501 
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: 
‘‘(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 
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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-
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. 
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(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. 
(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-
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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). 
(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 
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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. 
(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 
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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 
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.— 
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(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 
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. 
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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 
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 
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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. 
(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 
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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 
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-
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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 
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 
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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 
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 
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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-
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-
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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 
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. 
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(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 
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 
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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. 
(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 
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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 
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-
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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 
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: 
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(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 
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-
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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— 
(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.— 
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‘‘(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 
‘‘(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). 
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‘‘(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 
(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: 
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‘‘(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 
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 
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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 
‘‘(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 
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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; 
‘‘(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 
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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 
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. 
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‘‘(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 
(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 
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(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 
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 
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(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)— 
(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). 
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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’’. 
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 
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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. 
(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. 
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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 
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. 
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(3) Representatives from Medicare Advantage 
plans. 
(4) Such other entities or people as determined 
by the Secretary. 
(c) REPORT.—Not later than one 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-
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’’; 
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(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 
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 
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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. 
(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 
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(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’’. 
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 
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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 
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. 
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‘‘(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-
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 
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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 
‘‘(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.— 
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‘‘(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-
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: 
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‘‘(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 
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: 
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‘‘(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 
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, 
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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 
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)— 
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‘‘(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 
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 
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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 
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-
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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-
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.— 
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(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 
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 
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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 
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.— 
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‘‘(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 
‘‘(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-
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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.’’. 
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-
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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-
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-
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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-
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 
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(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 
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 
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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.— 
‘‘(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 
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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; 
‘‘(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.— 
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‘‘(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-
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-
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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 
‘‘(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— 
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‘‘(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.— 
(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.— 
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‘‘(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-
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-
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