to participating beneficiaries, with respect 
to such PCN. 
‘‘(ii) LIMITATION.—Any out-of-net-
work provider, with respect to a PCN, may 
not be reimbursed by the PCN for an item 
or service by an amount that is more than 
90 percent of the amount that would oth-
erwise be payable for such item or service 
under part A or part B, as applicable. 
‘‘(d) CALCULATION OF POPULATION HEALTH BUDG-
ETS AND PAYMENTS TO PCNS.— 
‘‘(1) CALCULATION
OF
POPULATION
HEALTH 
BUDGETS.—Under the demonstration project, the 
Secretary shall calculate PCN specific monthly pro-
spective population health budgets to PCNs as fol-
lows: 
‘‘(A) BASE ANNUAL POPULATION HEALTH 
BUDGET.—Subject to subparagraph (C), the 
Secretary shall calculate a base annual prospec-
tive population health budget for each PCN, 
which shall be the actual annual per capita 
total costs payable under parts A and B during 
the year prior to the first year of the dem-
onstration project attributable to all individuals 
enrolled under Medicare fee-for-service. 
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‘‘(B) PCN SPECIFIC POPULATION HEALTH 
BUDGET.—Subject to subparagraphs (C) and 
(D), for each year for which a PCN participates 
under the demonstration project, the Secretary 
shall calculate the PCN specific prospective 
population health budget for the PCN by— 
‘‘(i) adjusting the base annual pro-
spective population health budget under 
subparagraph (A) for such year for bene-
ficiary characteristics (including age, gen-
der, and health status) of the participating 
beneficiaries with respect to such PCN and 
the geographic factors with respect to such 
PCN; 
‘‘(ii) updating such budget annually to 
account for changes in population; 
‘‘(iii) updating such budget by the 
projected growth in parts A and B services 
under the original Medicare fee-for-service 
program, as estimated by the Secretary; 
and 
‘‘(iv) multiplying such budget by the 
number of participating beneficiaries ac-
counted for in the previous payment year 
in the PCN service area. 
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‘‘(C) NON-APPLICATION OF CERTAIN PRO-
VISIONS.—In calculating the base annual popu-
lation health budget under subparagraph (A) 
and the PCN specific population health budgets 
under subparagraph (B), subsections (p) and 
(q) of section 1886 shall not be taken into ac-
count. 
‘‘(D) LIMITATIONS.— 
‘‘(i) INITIAL 3 YEARS.—The PCN spe-
cific prospective population health budgets 
under subparagraph (B) for all PCNs shall 
be established in a manner that will result 
in total expenditures under this section 
being— 
‘‘(I) for the first year of the dem-
onstration project, not more than 99 
percent of the total expenditures 
under parts A and B that otherwise 
would have been expended for such 
participating beneficiaries for such 
year, as prospectively estimated by the 
Secretary; and 
‘‘(II) for the second and third 
years of the demonstration project, 
not less than 97 percent of the total 
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expenditures under parts A and B 
that otherwise would have been ex-
pended for such participating bene-
ficiaries for the year, as prospectively 
estimated by the Secretary. 
‘‘(ii) SUBSEQUENT YEARS.—The Sec-
retary may establish a generally applicable 
savings benchmark for all PCNs in the 
demonstration project for any year subse-
quent to the third year of the demonstra-
tion project, provided that in establishing 
such benchmark the Secretary shall not re-
capture the savings retained by PCNs in 
prior years in any manner. 
‘‘(2) PAYMENTS TO PCNS.— 
‘‘(A) IN
GENERAL.—For each month of 
each year a PCN participates in the demonstra-
tion project, the Secretary shall pay each PCN 
a prospective, monthly payment equal to one- 
twelfth of the PCN specific population health 
budget under paragraph (1)(B) calculated for 
such PCN for such year. In carrying out the 
previous sentence, any payment so made shall 
be made to the PCN and not to a provider of 
services or supplier participating in such PCN. 
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‘‘(B) SPECIAL CIRCUMSTANCES.—The Sec-
retary shall identify special circumstances in 
which payment may be made under parts A and 
B with respect to a participating beneficiary 
other than under this section. The Secretary 
shall ensure that each PCN establishes a mech-
anism for reimbursement and budget adjust-
ment in the case of such special circumstances 
attributable to participating beneficiaries and a 
method for adjusting the PCN specific prospec-
tive population health budgets to the PCNs in-
volved in such cases to account for payments 
made under parts A and B in such cir-
cumstances for such participating beneficiaries 
to providers of services and suppliers that are 
not participating in (or contracting with) the 
PCN involved. 
‘‘(e) DATA SHARING.—The Secretary shall promptly 
provide necessary data on a regular basis to a PCN, in-
cluding each claim for items and services for which pay-
ment may be made under parts A, B, and D associated 
with participating beneficiaries of such PCN, to enable the 
coordination of care for participating beneficiaries with re-
spect to such PCN. 
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‘‘(f) QUALITY REPORTS.—The Secretary shall estab-
lish performance standards (and a method to assess the 
performance of PCNs with respect to such quality stand-
ards) to assess the quality of care furnished by PCNs. 
Such assessment shall initially be based on the quality 
measures used for organizations that have entered into 
shared savings agreements pursuant to sections 1115A 
and 1899. The Secretary shall seek to improve the quality 
of care furnished by PCNs over time by specifying higher 
standards, new measures, or both for purposes of assess-
ing such quality of care. 
‘‘(g) COORDINATION.—The Secretary may, in such 
manner and according to such methods as specified by the 
Secretary, coordinate the activities of PCNs with respect 
to covered part D drugs in order to increase the quality 
and availability of health care items or services to partici-
pating beneficiaries and may elect to contract with PCNs 
to provide prescription drug coverage. 
‘‘(h) WAIVER
AUTHORITY.—The Secretary shall 
waive such requirements of sections 1128A and 1128B of 
this title as may be necessary to carry out the provisions 
of this section. Such waivers shall include, without limita-
tion, a waiver of prohibition on beneficiary inducements 
in the form of co-pay waivers, medical transportation, pro-
vision of tele-health and medical monitoring equipment for 
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home use, contracts with providers of services and sup-
pliers participating in the PCN, and waivers allowing the 
provision of other supplies and services that permit the 
efficient delivery of care in home, post-acute, and alter-
native settings. Any waivers established pursuant to sec-
tion 1899(f) shall also apply to the demonstration project. 
‘‘(i) ADMINISTRATION.—Chapter 35 of title 44, 
United States Code, shall not apply to the demonstration 
project. 
‘‘(j) STATE INSURANCE LAWS; PREEMPTION.—A 
PCN shall not be required to be licensed as a health insur-
ance company or health maintenance organization under 
the laws of any State. Any State law that would under-
mine the purpose of this section is preempted. 
‘‘(k) REPORTS TO CONGRESS.—The Secretary shall 
for each year of the demonstration project submit to Con-
gress a report on the status and results of the demonstra-
tion project. 
‘‘(l) EXPANSION OF PROJECT.—The Secretary may, 
through rulemaking, expand (including implementation on 
a nationwide basis) the duration and the scope of the dem-
onstration project, to the extent determined appropriate 
by the Secretary, if— 
‘‘(1) the Secretary determines that such expan-
sion is expected to— 
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‘‘(A) reduce spending under this title with-
out reducing the quality of care; or 
‘‘(B) improve the quality of patient care 
without increasing spending; 
‘‘(2) the Chief Actuary of the Centers for Medi-
care & Medicaid Services certifies that such expan-
sion would reduce (or would not result in any in-
crease in) net program spending under this title; and 
‘‘(3) the Secretary determines that such expan-
sion would not deny or limit the coverage or provi-
sion of benefits under the applicable title for applica-
ble individuals. 
‘‘(m) DEFINITIONS.—In this section: 
‘‘(1) The term ‘hospital’ means a subsection (d) 
hospital (as defined in section 1886(d)(1)(B)). 
‘‘(2) The term ‘Medicare fee-for-service bene-
ficiary’ has the meaning given such term in section 
1899(h)(3). 
‘‘(3) 
The 
term 
‘participating 
beneficiary’ 
means, with respect to a PCN, a Medicare fee-for- 
service beneficiary who has been assigned under sub-
section (c) to such PCN.’’. 
Æ 
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