section (c)(3), the contract shall be subject to open com-
petition. 
‘‘(2) Before publishing a request for proposal for a 
contract period, the Secretary shall, in consultation with 
the strategic advisory committee appointed under section 
1164(c)(1), establish measurable goals for each task to be 
included in such proposal. The contract shall include a 
performance threshold by which an organization holding 
a contract under this section may demonstrate excellent 
performance. The Secretary may not establish such per-
formance thresholds in such a way as to predetermine or 
limit either the number or percentage of organizations 
which may demonstrate excellent performance. 
‘‘(3) The Secretary shall publish the request for pro-
posals no later than four months prior to the beginning 
of such contract period. 
‘‘(4) The Secretary shall utilize the strategic advisory 
committee appointed under section 1164(c)(1) to qualify 
the validity, reliability, and feasibility of measures to be 
used in evaluating the performance of organizations hold-
ing a contract under this section. Before any performance 
measure may be used for such purpose, it must have been 
designated by such committee to be valid, reliable, and fea-
sible for use under similar circumstances, as demonstrated 
in at least one reliable and valid study. 
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‘‘(5) In the case of an open competition for a contract 
under this section, if an organization bidding for the con-
tract demonstrates excellent performance in fulfilling the 
terms of such a contract during the previous contract pe-
riod, the Secretary shall award the bidder a bonus equiva-
lent to ten percent of the total possible score for the pro-
posal. 
‘‘(6) The Secretary may not reduce the amount of 
a contract award below the amount proposed by the bidder 
prevailing in a competitive bidding process. 
‘‘(7) The Secretary shall design the process for per-
formance evaluation of contracts under this section— 
‘‘(A) to avoid interfering with the work of con-
tractors with plans, providers, and practitioners; 
‘‘(B) to hold harmless and not penalize contrac-
tors when performance is impaired or delayed by 
failures of the Secretary, personnel of the Depart-
ment of Health and Human Services, or contractors 
of the Secretary to provide timely deliverables by 
other entities; 
‘‘(C) to use a continuous measurement strategy 
with provision for frequent performance updates for 
evaluating interim progress; and 
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‘‘(D) to require that evaluation metrics be mon-
itored and adjusted based on experience or evolving 
science over the course of a contract cycle. 
‘‘(8) At the end of each 5-year contract term, the Sec-
retary may, without full and open competition, extend the 
term for an additional period of 5 years if the Secretary 
determines that the organization holding the contract has 
achieved excellent performance during the previous 5-year 
term. But in no case shall an organization be allowed to 
maintain such a contract for a period of longer than 10 
years without being subject to full and open competition.’’. 
SEC. 205. QUALITY IMPROVEMENT FUNDING. 
Section 1159 of the Social Security Act (42 U.S.C. 
1320c–8) is amended— 
(1) by inserting ‘‘(a)’’ before ‘‘Expenses in-
curred’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(b)(1) The aggregate annual funding under con-
tracts under this part for fiscal year 2007 and each subse-
quent fiscal year shall not be less than $421,666,000. In 
addition, there are authorized to be appropriated for con-
tract periods in subsequent fiscal years such additional 
amounts funds as may be necessary to adequately fund 
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any resource needs over the amount provided under the 
previous sentence. 
‘‘(2) At least 80 percent of the funding under this 
part in a contract period shall be expended in support of 
core contracts held by organizations under this part. 
‘‘(3) The Secretary shall determine the resource 
needs for a contract period in consultation with represent-
atives from existing contractors. The determination shall 
take into account factors including any new work added 
via contract modification during the course of the contract 
period or added from one contract cycle to the next cycle. 
New work includes— 
‘‘(A) additional core contract tasks, require-
ments, deliverables, and performance thresholds; 
‘‘(B) technical assistance for additional pro-
viders, practitioners, and health plans and additional 
provider settings; 
‘‘(C) increased outreach and communications to 
Medicare beneficiaries, providers, practitioners, and 
plans; and 
‘‘(D) increased volume of medical reviews. 
‘‘(4) With respect to the apportionment of funds 
under this part for a contract period— 
‘‘(A) the Secretary shall submit a proposed ap-
portionment to the Director of the Office of Manage-
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ment and Budget no later than 1 year before the 
first date of the contract period; 
‘‘(B) such Director shall approve or deny the 
proposed apportionment no later than 9 months be-
fore the first date of such contract period; 
‘‘(C) for tasks the Secretary proposes to con-
tinue from the previous contract period, if the ap-
portionment is not authorized by the deadline speci-
fied in subparagraph (B), funding shall continue for 
the next contract period at a level no less than the 
level for the previous contract period, increased by 
the percentage increase in the consumer price index 
for all urban consumers during the preceding 12- 
month period. 
‘‘(5) Organizations with a contract under this part 
may enter into contracts with public or private entities in-
cluding providers, practitioners, and payers other than 
Secretary, to provide quality improvement or other forms 
of technical assistance if there were arrangements made 
to avoid potential conflicts of interest. 
‘‘(6) Such organizations shall have the ability to meet 
the terms of a contract by allocating funds to functions 
established by the Secretary at its discretion. The Sec-
retary shall review the allocation of these funds and 
whether the organization met the functions and goals set 
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out for the organization, regardless of allocation of funds 
at the initial acceptance of the contract.’’. 
SEC. 206. QUALIFICATIONS FOR QIOS. 
(a) IN GENERAL.—Section 1153(b) of the Social Se-
curity Act (42 U.S.C. 1320c–2(b)) is amended by adding 
at the end the following new paragraph: 
‘‘(4) The Secretary shall not enter into or renew a 
contract under this section with an entity unless the fol-
lowing requirements are met: 
‘‘(A) The entity’s governing body must reflect 
representation of consumers and other stakeholders. 
‘‘(B) The entity must have demonstrated suc-
cess in facilitating clinical and administrative system 
redesign to improve the coordination, effectiveness, 
and safety of health care, and in facilitating co-
operation among stakeholders in quality improve-
ment.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to contract periods beginning 
after the date of the enactment of this Act. 
SEC. 207. COORDINATION WITH MEDICAID. 
(a) PERMITTING ALTERNATIVE QUALITY IMPROVE-
MENT PROGRAM.—Section 1902(a)(30) of the Social Se-
curity Act (42 U.S.C. 1396a(a)(30)) is amended by strik-
ing ‘‘and’’ at the end of subparagraph (A), by adding 
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‘‘and’’ and the end of subparagraph (B), and by adding 
at the end the following new subparagraph: 
‘‘(C) provide, at the discretion of the State 
plan, for a quality improvement program in 
place of the program described in subparagraph 
(A), in whole or in part, that— 
‘‘(i) establishes priorities for achieving 
significant measurable improvement in the 
quality of health care services provided to 
individuals eligible under this title, and re-
views such priorities at least every five 
years for the purpose of making appro-
priate revisions; 
‘‘(ii) provides quality improvement as-
sistance to providers and practitioners con-
sistent with such priorities; and 
‘‘(iii) provides for an annual report to 
the Secretary on quality performance 
under such plan of providers and practi-
tioners using nationally standardized qual-
ity measures;’’. 
(b) ROLE OF QIOS.—Section 1902(d) of such Act 
(42 U.S.C. 1396a(d)) is amended— 
(1) by inserting ‘‘(1)’’ after ‘‘(d)’’; and 
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(2) by adding at the end the following new 
paragraph: 
‘‘(2) If a State contracts with a Quality Improvement 
Organization having a contract with the Secretary under 
part B of title XI for the performance of quality improve-
ment program activities required by subsection (a)(30)(C), 
such requirements shall be deemed to be met for those 
activities by delegation to such an Organization if the con-
tract provides for the performance of activities not incon-
sistent with part B of title XI and provides for such assur-
ances of satisfactory performance by such an entity or or-
ganization as the Secretary may prescribe.’’. 
(c) FUNDING.—Section 1903(a)(3)(C) of such Act 
(42 U.S.C. 1396b(a)(3)(C)) is amended— 
(1) in clause (i), by striking ‘‘1902(d)’’ and in-
serting ‘‘1902(d)(1)’’; and 
(2) by adding at the end the following new 
clause: 
‘‘(iii) 75 percent of the sums expended 
with respect to costs incurred during such 
quarter (as found necessary by the Sec-
retary for the proper and efficient adminis-
tration of the State plan) as are attrib-
utable to the performance of quality im-
provement program activities by a Quality 
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Improvement Organization under a con-
tract 
entered 
into 
under 
section 
1902(d)(2); and’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contract periods beginning after 
the date of the enactment of this Act 
TITLE III—MEDICARE SAVINGS 
AND OTHER PROVISIONS 
SEC. 301. ELIMINATION OF STABILIZATION FUND FOR RE-
GIONAL PPOS. 
(a) IN GENERAL.—Except as provided in subsection 
(b), no funds shall be available for obligation, on or after 
the date of the enactment of this Act, from the MA Re-
gional Plan Stabilization Fund (under section 1858(e) of 
the Social Security Act). 
(b) AVAILABILITY OF FREED UP FUNDS.—Amounts 
in such MA Regional Plan Stabilization Fund that are not 
otherwise obligated shall be transferred and deposited into 
the Medicare Supplementary Medical Insurance Trust 
Fund under section 1841 of the Social Security Act (42 
U.S.C. 1395t) without additional appropriation to cover 
additional expenditures resulting from the amendments 
made by section title I of this Act. 
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SEC. 302. ONGOING EXAMINATION OF MEDICARE FUNDING. 
(a) EXAMINATION BY BOARD OF TRUSTEES.—The 
Board of Trustees of the Federal Hospital Insurance 
Trust Fund and of the Federal Supplementary Medical 
Insurance Trust Fund shall monitor and examine the ex-
tent to which the different funding mechanisms under 
parts A, B, and D of title XVIII of the Social Security 
Act provide an appropriate alignment with the program 
goals of the respective parts. Such examination shall in-
clude an examination of each of the following: 
(1) The extent to which, as volume of services 
increases in physician settings under such part B, 
there is a corresponding reduction in similar services 
provided in a hospital setting under such part A. 
(2) The extent to which, as a result of increased 
coordination between physicians and the delivery of 
prescription drugs under such part D, particularly 
with respect to individuals with chronic conditions, 
there will there be a decrease in hospitalizations 
under such part A. 
(3) The extent to which other changes in physi-
cian or other health care practice results in a shift-
ing of expenditures among the various parts. 
(b) INCLUSION IN ANNUAL REPORTS.—In each an-
nual report submitted to the Congress after the date of 
the enactment of this Act under section 1817(b)(2) or sec-
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tion 1841(b)(2) of the Social Security Act (42 U.S.C. 
1395i(b)(2), 1395t(b)(2)), such Board of Trustees shall 
include information on the matters described in subsection 
(a). 
SEC. 303. ONE-YEAR DELAY IN MEDICARE ADJUSTMENTS IN 
PAYMENTS FOR IMAGING SERVICES; IOM 
STUDY ON UTILIZATION AND APPROPRIATE-
NESS OF IMAGING SERVICES. 
(a) DELAY.—Subsections (b)(4)(A), (c)(2)(B)(v)(I), 
and (c)(2)(B)(v)(II) of section 1848 of the Social Security 
Act (42 U.S.C. 1395w–4), as amended by section 5102 
of the Deficit Reduction Act of 2005 (Public Law 109– 
171) are each amended by striking ‘‘2007’’ and inserting 
‘‘2008’’. 
(b) STUDY AND REPORT ON UTILIZATION AND AP-
PROPRIATENESS OF IMAGING SERVICES.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services shall request (and shall enter into 
a contract with) the Institute of Medicine to conduct 
a study of the utilization and appropriateness of im-
aging services described in section 1848(b)(4)(B) of 
the Social Security Act (42 U.S.C. 1395w– 
4(b)(4)(B)) under the Medicare program and to sub-
mit to the Secretary, not later than April 1, 2007, 
a report on such study, including recommendations 
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