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(c) USE OF PARTICULAR CRITERIA FOR DETERMINING 
RECLASSIFICATIONS.—Notwithstanding any other provi-
sion of law, in making decisions on applications for reclas-
sification of a subsection (d) hospital (as defined in para-
graph (1)(B) of section 1886(d) of the Social Security Act 
(42 U.S.C. 1395ww(d)) for the purposes described in para-
graph (10)(D)(v) of such section for fiscal year 2011 and 
each subsequent fiscal year (until the first fiscal year begin-
ning on or after the date that is 1 year after the Secretary 
of Health and Human Services submits the report to Con-
gress under subsection (b)), the Geographic Classification 
Review Board established under paragraph (10) of such sec-
tion shall use the average hourly wage comparison criteria 
used in making such decisions as of September 30, 2008. 
The preceding sentence shall be effected in a budget neutral 
manner. 
SEC. 3138. TREATMENT OF CERTAIN CANCER HOSPITALS. 
Section 1833(t) of the Social Security Act (42 U.S.C. 
1395l(t)) is amended by adding at the end the following 
new paragraph: 
‘‘(18) AUTHORIZATION
OF
ADJUSTMENT
FOR 
CANCER HOSPITALS.— 
‘‘(A) STUDY.—The Secretary shall conduct 
a study to determine if, under the system under 
this subsection, costs incurred by hospitals de-
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scribed in section 1886(d)(1)(B)(v) with respect 
to ambulatory payment classification groups ex-
ceed those costs incurred by other hospitals fur-
nishing services under this subsection (as deter-
mined appropriate by the Secretary). In con-
ducting the study under this subparagraph, the 
Secretary shall take into consideration the cost of 
drugs and biologicals incurred by such hospitals. 
‘‘(B) AUTHORIZATION
OF
ADJUSTMENT.— 
Insofar as the Secretary determines under sub-
paragraph (A) that costs incurred by hospitals 
described in section 1886(d)(1)(B)(v) exceed those 
costs incurred by other hospitals furnishing serv-
ices under this subsection, the Secretary shall 
provide for an appropriate adjustment under 
paragraph (2)(E) to reflect those higher costs ef-
fective for services furnished on or after January 
1, 2011.’’. 
SEC. 3139. PAYMENT FOR BIOSIMILAR BIOLOGICAL PROD-
UCTS. 
(a) IN GENERAL.—Section 1847A of the Social Secu-
rity Act (42 U.S.C. 1395w–3a) is amended— 
(1) in subsection (b)— 
(A) in paragraph (1)— 
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(i) in subparagraph (A), by striking 
‘‘or’’ at the end; 
(ii) in subparagraph (B), by striking 
the period at the end and inserting ‘‘; or’’; 
and 
(iii) by adding at the end the following 
new subparagraph: 
‘‘(C) in the case of a biosimilar biological 
product (as defined in subsection (c)(6)(H)), the 
amount determined under paragraph (8).’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(8) BIOSIMILAR
BIOLOGICAL
PRODUCT.—The 
amount specified in this paragraph for a biosimilar 
biological product described in paragraph (1)(C) is 
the sum of— 
‘‘(A) the average sales price as determined 
using the methodology described under para-
graph (6) applied to a biosimilar biological 
product for all National Drug Codes assigned to 
such product in the same manner as such para-
graph is applied to drugs described in such 
paragraph; and 
‘‘(B) 6 percent of the amount determined 
under paragraph (4) for the reference biological 
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product (as defined in subsection (c)(6)(I)).’’; 
and 
(2) in subsection (c)(6), by adding at the end the 
following new subparagraph: 
‘‘(H) BIOSIMILAR BIOLOGICAL PRODUCT.— 
The term ‘biosimilar biological product’ means a 
biological product approved under an abbre-
viated application for a license of a biological 
product that relies in part on data or informa-
tion in an application for another biological 
product licensed under section 351 of the Public 
Health Service Act. 
‘‘(I) REFERENCE BIOLOGICAL PRODUCT.— 
The term ‘reference biological product’ means the 
biological product licensed under such section 
351 that is referred to in the application de-
scribed in subparagraph (H) of the biosimilar 
biological product.’’. 
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to payments for biosimilar biological 
products beginning with the first day of the second calendar 
quarter after enactment of legislation providing for a bio-
similar pathway (as determined by the Secretary). 
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SEC. 3140. MEDICARE HOSPICE CONCURRENT CARE DEM-
ONSTRATION PROGRAM. 
(a) ESTABLISHMENT.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the 
‘‘Secretary’’) shall establish a Medicare Hospice Con-
current Care demonstration program at participating 
hospice programs under which Medicare beneficiaries 
are furnished, during the same period, hospice care 
and any other items or services covered under title 
XVIII of the Social Security Act (42 U.S.C. 1395 et 
seq.) from funds otherwise paid under such title to 
such hospice programs. 
(2) DURATION.—The demonstration program 
under this section shall be conducted for a 3-year pe-
riod. 
(3) SITES.—The Secretary shall select not more 
than 15 hospice programs at which the demonstration 
program under this section shall be conducted. Such 
hospice programs shall be located in urban and rural 
areas. 
(b) INDEPENDENT EVALUATION AND REPORTS.— 
(1) INDEPENDENT EVALUATION.—The Secretary 
shall provide for the conduct of an independent eval-
uation of the demonstration program under this sec-
tion. Such independent evaluation shall determine 
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whether the demonstration program has improved pa-
tient care, quality of life, and cost-effectiveness for 
Medicare beneficiaries participating in the dem-
onstration program. 
(2) REPORTS.—The Secretary shall submit to 
Congress a report containing the results of the evalua-
tion conducted under paragraph (1), together with 
such recommendations as the Secretary determines 
appropriate. 
(c) BUDGET NEUTRALITY.—With respect to the 3-year 
period of the demonstration program under this section, the 
Secretary shall ensure that the aggregate expenditures 
under title XVIII for such period shall not exceed the aggre-
gate expenditures that would have been expended under 
such title if the demonstration program under this section 
had not been implemented. 
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 October 
1, 2010, for purposes of applying section 4410 of the Bal-
anced Budget Act of 1997 (42 U.S.C. 1395ww note) and 
paragraph (h)(4) of section 412.64 of title 42, Code of Fed-
eral Regulations, the Secretary of Health and Human Serv-
ices shall administer subsection (b) of such section 4410 and 
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paragraph (e) of such section 412.64 in the same manner 
as the Secretary administered such subsection (b) and para-
graph (e) for discharges occurring during fiscal year 2008 
(through a uniform, national adjustment 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-dependent 
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-
pared to other hospitals which receive 1 or more 
additional payments or adjustments under such 
section (including those payments or adjustments 
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. 
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(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 re-
ferral center under subsection (d)(5)(C) of such 
section, payments to a critical access hospital 
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 section 1886, 
or payments to a medicare-dependent, 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 benefits 
under part A of title XVIII of such Act. 
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(b) REPORT.—Not later than 9 months after the date 
of enactment of this Act, the Secretary shall submit to Con-
gress a report containing the results of the study conducted 
under subsection (a), together with recommendations for 
such legislation and administrative action as the Secretary 
determines appropriate. 
SEC. 3143. PROTECTING HOME HEALTH BENEFITS. 
Nothing in the provisions of, or amendments made by, 
this Act shall result in the reduction of guaranteed home 
health benefits under title XVIII of the Social Security Act. 
Subtitle C—Provisions Relating to 
Part C 
SEC. 3201. MEDICARE ADVANTAGE PAYMENT. 
(a) MA BENCHMARK BASED ON PLAN’S COMPETITIVE 
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 purposes’’ 
and inserting ‘‘AMOUNTS.— 
‘‘(1) IN GENERAL.—For purposes’’; 
(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)— 
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(i) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively, 
and indenting the clauses appropriately; 
and 
(ii) in clause (i), as redesignated by 
clause (i), by striking ‘‘an amount equal to’’ 
and all that follows through the end and in-
serting ‘‘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— 
‘‘(AA) 
the 
applicable 
amount 
determined 
under 
subsection (k)(1) for the area 
for the year; and 
‘‘(BB) 12; and 
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‘‘(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 de-
termined) for the area for the 
month; 
‘‘(V) for 2014, the MA competitive 
benchmark amount for the area for a 
month in 2013 (as so determined), in-
creased by the national per capita MA 
growth percentage, described in sub-
section (c)(6) for 2014, but not taking 
into account any adjustment under 
subparagraph (C) of such subsection 
for a year before 2004; and 
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‘‘(VI) for 2015 and each subse-
quent year, the MA competitive bench-
mark 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 BENCH-
MARK 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 statutory 
non-drug monthly bid amount (as defined in sec-
tion 1854(b)(2)(E)) for each MA plan in the 
area, with the weight for each plan being equal 
to the average number of beneficiaries enrolled 
under such plan in the reference month (as de-
fined in section 1858(f)(4), except that, in apply-
ing such definition for purposes of this para-
graph, ‘to compute the MA competitive bench-
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mark amount under section 1853(j)(2)’ shall be 
substituted for ‘to compute the percentage speci-
fied in subparagraph (A) and other relevant per-
centages 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 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 bench-
mark 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 
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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; 
(II) in clause (iv), by striking the 
period at the end and inserting ‘‘; 
and’’; and 
(III) by adding at the end the fol-
lowing 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— 
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(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 Social 
Security Act (42 U.S.C. 1395w–29(d)(1)(A)) is 
amended by striking ‘‘1853(j)(1)(A)’’ and insert-
ing ‘‘1853(j)(1)(A)(i)’’. 
(b) REDUCTION OF NATIONAL PER CAPITA GROWTH 
PERCENTAGE FOR 2011.—Section 1853(c)(6) of the Social 
Security Act (42 U.S.C. 1395w–23(c)(6)) is amended— 
(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 
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(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 percent-
age points.’’. 
(c) ENHANCEMENT OF BENEFICIARY REBATES.—Sec-
tion 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 Jan-
uary 1, 2014)’’ after ‘‘75 percent’’. 
(d) BIDDING RULES.— 
(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 Ac-
tuaries and shall meet actuarial guidelines and rules 
established by the Secretary under subparagraph 
(B)(v).’’. 
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(2) ESTABLISHMENT
OF
ACTUARIAL
GUIDE-
LINES.—Section 1854(a)(6)(B) of the Social Security 
Act (42 U.S.C. 1395w–24(a)(6)(B)) is amended— 
(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 es-
tablish fair MA competitive bench-
marks under section 1853(j)(1)(A)(i), 
the Secretary, acting through the Chief 
Actuary of the Centers for Medicare & 
Medicaid Services (in this clause re-
ferred to as the ‘Chief Actuary’), shall 
establish— 
‘‘(aa) actuarial guidelines for 
the submission of bid information 
under this paragraph; and 
‘‘(bb) bidding rules that are 
appropriate to ensure accurate 
bids and fair competition among 
MA plans. 
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‘‘(II) DENIAL OF BID AMOUNTS.— 
The Secretary shall deny monthly bid 
amounts submitted under subpara-
graph (A) that do not meet the actu-
arial guidelines and rules established 
under subclause (I). 
‘‘(III) REFUSAL TO ACCEPT CER-
TAIN
BIDS
DUE
TO
MISREPRESENTA-
TIONS AND FAILURES TO ADEQUATELY 
MEET
REQUIREMENTS.—In the case 
where the Secretary determines that in-
formation submitted by an MA organi-
zation under subparagraph (A) con-
tains consistent misrepresentations and 
failures to adequately meet require-
ments of the organization, the Sec-
retary may refuse to accept any addi-
tional such bid amounts from the orga-
nization for the plan year and the 
Chief Actuary shall, if the Chief Actu-
ary 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.’’. 
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(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 Social 
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— 
‘‘(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 para-
graph (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.— 
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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 
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 orga-
nization or MA plan that preclude the offer-
ing 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 result 
of the delivery system model of the MA local 
plan.’’. 
(2) CONFORMING AMENDMENTS.— 
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(A) IN GENERAL.— 
(i) Section 1851(b)(1) of the Social Se-
curity 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 
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 
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(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). 
(B) EFFECTIVE
DATE.—The amendments 
made by this paragraph shall take effect on Jan-
uary 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 pro-
grams described in subparagraph (C) with re-
spect to the year, the Secretary shall, in addition 
to any other payment provided under this part, 
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make monthly payments, with respect to cov-
erage 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 month-
ly per capita cost for expenditures for indi-
viduals enrolled under the original 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— 
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‘‘(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, 
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 sta-
tus; 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 Medi-
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care 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 
specialties and sites of care, such as medical 
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 management 
programs that are more extensive than is 
required under section 1860D–4(c) (as de-
termined by the Secretary). 
‘‘(viii) Health information technology 
programs, including clinical decision sup-
port and other tools to facilitate data collec-
tion and ensure patient-centered, appro-
priate care. 
‘‘(ix) Such other care management and 
coordination programs as the Secretary de-
termines appropriate. 
‘‘(D) CONDUCT OF PROGRAM IN URBAN AND 
RURAL
AREAS.—An MA plan may conduct a 
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program described in subparagraph (C) in a 
manner appropriate for an urban or rural area, 
as applicable. 
‘‘(E) REPORTING OF DATA.—Each Medicare 
Advantage organization shall provide to the Sec-
retary the information needed to determine 
whether they are eligible for a care coordination 
and management performance bonus at a time 
and in a manner specified by the Secretary. 
‘‘(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 para-
graph. The Comptroller General shall monitor 
auditing activities conducted under this sub-
paragraph. 
‘‘(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 
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comparable rating) on a rating system described 
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 
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 comparable 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 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 1 percent of 
such national monthly per capita cost for the 
year. 
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‘‘(C) USE OF RATING SYSTEM.—For pur-
poses of subparagraph (A), a rating system de-
scribed in this paragraph is— 
‘‘(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-
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graph (B) shall be counted, for purposes of 
such rating or identification, as having the 
lowest plan performance rating and the 
lowest percentage improvement, respectively. 
‘‘(3) QUALITY BONUS FOR NEW AND LOW EN-
ROLLMENT MA PLANS.— 
‘‘(A) NEW MA PLANS.—For years beginning 
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 enroll-
ments made during the coverage election periods 
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 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 2 
percent of national monthly per capita cost for 
expenditures for individuals enrolled under the 
original medicare fee-for-service program for the 
year. In its fourth year of operation, the MA 
plan shall be paid in the same manner as other 
MA plans with comparable enrollment. 
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‘‘(B) LOW ENROLLMENT PLANS.—For years 
beginning with 2014, in the case of an MA plan 
that has low enrollment (as defined by the Sec-
retary) and would not otherwise be able to re-
ceive a bonus under subparagraph (A) or (B) of 
paragraph (2) or subparagraph (A) of this para-
graph for the year (referred to in this subpara-
graph 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 Secretary, on 
measures used to determine whether MA plans 
are eligible for a quality or an improved quality 
bonus, as applicable, to determine 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 subsection 
in the same manner as the Secretary risk adjusts ben-
eficiary 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 no-
tify the Medicare Advantage organization of any per-
formance bonus (including a care coordination and 
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management performance bonus under paragraph (1), 
a quality performance bonus under paragraph (2), 
and a quality bonus for new and low enrollment 
plans under paragraph (3)) that the organization will 
receive under this subsection with respect to the year. 
The Secretary shall provide for the publication of the 
information described in the previous sentence on the 
Internet website of the Centers for Medicare & Med-
icaid 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 Social Se-
curity Act (42 U.S.C. 1395w–27a) is amended— 
(A) in subsection (f)(1), by striking ‘‘sub-
section (e)’’ and inserting ‘‘subsections (e) and 
(i)’’; and 
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(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 sec-
tion 1853(n) (relating to bonuses for care coordination and 
management, quality performance, and new and low enroll-
ment 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 COM-
PETITIVE BIDDING.—Section 1853 of the Social Security 
Act (42 U.S.C. 1395w–23), as amended by subsection (f), 
is amended by adding at the end the following new sub-
section: 
‘‘(o) GRANDFATHERING
SUPPLEMENTAL
BENEFITS 
FOR CURRENT ENROLLES AFTER IMPLEMENTATION
OF 
COMPETITIVE BIDDING.— 
‘‘(1) IDENTIFICATION OF AREAS.—The Secretary 
shall identify MA local areas in which, with respect 
to 2009, average bids submitted by an MA organiza-
tion 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 involved, deter-
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mined under section 1876(a)(4), for the area for indi-
viduals who are not enrolled in an MA plan under 
this part for the year, but adjusted to exclude costs at-
tributable to payments under section 1848(o), 
1886(n), and 1886(h). 
‘‘(2) ELECTION TO PROVIDE REBATES TO GRAND-
FATHERED 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 re-
bates shall not exceed the applicable amount for 
the year (as defined in subparagraph (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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‘‘(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 IDENTIFIED 
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 described 
in paragraph (2): 
‘‘(A) 
PAYMENTS.—The 
amount 
of 
the 
monthly payment under this section to the Medi-
care Advantage organization, with respect to cov-
erage 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 section 
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— 
‘‘(I) the MA competitive bench-
mark 
amount 
under 
subsection 
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(j)(1)(A)(i) for the area for the month, 
adjusted, only to the extent the Sec-
retary determines necessary, to account 
for induced utilization as a result of 
rebates provided to grandfathered en-
rollees (except that such adjustment 
shall not exceed 0.5 percent of such MA 
competitive benchmark 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 organization shall 
remove from such bid amount any effects of in-
duced demand for care that may result from the 
higher rebates available to grandfathered enroll-
ees under this subsection. 
‘‘(C) NONAPPLICATION OF BONUS PAYMENTS 
AND ANY OTHER REBATES.—The Medicare Ad-
vantage organization offering the MA local plan 
shall not be eligible for any bonus payment 
under subsection (n) or any rebate under this 
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part (other than as provided under this sub-
section) 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 enroll-
ees under this subsection in the same manner as 
the Secretary risk adjusts beneficiary rebates de-
scribed in section 1854(b)(1)(C). 
‘‘(4) DEFINITION
OF
GRANDFATHERED
EN-
ROLLEE.—In this subsection, the term ‘grandfathered 
enrollee’ means an individual who is enrolled (effec-
tive 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).’’. 
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(h) TRANSITIONAL EXTRA BENEFITS.—Section 1853 
of the Social Security Act (42 U.S.C. 1395w–23), as amend-
ed 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 rebates 
under section 1854(b)(1)(C) for the provision of extra 
benefits (as specified by the Secretary) to enrollees de-
scribed 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 Secretary). 
‘‘(3) APPLICABLE AREAS.—In this subsection, the 
term ‘applicable area’ means the following: 
‘‘(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. 
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‘‘(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 year, 
but adjusted to exclude costs attributable 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 county 
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described in subparagraph (A) or (B), respec-
tively. 
‘‘(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 ensure 
that extra benefits (as specified by the Secretary) are 
provided to enrollees described in paragraph (2). 
‘‘(5) FUNDING.—The Secretary shall provide for 
the transfer from the Federal Hospital Insurance 
Trust Fund under section 1817 and the Federal Sup-
plementary Medical Insurance Trust Fund established 
under section 1841, in such proportion as the Sec-
retary 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 providing tran-
sitional rebates under section 1854(b)(1)(C) for the 
provision of extra benefits under this subsection.’’. 
(i) NONAPPLICATION OF COMPETITIVE BIDDING AND 
RELATED PROVISIONS AND CLARIFICATION OF MA PAY-
MENT AREA FOR PACE PROGRAMS.— 
(1) NONAPPLICATION OF COMPETITIVE BIDDING 
AND RELATED PROVISIONS FOR PACE PROGRAMS.— 
Section 1894 of the Social Security Act (42 U.S.C. 
1395eee) is amended— 
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(A) by redesignating subsections (h) and (i) 
as subsections (i) and (j), respectively; 
(B) by inserting after subsection (g) the fol-
lowing new subsection: 
‘‘(h) NONAPPLICATION OF COMPETITIVE BIDDING AND 
RELATED PROVISIONS UNDER PART C.—With respect 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 establish-
ment of MA local plan service areas. 
‘‘(3) Section 1853(n), relating to the payment of 
performance bonuses. 
‘‘(4) Section 1853(o), relating to grandfathering 
supplemental benefits for current enrollees after im-
plementation 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 
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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 de-
fined 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: 
‘‘(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 exceed 
the cost-sharing required for those services 
under parts A and B. 
‘‘(iv) SERVICES DESCRIBED.—The fol-
lowing services are described in this clause: 
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‘‘(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 (in-
cluding services that the Secretary de-
termines require a high level of predict-
ability and transparency for bene-
ficiaries). 
‘‘(v) EXCEPTION.—In the case of serv-
ices described in clause (iv) for which there 
is no cost-sharing required under parts A 
and B, cost-sharing may be required for 
those services in accordance with clause 
(i).’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to plan years beginning 
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— 
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(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 Janu-
ary 1, 2012, a rebate required under this 
subparagraph may not be used for the pur-
pose described in clause (ii)(III) and shall 
be provided through the application of the 
amount of the rebate in the following pri-
ority order: 
‘‘(I) First, to use the most signifi-
cant share to meaningfully reduce cost- 
sharing otherwise applicable for bene-
fits 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, copay-
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ments, and maximum limitations on 
out-of-pocket expenses otherwise appli-
cable. Any reduction of maximum lim-
itations 
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 pro-
vide 
coverage 
of 
preventive 
and 
wellness health care benefits (as defined 
by the Secretary) which are not bene-
fits under the original medicare fee-for- 
service program, such as smoking ces-
sation, a free flu shot, and an annual 
physical examination. 
‘‘(III) Third, to use the remaining 
share to meaningfully provide coverage 
of other health care benefits which are 
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not benefits under the original medi-
care fee-for-service program, such as 
eye examinations and dental coverage, 
and are not benefits described in sub-
clause (II).’’. 
(2) APPLICATION OF PERFORMANCE BONUSES.— 
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).’’. 
(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: 
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‘‘(ii) APPLICATION
OF
MA
MONTHLY 
SUPPLEMENTARY BENEFICIARY PREMIUM.— 
For plan years beginning on or after Janu-
ary 1, 2012, any MA monthly supple-
mentary 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: 
‘‘(iii) APPLICATION OF CODING INTEN-
SITY
ADJUSTMENT
FOR
2011
AND
SUBSE-
QUENT 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 incorporated into 
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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 subsequent 
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 PRO-
GRAM.— 
(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 MEDI-
CARE
FEE-FOR-SERVICE
PROGRAM.—Subject to 
subparagraph (D), at any time during the first 
45 days of a year (beginning with 2011), an in-
dividual who is enrolled in a Medicare Advan-
tage plan may change the election under sub-
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section (a)(1), but only with respect to coverage 
under the original medicare fee-for-service pro-
gram under parts A and B, and may elect quali-
fied prescription drug coverage in accordance 
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 ELECTION 
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)— 
(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 Octo-
ber 15 and ending on December 7 of the 
year before such year.’’. 
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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 Im-
provements for Patients and Providers Act of 2008 (Public 
Law 110–275), is amended by striking ‘‘2011’’ and insert-
ing ‘‘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 PLANS FOR 
SPECIAL NEEDS INDIVIDUALS.— 
‘‘(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 oth-
erwise apply under this part, but only 
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to the extent necessary to reflect the 
costs of treating high concentrations of 
frail individuals. 
‘‘(II) PLAN DESCRIBED.—A plan 
described in this subclause is a special-
ized MA plan for special needs individ-
uals 
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 determined 
by the Secretary) as the PACE pro-
gram.’’. 
(c) TRANSITION
AND EXCEPTION REGARDING RE-
STRICTION ON ENROLLMENT.—Section 1859(f) of the Social 
Security Act (42 U.S.C. 1395w–28(f)) is amended by add-
ing 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— 
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‘‘(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-serv-
ice 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 de-
fined in subsection (b)(6)); and 
‘‘(ii) is not within the 1 or more of the 
classes of special needs individuals to which 
enrollment under the plan is restricted to. 
‘‘(C) EXCEPTION.—The Secretary shall pro-
vide for an exception to the transition described 
in subparagraph (A) for a limited period of time 
for individuals enrolled under a specialized MA 
plan for special needs individuals described in 
subsection (b)(6)(B)(ii) who are no longer eligi-
ble for medical assistance under title XIX. 
‘‘(D) TIMELINE FOR INITIAL TRANSITION.— 
The Secretary shall ensure that applicable indi-
viduals enrolled in a specialized MA plan for 
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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 OPER-
ATE BUT NO SERVICE AREA EXPANSION FOR DUAL SPE-
CIAL NEEDS PLANS THAT DO NOT MEET CERTAIN RE-
QUIREMENTS.—Section 164(c)(2) of the Medicare Improve-
ments for Patients and Providers Act of 2008 (Public 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 Secu-
rity 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).’’; 
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(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 para-
graph: 
‘‘(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 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 re-
spect to individuals described in sub-
clause (II), the Secretary shall use a 
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risk score that reflects the known un-
derlying risk profile and chronic health 
status of similar individuals. Such risk 
score shall be used instead of the de-
fault risk score for new enrollees in 
Medicare Advantage plans that are not 
specialized MA plans for special needs 
individuals (as defined in section 
1859(b)(6)). 
‘‘(II) INDIVIDUALS DESCRIBED.— 
An individual described in this sub-
clause is a special needs individual de-
scribed in subsection (b)(6)(B)(iii) who 
enrolls in a specialized MA plan for 
special needs individuals 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 sub-
paragraph in order to, as accurately as 
possible, account for higher medical 
and care coordination costs associated 
with frailty, individuals with multiple, 
comorbid chronic conditions, and indi-
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viduals with a diagnosis of mental ill-
ness, and also to account for costs that 
may be associated with higher con-
centrations 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 preceding 
year and any revisions made under 
such subclause as a result of such eval-
uation.’’. 
(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 matter 
preceding subclause (I), by striking ‘‘January 1, 2010’’ and 
inserting ‘‘January 1, 2013’’. 
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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 Services 
is applying the 2008 service area extension waiver policy 
(as modified in the April 11, 2008, Centers for Medicare 
& Medicaid Services’ memorandum with the subject ‘‘2009 
Employer Group Waiver-Modification of the 2008 Service 
Area Extension Waiver Granted to Certain MA Local Co-
ordinated Care Plans’’) to Medicare Advantage coordinated 
care plans, the Secretary shall extend the application of 
such waiver policy to employers who contract directly with 
the Secretary as a Medicare Advantage private fee-for-serv-
ice 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 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 FACILITY 
PLANS.— 
‘‘(1) IN GENERAL.—In the case of a Medicare 
Advantage senior housing facility plan described in 
paragraph (2), notwithstanding any other provision 
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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)); 
‘‘(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.’’. 
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(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 Se-
curity Act (42 U.S.C. 1395w–24(a)(5)) is amended by add-
ing at the end the following new subparagraph: 
‘‘(C) REJECTION OF BIDS.— 
‘‘(i) IN GENERAL.—Nothing in this sec-
tion shall be construed as requiring the Sec-
retary to accept any or every bid submitted 
by an MA organization under this sub-
section. 
‘‘(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 shar-
ing 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: 
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‘‘(3) REJECTION OF BIDS.—Paragraph (5)(C) of 
section 1854(a) shall apply with respect to bids sub-
mitted by a PDP sponsor under subsection (b) in the 
same manner as such paragraph applies to bids sub-
mitted 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 be-
ginning 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 Security 
Act (42 U.S.C. 1395ss) is amended by adding at the end 
the following new subsection: 
‘‘(y) DEVELOPMENT OF NEW STANDARDS FOR CER-
TAIN MEDICARE SUPPLEMENTAL POLICIES.— 
‘‘(1) IN GENERAL.—The Secretary shall request 
the National Association of Insurance Commissioners 
to review and revise the standards for benefit pack-
ages described in paragraph (2) under subsection 
(p)(1), to otherwise update standards to include re-
quirements for nominal cost sharing to encourage the 
use of appropriate physicians’ services under part B. 
Such revisions shall be based on evidence published in 
peer-reviewed journals or current examples used by 
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integrated delivery systems and made consistent with 
the rules applicable under subsection (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 pre-
vious changes in law and the reference to ‘date of en-
actment of this subsection’ deemed a reference to the 
date of enactment of the Patient Protection and Af-
fordable Care Act. To the extent practicable, such re-
vision shall provide for the implementation of revised 
standards for benefit packages as of January 1, 2015. 
‘‘(2) BENEFIT PACKAGES DESCRIBED.—The ben-
efit 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 PROGRAM. 
(a) CONDITION FOR COVERAGE OF DRUGS UNDER 
PART D.—Part D of Title XVIII of the Social Security Act 
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(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 cov-
erage to be available under this part for covered part D 
drugs (as defined in section 1860D–2(e)) of a manufacturer, 
the manufacturer must— 
‘‘(1) participate in the Medicare coverage gap 
discount program under section 1860D–14A; 
‘‘(2) have entered into and have in effect an 
agreement described in subsection (b) of such section 
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 en-
tered 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 
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‘‘(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 
(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 pro-
gram (in this section referred to as the ‘program’) by not 
later than July 1, 2010. Under the program, the Secretary 
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 program 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-
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counted prices for applicable drugs of the manu-
facturer. 
‘‘(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 
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 sec-
tion with respect to the period beginning on 
July 1, 2010, and ending on December 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 manufac-
turer 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 paragraph (4)(A)) not later 
than January 30 of the preceding year. 
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‘‘(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 
it can demonstrate to the Secretary compliance with 
the requirements under the program. 
‘‘(3) COMPLIANCE WITH REQUIREMENTS FOR AD-
MINISTRATION
OF
PROGRAM.—Each manufacturer 
with an agreement in effect under this section shall 
comply with requirements imposed by the Secretary 
or a third party with a contract under subsection 
(d)(3), as applicable, for purposes of administering 
the program, including any determination under 
clause (i) of subsection (c)(1)(A) or procedures estab-
lished under such subsection (c)(1)(A). 
‘‘(4) LENGTH OF AGREEMENT.— 
‘‘(A) IN
GENERAL.—An agreement under 
this section shall be effective for an initial period 
of not less than 18 months and shall be auto-
matically renewed for a period of not less than 
1 year unless terminated under subparagraph 
(B). 
‘‘(B) TERMINATION.— 
‘‘(i) BY
THE
SECRETARY.—The Sec-
retary may provide for termination of an 
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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-
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 ef-
fective date to be repealed if the Secretary 
determines appropriate. 
‘‘(ii) BY A MANUFACTURER.—A manu-
facturer may terminate an agreement under 
this section for any reason. Any such termi-
nation shall be effective, with respect 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 
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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 ap-
plicable drugs of the manufacturer that are 
due under the agreement before the effective 
date of its termination. 
‘‘(iv) NOTICE TO THIRD PARTY.—The 
Secretary shall provide notice of such termi-
nation to a third party with a contract 
under subsection (d)(3) within not less than 
30 days before the effective date of such ter-
mination. 
‘‘(c) DUTIES DESCRIBED AND SPECIAL RULE FOR 
SUPPLEMENTAL BENEFITS.— 
‘‘(1) DUTIES DESCRIBED.—The duties described 
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 
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discounted prices are provided to applicable 
beneficiaries at pharmacies or by mail 
order service at the point-of-sale of an ap-
plicable drug; 
‘‘(iii) in the case where, during the pe-
riod beginning on July 1, 2010, and ending 
on December 31, 2011, it is not practicable 
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 prac-
ticable after the point-of-sale; 
‘‘(iv) the establishment of procedures to 
ensure that, not later than the applicable 
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 ap-
plicable drug; and 
‘‘(II) the discounted price of the 
applicable drug; 
‘‘(v) the establishment of procedures to 
ensure that the discounted price for an ap-
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plicable drug under this section is applied 
before any coverage or financial assistance 
under other health benefit plans or pro-
grams that provide coverage or financial as-
sistance for the purchase or provision of 
prescription drug coverage on behalf of ap-
plicable beneficiaries as the Secretary may 
specify; 
‘‘(vi) the establishment of procedures to 
implement the special rule for supplemental 
benefits under paragraph (2); and 
‘‘(vii) providing a reasonable dispute 
resolution mechanism to resolve disagree-
ments between manufacturers, applicable 
beneficiaries, and the third party with a 
contract under subsection (d)(3). 
‘‘(B) MONITORING COMPLIANCE.— 
‘‘(i) IN GENERAL.—The Secretary shall 
monitor compliance by a manufacturer 
with the terms of an agreement under this 
section. 
‘‘(ii) NOTIFICATION.—If a third party 
with a contract under subsection (d)(3) de-
termines that the manufacturer is not in 
compliance with such agreement, the third 
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party shall notify the Secretary of such 
noncompliance for appropriate enforcement 
under subsection (e). 
‘‘(C) COLLECTION
OF
DATA
FROM
PRE-
SCRIPTION DRUG PLANS AND MA–PD PLANS.— 
The Secretary may collect appropriate data from 
prescription drug plans and MA–PD plans in a 
timeframe that allows for discounted prices to be 
provided for applicable drugs under this section. 
‘‘(2) SPECIAL RULE FOR SUPPLEMENTAL BENE-
FITS.—For plan year 2010 and each subsequent plan 
year, in the case where an applicable beneficiary has 
supplemental benefits with respect to applicable drugs 
under the prescription drug plan or MA–PD plan 
that the applicable beneficiary is enrolled in, the ap-
plicable beneficiary shall not be provided a discounted 
price for an applicable drug under this section until 
after such supplemental benefits have been applied 
with respect to the applicable drug. 
‘‘(d) ADMINISTRATION.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), the 
Secretary shall provide for the implementation of this 
section, including the performance of the duties de-
scribed in subsection (c)(1). 
‘‘(2) LIMITATION.— 
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‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), in providing for such implementa-
tion, the Secretary shall not receive or distribute 
any funds of a manufacturer under the program. 
‘‘(B) EXCEPTION.—The limitation under 
subparagraph (A) shall not apply to the Sec-
retary with respect to drugs dispensed during the 
period beginning on July 1, 2010, and ending on 
December 31, 2010, but only if the Secretary de-
termines that the exception to such limitation 
under this subparagraph is necessary in order 
for the Secretary to begin implementation of this 
section and provide applicable beneficiaries time-
ly access to discounted prices during such period. 
‘‘(3) CONTRACT WITH THIRD PARTIES.—The Sec-
retary shall enter into a contract with 1 or more 
third parties to administer the requirements estab-
lished by the Secretary in order to carry out this sec-
tion. At a minimum, the contract with a third party 
under the preceding sentence shall require that the 
third party— 
‘‘(A) receive and transmit information be-
tween the Secretary, manufacturers, and other 
individuals or entities the Secretary determines 
appropriate; 
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‘‘(B) receive, distribute, or facilitate the dis-
tribution of funds of manufacturers to appro-
priate individuals or entities in order to meet 
the obligations of manufacturers under agree-
ments under this section; 
‘‘(C) provide adequate and timely informa-
tion to manufacturers, consistent with the agree-
ment with the manufacturer under this section, 
as necessary for the manufacturer to fulfill its 
obligations under this section; and 
‘‘(D) permit manufacturers to conduct peri-
odic audits, directly or through contracts, of the 
data and information used by the third party to 
determine discounts for applicable drugs of the 
manufacturer under the program. 
‘‘(4) PERFORMANCE REQUIREMENTS.—The Sec-
retary shall establish performance requirements for a 
third party with a contract under paragraph (3) and 
safeguards to protect the independence and integrity 
of the activities carried out by the third party under 
the program under this section. 
‘‘(5) IMPLEMENTATION.—The Secretary may im-
plement the program under this section by program 
instruction or otherwise. 
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‘‘(6) ADMINISTRATION.—Chapter 35 of title 44, 
United States Code, shall not apply to the program 
under this section. 
‘‘(e) ENFORCEMENT.— 
‘‘(1) AUDITS.—Each manufacturer with an 
agreement in effect under this section shall be subject 
to periodic audit by the Secretary. 
‘‘(2) CIVIL MONEY PENALTY.— 
‘‘(A) IN GENERAL.—The Secretary shall im-
pose a civil money penalty on a manufacturer 
that fails to provide applicable beneficiaries dis-
counts for applicable drugs of the manufacturer 
in accordance with such agreement for each such 
failure in an amount the Secretary determines is 
commensurate with the sum of— 
‘‘(i) the amount that the manufacturer 
would have paid with respect to such dis-
counts under the agreement, which will then 
be used to pay the discounts which the man-
ufacturer had failed to provide; and 
‘‘(ii) 25 percent of such amount. 
‘‘(B) APPLICATION.—The provisions of sec-
tion 1128A (other than subsections (a) and (b)) 
shall apply to a civil money penalty under this 
paragraph in the same manner as such provi-
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sions apply to a penalty or proceeding under 
section 1128A(a). 
‘‘(f) CLARIFICATION REGARDING AVAILABILITY
OF 
OTHER COVERED PART D DRUGS.—Nothing in this section 
shall prevent an applicable beneficiary from purchasing a 
covered part D drug that is not an applicable drug (includ-
ing a generic drug or a drug that is not on the formulary 
of the prescription drug plan or MA–PD plan that the ap-
plicable beneficiary is enrolled in). 
‘‘(g) DEFINITIONS.—In this section: 
‘‘(1) APPLICABLE BENEFICIARY.—The term ‘ap-
plicable beneficiary’ means an individual who, on the 
date of dispensing an applicable drug— 
‘‘(A) is enrolled in a prescription drug plan 
or an MA–PD plan; 
‘‘(B) is not enrolled in a qualified retiree 
prescription drug plan; 
‘‘(C) is not entitled to an income-related 
subsidy under section 1860D–14(a); 
‘‘(D) is not subject to a reduction in pre-
mium subsidy under section 1839(i); and 
‘‘(E) who— 
‘‘(i) has reached or exceeded the initial 
coverage limit under section 1860D–2(b)(3) 
during the year; and 
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‘‘(ii) has not incurred costs for covered 
part D drugs in the year equal to the an-
nual out-of-pocket threshold specified in sec-
tion 1860D–2(b)(4)(B). 
‘‘(2) APPLICABLE DRUG.—The term ‘applicable 
drug’ means, with respect to an applicable bene-
ficiary, a covered part D drug— 
‘‘(A) approved under a new drug applica-
tion under section 505(b) of the Federal Food, 
Drug, and Cosmetic Act or, in the case of a bio-
logic product, licensed under section 351 of the 
Public Health Service Act (other than a product 
licensed under subsection (k) of such section 
351); and 
‘‘(B)(i) if the PDP sponsor of the prescrip-
tion drug plan or the MA organization offering 
the MA–PD plan uses a formulary, which is on 
the formulary of the prescription drug plan or 
MA–PD plan that the applicable beneficiary is 
enrolled in; 
‘‘(ii) if the PDP sponsor of the prescription 
drug plan or the MA organization offering the 
MA–PD plan does not use a formulary, for 
which benefits are available under the prescrip-
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tion drug plan or MA–PD plan that the applica-
ble beneficiary is enrolled in; or 
‘‘(iii) is provided through an exception or 
appeal. 
‘‘(3) 
APPLICABLE
NUMBER
OF
CALENDAR 
DAYS.—The term ‘applicable number of calendar 
days’ means— 
‘‘(A) with respect to claims for reimburse-
ment submitted electronically, 14 days; and 
‘‘(B) with respect to claims for reimburse-
ment submitted otherwise, 30 days. 
‘‘(4) DISCOUNTED PRICE.— 
‘‘(A) IN
GENERAL.—The term ‘discounted 
price’ means 50 percent of the negotiated price 
of the applicable drug of a manufacturer. 
‘‘(B) CLARIFICATION.—Nothing in this sec-
tion shall be construed as affecting the responsi-
bility of an applicable beneficiary for payment 
of a dispensing fee for an applicable drug. 
‘‘(C) 
SPECIAL
CASE
FOR
CERTAIN 
CLAIMS.—In the case where the entire amount of 
the negotiated price of an individual claim for 
an applicable drug with respect to an applicable 
beneficiary does not fall at or above the initial 
coverage limit under section 1860D–2(b)(3) and 
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below the annual out-of-pocket threshold specified 
in section 1860D–2(b)(4)(B) for the year, the 
manufacturer of the applicable drug shall pro-
vide the discounted price under this section on 
only the portion of the negotiated price of the ap-
plicable drug that falls at or above such initial 
coverage limit and below such annual out-of- 
pocket threshold. 
‘‘(5) MANUFACTURER.—The term ‘manufacturer’ 
means any entity which is engaged in the production, 
preparation, propagation, compounding, conversion, 
or processing of prescription drug products, either di-
rectly or indirectly by extraction from substances of 
natural origin, or independently by means of chem-
ical synthesis, or by a combination of extraction and 
chemical synthesis. Such term does not include a 
wholesale distributor of drugs or a retail pharmacy li-
censed under State law. 
‘‘(6) NEGOTIATED PRICE.—The term ‘negotiated 
price’ has the meaning given such term in section 
423.100 of title 42, Code of Federal Regulations (as 
in effect on the date of enactment of this section), ex-
cept that such negotiated price shall not include any 
dispensing fee for the applicable drug. 
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‘‘(7) QUALIFIED RETIREE PRESCRIPTION DRUG 
PLAN.—The term ‘qualified retiree prescription drug 
plan’ has the meaning given such term in section 
1860D–22(a)(2).’’. 
(c) INCLUSION IN INCURRED COSTS.— 
(1) IN GENERAL.—Section 1860D–2(b)(4) of the 
Social Security Act (42 U.S.C. 1395w–102(b)(4)) is 
amended— 
(A) in subparagraph (C), in the matter pre-
ceding clause (i), by striking ‘‘In applying’’ and 
inserting ‘‘Except as provided in subparagraph 
(E), in applying’’; and 
(B) by adding at the end the following new 
subparagraph: 
‘‘(E) INCLUSION OF COSTS OF APPLICABLE 
DRUGS UNDER MEDICARE COVERAGE GAP DIS-
COUNT
PROGRAM.—In applying subparagraph 
(A), incurred costs shall include the negotiated 
price (as defined in paragraph (6) of section 
1860D–14A(g)) of an applicable drug (as defined 
in paragraph (2) of such section) of a manufac-
turer that is furnished to an applicable bene-
ficiary (as defined in paragraph (1) of such sec-
tion) under the Medicare coverage gap discount 
program under section 1860D–14A, regardless of 
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whether part of such costs were paid by a manu-
facturer under such program.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to costs incurred on or 
after July 1, 2010. 
(d) CONFORMING
AMENDMENT
PERMITTING
PRE-
SCRIPTION DRUG DISCOUNTS.— 
(1) IN
GENERAL.—Section 1128B(b)(3) of the 
Social Security Act (42 U.S.C. 1320a–7b(b)(3)) is 
amended— 
(A) by striking ‘‘and’’ at the end of sub-
paragraph (G); 
(B) in the subparagraph (H) added by sec-
tion 237(d) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 
(Public Law 108–173; 117 Stat. 2213)— 
(i) by moving such subparagraph 2 
ems to the left; and 
(ii) by striking the period at the end 
and inserting a semicolon; 
(C) in the subparagraph (H) added by sec-
tion 431(a) of such Act (117 Stat. 2287)— 
(i) by redesignating such subparagraph 
as subparagraph (I); 
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(ii) by moving such subparagraph 2 
ems to the left; and 
(iii) by striking the period at the end 
and inserting ‘‘; and’’; and 
(D) by adding at the end the following new 
subparagraph: 
‘‘(J) a discount in the price of an applica-
ble drug (as defined in paragraph (2) of section 
1860D–14A(g)) of a manufacturer that is fur-
nished to an applicable beneficiary (as defined 
in paragraph (1) of such section) under the 
Medicare coverage gap discount program under 
section 1860D–14A.’’. 
(2) CONFORMING AMENDMENT TO DEFINITION OF 
BEST
PRICE
UNDER
MEDICAID.—Section 
1927(c)(1)(C)(i)(VI) of the Social Security Act (42 
U.S.C. 1396r–8(c)(1)(C)(i)(VI)) is amended by insert-
ing ‘‘, or any discounts provided by manufacturers 
under the Medicare coverage gap discount program 
under section 1860D–14A’’ before the period at the 
end. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to drugs dispensed on 
or after July 1, 2010. 
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SEC. 3302. IMPROVEMENT IN DETERMINATION OF MEDI-
CARE PART D LOW-INCOME BENCHMARK PRE-
MIUM. 
(a) IN GENERAL.—Section 1860D–14(b)(2)(B)(iii) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395w– 
114(b)(2)(B)(iii)) is amended by inserting ‘‘, determined 
without regard to any reduction in such premium as a re-
sult of any beneficiary rebate under section 1854(b)(1)(C) 
or bonus payment under section 1853(n)’’ before the period 
at the end. 
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to premiums for months beginning 
on or after January 1, 2011. 
SEC. 3303. VOLUNTARY DE MINIMIS POLICY FOR SUBSIDY 
ELIGIBLE INDIVIDUALS UNDER PRESCRIP-
TION DRUG PLANS AND MA–PD PLANS. 
(a) IN GENERAL.—Section 1860D–14(a) of the Social 
Security Act (42 U.S.C. 1395w–114(a)) is amended by add-
ing at the end the following new paragraph: 
‘‘(5) WAIVER OF DE MINIMIS PREMIUMS.—The 
Secretary shall, under procedures established by the 
Secretary, permit a prescription drug plan or an 
MA–PD plan to waive the monthly beneficiary pre-
mium for a subsidy eligible individual if the amount 
of such premium is de minimis. If such premium is 
waived under the plan, the Secretary shall not reas-
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sign subsidy eligible individuals enrolled in the plan 
to other plans based on the fact that the monthly ben-
eficiary premium under the plan was greater than the 
low-income benchmark premium amount.’’. 
(b) AUTHORIZING THE SECRETARY TO AUTO-ENROLL 
SUBSIDY ELIGIBLE INDIVIDUALS IN PLANS THAT WAIVE 
DE MINIMIS PREMIUMS.—Section 1860D–1(b)(1) of the So-
cial Security Act (42 U.S.C. 1395w–101(b)(1)) is amend-
ed— 
(1) in subparagraph (C), by inserting ‘‘except as 
provided in subparagraph (D),’’ after ‘‘shall include,’’ 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(D) SPECIAL
RULE
FOR
PLANS
THAT 
WAIVE DE MINIMIS PREMIUMS.—The process es-
tablished under subparagraph (A) may include, 
in the case of a part D eligible individual who 
is a subsidy eligible individual (as defined in 
section 1860D–14(a)(3)) who has failed to enroll 
in a prescription drug plan or an MA–PD plan, 
for the enrollment in a prescription drug plan or 
MA–PD plan that has waived the monthly bene-
ficiary premium for such subsidy eligible indi-
vidual under section 1860D–14(a)(5). If there is 
more than one such plan available, the Secretary 
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shall enroll such an individual under the pre-
ceding sentence on a random basis among all 
such plans in the PDP region. Nothing in the 
previous sentence shall prevent such an indi-
vidual from declining or changing such enroll-
ment.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
subsection shall apply to premiums for months, and enroll-
ments for plan years, beginning on or after January 1, 
2011. 
SEC. 3304. SPECIAL RULE FOR WIDOWS AND WIDOWERS RE-
GARDING ELIGIBILITY FOR LOW-INCOME AS-
SISTANCE. 
(a) IN GENERAL.—Section 1860D–14(a)(3)(B) of the 
Social Security Act (42 U.S.C. 1395w–114(a)(3)(B)) is 
amended by adding at the end the following new clause: 
‘‘(vi) SPECIAL RULE FOR WIDOWS AND 
WIDOWERS.—Notwithstanding the preceding 
provisions of this subparagraph, in the case 
of an individual whose spouse dies during 
the effective period for a determination or 
redetermination that has been made under 
this subparagraph, such effective period 
shall be extended through the date that is 1 
year after the date on which the determina-
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tion or redetermination would (but for the 
application of this clause) otherwise cease to 
be effective.’’. 
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on January 1, 2011. 
SEC. 3305. IMPROVED INFORMATION FOR SUBSIDY ELIGI-
BLE INDIVIDUALS REASSIGNED TO PRESCRIP-
TION DRUG PLANS AND MA–PD PLANS. 
Section 1860D–14 of the Social Security Act (42 
U.S.C. 1395w–114) is amended— 
(1) by redesignating subsection (d) as subsection 
(e); and 
(2) by inserting after subsection (c) the following 
new subsection: 
‘‘(d) FACILITATION OF REASSIGNMENTS.—Beginning 
not later than January 1, 2011, the Secretary shall, in the 
case of a subsidy eligible individual who is enrolled in one 
prescription drug plan and is subsequently reassigned by 
the Secretary to a new prescription drug plan, provide the 
individual, within 30 days of such reassignment, with— 
‘‘(1) information on formulary differences be-
tween the individual’s former plan and the plan to 
which the individual is reassigned with respect to the 
individual’s drug regimens; and 
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‘‘(2) a description of the individual’s right to re-
quest a coverage determination, exception, or recon-
sideration under section 1860D–4(g), bring an appeal 
under section 1860D–4(h), or resolve a grievance 
under section 1860D–4(f).’’. 
SEC. 3306. FUNDING OUTREACH AND ASSISTANCE FOR 
LOW-INCOME PROGRAMS. 
(a) ADDITIONAL FUNDING FOR STATE HEALTH INSUR-
ANCE PROGRAMS.—Subsection (a)(1)(B) of section 119 of 
the Medicare Improvements for Patients and Providers Act 
of 2008 (42 U.S.C. 1395b–3 note) is amended by striking 
‘‘(42 U.S.C. 1395w–23(f))’’ and all that follows through the 
period at the end and inserting ‘‘(42 U.S.C. 1395w–23(f)), 
to the Centers for Medicare & Medicaid Services Program 
Management Account— 
‘‘(i) for fiscal year 2009, of $7,500,000; 
and 
‘‘(ii) for the period of fiscal years 2010 
through 2012, of $15,000,000. 
Amounts appropriated under this subparagraph 
shall remain available until expended.’’. 
(b) ADDITIONAL FUNDING FOR AREA AGENCIES ON 
AGING.—Subsection (b)(1)(B) of such section 119 is amend-
ed by striking ‘‘(42 U.S.C. 1395w–23(f))’’ and all that fol-
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lows through the period at the end and inserting ‘‘(42 
U.S.C. 1395w–23(f)), to the Administration on Aging— 
‘‘(i) for fiscal year 2009, of $7,500,000; 
and 
‘‘(ii) for the period of fiscal years 2010 
through 2012, of $15,000,000. 
Amounts appropriated under this subparagraph 
shall remain available until expended.’’. 
(c) ADDITIONAL FUNDING FOR AGING AND DISABILITY 
RESOURCE CENTERS.—Subsection (c)(1)(B) of such section 
119 is amended by striking ‘‘(42 U.S.C. 1395w–23(f))’’ and 
all that follows through the period at the end and inserting 
‘‘(42 U.S.C. 1395w–23(f)), to the Administration on 
Aging— 
‘‘(i) for fiscal year 2009, of $5,000,000; 
and 
‘‘(ii) for the period of fiscal years 2010 
through 2012, of $10,000,000. 
Amounts appropriated under this subparagraph 
shall remain available until expended.’’. 
(d) ADDITIONAL FUNDING FOR CONTRACT WITH THE 
NATIONAL CENTER FOR BENEFITS AND OUTREACH EN-
ROLLMENT.—Subsection (d)(2) of such section 119 is 
amended by striking ‘‘(42 U.S.C. 1395w–23(f))’’ and all 
that follows through the period at the end and inserting 
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‘‘(42 U.S.C. 1395w–23(f)), to the Administration on 
Aging— 
‘‘(i) for fiscal year 2009, of $5,000,000; 
and 
‘‘(ii) for the period of fiscal years 2010 
through 2012, of $5,000,000. 
Amounts appropriated under this subparagraph 
shall remain available until expended.’’. 
(e) SECRETARIAL AUTHORITY TO ENLIST SUPPORT IN 
CONDUCTING CERTAIN OUTREACH ACTIVITIES.—Such sec-
tion 119 is amended by adding at the end the following 
new subsection: 
‘‘(g) SECRETARIAL AUTHORITY TO ENLIST SUPPORT 
IN CONDUCTING CERTAIN OUTREACH ACTIVITIES.—The 
Secretary may request that an entity awarded a grant 
under this section support the conduct of outreach activities 
aimed at preventing disease and promoting wellness. Not-
withstanding any other provision of this section, an entity 
may use a grant awarded under this subsection to support 
the conduct of activities described in the preceding sen-
tence.’’. 
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SEC. 3307. IMPROVING FORMULARY REQUIREMENTS FOR 
PRESCRIPTION DRUG PLANS AND MA–PD 
PLANS WITH RESPECT TO CERTAIN CAT-
EGORIES OR CLASSES OF DRUGS. 
(a) IMPROVING FORMULARY REQUIREMENTS.—Sec-
tion 1860D–4(b)(3)(G) of the Social Security Act is amend-
ed to read as follows: 
‘‘(G) REQUIRED INCLUSION OF DRUGS IN 
CERTAIN CATEGORIES AND CLASSES.— 
‘‘(i) FORMULARY REQUIREMENTS.— 
‘‘(I) IN
GENERAL.—Subject to 
subclause (II), a PDP sponsor offering 
a prescription drug plan shall be re-
quired to include all covered part D 
drugs in the categories and classes 
identified by the Secretary under 
clause (ii)(I). 
‘‘(II) 
EXCEPTIONS.—The 
Sec-
retary may establish exceptions that 
permit a PDP sponsor offering a pre-
scription drug plan to exclude from its 
formulary a particular covered part D 
drug in a category or class that is oth-
erwise required to be included in the 
formulary under subclause (I) (or to 
otherwise limit access to such a drug, 
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including through prior authorization 
or utilization management). 
‘‘(ii) IDENTIFICATION
OF
DRUGS
IN 
CERTAIN CATEGORIES AND CLASSES.— 
‘‘(I) IN
GENERAL.—Subject to 
clause (iv), the Secretary shall identify, 
as appropriate, categories and classes 
of drugs for which the Secretary deter-
mines are of clinical concern. 
‘‘(II) CRITERIA.—The Secretary 
shall use criteria established by the 
Secretary in making any determina-
tion under subclause (I). 
‘‘(iii) 
IMPLEMENTATION.—The 
Sec-
retary shall establish the criteria under 
clause (ii)(II) and any exceptions under 
clause (i)(II) through the promulgation of a 
regulation which includes a public notice 
and comment period. 
‘‘(iv) REQUIREMENT
FOR
CERTAIN 
CATEGORIES AND CLASSES UNTIL CRITERIA 
ESTABLISHED.—Until such time as the Sec-
retary establishes the criteria under clause 
(ii)(II) the following categories and classes 
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of drugs shall be identified under clause 
(ii)(I): 
‘‘(I) Anticonvulsants. 
‘‘(II) Antidepressants. 
‘‘(III) Antineoplastics. 
‘‘(IV) Antipsychotics. 
‘‘(V) Antiretrovirals. 
‘‘(VI) Immunosuppressants for the 
treatment of transplant rejection.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to plan year 2011 and subsequent plan 
years. 
SEC. 3308. REDUCING PART D PREMIUM SUBSIDY FOR 
HIGH-INCOME BENEFICIARIES. 
(a) INCOME-RELATED INCREASE IN PART D PRE-
MIUM.— 
(1) IN GENERAL.—Section 1860D–13(a) of the 
Social Security Act (42 U.S.C. 1395w–113(a)) is 
amended by adding at the end the following new 
paragraph: 
‘‘(7) INCREASE IN BASE BENEFICIARY PREMIUM 
BASED ON INCOME.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual whose modified adjusted gross income ex-
ceeds the threshold amount applicable under 
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paragraph (2) of section 1839(i) (including ap-
plication of paragraph (5) of such section) for 
the calendar year, the monthly amount of the 
beneficiary premium applicable under this sec-
tion for a month after December 2010 shall be 
increased by the monthly adjustment amount 
specified in subparagraph (B). 
‘‘(B) MONTHLY
ADJUSTMENT
AMOUNT.— 
The monthly adjustment amount specified in this 
subparagraph for an individual for a month in 
a year is equal to the product of— 
‘‘(i) the quotient obtained by divid-
ing— 
‘‘(I) the applicable percentage de-
termined under paragraph (3)(C) of 
section 1839(i) (including application 
of paragraph (5) of such section) for 
the individual for the calendar year re-
duced by 25.5 percent; by 
‘‘(II) 25.5 percent; and 
‘‘(ii) the base beneficiary premium (as 
computed under paragraph (2)). 
‘‘(C) 
MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of this paragraph, the 
term ‘modified adjusted gross income’ has the 
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meaning given such term in subparagraph (A) of 
section 1839(i)(4), determined for the taxable 
year applicable under subparagraphs (B) and 
(C) of such section. 
‘‘(D) DETERMINATION BY COMMISSIONER OF 
SOCIAL SECURITY.—The Commissioner of Social 
Security shall make any determination necessary 
to carry out the income-related increase in the 
base beneficiary premium under this paragraph. 
‘‘(E) PROCEDURES TO ASSURE CORRECT IN-
COME-RELATED INCREASE IN BASE BENEFICIARY 
PREMIUM.— 
‘‘(i) DISCLOSURE
OF
BASE
BENE-
FICIARY
PREMIUM.—Not later than Sep-
tember 15 of each year beginning with 
2010, the Secretary shall disclose to the 
Commissioner 
of 
Social 
Security 
the 
amount of the base beneficiary premium (as 
computed under paragraph (2)) for the pur-
pose of carrying out the income-related in-
crease in the base beneficiary premium 
under this paragraph with respect to the 
following year. 
‘‘(ii) ADDITIONAL
DISCLOSURE.—Not 
later than October 15 of each year begin-
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ning with 2010, the Secretary shall disclose 
to the Commissioner of Social Security the 
following information for the purpose of 
carrying out the income-related increase in 
the base beneficiary premium under this 
paragraph with respect to the following 
year: 
‘‘(I) The modified adjusted gross 
income 
threshold 
applicable 
under 
paragraph (2) of section 1839(i) (in-
cluding application of paragraph (5) 
of such section). 
‘‘(II) The applicable percentage 
determined under paragraph (3)(C) of 
section 1839(i) (including application 
of paragraph (5) of such section). 
‘‘(III) The monthly adjustment 
amount specified in subparagraph (B). 
‘‘(IV) Any other information the 
Commissioner of Social Security deter-
mines necessary to carry out the in-
come-related increase in the base bene-
ficiary premium under this paragraph. 
‘‘(F) RULE
OF
CONSTRUCTION.—The for-
mula used to determine the monthly adjustment 
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amount specified under subparagraph (B) shall 
only be used for the purpose of determining such 
monthly adjustment amount under such sub-
paragraph.’’. 
(2) COLLECTION
OF
MONTHLY
ADJUSTMENT 
AMOUNT.—Section 1860D–13(c) of the Social Secu-
rity Act (42 U.S.C. 1395w–113(c)) is amended— 
(A) in paragraph (1), by striking ‘‘(2) and 
(3)’’ and inserting ‘‘(2), (3), and (4)’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(4) COLLECTION
OF
MONTHLY
ADJUSTMENT 
AMOUNT.— 
‘‘(A) IN
GENERAL.—Notwithstanding any 
provision of this subsection or section 1854(d)(2), 
subject to subparagraph (B), the amount of the 
income-related increase in the base beneficiary 
premium for an individual for a month (as de-
termined under subsection (a)(7)) shall be paid 
through withholding from benefit payments in 
the manner provided under section 1840. 
‘‘(B) AGREEMENTS.—In the case where the 
monthly benefit payments of an individual that 
are withheld under subparagraph (A) are insuf-
ficient to pay the amount described in such sub-
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paragraph, the Commissioner of Social Security 
shall enter into agreements with the Secretary, 
the Director of the Office of Personnel Manage-
ment, and the Railroad Retirement Board as 
necessary in order to allow other agencies to col-
lect the amount described in subparagraph (A) 
that was not withheld under such subpara-
graph.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) MEDICARE.—Section 1860D–13(a)(1) of the 
Social Security Act (42 U.S.C. 1395w–113(a)(1)) is 
amended— 
(A) by redesignating subparagraph (F) as 
subparagraph (G); 
(B) in subparagraph (G), as redesignated 
by subparagraph (A), by striking ‘‘(D) and (E)’’ 
and inserting ‘‘(D), (E), and (F)’’; and 
(C) by inserting after subparagraph (E) the 
following new subparagraph: 
‘‘(F) INCREASE
BASED
ON
INCOME.—The 
monthly beneficiary premium shall be increased 
pursuant to paragraph (7).’’. 
(2) 
INTERNAL
REVENUE
CODE.—Section 
6103(l)(20) of the Internal Revenue Code of 1986 (re-
lating to disclosure of return information to carry out 
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Medicare part B premium subsidy adjustment) is 
amended— 
(A) in the heading, by inserting ‘‘AND PART 
D BASE BENEFICIARY PREMIUM INCREASE’’ after 
‘‘PART B PREMIUM SUBSIDY ADJUSTMENT’’; 
(B) in subparagraph (A)— 
(i) in the matter preceding clause (i), 
by inserting ‘‘or increase under section 
1860D–13(a)(7)’’ after ‘‘1839(i)’’; and 
(ii) in clause (vii), by inserting after 
‘‘subsection (i) of such section’’ the fol-
lowing: ‘‘or increase under section 1860D– 
13(a)(7) of such Act’’; and 
(C) in subparagraph (B)— 
(i) by striking ‘‘Return information’’ 
and inserting the following: 
‘‘(i) IN
GENERAL.—Return informa-
tion’’; 
(ii) by inserting ‘‘or increase under 
such section 1860D–13(a)(7)’’ before the pe-
riod at the end; 
(iii) as amended by clause (i), by in-
serting ‘‘or for the purpose of resolving tax-
payer appeals with respect to any such pre-
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mium adjustment or increase’’ before the pe-
riod at the end; and 
(iv) by adding at the end the following 
new clause: 
‘‘(ii) DISCLOSURE
TO
OTHER
AGEN-
CIES.—Officers, employees, and contractors 
of the Social Security Administration may 
disclose— 
‘‘(I) the taxpayer identity infor-
mation and the amount of the pre-
mium subsidy adjustment or premium 
increase with respect to a taxpayer de-
scribed in subparagraph (A) to officers, 
employees, and contractors of the Cen-
ters for Medicare and Medicaid Serv-
ices, to the extent that such disclosure 
is necessary for the collection of the 
premium subsidy amount or the in-
creased premium amount, 
‘‘(II) the taxpayer identity infor-
mation and the amount of the pre-
mium subsidy adjustment or the in-
creased premium amount with respect 
to a taxpayer described in subpara-
graph (A) to officers and employees of 
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the Office of Personnel Management 
and the Railroad Retirement Board, to 
the extent that such disclosure is nec-
essary for the collection of the premium 
subsidy amount or the increased pre-
mium amount, 
‘‘(III) return information with re-
spect to a taxpayer described in sub-
paragraph (A) to officers and employ-
ees of the Department of Health and 
Human Services to the extent nec-
essary to resolve administrative ap-
peals of such premium subsidy adjust-
ment or increased premium, and 
‘‘(IV) return information with re-
spect to a taxpayer described in sub-
paragraph (A) to officers and employ-
ees of the Department of Justice for use 
in judicial proceedings to the extent 
necessary to carry out the purposes de-
scribed in clause (i).’’. 
SEC. 3309. ELIMINATION OF COST SHARING FOR CERTAIN 
DUAL ELIGIBLE INDIVIDUALS. 
Section 1860D–14(a)(1)(D)(i) of the Social Security 
Act (42 U.S.C. 1395w–114(a)(1)(D)(i)) is amended by in-
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serting ‘‘or, effective on a date specified by the Secretary 
(but in no case earlier than January 1, 2012), who would 
be such an institutionalized individual or couple, if the full- 
benefit dual eligible individual were not receiving services 
under a home and community-based waiver authorized for 
a State under section 1115 or subsection (c) or (d) of section 
1915 or under a State plan amendment under subsection 
(i) of such section or services provided through enrollment 
in a medicaid managed care organization with a contract 
under section 1903(m) or under section 1932’’ after 
‘‘1902(q)(1)(B))’’. 
SEC. 3310. REDUCING WASTEFUL DISPENSING OF OUT-
PATIENT PRESCRIPTION DRUGS IN LONG- 
TERM CARE FACILITIES UNDER PRESCRIP-
TION DRUG PLANS AND MA–PD PLANS. 
(a) IN GENERAL.—Section 1860D–4(c) of the Social 
Security Act (42 U.S.C. 1395w–104(c)) is amended by add-
ing at the end the following new paragraph: 
‘‘(3) REDUCING WASTEFUL DISPENSING OF OUT-
PATIENT PRESCRIPTION DRUGS IN LONG-TERM CARE 
FACILITIES.—The Secretary shall require PDP spon-
sors of prescription drug plans to utilize specific, uni-
form dispensing techniques, as determined by the Sec-
retary, in consultation with relevant stakeholders (in-
cluding representatives of nursing facilities, residents 
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of nursing facilities, pharmacists, the pharmacy in-
dustry (including retail and long-term care phar-
macy), prescription drug plans, MA–PD plans, and 
any other stakeholders the Secretary determines ap-
propriate), such as weekly, daily, or automated dose 
dispensing, when dispensing covered part D drugs to 
enrollees who reside in a long-term care facility in 
order to reduce waste associated with 30-day fills.’’. 
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to plan years beginning on or after 
January 1, 2012. 
SEC. 3311. IMPROVED MEDICARE PRESCRIPTION DRUG 
PLAN AND MA–PD PLAN COMPLAINT SYSTEM. 
(a) IN GENERAL.—The Secretary shall develop and 
maintain a complaint system, that is widely known and 
easy to use, to collect and maintain information on MA– 
PD plan and prescription drug plan complaints that are 
received (including by telephone, letter, e-mail, or any other 
means) by the Secretary (including by a regional office of 
the Department of Health and Human Services, the Medi-
care Beneficiary Ombudsman, a subcontractor, a carrier, 
a fiscal intermediary, and a Medicare administrative con-
tractor under section 1874A of the Social Security Act (42 
U.S.C. 1395kk)) through the date on which the complaint 
is resolved. The system shall be able to report and initiate 
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appropriate interventions and monitoring based on sub-
stantial complaints and to guide quality improvement. 
(b) MODEL ELECTRONIC COMPLAINT FORM.—The Sec-
retary shall develop a model electronic complaint form to 
be used for reporting plan complaints under the system. 
Such form shall be prominently displayed on the front page 
of the Medicare.gov Internet website and on the Internet 
website of the Medicare Beneficiary Ombudsman. 
(c) ANNUAL REPORTS BY THE SECRETARY.—The Sec-
retary shall submit to Congress annual reports on the sys-
tem. Such reports shall include an analysis of the number 
and types of complaints reported in the system, geographic 
variations in such complaints, the timeliness of agency or 
plan responses to such complaints, and the resolution of 
such complaints. 
(d) DEFINITIONS.—In this section: 
(1) MA–PD PLAN.—The term ‘‘MA–PD plan’’ 
has the meaning given such term in section 1860D– 
41(a)(9) of such Act (42 U.S.C. 1395w–151(a)(9)). 
(2) PRESCRIPTION DRUG PLAN.—The term ‘‘pre-
scription drug plan’’ has the meaning given such 
term in section 1860D–41(a)(14) of such Act (42 
U.S.C. 1395w–151(a)(14)). 
(3) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
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(4) SYSTEM.—The term ‘‘system’’ means the 
plan complaint system developed and maintained 
under subsection (a). 
SEC. 3312. UNIFORM EXCEPTIONS AND APPEALS PROCESS 
FOR PRESCRIPTION DRUG PLANS AND MA–PD 
PLANS. 
(a) IN GENERAL.—Section 1860D–4(b)(3) of the So-
cial Security Act (42 U.S.C. 1395w–104(b)(3)) is amended 
by adding at the end the following new subparagraph: 
‘‘(H) USE
OF
SINGLE, UNIFORM
EXCEP-
TIONS AND APPEALS PROCESS.—Notwithstanding 
any other provision of this part, each PDP spon-
sor of a prescription drug plan shall— 
‘‘(i) use a single, uniform exceptions 
and appeals process (including, to the ex-
tent the Secretary determines feasible, a sin-
gle, uniform model form for use under such 
process) with respect to the determination of 
prescription drug coverage for an enrollee 
under the plan; and 
‘‘(ii) provide instant access to such 
process by enrollees through a toll-free tele-
phone number and an Internet website.’’. 
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to exceptions and appeals on or after 
January 1, 2012. 
SEC. 3313. OFFICE OF THE INSPECTOR GENERAL STUDIES 
AND REPORTS. 
(a) STUDY
AND
ANNUAL
REPORT
ON
PART
D 
FORMULARIES’ INCLUSION OF DRUGS COMMONLY USED BY 
DUAL ELIGIBLES.— 
(1) STUDY.—The Inspector General of the De-
partment of Health and Human Services shall con-
duct a study of the extent to which formularies used 
by prescription drug plans and MA–PD plans under 
part D include drugs commonly used by full-benefit 
dual eligible individuals (as defined in section 
1935(c)(6) of the Social Security Act (42 U.S.C. 
1396u–5(c)(6))). 
(2) ANNUAL REPORTS.—Not later than July 1 of 
each year (beginning with 2011), the Inspector Gen-
eral shall submit to Congress a report on the study 
conducted under paragraph (1), together with such 
recommendations as the Inspector General determines 
appropriate. 
(b) STUDY
AND REPORT
ON PRESCRIPTION DRUG 
PRICES UNDER MEDICARE PART D AND MEDICAID.— 
(1) STUDY.— 
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(A) IN GENERAL.—The Inspector General of 
the Department of Health and Human Services 
shall conduct a study on prices for covered part 
D drugs under the Medicare prescription drug 
program under part D of title XVIII of the So-
cial Security Act and for covered outpatient 
drugs under title XIX. Such study shall include 
the following: 
(i) A comparison, with respect to the 
200 most frequently dispensed covered part 
D drugs under such program and covered 
outpatient drugs under such title (as deter-
mined by the Inspector General based on 
volume and expenditures), of— 
(I) the prices paid for covered 
part D drugs by PDP sponsors of pre-
scription drug plans and Medicare Ad-
vantage organizations offering MA–PD 
plans; and 
(II) the prices paid for covered 
outpatient drugs by a State plan 
under title XIX. 
(ii) An assessment of— 
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(I) the financial impact of any 
discrepancies in such prices on the 
Federal Government; and 
(II) the financial impact of any 
such discrepancies on enrollees under 
part D or individuals eligible for med-
ical assistance under a State plan 
under title XIX. 
(B) PRICE.—For purposes of subparagraph 
(A), the price of a covered part D drug or a cov-
ered outpatient drug shall include any rebate or 
discount under such program or such title, re-
spectively, including any negotiated price conces-
sion described in section 1860D–2(d)(1)(B) of the 
Social 
Security 
Act 
(42 
U.S.C. 
1395w– 
102(d)(1)(B)) or rebate under an agreement 
under section 1927 of the Social Security Act (42 
U.S.C. 1396r–8). 
(C) AUTHORITY
TO
COLLECT
ANY
NEC-
ESSARY
INFORMATION.—Notwithstanding 
any 
other provision of law, the Inspector General of 
the Department of Health and Human Services 
shall be able to collect any information related to 
the prices of covered part D drugs under such 
program and covered outpatient drugs under 
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such title XIX necessary to carry out the com-
parison under subparagraph (A). 
(2) REPORT.— 
(A) IN GENERAL.—Not later than October 1, 
2011, subject to subparagraph (B), the Inspector 
General shall submit to Congress a report con-
taining the results of the study conducted under 
paragraph (1), together with recommendations 
for such legislation and administrative action as 
the Inspector General determines appropriate. 
(B) LIMITATION
ON
INFORMATION
CON-
TAINED IN REPORT.—The report submitted under 
subparagraph (A) shall not include any informa-
tion that the Inspector General determines is 
proprietary or is likely to negatively impact the 
ability of a PDP sponsor or a State plan under 
title XIX to negotiate prices for covered part D 
drugs or covered outpatient drugs, respectively. 
(3) DEFINITIONS.—In this section: 
(A) COVERED
PART
D
DRUG.—The term 
‘‘covered part D drug’’ has the meaning given 
such term in section 1860D–2(e) of the Social 
Security Act (42 U.S.C. 1395w–102(e)). 
(B) COVERED
OUTPATIENT
DRUG.—The 
term ‘‘covered outpatient drug’’ has the meaning 
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given such term in section 1927(k) of such Act 
(42 U.S.C. 1396r(k)). 
(C) MA–PD PLAN.—The term ‘‘MA–PD 
plan’’ has the meaning given such term in sec-
tion 1860D–41(a)(9) of such Act (42 U.S.C. 
1395w–151(a)(9)). 
(D) 
MEDICARE
ADVANTAGE
ORGANIZA-
TION.—The term ‘‘Medicare Advantage organiza-
tion’’ has the meaning given such term in section 
1859(a)(1) of such Act (42 U.S.C. 1395w– 
28)(a)(1)). 
(E) PDP SPONSOR.—The term ‘‘PDP spon-
sor’’ has the meaning given such term in section 
1860D–41(a)(13) of such Act (42 U.S.C. 1395w– 
151(a)(13)). 
(F) PRESCRIPTION DRUG PLAN.—The term 
‘‘prescription drug plan’’ has the meaning given 
such term in section 1860D–41(a)(14) of such 
Act (42 U.S.C. 1395w–151(a)(14)). 
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SEC. 3314. INCLUDING COSTS INCURRED BY AIDS DRUG AS-
SISTANCE PROGRAMS AND INDIAN HEALTH 
SERVICE 
IN 
PROVIDING 
PRESCRIPTION 
DRUGS TOWARD THE ANNUAL OUT-OF-POCK-
ET THRESHOLD UNDER PART D. 
(a) IN GENERAL.—Section 1860D–2(b)(4)(C) of the 
Social Security Act (42 U.S.C. 1395w–102(b)(4)(C)) is 
amended— 
(1) in clause (i), by striking ‘‘and’’ at the end; 
(2) in clause (ii)— 
(A) by striking ‘‘such costs shall be treated 
as incurred only if’’ and inserting ‘‘subject to 
clause (iii), such costs shall be treated as in-
curred only if’’; 
(B) by striking ‘‘, under section 1860D–14, 
or under a State Pharmaceutical Assistance Pro-
gram’’; and 
(C) by striking the period at the end and 
inserting ‘‘; and’’; and 
(3) by inserting after clause (ii) the following 
new clause: 
‘‘(iii) such costs shall be treated as in-
curred and shall not be considered to be re-
imbursed under clause (ii) if such costs are 
borne or paid— 
‘‘(I) under section 1860D–14; 
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‘‘(II) under a State Pharma-
ceutical Assistance Program; 
‘‘(III) by the Indian Health Serv-
ice, an Indian tribe or tribal organiza-
tion, or an urban Indian organization 
(as defined in section 4 of the Indian 
Health Care Improvement Act); or 
‘‘(IV) under an AIDS Drug As-
sistance Program under part B of title 
XXVI of the Public Health Service 
Act.’’. 
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to costs incurred on or after January 
1, 2011. 
SEC. 3315. 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 para-
graph: 
‘‘(7) INCREASE IN INITIAL COVERAGE LIMIT IN 
2010.— 
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‘‘(A) IN GENERAL.—For the plan year be-
ginning on January 1, 2010, the initial coverage 
limit described in paragraph (3)(B) otherwise 
applicable 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 param-
eters 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 es-
timate of the additional increased costs at-
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tributable to the application of this para-
graph for increased drug utilization and fi-
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 proce-
dures 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. 
‘‘(C) NO EFFECT ON SUBSEQUENT YEARS.— 
The increase under subparagraph (A) shall only 
apply with respect to the plan year beginning on 
January 1, 2010, and the initial coverage limit 
for plan years beginning on or after January 1, 
2011, shall be determined as if subparagraph (A) 
had never applied.’’. 
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Subtitle E—Ensuring Medicare 
Sustainability 
SEC. 3401. REVISION OF CERTAIN MARKET BASKET UP-
DATES AND INCORPORATION OF PRODUC-
TIVITY IMPROVEMENTS INTO MARKET BAS-
KET UPDATES THAT DO NOT ALREADY INCOR-
PORATE SUCH IMPROVEMENTS. 
(a) 
INPATIENT
ACUTE
HOSPITALS.—Section 
1886(b)(3)(B) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)), as amended by section 3001(a)(3), is 
further amended— 
(1) in clause (i)(XX), by striking ‘‘clause (viii)’’ 
and inserting ‘‘clauses (viii), (ix), (xi), and (xii)’’; 
(2) in the first sentence of clause (viii), by in-
serting ‘‘of such applicable percentage increase (deter-
mined without regard to clause (ix), (xi), or (xii))’’ 
after ‘‘one-quarter’’; 
(3) in the first sentence of clause (ix)(I), by in-
serting ‘‘(determined without regard to clause (viii), 
(xi), or (xii))’’ after ‘‘clause (i)’’ the second time it 
appears; and 
(4) by adding at the end the following new 
clauses: 
‘‘(xi)(I) For 2012 and each subsequent fiscal year, 
after determining the applicable percentage increase de-
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scribed in clause (i) and after application of clauses (viii) 
and (ix), such percentage increase shall be reduced by the 
productivity adjustment described in subclause (II). 
‘‘(II) The productivity adjustment described in this 
subclause, with respect to a percentage, factor, or update 
for a fiscal year, year, cost reporting period, or other an-
nual period, is a productivity adjustment equal to the 10- 
year moving average of changes in annual economy-wide 
private nonfarm business multi-factor productivity (as pro-
jected by the Secretary for the 10-year period ending with 
the applicable fiscal year, year, cost reporting period, or 
other annual period). 
‘‘(III) The application of subclause (I) may result in 
the applicable percentage increase described in clause (i) 
being less than 0.0 for a fiscal year, and may result in pay-
ment rates under this section for a fiscal year being less 
than such payment rates for the preceding fiscal year. 
‘‘(xii) After determining the applicable percentage in-
crease described in clause (i), and after application of 
clauses (viii), (ix), and (xi), the Secretary shall reduce such 
applicable percentage increase— 
‘‘(I) for each of fiscal years 2010 and 2011, by 
0.25 percentage point; and 
‘‘(II) subject to clause (xiii), for each of fiscal 
years 2012 through 2019, by 0.2 percentage point. 
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The application of this clause may result in the applicable 
percentage increase described in clause (i) being less than 
0.0 for a fiscal year, and may result in payment rates 
under this section for a fiscal year being less than such pay-
ment rates for the preceding fiscal year. 
‘‘(xiii) Clause (xii) shall be applied with respect to any 
of fiscal years 2014 through 2019 by substituting ‘0.0 per-
centage points’ for ‘0.2 percentage point’, if for such fiscal 
year— 
‘‘(I) the excess (if any) of— 
‘‘(aa) the total percentage of the non-elderly 
insured population for the preceding fiscal year 
(based on the most recent estimates available 
from the Director of the Congressional Budget 
Office before a vote in either House on the Pa-
tient Protection and Affordable Care Act that, if 
determined in the affirmative, would clear such 
Act for enrollment); over 
‘‘(bb) the total percentage of the non-elderly 
insured population for such preceding fiscal year 
(as estimated by the Secretary); exceeds 
‘‘(II) 5 percentage points.’’. 
(b) 
SKILLED
NURSING
FACILITIES.—Section 
1888(e)(5)(B) of the Social Security Act (42 U.S.C. 
1395yy(e)(5)(B)) is amended— 
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(1) by striking ‘‘PERCENTAGE.—The term’’ and 
inserting ‘‘PERCENTAGE.— 
‘‘(i) IN
GENERAL.—Subject to clause 
(ii), the term’’; and 
(2) by adding at the end the following new 
clause: 
‘‘(ii) ADJUSTMENT.—For fiscal year 
2012 and each subsequent fiscal year, after 
determining the percentage described in 
clause (i), the Secretary shall reduce such 
percentage by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II). 
The application of the preceding sentence 
may result in such percentage being less 
than 0.0 for a fiscal year, and may result 
in payment rates under this subsection for 
a fiscal year being less than such payment 
rates for the preceding fiscal year.’’. 
(c) LONG-TERM CARE HOSPITALS.—Section 1886(m) 
of the Social Security Act (42 U.S.C. 1395ww(m)) is 
amended by adding at the end the following new para-
graphs: 
‘‘(3) IMPLEMENTATION FOR RATE YEAR 2010 AND 
SUBSEQUENT YEARS.— 
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‘‘(A) IN
GENERAL.—In implementing the 
system described in paragraph (1) for rate year 
2010 and each subsequent rate year, any annual 
update to a standard Federal rate for discharges 
for the hospital during the rate year, shall be re-
duced— 
‘‘(i) for rate year 2012 and each subse-
quent rate year, by the productivity adjust-
ment 
described 
in 
section 
1886(b)(3)(B)(xi)(II); and 
‘‘(ii) for each of rate years 2010 
through 2019, by the other adjustment de-
scribed in paragraph (4). 
‘‘(B) SPECIAL
RULE.—The application of 
this paragraph may result in such annual up-
date being less than 0.0 for a rate year, and may 
result in payment rates under the system de-
scribed in paragraph (1) for a rate year being 
less than such payment rates for the preceding 
rate year. 
‘‘(4) OTHER ADJUSTMENT.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (3)(A)(ii), the other adjustment described 
in this paragraph is— 
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‘‘(i) for each of rate years 2010 and 
2011, 0.25 percentage point; and 
‘‘(ii) subject to subparagraph (B), for 
each of rate years 2012 through 2019, 0.2 
percentage point. 
‘‘(B) 
REDUCTION
OF
OTHER
ADJUST-
MENT.—Subparagraph (A)(ii) shall be applied 
with respect to any of rate years 2014 through 
2019 by substituting ‘0.0 percentage points’ for 
‘0.2 percentage point’, if for such rate year— 
‘‘(i) the excess (if any) of— 
‘‘(I) the total percentage of the 
non-elderly insured population for the 
preceding rate year (based on the most 
recent estimates available from the Di-
rector of the Congressional Budget Of-
fice before a vote in either House on 
the Patient Protection and Affordable 
Care Act that, if determined in the af-
firmative, would clear such Act for en-
rollment); over 
‘‘(II) the total percentage of the 
non-elderly insured population for such 
preceding rate year (as estimated by 
the Secretary); exceeds 
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‘‘(ii) 5 percentage points.’’. 
(d) INPATIENT REHABILITATION FACILITIES.—Section 
1886(j)(3) of the Social Security Act (42 U.S.C. 
1395ww(j)(3)) is amended— 
(1) in subparagraph (C)— 
(A) by striking ‘‘FACTOR.—For purposes’’ 
and inserting ‘‘FACTOR.— 
‘‘(i) IN GENERAL.—For purposes’’; 
(B) by inserting ‘‘subject to clause (ii)’’ be-
fore the period at the end of the first sentence of 
clause (i), as added by paragraph (1); and 
(C) by adding at the end the following new 
clause: 
‘‘(ii) PRODUCTIVITY
AND
OTHER
AD-
JUSTMENT.—After establishing the increase 
factor described in clause (i) for a fiscal 
year, the Secretary shall reduce such in-
crease factor— 
‘‘(I) for fiscal year 2012 and each 
subsequent fiscal year, by the produc-
tivity adjustment described in section 
1886(b)(3)(B)(xi)(II); and 
‘‘(II) for each of fiscal years 2010 
through 2019, by the other adjustment 
described in subparagraph (D). 
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The application of this clause may result in 
the increase factor under this subparagraph 
being less than 0.0 for a fiscal year, and 
may result in payment rates under this 
subsection for a fiscal year being less than 
such payment rates for the preceding fiscal 
year.’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(D) OTHER ADJUSTMENT.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (C)(ii)(II), the other adjust-
ment described in this subparagraph is— 
‘‘(I) for each of fiscal years 2010 
and 2011, 0.25 percentage point; and 
‘‘(II) subject to clause (ii), for 
each of fiscal years 2012 through 2019, 
0.2 percentage point. 
‘‘(ii) REDUCTION OF OTHER ADJUST-
MENT.—Clause (i)(II) shall be applied with 
respect to any of fiscal years 2014 through 
2019 by substituting ‘0.0 percentage points’ 
for ‘0.2 percentage point’, if for such fiscal 
year— 
‘‘(I) the excess (if any) of— 
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‘‘(aa) the total percentage of 
the non-elderly insured popu-
lation for the preceding fiscal year 
(based on the most recent esti-
mates available from the Director 
of the Congressional Budget Office 
before a vote in either House on 
the Patient Protection and Afford-
able Care Act that, if determined 
in the affirmative, would clear 
such Act for enrollment); over 
‘‘(bb) the total percentage of 
the non-elderly insured popu-
lation for such preceding fiscal 
year (as estimated by the Sec-
retary); exceeds 
‘‘(II) 5 percentage points.’’. 
(e) HOME HEALTH AGENCIES.—Section 1895(b)(3)(B) 
of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is 
amended— 
(1) in clause (ii)(V), by striking ‘‘clause (v)’’ 
and inserting ‘‘clauses (v) and (vi)’’; and 
(2) by adding at the end the following new 
clause: 
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‘‘(vi) 
ADJUSTMENTS.—After 
deter-
mining the home health market basket per-
centage increase under clause (iii), and 
after application of clause (v), the Secretary 
shall reduce such percentage— 
‘‘(I) for 2015 and each subsequent 
year, by the productivity adjustment 
described 
in 
section 
1886(b)(3)(B)(xi)(II); and 
‘‘(II) for each of 2011 and 2012, 
by 1 percentage point. 
The application of this clause may result in 
the home health market basket percentage 
increase under clause (iii) being less than 
0.0 for a year, and may result in payment 
rates under the system under this subsection 
for a year being less than such payment 
rates for the preceding year.’’. 
(f) PSYCHIATRIC HOSPITALS.—Section 1886 of the So-
cial Security Act, as amended by sections 3001, 3008, 3025, 
and 3133, is amended by adding at the end the following 
new subsection: 
‘‘(s) PROSPECTIVE PAYMENT FOR PSYCHIATRIC HOS-
PITALS.— 
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‘‘(1) REFERENCE TO ESTABLISHMENT AND IM-
PLEMENTATION OF SYSTEM.—For provisions related 
to the establishment and implementation of a prospec-
tive payment system for payments under this title for 
inpatient hospital services furnished by psychiatric 
hospitals (as described in clause (i) of subsection 
(d)(1)(B)) and psychiatric units (as described in the 
matter following clause (v) of such subsection), see 
section 124 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999. 
‘‘(2) IMPLEMENTATION FOR RATE YEAR BEGIN-
NING IN 2010 AND SUBSEQUENT RATE YEARS.— 
‘‘(A) IN
GENERAL.—In implementing the 
system described in paragraph (1) for the rate 
year beginning in 2010 and any subsequent rate 
year, any update to a base rate for days during 
the rate year for a psychiatric hospital or unit, 
respectively, shall be reduced— 
‘‘(i) for the rate year beginning in 
2012 and each subsequent rate year, by the 
productivity adjustment described in section 
1886(b)(3)(B)(xi)(II); and 
‘‘(ii) for each of the rate years begin-
ning in 2010 through 2019, by the other ad-
justment described in paragraph (3). 
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‘‘(B) SPECIAL
RULE.—The application of 
this paragraph may result in such update being 
less than 0.0 for a rate year, and may result in 
payment rates under the system described in 
paragraph (1) for a rate year being less than 
such payment rates for the preceding rate year. 
‘‘(3) OTHER ADJUSTMENT.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (2)(A)(ii), the other adjustment described 
in this paragraph is— 
‘‘(i) for each of the rate years begin-
ning in 2010 and 2011, 0.25 percentage 
point; and 
‘‘(ii) subject to subparagraph (B), for 
each of the rate years beginning in 2012 
through 2019, 0.2 percentage point. 
‘‘(B) 
REDUCTION
OF
OTHER
ADJUST-
MENT.—Subparagraph (A)(ii) shall be applied 
with respect to any of rate years 2014 through 
2019 by substituting ‘0.0 percentage points’ for 
‘0.2 percentage point’, if for such rate year— 
‘‘(i) the excess (if any) of— 
‘‘(I) the total percentage of the 
non-elderly insured population for the 
preceding rate year (based on the most 
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recent estimates available from the Di-
rector of the Congressional Budget Of-
fice before a vote in either House on 
the Patient Protection and Affordable 
Care Act that, if determined in the af-
firmative, would clear such Act for en-
rollment); over 
‘‘(II) the total percentage of the 
non-elderly insured population for such 
preceding rate year (as estimated by 
the Secretary); exceeds 
‘‘(ii) 5 percentage points.’’. 
(g) HOSPICE CARE.—Section 1814(i)(1)(C) of the So-
cial Security Act (42 U.S.C. 1395f(i)(1)(C)), as amended 
by section 3132, is amended by adding at the end the fol-
lowing new clauses: 
‘‘(iv) After determining the market basket percentage 
increase under clause (ii)(VII) or (iii), as applicable, with 
respect to fiscal year 2013 and each subsequent fiscal year, 
the Secretary shall reduce such percentage— 
‘‘(I) for 2013 and each subsequent fiscal year, by 
the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II); and 
‘‘(II) subject to clause (v), for each of fiscal years 
2013 through 2019, by 0.5 percentage point. 
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The application of this clause may result in the market bas-
ket percentage increase under clause (ii)(VII) or (iii), as 
applicable, being less than 0.0 for a fiscal year, and may 
result in payment rates under this subsection for a fiscal 
year being less than such payment rates for the preceding 
fiscal year. 
‘‘(v) Clause (iv)(II) shall be applied with respect to 
any of fiscal years 2014 through 2019 by substituting ‘0.0 
percentage points’ for ‘0.5 percentage point’, if for such fis-
cal year— 
‘‘(I) the excess (if any) of— 
‘‘(aa) the total percentage of the non-elderly 
insured population for the preceding fiscal year 
(based on the most recent estimates available 
from the Director of the Congressional Budget 
Office before a vote in either House on the Pa-
tient Protection and Affordable Care Act that, if 
determined in the affirmative, would clear such 
Act for enrollment); over 
‘‘(bb) the total percentage of the non-elderly 
insured population for such preceding fiscal year 
(as estimated by the Secretary); exceeds 
‘‘(II) 5 percentage points.’’. 
(h) DIALYSIS.—Section 1881(b)(14)(F) of the Social 
Security Act (42 U.S.C. 1395rr(b)(14)(F)) is amended— 
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(1) in clause (i)— 
(A) by inserting ‘‘(I)’’ after ‘‘(F)(i)’’ 
(B) in subclause (I), as inserted by sub-
paragraph (A)— 
(i) by striking ‘‘clause (ii)’’ and insert-
ing ‘‘subclause (II) and clause (ii)’’; and 
(ii) by striking ‘‘minus 1.0 percentage 
point’’; and 
(C) by adding at the end the following new 
subclause: 
‘‘(II) For 2012 and each subsequent year, after deter-
mining the increase factor described in subclause (I), the 
Secretary shall reduce such increase factor by the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(xi)(II). The application of the preceding sen-
tence may result in such increase factor being less than 0.0 
for a year, and may result in payment rates under the pay-
ment system under this paragraph for a year being less 
than such payment rates for the preceding year.’’; and 
(2) in clause (ii)(II)— 
(A) by striking ‘‘The’’ and inserting ‘‘Sub-
ject to clause (i)(II), the’’; and 
(B) by striking ‘‘clause (i) minus 1.0 per-
centage point’’ and inserting ‘‘clause (i)(I)’’. 
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(i) OUTPATIENT HOSPITALS.—Section 1833(t)(3) of 
the Social Security Act (42 U.S.C. 1395l(t)(3)) is amend-
ed— 
(1) in subparagraph (C)(iv), by inserting ‘‘and 
subparagraph (F) of this paragraph’’ after ‘‘(17)’’; 
and 
(2) by adding at the end the following new sub-
paragraphs: 
‘‘(F) PRODUCTIVITY
AND
OTHER
ADJUST-
MENT.—After determining the OPD fee schedule 
increase factor under subparagraph (C)(iv), the 
Secretary shall reduce such increase factor— 
‘‘(i) for 2012 and subsequent years, by 
the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II); and 
‘‘(ii) for each of 2010 through 2019, by 
the adjustment described in subparagraph 
(G). 
The application of this subparagraph may result 
in the increase factor under subparagraph 
(C)(iv) being less than 0.0 for a year, and may 
result in payment rates under the payment sys-
tem under this subsection for a year being less 
than such payment rates for the preceding year. 
‘‘(G) OTHER ADJUSTMENT.— 
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‘‘(i) ADJUSTMENT.—For purposes of 
subparagraph (F)(ii), the adjustment de-
scribed in this subparagraph is— 
‘‘(I) for each of 2010 and 2011, 
0.25 percentage point; and 
‘‘(II) subject to clause (ii), for 
each of 2012 through 2019, 0.2 percent-
age point. 
‘‘(ii) REDUCTION OF OTHER ADJUST-
MENT.—Clause (i)(II) shall be applied with 
respect to any of 2014 through 2019 by sub-
stituting ‘0.0 percentage points’ for ‘0.2 per-
centage point’, if for such year— 
‘‘(I) the excess (if any) of— 
‘‘(aa) the total percentage of 
the non-elderly insured popu-
lation for the preceding year 
(based on the most recent esti-
mates available from the Director 
of the Congressional Budget Office 
before a vote in either House on 
the Patient Protection and Afford-
able Care Act that, if determined 
in the affirmative, would clear 
such Act for enrollment); over 
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‘‘(bb) the total percentage of 
the non-elderly insured popu-
lation for such preceding year (as 
estimated by the Secretary); ex-
ceeds 
‘‘(II) 5 percentage points.’’. 
(j) AMBULANCE SERVICES.—Section 1834(l)(3) of the 
Social Security Act (42 U.S.C. 1395m(l)(3)) is amended— 
(1) in subparagraph (A), by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (B)— 
(A) by inserting ‘‘, subject to subparagraph 
(C) and the succeeding sentence of this para-
graph,’’ after ‘‘increased’’; and 
(B) by striking the period at the end and 
inserting ‘‘; and’’; 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(C) for 2011 and each subsequent year, 
after determining the percentage increase under 
subparagraph (B) for the year, reduce such per-
centage increase by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II).’’; and 
(4) by adding at the end the following flush sen-
tence: 
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‘‘The application of subparagraph (C) may result in 
the percentage increase under subparagraph (B) being 
less than 0.0 for a year, and may result in payment 
rates under the fee schedule under this subsection for 
a year being less than such payment rates for the pre-
ceding year.’’. 
(k) AMBULATORY SURGICAL CENTER SERVICES.—Sec-
tion 1833(i)(2)(D) of the Social Security Act (42 U.S.C. 
1395l(i)(2)(D)) is amended— 
(1) by redesignating clause (v) as clause (vi); 
and 
(2) by inserting after clause (iv) the following 
new clause: 
‘‘(v) In implementing the system de-
scribed in clause (i) for 2011 and each sub-
sequent year, any annual update under 
such system for the year, after application 
of clause (iv), shall be reduced by the pro-
ductivity adjustment described in section 
1886(b)(3)(B)(xi)(II). The application of 
the preceding sentence may result in such 
update being less than 0.0 for a year, and 
may result in payment rates under the sys-
tem described in clause (i) for a year being 
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less than such payment rates for the pre-
ceding year.’’. 
(l) LABORATORY SERVICES.—Section 1833(h)(2)(A) of 
the Social Security Act (42 U.S.C. 1395l(h)(2)(A)) is 
amended— 
(1) in clause (i)— 
(A) by inserting ‘‘, subject to clause (iv),’’ 
after ‘‘year) by’’; and 
(B) by striking ‘‘through 2013’’ and insert-
ing ‘‘and 2010’’; and 
(2) by adding at the end the following new 
clause: 
‘‘(iv) After determining the adjustment 
to the fee schedules under clause (i), the Sec-
retary shall reduce such adjustment— 
‘‘(I) for 2011 and each subsequent 
year, by the productivity adjustment 
described 
in 
section 
1886(b)(3)(B)(xi)(II); and 
‘‘(II) for each of 2011 through 
2015, by 1.75 percentage points. 
Subclause (I) shall not apply in a year 
where the adjustment to the fee schedules de-
termined under clause (i) is 0.0 or a per-
centage decrease for a year. The application 
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of the productivity adjustment under sub-
clause (I) shall not result in an adjustment 
to the fee schedules under clause (i) being 
less than 0.0 for a year. The application of 
subclause (II) may result in an adjustment 
to the fee schedules under clause (i) being 
less than 0.0 for a year, and may result in 
payment rates for a year being less than 
such payment rates for the preceding year.’’. 
(m) CERTAIN DURABLE MEDICAL EQUIPMENT.—Sec-
tion 1834(a)(14) of the Social Security Act (42 U.S.C. 
1395m(a)(14)) is amended— 
(1) in subparagraph (K)— 
(A) by striking ‘‘2011, 2012, and 2013,’’; 
and 
(B) by inserting ‘‘and’’ after the semicolon 
at the end; 
(2) by striking subparagraphs (L) and (M) and 
inserting the following new subparagraph: 
‘‘(L) for 2011 and each subsequent year— 
‘‘(i) the percentage increase in the con-
sumer price index for all urban consumers 
(United States city average) for the 12- 
month period ending with June of the pre-
vious year, reduced by— 
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‘‘(ii) the productivity adjustment de-
scribed in section 1886(b)(3)(B)(xi)(II).’’; 
and 
(3) by adding at the end the following flush sen-
tence: 
‘‘The application of subparagraph (L)(ii) may result 
in the covered item update under this paragraph 
being less than 0.0 for a year, and may result in pay-
ment rates under this subsection for a year being less 
than such payment rates for the preceding year.’’. 
(n) PROSTHETIC DEVICES, ORTHOTICS, AND PROS-
THETICS.—Section 1834(h)(4) of the Social Security Act 
(42 U.S.C. 1395m(h)(4)) is amended— 
(1) in subparagraph (A)— 
(A) in clause (ix), by striking ‘‘and’’ at the 
end; 
(B) in clause (x)— 
(i) by striking ‘‘a subsequent year’’ 
and inserting ‘‘for each of 2007 through 
2010’’; and 
(ii) by inserting ‘‘and’’ after the semi-
colon at the end; 
(C) by adding at the end the following new 
clause: 
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‘‘(xi) for 2011 and each subsequent 
year— 
‘‘(I) the percentage increase in the 
consumer price index for all urban 
consumers (United States city average) 
for the 12-month period ending with 
June of the previous year, reduced 
by— 
‘‘(II) the productivity adjustment 
described 
in 
section 
1886(b)(3)(B)(xi)(II).’’; and 
(D) by adding at the end the following flush 
sentence: 
‘‘The application of subparagraph (A)(xi)(II) may re-
sult in the applicable percentage increase under sub-
paragraph (A) being less than 0.0 for a year, and 
may result in payment rates under this subsection for 
a year being less than such payment rates for the pre-
ceding year.’’. 
(o) OTHER ITEMS.—Section 1842(s)(1) of the Social 
Security Act (42 U.S.C. 1395u(s)(1)) is amended— 
(1) in the first sentence, by striking ‘‘Subject to’’ 
and inserting ‘‘(A) Subject to’’; 
(2) by striking the second sentence and inserting 
the following new subparagraph: 
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‘‘(B) Any fee schedule established under this 
paragraph for such item or service shall be up-
dated— 
‘‘(i) for years before 2011— 
‘‘(I) subject to subclause (II), by 
the percentage increase in the con-
sumer price index for all urban con-
sumers (United States city average) for 
the 12-month period ending with June 
of the preceding year; and 
‘‘(II) for items and services de-
scribed in paragraph (2)(D) for 2009, 
section 
1834(a)(14)(J) 
shall 
apply 
under this paragraph instead of the 
percentage increase otherwise applica-
ble; and 
‘‘(ii) for 2011 and subsequent years— 
‘‘(I) the percentage increase in the 
consumer price index for all urban 
consumers (United States city average) 
for the 12-month period ending with 
June of the previous year, reduced 
by— 
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‘‘(II) the productivity adjustment 
described 
in 
section 
1886(b)(3)(B)(xi)(II).’’; and 
(3) by adding at the end the following flush sen-
tence: 
‘‘The application of subparagraph (B)(ii)(II) may re-
sult in the update under this paragraph being less 
than 0.0 for a year, and may result in payment rates 
under any fee schedule established under this para-
graph for a year being less than such payment rates 
for the preceding year.’’. 
(p) NO APPLICATION PRIOR TO APRIL 1, 2010.—Not-
withstanding the preceding provisions of this section, the 
amendments made by subsections (a), (c), and (d) shall not 
apply to discharges occurring before April 1, 2010. 
SEC. 3402. TEMPORARY ADJUSTMENT TO THE CALCULA-
TION OF PART B PREMIUMS. 
Section 1839(i) of the Social Security Act (42 U.S.C. 
1395r(i)) is amended— 
(1) in paragraph (2), in the matter preceding 
subparagraph (A), by inserting ‘‘subject to paragraph 
(6),’’ after ‘‘subsection,’’; 
(2) in paragraph (3)(A)(i), by striking ‘‘The ap-
plicable’’ and inserting ‘‘Subject to paragraph (6), the 
applicable’’; 
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(3) by redesignating paragraph (6) as para-
graph (7); and 
(4) by inserting after paragraph (5) the fol-
lowing new paragraph: 
‘‘(6) TEMPORARY
ADJUSTMENT
TO
INCOME 
THRESHOLDS.—Notwithstanding any other provision 
of this subsection, during the period beginning on 
January 1, 2011, and ending on December 31, 
2019— 
‘‘(A) the threshold amount otherwise appli-
cable under paragraph (2) shall be equal to such 
amount for 2010; and 
‘‘(B) the dollar amounts otherwise applica-
ble under paragraph (3)(C)(i) shall be equal to 
such dollar amounts for 2010.’’. 
SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD. 
(a) BOARD.— 
(1) IN GENERAL.—Title XVIII of the Social Se-
curity Act (42 U.S.C. 1395 et seq.), as amended by 
section 3022, is amended by adding at the end the fol-
lowing new section: 
‘‘INDEPENDENT MEDICARE ADVISORY BOARD 
‘‘SEC. 1899A. (a) ESTABLISHMENT.—There is estab-
lished an independent board to be known as the ‘Inde-
pendent Medicare Advisory Board’. 
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‘‘(b) PURPOSE.—It is the purpose of this section to, 
in accordance with the following provisions of this section, 
reduce the per capita rate of growth in Medicare spend-
ing— 
‘‘(1) by requiring the Chief Actuary of the Cen-
ters for Medicare & Medicaid Services to determine in 
each year to which this section applies (in this section 
referred to as ‘a determination year’) the projected 
per capita growth rate under Medicare for the second 
year following the determination year (in this section 
referred to as ‘an implementation year’); 
‘‘(2) if the projection for the implementation 
year exceeds the target growth rate for that year, by 
requiring the Board to develop and submit during the 
first year following the determination year (in this 
section referred to as ‘a proposal year’) a proposal 
containing recommendations to reduce the Medicare 
per capita growth rate to the extent required by this 
section; and 
‘‘(3) by requiring the Secretary to implement 
such proposals unless Congress enacts legislation pur-
suant to this section. 
‘‘(c) BOARD PROPOSALS.— 
‘‘(1) DEVELOPMENT.— 
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‘‘(A) IN
GENERAL.—The Board shall de-
velop detailed and specific proposals related to 
the Medicare program in accordance with the 
succeeding provisions of this section. 
‘‘(B) ADVISORY REPORTS.—Beginning Jan-
uary 15, 2014, the Board may develop and sub-
mit to Congress advisory reports on matters re-
lated to the Medicare program, regardless of 
whether or not the Board submitted a proposal 
for such year. Such a report may, for years prior 
to 2020, include recommendations regarding im-
provements to payment systems for providers of 
services and suppliers who are not otherwise sub-
ject to the scope of the Board’s recommendations 
in a proposal under this section. Any advisory 
report submitted under this subparagraph shall 
not be subject to the rules for congressional con-
sideration under subsection (d). 
‘‘(2) PROPOSALS.— 
‘‘(A) REQUIREMENTS.—Each proposal sub-
mitted under this section in a proposal year 
shall meet each of the following requirements: 
‘‘(i) If the Chief Actuary of the Centers 
for Medicare & Medicaid Services has made 
a determination under paragraph (7)(A) in 
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the determination year, the proposal shall 
include recommendations so that the pro-
posal as a whole (after taking into account 
recommendations under clause (v)) will re-
sult in a net reduction in total Medicare 
program spending in the implementation 
year that is at least equal to the applicable 
savings target established under paragraph 
(7)(B) for such implementation year. In de-
termining whether a proposal meets the re-
quirement of the preceding sentence, reduc-
tions in Medicare program spending during 
the 3-month period immediately preceding 
the implementation year shall be counted to 
the extent that such reductions are a result 
of the implementation of recommendations 
contained in the proposal for a change in 
the payment rate for an item or service that 
was effective during such period pursuant 
to subsection (e)(2)(A). 
‘‘(ii) The proposal shall not include 
any recommendation to ration health care, 
raise revenues or Medicare beneficiary pre-
miums under section 1818, 1818A, or 1839, 
increase Medicare beneficiary cost-sharing 
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(including deductibles, coinsurance, and co-
payments), or otherwise restrict benefits or 
modify eligibility criteria. 
‘‘(iii) In the case of proposals sub-
mitted prior to December 31, 2018, the pro-
posal shall not include any recommendation 
that would reduce payment rates for items 
and services furnished, prior to December 
31, 2019, by providers of services (as de-
fined in section 1861(u)) and suppliers (as 
defined in section 1861(d)) scheduled, pur-
suant to the amendments made by section 
3401 of the Patient Protection and Afford-
able Care Act, to receive a reduction to the 
inflationary payment updates of such pro-
viders of services and suppliers in excess of 
a reduction due to productivity in a year in 
which such recommendations would take ef-
fect. 
‘‘(iv) As appropriate, the proposal 
shall include recommendations to reduce 
Medicare payments under parts C and D, 
such as reductions in direct subsidy pay-
ments to Medicare Advantage and prescrip-
tion drug plans specified under paragraph 
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(1) and (2) of section 1860D–15(a) that are 
related to administrative expenses (includ-
ing profits) for basic coverage, denying high 
bids or removing high bids for prescription 
drug coverage from the calculation of the 
national average monthly bid amount 
under section 1860D–13(a)(4), and reduc-
tions in payments to Medicare Advantage 
plans under clauses (i) and (ii) of section 
1853(a)(1)(B) that are related to adminis-
trative expenses (including profits) and per-
formance bonuses for Medicare Advantage 
plans under section 1853(n). Any such rec-
ommendation shall not affect the base bene-
ficiary premium percentage specified under 
1860D–13(a). 
‘‘(v) The proposal shall include rec-
ommendations with respect to administra-
tive funding for the Secretary to carry out 
the recommendations contained in the pro-
posal. 
‘‘(vi) The proposal shall only include 
recommendations related to the Medicare 
program. 
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‘‘(B) ADDITIONAL CONSIDERATIONS.—In de-
veloping and submitting each proposal under 
this section in a proposal year, the Board shall, 
to the extent feasible— 
‘‘(i) give priority to recommendations 
that extend Medicare solvency; 
‘‘(ii) include recommendations that— 
‘‘(I) improve the health care deliv-
ery system and health outcomes, in-
cluding by promoting integrated care, 
care 
coordination, 
prevention 
and 
wellness, and quality and efficiency 
improvement; and 
‘‘(II) protect and improve Medi-
care beneficiaries’ access to necessary 
and evidence-based items and services, 
including in rural and frontier areas; 
‘‘(iii) include recommendations that 
target reductions in Medicare program 
spending to sources of excess cost growth; 
‘‘(iv) consider the effects on Medicare 
beneficiaries of changes in payments to pro-
viders of services (as defined in section 
1861(u)) and suppliers (as defined in sec-
tion 1861(d)); 
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‘‘(v) consider the effects of the rec-
ommendations on providers of services and 
suppliers with actual or projected negative 
cost margins or payment updates; and 
‘‘(vi) consider the unique needs of 
Medicare beneficiaries who are dually eligi-
ble for Medicare and the Medicaid program 
under title XIX. 
‘‘(C) NO
INCREASE
IN
TOTAL
MEDICARE 
PROGRAM SPENDING.—Each proposal submitted 
under this section shall be designed in such a 
manner that implementation of the recommenda-
tions contained in the proposal would not be ex-
pected to result, over the 10-year period starting 
with the implementation year, in any increase 
in the total amount of net Medicare program 
spending relative to the total amount of net 
Medicare program spending that would have oc-
curred absent such implementation. 
‘‘(D) CONSULTATION
WITH
MEDPAC.—The 
Board shall submit a draft copy of each proposal 
to be submitted under this section to the Medi-
care Payment Advisory Commission established 
under section 1805 for its review. The Board 
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shall submit such draft copy by not later than 
September 1 of the determination year. 
‘‘(E) REVIEW AND COMMENT BY THE SEC-
RETARY.—The Board shall submit a draft copy 
of each proposal to be submitted to Congress 
under this section to the Secretary for the Sec-
retary’s review and comment. The Board shall 
submit such draft copy by not later than Sep-
tember 1 of the determination year. Not later 
than March 1 of the submission year, the Sec-
retary shall submit a report to Congress on the 
results of such review, unless the Secretary sub-
mits a proposal under paragraph (5)(A) in that 
year. 
‘‘(F) CONSULTATIONS.—In carrying out its 
duties under this section, the Board shall engage 
in regular consultations with the Medicaid and 
CHIP Payment and Access Commission under 
section 1900. 
‘‘(3) TRANSMISSION
OF
BOARD
PROPOSAL
TO 
PRESIDENT.— 
‘‘(A) IN GENERAL.— 
‘‘(i) IN GENERAL.—Except as provided 
in clause (ii) and subsection (f)(3)(B), the 
Board shall transmit a proposal under this 
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section to the President on January 15 of 
each year (beginning with 2014). 
‘‘(ii) EXCEPTION.—The Board shall 
not submit a proposal under clause (i) in a 
proposal year if the year is— 
‘‘(I) a year for which the Chief 
Actuary of the Centers for Medicare & 
Medicaid Services makes a determina-
tion in the determination year under 
paragraph (6)(A) that the growth rate 
described in clause (i) of such para-
graph does not exceed the growth rate 
described in clause (ii) of such para-
graph; 
‘‘(II) a year in which the Chief 
Actuary of the Centers for Medicare & 
Medicaid Services makes a determina-
tion in the determination year that the 
projected percentage increase (if any) 
for the medical care expenditure cat-
egory of the Consumer Price Index for 
All Urban Consumers (United States 
city average) for the implementation 
year is less than the projected percent-
age increase (if any) in the Consumer 
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Price Index for All Urban Consumers 
(all items; United States city average) 
for such implementation year; or 
‘‘(III) for proposal year 2019 and 
subsequent proposal years, a year in 
which the Chief Actuary of the Centers 
for Medicare & Medicaid Services 
makes a determination in the deter-
mination year that the growth rate de-
scribed in paragraph (8) exceeds the 
growth rate described in paragraph 
(6)(A)(i). 
‘‘(iii) START-UP PERIOD.—The Board 
may not submit a proposal under clause (i) 
prior to January 15, 2014. 
‘‘(B) REQUIRED INFORMATION.—Each pro-
posal submitted by the Board under subpara-
graph (A)(i) shall include— 
‘‘(i) the recommendations described in 
paragraph (2)(A)(i); 
‘‘(ii) an explanation of each rec-
ommendation contained in the proposal and 
the reasons for including such recommenda-
tion; 
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leader of the House or by Members of the House 
designated by the majority leader of the House. 
‘‘(B) NOT IN SESSION.—If either House is 
not in session on the day on which such legisla-
tive proposal is submitted, the legislative pro-
posal shall be introduced in that House, as pro-
vided in subparagraph (A), on the first day 
thereafter on which that House is in session. 
‘‘(C) ANY MEMBER.—If the legislative pro-
posal is not introduced in either House within 5 
days on which that House is in session after the 
day on which the legislative proposal is sub-
mitted, then any Member of that House may in-
troduce 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-
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‘‘(iv) DISPOSITION.—Upon disposition 
of a bill introduced pursuant to paragraph 
(1) that is received by one House from the 
other House, it shall no longer be in order 
to consider the bill that originates in the re-
ceiving House. 
‘‘(v) LIMITATION.—Clauses (ii), (iii), 
and (iv) shall apply only to a bill received 
by one House from the other House if the 
bill— 
‘‘(I) is related only to the pro-
gram under this title; and 
‘‘(II) satisfies the requirements of 
subparagraphs (A)(i) and (C) of sub-
section (c)(2). 
‘‘(D) SENATE LIMITS ON DEBATE.— 
‘‘(i) IN GENERAL.—In the Senate, con-
sideration of the bill and on all debatable 
motions and appeals in connection there-
with shall not exceed a total of 30 hours, 
which shall be divided equally between the 
majority and minority leaders or their des-
ignees. 
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(ii) who will provide a combination of 
professional perspectives, broad geographic 
representation, and a balance between 
urban, suburban, rural, and frontier rep-
resentatives. 
(B) INCLUSION.— 
(i) IN GENERAL.—The membership of 
the Commission shall include no less than 
one representative of— 
(I) the health care workforce and 
health professionals; 
(II) employers; 
(III) third-party payers; 
(IV) individuals skilled in the 
conduct and interpretation of health 
care services and health economics re-
search; 
(V) representatives of consumers; 
(VI) labor unions; 
(VII) State or local workforce in-
vestment boards; and 
(VIII) 
educational 
institutions 
(which may include elementary and 
secondary institutions, institutions of 
higher education, including 2 and 4 
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‘‘(i) NOTIFICATION
TO
SECRETARY.— 
Not later than 30 days after a complaint is 
served to a subsection (k) applicant in an 
action for patent infringement described 
under this paragraph, the subsection (k) ap-
plicant shall provide the Secretary with no-
tice and a copy of such complaint. 
‘‘(ii) PUBLICATION
BY
SECRETARY.— 
The Secretary shall publish in the Federal 
Register notice of a complaint received 
under clause (i). 
‘‘(7) NEWLY ISSUED OR LICENSED PATENTS.—In 
the case of a patent that— 
‘‘(A) is issued to, or exclusively licensed by, 
the reference product sponsor after the date that 
the reference product sponsor provided the list to 
the subsection (k) applicant under paragraph 
(3)(A); and 
‘‘(B) the reference product sponsor reason-
ably believes that, due to the issuance of such 
patent, a claim of patent infringement could rea-
sonably be asserted by the reference product 
sponsor if a person not licensed by the reference 
product sponsor engaged in the making, using, 
offering to sell, selling, or importing into the 
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United States of the biological product that is 
the subject of the subsection (k) application, 
not later than 30 days after such issuance or licens-
ing, the reference product sponsor shall provide to the 
subsection (k) applicant a supplement to the list pro-
vided by the reference product sponsor under para-
graph (3)(A) that includes such patent, not later than 
30 days after such supplement is provided, the sub-
section (k) applicant shall provide a statement to the 
reference product sponsor in accordance with para-
graph (3)(B), and such patent shall be subject to 
paragraph (8). 
‘‘(8) NOTICE OF COMMERCIAL MARKETING AND 
PRELIMINARY INJUNCTION.— 
‘‘(A) 
NOTICE
OF
COMMERCIAL
MAR-
KETING.—The subsection (k) applicant shall pro-
vide notice to the reference product sponsor not 
later than 180 days before the date of the first 
commercial marketing of the biological product 
licensed under subsection (k). 
‘‘(B) PRELIMINARY INJUNCTION.—After re-
ceiving the notice under subparagraph (A) and 
before such date of the first commercial mar-
keting of such biological product, the reference 
product sponsor may seek a preliminary injunc-
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following for purposes of paying for such serv-
ices: 
‘‘(i) The credit under section 36B of 
the Internal Revenue Code of 1986 (and the 
amount (if any) of the advance payment of 
the credit under section 1412 of the Patient 
Protection and Affordable Care Act). 
‘‘(ii) Any cost-sharing reduction under 
section 1402 of the Patient Protection and 
Affordable Care Act (and the amount (if 
any) of the advance payment of the reduc-
tion under section 1412 of the Patient Pro-
tection and Affordable Care Act). 
‘‘(B) ESTABLISHMENT OF ALLOCATION AC-
COUNTS.—In the case of a plan to which sub-
paragraph (A) applies, the issuer of the plan 
shall— 
‘‘(i) collect from each enrollee in the 
plan (without regard to the enrollee’s age, 
sex, or family status) a separate payment 
for each of the following: 
‘‘(I) an amount equal to the por-
tion of the premium to be paid directly 
by the enrollee for coverage under the 
plan of services other than services de-
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scribed in paragraph (1)(B)(i) (after 
reduction for credits and cost-sharing 
reductions described in subparagraph 
(A)); and 
‘‘(II) an amount equal to the ac-
tuarial value of the coverage of services 
described in paragraph (1)(B)(i), and 
‘‘(ii) shall deposit all such separate 
payments into separate allocation accounts 
as provided in subparagraph (C). 
In the case of an enrollee whose premium for 
coverage under the plan is paid through em-
ployee payroll deposit, the separate payments re-
quired under this subparagraph shall each be 
paid by a separate deposit. 
‘‘(C) SEGREGATION OF FUNDS.— 
‘‘(i) IN
GENERAL.—The issuer of a 
plan to which subparagraph (A) applies 
shall establish allocation accounts described 
in 
clause 
(ii) 
for 
enrollees 
receiving 
amounts described in subparagraph (A). 
‘‘(ii) 
ALLOCATION
ACCOUNTS.—The 
issuer of a plan to which subparagraph (A) 
applies shall deposit— 
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‘‘(I) all payments described in 
subparagraph (B)(i)(I) into a separate 
account that consists solely of such 
payments and that is used exclusively 
to pay for services other than services 
described in paragraph (1)(B)(i); and 
‘‘(II) all payments described in 
subparagraph (B)(i)(II) into a sepa-
rate account that consists solely of such 
payments and that is used exclusively 
to pay for services described in para-
graph (1)(B)(i). 
‘‘(D) ACTUARIAL VALUE.— 
‘‘(i) IN
GENERAL.—The issuer of a 
qualified health plan shall estimate the 
basic per enrollee, per month cost, deter-
mined on an average actuarial basis, for in-
cluding coverage under the qualified health 
plan of the services described in paragraph 
(1)(B)(i). 
‘‘(ii) CONSIDERATIONS.—In making 
such estimate, the issuer— 
‘‘(I) may take into account the 
impact on overall costs of the inclusion 
of such coverage, but may not take into 
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