359 
‘‘(5) DEFINITIONS AND SPECIAL RULES.—For 
purposes of this subsection— 
‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.— 
The term ‘economic substance doctrine’ means 
the common law doctrine under which tax bene-
fits under subtitle A with respect to a trans-
action are not allowable if the transaction does 
not have economic substance or lacks a business 
purpose. 
‘‘(B) EXCEPTION FOR PERSONAL TRANS-
ACTIONS OF INDIVIDUALS.—In the case of an 
individual, paragraph (1) shall apply only to 
transactions entered into in connection with a 
trade or business or an activity engaged in for 
the production of income. 
‘‘(C) OTHER
COMMON
LAW
DOCTRINES 
NOT
AFFECTED.—Except as specifically pro-
vided in this subsection, the provisions of this 
subsection shall not be construed as altering or 
supplanting any other rule of law, and the re-
quirements of this subsection shall be construed 
as being in addition to any such other rule of 
law. 
‘‘(D) DETERMINATION OF APPLICATION OF 
DOCTRINE NOT AFFECTED.—The determination
360 
of whether the economic substance doctrine is 
relevant to a transaction (or series of trans-
actions) shall be made in the same manner as 
if this subsection had never been enacted. 
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or ap-
propriate to carry out the purposes of this sub-
section.’’. 
(b) PENALTY FOR UNDERPAYMENTS ATTRIBUTABLE 
TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE.— 
(1) IN
GENERAL.—Subsection (b) of section 
6662 of such Code is amended by inserting after 
paragraph (5) the following new paragraph: 
‘‘(6) Any disallowance of claimed tax benefits 
by reason of a transaction lacking economic sub-
stance (within the meaning of section 7701(o)) or 
failing to meet the requirements of any similar rule 
of law.’’. 
(2) INCREASED PENALTY FOR NONDISCLOSED 
TRANSACTIONS.—Section 6662 of such Code is 
amended by adding at the end the following new 
subsection: 
‘‘(i) INCREASE IN PENALTY IN CASE OF NONDIS-
CLOSED NONECONOMIC SUBSTANCE TRANSACTIONS.—
361 
‘‘(1) IN GENERAL.—In the case of any portion 
of an underpayment which is attributable to one or 
more nondisclosed noneconomic substance trans-
actions, subsection (a) shall be applied with respect 
to such portion by substituting ‘40 percent’ for ‘20 
percent’. 
‘‘(2) 
NONDISCLOSED
NONECONOMIC
SUB-
STANCE TRANSACTIONS.—For purposes of this sub-
section, the term ‘nondisclosed noneconomic sub-
stance transaction’ means any portion of a trans-
action described in subsection (b)(6) with respect to 
which the relevant facts affecting the tax treatment 
are not adequately disclosed in the return nor in a 
statement attached to the return. 
‘‘(3) 
SPECIAL
RULE
FOR
AMENDED
RE-
TURNS.—Except as provided in regulations, in no 
event shall any amendment or supplement to a re-
turn of tax be taken into account for purposes of 
this subsection if the amendment or supplement is 
filed after the earlier of the date the taxpayer is first 
contacted by the Secretary regarding the examina-
tion of the return or such other date as is specified 
by the Secretary.’’.
362 
(3) CONFORMING AMENDMENT.—Subparagraph 
(B) of section 6662A(e)(2) of such Code is amend-
ed— 
(A) by striking ‘‘section 6662(h)’’ and in-
serting ‘‘subsections (h) or (i) of section 6662’’; 
and 
(B) 
by 
striking 
‘‘GROSS
VALUATION 
MISSTATEMENT PENALTY’’ in the heading and 
inserting 
‘‘CERTAIN
INCREASED
UNDER-
PAYMENT PENALTIES’’. 
(c) REASONABLE CAUSE EXCEPTION NOT APPLICA-
BLE TO NONECONOMIC SUBSTANCE TRANSACTIONS AND 
TAX SHELTERS.— 
(1) REASONABLE CAUSE EXCEPTION FOR UN-
DERPAYMENTS.—Subsection (c) of section 6664 of 
such Code is amended— 
(A) by redesignating paragraphs (2) and 
(3) as paragraphs (3) and (4), respectively; 
(B) by striking ‘‘paragraph (2)’’ in para-
graph (4)(A), as so redesignated, and inserting 
‘‘paragraph (3)’’; and 
(C) by inserting after paragraph (1) the 
following new paragraph: 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to any portion of an underpayment which is
363 
attributable to one or more tax shelters (as defined 
in section 6662(d)(2)(C)) or transactions described 
in section 6662(b)(6).’’. 
(2) REASONABLE CAUSE EXCEPTION FOR RE-
PORTABLE
TRANSACTION
UNDERSTATEMENTS.— 
Subsection (d) of section 6664 of such Code is 
amended— 
(A) by redesignating paragraphs (2) and 
(3) as paragraphs (3) and (4), respectively; 
(B) by striking ‘‘paragraph (2)(C)’’ in 
paragraph (4), as so redesignated, and inserting 
‘‘paragraph (3)(C)’’; and 
(C) by inserting after paragraph (1) the 
following new paragraph: 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to any portion of a reportable transaction un-
derstatement which is attributable to one or more 
tax shelters (as defined in section 6662(d)(2)(C)) or 
transactions described in section 6662(b)(6).’’. 
(d) APPLICATION
OF PENALTY
FOR ERRONEOUS 
CLAIM FOR REFUND OR CREDIT TO NONECONOMIC SUB-
STANCE TRANSACTIONS.—Section 6676 of such Code is 
amended by redesignating subsection (c) as subsection (d) 
and inserting after subsection (b) the following new sub-
section:
364 
‘‘(c) NONECONOMIC
SUBSTANCE
TRANSACTIONS 
TREATED AS LACKING REASONABLE BASIS.—For pur-
poses of this section, any excessive amount which is attrib-
utable to any transaction described in section 6662(b)(6) 
shall not be treated as having a reasonable basis.’’. 
(e) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to transactions entered into 
after the date of the enactment of this Act. 
(2) UNDERPAYMENTS.—The amendments made 
by subsections (b) and (c)(1) shall apply to under-
payments attributable to transactions entered into 
after the date of the enactment of this Act. 
(3) 
UNDERSTATEMENTS.—The 
amendments 
made by subsection (c)(2) shall apply to understate-
ments attributable to transactions entered into after 
the date of the enactment of this Act. 
(4) REFUNDS AND CREDITS.—The amendment 
made by subsection (d) shall apply to refunds and 
credits attributable to transactions entered into after 
the date of the enactment of this Act.
365 
SEC. 563. CERTAIN LARGE OR PUBLICLY TRADED PERSONS 
MADE SUBJECT TO A MORE LIKELY THAN 
NOT STANDARD FOR AVOIDING PENALTIES 
ON UNDERPAYMENTS. 
(a) IN GENERAL.—Subsection (c) of section 6664 of 
the Internal Revenue Code of 1986, as amended by section 
562, is amended— 
(1) by redesignating paragraphs (3) and (4) as 
paragraphs (4) and (5), respectively; 
(2) by striking ‘‘paragraph (3)’’ in paragraph 
(4)(A), as so redesignated, and inserting ‘‘paragraph 
(4)’’; and 
(3) by inserting after paragraph (2) the fol-
lowing new paragraph: 
‘‘(3) SPECIAL RULE FOR CERTAIN LARGE OR 
PUBLICLY TRADED PERSONS.— 
‘‘(A) IN
GENERAL.—In the case of any 
specified person, paragraph (1) shall apply to 
the portion of an underpayment which is attrib-
utable to any item only if such person has a 
reasonable belief that the tax treatment of such 
item by such person is more likely than not the 
proper tax treatment of such item. 
‘‘(B) SPECIFIED
PERSON.—For purposes 
of this paragraph, the term ‘specified person’ 
means—
366 
‘‘(i) any person required to file peri-
odic or other reports under section 13 of 
the Securities Exchange Act of 1934, and 
‘‘(ii) any corporation with gross re-
ceipts in excess of $100,000,000 for the 
taxable year involved. 
All persons treated as a single employer under 
section 52(a) shall be treated as one person for 
purposes of clause (ii).’’. 
(b) NONAPPLICATION OF SUBSTANTIAL AUTHORITY 
AND REASONABLE BASIS STANDARDS
FOR REDUCING 
UNDERSTATEMENTS.—Paragraph (2) of section 6662(d) 
of such Code is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(D) REDUCTION NOT TO APPLY TO CER-
TAIN LARGE OR PUBLICLY TRADED PERSONS.— 
Subparagraph (B) shall not apply to any speci-
fied 
person 
(as 
defined 
in 
section 
6664(c)(3)(B)).’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to underpayments attributable to trans-
actions entered into after the date of the enactment 
of this Act.
367 
(2) NONAPPLICATION
OF
UNDERSTATEMENT 
REDUCTION.—The amendment made by subsection 
(b) shall apply to understatements attributable to 
transactions entered into after the date of the enact-
ment of this Act. 
PART 3—PARITY IN HEALTH BENEFITS 
SEC. 571. CERTAIN HEALTH RELATED BENEFITS APPLICA-
BLE TO SPOUSES AND DEPENDENTS EX-
TENDED TO ELIGIBLE BENEFICIARIES. 
(a) APPLICATION OF ACCIDENT AND HEALTH PLANS 
TO ELIGIBLE BENEFICIARIES.— 
(1) EXCLUSION
OF
CONTRIBUTIONS.—Section 
106 of the Internal Revenue Code of 1986 (relating 
to contributions by employer to accident and health 
plans), as amended by section 531, is amended by 
adding at the end the following new subsection: 
‘‘(g) COVERAGE PROVIDED FOR ELIGIBLE BENE-
FICIARIES OF EMPLOYEES.— 
‘‘(1) IN GENERAL.—Subsection (a) shall apply 
with respect to any eligible beneficiary of the em-
ployee. 
‘‘(2) ELIGIBLE BENEFICIARY.—For purposes of 
this subsection, the term ‘eligible beneficiary’ means 
any individual who is eligible to receive benefits or 
coverage under an accident or health plan.’’.
368 
(2) EXCLUSION OF AMOUNTS EXPENDED FOR 
MEDICAL
CARE.—The first sentence of section 
105(b) of such Code (relating to amounts expended 
for medical care) is amended— 
(A) by striking ‘‘and his dependents’’ and 
inserting ‘‘his dependents’’; and 
(B) by inserting before the period the fol-
lowing: ‘‘and any eligible beneficiary (within the 
meaning of section 106(g)) with respect to the 
taxpayer’’. 
(3) PAYROLL TAXES.— 
(A) Section 3121(a)(2) of such Code is 
amended— 
(i) by striking ‘‘or any of his depend-
ents’’ in the matter preceding subpara-
graph (A) and inserting ‘‘, any of his de-
pendents, or any eligible beneficiary (with-
in the meaning of section 106(g)) with re-
spect to the employee’’; 
(ii) by striking ‘‘or any of his depend-
ents,’’ in subparagraph (A) and inserting 
‘‘, any of his dependents, or any eligible 
beneficiary (within the meaning of section 
106(g)) with respect to the employee,’’; 
and
369 
(iii) by striking ‘‘and their depend-
ents’’ both places it appears and inserting 
‘‘and such employees’ dependents and eligi-
ble beneficiaries (within the meaning of 
section 106(g))’’. 
(B) Section 3231(e)(1) of such Code is 
amended— 
(i) by striking ‘‘or any of his depend-
ents’’ and inserting ‘‘, any of his depend-
ents, or any eligible beneficiary (within the 
meaning of section 106(g)) with respect to 
the employee,’’; and 
(ii) by striking ‘‘and their depend-
ents’’ both places it appears and inserting 
‘‘and such employees’ dependents and eligi-
ble beneficiaries (within the meaning of 
section 106(g))’’. 
(C) Section 3306(b)(2) of such Code is 
amended— 
(i) by striking ‘‘or any of his depend-
ents’’ in the matter preceding subpara-
graph (A) and inserting ‘‘, any of his de-
pendents, or any eligible beneficiary (with-
in the meaning of section 106(g)) with re-
spect to the employee,’’;
370 
(ii) by striking ‘‘or any of his depend-
ents’’ in subparagraph (A) and inserting ‘‘, 
any of his dependents, or any eligible bene-
ficiary (within the meaning of section 
106(g)) with respect to the employee’’; and 
(iii) by striking ‘‘and their depend-
ents’’ both places it appears and inserting 
‘‘and such employees’ dependents and eligi-
ble beneficiaries (within the meaning of 
section 106(g))’’. 
(D) Section 3401(a) of such Code is 
amended by striking ‘‘or’’ at the end of para-
graph (22), by striking the period at the end of 
paragraph (23) and inserting ‘‘; or’’, and by in-
serting after paragraph (23) the following new 
paragraph: 
‘‘(24) for any payment made to or for the ben-
efit of an employee or any eligible beneficiary (within 
the meaning of section 106(g)) if at the time of such 
payment it is reasonable to believe that the employee 
will be able to exclude such payment from income 
under section 106 or under section 105 by reference 
in section 105(b) to section 106(g).’’.
371 
(b) EXPANSION OF DEPENDENCY FOR PURPOSES OF 
DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF- 
EMPLOYED INDIVIDUALS.— 
(1) IN
GENERAL.—Paragraph (1) of section 
162(l) of the Internal Revenue Code of 1986 (relat-
ing to special rules for health insurance costs of self- 
employed individuals) is amended to read as follows: 
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case 
of a taxpayer who is an employee within the mean-
ing of section 401(c)(1), there shall be allowed as a 
deduction under this section an amount equal to the 
amount paid during the taxable year for insurance 
which constitutes medical care for— 
‘‘(A) the taxpayer, 
‘‘(B) the taxpayer’s spouse, 
‘‘(C) the taxpayer’s dependents, 
‘‘(D) any individual who— 
‘‘(i) satisfies the age requirements of 
section 152(c)(3)(A), 
‘‘(ii) bears a relationship to the tax-
payer described in section 152(d)(2)(H), 
and 
‘‘(iii) meets the requirements of sec-
tion 152(d)(1)(C), and 
‘‘(E) one individual who—
372 
‘‘(i) does not satisfy the age require-
ments of section 152(c)(3)(A), 
‘‘(ii) bears a relationship to the tax-
payer described in section 152(d)(2)(H), 
‘‘(iii) meets the requirements of sec-
tion 152(d)(1)(D), and 
‘‘(iv) is not the spouse of the taxpayer 
and does not bear any relationship to the 
taxpayer described in subparagraphs (A) 
through (G) of section 152(d)(2).’’. 
(2) CONFORMING AMENDMENT.—Subparagraph 
(B) of section 162(l)(2) of such Code is amended by 
inserting ‘‘, any dependent, or individual described 
in subparagraph (D) or (E) of paragraph (1) with 
respect to’’ after ‘‘spouse’’. 
(c) EXTENSION
TO ELIGIBLE BENEFICIARIES
OF 
SICK AND ACCIDENT BENEFITS PROVIDED TO MEMBERS 
OF A VOLUNTARY EMPLOYEES’ BENEFICIARY ASSOCIA-
TION AND THEIR DEPENDENTS.—Section 501(c)(9) of 
the Internal Revenue Code of 1986 (relating to list of ex-
empt organizations) is amended by adding at the end the 
following new sentence: ‘‘For purposes of providing for the 
payment of sick and accident benefits to members of such 
an association and their dependents, the term ‘dependents’ 
shall include any individual who is an eligible beneficiary
373 
(within the meaning of section 106(g)), as determined 
under the terms of a medical benefit, health insurance, 
or other program under which members and their depend-
ents are entitled to sick and accident benefits.’’. 
(d) FLEXIBLE
SPENDING
ARRANGEMENTS
AND 
HEALTH REIMBURSEMENT ARRANGEMENTS.—The Sec-
retary of Treasury shall issue guidance of general applica-
bility providing that medical expenses that otherwise qual-
ify— 
(1) for reimbursement from a flexible spending 
arrangement under regulations in effect on the date 
of the enactment of this Act may be reimbursed 
from an employee’s flexible spending arrangement, 
notwithstanding the fact that such expenses are at-
tributable to any individual who is not the employ-
ee’s spouse or dependent (within the meaning of sec-
tion 105(b) of the Internal Revenue Code of 1986) 
but is an eligible beneficiary (within the meaning of 
section 106(g) of such Code) under the flexible 
spending arrangement with respect to the employee; 
and 
(2) for reimbursement from a health reimburse-
ment arrangement under regulations in effect on the 
date of the enactment of this Act may be reimbursed 
from an employee’s health reimbursement arrange-
374 
ment, notwithstanding the fact that such expenses 
are attributable to an individual who is not a spouse 
or dependent (within the meaning of section 105(b) 
of such Code) but is an eligible beneficiary (within 
the meaning of section 106(g) of such Code) under 
the health reimbursement arrangement with respect 
to the employee. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2009. 
DIVISION B—MEDICARE AND 
MEDICAID IMPROVEMENTS 
SEC. 1001. TABLE OF CONTENTS OF DIVISION. 
The table of contents of this division is as follows: 
Sec. 1001. Table of contents of division. 
TITLE I—IMPROVING HEALTH CARE VALUE 
Subtitle A—Provisions Related to Medicare Part A 
PART 1—MARKET BASKET UPDATES 
Sec. 1101. Skilled nursing facility payment update. 
Sec. 1102. Inpatient rehabilitation facility payment update. 
Sec. 1103. Incorporating productivity improvements into market basket updates 
that do not already incorporate such improvements. 
PART 2—OTHER MEDICARE PART A PROVISIONS 
Sec. 1111. Payments to skilled nursing facilities. 
Sec. 1112. Medicare DSH report and payment adjustments in response to cov-
erage expansion. 
Sec. 1113. Extension of hospice regulation moratorium. 
Sec. 1114. Permitting physician assistants to order post-hospital extended care 
services and to provide for recognition of attending physician 
assistants as attending physicians to serve hospice patients. 
Subtitle B—Provisions Related to Part B 
PART 1—PHYSICIANS’ SERVICES
375 
Sec. 1121. Resource-based feedback program for physicians in Medicare. 
Sec. 1122. Misvalued codes under the physician fee schedule. 
Sec. 1123. Payments for efficient areas. 
Sec. 1124. Modifications to the Physician Quality Reporting Initiative (PQRI). 
Sec. 1125. Adjustment to Medicare payment localities. 
PART 2—MARKET BASKET UPDATES 
Sec. 1131. Incorporating productivity improvements into market basket updates 
that do not already incorporate such improvements. 
PART 3—OTHER PROVISIONS 
Sec. 1141. Rental and purchase of power-driven wheelchairs. 
Sec. 1141A. Election to take ownership, or to decline ownership, of a certain 
item of complex durable medical equipment after the 13-month 
capped rental period ends. 
Sec. 1142. Extension of payment rule for brachytherapy. 
Sec. 1143. Home infusion therapy report to Congress. 
Sec. 1144. Require ambulatory surgical centers (ASCs) to submit cost data and 
other data. 
Sec. 1145. Treatment of certain cancer hospitals. 
Sec. 1146. Payment for imaging services. 
Sec. 1147. Durable medical equipment program improvements. 
Sec. 1148. MedPAC study and report on bone mass measurement. 
Sec. 1149. Timely access to post-mastectomy items. 
Sec. 1149A. Payment for biosimilar biological products. 
Sec. 1149B. Study and report on DME competitive bidding process. 
Subtitle C—Provisions Related to Medicare Parts A and B 
Sec. 1151. Reducing potentially preventable hospital readmissions. 
Sec. 1152. Post acute care services payment reform plan and bundling pilot 
program. 
Sec. 1153. Home health payment update for 2010. 
Sec. 1154. Payment adjustments for home health care. 
Sec. 1155. Incorporating productivity improvements into market basket update 
for home health services. 
Sec. 1155A. MedPAC study on variation in home health margins. 
Sec. 1155B. Permitting home health agencies to assign the most appropriate 
skilled service to make the initial assessment visit under a 
Medicare home health plan of care for rehabilitation cases. 
Sec. 1156. Limitation on Medicare exceptions to the prohibition on certain phy-
sician referrals made to hospitals. 
Sec. 1157. Institute of Medicine study of geographic adjustment factors under 
Medicare. 
Sec. 1158. Revision of medicare payment systems to address geographic inequi-
ties. 
Sec. 1159. Institute of Medicine study of geographic variation in health care 
spending and promoting high-value health care. 
Sec. 1160. Implementation, and Congressional review, of proposal to revise 
Medicare payments to promote high value health care. 
Subtitle D—Medicare Advantage Reforms 
PART 1—PAYMENT AND ADMINISTRATION
376 
Sec. 1161. Phase-in of payment based on fee-for-service costs; quality bonus 
payments. 
Sec. 1162. Authority for Secretarial coding intensity adjustment authority. 
Sec. 1163. Simplification of annual beneficiary election periods. 
Sec. 1164. Extension of reasonable cost contracts. 
Sec. 1165. Limitation of waiver authority for employer group plans. 
Sec. 1166. Improving risk adjustment for payments. 
Sec. 1167. Elimination of MA Regional Plan Stabilization Fund. 
Sec. 1168. Study regarding the effects of calculating Medicare Advantage pay-
ment rates on a regional average of Medicare fee for service 
rates. 
PART 2—BENEFICIARY PROTECTIONS AND ANTI-FRAUD 
Sec. 1171. Limitation on cost-sharing for individual health services. 
Sec. 1172. Continuous open enrollment for enrollees in plans with enrollment 
suspension. 
Sec. 1173. Information for beneficiaries on MA plan administrative costs. 
Sec. 1174. Strengthening audit authority. 
Sec. 1175. Authority to deny plan bids. 
Sec. 1175A. State authority to enforce standardized marketing requirements. 
PART 3—TREATMENT OF SPECIAL NEEDS PLANS 
Sec. 1176. Limitation on enrollment outside open enrollment period of individ-
uals into chronic care specialized MA plans for special needs 
individuals. 
Sec. 1177. Extension of authority of special needs plans to restrict enrollment; 
service area moratorium for certain SNPs. 
Sec. 1178. Extension of Medicare senior housing plans. 
Subtitle E—Improvements to Medicare Part D 
Sec. 1181. Elimination of coverage gap. 
Sec. 1182. Discounts for certain part D drugs in original coverage gap. 
Sec. 1183. Repeal of provision relating to submission of claims by pharmacies 
located in or contracting with long-term care facilities. 
Sec. 1184. Including costs incurred by AIDS drug assistance programs and In-
dian Health Service in providing prescription drugs toward the 
annual out-of-pocket threshold under part D. 
Sec. 1185. No mid-year formulary changes permitted. 
Sec. 1186. Negotiation of lower covered part D drug prices on behalf of Medi-
care beneficiaries. 
Sec. 1187. Accurate dispensing in long-term care facilities. 
Sec. 1188. Free generic fill. 
Sec. 1189. State certification prior to waiver of licensure requirements under 
Medicare prescription drug program. 
Subtitle F—Medicare Rural Access Protections 
Sec. 1191. Telehealth expansion and enhancements. 
Sec. 1192. Extension of outpatient hold harmless provision. 
Sec. 1193. Extension of section 508 hospital reclassifications. 
Sec. 1194. Extension of geographic floor for work. 
Sec. 1195. Extension of payment for technical component of certain physician 
pathology services. 
Sec. 1196. Extension of ambulance add-ons.
377 
TITLE II—MEDICARE BENEFICIARY IMPROVEMENTS 
Subtitle A—Improving and Simplifying Financial Assistance for Low Income 
Medicare Beneficiaries 
Sec. 1201. Improving assets tests for Medicare Savings Program and low-in-
come subsidy program. 
Sec. 1202. Elimination of part D cost-sharing for certain non-institutionalized 
full-benefit dual eligible individuals. 
Sec. 1203. Eliminating barriers to enrollment. 
Sec. 1204. Enhanced oversight relating to reimbursements for retroactive low 
income subsidy enrollment. 
Sec. 1205. Intelligent assignment in enrollment. 
Sec. 1206. Special enrollment period and automatic enrollment process for cer-
tain subsidy eligible individuals. 
Sec. 1207. Application of MA premiums prior to rebate and quality bonus pay-
ments in calculation of low income subsidy benchmark. 
Subtitle B—Reducing Health Disparities 
Sec. 1221. Ensuring effective communication in Medicare. 
Sec. 1222. Demonstration to promote access for Medicare beneficiaries with 
limited English proficiency by providing reimbursement for cul-
turally and linguistically appropriate services. 
Sec. 1223. IOM report on impact of language access services. 
Sec. 1224. Definitions. 
Subtitle C—Miscellaneous Improvements 
Sec. 1231. Extension of therapy caps exceptions process. 
Sec. 1232. Extended months of coverage of immunosuppressive drugs for kid-
ney transplant patients and other renal dialysis provisions. 
Sec. 1233. Voluntary advance care planning consultation. 
Sec. 1234. Part B special enrollment period and waiver of limited enrollment 
penalty for TRICARE beneficiaries. 
Sec. 1235. Exception for use of more recent tax year in case of gains from sale 
of primary residence in computing part B income-related pre-
mium. 
Sec. 1236. Demonstration program on use of patient decisions aids. 
TITLE III—PROMOTING PRIMARY CARE, MENTAL HEALTH 
SERVICES, AND COORDINATED CARE 
Sec. 1301. Accountable Care Organization pilot program. 
Sec. 1302. Medical home pilot program. 
Sec. 1303. Payment incentive for selected primary care services. 
Sec. 1304. Increased reimbursement rate for certified nurse-midwives. 
Sec. 1305. Coverage and waiver of cost-sharing for preventive services. 
Sec. 1306. Waiver of deductible for colorectal cancer screening tests regardless 
of coding, subsequent diagnosis, or ancillary tissue removal. 
Sec. 1307. Excluding clinical social worker services from coverage under the 
medicare skilled nursing facility prospective payment system 
and consolidated payment. 
Sec. 1308. Coverage of marriage and family therapist services and mental 
health counselor services. 
Sec. 1309. Extension of physician fee schedule mental health add-on. 
Sec. 1310. Expanding access to vaccines.
378 
Sec. 1311. Expansion of Medicare-Covered Preventive Services at Federally 
Qualified Health Centers. 
Sec. 1312. Independence at home demonstration program. 
Sec. 1313. Recognition of certified diabetes educators as certified providers for 
purposes of Medicare diabetes outpatient self-management 
training services. 
TITLE IV—QUALITY 
Subtitle A—Comparative Effectiveness Research 
Sec. 1401. Comparative effectiveness research. 
Subtitle B—Nursing Home Transparency 
PART 1—IMPROVING TRANSPARENCY OF INFORMATION ON SKILLED NURS-
ING FACILITIES, NURSING FACILITIES, AND OTHER LONG-TERM CARE FA-
CILITIES 
Sec. 1411. Required disclosure of ownership and additional disclosable parties 
information. 
Sec. 1412. Accountability requirements. 
Sec. 1413. Nursing home compare Medicare website. 
Sec. 1414. Reporting of expenditures. 
Sec. 1415. Standardized complaint form. 
Sec. 1416. Ensuring staffing accountability. 
Sec. 1417. Nationwide program for national and State background checks on 
direct patient access employees of long-term care facilities and 
providers. 
PART 2—TARGETING ENFORCEMENT 
Sec. 1421. Civil money penalties. 
Sec. 1422. National independent monitor pilot program. 
Sec. 1423. Notification of facility closure. 
PART 3—IMPROVING STAFF TRAINING 
Sec. 1431. Dementia and abuse prevention training. 
Sec. 1432. Study and report on training required for certified nurse aides and 
supervisory staff. 
Sec. 1433. Qualification of director of food services of a skilled nursing facility 
or nursing facility. 
Subtitle C—Quality Measurements 
Sec. 1441. Establishment of national priorities for quality improvement. 
Sec. 1442. Development of new quality measures; GAO evaluation of data col-
lection process for quality measurement. 
Sec. 1443. Multi-stakeholder pre-rulemaking input into selection of quality 
measures. 
Sec. 1444. Application of quality measures. 
Sec. 1445. Consensus-based entity funding. 
Sec. 1446. Quality indicators for care of people with Alzheimer’s Disease. 
Subtitle D—Physician Payments Sunshine Provision
379 
Sec. 1451. Reports on financial relationships between manufacturers and dis-
tributors of covered drugs, devices, biologicals, or medical sup-
plies under Medicare, Medicaid, or CHIP and physicians and 
other health care entities and between physicians and other 
health care entities. 
Subtitle E—Public Reporting on Health Care-Associated Infections 
Sec. 1461. Requirement for public reporting by hospitals and ambulatory sur-
gical centers on health care-associated infections. 
TITLE V—MEDICARE GRADUATE MEDICAL EDUCATION 
Sec. 1501. Distribution of unused residency positions. 
Sec. 1502. Increasing training in nonprovider settings. 
Sec. 1503. Rules for counting resident time for didactic and scholarly activities 
and other activities. 
Sec. 1504. Preservation of resident cap positions from closed hospitals. 
Sec. 1505. Improving accountability for approved medical residency training. 
TITLE VI—PROGRAM INTEGRITY 
Subtitle A—Increased Funding to Fight Waste, Fraud, and Abuse 
Sec. 1601. Increased funding and flexibility to fight fraud and abuse. 
Subtitle B—Enhanced Penalties for Fraud and Abuse 
Sec. 1611. Enhanced penalties for false statements on provider or supplier en-
rollment applications. 
Sec. 1612. Enhanced penalties for submission of false statements material to 
a false claim. 
Sec. 1613. Enhanced penalties for delaying inspections. 
Sec. 1614. Enhanced hospice program safeguards. 
Sec. 1615. Enhanced penalties for individuals excluded from program participa-
tion. 
Sec. 1616. Enhanced penalties for provision of false information by Medicare 
Advantage and part D plans. 
Sec. 1617. Enhanced penalties for Medicare Advantage and part D marketing 
violations. 
Sec. 1618. Enhanced penalties for obstruction of program audits. 
Sec. 1619. Exclusion of certain individuals and entities from participation in 
Medicare and State health care programs. 
Sec. 1620. OIG authority to exclude from Federal health care programs offi-
cers and owners of entities convicted of fraud. 
Sec. 1621. Self-referral disclosure protocol. 
Subtitle C—Enhanced Program and Provider Protections 
Sec. 1631. Enhanced CMS program protection authority. 
Sec. 1632. Enhanced Medicare, Medicaid, and CHIP program disclosure re-
quirements relating to previous affiliations. 
Sec. 1633. Required inclusion of payment modifier for certain evaluation and 
management services. 
Sec. 1634. Evaluations and reports required under Medicare Integrity Pro-
gram. 
Sec. 1635. Require providers and suppliers to adopt programs to reduce waste, 
fraud, and abuse.
380 
Sec. 1636. Maximum period for submission of Medicare claims reduced to not 
more than 12 months. 
Sec. 1637. Physicians who order durable medical equipment or home health 
services required to be Medicare enrolled physicians or eligible 
professionals. 
Sec. 1638. Requirement for physicians to provide documentation on referrals to 
programs at high risk of waste and abuse. 
Sec. 1639. Face-to-face encounter with patient required before eligibility certifi-
cations for home health services or durable medical equipment. 
Sec. 1640. Extension of testimonial subpoena authority to program exclusion 
investigations. 
Sec. 1641. Required repayments of Medicare and Medicaid overpayments. 
Sec. 1642. Expanded application of hardship waivers for OIG exclusions to 
beneficiaries of any Federal health care program. 
Sec. 1643. Access to certain information on renal dialysis facilities. 
Sec. 1644. Billing agents, clearinghouses, or other alternate payees required to 
register under Medicare. 
Sec. 1645. Conforming civil monetary penalties to False Claims Act amend-
ments. 
Sec. 1646. Requiring provider and supplier payments under Medicare to be 
made through direct deposit or electronic funds transfer (EFT) 
at insured depository institutions. 
Sec. 1647. Inspector General for the Health Choices Administration. 
Subtitle D—Access to Information Needed to Prevent Fraud, Waste, and 
Abuse 
Sec. 1651. Access to Information Necessary to Identify Fraud, Waste, and 
Abuse. 
Sec. 1652. Elimination of duplication between the Healthcare Integrity and 
Protection Data Bank and the National Practitioner Data 
Bank. 
Sec. 1653. Compliance with HIPAA privacy and security standards. 
Sec. 1654. Disclosure of Medicare fraud and abuse hotline number on expla-
nation of benefits. 
TITLE VII—MEDICAID AND CHIP 
Subtitle A—Medicaid and Health Reform 
Sec. 1701. Eligibility for individuals with income below 150 percent of the Fed-
eral poverty level. 
Sec. 1702.
Requirements and special rules for certain Medicaid eligible individ-
uals. 
Sec. 1703. CHIP and Medicaid maintenance of eligibility. 
Sec. 1704. Reduction in Medicaid DSH. 
Sec. 1705. Expanded outstationing. 
Subtitle B—Prevention 
Sec. 1711. Required coverage of preventive services. 
Sec. 1712. Tobacco cessation. 
Sec. 1713. Optional coverage of nurse home visitation services. 
Sec. 1714. State eligibility option for family planning services. 
Subtitle C—Access
381 
Sec. 1721. Payments to primary care practitioners. 
Sec. 1722. Medical home pilot program. 
Sec. 1723. Translation or interpretation services. 
Sec. 1724. Optional coverage for freestanding birth center services. 
Sec. 1725. Inclusion of public health clinics under the vaccines for children pro-
gram. 
Sec. 1726. Requiring coverage of services of podiatrists. 
Sec. 1726A. Requiring coverage of services of optometrists. 
Sec. 1727. Therapeutic foster care. 
Sec. 1728. Assuring adequate payment levels for services. 
Sec. 1729. Preserving Medicaid coverage for youths upon release from public 
institutions. 
Sec. 1730. Quality measures for maternity and adult health services under 
Medicaid and CHIP. 
Sec. 1730A. Accountable care organization pilot program. 
Sec. 1730B. FQHC coverage. 
Subtitle D—Coverage 
Sec. 1731. Optional Medicaid coverage of low-income HIV-infected individuals. 
Sec. 1732. Extending transitional Medicaid Assistance (TMA). 
Sec. 1733. Requirement of 12-month continuous coverage under certain CHIP 
programs. 
Sec. 1734. Preventing the application under CHIP of coverage waiting periods 
for certain children. 
Sec. 1735. Adult day health care services. 
Sec. 1736. Medicaid coverage for citizens of Freely Associated States. 
Sec. 1737. Continuing requirement of Medicaid coverage of nonemergency 
transportation to medically necessary services. 
Sec. 1738. State option to disregard certain income in providing continued 
Medicaid coverage for certain individuals with extremely high 
prescription costs. 
Sec. 1739. Provisions relating to community living assistance services and sup-
ports (CLASS). 
Sec. 1739A. Sense of Congress regarding Community First Choice Option to 
provide medicaid coverage of community-based attendant serv-
ices and supports. 
Subtitle E—Financing 
Sec. 1741. Payments to pharmacists. 
Sec. 1742. Prescription drug rebates. 
Sec. 1743. Extension of prescription drug discounts to enrollees of Medicaid 
managed care organizations. 
Sec. 1744. Payments for graduate medical education. 
Sec. 1745. Nursing Facility Supplemental Payment Program. 
Sec. 1746. Report on Medicaid payments. 
Sec. 1747. Reviews of Medicaid. 
Sec. 1748. Extension of delay in managed care organization provider tax elimi-
nation. 
Sec. 1749. Extension of ARRA increase in FMAP. 
Subtitle F—Waste, Fraud, and Abuse 
Sec. 1751. Health care acquired conditions. 
Sec. 1752. Evaluations and reports required under Medicaid Integrity Program.
382 
Sec. 1753. Require providers and suppliers to adopt programs to reduce waste, 
fraud, and abuse. 
Sec. 1754. Overpayments. 
Sec. 1755. Managed care organizations. 
Sec. 1756. Termination of provider participation under Medicaid and CHIP if 
terminated under Medicare or other State plan or child health 
plan. 
Sec. 1757. Medicaid and CHIP exclusion from participation relating to certain 
ownership, control, and management affiliations. 
Sec. 1758. Requirement to report expanded set of data elements under MMIS 
to detect fraud and abuse. 
Sec. 1759. Billing agents, clearinghouses, or other alternate payees required to 
register under Medicaid. 
Sec. 1760. Denial of payments for litigation-related misconduct. 
Sec. 1761. Mandatory State use of national correct coding initiative. 
Subtitle G—Payments to the Territories 
Sec. 1771. Payment to territories. 
Subtitle H—Miscellaneous 
Sec. 1781. Technical corrections. 
Sec. 1782. Extension of QI program. 
Sec. 1783. Assuring transparency of information. 
Sec. 1784. Medicaid and CHIP Payment and Access Commission. 
Sec. 1785. Outreach and enrollment of Medicaid and CHIP eligible individuals. 
Sec. 1786. Prohibitions on Federal Medicaid and CHIP payment for undocu-
mented aliens. 
Sec. 1787. Demonstration project for stabilization of emergency medical condi-
tions by institutions for mental diseases. 
Sec. 1788. Application of Medicaid Improvement Fund. 
Sec. 1789. Treatment of certain Medicaid brokers. 
Sec. 1790. Rule for changes requiring State legislation. 
TITLE VIII—REVENUE-RELATED PROVISIONS 
Sec. 1801. Disclosures to facilitate identification of individuals likely to be ineli-
gible for the low-income assistance under the Medicare pre-
scription drug program to assist Social Security Administra-
tion’s outreach to eligible individuals. 
Sec. 1802. Comparative Effectiveness Research Trust Fund; financing for 
Trust Fund. 
TITLE IX—MISCELLANEOUS PROVISIONS 
Sec. 1901. Repeal of trigger provision. 
Sec. 1902. Repeal of comparative cost adjustment (CCA) program. 
Sec. 1903. Extension of gainsharing demonstration. 
Sec. 1904. Grants to States for quality home visitation programs for families 
with young children and families expecting children. 
Sec. 1905. Improved coordination and protection for dual eligibles. 
Sec. 1906. Assessment of medicare cost-intensive diseases and conditions. 
Sec. 1907. Establishment of Center for Medicare and Medicaid Innovation 
within CMS. 
Sec. 1908. Application of emergency services laws.
383 
Sec. 1909. Disregard under the Supplemental Security Income program of com-
pensation for participation in clinical trials for rare diseases or 
conditions. 
TITLE I—IMPROVING HEALTH 
CARE VALUE 
Subtitle A—Provisions Related to 
Medicare Part A 
PART 1—MARKET BASKET UPDATES 
SEC. 1101. SKILLED NURSING FACILITY PAYMENT UPDATE. 
(a) IN GENERAL.—Section 1888(e)(4)(E)(ii) of the 
Social Security Act (42 U.S.C. 1395yy(e)(4)(E)(ii)) is 
amended— 
(1) in subclause (III), by striking ‘‘and’’ at the 
end; 
(2) by redesignating subclause (IV) as sub-
clause (VI); and 
(3) by inserting after subclause (III) the fol-
lowing new subclauses: 
‘‘(IV) for each of fiscal years 
2004 through 2009, the rate com-
puted for the previous fiscal year in-
creased by the skilled nursing facility 
market basket percentage change for 
the fiscal year involved; 
‘‘(V) for fiscal year 2010, the 
rate computed for the previous fiscal 
year; and’’.
384 
(b) 
DELAYED
EFFECTIVE
DATE.—Section 
1888(e)(4)(E)(ii)(V) of the Social Security Act, as in-
serted by subsection (a)(3), shall not apply to payment 
for days before January 1, 2010. 
SEC. 1102. INPATIENT REHABILITATION FACILITY PAY-
MENT UPDATE. 
(a) IN GENERAL.—Section 1886(j)(3)(C) of the So-
cial Security Act (42 U.S.C. 1395ww(j)(3)(C)) is amended 
by striking ‘‘and 2009’’ and inserting ‘‘through 2010’’. 
(b) DELAYED EFFECTIVE DATE.—The amendment 
made by subsection (a) shall not apply to payment units 
occurring before January 1, 2010. 
SEC. 
1103. 
INCORPORATING 
PRODUCTIVITY 
IMPROVE-
MENTS 
INTO 
MARKET 
BASKET 
UPDATES 
THAT DO NOT ALREADY INCORPORATE SUCH 
IMPROVEMENTS. 
(a) 
INPATIENT
ACUTE
HOSPITALS.—Section 
1886(b)(3)(B) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)) is amended— 
(1) in clause (iii)— 
(A) by striking ‘‘(iii) For purposes of this 
subparagraph,’’ and inserting ‘‘(iii)(I) For pur-
poses of this subparagraph, subject to the pro-
ductivity adjustment described in subclause 
(II),’’; and
385 
(B) by adding at the end the following new 
subclause: 
‘‘(II) The productivity adjustment described in this 
subclause, with respect to an increase or change for a fis-
cal year or year or cost reporting period, or other annual 
period, is a productivity offset in the form of a reduction 
in such increase or change equal to the percentage change 
in the 10-year moving average of annual economy-wide 
private nonfarm business multi-factor productivity (as re-
cently published in final form before the promulgation or 
publication of such increase for the year or period in-
volved). Except as otherwise provided, any reference to the 
increase described in this clause shall be a reference to 
the percentage increase described in subclause (I) minus 
the percentage change under this subclause.’’; 
(2) in the first sentence of clause (viii)(I), by 
inserting ‘‘(but not below zero)’’ after ‘‘shall be re-
duced’’; and 
(3) in the first sentence of clause (ix)(I)— 
(A) by inserting ‘‘(determined without re-
gard to clause (iii)(II))’’ after ‘‘clause (i)’’ the 
second time it appears; and 
(B) by inserting ‘‘(but not below zero)’’ 
after ‘‘reduced’’.
387 
(e) PSYCHIATRIC HOSPITALS.—Section 1886 of the 
Social Security Act (42 U.S.C. 1395ww) is amended by 
adding at the end the following new subsection: 
‘‘(o) PROSPECTIVE
PAYMENT
FOR
PSYCHIATRIC 
HOSPITALS.— 
‘‘(1) REFERENCE TO ESTABLISHMENT AND IM-
PLEMENTATION OF SYSTEM.—For provisions related 
to the establishment and implementation of a pro-
spective payment system for payments under this 
title for inpatient hospital services furnished by psy-
chiatric hospitals (as described in clause (i) of sub-
section (d)(1)(B) and psychiatric units (as described 
in the matter following clause (v) of such sub-
section), see section 124 of the Medicare, Medicaid, 
and SCHIP Balanced Budget Refinement Act of 
1999. 
‘‘(2) PRODUCTIVITY
ADJUSTMENT.—In imple-
menting the system described in paragraph (1) for 
days occurring during the rate year ending in 2011 
or any subsequent rate year for a psychiatric hos-
pital or unit described in such paragraph, to the ex-
tent that an annual percentage increase factor ap-
plies to a base rate for such days for the hospital 
or unit, respectively, such factor shall be subject to
388 
the productivity adjustment described in subsection 
(b)(3)(B)(iii)(II).’’. 
(f) HOSPICE CARE.—Subclause (VII) of section 
1814(i)(1)(C)(ii) of the Social Security Act (42 U.S.C. 
1395f(i)(1)(C)(ii)) is amended by inserting after ‘‘the 
market basket percentage increase’’ the following: ‘‘(which 
is subject to the productivity adjustment described in sec-
tion 1886(b)(3)(B)(iii)(II))’’. 
(g) EFFECTIVE DATES.— 
(1) IPPS.—The amendments made by sub-
section (a) shall apply to annual increases effected 
for fiscal years beginning with fiscal year 2010, but 
only with respect to discharges occurring on or after 
January 1, 2010. 
(2) SNF AND IRF.—The amendments made by 
subsections (b) and (d) shall apply to annual in-
creases effected for fiscal years beginning with fiscal 
year 2011. 
(3) HOSPICE CARE.—The amendment made by 
subsection (f) shall apply to annual increases ef-
fected for fiscal years beginning with fiscal year 
2010, but only with respect to days of care occurring 
on or after January 1, 2010.
389 
PART 2—OTHER MEDICARE PART A PROVISIONS 
SEC. 1111. PAYMENTS TO SKILLED NURSING FACILITIES. 
(a) CHANGE IN RECALIBRATION FACTOR.— 
(1) ANALYSIS.—The Secretary of Health and 
Human Services shall conduct, using calendar year 
2006 claims data, an initial analysis comparing total 
payments under title XVIII of the Social Security 
Act for skilled nursing facility services under the 
RUG–53 and under the RUG–44 classification sys-
tems. 
(2) ADJUSTMENT
IN
RECALIBRATION
FAC-
TOR.—Based on the initial analysis under paragraph 
(1), the Secretary shall adjust the case mix indexes 
under section 1888(e)(4)(G)(i) of the Social Security 
Act (42 U.S.C. 1395yy(e)(4)(G)(i)) for fiscal year 
2010 by the appropriate recalibration factor as pro-
posed in the final rule for Medicare skilled nursing 
facilities issued by such Secretary on August 11, 
2009 (74 Fed. Reg. 40287 et seq.). 
(b) CHANGE IN PAYMENT FOR NONTHERAPY ANCIL-
LARY (NTA) SERVICES AND THERAPY SERVICES.— 
(1) CHANGES
UNDER
CURRENT
SNF
CLASSI-
FICATION SYSTEM.— 
(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary of Health and Human 
Services shall, under the system for payment of
390 
skilled nursing facility services under section 
1888(e) of the Social Security Act (42 U.S.C. 
1395yy(e)), increase payment by 10 percent for 
non-therapy ancillary services (as specified by 
the Secretary in the notice issued on November 
27, 1998 (63 Fed. Reg. 65561 et seq.)) and 
shall decrease payment for the therapy case mix 
component of such rates by 5.5 percent. 
(B) EFFECTIVE
DATE.—The changes in 
payment described in subparagraph (A) shall 
apply for days on or after April 1, 2010, and 
until the Secretary implements an alternative 
case mix classification system for payment of 
skilled nursing facility services under section 
1888(e) of the Social Security Act (42 U.S.C. 
1395yy(e)). 
(C) IMPLEMENTATION.—Notwithstanding 
any other provision of law, the Secretary may 
implement by program instruction or otherwise 
the provisions of this paragraph. 
(2) CHANGES UNDER A FUTURE SNF CASE MIX 
CLASSIFICATION SYSTEM.— 
(A) ANALYSIS.— 
(i) IN
GENERAL.—The Secretary of 
Health and Human Services shall analyze
391 
payments for non-therapy ancillary services 
under a future skilled nursing facility clas-
sification system to ensure the accuracy of 
payment for non-therapy ancillary services. 
Such analysis shall consider use of appro-
priate predictors which may include age, 
physical and mental status, ability to per-
form activities of daily living, prior nursing 
home stay, diagnoses, broad RUG cat-
egory, and a proxy for length of stay. 
(ii) 
APPLICATION.—Such 
analysis 
shall be conducted in a manner such that 
the future skilled nursing facility classifica-
tion system is implemented to apply to 
services furnished during a fiscal year be-
ginning with fiscal year 2011. 
(B) CONSULTATION.—In conducting the 
analysis under subparagraph (A), the Secretary 
shall consult with interested parties, including 
the Medicare Payment Advisory Commission 
and other interested stakeholders, to identify 
appropriate predictors of nontherapy ancillary 
costs. 
(C) RULEMAKING.—The Secretary shall 
include the result of the analysis under sub-
392 
paragraph (A) in the fiscal year 2011 rule-
making cycle for purposes of implementation 
beginning for such fiscal year. 
(D) IMPLEMENTATION.—Subject to sub-
paragraph (E) and consistent with subpara-
graph (A)(ii), the Secretary shall implement 
changes to payments for non-therapy ancillary 
services (which shall include a separate rate 
component for non-therapy ancillary services 
and may include use of a model that predicts 
payment amounts applicable for non-therapy 
ancillary services) under such future skilled 
nursing facility services classification system as 
the Secretary determines appropriate based on 
the analysis conducted pursuant to subpara-
graph (A). 
(E) BUDGET NEUTRALITY.—The Secretary 
shall implement changes described in subpara-
graph (D) in a manner such that the estimated 
expenditures under such future skilled nursing 
facility services classification system for a fiscal 
year beginning with fiscal year 2011 with such 
changes would be equal to the estimated ex-
penditures that would otherwise occur under 
title XVIII of the Social Security Act under
393 
such future skilled nursing facility services clas-
sification system for such year without such 
changes. 
(c) OUTLIER POLICY FOR NTA AND THERAPY.—Sec-
tion 1888(e) of the Social Security Act (42 U.S.C. 
1395yy(e)) is amended by adding at the end the following 
new paragraph: 
‘‘(13) OUTLIERS FOR NTA AND THERAPY.— 
‘‘(A) 
IN
GENERAL.—With 
respect 
to 
outliers because of unusual variations in the 
type or amount of medically necessary care, be-
ginning with October 1, 2010, the Secretary— 
‘‘(i) shall provide for an addition or 
adjustment to the payment amount other-
wise made under this section with respect 
to non-therapy ancillary services in the 
case of such outliers; and 
‘‘(ii) may provide for such an addition 
or adjustment to the payment amount oth-
erwise made under this section with re-
spect to therapy services in the case of 
such outliers. 
‘‘(B) OUTLIERS
BASED
ON
AGGREGATE 
COSTS.—Outlier adjustments or additional pay-
ments described in subparagraph (A) shall be
394 
based on aggregate costs during a stay in a 
skilled nursing facility and not on the number 
of days in such stay. 
‘‘(C) BUDGET
NEUTRALITY.—The Sec-
retary shall reduce estimated payments that 
would otherwise be made under the prospective 
payment system under this subsection with re-
spect to a fiscal year by 2 percent. The total 
amount of the additional payments or payment 
adjustments for outliers made under this para-
graph with respect to a fiscal year may not ex-
ceed 2 percent of the total payments projected 
or estimated to be made based on the prospec-
tive payment system under this subsection for 
the fiscal year.’’. 
(d) 
CONFORMING
AMENDMENTS.—Section 
1888(e)(8) of such Act (42 U.S.C. 1395yy(e)(8)) is 
amended— 
(1) in subparagraph (A)— 
(A) by striking ‘‘and’’ before ‘‘adjust-
ments’’; and 
(B) by inserting ‘‘, and adjustment under 
section 1111(b) of the Affordable Health Care 
for America Act’’ before the semicolon at the 
end;
395 
(2) in subparagraph (B), by striking ‘‘and’’; 
(3) in subparagraph (C), by striking the period 
and inserting ‘‘; and’’; and 
(4) by adding at the end the following new sub-
paragraph: 
‘‘(D) the establishment of outliers under 
paragraph (13).’’. 
SEC. 1112. MEDICARE DSH REPORT AND PAYMENT ADJUST-
MENTS IN RESPONSE TO COVERAGE EXPAN-
SION. 
(a) DSH REPORT.— 
(1) IN GENERAL.—Not later than January 1, 
2016, the Secretary of Health and Human Services 
shall submit to Congress a report on Medicare DSH 
taking into account the impact of the health care re-
forms carried out under division A in reducing the 
number of uninsured individuals. The report shall 
include recommendations relating to the following: 
(A) The appropriate amount, targeting, 
and distribution of Medicare DSH to com-
pensate for higher Medicare costs associated 
with serving low-income beneficiaries (taking 
into account variations in the empirical jus-
tification for Medicare DSH attributable to hos-
pital characteristics, including bed size), con-
396 
sistent with the original intent of Medicare 
DSH. 
(B) The appropriate amount, targeting, 
and distribution of Medicare DSH to hospitals 
given their continued uncompensated care costs, 
to the extent such costs remain. 
(2) COORDINATION WITH MEDICAID DSH RE-
PORT.—The Secretary shall coordinate the report 
under this subsection with the report on Medicaid 
DSH under section 1704(a). 
(b) PAYMENT ADJUSTMENTS IN RESPONSE TO COV-
ERAGE EXPANSION.— 
(1) IN GENERAL.—If there is a significant de-
crease in the national rate of uninsurance as a result 
of this Act (as determined under paragraph (2)(A)), 
then the Secretary of Health and Human Services 
shall, beginning in fiscal year 2017, implement the 
following adjustments to Medicare DSH: 
(A) In lieu of the amount of Medicare 
DSH payment that would otherwise be made 
under section 1886(d)(5)(F) of the Social Secu-
rity Act, the amount of Medicare DSH payment 
shall be an amount based on the recommenda-
tions of the report under subsection (a)(1)(A) 
and shall take into account variations in the
397 
empirical justification for Medicare DSH attrib-
utable to hospital characteristics, including bed 
size. 
(B) Subject to paragraph (3), make an ad-
ditional payment to a hospital by an amount 
that is estimated based on the amount of un-
compensated care provided by the hospital 
based on criteria for uncompensated care as de-
termined by the Secretary, which shall exclude 
bad debt. 
(2) SIGNIFICANT DECREASE IN NATIONAL RATE 
OF UNINSURANCE AS A RESULT OF THIS ACT.—For 
purposes of this subsection— 
(A) IN GENERAL.—There is a ‘‘significant 
decrease in the national rate of uninsurance as 
a result of this Act’’ if there is a decrease in 
the national rate of uninsurance (as defined in 
subparagraph (B)) from 2012 to 2014 that ex-
ceeds 8 percentage points. 
(B) NATIONAL
RATE
OF
UNINSURANCE 
DEFINED.—The 
term 
‘‘national 
rate 
of 
uninsurance’’ means, for a year, such rate for 
the under-65 population for the year as deter-
mined and published by the Bureau of the Cen-
398 
sus in its Current Population Survey in or 
about September of the succeeding year. 
(3) UNCOMPENSATED CARE INCREASE.— 
(A) COMPUTATION OF DSH SAVINGS.—For 
each fiscal year (beginning with fiscal year 
2017), the Secretary shall estimate the aggre-
gate reduction in the amount of Medicare DSH 
payment that would be expected to result from 
the adjustment under paragraph (1)(A). 
(B) 
STRUCTURE
OF
PAYMENT
IN-
CREASE.—The Secretary shall compute the ad-
ditional payment to a hospital as described in 
paragraph (1)(B) for a fiscal year in accordance 
with a formula established by the Secretary 
that provides that— 
(i) the estimated aggregate amount of 
such increase for the fiscal year does not 
exceed 50 percent of the aggregate reduc-
tion in Medicare DSH estimated by the 
Secretary for such fiscal year; and 
(ii) hospitals with higher levels of un-
compensated care receive a greater in-
crease. 
(c) MEDICARE DSH.—In this section, the term 
‘‘Medicare DSH’’ means adjustments in payments under
429 
‘‘(cc) TREATMENT OF SUB-
SEQUENT RESUPPLY WITHIN PE-
RIOD
OF
REASONABLE
USEFUL 
LIFETIME OF GROUP 3 SUPPORT 
SURFACE IN CASE OF NEED.—If 
an individual rejects transfer of 
title to a Group 3 Support Sur-
face under this subclause and the 
individual requires such Support 
Surface at any subsequent time 
during the period of the reason-
able useful lifetime of such equip-
ment (as defined by the Sec-
retary) beginning with the first 
month for which payment is 
made for the rental of such 
equipment under clause (i), the 
supplier shall supply the equip-
ment without charge to the indi-
vidual or the program under this 
title during the remainder of 
such period, other than payment 
for maintenance and servicing 
during such period which would 
otherwise have been paid if the