(B) in clause (i), by striking ‘‘0.5’’ and in-
serting ‘‘1.0’’; 
(C) in clause (ii), by striking ‘‘1.0’’ and in-
serting ‘‘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)— 
(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 Rev-
enue Code of 1986, as added by section 1513 of the Pa-
tient 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 in-
dividuals 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 sub-
paragraph (C)(i), only 1 reduction under 
subclause (I) or (II) shall be allowed with
respect to such persons and such reduction 
shall be allocated among such persons rat-
ably on the basis of the number of full- 
time employees employed by each such per-
son.’’. 
(b) 
APPLICABLE
PAYMENT
AMOUNT.—Section 
4980H of such Code, as so added and amended, is amend-
ed— 
(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 pre-
ceding clause (i), by striking ‘‘subsection (b)(2) and 
(d)(1)’’ and inserting ‘‘subsection (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 pur-
poses 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 de-
termined, include for such month a number of 
full-time employees determined by dividing the 
aggregate number of hours of service of employ-
ees 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), respec-
tively. 
SEC. 1004. INCOME DEFINITIONS. 
(a) MODIFIED ADJUSTED GROSS INCOME.— 
(1) IN GENERAL.—The following provisions of 
the Internal Revenue Code of 1986 are each amend-
ed by striking ‘‘modified gross’’ each place it ap-
pears 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
IN-
COME.—The term ‘modified adjusted gross in-
come’ 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 tax-
able 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
IN-
COME.—The term ‘modified adjusted gross in-
come’ 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 tax-
able year which is exempt from tax.’’. 
(b) MODIFIED ADJUSTED GROSS INCOME DEFINI-
TION.— 
(1) MEDICAID.—Section 1902 of the Social Se-
curity 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 in-
serting ‘‘modified adjusted gross income’’: 
(A) Paragraph (14) of subsection (e), as 
added by section 2002(a) of the Patient Protec-
tion 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 sec-
tion 2101(d)(1) of the Patient Protection and 
Affordable Care Act, is amended by striking 
‘‘modified gross income’’ and inserting ‘‘modi-
fied adjusted gross income’’. 
(B) 
PLAN
ADMINISTRATION.—Section 
2107(e)(1)(E) of the Social Security Act (42
or cost-sharing reductions under section 1402 
of such Act. 
‘‘(C) The aggregate amount of any ad-
vance 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 Ex-
change, including any change of circumstances, 
necessary to determine eligibility for, and the 
amount of, such credit. 
‘‘(F) Information necessary to determine 
whether a taxpayer 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 (relat-
ing to amounts expended for medical care) is amend-
ed— 
(A) by striking ‘‘and his dependents’’ and 
inserting ‘‘his dependents’’; and
(B) by inserting before the period the fol-
lowing: ‘‘, and 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’’. 
(2) SELF-EMPLOYED HEALTH INSURANCE DE-
DUCTION.—Section 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 mean-
ing 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 DEDUC-
TION.—Section 162(l)(2)(B) of such Code is amend-
ed by inserting ‘‘, or any dependent, or individual 
described in subparagraph (D) of paragraph (1) 
with respect to,’’ after ‘‘spouse of’’.
(4) SICK AND ACCIDENT BENEFITS PROVIDED 
TO MEMBERS OF A VOLUNTARY EMPLOYEES’ BENE-
FICIARY ASSOCIATION AND THEIR DEPENDENTS.— 
Section 501(c)(9) of such Code is amended by add-
ing at the end the following new sentence: ‘‘For pur-
poses of providing for the payment of sick and acci-
dent 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 cal-
endar year has not attained age 27.’’. 
(5) MEDICAL AND OTHER BENEFITS FOR RE-
TIRED 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 de-
fined 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 CER-
TAIN INDIVIDUALS.—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 sub-
paragraph: 
‘‘(I) TREATMENT OF PORTION OF MODI-
FIED ADJUSTED GROSS INCOME.—For purposes 
of determining the income eligibility of an indi-
vidual for medical assistance whose eligibility is 
determined based on the application of modified 
adjusted gross income under subparagraph (A), 
the State shall— 
‘‘(i) determine the dollar equivalent of 
the difference between the upper income 
limit on eligibility for such an individual 
(expressed as a percentage of the poverty 
line) and such upper income limit in-
creased by 5 percentage points; and 
‘‘(ii) notwithstanding the requirement 
in subparagraph (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 Insurance 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 appro-
priated, $1,000,000,000 for Federal administrative ex-
penses 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.— 
(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 sec-
tion 1860D–14A(g)(1) who as of the last day of a 
calendar quarter in 2010 has incurred costs for cov-
ered part D drugs so that the individual has exceed-
ed the initial coverage limit under section 1860D– 
2(b)(3) for 2010, the Secretary shall provide for 
payment from the Medicare Prescription Drug Ac-
count of $250 to the individual 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 payment under this subsection with respect to 
any individual.’’. 
(2) REPEAL OF PROVISION.—Section 3315 of 
the Patient Protection and Affordable Care Act (in-
cluding the amendments made by such section) is re-
pealed, and any provision of law amended or re-
pealed 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 Pro-
tection 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 in-
serting ‘‘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 in-
serting ‘‘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 agree-
ment under subsection (a)’’; 
(C) in subsection (c)— 
(i) in paragraph (1)(A)(iii), by strik-
ing ‘‘July 1, 2010, and ending on Decem-
ber 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’’; 
(ii) by adding ‘‘and’’ at the end of 
subparagraph (C); 
(iii) by striking subparagraph (D); 
and 
(iv) by redesignating subparagraph 
(E) as subparagraph (D); and 
(3) in section 1860D–2(b)— 
(A) in paragraph (2)(A), by striking ‘‘The 
coverage’’ and inserting ‘‘Subject to subpara-
graphs (C) and (D), the coverage’’; 
(B) in paragraph (2)(B), by striking ‘‘sub-
paragraph (A)(ii)’’ and inserting ‘‘subpara-
graphs (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 pro-
vided 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 
paragraph (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 co-
insurance percentage (specified in 
clause (ii)) for the year; or 
‘‘(II) 
actuarially 
equivalent 
(using processes and methods estab-
lished 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 coinsur-
ance 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 pro-
vided 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 
paragraph (3) and below the out-of-pocket 
threshold) for the negotiated price (as de-
fined in section 1860D–14A(g)(6)) of cov-
ered part D drugs that are applicable 
drugs under section 1860D–14A(g)(2) that 
is—
‘‘(I) equal to the difference be-
tween 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 
‘‘(II) 
actuarially 
equivalent 
(using processes and methods estab-
lished 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
PERCENT-
AGE.—The applicable gap percentage spec-
ified in this clause for— 
‘‘(I) 2013 and 2014 is 97.5 per-
cent; 
‘‘(II) 2015 and 2016 is 95 per-
cent; 
‘‘(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 ‘‘paragraphs (2)(C), (2)(D), and 
(4)’’; 
(E) in paragraph (4)(E), by inserting be-
fore the period at the end the following: ‘‘, ex-
cept 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 cov-
erage 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.—Section 1927(k)(1)(B)(i) of the Social Secu-
rity Act (42 U.S.C. 1396r–8(k)(1)(B)(i)), as amended by 
section 2503(a)(2)(B) of the Patient Protection and Af-
fordable Care Act, is amended—
(1) by striking ‘‘and’’ at the end of subclause 
(III); 
(2) by striking the period at the end of sub-
clause (IV); and 
(3) by adding at the end the following new sub-
clause: 
‘‘(V) discounts provided by man-
ufacturers 
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 sub-
clause (VI); and 
(C) by inserting after subclause (I) the fol-
lowing 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 para-
graph (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 in-
crease described in paragraph (6) for 
the year involved, minus 0.25 percent-
age point; 
‘‘(IV) for each of years 2016 
through 2019, is equal to the amount 
specified in this subparagraph 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 Reconciliation Act of 2010 
had not been enacted; or’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(7) ADDITIONAL
ANNUAL
PERCENTAGE
IN-
CREASE.—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 enact-
ment 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, be-
ginning with 2007, 1⁄12 of the applicable amount de-
termined 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 ap-
plicable amount determined under subsection (k)(1)
for the area for the year; for 2011, 1⁄12 of the appli-
cable amount determined under subsection (k)(1) for 
the area for 2010; and, beginning with 2012, 1⁄12 of 
the blended benchmark amount determined under 
subsection (n)(1) for the area for the year)’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(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 speci-
fied in subparagraph (E) for the area and 
year adjusted to take into 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 subpara-
graph (B). 
‘‘(B) APPLICABLE PERCENTAGE.—Subject 
to subparagraph (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 sub-
paragraph (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 
subparagraph for the previous year is 115 
percent.
‘‘(C) PERIODIC
RANKING.—For purposes 
of this paragraph in the case of an area lo-
cated— 
‘‘(i) in 1 of the 50 States or the Dis-
trict of Columbia, the Secretary shall rank 
such area in each year specified under sub-
section (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 otherwise apply for the area for the 
year. 
‘‘(E) BASE
PAYMENT
AMOUNT.—Subject 
to subparagraph (F), the base payment amount 
specified in this subparagraph— 
‘‘(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 sub-
section (c)(1)(D)(ii), is the base 
amount specified in this subparagraph 
for the area for the previous year, in-
creased by the national per capita MA 
growth percentage, described in sub-
section (c)(6) for that succeeding 
year, but not taking into account any 
adjustment under subparagraph (C) 
of such subsection for a year before 
2004; and 
‘‘(II) is specified under sub-
section (c)(1)(D)(ii), is the amount 
specified in subsection (c)(1)(D) for 
the area for the year.
‘‘(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 sub-
section. 
‘‘(3) ALTERNATIVE PHASE-INS.— 
‘‘(A) 4-YEAR
PHASE-IN
FOR
CERTAIN 
AREAS.—If the difference between the applica-
ble amount (as defined in subsection (k)) for an 
area for 2010 and the projected 2010 bench-
mark 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 difference between the applica-
ble amount (as defined in subsection (k)) for an 
area for 2010 and the projected 2010 bench-
mark amount (as defined in subparagraph (C)) 
for the area is at least $50, the blended bench-
mark 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— 
‘‘(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 
projected 
2010 
benchmark 
amount described in this subparagraph 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 specified under subpara-
graph (B) of paragraph (2) (deter-
mined without regard to subpara-
graph (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 quali-
fying plan in the area under sub-
section (o) as if any reference in such 
subsection to 2012 were deemed a ref-
erence to 2010 and as if the deter-
mination 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 sub-
section (o)) be greater than the applicable amount 
that would (but for the application of this sub-
section) 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
IN-
CREASES.—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 sub-
section (b), by inserting ‘‘, subject to subsection (o)’’ 
after ‘‘as follows’’; and
(3) by adding at the end the following new sub-
section: 
‘‘(o) 
APPLICABLE
PERCENTAGE
QUALITY
IN-
CREASES.— 
‘‘(1) IN GENERAL.—Subject to the succeeding 
paragraphs, in the case of a qualifying plan with re-
spect to a year beginning with 2012, the applicable 
percentage under subsection (n)(2)(B) shall be in-
creased 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. 
‘‘(2) INCREASE
FOR
QUALIFYING
PLANS
IN 
QUALIFYING COUNTIES.—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 ‘quali-
fying 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 avail-
able for such year. 
‘‘(ii) APPLICATION OF INCREASES TO 
LOW ENROLLMENT 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 
paragraph (4) because of low enroll-
ment. 
‘‘(II) 2013 
AND
SUBSEQUENT 
YEARS.—For 2013 and subsequent 
years, for purposes of determining 
whether an MA plan with low enroll-
ment (as defined by the Secretary) is 
included as a qualifying plan, the Sec-
retary shall establish a method to 
apply to MA plans with low enroll-
ment (as defined by the Secretary) 
the computation of quality rating and
the rating system under paragraph 
(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 apply-
ing paragraph (1), the applicable per-
centage under subsection (n)(2)(B) 
shall be increased— 
‘‘(aa) for 2012, by 1.5 per-
centage points; 
‘‘(bb) for 2013, by 2.5 per-
centage points; and 
‘‘(cc) for 2014 or a subse-
quent 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 Advan-
tage organization in the preceding 3- 
year period.
‘‘(B) QUALIFYING
COUNTY.—The term 
‘qualifying county’ means, for a year, a coun-
ty— 
‘‘(i) that has an MA capitation rate 
that, in 2004, was based on the amount 
specified in subsection (c)(1)(B) for a Met-
ropolitan Statistical Area with a population 
of more than 250,000; 
‘‘(ii) for which, as of December 2009, 
of the Medicare Advantage eligible individ-
uals residing in the county at least 25 per-
cent of such individuals were enrolled in 
Medicare Advantage plans; and 
‘‘(iii) that has per capita fee-for-serv-
ice spending that is lower than the na-
tional monthly per capita cost for expendi-
tures for individuals enrolled under the 
original medicare fee-for-service program 
for the year. 
‘‘(4) QUALITY DETERMINATIONS FOR APPLICA-
TION OF INCREASE.— 
‘‘(A) 
QUALITY
DETERMINATION.—The 
quality rating for a plan shall be determined ac-
cording 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 pur-
poses of this paragraph shall be counted as hav-
ing a rating of fewer than 3.5 stars. 
‘‘(5) EXCEPTION FOR PACE PLANS.—This sub-
section shall not apply to payments to a PACE pro-
gram 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 quali-
fying plan, before the application of the increase 
under section 1853(o) for that plan and year in-
volved’’.
(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 Afford-
able Care Act, is further amended— 
(1) in clause (i), by inserting ‘‘(or the applica-
ble 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), respec-
tively, and by inserting after clause (ii) the following 
new clauses: 
‘‘(iii) APPLICABLE REBATE PERCENT-
AGE.—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 proportion for the year under 
clause (iv) and the final applicable re-
bate percentage under clause (v).
‘‘(iv) OLD AND NEW PHASE-IN PRO-
PORTIONS.—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 subse-
quent year, the old phase-in propor-
tion is 0 and the new phase-in propor-
tion is 1. 
‘‘(v) FINAL APPLICABLE REBATE PER-
CENTAGE.—Subject 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 ENROLL-
MENT AND NEW PLANS.—For purposes of 
clause (v)— 
‘‘(I) for 2012, in the case of a 
plan described in subclause (I) of sub-
section (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 PHASE-
OUT OF BUDGET NEUTRALITY FACTOR’’ and insert-
ing ‘‘OF CODING ADJUSTMENT’’;
(2) in the matter before subclause (I), by strik-
ing ‘‘through 2010’’ and inserting ‘‘and each subse-
quent year’’; and 
(3) in subclause (II)— 
(A) in the first sentence, by inserting ‘‘an-
nually’’ before ‘‘conduct an analysis’’; 
(B) in the second sentence— 
(i) by inserting ‘‘on a timely basis’’ 
after ‘‘are incorporated’’; 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 percent-
age point; and for 2019 and each sub-
sequent year, not less than 5.7 per-
cent. 
‘‘(IV) Such adjustment shall be 
applied to risk scores until the Sec-
retary implements risk adjustment 
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, Improvement, and Mod-
ernization Act of 2003 (Public Law 108–173), is repealed. 
SEC. 1103. SAVINGS FROM LIMITS ON MA PLAN ADMINIS-
TRATIVE COSTS. 
Section 1857(e) of the Social Security Act (42 U.S.C. 
1395w–27(e)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(4) REQUIREMENT
FOR
MINIMUM
MEDICAL 
LOSS RATIO.—If the Secretary determines for a con-
tract year (beginning with 2014) that an MA plan 
has failed to have a medical loss ratio of at least 
.85— 
‘‘(A) the MA plan shall remit to the Sec-
retary 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 dur-
ing the second succeeding contract year; and 
‘‘(C) the Secretary shall terminate the plan 
contract if the plan fails to have such a medical 
loss ratio for 5 consecutive contract years.’’. 
SEC. 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 Pro-
tection and Affordable Care Act and as amended by sec-
tion 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 fis-
cal years’’; 
(iii) in subclause (I), by striking ‘‘on 
such Act’’ and inserting ‘‘on the Health 
Care and Education Reconciliation Act of 
2010’’; and 
(iv) in the matter following subclause 
(II), by striking ‘‘minus 1.5 percentage 
points’’ and inserting ‘‘minus 0.1 percent-
age 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 Se-
curity Act (42 U.S.C. 1395ww(b)(3)(B)), as amended by 
sections 3401(a)(4) and 10319(a) of the Patient Protec-
tion and Affordable Care Act, is amended— 
(1) in clause (xii)—
(A) by placing the subclause (II) (inserted 
by section 10319(a)(3) of the Patient Protec-
tion 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 insert-
ing the following: 
‘‘(III) for fiscal year 2014, by 0.3 percentage 
point; 
‘‘(IV) for each of fiscal years 2015 and 2016, 
by 0.2 percentage 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 Pa-
tient 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 percent-
age 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 in-
serting ‘‘(4) OTHER ADJUSTMENT.—For purposes’’ 
(and redesignating clauses (i) through (vi) as sub-
paragraphs (A) through (F), respectively, with ap-
propriate indentation). 
(c) INPATIENT REHABILITATION FACILITIES.—Sec-
tion 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 Affordable 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 Protec-
tion 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 insert-
ing the following: 
‘‘(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 percent-
age point.’’; 
(2) by striking clause (ii); and 
(3) by striking ‘‘(D) OTHER ADJUSTMENT.—’’ 
and all that follows through ‘‘For purposes’’ and in-
serting ‘‘(D) OTHER ADJUSTMENT.—For purposes’’ 
(and redesignating subclauses (I) through (V) as 
clauses (i) through (v), respectively, with appropriate 
indentation). 
(d) PSYCHIATRIC HOSPITALS.—Section 1886(s)(3) of 
the Social Security Act, as added by section 3401(f) of 
the Patient Protection 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 begin-
ning in 2015 and 2016, 0.2 percentage 
point; and 
‘‘(v) for each of the rate years begin-
ning in 2017, 2018, and 2019, 0.75 per-
centage point.’’; 
(2) by striking subparagraph (B); and 
(3) by striking ‘‘(3) OTHER ADJUSTMENT.—’’ 
and all that follows through ‘‘For purposes’’ and in-
serting ‘‘(3) OTHER ADJUSTMENT.—For purposes’’ 
(and redesignating clauses (i) through (v) as sub-
paragraphs (A) through (E), respectively, with ap-
propriate 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 Pa-
tient 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 Protec-
tion 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 insert-
ing the following: 
‘‘(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 in-
serting ‘‘(G) OTHER ADJUSTMENT.—For purposes’’ 
(and redesignating subclauses (I) through (V) as 
clauses (i) through (v), respectively, with appropriate 
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 Affordable 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 subpara-
graph (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)’’; 
(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
DE-
SCRIBED.—A high Medicaid facility described in 
this subparagraph is a hospital that—
‘‘(i) is not the sole hospital in a coun-
ty; 
‘‘(ii) with respect to each of the 3 
most recent years for which data are avail-
able, has an annual percent of total inpa-
tient admissions that represent inpatient 
admissions under title XIX that is esti-
mated 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 subparagraph (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 UTILIZA-
TION RATE.—With respect to fee schedules es-
tablished for 2011 and subsequent years, in the 
methodology for determining practice expense 
relative value units for expensive diagnostic im-
aging equipment under the final rule published 
by the Secretary in the Federal Register on No-
vember 25, 2009 (42 CFR 410 et al.), the Sec-
retary shall use a 75 percent assumption in-
stead of the utilization rates otherwise estab-
lished in such final rule.’’; and 
(2) in subsection (c)(2)(B)(v), by striking sub-
clauses (III), (IV), and (V) and inserting the fol-
lowing new subclause: 
‘‘(III) CHANGE
IN
UTILIZATION 
RATE
FOR
CERTAIN
IMAGING
SERV-
ICES.—Effective for fee schedules es-
tablished beginning with 2011, re-
duced expenditures attributable to the 
change in the utilization rate applica-
ble 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 Pa-
tient Protection 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 amend-
ed by striking ‘‘3⁄4’’ and inserting ‘‘1⁄2’’. 
SEC. 1109. PAYMENT FOR QUALIFYING HOSPITALS. 
(a) IN GENERAL.—From the amount available under 
subsection (b), the Secretary of Health and Human Serv-
ices 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 deter-
mined, 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 quali-
fying hospitals for such fiscal year. 
(d) QUALIFYING HOSPITAL DEFINED.—In this sec-
tion, 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 ad-
justed 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 sub-
section (z) and realigning the left margins ac-
cordingly; and 
(B) by striking paragraph (1) and insert-
ing the following: 
‘‘(1) AMOUNT OF INCREASE.—Notwithstanding 
subsection (b), the Federal medical assistance per-
centage 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 ‘‘Sep-
tember 30, 2019’’ and inserting ‘‘December 31, 
2015’’ 
and 
by 
striking 
‘‘subsection 
(y)(1)(B)(ii)(II)’’ and inserting ‘‘paragraph 
(3)’’; 
(B) by striking paragraphs (2) through (4) 
and inserting the following: 
‘‘(2)(A) For calendar quarters in 2014 and 
each year thereafter, 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 cov-
erage under section 1937 shall be equal to the per-
cent specified in subparagraph (B)(i) for such year. 
‘‘(B)(i) The percent specified in this subpara-
graph 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 tran-
sition percentage (specified in clause (ii) for the 
year) of the number of percentage points by which— 
‘‘(I) such Federal medical assistance per-
centage 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 paragraph (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 fol-
lowing new subparagraph: 
‘‘(C) payment for primary care services (as 
defined in subsection (jj)) furnished in 2013 
and 2014 by a physician with a primary spe-
cialty 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 conver-
sion factor under such section for 2009);’’; and 
(B) by adding at the end the following new 
subsection: 
‘‘(jj) PRIMARY CARE SERVICES DEFINED.—For pur-
poses of subsection (a)(13)(C), the term ‘primary care 
services’ means— 
‘‘(1) evaluation and management services that 
are procedure codes (for services covered under title 
XVIII) for services in the category designated Eval-
uation and Management in the Healthcare Common 
Procedure Coding System (established by the Sec-
retary under section 1848(c)(5) as of December 31, 
2009, and as subsequently modified); and 
‘‘(2) services related to immunization adminis-
tration for vaccines and toxoids for which CPT codes 
90465, 90466, 90467, 90468, 90471, 90472, 90473, 
or 90474 (as subsequently modified) apply under 
such System.’’. 
(2) 
UNDER
MEDICAID
MANAGED
CARE 
PLANS.—Section 1932(f) of such Act (42 U.S.C. 
1396u–2(f)) is amended—
(A) in the heading, by adding at the end 
the following: ‘‘; ADEQUACY OF PAYMENT FOR 
PRIMARY CARE SERVICES’’; and 
(B) by inserting before the period at the 
end the following: ‘‘and, in the case of primary 
care 
services 
described 
in 
section 
1902(a)(13)(C), consistent with the minimum 
payment rates specified in such section (regard-
less of the manner in which such payments are 
made, including in the form of capitation or 
partial capitation)’’. 
(b) INCREASE
IN
PAYMENT
USING
INCREASED 
FMAP.—Section 1905 of the Social Security Act, as 
amended by section 1004(b) of this Act and section 
10201(c)(6) of the Patient Protection and Affordable Care 
Act, is amended by adding at the end the following new 
subsection: 
‘‘(dd) INCREASED FMAP FOR ADDITIONAL EXPEND-
ITURES FOR PRIMARY CARE SERVICES.—Notwithstanding 
subsection (b), with respect to the portion of the amounts 
expended for medical assistance for services described in 
section 1902(a)(13)(C) furnished on or after January 1, 
2013, and before January 1, 2015, that is attributable to 
the amount by which the minimum payment rate required 
under such section (or, by application, section 1932(f)) ex-
ceeds the payment rate applicable to such services under 
the State plan as of July 1, 2009, the Federal medical 
assistance percentage for a State that is one of the 50 
States or the District of Columbia shall be equal to 100 
percent. The preceding sentence does not prohibit the pay-
ment of Federal financial participation based on the Fed-
eral medical assistance percentage for amounts in excess 
of those specified in such sentence.’’. 
SEC. 1203. DISPROPORTIONATE SHARE HOSPITAL PAY-
MENTS. 
(a) IN GENERAL.—Section 1923(f) of the Social Se-
curity Act (42 U.S.C. 1396r–4(f)), as amended by sections 
2551(a)(4) and 10201(e)(1) of the Patient Protection and 
Affordable Care Act, is amended— 
(1) in paragraph (6)(B)(iii), in the matter pre-
ceding subclause (I), by striking ‘‘or paragraph (7)’’; 
and 
(2) by striking paragraph (7) and inserting the 
following: 
‘‘(7) MEDICAID DSH REDUCTIONS.— 
‘‘(A) REDUCTIONS.— 
‘‘(i) IN GENERAL.—For each of fiscal 
years 2014 through 2020 the Secretary 
shall effect the following reductions:
‘‘(I) REDUCTION IN DSH ALLOT-
MENTS.—The Secretary shall reduce 
DSH allotments to States in the 
amount specified under the DSH 
health reform methodology under sub-
paragraph (B) for the State for the 
fiscal year. 
‘‘(II) 
REDUCTIONS
IN
PAY-
MENTS.—The Secretary shall reduce 
payments to States under section 
1903(a) for each calendar quarter in 
the fiscal year, in the manner speci-
fied in clause (iii), in an amount equal 
to 1⁄4 of the DSH allotment reduction 
under subclause (I) for the State for 
the fiscal year. 
‘‘(ii) AGGREGATE REDUCTIONS.—The 
aggregate reductions in DSH allotments 
for all States under clause (i)(I) shall be 
equal to— 
‘‘(I) $500,000,000 for fiscal year 
2014; 
‘‘(II) $600,000,000 for fiscal 
year 2015;
‘‘(III) $600,000,000 for fiscal 
year 2016; 
‘‘(IV) $1,800,000,000 for fiscal 
year 2017; 
‘‘(V) $5,000,000,000 for fiscal 
year 2018; 
‘‘(VI) $5,600,000,000 for fiscal 
year 2019; and 
‘‘(VII) $4,000,000,000 for fiscal 
year 2020. 
The Secretary shall distribute such aggre-
gate reductions among States in accord-
ance with subparagraph (B). 
‘‘(iii) MANNER OF PAYMENT REDUC-
TION.—The amount of the payment reduc-
tion under clause (i)(II) for a State for a 
quarter shall be deemed an overpayment to 
the State under this title to be disallowed 
against the State’s regular quarterly draw 
for all spending under section 1903(d)(2). 
Such a disallowance is not subject to a re-
consideration under subsections (d) and (e) 
of section 1116.
‘‘(iv) DEFINITION.—In this para-
graph, the term ‘State’ means the 50 
States and the District of Columbia. 
‘‘(B) DSH HEALTH
REFORM
METHOD-
OLOGY.—The Secretary shall carry out sub-
paragraph (A) through use of a DSH Health 
Reform methodology that meets the following 
requirements: 
‘‘(i) The methodology imposes the 
largest percentage reductions on the States 
that— 
‘‘(I) have the lowest percentages 
of uninsured individuals (determined 
on the basis of data from the Bureau 
of the Census, audited hospital cost 
reports, and other information likely 
to yield accurate data) during the 
most recent year for which such data 
are available; or 
‘‘(II) do not target their DSH 
payments on— 
‘‘(aa) hospitals with high 
volumes of Medicaid inpatients 
(as 
defined 
in 
subsection 
(b)(1)(A)); and
‘‘(bb) hospitals that have 
high levels of uncompensated 
care (excluding bad debt). 
‘‘(ii) The methodology imposes a 
smaller percentage reduction on low DSH 
States described in paragraph (5)(B). 
‘‘(iii) The methodology takes into ac-
count the extent to which the DSH allot-
ment for a State was included in the budg-
et neutrality calculation for a coverage ex-
pansion approved under section 1115 as of 
July 31, 2009.’’. 
(b) EXTENSION
OF
DSH ALLOTMENT.—Section 
1923(f)(6)(A) of the Social Security Act (42 U.S.C. 
1396r–4(f)(6)(A)) is amended by adding at the end the 
following: 
‘‘(v) ALLOTMENT FOR 2D, 3RD, AND 
4TH QUARTERS OF FISCAL YEAR 2012 AND 
FOR FISCAL YEAR 2013.—Notwithstanding 
the table set forth in paragraph (2): 
‘‘(I) 2D, 3RD, AND
4TH
QUAR-
TERS OF FISCAL YEAR 2012.—In the 
case of a State that has a DSH allot-
ment of $0 for the 2d, 3rd, and 4th 
quarters of fiscal year 2012, the DSH
allotment shall be $47,200,000 for 
such quarters. 
‘‘(II) FISCAL YEAR 2013.—In the 
case of a State that has a DSH allot-
ment of $0 for fiscal year 2013, the 
DSH allotment shall be $53,100,000 
for such fiscal year.’’. 
SEC. 1204. FUNDING FOR THE TERRITORIES. 
(a) IN GENERAL.—Part III of subtitle D of title I 
of the Patient Protection and Affordable Care Act, as 
amended by section 10104(m) of such Act, is amended 
by inserting after section 1322 the following section: 
‘‘SEC. 1323. FUNDING FOR THE TERRITORIES. 
‘‘(a) IN GENERAL.—A territory that— 
‘‘(1) elects consistent with subsection (b) to es-
tablish an Exchange in accordance with part II of 
this subtitle and establishes such an Exchange in ac-
cordance with such part shall be treated as a State 
for purposes of such part and shall be entitled to 
payment from the amount allocated to the territory 
under subsection (c); or 
‘‘(2) does not make such election shall be enti-
tled to an increase in the dollar limitation applicable 
to the territory under subsections (f) and (g) of sec-
tion 1108 of the Social Security Act (42 U.S.C.
1308) for such period in such amount for such terri-
tory and such increase shall not be taken into ac-
count in computing any other amount under such 
subsections. 
‘‘(b) TERMS AND CONDITIONS.—An election under 
subsection (a)(1) shall— 
‘‘(1) not be effective unless the election is con-
sistent with section 1321 and is received not later 
than October 1, 2013; and 
‘‘(2) be contingent upon entering into an agree-
ment between the territory and the Secretary that 
requires that— 
‘‘(A) funds provided under the agreement 
shall be used only to provide premium and cost- 
sharing assistance to residents of the territory 
obtaining health insurance coverage through the 
Exchange; and 
‘‘(B) the premium and cost-sharing assist-
ance provided under such agreement shall be 
structured in such a manner so as to prevent 
any gap in assistance for individuals between 
the income level at which medical assistance is 
available through the territory’s Medicaid plan 
under title XIX of the Social Security Act and 
the income level at which premium and cost-
sharing assistance is available under the agree-
ment. 
‘‘(c) APPROPRIATION AND ALLOCATION.— 
‘‘(1) APPROPRIATION.—Out of any funds in the 
Treasury not otherwise appropriated, there is appro-
priated for purposes of payment pursuant to sub-
section (a) $1,000,000,000, to be available during 
the period beginning with 2014 and ending with 
2019. 
‘‘(2) ALLOCATION.—The Secretary shall allo-
cate the amount appropriated under paragraph (1) 
among the territories for purposes of carrying out 
this section as follows: 
‘‘(A) For Puerto Rico, $925,000,000. 
‘‘(B) For another territory, the portion of 
$75,000,000 specified by the Secretary.’’. 
(b) MEDICAID FUNDING.— 
(1) INCREASE
IN
FUNDING
CAPS.—Section 
1108(g) of the Social Security Act (42 U.S.C. 
1308(g)), as amended by section 2005(a) of the Pa-
tient Protection and Affordable Care Act, is amend-
ed— 
(A) in paragraph (2), by inserting ‘‘and 
section 1323(a)(2) of the Patient Protection
and Affordable Care Act’’ after ‘‘subject to’’; 
and 
(B) by striking paragraph (5) and insert-
ing the following: 
‘‘(5) ADDITIONAL
INCREASE.—The Secretary 
shall increase the amounts otherwise determined 
under this subsection for Puerto Rico, the Virgin Is-
lands, Guam, the Northern Mariana Islands, and 
American Samoa (after the application of subsection 
(f) and the preceding paragraphs of this subsection) 
for the period beginning July 1, 2011, and ending 
on September 30, 2019, by such amounts that the 
total additional payments under title XIX to such 
territories equals $6,300,000,000 for such period. 
The Secretary shall increase such amounts in pro-
portion to the amounts applicable to such territories 
under this subsection and subsection (f) on the date 
of enactment of this paragraph.’’. 
(2) DISREGARD
OF
PAYMENTS; INCREASED 
FMAP.—Section 2005 of the Patient Protection and 
Affordable Care Act is amended— 
(A) by repealing subsection (b) (and the 
amendments made by that subsection) and sec-
tion 1108(g)(4) of the Social Security Act shall
be applied as if such amendments had never 
been enacted; and 
(B) in subsection (c)(2), by striking ‘‘Jan-
uary’’ and inserting ‘‘July’’. 
SEC. 1205. DELAY IN COMMUNITY FIRST CHOICE OPTION. 
Section 1915(k)(1) of the Social Security Act (42 
U.S.C. 1396n(k)), as added by section 2401 of the Patient 
Protection and Affordable Care Act, is amended by strik-
ing ‘‘October 1, 2010’’ and inserting ‘‘October 1, 2011’’. 
SEC. 1206. DRUG REBATES FOR NEW FORMULATIONS OF 
EXISTING DRUGS. 
(a) TREATMENT
OF NEW FORMULATIONS.—Sub-
paragraph (C) of section 1927(c)(2) of the Social Security 
Act (42 U.S.C. 1396r–8(c)(2)), as added by section 
2501(d) of the Patient Protection and Affordable Care 
Act, is amended to read as follows: 
‘‘(C) TREATMENT
OF
NEW
FORMULA-
TIONS.—In the case of a drug that is a line ex-
tension of a single source drug or an innovator 
multiple source drug that is an oral solid dos-
age form, the rebate obligation with respect to 
such drug under this section shall be the 
amount computed under this section for such 
new drug or, if greater, the product of—
‘‘(i) the average manufacturer price of 
the line extension of a single source drug 
or an innovator multiple source drug that 
is an oral solid dosage form; 
‘‘(ii) the highest additional rebate 
(calculated as a percentage of average 
manufacturer price) under this section for 
any strength of the original single source 
drug or innovator multiple source drug; 
and 
‘‘(iii) the total number of units of 
each dosage form and strength of the line 
extension product paid for under the State 
plan in the rebate period (as reported by 
the State). 
In this subparagraph, the term ‘line extension’ 
means, with respect to a drug, a new formula-
tion of the drug, such as an extended release 
formulation.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall take effect as if included in the enact-
ment of the Patient Protection and Affordable Care Act.
Subtitle D—Reducing Fraud, 
Waste, and Abuse 
SEC. 1301. COMMUNITY MENTAL HEALTH CENTERS. 
(a) IN GENERAL.—Section 1861(ff)(3)(B) of the So-
cial Security Act (42 U.S.C. 1395x(ff)(3)(B)) is amend-
ed— 
(1) in clause (ii), by striking ‘‘and’’ at the end; 
(2) by redesignating clause (iii) as clause (iv); 
and 
(3) by inserting after clause (ii) the following: 
‘‘(iii) provides at least 40 percent of its services 
to individuals who are not eligible for benefits under 
this title; and’’. 
(b) RESTRICTION.—Section 1861(ff)(3)(A) of such 
Act (42 U.S.C. 1395x(ff)(3)(A)) is amended by inserting 
‘‘other than in an individual’s home or in an inpatient or 
residential setting’’ before the period. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to items and services furnished on 
or after the first day of the first calendar quarter that 
begins at least 12 months after the date of the enactment 
of this Act.
SEC. 1302. MEDICARE PREPAYMENT MEDICAL REVIEW LIM-
ITATIONS. 
Section 1874A(h) of the Social Security Act (42 
U.S.C. 1395w–3a(h)) is repealed. 
SEC. 1303. FUNDING TO FIGHT FRAUD, WASTE, AND ABUSE. 
(a) FUNDING
TO
FIGHT
FRAUD, WASTE, AND 
ABUSE.— 
(1) IN GENERAL.—Section 1817(k) of the So-
cial Security Act (42 U.S.C. 1395i(k)), as amended 
by section 6402(i) of the Patient Protection and Af-
fordable Care Act, is further amended— 
(A) by adding at the end the following new 
paragraph: 
‘‘(8) ADDITIONAL FUNDING.— 
‘‘(A) IN
GENERAL.—In addition to the 
funds otherwise appropriated to the Account 
from the Trust Fund under paragraphs (3)(C) 
and (4)(A) and for purposes described in para-
graphs (3)(C) and (4)(A), there are hereby ap-
propriated to such Account from such Trust 
Fund the following additional amounts: 
‘‘(i) 
For 
fiscal 
year 
2011, 
$95,000,000. 
‘‘(ii) 
For 
fiscal 
year 
2012, 
$55,000,000.
‘‘(iii) For each of fiscal years 2013 
and 2014, $30,000,000. 
‘‘(iv) For each of fiscal years 2015 
and 2016, $20,000,000. 
‘‘(B) ALLOCATION.—The funds appro-
priated under this paragraph shall be allocated 
in the same proportion as the total funding ap-
propriated with respect to paragraphs (3)(A) 
and (4)(A) was allocated with respect to fiscal 
year 2010, and shall be available without fur-
ther appropriation until expended.’’; and 
(B) in paragraph (4)(A), by inserting ‘‘for 
activities described in paragraph (3)(C) and’’ 
after ‘‘necessary’’. 
(b) 
MEDICAID
INTEGRITY
PROGRAM.—Section 
1936(e)(1) of such Act (42 U.S.C. 1396–u6(e)(1)) is 
amended— 
(1) in subparagraph (B), by striking at the end 
‘‘and’’; 
(2) in subparagraph (C)— 
(A) by striking ‘‘for each fiscal year there-
after’’ and inserting ‘‘for each of fiscal years 
2009 and 2010’’; and 
(B) by striking the period and inserting ‘‘; 
and’’; and
(3) by adding at the end the following new sub-
paragraph: 
‘‘(D) for each fiscal year after fiscal year 
2010, the amount appropriated under this para-
graph for the previous fiscal year, increased by 
the percentage increase in the consumer price 
index for all urban consumers (all items; United 
States city average) over the previous year.’’. 
SEC. 1304. 90-DAY PERIOD OF ENHANCED OVERSIGHT FOR 
INITIAL CLAIMS OF DME SUPPLIERS. 
Section 1866(j), as amended by section 6401 of the 
Patient Protection and Affordable Care Act, is further 
amended— 
(1) by redesignating paragraphs (4) through 
(7) as paragraphs (5) through (8), respectively; and 
(2) by inserting after paragraph (3) the fol-
lowing new paragraph: 
‘‘(4) 90-DAY PERIOD OF ENHANCED OVERSIGHT 
FOR INITIAL CLAIMS OF DME SUPPLIERS.—For peri-
ods beginning after January 1, 2011, if the Sec-
retary determines that there is a significant risk of 
fraudulent activity among suppliers of durable med-
ical equipment, in the case of a supplier of durable 
medical equipment who is within a category or geo-
graphic area under title XVIII identified pursuant to
such determination and who is initially enrolling 
under such title, the Secretary shall, notwith-
standing sections 1816(c), 1842(c), and 1869(a)(2), 
withhold payment under such title with respect to 
durable medical equipment furnished by such sup-
plier during the 90-day period beginning on the date 
of the first submission of a claim under such title 
for durable medical equipment furnished by such 
supplier.’’. 
Subtitle E—Provisions Relating to 
Revenue 
SEC. 1401. HIGH-COST PLAN EXCISE TAX. 
(a) IN GENERAL.—Section 4980I of the Internal 
Revenue Code of 1986, as added by section 9001 of the 
Patient Protection and Affordable Care Act and amended 
by section 10901 of such Act, is amended— 
(1) in subsection (b)(3)(B)— 
(A) by striking ‘‘The annual’’ and insert-
ing the following: 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the annual’’; and 
(B) by adding at the end the following new 
clause: 
‘‘(ii) MULTIEMPLOYER
PLAN
COV-
ERAGE.—Any coverage provided under a
multiemployer plan (as defined in section 
414(f)) shall be treated as coverage other 
than self-only coverage.’’; 
(2) in subsection (b)(3)(C)— 
(A) by striking ‘‘Except as provided in 
subparagraph (D)—’’; 
(B) in clause (i)— 
(i) by striking ‘‘2013’’ each place it 
appears in the heading and the text and 
inserting ‘‘2018’’; 
(ii) by striking ‘‘$8,500’’ in subclause 
(I) and inserting ‘‘$10,200 multiplied by 
the health cost adjustment percentage (de-
termined by only taking into account self- 
only coverage)’’; and 
(iii) by striking ‘‘$23,000’’ in sub-
clause (II) and inserting ‘‘$27,500 multi-
plied by the health cost adjustment per-
centage (determined by only taking into 
account coverage other than self-only cov-
erage)’’; 
(C) by redesignating clauses (ii) and (iii) 
as clauses (iv) and (v), respectively, and by in-
serting after clause (i) the following new 
clauses:
‘‘(ii) HEALTH
COST
ADJUSTMENT 
PERCENTAGE.—For purposes of clause (i), 
the health cost adjustment percentage is 
equal to 100 percent plus the excess (if 
any) of— 
‘‘(I) the percentage by which the 
per employee cost for providing cov-
erage under the Blue Cross/Blue 
Shield standard benefit option under 
the Federal Employees Health Bene-
fits Plan for plan year 2018 (deter-
mined by using the benefit package 
for such coverage in 2010) exceeds 
such cost for plan year 2010, over 
‘‘(II) 55 percent. 
‘‘(iii) AGE
AND
GENDER
ADJUST-
MENT.— 
‘‘(I) IN GENERAL.—The amount 
determined under subclause (I) or (II) 
of clause (i), whichever is applicable, 
for any taxable period shall be in-
creased by the amount determined 
under subclause (II). 
‘‘(II) AMOUNT
DETERMINED.— 
The amount determined under this
subclause is an amount equal to the 
excess (if any) of— 
‘‘(aa) the premium cost of 
the 
Blue 
Cross/Blue 
Shield 
standard benefit option under the 
Federal Employees Health Bene-
fits Plan for the type of coverage 
provided such individual in such 
taxable period if priced for the 
age and gender characteristics of 
all employees of the individual’s 
employer, over 
‘‘(bb) that premium cost for 
the provision of such coverage 
under such option in such taxable 
period if priced for the age and 
gender characteristics of the na-
tional workforce.’’. 
(D) in clause (iv), as redesignated by sub-
paragraph (C)— 
(i) by inserting ‘‘covered by the plan’’ 
after ‘‘whose employees’’; and 
(ii) by striking subclauses (I) and (II) 
and inserting the following:
‘‘(I) the dollar amount in clause 
(i)(I) shall be increased by $1,650, 
and 
‘‘(II) the dollar amount in clause 
(i)(II) shall be increased by $3,450,’’, 
and 
(E) in clause (v), as redesignated by sub-
paragraph (C)— 
(i) by striking ‘‘2013’’ and inserting 
‘‘2018’’; 
(ii) by striking ‘‘clauses (i) and (ii)’’ 
and inserting ‘‘clauses (i) (after the appli-
cation of clause (ii)) and (iv)’’; and 
(iii) by inserting ‘‘in the case of deter-
minations for calendar years beginning be-
fore 2020’’ after ‘‘1 percentage point’’ in 
subclause (II) thereof; 
(3) by striking subparagraph (D) of subsection 
(b)(3); 
(4) in subsection (d)(1)(B), by redesignating 
clause (ii) as clause (iii) and by inserting after 
clause (i) the following new clause: 
‘‘(ii) any coverage under a separate 
policy, certificate, or contract of insurance 
which provides benefits substantially all of
which are for treatment of the mouth (in-
cluding any organ or structure within the 
mouth) or for treatment of the eye, or’’; 
and 
(5) in subsection (d), by adding at the end the 
following new paragraph: 
‘‘(3) EMPLOYEE.—The term ‘employee’ includes 
any former employee, surviving spouse, or other pri-
mary insured individual.’’. 
(b) EFFECTIVE DATES.— 
(1) Section 9001(c) of the Patient Protection 
and Affordable Care Act is amended by striking 
‘‘2012’’ and inserting ‘‘2017’’. 
(2) Section 10901(c) of the Patient Protection 
and Affordable Care Act is amended by striking 
‘‘2012’’ and inserting ‘‘2017’’. 
SEC. 1402. UNEARNED INCOME MEDICARE CONTRIBUTION. 
(a) INVESTMENT INCOME.— 
(1) IN GENERAL.—Subtitle A of the Internal 
Revenue Code of 1986 is amended by inserting after 
chapter 2 the following new chapter: 
‘‘CHAPTER 2A—UNEARNED INCOME 
MEDICARE CONTRIBUTION 
‘‘Sec. 1411. Imposition of tax.
‘‘SEC. 1411. IMPOSITION OF TAX. 
‘‘(a) IN GENERAL.—Except as provided in subsection 
(e)— 
‘‘(1) APPLICATION
TO
INDIVIDUALS.—In the 
case of an individual, there is hereby imposed (in ad-
dition to any other tax imposed by this subtitle) for 
each taxable year a tax equal to 3.8 percent of the 
lesser of— 
‘‘(A) net investment income for such tax-
able year, or 
‘‘(B) the excess (if any) of— 
‘‘(i) the modified adjusted gross in-
come for such taxable year, over 
‘‘(ii) the threshold amount. 
‘‘(2) APPLICATION TO ESTATES AND TRUSTS.— 
In the case of an estate or trust, there is hereby im-
posed (in addition to any other tax imposed by this 
subtitle) for each taxable year a tax of 3.8 percent 
of the lesser of— 
‘‘(A) the undistributed net investment in-
come for such taxable year, or 
‘‘(B) the excess (if any) of— 
‘‘(i) the adjusted gross income (as de-
fined in section 67(e)) for such taxable 
year, over
‘‘(ii) the dollar amount at which the 
highest tax bracket in section 1(e) begins 
for such taxable year. 
‘‘(b) THRESHOLD AMOUNT.—For purposes of this 
chapter, the term ‘threshold amount’ means— 
‘‘(1) in the case of a taxpayer making a joint 
return under section 6013 or a surviving spouse (as 
defined in section 2(a)), $250,000, 
‘‘(2) in the case of a married taxpayer (as de-
fined in section 7703) filing a separate return, 1⁄2 of 
the dollar amount determined under paragraph (1), 
and 
‘‘(3) in any other case, $200,000. 
‘‘(c) NET INVESTMENT INCOME.—For purposes of 
this chapter— 
‘‘(1) IN GENERAL.—The term ‘net investment 
income’ means the excess (if any) of— 
‘‘(A) the sum of— 
‘‘(i) gross income from interest, divi-
dends, annuities, royalties, and rents, other 
than such income which is derived in the 
ordinary course of a trade or business not 
described in paragraph (2),
‘‘(ii) other gross income derived from 
a trade or business described in paragraph 
(2), and 
‘‘(iii) net gain (to the extent taken 
into account in computing taxable income) 
attributable to the disposition of property 
other than property held in a trade or 
business not described in paragraph (2), 
over 
‘‘(B) the deductions allowed by this sub-
title which are properly allocable to such gross 
income or net gain. 
‘‘(2) TRADES AND BUSINESSES TO WHICH TAX 
APPLIES.—A trade or business is described in this 
paragraph if such trade or business is— 
‘‘(A) a passive activity (within the meaning 
of section 469) with respect to the taxpayer, or 
‘‘(B) a trade or business of trading in fi-
nancial instruments or commodities (as defined 
in section 475(e)(2)). 
‘‘(3) INCOME
ON
INVESTMENT
OF
WORKING 
CAPITAL SUBJECT TO TAX.—A rule similar to the 
rule of section 469(e)(1)(B) shall apply for purposes 
of this subsection.
‘‘(4) EXCEPTION FOR CERTAIN ACTIVE INTER-
ESTS IN PARTNERSHIPS AND S CORPORATIONS.—In 
the case of a disposition of an interest in a partner-
ship or S corporation— 
‘‘(A) gain from such disposition shall be 
taken into account under clause (iii) of para-
graph (1)(A) only to the extent of the net gain 
which would be so taken into account by the 
transferor if all property of the partnership or 
S corporation were sold for fair market value 
immediately before the disposition of such inter-
est, and 
‘‘(B) a rule similar to the rule of subpara-
graph (A) shall apply to a loss from such dis-
position. 
‘‘(5) EXCEPTION
FOR
DISTRIBUTIONS
FROM 
QUALIFIED PLANS.—The term ‘net investment in-
come’ shall not include any distribution from a plan 
or arrangement described in section 401(a), 403(a), 
403(b), 408, 408A, or 457(b). 
‘‘(6) SPECIAL RULE.—Net investment income 
shall not include any item taken into account in de-
termining self-employment income for such taxable 
year on which a tax is imposed by section 1401(b).
122 
Grant 
amount, 
determined 
under 
section 
401(b)(2)(A), for which the student would be eligi-
ble’’; and 
(6) in section 894(f)(2)(C)(ii)(I) (20 U.S.C. 
1161y(f)(2)(C)(ii)(I)), by striking ‘‘the maximum 
Federal Pell Grant for each award year’’ and insert-
ing ‘‘the Federal Pell Grant amount, determined 
under section 401(b)(2)(A), for which a student may 
be eligible for each award year’’. 
(c) EFFECTIVE DATE.—The amendments made by 
subsections (a) and (b) shall take effect on July 1, 2010. 
SEC. 2102. COLLEGE ACCESS CHALLENGE GRANT PRO-
GRAM. 
Section 781 (20 U.S.C. 1141) is amended— 
(1) in the first sentence of subsection (a), by 
striking ‘‘$66,000,000’’ and all that follows through 
the period and inserting ‘‘$150,000,000 for each of 
the fiscal years 2010 through 2014. The authority 
to award grants under this section shall expire at 
the end of fiscal year 2014.’’; and 
(2) in subsection (c)(2), by striking ‘‘0.5 per-
cent’’ and inserting ‘‘1.0 percent’’.