment visit for an individual who is 
referred (and may be eligible) for home health services 
under title XVIII of the Social Security Act but who does
489 
not require skilled nursing care as long as the skilled serv-
ice (for which that therapist is qualified to provide the 
service) is included as part of the plan of care for home 
health services for such individual. 
(b) RULE
OF CONSTRUCTION.—Nothing in sub-
section (a) shall be construed to provide for initial eligi-
bility for coverage of home health services under title 
XVIII of the Social Security Act on the basis of a need 
for occupational therapy. 
SEC. 1156. LIMITATION ON MEDICARE EXCEPTIONS TO THE 
PROHIBITION ON CERTAIN PHYSICIAN RE-
FERRALS MADE TO HOSPITALS. 
(a) IN GENERAL.—Section 1877 of the Social Secu-
rity Act (42 U.S.C. 1395nn) is amended— 
(1) in subsection (d)(2)— 
(A) in subparagraph (A), by striking 
‘‘and’’ at the end; 
(B) in subparagraph (B), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) in the case where the entity is a hos-
pital, the hospital meets the requirements of 
paragraph (3)(D).’’; 
(2) in subsection (d)(3)—
490 
(A) in subparagraph (B), by striking 
‘‘and’’ at the end; 
(B) in subparagraph (C), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(D) the hospital meets the requirements 
described in subsection (i)(1).’’; 
(3) by amending subsection (f) to read as fol-
lows: 
‘‘(f) 
REPORTING
AND
DISCLOSURE
REQUIRE-
MENTS.— 
‘‘(1) IN GENERAL.—Each entity providing cov-
ered items or services for which payment may be 
made under this title shall provide the Secretary 
with the information concerning the entity’s owner-
ship, investment, and compensation arrangements, 
including— 
‘‘(A) the covered items and services pro-
vided by the entity, and 
‘‘(B) the names and unique physician iden-
tification numbers of all physicians with an 
ownership or investment interest (as described 
in subsection (a)(2)(A)), or with a compensa-
tion arrangement (as described in subsection
491 
(a)(2)(B)), in the entity, or whose immediate 
relatives have such an ownership or investment 
interest or who have such a compensation rela-
tionship with the entity. 
Such information shall be provided in such form, 
manner, and at such times as the Secretary shall 
specify. The requirement of this subsection shall not 
apply to designated health services provided outside 
the United States or to entities which the Secretary 
determines provide services for which payment may 
be made under this title very infrequently. 
‘‘(2) REQUIREMENTS
FOR
HOSPITALS
WITH 
PHYSICIAN
OWNERSHIP
OR
INVESTMENT.—In the 
case of a hospital that meets the requirements de-
scribed in subsection (i)(1), the hospital shall— 
‘‘(A) submit to the Secretary an initial re-
port, and periodic updates at a frequency deter-
mined by the Secretary, containing a detailed 
description of the identity of each physician 
owner and physician investor and any other 
owners or investors of the hospital; 
‘‘(B) require that any referring physician 
owner or investor discloses to the individual 
being referred, by a time that permits the indi-
vidual to make a meaningful decision regarding
492 
the receipt of services, as determined by the 
Secretary, the ownership or investment interest, 
as applicable, of such referring physician in the 
hospital; and 
‘‘(C) disclose the fact that the hospital is 
partially or wholly owned by one or more physi-
cians or has one or more physician investors— 
‘‘(i) on any public website for the hos-
pital; and 
‘‘(ii) in any public advertising for the 
hospital. 
The information to be reported or disclosed under 
this paragraph shall be provided in such form, man-
ner, and at such times as the Secretary shall specify. 
The requirements of this paragraph shall not apply 
to designated health services furnished outside the 
United States or to entities which the Secretary de-
termines provide services for which payment may be 
made under this title very infrequently. 
‘‘(3) PUBLICATION
OF
INFORMATION.—The 
Secretary shall publish, and periodically update, the 
information submitted by hospitals under paragraph 
(2)(A) on the public Internet website of the Centers 
for Medicare & Medicaid Services.’’;
493 
(4) by amending subsection (g)(5) to read as 
follows: 
‘‘(5) FAILURE TO REPORT OR DISCLOSE INFOR-
MATION.— 
‘‘(A) REPORTING.—Any person who is re-
quired, but fails, to meet a reporting require-
ment of paragraphs (1) and (2)(A) of sub-
section (f) is subject to a civil money penalty of 
not more than $10,000 for each day for which 
reporting is required to have been made. 
‘‘(B) DISCLOSURE.—Any physician who is 
required, but fails, to meet a disclosure require-
ment of subsection (f)(2)(B) or a hospital that 
is required, but fails, to meet a disclosure re-
quirement of subsection (f)(2)(C) is subject to 
a civil money penalty of not more than $10,000 
for each case in which disclosure is required to 
have been made. 
‘‘(C) APPLICATION.—The provisions of 
section 1128A (other than the first sentence of 
subsection (a) and other than subsection (b)) 
shall apply to a civil money penalty under sub-
paragraphs (A) and (B) in the same manner as 
such provisions apply to a penalty or proceeding 
under section 1128A(a).’’; and
494 
(5) by adding at the end the following new sub-
section: 
‘‘(i) REQUIREMENTS TO QUALIFY FOR RURAL PRO-
VIDER
AND
HOSPITAL
OWNERSHIP
EXCEPTIONS
TO 
SELF-REFERRAL PROHIBITION.— 
‘‘(1) REQUIREMENTS
DESCRIBED.—For pur-
poses of subsection (d)(3)(D), the requirements de-
scribed in this paragraph are as follows: 
‘‘(A) PROVIDER
AGREEMENT.—The hos-
pital had— 
‘‘(i) physician ownership or invest-
ment on January 1, 2009; and 
‘‘(ii) a provider agreement under sec-
tion 1866 in effect on such date. 
‘‘(B) PROHIBITION ON PHYSICIAN OWNER-
SHIP OR INVESTMENT.—The percentage of the 
total value of the ownership or investment in-
terests held in the hospital, or in an entity 
whose assets include the hospital, by physician 
owners or investors in the aggregate does not 
exceed such percentage as of the date of enact-
ment of this subsection. 
‘‘(C) PROHIBITION ON EXPANSION OF FA-
CILITY CAPACITY.—Except as provided in para-
graph (2), the number of operating rooms, pro-
495 
cedure rooms, or beds of the hospital at any 
time on or after the date of the enactment of 
this subsection are no greater than the number 
of operating rooms, procedure rooms, or beds, 
respectively, as of such date. 
‘‘(D) ENSURING
BONA
FIDE
OWNERSHIP 
AND INVESTMENT.— 
‘‘(i) Any ownership or investment in-
terests that the hospital offers to a physi-
cian are not offered on more favorable 
terms than the terms offered to a person 
who is not in a position to refer patients 
or otherwise generate business for the hos-
pital. 
‘‘(ii) The hospital (or any investors in 
the hospital) does not directly or indirectly 
provide loans or financing for any physi-
cian owner or investor in the hospital. 
‘‘(iii) The hospital (or any investors in 
the hospital) does not directly or indirectly 
guarantee a loan, make a payment toward 
a loan, or otherwise subsidize a loan, for 
any physician owner or investor or group 
of physician owners or investors that is re-
496 
lated to acquiring any ownership or invest-
ment interest in the hospital. 
‘‘(iv) Ownership or investment returns 
are distributed to each owner or investor in 
the hospital in an amount that is directly 
proportional to the ownership or invest-
ment interest of such owner or investor in 
the hospital. 
‘‘(v) The investment interest of the 
owner or investor is directly proportional 
to the owner’s or investor’s capital con-
tributions made at the time the ownership 
or investment interest is obtained. 
‘‘(vi) Physician owners and investors 
do not receive, directly or indirectly, any 
guaranteed receipt of or right to purchase 
other business interests related to the hos-
pital, including the purchase or lease of 
any property under the control of other 
owners or investors in the hospital or lo-
cated near the premises of the hospital. 
‘‘(vii) The hospital does not offer a 
physician owner or investor the oppor-
tunity to purchase or lease any property 
under the control of the hospital or any
497 
other owner or investor in the hospital on 
more favorable terms than the terms of-
fered to a person that is not a physician 
owner or investor. 
‘‘(viii) The hospital does not condition 
any physician ownership or investment in-
terests either directly or indirectly on the 
physician owner or investor making or in-
fluencing referrals to the hospital or other-
wise generating business for the hospital. 
‘‘(E) PATIENT SAFETY.—In the case of a 
hospital that does not offer emergency services, 
the hospital has the capacity to— 
‘‘(i) provide assessment and initial 
treatment for medical emergencies; and 
‘‘(ii) if the hospital lacks additional 
capabilities required to treat the emergency 
involved, refer and transfer the patient 
with the medical emergency to a hospital 
with the required capability. 
‘‘(F) LIMITATION
ON
APPLICATION
TO 
CERTAIN
CONVERTED
FACILITIES.—The hos-
pital was not converted from an ambulatory 
surgical center to a hospital on or after the date 
of enactment of this subsection.
498 
‘‘(2) EXCEPTION TO PROHIBITION ON EXPAN-
SION OF FACILITY CAPACITY.— 
‘‘(A) PROCESS.— 
‘‘(i) ESTABLISHMENT.—The Secretary 
shall establish and implement a process 
under which a hospital may apply for an 
exception from the requirement under 
paragraph (1)(C). 
‘‘(ii) OPPORTUNITY FOR COMMUNITY 
INPUT.—The process under clause (i) shall 
provide persons and entities in the commu-
nity in which the hospital applying for an 
exception is located with the opportunity to 
provide input with respect to the applica-
tion. 
‘‘(iii) 
TIMING
FOR
IMPLEMENTA-
TION.—The Secretary shall implement the 
process under clause (i) on the date that is 
one month after the promulgation of regu-
lations described in clause (iv). 
‘‘(iv) REGULATIONS.—Not later than 
the first day of the month beginning 18 
months after the date of the enactment of 
this subsection, the Secretary shall promul-
gate regulations to carry out the process
499 
under clause (i). The Secretary may issue 
such regulations as interim final regula-
tions. 
‘‘(B) FREQUENCY.—The process described 
in subparagraph (A) shall permit a hospital to 
apply for an exception up to once every 2 years. 
‘‘(C) PERMITTED INCREASE.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii) and subparagraph (D), a hospital 
granted an exception under the process de-
scribed in subparagraph (A) may increase 
the number of operating rooms, procedure 
rooms, or beds of the hospital above the 
baseline number of operating rooms, proce-
dure rooms, or beds, respectively, of the 
hospital (or, if the hospital has been grant-
ed a previous exception under this para-
graph, above the number of operating 
rooms, procedure rooms, or beds, respec-
tively, of the hospital after the application 
of the most recent increase under such an 
exception). 
‘‘(ii) 100 PERCENT INCREASE LIMITA-
TION.—The Secretary shall not permit an 
increase in the number of operating rooms,
500 
procedure rooms, or beds of a hospital 
under clause (i) to the extent such increase 
would result in the number of operating 
rooms, procedure rooms, or beds of the 
hospital exceeding 200 percent of the base-
line number of operating rooms, procedure 
rooms, or beds of the hospital. 
‘‘(iii) BASELINE
NUMBER
OF
OPER-
ATING
ROOMS, PROCEDURE
ROOMS, OR 
BEDS.—In this paragraph, the term ‘base-
line number of operating rooms, procedure 
rooms, or beds’ means the number of oper-
ating rooms, procedure rooms, or beds of a 
hospital as of the date of enactment of this 
subsection. 
‘‘(D) INCREASE
LIMITED
TO
FACILITIES 
ON THE MAIN CAMPUS OF THE HOSPITAL.— 
Any increase in the number of operating rooms, 
procedure rooms, or beds of a hospital pursuant 
to this paragraph may only occur in facilities on 
the main campus of the hospital. 
‘‘(E) CONDITIONS FOR APPROVAL OF AN 
INCREASE
IN
FACILITY
CAPACITY.—The Sec-
retary may grant an exception under the proc-
ess described in subparagraph (A) only to a
501 
hospital described in subparagraph (F) or a 
hospital— 
‘‘(i) that is located in a county in 
which the percentage increase in the popu-
lation during the most recent 5-year period 
for which data are available is estimated to 
be at least 150 percent of the percentage 
increase in the population growth of the 
State in which the hospital is located dur-
ing that period, as estimated by Bureau of 
the Census and available to the Secretary; 
‘‘(ii) whose annual percent of total in-
patient admissions that represent inpatient 
admissions under the program under title 
XIX is estimated to be equal to or greater 
than the average percent with respect to 
such admissions for all hospitals located in 
the county in which the hospital is located; 
‘‘(iii) that does not discriminate 
against beneficiaries of Federal health care 
programs and does not permit physicians 
practicing at the hospital to discriminate 
against such beneficiaries; 
‘‘(iv) that is located in a State in 
which the average bed capacity in the
502 
State is estimated to be less than the na-
tional average bed capacity; 
‘‘(v) that has an average bed occu-
pancy rate that is estimated to be greater 
than the average bed occupancy rate in the 
State in which the hospital is located; and 
‘‘(vi) that meets other conditions as 
determined by the Secretary. 
‘‘(F) SPECIAL
RULE
FOR
A
HIGH
MED-
ICAID FACILITY.—A hospital described in this 
subparagraph is a hospital that— 
‘‘(i) with respect to each of the 3 most 
recent cost reporting periods for which 
data are available, has an annual percent 
of total inpatient admissions that represent 
inpatient admissions under the program 
under title XIX that is determined by the 
Secretary 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 
‘‘(ii) meets the conditions described in 
clauses (iii) and (vi) of subparagraph (E). 
‘‘(G) PROCEDURE
ROOMS.—In this sub-
section, the term ‘procedure rooms’ includes
503 
rooms in which catheterizations, angiographies, 
angiograms, and endoscopies are furnished, but 
such term shall not include emergency rooms or 
departments (except for rooms in which cath-
eterizations, angiographies, angiograms, and 
endoscopies are furnished). 
‘‘(H) 
PUBLICATION
OF
FINAL
DECI-
SIONS.—Not later than 120 days after receiving 
a complete application under this paragraph, 
the Secretary shall publish on the public Inter-
net website of the Centers for Medicare & Med-
icaid Services the final decision with respect to 
such application. 
‘‘(I) LIMITATION ON REVIEW.—There shall 
be no administrative or judicial review under 
section 1869, section 1878, or otherwise of the 
exception process under this paragraph, includ-
ing the establishment of such process, and any 
determination made under such process. 
‘‘(3) PHYSICIAN
OWNER
OR
INVESTOR
DE-
FINED.—For purposes of this subsection and sub-
section (f)(2), the term ‘physician owner or investor’ 
means a physician (or an immediate family member 
of such physician) with a direct or an indirect own-
ership or investment interest in the hospital.
504 
‘‘(4) PATIENT SAFETY REQUIREMENT.—In the 
case of a hospital to which the requirements of para-
graph (1) apply, insofar as the hospital admits a pa-
tient and does not have any physician available on 
the premises 24 hours per day, 7 days per week, be-
fore admitting the patient— 
‘‘(A) the hospital shall disclose such fact to 
the patient; and 
‘‘(B) following such disclosure, the hospital 
shall receive from the patient a signed acknowl-
edgment that the patient understands such fact. 
‘‘(5) CLARIFICATION.—Nothing in this sub-
section shall be construed as preventing the Sec-
retary from terminating a hospital’s provider agree-
ment if the hospital is not in compliance with regu-
lations pursuant to section 1866.’’. 
(b) VERIFYING
COMPLIANCE.—The Secretary of 
Health and Human Services shall establish policies and 
procedures to verify compliance with the requirements de-
scribed in subsections (i)(1) and (i)(4) of section 1877 of 
the Social Security Act, as added by subsection (a)(5). 
The Secretary may use unannounced site reviews of hos-
pitals and audits to verify compliance with such require-
ments. 
(c) IMPLEMENTATION.—
505 
(1) FUNDING.—For purposes of carrying out 
the amendments made by subsection (a) and the 
provisions of subsection (b), in addition to funds 
otherwise available, out of any funds in the Treasury 
not otherwise appropriated there are appropriated to 
the Secretary of Health and Human Services for the 
Centers for Medicare & Medicaid Services Program 
Management Account $5,000,000 for each fiscal 
year beginning with fiscal year 2010. Amounts ap-
propriated under this paragraph for a fiscal year 
shall be available until expended. 
(2) ADMINISTRATION.—Chapter 35 of title 44, 
United States Code, shall not apply to the amend-
ments made by subsection (a) and the provisions of 
subsection (b). 
SEC. 1157. INSTITUTE OF MEDICINE STUDY OF GEO-
GRAPHIC 
ADJUSTMENT 
FACTORS 
UNDER 
MEDICARE. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services shall enter into a contract with the Insti-
tute of Medicine of the National Academy of Science to 
conduct a comprehensive empirical study, and provide rec-
ommendations as appropriate, on the accuracy of the geo-
graphic adjustment factors established under sections
506 
1848(e) and 1886(d)(3)(E) of the Social Security Act (42 
U.S.C. 1395w–4(e), 1395ww(d)(3)(E)). 
(b) MATTERS INCLUDED.—Such study shall include 
an evaluation and assessment of the following with respect 
to such adjustment factors: 
(1) Empirical validity of the adjustment factors. 
(2) Methodology used to determine the adjust-
ment factors. 
(3) Measures used for the adjustment factors, 
taking into account— 
(A) timeliness of data and frequency of re-
visions to such data; 
(B) sources of data and the degree to 
which such data are representative of costs; and 
(C) operational costs of providers who par-
ticipate in Medicare. 
(c) EVALUATION.—Such study shall, within the con-
text of the United States health care marketplace, evalu-
ate and consider the following: 
(1) The effect of the adjustment factors on the 
level and distribution of the health care workforce 
and resources, including— 
(A) recruitment and retention that takes 
into account workforce mobility between urban 
and rural areas;
507 
(B) ability of hospitals and other facilities 
to maintain an adequate and skilled workforce; 
and 
(C) patient access to providers and needed 
medical technologies. 
(2) The effect of the adjustment factors on pop-
ulation health and quality of care. 
(3) The effect of the adjustment factors on the 
ability of providers to furnish efficient, high value 
care. 
(d) REPORT.—The contract under subsection (a) 
shall provide for the Institute of Medicine to submit, not 
later than 1 year after the date of the enactment of this 
Act, to the Secretary and the Congress a report containing 
results and recommendations of the study conducted 
under this section. 
(e) FUNDING.—There are authorized to be appro-
priated to carry out this section such sums as may be nec-
essary. 
SEC. 1158. REVISION OF MEDICARE PAYMENT SYSTEMS TO 
ADDRESS GEOGRAPHIC INEQUITIES. 
(a) REVISION OF MEDICARE PAYMENT SYSTEMS.— 
Taking into account the recommendations described in the 
report under section 1157, and notwithstanding the geo-
graphic adjustments that would otherwise apply under sec-
508 
tion 1848(e) and section 1886(d)(3)(E) of the Social Se-
curity Act (42 U.S.C. 1395w–4(e), 1395ww(d)(3)(E)), the 
Secretary of Health and Human Services shall include in 
proposed rules applicable to the rulemaking cycle for pay-
ment systems for physicians’ services and inpatient hos-
pital services under sections 1848 and section 1886(d) of 
such Act, respectively, proposals (as the Secretary deter-
mines to be appropriate) to revise the geographic adjust-
ment factors used in such systems. Such proposals’ rules 
shall be contained in the next rulemaking cycle following 
the submission to the Secretary of the report described 
in section 1157. 
(b) PAYMENT ADJUSTMENTS.— 
(1) FUNDING FOR IMPROVEMENTS.—For years 
before 2014, the Secretary shall ensure that the ad-
ditional expenditures resulting from the implementa-
tion of the provisions of this section, as estimated by 
the Secretary, do not exceed $8,000,000,000, and do 
not exceed half of such amount in any payment year. 
(2) HOLD
HARMLESS.—In carrying out this 
subsection— 
(A) for payment years before 2014, the 
Secretary shall not reduce the geographic ad-
justment below the factor that applied for such
509 
payment system in the payment year before 
such changes; and 
(B) for payment years beginning with 
2014, the Secretary shall implement the geo-
graphic adjustment in a manner that does not 
result in any net change in aggregate expendi-
tures under title XVIII of the Social Security 
Act from the amount of such expenditures that 
the Secretary estimates would have occurred if 
no geographic adjustment had occurred under 
this section. 
(c) MEDICARE IMPROVEMENT FUND.— 
(1) Amounts in the Medicare Improvement 
Fund under section 1898 of the Social Security Act, 
as amended by paragraph (2), shall be available to 
the Secretary to make changes to the geographic ad-
justments factors as described in subsections (a) and 
(b) with respect to services furnished before January 
1, 2014.
No more than one-half of such amounts 
shall be available with respect to services furnished 
in any one payment year. 
(2) Section 1898(b) of the Social Security Act 
(42 U.S.C. 1395iii(b)) is amended— 
(A) by amending paragraph (1)(A) to read 
as follows:
510 
‘‘(A) the period beginning with fiscal year 
2011 and ending with fiscal year 2019, 
$8,000,000,000; and’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(5) ADJUSTMENT FOR UNDERFUNDING.—For 
fiscal year 2014 or a subsequent fiscal year specified 
by the Secretary, the amount available to the fund 
under subsection (a) shall be increased by the Sec-
retary’s estimate of the amount (based on data on 
actual expenditures) by which— 
‘‘(A) the additional expenditures resulting 
from the implementation of subsection (a) of 
section 1158 of the Affordable Health Care for 
America Act for the period before fiscal year 
2014, is less than 
‘‘(B) the maximum amount of funds avail-
able under subsection (a) of such section for 
funding for such expenditures.’’. 
SEC. 1159. INSTITUTE OF MEDICINE STUDY OF GEO-
GRAPHIC 
VARIATION 
IN 
HEALTH 
CARE 
SPENDING 
AND 
PROMOTING 
HIGH-VALUE 
HEALTH CARE. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services (in this section and the succeeding sec-
511 
tion referred to as the ‘‘Secretary’’) shall enter into an 
agreement with the Institute of Medicine of the National 
Academies (referred to in this section as the ‘‘Institute’’) 
to conduct a study on geographic variation and growth 
in volume and intensity of services in per capita health 
care spending among the Medicare, Medicaid, privately in-
sured and uninsured populations. Such study may draw 
on recent relevant reports of the Institute and shall in-
clude each of the following: 
(1) An evaluation of the extent and range of 
such variation using various units of geographic 
measurement, including micro areas within larger 
areas. 
(2) An evaluation of the extent to which geo-
graphic variation can be attributed to differences in 
input prices; health status; practice patterns; access 
to medical services; supply of medical services; socio- 
economic factors, including race, ethnicity, gender, 
age, income and educational status; and provider 
and payer organizational models. 
(3) An evaluation of the extent to which vari-
ations in spending are correlated with patient access 
to care, insurance status, distribution of health care 
resources, health care outcomes, and consensus- 
based measures of health care quality.
512 
(4) An evaluation of the extent to which vari-
ation can be attributed to physician and practitioner 
discretion in making treatment decisions, and the 
degree to which discretionary treatment decisions 
are made that could be characterized as different 
from the best available medical evidence. 
(5) An evaluation of the extent to which vari-
ation can be attributed to patient preferences and 
patient compliance with treatment protocols. 
(6) An assessment of the degree to which vari-
ation cannot be explained by empirical evidence. 
(7) For Medicare beneficiaries, An evaluation of 
the extent to which variations in spending are cor-
related with insurance status prior to enrollment in 
the Medicare program under title XVIII of the So-
cial Security Act, and institutionalization status; 
whether beneficiaries are dually eligible for the 
Medicare program and Medicaid under title XIX of 
such Act; and whether beneficiaries are enrolled in 
fee-for-service Medicare or Medicare Advantage. 
(8) An evaluation of such other factors as the 
Institute deems appropriate. 
The Institute shall conduct public hearings and provide 
an opportunity for comments prior to completion of the 
reports under subsection (e).
513 
(b) RECOMMENDATIONS.—Taking into account the 
findings under subsection (a) and the changes to the pay-
ment systems made by this Act, the Institute shall rec-
ommend changes to payment for items and services under 
parts A and B of title XVIII of the Social Security Act, 
for addressing variation in Medicare per capita spending 
for items and services (not including add-ons for graduate 
medical education, disproportionate share payments, and 
health information technology, as specified in sections 
1886(d)(5)(F), 1886(d)(5)(B), 1886(h), 1848(o), and 
1886(n), respectively, of such Act) by promoting high- 
value care (as defined in subsection (f)), with particular 
attention to high-volume, high-cost conditions. In making 
such recommendations, the Institute shall consider each 
of the following: 
(1) Measurement and reporting on quality and 
population health. 
(2) Reducing fragmented and duplicative care. 
(3) Promoting the practice of evidence-based 
medicine. 
(4) Empowering patients to make value-based 
care decisions. 
(5) Leveraging the use of health information 
technology.
514 
(6) The role of financial and other incentives 
affecting provision of care. 
(7) Variation in input costs. 
(8) The characteristics of the patient popu-
lation, including socio-economic factors (including 
race, ethnicity, gender, age, income and educational 
status), and whether the beneficiaries are dually eli-
gible for the Medicare program under title XVIII of 
the Social Security Act and Medicaid under title 
XIX of such Act. 
(9) Other topics the Institute deems appro-
priate. 
In making such recommendations, the Institute shall con-
sider an appropriate phase-in that takes into account the 
impact of payment changes on providers and facilities and 
preserves access to care for Medicare beneficiaries. 
(c) SPECIFIC CONSIDERATIONS.—In making the rec-
ommendations under subsection (b), the Institute shall 
specifically address whether payment systems under title 
XVIII of the Social Security Act for physicians and hos-
pitals should be further modified to incentivize high-value 
care. In so doing, the Institute shall consider the adoption 
of a value index based on a composite of appropriate meas-
ures of quality and cost that would adjust provider pay-
ments on a regional or provider-level basis. If the Institute
515 
finds that application of such a value index would signifi-
cantly incentivize providers to furnish high-value care, it 
shall make specific recommendations on how such an 
index would be designed and implemented. In so doing, 
it should identify specific measures of quality and cost ap-
propriate for use in such an index, and include a thorough 
analysis (including on a geographic basis) of how pay-
ments and spending under such title would be affected by 
such an index. 
(d) ADDITIONAL CONSIDERATIONS.—The Institute 
shall consider the experience of governmental and commu-
nity-based programs that promote high-value care. 
(e) REPORTS.— 
(1) Not later than April 15, 2011, the Institute 
shall submit to the Secretary and each House of 
Congress a report containing findings and rec-
ommendations of the study conducted under this 
section. 
(2) Following submission of the report under 
paragraph (1), the Institute shall use the data col-
lected and analyzed in this section to issue a subse-
quent report, or series of reports, on how best to ad-
dress geographic variation or efforts to promote 
high-value care for items and services reimbursed by 
private insurance or other programs. Such reports
516 
shall include a comparison to the Institute’s findings 
and recommendations regarding the Medicare pro-
gram. Such reports, and any recommendations, 
would not be subject to the procedures outlined in 
section 1160. 
(f) HIGH-VALUE CARE DEFINED.—For purposes of 
this section, the term ‘‘high-value care’’ means the effi-
cient delivery of high quality, evidence-based, patient-cen-
tered care. 
(g) APPROPRIATIONS.—There is appropriated from 
amounts in the general fund of the Treasury not otherwise 
appropriated $10,000,000 to carry out this section. Such 
sums are authorized to remain available until expended. 
SEC. 1160. IMPLEMENTATION, AND CONGRESSIONAL RE-
VIEW, OF PROPOSAL TO REVISE MEDICARE 
PAYMENTS 
TO 
PROMOTE 
HIGH 
VALUE 
HEALTH CARE. 
(a) PREPARATION AND SUBMISSION OF IMPLEMEN-
TATION PLANS.— 
(1) FINAL IMPLEMENTATION PLAN.—Not later 
than 240 days after the date of receipt by the Sec-
retary and each House of Congress of the report 
under section 1159(e)(1), the Secretary shall submit 
to each House of Congress a final implementation 
plan describing proposed changes to payment for
517 
items and services under parts A and B of title 
XVIII of the Social Security Act (which may include 
payment for inpatient and outpatient hospital serv-
ices for services furnished in PPS and PPS-exempt 
hospitals, physicians’ services, dialysis facility serv-
ices, skilled nursing facility services, home health 
services, hospice care, clinical laboratory services, 
durable medical equipment, and other items and 
services, but which shall exclude add-on payments 
for graduate medical education, disproportionate 
share payments, and health information technology, 
as 
specified 
in 
sections 
1886(d)(5)(F), 
1886(d)(5)(B), 1886(h), 1848(o), and 1886(n), re-
spectively, of the Social Security Act) taking into 
consideration, as appropriate, the recommendations 
of the report submitted under section 1159(e)(1) 
and the changes to the payment systems made by 
this Act. To the extent such implementation plan re-
quires a substantial change to the payment system, 
it shall include a transition phase-in that takes into 
consideration possible disruption to provider partici-
pation in the Medicare program under title XVIII of 
the Social Security Act and preserves access to care 
for Medicare beneficiaries.
518 
(2) PRELIMINARY
IMPLEMENTATION
PLAN.— 
Not later than 90 days after the date the Institute 
of Medicine submits to each House of Congress the 
report under section 1159(e)(1), the Secretary shall 
submit to each House of Congress a preliminary 
version of the implementation plan provided for 
under paragraph (1)(A). 
(3) NO
INCREASE
IN
BUDGET
EXPENDI-
TURES.—The Secretary shall include with the sub-
mission of the final implementation plan under para-
graph (1) a certification by the Chief Actuary of the 
Centers for Medicare & Medicaid Services that over 
the initial 10-year period in which the plan is imple-
mented, the aggregate level of net expenditures 
under the Medicare program under title XVIII of 
the Social Security Act will not exceed the aggregate 
level of such expenditures that would have occurred 
if the plan were not implemented. 
(4) WAIVERS
REQUIRED.—To the extent the 
final implementation plan under paragraph (1) pro-
poses changes that are not otherwise permitted 
under title XVIII of the Social Security Act, the 
Secretary shall specify in the plan the specific waiv-
ers required under such title to implement such 
changes. Except as provided in subsection (c), the
519 
Secretary is authorized to waive the requirements so 
specified in order to implement such changes. 
(5) ASSESSMENT
OF
IMPACT.—In addition, 
both the preliminary and final implementation plans 
under this subsection shall include a detailed assess-
ment of the effects of the proposed payment changes 
by provider or supplier type and State relative to the 
payments that would otherwise apply. 
(b) REVIEW BY MEDPAC AND GAO.—Not later than 
45 days after the date the preliminary implementation 
plan is received by each House of Congress under sub-
section (a)(2), the Medicare Payment Advisory Committee 
and the Comptroller General of the United States shall 
each evaluate such plan and submit to each House of Con-
gress a report containing its analysis and recommenda-
tions regarding implementation of the plan, including an 
analysis of the effects of the proposed changes in the plan 
on payments and projected spending. 
(c) IMPLEMENTATION.— 
(1) IN GENERAL.—The Secretary shall include, 
in applicable proposed rules for the next rulemaking 
cycle beginning after the Congressional action dead-
line, appropriate proposals to revise payments under 
title XVIII of the Social Security Act in accordance 
with the final implementation plan submitted under
520 
subsection (a)(1), and the waivers specified in sub-
section (a)(4) to the extent required to carry out 
such plan are effective, unless a joint resolution (de-
scribed in subsection (d)(5)(A)) with respect to such 
plan is enacted by not later than such deadline. If 
such a joint resolution is enacted, the Secretary is 
not authorized to implement such plan and the waiv-
er authority provided under subsection (a)(4) shall 
no longer be effective. 
(2) CONGRESSIONAL ACTION DEADLINE.—For 
purposes of this section, the term ‘‘Congressional ac-
tion deadline’’ means, with respect to a final imple-
mentation plan under subsection (a)(1), May 31, 
2012, or, if later, the date that is 145 days after the 
date of receipt of such plan by each House of Con-
gress under subsection (a). 
(d) CONGRESSIONAL PROCEDURES.— 
(1) INTRODUCTION.—On the day on which the 
final implementation plan is received by the House 
of Representatives and the Senate under subsection 
(a), a joint resolution specified in paragraph (5)(A) 
shall be introduced in the House of Representatives 
by the majority leader and minority leader of the 
House of Representatives and in the Senate by the 
majority leader and minority leader of the Senate. If
521 
either House is not in session on the day on which 
such a plan is received, the joint resolution with re-
spect to such plan shall be introduced in that House, 
as provided in the preceding sentence, on the first 
day thereafter on which that House is in session. 
(2) CONSIDERATION IN THE HOUSE OF REP-
RESENTATIVES.— 
(A) REPORTING
AND
DISCHARGE.—Any 
committee of the House of Representatives to 
which a joint resolution introduced under para-
graph (1) is referred shall report such joint res-
olution to the House not later than 50 legisla-
tive days after the applicable date of introduc-
tion of the joint resolution. If a committee fails 
to report such joint resolution within that pe-
riod, a motion to discharge the committee from 
further consideration of the joint resolution 
shall be in order. Such a motion shall be in 
order only at a time designated by the Speaker 
in the legislative schedule within two legislative 
days after the day on which the proponent an-
nounces an intention to offer the motion. Notice 
may not be given on an anticipatory basis. Such 
a motion shall not be in order after the last 
committee authorized to consider the joint reso-
522 
lution reports it to the House or after the 
House has disposed of a motion to discharge 
the joint resolution. The previous question shall 
be considered as ordered on the motion to its 
adoption without intervening motion except 20 
minutes of debate equally divided and controlled 
by the proponent and an opponent. A motion to 
reconsider the vote by which the motion is dis-
posed of shall not be in order. 
(B) PROCEEDING
TO
CONSIDERATION.— 
After each committee authorized to consider a 
joint resolution reports such joint resolution to 
the House of Representatives or has been dis-
charged from its consideration, a motion to pro-
ceed to consider such joint resolution shall be in 
order. Such a motion shall be in order only at 
a time designated by the Speaker in the legisla-
tive schedule within two legislative days after 
the day on which the proponent announces an 
intention to offer the motion. Notice may not be 
given on an anticipatory basis. Such a motion 
shall not be in order after the House of Rep-
resentatives has disposed of a motion to proceed 
on the joint resolution. The previous question 
shall be considered as ordered on the motion to
523 
its adoption without intervening motion. A mo-
tion to reconsider the vote by which the motion 
is disposed of shall not be in order. 
(C) CONSIDERATION.—The joint resolution 
shall be considered in the House and shall be 
considered as read. All points of order against 
a joint resolution and against its consideration 
are waived. The previous question shall be con-
sidered as ordered on the joint resolution to its 
passage without intervening motion except two 
hours of debate equally divided and controlled 
by the proponent and an opponent. A motion to 
reconsider the vote on passage of a joint resolu-
tion shall not be in order. 
(3) CONSIDERATION IN THE SENATE.— 
(A) REPORTING
AND
DISCHARGE.—Any 
committee of the Senate to which a joint resolu-
tion introduced under paragraph (1) is referred 
shall report such joint resolution to the Senate 
within 50 legislative days. If a committee fails 
to report such joint resolution at the close of 
the 15th legislative day after its receipt by the 
Senate, such committee shall be automatically 
discharged from further consideration of such 
joint resolution and such joint resolution or
524 
joint resolutions shall be placed on the calendar. 
A vote on final passage of such joint resolution 
shall be taken in the Senate on or before the 
close of the second legislative day after such 
joint resolution is reported by the committee or 
committees of the Senate to which it was re-
ferred, or after such committee or committees 
have been discharged from further consider-
ation of such joint resolution. 
(B) PROCEEDING TO CONSIDERATION.—A 
motion in the Senate to proceed to the consider-
ation of a joint resolution shall be privileged 
and not debatable. An amendment to such a 
motion shall not be in order, nor shall it be in 
order to move to reconsider the vote by which 
such a motion is agreed to or disagreed to. 
(C) CONSIDERATION.— 
(i) Debate in the Senate on a joint 
resolution, and all debatable motions and 
appeals in connection therewith, shall be 
limited to not more than 20 hours. The 
time shall be equally divided between, and 
controlled by, the majority leader and the 
minority leader or their designees.
525 
(ii) Debate in the Senate on any de-
batable motion or appeal in connection 
with a joint resolution shall be limited to 
not more than 1 hour, to be equally di-
vided between, and controlled by, the 
mover and the manager of the resolution, 
except that in the event the manager of the 
joint resolution is in favor of any such mo-
tion or appeal, the time in opposition 
thereto shall be controlled by the minority 
leader or a designee. Such leaders, or ei-
ther of them, may, from time under their 
control on the passage of a joint resolu-
tion, allot additional time to any Senator 
during the consideration of any debatable 
motion or appeal. 
(iii) A motion in the Senate to further 
limit debate is not debatable. A motion to 
recommit a joint resolution is not in order. 
(4) RULES RELATING TO SENATE AND HOUSE 
OF REPRESENTATIVES.— 
(A) COORDINATION
WITH
ACTION
BY 
OTHER HOUSE.—If, before the passage by one 
House of a joint resolution of that House, that 
House receives from the other House a joint
526 
resolution, then the following procedures shall 
apply: 
(i) The joint resolution of the other 
House shall not be referred to a com-
mittee. 
(ii) With respect to the joint resolu-
tion of the House receiving the resolution, 
the procedure in that House shall be the 
same as if no such joint resolution had 
been received from the other House; but 
the vote on passage shall be on the joint 
resolution of the other House. 
(B) TREATMENT
OF
COMPANION
MEAS-
URES.—If, following passage of a joint resolu-
tion in the Senate, the Senate then receives the 
companion measure from the House of Rep-
resentatives, the companion measure shall not 
be debatable. 
(C) RULES OF HOUSE OF REPRESENTA-
TIVES AND SENATE.—This paragraph and the 
preceding paragraphs are enacted by Con-
gress— 
(i) as an exercise of the rulemaking 
power of the Senate and House of Rep-
resentatives, respectively, and as such it is
527 
deemed a part of the rules of each House, 
respectively, but applicable only with re-
spect to the procedure to be followed in 
that House in the case of a joint resolu-
tion, and it supersedes other rules only to 
the extent that it is inconsistent with such 
rules; and 
(ii) with full recognition of the con-
stitutional right of either House to change 
the rules (so far as relating to the proce-
dure of that House) at any time, in the 
same manner, and to the same extent as in 
the case of any other rule of that House. 
(5) DEFINITIONS.—In this section: 
(A) JOINT RESOLUTION.—The term ‘‘joint 
resolution’’ means only a joint resolution— 
(i) which does not have a preamble; 
(ii) the title of which is as follows: 
‘‘Joint resolution disapproving a Medicare 
final implementation plan of the Secretary 
of Health and Human Services submitted 
under section 1160(a) of the Affordable 
Health Care for America Act’’; and 
(iii) the sole matter after the resolving 
clause of which is as follows: ‘‘That the
528 
Congress disapproves the final implementa-
tion plan of the Secretary of Health and 
Human Services transmitted to the Con-
gress on—————.’’, the blank space 
being filled with the appropriate date. 
(B) LEGISLATIVE DAY.—The term ‘‘legis-
lative day’’ means any calendar day excluding 
any day on which that House was not in ses-
sion. 
(6) BUDGETARY
TREATMENT.—For the pur-
poses of consideration of a joint resolution, the 
Chairmen of the House of Representatives and Sen-
ate Committees on the Budget shall exclude from 
the evaluation of the budgetary effects of the meas-
ure, any such effects that are directly attributable to 
disapproving a Medicare final implementation plan 
of the Secretary submitted under subsection (a). 
Subtitle D—Medicare Advantage 
Reforms 
PART 1—PAYMENT AND ADMINISTRATION 
SEC. 1161. PHASE-IN OF PAYMENT BASED ON FEE-FOR- 
SERVICE COSTS; QUALITY BONUS PAYMENTS. 
(a) PHASE-IN OF PAYMENT BASED ON FEE-FOR- 
SERVICE COSTS.—Section 1853 of the Social Security Act 
(42 U.S.C. 1395w–23) is amended—
529 
(1) in subsection (j)(1)(A)— 
(A) by striking ‘‘beginning with 2007’’ and 
inserting ‘‘for 2007, 2008, 2009, and 2010’’; 
and 
(B) by inserting after ‘‘(k)(1)’’ the fol-
lowing: ‘‘, or, beginning with 2011, 1⁄12 of the 
blended benchmark amount determined under 
subsection (n)(1)’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(n) DETERMINATION
OF BLENDED BENCHMARK 
AMOUNT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(j), subject to paragraphs (3) and (4), the term 
‘blended benchmark amount’ means for an area— 
‘‘(A) for 2011 the sum of— 
‘‘(i) 2⁄3 of the applicable amount (as 
defined in subsection (k)) for the area and 
year; and 
‘‘(ii) 1⁄3 of the amount specified in 
paragraph (2) for the area and year; 
‘‘(B) for 2012 the sum of— 
‘‘(i) 1⁄3 of the applicable amount for 
the area and year; and
530 
‘‘(ii) 2⁄3 of the amount specified in 
paragraph (2) for the area and year; and 
‘‘(C) for a subsequent year the amount 
specified in paragraph (2) for the area and 
year. 
‘‘(2) SPECIFIED AMOUNT.—The amount speci-
fied in this paragraph for an area and year is the 
amount specified in subsection (c)(1)(D)(i) for the 
area and year adjusted (in a manner specified by the 
Secretary) to take into account the phase-out in the 
indirect costs of medical education from capitation 
rates described in subsection (k)(4). 
‘‘(3) FEE-FOR-SERVICE
PAYMENT
FLOOR.—In 
no case shall the blended benchmark amount for an 
area and year be less than the amount specified in 
paragraph (2). 
‘‘(4) EXCEPTION FOR PACE PLANS.—This sub-
section shall not apply to payments to a PACE pro-
gram under section 1894.’’. 
(b) QUALITY BONUS PAYMENTS.—Section 1853 of 
the Social Security Act (42 U.S.C. 1395w–23), as amend-
ed by subsection (a), is amended— 
(1) in subsection (j), by inserting ‘‘subject to 
subsection (o),’’ after ‘‘For purposes of this part,’’; 
and
531 
(2) by adding at the end the following new sub-
section: 
‘‘(o) QUALITY BASED PAYMENT ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of a qualifying 
plan in a qualifying county with respect to a year 
beginning with 2011, the blended benchmark 
amount under subsection (n)(1) shall be increased— 
‘‘(A) for 2011, by 1.5 percent; 
‘‘(B) for 2012, by 3.0 percent; and 
‘‘(C) for a subsequent year, by 5.0 percent. 
‘‘(2) QUALIFYING
PLAN
AND
QUALIFYING 
COUNTY DEFINED.—For purposes of this subsection: 
‘‘(A) QUALIFYING PLAN.—The term ‘quali-
fying plan’ means, for a year and subject to 
paragraph (4), a plan that, in a preceding year 
specified by the Secretary, had a quality rank-
ing (based on the quality ranking system estab-
lished by the Centers for Medicare & Medicaid 
Services for Medicare Advantage plans) of 4 
stars or higher. 
‘‘(B) QUALIFYING
COUNTY.—The term 
‘qualifying county’ means, for a year, a coun-
ty— 
‘‘(i) that ranked within the lowest 
third of counties in the amount specified in
532 
subsection (n)(2) for a year specified by 
the Secretary; and 
‘‘(ii) for which, as of June of a year 
specified by the Secretary, of the Medicare 
Advantage eligible individuals residing in 
the county at least 20 percent of such indi-
viduals were enrolled in Medicare Advan-
tage plans. 
‘‘(3) DETERMINATIONS OF QUALITY.— 
‘‘(A) QUALITY PERFORMANCE.—The Sec-
retary shall provide for the computation of a 
quality performance score for each Medicare 
Advantage plan to be applied for each year. 
‘‘(B) COMPUTATION OF SCORE.— 
‘‘(i) QUALITY PERFORMANCE SORE.— 
For years before a year specified by the 
Secretary, the quality performance score 
for a Medicare Advantage plan shall be 
computed based on a blend (as designated 
by the Secretary) of the plan’s perform-
ance on— 
‘‘(I) HEDIS effectiveness of care 
quality measures; 
‘‘(II) CAHPS quality measures; 
and
533 
‘‘(III) such other measures of 
clinical quality as the Secretary may 
specify. 
Such measures shall be risk-adjusted as 
the Secretary deems appropriate. 
‘‘(ii) ESTABLISHMENT OF OUTCOME- 
BASED MEASURES.—By not later than for 
a year specified by the Secretary, the Sec-
retary shall implement reporting require-
ments for quality under this section on 
measures selected under clause (iii) that 
reflect the outcomes of care experienced by 
individuals enrolled in Medicare Advantage 
plans (in addition to measures described in 
clause (i)). Such measures may include— 
‘‘(I) measures of rates of admis-
sion and readmission to a hospital; 
‘‘(II) measures of prevention 
quality, such as those established by 
the Agency for Healthcare Research 
and Quality (that include hospital ad-
mission rates for specified conditions); 
‘‘(III) measures of patient mor-
tality and morbidity following surgery;
534 
‘‘(IV) measures of health func-
tioning (such as limitations on activi-
ties of daily living) and survival for 
patients with chronic diseases; 
‘‘(V) measures of patient safety; 
and 
‘‘(VI) other measure of outcomes 
and patient quality of life as deter-
mined by the Secretary. 
Such measures shall be risk-adjusted as 
the Secretary deems appropriate. In deter-
mining the quality measures to be used 
under this clause, the Secretary shall take 
into consideration the recommendations of 
the Medicare Payment Advisory Commis-
sion in its report to Congress under section 
168 of the Medicare Improvements for Pa-
tients and Providers Act of 2008 (Public 
Law 110–275) and shall provide pref-
erence to measures collected on and com-
parable to measures used in measuring 
quality under parts A and B. 
‘‘(iii) RULES
FOR
SELECTION
OF 
MEASURES.—The Secretary shall select
535 
measures for purposes of clause (ii) con-
sistent with the following: 
‘‘(I) The Secretary shall provide 
preference to clinical quality measures 
that have been endorsed by the entity 
with a contract with the Secretary 
under section 1890(a). 
‘‘(II) Prior to any measure being 
selected under this clause, the Sec-
retary shall publish in the Federal 
Register such measure and provide for 
a period of public comment on such 
measure. 
‘‘(iv) 
TRANSITIONAL
USE
OF 
BLEND.—For payments for years specified 
by the Secretary, the Secretary may com-
pute the quality performance score for a 
Medicare Advantage plan based on a blend 
of the measures specified in clause (i) and 
the measures described in clause (ii) and 
selected under clause (iii). 
‘‘(v) USE
OF
QUALITY
OUTCOMES 
MEASURES.—For payments beginning with 
a year specified by the Secretary (begin-
ning after the years specified for section
536 
(iv)), the preponderance of measures used 
under this paragraph shall be quality out-
comes measures described in clause (ii) 
and selected under clause (iii). 
‘‘(C) REPORTING OF DATA.—Each Medi-
care Advantage organization shall provide for 
the reporting to the Secretary of quality per-
formance data described in this paragraph (in 
order to determine a quality performance score 
under this paragraph) in such time and manner 
as the Secretary shall specify. 
‘‘(4) NOTIFICATION.—The Secretary, in the an-
nual 
announcement 
required 
under 
subsection 
(b)(1)(B) in 2010 and each succeeding year, shall 
notify the Medicare Advantage organization that is 
offering a qualifying plan in a qualifying county of 
such identification for the year. The Secretary shall 
provide for publication on the website for the Medi-
care program of the information described in the 
previous sentence. 
‘‘(5) AUTHORITY
TO
DISQUALIFY
DEFICIENT 
PLANS.—The Secretary may determine that a Medi-
care Advantage plan is not a qualifying plan if the 
Secretary has identified deficiencies in the plan’s
537 
compliance with rules for Medicare Advantage plans 
under this part.’’. 
SEC. 1162. AUTHORITY FOR SECRETARIAL CODING INTEN-
SITY ADJUSTMENT AUTHORITY. 
Section 1853(a)(1)(C)(ii) of the Social Security Act 
(42 U.S.C. 1395w–23(a)(1)(C)(ii) is amended— 
(1) in the matter before subclause (I), by strik-
ing ‘‘through 2010’’ and inserting ‘‘and each subse-
quent year’’; and 
(2) in subclause (II)— 
(A) by inserting ‘‘periodically’’ before ‘‘con-
duct an analysis’’; 
(B) by inserting ‘‘on a timely basis’’ after 
‘‘are incorporated’’; and 
(C) by striking ‘‘only for 2008, 2009, and 
2010’’ and inserting ‘‘for 2008 and subsequent 
years’’. 
SEC. 1163. SIMPLIFICATION OF ANNUAL BENEFICIARY 
ELECTION PERIODS. 
(a) 2 WEEK PROCESSING PERIOD FOR ANNUAL EN-
ROLLMENT PERIOD (AEP).—Paragraph (3)(B) of section 
1851(e) of the Social Security Act (42 U.S.C. 1395w– 
21(e)) is amended— 
(1) by striking ‘‘and’’ at the end of clause (iii); 
(2) in clause (iv)—
538 
(A) by striking ‘‘and succeeding years’’ 
and inserting ‘‘, 2008, 2009, and 2010’’; and 
(B) by striking the period at the end and 
inserting ‘‘; and’’; and 
(3) by adding at the end the following new 
clause: 
‘‘(v) with respect to 2011 and suc-
ceeding years, the period beginning on No-
vember 1 and ending on December 15 of 
the year before such year.’’. 
(b) ELIMINATION OF 3-MONTH ADDITIONAL OPEN 
ENROLLMENT PERIOD (OEP).—Effective for plan years 
beginning with 2011, paragraph (2) of such section is 
amended by striking subparagraph (C). 
SEC. 1164. EXTENSION OF REASONABLE COST CONTRACTS. 
Section 1876(h)(5)(C) of the Social Security Act (42 
U.S.C. 1395mm(h)(5)(C)) is amended— 
(1) in clause (ii), by striking ‘‘January 1, 
2010’’ and inserting ‘‘January 1, 2012’’; and 
(2) in clause (iii), by striking ‘‘the service area 
for the year’’ and inserting ‘‘the portion of the 
plan’s service area for the year that is within the 
service area of a reasonable cost reimbursement con-
tract’’.
539 
SEC. 1165. LIMITATION OF WAIVER AUTHORITY FOR EM-
PLOYER GROUP PLANS. 
(a) IN GENERAL.—The first sentence of each of para-
graphs (1) and (2) of section 1857(i) of the Social Secu-
rity Act (42 U.S.C. 1395w–27(i)) is amended by inserting 
before the period at the end the following: ‘‘, but only if 
90 percent of the Medicare Advantage eligible individuals 
enrolled under such plan reside in a county in which the 
MA organization offers an MA local plan’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply for plan years beginning on or 
after January 1, 2011, and shall not apply to plans which 
were in effect as of December 31, 2010. 
SEC. 1166. IMPROVING RISK ADJUSTMENT FOR PAYMENTS. 
(a) REPORT TO CONGRESS.—Not later than 1 year 
after the date of the enactment of this Act, the Secretary 
of Health and Human Services shall submit to Congress 
a report that evaluates the adequacy of the risk adjust-
ment system under section 1853(a)(1)(C) of the Social Se-
curity Act (42 U.S.C. 1395–23(a)(1)(C)) in predicting 
costs for beneficiaries with chronic or co-morbid condi-
tions, beneficiaries dually-eligible for Medicare and Med-
icaid, and non-Medicaid eligible low-income beneficiaries; 
and the need and feasibility of including further grada-
tions of diseases or conditions and multiple years of bene-
ficiary data.
540 
(b) IMPROVEMENTS
TO RISK ADJUSTMENT.—Not 
later than January 1, 2012, the Secretary shall implement 
necessary improvements to the risk adjustment system 
under section 1853(a)(1)(C) of the Social Security Act (42 
U.S.C. 1395–23(a)(1)(C)), taking into account the evalua-
tion under subsection (a). 
SEC. 1167. ELIMINATION OF MA REGIONAL PLAN STA-
BILIZATION FUND. 
(a) IN GENERAL.—Section 1858 of the Social Secu-
rity Act (42 U.S.C. 1395w–27a) is amended by striking 
subsection (e). 
(b) TRANSITION.—Any amount contained in the MA 
Regional Plan Stabilization Fund as of the date of the 
enactment of this Act shall be transferred to the Federal 
Supplementary Medical Insurance Trust Fund. 
SEC. 1168. STUDY REGARDING THE EFFECTS OF CALCU-
LATING MEDICARE ADVANTAGE PAYMENT 
RATES ON A REGIONAL AVERAGE OF MEDI-
CARE FEE FOR SERVICE RATES. 
(a) IN GENERAL.—The Administrator of the Centers 
for Medicare and Medicaid Services shall conduct a study 
to determine the potential effects of calculating Medicare 
Advantage payment rates on a more aggregated geo-
graphic basis (such as metropolitan statistical areas or 
other regional delineations) rather than using county
541 
boundaries. In conducting such study, the Administrator 
shall consider the effect of such alternative geographic 
basis on the following: 
(1) The quality of care received by Medicare 
Advantage enrollees. 
(2) The networks of Medicare Advantage plans, 
including any implications for providers contracting 
with Medicare Advantage plans. 
(3) The predictability of benchmark amounts 
for Medicare advantage plans. 
(b) CONSULTATIONS.—In conducting the study, the 
Administrator shall consult with the following: 
(1) Experts in health care financing. 
(2) Representatives of foundations and other 
nonprofit entities that have conducted or supported 
research on Medicare financing issues. 
(3) Representatives from Medicare Advantage 
plans. 
(4) Such other entities or people as determined 
by the Secretary. 
(c) REPORT.—Not later than 1 year after the date 
of the enactment of this Act, the Administrator shall 
transmit a report to the Congress on the study conducted 
under this section. The report shall contain a detailed 
statement of findings and conclusions of the study, to-
542 
gether with its recommendations for such legislation and 
administrative actions as the Administrator considers ap-
propriate. 
PART 2—BENEFICIARY PROTECTIONS AND ANTI- 
FRAUD 
SEC. 1171. LIMITATION ON COST-SHARING FOR INDIVIDUAL 
HEALTH SERVICES. 
(a) IN GENERAL.—Section 1852(a)(1) of the Social 
Security Act (42 U.S.C. 1395w–22(a)(1)) is amended— 
(1) in subparagraph (A), by inserting before the 
period at the end the following: ‘‘with cost-sharing 
that is no greater (and may be less) than the cost- 
sharing that would otherwise be imposed under such 
program option’’; 
(2) in subparagraph (B)(i), by striking ‘‘or an 
actuarially equivalent level of cost-sharing as deter-
mined in this part’’; and 
(3) by amending clause (ii) of subparagraph 
(B) to read as follows: 
‘‘(ii) PERMITTING USE OF FLAT CO-
PAYMENT OR PER DIEM RATE.—Nothing in 
clause (i) shall be construed as prohibiting 
a Medicare Advantage plan from using a 
flat copayment or per diem rate, in lieu of 
the cost-sharing that would be imposed
543 
under part A or B, so long as the amount 
of the cost-sharing imposed does not ex-
ceed the amount of the cost-sharing that 
would be imposed under the respective part 
if the individual were not enrolled in a plan 
under this part.’’. 
(b) LIMITATION FOR DUAL ELIGIBLES AND QUALI-
FIED MEDICARE BENEFICIARIES.—Section 1852(a)(7) of 
such Act is amended to read as follows: 
‘‘(7) LIMITATION ON COST-SHARING FOR DUAL 
ELIGIBLES
AND
QUALIFIED
MEDICARE
BENE-
FICIARIES.—In the case of a individual who is a full- 
benefit dual eligible individual (as defined in section 
1935(c)(6)) or a qualified medicare beneficiary (as 
defined in section 1905(p)(1)) who is enrolled in a 
Medicare Advantage plan, the plan may not impose 
cost-sharing that exceeds the amount of cost-sharing 
that would be permitted with respect to the indi-
vidual under this title and title XIX if the individual 
were not enrolled with such plan.’’. 
(c) EFFECTIVE DATES.— 
(1) The amendments made by subsection (a) 
shall apply to plan years beginning on or after Janu-
ary 1, 2011.
544 
(2) The amendments made by subsection (b) 
shall apply to plan years beginning on or after Janu-
ary 1, 2011. 
SEC. 1172. CONTINUOUS OPEN ENROLLMENT FOR ENROLL-
EES IN PLANS WITH ENROLLMENT SUSPEN-
SION. 
Section 1851(e)(4) of the Social Security Act (42 
U.S.C. 1395w(e)(4)) is amended— 
(1) in subparagraph (C), by striking at the end 
‘‘or’’; 
(2) in subparagraph (D)— 
(A) by inserting ‘‘, taking into account the 
health or well-being of the individual’’ before 
the period; and 
(B) by redesignating such subparagraph as 
subparagraph (E); and 
(3) by inserting after subparagraph (C) the fol-
lowing new subparagraph: 
‘‘(D) the individual is enrolled in an MA 
plan and enrollment in the plan is suspended 
under paragraph (2)(B) or (3)(C) of section 
1857(g) because of a failure of the plan to meet 
applicable requirements; or’’.
545 
SEC. 1173. INFORMATION FOR BENEFICIARIES ON MA PLAN 
ADMINISTRATIVE COSTS. 
(a) DISCLOSURE OF MEDICAL LOSS RATIOS AND 
OTHER EXPENSE DATA.—Section 1851 of the Social Se-
curity Act (42 U.S.C. 1395w–21), as previously amended 
by this subtitle, is amended by adding at the end the fol-
lowing new subsection: 
‘‘(p) PUBLICATION OF MEDICAL LOSS RATIOS AND 
OTHER COST-RELATED INFORMATION.— 
‘‘(1) IN GENERAL.—The Secretary shall pub-
lish, not later than November 1 of each year (begin-
ning with 2011), for each MA plan contract, the 
medical loss ratio of the plan in the previous year. 
‘‘(2) SUBMISSION OF DATA.— 
‘‘(A) IN GENERAL.—Each MA organization 
shall submit to the Secretary, in a form and 
manner specified by the Secretary, data nec-
essary for the Secretary to publish the medical 
loss ratio on a timely basis. 
‘‘(B) DATA FOR 2010 AND 2011.—The data 
submitted under subparagraph (A) for 2010 
and for 2011 shall be consistent in content with 
the data reported as part of the MA plan bid 
in June 2009 for 2010. 
‘‘(C) USE OF STANDARDIZED ELEMENTS 
AND DEFINITIONS.—The data to be submitted
546 
under subparagraph (A) relating to medical loss 
ratio for a year, beginning with 2012, shall be 
submitted based on the standardized elements 
and definitions developed under paragraph (3). 
‘‘(3) DEVELOPMENT
OF
DATA
REPORTING 
STANDARDS.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
develop and implement standardized data ele-
ments and definitions for reporting under this 
subsection, for contract years beginning with 
2012, of data necessary for the calculation of 
the medical loss ratio for MA plans. Not later 
than December 31, 2010, the Secretary shall 
publish a report describing the elements and 
definitions so developed. 
‘‘(B) 
CONSULTATION.—The 
Secretary 
shall consult with the Health Choices Commis-
sioner, representatives of MA organizations, ex-
perts on health plan accounting systems, and 
representatives of the National Association of 
Insurance Commissioners, in the development 
of such data elements and definitions. 
‘‘(4) MEDICAL LOSS RATIO TO BE DEFINED.— 
For purposes of this part, the term ‘medical loss 
ratio’ has the meaning given such term by the Sec-
547 
retary, taking into account the meaning given such 
term by the Health Choices Commissioner under 
section 116 of the Affordable Health Care for Amer-
ica Act.’’. 
(b) MINIMUM
MEDICAL
LOSS
RATIO.—Section 
1857(e) of the Social Security Act (42 U.S.C. 1395w– 
27(e)) is amended by adding at the end the following new 
paragraph: 
‘‘(4) REQUIREMENT
FOR
MINIMUM
MEDICAL 
LOSS RATIO.—If the Secretary determines for a con-
tract year (beginning with 2014) that an MA plan 
has failed to have a medical loss ratio (as defined in 
section 1851(p)(4)) of at least .85— 
‘‘(A) the Secretary shall require the Medi-
care Advantage organization offering the plan 
to give enrollees a rebate (in the second suc-
ceeding contract year) of premiums under this 
part (or part B or part D, if applicable) by 
such amount as would provide for a benefits 
ratio of at least .85; 
‘‘(B) for 3 consecutive contract years, the 
Secretary shall not permit the enrollment of 
new enrollees under the plan for coverage dur-
ing the second succeeding contract year; and
548 
‘‘(C) the Secretary shall terminate the plan 
contract if the plan fails to have such a medical 
loss ratio for 5 consecutive contract years.’’. 
SEC. 1174. STRENGTHENING AUDIT AUTHORITY. 
(a) FOR PART C PAYMENTS RISK ADJUSTMENT.— 
Section 1857(d)(1) of the Social Security Act (42 U.S.C. 
1395w–27(d)(1)) is amended by inserting after ‘‘section 
1858(c))’’ the following: ‘‘, and data submitted with re-
spect to risk adjustment under section 1853(a)(3)’’. 
(b) 
ENFORCEMENT
OF
AUDITS
AND
DEFI-
CIENCIES.— 
(1) IN GENERAL.—Section 1857(e) of such Act, 
as amended by section 1173, is amended by adding 
at the end the following new paragraph: 
‘‘(5) ENFORCEMENT
OF
AUDITS
AND
DEFI-
CIENCIES.— 
‘‘(A) INFORMATION
IN
CONTRACT.—The 
Secretary shall require that each contract with 
an MA organization under this section shall in-
clude terms that inform the organization of the 
provisions in subsection (d). 
‘‘(B) ENFORCEMENT
AUTHORITY.—The 
Secretary is authorized, in connection with con-
ducting audits and other activities under sub-
section (d), to take such actions, including pur-
549 
suit of financial recoveries, necessary to address 
deficiencies identified in such audits or other 
activities.’’. 
(2) APPLICATION UNDER PART D.—For provi-
sion applying the amendment made by paragraph 
(1) to prescription drug plans under part D, see sec-
tion 1860D–12(b)(3)(D) of the Social Security Act. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act and shall apply to audits and activities con-
ducted for contract years beginning on or after January 
1, 2011. 
SEC. 1175. AUTHORITY TO DENY PLAN BIDS. 
(a) IN GENERAL.—Section 1854(a)(5) of the Social 
Security Act (42 U.S.C. 1395w–24(a)(5)) is amended by 
adding at the end the following new subparagraph: 
‘‘(C) REJECTION
OF
BIDS.—Nothing in 
this section shall be construed as requiring the 
Secretary to accept any or every bid by an MA 
organization under this subsection.’’. 
(b) APPLICATION UNDER PART D.—Section 1860D– 
11(d) of such Act (42 U.S.C. 1395w–111(d)) is amended 
by adding at the end the following new paragraph: 
‘‘(3) REJECTION OF BIDS.—Paragraph (5)(C) 
of section 1854(a) shall apply with respect to bids
550 
under this section in the same manner as it applies 
to bids by an MA organization under such section.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bids for contract years begin-
ning on or after January 1, 2011. 
SEC. 1175A. STATE AUTHORITY TO ENFORCE STANDARD-
IZED MARKETING REQUIREMENTS. 
Section 1856(b)(3) of the Social Security Act (42 
U.S.C. 1395w–26(b)(3)) is amended— 
(1) by striking ‘‘The standards’’ and inserting 
‘‘(A) IN
GENERAL.—The standards’’ with appro-
priate indentation that is the same as for the sub-
paragraph (B) added by paragraph (2); and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) ENFORCEMENT OF FEDERAL STAND-
ARDS PERMITTED.— 
‘‘(i) IN
GENERAL.—Subject to the 
subsequent provision of this subparagraph, 
nothing in this title shall be construed to 
prohibit a State from conducting a market 
conduct examination or from imposing civil 
monetary penalties, in accordance with 
laws and procedures of the State, against 
Medicare Advantage organizations, PDP
551 
sponsors, or agents or brokers of such or-
ganizations or sponsors for violations of 
the marketing requirements under sub-
sections (h)(4), (h)(6), and (j) of section 
1851 and section 1857(g)(1)(E). 
‘‘(ii) ADDITIONAL REMEDIES RESULT-
ING
FROM
FEDERAL-STATE
COOPERA-
TION.— 
‘‘(I) 
STATE
RECOMMENDA-
TION.—A State may recommend to 
the Secretary the imposition of an in-
termediate sanction not described in 
clause (i) (such as those available 
under section 1857(g)) against a 
Medicare 
Advantage 
organization, 
PDP sponsor, or agent or broker of 
such an organization or sponsor for a 
violation described in such clause. 
‘‘(II) 
RESPONSE
TO
REC-
OMMENDATION.—Not later than 30 
days after receipt of a recommenda-
tion under subclause (I) from a State, 
with respect to a violation described in 
clause (i), the Secretary shall respond 
in writing to the State indicating the
552 
progress of any investigation involving 
such violation, whether the Secretary 
intends to pursue the recommendation 
from the State, and in the case the 
Secretary does not intend to pursue 
such recommendation, the reason for 
such decision. 
‘‘(iii) NON-DUPLICATION
OF
PEN-
ALTIES.—In the case that an action has 
been initiated against a Medicare Advan-
tage organization, PDP sponsor, or agent 
or broker of such an organization or spon-
sor for a violation of a marketing require-
ment under subsection (h)(4), (h)(6), or (j) 
of section 1851 or section 1857(g)(1)(E)— 
‘‘(I) in the case such action has 
been initiated by the Secretary, no 
State may bring an action under such 
applicable 
subsection 
or 
section 
against such organization, sponsor, 
agent, or broker with respect to such 
violation during the pendency period 
of the action initiated by the Sec-
retary and, if a penalty is imposed
553 
pursuant to such action, after such 
period; and 
‘‘(II) in the case such action has 
been initiated by a State, the Sec-
retary may not bring an action under 
such applicable subsection or section 
against such organization, sponsor, 
agent, or broker with respect to such 
violation during the pendency period 
of the action initiated by the Sec-
retary and, if a penalty is imposed 
pursuant to such action, after such 
period. 
Nothing in this clause shall be construed 
as limiting the ability of the Secretary to 
impose any sanction other than a civil 
monetary penalty under section 1857 
against a Medicare Advantage organiza-
tion, PDP sponsor, or agent or broker of 
such an organization or sponsor for a vio-
lation described in clause (i). 
‘‘(iv) 
CONSTRUCTION.—Nothing 
in 
this subparagraph shall be construed as af-
fecting any State authority to regulate bro-
kers described in this paragraph or any
554 
other conduct of a Medicare Advantage or-
ganization or PDP sponsor.’’. 
PART 3—TREATMENT OF SPECIAL NEEDS PLANS 
SEC. 1176. LIMITATION ON ENROLLMENT OUTSIDE OPEN 
ENROLLMENT PERIOD OF INDIVIDUALS INTO 
CHRONIC CARE SPECIALIZED MA PLANS FOR 
SPECIAL NEEDS INDIVIDUALS. 
Section 1859(f)(4) of the Social Security Act (42 
U.S.C. 1395w–28(f)(4)) is amended by adding at the end 
the following new subparagraph: 
‘‘(C) The plan does not enroll an individual 
on or after January 1, 2011, other than— 
‘‘(i) during an annual, coordinated 
open enrollment period; or 
‘‘(ii) during a special election period 
consisting of the period for which the indi-
vidual has a chronic condition that quali-
fies the individual as an individual de-
scribed in subsection (b)(6)(B)(iii) for such 
plan and ending on the date on which the 
individual enrolls in such a plan on the 
basis of such condition. 
If an individual is enrolled in such a plan on 
the basis of a chronic condition and becomes el-
igible for another such plan on the basis of an-
555 
other chronic condition, the other plan may en-
roll the individual on the basis of such other 
chronic condition during a special enrollment 
period described in clause (ii). An individual is 
eligible to apply such clause only once on the 
basis of any specific chronic condition.’’. 
SEC. 1177. EXTENSION OF AUTHORITY OF SPECIAL NEEDS 
PLANS TO RESTRICT ENROLLMENT; SERVICE 
AREA MORATORIUM FOR CERTAIN SNPS. 
(a) IN GENERAL.—Section 1859(f)(1) of the Social 
Security Act (42 U.S.C. 1395w–28(f)(1)) is amended by 
striking ‘‘January 1, 2011’’ and inserting ‘‘January 1, 
2013 (or January 1, 2016, in the case of a plan described 
in section 1177(b)(1) of the Affordable Health Care for 
America Act)’’. 
(b) EXTENSION OF CERTAIN PLANS.— 
(1) PLANS DESCRIBED.—For purposes of Sec-
tion 1859(f)(1) of the Social Security Act (42 
U.S.C. 1395w–28(f)(1)), a plan described in this 
paragraph is a Medicare Advantage dual eligible spe-
cial needs plan that— 
(A) whose sponsoring Medicare Advantage 
organization, as of the date enactment of the 
Affordable Health Care for America Act, has a 
contract with a State Medicaid Agency that
556 
participated in the ‘‘Demonstrations Serving 
Those Dually-Eligible for Medicare and Med-
icaid’’ under the Medicare program; and 
(B) that has been approved by the Centers 
for Medicare & Medicaid Services as a dual eli-
gible special needs plan and that offers inte-
grated Medicare and Medicaid services under a 
contract with the State Medicaid agency. 
(2) ANALYSIS; REPORT.— 
(A) ANALYSIS.—The Secretary of Health 
and Human Services shall provide, through a 
contract with an independent health services 
evaluation organization, for an analysis of the 
plans described in paragraph (1) with regard to 
the impact of such plans on cost, quality of 
care, patient satisfaction, and other subjects 
specified by the Secretary. Such report also will 
identify statutory changes needed to simplify 
access to needed services, improve coordination 
of benefits and services and ensure protection 
for dual eligibles as appropriate. 
(B) REPORT.—Not later than December 
31, 2011, the Secretary shall submit to the 
Congress a report on the analysis under sub-
paragraph (A) and shall include in such report
557 
such recommendations with regard to the treat-
ment of such plans as the Secretary deems ap-
propriate. 
(c) EXTENSION OF SERVICE AREA MORATORIUM FOR 
CERTAIN SNPS.—Section 164(c)(2) of the Medicare Im-
provements for Patients and Providers Act of 2008 is 
amended by striking ‘‘December 31, 2010’’ and inserting 
‘‘December 31, 2012’’. 
SEC. 1178. EXTENSION OF MEDICARE SENIOR HOUSING 
PLANS. 
Section 1859 of the Social Security Act (42 U.S.C. 
1395w–28) is amended by adding at the end the following 
new subsection: 
‘‘(g) SPECIAL RULES FOR SENIOR HOUSING FACIL-
ITY PLANS.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of this part, in the case of a Medicare Ad-
vantage senior housing facility plan described in 
paragraph (2) and for periods before January 1, 
2013— 
‘‘(A) the service area of such plan may be 
limited to a senior housing facility in a geo-
graphic area; 
‘‘(B) the service area of such plan may not 
be expanded; and
558 
‘‘(C) additional senior housing facilities 
may not be serviced by such plan. 
‘‘(2) MEDICARE ADVANTAGE SENIOR HOUSING 
FACILITY PLAN DESCRIBED.—For purposes of this 
subsection, a Medicare Advantage senior housing fa-
cility plan is a Medicare Advantage plan that— 
‘‘(A)(i) restricts enrollment of individuals 
under this part to individuals who reside in a 
continuing care retirement community (as de-
fined in section 1852(l)(4)(B)); 
‘‘(ii) provides primary care services onsite 
and has a ratio of accessible providers to bene-
ficiaries that the Secretary determines is ade-
quate, taking into consideration the number of 
residents onsite, the health needs of those resi-
dents, and the accessibility of providers offsite; 
and 
‘‘(iii) provides transportation services for 
beneficiaries to providers outside of the facility; 
and 
‘‘(B) is offered by a Medicare Advantage 
organization that has offered at least 1 plan de-
scribed in subparagraph (A) for at least 1 year 
prior to January 1, 2010, under a demonstra-
tion project established by the Secretary.’’.
559 
Subtitle E—Improvements to 
Medicare Part D 
SEC. 1181. ELIMINATION OF COVERAGE GAP. 
(a) IMMEDIATE REDUCTION IN COVERAGE GAP IN 
2010.—Section 1860D–2(b) of the Social Security Act 
(42 U.S.C. 1395w–102(b)) is amended— 
(1) in paragraph (3)(A), by striking ‘‘paragraph 
(4)’’ and inserting ‘‘paragraphs (4) and (7)’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(7) INCREASE IN INITIAL COVERAGE LIMIT IN 
2010.— 
‘‘(A) IN GENERAL.—For plan years begin-
ning during 2010, the initial coverage limit de-
scribed in paragraph (3)(B) otherwise applica-
ble shall be increased by $500. 
‘‘(B) APPLICATION.—In applying subpara-
graph (A)— 
‘‘(i) except as otherwise provided in 
this subparagraph, there shall be no 
change in the premiums, bids, or any other 
parameters under this part or part C; 
‘‘(ii) costs that would be treated as in-
curred costs for purposes of applying para-
graph (4) but for the application of sub-
560 
paragraph (A) shall continue to be treated 
as incurred costs; 
‘‘(iii) the Secretary shall establish pro-
cedures, which may include a reconciliation 
process, to fully reimburse PDP sponsors 
with respect to prescription drug plans and 
MA organizations with respect to MA–PD 
plans for the reduction in beneficiary cost 
sharing associated with the application of 
subparagraph (A); 
‘‘(iv) the Secretary shall develop an 
estimate of the additional increased costs 
attributable to the application of this para-
graph for increased drug utilization and fi-
nancing and administrative costs and shall 
use such estimate to adjust payments to 
PDP sponsors with respect to prescription 
drug plans under this part and MA organi-
zations with respect to MA–PD plans 
under part C; and 
‘‘(v) the Secretary shall establish pro-
cedures for retroactive reimbursement of 
part D eligible individuals who are covered 
under such a plan for costs which are in-
curred before the date of initial implemen-
561 
tation of subparagraph (A) and which 
would be reimbursed under such a plan if 
such implementation occurred as of Janu-
ary 1, 2010.’’. 
(b) ADDITIONAL CLOSURE IN GAP BEGINNING IN 
2011.—Section 1860D–2(b) of such Act (42 U.S.C. 
1395w–102(b)) as amended by subsection (a), is further 
amended— 
(1) in paragraph (3)(A), by striking ‘‘and (7)’’ 
and inserting ‘‘, (7), and (8)’’; 
(2) in paragraph (4)(B)(i), by inserting ‘‘sub-
ject to paragraph (8)’’ after ‘‘purposes of this part’’; 
and 
(3) by adding at the end the following new 
paragraph: 
‘‘(8) PHASED-IN
ELIMINATION
OF
COVERAGE 
GAP.— 
‘‘(A) IN GENERAL.—For each year begin-
ning with 2011, the Secretary shall consistent 
with this paragraph progressively increase the 
initial coverage limit (described in subsection 
(b)(3)) and decrease the annual out-of-pocket 
threshold from the amounts otherwise computed 
until, beginning in 2019, there is a continuation 
of coverage from the initial coverage limit for
562 
expenditures incurred through the total amount 
of expenditures at which benefits are available 
under paragraph (4). 
‘‘(B) INCREASE
IN
INITIAL
COVERAGE 
LIMIT.— 
‘‘(i) IN GENERAL.—For a year begin-
ning with 2011, subject to clause (ii), the 
initial coverage limit otherwise computed 
without regard to this paragraph shall be 
increased by the cumulative ICL phase-in 
percentage (as defined in clause (iii) for 
the year) times the out-of-pocket gap 
amount (as defined in subparagraph (D)) 
for the year. 
‘‘(ii) MAINTENANCE OF 2010 INITIAL 
COVERAGE LIMIT LEVEL.—If for a year the 
initial coverage limit otherwise computed 
under this paragraph would be less than 
the initial coverage limit applied during 
2010, taking into account paragraph (7), 
the initial coverage limit for that year shall 
be such initial coverage limit as so applied 
during 2010. 
‘‘(iii) CUMULATIVE
PHASE-IN
PER-
CENTAGE.—
563 
‘‘(I) IN GENERAL.—For purposes 
of this paragraph, subject to sub-
clause (II), the term ‘cumulative ICL 
phase-in percentage’ means for a year 
the sum of the annual ICL phase-in 
percentage (as defined in clause (iv)) 
for the year and the annual ICL 
phase-in percentages for each previous 
year beginning with 2011. 
‘‘(II) LIMITATION.—If the sum 
of the cumulative ICL phase-in per-
centage and the cumulative OPT 
phase-in percentage (as defined in 
subparagraph (C)(iii)) for a year 
would otherwise exceed 100 percent, 
each such percentage shall be reduced 
in a proportional amount so the sum 
does not exceed 100 percent. 
‘‘(iv) ANNUAL
ICL
PHASE-IN
PER-
CENTAGE.—For purposes of this para-
graph, the term ‘annual ICL phase-in per-
centage’ means— 
‘‘(I) for 2011, 8.25 percent; 
‘‘(II) for 2012, 2013, and 2014, 
4.5 percent;
564 
‘‘(III) for 2015 and 2016, 6 per-
cent; 
‘‘(IV) for 2017, 7.5 percent; 
‘‘(V) for 2018, 8 percent; and 
‘‘(VI) for 2019, 8 percent, or 
such other percent as may be nec-
essary to provide for a full continu-
ation of coverage as described in sub-
paragraph (A) in that year. 
‘‘(C) DECREASE IN ANNUAL OUT-OF-POCK-
ET THRESHOLD.— 
‘‘(i) IN GENERAL.—For a year begin-
ning with 2011, subject to clause (ii), the 
annual out-of-pocket threshold otherwise 
computed without regard to this paragraph 
shall be decreased by the cumulative OPT 
phase-in percentage (as defined in clause 
(iii) for the year) of the out-of-pocket gap 
amount for the year multiplied by 1.75. 
‘‘(ii) MAINTENANCE.—The Secretary 
shall adjust the annual out-of-pocket 
threshold for a year to the extent nec-
essary to ensure that the sum of the initial 
coverage limit described in subparagraph 
(A) and the out-of-pocket gap amount (de-
565 
fined in subparagraph (D)), as determined 
for the year pursuant to the provisions of 
this paragraph for such year, does not ex-
ceed such sum that would have applied if 
this paragraph did not apply. 
‘‘(iii) CUMULATIVE
OPT
PHASE-IN 
PERCENTAGE.—For purposes of this para-
graph, subject to subparagraph (B)(iii)(II), 
the term ‘cumulative OPT phase-in per-
centage’ means for a year the sum of the 
annual OPT phase-in percentage (as de-
fined in clause (iv)) for the year and the 
annual OPT phase-in percentages for each 
previous year beginning with 2011. 
‘‘(iv) ANNUAL
OPT
PHASE-IN
PER-
CENTAGE.—For purposes of this para-
graph, the term ‘annual OPT phase-in per-
centage’ means— 
‘‘(I) for 2011, 0 percent; 
‘‘(II) for 2012, 2013, and 2014, 
4.5 percent; 
‘‘(III) for 2015 and 2016, 6 per-
cent; 
‘‘(IV) for 2017, 7.5 percent; and
566 
‘‘(V) for 2018 and 2019, 8 per-
cent. 
‘‘(D) OUT-OF-POCKET GAP AMOUNT.—For 
purposes of this paragraph, the term ‘out-of- 
pocket gap amount’ means for a year the 
amount by which— 
‘‘(i) the annual out-of-pocket thresh-
old specified in paragraph (4)(B) for the 
year (as determined as if this paragraph 
did not apply), exceeds 
‘‘(ii) the sum of— 
‘‘(I) the annual deductible under 
paragraph (1) for the year; and 
‘‘(II) 1⁄4 of the amount by which 
the initial coverage limit under para-
graph (3) for the year (as determined 
as if this paragraph did not apply) ex-
ceeds such annual deductible. 
‘‘(E) RELATION TO AAHCA TRANSITIONAL 
INCREASE.—Except as otherwise specifically 
provided, this paragraph shall be applied as if 
no increase had been made in the initial cov-
erage limit under paragraph (7).’’. 
(c) REQUIRING DRUG MANUFACTURERS TO PROVIDE 
DRUG REBATES FOR REBATE ELIGIBLE INDIVIDUALS.—
567 
(1) IN GENERAL.—Section 1860D–2 of the So-
cial Security Act (42 U.S.C. 1395w–102) is amend-
ed— 
(A) in subsection (e)(1), in the matter be-
fore subparagraph (A), by inserting ‘‘and sub-
section (f)’’ after ‘‘this subsection’’; and 
(B) by adding at the end the following new 
subsection: 
‘‘(f) PRESCRIPTION DRUG REBATE AGREEMENT FOR 
REBATE ELIGIBLE INDIVIDUALS.— 
‘‘(1) REQUIREMENT.— 
‘‘(A) IN GENERAL.—For plan years begin-
ning on or after January 1, 2011, in this part, 
the term ‘covered part D drug’ does not include 
any drug or biological product that is manufac-
tured by a manufacturer that has not entered 
into and have in effect a rebate agreement de-
scribed in paragraph (2). 
‘‘(B) 2010 PLAN YEAR REQUIREMENT.— 
Any drug or biological product manufactured by 
a manufacturer that declines to enter into a re-
bate agreement described in paragraph (2) for 
the period beginning on January 1, 2010, and 
ending on December 31, 2010, shall not be in-
568 
cluded as a ‘covered part D drug ‘ for the sub-
sequent plan year. 
‘‘(2) REBATE
AGREEMENT.—A rebate agree-
ment under this subsection shall require the manu-
facturer to provide to the Secretary a rebate for 
each rebate period (as defined in paragraph (6)(B)) 
ending after December 31, 2009, in the amount 
specified in paragraph (3) for any covered part D 
drug of the manufacturer dispensed after December 
31, 2009, to any rebate eligible individual (as de-
fined in paragraph (6)(A)) for which payment was 
made by a PDP sponsor under part D or a MA or-
ganization under part C for such period, including 
payments passed through the low-income and rein-
surance subsidies under sections 1860D–14 and 
1860D–15(b), respectively. Such rebate shall be paid 
by the manufacturer to the Secretary not later than 
30 days after the date of receipt of the information 
described in section 1860D–12(b)(7), including as 
such section is applied under section 1857(f)(3), or 
30 days after the receipt of information under sub-
paragraph (D) of paragraph (3), as determined by 
the Secretary. Insofar as not inconsistent with this 
subsection, the Secretary shall establish terms and 
conditions of such agreement relating to compliance,
569 
penalties, and program evaluations, investigations, 
and audits that are similar to the terms and condi-
tions for rebate agreements under paragraphs (3) 
and (4) of section 1927(b). 
‘‘(3) REBATE FOR REBATE ELIGIBLE MEDICARE 
DRUG PLAN ENROLLEES.— 
‘‘(A) IN GENERAL.—The amount of the re-
bate specified under this paragraph for a manu-
facturer for a rebate period, with respect to 
each dosage form and strength of any covered 
part D drug provided by such manufacturer 
and dispensed to a rebate eligible individual, 
shall be equal to the product of— 
‘‘(i) the total number of units of such 
dosage form and strength of the drug so 
provided and dispensed for which payment 
was made by a PDP sponsor under part D 
or a MA organization under part C for the 
rebate period, including payments passed 
through the low-income and reinsurance 
subsidies under sections 1860D–14 and 
1860D–15(b), respectively; and 
‘‘(ii) the amount (if any) by which— 
‘‘(I) the Medicaid rebate amount 
(as defined in subparagraph (B)) for
570 
such form, strength, and period, ex-
ceeds 
‘‘(II) the average Medicare drug 
program rebate eligible rebate amount 
(as defined in subparagraph (C)) for 
such form, strength, and period. 
‘‘(B) MEDICAID
REBATE
AMOUNT.—For 
purposes of this paragraph, the term ‘Medicaid 
rebate amount’ means, with respect to each 
dosage form and strength of a covered part D 
drug provided by the manufacturer for a rebate 
period— 
‘‘(i) in the case of a single source 
drug or an innovator multiple source drug, 
the 
amount 
specified 
in 
paragraph 
(1)(A)(ii) of section 1927(c) plus the 
amount, if any, specified in paragraph 
(2)(A)(ii) of such section, for such form, 
strength, and period; or 
‘‘(ii) in the case of any other covered 
outpatient drug, the amount specified in 
paragraph (3)(A)(i) of such section for 
such form, strength, and period. 
‘‘(C) AVERAGE MEDICARE DRUG PROGRAM 
REBATE ELIGIBLE REBATE AMOUNT.—For pur-
571 
poses of this subsection, the term ‘average 
Medicare drug program rebate eligible rebate 
amount’ means, with respect to each dosage 
form and strength of a covered part D drug 
provided by a manufacturer for a rebate period, 
the sum, for all PDP sponsors under part D 
and MA organizations administering a MA–PD 
plan under part C, of— 
‘‘(i) the product, for each such spon-
sor or organization, of— 
‘‘(I) the sum of all rebates, dis-
counts, or other price concessions (not 
taking into account any rebate pro-
vided under paragraph (2) for such 
dosage form and strength of the drug 
dispensed, calculated on a per-unit 
basis, but only to the extent that any 
such rebate, discount, or other price 
concession applies equally to drugs 
dispensed to rebate eligible Medicare 
drug plan enrollees and drugs dis-
pensed to PDP and MA–PD enrollees 
who are not rebate eligible individuals; 
and
572 
‘‘(II) the number of the units of 
such dosage and strength of the drug 
dispensed during the rebate period to 
rebate eligible individuals enrolled in 
the prescription drug plans adminis-
tered by the PDP sponsor or the MA– 
PD plans administered by the MA or-
ganization; divided by 
‘‘(ii) the total number of units of such 
dosage and strength of the drug dispensed 
during the rebate period to rebate eligible 
individuals enrolled in all prescription drug 
plans administered by PDP sponsors and 
all MA–PD plans administered by MA or-
ganizations. 
‘‘(D) USE OF ESTIMATES.—The Secretary 
may establish a methodology for estimating the 
average Medicare drug program rebate eligible 
rebate amounts for each rebate period based on 
bid and utilization information under this part 
and may use these estimates as the basis for 
determining the rebates under this section. If 
the Secretary elects to estimate the average 
Medicare drug program rebate eligible rebate 
amounts, the Secretary shall establish a rec-
573 
onciliation process for adjusting manufacturer 
rebate payments not later than 3 months after 
the date that manufacturers receive the infor-
mation 
collected 
under 
section 
1860D– 
12(b)(7)(B). 
‘‘(4) LENGTH OF AGREEMENT.—The provisions 
of paragraph (4) of section 1927(b) (other than 
clauses (iv) and (v) of subparagraph (B)) shall apply 
to rebate agreements under this subsection in the 
same manner as such paragraph applies to a rebate 
agreement under such section. 
‘‘(5) OTHER
TERMS
AND
CONDITIONS.—The 
Secretary shall establish other terms and conditions 
of the rebate agreement under this subsection, in-
cluding terms and conditions related to compliance, 
that are consistent with this subsection. 
‘‘(6) DEFINITIONS.—In this subsection and sec-
tion 1860D–12(b)(7): 
‘‘(A) REBATE ELIGIBLE INDIVIDUAL.—The 
term ‘rebate eligible individual’— 
‘‘(i) means a full-benefit dual eligible 
individual 
(as 
defined 
in 
section 
1935(c)(6)); and 
‘‘(ii) includes, for drugs dispensed 
after December 31, 2014, a subsidy eligi-
574 
ble individual (as defined in section 
1860D–14(a)(3)(A)). 
‘‘(B) REBATE PERIOD.—The term ‘rebate 
period’ has the meaning given such term in sec-
tion 1927(k)(8). 
‘‘(7) WAIVER.—Chapter 35 of title 44, United 
States Code, shall not apply to the requirements 
under this subsection for the period beginning on 
January 1, 2010, and ending on December 31, 
2010.’’. 
(2) REPORTING REQUIREMENT FOR THE DE-
TERMINATION AND PAYMENT OF REBATES BY MANU-
FACTURES RELATED TO REBATE FOR REBATE ELIGI-
BLE MEDICARE DRUG PLAN ENROLLEES.— 
(A) 
REQUIREMENTS
FOR
PDP
SPON-
SORS.—Section 1860D–12(b) of the Social Se-
curity Act (42 U.S.C. 1395w–112(b)) is amend-
ed by adding at the end the following new para-
graph: 
‘‘(7) REPORTING REQUIREMENT FOR THE DE-
TERMINATION AND PAYMENT OF REBATES BY MANU-
FACTURERS RELATED TO REBATE FOR REBATE ELI-
GIBLE MEDICARE DRUG PLAN ENROLLEES.— 
‘‘(A) IN GENERAL.—For purposes of the 
rebate under section 1860D–2(f) for contract
575 
years beginning on or after January 1, 2011, 
each contract entered into with a PDP sponsor 
under this part with respect to a prescription 
drug plan shall require that the sponsor comply 
with subparagraphs (B) and (C). 
‘‘(B) REPORT FORM AND CONTENTS.—Not 
later than a date specified by the Secretary, a 
PDP sponsor of a prescription drug plan under 
this part shall report to each manufacturer— 
‘‘(i) information (by National Drug 
Code number) on the total number of units 
of each dosage, form, and strength of each 
drug of such manufacturer dispensed to re-
bate eligible Medicare drug plan enrollees 
under any prescription drug plan operated 
by the PDP sponsor during the rebate pe-
riod; 
‘‘(ii) information on the price dis-
counts, price concessions, and rebates for 
such drugs for such form, strength, and 
period; 
‘‘(iii) information on the extent to 
which such price discounts, price conces-
sions, and rebates apply equally to rebate 
eligible Medicare drug plan enrollees and
576 
PDP enrollees who are not rebate eligible 
Medicare drug plan enrollees; and 
‘‘(iv) any additional information that 
the Secretary determines is necessary to 
enable the Secretary to calculate the aver-
age Medicare drug program rebate eligible 
rebate amount (as defined in paragraph 
(3)(C) of such section), and to determine 
the amount of the rebate required under 
this section, for such form, strength, and 
period. 
Such report shall be in a form consistent with 
a standard reporting format established by the 
Secretary. 
‘‘(C) SUBMISSION TO SECRETARY.—Each 
PDP sponsor shall promptly transmit a copy of 
the information reported under subparagraph 
(B) to the Secretary for the purpose of audit 
oversight and evaluation. 
‘‘(D) 
CONFIDENTIALITY
OF
INFORMA-
TION.—The provisions of subparagraph (D) of 
section 1927(b)(3), relating to confidentiality of 
information, shall apply to information reported 
by PDP sponsors under this paragraph in the 
same manner that such provisions apply to in-
577 
formation disclosed by manufacturers or whole-
salers under such section, except— 
‘‘(i) that any reference to ‘this sec-
tion’ in clause (i) of such subparagraph 
shall be treated as being a reference to this 
section; 
‘‘(ii) the reference to the Director of 
the Congressional Budget Office in clause 
(iii) of such subparagraph shall be treated 
as including a reference to the Medicare 
Payment Advisory Commission; and 
‘‘(iii) clause (iv) of such subparagraph 
shall not apply. 
‘‘(E) OVERSIGHT.—Information reported 
under this paragraph may be used by the In-
spector General of the Department of Health 
and Human Services for the statutorily author-
ized purposes of audit, investigation, and eval-
uations. 
‘‘(F) PENALTIES
FOR
FAILURE
TO
PRO-
VIDE TIMELY INFORMATION AND PROVISION OF 
FALSE INFORMATION.—In the case of a PDP 
sponsor— 
‘‘(i) that fails to provide information 
required under subparagraph (B) on a
578 
timely basis, the sponsor is subject to a 
civil money penalty in the amount of 
$10,000 for each day in which such infor-
mation has not been provided; or 
‘‘(ii) that knowingly (as defined in 
section 1128A(i)) provides false informa-
tion under such subparagraph, the sponsor 
is subject to a civil money penalty in an 
amount not to exceed $100,000 for each 
item of false information. 
Such civil money penalties are in addition to 
other penalties as may be prescribed by law. 
The provisions of section 1128A (other than 
subsections (a) and (b)) shall apply to a civil 
money penalty under this subparagraph in the 
same manner as such provisions apply to a pen-
alty or proceeding under section 1128A(a).’’. 
(B) 
APPLICATION
TO
MA
ORGANIZA-
TIONS.—Section 1857(f)(3) of the Social Secu-
rity Act (42 U.S.C. 1395w–27(f)(3)) is amend-
ed by adding at the end the following: 
‘‘(D) REPORTING REQUIREMENT RELATED 
TO REBATE FOR REBATE ELIGIBLE MEDICARE 
DRUG
PLAN
ENROLLEES.—Section 1860D– 
12(b)(7).’’.
579 
(3) DEPOSIT OF REBATES INTO MEDICARE PRE-
SCRIPTION DRUG ACCOUNT.—Section 1860D–16(c) 
of such Act (42 U.S.C. 1395w–116(c)) is amended 
by adding at the end the following new paragraph: 
‘‘(6) REBATE FOR REBATE ELIGIBLE MEDICARE 
DRUG PLAN ENROLLEES.—Amounts paid under a re-
bate agreement under section 1860D–2(f) shall be 
deposited into the Account and shall be used to pay 
for all or part of the gradual elimination of the cov-
erage gap under section 1860D–2(b)(7).’’. 
SEC. 1182. DISCOUNTS FOR CERTAIN PART D DRUGS IN 
ORIGINAL COVERAGE GAP. 
Section 1860D–2 of the Social Security Act (42 
U.S.C. 1395w–102), as amended by section 1181, is 
amended— 
(1) in subsection (b)(4)(C)(ii), by inserting 
‘‘subject to subsection (g)(2)(C),’’ after ‘‘(ii)’’; 
(2) in subsection (e)(1), in the matter before 
subparagraph (A), by striking ‘‘subsection (f)’’ and 
inserting ‘‘subsections (f) and (g)’’ after ‘‘this sub-
section’’; and 
(3) by adding at the end the following new sub-
section: 
‘‘(g) REQUIREMENT FOR MANUFACTURER DISCOUNT 
AGREEMENT FOR CERTAIN QUALIFYING DRUGS.—
580 
‘‘(1) IN GENERAL.—In this part, the term ‘cov-
ered part D drug’ does not include any drug or bio-
logical product that is manufactured by a manufac-
turer that has not entered into and have in effect for 
all qualifying drugs (as defined in paragraph (5)(A)) 
a discount agreement described in paragraph (2). 
‘‘(2) DISCOUNT AGREEMENT.— 
‘‘(A) PERIODIC
DISCOUNTS.—A discount 
agreement under this paragraph shall require 
the manufacturer involved to provide, to each 
PDP sponsor with respect to a prescription 
drug plan or each MA organization with respect 
to each MA–PD plan, a discount in an amount 
specified in paragraph (3) for qualifying drugs 
(as defined in paragraph (5)(A)) of the manu-
facturer dispensed to a qualifying enrollee after 
January 1, 2010, insofar as the individual is in 
the original gap in coverage (as defined in para-
graph (5)(E)). 
‘‘(B) DISCOUNT AGREEMENT.—Insofar as 
not inconsistent with this subsection, the Sec-
retary shall establish terms and conditions of 
such agreement, including terms and conditions 
relating to compliance, similar to the terms and 
conditions for rebate agreements under para-
581 
graphs (2), (3), and (4) of section 1927(b), ex-
cept that— 
‘‘(i) discounts shall be applied under 
this subsection to prescription drug plans 
and MA–PD plans instead of State plans 
under title XIX; 
‘‘(ii) PDP sponsors and MA organiza-
tions shall be responsible, instead of 
States, for provision of necessary utiliza-
tion information to drug manufacturers; 
and 
‘‘(iii) sponsors and MA organizations 
shall be responsible for reporting informa-
tion on drug-component negotiated price. 
‘‘(C) COUNTING DISCOUNT TOWARD TRUE 
OUT-OF-POCKET
COSTS.—Under the discount 
agreement, in applying subsection (b)(4), with 
regard to subparagraph (C)(i) of such sub-
section, if a qualified enrollee purchases the 
qualified drug insofar as the enrollee is in an 
actual gap of coverage (as defined in paragraph 
(5)(D)), the amount of the discount under the 
agreement shall be treated and counted as costs 
incurred by the plan enrollee.
582 
‘‘(3) DISCOUNT AMOUNT.—The amount of the 
discount specified in this paragraph for a discount 
period for a plan is equal to 50 percent of the 
amount of the drug-component negotiated price (as 
defined in paragraph (5)(C)) for qualifying drugs for 
the period involved. 
‘‘(4) ADDITIONAL TERMS.—In the case of a dis-
count provided under this subsection with respect to 
a prescription drug plan offered by a PDP sponsor 
or an MA–PD plan offered by an MA organization, 
if a qualified enrollee purchases the qualified drug— 
‘‘(A) insofar as the enrollee is in an actual 
gap of coverage (as defined in paragraph 
(5)(D)), the sponsor or plan shall provide the 
discount to the enrollee at the time the enrollee 
pays for the drug; and 
‘‘(B) insofar as the enrollee is in the por-
tion of the original gap in coverage (as defined 
in paragraph (5)(E)) that is not in the actual 
gap in coverage, the discount shall not be ap-
plied against the negotiated price (as defined in 
subsection (d)(1)(B)) for the purpose of calcu-
lating the beneficiary payment. 
‘‘(5) DEFINITIONS.—In this subsection:
583 
‘‘(A) 
QUALIFYING
DRUG.—The 
term 
‘qualifying drug’ means, with respect to a pre-
scription drug plan or MA–PD plan, a drug or 
biological product that— 
‘‘(i)(I) is a drug produced or distrib-
uted under an original new drug applica-
tion approved by the Food and Drug Ad-
ministration, including a drug product 
marketed by any cross-licensed producers 
or distributors operating under the new 
drug application; 
‘‘(II) is a drug that was originally 
marketed under an original new drug ap-
plication approved by the Food and Drug 
Administration; or 
‘‘(III) is a biological product as ap-
proved under section 351(a) of the Public 
Health Services Act; 
‘‘(ii) is covered under the formulary of 
the plan or is treated as covered under the 
formulary of the plan as a result of a cov-
erage determination or appeal under sub-
section (g) or (h) of section 1860D–4; and 
‘‘(iii) is dispensed to an individual 
who is in the original gap in coverage.
584 
‘‘(B) QUALIFYING ENROLLEE.—The term 
‘qualifying enrollee’ means an individual en-
rolled in a prescription drug plan or MA–PD 
plan other than such an individual who is a 
subsidy-eligible individual (as defined in section 
1860D–14(a)(3)). 
‘‘(C) 
DRUG-COMPONENT
NEGOTIATED 
PRICE.—The term ‘drug-component negotiated 
price’ means, with respect to a qualifying drug, 
the negotiated price (as defined in section 
423.100 of title 42, Code of Federal Regula-
tions, as in effect on the date of enactment of 
this subsection), as determined without regard 
to any dispensing fee, of the drug under the 
prescription drug plan or MA–PD plan in-
volved. 
‘‘(D) ACTUAL
GAP
IN
COVERAGE.—The 
term ‘actual gap in coverage’ means the gap in 
prescription drug coverage that occurs between 
the initial coverage limit (as modified under 
paragraph (7) and subparagraph (B) of para-
graph (8) of subsection (b)) and the annual 
out-of-pocket threshold (as modified under sub-
paragraph (C) of such subsection).
585 
‘‘(E) ORIGINAL GAP IN COVERAGE.—The 
term ‘original in gap coverage’ means the gap 
in prescription drug coverage that would occur 
between the initial coverage limit (described in 
subsection (b)(3)) and the out-of-pocket thresh-
old (as defined in subsection (b)(4)(B)) if sub-
sections (b)(7) and (b)(8) did not apply. 
‘‘(6) SPECIAL RULE FOR 2010.—For the period 
beginning January 1, 2010, and ending December 
31, 2010, the Secretary may— 
‘‘(A) enter into agreements with manufac-
turers to directly receive the discount amount 
described in paragraph (3); 
‘‘(B) collect the necessary information 
from prescription drug plans and MA-PD plans 
to calculate the discount amount described in 
such paragraph; and 
‘‘(C) provide the discount described in such 
paragraph to beneficiaries as close as prac-
ticable after the point of sale. 
‘‘(7) WAIVER.—Chapter 35 of title 44, United 
States Code, shall not apply to the requirements 
under this subsection for the period beginning on 
January 1, 2010, and ending on December 31, 
2010.’’.
586 
SEC. 1183. REPEAL OF PROVISION RELATING TO SUBMIS-
SION OF CLAIMS BY PHARMACIES LOCATED 
IN OR CONTRACTING WITH LONG-TERM CARE 
FACILITIES. 
(a) PART D SUBMISSION.—Section 1860D–12(b) of 
the Social Security Act (42 U.S.C. 1395w–112(b)), as 
amended by section 172(a)(1) of Public Law 110–275, is 
amended by striking paragraph (5) and redesignating 
paragraph (6) and paragraph (7), as added by section 
1181(c)(2)(A), as paragraph (5) and paragraph (6), re-
spectively. 
(b) SUBMISSION
TO
MA–PD PLANS.—Section 
1857(f)(3) of the Social Security Act (42 U.S.C. 1395w– 
27(f)(3)), as added by section 171(b) of Public Law 110– 
275 and amended by section 172(a)(2) of such Public Law 
and section 1181 of this Act, is amended by striking sub-
paragraph (B) and redesignating subparagraphs (C) and 
(D) as subparagraphs (B) and (C) respectively. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply for contract years beginning with 
2010.
587 
SEC. 1184. INCLUDING COSTS INCURRED BY AIDS DRUG AS-
SISTANCE PROGRAMS AND INDIAN HEALTH 
SERVICE 
IN 
PROVIDING 
PRESCRIPTION 
DRUGS TOWARD THE ANNUAL OUT-OF-POCK-
ET THRESHOLD UNDER PART D. 
(a) IN GENERAL.—Section 1860D–2(b)(4)(C) of the 
Social Security Act (42 U.S.C. 1395w–102(b)(4)(C)) is 
amended— 
(1) in clause (i), by striking ‘‘and’’ at the end; 
(2) in clause (ii)— 
(A) by striking ‘‘such costs shall be treated 
as incurred only if’’ and inserting ‘‘and subject 
to clause (iii), such costs shall be treated as in-
curred only if’’; 
(B) by striking ‘‘, under section 1860D– 
14, or under a State Pharmaceutical Assistance 
Program’’; and 
(C) by striking the period at the end and 
inserting ‘‘; and’’; and 
(3) by inserting after clause (ii) the following 
new clause: 
‘‘(iii) such costs shall be treated as in-
curred and shall not be considered to be 
reimbursed under clause (ii) if such costs 
are borne or paid— 
‘‘(I) under section 1860D–14;
588 
‘‘(II) under a State Pharma-
ceutical Assistance Program; 
‘‘(III) by the Indian Health Serv-
ice, an Indian tribe or tribal organiza-
tion, or an urban Indian organization 
(as defined in section 4 of the Indian 
Health Care Improvement Act); or 
‘‘(IV) under an AIDS Drug As-
sistance Program under part B of 
title XXVI of the Public Health Serv-
ice Act.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to costs incurred on or after 
January 1, 2011. 
SEC. 1185. NO MID-YEAR FORMULARY CHANGES PER-
MITTED. 
(a) IN GENERAL.—Section 1860D–4(b)(3)(E) of the 
Social Security Act (42 U.S.C. 1395w–104(b)(3)(E)) is 
amended— 
(1) in the heading, by inserting ‘‘; CERTAIN 
FORMULARY
CHANGES
ONLY
BEFORE
INITIATING 
MARKETING FOR A PLAN YEAR’’ after ‘‘STATUS OF 
DRUG’’;
589 
(2) by striking ‘‘Any removal’’ and inserting 
‘‘(i) NOTICE.—Any removal’’ with the same indenta-
tion as the clause added by paragraph (2); 
(3) by adding at the end the following new 
clause: 
‘‘(ii) CERTAIN
CHANGES
IN
FOR-
MULARY ONLY BEFORE INITIATING MAR-
KETING FOR A PLAN YEAR.—Any removal 
of a covered part D drug from a formulary 
used by a PDP sponsor of a prescription 
drug plan (or MA organization of a MA– 
PD plan) or any other material change to 
the formulary so as to reduce the coverage 
(or increase the cost-sharing) of the drug 
under the plan for a plan year shall take 
effect by a date specified by the Secretary 
but no later than the start of plan mar-
keting activities for the plan year. In addi-
tion to any exceptions to the previous sen-
tence specified by the Secretary, the pre-
vious sentence shall not apply in the case 
that a drug is removed from the formulary 
of a plan because of a recall or withdrawal 
of the drug issued by the Food and Drug 
Administration, because the drug is re-
590 
placed with a generic drug that is a thera-
peutic equivalent, or because of utilization 
management applied to— 
‘‘(I) a drug whose labeling in-
cludes a boxed warning required by 
the Food and Drug Administration 
under section 201.57(c)(1) of title 21, 
Code of Federal Regulations (or a 
successor regulation); or 
‘‘(II) a drug required under sub-
section (c)(2) of section 505–1 of the 
Federal Food, Drug, and Cosmetic 
Act to have a Risk Evaluation and 
Management Strategy that includes 
elements under subsection (f) of such 
section.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to contract years beginning on 
or after January 1, 2011. 
SEC. 1186. NEGOTIATION OF LOWER COVERED PART D 
DRUG PRICES ON BEHALF OF MEDICARE 
BENEFICIARIES. 
(a) NEGOTIATION BY SECRETARY.—Section 1860D– 
11 of the Social Security Act (42 U.S.C. 1395w–111) is
591 
amended by striking subsection (i) (relating to noninter-
ference) and inserting the following: 
‘‘(i) NEGOTIATION OF LOWER DRUG PRICES.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of law, the Secretary shall negotiate with 
pharmaceutical manufacturers the prices (including 
discounts, rebates, and other price concessions) that 
may be charged to PDP sponsors and MA organiza-
tions for covered part D drugs for part D eligible in-
dividuals who are enrolled under a prescription drug 
plan or under an MA-PD plan. 
‘‘(2) 
NO
CHANGE
IN
RULES
FOR 
FORMULARIES.— 
‘‘(A) IN GENERAL.—Nothing in paragraph 
(1) shall be construed to authorize the Sec-
retary to establish or require a particular for-
mulary. 
‘‘(B) CONSTRUCTION.—Subparagraph (A) 
shall not be construed as affecting the Sec-
retary’s authority to ensure appropriate and 
adequate access to covered part D drugs under 
prescription drug plans and under MA-PD 
plans, including compliance of such plans with 
formulary requirements under section 1860D– 
4(b)(3).
592 
‘‘(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed as preventing the sponsor 
of a prescription drug plan, or an organization offer-
ing an MA-PD plan, from obtaining a discount or 
reduction of the price for a covered part D drug 
below the price negotiated under paragraph (1). 
‘‘(4) ANNUAL
REPORTS
TO
CONGRESS.—Not 
later than June 1, 2011, and annually thereafter, 
the Secretary shall submit to the Committees on 
Ways and Means, Energy and Commerce, and Over-
sight and Government Reform of the House of Rep-
resentatives and the Committee on Finance of the 
Senate a report on negotiations conducted by the 
Secretary to achieve lower prices for Medicare bene-
ficiaries, and the prices and price discounts achieved 
by the Secretary as a result of such negotiations.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall take effect on the date of the enact-
ment of this Act and shall first apply to negotiations and 
prices for plan years beginning on January 1, 2011. 
SEC. 1187. ACCURATE DISPENSING IN LONG-TERM CARE 
FACILITIES. 
Section 1860D–4(c) of the Social Security Act (42 
U.S.C. 1395w–104(c)) is amended by adding at the end 
the following new paragraph:
593 
‘‘(3) REDUCTION OF WASTEFUL DISPENSING.— 
‘‘(A) IN GENERAL.—For plan years begin-
ning on or after January 1, 2012, a PDP spon-
sor offering a prescription drug plan and MA 
organization offering a MA–PD plan under part 
C shall have in place the utilization manage-
ment techniques established under subpara-
graph (B). 
‘‘(B) 
REQUIREMENTS.—The 
Secretary 
shall establish utilization management tech-
niques, such as daily, weekly, or automated 
dose dispensing, to apply to PDP sponsors and 
MA organizations to reduce the quantities of 
covered part D drugs dispensed to enrollees 
who are residing in long-term care facilities in 
order to reduce waste associated with unused 
medications. 
‘‘(C) CONSULTATION.—In establishing the 
requirements under subparagraph (A), the Sec-
retary shall consult with the Administrator of 
the Environmental Protection Agency, Adminis-
trator of the Food and Drug Administration, 
Administrator of the Drug Enforcement Admin-
istration, State Boards of Pharmacy, pharmacy 
and physician organizations, and other appro-
594 
priate stakeholders to study and determine ad-
ditional methods for prescription drug plans to 
reduce waste associated with unused prescrip-
tion drugs.’’. 
SEC. 1188. FREE GENERIC FILL. 
(a) IN GENERAL.—Section 1128A(i)(6) of the Social 
Security Act (42 U.S.C. 1320a–7a(i)(6)) is amended— 
(1) in subparagraph (C), by striking ‘‘of 1996’’ 
and all that follows and inserting ‘‘of 1996;’’; 
(2) in the first subparagraph (D), by striking 
‘‘promulgated’’ and all that follows and inserting 
‘‘promulgated;’’; 
(3) by redesignating the second subparagraph 
(D) as a subparagraph (E) and by striking the pe-
riod at the end of such subparagraph and inserting 
‘‘; and’’; and 
(4) by adding at the end the following new sub-
paragraph: 
‘‘(F) with regard to a prescription drug 
plan offered by a PDP sponsor or an MA–PD 
plan offered by an MA organization, a reduc-
tion in or waiver of the copayment amount 
under the plan given to an individual to induce 
the individual to switch to a generic, bioequiva-
lent drug, or biosimilar.’’.
595 
(b) EFFECTIVE DATE.—The amendments made by 
this subsection shall take effect on the date of the enact-
ment of this Act and shall first apply with respect to remu-
neration offered, paid, solicited, or received on or after 
January 1, 2011. 
SEC. 1189. STATE CERTIFICATION PRIOR TO WAIVER OF LI-
CENSURE REQUIREMENTS UNDER MEDICARE 
PRESCRIPTION DRUG PROGRAM. 
(a) IN GENERAL.—Section 1860D–12(c) of the So-
cial Security Act (42 U.S.C. 1395w–112(c)) is amended— 
(1) in paragraph (1)(A), by striking ‘‘In the 
case’’ and inserting ‘‘Subject to paragraph (5), in 
the case’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(5) STATE CERTIFICATION REQUIRED.— 
‘‘(A) IN GENERAL.—Except as provided in 
section 1860D–21(f)(4), the Secretary may only 
grant a waiver under paragraph (1)(A) if the 
Secretary has received a certification from the 
State insurance commissioner that the prescrip-
tion drug plan has a substantially complete ap-
plication pending in the State. 
‘‘(B) REVOCATION OF WAIVER UPON FIND-
ING
OF
FRAUD
AND
ABUSE.—The Secretary
596 
shall revoke a waiver granted under paragraph 
(1)(A) if the State insurance commissioner sub-
mits a certification to the Secretary that the re-
cipient of such a waiver— 
‘‘(i) has committed fraud or abuse 
with respect to such waiver; 
‘‘(ii) has failed to make a good faith 
effort to satisfy State licensing require-
ments; or 
‘‘(iii) was determined ineligible for li-
censure by the State.’’. 
(b) EXCEPTION
FOR PACE PROGRAMS.—Section 
1860D–21(f) of such Act (42 U.S.C. 1395w–131(f)) is 
amended— 
(1) in paragraph (1), by striking ‘‘paragraphs 
(2) and (3)’’ and inserting ‘‘the succeeding para-
graphs’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(4) INAPPLICABILITY OF CERTAIN LICENSURE 
WAIVER REQUIREMENTS.—The provisions of para-
graph (1) of section 1860D–12(c) (relating to waiver 
of licensure under certain circumstances) shall apply 
without regard to paragraph (5) of such section in 
the case of a PACE program that elects to provide
597 
qualified prescription drug coverage to a part D eli-
gible individual who is enrolled under such pro-
gram.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning on or after January 1, 2010. 
Subtitle F—Medicare Rural Access 
Protections 
SEC. 1191. TELEHEALTH EXPANSION AND ENHANCEMENTS. 
(a) ADDITIONAL TELEHEALTH SITE.— 
(1) IN GENERAL.—Paragraph (4)(C)(ii) of sec-
tion 1834(m) of the Social Security Act (42 U.S.C. 
1395m(m)) is amended by adding at the end the fol-
lowing new subclause: 
‘‘(IX) A renal dialysis facility.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to services furnished on 
or after January 1, 2011. 
(b) TELEHEALTH ADVISORY COMMITTEE.— 
(1) ESTABLISHMENT.—Section 1868 of the So-
cial Security Act (42 U.S.C. 1395ee) is amended— 
(A) in the heading, by adding at the end 
the following: ‘‘TELEHEALTH
ADVISORY
COM-
MITTEE’’; and
598 
(B) by adding at the end the following new 
subsection: 
‘‘(c) TELEHEALTH ADVISORY COMMITTEE.— 
‘‘(1) IN GENERAL.—The Secretary shall appoint 
a Telehealth Advisory Committee (in this subsection 
referred to as the ‘Advisory Committee’) to make 
recommendations to the Secretary on policies of the 
Centers for Medicare & Medicaid Services regarding 
telehealth services as established under section 
1834(m), including the appropriate addition or dele-
tion of services (and HCPCS codes) to those speci-
fied in paragraphs (4)(F)(i) and (4)(F)(ii) of such 
section and for authorized payment under paragraph 
(1) of such section. 
‘‘(2) MEMBERSHIP; TERMS.— 
‘‘(A) MEMBERSHIP.— 
‘‘(i) 
IN
GENERAL.—The 
Advisory 
Committee shall be composed of 9 mem-
bers, to be appointed by the Secretary, of 
whom— 
‘‘(I) 5 shall be practicing physi-
cians; 
‘‘(II) 2 shall be practicing non- 
physician health care practitioners; 
and
599 
‘‘(III) 2 shall be administrators 
of telehealth programs. 
‘‘(ii) REQUIREMENTS
FOR
APPOINT-
ING MEMBERS.—In appointing members of 
the Advisory Committee, the Secretary 
shall— 
‘‘(I) ensure that each member 
has prior experience with the practice 
of telemedicine or telehealth; 
‘‘(II) give preference to individ-
uals who are currently providing tele-
medicine or telehealth services or who 
are involved in telemedicine or tele-
health programs; 
‘‘(III) ensure that the member-
ship of the Advisory Committee rep-
resents a balance of specialties and 
geographic regions; and 
‘‘(IV) take into account the rec-
ommendations of stakeholders. 
‘‘(B) TERMS.—The members of the Advi-
sory Committee shall serve for such term as the 
Secretary may specify. 
‘‘(C) CONFLICTS OF INTEREST.—An advi-
sory committee member may not participate
600 
with respect to a particular matter considered 
in an advisory committee meeting if such mem-
ber (or an immediate family member of such 
member) has a financial interest that could be 
affected by the advice given to the Secretary 
with respect to such matter. 
‘‘(3) MEETINGS.—The Advisory Committee 
shall meet twice each calendar year and at such 
other times as the Secretary may provide. 
‘‘(4) PERMANENT COMMITTEE.—Section 14 of 
the Federal Advisory Committee Act (5 U.S.C. 
App.) shall not apply to the Advisory Committee.’’. 
(2) FOLLOWING
RECOMMENDATIONS.—Section 
1834(m)(4)(F) 
of 
such 
Act 
(42 
U.S.C. 
1395m(m)(4)(F)) is amended by adding at the end 
the following new clause: 
‘‘(iii) RECOMMENDATIONS
OF
THE 
TELEHEALTH
ADVISORY
COMMITTEE.—In 
making determinations under clauses (i) 
and (ii), the Secretary shall take into ac-
count the recommendations of the Tele-
health Advisory Committee (established 
under section 1868(c)) when adding or de-
leting services (and HCPCS codes) and in 
establishing policies of the Centers for
601 
Medicare & Medicaid Services regarding 
the delivery of telehealth services. If the 
Secretary does not implement such a rec-
ommendation, the Secretary shall publish 
in the Federal Register a statement re-
garding the reason such recommendation 
was not implemented.’’. 
(3) WAIVER
OF
ADMINISTRATIVE
LIMITA-
TION.—The Secretary of Health and Human Serv-
ices shall establish the Telehealth Advisory Com-
mittee under the amendment made by paragraph (1) 
notwithstanding any limitation that may apply to 
the number of advisory committees that may be es-
tablished (within the Department of Health and 
Human Services or otherwise). 
(c) HOSPITAL CREDENTIALING OF TELEMEDICINE 
PHYSICIANS AND PRACTITIONERS.— 
(1) IN GENERAL.—Not later than 60 days after 
the date of the enactment of this Act, the Secretary 
of Health and Human Services shall issue guidance 
for hospitals (as defined in paragraph (4)) to sim-
plify requirements regarding compiling practitioner 
credentials for the purpose of rendering a medical 
staff privileging decision (under bylaws of the type 
described in section 1861(e)(3) of the Social Secu-
602 
rity Act) for physicians and practitioners (as defined 
in paragraph (4)) delivering telehealth services that 
are furnished via a telecommunications system. 
(2) 
FLEXIBILITY
IN
ACCEPTING 
CREDENTIALING BY ANOTHER MEDICARE PARTICI-
PATING HOSPITAL.— 
(A) IN
GENERAL.—Such guidance shall 
permit a hospital to accept credentialing pack-
ages compiled by another hospital participating 
under Medicare with regard to physicians and 
practitioners who seek medical staff privileges 
in the hospital to provide telehealth services via 
a telecommunications system from a site other 
than the hospital where the patient is located. 
(B) CONSTRUCTION.—Nothing in this sub-
section shall be construed to require a hospital 
to accept the credentialing package compiled by 
another facility. 
(C) NO OVERSIGHT REQUIRED.—If a hos-
pital does accept the credentialing materials 
prepared by another hospital, the hospital shall 
not be required to exercise oversight over the 
other hospital’s process for compiling and 
verifying credentials.
603 
(D) PRIVILEGING.—This paragraph shall 
only apply to credentialing and does not relieve 
a hospital from any applicable privileging re-
quirements. 
(3) CONSTRUCTION.—This subsection shall not 
be construed as limiting the ability of the Secretary 
to issue additional guidance regarding the require-
ments for the compilation of credentials for physi-
cians and practitioners not described in paragraph 
(1). 
(4) DEFINITIONS.—In this subsection: 
(A) The term ‘‘hospital’’ has the meaning 
given such term in subsection (e) of section 
1861 of the Social Security Act (42 U.S.C. 
1395x) and includes a critical access hospital 
(as defined in subsection (mm)(1) of such sec-
tion). 
(B) The term ‘‘physician’’ has the meaning 
given such term in subsection (r) of such sec-
tion. 
(C) The term ‘‘practitioner’’ means a prac-
titioner described in section 1842(b)(18)(C) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395u(b)(18)(C)).
604 
SEC. 1192. EXTENSION OF OUTPATIENT HOLD HARMLESS 
PROVISION. 
Section 1833(t)(7)(D)(i) of the Social Security Act 
(42 U.S.C. 1395l(t)(7)(D)(i)) is amended— 
(1) in subclause (II)— 
(A) in the first sentence, by striking 
‘‘‘2010’’ and inserting ‘‘2012’’; and 
(B) in the second sentence, by striking ‘‘or 
2009’’ and inserting ‘‘, 2009, 2010, or 2011’’; 
and 
(2) in subclause (III), by striking ‘‘January 1, 
2010’’ and inserting ‘‘January 1, 2012’’. 
SEC. 1193. EXTENSION OF SECTION 508 HOSPITAL RECLAS-
SIFICATIONS. 
(a) IN GENERAL.—Subsection (a) of section 106 of 
division B of the Tax Relief and Health Care Act of 2006 
(42 U.S.C. 1395 note), as amended by section 117 of the 
Medicare, Medicaid, and SCHIP Extension Act of 2007 
(Public Law 110–173) and section 124 of the Medicare 
Improvements for Patients and Providers Act of 2008 
(Public Law 110–275), is amended by striking ‘‘Sep-
tember 30, 2009’’ and inserting ‘‘September 30, 2011’’. 
(b) USE OF PARTICULAR WAGE INDEX FOR FISCAL 
YEAR 2010.—For purposes of implementation of the 
amendment made by subsection (a) for fiscal year 2010, 
the Secretary shall use the hospital wage index that was
605 
promulgated by the Secretary in the Federal Register on 
August 27, 2009 (74 Fed. Reg. 43754), and any subse-
quent corrections. 
SEC. 1194. EXTENSION OF GEOGRAPHIC FLOOR FOR WORK. 
Section 1848(e)(1)(E) of the Social Security Act (42 
U.S.C. 1395w–4(e)(1)(E)) is amended by striking ‘‘before 
January 1, 2010’’ and inserting ‘‘before January 1, 
2012’’. 
SEC. 1195. EXTENSION OF PAYMENT FOR TECHNICAL COM-
PONENT OF CERTAIN PHYSICIAN PATHOL-
OGY SERVICES. 
Section 542(c) of the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act of 2000 
(as enacted into law by section 1(a)(6) of Public Law 106– 
554), as amended by section 732 of the Medicare Prescrip-
tion Drug, Improvement, and Modernization Act of 2003 
(42 U.S.C. 1395w–4 note), section 104 of division B of 
the Tax Relief and Health Care Act of 2006 (42 U.S.C. 
1395w–4 note), section 104 of the Medicare, Medicaid, 
and SCHIP Extension Act of 2007 (Public Law 110– 
173), and section 136 of the Medicare Improvements for 
Patients and Providers Act of 1008 (Public Law 110– 
275), is amended by striking ‘‘and 2009’’ and inserting 
‘‘2009, 2010, and 2011’’.
606 
SEC. 1196. EXTENSION OF AMBULANCE ADD-ONS. 
(a) IN GENERAL.—Section 1834(l)(13) of the Social 
Security Act (42 U.S.C. 1395m(l)(13)) is amended— 
(1) in subparagraph (A)— 
(A) in the matter preceding clause (i), by 
striking ‘‘before January 1, 2010’’ and insert-
ing ‘‘before January 1, 2012’’; and 
(B) in each of clauses (i) and (ii), by strik-
ing ‘‘before January 1, 2010’’ and inserting 
‘‘before January 1, 2012’’. 
(b) 
AIR
AMBULANCE
IMPROVEMENTS.—Section 
146(b)(1) of the Medicare Improvements for Patients and 
Providers Act of 2008 (Public Law 110–275) is amended 
by striking ‘‘ending on December 31, 2009’’ and inserting 
‘‘ending on December 31, 2011’’. 
TITLE II—MEDICARE 
BENEFICIARY IMPROVEMENTS 
Subtitle A—Improving and Simpli-
fying Financial Assistance for 
Low 
Income 
Medicare 
Bene-
ficiaries 
SEC. 1201. IMPROVING ASSETS TESTS FOR MEDICARE SAV-
INGS PROGRAM AND LOW-INCOME SUBSIDY 
PROGRAM. 
(a) APPLICATION OF HIGHEST LEVEL PERMITTED 
UNDER LIS TO ALL SUBSIDY ELIGIBLE INDIVIDUALS.—
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(1) IN GENERAL.—Section 1860D–14(a)(1) of 
the Social Security Act (42 U.S.C. 1395w– 
114(a)(1)) is amended in the matter before subpara-
graph (A), by inserting ‘‘(or, beginning with 2012, 
paragraph (3)(E))’’ after ‘‘paragraph (3)(D)’’. 
(2) ANNUAL
INCREASE
IN
LIS
RESOURCE 
TEST.—Section 1860D–14(a)(3)(E)(i) of such Act 
(42 U.S.C. 1395w–114(a)(3)(E)(i)) is amended— 
(A) by striking ‘‘and’’ at the end of sub-
clause (I); 
(B) in subclause (II), by inserting ‘‘(before 
2012)’’ after ‘‘subsequent year’’; 
(C) by striking the period at the end of 
subclause (II) and inserting a semicolon; 
(D) by inserting after subclause (II) the 
following new subclauses: 
‘‘(III) for 2012, $17,000 (or 
$34,000 in the case of the combined 
value of the individual’s assets or re-
sources and the assets or resources of 
the individual’s spouse); and 
‘‘(IV) for a subsequent year, the 
dollar amounts specified in this sub-
clause (or subclause (III)) for the pre-
vious year increased by the annual
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percentage increase in the consumer 
price index (all items; United States 
city average) as of September of such 
previous year.’’; and 
(E) in the last sentence, by inserting ‘‘or 
(IV)’’ after ‘‘subclause (II)’’. 
(3) APPLICATION OF LIS TEST UNDER MEDI-
CARE SAVINGS PROGRAM.—Section 1905(p)(1)(C) of 
such Act (42 U.S.C. 1396d(p)(1)(C)) is amended— 
(A) by striking ‘‘effective beginning with 
January 1, 2010’’ and inserting ‘‘effective for 
the period beginning with January 1, 2010, and 
ending with December 31, 2011’’; and 
(B) by inserting before the period at the 
end the following: ‘‘or, effective beginning with 
January 1, 2012, whose resources (as so deter-
mined) do not exceed the maximum resource 
level applied for the year under subparagraph 
(E) of section 1860D–14(a)(3) (determined 
without regard to the life insurance policy ex-
clusion provided under subparagraph (G) of 
such section) applicable to an individual or to 
the individual and the individual’s spouse (as 
the case may be)’’.
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(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to eligibility determinations for 
income-related subsidies and medicare cost-sharing fur-
nished for periods beginning on or after January 1, 2012. 
SEC. 1202. ELIMINATION OF PART D COST-SHARING FOR 
CERTAIN 
NON-INSTITUTIONALIZED 
FULL- 
BENEFIT DUAL ELIGIBLE INDIVIDUALS. 
(a) IN GENERAL.—Section 1860D–14(a)(1)(D)(i) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395w– 
114(a)(1)(D)(i)) is amended— 
(1) by striking ‘‘INSTITUTIONALIZED INDIVID-
UALS.—In’’ and inserting ‘‘ELIMINATION OF COST- 
SHARING FOR CERTAIN FULL-BENEFIT DUAL ELIGI-
BLE INDIVIDUALS.— 
‘‘(I) INSTITUTIONALIZED
INDI-
VIDUALS.—In’’; and 
(2) by adding at the end the following new sub-
clause: 
‘‘(II) CERTAIN
OTHER
INDIVID-
UALS.—In the case of an individual 
who is a full-benefit dual eligible indi-
vidual and with respect to whom there 
has been a determination that but for 
the provision of home and community 
based care (whether under section
610 
1915, 1932, or under a waiver under 
section 1115) the individual would re-
quire the level of care provided in a 
hospital or a nursing facility or inter-
mediate care facility for the mentally 
retarded the cost of which could be re-
imbursed under the State plan under 
title XIX, the elimination of any bene-
ficiary coinsurance described in sec-
tion 1860D–2(b)(2) (for all amounts 
through the total amount of expendi-
tures at which benefits are available 
under section 1860D–2(b)(4)).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to drugs dispensed on or after 
January 1, 2011. 
SEC. 1203. ELIMINATING BARRIERS TO ENROLLMENT. 
(a) ADMINISTRATIVE VERIFICATION OF INCOME AND 
RESOURCES UNDER
THE LOW-INCOME SUBSIDY PRO-
GRAM.— 
(1) IN
GENERAL.—Clause (iii) of section 
1860D–14(a)(3)(E) of the Social Security Act (42 
U.S.C. 1395w–114(a)(3)(E)) is amended to read as 
follows:
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‘‘(iii) CERTIFICATION OF INCOME AND 
RESOURCES.—For purposes of applying 
this section— 
‘‘(I) an individual shall be per-
mitted to apply on the basis of self- 
certification of income and resources; 
and 
‘‘(II) matters attested to in the 
application shall be subject to appro-
priate methods of verification without 
the need of the individual to provide 
additional documentation, except in 
extraordinary situations as determined 
by the Commissioner.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply beginning January 1, 
2010. 
(b) DISCLOSURES TO FACILITATE IDENTIFICATION 
OF INDIVIDUALS LIKELY TO BE INELIGIBLE FOR THE 
LOW-INCOME ASSISTANCE UNDER THE MEDICARE PRE-
SCRIPTION DRUG PROGRAM TO ASSIST SOCIAL SECURITY 
ADMINISTRATION’S OUTREACH
TO ELIGIBLE INDIVID-
UALS.—For provision authorizing disclosure of return in-
formation to facilitate identification of individuals likely
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to be ineligible for low-income subsidies under Medicare 
prescription drug program, see section 1801. 
SEC. 1204. ENHANCED OVERSIGHT RELATING TO REIM-
BURSEMENTS FOR RETROACTIVE LOW IN-
COME SUBSIDY ENROLLMENT. 
(a) IN GENERAL.—In the case of a retroactive LIS 
enrollment beneficiary who is enrolled under a prescription 
drug plan under part D of title XVIII of the Social Secu-
rity Act (or an MA–PD plan under part C of such title), 
the beneficiary (or any eligible third party) is entitled to 
reimbursement by the plan for covered drug costs incurred 
by the beneficiary during the retroactive coverage period 
of the beneficiary in accordance with subsection (b) and 
in the case of such a beneficiary described in subsection 
(c)(4)(A)(i), such reimbursement shall be made automati-
cally by the plan upon receipt of appropriate notice the 
beneficiary is eligible for assistance described in such sub-
section (c)(4)(A)(i) without further information required 
to be filed with the plan by the beneficiary. 
(b) ADMINISTRATIVE REQUIREMENTS RELATING TO 
REIMBURSEMENTS.— 
(1) LINE-ITEM DESCRIPTION.—Each reimburse-
ment made by a prescription drug plan or MA–PD 
plan under subsection (a) shall include a line-item
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description of the items for which the reimbursement 
is made. 
(2) TIMING OF REIMBURSEMENTS.—A prescrip-
tion drug plan or MA–PD plan must make a reim-
bursement under subsection (a) to a retroactive LIS 
enrollment beneficiary, with respect to a claim, not 
later than 45 days after— 
(A) in the case of a beneficiary described 
in subsection (c)(4)(A)(i), the date on which the 
plan receives notice from the Secretary that the 
beneficiary is eligible for assistance described in 
such subsection; or 
(B) in the case of a beneficiary described 
in subsection (c)(4)(A)(ii), the date on which 
the beneficiary files the claim with the plan. 
(3) 
REPORTING
REQUIREMENT.—For 
each 
month beginning with January 2011, each prescrip-
tion drug plan and each MA–PD plan shall report 
to the Secretary the following: 
(A) The number of claims the plan has re-
adjudicated during the month due to a bene-
ficiary becoming retroactively eligible for sub-
sidies available under section 1860D–14 of the 
Social Security Act.
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(B) The total value of the readjudicated 
claim amount for the month. 
(C) The Medicare Health Insurance Claims 
Number of beneficiaries for whom claims were 
readjudicated. 
(D) For the claims described in subpara-
graphs (A) and (B), an attestation to the Ad-
ministrator of the Centers for Medicare & Med-
icaid Services of the total amount of reimburse-
ment the plan has provided to beneficiaries for 
premiums and cost-sharing that the beneficiary 
overpaid for which the plan received payment 
from the Centers for Medicare & Medicaid Serv-
ices. 
(c) DEFINITIONS.—For purposes of this section: 
(1) COVERED DRUG COSTS.—The term ‘‘cov-
ered drug costs’’ means, with respect to a retroactive 
LIS enrollment beneficiary enrolled under a pre-
scription drug plan under part D of title XVIII of 
the Social Security Act (or an MA–PD plan under 
part C of such title), the amount by which— 
(A) the costs incurred by such beneficiary 
during the retroactive coverage period of the 
beneficiary for covered part D drugs, premiums, 
and cost-sharing under such title; exceeds