H. R. 4872 
One Hundred Eleventh Congress 
of the 
United States of America 
AT THE SECOND SESSION 
Begun and held at the City of Washington on Tuesday, 
the fifth day of January, two thousand and ten 
An Act 
To provide for reconciliation pursuant to Title II of the concurrent resolution on 
the budget for fiscal year 2010 (S. Con. Res. 13). 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the ‘‘Health Care 
and Education Reconciliation Act of 2010’’. 
(b) TABLE OF CONTENTS.—The table of contents of this Act 
is as follows: 
Sec. 1. Short title; table of contents. 
TITLE I—COVERAGE, MEDICARE, MEDICAID, AND REVENUES 
Subtitle A—Coverage 
Sec. 1001. Tax credits. 
Sec. 1002. Individual responsibility. 
Sec. 1003. Employer responsibility. 
Sec. 1004. Income definitions. 
Sec. 1005. Implementation funding. 
Subtitle B—Medicare 
Sec. 1101. Closing the medicare prescription drug ‘‘donut hole’’. 
Sec. 1102. Medicare Advantage payments. 
Sec. 1103. Savings from limits on MA plan administrative costs. 
Sec. 1104. Disproportionate share hospital (DSH) payments. 
Sec. 1105. Market basket updates. 
Sec. 1106. Physician ownership-referral. 
Sec. 1107. Payment for imaging services. 
Sec. 1108. PE GPCI adjustment for 2010. 
Sec. 1109. Payment for qualifying hospitals. 
Subtitle C—Medicaid 
Sec. 1201. Federal funding for States. 
Sec. 1202. Payments to primary care physicians. 
Sec. 1203. Disproportionate share hospital payments. 
Sec. 1204. Funding for the territories. 
Sec. 1205. Delay in Community First Choice option. 
Sec. 1206. Drug rebates for new formulations of existing drugs. 
Subtitle D—Reducing Fraud, Waste, and Abuse 
Sec. 1301. Community mental health centers. 
Sec. 1302. Medicare prepayment medical review limitations. 
Sec. 1303. Funding to fight fraud, waste, and abuse. 
Sec. 1304. 90-day period of enhanced oversight for initial claims of DME suppliers. 
Subtitle E—Provisions Relating to Revenue 
Sec. 1401. High-cost plan excise tax. 
Sec. 1402. Unearned income Medicare contribution. 
Sec. 1403. Delay of limitation on health flexible spending arrangements under cafe-
teria plans.
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Sec. 1404. Brand name pharmaceuticals. 
Sec. 1405. Excise tax on medical device manufacturers. 
Sec. 1406. Health insurance providers. 
Sec. 1407. Delay of elimination of deduction for expenses allocable to medicare part 
D subsidy. 
Sec. 1408. Elimination of unintended application of cellulosic biofuel producer cred-
it. 
Sec. 1409. Codification of economic substance doctrine and penalties. 
Sec. 1410. Time for payment of corporate estimated taxes. 
Subtitle F—Other Provisions 
Sec. 1501. Community college and career training grant program. 
TITLE II—EDUCATION AND HEALTH 
Subtitle A—Education 
Sec. 2001. Short title; references. 
PART I—INVESTING IN STUDENTS AND FAMILIES 
Sec. 2101. Federal Pell Grants. 
Sec. 2102. College access challenge grant program. 
Sec. 2103. Investment in historically black colleges and universities and minority- 
serving institutions. 
PART II—STUDENT LOAN REFORM 
Sec. 2201. Termination of Federal Family Education Loan appropriations. 
Sec. 2202. Termination of Federal loan insurance program. 
Sec. 2203. Termination of applicable interest rates. 
Sec. 2204. Termination of Federal payments to reduce student interest costs. 
Sec. 2205. Termination of FFEL PLUS Loans. 
Sec. 2206. Federal Consolidation Loans. 
Sec. 2207. Termination of Unsubsidized Stafford Loans for middle-income bor-
rowers. 
Sec. 2208. Termination of special allowances. 
Sec. 2209. Origination of Direct Loans at institutions outside the United States. 
Sec. 2210. Conforming amendments. 
Sec. 2211. Terms and conditions of loans. 
Sec. 2212. Contracts; mandatory funds. 
Sec. 2213. Income-based repayment. 
Subtitle B—Health 
Sec. 2301. Insurance reforms. 
Sec. 2302. Drugs purchased by covered entities. 
Sec. 2303. Community health centers. 
TITLE I—COVERAGE, MEDICARE, 
MEDICAID, AND REVENUES 
Subtitle A—Coverage 
SEC. 1001. TAX CREDITS. 
(a) PREMIUM TAX CREDITS.—Section 36B of the Internal Rev-
enue Code of 1986, as added by section 1401 of the Patient Protec-
tion and Affordable Care Act and amended by section 10105 of 
such Act, is amended— 
(1) in subsection (b)(3)(A)— 
(A) in clause (i), by striking ‘‘with respect to any tax-
payer’’ and all that follows up to the end period and 
inserting: ‘‘for any taxable year shall be the percentage 
such that the applicable percentage for any taxpayer whose 
household income is within an income tier specified in 
the following table shall increase, on a sliding scale in 
a linear manner, from the initial premium percentage to
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the final premium percentage specified in such table for 
such income tier: 
‘‘In the case of household in-
come (expressed as a percent 
of poverty line) within the fol-
lowing income tier: 
The initial premium 
percentage is— 
The final premium 
percentage is— 
Up to 133% 
2.0% 
2.0% 
133% up to 150% 
3.0% 
4.0% 
150% up to 200% 
4.0% 
6.3% 
200% up to 250% 
6.3% 
8.05% 
250% up to 300% 
8.05% 
9.5% 
300% up to 400% 
9.5% 
9.5%’’; and 
(B) by striking clauses (ii) and (iii), and inserting the 
following: 
‘‘(ii) INDEXING.— 
‘‘(I) IN
GENERAL.—Subject to subclause (II), 
in the case of taxable years beginning in any cal-
endar year after 2014, the initial and final 
applicable percentages under clause (i) (as in effect 
for the preceding calendar year after application 
of this clause) shall be adjusted to reflect the excess 
of the rate of premium growth for the preceding 
calendar year over the rate of income growth for 
the preceding calendar year. 
‘‘(II) ADDITIONAL ADJUSTMENT.—Except as pro-
vided in subclause (III), in the case of any calendar 
year after 2018, the percentages described in sub-
clause (I) shall, in addition to the adjustment 
under subclause (I), be adjusted to reflect the 
excess (if any) of the rate of premium growth esti-
mated under subclause (I) for the preceding cal-
endar year over the rate of growth in the consumer 
price index for the preceding calendar year. 
‘‘(III) FAILSAFE.—Subclause (II) shall apply for 
any calendar year only if the aggregate amount 
of premium tax credits under this section and cost- 
sharing reductions under section 1402 of the 
Patient Protection and Affordable Care Act for the 
preceding calendar year exceeds an amount equal 
to 0.504 percent of the gross domestic product 
for the preceding calendar year.’’; and 
(2) in subsection (c)(2)(C)— 
(A) by striking ‘‘9.8 percent’’ in clauses (i)(II) and (iv) 
and inserting ‘‘9.5 percent’’; and 
(B) by striking ‘‘(b)(3)(A)(iii)’’ in clause (iv) and 
inserting ‘‘(b)(3)(A)(ii)’’. 
(b) COST SHARING.—Section 1402(c) of the Patient Protection 
and Affordable Care Act is amended— 
(1) in paragraph (1)(B)(i)— 
(A) in subclause (I), by striking ‘‘90’’ and inserting 
‘‘94’’; 
(B) in subclause (II)— 
(i) by striking ‘‘80’’ and inserting ‘‘87’’; and 
(ii) by striking ‘‘and’’; and
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(C) by striking subclause (III) and inserting the fol-
lowing: 
‘‘(III) 73 percent in the case of an eligible 
insured whose household income is more than 200 
percent but not more than 250 percent of the pov-
erty line for a family of the size involved; and 
‘‘(IV) 70 percent in the case of an eligible 
insured whose household income is more than 250 
percent but not more than 400 percent of the pov-
erty line for a family of the size involved.’’; and 
(2) in paragraph (2)— 
(A) in subparagraph (A)— 
(i) by striking ‘‘90’’ and inserting ‘‘94’’; and 
(ii) by striking ‘‘and’’; 
(B) in subparagraph (B)— 
(i) by striking ‘‘80’’ and inserting ‘‘87’’; and 
(ii) by striking the period and inserting ‘‘; and’’; 
and 
(C) by inserting after subparagraph (B) the following 
new subparagraph: 
‘‘(C) in the case of an eligible insured whose household 
income is more than 200 percent but not more than 250 
percent of the poverty line for a family of the size involved, 
increase the plan’s share of the total allowed costs of bene-
fits provided under the plan to 73 percent of such costs.’’. 
SEC. 1002. INDIVIDUAL RESPONSIBILITY. 
(a) AMOUNTS.—Section 5000A(c) of the Internal Revenue Code 
of 1986, as added by section 1501(b) of the Patient Protection 
and Affordable Care Act and amended by section 10106 of such 
Act, is amended— 
(1) in paragraph (2)(B)— 
(A) in the matter preceding clause (i), by— 
(i) inserting ‘‘the excess of’’ before ‘‘the taxpayer’s 
household income’’; and 
(ii) inserting ‘‘for the taxable year over the amount 
of gross income specified in section 6012(a)(1) with 
respect to the taxpayer’’ before ‘‘for the taxable year’’; 
(B) in clause (i), by striking ‘‘0.5’’ and inserting ‘‘1.0’’; 
(C) in clause (ii), by striking ‘‘1.0’’ and inserting ‘‘2.0’’; 
and 
(D) in clause (iii), by striking ‘‘2.0’’ and inserting ‘‘2.5’’; 
and 
(2) in paragraph (3)— 
(A) in subparagraph (A), by striking ‘‘$750’’ and 
inserting ‘‘$695’’; 
(B) in subparagraph (B), by striking ‘‘$495’’ and 
inserting ‘‘$325’’; and 
(C) in subparagraph (D)— 
(i) in the matter preceding clause (i), by striking 
‘‘$750’’ and inserting ‘‘$695’’; and 
(ii) in clause (i), by striking ‘‘$750’’ and inserting 
‘‘$695’’. 
(b) THRESHOLD.—Section 5000A of such Code, as so added 
and amended, is amended— 
(1) by striking subsection (c)(4)(D); and 
(2) in subsection (e)(2)—
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(A) by striking ‘‘UNDER 100 PERCENT OF POVERTY LINE’’ 
and inserting ‘‘BELOW FILING THRESHOLD’’; and 
(B) by striking all that follows ‘‘less than’’ and inserting 
‘‘the amount of gross income specified in section 6012(a)(1) 
with respect to the taxpayer.’’. 
SEC. 1003. EMPLOYER RESPONSIBILITY. 
(a) PAYMENT CALCULATION.—Subparagraph (D) of subsection 
(d)(2) of section 4980H of the Internal Revenue Code of 1986, 
as added by section 1513 of the Patient Protection and Affordable 
Care Act and amended by section 10106 of such Act, is amended 
to read as follows: 
‘‘(D) APPLICATION OF EMPLOYER SIZE TO ASSESSABLE 
PENALTIES.— 
‘‘(i) IN
GENERAL.—The number of individuals 
employed by an applicable large employer as full-time 
employees during any month shall be reduced by 30 
solely for purposes of calculating— 
‘‘(I) the assessable payment under subsection 
(a), or 
‘‘(II) the overall limitation under subsection 
(b)(2). 
‘‘(ii) AGGREGATION.—In the case of persons treated 
as 1 employer under subparagraph (C)(i), only 1 reduc-
tion under subclause (I) or (II) shall be allowed with 
respect to such persons and such reduction shall be 
allocated among such persons ratably on the basis 
of the number of full-time employees employed by each 
such person.’’. 
(b) APPLICABLE PAYMENT AMOUNT.—Section 4980H of such 
Code, as so added and amended, is amended— 
(1) in the flush text following subsection (c)(1)(B), by 
striking ‘‘400 percent of the applicable payment amount’’ and 
inserting ‘‘an amount equal to 1⁄12 of $3,000’’; 
(2) in subsection (d)(1), by striking ‘‘$750’’ and inserting 
‘‘$2,000’’; and 
(3) in subsection (d)(5)(A), in the matter preceding clause 
(i), by striking ‘‘subsection (b)(2) and (d)(1)’’ and inserting ‘‘sub-
section (b) and paragraph (1)’’. 
(c) COUNTING PART-TIME WORKERS IN SETTING THE THRESHOLD 
FOR EMPLOYER RESPONSIBILITY.—Section 4980H(d)(2) of such Code, 
as so added and amended and as amended by subsection (a), is 
amended by adding at the end the following new subparagraph: 
‘‘(E) FULL-TIME EQUIVALENTS TREATED AS FULL-TIME 
EMPLOYEES.—Solely for purposes of determining whether 
an employer is an applicable large employer under this 
paragraph, an employer shall, in addition to the number 
of full-time employees for any month otherwise determined, 
include for such month a number of full-time employees 
determined by dividing the aggregate number of hours 
of service of employees who are not full-time employees 
for the month by 120.’’. 
(d) ELIMINATING WAITING PERIOD ASSESSMENT.—Section 4980H 
of such Code, as so added and amended and as amended by the 
preceding subsections, is amended by striking subsection (b) and 
redesignating subsections (c), (d), and (e) as subsections (b), (c), 
and (d), respectively.
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SEC. 1004. INCOME DEFINITIONS. 
(a) MODIFIED ADJUSTED GROSS INCOME.— 
(1) IN GENERAL.—The following provisions of the Internal 
Revenue Code of 1986 are each amended by striking ‘‘modified 
gross’’ each place it appears and inserting ‘‘modified adjusted 
gross’’: 
(A) Clauses (i) and (ii) of section 36B(d)(2)(A), as added 
by section 1401 of the Patient Protection and Affordable 
Care Act. 
(B) Section 6103(l)(21)(A)(iv), as added by section 1414 
of such Act. 
(C) Clauses (i) and (ii) of section 5000A(c)(4), as added 
by section 1501(b) of such Act. 
(2) DEFINITION.— 
(A) Section 36B(d)(2)(B) of such Code, as so added, 
is amended to read as follows: 
‘‘(B) MODIFIED
ADJUSTED
GROSS
INCOME.—The term 
‘modified adjusted gross income’ means adjusted gross 
income increased by— 
‘‘(i) any amount excluded from gross income under 
section 911, and 
‘‘(ii) any amount of interest received or accrued 
by the taxpayer during the taxable year which is 
exempt from tax.’’. 
(B) Section 5000A(c)(4)(C) of such Code, as so added, 
is amended to read as follows: 
‘‘(C) MODIFIED
ADJUSTED
GROSS
INCOME.—The term 
‘modified adjusted gross income’ means adjusted gross 
income increased by— 
‘‘(i) any amount excluded from gross income under 
section 911, and 
‘‘(ii) any amount of interest received or accrued 
by the taxpayer during the taxable year which is 
exempt from tax.’’. 
(b) MODIFIED ADJUSTED GROSS INCOME DEFINITION.— 
(1) MEDICAID.—Section 1902 of the Social Security Act 
(42 U.S.C. 1396a) is amended by striking ‘‘modified gross 
income’’ each place it appears in the text and headings of 
the following provisions and inserting ‘‘modified adjusted gross 
income’’: 
(A) Paragraph (14) of subsection (e), as added by sec-
tion 2002(a) of the Patient Protection and Affordable Care 
Act. 
(B) Subsection (gg)(4)(A), as added by section 2001(b) 
of such Act. 
(2) CHIP.— 
(A) 
STATE
PLAN
REQUIREMENTS.—Section 
2102(b)(1)(B)(v) of the Social Security Act (42 U.S.C. 
1397bb(b)(1)(B)(v)), as added by section 2101(d)(1) of the 
Patient Protection and Affordable Care Act, is amended 
by striking ‘‘modified gross income’’ and inserting ‘‘modified 
adjusted gross income’’. 
(B) PLAN ADMINISTRATION.—Section 2107(e)(1)(E) of the 
Social Security Act (42 U.S.C. 1397gg(e)(1)(E)), as added 
by section 2101(d)(2) of the Patient Protection and Afford-
able Care Act, is amended by striking ‘‘modified gross 
income’’ and inserting ‘‘modified adjusted gross income’’.
H. R. 4872—7 
(c) NO EXCESS PAYMENTS.—Section 36B(f) of the Internal Rev-
enue Code of 1986, as added by section 1401(a) of the Patient 
Protection and Affordable Care Act, is amended by adding at the 
end the following new paragraph: 
‘‘(3) INFORMATION REQUIREMENT.—Each Exchange (or any 
person carrying out 1 or more responsibilities of an Exchange 
under section 1311(f)(3) or 1321(c) of the Patient Protection 
and Affordable Care Act) shall provide the following information 
to the Secretary and to the taxpayer with respect to any health 
plan provided through the Exchange: 
‘‘(A) The level of coverage described in section 1302(d) 
of the Patient Protection and Affordable Care Act and 
the period such coverage was in effect. 
‘‘(B) The total premium for the coverage without regard 
to the credit under this section or cost-sharing reductions 
under section 1402 of such Act. 
‘‘(C) The aggregate amount of any advance payment 
of such credit or reductions under section 1412 of such 
Act. 
‘‘(D) The name, address, and TIN of the primary 
insured and the name and TIN of each other individual 
obtaining coverage under the policy. 
‘‘(E) Any information provided to the Exchange, 
including any change of circumstances, necessary to deter-
mine eligibility for, and the amount of, such credit. 
‘‘(F) Information necessary to determine whether a tax-
payer has received excess advance payments.’’. 
(d) ADULT DEPENDENTS.— 
(1) EXCLUSION OF AMOUNTS EXPENDED FOR MEDICAL CARE.— 
The first sentence of section 105(b) of the Internal Revenue 
Code of 1986 (relating to amounts expended for medical care) 
is amended— 
(A) by striking ‘‘and his dependents’’ and inserting 
‘‘his dependents’’; and 
(B) by inserting before the period the following: ‘‘, 
and any child (as defined in section 152(f)(1)) of the tax-
payer who as of the end of the taxable year has not attained 
age 27’’. 
(2) SELF-EMPLOYED HEALTH INSURANCE DEDUCTION.—Sec-
tion 162(l)(1) of such Code is amended to read as follows: 
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case of a taxpayer 
who is an employee within the meaning of section 401(c)(1), 
there shall be allowed as a deduction under this section an 
amount equal to the amount paid during the taxable year 
for insurance which constitutes medical care for— 
‘‘(A) the taxpayer, 
‘‘(B) the taxpayer’s spouse, 
‘‘(C) the taxpayer’s dependents, and 
‘‘(D) any child (as defined in section 152(f)(1)) of the 
taxpayer who as of the end of the taxable year has not 
attained age 27.’’. 
(3) COVERAGE UNDER SELF-EMPLOYED DEDUCTION.—Section 
162(l)(2)(B) of such Code is amended by inserting ‘‘, or any 
dependent, or individual described in subparagraph (D) of para-
graph (1) with respect to,’’ after ‘‘spouse of’’. 
(4) SICK AND ACCIDENT BENEFITS PROVIDED TO MEMBERS 
OF
A
VOLUNTARY
EMPLOYEES’ BENEFICIARY
ASSOCIATION
AND
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THEIR DEPENDENTS.—Section 501(c)(9) of such Code is amended 
by adding at the end the following new sentence: ‘‘For purposes 
of providing for the payment of sick and accident benefits 
to members of such an association and their dependents, the 
term ‘dependent’ shall include any individual who is a child 
(as defined in section 152(f)(1)) of a member who as of the 
end of the calendar year has not attained age 27.’’. 
(5) 
MEDICAL
AND
OTHER
BENEFITS
FOR
RETIRED 
EMPLOYEES.—Section 401(h) of such Code is amended by adding 
at the end the following: ‘‘For purposes of this subsection, 
the term ‘dependent’ shall include any individual who is a 
child (as defined in section 152(f)(1)) of a retired employee 
who as of the end of the calendar year has not attained age 
27.’’. 
(e) FIVE PERCENT INCOME DISREGARD FOR CERTAIN INDIVID-
UALS.—Section 1902(e)(14) of the Social Security Act (42 U.S.C. 
1396a(e)(14)), as amended by subsection (b)(1), is further amended— 
(1) in subparagraph (B), by striking ‘‘No type’’ and inserting 
‘‘Subject to subparagraph (I), no type’’; and 
(2) by adding at the end the following new subparagraph: 
‘‘(I) TREATMENT
OF
PORTION
OF
MODIFIED
ADJUSTED 
GROSS INCOME.—For purposes of determining the income 
eligibility of an individual for medical assistance whose 
eligibility is determined based on the application of modi-
fied adjusted gross income under subparagraph (A), the 
State shall— 
‘‘(i) determine the dollar equivalent of the dif-
ference between the upper income limit on eligibility 
for such an individual (expressed as a percentage of 
the poverty line) and such upper income limit increased 
by 5 percentage points; and 
‘‘(ii) notwithstanding the requirement in subpara-
graph (A) with respect to use of modified adjusted 
gross income, utilize as the applicable income of such 
individual, in determining such income eligibility, an 
amount equal to the modified adjusted gross income 
applicable to such individual reduced by such dollar 
equivalent amount.’’. 
SEC. 1005. IMPLEMENTATION FUNDING. 
(a) IN GENERAL.—There is hereby established a Health Insur-
ance Reform Implementation Fund (referred to in this section as 
the ‘‘Fund’’) within the Department of Health and Human Services 
to carry out the Patient Protection and Affordable Care Act and 
this Act (and the amendments made by such Acts). 
(b) FUNDING.—There is appropriated to the Fund, out of any 
funds in the Treasury not otherwise appropriated, $1,000,000,000 
for Federal administrative expenses to carry out such Act (and 
the amendments made by such Acts). 
Subtitle B—Medicare 
SEC. 1101. CLOSING THE MEDICARE PRESCRIPTION DRUG ‘‘DONUT 
HOLE’’. 
(a) COVERAGE GAP REBATE FOR 2010.—
H. R. 4872—9 
(1) IN GENERAL.—Section 1860D–42 of the Social Security 
Act (42 U.S.C. 1395w–152) is amended by adding at the end 
the following new subsection: 
‘‘(c) COVERAGE GAP REBATE FOR 2010.— 
‘‘(1) IN GENERAL.—In the case of an individual described 
in subparagraphs (A) through (D) of section 1860D–14A(g)(1) 
who as of the last day of a calendar quarter in 2010 has 
incurred costs for covered part D drugs so that the individual 
has exceeded the initial coverage limit under section 1860D– 
2(b)(3) for 2010, the Secretary shall provide for payment from 
the Medicare Prescription Drug Account of $250 to the indi-
vidual by not later than the 15th day of the third month 
following the end of such quarter. 
‘‘(2) LIMITATION.—The Secretary shall provide only 1 pay-
ment under this subsection with respect to any individual.’’. 
(2) REPEAL
OF
PROVISION.—Section 3315 of the Patient 
Protection and Affordable Care Act (including the amendments 
made by such section) is repealed, and any provision of law 
amended or repealed by such sections is hereby restored or 
revived as if such section had not been enacted into law. 
(b) CLOSING THE DONUT HOLE.—Part D of title XVIII of the 
Social Security Act (42 U.S.C. 1395w–101 et seq.), as amended 
by section 3301 of the Patient Protection and Affordable Care Act, 
is further amended— 
(1) in section 1860D–43— 
(A) in subsection (b), by striking ‘‘July 1, 2010’’ and 
inserting ‘‘January 1, 2011’’; and 
(B) in subsection (c)(2), by striking ‘‘July 1, 2010, and 
ending on December 31, 2010,’’ and inserting ‘‘January 
1, 2011, and December 31, 2011,’’; 
(2) in section 1860D–14A— 
(A) in subsection (a)— 
(i) by striking ‘‘July 1, 2010’’ and inserting 
‘‘January 1, 2011’’; and 
(ii) by striking ‘‘April 1, 2010’’ and inserting ‘‘180 
days after the date of the enactment of this section’’; 
(B) in subsection (b)(1)(C)— 
(i) in the heading, by striking ‘‘2010 AND’’; 
(ii) by striking ‘‘July 1, 2010’’ and inserting 
‘‘January 1, 2011’’; and 
(iii) by striking ‘‘May 1, 2010’’ and inserting ‘‘not 
later than 30 days after the date of the establishment 
of a model agreement under subsection (a)’’; 
(C) in subsection (c)— 
(i) in paragraph (1)(A)(iii), by striking ‘‘July 1, 
2010, and ending on December 31, 2011’’ and inserting 
‘‘January 1, 2011, and ending on December 31, 2011’’; 
and 
(ii) in paragraph (2), by striking ‘‘2010’’ and 
inserting ‘‘2011’’; 
(D) in subsection (d)(2)(B), by striking ‘‘July 1, 2010, 
and ending on December 31, 2010’’ and inserting ‘‘January 
1, 2011, and ending on December 31, 2011’’; and 
(E) in subsection (g)(1)— 
(i) in the matter before subparagraph (A), by 
striking ‘‘an applicable drug’’ and inserting ‘‘a covered 
part D drug’’;
H. R. 4872—10 
(ii) by adding ‘‘and’’ at the end of subparagraph 
(C); 
(iii) by striking subparagraph (D); and 
(iv) by redesignating subparagraph (E) as subpara-
graph (D); and 
(3) in section 1860D–2(b)— 
(A) in paragraph (2)(A), by striking ‘‘The coverage’’ 
and inserting ‘‘Subject to subparagraphs (C) and (D), the 
coverage’’; 
(B) in paragraph (2)(B), by striking ‘‘subparagraph 
(A)(ii)’’ and inserting ‘‘subparagraphs (A)(ii), (C), and (D)’’; 
(C) by adding at the end of paragraph (2) the following 
new subparagraphs: 
‘‘(C) COVERAGE
FOR
GENERIC
DRUGS
IN
COVERAGE 
GAP.— 
‘‘(i) IN GENERAL.—Except as provided in paragraph 
(4), the coverage for an applicable beneficiary (as 
defined in section 1860D–14A(g)(1)) has coinsurance 
(for costs above the initial coverage limit under para-
graph (3) and below the out-of-pocket threshold) for 
covered part D drugs that are not applicable drugs 
under section 1860D–14A(g)(2) that is— 
‘‘(I) equal to the generic-gap coinsurance 
percentage (specified in clause (ii)) for the year; 
or 
‘‘(II) actuarially equivalent (using processes 
and methods established under section 1860D– 
11(c)) to an average expected payment of such 
percentage of such costs for covered part D drugs 
that are not applicable drugs under section 1860D– 
14A(g)(2). 
‘‘(ii) GENERIC-GAP
COINSURANCE
PERCENTAGE.— 
The generic-gap coinsurance percentage specified in 
this clause for— 
‘‘(I) 2011 is 93 percent; 
‘‘(II) 2012 and each succeeding year before 
2020 is the generic-gap coinsurance percentage 
under this clause for the previous year decreased 
by 7 percentage points; and 
‘‘(III) 2020 and each subsequent year is 25 
percent. 
‘‘(D) COVERAGE FOR APPLICABLE DRUGS IN COVERAGE 
GAP.— 
‘‘(i) IN GENERAL.—Except as provided in paragraph 
(4), the coverage for an applicable beneficiary (as 
defined in section 1860D–14A(g)(1)) has coinsurance 
(for costs above the initial coverage limit under para-
graph (3) and below the out-of-pocket threshold) for 
the negotiated price (as defined in section 1860D– 
14A(g)(6)) of covered part D drugs that are applicable 
drugs under section 1860D–14A(g)(2) that is— 
‘‘(I) equal to the difference between the 
applicable gap percentage (specified in clause (ii) 
for the year) and the discount percentage specified 
in section 1860D–14A(g)(4)(A) for such applicable 
drugs; or
H. R. 4872—11 
‘‘(II) actuarially equivalent (using processes 
and methods established under section 1860D– 
11(c)) to an average expected payment of such 
percentage of such costs, for covered part D drugs 
that are applicable drugs under section 1860D– 
14A(g)(2). 
‘‘(ii) APPLICABLE GAP PERCENTAGE.—The applicable 
gap percentage specified in this clause for— 
‘‘(I) 2013 and 2014 is 97.5 percent; 
‘‘(II) 2015 and 2016 is 95 percent; 
‘‘(III) 2017 is 90 percent; 
‘‘(IV) 2018 is 85 percent; 
‘‘(V) 2019 is 80 percent; and 
‘‘(VI) 2020 and each subsequent year is 75 
percent.’’; 
(D) in paragraph (3)(A), as restored under subsection 
(a)(2), by striking ‘‘paragraph (4)’’ and inserting ‘‘para-
graphs (2)(C), (2)(D), and (4)’’; and 
(E) in paragraph (4)(E), by inserting before the period 
at the end the following: ‘‘, except that incurred costs 
shall not include the portion of the negotiated price that 
represents the reduction in coinsurance resulting from the 
application of paragraph (2)(D)’’; and 
(4) in section 1860D–22(a)(2)(A), by inserting before the 
period at the end the following: ‘‘, not taking into account 
the value of any discount or coverage provided during the 
gap in prescription drug coverage that occurs between the 
initial coverage limit under section 1860D–2(b)(3) during the 
year and the out-of-pocket threshold specified in section 1860D– 
2(b)(4)(B)’’. 
(c) CONFORMING AMENDMENT TO AMP UNDER MEDICAID.—Sec-
tion 1927(k)(1)(B)(i) of the Social Security Act (42 U.S.C. 1396r– 
8(k)(1)(B)(i)), as amended by section 2503(a)(2)(B) of the Patient 
Protection and Affordable Care Act, is amended— 
(1) by striking ‘‘and’’ at the end of subclause (III); 
(2) by striking the period at the end of subclause (IV); 
and 
(3) by adding at the end the following new subclause: 
‘‘(V) discounts provided by manufacturers 
under section 1860D–14A.’’. 
(d) 
REDUCING
GROWTH
RATE
OF
OUT-OF-POCKET
COST 
THRESHOLD.—Section 1860D–2(b) of the Social Security Act (42 
U.S.C. 1395w–102(b)) is amended— 
(1) in paragraph (4)(B)(i)— 
(A) in subclause (I), by striking ‘‘or’’ at the end; 
(B) by redesignating subclause (II) as subclause (VI); 
and 
(C) by inserting after subclause (I) the following new 
subclauses: 
‘‘(II) for each of years 2007 through 2013, is 
equal to the amount specified in this subparagraph 
for the previous year, increased by the annual 
percentage increase described in paragraph (6) for 
the year involved; 
‘‘(III) for 2014 and 2015, is equal to the amount 
specified in this subparagraph for the previous 
year, increased by the annual percentage increase
H. R. 4872—12 
described in paragraph (6) for the year involved, 
minus 0.25 percentage point; 
‘‘(IV) for each of years 2016 through 2019, 
is equal to the amount specified in this subpara-
graph for the previous year, increased by the lesser 
of— 
‘‘(aa) the annual percentage increase 
described in paragraph (7) for the year 
involved, plus 2 percentage points; or 
‘‘(bb) the annual percentage increase 
described in paragraph (6) for the year; 
‘‘(V) for 2020, is equal to the amount that 
would have been applied under this subparagraph 
for 2020 if the amendments made by section 
1101(d)(1) of the Health Care and Education Rec-
onciliation Act of 2010 had not been enacted; or’’; 
and 
(2) by adding at the end the following new paragraph: 
‘‘(7) ADDITIONAL
ANNUAL
PERCENTAGE
INCREASE.—The 
annual percentage increase specified in this paragraph for a 
year is equal to the annual percentage increase in the consumer 
price index for all urban consumers (United States city average) 
for the 12-month period ending in July of the previous year.’’. 
SEC. 1102. MEDICARE ADVANTAGE PAYMENTS. 
(a) REPEAL.—Effective as if included in the enactment of the 
Patient Protection and Affordable Care Act, sections 3201 and 3203 
of such Act (and the amendments made by such sections) are 
repealed. 
(b) PHASE-IN OF MODIFIED BENCHMARKS.—Section 1853 of the 
Social Security Act (42 U.S.C. 1395w–23) is amended— 
(1) in subsection (j)(1)(A), by striking ‘‘(or, beginning with 
2007, 1⁄12 of the applicable amount determined under subsection 
(k)(1)) for the area for the year’’ and inserting ‘‘for the area 
for the year (or, for 2007, 2008, 2009, and 2010, 1⁄12 of the 
applicable amount determined under subsection (k)(1) for the 
area for the year; for 2011, 1⁄12 of the applicable amount deter-
mined under subsection (k)(1) for the area for 2010; and, begin-
ning with 2012, 1⁄12 of the blended benchmark amount deter-
mined under subsection (n)(1) for the area for the year)’’; and 
(2) by adding at the end the following new subsection: 
‘‘(n) DETERMINATION OF BLENDED BENCHMARK AMOUNT.— 
‘‘(1) IN GENERAL.—For purposes of subsection (j), subject 
to paragraphs (3), (4), and (5), the term ‘blended benchmark 
amount’ means for an area— 
‘‘(A) for 2012 the sum of— 
‘‘(i) 1⁄2 of the applicable amount for the area and 
year; and 
‘‘(ii) 1⁄2 of the amount specified in paragraph (2)(A) 
for the area and year; and 
‘‘(B) for a subsequent year the amount specified in 
paragraph (2)(A) for the area and year. 
‘‘(2) SPECIFIED AMOUNT.— 
‘‘(A) IN
GENERAL.—The amount specified in this 
subparagraph for an area and year is the product of— 
‘‘(i) the base payment amount specified in subpara-
graph (E) for the area and year adjusted to take into
H. R. 4872—13 
account the phase-out in the indirect costs of medical 
education from capitation rates described in subsection 
(k)(4); and 
‘‘(ii) the applicable percentage for the area for the 
year specified under subparagraph (B). 
‘‘(B) APPLICABLE
PERCENTAGE.—Subject to subpara-
graph (D), the applicable percentage specified in this 
subparagraph for an area for a year in the case of an 
area that is ranked— 
‘‘(i) in the highest quartile under subparagraph 
(C) for the previous year is 95 percent; 
‘‘(ii) in the second highest quartile under such 
subparagraph for the previous year is 100 percent; 
‘‘(iii) in the third highest quartile under such 
subparagraph for the previous year is 107.5 percent; 
or 
‘‘(iv) in the lowest quartile under such subpara-
graph for the previous year is 115 percent. 
‘‘(C) PERIODIC RANKING.—For purposes of this para-
graph in the case of an area located— 
‘‘(i) in 1 of the 50 States or the District of 
Columbia, the Secretary shall rank such area in each 
year specified under subsection (c)(1)(D)(ii) based upon 
the level of the amount specified in subparagraph (A)(i) 
for such areas; or 
‘‘(ii) in a territory, the Secretary shall rank such 
areas in each such year based upon the level of the 
amount specified in subparagraph (A)(i) for such area 
relative to quartile rankings computed under clause 
(i). 
‘‘(D) 1-YEAR TRANSITION FOR CHANGES IN APPLICABLE 
PERCENTAGE.—If, for a year after 2012, there is a change 
in the quartile in which an area is ranked compared to 
the previous year, the applicable percentage for the area 
in the year shall be the average of— 
‘‘(i) the applicable percentage for the area for the 
previous year; and 
‘‘(ii) the applicable percentage that would other-
wise apply for the area for the year. 
‘‘(E) BASE PAYMENT AMOUNT.—Subject to subparagraph 
(F), the base payment amount specified in this subpara-
graph— 
‘‘(i) for 2012 is the amount specified in subsection 
(c)(1)(D) for the area for the year; or 
‘‘(ii) for a subsequent year that— 
‘‘(I) 
is 
not 
specified 
under 
subsection 
(c)(1)(D)(ii), is the base amount specified in this 
subparagraph for the area for the previous year, 
increased by the national per capita MA growth 
percentage, described in subsection (c)(6) for that 
succeeding year, but not taking into account any 
adjustment under subparagraph (C) of such sub-
section for a year before 2004; and 
‘‘(II) is specified under subsection (c)(1)(D)(ii), 
is the amount specified in subsection (c)(1)(D) for 
the area for the year.
H. R. 4872—14 
‘‘(F) APPLICATION
OF
INDIRECT
MEDICAL
EDUCATION 
PHASE-OUT.—The base payment amount specified in 
subparagraph (E) for a year shall be adjusted in the same 
manner under paragraph (4) of subsection (k) as the 
applicable amount is adjusted under such subsection. 
‘‘(3) ALTERNATIVE PHASE-INS.— 
‘‘(A) 4-YEAR PHASE-IN FOR CERTAIN AREAS.—If the dif-
ference between the applicable amount (as defined in sub-
section (k)) for an area for 2010 and the projected 2010 
benchmark amount (as defined in subparagraph (C)) for 
the area is at least $30 but less than $50, the blended 
benchmark amount for the area is— 
‘‘(i) for 2012 the sum of— 
‘‘(I) 3⁄4 of the applicable amount for the area 
and year; and 
‘‘(II) 1⁄4 of the amount specified in paragraph 
(2)(A) for the area and year; 
‘‘(ii) for 2013 the sum of— 
‘‘(I) 1⁄2 of the applicable amount for the area 
and year; and 
‘‘(II) 1⁄2 of the amount specified in paragraph 
(2)(A) for the area and year; 
‘‘(iii) for 2014 the sum of— 
‘‘(I) 1⁄4 of the applicable amount for the area 
and year; and 
‘‘(II) 3⁄4 of the amount specified in paragraph 
(2)(A) for the area and year; and 
‘‘(iv) for a subsequent year the amount specified 
in paragraph (2)(A) for the area and year. 
‘‘(B) 6-YEAR PHASE-IN FOR CERTAIN AREAS.—If the dif-
ference between the applicable amount (as defined in sub-
section (k)) for an area for 2010 and the projected 2010 
benchmark amount (as defined in subparagraph (C)) for 
the area is at least $50, the blended benchmark amount 
for the area is— 
‘‘(i) for 2012 the sum of— 
‘‘(I) 5⁄6 of the applicable amount for the area 
and year; and 
‘‘(II) 1⁄6 of the amount specified in paragraph 
(2)(A) for the area and year; 
‘‘(ii) for 2013 the sum of— 
‘‘(I) 2⁄3 of the applicable amount for the area 
and year; and 
‘‘(II) 1⁄3 of the amount specified in paragraph 
(2)(A) for the area and year; 
‘‘(iii) for 2014 the sum of— 
‘‘(I) 1⁄2 of the applicable amount for the area 
and year; and 
‘‘(II) 1⁄2 of the amount specified in paragraph 
(2)(A) for the area and year; 
‘‘(iv) for 2015 the sum of— 
‘‘(I) 1⁄3 of the applicable amount for the area 
and year; and 
‘‘(II) 2⁄3 of the amount specified in paragraph 
(2)(A) for the area and year; and 
‘‘(v) for 2016 the sum of—
H. R. 4872—15 
‘‘(I) 1⁄6 of the applicable amount for the area 
and year; and 
‘‘(II) 5⁄6 of the amount specified in paragraph 
(2)(A) for the area and year; and 
‘‘(vi) for a subsequent year the amount specified 
in paragraph (2)(A) for the area and year. 
‘‘(C) PROJECTED 2010 BENCHMARK AMOUNT.—The pro-
jected 2010 benchmark amount described in this subpara-
graph for an area is equal to the sum of— 
‘‘(i) 1⁄2 of the applicable amount (as defined in 
subsection (k)) for the area for 2010; and 
‘‘(ii) 1⁄2 of the amount specified in paragraph (2)(A) 
for the area for 2010 but determined as if there were 
substituted for the applicable percentage specified in 
clause (ii) of such paragraph the sum of— 
‘‘(I) the applicable percent that would be speci-
fied under subparagraph (B) of paragraph (2) 
(determined without regard to subparagraph (D) 
of such paragraph) for the area for 2010 if any 
reference in such paragraph to ‘the previous year’ 
were deemed a reference to 2010; and 
‘‘(II) the applicable percentage increase that 
would apply to a qualifying plan in the area under 
subsection (o) as if any reference in such subsection 
to 2012 were deemed a reference to 2010 and 
as if the determination of a qualifying county 
under paragraph (3)(B) of such subsection were 
made for 2010. 
‘‘(4) CAP ON BENCHMARK AMOUNT.—In no case shall the 
blended benchmark amount for an area for a year (determined 
taking into account subsection (o)) be greater than the 
applicable amount that would (but for the application of this 
subsection) be determined under subsection (k)(1) for the area 
for the year. 
‘‘(5) NON-APPLICATION
TO
PACE
PLANS.—This subsection 
shall not apply to payments to a PACE program under section 
1894.’’. 
(c) APPLICABLE PERCENTAGE QUALITY INCREASES.—Section 1853 
of such Act (42 U.S.C. 1395w–23), as amended by subsection (b), 
is amended— 
(1) in subsection (j), by inserting ‘‘subject to subsection 
(o),’’ after ‘‘For purposes of this part,’’; 
(2) in subsection (n)(2)(B), as added by subsection (b), by 
inserting ‘‘, subject to subsection (o)’’ after ‘‘as follows’’; and 
(3) by adding at the end the following new subsection: 
‘‘(o) APPLICABLE PERCENTAGE QUALITY INCREASES.— 
‘‘(1) IN GENERAL.—Subject to the succeeding paragraphs, 
in the case of a qualifying plan with respect to a year beginning 
with 2012, the applicable percentage under subsection (n)(2)(B) 
shall be increased on a plan or contract level, as determined 
by the Secretary— 
‘‘(A) for 2012, by 1.5 percentage points; 
‘‘(B) for 2013, by 3.0 percentage points; and 
‘‘(C) for 2014 or a subsequent year, by 5.0 percentage 
points.
H. R. 4872—16 
‘‘(2) INCREASE FOR QUALIFYING PLANS IN QUALIFYING COUN-
TIES.—The increase applied under paragraph (1) for a qualifying 
plan located in a qualifying county for a year shall be doubled. 
‘‘(3) QUALIFYING PLANS AND QUALIFYING COUNTY DEFINED; 
APPLICATION
OF
INCREASES
TO
LOW
ENROLLMENT
AND
NEW 
PLANS.—For purposes of this subsection: 
‘‘(A) QUALIFYING PLAN.— 
‘‘(i) IN
GENERAL.—The term ‘qualifying plan’ 
means, for a year and subject to paragraph (4), a 
plan that had a quality rating under paragraph (4) 
of 4 stars or higher based on the most recent data 
available for such year. 
‘‘(ii) APPLICATION OF INCREASES TO LOW ENROLL-
MENT PLANS.— 
‘‘(I) 2012.—For 2012, the term ‘qualifying plan’ 
includes an MA plan that the Secretary determines 
is not able to have a quality rating under para-
graph (4) because of low enrollment. 
‘‘(II) 2013 AND SUBSEQUENT YEARS.—For 2013 
and subsequent years, for purposes of determining 
whether an MA plan with low enrollment (as 
defined by the Secretary) is included as a quali-
fying plan, the Secretary shall establish a method 
to apply to MA plans with low enrollment (as 
defined by the Secretary) the computation of 
quality rating and the rating system under para-
graph (4). 
‘‘(iii) APPLICATION OF INCREASES TO NEW PLANS.— 
‘‘(I) IN GENERAL.—A new MA plan that meets 
criteria specified by the Secretary shall be treated 
as a qualifying plan, except that in applying para-
graph (1), the applicable percentage under sub-
section (n)(2)(B) shall be increased— 
‘‘(aa) for 2012, by 1.5 percentage points; 
‘‘(bb) for 2013, by 2.5 percentage points; 
and 
‘‘(cc) for 2014 or a subsequent year, by 
3.5 percentage points. 
‘‘(II) NEW MA PLAN DEFINED.—The term ‘new 
MA plan’ means, with respect to a year, a plan 
offered by an organization or sponsor that has 
not had a contract as a Medicare Advantage 
organization in the preceding 3-year period. 
‘‘(B) QUALIFYING COUNTY.—The term ‘qualifying county’ 
means, for a year, a county— 
‘‘(i) that has an MA capitation rate that, in 2004, 
was based on the amount specified in subsection 
(c)(1)(B) for a Metropolitan Statistical Area with a 
population of more than 250,000; 
‘‘(ii) for which, as of December 2009, of the Medi-
care Advantage eligible individuals residing in the 
county at least 25 percent of such individuals were 
enrolled in Medicare Advantage plans; and 
‘‘(iii) that has per capita fee-for-service spending 
that is lower than the national monthly per capita 
cost for expenditures for individuals enrolled under
H. R. 4872—17 
the original medicare fee-for-service program for the 
year. 
‘‘(4) 
QUALITY
DETERMINATIONS
FOR
APPLICATION
OF 
INCREASE.— 
‘‘(A) QUALITY DETERMINATION.—The quality rating for 
a plan shall be determined according to a 5-star rating 
system (based on the data collected under section 1852(e)). 
‘‘(B) PLANS
THAT
FAILED
TO
REPORT.—An MA plan 
which does not report data that enables the Secretary 
to rate the plan for purposes of this paragraph shall be 
counted as having a rating of fewer than 3.5 stars. 
‘‘(5) EXCEPTION
FOR
PACE
PLANS.—This subsection shall 
not apply to payments to a PACE program under section 1894.’’. 
(4) DETERMINATION
OF
MEDICARE
PART
D
LOW-INCOME 
BENCHMARK
PREMIUM.—Section 1860D–14(b)(2)(B)(iii) of the 
Social Security Act (42 U.S.C. 1395w–114(b)(2)(B)(iii)) as 
amended by section 3302 of the Patient Protection and Afford-
able Care Act, is amended by striking ‘‘, determined without 
regard to any reduction in such premium as a result of any 
beneficiary rebate under section 1854(b)(1)(C) or bonus payment 
under section 1853(n)’’ and inserting the following: ‘‘and deter-
mined before the application of the monthly rebate computed 
under section 1854(b)(1)(C)(i) for that plan and year involved 
and, in the case of a qualifying plan, before the application 
of the increase under section 1853(o) for that plan and year 
involved’’. 
(d) BENEFICIARY REBATES.—Section 1854(b)(1)(C) of such Act 
(42 U.S.C. 1395w–24(b)(1)(C)), as amended by section 3202(b) of 
the Patient Protection and Affordable Care Act, is further 
amended— 
(1) in clause (i), by inserting ‘‘(or the applicable rebate 
percentage specified in clause (iii) in the case of plan years 
beginning on or after January 1, 2012)’’ after ‘‘75 percent’’; 
and 
(2) by striking clause (iii), by redesignating clauses (iv) 
and (v) as clauses (vii) and (viii), respectively, and by inserting 
after clause (ii) the following new clauses: 
‘‘(iii) 
APPLICABLE
REBATE
PERCENTAGE.—The 
applicable rebate percentage specified in this clause 
for a plan for a year, based on the system under 
section 1853(o)(4)(A), is the sum of— 
‘‘(I) the product of the old phase-in proportion 
for the year under clause (iv) and 75 percent; 
and 
‘‘(II) the product of the new phase-in propor-
tion for the year under clause (iv) and the final 
applicable rebate percentage under clause (v). 
‘‘(iv) OLD AND NEW PHASE-IN PROPORTIONS.—For 
purposes of clause (iv)— 
‘‘(I) for 2012, the old phase-in proportion is 
2⁄3 and the new phase-in proportion is 1⁄3; 
‘‘(II) for 2013, the old phase-in proportion is 
1⁄3 and the new phase-in proportion is 2⁄3; and 
‘‘(III) for 2014 and any subsequent year, the 
old phase-in proportion is 0 and the new phase- 
in proportion is 1.
H. R. 4872—18 
‘‘(v) FINAL APPLICABLE REBATE PERCENTAGE.—Sub-
ject to clause (vi), the final applicable rebate percentage 
under this clause is— 
‘‘(I) in the case of a plan with a quality rating 
under such system of at least 4.5 stars, 70 percent; 
‘‘(II) in the case of a plan with a quality rating 
under such system of at least 3.5 stars and less 
than 4.5 stars, 65 percent; and 
‘‘(III) in the case of a plan with a quality 
rating under such system of less than 3.5 stars, 
50 percent. 
‘‘(vi) TREATMENT OF LOW ENROLLMENT AND NEW 
PLANS.—For purposes of clause (v)— 
‘‘(I) for 2012, in the case of a plan described 
in subclause (I) of subsection (o)(3)(A)(ii), the plan 
shall be treated as having a rating of 4.5 stars; 
and 
‘‘(II) for 2012 or a subsequent year, in the 
case of a new MA plan (as defined under subclause 
(III) of subsection (o)(3)(A)(iii)) that is treated as 
a qualifying plan pursuant to subclause (I) of such 
subsection, the plan shall be treated as having 
a rating of 3.5 stars.’’. 
(e) CODING INTENSITY ADJUSTMENT.—Section 1853(a)(1)(C)(ii) 
of such Act (42 U.S.C. 1395w–23(a)(1)(C)(ii)) is amended— 
(1) in the heading, by striking ‘‘DURING
PHASEOUT
OF 
BUDGET NEUTRALITY FACTOR’’ and inserting ‘‘OF CODING ADJUST-
MENT’’; 
(2) in the matter before subclause (I), by striking ‘‘through 
2010’’ and inserting ‘‘and each subsequent year’’; and 
(3) in subclause (II)— 
(A) in the first sentence, by inserting ‘‘annually’’ before 
‘‘conduct an analysis’’; 
(B) in the second sentence— 
(i) by inserting ‘‘on a timely basis’’ after ‘‘are incor-
porated’’; and 
(ii) by striking ‘‘only for 2008, 2009, and 2010’’ 
and inserting ‘‘for 2008 and subsequent years’’; 
(C) in the third sentence, by inserting ‘‘and updated 
as appropriate’’ before the period at the end; and 
(D) by adding at the end the following new subclauses: 
‘‘(III) In calculating each year’s adjustment, 
the adjustment factor shall be for 2014, not less 
than the adjustment factor applied for 2010, plus 
1.3 percentage points; for each of years 2015 
through 2018, not less than the adjustment factor 
applied for the previous year, plus 0.25 percentage 
point; and for 2019 and each subsequent year, 
not less than 5.7 percent. 
‘‘(IV) Such adjustment shall be applied to risk 
scores until the Secretary implements risk adjust-
ment using Medicare Advantage diagnostic, cost, 
and use data.’’. 
(f) REPEAL OF COMPARATIVE COST ADJUSTMENT PROGRAM.— 
Section 1860C–1 of the Social Security Act (42 U.S.C. 1395w– 
29), as added by section 241(a) of the Medicare Prescription Drug,
H. R. 4872—19 
Improvement, and Modernization Act of 2003 (Public Law 108– 
173), is repealed. 
SEC. 1103. SAVINGS FROM LIMITS ON MA PLAN ADMINISTRATIVE 
COSTS. 
Section 1857(e) of the Social Security Act (42 U.S.C. 1395w– 
27(e)) is amended by adding at the end the following new paragraph: 
‘‘(4) REQUIREMENT FOR MINIMUM MEDICAL LOSS RATIO.— 
If the Secretary determines for a contract year (beginning with 
2014) that an MA plan has failed to have a medical loss 
ratio of at least .85— 
‘‘(A) the MA plan shall remit to the Secretary an 
amount equal to the product of— 
‘‘(i) the total revenue of the MA plan under this 
part for the contract year; and 
‘‘(ii) the difference between .85 and the medical 
loss ratio; 
‘‘(B) for 3 consecutive contract years, the Secretary 
shall not permit the enrollment of new enrollees under 
the plan for coverage during the second succeeding contract 
year; and 
‘‘(C) the Secretary shall terminate the plan contract 
if the plan fails to have such a medical loss ratio for 
5 consecutive contract years.’’. 
SEC. 1104. DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS. 
Section 1886(r) of the Social Security Act (42 U.S.C. 1395ww(r)), 
as added by section 3133 of the Patient Protection and Affordable 
Care Act and as amended by section 10316 of such Act, is 
amended— 
(1) in paragraph (1), by striking ‘‘2015’’ and inserting 
‘‘2014’’; and 
(2) in paragraph (2)— 
(A) in the matter preceding subparagraph (A), by 
striking ‘‘2015’’ and inserting ‘‘2014’’; 
(B) in subparagraph (B)(i)— 
(i) in the heading, by inserting ‘‘2014,’’ after 
‘‘YEARS’’; 
(ii) in the matter preceding subclause (I), by 
inserting ‘‘2014,’’ after ‘‘each of fiscal years’’; 
(iii) in subclause (I), by striking ‘‘on such Act’’ 
and inserting ‘‘on the Health Care and Education Rec-
onciliation Act of 2010’’; and 
(iv) in the matter following subclause (II), by 
striking ‘‘minus 1.5 percentage points’’ and inserting 
‘‘minus 0.1 percentage points for fiscal year 2014 and 
minus 0.2 percentage points for each of fiscal years 
2015, 2016, and 2017’’; and 
(C) in subparagraph (B)(ii), in the matter following 
subclause (II), by striking ‘‘and, for each of 2018 and 2019, 
minus 1.5 percentage points’’ and inserting ‘‘minus 0.2 
percentage points for each of fiscal years 2018 and 2019’’. 
SEC. 1105. MARKET BASKET UPDATES. 
(a) IPPS.—Section 1886(b)(3)(B) of the Social Security Act (42 
U.S.C. 1395ww(b)(3)(B)), as amended by sections 3401(a)(4) and 
10319(a) of the Patient Protection and Affordable Care Act, is 
amended—
H. R. 4872—20 
(1) in clause (xii)— 
(A) by placing the subclause (II) (inserted by section 
10319(a)(3) of the Patient Protection and Affordable Care 
Act) immediately after subclause (I) and, in such subclause 
(II), by striking ‘‘and’’ at the end; and 
(B) by striking subclause (III) and inserting the fol-
lowing: 
‘‘(III) for fiscal year 2014, by 0.3 percentage point; 
‘‘(IV) for each of fiscal years 2015 and 2016, by 0.2 percent-
age point; and 
‘‘(V) for each of fiscal years 2017, 2018, and 2019, by 
0.75 percentage point.’’; and 
(2) by striking clause (xiii). 
(b) LONG-TERM CARE HOSPITALS.—Section 1886(m)(4) of the 
Social Security Act (42 U.S.C. 1395ww(m)(4)), as added by section 
3401(c) of the Patient Protection and Affordable Care Act and 
amended by section 10319(b) of such Act, is amended— 
(1) in subparagraph (A)— 
(A) in clause (iii), by striking ‘‘and’’ at the end; and 
(B) by striking clause (iv) and inserting the following: 
‘‘(iv) for rate year 2014, 0.3 percentage point; 
‘‘(v) for each of rate years 2015 and 2016, 0.2 
percentage point; and 
‘‘(vi) for each of rate years 2017, 2018, and 2019, 
0.75 percentage point.’’; 
(2) by striking subparagraph (B); and 
(3) by striking ‘‘(4) OTHER ADJUSTMENT.—’’ and all that 
follows through ‘‘For purposes’’ and inserting ‘‘(4) OTHER 
ADJUSTMENT.—For purposes’’ (and redesignating clauses (i) 
through (vi) as subparagraphs (A) through (F), respectively, 
with appropriate indentation). 
(c) 
INPATIENT
REHABILITATION
FACILITIES.—Section 
1886(j)(3)(D) of the Social Security Act (42 U.S.C. 1395ww(j)(3)(D)), 
as added by section 3401(d)(2) of the Patient Protection and Afford-
able Care Act and amended by section 10319(c) of such Act, is 
amended— 
(1) in clause (i)— 
(A) by placing the subclause (II) (inserted by section 
10319(c)(3) of the Patient Protection and Affordable Care 
Act) immediately after subclause (I) and, in such subclause 
(II), by striking ‘‘and’’ at the end; and 
(B) by striking subclause (III) and inserting the fol-
lowing: 
‘‘(III) for fiscal year 2014, 0.3 percentage point; 
‘‘(IV) for each of fiscal years 2015 and 2016, 
0.2 percentage point; and 
‘‘(V) for each of fiscal years 2017, 2018, and 
2019, 0.75 percentage point.’’; 
(2) by striking clause (ii); and 
(3) by striking ‘‘(D) OTHER ADJUSTMENT.—’’ and all that 
follows through ‘‘For purposes’’ and inserting ‘‘(D) OTHER 
ADJUSTMENT.—For purposes’’ (and redesignating subclauses (I) 
through (V) as clauses (i) through (v), respectively, with appro-
priate indentation). 
(d) PSYCHIATRIC HOSPITALS.—Section 1886(s)(3) of the Social 
Security Act, as added by section 3401(f) of the Patient Protection
H. R. 4872—21 
and Affordable Care Act and amended by section 10319(e) of such 
Act, is amended— 
(1) in subparagraph (A)— 
(A) by placing the clause (ii) (inserted by section 
10319(e)(3) of the Patient Protection and Affordable Care 
Act) immediately after clause (i) and, in such clause (ii), 
by striking ‘‘and’’ at the end; and 
(B) by striking clause (iii) and inserting the following: 
‘‘(iii) for the rate year beginning in 2014, 0.3 
percentage point; 
‘‘(iv) for each of the rate years beginning in 2015 
and 2016, 0.2 percentage point; and 
‘‘(v) for each of the rate years beginning in 2017, 
2018, and 2019, 0.75 percentage point.’’; 
(2) by striking subparagraph (B); and 
(3) by striking ‘‘(3) OTHER ADJUSTMENT.—’’ and all that 
follows through ‘‘For purposes’’ and inserting ‘‘(3) OTHER 
ADJUSTMENT.—For purposes’’ (and redesignating clauses (i) 
through (v) as subparagraphs (A) through (E), respectively, 
with appropriate indentation). 
(e) OUTPATIENT HOSPITALS.—Section 1833(t)(3)(G) of the Social 
Security Act (42 U.S.C. 1395l(t)(3)(G)), as added by section 3401(i)(2) 
of the Patient Protection and Affordable Care Act and amended 
by section 10319(g) of such Act, is amended— 
(1) in clause (i)— 
(A) by placing the subclause (II) (inserted by section 
10319(g)(3) of the Patient Protection and Affordable Care 
Act) immediately after subclause (I) and, in such subclause 
(II), by striking ‘‘and’’ at the end; and 
(B) by striking subclause (III) and inserting the fol-
lowing: 
‘‘(III) for 2014, 0.3 percentage point; 
‘‘(IV) for each of 2015 and 2016, 0.2 percentage 
point; and 
‘‘(V) for each of 2017, 2018, and 2019, 0.75 
percentage point.’’; 
(2) by striking clause (ii); and 
(3) by striking ‘‘(G) OTHER ADJUSTMENT.—’’ and all that 
follows through ‘‘For purposes’’ and inserting ‘‘(G) OTHER 
ADJUSTMENT.—For purposes’’ (and redesignating subclauses (I) 
through (V) as clauses (i) through (v), respectively, with appro-
priate indentation). 
SEC. 1106. PHYSICIAN OWNERSHIP-REFERRAL. 
Section 1877(i) of the Social Security Act (42 U.S.C. 1395nn(i)), 
as added by section 6001(a)(3) of the Patient Protection and Afford-
able Care Act and as amended by section 10601(a) of such Act, 
is amended— 
(1) in paragraph (1)(A)(i), by striking ‘‘August 1, 2010’’ 
and inserting ‘‘December 31, 2010’’; and 
(2) in paragraph (3)— 
(A) in subparagraph (A)(i), by striking ‘‘an applicable 
hospital (as defined in subparagraph (E))’’ and inserting 
‘‘a hospital that is an applicable hospital (as defined in 
subparagraph (E)) or is a high Medicaid facility described 
in subparagraph (F)’’;
H. R. 4872—22 
(B) in subparagraph (C)(iii), by inserting after ‘‘date 
of enactment of this subsection’’ the following: ‘‘(or, in the 
case of a hospital that did not have a provider agreement 
in effect as of such date but does have such an agreement 
in effect on December 31, 2010, the effective date of such 
provider agreement)’’; 
(C) by redesignating subparagraphs (F) through (H) 
as subparagraphs (G) through (I), respectively; and 
(D) by inserting after subparagraph (E) the following 
new subparagraph: 
‘‘(F) HIGH MEDICAID FACILITY DESCRIBED.—A high Med-
icaid facility described in this subparagraph is a hospital 
that— 
‘‘(i) is not the sole hospital in a county; 
‘‘(ii) with respect to each of the 3 most recent 
years for which data are available, has an annual 
percent of total inpatient admissions that represent 
inpatient admissions under title XIX that is estimated 
to be greater than such percent with respect to such 
admissions for any other hospital located in the county 
in which the hospital is located; and 
‘‘(iii) meets the conditions described in subpara-
graph (E)(iii).’’. 
SEC. 1107. PAYMENT FOR IMAGING SERVICES. 
Section 1848 of the Social Security Act (42 U.S.C. 1395w– 
4), as amended by section 3135(a) of the Patient Protection and 
Affordable Care Act, is amended— 
(1) in subsection (b)(4)— 
(A) in subparagraph (B), by striking ‘‘this paragraph’’ 
and inserting ‘‘subparagraph (A)’’; and 
(B) by amending subparagraph (C) to read as follows: 
‘‘(C) ADJUSTMENT IN IMAGING UTILIZATION RATE.—With 
respect to fee schedules established for 2011 and subse-
quent years, in the methodology for determining practice 
expense relative value units for expensive diagnostic 
imaging equipment under the final rule published by the 
Secretary in the Federal Register on November 25, 2009 
(42 CFR 410 et al.), the Secretary shall use a 75 percent 
assumption instead of the utilization rates otherwise estab-
lished in such final rule.’’; and 
(2) in subsection (c)(2)(B)(v), by striking subclauses (III), 
(IV), and (V) and inserting the following new subclause: 
‘‘(III) CHANGE IN UTILIZATION RATE FOR CER-
TAIN IMAGING SERVICES.—Effective for fee sched-
ules established beginning with 2011, reduced 
expenditures attributable to the change in the 
utilization rate applicable to 2011, as described 
in subsection (b)(4)(C).’’. 
SEC. 1108. PE GPCI ADJUSTMENT FOR 2010. 
Effective as if included in the enactment of the Patient Protec-
tion and Affordable Care Act, section 1848(e)(1)(H)(i) of the Social 
Security Act (42 U.S.C. 1395w–4(e)(1)(H)(i)), as added by section 
3102(b)(2) of the Patient Protection and Affordable Care Act, is 
amended by striking ‘‘3⁄4’’ and inserting ‘‘1⁄2’’.
H. R. 4872—23 
SEC. 1109. PAYMENT FOR QUALIFYING HOSPITALS. 
(a) IN GENERAL.—From the amount available under subsection 
(b), the Secretary of Health and Human Services shall provide 
for a payment to qualifying hospitals (as defined in subsection 
(d)) for fiscal years 2011 and 2012 of the amount determined under 
subsection (c). 
(b) AMOUNTS AVAILABLE.—There shall be available from the 
Federal Hospital Insurance Trust Fund $400,000,000 for payments 
under this section for fiscal years 2011 and 2012. 
(c) PAYMENT AMOUNT.—The amount of payment under this 
section for a qualifying hospital shall be determined, in a manner 
consistent with the amount available under subsection (b), in 
proportion to the portion of the amount of the aggregate payments 
under section 1886(d) of the Social Security Act to the hospital 
for fiscal year 2009 bears to the sum of all such payments to 
all qualifying hospitals for such fiscal year. 
(d) QUALIFYING HOSPITAL DEFINED.—In this section, the term 
‘‘qualifying hospital’’ means a subsection (d) hospital (as defined 
for purposes of section 1886(d) of the Social Security Act) that 
is located in a county that ranks, based upon its ranking in age, 
sex, and race adjusted spending for benefits under parts A and 
B under title XVIII of such Act per enrollee, within the lowest 
quartile of such counties in the United States. 
Subtitle C—Medicaid 
SEC. 1201. FEDERAL FUNDING FOR STATES. 
Section 1905 of the Social Security Act (42 U.S.C. 1396d), 
as amended by sections 2001(a)(3) and 10201(c) of the Patient 
Protection and Affordable Care Act, is amended— 
(1) in subsection (y)— 
(A) by redesignating subclause (II) of paragraph 
(1)(B)(ii) as paragraph (5) of subsection (z) and realigning 
the left margins accordingly; and 
(B) by striking paragraph (1) and inserting the fol-
lowing: 
‘‘(1) AMOUNT
OF
INCREASE.—Notwithstanding subsection 
(b), the Federal medical assistance percentage for a State that 
is one of the 50 States or the District of Columbia, with respect 
to amounts expended by such State for medical assistance 
for newly eligible individuals described in subclause (VIII) of 
section 1902(a)(10)(A)(i), shall be equal to— 
‘‘(A) 100 percent for calendar quarters in 2014, 2015, 
and 2016; 
‘‘(B) 95 percent for calendar quarters in 2017; 
‘‘(C) 94 percent for calendar quarters in 2018; 
‘‘(D) 93 percent for calendar quarters in 2019; and 
‘‘(E) 90 percent for calendar quarters in 2020 and each 
year thereafter.’’; and 
(2) in subsection (z)— 
(A) in paragraph (1), by striking ‘‘September 30, 2019’’ 
and inserting ‘‘December 31, 2015’’ and by striking ‘‘sub-
section (y)(1)(B)(ii)(II)’’ and inserting ‘‘paragraph (3)’’; 
(B) by striking paragraphs (2) through (4) and inserting 
the following:
H. R. 4872—24 
‘‘(2)(A) For calendar quarters in 2014 and each year there-
after, the Federal medical assistance percentage otherwise 
determined under subsection (b) for an expansion State 
described in paragraph (3) with respect to medical assistance 
for individuals described in section 1902(a)(10)(A)(i)(VIII) who 
are nonpregnant childless adults with respect to whom the 
State may require enrollment in benchmark coverage under 
section 1937 shall be equal to the percent specified in subpara-
graph (B)(i) for such year. 
‘‘(B)(i) The percent specified in this subparagraph for a 
State for a year is equal to the Federal medical assistance 
percentage (as defined in the first sentence of subsection (b)) 
for the State increased by a number of percentage points equal 
to the transition percentage (specified in clause (ii) for the 
year) of the number of percentage points by which— 
‘‘(I) such Federal medical assistance percentage for 
the State, is less than 
‘‘(II) the percent specified in subsection (y)(1) for the 
year. 
‘‘(ii) The transition percentage specified in this clause for— 
‘‘(I) 2014 is 50 percent; 
‘‘(II) 2015 is 60 percent; 
‘‘(III) 2016 is 70 percent; 
‘‘(IV) 2017 is 80 percent; 
‘‘(V) 2018 is 90 percent; and 
‘‘(VI) 2019 and each subsequent year is 100 percent.’’; 
and 
(C) by redesignating paragraph (5) (as added by para-
graph (1)(A) of this section) as paragraph (3), realigning 
the left margins to align with paragraph (2), and striking 
the heading and all that follows through ‘‘a State is’’ and 
inserting ‘‘A State is’’. 
SEC. 1202. PAYMENTS TO PRIMARY CARE PHYSICIANS. 
(a) IN GENERAL.— 
(1) FEE-FOR-SERVICE PAYMENTS.—Section 1902 of the Social 
Security Act (42 U.S.C. 1396a), as amended by section 
2303(a)(2) of the Patient Protection and Affordable Care Act, 
is amended— 
(A) in subsection (a)(13)— 
(i) by striking ‘‘and’’ at the end of subparagraph 
(A); 
(ii) by adding ‘‘and’’ at the end of subparagraph 
(B); and 
(iii) by adding at the end the following new 
subparagraph: 
‘‘(C) payment for primary care services (as defined 
in subsection (jj)) furnished in 2013 and 2014 by a physician 
with a primary specialty designation of family medicine, 
general internal medicine, or pediatric medicine at a rate 
not less than 100 percent of the payment rate that applies 
to such services and physician under part B of title XVIII 
(or, if greater, the payment rate that would be applicable 
under such part if the conversion factor under section 
1848(d) for the year involved were the conversion factor 
under such section for 2009);’’; and 
(B) by adding at the end the following new subsection: