867 
•AMDT. NO. 2786 
SEC. 3141. APPLICATION OF BUDGET NEUTRALITY ON A NA-
TIONAL BASIS IN THE CALCULATION OF THE 
MEDICARE HOSPITAL WAGE INDEX FLOOR. 
In the case of discharges occurring on or after Octo-
ber 1, 2010, for purposes of applying section 4410 of the 
Balanced Budget Act of 1997 (42 U.S.C. 1395ww note) 
and paragraph (h)(4) of section 412.64 of title 42, Code 
of Federal Regulations, the Secretary of Health and 
Human Services shall administer subsection (b) of such 
section 4410 and paragraph (e) of such section 412.64 
in the same manner as the Secretary administered such 
subsection (b) and paragraph (e) for discharges occurring 
during fiscal year 2008 (through a uniform, national ad-
justment to the area wage index). 
SEC. 3142. HHS STUDY ON URBAN MEDICARE-DEPENDENT 
HOSPITALS. 
(a) STUDY.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the 
‘‘Secretary’’) shall conduct a study on the need for 
an additional payment for urban Medicare-depend-
ent hospitals for inpatient hospital services under 
section 1886 of the Social Security Act (42 U.S.C. 
1395ww). Such study shall include an analysis of— 
(A) the Medicare inpatient margins of 
urban Medicare-dependent hospitals, as com-
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•AMDT. NO. 2786 
pared to other hospitals which receive 1 or more 
additional payments or adjustments under such 
section (including those payments or adjust-
ments described in paragraph (2)(A)); and 
(B) whether payments to medicare-depend-
ent, small rural hospitals under subsection 
(d)(5)(G) of such section should be applied to 
urban Medicare-dependent hospitals. 
(2) URBAN
MEDICARE-DEPENDENT
HOSPITAL 
DEFINED.—For purposes of this section, the term 
‘‘urban Medicare-dependent hospital’’ means a sub-
section (d) hospital (as defined in subsection 
(d)(1)(B) of such section) that— 
(A) does not receive any additional pay-
ment or adjustment under such section, such as 
payments for indirect medical education costs 
under subsection (d)(5)(B) of such section, dis-
proportionate share payments under subsection 
(d)(5)(A) of such section, payments to a rural 
referral center under subsection (d)(5)(C) of 
such section, payments to a critical access hos-
pital under section 1814(l) of such Act (42 
U.S.C. 1395f(l)), payments to a sole community 
hospital under subsection (d)(5)(D) of such sec-
tion 1886, or payments to a medicare-depend-
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•AMDT. NO. 2786 
ent, small rural hospital under subsection 
(d)(5)(G) of such section 1886; and 
(B) for which more than 60 percent of its 
inpatient days or discharges during 2 of the 3 
most recently audited cost reporting periods for 
which the Secretary has a settled cost report 
were attributable to inpatients entitled to bene-
fits under part A of title XVIII of such Act. 
(b) REPORT.—Not later than 9 months after the date 
of enactment of this Act, the Secretary shall submit to 
Congress a report containing the results of the study con-
ducted under subsection (a), together with recommenda-
tions for such legislation and administrative action as the 
Secretary determines appropriate. 
Subtitle C—Provisions Relating to 
Part C 
SEC. 3201. MEDICARE ADVANTAGE PAYMENT. 
(a) MA BENCHMARK BASED ON PLAN’S COMPETI-
TIVE BIDS.— 
(1) IN GENERAL.—Section 1853(j) of the Social 
Security Act (42 U.S.C. 1395w–23(j)) is amended— 
(A) by striking ‘‘AMOUNTS.—For pur-
poses’’ and inserting ″AMOUNTS.— 
‘‘(1) IN GENERAL.—For purposes’’; 
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•AMDT. NO. 2786 
(B) by redesignating paragraphs (1) and 
(2) as subparagraphs (A) and (B), respectively, 
and indenting the subparagraphs appropriately; 
(C) in subparagraph (A), as redesignated 
by subparagraph (B)— 
(i) by redesignating subparagraphs 
(A) and (B) as clauses (i) and (ii), respec-
tively, and indenting the clauses appro-
priately; and 
(ii) in clause (i), as redesignated by 
clause (i), by striking ‘‘an amount equal 
to’’ and all that follows through the end 
and inserting ‘‘an amount equal to— 
‘‘(I) for years before 2007, 1⁄12 of 
the annual MA capitation rate under 
section 1853(c)(1) for the area for the 
year, adjusted as appropriate for the 
purpose of risk adjustment; 
‘‘(II) for 2007 through 2011, 1⁄12 
of the applicable amount determined 
under subsection (k)(1) for the area 
for the year; 
‘‘(III) for 2012, the sum of— 
‘‘(aa) 
2⁄3
of the quotient 
of— 
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•AMDT. NO. 2786 
‘‘(AA) 
the 
applicable 
amount determined under 
subsection (k)(1) for the 
area for the year; and 
‘‘(BB) 12; and 
‘‘(bb) 1⁄3 of the MA competi-
tive benchmark amount (deter-
mined under paragraph (2)) for 
the area for the month; 
‘‘(IV) for 2013, the sum of— 
‘‘(aa) 
1⁄3
of the quotient 
of— 
‘‘(AA) 
the 
applicable 
amount determined under 
subsection (k)(1) for the 
area for the year; and 
‘‘(BB) 12; and 
‘‘(bb) 2⁄3 of the MA competi-
tive benchmark amount (as so 
determined) for the area for the 
month; 
‘‘(V) for 2014, the MA competi-
tive benchmark amount for the area 
for a month in 2013 (as so deter-
mined), increased by the national per 
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•AMDT. NO. 2786 
capita MA growth percentage, de-
scribed in subsection (c)(6) for 2014, 
but not taking into account any ad-
justment under subparagraph (C) of 
such subsection for a year before 
2004; and 
‘‘(VI) for 2015 and each subse-
quent 
year, 
the 
MA 
competitive 
benchmark amount (as so determined) 
for the area for the month; or’’; 
(iii) in clause (ii), as redesignated by 
clause (i), by striking ‘‘subparagraph (A)’’ 
and inserting ‘‘clause (i)’’; 
(D) by adding at the end the following new 
paragraphs: 
‘‘(2) 
COMPUTATION
OF
MA
COMPETITIVE 
BENCHMARK AMOUNT.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) and paragraph (3), for months in 
each year (beginning with 2012) for each MA 
payment area the Secretary shall compute an 
MA competitive benchmark amount equal to the 
weighted average of the unadjusted MA statu-
tory non-drug monthly bid amount (as defined 
in section 1854(b)(2)(E)) for each MA plan in 
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•AMDT. NO. 2786 
the area, with the weight for each plan being 
equal to the average number of beneficiaries en-
rolled under such plan in the reference month 
(as defined in section 1858(f)(4), except that, 
in applying such definition for purposes of this 
paragraph, ‘to compute the MA competitive 
benchmark amount under section 1853(j)(2)’ 
shall be substituted for ‘to compute the percent-
age specified in subparagraph (A) and other 
relevant percentages under this part’). 
‘‘(B) WEIGHTING RULES.— 
‘‘(i) SINGLE PLAN RULE.—In the case 
of an MA payment area in which only a 
single MA plan is being offered, the weight 
under subparagraph (A) shall be equal to 
1. 
‘‘(ii) USE OF SIMPLE AVERAGE AMONG 
MULTIPLE PLANS IF NO PLANS OFFERED 
IN PREVIOUS YEAR.—In the case of an MA 
payment area in which no MA plan was of-
fered in the previous year and more than 
1 MA plan is offered in the current year, 
the Secretary shall use a simple average of 
the unadjusted MA statutory non-drug 
monthly bid amount (as so defined) for 
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•AMDT. NO. 2786 
purposes of computing the MA competitive 
benchmark amount under subparagraph 
(A). 
‘‘(3) CAP
ON
MA
COMPETITIVE
BENCHMARK 
AMOUNT.—In no case shall the MA competitive 
benchmark amount for an area for a month in a 
year be greater than the applicable amount that 
would (but for the application of this subsection) be 
determined under subsection (k)(1) for the area for 
the month in the year.’’; and 
(E) in subsection (k)(2)(B)(ii)(III), by 
striking 
‘‘(j)(1)(A)’’ 
and 
inserting 
‘‘(j)(1)(A)(i)’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 1853(k)(2) of the Social Secu-
rity Act (42 U.S.C. 1395w–23(k)(2)) is amend-
ed— 
(i) in subparagraph (A), by striking 
‘‘through 2010’’ and inserting ‘‘and subse-
quent years’’; and 
(ii) in subparagraph (C)— 
(I) in clause (iii), by striking 
‘‘and’’ at the end; 
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•AMDT. NO. 2786 
(II) in clause (iv), by striking the 
period at the end and inserting ‘‘; 
and’’; and 
(III) by adding at the end the 
following new clause: 
‘‘(v) for 2011 and subsequent years, 
0.00.’’. 
(B) Section 1854(b) of the Social Security 
Act (42 U.S.C. 1395w–24(b)) is amended— 
(i) in paragraph (3)(B)(i), by striking 
‘‘1853(j)(1)’’ 
and 
inserting 
‘‘1853(j)(1)(A)’’; and 
(ii) in paragraph (4)(B)(i), by striking 
‘‘1853(j)(2)’’ 
and 
inserting 
‘‘1853(j)(1)(B)’’. 
(C) Section 1858(f) of the Social Security 
Act (42 U.S.C. 1395w–27(f)) is amended— 
(i) in paragraph (1), by striking 
‘‘1853(j)(2)’’ 
and 
inserting 
‘‘1853(j)(1)(B)’’; and 
(ii) in paragraph (3)(A), by striking 
‘‘1853(j)(1)(A)’’ 
and 
inserting 
‘‘1853(j)(1)(A)(i)’’. 
(D) Section 1860C–1(d)(1)(A) of the So-
cial 
Security 
Act 
(42 
U.S.C. 
1395w– 
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•AMDT. NO. 2786 
29(d)(1)(A)) 
is 
amended 
by 
striking 
‘‘1853(j)(1)(A)’’ 
and 
inserting 
‘‘1853(j)(1)(A)(i)’’. 
(b) REDUCTION OF NATIONAL PER CAPITA GROWTH 
PERCENTAGE FOR 2011.—Section 1853(c)(6) of the So-
cial Security Act (42 U.S.C. 1395w–23(c)(6)) is amend-
ed— 
(1) in clause (v), by striking ‘‘and’’ at the end; 
(2) in clause (vi)— 
(A) by striking ‘‘for a year after 2002’’ 
and inserting ‘‘for 2003 through 2010’’; and 
(B) by striking the period at the end and 
inserting a comma; and 
(C) by adding at the end the following new 
clauses: 
‘‘(vii) for 2011, 3 percentage points; 
and 
‘‘(viii) for a year after 2011, 0 per-
centage points.’’. 
(c) ENHANCEMENT OF BENEFICIARY REBATES.— 
Section 1854(b)(1)(C)(i) of the Social Security Act (42 
U.S.C. 1395w–24(b)(1)(C)(i)) is amended by inserting 
‘‘(or 100 percent in the case of plan years beginning on 
or after January 1, 2014)’’ after ‘‘75 percent’’. 
(d) BIDDING RULES.— 
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•AMDT. NO. 2786 
(1) REQUIREMENTS
FOR
INFORMATION
SUB-
MITTED.—Section 1854(a)(6)(A) of the Social Secu-
rity Act (42 U.S.C. 1395w–24(a)(6)(A)) is amended, 
in the flush matter following clause (v), by adding 
at the end the following sentence: ‘‘Information to 
be submitted under this paragraph shall be certified 
by a qualified member of the American Academy of 
Actuaries and shall meet actuarial guidelines and 
rules established by the Secretary under subpara-
graph (B)(v).’’. 
(2) ESTABLISHMENT
OF
ACTUARIAL
GUIDE-
LINES.—Section 1854(a)(6)(B) of the Social Secu-
rity Act (42 U.S.C. 1395w–24(a)(6)(B)) is amend-
ed— 
(A) in clause (i), by striking ‘‘(iii) and 
(iv)’’ and inserting ‘‘(iii), (iv), and (v)’’; and 
(B) by adding at the end the following new 
clause: 
‘‘(v) ESTABLISHMENT OF ACTUARIAL 
GUIDELINES.— 
‘‘(I) IN GENERAL.—In order to 
establish fair MA competitive bench-
marks under section 1853(j)(1)(A)(i), 
the Secretary, acting through the 
Chief Actuary of the Centers for 
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•AMDT. NO. 2786 
Medicare & Medicaid Services (in this 
clause referred to as the ‘Chief Actu-
ary’), shall establish— 
‘‘(aa) 
actuarial 
guidelines 
for the submission of bid infor-
mation under this paragraph; 
and 
‘‘(bb) bidding rules that are 
appropriate to ensure accurate 
bids and fair competition among 
MA plans. 
‘‘(II) 
DENIAL
OF
BID 
AMOUNTS.—The Secretary shall deny 
monthly bid amounts submitted under 
subparagraph (A) that do not meet 
the actuarial guidelines and rules es-
tablished under subclause (I). 
‘‘(III) REFUSAL TO ACCEPT CER-
TAIN BIDS DUE TO MISREPRESENTA-
TIONS
AND
FAILURES
TO
ADE-
QUATELY MEET REQUIREMENTS.—In 
the case where the Secretary deter-
mines that information submitted by 
an MA organization under subpara-
graph (A) contains consistent mis-
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•AMDT. NO. 2786 
representations and failures to ade-
quately meet requirements of the or-
ganization, the Secretary may refuse 
to accept any additional such bid 
amounts from the organization for the 
plan year and the Chief Actuary shall, 
if the Chief Actuary determines that 
the actuaries of the organization were 
complicit in those misrepresentations 
and failures, report those actuaries to 
the Actuarial Board for Counseling 
and Discipline.’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to bid amounts sub-
mitted on or after January 1, 2012. 
(e) MA LOCAL PLAN SERVICE AREAS.— 
(1) IN GENERAL.—Section 1853(d) of the So-
cial Security Act (42 U.S.C. 1395w–23(d)) is 
amended— 
(A) in the subsection heading, by striking 
‘‘MA REGION’’ and inserting ‘‘MA REGION; MA 
LOCAL PLAN SERVICE AREA’’; 
(B) in paragraph (1), by striking subpara-
graph (A) and inserting the following: 
‘‘(A) with respect to an MA local plan— 
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•AMDT. NO. 2786 
‘‘(i) for years before 2012, an MA 
local area (as defined in paragraph (2)); 
and 
‘‘(ii) for 2012 and succeeding years, a 
service area that is an entire urban or 
rural area, as applicable (as described in 
paragraph (5)); and’’; and 
(C) by adding at the end the following new 
paragraph: 
‘‘(5) MA LOCAL
PLAN
SERVICE
AREA.—For 
2012 and succeeding years, the service area for an 
MA local plan shall be an entire urban or rural area 
in each State as follows: 
‘‘(A) URBAN AREAS.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii) and subparagraphs (C) and (D), the 
service area for an MA local plan in an 
urban area shall be the Core Based Statis-
tical Area (in this paragraph referred to as 
a ‘CBSA’) or, if applicable, a conceptually 
similar alternative classification, as defined 
by the Director of the Office of Manage-
ment and Budget. 
‘‘(ii) CBSA COVERING
MORE
THAN 
ONE STATE.—In the case of a CBSA (or 
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•AMDT. NO. 2786 
alternative classification) that covers more 
than one State, the Secretary shall divide 
the CBSA (or alternative classification) 
into separate service areas with respect to 
each State covered by the CBSA (or alter-
native classification). 
‘‘(B) RURAL AREAS.—Subject to subpara-
graphs (C) and (D), the service area for an MA 
local plan in a rural area shall be a county that 
does not qualify for inclusion in a CBSA (or al-
ternative classification), as defined by the Di-
rector of the Office of Management and Budg-
et. 
‘‘(C) REFINEMENTS TO SERVICE AREAS.— 
For 2015 and succeeding years, in order to re-
flect actual patterns of health care service utili-
zation, the Secretary may adjust the boundaries 
of service areas for MA local plans in urban 
areas and rural areas under subparagraphs (A) 
and (B), respectively, but may only do so based 
on recent analyses of actual patterns of care. 
‘‘(D) ADDITIONAL
AUTHORITY
TO
MAKE 
LIMITED
EXCEPTIONS
TO
SERVICE
AREA
RE-
QUIREMENTS FOR MA LOCAL PLANS.—The Sec-
retary may, in addition to any adjustments 
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•AMDT. NO. 2786 
under subparagraph (C), make limited excep-
tions to service area requirements otherwise ap-
plicable under this part for MA local plans that 
have in effect (as of the date of enactment of 
the Patient Protection and Affordable Care 
Act)— 
‘‘(i) agreements with another MA or-
ganization or MA plan that preclude the 
offering of benefits throughout an entire 
service area; or 
‘‘(ii) limitations in their structural ca-
pacity 
to 
support 
adequate 
networks 
throughout an entire service area as a re-
sult of the delivery system model of the 
MA local plan.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) IN GENERAL.— 
(i) Section 1851(b)(1) of the Social 
Security Act (42 U.S.C. 1395w–21(b)(1)) 
is amended by striking subparagraph (C). 
(ii) Section 1853(b)(1)(B)(i) of such 
Act (42 U.S.C. 1395w–23(b)(1)(B)(i))— 
(I) in the matter preceding sub-
clause (I), by striking ‘‘MA payment 
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•AMDT. NO. 2786 
area’’ and inserting ‘‘MA local area 
(as defined in subsection (d)(2))’’; and 
(II) in subclause (I), by striking 
‘‘MA payment area’’ and inserting 
‘‘MA local area (as so defined)’’. 
(iii) Section 1853(b)(4) of such Act 
(42 U.S.C. 1395w–23(b)(4)) is amended 
by striking ‘‘Medicare Advantage payment 
area’’ and inserting ‘‘MA local area (as so 
defined)’’. 
(iv) Section 1853(c)(1) of such Act 
(42 U.S.C. 1395w–23(c)(1)) is amended— 
(I) in the matter preceding sub-
paragraph (A), by striking ‘‘a Medi-
care Advantage payment area that 
is’’; and 
(II) in subparagraph (D)(i), by 
striking ‘‘MA payment area’’ and in-
serting ‘‘MA local area (as defined in 
subsection (d)(2))’’. 
(v) Section 1854 of such Act (42 
U.S.C. 1395w–24) is amended by striking 
subsection (h). 
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•AMDT. NO. 2786 
(B) EFFECTIVE DATE.—The amendments 
made by this paragraph shall take effect on 
January 1, 2012. 
(f) PERFORMANCE BONUSES.— 
(1) MA PLANS.— 
(A) IN GENERAL.—Section 1853 of the So-
cial Security Act (42 U.S.C. 1395w–23) is 
amended by adding at the end the following 
new subsection: 
‘‘(n) PERFORMANCE BONUSES.— 
‘‘(1) CARE COORDINATION AND MANAGEMENT 
PERFORMANCE BONUS.— 
‘‘(A) IN GENERAL.—For years beginning 
with 2014, subject to subparagraph (B), in the 
case of an MA plan that conducts 1 or more 
programs described in subparagraph (C) with 
respect to the year, the Secretary shall, in addi-
tion to any other payment provided under this 
part, make monthly payments, with respect to 
coverage of an individual under this part, to the 
MA plan in an amount equal to the product 
of— 
‘‘(i) 0.5 percent of the national 
monthly per capita cost for expenditures 
for individuals enrolled under the original 
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•AMDT. NO. 2786 
medicare fee-for-service program for the 
year; and 
‘‘(ii) the total number of programs de-
scribed in clauses (i) through (ix) of sub-
paragraph (C) that the Secretary deter-
mines the plan is conducting for the year 
under such subparagraph. 
‘‘(B) LIMITATION.—In no case may the 
total amount of payment with respect to a year 
under subparagraph (A) be greater than 2 per-
cent of the national monthly per capita cost for 
expenditures for individuals enrolled under the 
original medicare fee-for-service program for 
the year, as determined prior to the application 
of risk adjustment under paragraph (4). 
‘‘(C) PROGRAMS
DESCRIBED.—The fol-
lowing programs are described in this para-
graph: 
‘‘(i) 
Care 
management 
programs 
that— 
‘‘(I) target individuals with 1 or 
more chronic conditions; 
‘‘(II) identify gaps in care; and 
‘‘(III) facilitate improved care by 
using additional resources like nurses, 
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•AMDT. NO. 2786 
nurse practitioners, and physician as-
sistants. 
‘‘(ii) Programs that focus on patient 
education and self-management of health 
conditions, including interventions that— 
‘‘(I) help manage chronic condi-
tions; 
‘‘(II) reduce declines in health 
status; and 
‘‘(III) foster patient and provider 
collaboration. 
‘‘(iii) Transitional care interventions 
that focus on care provided around a hos-
pital inpatient episode, including programs 
that target post-discharge patient care in 
order to reduce unnecessary health com-
plications and readmissions. 
‘‘(iv) Patient safety programs, includ-
ing provisions for hospital-based patient 
safety programs in contracts that the 
Medicare Advantage organization offering 
the MA plan has with hospitals. 
‘‘(v) Financial policies that promote 
systematic coordination of care by primary 
care physicians across the full spectrum of 
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•AMDT. NO. 2786 
specialties and sites of care, such as med-
ical homes, capitation arrangements, or 
pay-for-performance programs. 
‘‘(vi) Programs that address, identify, 
and ameliorate health care disparities 
among principal at-risk subpopulations. 
‘‘(vii) Medication therapy manage-
ment programs that are more extensive 
than is required under section 1860D–4(c) 
(as determined by the Secretary). 
‘‘(viii) Health information technology 
programs, including clinical decision sup-
port and other tools to facilitate data col-
lection and ensure patient-centered, appro-
priate care. 
‘‘(ix) Such other care management 
and coordination programs as the Sec-
retary determines appropriate. 
‘‘(D) CONDUCT
OF
PROGRAM
IN
URBAN 
AND RURAL AREAS.—An MA plan may conduct 
a program described in subparagraph (C) in a 
manner appropriate for an urban or rural area, 
as applicable. 
‘‘(E) REPORTING OF DATA.—Each Medi-
care Advantage organization shall provide to 
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•AMDT. NO. 2786 
the Secretary the information needed to deter-
mine whether they are eligible for a care coordi-
nation and management performance bonus at 
a time and in a manner specified by the Sec-
retary. 
‘‘(F) PERIODIC AUDITING.—The Secretary 
shall provide for the annual auditing of pro-
grams described in subparagraph (C) for which 
an MA plan receives a care coordination and 
management performance bonus under this 
paragraph. The Comptroller General shall mon-
itor auditing activities conducted under this 
subparagraph. 
‘‘(2) QUALITY PERFORMANCE BONUSES.— 
‘‘(A) QUALITY BONUS.—For years begin-
ning with 2014, the Secretary shall, in addition 
to any other payment provided under this part, 
make monthly payments, with respect to cov-
erage of an individual under this part, to an 
MA plan that achieves at least a 3 star rating 
(or comparable rating) on a rating system de-
scribed in subparagraph (C) in an amount 
equal to— 
‘‘(i) in the case of a plan that achieves 
a 3 star rating (or comparable rating) on 
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•AMDT. NO. 2786 
such system 2 percent of the national 
monthly per capita cost for expenditures 
for individuals enrolled under the original 
medicare fee-for-service program for the 
year; and 
‘‘(ii) in the case of a plan that 
achieves a 4 or 5 star rating (or com-
parable rating on such system, 4 percent 
of such national monthly per capita cost 
for the year. 
‘‘(B) IMPROVED
QUALITY
BONUS.—For 
years beginning with 2014, in the case of an 
MA plan that does not receive a quality bonus 
under subparagraph (A) and is an improved 
quality MA plan with respect to the year (as 
identified by the Secretary), the Secretary shall, 
in addition to any other payment provided 
under this part, make monthly payments, with 
respect to coverage of an individual under this 
part, to the MA plan in an amount equal to 1 
percent of such national monthly per capita 
cost for the year. 
‘‘(C) USE OF RATING SYSTEM.—For pur-
poses of subparagraph (A), a rating system de-
scribed in this paragraph is— 
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•AMDT. NO. 2786 
‘‘(i) a rating system that uses up to 5 
stars to rate clinical quality and enrollee 
satisfaction and performance at the Medi-
care Advantage contract or MA plan level; 
or 
‘‘(ii) such other system established by 
the Secretary that provides for the deter-
mination of a comparable quality perform-
ance rating to the rating system described 
in clause (i). 
‘‘(D) 
DATA
USED
IN
DETERMINING 
SCORE.— 
‘‘(i) IN GENERAL.—The rating of an 
MA plan under the rating system described 
in subparagraph (C) with respect to a year 
shall be based on based on the most recent 
data available. 
‘‘(ii) PLANS THAT FAIL TO REPORT 
DATA.—An MA plan which does not report 
data that enables the Secretary to rate the 
plan for purposes of subparagraph (A) or 
identify the plan for purposes of subpara-
graph (B) shall be counted, for purposes of 
such rating or identification, as having the 
lowest plan performance rating and the 
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•AMDT. NO. 2786 
lowest percentage improvement, respec-
tively. 
‘‘(3) QUALITY BONUS FOR NEW AND LOW EN-
ROLLMENT MA PLANS.— 
‘‘(A) NEW MA PLANS.—For years begin-
ning with 2014, in the case of an MA plan that 
first submits a bid under section 1854(a)(1)(A) 
for 2012 or a subsequent year, only receives en-
rollments made during the coverage election pe-
riods described in section 1851(e), and is not 
able to receive a bonus under subparagraph (A) 
or (B) of paragraph (2) for the year, the Sec-
retary shall, in addition to any other payment 
provided under this part, make monthly pay-
ments, with respect to coverage of an individual 
under this part, to the MA plan in an amount 
equal to 2 percent of national monthly per cap-
ita cost for expenditures for individuals enrolled 
under the original medicare fee-for-service pro-
gram for the year. In its fourth year of oper-
ation, the MA plan shall be paid in the same 
manner as other MA plans with comparable en-
rollment. 
‘‘(B) LOW
ENROLLMENT
PLANS.—For 
years beginning with 2014, in the case of an 
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•AMDT. NO. 2786 
MA plan that has low enrollment (as defined by 
the Secretary) and would not otherwise be able 
to receive a bonus under subparagraph (A) or 
(B) of paragraph (2) or subparagraph (A) of 
this paragraph for the year (referred to in this 
subparagraph as a ‘low enrollment plan’), the 
Secretary shall use a regional or local mean of 
the rating of all MA plans in the region or local 
area, as determined appropriate by the Sec-
retary, on measures used to determine whether 
MA plans are eligible for a quality or an im-
proved quality bonus, as applicable, to deter-
mine whether the low enrollment plan is eligible 
for a bonus under such a subparagraph. 
‘‘(4) RISK ADJUSTMENT.—The Secretary shall 
risk adjust a performance bonus under this sub-
section in the same manner as the Secretary risk ad-
justs beneficiary rebates described in section 
1854(b)(1)(C). 
‘‘(5) NOTIFICATION.—The Secretary, in the an-
nual 
announcement 
required 
under 
subsection 
(b)(1)(B) for 2014 and each succeeding year, shall 
notify the Medicare Advantage organization of any 
performance bonus (including a care coordination 
and management performance bonus under para-
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•AMDT. NO. 2786 
graph (1), a quality performance bonus under para-
graph (2), and a quality bonus for new and low en-
rollment plans under paragraph (3)) that the organi-
zation will receive under this subsection with respect 
to the year. The Secretary shall provide for the pub-
lication of the information described in the previous 
sentence on the Internet website of the Centers for 
Medicare & Medicaid Services.’’ 
(B) CONFORMING
AMENDMENT.—Section 
1853(a)(1)(B) of the Social Security Act (42 
U.S.C. 1395w–23(a)(1)(B)) is amended— 
(i) in clause (i), by inserting ‘‘and any 
performance bonus under subsection (n)’’ 
before the period at the end; and 
(ii) in clause (ii), by striking ‘‘(G)’’ 
and inserting ‘‘(G), plus the amount (if 
any) of any performance bonus under sub-
section (n)’’. 
(2) APPLICATION OF PERFORMANCE BONUSES 
TO MA REGIONAL PLANS.—Section 1858 of the So-
cial Security Act (42 U.S.C. 1395w–27a) is amend-
ed— 
(A) in subsection (f)(1), by striking ‘‘sub-
section (e)’’ and inserting ‘‘subsections (e) and 
(i)’’; and 
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•AMDT. NO. 2786 
(B) by adding at the end the following new 
subsection: 
‘‘(i) APPLICATION OF PERFORMANCE BONUSES TO 
MA REGIONAL PLANS.—For years beginning with 2014, 
the Secretary shall apply the performance bonuses under 
section 1853(n) (relating to bonuses for care coordination 
and management, quality performance, and new and low 
enrollment MA plans) to MA regional plans in a similar 
manner as such performance bonuses apply to MA plans 
under such subsection.’’. 
(g) GRANDFATHERING SUPPLEMENTAL BENEFITS 
FOR CURRENT ENROLLEES AFTER IMPLEMENTATION OF 
COMPETITIVE BIDDING.—Section 1853 of the Social Se-
curity Act (42 U.S.C. 1395w–23), as amended by sub-
section (f), is amended by adding at the end the following 
new subsection: 
‘‘(o) GRANDFATHERING SUPPLEMENTAL BENEFITS 
FOR CURRENT ENROLLES AFTER IMPLEMENTATION OF 
COMPETITIVE BIDDING.— 
‘‘(1) IDENTIFICATION
OF
AREAS.—The Sec-
retary shall identify MA local areas in which, with 
respect to 2009, average bids submitted by an MA 
organization under section 1854(a) for MA local 
plans in the area are not greater than 75 percent of 
the adjusted average per capita cost for the year in-
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•AMDT. NO. 2786 
volved, determined under section 1876(a)(4), for the 
area for individuals who are not enrolled in an MA 
plan under this part for the year, but adjusted to ex-
clude costs attributable to payments under section 
1848(o), 1886(n), and 1886(h). 
‘‘(2) ELECTION
TO
PROVIDE
REBATES
TO 
GRANDFATHERED ENROLLEES.— 
‘‘(A) IN GENERAL.—For years beginning 
with 2012, each Medicare Advantage organiza-
tion offering an MA local plan in an area iden-
tified by the Secretary under paragraph (1) 
may elect to provide rebates to grandfathered 
enrollees under section 1854(b)(1)(C). In the 
case where an MA organization makes such an 
election, the monthly per capita dollar amount 
of such rebates shall not exceed the applicable 
amount for the year (as defined in subpara-
graph (B)). 
‘‘(B) APPLICABLE AMOUNT.—For purposes 
of this subsection, the term ‘applicable amount’ 
means— 
‘‘(i) for 2012, the monthly per capita 
dollar amount of such rebates provided to 
enrollees under the MA local plan with re-
spect to 2011; and 
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•AMDT. NO. 2786 
‘‘(ii) for a subsequent year, 95 percent 
of the amount determined under this sub-
paragraph for the preceding year. 
‘‘(3) SPECIAL RULES FOR PLANS IN IDENTI-
FIED AREAS.—Notwithstanding any other provision 
of this part, the following shall apply with respect to 
each Medicare Advantage organization offering an 
MA local plan in an area identified by the Secretary 
under paragraph (1) that makes an election de-
scribed in paragraph (2): 
‘‘(A) PAYMENTS.—The amount of the 
monthly payment under this section to the 
Medicare Advantage organization, with respect 
to coverage of a grandfathered enrollee under 
this part in the area for a month, shall be equal 
to— 
‘‘(i) for 2012 and 2013, the sum of— 
‘‘(I) the bid amount under sec-
tion 1854(a) for the MA local plan; 
and 
‘‘(II) the applicable amount (as 
defined in paragraph (2)(B)) for the 
MA local plan for the year. 
‘‘(ii) for 2014 and subsequent years, 
the sum of— 
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•AMDT. NO. 2786 
‘‘(I) the MA competitive bench-
mark 
amount 
under 
subsection 
(j)(1)(A)(i) for the area for the 
month, adjusted, only to the extent 
the Secretary determines necessary, to 
account for induced utilization as a 
result of rebates provided to grand-
fathered enrollees (except that such 
adjustment shall not exceed 0.5 per-
cent of such MA competitive bench-
mark amount); and 
‘‘(II) the applicable amount (as 
so defined) for the MA local plan for 
the year. 
‘‘(B) REQUIREMENT
TO
SUBMIT
BIDS 
UNDER COMPETITIVE BIDDING.—The Medicare 
Advantage organization shall submit a single 
bid amount under section 1854(a) for the MA 
local plan. The Medicare Advantage organiza-
tion shall remove from such bid amount any ef-
fects of induced demand for care that may re-
sult from the higher rebates available to grand-
fathered enrollees under this subsection. 
‘‘(C) NONAPPLICATION
OF
BONUS
PAY-
MENTS AND ANY OTHER REBATES.—The Medi-
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•AMDT. NO. 2786 
care Advantage organization offering the MA 
local plan shall not be eligible for any bonus 
payment under subsection (n) or any rebate 
under this part (other than as provided under 
this subsection) with respect to grandfathered 
enrollees. 
‘‘(D) NONAPPLICATION OF UNIFORM BID 
AND PREMIUM AMOUNTS TO GRANDFATHERED 
ENROLLEES.—Section 1854(c) shall not apply 
with respect to the MA local plan. 
‘‘(E) NONAPPLICATION OF LIMITATION ON 
APPLICATION OF PLAN REBATES TOWARD PAY-
MENT OF PART B PREMIUM.—Notwithstanding 
clause (iii) of section 1854(b)(1)(C), in the case 
of a grandfathered enrollee, a rebate under such 
section may be used for the purpose described 
in clause (ii)(III) of such section. 
‘‘(F) RISK ADJUSTMENT.—The Secretary 
shall risk adjust rebates to grandfathered en-
rollees under this subsection in the same man-
ner as the Secretary risk adjusts beneficiary re-
bates described in section 1854(b)(1)(C). 
‘‘(4) DEFINITION
OF
GRANDFATHERED
EN-
ROLLEE.—In this subsection, the term ‘grand-
fathered enrollee’ means an individual who is en-
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•AMDT. NO. 2786 
rolled (effective as of the date of enactment of this 
subsection) in an MA local plan in an area that is 
identified by the Secretary under paragraph (1).’’. 
(h) TRANSITIONAL EXTRA BENEFITS.—Section 1853 
of the Social Security Act (42 U.S.C. 1395w–23), as 
amended by subsections (f) and (g), is amended by adding 
at the end the following new subsection: 
‘‘(p) TRANSITIONAL EXTRA BENEFITS.— 
‘‘(1) IN GENERAL.—For years beginning with 
2012, the Secretary shall provide transitional re-
bates under section 1854(b)(1)(C) for the provision 
of extra benefits (as specified by the Secretary) to 
enrollees described in paragraph (2). 
‘‘(2) ENROLLEES DESCRIBED.—An enrollee de-
scribed in this paragraph is an individual who— 
‘‘(A) enrolls in an MA local plan in an ap-
plicable area; and 
‘‘(B) experiences a significant reduction in 
extra benefits described in clause (ii) of section 
1854(b)(1)(C) as a result of competitive bidding 
under this part (as determined by the Sec-
retary). 
‘‘(3) APPLICABLE AREAS.—In this subsection, 
the term ‘applicable area’ means the following: 
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•AMDT. NO. 2786 
‘‘(A) The 2 largest metropolitan statistical 
areas, if the Secretary determines that the total 
amount of such extra benefits for each enrollee 
for the month in those areas is greater than 
$100. 
‘‘(B) A county where— 
‘‘(i) the MA area-specific non-drug 
monthly benchmark amount for a month in 
2011 is equal to the legacy urban floor 
amount 
(as 
described 
in 
subsection 
(c)(1)(B)(iii)), as determined by the Sec-
retary for the area for 2011; 
‘‘(ii) the percentage of Medicare Ad-
vantage eligible beneficiaries in the county 
who are enrolled in an MA plan for 2009 
is greater than 30 percent (as determined 
by the Secretary); and 
‘‘(iii) average bids submitted by an 
MA organization under section 1854(a) for 
MA local plans in the county for 2011 are 
not greater than the adjusted average per 
capita cost for the year involved, deter-
mined under section 1876(a)(4), for the 
county for individuals who are not enrolled 
in an MA plan under this part for the 
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•AMDT. NO. 2786 
year, but adjusted to exclude costs attrib-
utable to payments under section 1848(o), 
1886(n), and 1886(h). 
‘‘(C) If the Secretary determines appro-
priate, a county contiguous to an area or coun-
ty described in subparagraph (A) or (B), re-
spectively. 
‘‘(4) REVIEW OF PLAN BIDS.—In the case of a 
bid submitted by an MA organization under section 
1854(a) for an MA local plan in an applicable area, 
the Secretary shall review such bid in order to en-
sure that extra benefits (as specified by the Sec-
retary) are provided to enrollees described in para-
graph (2). 
‘‘(5) FUNDING.—The Secretary shall provide 
for the transfer from the Federal Hospital Insurance 
Trust Fund under section 1817 and the Federal 
Supplementary Medical Insurance Trust Fund es-
tablished under section 1841, in such proportion as 
the Secretary determines appropriate, of an amount 
not to exceed $5,000,000,000 for the period of fiscal 
years 2012 through 2019 for the purpose of pro-
viding 
transitional 
rebates 
under 
section 
1854(b)(1)(C) for the provision of extra benefits 
under this subsection.’’. 
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902 
•AMDT. NO. 2786 
(i) NONAPPLICATION OF COMPETITIVE BIDDING AND 
RELATED PROVISIONS AND CLARIFICATION OF MA PAY-
MENT AREA FOR PACE PROGRAMS.— 
(1) NONAPPLICATION
OF
COMPETITIVE
BID-
DING
AND
RELATED
PROVISIONS
FOR
PACE
PRO-
GRAMS.—Section 1894 of the Social Security Act 
(42 U.S.C. 1395eee) is amended— 
(A) by redesignating subsections (h) and 
(i) as subsections (i) and (j), respectively; 
(B) by inserting after subsection (g) the 
following new subsection: 
‘‘(h) NONAPPLICATION OF COMPETITIVE BIDDING 
AND RELATED PROVISIONS UNDER PART C.—With re-
spect to a PACE program under this section, the following 
provisions (and regulations relating to such provisions) 
shall not apply: 
‘‘(1) Section 1853(j)(1)(A)(i), relating to MA 
area-specific non-drug monthly benchmark amount 
being based on competitive bids. 
‘‘(2) Section 1853(d)(5), relating to the estab-
lishment of MA local plan service areas. 
‘‘(3) Section 1853(n), relating to the payment 
of performance bonuses. 
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903 
•AMDT. NO. 2786 
‘‘(4) 
Section 
1853(o), 
relating 
to 
grandfathering supplemental benefits for current en-
rollees after implementation of competitive bidding. 
‘‘(5) Section 1853(p), relating to transitional 
extra benefits.’’. 
(2) SPECIAL RULE FOR MA PAYMENT AREA FOR 
PACE PROGRAMS.—Section 1853(d) of the Social Se-
curity Act (42 U.S.C. 1395w–23(d)), as amended by 
subsection (e), is amended by adding at the end the 
following new paragraph: 
‘‘(6) SPECIAL RULE FOR MA PAYMENT AREA 
FOR
PACE
PROGRAMS.—For years beginning with 
2012, in the case of a PACE program under section 
1894, the MA payment area shall be the MA local 
area (as defined in paragraph (2)).’’. 
SEC. 3202. BENEFIT PROTECTION AND SIMPLIFICATION. 
(a) LIMITATION ON VARIATION OF COST SHARING 
FOR CERTAIN BENEFITS.— 
(1) IN GENERAL.—Section 1852(a)(1)(B) of the 
Social Security Act (42 U.S.C. 1395w–22(a)(1)(B)) 
is amended— 
(A) in clause (i), by inserting ‘‘, subject to 
clause (iii),’’ after ‘‘and B or’’; and 
(B) by adding at the end the following new 
clauses: 
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•AMDT. NO. 2786 
‘‘(iii) LIMITATION ON VARIATION OF 
COST SHARING FOR CERTAIN BENEFITS.— 
Subject to clause (v), cost-sharing for serv-
ices described in clause (iv) shall not ex-
ceed the cost-sharing required for those 
services under parts A and B. 
‘‘(iv) SERVICES DESCRIBED.—The fol-
lowing services are described in this clause: 
‘‘(I) Chemotherapy administra-
tion services. 
‘‘(II) Renal dialysis services (as 
defined in section 1881(b)(14)(B)). 
‘‘(III) Skilled nursing care. 
‘‘(IV) Such other services that 
the Secretary determines appropriate 
(including services that the Secretary 
determines require a high level of pre-
dictability and transparency for bene-
ficiaries). 
‘‘(v) EXCEPTION.—In the case of 
services described in clause (iv) for which 
there is no cost-sharing required under 
parts A and B, cost-sharing may be re-
quired for those services in accordance 
with clause (i).’’. 
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•AMDT. NO. 2786 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to plan years begin-
ning on or after January 1, 2011. 
(b) APPLICATION OF REBATES, PERFORMANCE BO-
NUSES, AND PREMIUMS.— 
(1) 
APPLICATION
OF
REBATES.—Section 
1854(b)(1)(C) of the Social Security Act (42 U.S.C. 
1395w–24(b)(1)(C)) is amended— 
(A) in clause (ii), by striking ‘‘REBATE.— 
A rebate’’ and inserting ‘‘REBATE FOR PLAN 
YEARS
BEFORE
2012.—For plan years before 
2012, a rebate’’; 
(B) by redesignating clauses (iii) and (iv) 
as clauses (iv) and (v); and 
(C) by inserting after clause (ii) the fol-
lowing new clause: 
‘‘(iii) FORM
OF
REBATE
FOR
PLAN 
YEAR
2012
AND
SUBSEQUENT
PLAN 
YEARS.—For plan years beginning on or 
after January 1, 2012, a rebate required 
under this subparagraph may not be used 
for the purpose described in clause (ii)(III) 
and shall be provided through the applica-
tion of the amount of the rebate in the fol-
lowing priority order: 
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•AMDT. NO. 2786 
‘‘(I) First, to use the most sig-
nificant share to meaningfully reduce 
cost-sharing otherwise applicable for 
benefits under the original medicare 
fee-for-service program under parts A 
and B and for qualified prescription 
drug coverage under part D, including 
the reduction of any deductibles, co-
payments, and maximum limitations 
on out-of-pocket expenses otherwise 
applicable. Any reduction of maximum 
limitations on out-of-pocket expenses 
under the preceding sentence shall 
apply to all benefits under the original 
medicare fee-for-service program op-
tion. The Secretary may provide guid-
ance on meaningfully reducing cost- 
sharing under this subclause, except 
that such guidance may not require a 
particular amount of cost-sharing or 
reduction in cost-sharing. 
‘‘(II) Second, to use the next 
most significant share to meaningfully 
provide coverage of preventive and 
wellness health care benefits (as de-
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•AMDT. NO. 2786 
fined by the Secretary) which are not 
benefits under the original medicare 
fee-for-service program, such as smok-
ing cessation, a free flu shot, and an 
annual physical examination. 
‘‘(III) Third, to use the remain-
ing share to meaningfully provide cov-
erage of other health care benefits 
which are not benefits under the origi-
nal medicare fee-for-service program, 
such as eye examinations and dental 
coverage, and are not benefits de-
scribed in subclause (II).’’. 
(2) 
APPLICATION
OF
PERFORMANCE
BO-
NUSES.—Section 1853(n) of the Social Security Act, 
as added by section 3201(f), is amended by adding 
at the end the following new paragraph: 
‘‘(6) APPLICATION
OF
PERFORMANCE
BO-
NUSES.—For plan years beginning on or after Janu-
ary 1, 2014, any performance bonus paid to an MA 
plan under this subsection shall be used for the pur-
poses, and in the priority order, described in sub-
clauses 
(I) 
through 
(III) 
of 
section 
1854(b)(1)(C)(iii).’’. 
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•AMDT. NO. 2786 
(3) APPLICATION
OF
MA
MONTHLY
SUPPLE-
MENTARY
BENEFICIARY
PREMIUM.—Section 
1854(b)(2)(C) of the Social Security Act (42 U.S.C. 
1395w–24(b)(2)(C)) is amended— 
(A) by striking ‘‘PREMIUM.—The term’’ 
and inserting ‘‘PREMIUM.— 
‘‘(i) IN GENERAL.—The term’’; and 
(B) by adding at the end the following new 
clause: 
‘‘(ii) APPLICATION OF MA MONTHLY 
SUPPLEMENTARY
BENEFICIARY
PRE-
MIUM.—For plan years beginning on or 
after January 1, 2012, any MA monthly 
supplementary 
beneficiary 
premium 
charged to an individual enrolled in an MA 
plan shall be used for the purposes, and in 
the priority order, described in subclauses 
(I) 
through 
(III) 
of 
paragraph 
(1)(C)(iii).’’. 
SEC. 3203. APPLICATION OF CODING INTENSITY ADJUST-
MENT DURING MA PAYMENT TRANSITION. 
Section 1853(a)(1)(C) of the Social Security Act (42 
U.S.C. 1395w–23(a)(1)(C)) is amended by adding at the 
end the following new clause: 
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•AMDT. NO. 2786 
‘‘(iii) APPLICATION
OF
CODING
IN-
TENSITY ADJUSTMENT FOR 2011 AND SUB-
SEQUENT YEARS.— 
‘‘(I) REQUIREMENT TO APPLY IN 
2011 THROUGH 2013.—In order to en-
sure payment accuracy, the Secretary 
shall conduct an analysis of the dif-
ferences described in clause (ii)(I). 
The Secretary shall ensure that the 
results of such analysis are incor-
porated into the risk scores for 2011, 
2012, and 2013. 
‘‘(II) AUTHORITY
TO
APPLY
IN 
2014 AND SUBSEQUENT YEARS.—The 
Secretary may, as appropriate, incor-
porate the results of such analysis 
into the risk scores for 2014 and sub-
sequent years.’’. 
SEC. 3204. SIMPLIFICATION OF ANNUAL BENEFICIARY 
ELECTION PERIODS. 
(a) ANNUAL 45-DAY PERIOD FOR DISENROLLMENT 
FROM MA PLANS
TO ELECT
TO RECEIVE BENEFITS 
UNDER
THE ORIGINAL MEDICARE FEE-FOR-SERVICE 
PROGRAM.— 
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•AMDT. NO. 2786 
(1) IN GENERAL.—Section 1851(e)(2)(C) of the 
Social Security Act (42 U.S.C. 1395w–1(e)(2)(C)) is 
amended to read as follows: 
‘‘(C) 
ANNUAL
45-DAY
PERIOD
FOR 
DISENROLLMENT FROM MA PLANS TO ELECT TO 
RECEIVE
BENEFITS
UNDER
THE
ORIGINAL 
MEDICARE
FEE-FOR-SERVICE
PROGRAM.—Sub-
ject to subparagraph (D), at any time during 
the first 45 days of a year (beginning with 
2011), an individual who is enrolled in a Medi-
care Advantage plan may change the election 
under subsection (a)(1), but only with respect 
to coverage under the original medicare fee-for- 
service program under parts A and B, and may 
elect qualified prescription drug coverage in ac-
cordance with section 1860D–1.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply with respect to 2011 
and succeeding years. 
(b) TIMING OF THE ANNUAL, COORDINATED ELEC-
TION
PERIOD
UNDER
PARTS
C 
AND
D.—Section 
1851(e)(3)(B) of the Social Security Act (42 U.S.C. 
1395w–1(e)(3)(B)) is amended— 
(1) in clause (iii), by striking ‘‘and’’ at the end; 
(2) in clause (iv)— 
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•AMDT. NO. 2786 
(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 2012 and suc-
ceeding years, the period beginning on Oc-
tober 15 and ending on December 7 of the 
year before such year.’’. 
SEC. 3205. EXTENSION FOR SPECIALIZED MA PLANS FOR 
SPECIAL NEEDS INDIVIDUALS. 
(a) EXTENSION
OF
SNP AUTHORITY.—Section 
1859(f)(1) of the Social Security Act (42 U.S.C. 1395w– 
28(f)(1)), as amended by section 164(a) of the Medicare 
Improvements for Patients and Providers Act of 2008 
(Public Law 110–275), is amended by striking ‘‘2011’’ 
and inserting ‘‘2014’’. 
(b) AUTHORITY TO APPLY FRAILTY ADJUSTMENT 
UNDER PACE PAYMENT RULES.—Section 1853(a)(1)(B) 
of the Social Security Act (42 U.S.C. 1395w–23(a)(1)(B)) 
is amended by adding at the end the following new clause: 
‘‘(iv) AUTHORITY TO APPLY FRAILTY 
ADJUSTMENT
UNDER
PACE
PAYMENT 
RULES
FOR
CERTAIN
SPECIALIZED
MA 
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•AMDT. NO. 2786 
PLANS
FOR
SPECIAL
NEEDS
INDIVID-
UALS.— 
‘‘(I) 
IN
GENERAL.—Notwith-
standing the preceding provisions of 
this paragraph, for plan year 2011 
and subsequent plan years, in the case 
of a plan described in subclause (II), 
the Secretary may apply the payment 
rules under section 1894(d) (other 
than paragraph (3) of such section) 
rather than the payment rules that 
would otherwise apply under this part, 
but only to the extent necessary to re-
flect the costs of treating high con-
centrations of frail individuals. 
‘‘(II) PLAN DESCRIBED.—A plan 
described in this subclause is a spe-
cialized MA plan for special needs in-
dividuals 
described 
in 
section 
1859(b)(6)(B)(ii) that is fully inte-
grated with capitated contracts with 
States for Medicaid benefits, including 
long-term care, and that have similar 
average levels of frailty (as deter-
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•AMDT. NO. 2786 
mined by the Secretary) as the PACE 
program.’’. 
(c) TRANSITION AND EXCEPTION REGARDING RE-
STRICTION ON ENROLLMENT.—Section 1859(f) of the So-
cial Security Act (42 U.S.C. 1395w–28(f)) is amended by 
adding at the end the following new paragraph: 
‘‘(6) TRANSITION AND EXCEPTION REGARDING 
RESTRICTION ON ENROLLMENT.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (C), the Secretary shall establish proce-
dures for the transition of applicable individuals 
to— 
‘‘(i) a Medicare Advantage plan that 
is not a specialized MA plan for special 
needs individuals (as defined in subsection 
(b)(6)); or 
‘‘(ii) the original medicare fee-for- 
service program under parts A and B. 
‘‘(B) APPLICABLE INDIVIDUALS.—For pur-
poses of clause (i), the term ‘applicable indi-
vidual’ means an individual who— 
‘‘(i) is enrolled under a specialized 
MA plan for special needs individuals (as 
defined in subsection (b)(6)); and 
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•AMDT. NO. 2786 
‘‘(ii) is not within the 1 or more of 
the classes of special needs individuals to 
which enrollment under the plan is re-
stricted to. 
‘‘(C) EXCEPTION.—The Secretary shall 
provide for an exception to the transition de-
scribed in subparagraph (A) for a limited pe-
riod of time for individuals enrolled under a 
specialized MA plan for special needs individ-
uals described in subsection (b)(6)(B)(ii) who 
are no longer eligible for medical assistance 
under title XIX. 
‘‘(D) TIMELINE
FOR
INITIAL
TRANSI-
TION.—The Secretary shall ensure that applica-
ble individuals enrolled in a specialized MA plan 
for special needs individuals (as defined in sub-
section (b)(6)) prior to January 1, 2010, are 
transitioned to a plan or the program described 
in subparagraph (A) by not later than January 
1, 2013.’’. 
(d) TEMPORARY EXTENSION OF AUTHORITY TO OP-
ERATE BUT NO SERVICE AREA EXPANSION FOR DUAL 
SPECIAL NEEDS PLANS THAT DO NOT MEET CERTAIN 
REQUIREMENTS.—Section 164(c)(2) of the Medicare Im-
provements for Patients and Providers Act of 2008 (Pub-
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•AMDT. NO. 2786 
lic Law 110–275) is amended by striking ‘‘December 31, 
2010’’ and inserting ‘‘December 31, 2012’’. 
(e) AUTHORITY TO REQUIRE SPECIAL NEEDS PLANS 
BE NCQA APPROVED.—Section 1859(f) of the Social Se-
curity Act (42 U.S.C. 1395w–28(f)), as amended by sub-
sections (a) and (c), is amended— 
(1) in paragraph (2), by adding at the end the 
following new subparagraph: 
‘‘(C) If applicable, the plan meets the re-
quirement described in paragraph (7).’’; 
(2) in paragraph (3), by adding at the end the 
following new subparagraph: 
‘‘(E) If applicable, the plan meets the re-
quirement described in paragraph (7).’’; 
(3) in paragraph (4), by adding at the end the 
following new subparagraph: 
‘‘(C) If applicable, the plan meets the re-
quirement described in paragraph (7).’’; and 
(4) by adding at the end the following new 
paragraph: 
‘‘(7) AUTHORITY TO REQUIRE SPECIAL NEEDS 
PLANS BE NCQA APPROVED.—For 2012 and subse-
quent years, the Secretary shall require that a Medi-
care Advantage organization offering a specialized 
MA plan for special needs individuals be approved 
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•AMDT. NO. 2786 
by the National Committee for Quality Assurance 
(based on standards established by the Secretary).’’. 
(f) RISK ADJUSTMENT.—Section 1853(a)(1)(C) of 
the Social Security Act (42 U.S.C. 1395i–23(a)(1)(C)) is 
amended by adding at the end the following new clause: 
‘‘(iii) IMPROVEMENTS
TO
RISK
AD-
JUSTMENT FOR SPECIAL NEEDS INDIVID-
UALS
WITH
CHRONIC
HEALTH
CONDI-
TIONS.— 
‘‘(I) IN
GENERAL.—For 2011 
and subsequent years, for purposes of 
the adjustment under clause (i) with 
respect to individuals described in 
subclause (II), the Secretary shall use 
a risk score that reflects the known 
underlying risk profile and chronic 
health status of similar individuals. 
Such risk score shall be used instead 
of the default risk score for new en-
rollees in Medicare Advantage plans 
that are not specialized MA plans for 
special needs individuals (as defined 
in section 1859(b)(6)). 
‘‘(II) 
INDIVIDUALS
DE-
SCRIBED.—An individual described in 
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•AMDT. NO. 2786 
this subclause is a special needs indi-
vidual 
described 
in 
subsection 
(b)(6)(B)(iii) who enrolls in a special-
ized MA plan for special needs indi-
viduals on or after January 1, 2011. 
‘‘(III) EVALUATION.—For 2011 
and periodically thereafter, the Sec-
retary shall evaluate and revise the 
risk adjustment system under this 
subparagraph in order to, as accu-
rately as possible, account for higher 
medical and care coordination costs 
associated with frailty, individuals 
with multiple, comorbid chronic condi-
tions, and individuals with a diagnosis 
of mental illness, and also to account 
for costs that may be associated with 
higher concentrations of beneficiaries 
with those conditions. 
‘‘(IV) PUBLICATION OF EVALUA-
TION AND REVISIONS.—The Secretary 
shall publish, as part of an announce-
ment under subsection (b), a descrip-
tion of any evaluation conducted 
under subclause (III) during the pre-
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•AMDT. NO. 2786 
ceding year and any revisions made 
under such subclause as a result of 
such evaluation.’’. 
(g) TECHNICAL CORRECTION.—Section 1859(f)(5) of 
the Social Security Act (42 U.S.C. 1395w–28(f)(5)) is 
amended, in the matter preceding subparagraph (A), by 
striking ‘‘described in subsection (b)(6)(B)(i)’’. 
SEC. 3206. EXTENSION OF REASONABLE COST CONTRACTS. 
Section 1876(h)(5)(C)(ii) of the Social Security Act 
(42 U.S.C. 1395mm(h)(5)(C)(ii)) is amended, in the mat-
ter preceding subclause (I), by striking ‘‘January 1, 2010’’ 
and inserting ‘‘January 1, 2013’’. 
SEC. 3207. TECHNICAL CORRECTION TO MA PRIVATE FEE- 
FOR-SERVICE PLANS. 
For plan year 2011 and subsequent plan years, to 
the extent that the Secretary of Health and Human Serv-
ices is applying the 2008 service area extension waiver pol-
icy (as modified in the April 11, 2008, Centers for Medi-
care & Medicaid Services’ memorandum with the subject 
‘‘2009 Employer Group Waiver-Modification of the 2008 
Service Area Extension Waiver Granted to Certain MA 
Local Coordinated Care Plans’’) to Medicare Advantage 
coordinated care plans, the Secretary shall extend the ap-
plication of such waiver policy to employers who contract 
directly with the Secretary as a Medicare Advantage pri-
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•AMDT. NO. 2786 
vate fee-for-service plan under section 1857(i)(2) of the 
Social Security Act (42 U.S.C. 1395w–27(i)(2)) and that 
had enrollment as of October 1, 2009. 
SEC. 3208. MAKING SENIOR HOUSING FACILITY DEM-
ONSTRATION PERMANENT. 
(a) IN GENERAL.—Section 1859 of the Social Secu-
rity Act (42 U.S.C. 1395w–28) is amended by adding at 
the end the following new subsection: 
‘‘(g) SPECIAL RULES FOR SENIOR HOUSING FACIL-
ITY PLANS.— 
‘‘(1) IN GENERAL.—In the case of a Medicare 
Advantage senior housing facility plan described in 
paragraph (2), notwithstanding any other provision 
of this part to the contrary and in accordance with 
regulations of the Secretary, the service area of such 
plan may be limited to a senior housing facility in 
a geographic area. 
‘‘(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) 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)); 
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•AMDT. NO. 2786 
‘‘(B) provides primary care services onsite 
and has a ratio of accessible physicians to bene-
ficiaries that the Secretary determines is ade-
quate; 
‘‘(C) provides transportation services for 
beneficiaries to specialty providers outside of 
the facility; and 
‘‘(D) has participated (as of December 31, 
2009) in a demonstration project established by 
the Secretary under which such a plan was of-
fered for not less than 1 year.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on January 1, 2010, and shall 
apply to plan years beginning on or after such date. 
SEC. 3209. AUTHORITY TO DENY PLAN BIDS. 
(a) IN GENERAL.—Section 1854(a)(5) of the Social 
Security Act (42 U.S.C. 1395w–24(a)(5)) is amended by 
adding at the end the following new subparagraph: 
‘‘(C) REJECTION OF BIDS.— 
‘‘(i) IN
GENERAL.—Nothing in this 
section shall be construed as requiring the 
Secretary to accept any or every bid sub-
mitted by an MA organization under this 
subsection. 
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•AMDT. NO. 2786 
‘‘(ii) AUTHORITY TO DENY BIDS THAT 
PROPOSE SIGNIFICANT INCREASES IN COST 
SHARING OR DECREASES IN BENEFITS.— 
The Secretary may deny a bid submitted 
by an MA organization for an MA plan if 
it proposes significant increases in cost 
sharing or decreases in benefits offered 
under the plan.’’. 
(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 
submitted by a PDP sponsor under subsection (b) in 
the same manner as such paragraph applies to bids 
submitted by an MA organization under such section 
1854(a).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bids submitted for contract 
years beginning on or after January 1, 2011. 
SEC. 3210. DEVELOPMENT OF NEW STANDARDS FOR CER-
TAIN MEDIGAP PLANS. 
(a) IN GENERAL.—Section 1882 of the Social Secu-
rity Act (42 U.S.C. 1395ss) is amended by adding at the 
end the following new subsection: 
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•AMDT. NO. 2786 
‘‘(y) DEVELOPMENT OF NEW STANDARDS FOR CER-
TAIN MEDICARE SUPPLEMENTAL POLICIES.— 
‘‘(1) IN GENERAL.—The Secretary shall request 
the National Association of Insurance Commis-
sioners to review and revise the standards for benefit 
packages described in paragraph (2) under sub-
section (p)(1), to otherwise update standards to in-
clude requirements for nominal cost sharing to en-
courage the use of appropriate physicians’ services 
under part B. Such revisions shall be based on evi-
dence published in peer-reviewed journals or current 
examples used by integrated delivery systems and 
made consistent with the rules applicable under sub-
section (p)(1)(E) with the reference to the ‘1991 
NAIC Model Regulation’ deemed a reference to the 
NAIC Model Regulation as published in the Federal 
Register on December 4, 1998, and as subsequently 
updated by the National Association of Insurance 
Commissioners to reflect previous changes in law 
and the reference to ‘date of enactment of this sub-
section’ deemed a reference to the date of enactment 
of the Patient Protection and Affordable Care Act. 
To the extent practicable, such revision shall provide 
for the implementation of revised standards for ben-
efit packages as of January 1, 2015. 
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•AMDT. NO. 2786 
‘‘(2) BENEFIT
PACKAGES
DESCRIBED.—The 
benefit packages described in this paragraph are 
benefit packages classified as ‘C’ and ‘F’.’’. 
(b) CONFORMING AMENDMENT.—Section 1882(o)(1) 
of the Social Security Act (42 U.S.C. 1395ss(o)(1)) is 
amended by striking ‘‘, and (w)’’ and inserting ‘‘(w), and 
(y)’’. 
Subtitle D—Medicare Part D Im-
provements 
for 
Prescription 
Drug Plans and MA–PD Plans 
SEC. 3301. MEDICARE COVERAGE GAP DISCOUNT PRO-
GRAM. 
(a) CONDITION FOR COVERAGE OF DRUGS UNDER 
PART D.—Part D of Title XVIII of the Social Security 
Act (42 U.S.C. 1395w–101 et seq.), is amended by adding 
at the end the following new section: 
‘‘CONDITION FOR COVERAGE OF DRUGS UNDER THIS 
PART 
‘‘SEC. 1860D–43. (a) IN GENERAL.—In order for 
coverage to be available under this part for covered part 
D drugs (as defined in section 1860D–2(e)) of a manufac-
turer, the manufacturer must— 
‘‘(1) participate in the Medicare coverage gap 
discount program under section 1860D–14A; 
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•AMDT. NO. 2786 
‘‘(2) have entered into and have in effect an 
agreement described in subsection (b) of such sec-
tion with the Secretary; and 
‘‘(3) have entered into and have in effect, under 
terms and conditions specified by the Secretary, a 
contract with a third party that the Secretary has 
entered into a contract with under subsection (d)(3) 
of such section. 
‘‘(b) EFFECTIVE DATE.—Subsection (a) shall apply 
to covered part D drugs dispensed under this part on or 
after July 1, 2010. 
‘‘(c) AUTHORIZING COVERAGE FOR DRUGS NOT COV-
ERED UNDER AGREEMENTS.—Subsection (a) shall not 
apply to the dispensing of a covered part D drug if— 
‘‘(1) the Secretary has made a determination 
that the availability of the drug is essential to the 
health of beneficiaries under this part; or 
‘‘(2) the Secretary determines that in the period 
beginning on July 1, 2010, and ending on December 
31, 2010, there were extenuating circumstances. 
‘‘(d) DEFINITION OF MANUFACTURER.—In this sec-
tion, the term ‘manufacturer’ has the meaning given such 
term in section 1860D–14A(g)(5).’’. 
(b) MEDICARE COVERAGE GAP DISCOUNT PRO-
GRAM.—Part D of title XVIII of the Social Security Act 
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•AMDT. NO. 2786 
(42 U.S.C. 1395w–101) is amended by inserting after sec-
tion 1860D–14 the following new section: 
‘‘MEDICARE COVERAGE GAP DISCOUNT PROGRAM 
‘‘SEC. 1860D–14A. (a) ESTABLISHMENT.—The Sec-
retary shall establish a Medicare coverage gap discount 
program (in this section referred to as the ‘program’) by 
not later than July 1, 2010. Under the program, the Sec-
retary shall enter into agreements described in subsection 
(b) with manufacturers and provide for the performance 
of the duties described in subsection (c)(1). The Secretary 
shall establish a model agreement for use under the pro-
gram by not later than April 1, 2010, in consultation with 
manufacturers, and allow for comment on such model 
agreement. 
‘‘(b) TERMS OF AGREEMENT.— 
‘‘(1) IN GENERAL.— 
‘‘(A) AGREEMENT.—An agreement under 
this section shall require the manufacturer to 
provide applicable beneficiaries access to dis-
counted prices for applicable drugs of the man-
ufacturer. 
‘‘(B) PROVISION OF DISCOUNTED PRICES 
AT THE POINT-OF-SALE.—Except as provided in 
subsection (c)(1)(A)(iii), such discounted prices 
shall be provided to the applicable beneficiary at 
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•AMDT. NO. 2786 
the pharmacy or by the mail order service at 
the point-of-sale of an applicable drug. 
‘‘(C) TIMING OF AGREEMENT.— 
‘‘(i) SPECIAL
RULE
FOR
2010
AND 
2011.—In order for an agreement with a 
manufacturer to be in effect under this 
section with respect to the period begin-
ning on July 1, 2010, and ending on De-
cember 31, 2011, the manufacturer shall 
enter into such agreement not later than 
May 1, 2010. 
‘‘(ii) 
2012 
AND
SUBSEQUENT 
YEARS.—In order for an agreement with a 
manufacturer to be in effect under this 
section with respect to plan year 2012 or 
a subsequent plan year, the manufacturer 
shall enter into such agreement (or such 
agreement shall be renewed under para-
graph (4)(A)) not later than January 30 of 
the preceding year. 
‘‘(2) PROVISION OF APPROPRIATE DATA.—Each 
manufacturer with an agreement in effect under this 
section shall collect and have available appropriate 
data, as determined by the Secretary, to ensure that 
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•AMDT. NO. 2786 
it can demonstrate to the Secretary compliance with 
the requirements under the program. 
‘‘(3) COMPLIANCE
WITH
REQUIREMENTS
FOR 
ADMINISTRATION
OF
PROGRAM.—Each manufac-
turer with an agreement in effect under this section 
shall comply with requirements imposed by the Sec-
retary or a third party with a contract under sub-
section (d)(3), as applicable, for purposes of admin-
istering the program, including any determination 
under clause (i) of subsection (c)(1)(A) or proce-
dures established under such subsection (c)(1)(A). 
‘‘(4) LENGTH OF AGREEMENT.— 
‘‘(A) IN GENERAL.—An agreement under 
this section shall be effective for an initial pe-
riod of not less than 18 months and shall be 
automatically renewed for a period of not less 
than 1 year unless terminated under subpara-
graph (B). 
‘‘(B) TERMINATION.— 
‘‘(i) BY THE SECRETARY.—The Sec-
retary may provide for termination of an 
agreement under this section for a knowing 
and willful violation of the requirements of 
the agreement or other good cause shown. 
Such termination shall not be effective ear-
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•AMDT. NO. 2786 
lier than 30 days after the date of notice 
to the manufacturer of such termination. 
The Secretary shall provide, upon request, 
a manufacturer with a hearing concerning 
such a termination, and such hearing shall 
take place prior to the effective date of the 
termination with sufficient time for such 
effective date to be repealed if the Sec-
retary determines appropriate. 
‘‘(ii) BY A MANUFACTURER.—A man-
ufacturer may terminate an agreement 
under this section for any reason. Any 
such termination shall be effective, with re-
spect to a plan year— 
‘‘(I) if the termination occurs be-
fore January 30 of a plan year, as of 
the day after the end of the plan year; 
and 
‘‘(II) if the termination occurs on 
or after January 30 of a plan year, as 
of the day after the end of the suc-
ceeding plan year. 
‘‘(iii) EFFECTIVENESS
OF
TERMI-
NATION.—Any termination under this sub-
paragraph shall not affect discounts for 
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•AMDT. NO. 2786 
applicable drugs of the manufacturer that 
are due under the agreement before the ef-
fective date of its termination. 
‘‘(iv) NOTICE TO THIRD PARTY.—The 
Secretary shall provide notice of such ter-
mination to a third party with a contract 
under subsection (d)(3) within not less 
than 30 days before the effective date of 
such termination. 
‘‘(c) DUTIES DESCRIBED AND SPECIAL RULE FOR 
SUPPLEMENTAL BENEFITS.— 
‘‘(1) DUTIES
DESCRIBED.—The duties de-
scribed in this subsection are the following: 
‘‘(A) ADMINISTRATION OF PROGRAM.—Ad-
ministering the program, including— 
‘‘(i) the determination of the amount 
of the discounted price of an applicable 
drug of a manufacturer; 
‘‘(ii) except as provided in clause (iii), 
the establishment of procedures under 
which discounted prices are provided to ap-
plicable beneficiaries at pharmacies or by 
mail order service at the point-of-sale of an 
applicable drug; 
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•AMDT. NO. 2786 
‘‘(iii) in the case where, during the pe-
riod beginning on July 1, 2010, and end-
ing on December 31, 2011, it is not prac-
ticable to provide such discounted prices at 
the point-of-sale (as described in clause 
(ii)), the establishment of procedures to 
provide such discounted prices as soon as 
practicable after the point-of-sale; 
‘‘(iv) the establishment of procedures 
to ensure that, not later than the applica-
ble number of calendar days after the dis-
pensing of an applicable drug by a phar-
macy or mail order service, the pharmacy 
or mail order service is reimbursed for an 
amount equal to the difference between— 
‘‘(I) the negotiated price of the 
applicable drug; and 
‘‘(II) the discounted price of the 
applicable drug; 
‘‘(v) the establishment of procedures 
to ensure that the discounted price for an 
applicable drug under this section is ap-
plied before any coverage or financial as-
sistance under other health benefit plans 
or programs that provide coverage or fi-
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•AMDT. NO. 2786 
mitted, then any Member of that House may 
introduce the legislative proposal. 
‘‘(D) REFERRAL.—The legislation intro-
duced under this paragraph shall be referred by 
the Presiding Officers of the respective Houses 
to the Committee on Finance in the Senate and 
to the Committee on Energy and Commerce 
and the Committee on Ways and Means in the 
House of Representatives. 
‘‘(2) COMMITTEE
CONSIDERATION
OF
PRO-
POSAL.— 
‘‘(A) REPORTING
BILL.—Not later than 
April 1 of any proposal year in which a pro-
posal is submitted by the President to Congress 
under this section, the Committee on Ways and 
Means and the Committee on Energy and Com-
merce of the House of Representatives and the 
Committee on Finance of the Senate may re-
port the bill referred to the Committee under 
paragraph (1)(D) with committee amendments 
related to the Medicare program. 
‘‘(B) 
CALCULATIONS.—In 
determining 
whether a committee amendment meets the re-
quirement of subparagraph (A), the reductions 
in Medicare program spending during the 3- 
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