SEC. 2. FINDINGS. 
Congress makes the following findings: 
(1) Regional inequities in Medicare reimburse-
ment have created barriers to care for seniors and 
the disabled. 
(2) The regional inequities in Medicare reim-
bursement penalize States that have cost-effective 
health care delivery systems and reward those States 
with high utilization rates and that provide ineffi-
cient care. 
(3) Comparatively, in 2007, the average per 
capita spending under traditional Medicare was 
$8,682 for beneficiaries in the United States, $7,320 
for beneficiaries in Seattle, $11,303 for those in Los 
Angeles, and $17,274 for those in Miami. 
(4) Over a lifetime, regional inequities can 
mean as much as a $125,000 difference in the cost 
of care provided per beneficiary. 
(5) Regional inequities have resulted in creating 
very different Medicare programs and amount of 
care received for seniors and the disabled based on 
where they live. 
(6) Because the Medicare Advantage rate is 
based on the fee-for-service reimbursement rate, re-
gional inequities have allowed some Medicare bene-
ficiaries access to Medicare Advantage plans with 
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significantly more benefits and reduced cost sharing. 
Beneficiaries in States with lower Medicare Advan-
tage reimbursement rates have not benefitted to the 
same degree as beneficiaries in other parts of the 
country. 
(7) Regional inequities in Medicare reimburse-
ment have created an unfair competitive advantage 
for hospitals and other health care providers in 
States that receive above average payments. Higher 
payments mean that those providers can pay higher 
salaries in a tight, competitive market. 
(8) Regional inequities in Medicare reimburse-
ment, if left unchecked, will reduce access to Medi-
care services and impact healthy outcomes for bene-
ficiaries. 
SEC. 3. IMPROVING FAIRNESS OF PAYMENTS TO PRO-
VIDERS UNDER THE MEDICARE FEE-FOR- 
SERVICE PROGRAM. 
Title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.) is amended by adding at the end the fol-
lowing new section: 
‘‘IMPROVING PAYMENT EQUITY UNDER THE ORIGINAL 
MEDICARE FEE-FOR-SERVICE PROGRAM 
‘‘SEC. 1899C. (a) IN GENERAL.—Notwithstanding 
any other provision of law, the Secretary shall establish 
a system for making adjustments to the amount of pay-
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ment made to entities and individuals for items and serv-
ices provided under the original Medicare fee-for-service 
program under parts A and B. 
‘‘(b) SYSTEM REQUIREMENTS.— 
‘‘(1) INCREASE FOR STATES BELOW THE NA-
TIONAL
AVERAGE.—Under the system established 
under subsection (a), if a State average per bene-
ficiary amount for a year is less than the national 
average per beneficiary amount for such year, then 
the Secretary (beginning in 2017) shall increase the 
amount of applicable payments in such a manner as 
will result (as estimated by the Secretary) in the 
State average per beneficiary amount for the subse-
quent year being equal to the national average per 
beneficiary amount for such subsequent year. 
‘‘(2) REDUCTION FOR CERTAIN STATES ABOVE 
THE
NATIONAL
AVERAGE
TO
ENHANCE
QUALITY 
CARE AND MAINTAIN BUDGET NEUTRALITY.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
ensure that the increase in payments under 
paragraph (1) does not cause the estimated 
amount of expenditures under this title for a 
year to increase or decrease from the estimated 
amount of expenditures under this title that 
would have been made in such year if this sec-
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tion had not been enacted by reducing the 
amount of applicable payments in each State 
that the Secretary determines has— 
‘‘(i) a State average per beneficiary 
amount for a year that is greater than the 
national average per beneficiary amount 
for such year; and 
‘‘(ii) healthy outcome measurements 
or quality care measurements that indicate 
that a reduction in applicable payments 
would encourage more efficient use of, and 
reduce overuse of, items and services for 
which payment is made under this title. 
‘‘(B) LIMITATION.—The Secretary shall 
not reduce applicable payments under subpara-
graph (A) to a State that— 
‘‘(i) has a State average per bene-
ficiary amount for a year that is greater 
than the national average per beneficiary 
amount for such year; and 
‘‘(ii) has healthy outcome measure-
ments or quality care measurements that 
indicate that the applicable payments are 
being used to improve the access of bene-
ficiaries to quality care. 
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‘‘(3) DETERMINATION OF AVERAGES.— 
‘‘(A) STATE AVERAGE PER BENEFICIARY 
AMOUNT.—Each year (beginning in 2017), the 
Secretary shall determine a State average per 
beneficiary amount for each State which shall 
be equal to the Secretary’s estimate of the aver-
age amount of expenditures under the original 
Medicare fee-for-service program under parts A 
and B for the year for a beneficiary enrolled 
under such parts that resides in the State. 
‘‘(B) NATIONAL
AVERAGE
PER
BENE-
FICIARY
AMOUNT.—Each year (beginning in 
2017), the Secretary shall determine the na-
tional average per beneficiary amount which 
shall be equal to the average of the State aver-
age per beneficiary amount determined under 
subparagraph (A) for the year. 
‘‘(4) DEFINITIONS.—In this section: 
‘‘(A) APPLICABLE PAYMENTS.—The term 
‘applicable payments’ means payments made to 
entities and individuals for items and services 
provided under the original Medicare fee-for- 
service program under parts A and B to bene-
ficiaries enrolled under such parts that reside in 
the State. 
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‘‘(B) STATE.—The term ‘State’ has the 
meaning given such term in section 210(h). 
‘‘(c) BENEFICIARIES HELD HARMLESS.—The provi-
sions of this section shall not affect— 
‘‘(1) the entitlement to items and services of a 
beneficiary under this title, including the scope of 
such items and services; or 
‘‘(2) any liability of the beneficiary with respect 
to such items and services. 
‘‘(d) REGULATIONS.— 
‘‘(1) IN GENERAL.—The Secretary, in consulta-
tion with the Medicare Payment Advisory Commis-
sion, shall promulgate regulations to carry out this 
section. 
‘‘(2) PROTECTING
RURAL
COMMUNITIES.—In 
promulgating the regulations pursuant to paragraph 
(1), the Secretary shall give special consideration to 
rural areas.’’. 
SEC. 4. MEDPAC RECOMMENDATIONS ON HEALTHY OUT-
COMES AND QUALITY CARE. 
(a) RECOMMENDATIONS.—The Medicare Payment 
Advisory Commission established under section 1805 of 
the Social Security Act (42 U.S.C. 1395b–6) shall develop 
recommendations on policies and practices that, if imple-
mented, would encourage— 
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(1) healthy outcomes and quality care under the 
Medicare program in States with respect to which 
payments are reduced under section 1899B(b)(2) of 
such Act (as added by section 3); and 
(2) the efficient use of payments made under 
the Medicare program in such States. 
(b) SUBMISSION.—Not later than the date that is 9 
months after the date of the enactment of this Act, the 
Commission shall submit to Congress the recommenda-
tions developed under subsection (a). 
Æ 
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