    [House Report 111-299]
    [From the U.S. Government Publishing Office]

    111th Congress                                            Rept. 111-299
                            HOUSE OF REPRESENTATIVES
     1st Session                                                     Part 2
    _______________________________________________________________________

                AMERICA'S AFFORDABLE HEALTH CHOICES ACT OF 2009

                                   ----------

                                  R E P O R T

                                     of the

                          COMMITTEE ON WAYS AND MEANS

                                       on

                                   H.R. 3200

                                 together with

                        DISSENTING AND ADDITIONAL VIEWS

                    October 14, 2009.--Ordered to be printed
            AMERICA'S AFFORDABLE HEALTH CHOICES ACT OF 2009--PART 2

    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800
    Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001

    111th Congress
     1st Session            HOUSE OF REPRESENTATIVES          Rept. 111-299
                                                                     Part 2
    _______________________________________________________________________

                AMERICA'S AFFORDABLE HEALTH CHOICES ACT OF 2009

                                   __________

                                  R E P O R T

                                     of the

                          COMMITTEE ON WAYS AND MEANS

                                       on

                                   H.R. 3200

                                 together with

                        DISSENTING AND ADDITIONAL VIEWS

                    October 14, 2009.--Ordered to be printed

    111th Congress                                            Rept. 111-299
                            HOUSE OF REPRESENTATIVES
     1st Session                                                     Part 2

    ======================================================================

                AMERICA'S AFFORDABLE HEALTH CHOICES ACT OF 2009

                                    _______

    October 14, 2009.--Committed to the Committee of the Whole House on the
                  State of the Union and ordered to be printed

                                    _______

        Mr. Rangel, from the Committee on Ways and Means, submitted the
                                   following

                                  R E P O R T

                                 together with

                        DISSENTING AND ADDITIONAL VIEWS

                            [To accompany H.R. 3200]

      The Committee on Ways and Means, to whom was referred the
    bill (H.R. 3200) to provide affordable, quality health care for
    all Americans and reduce the growth in health care spending,
    and for other purposes, having considered the same, report
    favorably thereon with an amendment and recommend that the bill
    as amended do pass.
      The amendment is as follows:
      Strike out all after the enacting clause (other than title
    VII of division B and division C) and insert the following:

    SECTION 1. SHORT TITLE; TABLE OF DIVISIONS, TITLES, AND SUBTITLES.

      (a) Short Title.--This Act may be cited as the ``America's Affordable
    Health Choices Act of 2009''.
      (b) Table of Divisions, Titles, and Subtitles.--This Act is divided
    into divisions, titles, and subtitles as follows:

                   DIVISION A--AFFORDABLE HEALTH CARE CHOICES

    TITLE I--PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH BENEFITS PLANS
    Subtitle A--General Standards
    Subtitle B--Standards Guaranteeing Access to Affordable Coverage
    Subtitle C--Standards Guaranteeing Access to Essential Benefits
    Subtitle D--Additional Consumer Protections
    Subtitle E--Governance
    Subtitle F--Relation to other requirements; Miscellaneous
    Subtitle G--Early Investments
    TITLE II--HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS
    Subtitle A--Health Insurance Exchange
    Subtitle B--Public health insurance option
    Subtitle C--Individual Affordability Credits
    TITLE III--SHARED RESPONSIBILITY
    Subtitle A--Individual responsibility
    Subtitle B--Employer Responsibility
    TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
    Subtitle A--Shared responsibility
    Subtitle B--Credit for small business employee health coverage expenses
    Subtitle C--Disclosures to carry out health insurance exchange
    subsidies
    Subtitle D--Other revenue provisions

                 DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

    TITLE I--IMPROVING HEALTH CARE VALUE
    Subtitle A--Provisions related to Medicare part A
    Subtitle B--Provisions Related to Part B
    Subtitle C--Provisions Related to Medicare Parts A and B
    Subtitle D--Medicare Advantage Reforms
    Subtitle E--Improvements to Medicare Part D
    Subtitle F--Medicare Rural Access Protections
    TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS
    Subtitle A--Improving and Simplifying Financial Assistance for Low
    Income Medicare Beneficiaries
    Subtitle B--Reducing Health Disparities
    Subtitle C--Miscellaneous Improvements
    TITLE III--PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES, AND
    COORDINATED CARE
    TITLE IV--QUALITY
    Subtitle A--Comparative Effectiveness Research
    Subtitle B--Nursing Home Transparency
    Subtitle C--Quality Measurements
    Subtitle D--Physician Payments Sunshine Provision
    Subtitle E--Public Reporting on Health Care-Associated Infections
    TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION
    TITLE VI--PROGRAM INTEGRITY
    Subtitle A--Increased funding to fight waste, fraud, and abuse
    Subtitle B--Enhanced penalties for fraud and abuse
    Subtitle C--Enhanced Program and Provider Protections
    Subtitle D--Access to Information Needed to Prevent Fraud, Waste, and
    Abuse
    TITLE VII--MEDICAID AND CHIP
    Subtitle A--Medicaid and Health Reform
    Subtitle B--Prevention
    Subtitle C--Access
    Subtitle D--Coverage
    Subtitle E--Financing
    Subtitle F--Waste, Fraud, and Abuse
    Subtitle G--Puerto Rico and the Territories
    Subtitle H--Miscellaneous
    TITLE VIII--REVENUE-RELATED PROVISIONS
    TITLE IX--MISCELLANEOUS PROVISIONS

              DIVISION C--PUBLIC HEALTH AND WORKFORCE DEVELOPMENT

    TITLE I--COMMUNITY HEALTH CENTERS
    TITLE II--WORKFORCE
    Subtitle A--Primary care workforce
    Subtitle B--Nursing workforce
    Subtitle C--Public Health Workforce
    Subtitle D--Adapting workforce to evolving health system needs
    TITLE III--PREVENTION AND WELLNESS
    TITLE IV--QUALITY AND SURVEILLANCE
    TITLE V--OTHER PROVISIONS
    Subtitle A--Drug discount for rural and other hospitals
    Subtitle B--School-Based health clinics
    Subtitle C--National medical device registry
    Subtitle D--Grants for comprehensive programs To provide education to
    nurses and create a pipeline to nursing
    Subtitle E--States failing To adhere to certain employment obligations

                   DIVISION A--AFFORDABLE HEALTH CARE CHOICES

    SEC. 100. PURPOSE; TABLE OF CONTENTS OF DIVISION; GENERAL DEFINITIONS.

      (a) Purpose.--
              (1) In general.--The purpose of this division is to provide
            affordable, quality health care for all Americans and reduce
            the growth in health care spending.
              (2) Building on current system.--This division achieves this
            purpose by building on what works in today's health care
            system, while repairing the aspects that are broken.
              (3) Insurance reforms.--This division--
                      (A) enacts strong insurance market reforms;
                      (B) creates a new Health Insurance Exchange, with a
                    public health insurance option alongside private plans;
                      (C) includes sliding scale affordability credits; and
                      (D) initiates shared responsibility among workers,
                    employers, and the government;
            so that all Americans have coverage of essential health
            benefits.
              (4) Health delivery reform.--This division institutes health
            delivery system reforms both to increase quality and to reduce
            growth in health spending so that health care becomes more
            affordable for businesses, families, and government.
      (b) Table of Contents of Division.--The table of contents of this
    division is as follows:

    Sec. 100. Purpose; table of contents of division; general definitions.

     TITLE I--PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH BENEFITS PLANS

                         Subtitle A--General Standards

    Sec. 101. Requirements reforming health insurance marketplace.
    Sec. 102. Protecting the choice to keep current coverage.

        Subtitle B--Standards Guaranteeing Access to Affordable Coverage

    Sec. 111. Prohibiting pre-existing condition exclusions.
    Sec. 112. Guaranteed issue and renewal for insured plans.
    Sec. 113. Insurance rating rules.
    Sec. 114. Nondiscrimination in benefits; parity in mental health and
    substance abuse disorder benefits.
    Sec. 115. Ensuring adequacy of provider networks.
    Sec. 116. Ensuring value and lower premiums.

        Subtitle C--Standards Guaranteeing Access to Essential Benefits

    Sec. 121. Coverage of essential benefits package.
    Sec. 122. Essential benefits package defined.
    Sec. 123. Health Benefits Advisory Committee.
    Sec. 124. Process for adoption of recommendations; adoption of benefit
    standards.

                  Subtitle D--Additional Consumer Protections

    Sec. 131. Requiring fair marketing practices by health insurers.
    Sec. 132. Requiring fair grievance and appeals mechanisms.
    Sec. 133. Requiring information transparency and plan disclosure.
    Sec. 134. Application to qualified health benefits plans not offered
    through the Health Insurance Exchange.
    Sec. 135. Timely payment of claims.
    Sec. 136. Standardized rules for coordination and subrogation of
    benefits.
    Sec. 137. Application of administrative simplification.

                             Subtitle E--Governance

    Sec. 141. Health Choices Administration; Health Choices Commissioner.
    Sec. 142. Duties and authority of Commissioner.
    Sec. 143. Consultation and coordination.
    Sec. 144.  Health Insurance Ombudsman.

           Subtitle F--Relation to Other Requirements; Miscellaneous

    Sec. 151. Relation to other requirements.
    Sec. 152. Prohibiting discrimination in health care.
    Sec. 153. Whistleblower protection.
    Sec. 154. Construction regarding collective bargaining.
    Sec. 155. Severability.

                         Subtitle G--Early Investments

    Sec. 161. Ensuring value and lower premiums.
    Sec. 162. Ending health insurance rescission abuse.
    Sec. 163. Administrative simplification.
    Sec. 164. Reinsurance program for retirees.

           TITLE II--HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS

                     Subtitle A--Health Insurance Exchange

    Sec. 201. Establishment of Health Insurance Exchange; outline of
    duties; definitions.
    Sec. 202. Exchange-eligible individuals and employers.
    Sec. 203. Benefits package levels.
    Sec. 204. Contracts for the offering of Exchange-participating health
    benefits plans.
    Sec. 205. Outreach and enrollment of Exchange-eligible individuals and
    employers in Exchange-participating health benefits plan.
    Sec. 206. Other functions.
    Sec. 207. Health Insurance Exchange Trust Fund.
    Sec. 208. Optional operation of State-based health insurance exchanges.

                   Subtitle B--Public Health Insurance Option

    Sec. 221. Establishment and administration of a public health insurance
    option as an Exchange-qualified health benefits plan.
    Sec. 222. Premiums and financing.
    Sec. 223. Payment rates for items and services.
    Sec. 224. Modernized payment initiatives and delivery system reform.
    Sec. 225. Provider participation.
    Sec. 226. Application of fraud and abuse provisions.

                  Subtitle C--Individual Affordability Credits

    Sec. 241. Availability through Health Insurance Exchange.
    Sec. 242. Affordable credit eligible individual.
    Sec. 243. Affordable premium credit.
    Sec. 244. Affordability cost-sharing credit.
    Sec. 245. Income determinations.
    Sec. 246. No Federal payment for undocumented aliens.

                        TITLE III--SHARED RESPONSIBILITY

                     Subtitle A--Individual Responsibility

    Sec. 301. Individual responsibility.

                      Subtitle B--Employer Responsibility

               Part 1--Health Coverage Participation Requirements

    Sec. 311. Health coverage participation requirements.
    Sec. 312. Employer responsibility to contribute towards employee and
    dependent coverage.
    Sec. 313. Employer contributions in lieu of coverage.
    Sec. 314. Authority related to improper steering.

       Part 2--Satisfaction of Health Coverage Participation Requirements

    Sec. 321. Satisfaction of health coverage participation requirements
    under the Employee Retirement Income Security Act of 1974.
    Sec. 322. Satisfaction of health coverage participation requirements
    under the Internal Revenue Code of 1986.
    Sec. 323. Satisfaction of health coverage participation requirements
    under the Public Health Service Act.
    Sec. 324. Additional rules relating to health coverage participation
    requirements.

             TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

                       Subtitle A--Shared Responsibility

                       Part 1--Individual Responsibility

    Sec. 401. Tax on individuals without acceptable health care coverage.

                        Part 2--Employer Responsibility

    Sec. 411. Election to satisfy health coverage participation
    requirements.
    Sec. 412. Responsibilities of nonelecting employers.

    Subtitle B--Credit for Small Business Employee Health Coverage Expenses

    Sec. 421. Credit for small business employee health coverage expenses.

        Subtitle C--Disclosures to Carry Out Health Insurance Exchange
                                   Subsidies

    Sec. 431. Disclosures to carry out health insurance exchange subsidies.

                      Subtitle D--Other Revenue Provisions

                           Part 1--General Provisions

    Sec. 441. Surcharge on high income individuals.
    Sec. 442. Distributions for medicine qualified only if for prescribed
    drug or insulin.
    Sec. 443. Delay in application of worldwide allocation of interest.

                      Part 2--Prevention of Tax Avoidance

    Sec. 451. Limitation on treaty benefits for certain deductible
    payments.
    Sec. 452. Codification of economic substance doctrine.
    Sec. 453. Penalties for underpayments.

                       Part 3--Parity in Health Benefits

    Sec. 461. Certain health related benefits applicable to spouses and
    dependents extended to eligible beneficiaries.

      (c) General Definitions.--Except as otherwise provided, in this
    division:
              (1) Acceptable coverage.--The term ``acceptable coverage''
            has the meaning given such term in section 202(d)(2).
              (2) Basic plan.--The term ``basic plan'' has the meaning
            given such term in section 203(c).
              (3) Commissioner.--The term ``Commissioner'' means the Health
            Choices Commissioner established under section 141.
              (4) Cost-sharing.--The term ``cost-sharing'' includes
            deductibles, coinsurance, copayments, and similar charges but
            does not include premiums or any network payment differential
            for covered services or spending for non-covered services.
              (5) Dependent.--The term ``dependent'' has the meaning given
            such term by the Commissioner and includes a spouse.
              (6) Employment-based health plan.--The term ``employment-
            based health plan''--
                      (A) means a group health plan (as defined in section
                    733(a)(1) of the Employee Retirement Income Security
                    Act of 1974); and
                      (B) includes such a plan that is the following:
                              (i) Federal, state, and tribal governmental
                            plans.--A governmental plan (as defined in
                            section 3(32) of the Employee Retirement Income
                            Security Act of 1974), including a health
                            benefits plan offered under chapter 89 of title
                            5, United States Code.
                              (ii) Church plans.--A church plan (as defined
                            in section 3(33) of the Employee Retirement
                            Income Security Act of 1974).
              (7) Enhanced plan.--The term ``enhanced plan'' has the
            meaning given such term in section 203(c).
              (8) Essential benefits package.--The term ``essential
            benefits package'' is defined in section 122(a).
              (9) Family.--The term ``family'' means an individual and
            includes the individual's dependents.
              (10) Federal poverty level; fpl.--The terms ``Federal poverty
            level'' and ``FPL'' have the meaning given the term ``poverty
            line'' in section 673(2) of the Community Services Block Grant
            Act (42 U.S.C. 9902(2)), including any revision required by
            such section.
              (11) Health benefits plan.--The terms ``health benefits
            plan'' means health insurance coverage and an employment-based
            health plan and includes the public health insurance option.
              (12) Health insurance coverage; health insurance issuer.--The
            terms ``health insurance coverage'' and ``health insurance
            issuer'' have the meanings given such terms in section 2791 of
            the Public Health Service Act.
              (13) Health insurance exchange.--The term ``Health Insurance
            Exchange'' means the Health Insurance Exchange established
            under section 201.
              (14) Medicaid.--The term ``Medicaid'' means a State plan
            under title XIX of the Social Security Act (whether or not the
            plan is operating under a waiver under section 1115 of such
            Act).
              (15) Medicare.--The term ``Medicare'' means the health
            insurance programs under title XVIII of the Social Security
            Act.
              (16) Plan sponsor.--The term ``plan sponsor'' has the meaning
            given such term in section 3(16)(B) of the Employee Retirement
            Income Security Act of 1974.
              (17) Plan year.--The term ``plan year'' means--
                      (A) with respect to an employment-based health plan,
                    a plan year as specified under such plan; or
                      (B) with respect to a health benefits plan other than
                    an employment-based health plan, a 12-month period as
                    specified by the Commissioner.
              (18) Premium plan; premium-plus plan.--The terms ``premium
            plan'' and ``premium-plus plan'' have the meanings given such
            terms in section 203(c).
              (19) QHBP offering entity.--The terms ``QHBP offering
            entity'' means, with respect to a health benefits plan that
            is--
                      (A) a group health plan (as defined, subject to
                    subsection (d), in section 733(a)(1) of the Employee
                    Retirement Income Security Act of 1974), the plan
                    sponsor in relation to such group health plan, except
                    that, in the case of a plan maintained jointly by 1 or
                    more employers and 1 or more employee organizations and
                    with respect to which an employer is the primary source
                    of financing, such term means such employer;
                      (B) health insurance coverage, the health insurance
                    issuer offering the coverage;
                      (C) the public health insurance option, the Secretary
                    of Health and Human Services;
                      (D) a non-Federal governmental plan (as defined in
                    section 2791(d) of the Public Health Service Act), the
                    State or political subdivision of a State (or agency or
                    instrumentality of such State or subdivision) which
                    establishes or maintains such plan; or
                      (E) a Federal governmental plan (as defined in
                    section 2791(d) of the Public Health Service Act), the
                    appropriate Federal official.
              (20) Qualified health benefits plan.--The term ``qualified
            health benefits plan'' means a health benefits plan that meets
            the requirements for such a plan under title I and includes the
            public health insurance option.
              (21) Public health insurance option.--The term ``public
            health insurance option'' means the public health insurance
            option as provided under subtitle B of title II.
              (22) Service area; premium rating area.--The terms ``service
            area'' and ``premium rating area'' mean with respect to health
            insurance coverage--
                      (A) offered other than through the Health Insurance
                    Exchange, such an area as established by the QHBP
                    offering entity of such coverage in accordance with
                    applicable State law; and
                      (B) offered through the Health Insurance Exchange,
                    such an area as established by such entity in
                    accordance with applicable State law and applicable
                    rules of the Commissioner for Exchange-participating
                    health benefits plans.
              (23) State.--The term ``State'' means the 50 States and the
            District of Columbia.
              (24) State medicaid agency.--The term ``State Medicaid
            agency'' means, with respect to a Medicaid plan, the single
            State agency responsible for administering such plan under
            title XIX of the Social Security Act.
              (25) Y1, y2, etc.--The terms ``Y1'' , ``Y2'', ``Y3'', ``Y4'',
            ``Y5'', and similar subsequently numbered terms, mean 2013 and
            subsequent years, respectively.

     TITLE I--PROTECTIONS AND STANDARDS FOR QUALIFIED HEALTH BENEFITS PLANS

                         Subtitle A--General Standards

    SEC. 101. REQUIREMENTS REFORMING HEALTH INSURANCE MARKETPLACE.

      (a) Purpose.--The purpose of this title is to establish standards to
    ensure that new health insurance coverage and employment-based health
    plans that are offered meet standards guaranteeing access to affordable
    coverage, essential benefits, and other consumer protections.
      (b) Requirements for Qualified Health Benefits Plans.--On or after
    the first day of Y1, a health benefits plan shall not be a qualified
    health benefits plan under this division unless the plan meets the
    applicable requirements of the following subtitles for the type of plan
    and plan year involved:
              (1) Subtitle B (relating to affordable coverage).
              (2) Subtitle C (relating to essential benefits).
              (3) Subtitle D (relating to consumer protection).
      (c) Terminology.--In this division:
              (1) Enrollment in employment-based health plans.--An
            individual shall be treated as being ``enrolled'' in an
            employment-based health plan if the individual is a participant
            or beneficiary (as such terms are defined in section 3(7) and
            3(8), respectively, of the Employee Retirement Income Security
            Act of 1974) in such plan.
              (2) Individual and group health insurance coverage.--The
            terms ``individual health insurance coverage'' and ``group
            health insurance coverage'' mean health insurance coverage
            offered in the individual market or large or small group
            market, respectively, as defined in section 2791 of the Public
            Health Service Act.

    SEC. 102. PROTECTING THE CHOICE TO KEEP CURRENT COVERAGE.

      (a) Grandfathered Health Insurance Coverage Defined.--Subject to the
    succeeding provisions of this section, for purposes of establishing
    acceptable coverage under this division, the term ``grandfathered
    health insurance coverage'' means individual health insurance coverage
    that is offered and in force and effect before the first day of Y1 if
    the following conditions are met:
              (1) Limitation on new enrollment.--
                      (A) In general.--Except as provided in this
                    paragraph, the individual health insurance issuer
                    offering such coverage does not enroll any individual
                    in such coverage if the first effective date of
                    coverage is on or after the first day of Y1.
                      (B) Dependent coverage permitted.--Subparagraph (A)
                    shall not affect the subsequent enrollment of a
                    dependent of an individual who is covered as of such
                    first day.
              (2) Limitation on changes in terms or conditions.--Subject to
            paragraph (3) and except as required by law, the issuer does
            not change any of its terms or conditions, including benefits
            and cost-sharing, from those in effect as of the day before the
            first day of Y1.
              (3) Restrictions on premium increases.--The issuer cannot
            vary the percentage increase in the premium for a risk group of
            enrollees in specific grandfathered health insurance coverage
            without changing the premium for all enrollees in the same risk
            group at the same rate, as specified by the Commissioner.
      (b) Grace Period for Current Employment-based Health Plans.--
              (1) Grace period.--
                      (A) In general.--The Commissioner shall establish a
                    grace period whereby, for plan years beginning after
                    the end of the 5-year period beginning with Y1, an
                    employment-based health plan in operation as of the day
                    before the first day of Y1 must meet the same
                    requirements as apply to a qualified health benefits
                    plan under section 101, including the essential benefit
                    package requirement under section 121.
                      (B) Exception for limited benefits plans.--
                    Subparagraph (A) shall not apply to an employment-based
                    health plan in which the coverage consists only of one
                    or more of the following:
                              (i) Any coverage described in section
                            3001(a)(1)(B)(ii)(IV) of division B of the
                            American Recovery and Reinvestment Act of 2009
                            (P.L. 111-5).
                              (ii) Excepted benefits (as defined in section
                            733(c) of the Employee Retirement Income
                            Security Act of 1974), including coverage under
                            a specified disease or illness policy described
                            in paragraph (3)(A) of such section.
                              (iii) Such other limited benefits as the
                            Commissioner may specify.
                    In no case shall an employment-based health plan in
                    which the coverage consists only of one or more of the
                    coverage or benefits described in clauses (i) through
                    (iii) be treated as acceptable coverage under this
                    division
              (2) Transitional treatment as acceptable coverage.--During
            the grace period specified in paragraph (1)(A), an employment-
            based health plan that is described in such paragraph shall be
            treated as acceptable coverage under this division.
      (c) Limitation on Individual Health Insurance Coverage.--
              (1) In general.--Individual health insurance coverage that is
            not grandfathered health insurance coverage under subsection
            (a) may only be offered on or after the first day of Y1 as an
            Exchange-participating health benefits plan.
              (2) Separate, excepted coverage permitted.--Excepted benefits
            (as defined in section 2791(c) of the Public Health Service
            Act) are not included within the definition of health insurance
            coverage. Nothing in paragraph (1) shall prevent the offering,
            other than through the Health Insurance Exchange, of excepted
            benefits so long as it is offered and priced separately from
            health insurance coverage.

        Subtitle B--Standards Guaranteeing Access to Affordable Coverage

    SEC. 111. PROHIBITING PRE-EXISTING CONDITION EXCLUSIONS.

      A qualified health benefits plan may not impose any pre-existing
    condition exclusion (as defined in section 2701(b)(1)(A) of the Public
    Health Service Act) or otherwise impose any limit or condition on the
    coverage under the plan with respect to an individual or dependent
    based on any health status-related factors (as defined in section
    2791(d)(9) of the Public Health Service Act) in relation to the
    individual or dependent.

    SEC. 112. GUARANTEED ISSUE AND RENEWAL FOR INSURED PLANS.

      The requirements of sections 2711 (other than subsections (c) and
    (e)) and 2712 (other than paragraphs (3), and (6) of subsection (b) and
    subsection (e)) of the Public Health Service Act, relating to
    guaranteed availability and renewability of health insurance coverage,
    shall apply to individuals and employers in all individual and group
    health insurance coverage, whether offered to individuals or employers
    through the Health Insurance Exchange, through any employment-based
    health plan, or otherwise, in the same manner as such sections apply to
    employers and health insurance coverage offered in the small group
    market, except that such section 2712(b)(1) shall apply only if, before
    nonrenewal or discontinuation of coverage, the issuer has provided the
    enrollee with notice of non-payment of premiums and there is a grace
    period during which the enrollees has an opportunity to correct such
    nonpayment. Rescissions of such coverage shall be prohibited except in
    cases of fraud as defined in sections 2712(b)(2) of such Act.

    SEC. 113. INSURANCE RATING RULES.

      (a) In General.--The premium rate charged for an insured qualified
    health benefits plan may not vary except as follows:
              (1) Limited age variation permitted.--By age (within such age
            categories as the Commissioner shall specify) so long as the
            ratio of the highest such premium to the lowest such premium
            does not exceed the ratio of 2 to 1.
              (2) By area.--By premium rating area (as permitted by State
            insurance regulators or, in the case of Exchange-participating
            health benefits plans, as specified by the Commissioner in
            consultation with such regulators).
              (3) By family enrollment.--By family enrollment (such as
            variations within categories and compositions of families) so
            long as the ratio of the premium for family enrollment (or
            enrollments) to the premium for individual enrollment is
            uniform, as specified under State law and consistent with rules
            of the Commissioner.
      (b) Study and Reports.--
              (1) Study.--The Commissioner, in coordination with the
            Secretary of Health and Human Services and the Secretary of
            Labor, shall conduct a study of the large group insured and
            self-insured employer health care markets. Such study shall
            examine the following:
                      (A) The types of employers by key characteristics,
                    including size, that purchase insured products versus
                    those that self-insure.
                      (B) The similarities and differences between typical
                    insured and self-insured health plans.
                      (C) The financial solvency and capital reserve levels
                    of employers that self-insure by employer size.
                      (D) The risk of self-insured employers not being able
                    to pay obligations or otherwise becoming financially
                    insolvent.
                      (E) The extent to which rating rules are likely to
                    cause adverse selection in the large group market or to
                    encourage small and mid size employers to self-insure
              (2) Reports.--Not later than 18 months after the date of the
            enactment of this Act, the Commissioner shall submit to
            Congress and the applicable agencies a report on the study
            conducted under paragraph (1). Such report shall include any
            recommendations the Commissioner deems appropriate to ensure
            that the law does not provide incentives for small and mid-size
            employers to self-insure or create adverse selection in the
            risk pools of large group insurers and self-insured employers.
            Not later than 18 months after the first day of Y1, the
            Commissioner shall submit to Congress and the applicable
            agencies an updated report on such study, including updates on
            such recommendations.

    SEC. 114. NONDISCRIMINATION IN BENEFITS; PARITY IN MENTAL HEALTH AND
                        SUBSTANCE ABUSE DISORDER BENEFITS.

      (a) Nondiscrimination in Benefits.--A qualified health benefits plan
    shall comply with standards established by the Commissioner to prohibit
    discrimination in health benefits or benefit structures for qualifying
    health benefits plans, building from sections 702 of Employee
    Retirement Income Security Act of 1974, 2702 of the Public Health
    Service Act, and section 9802 of the Internal Revenue Code of 1986.
      (b) Parity in Mental Health and Substance Abuse Disorder Benefits.--
    To the extent such provisions are not superceded by or inconsistent
    with subtitle C, the provisions of section 2705 (other than subsections
    (a)(1), (a)(2), and (c)) of section 2705 of the Public Health Service
    Act shall apply to a qualified health benefits plan, regardless of
    whether it is offered in the individual or group market, in the same
    manner as such provisions apply to health insurance coverage offered in
    the large group market.

    SEC. 115. ENSURING ADEQUACY OF PROVIDER NETWORKS.

      (a) In General.--A qualified health benefits plan that uses a
    provider network for items and services shall meet such standards
    respecting provider networks as the Commissioner may establish to
    assure the adequacy of such networks in ensuring enrollee access to
    such items and services and transparency in the cost-sharing
    differentials between in-network coverage and out-of-network coverage.
      (b) Provider Network Defined.--In this division, the term ``provider
    network'' means the providers with respect to which covered benefits,
    treatments, and services are available under a health benefits plan.

    SEC. 116. ENSURING VALUE AND LOWER PREMIUMS.

      (a) In General.--A qualified health benefits plan shall meet a
    medical loss ratio as defined by the Commissioner. For any plan year in
    which the qualified health benefits plan does not meet such medical
    loss ratio, QHBP offering entity shall provide in a manner specified by
    the Commissioner for rebates to enrollees of payment sufficient to meet
    such loss ratio.
      (b) Building on Interim Rules.--In implementing subsection (a), the
    Commissioner shall build on the definition and methodology developed by
    the Secretary of Health and Human Services under the amendments made by
    section 161 for determining how to calculate the medical loss ratio.
    Such methodology shall be set at the highest level medical loss ratio
    possible that is designed to ensure adequate participation by QHBP
    offering entities, competition in the health insurance market in and
    out of the Health Insurance Exchange, and value for consumers so that
    their premiums are used for services.

        Subtitle C--Standards Guaranteeing Access to Essential Benefits

    SEC. 121. COVERAGE OF ESSENTIAL BENEFITS PACKAGE.

      (a) In General.--A qualified health benefits plan shall provide
    coverage that at least meets the benefit standards adopted under
    section 124 for the essential benefits package described in section 122
    for the plan year involved.
      (b) Choice of Coverage.--
              (1) Non-exchange-participating health benefits plans.--In the
            case of a qualified health benefits plan that is not an
            Exchange-participating health benefits plan, such plan may
            offer such coverage in addition to the essential benefits
            package as the QHBP offering entity may specify.
              (2) Exchange-participating health benefits plans.--In the
            case of an Exchange-participating health benefits plan, such
            plan is required under section 203 to provide specified levels
            of benefits and, in the case of a plan offering a premium-plus
            level of benefits, provide additional benefits.
              (3) Continuation of offering of separate excepted benefits
            coverage.--Nothing in this division shall be construed as
            affecting the offering of health benefits in the form of
            excepted benefits (described in section 102(b)(1)(B)(ii)) if
            such benefits are offered under a separate policy, contract, or
            certificate of insurance.
      (c) No Restrictions on Coverage Unrelated to Clinical
    Appropriateness.--A qualified health benefits plan may not impose any
    restriction (other than cost-sharing) unrelated to clinical
    appropriateness on the coverage of the health care items and services.

    SEC. 122. ESSENTIAL BENEFITS PACKAGE DEFINED.

      (a) In General.--In this division, the term ``essential benefits
    package'' means health benefits coverage, consistent with standards
    adopted under section 124 to ensure the provision of quality health
    care and financial security, that--
              (1) provides payment for the items and services described in
            subsection (b) in accordance with generally accepted standards
            of medical or other appropriate clinical or professional
            practice;
              (2) limits cost-sharing for such covered health care items
            and services in accordance with such benefit standards,
            consistent with subsection (c);
              (3) does not impose any annual or lifetime limit on the
            coverage of covered health care items and services;
              (4) complies with section 115(a) (relating to network
            adequacy); and
              (5) is equivalent, as certified by Office of the Actuary of
            the Centers for Medicare & Medicaid Services, to the average
            prevailing employer-sponsored coverage.
      (b) Minimum Services to Be Covered.--The items and services described
    in this subsection are the following:
              (1) Hospitalization.
              (2) Outpatient hospital and outpatient clinic services,
            including emergency department services.
              (3) Professional services of physicians and other health
            professionals.
              (4) Such services, equipment, and supplies incident to the
            services of a physician's or a health professional's delivery
            of care in institutional settings, physician offices, patients'
            homes or place of residence, or other settings, as appropriate.
              (5) Prescription drugs.
              (6) Rehabilitative and habilitative services.
              (7) Mental health and substance use disorder services.
              (8) Preventive services, including those services recommended
            with a grade of A or B by the Task Force on Clinical Preventive
            Services and those vaccines recommended for use by the Director
            of the Centers for Disease Control and Prevention.
              (9) Maternity care.
              (10) Well baby and well child care and oral health, vision,
            and hearing services, equipment, and supplies at least for
            children under 21 years of age.
      (c) Requirements Relating to Cost-sharing and Minimum Actuarial
    Value.--
              (1) No cost-sharing for preventive services.--There shall be
            no cost-sharing under the essential benefits package for
            preventive items and services (as specified under the benefit
            standards), including well baby and well child care.
              (2) Annual limitation.--
                      (A) Annual limitation.--The cost-sharing incurred
                    under the essential benefits package with respect to an
                    individual (or family) for a year does not exceed the
                    applicable level specified in subparagraph (B).
                      (B) Applicable level.--The applicable level specified
                    in this subparagraph for Y1 is $5,000 for an individual
                    and $10,000 for a family. Such levels shall be
                    increased (rounded to the nearest $100) for each
                    subsequent year by the annual percentage increase in
                    the Consumer Price Index (United States city average)
                    applicable to such year.
                      (C) Use of copayments.--In establishing cost-sharing
                    levels for basic, enhanced, and premium plans under
                    this subsection, the Secretary shall, to the maximum
                    extent possible, use only copayments and not
                    coinsurance.
              (3) Minimum actuarial value.--
                      (A) In general.--The cost-sharing under the essential
                    benefits package shall be designed to provide a level
                    of coverage that is designed to provide benefits that
                    are actuarially equivalent to approximately 70 percent
                    of the full actuarial value of the benefits provided
                    under the reference benefits package described in
                    subparagraph (B).
                      (B) Reference benefits package described.--The
                    reference benefits package described in this
                    subparagraph is the essential benefits package if there
                    were no cost-sharing imposed.

    SEC. 123. HEALTH BENEFITS ADVISORY COMMITTEE.

      (a) Establishment.--
              (1) In general.--There is established a private-public
            advisory committee which shall be a panel of medical and other
            experts to be known as the Health Benefits Advisory Committee
            to recommend covered benefits and essential, enhanced, and
            premium plans.
              (2) Chair.--The Surgeon General shall be a member and the
            chair of the Health Benefits Advisory Committee.
              (3) Membership.--The Health Benefits Advisory Committee shall
            be composed of the following members, in addition to the
            Surgeon General:
                      (A) 9 members who are not Federal employees or
                    officers and who are appointed by the President.
                      (B) 9 members who are not Federal employees or
                    officers and who are appointed by the Comptroller
                    General of the United States in a manner similar to the
                    manner in which the Comptroller General appoints
                    members to the Medicare Payment Advisory Commission
                    under section 1805(c) of the Social Security Act.
                      (C) Such even number of members (not to exceed 8) who
                    are Federal employees and officers, as the President
                    may appoint.
            Such initial appointments shall be made not later than 60 days
            after the date of the enactment of this Act.
              (4) Terms.--Each member of the Health Benefits Advisory
            Committee shall serve a 3-year term on the Committee, except
            that the terms of the initial members shall be adjusted in
            order to provide for a staggered term of appointment for all
            such members.
              (5) Participation.--The membership of the Health Benefits
            Advisory Committee shall at least reflect providers, consumer
            representatives, employers, labor, health insurance issuers,
            experts in health care financing and delivery, experts in
            racial and ethnic disparities, experts in care for those with
            disabilities, representatives of relevant governmental
            agencies. and at least one practicing physician or other health
            professional and an expert on children's health and shall
            represent a balance among various sectors of the health care
            system so that no single sector unduly influences the
            recommendations of such Committee.
      (b) Duties.--
              (1) Recommendations on benefit standards.--The Health
            Benefits Advisory Committee shall recommend to the Secretary of
            Health and Human Services (in this subtitle referred to as the
            ``Secretary'') benefit standards (as defined in paragraph (4)),
            and periodic updates to such standards. In developing such
            recommendations, the Committee shall take into account
            innovation in health care and consider how such standards could
            reduce health disparities.
              (2) Deadline.--The Health Benefits Advisory Committee shall
            recommend initial benefit standards to the Secretary not later
            than 1 year after the date of the enactment of this Act.
              (3) Public input.--The Health Benefits Advisory Committee
            shall allow for public input as a part of developing
            recommendations under this subsection.
              (4) Benefit standards defined.--In this subtitle, the term
            ``benefit standards'' means standards respecting--
                      (A) the essential benefits package described in
                    section 122, including categories of covered
                    treatments, items and services within benefit classes,
                    and cost-sharing; and
                      (B) the cost-sharing levels for enhanced plans and
                    premium plans (as provided under section 203(c))
                    consistent with paragraph (5).
              (5) Levels of cost-sharing for enhanced and premium plans.--
                      (A) Enhanced plan.--The level of cost-sharing for
                    enhanced plans shall be designed so that such plans
                    have benefits that are actuarially equivalent to
                    approximately 85 percent of the actuarial value of the
                    benefits provided under the reference benefits package
                    described in section 122(c)(3)(B).
                      (B) Premium plan.--The level of cost-sharing for
                    premium plans shall be designed so that such plans have
                    benefits that are actuarially equivalent to
                    approximately 95 percent of the actuarial value of the
                    benefits provided under the reference benefits package
                    described in section 122(c)(3)(B).
      (c) Operations.--
              (1) Per diem pay.--Each member of the Health Benefits
            Advisory Committee shall receive travel expenses, including per
            diem in accordance with applicable provisions under subchapter
            I of chapter 57 of title 5, United States Code, and shall
            otherwise serve without additional pay.
              (2) Members not treated as federal employees.--Members of the
            Health Benefits Advisory Committee shall not be considered
            employees of the Federal government solely by reason of any
            service on the Committee.
              (3) Application of faca.--The Federal Advisory Committee Act
            (5 U.S.C. App.), other than section 14, shall apply to the
            Health Benefits Advisory Committee.
      (d) Publication.--The Secretary shall provide for publication in the
    Federal Register and the posting on the Internet website of the
    Department of Health and Human Services of all recommendations made by
    the Health Benefits Advisory Committee under this section.

    SEC. 124. PROCESS FOR ADOPTION OF RECOMMENDATIONS; ADOPTION OF BENEFIT
                        STANDARDS.

      (a) Process for Adoption of Recommendations.--
              (1) Review of recommended standards.--Not later than 45 days
            after the date of receipt of benefit standards recommended
            under section 123 (including such standards as modified under
            paragraph (2)(B)), the Secretary shall review such standards
            and shall determine whether to propose adoption of such
            standards as a package.
              (2) Determination to adopt standards.--If the Secretary
            determines--
                      (A) to propose adoption of benefit standards so
                    recommended as a package, the Secretary shall, by
                    regulation under section 553 of title 5, United States
                    Code, propose adoption such standards; or
                      (B) not to propose adoption of such standards as a
                    package, the Secretary shall notify the Health Benefits
                    Advisory Committee in writing of such determination and
                    the reasons for not proposing the adoption of such
                    recommendation and provide the Committee with a further
                    opportunity to modify its previous recommendations and
                    submit new recommendations to the Secretary on a timely
                    basis.
              (3) Contingency.--If, because of the application of paragraph
            (2)(B), the Secretary would otherwise be unable to propose
            initial adoption of such recommended standards by the deadline
            specified in subsection (b)(1), the Secretary shall, by
            regulation under section 553 of title 5, United States Code,
            propose adoption of initial benefit standards by such deadline.
              (4) Publication.--The Secretary shall provide for publication
            in the Federal Register of all determinations made by the
            Secretary under this subsection.
      (b) Adoption of Standards.--
              (1) Initial standards.--Not later than 18 months after the
            date of the enactment of this Act, the Secretary shall, through
            the rulemaking process consistent with subsection (a), adopt an
            initial set of benefit standards.
              (2) Periodic updating standards.--Under subsection (a), the
            Secretary shall provide for the periodic updating of the
            benefit standards previously adopted under this section.
              (3) Requirement.--The Secretary may not adopt any benefit
            standards for an essential benefits package or for level of
            cost-sharing that are inconsistent with the requirements for
            such a package or level under sections 122 and 123(b)(5).

                  Subtitle D--Additional Consumer Protections

    SEC. 131. REQUIRING FAIR MARKETING PRACTICES BY HEALTH INSURERS.

      The Commissioner shall establish uniform marketing standards that all
    insured QHBP offering entities shall meet.

    SEC. 132. REQUIRING FAIR GRIEVANCE AND APPEALS MECHANISMS.

      (a) In General.--A QHBP offering entity shall provide for timely
    grievance and appeals mechanisms that the Commissioner shall establish.
      (b) Internal Claims and Appeals Process.--Under a qualified health
    benefits plan the QHBP offering entity shall provide an internal claims
    and appeals process that initially incorporates the claims and appeals
    procedures (including urgent claims) set forth at section 2560.503-1 of
    title 29, Code of Federal Regulations, as published on November 21,
    2000 (65 Fed. Reg. 70246) and shall update such process in accordance
    with any standards that the Commissioner may establish.
      (c) External Review Process.--
              (1) In general.--The Commissioner shall establish an external
            review process (including procedures for expedited reviews of
            urgent claims) that provides for an impartial, independent, and
            de novo review of denied claims under this division.
              (2) Requiring fair grievance and appeals mechanisms.--A
            determination made, with respect to a qualified health benefits
            plan offered by a QHBP offering entity, under the external
            review process established under this subsection shall be
            binding on the plan and the entity.
      (d) Construction.--Nothing in this section shall be construed as
    affecting the availability of judicial review under State law for
    adverse decisions under subsection (b) or (c), subject to section 151.

    SEC. 133. REQUIRING INFORMATION TRANSPARENCY AND PLAN DISCLOSURE.

      (a) Accurate and Timely Disclosure.--
              (1) In general.--A qualified health benefits plan shall
            comply with standards established by the Commissioner for the
            accurate and timely disclosure of plan documents, plan terms
            and conditions, claims payment policies and practices, periodic
            financial disclosure, data on enrollment, data on
            disenrollment, data on the number of claims denials, data on
            rating practices, information on cost-sharing and payments with
            respect to any out-of-network coverage, and other information
            as determined appropriate by the Commissioner. The Commissioner
            shall require that such disclosure be provided in plain
            language.
              (2) Plain language.--In this subsection, the term ``plain
            language'' means language that the intended audience, including
            individuals with limited English proficiency, can readily
            understand and use because that language is clean, concise,
            well-organized, and follows other best practices of plain
            language writing.
              (3) Guidance.--The Commissioner shall develop and issue
            guidance on best practices of plain language writing.
      (b) Contracting Reimbursement.--A qualified health benefits plan
    shall comply with standards established by the Commissioner to ensure
    transparency to each health care provider relating to reimbursement
    arrangements between such plan and such provider.
      (c) Advance Notice of Plan Changes.--A change in a qualified health
    benefits plan shall not be made without such reasonable and timely
    advance notice to enrollees of such change.

    SEC. 134. APPLICATION TO QUALIFIED HEALTH BENEFITS PLANS NOT OFFERED
                        THROUGH THE HEALTH INSURANCE EXCHANGE.

      The requirements of the previous provisions of this subtitle shall
    apply to qualified health benefits plans that are not being offered
    through the Health Insurance Exchange only to the extent specified by
    the Commissioner.

    SEC. 135. TIMELY PAYMENT OF CLAIMS.

      A QHBP offering entity shall comply with the requirements of section
    1857(f) of the Social Security Act with respect to a qualified health
    benefits plan it offers in the same manner an Medicare Advantage
    organization is required to comply with such requirements with respect
    to a Medicare Advantage plan it offers under part C of Medicare.

    SEC. 136. STANDARDIZED RULES FOR COORDINATION AND SUBROGATION OF
                        BENEFITS.

      The Commissioner shall establish standards for the coordination and
    subrogation of benefits and reimbursement of payments in cases
    involving individuals and multiple plan coverage.

    SEC. 137. APPLICATION OF ADMINISTRATIVE SIMPLIFICATION.

      A QHBP offering entity is required to comply with standards for
    electronic financial and administrative transactions under section
    1173A of the Social Security Act, added by section 163(a).

                             Subtitle E--Governance

    SEC. 141. HEALTH CHOICES ADMINISTRATION; HEALTH CHOICES COMMISSIONER.

      (a) In General.--There is hereby established, as an independent
    agency in the executive branch of the Government, a Health Choices
    Administration (in this division referred to as the
    ``Administration'').
      (b) Commissioner.--
              (1) In general.--The Administration shall be headed by a
            Health Choices Commissioner (in this division referred to as
            the ``Commissioner'') who shall be appointed by the President,
            by and with the advice and consent of the Senate.
              (2) Compensation; etc.--The provisions of paragraphs (2),
            (5), and (7) of subsection (a) (relating to compensation,
            terms, general powers, rulemaking, and delegation) of section
            702 of the Social Security Act (42 U.S.C. 902) shall apply to
            the Commissioner and the Administration in the same manner as
            such provisions apply to the Commissioner of Social Security
            and the Social Security Administration.

    SEC. 142. DUTIES AND AUTHORITY OF COMMISSIONER.

      (a) Duties.--The Commissioner is responsible for carrying out the
    following functions under this division:
              (1) Qualified plan standards.--The establishment of qualified
            health benefits plan standards under this title, including the
            enforcement of such standards in coordination with State
            insurance regulators and the Secretaries of Labor and the
            Treasury.
              (2) Health insurance exchange.--The establishment and
            operation of a Health Insurance Exchange under subtitle A of
            title II.
              (3) Individual affordability credits.--The administration of
            individual affordability credits under subtitle C of title II,
            including determination of eligibility for such credits.
              (4) Additional functions.--Such additional functions as may
            be specified in this division.
      (b) Promoting Accountability.--
              (1) In general.--The Commissioner shall undertake activities
            in accordance with this subtitle to promote accountability of
            QHBP offering entities in meeting Federal health insurance
            requirements, regardless of whether such accountability is with
            respect to qualified health benefits plans offered through the
            Health Insurance Exchange or outside of such Exchange.
              (2) Compliance examination and audits.--
                      (A) In general.--The commissioner shall, in
                    coordination with States, conduct audits of qualified
                    health benefits plan compliance with Federal
                    requirements.   Such audits may include random
                    compliance audits and targeted audits in response to
                    complaints or other suspected non-compliance.
                      (B) Recoupment of costs in connection with
                    examination and audits.--The Commissioner is authorized
                    to recoup from qualified health benefits plans
                    reimbursement for the costs of such examinations and
                    audit of such QHBP offering entities.
      (c) Data Collection.--The Commissioner shall collect data for
    purposes of carrying out the Commissioner's duties, including for
    purposes of promoting quality and value, protecting consumers, and
    addressing disparities in health and health care and may share such
    data with the Secretary of Health and Human Services.
      (d) Sanctions Authority.--
              (1) In general.--In the case that the Commissioner determines
            that a QHBP offering entity violates a requirement of this
            title, the Commissioner may, in coordination with State
            insurance regulators and the Secretary of Labor, provide, in
            addition to any other remedies authorized by law, for any of
            the remedies described in paragraph (2).
              (2) Remedies.--The remedies described in this paragraph, with
            respect to a qualified health benefits plan offered by a QHBP
            offering entity, are--
                      (A) civil money penalties of not more than the amount
                    that would be applicable under similar circumstances
                    for similar violations under section 1857(g) of the
                    Social Security Act;
                      (B) suspension of enrollment of individuals under
                    such plan after the date the Commissioner notifies the
                    entity of a determination under paragraph (1) and until
                    the Commissioner is satisfied that the basis for such
                    determination has been corrected and is not likely to
                    recur;
                      (C) in the case of an Exchange-participating health
                    benefits plan, suspension of payment to the entity
                    under the Health Insurance Exchange for individuals
                    enrolled in such plan after the date the Commissioner
                    notifies the entity of a determination under paragraph
                    (1) and until the Secretary is satisfied that the basis
                    for such determination has been corrected and is not
                    likely to recur; or
                      (D) working with State insurance regulators to
                    terminate plans for repeated failure by the offering
                    entity to meet the requirements of this title.
      (e) Standard Definitions of Insurance and Medical Terms.--The
    Commissioner shall provide for the development of standards for the
    definitions of terms used in health insurance coverage, including
    insurance-related terms.
      (f) Efficiency in Administration.--The Commissioner shall issue
    regulations for the effective and efficient administration of the
    Health Insurance Exchange and affordability credits under subtitle C,
    including, with respect to the determination of eligibility for
    affordability credits, the use of personnel who are employed in
    accordance with the requirements of title 5, United States Code, to
    carry out the duties of the Commissioner or, in the case of sections
    208 and 241(b)(2), the use of State personnel who are employed in
    accordance with standards prescribed by the Office of Personnel
    Management pursuant to section 208 of the Intergovernmental Personnel
    Act of 1970 (42 U.S.C. 4728).

    SEC. 143. CONSULTATION AND COORDINATION.

      (a) Consultation.--In carrying out the Commissioner's duties under
    this division, the Commissioner, as appropriate, shall consult with at
    least with the following:
              (1) The National Association of Insurance Commissioners,
            State attorneys general, and State insurance regulators,
            including concerning the standards for insured qualified health
            benefits plans under this title and enforcement of such
            standards.
              (2) Appropriate State agencies, specifically concerning the
            administration of individual affordability credits under
            subtitle C of title II and the offering of Exchange-
            participating health benefits plans, to Medicaid eligible
            individuals under subtitle A of such title.
              (3) Other appropriate Federal agencies.
              (4) Indian tribes and tribal organizations.
              (5) The National Association of Insurance Commissioners for
            purposes of using model guidelines established by such
            association for purposes of subtitles B and D.
      (b) Coordination.--
              (1) In general.--In carrying out the functions of the
            Commissioner, including with respect to the enforcement of the
            provisions of this division, the Commissioner shall work in
            coordination with existing Federal and State entities to the
            maximum extent feasible consistent with this division and in a
            manner that prevents conflicts of interest in duties and
            ensures effective enforcement.
              (2) Uniform standards.--The Commissioner, in coordination
            with such entities, shall seek to achieve uniform standards
            that adequately protect consumers in a manner that does not
            unreasonably affect employers and insurers.

    SEC. 144. HEALTH INSURANCE OMBUDSMAN.

      (a) In General.--The Commissioner shall appoint within the Health
    Choices Administration a Qualified Health Benefits Plan Ombudsman who
    shall have expertise and experience in the fields of health care and
    education of (and assistance to) individuals.
      (b) Duties.--The Qualified Health Benefits Plan Ombudsman shall, in a
    linguistically appropriate manner--
              (1) receive complaints, grievances, and requests for
            information submitted by individuals;
              (2) provide assistance with respect to complaints,
            grievances, and requests referred to in paragraph (1),
            including--
                      (A) helping individuals determine the relevant
                    information needed to seek an appeal of a decision or
                    determination;
                      (B) assistance to such individuals with any problems
                    arising from disenrollment from such a plan;
                      (C) assistance to such individuals in choosing a
                    qualified health benefits plan in which to enroll; and
                      (D) assistance to such individuals in presenting
                    information under subtitle C (relating to affordability
                    credits); and
              (3) submit annual reports to Congress and the Commissioner
            that describe the activities of the Ombudsman and that include
            such recommendations for improvement in the administration of
            this division as the Ombudsman determines appropriate. The
            Ombudsman shall not serve as an advocate for any increases in
            payments or new coverage of services, but may identify issues
            and problems in payment or coverage policies.

           Subtitle F--Relation to Other Requirements; Miscellaneous

    SEC. 151. RELATION TO OTHER REQUIREMENTS.

      (a) Coverage Not Offered Through Exchange.--
              (1) In general.--In the case of health insurance coverage not
            offered through the Health Insurance Exchange (whether or not
            offered in connection with an employment-based health plan),
            and in the case of employment-based health plans, the
            requirements of this title do not supercede any requirements
            applicable under titles XXII and XXVII of the Public Health
            Service Act, parts 6 and 7 of subtitle B of title I of the
            Employee Retirement Income Security Act of 1974, or State law,
            except insofar as such requirements prevent the application of
            a requirement of this division, as determined by the
            Commissioner.
              (2) Construction.--Nothing in paragraph (1) shall be
            construed as affecting the application of section 514 of the
            Employee Retirement Income Security Act of 1974.
      (b) Coverage Offered Through Exchange.--
              (1) In general.--In the case of health insurance coverage
            offered through the Health Insurance Exchange--
                      (A) the requirements of this title do not supercede
                    any requirements (including requirements relating to
                    genetic information nondiscrimination and mental
                    health) applicable under title XXVII of the Public
                    Health Service Act or under State law, except insofar
                    as such requirements prevent the application of a
                    requirement of this division, as determined by the
                    Commissioner; and
                      (B) individual rights and remedies under State laws
                    shall apply.
              (2) Construction.--In the case of coverage described in
            paragraph (1), nothing in such paragraph shall be construed as
            preventing the application of rights and remedies under State
            laws with respect to any requirement referred to in paragraph
            (1)(A).

    SEC. 152. PROHIBITING DISCRIMINATION IN HEALTH CARE.

      (a) In General.--Except as otherwise explicitly permitted by this Act
    and by subsequent regulations consistent with this Act, all health care
    and related services (including insurance coverage and public health
    activities) covered by this Act shall be provided without regard to
    personal characteristics extraneous to the provision of high quality
    health care or related services.
      (b) Implementation.--To implement the requirement set forth in
    subsection (a), the Secretary of Health and Human Services shall, not
    later than 18 months after the date of the enactment of this Act,
    promulgate such regulations as are necessary or appropriate to insure
    that all health care and related services (including insurance coverage
    and public health activities) covered by this Act are provided (whether
    directly or through contractual, licensing, or other arrangements)
    without regard to personal characteristics extraneous to the provision
    of high quality health care or related services.

    SEC. 153. WHISTLEBLOWER PROTECTION.

      (a) Retaliation Prohibited.--No employer may discharge any employee
    or otherwise discriminate against any employee with respect to his
    compensation, terms, conditions, or other privileges of employment
    because the employee (or any person acting pursuant to a request of the
    employee)--
              (1) provided, caused to be provided, or is about to provide
            or cause to be provided to the employer, the Federal
            Government, or the attorney general of a State information
            relating to any violation of, or any act or omission the
            employee reasonably believes to be a violation of any provision
            of this Act or any order, rule, or regulation promulgated under
            this Act;
              (2) testified or is about to testify in a proceeding
            concerning such violation;
              (3) assisted or participated or is about to assist or
            participate in such a proceeding; or
              (4) objected to, or refused to participate in, any activity,
            policy, practice, or assigned task that the employee (or other
            such person) reasonably believed to be in violation of any
            provision of this Act or any order, rule, or regulation
            promulgated under this Act.
      (b) Enforcement Action.--An employee covered by this section who
    alleges discrimination by an employer in violation of subsection (a)
    may bring an action governed by the rules, procedures, legal burdens of
    proof, and remedies set forth in section 40(b) of the Consumer Product
    Safety Act (15 U.S.C. 2087(b)).
      (c) Employer Defined.--As used in this section, the term ``employer''
    means any person (including one or more individuals, partnerships,
    associations, corporations, trusts, professional membership
    organization including a certification, disciplinary, or other
    professional body, unincorporated organizations, nongovernmental
    organizations, or trustees) engaged in profit or nonprofit business or
    industry whose activities are governed by this Act, and any agent,
    contractor, subcontractor, grantee, or consultant of such person.
      (d) Rule of Construction.--The rule of construction set forth in
    section 20109(h) of title 49, United States Code, shall also apply to
    this section.

    SEC. 154. CONSTRUCTION REGARDING COLLECTIVE BARGAINING.

      Nothing in this division shall be construed to alter of supercede any
    statutory or other obligation to engage in collective bargaining over
    the terms and conditions of employment related to health care.

    SEC. 155. SEVERABILITY.

      If any provision of this Act, or any application of such provision to
    any person or circumstance, is held to be unconstitutional, the
    remainder of the provisions of this Act and the application of the
    provision to any other person or circumstance shall not be affected.

                         Subtitle G--Early Investments

    SEC. 161. ENSURING VALUE AND LOWER PREMIUMS.

      (a) Group Health Insurance Coverage.--Title XXVII of the Public
    Health Service Act is amended by inserting after section 2713 the
    following new section:

    ``SEC. 2714. ENSURING VALUE AND LOWER PREMIUMS.

      ``(a) In General.--Each health insurance issuer that offers health
    insurance coverage in the small or large group market shall provide
    that for any plan year in which the coverage has a medical loss ratio
    below a level specified by the Secretary, the issuer shall provide in a
    manner specified by the Secretary for rebates to enrollees of payment
    sufficient to meet such loss ratio. Such methodology shall be set at
    the highest level medical loss ratio possible that is designed to
    ensure adequate participation by issuers, competition in the health
    insurance market, and value for consumers so that their premiums are
    used for services.
      ``(b) Uniform Definitions.--The Secretary shall establish a uniform
    definition of medical loss ratio and methodology for determining how to
    calculate the medical loss ratio. Such methodology shall be designed to
    take into account the special circumstances of smaller plans, different
    types of plans, and newer plans.''.
      (b) Individual Health Insurance Coverage.--Such title is further
    amended by inserting after section 2753 the following new section:

    ``SEC. 2754. ENSURING VALUE AND LOWER PREMIUMS.

      ``The provisions of section 2714 shall apply to health insurance
    coverage offered in the individual market in the same manner as such
    provisions apply to health insurance coverage offered in the small or
    large group market.''.
      (c) Immediate Implementation.--The amendments made by this section
    shall apply in the group and individual market for plan years beginning
    on or after January 1, 2011.

    SEC. 162. ENDING HEALTH INSURANCE RESCISSION ABUSE.

      (a) Clarification Regarding Application of Guaranteed Renewability of
    Individual Health Insurance Coverage.--Section 2742 of the Public
    Health Service Act (42 U.S.C. 300gg-42) is amended--
              (1) in its heading, by inserting ``AND CONTINUATION IN FORCE,
            INCLUDING PROHIBITION OF RESCISSION,'' after ``GUARANTEED
            RENEWABILITY''; and
              (2) in subsection (a), by inserting ``, including without
            rescission,'' after ``continue in force''.
      (b) Secretarial Guidance Regarding Rescissions.--Section 2742 of such
    Act (42 U.S.C. 300gg-42) is amended by adding at the end the following:
      ``(f) Rescission.--A health insurance issuer may rescind health
    insurance coverage only upon clear and convincing evidence of fraud
    described in subsection (b)(2). The Secretary, no later than July 1,
    2010, shall issue guidance implementing this requirement, including
    procedures for independent, external third party review.''.
      (c) Opportunity for Independent, External Third Party Review in
    Certain Cases.--Subpart 1 of part B of title XXVII of such Act (42
    U.S.C. 300gg-41 et seq.) is amended by adding at the end the following:

    ``SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL THIRD PARTY REVIEW
                        IN CASES OF RESCISSION.

      ``(a) Notice and Review Right.--If a health insurance issuer
    determines to rescind health insurance coverage for an individual in
    the individual market, before such rescission may take effect the
    issuer shall provide the individual with notice of such proposed
    rescission and an opportunity for a review of such determination by an
    independent, external third party under procedures specified by the
    Secretary under section 2742(f).
      ``(b) Independent Determination.--If the individual requests such
    review by an independent, external third party of a rescission of
    health insurance coverage, the coverage shall remain in effect until
    such third party determines that the coverage may be rescinded under
    the guidance issued by the Secretary under section 2742(f).''.
      (d) Effective Date.--The amendments made by this section shall apply
    on and after October 1, 2010, with respect to health insurance coverage
    issued before, on, or after such date.

    SEC. 163. ADMINISTRATIVE SIMPLIFICATION.

      (a) Standardizing Electronic Administrative Transactions.--
              (1) In general.--Part C of title XI of the Social Security
            Act (42 U.S.C. 1320d et seq.) is amended by inserting after
            section 1173 the following new section:

    ``SEC. 1173A. STANDARDIZE ELECTRONIC ADMINISTRATIVE TRANSACTIONS.

      ``(a) Standards for Financial and Administrative Transactions.--
              ``(1) In general.--The Secretary shall adopt and regularly
            update standards consistent with the goals described in
            paragraph (2).
              ``(2) Goals for financial and administrative transactions.--
            The goals for standards under paragraph (1) are that such
            standards shall--
                      ``(A) be unique with no conflicting or redundant
                    standards;
                      ``(B) be authoritative, permitting no additions or
                    constraints for electronic transactions, including
                    companion guides;
                      ``(C) be comprehensive, efficient and robust,
                    requiring minimal augmentation by paper transactions or
                    clarification by further communications;
                      ``(D) enable the real-time (or near real-time)
                    determination of an individual's financial
                    responsibility at the point of service and, to the
                    extent possible, prior to service, including whether
                    the individual is eligible for a specific service with
                    a specific physician at a specific facility, which may
                    include utilization of a machine-readable health plan
                    beneficiary identification card;
                      ``(E) enable, where feasible, near real-time
                    adjudication of claims;
                      ``(F) provide for timely acknowledgment, response,
                    and status reporting applicable to any electronic
                    transaction deemed appropriate by the Secretary;
                      ``(G) describe all data elements (such as reason and
                    remark codes) in unambiguous terms, not permit optional
                    fields, require that data elements be either required
                    or conditioned upon set values in other fields, and
                    prohibit additional conditions; and
                      ``(H) harmonize all common data elements across
                    administrative and clinical transaction standards.
              ``(3) Time for adoption.--Not later than 2 years after the
            date of implementation of the X12 Version 5010 transaction
            standards implemented under this part, the Secretary shall
            adopt standards under this section.
              ``(4) Requirements for specific standards.--The standards
            under this section shall be developed, adopted, and enforced so
            as to--
                      ``(A) clarify, refine, complete, and expand, as
                    needed, the standards required under section 1173;
                      ``(B) require paper versions of standardized
                    transactions to comply with the same standards as to
                    data content such that a fully compliant, equivalent
                    electronic transaction can be populated from the data
                    from a paper version;
                      ``(C) enable electronic funds transfers, in order to
                    allow automated reconciliation with the related health
                    care payment and remittance advice;
                      ``(D) require timely and transparent claim and denial
                    management processes, including tracking, adjudication,
                    and appeal processing;
                      ``(E) require the use of a standard electronic
                    transaction with which health care providers may
                    quickly and efficiently enroll with a health plan to
                    conduct the other electronic transactions provided for
                    in this part; and
                      ``(F) provide for other requirements relating to
                    administrative simplification as identified by the
                    Secretary, in consultation with stakeholders.
              ``(5) Building on existing standards.--In developing the
            standards under this section, the Secretary shall build upon
            existing and planned standards.
              ``(6) Implementation and enforcement.--Not later than 6
            months after the date of the enactment of this section, the
            Secretary shall submit to the appropriate committees of
            Congress a plan for the implementation and enforcement, by not
            later than 5 years after such date of enactment, of the
            standards under this section. Such plan shall include--
                      ``(A) a process and timeframe with milestones for
                    developing the complete set of standards;
                      ``(B) an expedited upgrade program for continually
                    developing and approving additions and modifications to
                    the standards as often as annually to improve their
                    quality and extend their functionality to meet evolving
                    requirements in health care;
                      ``(C) programs to provide incentives for, and ease
                    the burden of, implementation for certain health care
                    providers, with special consideration given to such
                    providers serving rural or underserved areas and ensure
                    coordination with standards, implementation
                    specifications, and certification criteria being
                    adopted under the HITECH Act;
                      ``(D) programs to provide incentives for, and ease
                    the burden of, health care providers who volunteer to
                    participate in the process of setting standards for
                    electronic transactions;
                      ``(E) an estimate of total funds needed to ensure
                    timely completion of the implementation plan; and
                      ``(F) an enforcement process that includes timely
                    investigation of complaints, random audits to ensure
                    compliance, civil monetary and programmatic penalties
                    for non-compliance consistent with existing laws and
                    regulations, and a fair and reasonable appeals process
                    building off of enforcement provisions under this part.
      ``(b) Limitations on Use of Data.--Nothing in this section shall be
    construed to permit the use of information collected under this section
    in a manner that would adversely affect any individual.
      ``(c) Protection of Data.--The Secretary shall ensure (through the
    promulgation of regulations or otherwise) that all data collected
    pursuant to subsection (a) are--
              ``(1) used and disclosed in a manner that meets the HIPAA
            privacy and security law (as defined in section 3009(a)(2) of
            the Public Health Service Act), including any privacy or
            security standard adopted under section 3004 of such Act; and
              ``(2) protected from all inappropriate internal use by any
            entity that collects, stores, or receives the data, including
            use of such data in determinations of eligibility (or continued
            eligibility) in health plans, and from other inappropriate
            uses, as defined by the Secretary.''.
              (2) Definitions.--Section 1171 of such Act (42 U.S.C. 1320d)
            is amended--
                      (A) in paragraph (7), by striking ``with reference
                    to'' and all that follows and inserting ``with
                    reference to a transaction or data element of health
                    information in section 1173 means implementation
                    specifications, certification criteria, operating
                    rules, messaging formats, codes, and code sets adopted
                    or established by the Secretary for the electronic
                    exchange and use of information''; and
                      (B) by adding at the end the following new paragraph:
              ``(9) Operating rules.--The term `operating rules' means
            business rules for using and processing transactions. Operating
            rules should address the following:
                      ``(A) Requirements for data content using available
                    and established national standards.
                      ``(B) Infrastructure requirements that establish best
                    practices for streamlining data flow to yield timely
                    execution of transactions.
                      ``(C) Policies defining the transaction related
                    rights and responsibilities for entities that are
                    transmitting or receiving data.''.
              (3) Conforming amendment.--Section 1179(a) of such Act (42
            U.S.C. 1320d-8(a)) is amended, in the matter before paragraph
            (1)--
                      (A) by inserting ``on behalf of an individual'' after
                    ``1978)''; and
                      (B) by inserting ``on behalf of an individual'' after
                    ``for a financial institution'' and
      (b) Standards for Claims Attachments and Coordination of Benefits .--
              (1) Standard for health claims attachments.--Not later than 1
            year after the date of the enactment of this Act, the Secretary
            of Health and Human Services shall promulgate a final rule to
            establish a standard for health claims attachment transaction
            described in section 1173(a)(2)(B) of the Social Security Act
            (42 U.S.C. 1320d-2(a)(2)(B)) and coordination of benefits.
              (2) Revision in processing payment transactions by financial
            institutions.--
                      (A) In general.--Section 1179 of the Social Security
                    Act (42 U.S.C. 1320d-8) is amended, in the matter
                    before paragraph (1)--
                              (i) by striking ``or is engaged'' and
                            inserting ``and is engaged''; and
                              (ii) by inserting ``(other than as a business
                            associate for a covered entity)'' after ``for a
                            financial institution''.
                      (B) Effective date.--The amendments made by paragraph
                    (1) shall apply to transactions occurring on or after
                    such date (not later than 6 months after the date of
                    the enactment of this Act) as the Secretary of Health
                    and Human Services shall specify.

    SEC. 164. REINSURANCE PROGRAM FOR RETIREES.

      (a) Establishment.--
              (1) In general.--Not later than 90 days after the date of the
            enactment of this Act, the Secretary of Health and Human
            Services shall establish a temporary reinsurance program (in
            this section referred to as the ``reinsurance program'') to
            provide reimbursement to assist participating employment-based
            plans with the cost of providing health benefits to retirees
            and to eligible spouses, surviving spouses and dependents of
            such retirees.
              (2) Definitions.--For purposes of this section:
                      (A) The term ``eligible employment-based plan'' means
                    a group health benefits plan that--
                              (i) is maintained by one or more employers,
                            former employers or employee associations, or a
                            voluntary employees' beneficiary association,
                            or a committee or board of individuals
                            appointed to administer such plan, and
                              (ii) provides health benefits to retirees.
                      (B) The term ``health benefits'' means medical,
                    surgical, hospital, prescription drug, and such other
                    benefits as shall be determined by the Secretary,
                    whether self-funded or delivered through the purchase
                    of insurance or otherwise.
                      (C) The term ``participating employment-based plan''
                    means an eligible employment-based plan that is
                    participating in the reinsurance program.
                      (D) The term ``retiree'' means, with respect to a
                    participating employment-benefit plan, an individual
                    who--
                              (i) is 55 years of age or older;
                              (ii) is not eligible for coverage under title
                            XVIII of the Social Security Act; and
                              (iii) is not an active employee of an
                            employer maintaining the plan or of any
                            employer that makes or has made substantial
                            contributions to fund such plan.
                      (E) The term ``Secretary'' means Secretary of Health
                    and Human Services.
      (b) Participation.--To be eligible to participate in the reinsurance
    program, an eligible employment-based plan shall submit to the
    Secretary an application for participation in the program, at such
    time, in such manner, and containing such information as the Secretary
    shall require.
      (c) Payment.--
              (1) Submission of claims.--
                      (A) In general.--Under the reinsurance program, a
                    participating employment-based plan shall submit claims
                    for reimbursement to the Secretary which shall contain
                    documentation of the actual costs of the items and
                    services for which each claim is being submitted.
                      (B) Basis for claims.--Each claim submitted under
                    subparagraph (A) shall be based on the actual amount
                    expended by the participating employment-based plan
                    involved within the plan year for the appropriate
                    employment based health benefits provided to a retiree
                    or to the spouse, surviving spouse, or dependent of a
                    retiree. In determining the amount of any claim for
                    purposes of this subsection, the participating
                    employment-based plan shall take into account any
                    negotiated price concessions (such as discounts, direct
                    or indirect subsidies, rebates, and direct or indirect
                    remunerations) obtained by such plan with respect to
                    such health benefits. For purposes of calculating the
                    amount of any claim, the costs paid by the retiree or
                    by the spouse, surviving spouse, or dependent of the
                    retiree in the form of deductibles, co-payments, and
                    co-insurance shall be included along with the amounts
                    paid by the participating employment-based plan.
              (2) Program payments and limit.--If the Secretary determines
            that a participating employment-based plan has submitted a
            valid claim under paragraph (1), the Secretary shall reimburse
            such plan for 80 percent of that portion of the costs
            attributable to such claim that exceeds $15,000, but is less
            than $90,000. Such amounts shall be adjusted each year based on
            the percentage increase in the medical care component of the
            Consumer Price Index (rounded to the nearest multiple of
            $1,000) for the year involved.
              (3) Use of payments.--Amounts paid to a participating
            employment-based plan under this subsection shall be used to
            lower the costs borne directly by the participants and
            beneficiaries for health benefits provided under such plan in
            the form of premiums, co-payments, deductibles, co-insurance,
            or other out-of-pocket costs. Such payments shall not be used
            to reduce the costs of an employer maintaining the
            participating employment-based plan. The Secretary shall
            develop a mechanism to monitor the appropriate use of such
            payments by such plans.
              (4) Appeals and program protections.--The Secretary shall
            establish--
                      (A) an appeals process to permit participating
                    employment-based plans to appeal a determination of the
                    Secretary with respect to claims submitted under this
                    section; and
                      (B) procedures to protect against fraud, waste, and
                    abuse under the program.
              (5) Audits.--The Secretary shall conduct annual audits of
            claims data submitted by participating employment-based plans
            under this section to ensure that they are in compliance with
            the requirements of this section.
      (d) Retiree Reserve Trust Fund.--
              (1) Establishment.--
                      (A) In general.--There is established in the Treasury
                    of the United States a trust fund to be known as the
                    ``Retiree Reserve Trust Fund'' (referred to in this
                    section as the ``Trust Fund''), that shall consist of
                    such amounts as may be appropriated or credited to the
                    Trust Fund as provided for in this subsection to enable
                    the Secretary to carry out the reinsurance program.
                    Such amounts shall remain available until expended.
                      (B) Funding.--There are hereby appropriated to the
                    Trust Fund, out of any moneys in the Treasury not
                    otherwise appropriated, an amount requested by the
                    Secretary as necessary to carry out this section,
                    except that the total of all such amounts requested
                    shall not exceed $10,000,000,000.
                      (C) Appropriations from the trust fund.--
                              (i) In general.--Amounts in the Trust Fund
                            are appropriated to provide funding to carry
                            out the reinsurance program and shall be used
                            to carry out such program.
                              (ii) Budgetary implications.--Amounts
                            appropriated under clause (i), and outlays
                            flowing from such appropriations, shall not be
                            taken into account for purposes of any budget
                            enforcement procedures including allocations
                            under section 302(a) and (b) of the Balanced
                            Budget and Emergency Deficit Control Act and
                            budget resolutions for fiscal years during
                            which appropriations are made from the Trust
                            Fund.
                              (iii) Limitation to available funds.--The
                            Secretary has the authority to stop taking
                            applications for participation in the program
                            or take such other steps in reducing
                            expenditures under the reinsurance program in
                            order to ensure that expenditures under the
                            reinsurance program do not exceed the funds
                            available under this subsection.

           TITLE II--HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS

                     Subtitle A--Health Insurance Exchange

    SEC. 201. ESTABLISHMENT OF HEALTH INSURANCE EXCHANGE; OUTLINE OF
                        DUTIES; DEFINITIONS.

      (a) Establishment.--There is established within the Health Choices
    Administration and under the direction of the Commissioner a Health
    Insurance Exchange in order to facilitate access of individuals and
    employers, through a transparent process, to a variety of choices of
    affordable, quality health insurance coverage, including a public
    health insurance option.
      (b) Outline of Duties of Commissioner.--In accordance with this
    subtitle and in coordination with appropriate Federal and State
    officials as provided under section 143(b), the Commissioner shall--
              (1) under section 204 establish standards for, accept bids
            from, and negotiate and enter into contracts with, QHBP
            offering entities for the offering of health benefits plans
            through the Health Insurance Exchange, with different levels of
            benefits required under section 203, and including with respect
            to oversight and enforcement;
              (2) under section 205 facilitate outreach and enrollment in
            such plans of Exchange-eligible individuals and employers
            described in section 202; and
              (3) conduct such activities related to the Health Insurance
            Exchange as required, including establishment of a risk pooling
            mechanism under section 206 and consumer protections under
            subtitle D of title I.
      (c) Exchange-participating Health Benefits Plan Defined.--In this
    division, the term ``Exchange-participating health benefits plan''
    means a qualified health benefits plan that is offered through the
    Health Insurance Exchange.

    SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS.

      (a) Access to Coverage.--In accordance with this section, all
    individuals are eligible to obtain coverage through enrollment in an
    Exchange-participating health benefits plan offered through the Health
    Insurance Exchange unless such individuals are enrolled in another
    qualified health benefits plan or other acceptable coverage.
      (b) Definitions.--In this division:
              (1) Exchange-eligible individual.--The term ``Exchange-
            eligible individual'' means an individual who is eligible under
            this section to be enrolled through the Health Insurance
            Exchange in an Exchange-participating health benefits plan and,
            with respect to family coverage, includes dependents of such
            individual.
              (2) Exchange-eligible employer.--The term ``Exchange-eligible
            employer'' means an employer that is eligible under this
            section to enroll through the Health Insurance Exchange
            employees of the employer (and their dependents) in Exchange-
            eligible health benefits plans.
              (3) Employment-related definitions.--The terms ``employer'',
            ``employee'', ``full-time employee'', and ``part-time
            employee'' have the meanings given such terms by the
            Commissioner for purposes of this division.
      (c) Transition.--Individuals and employers shall only be eligible to
    enroll or participate in the Health Insurance Exchange in accordance
    with the following transition schedule:
              (1) First year.--In Y1 (as defined in section 100(c))--
                      (A) individuals described in subsection (d)(1),
                    including individuals described in paragraphs (3) and
                    (4) of subsection (d); and
                      (B) smallest employers described in subsection
                    (e)(1).
              (2) Second year.--In Y2--
                      (A) individuals and employers described in paragraph
                    (1); and
                      (B) smaller employers described in subsection (e)(2).
              (3) Third and subsequent years.--In Y3 and subsequent years--
                      (A) individuals and employers described in paragraph
                    (2); and
                      (B) larger employers as permitted by the Commissioner
                    under subsection (e)(3).
      (d) Individuals.--
              (1) Individual described.--Subject to the succeeding
            provisions of this subsection, an individual described in this
            paragraph is an individual who--
                      (A) is not enrolled in coverage described in
                    subparagraphs (C) through (F) of paragraph (2); and
                      (B) is not enrolled in coverage as a full-time
                    employee (or as a dependent of such an employee) under
                    a group health plan if the coverage and an employer
                    contribution under the plan meet the requirements of
                    section 312.
            For purposes of subparagraph (B), in the case of an individual
            who is self-employed, who has at least 1 employee, and who
            meets the requirements of section 312, such individual shall be
            deemed a full-time employee described in such subparagraph.
              (2) Acceptable coverage.--For purposes of this division, the
            term ``acceptable coverage'' means any of the following:
                      (A) Qualified health benefits plan coverage.--
                    Coverage under a qualified health benefits plan.
                      (B) Grandfathered health insurance coverage; coverage
                    under current group health plan.--Coverage under a
                    grandfathered health insurance coverage (as defined in
                    subsection (a) of section 102) or under a current group
                    health plan (described in subsection (b) of such
                    section).
                      (C) Medicare.--Coverage under part A of title XVIII
                    of the Social Security Act.
                      (D) Medicaid.--Coverage for medical assistance under
                    title XIX of the Social Security Act, excluding such
                    coverage that is only available because of the
                    application of subsection (u), (z), or (aa) of section
                    1902 of such Act
                      (E) Members of the armed forces and dependents
                    (including tricare).--Coverage under chapter 55 of
                    title 10, United States Code, including similar
                    coverage furnished under section 1781 of title 38 of
                    such Code.
                      (F) VA.--Coverage under the veteran's health care
                    program under chapter 17 of title 38, United States
                    Code, but only if the coverage for the individual
                    involved is determined by the Commissioner in
                    coordination with the Secretary of Treasury to be not
                    less than a level specified by the Commissioner and
                    Secretary of Veteran's Affairs, in coordination with
                    the Secretary of Treasury, based on the individual's
                    priority for services as provided under section 1705(a)
                    of such title.
                      (G) Other coverage.--Such other health benefits
                    coverage, such as a State health benefits risk pool, as
                    the Commissioner, in coordination with the Secretary of
                    the Treasury, recognizes for purposes of this
                    paragraph.
            The Commissioner shall make determinations under this paragraph
            in coordination with the Secretary of the Treasury.
              (3) Treatment of certain non-traditional medicaid eligible
            individuals.--An individual who is a non-traditional Medicaid
            eligible individual (as defined in section 205(e)(4)(C)) in a
            State may be an Exchange-eligible individual if the individual
            was enrolled in a qualified health benefits plan, grandfathered
            health insurance coverage, or current group health plan during
            the 6 months before the individual became a non-traditional
            Medicaid eligible individual. During the period in which such
            an individual has chosen to enroll in an Exchange-participating
            health benefits plan, the individual is not also eligible for
            medical assistance under Medicaid.
              (4) Continuing eligibility permitted.--
                      (A) In general.--Except as provided in subparagraph
                    (B), once an individual qualifies as an Exchange-
                    eligible individual under this subsection (including as
                    an employee or dependent of an employee of an Exchange-
                    eligible employer) and enrolls under an Exchange-
                    participating health benefits plan through the Health
                    Insurance Exchange, the individual shall continue to be
                    treated as an Exchange-eligible individual until the
                    individual is no longer enrolled with an Exchange-
                    participating health benefits plan.
                      (B) Exceptions.--
                              (i) In general.--Subparagraph (A) shall not
                            apply to an individual once the individual
                            becomes eligible for coverage--
                                      (I) under part A of the Medicare
                                    program;
                                      (II) under the Medicaid program as a
                                    Medicaid eligible individual, except as
                                    permitted under paragraph (3) or clause
                                    (ii); or
                                      (III) in such other circumstances as
                                    the Commissioner may provide.
                              (ii) Transition period.--In the case
                            described in clause (i)(II), the Commissioner
                            shall permit the individual to continue
                            treatment under subparagraph (A) until such
                            limited time as the Commissioner determines it
                            is administratively feasible, consistent with
                            minimizing disruption in the individual's
                            access to health care.
      (e) Employers.--
              (1) Smallest employer.--Subject to paragraph (4), smallest
            employers described in this paragraph are employers with 10 or
            fewer employees.
              (2) Smaller employers.--Subject to paragraph (4), smaller
            employers described in this paragraph are employers that are
            not smallest employers described in paragraph (1) and have 20
            or fewer employees.
              (3) Larger employers.--
                      (A) In general.--Beginning with Y3, the Commissioner
                    may permit employers not described in paragraph (1) or
                    (2) to be Exchange-eligible employers.
                      (B) Phase-in.--In applying subparagraph (A), the
                    Commissioner may phase-in the application of such
                    subparagraph based on the number of full-time employees
                    of an employer and such other considerations as the
                    Commissioner deems appropriate.
              (4) Continuing eligibility.--Once an employer is permitted to
            be an Exchange-eligible employer under this subsection and
            enrolls employees through the Health Insurance Exchange, the
            employer shall continue to be treated as an Exchange-eligible
            employer for each subsequent plan year regardless of the number
            of employees involved unless and until the employer meets the
            requirement of section 311(a) through paragraph (1) of such
            section by offering a group health plan and not through
            offering an Exchange-participating health benefits plan.
              (5) Employer participation and contributions.--
                      (A) Satisfaction of employer responsibility.--For any
                    year in which an employer is an Exchange-eligible
                    employer, such employer may meet the requirements of
                    section 312 with respect to employees of such employer
                    by offering such employees the option of enrolling with
                    Exchange-participating health benefits plans through
                    the Health Insurance Exchange consistent with the
                    provisions of subtitle B of title III.
                      (B) Employee choice.--Any employee offered Exchange-
                    participating health benefits plans by the employer of
                    such employee under subparagraph (A) may choose
                    coverage under any such plan. That choice includes,
                    with respect to family coverage, coverage of the
                    dependents of such employee.
              (6) Affiliated groups.--Any employer which is part of a group
            of employers who are treated as a single employer under
            subsection (b), (c), (m), or (o) of section 414 of the Internal
            Revenue Code of 1986 shall be treated, for purposes of this
            subtitle, as a single employer.
              (7) Other counting rules.--The Commissioner shall establish
            rules relating to how employees are counted for purposes of
            carrying out this subsection.
      (f) Special Situation Authority.--The Commissioner shall have the
    authority to establish such rules as may be necessary to deal with
    special situations with regard to uninsured individuals and employers
    participating as Exchange-eligible individuals and employers, such as
    transition periods for individuals and employers who gain, or lose,
    Exchange-eligible participation status, and to establish grace periods
    for premium payment.
      (g) Surveys of Individuals and Employers.--The Commissioner shall
    provide for periodic surveys of Exchange-eligible individuals and
    employers concerning satisfaction of such individuals and employers
    with the Health Insurance Exchange and Exchange-participating health
    benefits plans.
      (h) Exchange Access Study.--
              (1) In general.--The Commissioner shall conduct a study of
            access to the Health Insurance Exchange for individuals and for
            employers, including individuals and employers who are not
            eligible and enrolled in Exchange-participating health benefits
            plans. The goal of the study is to determine if there are
            significant groups and types of individuals and employers who
            are not Exchange eligible individuals or employers, but who
            would have improved benefits and affordability if made eligible
            for coverage in the Exchange.
              (2) Items included in study.--Such study also shall examine--
                      (A) the terms, conditions, and affordability of group
                    health coverage offered by employers and QHBP offering
                    entities outside of the Exchange compared to Exchange-
                    participating health benefits plans; and
                      (B) the affordability-test standard for access of
                    certain employed individuals to coverage in the Health
                    Insurance Exchange.
              (3) Report.--Not later than January 1 of Y3, in Y6, and
            thereafter, the Commissioner shall submit to Congress on the
            study conducted under this subsection and shall include in such
            report recommendations regarding changes in standards for
            Exchange eligibility for individuals and employers.

    SEC. 203. BENEFITS PACKAGE LEVELS.

      (a) In General.--The Commissioner shall specify the benefits to be
    made available under Exchange-participating health benefits plans
    during each plan year, consistent with subtitle C of title I and this
    section.
      (b) Limitation on Health Benefits Plans Offered by Offering
    Entities.--The Commissioner may not enter into a contract with a QHBP
    offering entity under section 204(c) for the offering of an Exchange-
    participating health benefits plan in a service area unless the
    following requirements are met:
              (1) Required offering of basic plan.--The entity offers only
            one basic plan for such service area.
              (2) Optional offering of enhanced plan.--If and only if the
            entity offers a basic plan for such service area, the entity
            may offer one enhanced plan for such area.
              (3) Optional offering of premium plan.--If and only if the
            entity offers an enhanced plan for such service area, the
            entity may offer one premium plan for such area.
              (4) Optional offering of premium-plus plans.--If and only if
            the entity offers a premium plan for such service area, the
            entity may offer one or more premium-plus plans for such area.
    All such plans may be offered under a single contract with the
    Commissioner.
      (c) Specification of Benefit Levels for Plans.--
              (1) In general.--The Commissioner shall establish the
            following standards consistent with this subsection and title
            I:
                      (A) Basic, enhanced, and premium plans.--Standards
                    for 3 levels of Exchange-participating health benefits
                    plans: basic, enhanced, and premium (in this division
                    referred to as a ``basic plan'', ``enhanced plan'', and
                    ``premium plan'', respectively).
                      (B) Premium-plus plan benefits.--Standards for
                    additional benefits that may be offered, consistent
                    with this subsection and subtitle C of title I, under a
                    premium plan (such a plan with additional benefits
                    referred to in this division as a ``premium-plus
                    plan'') .
              (2) Basic plan.--
                      (A) In general.--A basic plan shall offer the
                    essential benefits package required under title I for a
                    qualified health benefits plan.
                      (B) Tiered cost-sharing for affordable credit
                    eligible individuals.--In the case of an affordable
                    credit eligible individual (as defined in section
                    242(a)(1)) enrolled in an Exchange-participating health
                    benefits plan, the benefits under a basic plan are
                    modified to provide for the reduced cost-sharing for
                    the income tier applicable to the individual under
                    section 244(c).
              (3) Enhanced plan.--An enhanced plan shall offer, in addition
            to the level of benefits under the basic plan, a lower level of
            cost-sharing as provided under title I consistent with section
            123(b)(5)(A).
              (4) Premium plan.--A premium plan shall offer, in addition to
            the level of benefits under the basic plan, a lower level of
            cost-sharing as provided under title I consistent with section
            123(b)(5)(B).
              (5) Premium-plus plan.--A premium-plus plan is a premium plan
            that also provides additional benefits, such as adult oral
            health and vision care, approved by the Commissioner. The
            portion of the premium that is attributable to such additional
            benefits shall be separately specified.
              (6) Range of permissible variation in cost-sharing.--The
            Commissioner shall establish a permissible range of variation
            of cost-sharing for each basic, enhanced, and premium plan,
            except with respect to any benefit for which there is no cost-
            sharing permitted under the essential benefits package. Such
            variation shall permit a variation of not more than plus (or
            minus) 10 percent in cost-sharing with respect to each benefit
            category specified under section 122.
      (d) Treatment of State Benefit Mandates.--Insofar as a State requires
    a health insurance issuer offering health insurance coverage to include
    benefits beyond the essential benefits package, such requirement shall
    continue to apply to an Exchange-participating health benefits plan, if
    the State has entered into an arrangement satisfactory to the
    Commissioner to reimburse the Commissioner for the amount of any net
    increase in affordability premium credits under subtitle C as a result
    of an increase in premium in basic plans as a result of application of
    such requirement.

    SEC. 204. CONTRACTS FOR THE OFFERING OF EXCHANGE-PARTICIPATING HEALTH
                        BENEFITS PLANS.

      (a) Contracting Duties.--In carrying out section 201(b)(1) and
    consistent with this subtitle:
              (1) Offering entity and plan standards.--The Commissioner
            shall--
                      (A) establish standards necessary to implement the
                    requirements of this title and title I for--
                              (i) QHBP offering entities for the offering
                            of an Exchange-participating health benefits
                            plan; and
                              (ii) for Exchange-participating health
                            benefits plans; and
                      (B) certify QHBP offering entities and qualified
                    health benefits plans as meeting such standards and
                    requirements of this title and title I for purposes of
                    this subtitle.
              (2) Soliciting and negotiating bids; contracts.--The
            Commissioner shall--
                      (A) solicit bids from QHBP offering entities for the
                    offering of Exchange-participating health benefits
                    plans;
                      (B) based upon a review of such bids, negotiate with
                    such entities for the offering of such plans; and
                      (C) enter into contracts with such entities for the
                    offering of such plans through the Health Insurance
                    Exchange under terms (consistent with this title)
                    negotiated between the Commissioner and such entities.
              (3) FAR not applicable.--The provisions of the Federal
            Acquisition Regulation shall not apply to contracts between the
            Commissioner and QHBP offering entities for the offering of
            Exchange-participating health benefits plans under this title.
      (b) Standards for QHBP Offering Entities to Offer Exchange-
    participating Health Benefits Plans.--The standards established under
    subsection (a)(1)(A) shall require that, in order for a QHBP offering
    entity to offer an Exchange-participating health benefits plan, the
    entity must meet the following requirements:
              (1) Licensed.--The entity shall be licensed to offer health
            insurance coverage under State law for each State in which it
            is offering such coverage.
              (2) Data reporting.--The entity shall provide for the
            reporting of such information as the Commissioner may specify,
            including information necessary to administer the risk pooling
            mechanism described in section 206(b) and information to
            address disparities in health and health care.
              (3) Implementing affordability credits.--The entity shall
            provide for implementation of the affordability credits
            provided for enrollees under subtitle C, including the
            reduction in cost-sharing under section 244(c).
              (4) Enrollment.--The entity shall accept all enrollments
            under this subtitle, subject to such exceptions (such as
            capacity limitations) in accordance with the requirements under
            title I for a qualified health benefits plan. The entity shall
            notify the Commissioner if the entity projects or anticipates
            reaching such a capacity limitation that would result in a
            limitation in enrollment.
              (5) Risk pooling participation.--The entity shall participate
            in such risk pooling mechanism as the Commissioner establishes
            under section 206(b).
              (6) Essential community providers.--With respect to the basic
            plan offered by the entity, the entity shall contract for
            outpatient services with covered entities (as defined in
            section 340B(a)(4) of the Public Health Service Act, as in
            effect as of July 1, 2009). The Commissioner shall specify the
            extent to which and manner in which the previous sentence shall
            apply in the case of a basic plan with respect to which the
            Commissioner determines provides substantially all benefits
            through a health maintenance organization, as defined in
            section 2791(b)(3) of the Public Health Service Act.
              (7) Culturally and linguistically appropriate services and
            communications.--The entity shall provide for culturally and
            linguistically appropriate communication and health services.
              (8) Additional requirements.--The entity shall comply with
            other applicable requirements of this title, as specified by
            the Commissioner, which shall include standards regarding
            billing and collection practices for premiums and related grace
            periods and which may include standards to ensure that the
            entity does not use coercive practices to force providers not
            to contract with other entities offering coverage through the
            Health Insurance Exchange.
      (c) Contracts.--
              (1) Bid application.--To be eligible to enter into a contract
            under this section, a QHBP offering entity shall submit to the
            Commissioner a bid at such time, in such manner, and containing
            such information as the Commissioner may require.
              (2) Term.--Each contract with a QHBP offering entity under
            this section shall be for a term of not less than one year, but
            may be made automatically renewable from term to term in the
            absence of notice of termination by either party.
              (3) Enforcement of network adequacy.--In the case of a health
            benefits plan of a QHBP offering entity that uses a provider
            network, the contract under this section with the entity shall
            provide that if--
                      (A) the Commissioner determines that such provider
                    network does not meet such standards as the
                    Commissioner shall establish under section 115; and
                      (B) an individual enrolled in such plan receives an
                    item or service from a provider that is not within such
                    network;
            then any cost-sharing for such item or service shall be equal
            to the amount of such cost-sharing that would be imposed if
            such item or service was furnished by a provider within such
            network.
              (4) Oversight and enforcement responsibilities.--The
            Commissioner shall establish processes, in coordination with
            State insurance regulators, to oversee, monitor, and enforce
            applicable requirements of this title with respect to QHBP
            offering entities offering Exchange-participating health
            benefits plans and such plans, including the marketing of such
            plans. Such processes shall include the following:
                      (A) Grievance and complaint mechanisms.--The
                    Commissioner shall establish, in coordination with
                    State insurance regulators, a process under which
                    Exchange-eligible individuals and employers may file
                    complaints concerning violations of such standards.
                      (B) Enforcement.--In carrying out authorities under
                    this division relating to the Health Insurance
                    Exchange, the Commissioner may impose one or more of
                    the intermediate sanctions described in section 142(c).
                      (C) Termination.--
                              (i) In general.--The Commissioner may
                            terminate a contract with a QHBP offering
                            entity under this section for the offering of
                            an Exchange-participating health benefits plan
                            if such entity fails to comply with the
                            applicable requirements of this title. Any
                            determination by the Commissioner to terminate
                            a contract shall be made in accordance with
                            formal investigation and compliance procedures
                            established by the Commissioner under which--
                                      (I) the Commissioner provides the
                                    entity with the reasonable opportunity
                                    to develop and implement a corrective
                                    action plan to correct the deficiencies
                                    that were the basis of the
                                    Commissioner's determination; and
                                      (II) the Commissioner provides the
                                    entity with reasonable notice and
                                    opportunity for hearing (including the
                                    right to appeal an initial decision)
                                    before terminating the contract.
                              (ii) Exception for imminent and serious risk
                            to health.--Clause (i) shall not apply if the
                            Commissioner determines that a delay in
                            termination, resulting from compliance with the
                            procedures specified in such clause prior to
                            termination, would pose an imminent and serious
                            risk to the health of individuals enrolled
                            under the qualified health benefits plan of the
                            QHBP offering entity.
                      (D) Construction.--Nothing in this subsection shall
                    be construed as preventing the application of other
                    sanctions under subtitle E of title I with respect to
                    an entity for a violation of such a requirement.

    SEC. 205. OUTREACH AND ENROLLMENT OF EXCHANGE-ELIGIBLE INDIVIDUALS AND
                        EMPLOYERS IN EXCHANGE-PARTICIPATING HEALTH BENEFITS
                        PLAN.

      (a) In General.--
              (1) Outreach.--The Commissioner shall conduct outreach
            activities consistent with subsection (c), including through
            use of appropriate entities as described in paragraph (4) of
            such subsection, to inform and educate individuals and
            employers about the Health Insurance Exchange and Exchange-
            participating health benefits plan options. Such outreach shall
            include outreach specific to vulnerable populations, such as
            children, individuals with disabilities, individuals with
            mental illness, and individuals with other cognitive
            impairments.
              (2) Eligibility.--The Commissioner shall make timely
            determinations of whether individuals and employers are
            Exchange-eligible individuals and employers (as defined in
            section 202).
              (3) Enrollment.--The Commissioner shall establish and carry
            out an enrollment process for Exchange-eligible individuals and
            employers, including at community locations, in accordance with
            subsection (b).
      (b) Enrollment Process.--
              (1) In general.--The Commissioner shall establish a process
            consistent with this title for enrollments in Exchange-
            participating health benefits plans. Such process shall provide
            for enrollment through means such as the mail, by telephone,
            electronically, and in person.
              (2) Enrollment periods.--
                      (A) Open enrollment period.--The Commissioner shall
                    establish an annual open enrollment period during which
                    an Exchange-eligible individual or employer may elect
                    to enroll in an Exchange-participating health benefits
                    plan for the following plan year and an enrollment
                    period for affordability credits under subtitle C. Such
                    periods shall be during September through November of
                    each year, or such other time that would maximize
                    timeliness of income verification for purposes of such
                    subtitle. The open enrollment period shall not be less
                    than 30 days.
                      (B) Special enrollment.--The Commissioner shall also
                    provide for special enrollment periods to take into
                    account special circumstances of individuals and
                    employers, such as an individual who--
                              (i) loses acceptable coverage;
                              (ii) experiences a change in marital or other
                            dependent status;
                              (iii) moves outside the service area of the
                            Exchange-participating health benefits plan in
                            which the individual is enrolled; or
                              (iv) experiences a significant change in
                            income.
                      (C) Enrollment information.--The Commissioner shall
                    provide for the broad dissemination of information to
                    prospective enrollees on the enrollment process,
                    including before each open enrollment period. In
                    carrying out the previous sentence, the Commissioner
                    may work with other appropriate entities to facilitate
                    such provision of information.
              (3) Automatic enrollment for non-medicaid eligible
            individuals.--
                      (A) In general.--The Commissioner shall provide for a
                    process under which individuals who are Exchange-
                    eligible individuals described in subparagraph (B) are
                    automatically enrolled under an appropriate Exchange-
                    participating health benefits plan. Such process may
                    involve a random assignment or some other form of
                    assignment that takes into account the health care
                    providers used by the individual involved or such other
                    relevant factors as the Commissioner may specify.
                      (B) Subsidized individuals described.--An individual
                    described in this subparagraph is an Exchange-eligible
                    individual who is either of the following:
                              (i) Affordability credit eligible
                            individuals.--The individual--
                                      (I) has applied for, and been
                                    determined eligible for, affordability
                                    credits under subtitle C;
                                      (II) has not opted out from receiving
                                    such affordability credit; and
                                      (III) does not otherwise enroll in
                                    another Exchange-participating health
                                    benefits plan.
                              (ii) Individuals enrolled in a terminated
                            plan.--The individual is enrolled in an
                            Exchange-participating health benefits plan
                            that is terminated (during or at the end of a
                            plan year) and who does not otherwise enroll in
                            another Exchange-participating health benefits
                            plan.
              (4) Direct payment of premiums to plans.--Under the
            enrollment process, individuals enrolled in an Exchange-
            participating health benefits plan shall pay such plans
            directly, and not through the Commissioner or the Health
            Insurance Exchange.
      (c) Coverage Information and Assistance.--
              (1) Coverage information.--The Commissioner shall provide for
            the broad dissemination of information on Exchange-
            participating health benefits plans offered under this title.
            Such information shall be provided in a comparative manner, and
            shall include information on benefits, premiums, cost-sharing,
            quality, provider networks, and consumer satisfaction.
              (2) Consumer assistance with choice.--To provide assistance
            to Exchange-eligible individuals and employers, the
            Commissioner shall--
                      (A) provide for the operation of a toll-free
                    telephone hotline to respond to requests for assistance
                    and maintain an Internet website through which
                    individuals may obtain information on coverage under
                    Exchange-participating health benefits plans and file
                    complaints;
                      (B) develop and disseminate information to Exchange-
                    eligible enrollees on their rights and
                    responsibilities;
                      (C) assist Exchange-eligible individuals in selecting
                    Exchange-participating health benefits plans and
                    obtaining benefits through such plans; and
                      (D) ensure that the Internet website described in
                    subparagraph (A) and the information described in
                    subparagraph (B) is developed using plain language (as
                    defined in section 133(a)(2)).
              (3) Use of other entities.--In carrying out this subsection,
            the Commissioner may work with other appropriate entities to
            facilitate the dissemination of information under this
            subsection and to provide assistance as described in paragraph
            (2).
      (d) Special Duties Related to Medicaid and CHIP.--
              (1) Coverage for certain newborns.--
                      (A) In general.--In the case of a child born in the
                    United States who at the time of birth is not otherwise
                    covered under acceptable coverage, for the period of
                    time beginning on the date of birth and ending on the
                    date the child otherwise is covered under acceptable
                    coverage (or, if earlier, the end of the month in which
                    the 60-day period, beginning on the date of birth,
                    ends), the child shall be deemed--
                              (i) to be a non-traditional Medicaid eligible
                            individual (as defined in subsection (e)(5))
                            for purposes of this division and Medicaid; and
                              (ii) to have elected to enroll in Medicaid
                            through the application of paragraph (3).
                      (B) Extended treatment as traditional medicaid
                    eligible individual.--In the case of a child described
                    in subparagraph (A) who at the end of the period
                    referred to in such subparagraph is not otherwise
                    covered under acceptable coverage, the child shall be
                    deemed (until such time as the child obtains such
                    coverage or the State otherwise makes a determination
                    of the child's eligibility for medical assistance under
                    its Medicaid plan pursuant to section 1943(c)(1) of the
                    Social Security Act) to be a traditional Medicaid
                    eligible individual described in section 1902(l)(1)(B)
                    of such Act.
              (2) CHIP transition.--A child who, as of the day before the
            first day of Y1, is eligible for child health assistance under
            title XXI of the Social Security Act (including a child
            receiving coverage under an arrangement described in section
            2101(a)(2) of such Act) is deemed as of such first day to be an
            Exchange-eligible individual unless the individual is a
            traditional Medicaid eligible individual as of such day.
              (3) Automatic enrollment of medicaid eligible individuals
            into medicaid.--The Commissioner shall provide for a process
            under which an individual who is described in section 202(d)(3)
            and has not elected to enroll in an Exchange-participating
            health benefits plan is automatically enrolled under Medicaid.
              (4) Notifications.--The Commissioner shall notify each State
            in Y1 and for purposes of section 1902(gg)(1) of the Social
            Security Act (as added by section 1703(a)) whether the Health
            Insurance Exchange can support enrollment of children described
            in paragraph (2) in such State in such year.
      (e) Medicaid Coverage for Medicaid Eligible Individuals.--
              (1) In general.--
                      (A) Choice for limited exchange-eligible
                    individuals.--As part of the enrollment process under
                    subsection (b), the Commissioner shall provide the
                    option, in the case of an Exchange-eligible individual
                    described in section 202(d)(3), for the individual to
                    elect to enroll under Medicaid instead of under an
                    Exchange-participating health benefits plan. Such an
                    individual may change such election during an
                    enrollment period under subsection (b)(2).
                      (B) Medicaid enrollment obligation.--An Exchange
                    eligible individual may apply, in the manner described
                    in section 241(b)(1), for a determination of whether
                    the individual is a Medicaid-eligible individual. If
                    the individual is determined to be so eligible, the
                    Commissioner, through the Medicaid memorandum of
                    understanding, shall provide for the enrollment of the
                    individual under the State Medicaid plan in accordance
                    with the Medicaid memorandum of understanding under
                    paragraph (4). In the case of such an enrollment, the
                    State shall provide for the same periodic
                    redetermination of eligibility under Medicaid as would
                    otherwise apply if the individual had directly applied
                    for medical assistance to the State Medicaid agency.
              (2) Non-traditional medicaid eligible individuals.--In the
            case of a non-traditional Medicaid eligible individual
            described in section 202(d)(3) who elects to enroll under
            Medicaid under paragraph (1)(A), the Commissioner shall provide
            for the enrollment of the individual under the State Medicaid
            plan in accordance with the Medicaid memorandum of
            understanding under paragraph (4).
              (3) Coordinated enrollment with state through memorandum of
            understanding.--The Commissioner, in consultation with the
            Secretary of Health and Human Services, shall enter into a
            memorandum of understanding with each State (each in this
            division referred to as a ``Medicaid memorandum of
            understanding'') with respect to coordinating enrollment of
            individuals in Exchange-participating health benefits plans and
            under the State's Medicaid program consistent with this section
            and to otherwise coordinate the implementation of the
            provisions of this division with respect to the Medicaid
            program. Such memorandum shall permit the exchange of
            information consistent with the limitations described in
            section 1902(a)(7) of the Social Security Act. Nothing in this
            section shall be construed as permitting such memorandum to
            modify or vitiate any requirement of a State Medicaid plan.
              (4) Medicaid eligible individuals.--For purposes of this
            division:
                      (A) Medicaid eligible individual.--The term
                    ``Medicaid eligible individual'' means an individual
                    who is eligible for medical assistance under Medicaid.
                      (B) Traditional medicaid eligible individual.--The
                    term ``traditional Medicaid eligible individual'' means
                    a Medicaid eligible individual other than an individual
                    who is--
                              (i) a Medicaid eligible individual by reason
                            of the application of subclause (VIII) of
                            section 1902(a)(10)(A)(i) of the Social
                            Security Act; or
                              (ii) a childless adult not described in
                            section 1902(a)(10)(A) or (C) of such Act (as
                            in effect as of the day before the date of the
                            enactment of this Act).
                      (C) Non-traditional medicaid eligible individual.--
                    The term ``non-traditional Medicaid eligible
                    individual'' means a Medicaid eligible individual who
                    is not a traditional Medicaid eligible individual.
      (f) Effective Culturally and Linguistically Appropriate
    Communication.--In carrying out this section, the Commissioner shall
    establish effective methods for communicating in plain language and a
    culturally and linguistically appropriate manner.

    SEC. 206. OTHER FUNCTIONS.

      (a) Coordination of Affordability Credits.--The Commissioner shall
    coordinate the distribution of affordability premium and cost-sharing
    credits under subtitle C to QHBP offering entities offering Exchange-
    participating health benefits plans.
      (b) Coordination of Risk Pooling.--The Commissioner shall establish a
    mechanism whereby there is an adjustment made of the premium amounts
    payable among QHBP offering entities offering Exchange-participating
    health benefits plans of premiums collected for such plans that takes
    into account (in a manner specified by the Commissioner) the
    differences in the risk characteristics of individuals and employers
    enrolled under the different Exchange-participating health benefits
    plans offered by such entities so as to minimize the impact of adverse
    selection of enrollees among the plans offered by such entities.
      (c) Special Inspector General for the Health Insurance Exchange.--
              (1) Establishment; appointment.--There is hereby established
            the Office of the Special Inspector General for the Health
            Insurance Exchange, to be headed by a Special Inspector General
            for the Health Insurance Exchange (in this subsection referred
            to as the ``Special Inspector General'') to be appointed by the
            President, by and with the advice and consent of the Senate.
            The nomination of an individual as Special Inspector General
            shall be made as soon as practicable after the establishment of
            the program under this subtitle.
              (2) Duties.--The Special Inspector General shall--
                      (A) conduct, supervise, and coordinate audits,
                    evaluations and investigations of the Health Insurance
                    Exchange to protect the integrity of the Health
                    Insurance Exchange, as well as the health and welfare
                    of participants in the Exchange;
                      (B) report both to the Commissioner and to the
                    Congress regarding program and management problems and
                    recommendations to correct them;
                      (C) have other duties (described in paragraphs (2)
                    and (3) of section 121 of division A of Public Law 110-
                    343) in relation to the duties described in the
                    previous subparagraphs; and
                      (D) have the authorities provided in section 6 of the
                    Inspector General Act of 1978 in carrying out duties
                    under this paragraph.
              (3) Application of other special inspector general
            provisions.--The provisions of subsections (b) (other than
            paragraphs (1) and (3)), (d) (other than paragraph (1)), and
            (e) of section 121 of division A of the Emergency Economic
            Stabilization Act of 2009 (Public Law 110-343) shall apply to
            the Special Inspector General under this subsection in the same
            manner as such provisions apply to the Special Inspector
            General under such section.
              (4) Reports.--Not later than one year after the confirmation
            of the Special Inspector General, and annually thereafter, the
            Special Inspector General shall submit to the appropriate
            committees of Congress a report summarizing the activities of
            the Special Inspector General during the one year period ending
            on the date such report is submitted.
              (5) Termination.--The Office of the Special Inspector General
            shall terminate five years after the date of the enactment of
            this Act.

    SEC. 207. HEALTH INSURANCE EXCHANGE TRUST FUND.

      (a) Establishment of Health Insurance Exchange Trust Fund.--There is
    created within the Treasury of the United States a trust fund to be
    known as the ``Health Insurance Exchange Trust Fund'' (in this section
    referred to as the ``Trust Fund''), consisting of such amounts as may
    be appropriated or credited to the Trust Fund under this section or any
    other provision of law.
      (b) Payments From Trust Fund.--The Commissioner shall pay from time
    to time from the Trust Fund such amounts as the Commissioner determines
    are necessary to make payments to operate the Health Insurance
    Exchange, including payments under subtitle C (relating to
    affordability credits).
      (c) Transfers to Trust Fund.--
              (1) Dedicated payments.--There is hereby appropriated to the
            Trust Fund amounts equivalent to the following:
                      (A) Taxes on individuals not obtaining acceptable
                    coverage.--The amounts received in the Treasury under
                    section 59B of the Internal Revenue Code of 1986
                    (relating to requirement of health insurance coverage
                    for individuals).
                      (B) Employment taxes on employers not providing
                    acceptable coverage.--The amounts received in the
                    Treasury under section 3111(c) of the Internal Revenue
                    Code of 1986 (relating to employers electing to not
                    provide health benefits).
                      (C) Excise tax on failures to meet certain health
                    coverage requirements.--The amounts received in the
                    Treasury under section 4980H(b) (relating to excise tax
                    with respect to failure to meet health coverage
                    participation requirements).
              (2) Appropriations to cover government contributions.--There
            are hereby appropriated, out of any moneys in the Treasury not
            otherwise appropriated, to the Trust Fund, an amount equivalent
            to the amount of payments made from the Trust Fund under
            subsection (b) plus such amounts as are necessary reduced by
            the amounts deposited under paragraph (1).
      (d) Application of Certain Rules.--Rules similar to the rules of
    subchapter B of chapter 98 of the Internal Revenue Code of 1986 shall
    apply with respect to the Trust Fund.

    SEC. 208. OPTIONAL OPERATION OF STATE-BASED HEALTH INSURANCE EXCHANGES.

      (a) In General.--If--
              (1) a State (or group of States, subject to the approval of
            the Commissioner) applies to the Commissioner for approval of a
            State-based Health Insurance Exchange to operate in the State
            (or group of States); and
              (2) the Commissioner approves such State-based Health
            Insurance Exchange,
    then, subject to subsections (c) and (d), the State-based Health
    Insurance Exchange shall operate, instead of the Health Insurance
    Exchange, with respect to such State (or group of States). The
    Commissioner shall approve a State-based Health Insurance Exchange if
    it meets the requirements for approval under subsection (b).
      (b) Requirements for Approval.--The Commissioner may not approve a
    State-based Health Insurance Exchange under this section unless the
    following requirements are met:
              (1) The State-based Health Insurance Exchange must
            demonstrate the capacity to and provide assurances satisfactory
            to the Commissioner that the State-based Health Insurance
            Exchange will carry out the functions specified for the Health
            Insurance Exchange in the State (or States) involved,
            including--
                      (A) negotiating and contracting with QHBP offering
                    entities for the offering of Exchange-participating
                    health benefits plan, which satisfy the standards and
                    requirements of this title and title I;
                      (B) enrolling Exchange-eligible individuals and
                    employers in such State in such plans;
                      (C) the establishment of sufficient local offices to
                    meet the needs of Exchange-eligible individuals and
                    employers;
                      (D) administering affordability credits under
                    subtitle B using the same methodologies (and at least
                    the same income verification methods) as would
                    otherwise apply under such subtitle and at a cost to
                    the Federal Government which does exceed the cost to
                    the Federal Government if this section did not apply;
                    and
                      (E) enforcement activities consistent with federal
                    requirements.
              (2) There is no more than one Health Insurance Exchange
            operating with respect to any one State.
              (3) The State provides assurances satisfactory to the
            Commissioner that approval of such an Exchange will not result
            in any net increase in expenditures to the Federal Government.
              (4) The State provides for reporting of such information as
            the Commissioner determines and assurances satisfactory to the
            Commissioner that it will vigorously enforce violations of
            applicable requirements.
              (5) Such other requirements as the Commissioner may specify.
      (c) Ceasing Operation.--
              (1) In general.--A State-based Health Insurance Exchange may,
            at the option of each State involved, and only after providing
            timely and reasonable notice to the Commissioner, cease
            operation as such an Exchange, in which case the Health
            Insurance Exchange shall operate, instead of such State-based
            Health Insurance Exchange, with respect to such State (or
            States).
              (2) Termination; health insurance exchange resumption of
            functions.--The Commissioner may terminate the approval (for
            some or all functions) of a State-based Health Insurance
            Exchange under this section if the Commissioner determines that
            such Exchange no longer meets the requirements of subsection
            (b) or is no longer capable of carrying out such functions in
            accordance with the requirements of this subtitle. In lieu of
            terminating such approval, the Commissioner may temporarily
            assume some or all functions of the State-based Health
            Insurance Exchange until such time as the Commissioner
            determines the State-based Health Insurance Exchange meets such
            requirements of subsection (b) and is capable of carrying out
            such functions in accordance with the requirements of this
            subtitle.
              (3) Effectiveness.--The ceasing or termination of a State-
            based Health Insurance Exchange under this subsection shall be
            effective in such time and manner as the Commissioner shall
            specify.
      (d) Retention of Authority.--
              (1) Authority retained.--Enforcement authorities of the
            Commissioner shall be retained by the Commissioner.
              (2) Discretion to retain additional authority.--The
            Commissioner may specify functions of the Health Insurance
            Exchange that--
                      (A) may not be performed by a State-based Health
                    Insurance Exchange under this section; or
                      (B) may be performed by the Commissioner and by such
                    a State-based Health Insurance Exchange.
      (e) References.--In the case of a State-based Health Insurance
    Exchange, except as the Commissioner may otherwise specify under
    subsection (d), any references in this subtitle to the Health Insurance
    Exchange or to the Commissioner in the area in which the State-based
    Health Insurance Exchange operates shall be deemed a reference to the
    State-based Health Insurance Exchange and the head of such Exchange,
    respectively.
      (f) Funding.--In the case of a State-based Health Insurance Exchange,
    there shall be assistance provided for the operation of such Exchange
    in the form of a matching grant with a State share of expenditures
    required.

                   Subtitle B--Public Health Insurance Option

    SEC. 221. ESTABLISHMENT AND ADMINISTRATION OF A PUBLIC HEALTH INSURANCE
                        OPTION AS AN EXCHANGE-QUALIFIED HEALTH BENEFITS
                        PLAN.

      (a) Establishment.--For years beginning with Y1, the Secretary of
    Health and Human Services (in this subtitle referred to as the
    ``Secretary'') shall provide for the offering of an Exchange-
    participating health benefits plan (in this division referred to as the
    ``public health insurance option'') that ensures choice, competition,
    and stability of affordable, high quality coverage throughout the
    United States in accordance with this subtitle. In designing the
    option, the Secretary's primary responsibility is to create a low-cost
    plan without compromising quality or access to care.
      (b) Offering as an Exchange-participating Health Benefits Plan.--
              (1) Exclusive to the exchange.--The public health insurance
            option shall only be made available through the Health
            Insurance Exchange.
              (2) Ensuring a level playing field.--Consistent with this
            subtitle, the public health insurance option shall comply with
            requirements that are applicable under this title to an
            Exchange-participating health benefits plan, including
            requirements related to benefits, benefit levels, provider
            networks, notices, consumer protections, and cost sharing.
              (3) Provision of benefit levels.--The public health insurance
            option--
                      (A) shall offer basic, enhanced, and premium plans;
                    and
                      (B) may offer premium-plus plans.
      (c) Administrative Contracting.--The Secretary may enter into
    contracts for the purpose of performing administrative functions
    (including functions described in subsection (a)(4) of section 1874A of
    the Social Security Act) with respect to the public health insurance
    option in the same manner as the Secretary may enter into contracts
    under subsection (a)(1) of such section. The Secretary has the same
    authority with respect to the public health insurance option as the
    Secretary has under subsections (a)(1) and (b) of section 1874A of the
    Social Security Act with respect to title XVIII of such Act. Contracts
    under this subsection shall not involve the transfer of insurance risk
    to such entity.
      (d) Ombudsman.--The Secretary shall establish an office of the
    ombudsman for the public health insurance option which shall have
    duties with respect to the public health insurance option similar to
    the duties of the Medicare Beneficiary Ombudsman under section
    1808(c)(2) of the Social Security Act.
      (e) Data Collection.--The Secretary shall collect such data as may be
    required to establish premiums and payment rates for the public health
    insurance option and for other purposes under this subtitle, including
    to improve quality and to reduce racial, ethnic, and other disparities
    in health and health care.
      (f) Treatment of Public Health Insurance Option.--With respect to the
    public health insurance option, the Secretary shall be treated as a
    QHBP offering entity offering an Exchange-participating health benefits
    plan.
      (g) Access to Federal Courts.--The provisions of Medicare (and
    related provisions of title II of the Social Security Act) relating to
    access of Medicare beneficiaries to Federal courts for the enforcement
    of rights under Medicare, including with respect to amounts in
    controversy, shall apply to the public health insurance option and
    individuals enrolled under such option under this title in the same
    manner as such provisions apply to Medicare and Medicare beneficiaries.

    SEC. 222. PREMIUMS AND FINANCING.

      (a) Establishment of Premiums.--
              (1) In general.--The Secretary shall establish
            geographically-adjusted premium rates for the public health
            insurance option in a manner--
                      (A) that complies with the premium rules established
                    by the Commissioner under section 113 for Exchange-
                    participating health benefit plans; and
                      (B) at a level sufficient to fully finance the costs
                    of--
                              (i) health benefits provided by the public
                            health insurance option; and
                              (ii) administrative costs related to
                            operating the public health insurance option.
              (2) Contingency margin.--In establishing premium rates under
            paragraph (1), the Secretary shall include an appropriate
            amount for a contingency margin.
      (b) Account.--
              (1) Establishment.--There is established in the Treasury of
            the United States an Account for the receipts and disbursements
            attributable to the operation of the public health insurance
            option, including the start-up funding under paragraph (2).
            Section 1854(g) of the Social Security Act shall apply to
            receipts described in the previous sentence in the same manner
            as such section applies to payments or premiums described in
            such section.
              (2) Start-up funding.--
                      (A) In general.--In order to provide for the
                    establishment of the public health insurance option
                    there is hereby appropriated to the Secretary, out of
                    any funds in the Treasury not otherwise appropriated,
                    $2,000,000,000. In order to provide for initial claims
                    reserves before the collection of premiums, there is
                    hereby appropriated to the Secretary, out of any funds
                    in the Treasury not otherwise appropriated, such sums
                    as necessary to cover 90 days worth of claims reserves
                    based on projected enrollment.
                      (B) Amortization of start-up funding.--The Secretary
                    shall provide for the repayment of the startup funding
                    provided under subparagraph (A) to the Treasury in an
                    amortized manner over the 10-year period beginning with
                    Y1.
                      (C) Limitation on funding.--Nothing in this section
                    shall be construed as authorizing any additional
                    appropriations to the Account, other than such amounts
                    as are otherwise provided with respect to other
                    Exchange-participating health benefits plans.

    SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES.

      (a) Rates Established by Secretary.--
              (1) In general.--The Secretary shall establish payment rates
            for the public health insurance option for services and health
            care providers consistent with this section and may change such
            payment rates in accordance with section 224.
              (2) Initial payment rules.--
                      (A) In general.--Except as provided in subparagraph
                    (B) and subsection (b)(1), during Y1, Y2, and Y3, the
                    Secretary shall base the payment rates under this
                    section for services and providers described in
                    paragraph (1) on the payment rates for similar services
                    and providers under parts A and B of Medicare.
                      (B) Exceptions.--
                              (i) Practitioners' services.--Payment rates
                            for practitioners' services otherwise
                            established under the fee schedule under
                            section 1848 of the Social Security Act shall
                            be applied without regard to the provisions
                            under subsection (f) of such section and the
                            update under subsection (d)(4) under such
                            section for a year as applied under this
                            paragraph shall be not less than 1 percent.
                              (ii) Adjustments.--The Secretary may
                            determine the extent to which Medicare
                            adjustments applicable to base payment rates
                            under parts A and B of Medicare shall apply
                            under this subtitle.
              (3) For new services.--The Secretary shall modify payment
            rates described in paragraph (2) in order to accommodate
            payments for services, such as well-child visits, that are not
            otherwise covered under Medicare.
              (4) Prescription drugs.--Payment rates under this section for
            prescription drugs that are not paid for under part A or part B
            of Medicare shall be at rates negotiated by the Secretary.
      (b) Incentives for Participating Providers.--
              (1) Initial incentive period.--
                      (A) In general.--The Secretary shall provide, in the
                    case of services described in subparagraph (B)
                    furnished during Y1, Y2, and Y3, for payment rates that
                    are 5 percent greater than the rates established under
                    subsection (a).
                      (B) Services described.--The services described in
                    this subparagraph are items and professional services,
                    under the public health insurance option by a physician
                    or other health care practitioner who participates in
                    both Medicare and the public health insurance option.
                      (C) Special rules.--A pediatrician and any other
                    health care practitioner who is a type of practitioner
                    that does not typically participate in Medicare (as
                    determined by the Secretary) shall also be eligible for
                    the increased payment rates under subparagraph (A).
              (2) Subsequent periods.--Beginning with Y4 and for subsequent
            years, the Secretary shall continue to use an administrative
            process to set such rates in order to promote payment accuracy,
            to ensure adequate beneficiary access to providers, and to
            promote affordability and the efficient delivery of medical
            care consistent with section 221(a). Such rates shall not be
            set at levels expected to increase overall medical costs under
            the option beyond what would be expected if the process under
            subsection (a)(2) and paragraph (1) of this subsection were
            continued.
              (3) Establishment of a provider network.--Health care
            providers participating under Medicare are participating
            providers in the public health insurance option unless they opt
            out in a process established by the Secretary.
      (c) Administrative Process for Setting Rates.--Chapter 5 of title 5,
    United States Code shall apply to the process for the initial
    establishment of payment rates under this section but not to the
    specific methodology for establishing such rates or the calculation of
    such rates.
      (d) Construction.--Nothing in this subtitle shall be construed as
    limiting the Secretary's authority to correct for payments that are
    excessive or deficient, taking into account the provisions of section
    221(a) and the amounts paid for similar health care providers and
    services under other Exchange-participating health benefits plans.
      (e) Construction.--Nothing in this subtitle shall be construed as
    affecting the authority of the Secretary to establish payment rates,
    including payments to provide for the more efficient delivery of
    services, such as the initiatives provided for under section 224.
      (f) Limitations on Review.--There shall be no administrative or
    judicial review of a payment rate or methodology established under this
    section or under section 224.

    SEC. 224. MODERNIZED PAYMENT INITIATIVES AND DELIVERY SYSTEM REFORM.

      (a) In General.--For plan years beginning with Y1, the Secretary may
    utilize innovative payment mechanisms and policies to determine
    payments for items and services under the public health insurance
    option. The payment mechanisms and policies under this section may
    include patient-centered medical home and other care management
    payments, accountable care organizations, value-based purchasing,
    bundling of services, differential payment rates, performance or
    utilization based payments, partial capitation, and direct contracting
    with providers.
      (b) Requirements for Innovative Payments.--The Secretary shall design
    and implement the payment mechanisms and policies under this section in
    a manner that--
              (1) seeks to--
                      (A) improve health outcomes;
                      (B) reduce health disparities (including racial,
                    ethnic, and other disparities);
                      (C) provide efficient and affordable care;
                      (D) address geographic variation in the provision of
                    health services; or
                      (E) prevent or manage chronic illness; and
              (2) promotes care that is integrated, patient-centered,
            quality, and efficient.
      (c) Encouraging the Use of High Value Services.--To the extent
    allowed by the benefit standards applied to all Exchange-participating
    health benefits plans, the public health insurance option may modify
    cost sharing and payment rates to encourage the use of services that
    promote health and value.
      (d) Non-uniformity Permitted.--Nothing in this subtitle shall prevent
    the Secretary from varying payments based on different payment
    structure models (such as accountable care organizations and medical
    homes) under the public health insurance option for different
    geographic areas.

    SEC. 225. PROVIDER PARTICIPATION.

      (a) In General.--The Secretary shall establish conditions of
    participation for health care providers under the public health
    insurance option.
      (b) Licensure or Certification.--The Secretary shall not allow a
    health care provider to participate in the public health insurance
    option unless such provider is appropriately licensed or certified
    under State law.
      (c) Payment Terms for Providers.--
              (1) Physicians.--The Secretary shall provide for the annual
            participation of physicians under the public health insurance
            option, for which payment may be made for services furnished
            during the year, in one of 2 classes:
                      (A) Preferred physicians.--Those physicians who agree
                    to accept the payment rate established under section
                    223 (without regard to cost-sharing) as the payment in
                    full.
                      (B) Participating, non-preferred physicians.--Those
                    physicians who agree not to impose charges (in relation
                    to the payment rate described in section 223 for such
                    physicians) that exceed the ratio permitted under
                    section 1848(g)(2)(C) of the Social Security Act.
              (2) Other providers.--The Secretary shall provide for the
            participation (on an annual or other basis specified by the
            Secretary) of health care providers (other than physicians)
            under the public health insurance option under which payment
            shall only be available if the provider agrees to accept the
            payment rate established under section 223 (without regard to
            cost-sharing) as the payment in full.
      (d) Exclusion of Certain Providers.--The Secretary shall exclude from
    participation under the public health insurance option a health care
    provider that is excluded from participation in a Federal health care
    program (as defined in section 1128B(f) of the Social Security Act).

    SEC. 226. APPLICATION OF FRAUD AND ABUSE PROVISIONS.

      Provisions of law (other than criminal law provisions) identified by
    the Secretary by regulation, in consultation with the Inspector General
    of the Department of Health and Human Services, that impose sanctions
    with respect to waste, fraud, and abuse under Medicare, such as the
    False Claims Act (31 U.S.C. 3729 et seq.), shall also apply to the
    public health insurance option.

                  Subtitle C--Individual Affordability Credits

    SEC. 241. AVAILABILITY THROUGH HEALTH INSURANCE EXCHANGE.

      (a) In General.--Subject to the succeeding provisions of this
    subtitle, in the case of an affordable credit eligible individual
    enrolled in an Exchange-participating health benefits plan--
              (1) the individual shall be eligible for, in accordance with
            this subtitle, affordability credits consisting of--
                      (A) an affordability premium credit under section 243
                    to be applied against the premium for the Exchange-
                    participating health benefits plan in which the
                    individual is enrolled; and
                      (B) an affordability cost-sharing credit under
                    section 244 to be applied as a reduction of the cost-
                    sharing otherwise applicable to such plan; and
              (2) the Commissioner shall pay the QHBP offering entity that
            offers such plan from the Health Insurance Exchange Trust Fund
            the aggregate amount of affordability credits for all
            affordable credit eligible individuals enrolled in such plan.
      (b) Application.--
              (1) In general.--An Exchange eligible individual may apply to
            the Commissioner through the Health Insurance Exchange or
            through another entity under an arrangement made with the
            Commissioner, in a form and manner specified by the
            Commissioner. The Commissioner through the Health Insurance
            Exchange or through another public entity under an arrangement
            made with the Commissioner shall make a determination as to
            eligibility of an individual for affordability credits under
            this subtitle. The Commissioner shall establish a process
            whereby, on the basis of information otherwise available,
            individuals may be deemed to be affordable credit eligible
            individuals. In carrying this subtitle, the Commissioner shall
            establish effective methods that ensure that individuals with
            limited English proficiency are able to apply for affordability
            credits.
              (2) Use of state medicaid agencies.--If the Commissioner
            determines that a State Medicaid agency has the capacity to
            make a determination of eligibility for affordability credits
            under this subtitle and under the same standards as used by the
            Commissioner, under the Medicaid memorandum of understanding
            (as defined in section 205(c)(4))--
                      (A) the State Medicaid agency is authorized to
                    conduct such determinations for any Exchange-eligible
                    individual who requests such a determination; and
                      (B) the Commissioner shall reimburse the State
                    Medicaid agency for the costs of conducting such
                    determinations.
              (3) Medicaid screen and enroll obligation.--In the case of an
            application made under paragraph (1), there shall be a
            determination of whether the individual is a Medicaid-eligible
            individual. If the individual is determined to be so eligible,
            the Commissioner, through the Medicaid memorandum of
            understanding, shall provide for the enrollment of the
            individual under the State Medicaid plan in accordance with the
            Medicaid memorandum of understanding. In the case of such an
            enrollment, the State shall provide for the same periodic
            redetermination of eligibility under Medicaid as would
            otherwise apply if the individual had directly applied for
            medical assistance to the State Medicaid agency.
      (c) Use of Affordability Credits.--
              (1) In general.--In Y1 and Y2 an affordable credit eligible
            individual may use an affordability credit only with respect to
            a basic plan.
              (2) Flexibility in plan enrollment authorized.--Beginning
            with Y3, the Commissioner shall establish a process to allow an
            affordability credit to be used for enrollees in enhanced or
            premium plans. In the case of an affordable credit eligible
            individual who enrolls in an enhanced or premium plan, the
            individual shall be responsible for any difference between the
            premium for such plan and the affordability credit amount
            otherwise applicable if the individual had enrolled in a basic
            plan.
      (d) Access to Data.--In carrying out this subtitle, the Commissioner
    shall request from the Secretary of the Treasury consistent with
    section 6103 of the Internal Revenue Code of 1986 such information as
    may be required to carry out this subtitle.
      (e) No Cash Rebates.--In no case shall an affordable credit eligible
    individual receive any cash payment as a result of the application of
    this subtitle.

    SEC. 242. AFFORDABLE CREDIT ELIGIBLE INDIVIDUAL.

      (a) Definition.--
              (1) In general.--For purposes of this division, the term
            ``affordable credit eligible individual'' means, subject to
            subsection (b), an individual who is lawfully present in a
            State in the United States (other than as a nonimmigrant
            described in a subparagraph (excluding subparagraphs (K), (T),
            (U), and (V)) of section 101(a)(15) of the Immigration and
            Nationality Act)--
                      (A) who is enrolled under an Exchange-participating
                    health benefits plan and is not enrolled under such
                    plan as an employee (or dependent of an employee)
                    through an employer qualified health benefits plan that
                    meets the requirements of section 312;
                      (B) with family income below 400 percent of the
                    Federal poverty level for a family of the size
                    involved; and
                      (C) who is not a Medicaid eligible individual, other
                    than an individual described in section 202(d)(3) or an
                    individual during a transition period under section
                    202(d)(4)(B)(ii).
              (2) Treatment of family.--Except as the Commissioner may
            otherwise provide, members of the same family who are
            affordable credit eligible individuals shall be treated as a
            single affordable credit individual eligible for the applicable
            credit for such a family under this subtitle.
      (b) Limitations on Employee and Dependent Disqualification.--
              (1) In general.--Subject to paragraph (2), the term
            ``affordable credit eligible individual'' does not include a
            full-time employee of an employer if the employer offers the
            employee coverage (for the employee and dependents) as a full-
            time employee under a group health plan if the coverage and
            employer contribution under the plan meet the requirements of
            section 312.
              (2) Exceptions.--
                      (A) For certain family circumstances.--The
                    Commissioner shall establish such exceptions and
                    special rules in the case described in paragraph (1) as
                    may be appropriate in the case of a divorced or
                    separated individual or such a dependent of an employee
                    who would otherwise be an affordable credit eligible
                    individual.
                      (B) For unaffordable employer coverage.--Beginning in
                    Y2, in the case of full-time employees for which the
                    cost of the employee premium for coverage under a group
                    health plan would exceed 11 percent of current family
                    income (determined by the Commissioner on the basis of
                    verifiable documentation and without regard to section
                    245), paragraph (1) shall not apply.
      (c) Income Defined.--
              (1) In general.--In this title, the term ``income'' means
            modified adjusted gross income (as defined in section 59B of
            the Internal Revenue Code of 1986).
              (2) Study of income disregards.--The Commissioner shall
            conduct a study that examines the application of income
            disregards for purposes of this subtitle. Not later than the
            first day of Y2, the Commissioner shall submit to Congress a
            report on such study and shall include such recommendations as
            the Commissioner determines appropriate.
      (d) Clarification of Treatment of Affordability Credits.--
    Affordability credits under this subtitle shall not be treated, for
    purposes of title IV of the Personal Responsibility and Work
    Opportunity Reconciliation Act of 1996, to be a benefit provided under
    section 403 of such title.

    SEC. 243. AFFORDABILITY PREMIUM CREDIT.

      (a) In General.--The affordability premium credit under this section
    for an affordable credit eligible individual enrolled in an Exchange-
    participating health benefits plan is in an amount equal to the amount
    (if any) by which the premium for the plan (or, if less, the reference
    premium amount specified in subsection (c)), exceeds the affordable
    premium amount specified in subsection (b) for the individual.
      (b) Affordable Premium Amount.--
              (1) In general.--The affordable premium amount specified in
            this subsection for an individual for monthly premium in a plan
            year shall be equal to \1/12\ of the product of--
                      (A) the premium percentage limit specified in
                    paragraph (2) for the individual based upon the
                    individual's family income for the plan year; and
                      (B) the individual's family income for such plan
                    year.
              (2) Premium percentage limits based on table.--The
            Commissioner shall establish premium percentage limits so that
            for individuals whose family income is within an income tier
            specified in the table in subsection (d) such percentage limits
            shall increase, on a sliding scale in a linear manner, from the
            initial premium percentage to the final premium percentage
            specified in such table for such income tier.
      (c) Reference Premium Amount.--The reference premium amount specified
    in this subsection for a plan year for an individual in a premium
    rating area is equal to the average premium for the 3 basic plans in
    the area for the plan year with the lowest premium levels. In computing
    such amount the Commissioner may exclude plans with extremely limited
    enrollments.
      (d) Table of Premium Percentage Limits and Actuarial Value
    Percentages Based on Income Tier.--
              (1) In general.--For purposes of this subtitle, the table
            specified in this subsection is as follows:

       In the case of family income
     (expressed as a percent of FPL)      The initial premium         The final premium        The actuarial value
    within the following income tier:       percentage is--            percentage is--           percentage is--

    133% through 150%                  1.5%                       3%                        97%
    150% through 200%                  3%                         5%                        93%
    200% through 250%                  5%                         7%                        85%
    250% through 300%                  7%                         9%                        78%
    300% through 350%                  9%                         10%                       72%
    350% through 400%                  10%                        11%                       70%

              (2) Special rules.--For purposes of applying the table under
            paragraph (1)--
                      (A) For lowest level of income.--In the case of an
                    individual with income that does not exceed 133 percent
                    of FPL, the individual shall be considered to have
                    income that is 133% of FPL.
                      (B) Application of higher actuarial value percentage
                    at tier transition points.--If two actuarial value
                    percentages may be determined with respect to an
                    individual, the actuarial value percentage shall be the
                    higher of such percentages.

    SEC. 244. AFFORDABILITY COST-SHARING CREDIT.

      (a) In General.--The affordability cost-sharing credit under this
    section for an affordable credit eligible individual enrolled in an
    Exchange-participating health benefits plan is in the form of the cost-
    sharing reduction described in subsection (b) provided under this
    section for the income tier in which the individual is classified based
    on the individual's family income.
      (b) Cost-sharing Reductions.--The Commissioner shall specify a
    reduction in cost-sharing amounts and the annual limitation on cost-
    sharing specified in section 122(c)(2)(B) under a basic plan for each
    income tier specified in the table under section 243(d), with respect
    to a year, in a manner so that, as estimated by the Commissioner, the
    actuarial value of the coverage with such reduced cost-sharing amounts
    (and the reduced annual cost-sharing limit) is equal to the actuarial
    value percentage (specified in the table under section 243(d) for the
    income tier involved) of the full actuarial value if there were no
    cost-sharing imposed under the plan.
      (c) Determination and Payment of Cost-sharing Affordability Credit.--
    In the case of an affordable credit eligible individual in a tier
    enrolled in an Exchange-participating health benefits plan offered by a
    QHBP offering entity, the Commissioner shall provide for payment to the
    offering entity of an amount equivalent to the increased actuarial
    value of the benefits under the plan provided under section
    203(c)(2)(B) resulting from the reduction in cost-sharing described in
    subsection (b).

    SEC. 245. INCOME DETERMINATIONS.

      (a) In General.--In applying this subtitle for an affordability
    credit for an individual for a plan year, the individual's income shall
    be the income (as defined in section 242(c)) for the individual for the
    most recent taxable year (as determined in accordance with rules of the
    Commissioner). The Federal poverty level applied shall be such level in
    effect as of the date of the application.
      (b) Program Integrity; Income Verification Procedures.--
              (1) Program integrity.--The Commissioner shall take such
            steps as may be appropriate to ensure the accuracy of
            determinations and redeterminations under this subtitle.
              (2) Income verification.--
                      (A) In general.--Upon an initial application of an
                    individual for an affordability credit under this
                    subtitle (or in applying section 242(b)) or upon an
                    application for a change in the affordability credit
                    based upon a significant change in family income
                    described in subparagraph (A)--
                              (i) the Commissioner shall request from the
                            Secretary of the Treasury the disclosure to the
                            Commissioner of such information as may be
                            permitted to verify the information contained
                            in such application; and
                              (ii) the Commissioner shall use the
                            information so disclosed to verify such
                            information.
                      (B) Alternative procedures.--The Commissioner shall
                    establish procedures for the verification of income for
                    purposes of this subtitle if no income tax return is
                    available for the most recent completed tax year.
      (c) Special Rules.--
              (1) Changes in income as a percent of fpl.--In the case that
            an individual's income (expressed as a percentage of the
            Federal poverty level for a family of the size involved) for a
            plan year is expected (in a manner specified by the
            Commissioner) to be significantly different from the income (as
            so expressed) used under subsection (a), the Commissioner shall
            establish rules requiring an individual to report, consistent
            with the mechanism established under paragraph (2), significant
            changes in such income (including a significant change in
            family composition) to the Commissioner and requiring the
            substitution of such income for the income otherwise
            applicable.
              (2) Reporting of significant changes in income.--The
            Commissioner shall establish rules under which an individual
            determined to be an affordable credit eligible individual would
            be required to inform the Commissioner when there is a
            significant change in the family income of the individual
            (expressed as a percentage of the FPL for a family of the size
            involved) and of the information regarding such change. Such
            mechanism shall provide for guidelines that specify the
            circumstances that qualify as a significant change, the
            verifiable information required to document such a change, and
            the process for submission of such information. If the
            Commissioner receives new information from an individual
            regarding the family income of the individual, the Commissioner
            shall provide for a redetermination of the individual's
            eligibility to be an affordable credit eligible individual.
              (3) Transition for chip.--In the case of a child described in
            section 202(d)(2), the Commissioner shall establish rules under
            which the family income of the child is deemed to be no greater
            than the family income of the child as most recently determined
            before Y1 by the State under title XXI of the Social Security
            Act.
              (4) Study of geographic variation in application of fpl.--The
            Commissioner shall examine the feasibility and implication of
            adjusting the application of the Federal poverty level under
            this subtitle for different geographic areas so as to reflect
            the variations in cost-of-living among different areas within
            the United States. If the Commissioner determines that an
            adjustment is feasible, the study should include a methodology
            to make such an adjustment. Not later than the first day of Y2,
            the Commissioner shall submit to Congress a report on such
            study and shall include such recommendations as the
            Commissioner determines appropriate.
      (d) Penalties for Misrepresentation.--In the case of an individual
    intentionally misrepresents family income or the individual fails
    (without regard to intent) to disclose to the Commissioner a
    significant change in family income under subsection (c) in a manner
    that results in the individual becoming an affordable credit eligible
    individual when the individual is not or in the amount of the
    affordability credit exceeding the correct amount--
              (1) the individual is liable for repayment of the amount of
            the improper affordability credit; ;and
              (2) in the case of such an intentional misrepresentation or
            other egregious circumstances specified by the Commissioner,
            the Commissioner may impose an additional penalty.

    SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED ALIENS.

      Nothing in this subtitle shall allow Federal payments for
    affordability credits on behalf of individuals who are not lawfully
    present in the United States.

                        TITLE III--SHARED RESPONSIBILITY

                     Subtitle A--Individual Responsibility

    SEC. 301. INDIVIDUAL RESPONSIBILITY.

      For an individual's responsibility to obtain acceptable coverage, see
    section 59B of the Internal Revenue Code of 1986 (as added by section
    401 of this Act).

                      Subtitle B--Employer Responsibility

               PART 1--HEALTH COVERAGE PARTICIPATION REQUIREMENTS

    SEC. 311. HEALTH COVERAGE PARTICIPATION REQUIREMENTS.

      An employer meets the requirements of this section if such employer
    does all of the following:
              (1) Offer of coverage.--The employer offers each employee
            individual and family coverage under a qualified health
            benefits plan (or under a current employment-based health plan
            (within the meaning of section 102(b))) in accordance with
            section 312.
              (2) Contribution towards coverage.--If an employee accepts
            such offer of coverage, the employer makes timely contributions
            towards such coverage in accordance with section 312.
              (3) Contribution in lieu of coverage.--Beginning with Y2, if
            an employee declines such offer but otherwise obtains coverage
            in an Exchange-participating health benefits plan (other than
            by reason of being covered by family coverage as a spouse or
            dependent of the primary insured), the employer shall make a
            timely contribution to the Health Insurance Exchange with
            respect to each such employee in accordance with section 313.

    SEC. 312. EMPLOYER RESPONSIBILITY TO CONTRIBUTE TOWARDS EMPLOYEE AND
                        DEPENDENT COVERAGE.

      (a) In General.--An employer meets the requirements of this section
    with respect to an employee if the following requirements are met:
              (1) Offering of coverage.--The employer offers the coverage
            described in section 311(1) either through an Exchange-
            participating health benefits plan or other than through such a
            plan.
              (2) Employer required contribution.--The employer timely pays
            to the issuer of such coverage an amount not less than the
            employer required contribution specified in subsection (b) for
            such coverage.
              (3) Provision of information.--The employer provides the
            Health Choices Commissioner, the Secretary of Labor, the
            Secretary of Health and Human Services, and the Secretary of
            the Treasury, as applicable, with such information as the
            Commissioner may require to ascertain compliance with the
            requirements of this section.
              (4) Autoenrollment of employees.--The employer provides for
            autoenrollment of the employee in accordance with subsection
            (c).
      (b) Reduction of Employee Premiums Through Minimum Employer
    Contribution.--
              (1) Full-time employees.--The minimum employer contribution
            described in this subsection for coverage of a full-time
            employee (and, if any, the employee's spouse and qualifying
            children (as defined in section 152(c) of the Internal Revenue
            Code of 1986) under a qualified health benefits plan (or
            current employment-based health plan) is equal to--
                      (A) in case of individual coverage, not less than
                    72.5 percent of the applicable premium (as defined in
                    section 4980B(f)(4) of such Code, subject to paragraph
                    (2)) of the lowest cost plan offered by the employer
                    that is a qualified health benefits plan (or is such
                    current employment-based health plan); and
                      (B) in the case of family coverage which includes
                    coverage of such spouse and children, not less 65
                    percent of such applicable premium of such lowest cost
                    plan.
              (2) Applicable premium for exchange coverage.--In this
            subtitle, the amount of the applicable premium of the lowest
            cost plan with respect to coverage of an employee under an
            Exchange-participating health benefits plan is the reference
            premium amount under section 243(c) for individual coverage
            (or, if elected, family coverage) for the premium rating area
            in which the individual or family resides.
              (3) Minimum employer contribution for employees other than
            full-time employees.--In the case of coverage for an employee
            who is not a full-time employee, the amount of the minimum
            employer contribution under this subsection shall be a
            proportion (as determined in accordance with rules of the
            Health Choices Commissioner, the Secretary of Labor, the
            Secretary of Health and Human Services, and the Secretary of
            the Treasury, as applicable) of the minimum employer
            contribution under this subsection with respect to a full-time
            employee that reflects the proportion of--
                      (A) the average weekly hours of employment of the
                    employee by the employer, to
                      (B) the minimum weekly hours specified by the
                    Commissioner for an employee to be a full-time
                    employee.
              (4) Salary reductions not treated as employer
            contributions.--For purposes of this section, any contribution
            on behalf of an employee with respect to which there is a
            corresponding reduction in the compensation of the employee
            shall not be treated as an amount paid by the employer.
      (c) Automatic Enrollment for Employer Sponsored Health Benefits.--
              (1) In general.--The requirement of this subsection with
            respect to an employer and an employee is that the employer
            automatically enroll such employee into the employment-based
            health benefits plan for individual coverage under the plan
            option with the lowest applicable employee premium.
              (2) Opt-out.--In no case may an employer automatically enroll
            an employee in a plan under paragraph (1) if such employee
            makes an affirmative election to opt out of such plan or to
            elect coverage under an employment-based health benefits plan
            offered by such employer. An employer shall provide an employee
            with a 30-day period to make such an affirmative election
            before the employer may automatically enroll the employee in
            such a plan.
              (3) Notice requirements.--
                      (A) In general.--Each employer described in paragraph
                    (1) who automatically enrolls an employee into a plan
                    as described in such paragraph shall provide the
                    employees, within a reasonable period before the
                    beginning of each plan year (or, in the case of new
                    employees, within a reasonable period before the end of
                    the enrollment period for such a new employee), written
                    notice of the employees' rights and obligations
                    relating to the automatic enrollment requirement under
                    such paragraph. Such notice must be comprehensive and
                    understood by the average employee to whom the
                    automatic enrollment requirement applies.
                      (B) Inclusion of specific information.--The written
                    notice under subparagraph (A) must explain an
                    employee's right to opt out of being automatically
                    enrolled in a plan and in the case that more than one
                    level of benefits or employee premium level is offered
                    by the employer involved, the notice must explain which
                    level of benefits and employee premium level the
                    employee will be automatically enrolled in the absence
                    of an affirmative election by the employee.

    SEC. 313. EMPLOYER CONTRIBUTIONS IN LIEU OF COVERAGE.

      (a) In General.--A contribution is made in accordance with this
    section with respect to an employee if such contribution is equal to an
    amount equal to 8 percent of the average wages paid by the employer
    during the period of enrollment (determined by taking into account all
    employees of the employer and in such manner as the Commissioner
    provides, including rules providing for the appropriate aggregation of
    related employers). Any such contribution--
              (1) shall be paid to the Health Choices Commissioner for
            deposit into the Health Insurance Exchange Trust Fund, and
              (2) shall not be applied against the premium of the employee
            under the Exchange-participating health benefits plan in which
            the employee is enrolled.
      (b) Special Rules for Small Employers.--
              (1) In general.--In the case of any employer who is a small
            employer for any calendar year, subsection (a) shall be applied
            by substituting the applicable percentage determined in
            accordance with the following table for ``8 percent'':

    If the annual payroll of such employer   The applicable percentage is:
     for the preceding calendar year:
      Does not exceed $250,000.............  0 percent
      Exceeds $250,000, but does not exceed  2 percent
       $300,000.
      Exceeds $300,000, but does not exceed  4 percent
       $350,000.
      Exceeds $350,000, but does not exceed  6 percent
       $400,000.

              (2) Small employer.--For purposes of this subsection, the
            term ``small employer'' means any employer for any calendar
            year if the annual payroll of such employer for the preceding
            calendar year does not exceed $400,000.
              (3) Annual payroll.--For purposes of this paragraph, the term
            ``annual payroll'' means, with respect to any employer for any
            calendar year, the aggregate wages paid by the employer during
            such calendar year.
              (4) Aggregation rules.--Related employers and predecessors
            shall be treated as a single employer for purposes of this
            subsection.

    SEC. 314. AUTHORITY RELATED TO IMPROPER STEERING.

      The Health Choices Commissioner (in coordination with the Secretary
    of Labor, the Secretary of Health and Human Services, and the Secretary
    of the Treasury) shall have authority to set standards for determining
    whether employers or insurers are undertaking any actions to affect the
    risk pool within the Health Insurance Exchange by inducing individuals
    to decline coverage under a qualified health benefits plan (or current
    employment-based health plan (within the meaning of section 102(b))
    offered by the employer and instead to enroll in an Exchange-
    participating health benefits plan. An employer violating such
    standards shall be treated as not meeting the requirements of this
    section.

       PART 2--SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS

    SEC. 321. SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS
                        UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
                        OF 1974.

      (a) In General.--Subtitle B of title I of the Employee Retirement
    Income Security Act of 1974 is amended by adding at the end the
    following new part:

         ``PART 8--NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS

    ``SEC. 801. ELECTION OF EMPLOYER TO BE SUBJECT TO NATIONAL HEALTH
                        COVERAGE PARTICIPATION REQUIREMENTS.

      ``(a) In General.--An employer may make an election with the
    Secretary to be subject to the health coverage participation
    requirements.
      ``(b) Time and Manner.--An election under subsection (a) may be made
    at such time and in such form and manner as the Secretary may
    prescribe.

    ``SEC. 802. TREATMENT OF COVERAGE RESULTING FROM ELECTION.

      ``(a) In General.--If an employer makes an election to the Secretary
    under section 801--
              ``(1) such election shall be treated as the establishment and
            maintenance of a group health plan (as defined in section
            733(a)) for purposes of this title, subject to section 151 of
            the America's Affordable Health Choices Act of 2009, and
              ``(2) the health coverage participation requirements shall be
            deemed to be included as terms and conditions of such plan.
      ``(b) Periodic Investigations to Discover Noncompliance.--The
    Secretary shall regularly audit a representative sampling of employers
    and group health plans and conduct investigations and other activities
    under section 504 with respect to such sampling of plans so as to
    discover noncompliance with the health coverage participation
    requirements in connection with such plans. The Secretary shall
    communicate findings of noncompliance made by the Secretary under this
    subsection to the Secretary of the Treasury and the Health Choices
    Commissioner. The Secretary shall take such timely enforcement action
    as appropriate to achieve compliance.

    ``SEC. 803. HEALTH COVERAGE PARTICIPATION REQUIREMENTS.

      ``For purposes of this part, the term `health coverage participation
    requirements' means the requirements of part 1 of subtitle B of title
    III of division A of America's Affordable Health Choices Act of 2009
    (as in effect on the date of the enactment of such Act).

    ``SEC. 804. RULES FOR APPLYING REQUIREMENTS.

      ``(a) Affiliated Groups.--In the case of any employer which is part
    of a group of employers who are treated as a single employer under
    subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue
    Code of 1986, the election under section 801 shall be made by such
    employer as the Secretary may provide. Any such election, once made,
    shall apply to all members of such group.
      ``(b) Separate Elections.--Under regulations prescribed by the
    Secretary, separate elections may be made under section 801 with
    respect to--
              ``(1) separate lines of business, and
              ``(2) full-time employees and employees who are not full-time
            employees.

    ``SEC. 805. TERMINATION OF ELECTION IN CASES OF SUBSTANTIAL
                        NONCOMPLIANCE.

      ``The Secretary may terminate the election of any employer under
    section 801 if the Secretary (in coordination with the Health Choices
    Commissioner) determines that such employer is in substantial
    noncompliance with the health coverage participation requirements and
    shall refer any such determination to the Secretary of the Treasury as
    appropriate.

    ``SEC. 806. REGULATIONS.

      ``The Secretary may promulgate such regulations as may be necessary
    or appropriate to carry out the provisions of this part, in accordance
    with section 324(a) of the America's Affordable Health Choices Act of
    2009. The Secretary may promulgate any interim final rules as the
    Secretary determines are appropriate to carry out this part.''.
      (b) Enforcement of Health Coverage Participation Requirements.--
    Section 502 of such Act (29 U.S.C. 1132) is amended--
              (1) in subsection (a)(6), by striking ``paragraph'' and all
            that follows through ``subsection (c)'' and inserting
            ``paragraph (2), (4), (5), (6), (7), (8), (9), (10), or (11) of
            subsection (c)''; and
              (2) in subsection (c), by redesignating the second paragraph
            (10) as paragraph (12) and by inserting after the first
            paragraph (10) the following new paragraph:
              ``(11) Health coverage participation requirements.--
                      ``(A) Civil penalties.--In the case of any employer
                    who fails (during any period with respect to which an
                    election under section 801(a) is in effect) to satisfy
                    the health coverage participation requirements with
                    respect to any employee, the Secretary may assess a
                    civil penalty against the employer of $100 for each day
                    in the period beginning on the date such failure first
                    occurs and ending on the date such failure is
                    corrected.
                      ``(B) Health coverage participation requirements.--
                    For purposes of this paragraph, the term `health
                    coverage participation requirements' has the meaning
                    provided in section 803.
                      ``(C) Limitations on amount of penalty.--
                              ``(i) Penalty not to apply where failure not
                            discovered exercising reasonable diligence.--No
                            penalty shall be assessed under subparagraph
                            (A) with respect to any failure during any
                            period for which it is established to the
                            satisfaction of the Secretary that the employer
                            did not know, or exercising reasonable
                            diligence would not have known, that such
                            failure existed.
                              ``(ii) Penalty not to apply to failures
                            corrected within 30 days.--No penalty shall be
                            assessed under subparagraph (A) with respect to
                            any failure if--
                                      ``(I) such failure was due to
                                    reasonable cause and not to willful
                                    neglect, and
                                      ``(II) such failure is corrected
                                    during the 30-day period beginning on
                                    the 1st date that the employer knew, or
                                    exercising reasonable diligence would
                                    have known, that such failure existed.
                              ``(iii) Overall limitation for unintentional
                            failures.--In the case of failures which are
                            due to reasonable cause and not to willful
                            neglect, the penalty assessed under
                            subparagraph (A) for failures during any 1-year
                            period shall not exceed the amount equal to the
                            lesser of--
                                      ``(I) 10 percent of the aggregate
                                    amount paid or incurred by the employer
                                    (or predecessor employer) during the
                                    preceding 1-year period for group
                                    health plans, or
                                      ``(II) $500,000.
                      ``(D) Advance notification of failure prior to
                    assessment.--Before a reasonable time prior to the
                    assessment of any penalty under this paragraph with
                    respect to any failure by an employer, the Secretary
                    shall inform the employer in writing of such failure
                    and shall provide the employer information regarding
                    efforts and procedures which may be undertaken by the
                    employer to correct such failure.
                      ``(E) Coordination with excise tax.--Under
                    regulations prescribed in accordance with section 324
                    of the America's Affordable Health Choices Act of 2009,
                    the Secretary and the Secretary of the Treasury shall
                    coordinate the assessment of penalties under this
                    section in connection with failures to satisfy health
                    coverage participation requirements with the imposition
                    of excise taxes on such failures under section 4980H(b)
                    of the Internal Revenue Code of 1986 so as to avoid
                    duplication of penalties with respect to such failures.
                      ``(F) Deposit of penalty collected.--Any amount of
                    penalty collected under this paragraph shall be
                    deposited as miscellaneous receipts in the Treasury of
                    the United States.''.
      (c) Clerical Amendments.--The table of contents in section 1 of such
    Act is amended by inserting after the item relating to section 734 the
    following new items:

         ``Part 8--National Health Coverage Participation Requirements

    ``Sec. 801. Election of employer to be subject to national health
    coverage participation requirements.
    ``Sec. 802. Treatment of coverage resulting from election.
    ``Sec. 803. Health coverage participation requirements.
    ``Sec. 804. Rules for applying requirements.
    ``Sec. 805. Termination of election in cases of substantial
    noncompliance.
    ``Sec. 806. Regulations.''.

      (d) Effective Date.--The amendments made by this section shall apply
    to periods beginning after December 31, 2012.

    SEC. 322. SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS
                        UNDER THE INTERNAL REVENUE CODE OF 1986.

      (a) Failure to Elect, or Substantially Comply With, Health Coverage
    Participation Requirements.--For employment tax on employers who fail
    to elect, or substantially comply with, the health coverage
    participation requirements described in part 1, see section 3111(c) of
    the Internal Revenue Code of 1986 (as added by section 412 of this
    Act).
      (b) Other Failures.--For excise tax on other failures of electing
    employers to comply with such requirements, see section 4980H of the
    Internal Revenue Code of 1986 (as added by section 411 of this Act).

    SEC. 323. SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS
                        UNDER THE PUBLIC HEALTH SERVICE ACT.

      (a) In General.--Part C of title XXVII of the Public Health Service
    Act is amended by adding at the end the following new section:

    ``SEC. 2793. NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS.

      ``(a) Election of Employer to Be Subject to National Health Coverage
    Participation Requirements.--
              ``(1) In general.--An employer may make an election with the
            Secretary to be subject to the health coverage participation
            requirements.
              ``(2) Time and manner.--An election under paragraph (1) may
            be made at such time and in such form and manner as the
            Secretary may prescribe.
      ``(b) Treatment of Coverage Resulting From Election.--
              ``(1) In general.--If an employer makes an election to the
            Secretary under subsection (a)--
                      ``(A) such election shall be treated as the
                    establishment and maintenance of a group health plan
                    for purposes of this title, subject to section 151 of
                    the America's Affordable Health Choices Act of 2009,
                    and
                      ``(B) the health coverage participation requirements
                    shall be deemed to be included as terms and conditions
                    of such plan.
              ``(2) Periodic investigations to determine compliance with
            health coverage participation requirements.--The Secretary
            shall regularly audit a representative sampling of employers
            and conduct investigations and other activities with respect to
            such sampling of employers so as to discover noncompliance with
            the health coverage participation requirements in connection
            with such employers (during any period with respect to which an
            election under subsection (a) is in effect). The Secretary
            shall communicate findings of noncompliance made by the
            Secretary under this subsection to the Secretary of the
            Treasury and the Health Choices Commissioner. The Secretary
            shall take such timely enforcement action as appropriate to
            achieve compliance.
      ``(c) Health Coverage Participation Requirements.--For purposes of
    this section, the term `health coverage participation requirements'
    means the requirements of part 1 of subtitle B of title III of division
    A of the America's Affordable Health Choices Act of 2009 (as in effect
    on the date of the enactment of this section).
      ``(d) Separate Elections.--Under regulations prescribed by the
    Secretary, separate elections may be made under subsection (a) with
    respect to full-time employees and employees who are not full-time
    employees.
      ``(e) Termination of Election in Cases of Substantial
    Noncompliance.--The Secretary may terminate the election of any
    employer under subsection (a) if the Secretary (in coordination with
    the Health Choices Commissioner) determines that such employer is in
    substantial noncompliance with the health coverage participation
    requirements and shall refer any such determination to the Secretary of
    the Treasury as appropriate.
      ``(f) Enforcement of Health Coverage Participation Requirements.--
              ``(1) Civil penalties.--In the case of any employer who fails
            (during any period with respect to which the election under
            subsection (a) is in effect) to satisfy the health coverage
            participation requirements with respect to any employee, the
            Secretary may assess a civil penalty against the employer of
            $100 for each day in the period beginning on the date such
            failure first occurs and ending on the date such failure is
            corrected.
              ``(2) Limitations on amount of penalty.--
                      ``(A) Penalty not to apply where failure not
                    discovered exercising reasonable diligence.--No penalty
                    shall be assessed under paragraph (1) with respect to
                    any failure during any period for which it is
                    established to the satisfaction of the Secretary that
                    the employer did not know, or exercising reasonable
                    diligence would not have known, that such failure
                    existed.
                      ``(B) Penalty not to apply to failures corrected
                    within 30 days.--No penalty shall be assessed under
                    paragraph (1) with respect to any failure if--
                              ``(i) such failure was due to reasonable
                            cause and not to willful neglect, and
                              ``(ii) such failure is corrected during the
                            30-day period beginning on the 1st date that
                            the employer knew, or exercising reasonable
                            diligence would have known, that such failure
                            existed.
                      ``(C) Overall limitation for unintentional
                    failures.--In the case of failures which are due to
                    reasonable cause and not to willful neglect, the
                    penalty assessed under paragraph (1) for failures
                    during any 1-year period shall not exceed the amount
                    equal to the lesser of--
                              ``(i) 10 percent of the aggregate amount paid
                            or incurred by the employer (or predecessor
                            employer) during the preceding taxable year for
                            group health plans, or
                              ``(ii) $500,000.
              ``(3) Advance notification of failure prior to assessment.--
            Before a reasonable time prior to the assessment of any penalty
            under paragraph (1) with respect to any failure by an employer,
            the Secretary shall inform the employer in writing of such
            failure and shall provide the employer information regarding
            efforts and procedures which may be undertaken by the employer
            to correct such failure.
              ``(4) Actions to enforce assessments.--The Secretary may
            bring a civil action in any District Court of the United States
            to collect any civil penalty under this subsection.
              ``(5) Coordination with excise tax.--Under regulations
            prescribed in accordance with section 324 of the America's
            Affordable Health Choices Act of 2009, the Secretary and the
            Secretary of the Treasury shall coordinate the assessment of
            penalties under paragraph (1) in connection with failures to
            satisfy health coverage participation requirements with the
            imposition of excise taxes on such failures under section
            4980H(b) of the Internal Revenue Code of 1986 so as to avoid
            duplication of penalties with respect to such failures.
              ``(6) Deposit of penalty collected.--Any amount of penalty
            collected under this subsection shall be deposited as
            miscellaneous receipts in the Treasury of the United States.
      ``(g) Regulations.--The Secretary may promulgate such regulations as
    may be necessary or appropriate to carry out the provisions of this
    section, in accordance with section 324(a) of the America's Affordable
    Health Choices Act of 2009. The Secretary may promulgate any interim
    final rules as the Secretary determines are appropriate to carry out
    this section.''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to periods beginning after December 31, 2012.

    SEC. 324. ADDITIONAL RULES RELATING TO HEALTH COVERAGE PARTICIPATION
                        REQUIREMENTS.

      (a) Assuring Coordination.--The officers consisting of the Secretary
    of Labor, the Secretary of the Treasury, the Secretary of Health and
    Human Services, and the Health Choices Commissioner shall ensure,
    through the execution of an interagency memorandum of understanding
    among such officers, that--
              (1) regulations, rulings, and interpretations issued by such
            officers relating to the same matter over which two or more of
            such officers have responsibility under subpart B of part 6 of
            subtitle B of title I of the Employee Retirement Income
            Security Act of 1974, section 4980H of the Internal Revenue
            Code of 1986, and section 2793 of the Public Health Service Act
            are administered so as to have the same effect at all times;
            and
              (2) coordination of policies relating to enforcing the same
            requirements through such officers in order to have a
            coordinated enforcement strategy that avoids duplication of
            enforcement efforts and assigns priorities in enforcement.
      (b) Multiemployer Plans.--In the case of a group health plan that is
    a multiemployer plan (as defined in section 3(37) of the Employee
    Retirement Income Security Act of 1974), the regulations prescribed in
    accordance with subsection (a) by the officers referred to in
    subsection (a) shall provide for the application of the health coverage
    participation requirements to the plan sponsor and contributing
    sponsors of such plan.

             TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

                       Subtitle A--Shared Responsibility

                       PART 1--INDIVIDUAL RESPONSIBILITY

    SEC. 401. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE.

      (a) In General.--Subchapter A of chapter 1 of the Internal Revenue
    Code of 1986 is amended by adding at the end the following new part:

                     ``PART VIII--HEALTH CARE RELATED TAXES

        ``subpart a. tax on individuals without acceptable health care
                                   coverage.

    ``Subpart A--Tax on Individuals Without Acceptable Health Care Coverage

    ``Sec. 59B. Tax on individuals without acceptable health care coverage.

    ``SEC. 59B. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE.

      ``(a) Tax Imposed.--In the case of any individual who does not meet
    the requirements of subsection (d) at any time during the taxable year,
    there is hereby imposed a tax equal to 2.5 percent of the excess of--
              ``(1) the taxpayer's modified adjusted gross income for the
            taxable year, over
              ``(2) the amount of gross income specified in section
            6012(a)(1) with respect to the taxpayer.
      ``(b) Limitations.--
              ``(1) Tax limited to average premium.--
                      ``(A) In general.--The tax imposed under subsection
                    (a) with respect to any taxpayer for any taxable year
                    shall not exceed the applicable national average
                    premium for such taxable year.
                      ``(B) Applicable national average premium.--
                              ``(i) In general.--For purposes of
                            subparagraph (A), the `applicable national
                            average premium' means, with respect to any
                            taxable year, the average premium (as
                            determined by the Secretary, in coordination
                            with the Health Choices Commissioner) for self-
                            only coverage under a basic plan which is
                            offered in a Health Insurance Exchange for the
                            calendar year in which such taxable year
                            begins.
                              ``(ii) Failure to provide coverage for more
                            than one individual.--In the case of any
                            taxpayer who fails to meet the requirements of
                            subsection (e) with respect to more than one
                            individual during the taxable year, clause (i)
                            shall be applied by substituting `family
                            coverage' for `self-only coverage'.
              ``(2) Proration for part year failures.--The tax imposed
            under subsection (a) with respect to any taxpayer for any
            taxable year shall not exceed the amount which bears the same
            ratio to the amount of tax so imposed (determined without
            regard to this paragraph and after application of paragraph
            (1)) as--
                      ``(A) the aggregate periods during such taxable year
                    for which such individual failed to meet the
                    requirements of subsection (d), bears to
                      ``(B) the entire taxable year.
      ``(c) Exceptions.--
              ``(1) Dependents.--Subsection (a) shall not apply to any
            individual for any taxable year if a deduction is allowable
            under section 151 with respect to such individual to another
            taxpayer for any taxable year beginning in the same calendar
            year as such taxable year.
              ``(2) Nonresident aliens.--Subsection (a) shall not apply to
            any individual who is a nonresident alien.
              ``(3) Individuals residing outside united states.--Any
            qualified individual (as defined in section 911(d)) (and any
            qualifying child residing with such individual) shall be
            treated for purposes of this section as covered by acceptable
            coverage during the period described in subparagraph (A) or (B)
            of section 911(d)(1), whichever is applicable.
              ``(4) Individuals residing in possessions of the united
            states.--Any individual who is a bona fide resident of any
            possession of the United States (as determined under section
            937(a)) for any taxable year (and any qualifying child residing
            with such individual) shall be treated for purposes of this
            section as covered by acceptable coverage during such taxable
            year.
              ``(5) Religious conscience exemption.--
                      ``(A) In general.--Subsection (a) shall not apply to
                    any individual (and any qualifying child residing with
                    such individual) for any period if such individual has
                    in effect an exemption which certifies that such
                    individual is a member of a recognized religious sect
                    or division thereof described in section 1402(g)(1) and
                    an adherent of established tenets or teachings of such
                    sect or division as described in such section.
                      ``(B) Exemption.--An application for the exemption
                    described in subparagraph (A) shall be filed with the
                    Secretary at such time and in such form and manner as
                    the Secretary may prescribe. Any such exemption granted
                    by the Secretary shall be effective for such period as
                    the Secretary determines appropriate.
      ``(d) Acceptable Coverage Requirement.--
              ``(1) In general.--The requirements of this subsection are
            met with respect to any individual for any period if such
            individual (and each qualifying child of such individual) is
            covered by acceptable coverage at all times during such period.
              ``(2) Acceptable coverage.--For purposes of this section, the
            term `acceptable coverage' means any of the following:
                      ``(A) Qualified health benefits plan coverage.--
                    Coverage under a qualified health benefits plan (as
                    defined in section 100(c) of the America's Affordable
                    Health Choices Act of 2009).
                      ``(B) Grandfathered health insurance coverage;
                    coverage under grandfathered employment-based health
                    plan.--Coverage under a grandfathered health insurance
                    coverage (as defined in subsection (a) of section 102
                    of the America's Affordable Health Choices Act of 2009)
                    or under a current employment-based health plan (within
                    the meaning of subsection (b) of such section).
                      ``(C) Medicare.--Coverage under part A of title XVIII
                    of the Social Security Act.
                      ``(D) Medicaid.--Coverage for medical assistance
                    under title XIX of the Social Security Act.
                      ``(E) Members of the armed forces and dependents
                    (including tricare).--Coverage under chapter 55 of
                    title 10, United States Code, including similar
                    coverage furnished under section 1781 of title 38 of
                    such Code.
                      ``(F) VA.--Coverage under the veteran's health care
                    program under chapter 17 of title 38, United States
                    Code, but only if the coverage for the individual
                    involved is determined by the Secretary in coordination
                    with the Health Choices Commissioner to be not less
                    than the level specified by the Secretary of the
                    Treasury, in coordination with the Secretary of
                    Veteran's Affairs and the Health Choices Commissioner,
                    based on the individual's priority for services as
                    provided under section 1705(a) of such title.
                      ``(G) Other coverage.--Such other health benefits
                    coverage as the Secretary, in coordination with the
                    Health Choices Commissioner, recognizes for purposes of
                    this subsection.
      ``(e) Other Definitions and Special Rules.--
              ``(1) Qualifying child.--For purposes of this section, the
            term `qualifying child' has the meaning given such term by
            section 152(c). With respect to any period during which health
            coverage for a child must be provided by an individual pursuant
            to a child support order, such child shall be treated as a
            qualifying child of such individual (and not as a qualifying
            child of any other individual).
              ``(2) Basic plan.--For purposes of this section, the term
            `basic plan' has the meaning given such term under section
            100(c) of the America's Affordable Health Choices Act of 2009.
              ``(3) Health insurance exchange.--For purposes of this
            section, the term `Health Insurance Exchange' has the meaning
            given such term under section 100(c) of the America's
            Affordable Health Choices Act of 2009, including any State-
            based health insurance exchange approved for operation under
            section 208 of such Act.
              ``(4) Family coverage.--For purposes of this section, the
            term `family coverage' means any coverage other than self-only
            coverage.
              ``(5) Modified adjusted gross income.--For purposes of this
            section, the term `modified adjusted gross income' means
            adjusted gross income--
                      ``(A) determined without regard to section 911, and
                      ``(B) increased by the amount of interest received or
                    accrued by the taxpayer during the taxable year which
                    is exempt from tax.
              ``(6) Not treated as tax imposed by this chapter for certain
            purposes.--The tax imposed under this section shall not be
            treated as tax imposed by this chapter for purposes of
            determining the amount of any credit under this chapter or for
            purposes of section 55.
      ``(f) Regulations.--The Secretary shall prescribe such regulations or
    other guidance as may be necessary or appropriate to carry out the
    purposes of this section, including regulations or other guidance
    (developed in coordination with the Health Choices Commissioner) which
    provide--
              ``(1) exemption from the tax imposed under subsection (a) in
            cases of de minimis lapses of acceptable coverage, and
              ``(2) a process for applying for a waiver of the application
            of subsection (a) in cases of hardship.''.
      (b) Information Reporting.--
              (1) In general.--Subpart B of part III of subchapter A of
            chapter 61 of such Code is amended by inserting after section
            6050W the following new section:

    ``SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE COVERAGE.

      ``(a) Requirement of Reporting.--Every person who provides acceptable
    coverage (as defined in section 59B(d)) to any individual during any
    calendar year shall, at such time as the Secretary may prescribe, make
    the return described in subsection (b) with respect to such individual.
      ``(b) Form and Manner of Returns.--A return is described in this
    subsection if such return--
              ``(1) is in such form as the Secretary may prescribe, and
              ``(2) contains--
                      ``(A) the name, address, and TIN of the primary
                    insured and the name of each other individual obtaining
                    coverage under the policy,
                      ``(B) the period for which each such individual was
                    provided with the coverage referred to in subsection
                    (a), and
                      ``(C) such other information as the Secretary may
                    require.
      ``(c) Statements to Be Furnished to Individuals With Respect to Whom
    Information Is Required.--Every person required to make a return under
    subsection (a) shall furnish to each primary insured whose name is
    required to be set forth in such return a written statement showing--
              ``(1) the name and address of the person required to make
            such return and the phone number of the information contact for
            such person, and
              ``(2) the information required to be shown on the return with
            respect to such individual.
    The written statement required under the preceding sentence shall be
    furnished on or before January 31 of the year following the calendar
    year for which the return under subsection (a) is required to be made.
      ``(d) Coverage Provided by Governmental Units.--In the case of
    coverage provided by any governmental unit or any agency or
    instrumentality thereof, the officer or employee who enters into the
    agreement to provide such coverage (or the person appropriately
    designated for purposes of this section) shall make the returns and
    statements required by this section.''.
              (2) Penalty for failure to file.--
                      (A) Return.--Subparagraph (B) of section 6724(d)(1)
                    of such Code is amended by striking ``or'' at the end
                    of clause (xxii), by striking ``and'' at the end of
                    clause (xxiii) and inserting ``or'', and by adding at
                    the end the following new clause:
                              ``(xxiv) section 6050X (relating to returns
                            relating to health insurance coverage), and''.
                      (B) Statement.--Paragraph (2) of section 6724(d) of
                    such Code is amended by striking ``or'' at the end of
                    subparagraph (EE), by striking the period at the end of
                    subparagraph (FF) and inserting ``, or'', and by
                    inserting after subparagraph (FF) the following new
                    subparagraph:
                      ``(GG) section 6050X (relating to returns relating to
                    health insurance coverage).''.
      (c) Return Requirement.--Subsection (a) of section 6012 of such Code
    is amended by inserting after paragraph (9) the following new
    paragraph:
              ``(10) Every individual to whom section 59B(a) applies and
            who fails to meet the requirements of section 59B(d) with
            respect to such individual or any qualifying child (as defined
            in section 152(c)) of such individual.''.
      (d) Clerical Amendments.--
              (1) The table of parts for subchapter A of chapter 1 of the
            Internal Revenue Code of 1986 is amended by adding at the end
            the following new item:

                   ``Part VIII. Health Care Related Taxes.''.

              (2) The table of sections for subpart B of part III of
            subchapter A of chapter 61 is amended by adding at the end the
            following new item:

    ``Sec. 6050X. Returns relating to health insurance coverage.''.

      (e) Section 15 Not to Apply.--The amendment made by subsection (a)
    shall not be treated as a change in a rate of tax for purposes of
    section 15 of the Internal Revenue Code of 1986.
      (f) Effective Date.--
              (1) In general.--The amendments made by this section shall
            apply to taxable years beginning after December 31, 2012.
              (2) Returns.--The amendments made by subsection (b) shall
            apply to calendar years beginning after December 31, 2012.

                        PART 2--EMPLOYER RESPONSIBILITY

    SEC. 411. ELECTION TO SATISFY HEALTH COVERAGE PARTICIPATION
                        REQUIREMENTS.

      (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 is
    amended by adding at the end the following new section:

    ``SEC. 4980H. ELECTION WITH RESPECT TO HEALTH COVERAGE PARTICIPATION
                        REQUIREMENTS.

      ``(a) Election of Employer Responsibility to Provide Health
    Coverage.--
              ``(1) In general.--Subsection (b) shall apply to any employer
            with respect to whom an election under paragraph (2) is in
            effect.
              ``(2) Time and manner.--An employer may make an election
            under this paragraph at such time and in such form and manner
            as the Secretary may prescribe.
              ``(3) Affiliated groups.--In the case of any employer which
            is part of a group of employers who are treated as a single
            employer under subsection (b), (c), (m), or (o) of section 414,
            the election under paragraph (2) shall be made by such person
            as the Secretary may provide. Any such election, once made,
            shall apply to all members of such group.
              ``(4) Separate elections.--Under regulations prescribed by
            the Secretary, separate elections may be made under paragraph
            (2) with respect to--
                      ``(A) separate lines of business, and
                      ``(B) full-time employees and employees who are not
                    full-time employees.
              ``(5) Termination of election in cases of substantial
            noncompliance.--The Secretary may terminate the election of any
            employer under paragraph (2) if the Secretary (in coordination
            with the Health Choices Commissioner) determines that such
            employer is in substantial noncompliance with the health
            coverage participation requirements.
      ``(b) Excise Tax With Respect to Failure to Meet Health Coverage
    Participation Requirements.--
              ``(1) In general.--In the case of any employer who fails
            (during any period with respect to which the election under
            subsection (a) is in effect) to satisfy the health coverage
            participation requirements with respect to any employee to whom
            such election applies, there is hereby imposed on each such
            failure with respect to each such employee a tax of $100 for
            each day in the period beginning on the date such failure first
            occurs and ending on the date such failure is corrected.
              ``(2) Limitations on amount of tax.--
                      ``(A) Tax not to apply where failure not discovered
                    exercising reasonable diligence.--No tax shall be
                    imposed by paragraph (1) on any failure during any
                    period for which it is established to the satisfaction
                    of the Secretary that the employer neither knew, nor
                    exercising reasonable diligence would have known, that
                    such failure existed.
                      ``(B) Tax not to apply to failures corrected within
                    30 days.--No tax shall be imposed by paragraph (1) on
                    any failure if--
                              ``(i) such failure was due to reasonable
                            cause and not to willful neglect, and
                              ``(ii) such failure is corrected during the
                            30-day period beginning on the 1st date that
                            the employer knew, or exercising reasonable
                            diligence would have known, that such failure
                            existed.
                      ``(C) Overall limitation for unintentional
                    failures.--In the case of failures which are due to
                    reasonable cause and not to willful neglect, the tax
                    imposed by subsection (a) for failures during the
                    taxable year of the employer shall not exceed the
                    amount equal to the lesser of--
                              ``(i) 10 percent of the aggregate amount paid
                            or incurred by the employer (or predecessor
                            employer) during the preceding taxable year for
                            employment-based health plans, or
                              ``(ii) $500,000.
                      ``(D) Coordination with other enforcement
                    provisions.--The tax imposed under paragraph (1) with
                    respect to any failure shall be reduced (but not below
                    zero) by the amount of any civil penalty collected
                    under section 502(c)(11) of the Employee Retirement
                    Income Security Act of 1974 or section 2793(g) of the
                    Public Health Service Act with respect to such failure.
      ``(c) Health Coverage Participation Requirements.--For purposes of
    this section, the term `health coverage participation requirements'
    means the requirements of part I of subtitle B of title III of the
    America's Affordable Health Choices Act of 2009 (as in effect on the
    date of the enactment of this section).''.
      (b) Clerical Amendment.--The table of sections for chapter 43 of such
    Code is amended by adding at the end the following new item:

    ``Sec. 4980H. Election with respect to health coverage participation
    requirements.''.

      (c) Effective Date.--The amendments made by this section shall apply
    to periods beginning after December 31, 2012.

    SEC. 412. RESPONSIBILITIES OF NONELECTING EMPLOYERS.

      (a) In General.--Section 3111 of the Internal Revenue Code of 1986 is
    amended by redesignating subsection (c) as subsection (d) and by
    inserting after subsection (b) the following new subsection:
      ``(c) Employers Electing to Not Provide Health Benefits.--
              ``(1) In general.--In addition to other taxes, there is
            hereby imposed on every nonelecting employer an excise tax,
            with respect to having individuals in his employ, equal to 8
            percent of the wages (as defined in section 3121(a)) paid by
            him with respect to employment (as defined in section 3121(b)).
              ``(2) Special rules for small employers.--
                      ``(A) In general.--In the case of any employer who is
                    small employer for any calendar year, paragraph (1)
                    shall be applied by substituting the applicable
                    percentage determined in accordance with the following
                    table for `8 percent':

    ``If the annual payroll of such          The applicable percentage is:
     employer for the preceding calendar
     year:
      Does not exceed $250,000.............  0 percent
      Exceeds $250,000, but does not exceed  2 percent
       $300,000.
      Exceeds $300,000, but does not exceed  4 percent
       $350,000.
      Exceeds $350,000, but does not exceed  6 percent
       $400,000.

                      ``(B) Small employer.--For purposes of this
                    paragraph, the term `small employer' means any employer
                    for any calendar year if the annual payroll of such
                    employer for the preceding calendar year does not
                    exceed $400,000.
                      ``(C) Annual payroll.--For purposes of this
                    paragraph, the term `annual payroll' means, with
                    respect to any employer for any calendar year, the
                    aggregate wages (as defined in section 3121(a)) paid by
                    him with respect to employment (as defined in section
                    3121(b)) during such calendar year.
              ``(3) Nonelecting employer.--For purposes of paragraph (1),
            the term `nonelecting employer' means any employer for any
            period with respect to which such employer does not have an
            election under section 4980H(a) in effect.
              ``(4) Special rule for separate elections.--In the case of an
            employer who makes a separate election described in section
            4980H(a)(4) for any period, paragraph (1) shall be applied for
            such period by taking into account only the wages paid to
            employees who are not subject to such election.
              ``(5) Aggregation; predecessors.--For purposes of this
            subsection--
                      ``(A) all persons treated as a single employer under
                    subsection (b), (c), (m), or (o) of section 414 shall
                    be treated as 1 employer, and
                      ``(B) any reference to any person shall be treated as
                    including a reference to any predecessor of such
                    person.''.
      (b) Definitions.--Section 3121 of such Code is amended by adding at
    the end the following new subsection:
      ``(aa) Special Rules for Tax on Employers Electing Not to Provide
    Health Benefits.--For purposes of section 3111(c)--
              ``(1) Paragraphs (1), (5), and (19) of subsection (b) shall
            not apply.
              ``(2) Paragraph (7) of subsection (b) shall apply by treating
            all services as not covered by the retirement systems referred
            to in subparagraphs (C) and (F) thereof.
              ``(3) Subsection (e) shall not apply and the term `State'
            shall include the District of Columbia.''.
      (c) Conforming Amendment.--Subsection (d) of section 3111 of such
    Code, as redesignated by this section, is amended by striking ``this
    section'' and inserting ``subsections (a) and (b)''.
      (d) Application to Railroads.--
              (1) In general.--Section 3221 of such Code is amended by
            redesignating subsection (c) as subsection (d) and by inserting
            after subsection (b) the following new subsection:
      ``(c) Employers Electing to Not Provide Health Benefits.--
              ``(1) In general.--In addition to other taxes, there is
            hereby imposed on every nonelecting employer an excise tax,
            with respect to having individuals in his employ, equal to 8
            percent of the compensation paid during any calendar year by
            such employer for services rendered to such employer.
              ``(2) Exception for small employers.--Rules similar to the
            rules of section 3111(c)(2) shall apply for purposes of this
            subsection.
              ``(3) Nonelecting employer.--For purposes of paragraph (1),
            the term `nonelecting employer' means any employer for any
            period with respect to which such employer does not have an
            election under section 4980H(a) in effect.
              ``(4) Special rule for separate elections.--In the case of an
            employer who makes a separate election described in section
            4980H(a)(4) for any period, subsection (a) shall be applied for
            such period by taking into account only the wages paid to
            employees who are not subject to such election.''.
              (2) Definitions.--Subsection (e) of section 3231 of such Code
            is amended by adding at the end the following new paragraph:
              ``(13) Special rules for tax on employers electing not to
            provide health benefits.--For purposes of section 3221(c)--
                      ``(A) Paragraph (1) shall be applied without regard
                    to the third sentence thereof.
                      ``(B) Paragraph (2) shall not apply.''.
              (3) Conforming amendment.--Subsection (d) of section 3221 of
            such Code, as redesignated by this section, is amended by
            striking ``subsections (a) and (b), see section 3231(e)(2)''
            and inserting ``this section, see paragraphs (2) and (13)(B) of
            section 3231(e)''.
      (e) Effective Date.--The amendments made by this section shall apply
    to periods beginning after December 31, 2012.

    Subtitle B--Credit for Small Business Employee Health Coverage Expenses

    SEC. 421. CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH COVERAGE EXPENSES.

      (a) In General.--Subpart D of part IV of subchapter A of chapter 1 of
    the Internal Revenue Code of 1986 (relating to business-related
    credits) is amended by adding at the end the following new section:

    ``SEC. 45R. SMALL BUSINESS EMPLOYEE HEALTH COVERAGE CREDIT.

      ``(a) In General.--For purposes of section 38, in the case of a
    qualified small employer, the small business employee health coverage
    credit determined under this section for the taxable year is an amount
    equal to the applicable percentage of the qualified employee health
    coverage expenses of such employer for such taxable year.
      ``(b) Applicable Percentage.--
              ``(1) In general.--For purposes of this section, the
            applicable percentage is 50 percent.
              ``(2) Phaseout based on average compensation of employees.--
            In the case of an employer whose average annual employee
            compensation for the taxable year exceeds $20,000, the
            percentage specified in paragraph (1) shall be reduced by a
            number of percentage points which bears the same ratio to 50 as
            such excess bears to $20,000.
      ``(c) Limitations.--
              ``(1) Phaseout based on employer size.--In the case of an
            employer who employs more than 10 qualified employees during
            the taxable year, the credit determined under subsection (a)
            shall be reduced by an amount which bears the same ratio to the
            amount of such credit (determined without regard to this
            paragraph and after the application of the other provisions of
            this section) as--
                      ``(A) the excess of--
                              ``(i) the number of qualified employees
                            employed by the employer during the taxable
                            year, over
                              ``(ii) 10, bears to
                      ``(B) 15.
              ``(2) Credit not allowed with respect to certain highly
            compensated employees.--No credit shall be allowed under
            subsection (a) with respect to qualified employee health
            coverage expenses paid or incurred with respect to any employee
            for any taxable year if the aggregate compensation paid by the
            employer to such employee during such taxable year exceeds
            $80,000.
      ``(d) Qualified Employee Health Coverage Expenses.--For purposes of
    this section--
              ``(1) In general.--The term `qualified employee health
            coverage expenses' means, with respect to any employer for any
            taxable year, the aggregate amount paid or incurred by such
            employer during such taxable year for coverage of any qualified
            employee of the employer (including any family coverage which
            covers such employee) under qualified health coverage.
              ``(2) Qualified health coverage.--The term `qualified health
            coverage' means acceptable coverage (as defined in section
            59B(d)) which--
                      ``(A) is provided pursuant to an election under
                    section 4980H(a), and
                      ``(B) satisfies the requirements referred to in
                    section 4980H(c).
      ``(e) Other Definitions.--For purposes of this section--
              ``(1) Qualified small employer.--For purposes of this
            section, the term `qualified small employer' means any employer
            for any taxable year if--
                      ``(A) the number of qualified employees employed by
                    such employer during the taxable year does not exceed
                    25, and
                      ``(B) the average annual employee compensation of
                    such employer for such taxable year does not exceed the
                    sum of the dollar amounts in effect under subsection
                    (b)(2).
              ``(2) Qualified employee.--The term `qualified employee'
            means any employee of an employer for any taxable year of the
            employer if such employee received at least $5,000 of
            compensation from such employer for services performed in the
            trade or business of such employer during such taxable year.
              ``(3) Average annual employee compensation.--The term
            `average annual employee compensation' means, with respect to
            any employer for any taxable year, the average amount of
            compensation paid by such employer to qualified employees of
            such employer during such taxable year.
              ``(4) Compensation.--The term `compensation' has the meaning
            given such term in section 408(p)(6)(A).
              ``(5) Family coverage.--The term `family coverage' means any
            coverage other than self-only coverage.
      ``(f) Special Rules.--For purposes of this section--
              ``(1) Special rule for partnerships and self-employed.--In
            the case of a partnership (or a trade or business carried on by
            an individual) which has one or more qualified employees
            (determined without regard to this paragraph) with respect to
            whom the election under 4980H(a) applies, each partner (or, in
            the case of a trade or business carried on by an individual,
            such individual) shall be treated as an employee.
              ``(2) Aggregation rule.--All persons treated as a single
            employer under subsection (b), (c), (m), or (o) of section 414
            shall be treated as 1 employer.
              ``(3) Denial of double benefit.--Any deduction otherwise
            allowable with respect to amounts paid or incurred for health
            insurance coverage to which subsection (a) applies shall be
            reduced by the amount of the credit determined under this
            section.
              ``(4) Inflation adjustment.--In the case of any taxable year
            beginning after 2013, each of the dollar amounts in subsections
            (b)(2), (c)(2), and (e)(2) shall be increased by an amount
            equal to--
                      ``(A) such dollar amount, multiplied by
                      ``(B) the cost of living adjustment determined under
                    section 1(f)(3) for the calendar year in which the
                    taxable year begins determined by substituting
                    `calendar year 2012' for `calendar year 1992' in
                    subparagraph (B) thereof.
            If any increase determined under this paragraph is not a
            multiple of $50, such increase shall be rounded to the next
            lowest multiple of $50.''.
      (b) Credit to Be Part of General Business Credit.--Subsection (b) of
    section 38 of such Code (relating to general business credit) is
    amended by striking ``plus'' at the end of paragraph (34), by striking
    the period at the end of paragraph (35) and inserting ``, plus'' , and
    by adding at the end the following new paragraph:
              ``(36) in the case of a qualified small employer (as defined
            in section 45R(e)), the small business employee health coverage
            credit determined under section 45R(a).''.
      (c) Clerical Amendment.--The table of sections for subpart D of part
    IV of subchapter A of chapter 1 of such Code is amended by inserting
    after the item relating to section 45Q the following new item:

    ``Sec. 45R. Small business employee health coverage credit.''.

      (d) Effective Date.--The amendments made by this section shall apply
    to taxable years beginning after December 31, 2012.

        Subtitle C--Disclosures to Carry Out Health Insurance Exchange
                                   Subsidies

    SEC. 431. DISCLOSURES TO CARRY OUT HEALTH INSURANCE EXCHANGE SUBSIDIES.

      (a) In General.--Subsection (l) of section 6103 of the Internal
    Revenue Code of 1986 is amended by adding at the end the following new
    paragraph:
              ``(21) Disclosure of return information to carry out health
            insurance exchange subsidies.--
                      ``(A) In general.--The Secretary, upon written
                    request from the Health Choices Commissioner or the
                    head of a State-based health insurance exchange
                    approved for operation under section 208 of the
                    America's Affordable Health Choices Act of 2009, shall
                    disclose to officers and employees of the Health
                    Choices Administration or such State-based health
                    insurance exchange, as the case may be, return
                    information of any taxpayer whose income is relevant in
                    determining any affordability credit described in
                    subtitle C of title II of the America's Affordable
                    Health Choices Act of 2009. Such return information
                    shall be limited to--
                              ``(i) taxpayer identity information with
                            respect to such taxpayer,
                              ``(ii) the filing status of such taxpayer,
                              ``(iii) the modified adjusted gross income of
                            such taxpayer (as defined in section
                            59B(e)(5)),
                              ``(iv) the number of dependents of the
                            taxpayer,
                              ``(v) such other information as is prescribed
                            by the Secretary by regulation as might
                            indicate whether the taxpayer is eligible for
                            such affordability credits (and the amount
                            thereof), and
                              ``(vi) the taxable year with respect to which
                            the preceding information relates or, if
                            applicable, the fact that such information is
                            not available.
                      ``(B) Restriction on use of disclosed information.--
                    Return information disclosed under subparagraph (A) may
                    be used by officers and employees of the Health Choices
                    Administration or such State-based health insurance
                    exchange, as the case may be, only for the purposes of,
                    and to the extent necessary in, establishing and
                    verifying the appropriate amount of any affordability
                    credit described in subtitle C of title II of the
                    America's Affordable Health Choices Act of 2009 and
                    providing for the repayment of any such credit which
                    was in excess of such appropriate amount.''.
      (b) Procedures and Recordkeeping Related to Disclosures.--Paragraph
    (4) of section 6103(p) of such Code is amended--
              (1) by inserting ``, or any entity described in subsection
            (l)(21),'' after ``or (20)'' in the matter preceding
            subparagraph (A),
              (2) by inserting ``or any entity described in subsection
            (l)(21),'' after ``or (o)(1)(A),'' in subparagraph (F)(ii), and
              (3) by inserting ``or any entity described in subsection
            (l)(21),'' after ``or (20),'' both places it appears in the
            matter after subparagraph (F).
      (c) Unauthorized Disclosure or Inspection.--Paragraph (2) of section
    7213(a) of such Code is amended by striking ``or (20)'' and inserting
    ``(20), or (21)''.

                      Subtitle D--Other Revenue Provisions

                           PART 1--GENERAL PROVISIONS

    SEC. 441. SURCHARGE ON HIGH INCOME INDIVIDUALS.

      (a) In General.--Part VIII of subchapter A of chapter 1 of the
    Internal Revenue Code of 1986, as added by this title, is amended by
    adding at the end the following new subpart:

               ``Subpart B--Surcharge on High Income Individuals

    ``Sec. 59C. Surcharge on high income individuals.

    ``SEC. 59C. SURCHARGE ON HIGH INCOME INDIVIDUALS.

      ``(a) General Rule.--In the case of a taxpayer other than a
    corporation, there is hereby imposed (in addition to any other tax
    imposed by this subtitle) a tax equal to--
              ``(1) 1 percent of so much of the modified adjusted gross
            income of the taxpayer as exceeds $350,000 but does not exceed
            $500,000,
              ``(2) 1.5 percent of so much of the modified adjusted gross
            income of the taxpayer as exceeds $500,000 but does not exceed
            $1,000,000, and
              ``(3) 5.4 percent of so much of the modified adjusted gross
            income of the taxpayer as exceeds $1,000,000.
      ``(b) Taxpayers Not Making a Joint Return.--In the case of any
    taxpayer other than a taxpayer making a joint return under section 6013
    or a surviving spouse (as defined in section 2(a)), subsection (a)
    shall be applied by substituting for each of the dollar amounts therein
    (after any increase determined under subsection (e)) a dollar amount
    equal to--
              ``(1) 50 percent of the dollar amount so in effect in the
            case of a married individual filing a separate return, and
              ``(2) 80 percent of the dollar amount so in effect in any
            other case.
      ``(c) Adjustments Based on Federal Health Reform Savings.--
              ``(1) In general.--Except as provided in paragraph (2), in
            the case of any taxable year beginning after December 31, 2012,
            subsection (a) shall be applied--
                      ``(A) by substituting `2 percent' for `1 percent',
                    and
                      ``(B) by substituting `3 percent' for `1.5 percent'.
              ``(2) Adjustments based on excess federal health reform
            savings.--
                      ``(A) Exception if federal health reform savings
                    significantly exceeds base amount.--If the excess
                    Federal health reform savings is more than
                    $150,000,000,000 but not more than $175,000,000,000,
                    paragraph (1) shall not apply.
                      ``(B) Further adjustment for additional federal
                    health reform savings.--If the excess Federal health
                    reform savings is more than $175,000,000,000,
                    paragraphs (1) and (2) of subsection (a) (and paragraph
                    (1) of this subsection) shall not apply to any taxable
                    year beginning after December 31, 2012.
                      ``(C) Excess federal health reform savings.--For
                    purposes of this subsection, the term `excess Federal
                    health reform savings' means the excess of--
                              ``(i) the Federal health reform savings, over
                              ``(ii) $525,000,000,000.
                      ``(D) Federal health reform savings.--The term
                    `Federal health reform savings' means the sum of the
                    amounts described in subparagraphs (A) and (B) of
                    paragraph (3).
              ``(3) Determination of federal health reform savings.--Not
            later than December 1, 2012, the Director of the Office of
            Management and Budget shall--
                      ``(A) determine, on the basis of the study conducted
                    under paragraph (4), the aggregate reductions in
                    Federal expenditures which have been achieved as a
                    result of the provisions of, and amendments made by,
                    division B of the America's Affordable Health Choices
                    Act of 2009 during the period beginning on October 1,
                    2009, and ending with the latest date with respect to
                    which the Director has sufficient data to make such
                    determination, and
                      ``(B) estimate, on the basis of such study and the
                    determination under subparagraph (A), the aggregate
                    reductions in Federal expenditures which will be
                    achieved as a result of such provisions and amendments
                    during so much of the period beginning with fiscal year
                    2010 and ending with fiscal year 2019 as is not taken
                    into account under subparagraph (A).
              ``(4) Study of federal health reform savings.--The Director
            of the Office of Management and Budget shall conduct a study of
            the reductions in Federal expenditures during fiscal years 2010
            through 2019 which are attributable to the provisions of, and
            amendments made by, division B of the America's Affordable
            Health Choices Act of 2009. The Director shall complete such
            study not later than December 1, 2012.
              ``(5) Reductions in federal expenditures determined without
            regard to program investments.--For purposes of paragraphs (3)
            and (4), reductions in Federal expenditures shall be determined
            without regard to section 1121 of the America's Affordable
            Health Choices Act of 2009 and other program investments under
            division B thereof.
      ``(d) Modified Adjusted Gross Income.--For purposes of this section,
    the term `modified adjusted gross income' means adjusted gross income
    reduced by any deduction (not taken into account in determining
    adjusted gross income) allowed for investment interest (as defined in
    section 163(d)). In the case of an estate or trust, adjusted gross
    income shall be determined as provided in section 67(e).
      ``(e) Inflation Adjustments.--
              ``(1) In general.--In the case of taxable years beginning
            after 2011, the dollar amounts in subsection (a) shall be
            increased by an amount equal to--
                      ``(A) such dollar amount, multiplied by
                      ``(B) the cost-of-living adjustment determined under
                    section 1(f)(3) for the calendar year in which the
                    taxable year begins, by substituting `calendar year
                    2010' for `calendar year 1992' in subparagraph (B)
                    thereof.
              ``(2) Rounding.--If any amount as adjusted under paragraph
            (1) is not a multiple of $5,000, such amount shall be rounded
            to the next lowest multiple of $5,000.
      ``(f) Special Rules.--
              ``(1) Nonresident alien.--In the case of a nonresident alien
            individual, only amounts taken into account in connection with
            the tax imposed under section 871(b) shall be taken into
            account under this section.
              ``(2) Citizens and residents living abroad.--The dollar
            amounts in effect under subsection (a) (after the application
            of subsections (b) and (e)) shall be decreased by the excess
            of--
                      ``(A) the amounts excluded from the taxpayer's gross
                    income under section 911, over
                      ``(B) the amounts of any deductions or exclusions
                    disallowed under section 911(d)(6) with respect to the
                    amounts described in subparagraph (A).
              ``(3) Charitable trusts.--Subsection (a) shall not apply to a
            trust all the unexpired interests in which are devoted to one
            or more of the purposes described in section 170(c)(2)(B).
              ``(4) Not treated as tax imposed by this chapter for certain
            purposes.--The tax imposed under this section shall not be
            treated as tax imposed by this chapter for purposes of
            determining the amount of any credit under this chapter or for
            purposes of section 55.''.
      (b) Clerical Amendment.--The table of subparts for part VIII of
    subchapter A of chapter 1 of such Code, as added by this title, is
    amended by inserting after the item relating to subpart A the following
    new item:

             ``subpart b. surcharge on high income individuals.''.

      (c) Section 15 Not to Apply.--The amendment made by subsection (a)
    shall not be treated as a change in a rate of tax for purposes of
    section 15 of the Internal Revenue Code of 1986.
      (d) Effective Date.--The amendments made by this section shall apply
    to taxable years beginning after December 31, 2010.

    SEC. 442. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED
                        DRUG OR INSULIN.

      (a) HSAs.--Subparagraph (A) of section 223(d)(2) of the Internal
    Revenue Code of 1986 is amended by adding at the end the following:
    ``Such term shall include an amount paid for medicine or a drug only if
    such medicine or drug is a prescribed drug or is insulin.''.
      (b) Archer MSAs.--Subparagraph (A) of section 220(d)(2) of such Code
    is amended by adding at the end the following: ``Such term shall
    include an amount paid for medicine or a drug only if such medicine or
    drug is a prescribed drug or is insulin.''.
      (c) Health Flexible Spending Arrangements and Health Reimbursement
    Arrangements.--Section 106 of such Code is amended by adding at the end
    the following new subsection:
      ``(f) Reimbursements for Medicine Restricted to Prescribed Drugs and
    Insulin.--For purposes of this section and section 105, reimbursement
    for expenses incurred for a medicine or a drug shall be treated as a
    reimbursement for medical expenses only if such medicine or drug is a
    prescribed drug or is insulin.''.
      (d) Effective Dates.--The amendment made by this section shall apply
    to expenses incurred after December 31, 2009.

    SEC. 443. DELAY IN APPLICATION OF WORLDWIDE ALLOCATION OF INTEREST.

      (a) In General.--Paragraphs (5)(D) and (6) of section 864(f) of the
    Internal Revenue Code of 1986 are each amended by striking ``December
    31, 2010'' and inserting ``December 31, 2019''.
      (b) Transition.--Subsection (f) of section 864 of such Code is
    amended by striking paragraph (7).

                      PART 2--PREVENTION OF TAX AVOIDANCE

    SEC. 451. LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE
                        PAYMENTS.

      (a) In General.--Section 894 of the Internal Revenue Code of 1986
    (relating to income affected by treaty) is amended by adding at the end
    the following new subsection:
      ``(d) Limitation on Treaty Benefits for Certain Deductible
    Payments.--
              ``(1) In general.--In the case of any deductible related-
            party payment, any withholding tax imposed under chapter 3 (and
            any tax imposed under subpart A or B of this part) with respect
            to such payment may not be reduced under any treaty of the
            United States unless any such withholding tax would be reduced
            under a treaty of the United States if such payment were made
            directly to the foreign parent corporation.
              ``(2) Deductible related-party payment.--For purposes of this
            subsection, the term `deductible related-party payment' means
            any payment made, directly or indirectly, by any person to any
            other person if the payment is allowable as a deduction under
            this chapter and both persons are members of the same foreign
            controlled group of entities.
              ``(3) Foreign controlled group of entities.--For purposes of
            this subsection--
                      ``(A) In general.--The term `foreign controlled group
                    of entities' means a controlled group of entities the
                    common parent of which is a foreign corporation.
                      ``(B) Controlled group of entities.--The term
                    `controlled group of entities' means a controlled group
                    of corporations as defined in section 1563(a)(1),
                    except that--
                              ``(i) `more than 50 percent' shall be
                            substituted for `at least 80 percent' each
                            place it appears therein, and
                              ``(ii) the determination shall be made
                            without regard to subsections (a)(4) and (b)(2)
                            of section 1563.
                    A partnership or any other entity (other than a
                    corporation) shall be treated as a member of a
                    controlled group of entities if such entity is
                    controlled (within the meaning of section 954(d)(3)) by
                    members of such group (including any entity treated as
                    a member of such group by reason of this sentence).
              ``(4) Foreign parent corporation.--For purposes of this
            subsection, the term `foreign parent corporation' means, with
            respect to any deductible related-party payment, the common
            parent of the foreign controlled group of entities referred to
            in paragraph (3)(A).
              ``(5) Regulations.--The Secretary may prescribe such
            regulations or other guidance as are necessary or appropriate
            to carry out the purposes of this subsection, including
            regulations or other guidance which provide for--
                      ``(A) the treatment of two or more persons as members
                    of a foreign controlled group of entities if such
                    persons would be the common parent of such group if
                    treated as one corporation, and
                      ``(B) the treatment of any member of a foreign
                    controlled group of entities as the common parent of
                    such group if such treatment is appropriate taking into
                    account the economic relationships among such
                    entities.''.
      (b) Effective Date.--The amendment made by this section shall apply
    to payments made after the date of the enactment of this Act.

    SEC. 452. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

      (a) In General.--Section 7701 of the Internal Revenue Code of 1986 is
    amended by redesignating subsection (o) as subsection (p) and by
    inserting after subsection (n) the following new subsection:
      ``(o) Clarification of Economic Substance Doctrine.--
              ``(1) Application of doctrine.--In the case of any
            transaction to which the economic substance doctrine is
            relevant, such transaction shall be treated as having economic
            substance only if--
                      ``(A) the transaction changes in a meaningful way
                    (apart from Federal income tax effects) the taxpayer's
                    economic position, and
                      ``(B) the taxpayer has a substantial purpose (apart
                    from Federal income tax effects) for entering into such
                    transaction.
              ``(2) Special rule where taxpayer relies on profit
            potential.--
                      ``(A) In general.--The potential for profit of a
                    transaction shall be taken into account in determining
                    whether the requirements of subparagraphs (A) and (B)
                    of paragraph (1) are met with respect to the
                    transaction only if the present value of the reasonably
                    expected pre-tax profit from the transaction is
                    substantial in relation to the present value of the
                    expected net tax benefits that would be allowed if the
                    transaction were respected.
                      ``(B) Treatment of fees and foreign taxes.--Fees and
                    other transaction expenses and foreign taxes shall be
                    taken into account as expenses in determining pre-tax
                    profit under subparagraph (A).
              ``(3) State and local tax benefits.--For purposes of
            paragraph (1), any State or local income tax effect which is
            related to a Federal income tax effect shall be treated in the
            same manner as a Federal income tax effect.
              ``(4) Financial accounting benefits.--For purposes of
            paragraph (1)(B), achieving a financial accounting benefit
            shall not be taken into account as a purpose for entering into
            a transaction if the origin of such financial accounting
            benefit is a reduction of Federal income tax.
              ``(5) Definitions and special rules.--For purposes of this
            subsection--
                      ``(A) Economic substance doctrine.--The term
                    `economic substance doctrine' means the common law
                    doctrine under which tax benefits under subtitle A with
                    respect to a transaction are not allowable if the
                    transaction does not have economic substance or lacks a
                    business purpose.
                      ``(B) Exception for personal transactions of
                    individuals.--In the case of an individual, paragraph
                    (1) shall apply only to transactions entered into in
                    connection with a trade or business or an activity
                    engaged in for the production of income.
                      ``(C) Other common law doctrines not affected.--
                    Except as specifically provided in this subsection, the
                    provisions of this subsection shall not be construed as
                    altering or supplanting any other rule of law, and the
                    requirements of this subsection shall be construed as
                    being in addition to any such other rule of law.
                      ``(D) Determination of application of doctrine not
                    affected.--The determination of whether the economic
                    substance doctrine is relevant to a transaction (or
                    series of transactions) shall be made in the same
                    manner as if this subsection had never been enacted.
              ``(6) Regulations.--The Secretary shall prescribe such
            regulations as may be necessary or appropriate to carry out the
            purposes of this subsection.''.
      (b) Effective Date.--The amendments made by this section shall apply
    to transactions entered into after the date of the enactment of this
    Act.

    SEC. 453. PENALTIES FOR UNDERPAYMENTS.

      (a) Penalty for Underpayments Attributable to Transactions Lacking
    Economic Substance.--
              (1) In general.--Subsection (b) of section 6662 of the
            Internal Revenue Code of 1986 is amended by inserting after
            paragraph (5) the following new paragraph:
              ``(6) Any disallowance of claimed tax benefits by reason of a
            transaction lacking economic substance (within the meaning of
            section 7701(o)) or failing to meet the requirements of any
            similar rule of law.''.
              (2) Increased penalty for nondisclosed transactions.--Section
            6662 of such Code is amended by adding at the end the following
            new subsection:
      ``(i) Increase in Penalty in Case of Nondisclosed Noneconomic
    Substance Transactions.--
              ``(1) In general.--In the case of any portion of an
            underpayment which is attributable to one or more nondisclosed
            noneconomic substance transactions, subsection (a) shall be
            applied with respect to such portion by substituting `40
            percent' for `20 percent'.
              ``(2) Nondisclosed noneconomic substance transactions.--For
            purposes of this subsection, the term `nondisclosed noneconomic
            substance transaction' means any portion of a transaction
            described in subsection (b)(6) with respect to which the
            relevant facts affecting the tax treatment are not adequately
            disclosed in the return nor in a statement attached to the
            return.
              ``(3) Special rule for amended returns.--Except as provided
            in regulations, in no event shall any amendment or supplement
            to a return of tax be taken into account for purposes of this
            subsection if the amendment or supplement is filed after the
            earlier of the date the taxpayer is first contacted by the
            Secretary regarding the examination of the return or such other
            date as is specified by the Secretary.''.
              (3) Conforming amendment.--Subparagraph (B) of section
            6662A(e)(2) of such Code is amended--
                      (A) by striking ``section 6662(h)'' and inserting
                    ``subsections (h) or (i) of section 6662'', and
                      (B) by striking ``gross valuation misstatement
                    penalty'' in the heading and inserting ``certain
                    increased underpayment penalties''.
      (b) Reasonable Cause Exception Not Applicable to Noneconomic
    Substance Transactions, Tax Shelters, and Certain Large or Publicly
    Traded Persons.--Subsection (c) of section 6664 of such Code is
    amended--
              (1) by redesignating paragraphs (2) and (3) as paragraphs (3)
            and (4), respectively,
              (2) by striking ``paragraph (2)'' in paragraph (4)(A), as so
            redesignated, and inserting ``paragraph (3)'', and
              (3) by inserting after paragraph (1) the following new
            paragraph:
              ``(2) Exception.--Paragraph (1) shall not apply to--
                      ``(A) to any portion of an underpayment which is
                    attributable to one or more tax shelters (as defined in
                    section 6662(d)(2)(C)) or transactions described in
                    section 6662(b)(6), and
                      ``(B) to any taxpayer if such taxpayer is a specified
                    person (as defined in section 6662(d)(2)(D)(ii)).''.
      (c) Application of Penalty for Erroneous Claim for Refund or Credit
    to Noneconomic Substance Transactions.--Section 6676 of such Code is
    amended by redesignating subsection (c) as subsection (d) and inserting
    after subsection (b) the following new subsection:
      ``(c) Noneconomic Substance Transactions Treated as Lacking
    Reasonable Basis.--For purposes of this section, any excessive amount
    which is attributable to any transaction described in section
    6662(b)(6) shall not be treated as having a reasonable basis.''.
      (d) Special Understatement Reduction Rule for Certain Large or
    Publicly Traded Persons.--
              (1) In general.--Paragraph (2) of section 6662(d) of such
            Code is amended by adding at the end the following new
            subparagraph:
                      ``(D) Special reduction rule for certain large or
                    publicly traded persons.--
                              ``(i) In general.--In the case of any
                            specified person--
                                      ``(I) subparagraph (B) shall not
                                    apply, and
                                      ``(II) the amount of the
                                    understatement under subparagraph (A)
                                    shall be reduced by that portion of the
                                    understatement which is attributable to
                                    any item with respect to which the
                                    taxpayer has a reasonable belief that
                                    the tax treatment of such item by the
                                    taxpayer is more likely than not the
                                    proper tax treatment of such item.
                              ``(ii) Specified person.--For purposes of
                            this subparagraph, the term `specified person'
                            means--
                                      ``(I) any person required to file
                                    periodic or other reports under section
                                    13 of the Securities Exchange Act of
                                    1934, and
                                      ``(II) any corporation with gross
                                    receipts in excess of $100,000,000 for
                                    the taxable year involved.
                            All persons treated as a single employer under
                            section 52(a) shall be treated as one person
                            for purposes of subclause (II).''.
              (2) Conforming amendment.--Subparagraph (C) of section
            6662(d)(2) of such Code is amended by striking ``Subparagraph
            (B)'' and inserting ``Subparagraphs (B) and (D)(i)(II)''.
      (e) Effective Date.--The amendments made by this section shall apply
    to transactions entered into after the date of the enactment of this
    Act.

                       PART 3--PARITY IN HEALTH BENEFITS

    SEC. 461. CERTAIN HEALTH RELATED BENEFITS APPLICABLE TO SPOUSES AND
                        DEPENDENTS EXTENDED TO ELIGIBLE BENEFICIARIES.

      (a) Application of Accident and Health Plans to Eligible
    Beneficiaries.--
              (1) Exclusion of contributions.--Section 106 of the Internal
            Revenue Code of 1986, as amended by section 442, (relating to
            contributions by employer to accident and health plans) is
            amended by adding at the end the following new subsection:
      ``(g) Coverage Provided for Eligible Beneficiaries of Employees.--
              ``(1) In general.--Subsection (a) shall apply with respect to
            any eligible beneficiary of the employee.
              ``(2) Eligible beneficiary.--For purposes of this subsection,
            the term `eligible beneficiary' means any individual who is
            eligible to receive benefits or coverage under an accident or
            health plan.''.
              (2) Exclusion of amounts expended for medical care.--The
            first sentence of section 105(b) of such Code (relating to
            amounts expended for medical care) is amended--
                      (A) by striking ``and his dependents'' and inserting
                    ``his dependents'', and
                      (B) by inserting before the period the following:
                    ``and any eligible beneficiary (within the meaning of
                    section 106(f)) with respect to the taxpayer''.
              (3) Payroll taxes.--
                      (A) Section 3121(a)(2) of such Code is amended--
                              (i) by striking ``or any of his dependents''
                            in the matter preceding subparagraph (A) and
                            inserting ``, any of his dependents, or any
                            eligible beneficiary (within the meaning of
                            section 106(g)) with respect to the employee'',
                              (ii) by striking ``or any of his
                            dependents,'' in subparagraph (A) and inserting
                            ``, any of his dependents, or any eligible
                            beneficiary (within the meaning of section
                            106(g)) with respect to the employee,'', and
                              (iii) by striking ``and their dependents''
                            both places it appears and inserting ``and such
                            employees' dependents and eligible
                            beneficiaries (within the meaning of section
                            106(g))''.
                      (B) Section 3231(e)(1) of such Code is amended--
                              (i) by striking ``or any of his dependents''
                            and inserting ``, any of his dependents, or any
                            eligible beneficiary (within the meaning of
                            section 106(g)) with respect to the
                            employee,'', and
                              (ii) by striking ``and their dependents''
                            both places it appears and inserting ``and such
                            employees' dependents and eligible
                            beneficiaries (within the meaning of section
                            106(g))''.
                      (C) Section 3306(b)(2) of such Code is amended--
                              (i) by striking ``or any of his dependents''
                            in the matter preceding subparagraph (A) and
                            inserting ``, any of his dependents, or any
                            eligible beneficiary (within the meaning of
                            section 106(g)) with respect to the
                            employee,'',
                              (ii) by striking ``or any of his dependents''
                            in subparagraph (A) and inserting ``, any of
                            his dependents, or any eligible beneficiary
                            (within the meaning of section 106(g)) with
                            respect to the employee'', and
                              (iii) by striking ``and their dependents''
                            both places it appears and inserting ``and such
                            employees' dependents and eligible
                            beneficiaries (within the meaning of section
                            106(g))''.
                      (D) Section 3401(a) of such Code is amended by
                    striking ``or'' at the end of paragraph (22), by
                    striking the period at the end of paragraph (23) and
                    inserting ``; or'', and by inserting after paragraph
                    (23) the following new paragraph:
              ``(24) for any payment made to or for the benefit of an
            employee or any eligible beneficiary (within the meaning of
            section 106(g)) if at the time of such payment it is reasonable
            to believe that the employee will be able to exclude such
            payment from income under section 106 or under section 105 by
            reference in section 105(b) to section 106(g).''.
      (b) Expansion of Dependency for Purposes of Deduction for Health
    Insurance Costs of Self-employed Individuals.--
              (1) In general.--Paragraph (1) of section 162(l) of the
            Internal Revenue Code of 1986 (relating to special rules for
            health insurance costs of self-employed individuals) is amended
            to read as follows:
              ``(1) Allowance of deduction.--In the case of a taxpayer who
            is an employee within the meaning of section 401(c)(1), there
            shall be allowed as a deduction under this section an amount
            equal to the amount paid during the taxable year for insurance
            which constitutes medical care for--
                      ``(A) the taxpayer,
                      ``(B) the taxpayer's spouse,
                      ``(C) the taxpayer's dependents, and
                      ``(D) any individual who--
                              ``(i) satisfies the age requirements of
                            section 152(c)(3)(A),
                              ``(ii) bears a relationship to the taxpayer
                            described in section 152(d)(2)(H), and
                              ``(iii) meets the requirements of section
                            152(d)(1)(C), and
                      ``(E) one individual who--
                              ``(i) does not satisfy the age requirements
                            of section 152(c)(3)(A),
                              ``(ii) bears a relationship to the taxpayer
                            described in section 152(d)(2)(H),
                              ``(iii) meets the requirements of section
                            152(d)(1)(D), and
                              ``(iv) is not the spouse of the taxpayer and
                            does not bear any relationship to the taxpayer
                            described in subparagraphs (A) through (G) of
                            section 152(d)(2).''.
              (2) Conforming amendment.--Subparagraph (B) of section
            162(l)(2) of such Code is amended by inserting ``, any
            dependent, or individual described in subparagraph (D) or (E)
            of paragraph (1) with respect to'' after ``spouse''.
      (c) Extension to Eligible Beneficiaries of Sick and Accident Benefits
    Provided to Members of a Voluntary Employees' Beneficiary Association
    and Their Dependents.--Section 501(c)(9) of the Internal Revenue Code
    of 1986 (relating to list of exempt organizations) is amended by adding
    at the end the following new sentence: ``For purposes of providing for
    the payment of sick and accident benefits to members of such an
    association and their dependents, the term `dependents' shall include
    any individual who is an eligible beneficiary (within the meaning of
    section 106(f)), as determined under the terms of a medical benefit,
    health insurance, or other program under which members and their
    dependents are entitled to sick and accident benefits.''.
      (d) Flexible Spending Arrangements and Health Reimbursement
    Arrangements.--The Secretary of Treasury shall issue guidance of
    general applicability providing that medical expenses that otherwise
    qualify--
              (1) for reimbursement from a flexible spending arrangement
            under regulations in effect on the date of the enactment of
            this Act may be reimbursed from an employee's flexible spending
            arrangement, notwithstanding the fact that such expenses are
            attributable to any individual who is not the employee's spouse
            or dependent (within the meaning of section 105(b) of the
            Internal Revenue Code of 1986) but is an eligible beneficiary
            (within the meaning of section 106(f) of such Code) under the
            flexible spending arrangement with respect to the employee, and
              (2) for reimbursement from a health reimbursement arrangement
            under regulations in effect on the date of the enactment of
            this Act may be reimbursed from an employee's health
            reimbursement arrangement, notwithstanding the fact that such
            expenses are attributable to an individual who is not a spouse
            or dependent (within the meaning of section 105(b) of such
            Code) but is an eligible beneficiary (within the meaning of
            section 106(f) of such Code) under the health reimbursement
            arrangement with respect to the employee.
      (e) Effective Date.--The amendments made by this section shall apply
    to taxable years beginning after December 31, 2009.

                 DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

    SEC. 1001. TABLE OF CONTENTS OF DIVISION.

      The table of contents for this division is as follows:

                 DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

    Sec. 1001. Table of contents of division.

                      TITLE I--IMPROVING HEALTH CARE VALUE

               Subtitle A--Provisions Related to Medicare Part A

                         Part 1--Market Basket Updates

    Sec. 1101. Skilled nursing facility payment update.
    Sec. 1102. Inpatient rehabilitation facility payment update.
    Sec. 1103. Incorporating productivity improvements into market basket
    updates that do not already incorporate such improvements.

                    Part 2--Other Medicare Part A Provisions

    Sec. 1111. Payments to skilled nursing facilities.
    Sec. 1112. Medicare DSH report and payment adjustments in response to
    coverage expansion.
    Sec. 1113. Extension of hospice regulation moratorium.

                    Subtitle B--Provisions Related to Part B

                          Part 1--Physicians' Services

    Sec. 1121. Sustainable growth rate reform.
    Sec. 1122. Misvalued codes under the physician fee schedule.
    Sec. 1123. Payments for efficient areas.
    Sec. 1124. Modifications to the Physician Quality Reporting Initiative
    (PQRI).
    Sec. 1125. Adjustment to Medicare payment localities.

                         Part 2--Market Basket Updates

    Sec. 1131. Incorporating productivity improvements into market basket
    updates that do not already incorporate such improvements.

                            Part 3--Other Provisions

    Sec. 1141. Rental and purchase of power-driven wheelchairs.
    Sec. 1142. Extension of payment rule for brachytherapy.
    Sec. 1143. Home infusion therapy report to congress.
    Sec. 1144. Require ambulatory surgical centers (ASCs) to submit cost
    data and other data.
    Sec. 1145. Treatment of certain cancer hospitals.
    Sec. 1146. Medicare Improvement Fund.
    Sec. 1147. Payment for imaging services.
    Sec. 1148. Durable medical equipment program improvements.
    Sec. 1149. MedPAC study and report on bone mass measurement.

            Subtitle C--Provisions Related to Medicare Parts A and B

    Sec. 1151. Reducing potentially preventable hospital readmissions.
    Sec. 1152. Post acute care services payment reform plan and bundling
    pilot program.
    Sec. 1153. Home health payment update for 2010.
    Sec. 1154. Payment adjustments for home health care.
    Sec. 1155. Incorporating productivity improvements into market basket
    update for home health services.
    Sec. 1156. Limitation on Medicare exceptions to the prohibition on
    certain physician referrals made to hospitals.
    Sec. 1157. Institute of Medicine study of geographic adjustment factors
    under Medicare.
    Sec. 1158. Revision of medicare payment systems to address geographic
    inequities.
    Sec. 1159. Institute of Medicine study of geographic variation in
    health care spending and promoting high-value health care.

                     Subtitle D--Medicare Advantage Reforms

                       Part 1--Payment and Administration

    Sec. 1161. Phase-in of payment based on fee-for-service costs.
    Sec. 1162. Quality bonus payments.
    Sec. 1163. Extension of Secretarial coding intensity adjustment
    authority.
    Sec. 1164. Simplification of annual beneficiary election periods.
    Sec. 1165. Extension of reasonable cost contracts.
    Sec. 1166. Limitation of waiver authority for employer group plans.
    Sec. 1167. Improving risk adjustment for payments.
    Sec. 1168. Elimination of MA Regional Plan Stabilization Fund.

                 Part 2--Beneficiary Protections and Anti-Fraud

    Sec. 1171. Limitation on cost-sharing for individual health services.
    Sec. 1172. Continuous open enrollment for enrollees in plans with
    enrollment suspension.
    Sec. 1173. Information for beneficiaries on MA plan administrative
    costs.
    Sec. 1174. Strengthening audit authority.
    Sec. 1175. Authority to deny plan bids.

                    Part 3--Treatment of Special Needs Plans

    Sec. 1176. Limitation on enrollment outside open enrollment period of
    individuals into chronic care specialized MA plans for special needs
    individuals.
    Sec. 1177. Extension of authority of special needs plans to restrict
    enrollment.

                  Subtitle E--Improvements to Medicare Part D

    Sec. 1181. Elimination of coverage gap.
    Sec. 1182. Discounts for certain part D drugs in original coverage gap.
    Sec. 1183. Repeal of provision relating to submission of claims by
    pharmacies located in or contracting with long-term care facilities.
    Sec. 1184. Including costs incurred by AIDS drug assistance programs
    and Indian Health Service in providing prescription drugs toward the
    annual out-of-pocket threshold under part D.
    Sec. 1185. Permitting mid-year changes in enrollment for formulary
    changes that adversely impact an enrollee.

                 Subtitle F--Medicare Rural Access Protections

    Sec. 1191. Telehealth expansion and enhancements.
    Sec. 1192. Extension of outpatient hold harmless provision.
    Sec. 1193. Extension of section 508 hospital reclassifications.
    Sec. 1194. Extension of geographic floor for work.
    Sec. 1195. Extension of payment for technical component of certain
    physician pathology services.
    Sec. 1196. Extension of ambulance add-ons.

                  TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS

      Subtitle A--Improving and Simplifying Financial Assistance for Low
                         Income Medicare Beneficiaries

    Sec. 1201. Improving assets tests for Medicare Savings Program and low-
    income subsidy program.
    Sec. 1202. Elimination of part D cost-sharing for certain non-
    institutionalized full-benefit dual eligible individuals.
    Sec. 1203. Eliminating barriers to enrollment.
    Sec. 1204. Enhanced oversight relating to reimbursements for
    retroactive low income subsidy enrollment.
    Sec. 1205. Intelligent assignment in enrollment.
    Sec. 1206. Special enrollment period and automatic enrollment process
    for certain subsidy eligible individuals.
    Sec. 1207. Application of MA premiums prior to rebate in calculation of
    low income subsidy benchmark.

                    Subtitle B--Reducing Health Disparities

    Sec. 1221. Ensuring effective communication in Medicare.
    Sec. 1222. Demonstration to promote access for Medicare beneficiaries
    with limited English proficiency by providing reimbursement for
    culturally and linguistically appropriate services.
    Sec. 1223. IOM report on impact of language access services.
    Sec. 1224. Definitions.

                     Subtitle C--Miscellaneous Improvements

    Sec. 1231. Extension of therapy caps exceptions process.
    Sec. 1232. Extended months of coverage of immunosuppressive drugs for
    kidney transplant patients and other renal dialysis provisions.
    Sec. 1233. Advance care planning consultation.
    Sec. 1234. Part B special enrollment period and waiver of limited
    enrollment penalty for TRICARE beneficiaries.
    Sec. 1235. Exception for use of more recent tax year in case of gains
    from sale of primary residence in computing part B income-related
    premium.
    Sec. 1236. Demonstration program on use of patient decisions aids.

        TITLE III--PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES, AND
                                COORDINATED CARE

    Sec. 1301. Accountable Care Organization pilot program.
    Sec. 1302. Medical home pilot program.
    Sec. 1303. Payment incentive for selected primary care services.
    Sec. 1304. Increased reimbursement rate for certified nurse-midwives.
    Sec. 1305. Coverage and waiver of cost-sharing for preventive services.
    Sec. 1306. Waiver of deductible for colorectal cancer screening tests
    regardless of coding, subsequent diagnosis, or ancillary tissue
    removal.
    Sec. 1307. Excluding clinical social worker services from coverage
    under the medicare skilled nursing facility prospective payment system
    and consolidated payment.
    Sec. 1308. Coverage of marriage and family therapist services and
    mental health counselor services.
    Sec. 1309. Extension of physician fee schedule mental health add-on.
    Sec. 1310. Expanding access to vaccines.
    Sec. 1311. Expansion of Medicare-Covered Preventive Services at
    Federally Qualified Health Centers.

                               TITLE IV--QUALITY

                 Subtitle A--Comparative Effectiveness Research

    Sec. 1401. Comparative effectiveness research.

                     Subtitle B--Nursing Home Transparency

       Part 1--Improving Transparency of Information on Skilled Nursing
                       Facilities and Nursing Facilities

    Sec. 1411. Required disclosure of ownership and additional disclosable
    parties information.
    Sec. 1412. Accountability requirements.
    Sec. 1413. Nursing home compare Medicare website.
    Sec. 1414. Reporting of expenditures.
    Sec. 1415. Standardized complaint form.
    Sec. 1416. Ensuring staffing accountability.

                         Part 2--Targeting Enforcement

    Sec. 1421. Civil money penalties.
    Sec. 1422. National independent monitor pilot program.
    Sec. 1423. Notification of facility closure.

                        Part 3--Improving Staff Training

    Sec. 1431. Dementia and abuse prevention training.
    Sec. 1432. Study and report on training required for certified nurse
    aides and supervisory staff.

                        Subtitle C--Quality Measurements

    Sec. 1441. Establishment of national priorities for quality
    improvement.
    Sec. 1442. Development of new quality measures; GAO evaluation of data
    collection process for quality measurement.
    Sec. 1443. Multi-stakeholder pre-rulemaking input into selection of
    quality measures.
    Sec. 1444. Application of quality measures.
    Sec. 1445. Consensus-based entity funding.

               Subtitle D--Physician Payments Sunshine Provision

    Sec. 1451. Reports on financial relationships between manufacturers and
    distributors of covered drugs, devices, biologicals, or medical
    supplies under Medicare, Medicaid, or CHIP and physicians and other
    health care entities and between physicians and other health care
    entities.

       Subtitle E--Public Reporting on Health Care-Associated Infections

    Sec. 1461. Requirement for public reporting by hospitals and ambulatory
    surgical centers on health care-associated infections.

                  TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION

    Sec. 1501. Distribution of unused residency positions.
    Sec. 1502. Increasing training in nonprovider settings.
    Sec. 1503. Rules for counting resident time for didactic and scholarly
    activities and other activities.
    Sec. 1504. Preservation of resident cap positions from closed
    hospitals.
    Sec. 1505. Improving accountability for approved medical residency
    training.

                          TITLE VI--PROGRAM INTEGRITY

         Subtitle A--Increased Funding to Fight Waste, Fraud, and Abuse

    Sec. 1601. Increased funding and flexibility to fight fraud and abuse.

               Subtitle B--Enhanced Penalties for Fraud and Abuse

    Sec. 1611. Enhanced penalties for false statements on provider or
    supplier enrollment applications.
    Sec. 1612. Enhanced penalties for submission of false statements
    material to a false claim.
    Sec. 1613. Enhanced penalties for delaying inspections.
    Sec. 1614. Enhanced hospice program safeguards.
    Sec. 1615. Enhanced penalties for individuals excluded from program
    participation.
    Sec. 1616. Enhanced penalties for provision of false information by
    Medicare Advantage and part D plans.
    Sec. 1617. Enhanced penalties for Medicare Advantage and part D
    marketing violations.
    Sec. 1618. Enhanced penalties for obstruction of program audits.
    Sec. 1619. Exclusion of certain individuals and entities from
    participation in Medicare and State health care programs.

             Subtitle C--Enhanced Program and Provider Protections

    Sec. 1631. Enhanced CMS program protection authority.
    Sec. 1632. Enhanced Medicare, Medicaid, and CHIP program disclosure
    requirements relating to previous affiliations.
    Sec. 1633. Required inclusion of payment modifier for certain
    evaluation and management services.
    Sec. 1634. Evaluations and reports required under Medicare Integrity
    Program.
    Sec. 1635. Require providers and suppliers to adopt programs to reduce
    waste, fraud, and abuse.
    Sec. 1636. Maximum period for submission of Medicare claims reduced to
    not more than 12 months.
    Sec. 1637. Physicians who order durable medical equipment or home
    health services required to be Medicare enrolled physicians or eligible
    professionals.
    Sec. 1638. Requirement for physicians to provide documentation on
    referrals to programs at high risk of waste and abuse.
    Sec. 1639. Face to face encounter with patient required before
    physicians may certify eligibility for home health services or durable
    medical equipment under Medicare.
    Sec. 1640. Extension of testimonial subpoena authority to program
    exclusion investigations.
    Sec. 1641. Required repayments of Medicare and Medicaid overpayments.
    Sec. 1642. Expanded application of hardship waivers for OIG exclusions
    to beneficiaries of any Federal health care program.
    Sec. 1643. Access to certain information on renal dialysis facilities.
    Sec. 1644. Billing agents, clearinghouses, or other alternate payees
    required to register under Medicare.
    Sec. 1645. Conforming civil monetary penalties to False Claims Act
    amendments.

     Subtitle D--Access to Information Needed to Prevent Fraud, Waste, and
                                     Abuse

    Sec. 1651. Access to Information Necessary to Identify Fraud, Waste,
    and Abuse.
    Sec. 1652. Elimination of duplication between the Healthcare Integrity
    and Protection Data Bank and the National Practitioner Data Bank.
    Sec. 1653. Compliance with HIPAA privacy and security standards.

      [FOR ITEMS RELATING TO TITLE VII OF DIVISION B, SEE COPY OF BILL AS
                          INTRODUCED ON JULY 14, 2009]

                     TITLE VIII--REVENUE-RELATED PROVISIONS

    Sec. 1801. Disclosures to facilitate identification of individuals
    likely to be ineligible for the low-income assistance under the
    Medicare prescription drug program to assist Social Security
    Administration's outreach to eligible individuals.
    Sec. 1802. Comparative Effectiveness Research Trust Fund; financing for
    Trust Fund.

                       TITLE IX--MISCELLANEOUS PROVISIONS

    Sec. 1901. Repeal of trigger provision.
    Sec. 1902. Repeal of comparative cost adjustment (CCA) program.
    Sec. 1903. Extension of gainsharing demonstration.
    Sec. 1904. Grants to States for quality home visitation programs for
    families with young children and families expecting children.
    Sec. 1905. Improved coordination and protection for dual eligibles.
    Sec. 1906. Assessment of Medicare cost-intensive diseases and
    conditions.

                      TITLE I--IMPROVING HEALTH CARE VALUE

               Subtitle A--Provisions Related to Medicare Part A

                         PART 1--MARKET BASKET UPDATES

    SEC. 1101. SKILLED NURSING FACILITY PAYMENT UPDATE.

      (a) In General.--Section 1888(e)(4)(E)(ii) of the Social Security Act
    (42 U.S.C. 1395yy(e)(4)(E)(ii)) is amended--
              (1) in subclause (III), by striking ``and'' at the end;
              (2) by redesignating subclause (IV) as subclause (VI); and
              (3) by inserting after subclause (III) the following new
            subclauses:
                                      ``(IV) for each of fiscal years 2004
                                    through 2009, the rate computed for the
                                    previous fiscal year increased by the
                                    skilled nursing facility market basket
                                    percentage change for the fiscal year
                                    involved;
                                      ``(V) for fiscal year 2010, the rate
                                    computed for the previous fiscal year;
                                    and''.
      (b) Delayed Effective Date.--Section 1888(e)(4)(E)(ii)(V) of the
    Social Security Act, as inserted by subsection (a)(3), shall not apply
    to payment for days before January 1, 2010.

    SEC. 1102. INPATIENT REHABILITATION FACILITY PAYMENT UPDATE.

      (a) In General.--Section 1886(j)(3)(C) of the Social Security Act (42
    U.S.C. 1395ww(j)(3)(C)) is amended by striking ``and 2009'' and
    inserting ``through 2010''.
      (b) Delayed Effective Date.--The amendment made by subsection (a)
    shall not apply to payment units occurring before January 1, 2010.

    SEC. 1103. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET
                        UPDATES THAT DO NOT ALREADY INCORPORATE SUCH
                        IMPROVEMENTS.

      (a) Inpatient Acute Hospitals.--Section 1886(b)(3)(B) of the Social
    Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended--
              (1) in clause (iii)--
                      (A) by striking ``(iii) For purposes of this
                    subparagraph,'' and inserting ``(iii)(I) For purposes
                    of this subparagraph, subject to the productivity
                    adjustment described in subclause (II),''; and
                      (B) by adding at the end the following new subclause:
      ``(II) The productivity adjustment described in this subclause, with
    respect to an increase or change for a fiscal year or year or cost
    reporting period, or other annual period, is a productivity offset
    equal to the percentage change in the 10-year moving average of annual
    economy-wide private nonfarm business multi-factor productivity (as
    recently published before the promulgation of such increase for the
    year or period involved). Except as otherwise provided, any reference
    to the increase described in this clause shall be a reference to the
    percentage increase described in subclause (I) minus the percentage
    change under this subclause.'';
              (2) in the first sentence of clause (viii)(I), by inserting
            ``(but not below zero)'' after ``shall be reduced''; and
              (3) in the first sentence of clause (ix)(I)--
                      (A) by inserting ``(determined without regard to
                    clause (iii)(II)'' after ``clause (i)'' the second time
                    it appears; and
                      (B) by inserting ``(but not below zero)'' after
                    ``reduced''.
      (b) Skilled Nursing Facilities.--Section 1888(e)(5)(B) of such Act
    (42 U.S.C. 1395yy(e)(5))(B) is amended by inserting ``subject to the
    productivity adjustment described in section 1886(b)(3)(B)(iii)(II)''
    after ``as calculated by the Secretary''.
      (c) Long Term Care Hospitals.--Section 1886(m) of the Social Security
    Act (42 U.S.C. 1395ww(m)) is amended by adding at the end the following
    new paragraph:
              ``(3) Productivity adjustment.--In implementing the system
            described in paragraph (1) for discharges occurring during the
            rate year ending in 2010 or any subsequent rate year for a
            hospital, to the extent that an annual percentage increase
            factor applies to a base rate for such discharges for the
            hospital, such factor shall be subject to the productivity
            adjustment described in subsection (b)(3)(B)(iii)(II).''.
      (d) Inpatient Rehabilitation Facilities.--The second sentence of
    section 1886(j)(3)(C) of the Social Security Act (42 U.S.C.
    1395ww(j)(3)(C)) is amended by inserting ``(subject to the productivity
    adjustment described in subsection (b)(3)(B)(iii)(II))'' after
    ``appropriate percentage increase''.
      (e) Psychiatric Hospitals.--Section 1886 of the Social Security Act
    (42 U.S.C. 1395ww) is amended by adding at the end the following new
    subsection:
      ``(o) Prospective Payment for Psychiatric Hospitals.--
              ``(1) Reference to establishment and implementation of
            system.--For provisions related to the establishment and
            implementation of a prospective payment system for payments
            under this title for inpatient hospital services furnished by
            psychiatric hospitals (as described in clause (i) of subsection
            (d)(1)(B) and psychiatric units (as described in the matter
            following clause (v) of such subsection), see section 124 of
            the Medicare, Medicaid, and SCHIP Balanced Budget Refinement
            Act of 1999.
              ``(2) Productivity adjustment.--In implementing the system
            described in paragraph (1) for discharges occurring during the
            rate year ending in 2011 or any subsequent rate year for a
            psychiatric hospital or unit described in such paragraph, to
            the extent that an annual percentage increase factor applies to
            a base rate for such discharges for the hospital or unit,
            respectively, such factor shall be subject to the productivity
            adjustment described in subsection (b)(3)(B)(iii)(II).''.
      (f) Hospice Care.--Subclause (VII) of section 1814(i)(1)(C)(ii) of
    the Social Security Act (42 U.S.C. 1395f(i)(1)(C)(ii)) is amended by
    inserting after ``the market basket percentage increase'' the
    following: ``(which is subject to the productivity adjustment described
    in section 1886(b)(3)(B)(iii)(II))''.
      (g) Effective Date.--The amendments made by subsections (a), (b),
    (d), and (f) shall apply to annual increases effected for fiscal years
    beginning with fiscal year 2010.

                    PART 2--OTHER MEDICARE PART A PROVISIONS

    SEC. 1111. PAYMENTS TO SKILLED NURSING FACILITIES.

      (a) Change in Recalibration Factor.--
              (1) Analysis.--The Secretary of Health and Human Services
            shall conduct, using calendar year 2006 claims data, an initial
            analysis comparing total payments under title XVIII of the
            Social Security Act for skilled nursing facility services under
            the RUG-53 and under the RUG-44 classification systems.
              (2) Adjustment in recalibration factor.--Based on the initial
            analysis under paragraph (1), the Secretary shall adjust the
            case mix indexes under section 1888(e)(4)(G)(i) of the Social
            Security Act (42 U.S.C. 1395yy(e)(4)(G)(i)) for fiscal year
            2010 by the appropriate recalibration factor as proposed in the
            proposed rule for Medicare skilled nursing facilities issued by
            such Secretary on May 12, 2009 (74 Federal Register 22214 et
            seq.).
      (b) Change in Payment for Nontherapy Ancillary (NTA) Services and
    Therapy Services.--
              (1) Changes under current snf classification system.--
                      (A) In general.--Subject to subparagraph (B), the
                    Secretary of Health and Human Services shall, under the
                    system for payment of skilled nursing facility services
                    under section 1888(e) of the Social Security Act (42
                    U.S.C. 1395yy(e)), increase payment by 10 percent for
                    non-therapy ancillary services (as specified by the
                    Secretary in the notice issued on November 27, 1998 (63
                    Federal Register 65561 et seq.)) and shall decrease
                    payment for the therapy case mix component of such
                    rates by 5.5 percent.
                      (B) Effective date.--The changes in payment described
                    in subparagraph (A) shall apply for days on or after
                    January 1, 2010, and until the Secretary implements an
                    alternative case mix classification system for payment
                    of skilled nursing facility services under section
                    1888(e) of the Social Security Act (42 U.S.C.
                    1395yy(e)).
                      (C) Implementation.--Notwithstanding any other
                    provision of law, the Secretary may implement by
                    program instruction or otherwise the provisions of this
                    paragraph.
              (2) Changes under a future snf case mix classification
            system.--
                      (A) Analysis.--
                              (i) In general.--The Secretary of Health and
                            Human Services shall analyze payments for non-
                            therapy ancillary services under a future
                            skilled nursing facility classification system
                            to ensure the accuracy of payment for non-
                            therapy ancillary services. Such analysis shall
                            consider use of appropriate predictors which
                            may include age, physical and mental status,
                            ability to perform activities of daily living,
                            prior nursing home stay, diagnoses, broad RUG
                            category, and a proxy for length of stay.
                              (ii) Application.--Such analysis shall be
                            conducted in a manner such that the future
                            skilled nursing facility classification system
                            is implemented to apply to services furnished
                            during a fiscal year beginning with fiscal year
                            2011.
                      (B) Consultation.--In conducting the analysis under
                    subparagraph (A), the Secretary shall consult with
                    interested parties, including the Medicare Payment
                    Advisory Commission and other interested stakeholders,
                    to identify appropriate predictors of nontherapy
                    ancillary costs.
                      (C) Rulemaking.--The Secretary shall include the
                    result of the analysis under subparagraph (A) in the
                    fiscal year 2011 rulemaking cycle for purposes of
                    implementation beginning for such fiscal year.
                      (D) Implementation.--Subject to subparagraph (E) and
                    consistent with subparagraph (A)(ii), the Secretary
                    shall implement changes to payments for non-therapy
                    ancillary services (which shall include a separate rate
                    component for non-therapy ancillary services and may
                    include use of a model that predicts payment amounts
                    applicable for non-therapy ancillary services) under
                    such future skilled nursing facility services
                    classification system as the Secretary determines
                    appropriate based on the analysis conducted pursuant to
                    subparagraph (A).
                      (E) Budget neutrality.--The Secretary shall implement
                    changes described in subparagraph (D) in a manner such
                    that the estimated expenditures under such future
                    skilled nursing facility services classification system
                    for a fiscal year beginning with fiscal year 2011 with
                    such changes would be equal to the estimated
                    expenditures that would otherwise occur under title
                    XVIII of the Social Security Act under such future
                    skilled nursing facility services classification system
                    for such year without such changes.
      (c) Outlier Policy for NTA and Therapy.--Section 1888(e) of the
    Social Security Act (42 U.S.C. 1395yy(e)) is amended by adding at the
    end the following new paragraph:
              ``(13) Outliers for nta and therapy.--
                      ``(A) In general.--With respect to outliers because
                    of unusual variations in the type or amount of
                    medically necessary care, beginning with October 1,
                    2010, the Secretary--
                              ``(i) shall provide for an addition or
                            adjustment to the payment amount otherwise made
                            under this section with respect to non-therapy
                            ancillary services in the case of such
                            outliers; and
                              ``(ii) may provide for such an addition or
                            adjustment to the payment amount otherwise made
                            under this section with respect to therapy
                            services in the case of such outliers.
                      ``(B) Outliers based on aggregate costs.--Outlier
                    adjustments or additional payments described in
                    subparagraph (A) shall be based on aggregate costs
                    during a stay in a skilled nursing facility and not on
                    the number of days in such stay.
                      ``(C) Budget neutrality.--The Secretary shall reduce
                    estimated payments that would otherwise be made under
                    the prospective payment system under this subsection
                    with respect to a fiscal year by 2 percent. The total
                    amount of the additional payments or payment
                    adjustments for outliers made under this paragraph with
                    respect to a fiscal year may not exceed 2 percent of
                    the total payments projected or estimated to be made
                    based on the prospective payment system under this
                    subsection for the fiscal year.''.
      (d) Conforming Amendments.--Section 1888(e)(8) of such Act (42 U.S.C.
    1395yy(e)(8)) is amended--
              (1) in subparagraph (A)--
                      (A) by striking ``and'' before ``adjustments''; and
                      (B) by inserting ``, and adjustment under section
                    1111(b) of the America's Affordable Health Choices Act
                    of 2009'' before the semicolon at the end;
              (2) in subparagraph (B), by striking ``and'';
              (3) in subparagraph (C), by striking the period and inserting
            ``; and''; and
              (4) by adding at the end the following new subparagraph:
                      ``(D) the establishment of outliers under paragraph
                    (13).''.

    SEC. 1112. MEDICARE DSH REPORT AND PAYMENT ADJUSTMENTS IN RESPONSE TO
                        COVERAGE EXPANSION.

      (a) DSH Report.--
              (1) In general.--Not later than January 1, 2016, the
            Secretary of Health and Human Services shall submit to Congress
            a report on Medicare DSH taking into account the impact of the
            health care reforms carried out under division A in reducing
            the number of uninsured individuals. The report shall include
            recommendations relating to the following:
                      (A) The appropriate amount, targeting, and
                    distribution of Medicare DSH to compensate for higher
                    Medicare costs associated with serving low-income
                    beneficiaries (taking into account variations in the
                    empirical justification for Medicare DSH attributable
                    to hospital characteristics, including bed size),
                    consistent with the original intent of Medicare DSH.
                      (B) The appropriate amount, targeting, and
                    distribution of Medicare DSH to hospitals given their
                    continued uncompensated care costs, to the extent such
                    costs remain.
              (2) Coordination with medicaid dsh report.--The Secretary
            shall coordinate the report under this subsection with the
            report on Medicaid DSH under section 1704(a).
      (b) Payment Adjustments in Response to Coverage Expansion.--
              (1) In general.--If there is a significant decrease in the
            national rate of uninsurance as a result of this Act (as
            determined under paragraph (2)(A)), then the Secretary of
            Health and Human Services shall, beginning in fiscal year 2017,
            implement the following adjustments to Medicare DSH:
                      (A) In lieu of the amount of Medicare DSH payment
                    that would otherwise be made under section
                    1886(d)(5)(F) of the Social Security Act, the amount of
                    Medicare DSH payment shall be an amount based on the
                    recommendations of the report under subsection
                    (a)(1)(A) and shall take into account variations in the
                    empirical justification for Medicare DSH attributable
                    to hospital characteristics, including bed size.
                      (B) Subject to paragraph (3), make an additional
                    payment to a hospital by an amount that is estimated
                    based on the amount of uncompensated care provided by
                    the hospital based on criteria for uncompensated care
                    as determined by the Secretary, which shall exclude bad
                    debt.
              (2) Significant decrease in national rate of uninsurance as a
            result of this act.--For purposes of this subsection--
                      (A) In general.--There is a ``significant decrease in
                    the national rate of uninsurance as a result of this
                    Act'' if there is a decrease in the national rate of
                    uninsurance (as defined in subparagraph (B)) from 2012
                    to 2014 that exceeds 8 percentage points.
                      (B) National rate of uninsurance defined.--The term
                    ``national rate of uninsurance'' means, for a year,
                    such rate for the under-65 population for the year as
                    determined and published by the Bureau of the Census in
                    its Current Population Survey in or about September of
                    the succeeding year.
              (3) Uncompensated care increase.--
                      (A) Computation of dsh savings.--For each fiscal year
                    (beginning with fiscal year 2017), the Secretary shall
                    estimate the aggregate reduction in the amount of
                    Medicare DSH payment that would be expected to result
                    from the adjustment under paragraph (1)(A).
                      (B) Structure of payment increase.--The Secretary
                    shall compute the additional payment to a hospital as
                    described in paragraph (1)(B) for a fiscal year in
                    accordance with a formula established by the Secretary
                    that provides that--
                              (i) the estimated aggregate amount of such
                            increase for the fiscal year does not exceed 50
                            percent of the aggregate reduction in Medicare
                            DSH estimated by the Secretary for such fiscal
                            year; and
                              (ii) hospitals with higher levels of
                            uncompensated care receive a greater increase.
      (c) Medicare DSH.--In this section, the term ``Medicare DSH'' means
    adjustments in payments under section 1886(d)(5)(F) of the Social
    Security Act (42 U.S.C. 1395ww(d)(5)(F)) for inpatient hospital
    services furnished by disproportionate share hospitals.

    SEC. 1113. EXTENSION OF HOSPICE REGULATION MORATORIUM.

      Section 4301(a) of division B of the American Recovery and
    Reinvestment Act of 2009 (Public Law 111-5) is amended--
              (1) by striking ``October 1, 2009'' and inserting ``October
            1, 2010''; and
              (2) by striking ``for fiscal year 2009'' and inserting ``for
            fiscal years 2009 and 2010''.

                    Subtitle B--Provisions Related to Part B

                          PART 1--PHYSICIANS' SERVICES

    SEC. 1121. SUSTAINABLE GROWTH RATE REFORM.

      (a) Transitional Update for 2010.--Section 1848(d) of the Social
    Security Act (42 U.S.C. 1395w-4(d)) is amended by adding at the end the
    following new paragraph:
              ``(10) Update for 2010.--The update to the single conversion
            factor established in paragraph (1)(C) for 2010 shall be the
            percentage increase in the MEI (as defined in section
            1842(i)(3)) for that year.''.
      (b) Rebasing SGR Using 2009; Limitation on Cumulative Adjustment
    Period.--Section 1848(d)(4) of such Act (42 U.S.C. 1395w-4(d)(4)) is
    amended--
              (1) in subparagraph (B), by striking ``subparagraph (D)'' and
            inserting ``subparagraphs (D) and (G)''; and
              (2) by adding at the end the following new subparagraph:
                      ``(G) Rebasing using 2009 for future update
                    adjustments.--In determining the update adjustment
                    factor under subparagraph (B) for 2011 and subsequent
                    years--
                              ``(i) the allowed expenditures for 2009 shall
                            be equal to the amount of the actual
                            expenditures for physicians' services during
                            2009; and
                              ``(ii) the reference in subparagraph
                            (B)(ii)(I) to `April 1, 1996' shall be treated
                            as a reference to `January 1, 2009 (or, if
                            later, the first day of the fifth year before
                            the year involved)'.''.
      (c) Limitation on Physicians' Services Included in Target Growth Rate
    Computation to Services Covered Under Physician Fee Schedule.--
    Effective for services furnished on or after January 1, 2009, section
    1848(f)(4)(A) of such Act is amended by striking ``(such as clinical''
    and all that follows through ``in a physician's office'' and inserting
    ``for which payment under this part is made under the fee schedule
    under this section, for services for practitioners described in section
    1842(b)(18)(C) on a basis related to such fee schedule, or for services
    described in section 1861(p) (other than such services when furnished
    in the facility of a provider of services)''.
      (d) Establishment of Separate Target Growth Rates for Categories of
    Services.--
              (1) Establishment of service categories.--Subsection (j) of
            section 1848 of the Social Security Act (42 U.S.C. 1395w-4) is
            amended by adding at the end the following new paragraph:
              ``(5) Service categories.--For services furnished on or after
            January 1, 2009, each of the following categories of
            physicians' services (as defined in paragraph (3)) shall be
            treated as a separate `service category':
                      ``(A) Evaluation and management services that are
                    procedure codes (for services covered under this title)
                    for--
                              ``(i) services in the category designated
                            Evaluation and Management in the Health Care
                            Common Procedure Coding System (established by
                            the Secretary under subsection (c)(5) as of
                            December 31, 2009, and as subsequently modified
                            by the Secretary); and
                              ``(ii) preventive services (as defined in
                            section 1861(iii)) for which payment is made
                            under this section.
                      ``(B) All other services not described in
                    subparagraph (A).
            Service categories established under this paragraph shall apply
            without regard to the specialty of the physician furnishing the
            service.''.
              (2) Establishment of separate conversion factors for each
            service category.--Subsection (d)(1) of section 1848 of the
            Social Security Act (42 U.S.C. 1395w-4) is amended--
                      (A) in subparagraph (A)--
                              (i) by designating the sentence beginning
                            ``The conversion factor'' as clause (i) with
                            the heading ``Application of single conversion
                            factor.--'' and with appropriate indentation;
                              (ii) by striking ``The conversion factor''
                            and inserting ``Subject to clause (ii), the
                            conversion factor''; and
                              (iii) by adding at the end the following new
                            clause:
                              ``(ii) Application of multiple conversion
                            factors beginning with 2011.--
                                      ``(I) In general.--In applying clause
                                    (i) for years beginning with 2011,
                                    separate conversion factors shall be
                                    established for each service category
                                    of physicians' services (as defined in
                                    subsection (j)(5)) and any reference in
                                    this section to a conversion factor for
                                    such years shall be deemed to be a
                                    reference to the conversion factor for
                                    each of such categories.
                                      ``(II) Initial conversion factors.--
                                    Such factors for 2011 shall be based
                                    upon the single conversion factor for
                                    the previous year multiplied by the
                                    update established under paragraph (11)
                                    for such category for 2011.
                                      ``(III) Updating of conversion
                                    factors.--Such factor for a service
                                    category for a subsequent year shall be
                                    based upon the conversion factor for
                                    such category for the previous year and
                                    adjusted by the update established for
                                    such category under paragraph (11) for
                                    the year involved.''; and
                      (B) in subparagraph (D), by striking ``other
                    physicians' services'' and inserting ``for physicians'
                    services described in the service category described in
                    subsection (j)(5)(B)''.
              (3) Establishing updates for conversion factors for service
            categories.--Section 1848(d) of the Social Security Act (42
            U.S.C. 1395w-4(d)), as amended by subsection (a), is amended--
                      (A) in paragraph (4)(C)(iii), by striking ``The
                    allowed'' and inserting ``Subject to paragraph (11)(B),
                    the allowed''; and
                      (B) by adding at the end the following new paragraph:
              ``(11) Updates for service categories beginning with 2011.--
                      ``(A) In general.--In applying paragraph (4) for a
                    year beginning with 2011, the following rules apply:
                              ``(i) Application of separate update
                            adjustments for each service category.--
                            Pursuant to paragraph (1)(A)(ii)(I), the update
                            shall be made to the conversion factor for each
                            service category (as defined in subsection
                            (j)(5)) based upon an update adjustment factor
                            for the respective category and year and the
                            update adjustment factor shall be computed, for
                            a year, separately for each service category.
                              ``(ii) Computation of allowed and actual
                            expenditures based on service categories.--In
                            computing the prior year adjustment component
                            and the cumulative adjustment component under
                            clauses (i) and (ii) of paragraph (4)(B), the
                            following rules apply:
                                      ``(I) Application based on service
                                    categories.--The allowed expenditures
                                    and actual expenditures shall be the
                                    allowed and actual expenditures for the
                                    service category, as determined under
                                    subparagraph (B).
                                      ``(II) Application of category
                                    specific target growth rate.--The
                                    growth rate applied under clause
                                    (ii)(II) of such paragraph shall be the
                                    target growth rate for the service
                                    category involved under subsection
                                    (f)(5).
                      ``(B) Determination of allowed expenditures.--In
                    applying paragraph (4) for a year beginning with 2010,
                    notwithstanding subparagraph (C)(iii) of such
                    paragraph, the allowed expenditures for a service
                    category for a year is an amount computed by the
                    Secretary as follows:
                              ``(i) For 2010.--For 2010:
                                      ``(I) Total 2009 actual expenditures
                                    for all services included in sgr
                                    computation for each service
                                    category.--Compute total actual
                                    expenditures for physicians' services
                                    (as defined in subsection (f)(4)(A))
                                    for 2009 for each service category.
                                      ``(II) Increase by growth rate to
                                    obtain 2010 allowed expenditures for
                                    service category.--Compute allowed
                                    expenditures for the service category
                                    for 2010 by increasing the allowed
                                    expenditures for the service category
                                    for 2009 computed under subclause (I)
                                    by the target growth rate for such
                                    service category under subsection (f)
                                    for 2010.
                              ``(ii) For subsequent years.--For a
                            subsequent year, take the amount of allowed
                            expenditures for such category for the
                            preceding year (under clause (i) or this
                            clause) and increase it by the target growth
                            rate determined under subsection (f) for such
                            category and year.''.
              (4) Application of separate target growth rates for each
            category.--
                      (A) In general.--Section 1848(f) of the Social
                    Security Act (42 U.S.C. 1395w-4(f)) is amended by
                    adding at the end the following new paragraph:
              ``(5) Application of separate target growth rates for each
            service category beginning with 2010.--The target growth rate
            for a year beginning with 2010 shall be computed and applied
            separately under this subsection for each service category (as
            defined in subsection (j)(5)) and shall be computed using the
            same method for computing the target growth rate except that
            the factor described in paragraph (2)(C) for--
                      ``(A) the service category described in subsection
                    (j)(5)(A) shall be increased by 0.02; and
                      ``(B) the service category described in subsection
                    (j)(5)(B) shall be increased by 0.01.''.
                      (B) Use of target growth rates.--Section 1848 of such
                    Act is further amended--
                              (i) in subsection (d)--
                                      (I) in paragraph (1)(E)(ii), by
                                    inserting ``or target'' after
                                    ``sustainable''; and
                                      (II) in paragraph (4)(B)(ii)(II), by
                                    inserting ``or target'' after
                                    ``sustainable''; and
                              (ii) in the heading of subsection (f), by
                            inserting ``and Target Growth Rate'' after
                            ``Sustainable Growth Rate'';
                              (iii) in subsection (f)(1)--
                                      (I) by striking ``and'' at the end of
                                    subparagraph (A);
                                      (II) in subparagraph (B), by
                                    inserting ``before 2010'' after ``each
                                    succeeding year'' and by striking the
                                    period at the end and inserting ``;
                                    and''; and
                                      (III) by adding at the end the
                                    following new subparagraph:
                      ``(C) November 1 of each succeeding year the target
                    growth rate for such succeeding year and each of the 2
                    preceding years.''; and
                              (iv) in subsection (f)(2), in the matter
                            before subparagraph (A), by inserting after
                            ``beginning with 2000'' the following: ``and
                            ending with 2009''.
      (e) Application to Accountable Care Organization Pilot Program.--In
    applying the target growth rate under subsections (d) and (f) of
    section 1848 of the Social Security Act to services furnished by a
    practitioner to beneficiaries who are attributable to an accountable
    care organization under the pilot program provided under section 1866D
    of such Act, the Secretary of Health and Human Services shall develop,
    not later than January 1, 2012, for application beginning with 2012, a
    method that--
              (1) allows each such organization to have its own expenditure
            targets and updates for such practitioners, with respect to
            beneficiaries who are attributable to that organization, that
            are consistent with the methodologies described in such
            subsection (f); and
              (2) provides that the target growth rate applicable to other
            physicians shall not apply to such physicians to the extent
            that the physicians' services are furnished through the
            accountable care organization.
    In applying paragraph (1), the Secretary of Health and Human Services
    may apply the difference in the update under such paragraph on a claim-
    by-claim or lump sum basis and such a payment shall be taken into
    account under the pilot program.

    SEC. 1122. MISVALUED CODES UNDER THE PHYSICIAN FEE SCHEDULE.

      (a) In General.--Section 1848(c)(2) of the Social Security Act (42
    U.S.C. 1395w-4(c)(2)) is amended by adding at the end the following new
    subparagraphs:
                      ``(K) Potentially misvalued codes.--
                              ``(i) In general.--The Secretary shall--
                                      ``(I) periodically identify services
                                    as being potentially misvalued using
                                    criteria specified in clause (ii); and
                                      ``(II) review and make appropriate
                                    adjustments to the relative values
                                    established under this paragraph for
                                    services identified as being
                                    potentially misvalued under subclause
                                    (I).
                              ``(ii) Identification of potentially
                            misvalued codes.--For purposes of identifying
                            potentially misvalued services pursuant to
                            clause (i)(I), the Secretary shall examine (as
                            the Secretary determines to be appropriate)
                            codes (and families of codes as appropriate)
                            for which there has been the fastest growth;
                            codes (and families of codes as appropriate)
                            that have experienced substantial changes in
                            practice expenses; codes for new technologies
                            or services within an appropriate period (such
                            as three years) after the relative values are
                            initially established for such codes; multiple
                            codes that are frequently billed in conjunction
                            with furnishing a single service; codes with
                            low relative values, particularly those that
                            are often billed multiple times for a single
                            treatment; codes which have not been subject to
                            review since the implementation of the RBRVS
                            (the so-called `Harvard-valued codes'); and
                            such other codes determined to be appropriate
                            by the Secretary.
                              ``(iii) Review and adjustments.--
                                      ``(I) The Secretary may use existing
                                    processes to receive recommendations on
                                    the review and appropriate adjustment
                                    of potentially misvalued services
                                    described clause (i)(II).
                                      ``(II) The Secretary may conduct
                                    surveys, other data collection
                                    activities, studies, or other analyses
                                    as the Secretary determines to be
                                    appropriate to facilitate the review
                                    and appropriate adjustment described in
                                    clause (i)(II).
                                      ``(III) The Secretary may use
                                    analytic contractors to identify and
                                    analyze services identified under
                                    clause (i)(I), conduct surveys or
                                    collect data, and make recommendations
                                    on the review and appropriate
                                    adjustment of services described in
                                    clause (i)(II).
                                      ``(IV) The Secretary may coordinate
                                    the review and appropriate adjustment
                                    described in clause (i)(II) with the
                                    periodic review described in
                                    subparagraph (B).
                                      ``(V) As part of the review and
                                    adjustment described in clause (i)(II),
                                    including with respect to codes with
                                    low relative values described in clause
                                    (ii), the Secretary may make
                                    appropriate coding revisions (including
                                    using existing processes for
                                    consideration of coding changes) which
                                    may include consolidation of individual
                                    services into bundled codes for payment
                                    under the fee schedule under subsection
                                    (b).
                                      ``(VI) The provisions of subparagraph
                                    (B)(ii)(II) shall apply to adjustments
                                    to relative value units made pursuant
                                    to this subparagraph in the same manner
                                    as such provisions apply to adjustments
                                    under subparagraph (B)(ii)(II).
                      ``(L) Validating relative value units.--
                              ``(i) In general.--The Secretary shall
                            establish a process to validate relative value
                            units under the fee schedule under subsection
                            (b).
                              ``(ii) Components and elements of work.--The
                            process described in clause (i) may include
                            validation of work elements (such as time,
                            mental effort and professional judgment,
                            technical skill and physical effort, and stress
                            due to risk) involved with furnishing a service
                            and may include validation of the pre, post,
                            and intra-service components of work.
                              ``(iii) Scope of codes.--The validation of
                            work relative value units shall include a
                            sampling of codes for services that is the same
                            as the codes listed under subparagraph (K)(ii)
                              ``(iv) Methods.--The Secretary may conduct
                            the validation under this subparagraph using
                            methods described in subclauses (I) through (V)
                            of subparagraph (K)(iii) as the Secretary
                            determines to be appropriate.
                              ``(v) Adjustments.--The Secretary shall make
                            appropriate adjustments to the work relative
                            value units under the fee schedule under
                            subsection (b). The provisions of subparagraph
                            (B)(ii)(II) shall apply to adjustments to
                            relative value units made pursuant to this
                            subparagraph in the same manner as such
                            provisions apply to adjustments under
                            subparagraph (B)(ii)(II).''.
      (b) Implementation.--
              (1) Funding.--For purposes of carrying out the provisions of
            subparagraphs (K) and (L) of 1848(c)(2) of the Social Security
            Act, as added by subsection (a), in addition to funds otherwise
            available, out of any funds in the Treasury not otherwise
            appropriated, there are appropriated to the Secretary of Health
            and Human Services for the Center for Medicare & Medicaid
            Services Program Management Account $20,000,000 for fiscal year
            2010 and each subsequent fiscal year. Amounts appropriated
            under this paragraph for a fiscal year shall be available until
            expended.
              (2) Administration.--
                      (A) Chapter 35 of title 44, United States Code and
                    the provisions of the Federal Advisory Committee Act (5
                    U.S.C. App.) shall not apply to this section or the
                    amendment made by this section.
                      (B) Notwithstanding any other provision of law, the
                    Secretary may implement subparagraphs (K) and (L) of
                    1848(c)(2) of the Social Security Act, as added by
                    subsection (a), by program instruction or otherwise.
                      (C) Section 4505(d) of the Balanced Budget Act of
                    1997 is repealed.
                      (D) Except for provisions related to confidentiality
                    of information, the provisions of the Federal
                    Acquisition Regulation shall not apply to this section
                    or the amendment made by this section.
              (3) Focusing cms resources on potentially overvalued codes.--
            Section 1868(a) of the Social Security Act (42 1395ee(a)) is
            repealed.

    SEC. 1123. PAYMENTS FOR EFFICIENT AREAS.

      Section 1833 of the Social Security Act (42 U.S.C. 1395l) is amended
    by adding at the end the following new subsection:
      ``(x) Incentive Payments for Efficient Areas.--
              ``(1) In general.--In the case of services furnished under
            the physician fee schedule under section 1848 on or after
            January 1, 2011, and before January 1, 2013, by a supplier that
            is paid under such fee schedule in an efficient area (as
            identified under paragraph (2)), in addition to the amount of
            payment that would otherwise be made for such services under
            this part, there also shall be paid (on a monthly or quarterly
            basis) an amount equal to 5 percent of the payment amount for
            the services under this part.
              ``(2) Identification of efficient areas.--
                      ``(A) In general.--Based upon available data, the
                    Secretary shall identify those counties or equivalent
                    areas in the United States in the lowest fifth
                    percentile of utilization based on per capita spending
                    under this part and part A for services provided in the
                    most recent year for which data are available as of the
                    date of the enactment of this subsection, as
                    standardized to eliminate the effect of geographic
                    adjustments in payment rates.
                      ``(B) Identification of counties where service is
                    furnished.--For purposes of paying the additional
                    amount specified in paragraph (1), if the Secretary
                    uses the 5-digit postal ZIP Code where the service is
                    furnished, the dominant county of the postal ZIP Code
                    (as determined by the United States Postal Service, or
                    otherwise) shall be used to determine whether the
                    postal ZIP Code is in a county described in
                    subparagraph (A).
                      ``(C) Limitation on review.--There shall be no
                    administrative or judicial review under section 1869,
                    1878, or otherwise, respecting--
                              ``(i) the identification of a county or other
                            area under subparagraph (A); or
                              ``(ii) the assignment of a postal ZIP Code to
                            a county or other area under subparagraph (B).
                      ``(D) Publication of list of counties; posting on
                    website.--With respect to a year for which a county or
                    area is identified under this paragraph, the Secretary
                    shall identify such counties or areas as part of the
                    proposed and final rule to implement the physician fee
                    schedule under section 1848 for the applicable year.
                    The Secretary shall post the list of counties
                    identified under this paragraph on the Internet website
                    of the Centers for Medicare & Medicaid Services.''.

    SEC. 1124. MODIFICATIONS TO THE PHYSICIAN QUALITY REPORTING INITIATIVE
                        (PQRI).

      (a) Feedback.--Section 1848(m)(5) of the Social Security Act (42
    U.S.C. 1395w-4(m)(5)) is amended by adding at the end the following new
    subparagraph:
                      ``(H) Feedback.--The Secretary shall provide timely
                    feedback to eligible professionals on the performance
                    of the eligible professional with respect to
                    satisfactorily submitting data on quality measures
                    under this subsection.''.
      (b) Appeals.--Such section is further amended--
              (1) in subparagraph (E), by striking ``There shall be'' and
            inserting ``Subject to subparagraph (I), there shall be''; and
              (2) by adding at the end the following new subparagraph:
                      ``(I) Informal appeals process.--Notwithstanding
                    subparagraph (E), by not later than January 1, 2011,
                    the Secretary shall establish and have in place an
                    informal process for eligible professionals to appeal
                    the determination that an eligible professional did not
                    satisfactorily submit data on quality measures under
                    this subsection.''.
      (c) Integration of Physician Quality Reporting and EHR Reporting.--
    Section 1848(m) of such Act is amended by adding at the end the
    following new paragraph:
              ``(7) Integration of physician quality reporting and ehr
            reporting.--Not later than January 1, 2012, the Secretary shall
            develop a plan to integrate clinical reporting on quality
            measures under this subsection with reporting requirements
            under subsection (o) relating to the meaningful use of
            electronic health records. Such integration shall consist of
            the following:
                      ``(A) The development of measures, the reporting of
                    which would both demonstrate--
                              ``(i) meaningful use of an electronic health
                            record for purposes of subsection (o); and
                              ``(ii) clinical quality of care furnished to
                            an individual.
                      ``(B) The collection of health data to identify
                    deficiencies in the quality and coordination of care
                    for individuals eligible for benefits under this part.
                      ``(C) Such other activities as specified by the
                    Secretary.''.
      (d) Extension of Incentive Payments.--Section 1848(m)(1) of such Act
    (42 U.S.C. 1395w-4(m)(1)) is amended--
              (1) in subparagraph (A), by striking ``2010'' and inserting
            ``2012''; and
              (2) in subparagraph (B)(ii), by striking ``2009 and 2010''
            and inserting ``for each of the years 2009 through 2012''.

    SEC. 1125. ADJUSTMENT TO MEDICARE PAYMENT LOCALITIES.

      (a) In General.--Section 1848(e) of the Social Security Act (42
    U.S.C.1395w-4(e)) is amended by adding at the end the following new
    paragraph:
              ``(6) Transition to use of msas as fee schedule areas in
            california.--
                      ``(A) In general.--
                              ``(i) Revision.--Subject to clause (ii) and
                            notwithstanding the previous provisions of this
                            subsection, for services furnished on or after
                            January 1, 2011, the Secretary shall revise the
                            fee schedule areas used for payment under this
                            section applicable to the State of California
                            using the Metropolitan Statistical Area (MSA)
                            iterative Geographic Adjustment Factor
                            methodology as follows:
                                      ``(I) The Secretary shall configure
                                    the physician fee schedule areas using
                                    the Core-Based Statistical Areas-
                                    Metropolitan Statistical Areas (each in
                                    this paragraph referred to as an
                                    `MSA'), as defined by the Director of
                                    the Office of Management and Budget, as
                                    the basis for the fee schedule areas.
                                    The Secretary shall employ an iterative
                                    process to transition fee schedule
                                    areas. First, the Secretary shall list
                                    all MSAs within the State by Geographic
                                    Adjustment Factor described in
                                    paragraph (2) (in this paragraph
                                    referred to as a `GAF') in descending
                                    order. In the first iteration, the
                                    Secretary shall compare the GAF of the
                                    highest cost MSA in the State to the
                                    weighted-average GAF of the group of
                                    remaining MSAs in the State. If the
                                    ratio of the GAF of the highest cost
                                    MSA to the weighted-average GAF of the
                                    rest of State is 1.05 or greater then
                                    the highest cost MSA becomes a separate
                                    fee schedule area.
                                      ``(II) In the next iteration, the
                                    Secretary shall compare the MSA of the
                                    second-highest GAF to the weighted-
                                    average GAF of the group of remaining
                                    MSAs. If the ratio of the second-
                                    highest MSA's GAF to the weighted-
                                    average of the remaining lower cost
                                    MSAs is 1.05 or greater, the second-
                                    highest MSA becomes a separate fee
                                    schedule area. The iterative process
                                    continues until the ratio of the GAF of
                                    the highest-cost remaining MSA to the
                                    weighted-average of the remaining
                                    lower-cost MSAs is less than 1.05, and
                                    the remaining group of lower cost MSAs
                                    form a single fee schedule area, If two
                                    MSAs have identical GAFs, they shall be
                                    combined in the iterative comparison.
                              ``(ii) Transition.--For services furnished on
                            or after January 1, 2011, and before January 1,
                            2016, in the State of California, after
                            calculating the work, practice expense, and
                            malpractice geographic indices described in
                            clauses (i), (ii), and (iii) of paragraph
                            (1)(A) that would otherwise apply through
                            application of this paragraph, the Secretary
                            shall increase any such index to the county-
                            based fee schedule area value on December 31,
                            2009, if such index would otherwise be less
                            than the value on January 1, 2010.
                      ``(B) Subsequent revisions.--
                              ``(i) Periodic review and adjustments in fee
                            schedule areas.--Subsequent to the process
                            outlined in paragraph (1)(C), not less often
                            than every three years, the Secretary shall
                            review and update the California Rest-of-State
                            fee schedule area using MSAs as defined by the
                            Director of the Office of Management and Budget
                            and the iterative methodology described in
                            subparagraph (A)(i).
                              ``(ii) Link with geographic index data
                            revision.--The revision described in clause (i)
                            shall be made effective concurrently with the
                            application of the periodic review of the
                            adjustment factors required under paragraph
                            (1)(C) for California for 2012 and subsequent
                            periods. Upon request, the Secretary shall make
                            available to the public any county-level or MSA
                            derived data used to calculate the geographic
                            practice cost index.
                      ``(C) References to fee schedule areas.--Effective
                    for services furnished on or after January 1, 2010, for
                    the State of California, any reference in this section
                    to a fee schedule area shall be deemed a reference to
                    an MSA in the State.''.
      (b) Conforming Amendment to Definition of Fee Schedule Area.--Section
    1848(j)(2) of the Social Security Act (42 U.S.C. 1395w(j)(2)) is
    amended by striking ``The term'' and inserting ``Except as provided in
    subsection (e)(6)(C), the term''.

                         PART 2--MARKET BASKET UPDATES

    SEC. 1131. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET
                        UPDATES THAT DO NOT ALREADY INCORPORATE SUCH
                        IMPROVEMENTS.

      (a) Outpatient Hospitals.--
              (1) In general.--The first sentence of section
            1833(t)(3)(C)(iv) of the Social Security Act (42 U.S.C.
            1395l(t)(3)(C)(iv)) is amended--
                      (A) by inserting ``(which is subject to the
                    productivity adjustment described in subclause (II) of
                    such section)'' after ``1886(b)(3)(B)(iii)''; and
                      (B) by inserting ``(but not below 0)'' after
                    ``reduced''.
              (2) Effective date.--The amendments made by paragraph (1)
            shall apply to increase factors for services furnished in years
            beginning with 2010.
      (b) Ambulance Services.--Section 1834(l)(3)(B) of such Act (42 U.S.C.
    1395m(l)(3)(B))) is amended by inserting before the period at the end
    the following: ``and, in the case of years beginning with 2010, subject
    to the productivity adjustment described in section
    1886(b)(3)(B)(iii)(II)''.
      (c) Ambulatory Surgical Center Services.--Section 1833(i)(2)(D) of
    such Act (42 U.S.C. 1395l(i)(2)(D)) is amended--
              (1) by redesignating clause (v) as clause (vi); and
              (2) by inserting after clause (iv) the following new clause:
      ``(v) In implementing the system described in clause (i), for
    services furnished during 2010 or any subsequent year, to the extent
    that an annual percentage change factor applies, such factor shall be
    subject to the productivity adjustment described in section
    1886(b)(3)(B)(iii)(II).''.
      (d) Laboratory Services.--Section 1833(h)(2)(A) of such Act (42
    U.S.C. 1395l(h)(2)(A)) is amended--
              (1) in clause (i), by striking ``for each of the years 2009
            through 2013'' and inserting ``for 2009''; and
              (2) clause (ii)--
                      (A) by striking ``and'' at the end of subclause
                    (III);
                      (B) by striking the period at the end of subclause
                    (IV) and inserting ``; and''; and
                      (C) by adding at the end the following new subclause:
              ``(V) the annual adjustment in the fee schedules determined
            under clause (i) for years beginning with 2010 shall be subject
            to the productivity adjustment described in section
            1886(b)(3)(B)(iii)(II).''.
      (e) Certain Durable Medical Equipment.--Section 1834(a)(14) of such
    Act (42 U.S.C. 1395m(a)(14)) is amended--
              (1) in subparagraph (K), by inserting before the semicolon at
            the end the following: ``, subject to the productivity
            adjustment described in section 1886(b)(3)(B)(iii)(II)'';
              (2) in subparagraph (L)(i), by inserting after ``June 2013,''
            the following: ``subject to the productivity adjustment
            described in section 1886(b)(3)(B)(iii)(II),'';
              (3) in subparagraph (L)(ii), by inserting after ``June 2013''
            the following: ``, subject to the productivity adjustment
            described in section 1886(b)(3)(B)(iii)(II)''; and
              (4) in subparagraph (M), by inserting before the period at
            the end the following: ``, subject to the productivity
            adjustment described in section 1886(b)(3)(B)(iii)(II)''.

                            PART 3--OTHER PROVISIONS

    SEC. 1141. RENTAL AND PURCHASE OF POWER-DRIVEN WHEELCHAIRS.

      (a) In General.--Section 1834(a)(7)(A)(iii) of the Social Security
    Act (42 U.S.C. 1395m(a)(7)(A)(iii)) is amended--
              (1) in the heading, by inserting ``certain complex
            rehabilitative'' after ``option for''; and
              (2) by striking ``power-driven wheelchair'' and inserting
            ``complex rehabilitative power-driven wheelchair recognized by
            the Secretary as classified within group 3 or higher''.
      (b) Effective Date.--The amendments made by subsection (a) shall take
    effect on January 1, 2011, and shall apply to power-driven wheelchairs
    furnished on or after such date. Such amendments shall not apply to
    contracts entered into under section 1847 of the Social Security Act
    (42 U.S.C. 1395w-3) pursuant to a bid submitted under such section
    before October 1, 2010, under subsection (a)(1)(B)(i)(I) of such
    section.

    SEC. 1142. EXTENSION OF PAYMENT RULE FOR BRACHYTHERAPY.

       Section 1833(t)(16)(C) of the Social Security Act (42 U.S.C.
    1395l(t)(16)(C)), as amended by section 142 of the Medicare
    Improvements for Patients and Providers Act of 2008 (Public Law 110-
    275), is amended by striking, the first place it appears, ``January 1,
    2010'' and inserting ``January 1, 2012''.

    SEC. 1143. HOME INFUSION THERAPY REPORT TO CONGRESS.

      Not later than 12 months after the date of enactment of this Act, the
    Medicare Payment Advisory Commission shall submit to Congress a report
    on the following:
              (1) The scope of coverage for home infusion therapy in the
            fee-for-service Medicare program under title XVIII of the
            Social Security Act, Medicare Advantage under part C of such
            title, the veteran's health care program under chapter 17 of
            title 38, United States Code, and among private payers,
            including an analysis of the scope of services provided by home
            infusion therapy providers to their patients in such programs.
              (2) The benefits and costs of providing such coverage under
            the Medicare program, including a calculation of the potential
            savings achieved through avoided or shortened hospital and
            nursing home stays as a result of Medicare coverage of home
            infusion therapy.
              (3) An assessment of sources of data on the costs of home
            infusion therapy that might be used to construct payment
            mechanisms in the Medicare program.
              (4) Recommendations, if any, on the structure of a payment
            system under the Medicare program for home infusion therapy,
            including an analysis of the payment methodologies used under
            Medicare Advantage plans and private health plans for the
            provision of home infusion therapy and their applicability to
            the Medicare program.

    SEC. 1144. REQUIRE AMBULATORY SURGICAL CENTERS (ASCS) TO SUBMIT COST
                        DATA AND OTHER DATA.

      (a) Cost Reporting.--
              (1) In general.--Section 1833(i) of the Social Security Act
            (42 U.S.C. 1395l(i)) is amended by adding at the end the
            following new paragraph:
      ``(8) The Secretary shall require, as a condition of the agreement
    described in section 1832(a)(2)(F)(i), the submission of such cost
    report as the Secretary may specify, taking into account the
    requirements for such reports under section 1815 in the case of a
    hospital.''.
              (2) Development of cost report.--Not later than 3 years after
            the date of the enactment of this Act, the Secretary of Health
            and Human Services shall develop a cost report form for use
            under section 1833(i)(8) of the Social Security Act, as added
            by paragraph (1).
              (3) Audit requirement.--The Secretary shall provide for
            periodic auditing of cost reports submitted under section
            1833(i)(8) of the Social Security Act, as added by paragraph
            (1).
              (4) Effective date.--The amendment made by paragraph (1)
            shall apply to agreements applicable to cost reporting periods
            beginning 18 months after the date the Secretary develops the
            cost report form under paragraph (2).
      (b) Additional Data on Quality.--
              (1) In general.--Section 1833(i)(7) of such Act (42 U.S.C.
            1395l(i)(7)) is amended--
                      (A) in subparagraph (B), by inserting ``subject to
                    subparagraph (C),'' after ``may otherwise provide,'';
                    and
                      (B) by adding at the end the following new
                    subparagraph:
      ``(C) Under subparagraph (B) the Secretary shall require the
    reporting of such additional data relating to quality of services
    furnished in an ambulatory surgical facility, including data on health
    care associated infections, as the Secretary may specify.''.
              (2) Effective date.--The amendment made by paragraph (1)
            shall to reporting for years beginning with 2012.

    SEC. 1145. TREATMENT OF CERTAIN CANCER HOSPITALS.

      Section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)) is
    amended by adding at the end the following new paragraph:
              ``(18) Authorization of adjustment for cancer hospitals.--
                      ``(A) Study.--The Secretary shall conduct a study to
                    determine if, under the system under this subsection,
                    costs incurred by hospitals described in section
                    1886(d)(1)(B)(v) with respect to ambulatory payment
                    classification groups exceed those costs incurred by
                    other hospitals furnishing services under this
                    subsection (as determined appropriate by the
                    Secretary).
                      ``(B) Authorization of adjustment.--Insofar as the
                    Secretary determines under subparagraph (A) that costs
                    incurred by hospitals described in section
                    1886(d)(1)(B)(v) exceed those costs incurred by other
                    hospitals furnishing services under this subsection,
                    the Secretary shall provide for an appropriate
                    adjustment under paragraph (2)(E) to reflect those
                    higher costs effective for services furnished on or
                    after January 1, 2011.''.

    SEC. 1146. MEDICARE IMPROVEMENT FUND.

      Section 1898(b)(1)(A) of the Social Security Act (42 U.S.C.
    1395iii(b)(1)(A)) is amended to read as follows:
                      ``(A) the period beginning with fiscal year 2011 and
                    ending with fiscal year 2019, $8,000,000,000; and''.

    SEC. 1147. PAYMENT FOR IMAGING SERVICES.

      (a) Adjustment in Practice Expense to Reflect Higher Presumed
    Utilization.--Section 1848 of the Social Security Act (42 U.S.C. 1395w)
    is amended--
              (1) in subsection (b)(4)--
                      (A) in subparagraph (B), by striking ``subparagraph
                    (A)'' and inserting ``this paragraph''; and
                      (B) by adding at the end the following new
                    subparagraph:
                      ``(C) Adjustment in practice expense to reflect
                    higher presumed utilization.--In computing the number
                    of practice expense relative value units under
                    subsection (c)(2)(C)(ii) with respect to advanced
                    diagnostic imaging services (as defined in section
                    1834(e)(1)(B)), the Secretary shall adjust such number
                    of units so it reflects a 75 percent (rather than 50
                    percent) presumed rate of utilization of imaging
                    equipment.''; and
              (2) in subsection (c)(2)(B)(v)(II), by inserting ``and other
            provisions'' after ``OPD payment cap''.
      (b) Adjustment in Technical Component ``discount'' on Single-session
    Imaging to Consecutive Body Parts.--Section 1848(b)(4) of such Act is
    further amended by adding at the end the following new subparagraph:
                      ``(D) Adjustment in technical component discount on
                    single-session imaging involving consecutive body
                    parts.--The Secretary shall increase the reduction in
                    expenditures attributable to the multiple procedure
                    payment reduction applicable to the technical component
                    for imaging under the final rule published by the
                    Secretary in the Federal Register on November 21, 2005
                    (part 405 of title 42, Code of Federal Regulations)
                    from 25 percent to 50 percent.''.
      (c) Effective Date.--Except as otherwise provided, this section, and
    the amendments made by this section, shall apply to services furnished
    on or after January 1, 2011.

    SEC. 1148. DURABLE MEDICAL EQUIPMENT PROGRAM IMPROVEMENTS.

      (a) Waiver of Surety Bond Requirement.--Section 1834(a)(16) of the
    Social Security Act (42 U.S.C. 1395m(a)(16)) is amended by adding at
    the end the following: ``The requirement for a surety bond described in
    subparagraph (B) shall not apply in the case of a pharmacy (i) that has
    been enrolled under section 1866(j) as a supplier of durable medical
    equipment, prosthetics, orthotics, and supplies and has been issued
    (which may include renewal of) a provider number (as described in the
    first sentence of this paragraph) for at least 5 years, and (ii) for
    which a final adverse action (as defined in section 424.57(a) of title
    42, Code of Federal Regulations) has never been imposed.''.
      (b) Ensuring Supply of Oxygen Equipment .--
              (1) In general.--Section 1834(a)(5)(F) of the Social Security
            Act (42 U.S.C. 1395m(a)(5)(F)) is amended--
                      (A) in clause (ii), by striking ``After the'' and
                    inserting ``Except as provided in clause (iii), after
                    the''; and
                      (B) by adding at the end the following new clause:
                              ``(iii) Continuation of supply.--In the case
                            of a supplier furnishing such equipment to an
                            individual under this subsection as of the 27th
                            month of the 36 months described in clause (i),
                            the supplier furnishing such equipment as of
                            such month shall continue to furnish such
                            equipment to such individual (either directly
                            or though arrangements with other suppliers of
                            such equipment) during any subsequent period of
                            medical need for the remainder of the
                            reasonable useful lifetime of the equipment, as
                            determined by the Secretary, regardless of the
                            location of the individual, unless another
                            supplier has accepted responsibility for
                            continuing to furnish such equipment during the
                            remainder of such period.''.
              (2) Effective date.--The amendments made by paragraph (1)
            shall take effect as of the date of the enactment of this Act
            and shall apply to the furnishing of equipment to individuals
            for whom the 27th month of a continuous period of use of oxygen
            equipment described in section 1834(a)(5)(F) of the Social
            Security Act occurs on or after July 1, 2010.
      (c) Treatment of Current Accreditation Applications.--Section
    1834(a)(20)(F) of such Act (42 U.S.C. 1395m(a)(20)(F)) is amended--
              (1) in clause (i)--
                      (A) by striking ``clause (ii)'' and inserting
                    ``clauses (ii) and (iii)''; and
                      (B) by striking ``and'' at the end;
              (2) by striking the period at the end of clause (ii)(II) and
            by inserting ``; and'';
              (3) by inserting after clause (ii) the following new clause:
                              ``(iii) the requirement for accreditation
                            described in clause (i) shall not apply for
                            purposes of supplying diabetic testing
                            supplies, canes, and crutches in the case of a
                            pharmacy that is enrolled under section 1866(j)
                            as a supplier of durable medical equipment,
                            prosthetics, orthotics, and supplies.''; and
              (4) by adding after and below clause (iii) the following:
                    ``Any supplier that has submitted an application for
                    accreditation before August 1, 2009, shall be deemed as
                    meeting applicable standards and accreditation
                    requirement under this subparagraph until such time as
                    the independent accreditation organization takes action
                    on the supplier's application.''.
      (d) Restoring 36-month Oxygen Rental Period in Case of Supplier
    Bankruptcy for Certain Individuals.--Section 1834(a)(5)(F) of such Act
    (42 U.S.C. 1395m(a)(5)(F)), as amended by subsection (b), is further
    amended by adding at the end the following new clause:
                              ``(iv) Exception for bankruptcy.--If a
                            supplier who furnishes oxygen and oxygen
                            equipment to an individual is declared bankrupt
                            and its assets are liquidated and at the time
                            of such declaration and liquidation more than
                            24 months of rental payments have been made,
                            such individual may begin a new 36-month rental
                            period under this subparagraph with another
                            supplier of oxygen.''.

    SEC. 1149. MEDPAC STUDY AND REPORT ON BONE MASS MEASUREMENT.

      (a) In General.--The Medicare Payment Advisory Commission shall
    conduct a study regarding bone mass measurement, including computed
    tomography, duel-energy x-ray absorptriometry, and vertebral fracture
    assessment. The study shall focus on the following:
              (1) An assessment of the adequacy of Medicare payment rates
            for such services, taking into account costs of acquiring the
            necessary equipment, professional work time, and practice
            expense costs.
              (2) The impact of Medicare payment changes since 2006 on
            beneficiary access to bone mass measurement benefits in general
            and in rural and minority communities specifically.
              (3) A review of the clinically appropriate and recommended
            use among Medicare beneficiaries and how usage rates among such
            beneficiaries compares to such recommendations.
              (4) In conjunction with the findings under (3),
            recommendations, if necessary, regarding methods for reaching
            appropriate use of bone mass measurement studies among Medicare
            beneficiaries.
      (b) Report.--The Commission shall submit a report to the Congress,
    not later than 9 months after the date of the enactment of this Act,
    containing a description of the results of the study conducted under
    subsection (a) and the conclusions and recommendations, if any,
    regarding each of the issues described in paragraphs (1), (2) (3) and
    (4) of such subsection.

            Subtitle C--Provisions Related to Medicare Parts A and B

    SEC. 1151. REDUCING POTENTIALLY PREVENTABLE HOSPITAL READMISSIONS.

      (a) Hospitals.--
              (1) In general.--Section 1886 of the Social Security Act (42
            U.S.C. 1395ww), as amended by section 1103(a), is amended by
            adding at the end the following new subsection:
      ``(p) Adjustment to Hospital Payments for Excess Readmissions.--
              ``(1) In general.--With respect to payment for discharges
            from an applicable hospital (as defined in paragraph (5)(C))
            occurring during a fiscal year beginning on or after October 1,
            2011, in order to account for excess readmissions in the
            hospital, the Secretary shall reduce the payments that would
            otherwise be made to such hospital under subsection (d) (or
            section 1814(b)(3), as the case may be) for such a discharge by
            an amount equal to the product of--
                      ``(A) the base operating DRG payment amount (as
                    defined in paragraph (2)) for the discharge; and
                      ``(B) the adjustment factor (described in paragraph
                    (3)(A)) for the hospital for the fiscal year.
              ``(2) Base operating drg payment amount.--
                      ``(A) In general.--Except as provided in subparagraph
                    (B), for purposes of this subsection, the term `base
                    operating DRG payment amount' means, with respect to a
                    hospital for a fiscal year, the payment amount that
                    would otherwise be made under subsection (d) for a
                    discharge if this subsection did not apply, reduced by
                    any portion of such amount that is attributable to
                    payments under subparagraphs (B) and (F) of paragraph
                    (5).
                      ``(B) Adjustments.--For purposes of subparagraph (A),
                    in the case of a hospital that is paid under section
                    1814(b)(3), the term `base operating DRG payment
                    amount' means the payment amount under such section.
              ``(3) Adjustment factor.--
                      ``(A) In general.--For purposes of paragraph (1), the
                    adjustment factor under this paragraph for an
                    applicable hospital for a fiscal year is equal to the
                    greater of--
                              ``(i) the ratio described in subparagraph (B)
                            for the hospital for the applicable period (as
                            defined in paragraph (5)(D)) for such fiscal
                            year; or
                              ``(ii) the floor adjustment factor specified
                            in subparagraph (C).
                      ``(B) Ratio.--The ratio described in this
                    subparagraph for a hospital for an applicable period is
                    equal to 1 minus the ratio of--
                              ``(i) the aggregate payments for excess
                            readmissions (as defined in paragraph (4)(A))
                            with respect to an applicable hospital for the
                            applicable period; and
                              ``(ii) the aggregate payments for all
                            discharges (as defined in paragraph (4)(B))
                            with respect to such applicable hospital for
                            such applicable period.
                      ``(C) Floor adjustment factor.--For purposes of
                    subparagraph (A), the floor adjustment factor specified
                    in this subparagraph for--
                              ``(i) fiscal year 2012 is 0.99;
                              ``(ii) fiscal year 2013 is 0.98;
                              ``(iii) fiscal year 2014 is 0.97; or
                              ``(iv) a subsequent fiscal year is 0.95.
              ``(4) Aggregate payments, excess readmission ratio defined.--
            For purposes of this subsection:
                      ``(A) Aggregate payments for excess readmissions.--
                    The term `aggregate payments for excess readmissions'
                    means, for a hospital for a fiscal year, the sum, for
                    applicable conditions (as defined in paragraph (5)(A)),
                    of the product, for each applicable condition, of--
                              ``(i) the base operating DRG payment amount
                            for such hospital for such fiscal year for such
                            condition;
                              ``(ii) the number of admissions for such
                            condition for such hospital for such fiscal
                            year; and
                              ``(iii) the excess readmissions ratio (as
                            defined in subparagraph (C)) for such hospital
                            for the applicable period for such fiscal year
                            minus 1.
                      ``(B) Aggregate payments for all discharges.--The
                    term `aggregate payments for all discharges' means, for
                    a hospital for a fiscal year, the sum of the base
                    operating DRG payment amounts for all discharges for
                    all conditions from such hospital for such fiscal year.
                      ``(C) Excess readmission ratio.--
                              ``(i) In general.--Subject to clauses (ii)
                            and (iii), the term `excess readmissions ratio'
                            means, with respect to an applicable condition
                            for a hospital for an applicable period, the
                            ratio (but not less than 1.0) of--
                                      ``(I) the risk adjusted readmissions
                                    based on actual readmissions, as
                                    determined consistent with a
                                    readmission measure methodology that
                                    has been endorsed under paragraph
                                    (5)(A)(ii)(I), for an applicable
                                    hospital for such condition with
                                    respect to the applicable period; to
                                      ``(II) the risk adjusted expected
                                    readmissions (as determined consistent
                                    with such a methodology) for such
                                    hospital for such condition with
                                    respect to such applicable period.
                              ``(ii) Exclusion of certain readmissions.--
                            For purposes of clause (i), with respect to a
                            hospital, excess readmissions shall not include
                            readmissions for an applicable condition for
                            which there are fewer than a minimum number (as
                            determined by the Secretary) of discharges for
                            such applicable condition for the applicable
                            period and such hospital.
                              ``(iii) Adjustment.--In order to promote a
                            reduction over time in the overall rate of
                            readmissions for applicable conditions, the
                            Secretary may provide, beginning with
                            discharges for fiscal year 2014, for the
                            determination of the excess readmissions ratio
                            under subparagraph (C) to be based on a ranking
                            of hospitals by readmission ratios (from lower
                            to higher readmission ratios) normalized to a
                            benchmark that is lower than the 50th
                            percentile.
              ``(5) Definitions.--For purposes of this subsection:
                      ``(A) Applicable condition.--The term `applicable
                    condition' means, subject to subparagraph (B), a
                    condition or procedure selected by the Secretary among
                    conditions and procedures for which--
                              ``(i) readmissions (as defined in
                            subparagraph (E)) that represent conditions or
                            procedures that are high volume or high
                            expenditures under this title (or other
                            criteria specified by the Secretary); and
                              ``(ii) measures of such readmissions--
                                      ``(I) have been endorsed by the
                                    entity with a contract under section
                                    1890(a); and
                                      ``(II) such endorsed measures have
                                    appropriate exclusions for readmissions
                                    that are unrelated to the prior
                                    discharge (such as a planned
                                    readmission or transfer to another
                                    applicable hospital).
                      ``(B) Expansion of applicable conditions.--Beginning
                    with fiscal year 2013, the Secretary shall expand the
                    applicable conditions beyond the 3 conditions for which
                    measures have been endorsed as described in
                    subparagraph (A)(ii)(I) as of the date of the enactment
                    of this subsection to the additional 4 conditions that
                    have been so identified by the Medicare Payment
                    Advisory Commission in its report to Congress in June
                    2007 and to other conditions and procedures which may
                    include an all-condition measure of readmissions, as
                    determined appropriate by the Secretary. In expanding
                    such applicable conditions, the Secretary shall seek
                    the endorsement described in subparagraph (A)(ii)(I)
                    but may apply such measures without such an
                    endorsement.
                      ``(C) Applicable hospital.--The term `applicable
                    hospital' means a subsection (d) hospital or a hospital
                    that is paid under section 1814(b)(3).
                      ``(D) Applicable period.--The term `applicable
                    period' means, with respect to a fiscal year, such
                    period as the Secretary shall specify for purposes of
                    determining excess readmissions.
                      ``(E) Readmission.--The term `readmission' means, in
                    the case of an individual who is discharged from an
                    applicable hospital, the admission of the individual to
                    the same or another applicable hospital within a time
                    period specified by the Secretary from the date of such
                    discharge. Insofar as the discharge relates to an
                    applicable condition for which there is an endorsed
                    measure described in subparagraph (A)(ii)(I), such time
                    period (such as 30 days) shall be consistent with the
                    time period specified for such measure.
              ``(6) Limitations on review.--There shall be no
            administrative or judicial review under section 1869, section
            1878, or otherwise of--
                      ``(A) the determination of base operating DRG payment
                    amounts;
                      ``(B) the methodology for determining the adjustment
                    factor under paragraph (3), including excess
                    readmissions ratio under paragraph (4)(C), aggregate
                    payments for excess readmissions under paragraph
                    (4)(A), and aggregate payments for all discharges under
                    paragraph (4)(B), and applicable periods and applicable
                    conditions under paragraph (5);
                      ``(C) the measures of readmissions as described in
                    paragraph (5)(A)(ii); and
                      ``(D) the determination of a targeted hospital under
                    paragraph (8)(B)(i), the increase in payment under
                    paragraph (8)(B)(ii), the aggregate cap under paragraph
                    (8)(C)(i), the hospital-specific limit under paragraph
                    (8)(C)(ii), and the form of payment made by the
                    Secretary under paragraph (8)(D).
              ``(7) Monitoring inappropriate changes in admissions
            practices.--The Secretary shall monitor the activities of
            applicable hospitals to determine if such hospitals have taken
            steps to avoid patients at risk in order to reduce the
            likelihood of increasing readmissions for applicable
            conditions. If the Secretary determines that such a hospital
            has taken such a step, after notice to the hospital and
            opportunity for the hospital to undertake action to alleviate
            such steps, the Secretary may impose an appropriate sanction.
              ``(8) Assistance to certain hospitals.--
                      ``(A) In general.--For purposes of providing funds to
                    applicable hospitals to take steps described in
                    subparagraph (E) to address factors that may impact
                    readmissions of individuals who are discharged from
                    such a hospital, for fiscal years beginning on or after
                    October 1, 2011, the Secretary shall make a payment
                    adjustment for a hospital described in subparagraph
                    (B), with respect to each such fiscal year, by a
                    percent estimated by the Secretary to be consistent
                    with subparagraph (C).
                      ``(B) Targeted hospitals.--Subparagraph (A) shall
                    apply to an applicable hospital that--
                              ``(i) received (or, in the case of an
                            1814(b)(3) hospital, otherwise would have been
                            eligible to receive) $10,000,000 or more in
                            disproportionate share payments using the
                            latest available data as estimated by the
                            Secretary; and
                              ``(ii) provides assurances satisfactory to
                            the Secretary that the increase in payment
                            under this paragraph shall be used for purposes
                            described in subparagraph (E).
                      ``(C) Caps.--
                              ``(i) Aggregate cap.--The aggregate amount of
                            the payment adjustment under this paragraph for
                            a fiscal year shall not exceed 5 percent of the
                            estimated difference in the spending that would
                            occur for such fiscal year with and without
                            application of the adjustment factor described
                            in paragraph (3) and applied pursuant to
                            paragraph (1).
                              ``(ii) Hospital-specific limit.--The
                            aggregate amount of the payment adjustment for
                            a hospital under this paragraph shall not
                            exceed the estimated difference in spending
                            that would occur for such fiscal year for such
                            hospital with and without application of the
                            adjustment factor described in paragraph (3)
                            and applied pursuant to paragraph (1).
                      ``(D) Form of payment.--The Secretary may make the
                    additional payments under this paragraph on a lump sum
                    basis, a periodic basis, a claim by claim basis, or
                    otherwise.
                      ``(E) Use of additional payment.--Funding under this
                    paragraph shall be used by targeted hospitals for
                    transitional care activities designed to address the
                    patient noncompliance issues that result in higher than
                    normal readmission rates, such as one or more of the
                    following:
                              ``(i) Providing care coordination services to
                            assist in transitions from the targeted
                            hospital to other settings.
                              ``(ii) Hiring translators and interpreters.
                              ``(iii) Increasing services offered by
                            discharge planners.
                              ``(iv) Ensuring that individuals receive a
                            summary of care and medication orders upon
                            discharge.
                              ``(v) Developing a quality improvement plan
                            to assess and remedy preventable readmission
                            rates.
                              ``(vi) Assigning discharged individuals to a
                            medical home.
                              ``(vii) Doing other activities as determined
                            appropriate by the Secretary.
                      ``(F) GAO report on use of funds.--Not later than 3
                    years after the date on which funds are first made
                    available under this paragraph, the Comptroller General
                    of the United States shall submit to Congress a report
                    on the use of such funds.
                      ``(G) Disproportionate share hospital payment.--In
                    this paragraph, the term `disproportionate share
                    hospital payment' means an additional payment amount
                    under subsection (d)(5)(F).''.
      (b) Application to Critical Access Hospitals.--Section 1814(l) of the
    Social Security Act (42 U.S.C. 1395f(l)) is amended--
              (1) in paragraph (5)--
                      (A) by striking ``and'' at the end of subparagraph
                    (C);
                      (B) by striking the period at the end of subparagraph
                    (D) and inserting ``; and'';
                      (C) by inserting at the end the following new
                    subparagraph:
              ``(E) the methodology for determining the adjustment factor
            under paragraph (5), including the determination of aggregate
            payments for actual and expected readmissions, applicable
            periods, applicable conditions and measures of readmissions.'';
            and
                      (D) by redesignating such paragraph as paragraph (6);
                    and
              (2) by inserting after paragraph (4) the following new
            paragraph:
      ``(5) The adjustment factor described in section 1886(p)(3) shall
    apply to payments with respect to a critical access hospital with
    respect to a cost reporting period beginning in fiscal year 2012 and
    each subsequent fiscal year (after application of paragraph (4) of this
    subsection) in a manner similar to the manner in which such section
    applies with respect to a fiscal year to an applicable hospital as
    described in section 1886(p)(2).''.
      (c) Post Acute Care Providers.--
              (1) Interim policy.--
                      (A) In general.--With respect to a readmission to an
                    applicable hospital or a critical access hospital (as
                    described in section 1814(l) of the Social Security
                    Act) from a post acute care provider (as defined in
                    paragraph (3)) and such a readmission is not governed
                    by section 412.531 of title 42, Code of Federal
                    Regulations, if the claim submitted by such a post-
                    acute care provider under title XVIII of the Social
                    Security Act indicates that the individual was
                    readmitted to a hospital from such a post-acute care
                    provider or admitted from home and under the care of a
                    home health agency within 30 days of an initial
                    discharge from an applicable hospital or critical
                    access hospital, the payment under such title on such
                    claim shall be the applicable percent specified in
                    subparagraph (B) of the payment that would otherwise be
                    made under the respective payment system under such
                    title for such post-acute care provider if this
                    subsection did not apply.
                      (B) Applicable percent defined.--For purposes of
                    subparagraph (A), the applicable percent is--
                              (i) for fiscal or rate year 2012 is 0.996;
                              (ii) for fiscal or rate year 2013 is 0.993;
                            and
                              (iii) for fiscal or rate year 2014 is 0.99.
                      (C) Effective date.--Subparagraph (1) shall apply to
                    discharges or services furnished (as the case may be
                    with respect to the applicable post acute care
                    provider) on or after the first day of the fiscal year
                    or rate year, beginning on or after October 1, 2011,
                    with respect to the applicable post acute care
                    provider.
              (2) Development and application of performance measures.--
                      (A) In general.--The Secretary of Health and Human
                    Services shall develop appropriate measures of
                    readmission rates for post acute care providers. The
                    Secretary shall seek endorsement of such measures by
                    the entity with a contract under section 1890(a) of the
                    Social Security Act but may adopt and apply such
                    measures under this paragraph without such an
                    endorsement. The Secretary shall expand such measures
                    in a manner similar to the manner in which applicable
                    conditions are expanded under paragraph (5)(B) of
                    section 1886(p) of the Social Security Act, as added by
                    subsection (a).
                      (B) Implementation.--The Secretary shall apply, on or
                    after October 1, 2014, with respect to post acute care
                    providers, policies similar to the policies applied
                    with respect to applicable hospitals and critical
                    access hospitals under the amendments made by
                    subsection (a). The provisions of paragraph (1) shall
                    apply with respect to any period on or after October 1,
                    2014, and before such application date described in the
                    previous sentence in the same manner as such provisions
                    apply with respect to fiscal or rate year 2014.
                      (C) Monitoring and penalties.--The provisions of
                    paragraph (7) of such section 1886(p) shall apply to
                    providers under this paragraph in the same manner as
                    they apply to hospitals under such section.
              (3) Definitions.--For purposes of this subsection:
                      (A) Post acute care provider.--The term ``post acute
                    care provider'' means--
                              (i) a skilled nursing facility (as defined in
                            section 1819(a) of the Social Security Act);
                              (ii) an inpatient rehabilitation facility
                            (described in section 1886(h)(1)(A) of such
                            Act);
                              (iii) a home health agency (as defined in
                            section 1861(o) of such Act); and
                              (iv) a long term care hospital (as defined in
                            section 1861(ccc) of such Act).
                      (B) Other terms .--The terms ``applicable
                    condition'', ``applicable hospital'', and
                    ``readmission'' have the meanings given such terms in
                    section 1886(p)(5) of the Social Security Act, as added
                    by subsection (a)(1).
      (d) Physicians.--
              (1) Study.--The Secretary of Health and Human Services shall
            conduct a study to determine how the readmissions policy
            described in the previous subsections could be applied to
            physicians.
              (2) Considerations.--In conducting the study, the Secretary
            shall consider approaches such as--
                      (A) creating a new code (or codes) and payment amount
                    (or amounts) under the fee schedule in section 1848 of
                    the Social Security Act (in a budget neutral manner)
                    for services furnished by an appropriate physician who
                    sees an individual within the first week after
                    discharge from a hospital or critical access hospital;
                      (B) developing measures of rates of readmission for
                    individuals treated by physicians;
                      (C) applying a payment reduction for physicians who
                    treat the patient during the initial admission that
                    results in a readmission; and
                      (D) methods for attributing payments or payment
                    reductions to the appropriate physician or physicians.
              (3) Report.--The Secretary shall issue a public report on
            such study not later than the date that is one year after the
            date of the enactment of this Act.
      (e) Funding.--For purposes of carrying out the provisions of this
    section, in addition to funds otherwise available, out of any funds in
    the Treasury not otherwise appropriated, there are appropriated to the
    Secretary of Health and Human Services for the Center for Medicare &
    Medicaid Services Program Management Account $25,000,000 for each
    fiscal year beginning with 2010. Amounts appropriated under this
    subsection for a fiscal year shall be available until expended.

    SEC. 1152. POST ACUTE CARE SERVICES PAYMENT REFORM PLAN AND BUNDLING
                        PILOT PROGRAM.

      (a) Plan.--
              (1) In general.--The Secretary of Health and Human Services
            (in this section referred to as the ``Secretary'') shall
            develop a detailed plan to reform payment for post acute care
            (PAC) services under the Medicare program under title XVIII of
            the Social Security Act (in this section referred to as the
            ``Medicare program)''. The goals of such payment reform are
            to--
                      (A) improve the coordination, quality, and efficiency
                    of such services; and
                      (B) improve outcomes for individuals such as reducing
                    the need for readmission to hospitals from providers of
                    such services.
              (2) Bundling post acute services.--The plan described in
            paragraph (1) shall include detailed specifications for a
            bundled payment for post acute services (in this section
            referred to as the ``post acute care bundle''), and may include
            other approaches determined appropriate by the Secretary.
              (3) Post acute services.--For purposes of this section, the
            term ``post acute services'' means services for which payment
            may be made under the Medicare program that are furnished by
            skilled nursing facilities, inpatient rehabilitation
            facilities, long term care hospitals, hospital based outpatient
            rehabilitation facilities and home health agencies to an
            individual after discharge of such individual from a hospital,
            and such other services determined appropriate by the
            Secretary.
      (b) Details.--The plan described in subsection (a)(1) shall include
    consideration of the following issues:
              (1) The nature of payments under a post acute care bundle,
            including the type of provider or entity to whom payment should
            be made, the scope of activities and services included in the
            bundle, whether payment for physicians' services should be
            included in the bundle, and the period covered by the bundle.
              (2) Whether the payment should be consolidated with the
            payment under the inpatient prospective system under section
            1886 of the Social Security Act (in this section referred to as
            MS-DRGs) or a separate payment should be established for such
            bundle, and if a separate payment is established, whether it
            should be made only upon use of post acute care services or for
            every discharge.
              (3) Whether the bundle should be applied across all
            categories of providers of inpatient services (including
            critical access hospitals) and post acute care services or
            whether it should be limited to certain categories of
            providers, services, or discharges, such as high volume or high
            cost MS-DRGs.
              (4) The extent to which payment rates could be established to
            achieve offsets for efficiencies that could be expected to be
            achieved with a bundle payment, whether such rates should be
            established on a national basis or for different geographic
            areas, should vary according to discharge, case mix, outliers,
            and geographic differences in wages or other appropriate
            adjustments, and how to update such rates.
              (5) The nature of protections needed for individuals under a
            system of bundled payments to ensure that individuals receive
            quality care, are furnished the level and amount of services
            needed as determined by an appropriate assessment instrument,
            are offered choice of provider, and the extent to which
            transitional care services would improve quality of care for
            individuals and the functioning of a bundled post-acute system.
              (6) The nature of relationships that may be required between
            hospitals and providers of post acute care services to
            facilitate bundled payments, including the application of
            gainsharing, anti-referral, anti-kickback, and anti-trust laws.
              (7) Quality measures that would be appropriate for reporting
            by hospitals and post acute providers (such as measures that
            assess changes in functional status and quality measures
            appropriate for each type of post acute services provider
            including how the reporting of such quality measures could be
            coordinated with other reporting of such quality measures by
            such providers otherwise required).
              (8) How cost-sharing for a post acute care bundle should be
            treated relative to current rules for cost-sharing for
            inpatient hospital, home health, skilled nursing facility, and
            other services.
              (9) How other programmatic issues should be treated in a post
            acute care bundle, including rules specific to various types of
            post-acute providers such as the post-acute transfer policy,
            three-day hospital stay to qualify for services furnished by
            skilled nursing facilities, and the coordination of payments
            and care under the Medicare program and the Medicaid program.
              (10) Such other issues as the Secretary deems appropriate.
      (c) Consultations and Analysis.--
              (1) Consultation with stakeholders.--In developing the plan
            under subsection (a)(1), the Secretary shall consult with
            relevant stakeholders and shall consider experience with such
            research studies and demonstrations that the Secretary
            determines appropriate.
              (2) Analysis and data collection.--In developing such plan,
            the Secretary shall--
                      (A) analyze the issues described in subsection (b)
                    and other issues that the Secretary determines
                    appropriate;
                      (B) analyze the impacts (including geographic
                    impacts) of post acute service reform approaches,
                    including bundling of such services on individuals,
                    hospitals, post acute care providers, and physicians;
                      (C) use existing data (such as data submitted on
                    claims) and collect such data as the Secretary
                    determines are appropriate to develop such plan
                    required in this section; and
                      (D) if patient functional status measures are
                    appropriate for the analysis, to the extent practical,
                    build upon the CARE tool being developed pursuant to
                    section 5008 of the Deficit Reduction Act of 2005.
      (d) Administration.--
              (1) Funding.--For purposes of carrying out the provisions of
            this section, in addition to funds otherwise available, out of
            any funds in the Treasury not otherwise appropriated, there are
            appropriated to the Secretary for the Center for Medicare &
            Medicaid Services Program Management Account $15,000,000 for
            each of the fiscal years 2010 through 2012. Amounts
            appropriated under this paragraph for a fiscal year shall be
            available until expended.
              (2) Expedited data collection.--Chapter 35 of title 44,
            United States Code shall not apply to this section.
      (e) Public Reports.--
              (1) Interim reports.--The Secretary shall issue interim
            public reports on a periodic basis on the plan described in
            subsection (a)(1), the issues described in subsection (b), and
            impact analyses as the Secretary determines appropriate.
              (2) Final report.--Not later than the date that is 3 years
            after the date of the enactment of this Act, the Secretary
            shall issue a final public report on such plan, including
            analysis of issues described in subsection (b) and impact
            analyses.
      (f) Conversion of Acute Care Episode Demonstration to Pilot Program
    and Expansion to Include Post Acute Services.--
              (1) In general.--Part E of title XVIII of the Social Security
            Act is amended by inserting after section 1866C the following
            new section:
     ``conversion of acute care episode demonstration to pilot program and
                    expansion to include post acute services
      ``Sec. 1866D.  (a) Conversion and Expansion.--
              ``(1) In general.--By not later than January 1, 2011, the
            Secretary shall, for the purpose of promoting the use of
            bundled payments to promote efficient and high quality delivery
            of care--
                      ``(A) convert the acute care episode demonstration
                    program conducted under section 1866C to a pilot
                    program; and
                      ``(B) subject to subsection (c), expand such program
                    as so converted to include post acute services and such
                    other services the Secretary determines to be
                    appropriate, which may include transitional services.
              ``(2) Bundled payment structures.--
                      ``(A) In general.--In carrying out paragraph (1), the
                    Secretary may apply bundled payments with respect to--
                              ``(i) hospitals and physicians;
                              ``(ii) hospitals and post-acute care
                            providers;
                              ``(iii) hospitals, physicians, and post-acute
                            care providers; or
                              ``(iv) combinations of post-acute providers.
                      ``(B) Further application.--
                              ``(i) In general.--In carrying out paragraph
                            (1), the Secretary shall apply bundled payments
                            in a manner so as to include collaborative care
                            networks and continuing care hospitals.
                              ``(ii) Collaborative care network defined.--
                            For purposes of this subparagraph, the term
                            `collaborative care network' means a consortium
                            of health care providers that provides a
                            comprehensive range of coordinated and
                            integrated health care services to low-income
                            patient populations (including the uninsured)
                            which may include coordinated and comprehensive
                            care by safety net providers to reduce any
                            unnecessary use of items and services furnished
                            in emergency departments, manage chronic
                            conditions, improve quality and efficiency of
                            care, increase preventive services, and promote
                            adherence to post-acute and follow-up care
                            plans.
                              ``(iii) Continuing care hospital defined.--
                            For purposes of this subparagraph, the term
                            `continuing care hospital' means an entity that
                            has demonstrated the ability to meet patient
                            care and patient safety standards and that
                            provides under common management the medical
                            and rehabilitation services provided in
                            inpatient rehabilitation hospitals and units
                            (as defined in section 1886(d)(1)(B)(ii)),
                            long-term care hospitals (as defined in section
                            1886(d)(1)(B)(iv)(I)), and skilled nursing
                            facilities (as defined in section 1819(a)) that
                            are located in a hospital described in section
                            1886(d).
      ``(b) Scope.--The pilot program under subsection (a) may include
    additional geographic areas and additional conditions which account for
    significant program spending, as defined by the Secretary. Nothing in
    this subsection shall be construed as limiting the number of hospital
    and physician groups or the number of hospital and post-acute provider
    groups that may participate in the pilot program.
      ``(c) Limitation.--The Secretary shall only expand the pilot program
    under subsection (a) if the Secretary finds that--
              ``(1) the demonstration program under section 1866C and pilot
            program under this section maintain or increase the quality of
            care received by individuals enrolled under this title; and
              ``(2) such demonstration program and pilot program reduce
            program expenditures and, based on the certification under
            subsection (d), that the expansion of such pilot program would
            result in estimated spending that would be less than what
            spending would otherwise be in the absence of this section.
      ``(d) Certification.--For purposes of subsection (c), the Chief
    Actuary of the Centers for Medicare & Medicaid Services shall certify
    whether expansion of the pilot program under this section would result
    in estimated spending that would be less than what spending would
    otherwise be in the absence of this section.
      ``(e) Voluntary Participation.--Nothing in this paragraph shall be
    construed as requiring the participation of an entity in the pilot
    program under this section.
      ``(f) Evaluation on Cost and Quality of Care.--The Secretary shall
    conduct an evaluation of the pilot program under subsection (a) to
    study the effect of such program on costs and quality of care. The
    findings of such evaluation shall be included in the final report
    required under section 1152(e)(2) of America's Affordable Health
    Choices Act of 2009.
      ``(g) Study of Additional Bundling and Episode-based Payment for
    Physicians' Services.--
              ``(1) In general.--The Secretary shall provide for a study of
            and development of a plan for testing additional ways to
            increase bundling of payments for physicians in connection with
            an episode of care, such as in connection with outpatient
            hospital services or services rendered in physicians' offices,
            other than those provided under the pilot program.
              ``(2) Application.--The Secretary may implement such a plan
            through a demonstration program.''.
              (2) Conforming amendment.--Section 1866C(b) of the Social
            Security Act (42 U.S.C. 1395cc-3(b)) is amended by striking
            ``The Secretary'' and inserting ``Subject to section 1866D, the
            Secretary''.

    SEC. 1153. HOME HEALTH PAYMENT UPDATE FOR 2010.

      Section 1895(b)(3)(B)(ii) of the Social Security Act (42 U.S.C.
    1395fff(b)(3)(B)(ii)) is amended--
              (1) in subclause (IV), by striking ``and'';
              (2) by redesignating subclause (V) as subclause (VII); and
              (3) by inserting after subclause (IV) the following new
            subclauses:
                                      ``(V) 2007, 2008, and 2009, subject
                                    to clause (v), the home health market
                                    basket percentage increase;
                                      ``(VI) 2010, subject to clause (v), 0
                                    percent; and''.

    SEC. 1154. PAYMENT ADJUSTMENTS FOR HOME HEALTH CARE.

      (a) Acceleration of Adjustment for Case Mix Changes.--Section
    1895(b)(3)(B) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B))
    is amended--
              (1) in clause (iv), by striking ``Insofar as'' and inserting
            ``Subject to clause (vi), insofar as''; and
              (2) by adding at the end the following new clause:
                              ``(vi) Special rule for case mix changes for
                            2011.--
                                      ``(I) In general.--With respect to
                                    the case mix adjustments established in
                                    section 484.220(a) of title 42, Code of
                                    Federal Regulations, the Secretary
                                    shall apply, in 2010, the adjustment
                                    established in paragraph (3) of such
                                    section for 2011, in addition to
                                    applying the adjustment established in
                                    paragraph (2) for 2010.
                                      ``(II) Construction.--Nothing in this
                                    clause shall be construed as limiting
                                    the amount of adjustment for case mix
                                    for 2010 or 2011 if more recent data
                                    indicate an appropriate adjustment that
                                    is greater than the amount established
                                    in the section described in subclause
                                    (I).''.
      (b) Rebasing Home Health Prospective Payment Amount.--Section
    1895(b)(3)(A) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(A))
    is amended--
              (1) in clause (i)--
                      (A) in subclause (III), by inserting ``and before
                    2011'' after ``after the period described in subclause
                    (II)''; and
                      (B) by inserting after subclause (III) the following
                    new subclauses:
                                      ``(IV) Subject to clause (iii)(I),
                                    for 2011, such amount (or amounts)
                                    shall be adjusted by a uniform
                                    percentage determined to be appropriate
                                    by the Secretary based on analysis of
                                    factors such as changes in the average
                                    number and types of visits in an
                                    episode, the change in intensity of
                                    visits in an episode, growth in cost
                                    per episode, and other factors that the
                                    Secretary considers to be relevant.
                                      ``(V) Subject to clause (iii)(II),
                                    for a year after 2011, such a amount
                                    (or amounts) shall be equal to the
                                    amount (or amounts) determined under
                                    this clause for the previous year,
                                    updated under subparagraph (B).''; and
              (2) by adding at the end the following new clause:
                              ``(iii) Special rule in case of inability to
                            effect timely rebasing.--
                                      ``(I) Application of proxy amount for
                                    2011.--If the Secretary is not able to
                                    compute the amount (or amounts) under
                                    clause (i)(IV) so as to permit, on a
                                    timely basis, the application of such
                                    clause for 2011, the Secretary shall
                                    substitute for such amount (or amounts)
                                    95 percent of the amount (or amounts)
                                    that would otherwise be specified under
                                    clause (i)(III) if it applied for 2011.
                                      ``(II) Adjustment for subsequent
                                    years based on data.--If the Secretary
                                    applies subclause (I), the Secretary
                                    before July 1, 2011, shall compare the
                                    amount (or amounts) applied under such
                                    subclause with the amount (or amounts)
                                    that should have been applied under
                                    clause (i)(IV). The Secretary shall
                                    decrease or increase the prospective
                                    payment amount (or amounts) under
                                    clause (i)(V) for 2012 (or, at the
                                    Secretary's discretion, over a period
                                    of several years beginning with 2012)
                                    by the amount (if any) by which the
                                    amount (or amounts) applied under
                                    subclause (I) is greater or less,
                                    respectively, than the amount (or
                                    amounts) that should have been applied
                                    under clause (i)(IV).''.

    SEC. 1155. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET
                        UPDATE FOR HOME HEALTH SERVICES.

      (a) In General.--Section 1895(b)(3)(B) of the Social Security Act (42
    U.S.C. 1395fff(b)(3)(B)) is amended--
              (1) in clause (iii), by inserting ``(including being subject
            to the productivity adjustment described in section
            1886(b)(3)(B)(iii)(II))'' after ``in the same manner''; and
              (2) in clause (v)(I), by inserting ``(but not below 0)''
            after ``reduced''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to home health market basket percentage increases for years beginning
    with 2010.

    SEC. 1156. LIMITATION ON MEDICARE EXCEPTIONS TO THE PROHIBITION ON
                        CERTAIN PHYSICIAN REFERRALS MADE TO HOSPITALS.

      (a) In General.--Section 1877 of the Social Security Act (42 U.S.C.
    1395nn) is amended--
              (1) in subsection (d)(2)--
                      (A) in subparagraph (A), by striking ``and'' at the
                    end;
                      (B) in subparagraph (B), by striking the period at
                    the end and inserting ``; and''; and
                      (C) by adding at the end the following new
                    subparagraph:
                      ``(C) in the case where the entity is a hospital, the
                    hospital meets the requirements of paragraph (3)(D).'';
              (2) in subsection (d)(3)--
                      (A) in subparagraph (B), by striking ``and'' at the
                    end;
                      (B) in subparagraph (C), by striking the period at
                    the end and inserting ``; and''; and
                      (C) by adding at the end the following new
                    subparagraph:
                      ``(D) the hospital meets the requirements described
                    in subsection (i)(1).'';
              (3) by amending subsection (f) to read as follows:
      ``(f) Reporting and Disclosure Requirements.--
              ``(1) In general.--Each entity providing covered items or
            services for which payment may be made under this title shall
            provide the Secretary with the information concerning the
            entity's ownership, investment, and compensation arrangements,
            including--
                      ``(A) the covered items and services provided by the
                    entity, and
                      ``(B) the names and unique physician identification
                    numbers of all physicians with an ownership or
                    investment interest (as described in subsection
                    (a)(2)(A)), or with a compensation arrangement (as
                    described in subsection (a)(2)(B)), in the entity, or
                    whose immediate relatives have such an ownership or
                    investment interest or who have such a compensation
                    relationship with the entity.
            Such information shall be provided in such form, manner, and at
            such times as the Secretary shall specify. The requirement of
            this subsection shall not apply to designated health services
            provided outside the United States or to entities which the
            Secretary determines provide services for which payment may be
            made under this title very infrequently.
              ``(2) Requirements for hospitals with physician ownership or
            investment.--In the case of a hospital that meets the
            requirements described in subsection (i)(1), the hospital
            shall--
                      ``(A) submit to the Secretary an initial report, and
                    periodic updates at a frequency determined by the
                    Secretary, containing a detailed description of the
                    identity of each physician owner and physician investor
                    and any other owners or investors of the hospital;
                      ``(B) require that any referring physician owner or
                    investor discloses to the individual being referred, by
                    a time that permits the individual to make a meaningful
                    decision regarding the receipt of services, as
                    determined by the Secretary, the ownership or
                    investment interest, as applicable, of such referring
                    physician in the hospital; and
                      ``(C) disclose the fact that the hospital is
                    partially or wholly owned by one or more physicians or
                    has one or more physician investors--
                              ``(i) on any public website for the hospital;
                            and
                              ``(ii) in any public advertising for the
                            hospital.
            The information to be reported or disclosed under this
            paragraph shall be provided in such form, manner, and at such
            times as the Secretary shall specify. The requirements of this
            paragraph shall not apply to designated health services
            furnished outside the United States or to entities which the
            Secretary determines provide services for which payment may be
            made under this title very infrequently.
              ``(3) Publication of information.--The Secretary shall
            publish, and periodically update, the information submitted by
            hospitals under paragraph (2)(A) on the public Internet website
            of the Centers for Medicare & Medicaid Services.'';
              (4) by amending subsection (g)(5) to read as follows:
              ``(5) Failure to report or disclose information.--
                      ``(A) Reporting.--Any person who is required, but
                    fails, to meet a reporting requirement of paragraphs
                    (1) and (2)(A) of subsection (f) is subject to a civil
                    money penalty of not more than $10,000 for each day for
                    which reporting is required to have been made.
                      ``(B) Disclosure.--Any physician who is required, but
                    fails, to meet a disclosure requirement of subsection
                    (f)(2)(B) or a hospital that is required, but fails, to
                    meet a disclosure requirement of subsection (f)(2)(C)
                    is subject to a civil money penalty of not more than
                    $10,000 for each case in which disclosure is required
                    to have been made.
                      ``(C) Application.--The provisions of section 1128A
                    (other than the first sentence of subsection (a) and
                    other than subsection (b)) shall apply to a civil money
                    penalty under subparagraphs (A) and (B) in the same
                    manner as such provisions apply to a penalty or
                    proceeding under section 1128A(a).''; and
              (5) by adding at the end the following new subsection:
      ``(i) Requirements To Qualify for Rural Provider and Hospital
    Ownership Exceptions to Self-referral Prohibition.--
              ``(1) Requirements described.--For purposes of subsection
            (d)(3)(D), the requirements described in this paragraph are as
            follows:
                      ``(A) Provider agreement.--The hospital had--
                              ``(i) physician ownership or investment on
                            January 1, 2009; and
                              ``(ii) a provider agreement under section
                            1866 in effect on such date.
                      ``(B) Prohibition on physician ownership or
                    investment.--The percentage of the total value of the
                    ownership or investment interests held in the hospital,
                    or in an entity whose assets include the hospital, by
                    physician owners or investors in the aggregate does not
                    exceed such percentage as of the date of enactment of
                    this subsection.
                      ``(C) Prohibition on expansion of facility
                    capacity.--Except as provided in paragraph (2), the
                    number of operating rooms, procedure rooms, or beds of
                    the hospital at any time on or after the date of the
                    enactment of this subsection are no greater than the
                    number of operating rooms, procedure rooms, or beds,
                    respectively, as of such date.
                      ``(D) Ensuring bona fide ownership and investment.--
                              ``(i) Any ownership or investment interests
                            that the hospital offers to a physician are not
                            offered on more favorable terms than the terms
                            offered to a person who is not in a position to
                            refer patients or otherwise generate business
                            for the hospital.
                              ``(ii) The hospital (or any investors in the
                            hospital) does not directly or indirectly
                            provide loans or financing for any physician
                            owner or investor in the hospital.
                              ``(iii) The hospital (or any investors in the
                            hospital) does not directly or indirectly
                            guarantee a loan, make a payment toward a loan,
                            or otherwise subsidize a loan, for any
                            physician owner or investor or group of
                            physician owners or investors that is related
                            to acquiring any ownership or investment
                            interest in the hospital.
                              ``(iv) Ownership or investment returns are
                            distributed to each owner or investor in the
                            hospital in an amount that is directly
                            proportional to the ownership or investment
                            interest of such owner or investor in the
                            hospital.
                              ``(v) The investment interest of the owner or
                            investor is directly proportional to the
                            owner's or investor's capital contributions
                            made at the time the ownership or investment
                            interest is obtained.
                              ``(vi) Physician owners and investors do not
                            receive, directly or indirectly, any guaranteed
                            receipt of or right to purchase other business
                            interests related to the hospital, including
                            the purchase or lease of any property under the
                            control of other owners or investors in the
                            hospital or located near the premises of the
                            hospital.
                              ``(vii) The hospital does not offer a
                            physician owner or investor the opportunity to
                            purchase or lease any property under the
                            control of the hospital or any other owner or
                            investor in the hospital on more favorable
                            terms than the terms offered to a person that
                            is not a physician owner or investor.
                              ``(viii) The hospital does not condition any
                            physician ownership or investment interests
                            either directly or indirectly on the physician
                            owner or investor making or influencing
                            referrals to the hospital or otherwise
                            generating business for the hospital.
                      ``(E) Patient safety.--In the case of a hospital that
                    does not offer emergency services, the hospital has the
                    capacity to--
                              ``(i) provide assessment and initial
                            treatment for medical emergencies; and
                              ``(ii) if the hospital lacks additional
                            capabilities required to treat the emergency
                            involved, refer and transfer the patient with
                            the medical emergency to a hospital with the
                            required capability.
                      ``(F) Limitation on application to certain converted
                    facilities.--The hospital was not converted from an
                    ambulatory surgical center to a hospital on or after
                    the date of enactment of this subsection.
              ``(2) Exception to prohibition on expansion of facility
            capacity.--
                      ``(A) Process.--
                              ``(i) Establishment.--The Secretary shall
                            establish and implement a process under which a
                            hospital may apply for an exception from the
                            requirement under paragraph (1)(C).
                              ``(ii) Opportunity for community input.--The
                            process under clause (i) shall provide persons
                            and entities in the community in which the
                            hospital applying for an exception is located
                            with the opportunity to provide input with
                            respect to the application.
                              ``(iii) Timing for implementation.--The
                            Secretary shall implement the process under
                            clause (i) on the date that is one month after
                            the promulgation of regulations described in
                            clause (iv).
                              ``(iv) Regulations.--Not later than the first
                            day of the month beginning 18 months after the
                            date of the enactment of this subsection, the
                            Secretary shall promulgate regulations to carry
                            out the process under clause (i). The Secretary
                            may issue such regulations as interim final
                            regulations.
                      ``(B) Frequency.--The process described in
                    subparagraph (A) shall permit a hospital to apply for
                    an exception up to once every 2 years.
                      ``(C) Permitted increase.--
                              ``(i) In general.--Subject to clause (ii) and
                            subparagraph (D), a hospital granted an
                            exception under the process described in
                            subparagraph (A) may increase the number of
                            operating rooms, procedure rooms, or beds of
                            the hospital above the baseline number of
                            operating rooms, procedure rooms, or beds,
                            respectively, of the hospital (or, if the
                            hospital has been granted a previous exception
                            under this paragraph, above the number of
                            operating rooms, procedure rooms, or beds,
                            respectively, of the hospital after the
                            application of the most recent increase under
                            such an exception).
                              ``(ii) 100 percent increase limitation.--The
                            Secretary shall not permit an increase in the
                            number of operating rooms, procedure rooms, or
                            beds of a hospital under clause (i) to the
                            extent such increase would result in the number
                            of operating rooms, procedure rooms, or beds of
                            the hospital exceeding 200 percent of the
                            baseline number of operating rooms, procedure
                            rooms, or beds of the hospital.
                              ``(iii) Baseline number of operating rooms,
                            procedure rooms, or beds.--In this paragraph,
                            the term `baseline number of operating rooms,
                            procedure rooms, or beds' means the number of
                            operating rooms, procedure rooms, or beds of a
                            hospital as of the date of enactment of this
                            subsection.
                      ``(D) Increase limited to facilities on the main
                    campus of the hospital.--Any increase in the number of
                    operating rooms, procedure rooms, or beds of a hospital
                    pursuant to this paragraph may only occur in facilities
                    on the main campus of the hospital.
                      ``(E) Conditions for approval of an increase in
                    facility capacity.--The Secretary may grant an
                    exception under the process described in subparagraph
                    (A) only to a hospital--
                              ``(i) that is located in a county in which
                            the percentage increase in the population
                            during the most recent 5-year period for which
                            data are available is estimated to be at least
                            150 percent of the percentage increase in the
                            population growth of the State in which the
                            hospital is located during that period, as
                            estimated by Bureau of the Census and available
                            to the Secretary;
                              ``(ii) whose annual percent of total
                            inpatient admissions that represent inpatient
                            admissions under the program under title XIX is
                            estimated to be equal to or greater than the
                            average percent with respect to such admissions
                            for all hospitals located in the county in
                            which the hospital is located;
                              ``(iii) that does not discriminate against
                            beneficiaries of Federal health care programs
                            and does not permit physicians practicing at
                            the hospital to discriminate against such
                            beneficiaries;
                              ``(iv) that is located in a State in which
                            the average bed capacity in the State is
                            estimated to be less than the national average
                            bed capacity;
                              ``(v) that has an average bed occupancy rate
                            that is estimated to be greater than the
                            average bed occupancy rate in the State in
                            which the hospital is located; and
                              ``(vi) that meets other conditions as
                            determined by the Secretary.
                      ``(F) Procedure rooms.--In this subsection, the term
                    `procedure rooms' includes rooms in which
                    catheterizations, angiographies, angiograms, and
                    endoscopies are furnished, but such term shall not
                    include emergency rooms or departments (except for
                    rooms in which catheterizations, angiographies,
                    angiograms, and endoscopies are furnished).
                      ``(G) Publication of final decisions.--Not later than
                    120 days after receiving a complete application under
                    this paragraph, the Secretary shall publish on the
                    public Internet website of the Centers for Medicare &
                    Medicaid Services the final decision with respect to
                    such application.
                      ``(H) Limitation on review.--There shall be no
                    administrative or judicial review under section 1869,
                    section 1878, or otherwise of the exception process
                    under this paragraph, including the establishment of
                    such process, and any determination made under such
                    process.
              ``(3) Physician owner or investor defined.--For purposes of
            this subsection and subsection (f)(2), the term `physician
            owner or investor' means a physician (or an immediate family
            member of such physician) with a direct or an indirect
            ownership or investment interest in the hospital.
              ``(4) Patient safety requirement.--In the case of a hospital
            to which the requirements of paragraph (1) apply, insofar as
            the hospital admits a patient and does not have any physician
            available on the premises 24 hours per day, 7 days per week,
            before admitting the patient--
                      ``(A) the hospital shall disclose such fact to the
                    patient; and
                      ``(B) following such disclosure, the hospital shall
                    receive from the patient a signed acknowledgment that
                    the patient understands such fact.
              ``(5) Clarification.--Nothing in this subsection shall be
            construed as preventing the Secretary from terminating a
            hospital's provider agreement if the hospital is not in
            compliance with regulations pursuant to section 1866.''.
      (b) Verifying Compliance.--The Secretary of Health and Human Services
    shall establish policies and procedures to verify compliance with the
    requirements described in subsections (i)(1) and (i)(4) of section 1877
    of the Social Security Act, as added by subsection (a)(5). The
    Secretary may use unannounced site reviews of hospitals and audits to
    verify compliance with such requirements.
      (c) Implementation.--
              (1) Funding.--For purposes of carrying out the amendments
            made by subsection (a) and the provisions of subsection (b), in
            addition to funds otherwise available, out of any funds in the
            Treasury not otherwise appropriated there are appropriated to
            the Secretary of Health and Human Services for the Centers for
            Medicare & Medicaid Services Program Management Account
            $5,000,000 for each fiscal year beginning with fiscal year
            2010. Amounts appropriated under this paragraph for a fiscal
            year shall be available until expended.
              (2) Administration.--Chapter 35 of title 44, United States
            Code, shall not apply to the amendments made by subsection (a)
            and the provisions of subsection (b).

    SEC. 1157. INSTITUTE OF MEDICINE STUDY OF GEOGRAPHIC ADJUSTMENT FACTORS
                        UNDER MEDICARE.

      (a) In General.--The Secretary of Health and Human Services shall
    enter into a contract with the Institute of Medicine of the National
    Academy of Science to conduct a comprehensive empirical study, and
    provide recommendations as appropriate, on the accuracy of the
    geographic adjustment factors established under sections 1848(e) and
    1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395w-4(e),
    11395ww(d)(3)).
      (b) Matters Included.--Such study shall include an evaluation and
    assessment of the following with respect to such adjustment factors:
              (1) Empirical validity of the adjustment factors.
              (2) Methodology used to determine the adjustment factors.
              (3) Measures used for the adjustment factors, taking into
            account--
                      (A) timeliness of data and frequency of revisions to
                    such data;
                      (B) sources of data and the degree to which such data
                    are representative of costs; and
                      (C) operational costs of providers who participate in
                    Medicare.
      (c) Evaluation.--Such study shall, within the context of the United
    States health care marketplace, evaluate and consider the following:
              (1) The effect of the adjustment factors on the level and
            distribution of the health care workforce and resources,
            including--
                      (A) recruitment and retention that takes into account
                    workforce mobility between urban and rural areas;
                      (B) ability of hospitals and other facilities to
                    maintain an adequate and skilled workforce; and
                      (C) patient access to providers and needed medical
                    technologies.
              (2) The effect of the adjustment factors on population health
            and quality of care.
              (3) The effect of the adjustment factors on the ability of
            providers to furnish efficient, high value care.
      (d) Report.--The contract under subsection (a) shall provide for the
    Institute of Medicine to submit, not later than one year after the date
    of the enactment of this Act, to the Secretary and the Congress a
    report containing results and recommendations of the study conducted
    under this section.
      (e) Funding.--There are authorized to be appropriated to carry out
    this section such sums as may be necessary.

    SEC. 1158. REVISION OF MEDICARE PAYMENT SYSTEMS TO ADDRESS GEOGRAPHIC
                        INEQUITIES.

      (a) Revision of Medicare Payment Systems.--Taking into account the
    recommendations described in the report under section 1157, and
    notwithstanding the geographic adjustments that would otherwise apply
    under section 1848(e) and section 1886(d)(3)(E) of the Social Security
    Act ((42 U.S.C. 1395w-4, 1395ww(d)), the Secretary of Health and Human
    Services shall include in proposed rules applicable to the rulemaking
    cycle for payment systems for physicians' services and inpatient
    hospital services under sections 1848 and section 1886(d) of such Act,
    respectively, proposals (as the Secretary determines to be appropriate)
    to revise the geographic adjustment factors used in such systems. Such
    proposals' rules shall be contained in the next rulemaking cycle
    following the submission to the Secretary of the report described in
    section 1157.
      (b) Payment Adjustments.--
              (1) Funding for improvements.--The Secretary shall use funds
            as provided under subsection (c) in making changes to the
            geographic adjustment factors pursuant to subsection (a). In
            making such changes to such geographic adjustment factors, the
            Secretary shall ensure that the estimated increased
            expenditures resulting from such changes does not exceed the
            amounts provided under subsection (c).
              (2) Ensuring fairness.--In carrying out this subsection, the
            Secretary shall not reduce the geographic adjustment below the
            factor that applied for such payment system in the payment year
            before such changes.
      (c) Funding.--Amounts in the Medicare Improvement Fund under section
    1898, as amended by section 1146, shall be available to the Secretary
    to make changes to the geographic adjustments factors as described in
    subsections (a) and (b) with respect to services furnished before
    January 1, 2014.   No more than one-half of such amounts shall be
    available with respect to services furnished in any one payment year.

    SEC. 1159. INSTITUTE OF MEDICINE STUDY OF GEOGRAPHIC VARIATION IN
                        HEALTH CARE SPENDING AND PROMOTING HIGH-VALUE
                        HEALTH CARE.

      (a) In General.--The Secretary of Health and Human Services shall
    enter into an agreement with the Institutes of Medicine of the National
    Academies (referred to in this section as the ``Institute'') to conduct
    a study on geographic variation in per capita health care spending
    among both the Medicare and privately insured populations. Such study
    shall include each of the following:
              (1) An evaluation of the extent and range of such variation
            using various units of geographic measurement.
              (2) The extent to which geographic variation can be
            attributed to differences in input prices, practice patterns,
            access to medical services, supply of medical services, socio-
            economic factors, and provider organizational models.
              (3) The extent to which variations in spending are correlated
            with patient access to care, distribution of health care
            resources, and consensus-based measures of health care quality.
              (4) The extent to which variation can be attributed to
            physician and practitioner discretion in making treatment
            decisions, and the degree to which discretionary treatment
            decisions are made that could be characterized as different
            from the best available medical evidence.
              (5) An assessment of the degree to which variation cannot be
            explained by empirical evidence.
              (6) Other factors the Institute deems appropriate.
      (b) Recommendations.--Taking into account the findings under
    subsection (a), the Institute shall recommend strategies for addressing
    variation in per capita spending by promoting high-value care (as
    defined in subsection (e)). In making such recommendations, the
    Institute shall consider each of the following:
              (1) Measurement and reporting on quality and population
            health.
              (2) Reducing fragmented and duplicative care.
              (3) Promoting the practice of evidence-based medicine.
              (4) Empowering patients to make value-based care decisions.
              (5) Leveraging the use of health information technology.
              (6) The role of financial and other incentives.
              (7) Other topics the Institute deems appropriate.
      (c) Specific Considerations.--In making the recommendations under
    subsection (b), the Institute shall specifically address whether
    payment systems under title XVIII of the Social Security Act for
    physicians and hospitals should be further modified to incentivize
    high-value care. In so doing, the Institute shall consider the adoption
    of a value index based on a composite of appropriate measures of
    quality and cost that would adjust provider payments on a regional or
    provider-level basis. If the Institute finds that application of such a
    value index would significantly incentivize providers to furnish high-
    value care, it shall make specific recommendations on how such an index
    would be designed and implemented. In so doing, it should identify
    specific measures of quality and cost appropriate for use in such an
    index, and include a thorough analysis (including on a geographic
    basis) of how payments and spending under such title would be affected
    by such an index.
      (d) Report.-- Not later than three years after the date of the
    enactment of this Act, the Institute shall submit to Congress a report
    containing findings and recommendations of the study conducted under
    this section.
      (e) High-value Care Defined.--For purposes of this section, the term
    ``high-value care'' means the efficient delivery of high quality,
    evidence-based, patient-centered care.
      (f) Authorization of Appropriations.--There is authorized to be
    appropriated such sums as are necessary to carry out this section. Such
    sums are authorized to remain available until expended.

                     Subtitle D--Medicare Advantage Reforms

                       PART 1--PAYMENT AND ADMINISTRATION

    SEC. 1161. PHASE-IN OF PAYMENT BASED ON FEE-FOR-SERVICE COSTS.

      Section 1853 of the Social Security Act (42 U.S.C. 1395w-23) is
    amended--
              (1) in subsection (j)(1)(A)--
                      (A) by striking ``beginning with 2007'' and inserting
                    ``for 2007, 2008, 2009, and 2010''; and
                      (B) by inserting after ``(k)(1)'' the following: ``,
                    or, beginning with 2011, \1/12\ of the blended
                    benchmark amount determined under subsection (n)(1)'';
                    and
              (2) by adding at the end the following new subsection:
      ``(n) Determination of Blended Benchmark Amount.--
              ``(1) In general.--For purposes of subsection (j), subject to
            paragraphs (3) and (4), the term `blended benchmark amount'
            means for an area--
                      ``(A) for 2011 the sum of--
                              ``(i) \2/3\ of the applicable amount (as
                            defined in subsection (k)) for the area and
                            year; and
                              ``(ii) \1/3\ of the amount specified in
                            paragraph (2) for the area and year;
                      ``(B) for 2012 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) for the area and year; and
                      ``(C) for a subsequent year the amount specified in
                    paragraph (2) for the area and year.
              ``(2) Specified amount.--The amount specified in this
            paragraph for an area and year is the amount specified in
            subsection (c)(1)(D)(i) for the area and year adjusted (in a
            manner specified by the Secretary) to take into account the
            phase-out in the indirect costs of medical education from
            capitation rates described in subsection (k)(4).
              ``(3) Fee-for-service payment floor.--In no case shall the
            blended benchmark amount for an area and year be less than the
            amount specified in paragraph (2).
              ``(4) Exception for pace plans.--This subsection shall not
            apply to payments to a PACE program under section 1894.''.

    SEC. 1162. QUALITY BONUS PAYMENTS.

      (a) In General.--Section 1853 of the Social Security Act (42 U.S.C.
    1395w-23), as amended by section 1161, is amended--
              (1) in subsection (j), by inserting ``subject to subsection
            (o),'' after ``For purposes of this part,''; and
              (2) by adding at the end the following new subsection:
      ``(o) Quality Based Payment Adjustment.--
              ``(1) In general.--In the case of a qualifying plan in a
            qualifying county with respect to a year beginning with 2011,
            the blended benchmark amount under subsection (n)(1) shall be
            increased--
                      ``(A) for 2011, by 2.6 percent;
                      ``(B) for 2012, by 5.3 percent; and
                      ``(C) for a subsequent year, by 8.0 percent.
              ``(2) Qualifying plan and qualifying county defined.--For
            purposes of this subsection:
                      ``(A) Qualifying plan.--The term `qualifying plan'
                    means, for a year and subject to paragraph (4), a plan
                    that, in a preceding year specified by the Secretary,
                    had a quality ranking (based on the quality ranking
                    system established by the Centers for Medicare &
                    Medicaid Services for Medicare Advantage plans) of 4
                    stars or higher.
                      ``(B) Qualifying county.--The term `qualifying
                    county' means, for a year, a county--
                              ``(i) that ranked within the lowest quartile
                            of counties in the amount specified in
                            subsection (n)(2) for the year specified by the
                            Secretary under subparagraph (A); and
                              ``(ii) for which, as of June of such
                            specified year, of the Medicare Advantage
                            eligible individuals residing in the county--
                                      ``(I) at least 50 percent of such
                                    individuals were enrolled in Medicare
                                    Advantage plans; and
                                      ``(II) of the residents so enrolled
                                    at least 50 percent of such individuals
                                    were enrolled in such plans with a
                                    quality ranking (based on the quality
                                    ranking system established by the
                                    Centers for Medicare & Medicaid
                                    Services for Medicare Advantage plans)
                                    of 4 stars or higher.
              ``(3) Notification.--The Secretary, in the annual
            announcement required under subsection (b)(1)(B) in 2010 and
            each succeeding year, shall notify the Medicare Advantage
            organization that is offering a qualifying plan in a qualifying
            county of such identification for the year. The Secretary shall
            provide for publication on the website for the Medicare program
            of the information described in the previous sentence.
              ``(4) Authority to disqualify deficient plans.--The Secretary
            may determine that a Medicare Advantage plan is not a
            qualifying plan if the Secretary has identified deficiencies in
            the plan's compliance with rules for Medicare Advantage plans
            under this part.''.

    SEC. 1163. EXTENSION OF SECRETARIAL CODING INTENSITY ADJUSTMENT
                        AUTHORITY.

      Section 1853(a)(1)(C)(ii) of the Social Security Act (42 U.S.C.
    1395w-23(a)(1)(C)(ii) is amended--
              (1) in the matter before subclause (I), by striking ``through
            2010'' and inserting ``and each subsequent year''; and
              (2) in subclause (II)--
                      (A) by inserting ``periodically'' before ``conduct an
                    analysis'';
                      (B) by inserting ``on a timely basis'' after ``are
                    incorporated''; and
                      (C) by striking ``only for 2008, 2009, and 2010'' and
                    inserting ``for 2008 and subsequent years''.

    SEC. 1164. SIMPLIFICATION OF ANNUAL BENEFICIARY ELECTION PERIODS.

      (a) 2 Week Processing Period for Annual Enrollment Period (AEP).--
    Paragraph (3)(B) of section 1851(e) of the Social Security Act (42
    U.S.C. 1395w-21(e)) is amended--
              (1) by striking ``and'' at the end of clause (iii);
              (2) in clause (iv)--
                      (A) by striking ``and succeeding years'' and
                    inserting ``, 2008, 2009, and 2010''; and
                      (B) by striking the period at the end and inserting
                    ``; and''; and
              (3) by adding at the end the following new clause:
                              ``(v) with respect to 2011 and succeeding
                            years, the period beginning on November 1 and
                            ending on December 15 of the year before such
                            year.''.
      (b) Elimination of 3-month Additional Open Enrollment Period (OEP).--
    Effective for plan years beginning with 2011, paragraph (2) of such
    section is amended by striking subparagraph (C).

    SEC. 1165. EXTENSION OF REASONABLE COST CONTRACTS.

      Section 1876(h)(5)(C) of the Social Security Act (42 U.S.C.
    1395mm(h)(5)(C)) is amended--
              (1) in clause (ii), by striking ``January 1, 2010'' and
            inserting ``January 1, 2012''; and
              (2) in clause (iii), by striking ``the service area for the
            year'' and inserting ``the portion of the plan's service area
            for the year that is within the service area of a reasonable
            cost reimbursement contract''.

    SEC. 1166. LIMITATION OF WAIVER AUTHORITY FOR EMPLOYER GROUP PLANS.

      (a) In General.--The first sentence of paragraph (2) of section
    1857(i) of the Social Security Act (42 U.S.C. 1395w-27(i)) is amended
    by inserting before the period at the end the following: ``, but only
    if 90 percent of the Medicare Advantage eligible individuals enrolled
    under such plan reside in a county in which the MA organization offers
    an MA local plan''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    for plan years beginning on or after January 1, 2011, and shall not
    apply to plans which were in effect as of December 31, 2010.

    SEC. 1167. IMPROVING RISK ADJUSTMENT FOR PAYMENTS.

      (a) Report to Congress.--Not later than 1 year after the date of the
    enactment of this Act, the Secretary of Health and Human Services shall
    submit to Congress a report that evaluates the adequacy of the risk
    adjustment system under section 1853(a)(1)(C) of the Social Security
    Act (42 U.S.C. 1395-23(a)(1)(C)) in predicting costs for beneficiaries
    with chronic or co-morbid conditions, beneficiaries dually-eligible for
    Medicare and Medicaid, and non-Medicaid eligible low-income
    beneficiaries; and the need and feasibility of including further
    gradations of diseases or conditions and multiple years of beneficiary
    data.
      (b) Improvements to Risk Adjustment.--Not later than January 1, 2012,
    the Secretary shall implement necessary improvements to the risk
    adjustment system under section 1853(a)(1)(C) of the Social Security
    Act (42 U.S.C. 1395-23(a)(1)(C)), taking into account the evaluation
    under subsection (a).

    SEC. 1168. ELIMINATION OF MA REGIONAL PLAN STABILIZATION FUND.

      (a) In General.--Section 1858 of the Social Security Act (42 U.S.C.
    1395w-27a) is amended by striking subsection (e).
      (b) Transition.--Any amount contained in the MA Regional Plan
    Stabilization Fund as of the date of the enactment of this Act shall be
    transferred to the Federal Supplementary Medical Insurance Trust Fund.

                 PART 2--BENEFICIARY PROTECTIONS AND ANTI-FRAUD

    SEC. 1171. LIMITATION ON COST-SHARING FOR INDIVIDUAL HEALTH SERVICES.

      (a) In General.--Section 1852(a)(1) of the Social Security Act (42
    U.S.C. 1395w-22(a)(1)) is amended--
              (1) in subparagraph (A), by inserting before the period at
            the end the following: ``with cost-sharing that is no greater
            (and may be less) than the cost-sharing that would otherwise be
            imposed under such program option'';
              (2) in subparagraph (B)(i), by striking ``or an actuarially
            equivalent level of cost-sharing as determined in this part'';
            and
              (3) by amending clause (ii) of subparagraph (B) to read as
            follows:
                              ``(ii) Permitting use of flat copayment or
                            per diem rate.--Nothing in clause (i) shall be
                            construed as prohibiting a Medicare Advantage
                            plan from using a flat copayment or per diem
                            rate, in lieu of the cost-sharing that would be
                            imposed under part A or B, so long as the
                            amount of the cost-sharing imposed does not
                            exceed the amount of the cost-sharing that
                            would be imposed under the respective part if
                            the individual were not enrolled in a plan
                            under this part.''.
      (b) Limitation for Dual Eligibles and Qualified Medicare
    Beneficiaries.--Section 1852(a)(7) of such Act is amended to read as
    follows:
              ``(7) Limitation on cost-sharing for dual eligibles and
            qualified medicare beneficiaries.--In the case of a individual
            who is a full-benefit dual eligible individual (as defined in
            section 1935(c)(6)) or a qualified medicare beneficiary (as
            defined in section 1905(p)(1)) who is enrolled in a Medicare
            Advantage plan, the plan may not impose cost-sharing that
            exceeds the amount of cost-sharing that would be permitted with
            respect to the individual under this title and title XIX if the
            individual were not enrolled with such plan.''.
      (c) Effective Dates.--
              (1) The amendments made by subsection (a) shall apply to plan
            years beginning on or after January 1, 2011.
              (2) The amendments made by subsection (b) shall apply to plan
            years beginning on or after January 1, 2011.

    SEC. 1172. CONTINUOUS OPEN ENROLLMENT FOR ENROLLEES IN PLANS WITH
                        ENROLLMENT SUSPENSION.

      Section 1851(e)(4) of the Social Security Act (42 U.S.C. 1395w(e)(4))
    is amended--
              (1) in subparagraph (C), by striking at the end ``or'';
              (2) in subparagraph (D)--
                      (A) by inserting ``, taking into account the health
                    or well-being of the individual'' before the period;
                    and
                      (B) by redesignating such subparagraph as
                    subparagraph (E); and
              (3) by inserting after subparagraph (C) the following new
            subparagraph:
                      ``(D) the individual is enrolled in an MA plan and
                    enrollment in the plan is suspended under paragraph
                    (2)(B) or (3)(C) of section 1857(g) because of a
                    failure of the plan to meet applicable requirements;
                    or''.

    SEC. 1173. INFORMATION FOR BENEFICIARIES ON MA PLAN ADMINISTRATIVE
                        COSTS.

      (a) Disclosure of Medical Loss Ratios and Other Expense Data.--
    Section 1851 of the Social Security Act (42 U.S.C. 1395w-21), as
    previously amended by this subtitle, is amended by adding at the end
    the following new subsection:
      ``(p) Publication of Medical Loss Ratios and Other Cost-related
    Information.--
              ``(1) In general.--The Secretary shall publish, not later
            than November 1 of each year (beginning with 2011), for each MA
            plan contract, the medical loss ratio of the plan in the
            previous year.
              ``(2) Submission of data.--
                      ``(A) In general.--Each MA organization shall submit
                    to the Secretary, in a form and manner specified by the
                    Secretary, data necessary for the Secretary to publish
                    the medical loss ratio on a timely basis.
                      ``(B) Data for 2010 and 2011.--The data submitted
                    under subparagraph (A) for 2010 and for 2011 shall be
                    consistent in content with the data reported as part of
                    the MA plan bid in June 2009 for 2010.
                      ``(C) Use of standardized elements and definitions.--
                    The data to be submitted under subparagraph (A)
                    relating to medical loss ratio for a year, beginning
                    with 2012, shall be submitted based on the standardized
                    elements and definitions developed under paragraph (3).
              ``(3) Development of data reporting standards.--
                      ``(A) In general.--The Secretary shall develop and
                    implement standardized data elements and definitions
                    for reporting under this subsection, for contract years
                    beginning with 2012, of data necessary for the
                    calculation of the medical loss ratio for MA plans. Not
                    later than December 31, 2010, the Secretary shall
                    publish a report describing the elements and
                    definitions so developed.
                      ``(B) Consultation.--The Secretary shall consult with
                    the Health Choices Commissioner, representatives of MA
                    organizations, experts on health plan accounting
                    systems, and representatives of the National
                    Association of Insurance Commissioners, in the
                    development of such data elements and definitions.
              ``(4) Medical loss ratio to be defined.--For purposes of this
            part, the term `medical loss ratio' has the meaning given such
            term by the Secretary, taking into account the meaning given
            such term by the Health Choices Commissioner under section 116
            of the America's Affordable Health Choices Act of 2009.''.
      (b) Minimum Medical Loss Ratio.--Section 1857(e) of the Social
    Security Act (42 U.S.C. 1395w-27(e)) is amended by adding at the end
    the following new paragraph:
              ``(4) Requirement for minimum medical loss ratio.--If the
            Secretary determines for a contract year (beginning with 2014)
            that an MA plan has failed to have a medical loss ratio (as
            defined in section 1851(p)(4)) of at least .85--
                      ``(A) the Secretary shall require the Medicare
                    Advantage organization offering the plan to give
                    enrollees a rebate (in the second succeeding contract
                    year) of premiums under this part (or part B or part D,
                    if applicable) by such amount as would provide for a
                    benefits ratio of at least .85;
                      ``(B) for 3 consecutive contract years, the Secretary
                    shall not permit the enrollment of new enrollees under
                    the plan for coverage during the second succeeding
                    contract year; and
                      ``(C) the Secretary shall terminate the plan contract
                    if the plan fails to have such a medical loss ratio for
                    5 consecutive contract years.''.

    SEC. 1174. STRENGTHENING AUDIT AUTHORITY.

      (a) For Part C Payments Risk Adjustment.--Section 1857(d)(1) of the
    Social Security Act (42 U.S.C. 1395w-27(d)(1)) is amended by inserting
    after ``section 1858(c))'' the following: ``, and data submitted with
    respect to risk adjustment under section 1853(a)(3)''.
      (b) Enforcement of Audits and Deficiencies.--
              (1) In general.--Section 1857(e) of such Act, as amended by
            section 1173, is amended by adding at the end the following new
            paragraph:
              ``(5) Enforcement of audits and deficiencies.--
                      ``(A) Information in contract.--The Secretary shall
                    require that each contract with an MA organization
                    under this section shall include terms that inform the
                    organization of the provisions in subsection (d).
                      ``(B) Enforcement authority.--The Secretary is
                    authorized, in connection with conducting audits and
                    other activities under subsection (d), to take such
                    actions, including pursuit of financial recoveries,
                    necessary to address deficiencies identified in such
                    audits or other activities.''.
              (2) Application under part d.--For provision applying the
            amendment made by paragraph (1) to prescription drug plans
            under part D, see section 1860D-12(b)(3)(D) of the Social
            Security Act.
      (c) Effective Date.--The amendments made by this section shall take
    effect on the date of the enactment of this Act and shall apply to
    audits and activities conducted for contract years beginning on or
    after January 1, 2011.

    SEC. 1175. AUTHORITY TO DENY PLAN BIDS.

      (a) In General.--Section 1854(a)(5) of the Social Security Act (42
    U.S.C. 1395w-24(a)(5)) is amended by adding at the end the following
    new subparagraph:
                      ``(C) Rejection of bids.--Nothing in this section
                    shall be construed as requiring the Secretary to accept
                    any or every bid by an MA organization under this
                    subsection.''.
      (b) Application Under Part D.--Section 1860D-11(d) of such Act (42
    U.S.C. 1395w-111(d)) is amended by adding at the end the following new
    paragraph:
              ``(3) Rejection of bids.--Paragraph (5)(C) of section 1854(a)
            shall apply with respect to bids under this section in the same
            manner as it applies to bids by an MA organization under such
            section.''.
      (c) Effective Date.--The amendments made by this section shall apply
    to bids for contract years beginning on or after January 1, 2011.

                    PART 3--TREATMENT OF SPECIAL NEEDS PLANS

    SEC. 1176. LIMITATION ON ENROLLMENT OUTSIDE OPEN ENROLLMENT PERIOD OF
                        INDIVIDUALS INTO CHRONIC CARE SPECIALIZED MA PLANS
                        FOR SPECIAL NEEDS INDIVIDUALS.

      Section 1859(f)(4) of the Social Security Act (42 U.S.C. 1395w-
    28(f)(4)) is amended by adding at the end the following new
    subparagraph:
                      ``(C) The plan does not enroll an individual on or
                    after January 1, 2011, other than during an annual,
                    coordinated open enrollment period or when at the time
                    of the diagnosis of the disease or condition that
                    qualifies the individual as an individual described in
                    subsection (b)(6)(B)(iii).''.

    SEC. 1177. EXTENSION OF AUTHORITY OF SPECIAL NEEDS PLANS TO RESTRICT
                        ENROLLMENT.

      (a) In General.--Section 1859(f)(1) of the Social Security Act (42
    U.S.C. 1395w-28(f)(1)) is amended by striking ``January 1, 2011'' and
    inserting ``January 1, 2013 (or January 1, 2016, in the case of a plan
    described in section 1177(b)(1) of the America's Affordable Health
    Choices Act of 2009)''.
      (b) Grandfathering of Certain Plans.--
              (1) Plans described.--For purposes of section 1859(f)(1) of
            the Social Security Act (42 U.S.C. 1395w-28(f)(1)), a plan
            described in this paragraph is a plan that had a contract with
            a State that had a State program to operate an integrated
            Medicaid-Medicare program that had been approved by the Centers
            for Medicare & Medicaid Services as of January 1, 2004.
              (2) Analysis; report.--The Secretary of Health and Human
            Services shall provide, through a contract with an independent
            health services evaluation organization, for an analysis of the
            plans described in paragraph (1) with regard to the impact of
            such plans on cost, quality of care, patient satisfaction, and
            other subjects as specified by the Secretary. Not later than
            December 31, 2011, the Secretary shall submit to Congress a
            report on such analysis and shall include in such report such
            recommendations with regard to the treatment of such plans as
            the Secretary deems appropriate.

                  Subtitle E--Improvements to Medicare Part D

    SEC. 1181. ELIMINATION OF COVERAGE GAP.

      (a) In General.--Section 1860D-2(b) of such Act (42 U.S.C. 1395w-
    102(b)) is amended--
              (1) in paragraph (3)(A), by striking ``paragraph (4)'' and
            inserting ``paragraphs (4) and (7)'';
              (2) in paragraph (4)(B)(i), by inserting ``subject to
            paragraph (7)'' after ``purposes of this part''; and
              (3) by adding at the end the following new paragraph:
              ``(7) Phased-in elimination of coverage gap.--
                      ``(A) In general.--For each year beginning with 2011,
                    the Secretary shall consistent with this paragraph
                    progressively increase the initial coverage limit
                    (described in subsection (b)(3)) and decrease the
                    annual out-of-pocket threshold from the amounts
                    otherwise computed until there is a continuation of
                    coverage from the initial coverage limit for
                    expenditures incurred through the total amount of
                    expenditures at which benefits are available under
                    paragraph (4).
                      ``(B) Increase in initial coverage limit.--For a year
                    beginning with 2011, the initial coverage limit
                    otherwise computed without regard to this paragraph
                    shall be increased by \1/2\ of the cumulative phase-in
                    percentage (as defined in subparagraph (D)(ii) for the
                    year) times the out-of-pocket gap amount (as defined in
                    subparagraph (E)) for the year.
                      ``(C) Decrease in annual out-of-pocket threshold.--
                    For a year beginning with 2011, the annual out-of-
                    pocket threshold otherwise computed without regard to
                    this paragraph shall be decreased by \1/2\ of the
                    cumulative phase-in percentage of the out-of-pocket gap
                    amount for the year multiplied by 1.75.
                      ``(D) Phase-in.--For purposes of this paragraph:
                              ``(i) Annual phase-in percentage.--The term
                            `annual phase-in percentage' means--
                                      ``(I) for 2011, 13 percent;
                                      ``(II) for 2012, 2013, 2014, and
                                    2015, 5 percent;
                                      ``(III) for 2016 through 2018, 7.5
                                    percent; and
                                      ``(IV) for 2019 and each subsequent
                                    year, 10 percent.
                              ``(ii) Cumulative phase-in percentage.--The
                            term `cumulative phase-in percentage' means for
                            a year the sum of the annual phase-in
                            percentage for the year and the annual phase-in
                            percentages for each previous year beginning
                            with 2011, but in no case more than 100
                            percent.
                      ``(E) Out-of-pocket gap amount.--For purposes of this
                    paragraph, the term `out-of-pocket gap amount' means
                    for a year the amount by which--
                              ``(i) the annual out-of-pocket threshold
                            specified in paragraph (4)(B) for the year (as
                            determined as if this paragraph did not apply),
                            exceeds
                              ``(ii) the sum of--
                                      ``(I) the annual deductible under
                                    paragraph (1) for the year; and
                                      ``(II) \1/4\ of the amount by which
                                    the initial coverage limit under
                                    paragraph (3) for the year (as
                                    determined as if this paragraph did not
                                    apply) exceeds such annual
                                    deductible.''.
      (b) Requiring Drug Manufacturers to Provide Drug Rebates for Full-
    benefit Dual Eligibles.--
              (1) In general.--Section 1860D-2 of the Social Security Act
            (42 U.S.C. 1396r-8) is amended--
                      (A) in subsection (e)(1), in the matter before
                    subparagraph (A), by inserting ``and subsection (f)''
                    after ``this subsection''; and
                      (B) by adding at the end the following new
                    subsection:
      ``(f) Prescription Drug Rebate Agreement for Full-benefit Dual
    Eligible Individuals.--
              ``(1) In general.--In this part, the term `covered part D
            drug' does not include any drug or biologic that is
            manufactured by a manufacturer that has not entered into and
            have in effect a rebate agreement described in paragraph (2).
              ``(2) Rebate agreement.--A rebate agreement under this
            subsection shall require the manufacturer to provide to the
            Secretary a rebate for each rebate period (as defined in
            paragraph (6)(B)) ending after December 31, 2010, in the amount
            specified in paragraph (3) for any covered part D drug of the
            manufacturer dispensed after December 31, 2010, to any full-
            benefit dual eligible individual (as defined in paragraph
            (6)(A)) for which payment was made by a PDP sponsor under part
            D or a MA organization under part C for such period. Such
            rebate shall be paid by the manufacturer to the Secretary not
            later than 30 days after the date of receipt of the information
            described in section 1860D-12(b)(7), including as such section
            is applied under section 1857(f)(3).
              ``(3) Rebate for full-benefit dual eligible medicare drug
            plan enrollees.--
                      ``(A) In general.--The amount of the rebate specified
                    under this paragraph for a manufacturer for a rebate
                    period, with respect to each dosage form and strength
                    of any covered part D drug provided by such
                    manufacturer and dispensed to a full-benefit dual
                    eligible individual, shall be equal to the product of--
                              ``(i) the total number of units of such
                            dosage form and strength of the drug so
                            provided and dispensed for which payment was
                            made by a PDP sponsor under part D or a MA
                            organization under part C for the rebate period
                            (as reported under section 1860D-12(b)(7),
                            including as such section is applied under
                            section 1857(f)(3)); and
                              ``(ii) the amount (if any) by which--
                                      ``(I) the Medicaid rebate amount (as
                                    defined in subparagraph (B)) for such
                                    form, strength, and period, exceeds
                                      ``(II) the average Medicare drug
                                    program full-benefit dual eligible
                                    rebate amount (as defined in
                                    subparagraph (C)) for such form,
                                    strength, and period.
                      ``(B) Medicaid rebate amount.--For purposes of this
                    paragraph, the term `Medicaid rebate amount' means,
                    with respect to each dosage form and strength of a
                    covered part D drug provided by the manufacturer for a
                    rebate period--
                              ``(i) in the case of a single source drug or
                            an innovator multiple source drug, the amount
                            specified in paragraph (1)(A)(ii) of section
                            1927(b) plus the amount, if any, specified in
                            paragraph (2)(A)(ii) of such section, for such
                            form, strength, and period; or
                              ``(ii) in the case of any other covered
                            outpatient drug, the amount specified in
                            paragraph (3)(A)(i) of such section for such
                            form, strength, and period.
                      ``(C) Average medicare drug program full-benefit dual
                    eligible rebate amount.--For purposes of this
                    subsection, the term `average Medicare drug program
                    full-benefit dual eligible rebate amount' means, with
                    respect to each dosage form and strength of a covered
                    part D drug provided by a manufacturer for a rebate
                    period, the sum, for all PDP sponsors under part D and
                    MA organizations administering a MA-PD plan under part
                    C, of--
                              ``(i) the product, for each such sponsor or
                            organization, of--
                                      ``(I) the sum of all rebates,
                                    discounts, or other price concessions
                                    (not taking into account any rebate
                                    provided under paragraph (2) for such
                                    dosage form and strength of the drug
                                    dispensed, calculated on a per-unit
                                    basis, but only to the extent that any
                                    such rebate, discount, or other price
                                    concession applies equally to drugs
                                    dispensed to full-benefit dual eligible
                                    Medicare drug plan enrollees and drugs
                                    dispensed to PDP and MA-PD enrollees
                                    who are not full-benefit dual eligible
                                    individuals; and
                                      ``(II) the number of the units of
                                    such dosage and strength of the drug
                                    dispensed during the rebate period to
                                    full-benefit dual eligible individuals
                                    enrolled in the prescription drug plans
                                    administered by the PDP sponsor or the
                                    MA-PD plans administered by the MA-PD
                                    organization; divided by
                              ``(ii) the total number of units of such
                            dosage and strength of the drug dispensed
                            during the rebate period to full-benefit dual
                            eligible individuals enrolled in all
                            prescription drug plans administered by PDP
                            sponsors and all MA-PD plans administered by
                            MA-PD organizations.
              ``(4) Length of agreement.--The provisions of paragraph (4)
            of section 1927(b) (other than clauses (iv) and (v) of
            subparagraph (B)) shall apply to rebate agreements under this
            subsection in the same manner as such paragraph applies to a
            rebate agreement under such section.
              ``(5) Other terms and conditions.--The Secretary shall
            establish other terms and conditions of the rebate agreement
            under this subsection, including terms and conditions related
            to compliance, that are consistent with this subsection.
              ``(6) Definitions.--In this subsection and section 1860D-
            12(b)(7):
                      ``(A) Full-benefit dual eligible individual.--The
                    term `full-benefit dual eligible individual' has the
                    meaning given such term in section 1935(c)(6).
                      ``(B) Rebate period.--The term `rebate period' has
                    the meaning given such term in section 1927(k)(8).''.
              (2) Reporting requirement for the determination and payment
            of rebates by manufactures related to rebate for full-benefit
            dual eligible medicare drug plan enrollees.--
                      (A) Requirements for pdp sponsors.--Section 1860D-
                    12(b) of the Social Security Act (42 U.S.C. 1395w-
                    112(b)) is amended by adding at the end the following
                    new paragraph:
              ``(7) Reporting requirement for the determination and payment
            of rebates by manufacturers related to rebate for full-benefit
            dual eligible medicare drug plan enrollees.--
                      ``(A) In general.--For purposes of the rebate under
                    section 1860D-2(f) for contract years beginning on or
                    after January 1, 2011, each contract entered into with
                    a PDP sponsor under this part with respect to a
                    prescription drug plan shall require that the sponsor
                    comply with subparagraphs (B) and (C).
                      ``(B) Report form and contents.--Not later than 60
                    days after the end of each rebate period (as defined in
                    section 1860D-2(f)(6)(B)) within such a contract year
                    to which such section applies, a PDP sponsor of a
                    prescription drug plan under this part shall report to
                    each manufacturer--
                              ``(i) information (by National Drug Code
                            number) on the total number of units of each
                            dosage, form, and strength of each drug of such
                            manufacturer dispensed to full-benefit dual
                            eligible Medicare drug plan enrollees under any
                            prescription drug plan operated by the PDP
                            sponsor during the rebate period;
                              ``(ii) information on the price discounts,
                            price concessions, and rebates for such drugs
                            for such form, strength, and period;
                              ``(iii) information on the extent to which
                            such price discounts, price concessions, and
                            rebates apply equally to full-benefit dual
                            eligible Medicare drug plan enrollees and PDP
                            enrollees who are not full-benefit dual
                            eligible Medicare drug plan enrollees; and
                              ``(iv) any additional information that the
                            Secretary determines is necessary to enable the
                            Secretary to calculate the average Medicare
                            drug program full-benefit dual eligible rebate
                            amount (as defined in paragraph (3)(C) of such
                            section), and to determine the amount of the
                            rebate required under this section, for such
                            form, strength, and period.
                    Such report shall be in a form consistent with a
                    standard reporting format established by the Secretary.
                      ``(C) Submission to secretary.--Each PDP sponsor
                    shall promptly transmit a copy of the information
                    reported under subparagraph (B) to the Secretary for
                    the purpose of audit oversight and evaluation.
                      ``(D) Confidentiality of information.--The provisions
                    of subparagraph (D) of section 1927(b)(3), relating to
                    confidentiality of information, shall apply to
                    information reported by PDP sponsors under this
                    paragraph in the same manner that such provisions apply
                    to information disclosed by manufacturers or
                    wholesalers under such section, except--
                              ``(i) that any reference to `this section' in
                            clause (i) of such subparagraph shall be
                            treated as being a reference to this section;
                              ``(ii) the reference to the Director of the
                            Congressional Budget Office in clause (iii) of
                            such subparagraph shall be treated as including
                            a reference to the Medicare Payment Advisory
                            Commission; and
                              ``(iii) clause (iv) of such subparagraph
                            shall not apply.
                      ``(E) Oversight.--Information reported under this
                    paragraph may be used by the Inspector General of the
                    Department of Health and Human Services for the
                    statutorily authorized purposes of audit,
                    investigation, and evaluations.
                      ``(F) Penalties for failure to provide timely
                    information and provision of false information.--In the
                    case of a PDP sponsor--
                              ``(i) that fails to provide information
                            required under subparagraph (B) on a timely
                            basis, the sponsor is subject to a civil money
                            penalty in the amount of $10,000 for each day
                            in which such information has not been
                            provided; or
                              ``(ii) that knowingly (as defined in section
                            1128A(i)) provides false information under such
                            subparagraph, the sponsor is subject to a civil
                            money penalty in an amount not to exceed
                            $100,000 for each item of false information.
                    Such civil money penalties are in addition to other
                    penalties as may be prescribed by law. The provisions
                    of section 1128A (other than subsections (a) and (b))
                    shall apply to a civil money penalty under this
                    subparagraph in the same manner as such provisions
                    apply to a penalty or proceeding under section
                    1128A(a).''.
                      (B) Application to ma organizations.--Section
                    1857(f)(3) of the Social Security Act (42 U.S.C. 1395w-
                    27(f)(3)) is amended by adding at the end the
                    following:
                      ``(D) Reporting requirement related to rebate for
                    full-benefit dual eligible medicare drug plan
                    enrollees.--Section 1860D-12(b)(7).''.
              (3) Deposit of rebates into medicare prescription drug
            account.--Section 1860D-16(c) of such Act (42 U.S.C. 1395w-
            116(c)) is amended by adding at the end the following new
            paragraph:
              ``(6) Rebate for full-benefit dual eligible medicare drug
            plan enrollees.--Amounts paid under a rebate agreement under
            section 1860D-2(f) shall be deposited into the Account and
            shall be used to pay for all or part of the gradual elimination
            of the coverage gap under section 1860D-2(b)(7).''.

    SEC. 1182. DISCOUNTS FOR CERTAIN PART D DRUGS IN ORIGINAL COVERAGE GAP.

      Section 1860D-2 of the Social Security Act (42 U.S.C. 1395w-102), as
    amended by section 1181, is amended--
              (1) in subsection (b)(4)(C)(ii), by inserting ``subject to
            subsection (g)(2)(C),'' after ``(ii)'';
              (2) in subsection (e)(1), in the matter before subparagraph
            (A), by striking ``subsection (f)'' and inserting ``subsections
            (f) and (g)'' after ``this subsection''; and
              (3) by adding at the end the following new subsection:
      ``(g) Requirement for Manufacturer Discount Agreement for Certain
    Qualifying Drugs.--
              ``(1) In general.--In this part, the term `covered part D
            drug' does not include any drug or biologic that is
            manufactured by a manufacturer that has not entered into and
            have in effect for all qualifying drugs (as defined in
            paragraph (5)(A)) a discount agreement described in paragraph
            (2).
              ``(2) Discount agreement.--
                      ``(A) Periodic discounts.--A discount agreement under
                    this paragraph shall require the manufacturer involved
                    to provide, to each PDP sponsor with respect to a
                    prescription drug plan or each MA organization with
                    respect to each MA-PD plan, a discount in an amount
                    specified in paragraph (3) for qualifying drugs (as
                    defined in paragraph (5)(A)) of the manufacturer
                    dispensed to a qualifying enrollee after December 31,
                    2010, insofar as the individual is in the original gap
                    in coverage (as defined in paragraph (5)(E)).
                      ``(B) Discount agreement.--Insofar as not
                    inconsistent with this subsection, the Secretary shall
                    establish terms and conditions of such agreement,
                    including terms and conditions relating to compliance,
                    similar to the terms and conditions for rebate
                    agreements under paragraphs (2), (3), and (4) of
                    section 1927(b), except that--
                              ``(i) discounts shall be applied under this
                            subsection to prescription drug plans and MA-PD
                            plans instead of State plans under title XIX;
                              ``(ii) PDP sponsors and MA organizations
                            shall be responsible, instead of States, for
                            provision of necessary utilization information
                            to drug manufacturers; and
                              ``(iii) sponsors and MA organizations shall
                            be responsible for reporting information on
                            drug-component negotiated price, instead of
                            other manufacturer prices.
                      ``(C) Counting discount toward true out-of-pocket
                    costs.--Under the discount agreement, in applying
                    subsection (b)(4), with regard to subparagraph (C)(i)
                    of such subsection, if a qualified enrollee purchases
                    the qualified drug insofar as the enrollee is in an
                    actual gap of coverage (as defined in paragraph
                    (5)(D)), the amount of the discount under the agreement
                    shall be treated and counted as costs incurred by the
                    plan enrollee.
              ``(3) Discount amount.--The amount of the discount specified
            in this paragraph for a discount period for a plan is equal to
            50 percent of the amount of the drug-component negotiated price
            (as defined in paragraph (5)(C)) for qualifying drugs for the
            period involved.
              ``(4) Additional terms.--In the case of a discount provided
            under this subsection with respect to a prescription drug plan
            offered by a PDP sponsor or an MA-PD plan offered by an MA
            organization, if a qualified enrollee purchases the qualified
            drug--
                      ``(A) insofar as the enrollee is in an actual gap of
                    coverage (as defined in paragraph (5)(D)), the sponsor
                    or plan shall provide the discount to the enrollee at
                    the time the enrollee pays for the drug; and
                      ``(B) insofar as the enrollee is in the portion of
                    the original gap in coverage (as defined in paragraph
                    (5)(E)) that is not in the actual gap in coverage, the
                    discount shall not be applied against the negotiated
                    price (as defined in subsection (d)(1)(B)) for the
                    purpose of calculating the beneficiary payment.
              ``(5) Definitions.--In this subsection:
                      ``(A) Qualifying drug.--The term `qualifying drug'
                    means, with respect to a prescription drug plan or MA-
                    PD plan, a drug or biological product that--
                              ``(i)(I) is a drug produced or distributed
                            under an original new drug application approved
                            by the Food and Drug Administration, including
                            a drug product marketed by any cross-licensed
                            producers or distributors operating under the
                            new drug application;
                              ``(II) is a drug that was originally marketed
                            under an original new drug application approved
                            by the Food and Drug Administration; or
                              ``(III) is a biological product as approved
                            under Section 351(a) of the Public Health
                            Services Act;
                              ``(ii) is covered under the formulary of the
                            plan; and
                              ``(iii) is dispensed to an individual who is
                            in the original gap in coverage.
                      ``(B) Qualifying enrollee.--The term `qualifying
                    enrollee' means an individual enrolled in a
                    prescription drug plan or MA-PD plan other than such an
                    individual who is a subsidy-eligible individual (as
                    defined in section 1860D-14(a)(3)).
                      ``(C) Drug-component negotiated price.--The term
                    `drug-component negotiated price' means, with respect
                    to a qualifying drug, the negotiated price (as defined
                    in subsection (d)(1)(B)), as determined without regard
                    to any dispensing fee, of the drug under the
                    prescription drug plan or MA-PD plan involved.
                      ``(D) Actual gap in coverage.--The term `actual gap
                    in coverage' means the gap in prescription drug
                    coverage that occurs between the initial coverage limit
                    (as modified under subparagraph (B) of subsection
                    (b)(7)) and the annual out-of-pocket threshold (as
                    modified under subparagraph (C) of such subsection).
                      ``(E) Original gap in coverage.--The term `original
                    in gap coverage' means the gap in prescription drug
                    coverage that would occur between the initial coverage
                    limit (described in subsection (b)(3)) and the out-of-
                    pocket threshold (as defined in subsection (b)(4))(B)
                    if subsection (b)(7) did not apply.''.

    SEC. 1183. REPEAL OF PROVISION RELATING TO SUBMISSION OF CLAIMS BY
                        PHARMACIES LOCATED IN OR CONTRACTING WITH LONG-TERM
                        CARE FACILITIES.

      (a) Part D Submission.--Section 1860D-12(b) of the Social Security
    Act (42 U.S.C. 1395w-112(b)), as amended by section 172(a)(1) of Public
    Law 110-275, is amended by striking paragraph (5) and redesignating
    paragraph (6) and paragraph (7), as added by section 1181(b)(2), as
    paragraph (5) and paragraph (6), respectively.
      (b) Submission to MA-PD Plans.--Section 1857(f)(3) of the Social
    Security Act (42 U.S.C. 1395w-27(f)(3)), as added by section 171(b) of
    Public Law 110-275 and amended by section 172(a)(2) of such Public Law
    and section 1181 of this Act, is amended by striking subparagraph (B)
    and redesignating subparagraphs (C) and (D) as subparagraphs (B) and
    (C) respectively.
      (c) Effective Date.--The amendments made by this section shall apply
    for contract years beginning with 2010.

    SEC. 1184. INCLUDING COSTS INCURRED BY AIDS DRUG ASSISTANCE PROGRAMS
                        AND INDIAN HEALTH SERVICE IN PROVIDING PRESCRIPTION
                        DRUGS TOWARD THE ANNUAL OUT-OF-POCKET THRESHOLD
                        UNDER PART D.

      (a) In General.--Section 1860D-2(b)(4)(C) of the Social Security Act
    (42 U.S.C. 1395w-102(b)(4)(C)) is amended--
              (1) in clause (i), by striking ``and'' at the end;
              (2) in clause (ii)--
                      (A) by striking ``such costs shall be treated as
                    incurred only if'' and inserting ``subject to clause
                    (iii), such costs shall be treated as incurred only
                    if'';
                      (B) by striking ``, under section 1860D-14, or under
                    a State Pharmaceutical Assistance Program''; and
                      (C) by striking the period at the end and inserting
                    ``; and''; and
              (3) by inserting after clause (ii) the following new clause:
                              ``(iii) such costs shall be treated as
                            incurred and shall not be considered to be
                            reimbursed under clause (ii) if such costs are
                            borne or paid--
                                      ``(I) under section 1860D-14;
                                      ``(II) under a State Pharmaceutical
                                    Assistance Program;
                                      ``(III) by the Indian Health Service,
                                    an Indian tribe or tribal organization,
                                    or an urban Indian organization (as
                                    defined in section 4 of the Indian
                                    Health Care Improvement Act); or
                                      ``(IV) under an AIDS Drug Assistance
                                    Program under part B of title XXVI of
                                    the Public Health Service Act.''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to costs incurred on or after January 1, 2011.

    SEC. 1185. PERMITTING MID-YEAR CHANGES IN ENROLLMENT FOR FORMULARY
                        CHANGES THAT ADVERSELY IMPACT AN ENROLLEE.

      (a) In General.--Section 1860D-1(b)(3) of the Social Security Act (42
    U.S.C. 1395w-101(b)(3)) is amended by adding at the end the following
    new subparagraph:
                      ``(F) Change in formulary resulting in increase in
                    cost-sharing.--
                              ``(i) In general.--Except as provided in
                            clause (ii), in the case of an individual
                            enrolled in a prescription drug plan (or MA-PD
                            plan) who has been prescribed and is using a
                            covered part D drug while so enrolled, if the
                            formulary of the plan is materially changed
                            (other than at the end of a contract year) so
                            to reduce the coverage (or increase the cost-
                            sharing) of the drug under the plan.
                              ``(ii) Exception.--Clause (i) shall not apply
                            in the case that a drug is removed from the
                            formulary of a plan because of a recall or
                            withdrawal of the drug issued by the Food and
                            Drug Administration, because the drug is
                            replaced with a generic drug that is a
                            therapeutic equivalent, or because of
                            utilization management applied to--
                                      ``(I) a drug whose labeling includes
                                    a boxed warning required by the Food
                                    and Drug Administration under section
                                    210.57(c)(1) of title 21, Code of
                                    Federal Regulations (or a successor
                                    regulation); or
                                      ``(II) a drug required under
                                    subsection (c)(2) of section 505-1 of
                                    the Federal Food, Drug, and Cosmetic
                                    Act to have a Risk Evaluation and
                                    Management Strategy that includes
                                    elements under subsection (f) of such
                                    section.''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to contract years beginning on or after January 1, 2011.

                 Subtitle F--Medicare Rural Access Protections

    SEC. 1191. TELEHEALTH EXPANSION AND ENHANCEMENTS. .

       (a) Additional Telehealth Site.--
              (1) In general.--Paragraph (4)(C)(ii) of section 1834(m) of
            the Social Security Act (42 U.S.C. 1395m(m)) is amended by
            adding at the end the following new subclause:
                                      ``(IX) A renal dialysis facility.''
              (2) Effective date.--The amendment made by paragraph (1)
            shall apply to services furnished on or after January 1, 2011.
      (b) Telehealth Advisory Committee.--
              (1) Establishment.--Section 1868 of the Social Security Act
            (42 U.S.C. 1395ee) is amended--
                      (A) in the heading, by adding at the end the
                    following: ``telehealth advisory committee''; and
                      (B) by adding at the end the following new
                    subsection:
      ``(c) Telehealth Advisory Committee.--
              ``(1) In general.--The Secretary shall appoint a Telehealth
            Advisory Committee (in this subsection referred to as the
            `Advisory Committee') to make recommendations to the Secretary
            on policies of the Centers for Medicare & Medicaid Services
            regarding telehealth services as established under section
            1834(m), including the appropriate addition or deletion of
            services (and HCPCS codes) to those specified in paragraphs
            (4)(F)(i) and (4)(F)(ii) of such section and for authorized
            payment under paragraph (1) of such section.
              ``(2) Membership; terms.--
                      ``(A) Membership.--
                              ``(i) In general.--The Advisory Committee
                            shall be composed of 9 members, to be appointed
                            by the Secretary, of whom--
                                      ``(I) 5 shall be practicing
                                    physicians;
                                      ``(II) 2 shall be practicing non-
                                    physician health care practitioners;
                                    and
                                      ``(III) 2 shall be administrators of
                                    telehealth programs.
                              ``(ii) Requirements for appointing members.--
                            In appointing members of the Advisory
                            Committee, the Secretary shall--
                                      ``(I) ensure that each member has
                                    prior experience with the practice of
                                    telemedicine or telehealth;
                                      ``(II) give preference to individuals
                                    who are currently providing
                                    telemedicine or telehealth services or
                                    who are involved in telemedicine or
                                    telehealth programs;
                                      ``(III) ensure that the membership of
                                    the Advisory Committee represents a
                                    balance of specialties and geographic
                                    regions; and
                                      ``(IV) take into account the
                                    recommendations of stakeholders.
                      ``(B) Terms.--The members of the Advisory Committee
                    shall serve for such term as the Secretary may specify.
                      ``(C) Conflicts of interest.--An advisory committee
                    member may not participate with respect to a particular
                    matter considered in an advisory committee meeting if
                    such member (or an immediate family member of such
                    member) has a financial interest that could be affected
                    by the advice given to the Secretary with respect to
                    such matter.
              ``(3) Meetings.--The Advisory Committee shall meet twice each
            calendar year and at such other times as the Secretary may
            provide.
              ``(4) Permanent committee.--Section 14 of the Federal
            Advisory Committee Act (5 U.S.C. App.) shall not apply to the
            Advisory Committee.''
              (2) Following recommendations.--Section 1834(m)(4)(F) of such
            Act (42 U.S.C. 1395m(m)(4)(F)) is amended by adding at the end
            the following new clause:
                              ``(iii) Recommendations of the telehealth
                            advisory committee.--In making determinations
                            under clauses (i) and (ii), the Secretary shall
                            take into account the recommendations of the
                            Telehealth Advisory Committee (established
                            under section 1868(c)) when adding or deleting
                            services (and HCPCS codes) and in establishing
                            policies of the Centers for Medicare & Medicaid
                            Services regarding the delivery of telehealth
                            services. If the Secretary does not implement
                            such a recommendation, the Secretary shall
                            publish in the Federal Register a statement
                            regarding the reason such recommendation was
                            not implemented.''
              (3) Waiver of administrative limitation.--The Secretary of
            Health and Human Services shall establish the Telehealth
            Advisory Committee under the amendment made by paragraph (1)
            notwithstanding any limitation that may apply to the number of
            advisory committees that may be established (within the
            Department of Health and Human Services or otherwise).
      (c) Credentialing Telemedicine Practitioners.--Section 1834(m) of
    such Act (42 U.S.C. 1395m(m)) is amended by adding at the end the
    following new paragraph:
              ``(5) Hospital credentialing of telemedicine practitioners.--
            A telemedicine practitioner that is credentialed by a hospital
            in compliance with the Joint Commission Standards for
            Telemedicine shall be considered in compliance with conditions
            of participation and reimbursement credentialing requirements
            under this title for telemedicine services.''.

    SEC. 1192. EXTENSION OF OUTPATIENT HOLD HARMLESS PROVISION.

       Section 1833(t)(7)(D)(i) of the Social Security Act (42 U.S.C.
    1395l(t)(7)(D)(i)) is amended--
              (1) in subclause (II)--
                      (A) in the first sentence, by striking ```2010'' and
                    inserting ``2012''; and
                      (B) in the second sentence, by striking ``or 2009''
                    and inserting ``, 2009, 2010, or 2011''; and
              (2) in subclause (III), by striking ``January 1, 2010'' and
            inserting ``January 1, 2012''.

    SEC. 1193. EXTENSION OF SECTION 508 HOSPITAL RECLASSIFICATIONS.

      Subsection (a) of section 106 of division B of the Tax Relief and
    Health Care Act of 2006 (42 U.S.C. 1395 note), as amended by section
    117 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public
    Law 110-173) and section 124 of the Medicare Improvements for Patients
    and Providers Act of 2008 (Public Law 110-275), is amended by striking
    ``September 30, 2009'' and inserting ``September 30, 2011''.

    SEC. 1194. EXTENSION OF GEOGRAPHIC FLOOR FOR WORK.

      Section 1848(e)(1)(E) of the Social Security Act (42 U.S.C. 1395w-
    4(e)(1)(E)) is amended by striking ``before January 1, 2010'' and
    inserting ``before January 1, 2012''.

    SEC. 1195. EXTENSION OF PAYMENT FOR TECHNICAL COMPONENT OF CERTAIN
                        PHYSICIAN PATHOLOGY SERVICES.

      Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits
    Improvement and Protection Act of 2000 (as enacted into law by section
    1(a)(6) of Public Law 106-554), as amended by section 732 of the
    Medicare Prescription Drug, Improvement, and Modernization Act of 2003
    (42 U.S.C. 1395w-4 note), section 104 of division B of the Tax Relief
    and Health Care Act of 2006 (42 U.S.C. 1395w-4 note), section 104 of
    the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law
    110-173), and section 136 of the Medicare Improvements for Patients and
    Providers Act of 1008 (Public Law 110-275), is amended by striking
    ``and 2009'' and inserting ``2009, 2010, and 2011''.

    SEC. 1196. EXTENSION OF AMBULANCE ADD-ONS.

      (a) In General.--Section 1834(l)(13) of the Social Security Act (42
    U.S.C. 1395m(l)(13)) is amended--
              (1) in subparagraph (A)--
                      (A) in the matter preceding clause (i), by striking
                    ``before January 1, 2010'' and inserting ``before
                    January 1, 2012''; and
                      (B) in each of clauses (i) and (ii), by striking
                    ``before January 1, 2010'' and inserting ``before
                    January 1, 2012''.
      (b) Air Ambulance Improvements.--Section 146(b)(1) of the Medicare
    Improvements for Patients and Providers Act of 2008 (Public Law 110-
    275) is amended by striking ``ending on December 31, 2009'' and
    inserting ``ending on December 31, 2011''.

                  TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS

      Subtitle A--Improving and Simplifying Financial Assistance for Low
                         Income Medicare Beneficiaries

    SEC. 1201. IMPROVING ASSETS TESTS FOR MEDICARE SAVINGS PROGRAM AND LOW-
                        INCOME SUBSIDY PROGRAM.

      (a) Application of Highest Level Permitted Under LIS to All Subsidy
    Eligible Individuals.--
              (1) In general.--Section 1860D-14(a)(1) of the Social
            Security Act (42 U.S.C. 1395w-114(a)(1)) is amended in the
            matter before subparagraph (A), by inserting ``(or, beginning
            with 2012, paragraph (3)(E))'' after ``paragraph (3)(D)''.
              (2) Annual increase in lis resource test.--Section 1860D-
            14(a)(3)(E)(i) of such Act (42 U.S.C. 1395w-114(a)(3)(E)(i)) is
            amended--
                      (A) by striking ``and'' at the end of subclause (I);
                      (B) in subclause (II), by inserting ``(before 2012)''
                    after ``subsequent year'';
                      (C) by striking the period at the end of subclause
                    (II) and inserting a semicolon;
                      (D) by inserting after subclause (II) the following
                    new subclauses:
                                      ``(III) for 2012, $17,000 (or $34,000
                                    in the case of the combined value of
                                    the individual's assets or resources
                                    and the assets or resources of the
                                    individual's spouse); and
                                      ``(IV) for a subsequent year, the
                                    dollar amounts specified in this
                                    subclause (or subclause (III)) for the
                                    previous year increased by the annual
                                    percentage increase in the consumer
                                    price index (all items; U.S. city
                                    average) as of September of such
                                    previous year.''; and
                      (E) in the last sentence, by inserting ``or (IV)''
                    after ``subclause (II)''.
              (3) Application of lis test under medicare savings program.--
            Section 1905(p)(1)(C) of such Act (42 U.S.C. 1396d(p)(1)(C)) is
            amended--
                      (A) by striking ``effective beginning with January 1,
                    2010'' and inserting ``effective for the period
                    beginning with January 1, 2010, and ending with
                    December 31, 2011''; and
                      (B) by inserting before the period at the end the
                    following: ``or, effective beginning with January 1,
                    2012, whose resources (as so determined) do not exceed
                    the maximum resource level applied for the year under
                    subparagraph (E) of section 1860D-14(a)(3) (determined
                    without regard to the life insurance policy exclusion
                    provided under subparagraph (G) of such section)
                    applicable to an individual or to the individual and
                    the individual's spouse (as the case may be)''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to eligibility determinations for income-related subsidies and
    medicare cost-sharing furnished for periods beginning on or after
    January 1, 2012.

    SEC. 1202. ELIMINATION OF PART D COST-SHARING FOR CERTAIN NON-
                        INSTITUTIONALIZED FULL-BENEFIT DUAL ELIGIBLE
                        INDIVIDUALS.

      (a) In General.--Section 1860D-14(a)(1)(D)(i) of the Social Security
    Act (42 U.S.C. 1395w-114(a)(1)(D)(i)) is amended--
              (1) by striking ``Institutionalized individuals.--In'' and
            inserting ``Elimination of cost-sharing for certain full-
            benefit dual eligible individuals.--
                                      ``(I) Institutionalized
                                    individuals.--In''; and
              (2) by adding at the end the following new subclause:
                                      ``(II) Certain other individuals.--In
                                    the case of an individual who is a
                                    full-benefit dual eligible individual
                                    and with respect to whom there has been
                                    a determination that but for the
                                    provision of home and community based
                                    care (whether under section 1915, 1932,
                                    or under a waiver under section 1115)
                                    the individual would require the level
                                    of care provided in a hospital or a
                                    nursing facility or intermediate care
                                    facility for the mentally retarded the
                                    cost of which could be reimbursed under
                                    the State plan under title XIX, the
                                    elimination of any beneficiary
                                    coinsurance described in section 1860D-
                                    2(b)(2) (for all amounts through the
                                    total amount of expenditures at which
                                    benefits are available under section
                                    1860D-2(b)(4)).''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to drugs dispensed on or after January 1, 2011.

    SEC. 1203. ELIMINATING BARRIERS TO ENROLLMENT.

      (a) Administrative Verification of Income and Resources Under the
    Low-income Subsidy Program.--
              (1) In general.--Clause (iii) of section 1860D-14(a)(3)(E) of
            the Social Security Act (42 U.S.C. 1395w-114(a)(3)(E)) is
            amended to read as follows:
                              ``(iii) Certification of income and
                            resources.--For purposes of applying this
                            section--
                                      ``(I) an individual shall be
                                    permitted to apply on the basis of
                                    self-certification of income and
                                    resources; and
                                      ``(II) matters attested to in the
                                    application shall be subject to
                                    appropriate methods of verification
                                    without the need of the individual to
                                    provide additional documentation,
                                    except in extraordinary situations as
                                    determined by the Commissioner.''.
              (2) Effective date.--The amendment made by paragraph (1)
            shall apply beginning January 1, 2010.
      (b) Disclosures To Facilitate Identification of Individuals Likely To
    Be Ineligible for the Low-income Assistance Under the Medicare
    Prescription Drug Program To Assist Social Security Administration's
    Outreach to Eligible Individuals.--For provision authorizing disclosure
    of return information to facilitate identification of individuals
    likely to be ineligible for low-income subsidies under Medicare
    prescription drug program, see section 1801.

    SEC. 1204. ENHANCED OVERSIGHT RELATING TO REIMBURSEMENTS FOR
                        RETROACTIVE LOW INCOME SUBSIDY ENROLLMENT.

      (a) In General.--In the case of a retroactive LIS enrollment
    beneficiary who is enrolled under a prescription drug plan under part D
    of title XVIII of the Social Security Act (or an MA-PD plan under part
    C of such title), the beneficiary (or any eligible third party) is
    entitled to reimbursement by the plan for covered drug costs incurred
    by the beneficiary during the retroactive coverage period of the
    beneficiary in accordance with subsection (b) and in the case of such a
    beneficiary described in subsection (c)(4)(A)(i), such reimbursement
    shall be made automatically by the plan upon receipt of appropriate
    notice the beneficiary is eligible for assistance described in such
    subsection (c)(4)(A)(i) without further information required to be
    filed with the plan by the beneficiary.
      (b) Administrative Requirements Relating to Reimbursements.--
              (1) Line-item description.--Each reimbursement made by a
            prescription drug plan or MA-PD plan under subsection (a) shall
            include a line-item description of the items for which the
            reimbursement is made.
              (2) Timing of reimbursements.--A prescription drug plan or
            MA-PD plan must make a reimbursement under subsection (a) to a
            retroactive LIS enrollment beneficiary, with respect to a
            claim, not later than 45 days after--
                      (A) in the case of a beneficiary described in
                    subsection (c)(4)(A)(i), the date on which the plan
                    receives notice from the Secretary that the beneficiary
                    is eligible for assistance described in such
                    subsection; or
                      (B) in the case of a beneficiary described in
                    subsection (c)(4)(A)(ii), the date on which the
                    beneficiary files the claim with the plan.
              (3) Reporting requirement.--For each month beginning with
            January 2011, each prescription drug plan and each MA-PD plan
            shall report to the Secretary the following:
                      (A) The number of claims the plan has readjudicated
                    during the month due to a beneficiary becoming
                    retroactively eligible for subsidies available under
                    section 1860D-14 of the Social Security Act.
                      (B) The total value of the readjudicated claim amount
                    for the month.
                      (C) The Medicare Health Insurance Claims Number of
                    beneficiaries for whom claims were readjudicated.
                      (D) For the claims described in subparagraphs (A) and
                    (B), an attestation to the Administrator of the Centers
                    for Medicare & Medicaid Services of the total amount of
                    reimbursement the plan has provided to beneficiaries
                    for premiums and cost-sharing that the beneficiary
                    overpaid for which the plan received payment from the
                    Centers for Medicare & Medicaid Services.
      (c) Definitions.--For purposes of this section:
              (1) Covered drug costs.--The term ``covered drug costs''
            means, with respect to a retroactive LIS enrollment beneficiary
            enrolled under a prescription drug plan under part D of title
            XVIII of the Social Security Act (or an MA-PD plan under part C
            of such title), the amount by which--
                      (A) the costs incurred by such beneficiary during the
                    retroactive coverage period of the beneficiary for
                    covered part D drugs, premiums, and cost-sharing under
                    such title; exceeds
                      (B) such costs that would have been incurred by such
                    beneficiary during such period if the beneficiary had
                    been both enrolled in the plan and recognized by such
                    plan as qualified during such period for the low income
                    subsidy under section 1860D-14 of the Social Security
                    Act to which the individual is entitled.
              (2) Eligible third party.--The term ``eligible third party''
            means, with respect to a retroactive LIS enrollment
            beneficiary, an organization or other third party that is owed
            payment on behalf of such beneficiary for covered drug costs
            incurred by such beneficiary during the retroactive coverage
            period of such beneficiary.
              (3) Retroactive coverage period.--The term ``retroactive
            coverage period'' means--
                      (A) with respect to a retroactive LIS enrollment
                    beneficiary described in paragraph (4)(A)(i), the
                    period--
                              (i) beginning on the effective date of the
                            assistance described in such paragraph for
                            which the individual is eligible; and
                              (ii) ending on the date the plan effectuates
                            the status of such individual as so eligible;
                            and
                      (B) with respect to a retroactive LIS enrollment
                    beneficiary described in paragraph (4)(A)(ii), the
                    period--
                              (i) beginning on the date the individual is
                            both entitled to benefits under part A, or
                            enrolled under part B, of title XVIII of the
                            Social Security Act and eligible for medical
                            assistance under a State plan under title XIX
                            of such Act; and
                              (ii) ending on the date the plan effectuates
                            the status of such individual as a full-benefit
                            dual eligible individual (as defined in section
                            1935(c)(6) of such Act).
              (4) Retroactive lis enrollment beneficiary.--
                      (A) In general.--The term ``retroactive LIS
                    enrollment beneficiary'' means an individual who--
                              (i) is enrolled in a prescription drug plan
                            under part D of title XVIII of the Social
                            Security Act (or an MA-PD plan under part C of
                            such title) and subsequently becomes eligible
                            as a full-benefit dual eligible individual (as
                            defined in section 1935(c)(6) of such Act), an
                            individual receiving a low-income subsidy under
                            section 1860D-14 of such Act, an individual
                            receiving assistance under the Medicare Savings
                            Program implemented under clauses (i), (iii),
                            and (iv) of section 1902(a)(10)(E) of such Act,
                            or an individual receiving assistance under the
                            supplemental security income program under
                            section 1611 of such Act; or
                              (ii) subject to subparagraph (B)(i), is a
                            full-benefit dual eligible individual (as
                            defined in section 1935(c)(6) of such Act) who
                            is automatically enrolled in such a plan under
                            section 1860D-1(b)(1)(C) of such Act.
                      (B) Exception for beneficiaries enrolled in rfp
                    plan.--
                              (i) In general.--In no case shall an
                            individual described in subparagraph (A)(ii)
                            include an individual who is enrolled, pursuant
                            to a RFP contract described in clause (ii), in
                            a prescription drug plan offered by the sponsor
                            of such plan awarded such contract.
                              (ii) RFP contract described.--The RFP
                            contract described in this section is a
                            contract entered into between the Secretary and
                            a sponsor of a prescription drug plan pursuant
                            to the Centers for Medicare & Medicaid
                            Services' request for proposals issued on
                            February 17, 2009, relating to Medicare part D
                            retroactive coverage for certain low income
                            beneficiaries, or a similar subsequent request
                            for proposals.

    SEC. 1205. INTELLIGENT ASSIGNMENT IN ENROLLMENT.

      (a) In General.--Section 1860D-1(b)(1)(C) of the Social Security Act
    (42 U.S.C. 1395w-101(b)(1)(C)) is amended by adding after ``PDP
    region'' the following: ``or through use of an intelligent assignment
    process that is designed to maximize the access of such individual to
    necessary prescription drugs while minimizing costs to such individual
    and to the program under this part to the greatest extent possible. In
    the case the Secretary enrolls such individuals through use of an
    intelligent assignment process, such process shall take into account
    the extent to which prescription drugs necessary for the individual are
    covered in the case of a PDP sponsor of a prescription drug plan that
    uses a formulary, the use of prior authorization or other restrictions
    on access to coverage of such prescription drugs by such a sponsor, and
    the overall quality of a prescription drug plan as measured by quality
    ratings established by the Secretary''
      (b) Effective Date.--The amendment made by subsection (a) shall take
    effect for contract years beginning with 2012.

    SEC. 1206. SPECIAL ENROLLMENT PERIOD AND AUTOMATIC ENROLLMENT PROCESS
                        FOR CERTAIN SUBSIDY ELIGIBLE INDIVIDUALS.

      (a) Special Enrollment Period.--Section 1860D-1(b)(3)(D) of the
    Social Security Act (42 U.S.C. 1395w-101(b)(3)(D)) is amended to read
    as follows:
                      ``(D) Subsidy eligible individuals.--In the case of
                    an individual (as determined by the Secretary) who is
                    determined under subparagraph (B) of section 1860D-
                    14(a)(3) to be a subsidy eligible individual.''.
      (b) Automatic Enrollment.--Section 1860D-1(b)(1) of the Social
    Security Act (42 U.S.C. 1395w-101(b)(1)) is amended by adding at the
    end the following new subparagraph:
                      ``(D) Special rule for subsidy eligible
                    individuals.--The process established under
                    subparagraph (A) shall include, in the case of an
                    individual described in section 1860D-1(b)(3)(D) who
                    fails to enroll in a prescription drug plan or an MA-PD
                    plan during the special enrollment established under
                    such section applicable to such individual, the
                    application of the assignment process described in
                    subparagraph (C) to such individual in the same manner
                    as such assignment process applies to a part D eligible
                    individual described in such subparagraph (C). Nothing
                    in the previous sentence shall prevent an individual
                    described in such sentence from declining enrollment in
                    a plan determined appropriate by the Secretary (or in
                    the program under this part) or from changing such
                    enrollment.''.
      (c) Effective Date.--The amendments made by this section shall apply
    to subsidy determinations made for months beginning with January 2011.

    SEC. 1207. APPLICATION OF MA PREMIUMS PRIOR TO REBATE IN CALCULATION OF
                        LOW INCOME SUBSIDY BENCHMARK.

      (a) In General.--Section 1860D-14(b)(2)(B)(iii) of the Social
    Security Act (42 U.S.C. 1395w-114(b)(2)(B)(iii)) is amended by
    inserting before the period the following: ``before the application of
    the monthly rebate computed under section 1854(b)(1)(C)(i) for that
    plan and year involved''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to subsidy determinations made for months beginning with January 2011.

                    Subtitle B--Reducing Health Disparities

    SEC. 1221. ENSURING EFFECTIVE COMMUNICATION IN MEDICARE.

      (a) Ensuring Effective Communication by the Centers for Medicare &
    Medicaid Services.--
              (1) Study on medicare payments for language services.--The
            Secretary of Health and Human Services shall conduct a study
            that examines the extent to which Medicare service providers
            utilize, offer, or make available language services for
            beneficiaries who are limited English proficient and ways that
            Medicare should develop payment systems for language services.
              (2) Analyses.--The study shall include an analysis of each of
            the following:
                      (A) How to develop and structure appropriate payment
                    systems for language services for all Medicare service
                    providers.
                      (B) The feasibility of adopting a payment methodology
                    for on-site interpreters, including interpreters who
                    work as independent contractors and interpreters who
                    work for agencies that provide on-site interpretation,
                    pursuant to which such interpreters could directly bill
                    Medicare for services provided in support of physician
                    office services for an LEP Medicare patient.
                      (C) The feasibility of Medicare contracting directly
                    with agencies that provide off-site interpretation
                    including telephonic and video interpretation pursuant
                    to which such contractors could directly bill Medicare
                    for the services provided in support of physician
                    office services for an LEP Medicare patient.
                      (D) The feasibility of modifying the existing
                    Medicare resource-based relative value scale (RBRVS) by
                    using adjustments (such as multipliers or add-ons) when
                    a patient is LEP.
                      (E) How each of options described in a previous
                    paragraph would be funded and how such funding would
                    affect physician payments, a physician's practice, and
                    beneficiary cost-sharing.
                      (F) The extent to which providers under parts A and B
                    of title XVIII of the Social Security Act, MA
                    organizations offering Medicare Advantage plans under
                    part C of such title and PDP sponsors of a prescription
                    drug plan under part D of such title utilize, offer, or
                    make available language services for beneficiaries with
                    limited English proficiency.
                      (G) The nature and type of language services provided
                    by States under title XIX of the Social Security Act
                    and the extent to which such services could be utilized
                    by beneficiaries and providers under title XVIII of
                    such Act.
              (3) Variation in payment system described.--The payment
            systems described in paragraph (2)(A) may allow variations
            based upon types of service providers, available delivery
            methods, and costs for providing language services including
            such factors as--
                      (A) the type of language services provided (such as
                    provision of health care or health care related
                    services directly in a non-English language by a
                    bilingual provider or use of an interpreter);
                      (B) type of interpretation services provided (such as
                    in-person, telephonic, video interpretation);
                      (C) the methods and costs of providing language
                    services (including the costs of providing language
                    services with internal staff or through contract with
                    external independent contractors or agencies, or both);
                      (D) providing services for languages not frequently
                    encountered in the United States; and
                      (E) providing services in rural areas.
              (4) Report.--The Secretary shall submit a report on the study
            conducted under subsection (a) to appropriate committees of
            Congress not later than 12 months after the date of the
            enactment of this Act.
              (5) Exemption from paperwork reduction act.--Chapter 35 of
            title 44, United States Code (commonly known as the ``Paperwork
            Reduction Act'' ), shall not apply for purposes of carrying out
            this subsection.
              (6) Authorization of appropriations.--There is authorized to
            be appropriated to carry out this subsection such sums as are
            necessary.
      (b) Health Plans.--Section 1857(g)(1) of the Social Security Act (42
    U.S.C. 1395w-27(g)(1)) is amended--
              (1) by striking ``or'' at the end of subparagraph (F);
              (2) by adding ``or'' at the end of subparagraph (G); and
              (3) by inserting after subparagraph (G) the following new
            subparagraph:
                      ``(H) fails substantially to provide language
                    services to limited English proficient beneficiaries
                    enrolled in the plan that are required under law;''.

    SEC. 1222. DEMONSTRATION TO PROMOTE ACCESS FOR MEDICARE BENEFICIARIES
                        WITH LIMITED ENGLISH PROFICIENCY BY PROVIDING
                        REIMBURSEMENT FOR CULTURALLY AND LINGUISTICALLY
                        APPROPRIATE SERVICES.

      (a) In General.--Not later than 6 months after the date of the
    completion of the study described in section 1221(a), the Secretary,
    acting through the Centers for Medicare & Medicaid Services, shall
    carry out a demonstration program under which the Secretary shall award
    not fewer than 24 3-year grants to eligible Medicare service providers
    (as described in subsection (b)(1)) to improve effective communication
    between such providers and Medicare beneficiaries who are living in
    communities where racial and ethnic minorities, including populations
    that face language barriers, are underserved with respect to such
    services. In designing and carrying out the demonstration the Secretary
    shall take into consideration the results of the study conducted under
    section 1221(a) and adjust, as appropriate, the distribution of grants
    so as to better target Medicare beneficiaries who are in the greatest
    need of language services. The Secretary shall not authorize a grant
    larger than $500,000 over three years for any grantee.
      (b) Eligibility; Priority.--
              (1) Eligibility.--To be eligible to receive a grant under
            subsection (a) an entity shall--
                      (A) be--
                              (i) a provider of services under part A of
                            title XVIII of the Social Security Act;
                              (ii) a service provider under part B of such
                            title;
                              (iii) a part C organization offering a
                            Medicare part C plan under part C of such
                            title; or
                              (iv) a PDP sponsor of a prescription drug
                            plan under part D of such title; and
                      (B) prepare and submit to the Secretary an
                    application, at such time, in such manner, and
                    accompanied by such additional information as the
                    Secretary may require.
              (2) Priority.--
                      (A) Distribution.--To the extent feasible, in
                    awarding grants under this section, the Secretary shall
                    award--
                              (i) at least 6 grants to providers of
                            services described in paragraph (1)(A)(i);
                              (ii) at least 6 grants to service providers
                            described in paragraph (1)(A)(ii);
                              (iii) at least 6 grants to organizations
                            described in paragraph (1)(A)(iii); and
                              (iv) at least 6 grants to sponsors described
                            in paragraph (1)(A)(iv).
                      (B) For community organizations.--The Secretary shall
                    give priority to applicants that have developed
                    partnerships with community organizations or with
                    agencies with experience in language access.
                      (C) Variation in grantees.--The Secretary shall also
                    ensure that the grantees under this section represent,
                    among other factors, variations in--
                              (i) different types of language services
                            provided and of service providers and
                            organizations under parts A through D of title
                            XVIII of the Social Security Act;
                              (ii) languages needed and their frequency of
                            use;
                              (iii) urban and rural settings;
                              (iv) at least two geographic regions, as
                            defined by the Secretary; and
                              (v) at least two large metropolitan
                            statistical areas with diverse populations.
      (c) Use of Funds.--
              (1) In general.--A grantee shall use grant funds received
            under this section to pay for the provision of competent
            language services to Medicare beneficiaries who are limited
            English proficient. Competent interpreter services may be
            provided through on-site interpretation, telephonic
            interpretation, or video interpretation or direct provision of
            health care or health care related services by a bilingual
            health care provider. A grantee may use bilingual providers,
            staff, or contract interpreters. A grantee may use grant funds
            to pay for competent translation services. A grantee may use up
            to 10 percent of the grant funds to pay for administrative
            costs associated with the provision of competent language
            services and for reporting required under subsection (e).
              (2) Organizations.--Grantees that are part C organizations or
            PDP sponsors must ensure that their network providers receive
            at least 50 percent of the grant funds to pay for the provision
            of competent language services to Medicare beneficiaries who
            are limited English proficient, including physicians and
            pharmacies.
              (3) Determination of payments for language services.--
            Payments to grantees shall be calculated based on the estimated
            numbers of limited English proficient Medicare beneficiaries in
            a grantee's service area utilizing--
                      (A) data on the numbers of limited English proficient
                    individuals who speak English less than ``very well''
                    from the most recently available data from the Bureau
                    of the Census or other State-based study the Secretary
                    determines likely to yield accurate data regarding the
                    number of such individuals served by the grantee; or
                      (B) the grantee's own data if the grantee routinely
                    collects data on Medicare beneficiaries' primary
                    language in a manner determined by the Secretary to
                    yield accurate data and such data shows greater numbers
                    of limited English proficient individuals than the data
                    listed in subparagraph (A).
              (4) Limitations.--
                      (A) Reporting.--Payments shall only be provided under
                    this section to grantees that report their costs of
                    providing language services as required under
                    subsection (e) and may be modified annually at the
                    discretion of the Secretary. If a grantee fails to
                    provide the reports under such section for the first
                    year of a grant, the Secretary may terminate the grant
                    and solicit applications from new grantees to
                    participate in the subsequent two years of the
                    demonstration program.
                      (B) Type of services.--
                              (i) In general.--Subject to clause (ii),
                            payments shall be provided under this section
                            only to grantees that utilize competent
                            bilingual staff or competent interpreter or
                            translation services which--
                                      (I) if the grantee operates in a
                                    State that has statewide health care
                                    interpreter standards, meet the State
                                    standards currently in effect; or
                                      (II) if the grantee operates in a
                                    State that does not have statewide
                                    health care interpreter standards,
                                    utilizes competent interpreters who
                                    follow the National Council on
                                    Interpreting in Health Care's Code of
                                    Ethics and Standards of Practice.
                              (ii) Exemptions.--The requirements of clause
                            (i) shall not apply--
                                      (I) in the case of a Medicare
                                    beneficiary who is limited English
                                    proficient (who has been informed in
                                    the beneficiary's primary language of
                                    the availability of free interpreter
                                    and translation services) and who
                                    requests the use of family, friends, or
                                    other persons untrained in
                                    interpretation or translation and the
                                    grantee documents the request in the
                                    beneficiary's record; and
                                      (II) in the case of a medical
                                    emergency where the delay directly
                                    associated with obtaining a competent
                                    interpreter or translation services
                                    would jeopardize the health of the
                                    patient.
                            Nothing in clause (ii)(II) shall be construed
                            to exempt emergency rooms or similar entities
                            that regularly provide health care services in
                            medical emergencies from having in place
                            systems to provide competent interpreter and
                            translation services without undue delay.
      (d) Assurances.--Grantees under this section shall--
              (1) ensure that appropriate clinical and support staff
            receive ongoing education and training in linguistically
            appropriate service delivery;
              (2) ensure the linguistic competence of bilingual providers;
              (3) offer and provide appropriate language services at no
            additional charge to each patient with limited English
            proficiency at all points of contact, in a timely manner during
            all hours of operation;
              (4) notify Medicare beneficiaries of their right to receive
            language services in their primary language;
              (5) post signage in the languages of the commonly encountered
            group or groups present in the service area of the
            organization; and
              (6) ensure that--
                      (A) primary language data are collected for
                    recipients of language services; and
                      (B) consistent with the privacy protections provided
                    under the regulations promulgated pursuant to section
                    264(c) of the Health Insurance Portability and
                    Accountability Act of 1996 (42 U.S.C. 1320d-2 note), if
                    the recipient of language services is a minor or is
                    incapacitated, the primary language of the parent or
                    legal guardian is collected and utilized.
      (e) Reporting Requirements.--Grantees under this section shall
    provide the Secretary with reports at the conclusion of the each year
    of a grant under this section. Each report shall include at least the
    following information:
              (1) The number of Medicare beneficiaries to whom language
            services are provided.
              (2) The languages of those Medicare beneficiaries.
              (3) The types of language services provided (such as
            provision of services directly in non-English language by a
            bilingual health care provider or use of an interpreter).
              (4) Type of interpretation (such as in-person, telephonic, or
            video interpretation).
              (5) The methods of providing language services (such as staff
            or contract with external independent contractors or agencies).
              (6) The length of time for each interpretation encounter.
              (7) The costs of providing language services (which may be
            actual or estimated, as determined by the Secretary).
      (f) No Cost Sharing.--Limited English proficient Medicare
    beneficiaries shall not have to pay cost-sharing or co-pays for
    language services provided through this demonstration program.
      (g) Evaluation and Report.--The Secretary shall conduct an evaluation
    of the demonstration program under this section and shall submit to the
    appropriate committees of Congress a report not later than 1 year after
    the completion of the program. The report shall include the following:
              (1) An analysis of the patient outcomes and costs of
            furnishing care to the limited English proficient Medicare
            beneficiaries participating in the project as compared to such
            outcomes and costs for limited English proficient Medicare
            beneficiaries not participating.
              (2) The effect of delivering culturally and linguistically
            appropriate services on beneficiary access to care, utilization
            of services, efficiency and cost-effectiveness of health care
            delivery, patient satisfaction, and select health outcomes.
              (3) Recommendations, if any, regarding the extension of such
            project to the entire Medicare program.
      (h) General Provisions.--Nothing in this section shall be construed
    to limit otherwise existing obligations of recipients of Federal
    financial assistance under title VI of the Civil Rights Act of 1964 (42
    U.S.C. 2000(d) et seq.) or any other statute.
      (i) Authorization of Appropriations.--There are authorized to be
    appropriated to carry out this section $16,000,000 for each fiscal year
    of the demonstration program.

    SEC. 1223. IOM REPORT ON IMPACT OF LANGUAGE ACCESS SERVICES.

      (a) In General.--The Secretary of Health and Human Services shall
    enter into an arrangement with the Institute of Medicine under which
    the Institute will prepare and publish, not later than 3 years after
    the date of the enactment of this Act, a report on the impact of
    language access services on the health and health care of limited
    English proficient populations.
      (b) Contents.--Such report shall include--
              (1) recommendations on the development and implementation of
            policies and practices by health care organizations and
            providers for limited English proficient patient populations;
              (2) a description of the effect of providing language access
            services on quality of health care and access to care and
            reduced medical error; and
              (3) a description of the costs associated with or savings
            related to provision of language access services.

    SEC. 1224. DEFINITIONS.

      In this subtitle:
              (1) Bilingual.--The term ``bilingual'' with respect to an
            individual means a person who has sufficient degree of
            proficiency in two languages and can ensure effective
            communication can occur in both languages.
              (2) Competent interpreter services.--The term ``competent
            interpreter services'' means a trans-language rendition of a
            spoken message in which the interpreter comprehends the source
            language and can speak comprehensively in the target language
            to convey the meaning intended in the source language. The
            interpreter knows health and health-related terminology and
            provides accurate interpretations by choosing equivalent
            expressions that convey the best matching and meaning to the
            source language and captures, to the greatest possible extent,
            all nuances intended in the source message.
              (3) Competent translation services.--The term ``competent
            translation services'' means a trans-language rendition of a
            written document in which the translator comprehends the source
            language and can write comprehensively in the target language
            to convey the meaning intended in the source language. The
            translator knows health and health-related terminology and
            provides accurate translations by choosing equivalent
            expressions that convey the best matching and meaning to the
            source language and captures, to the greatest possible extent,
            all nuances intended in the source document.
              (4) Effective communication.--The term ``effective
            communication'' means an exchange of information between the
            provider of health care or health care-related services and the
            limited English proficient recipient of such services that
            enables limited English proficient individuals to access,
            understand, and benefit from health care or health care-related
            services.
              (5) Interpreting/interpretation.--The terms ``interpreting''
            and ``interpretation'' mean the transmission of a spoken
            message from one language into another, faithfully, accurately,
            and objectively.
              (6) Health care services.--The term ``health care services''
            means services that address physical as well as mental health
            conditions in all care settings.
              (7) Health care-related services.--The term ``health care-
            related services'' means human or social services programs or
            activities that provide access, referrals or links to health
            care.
              (8) Language access.--The term ``language access'' means the
            provision of language services to an LEP individual designed to
            enhance that individual's access to, understanding of or
            benefit from health care or health care-related services.
              (9) Language services.--The term ``language services'' means
            provision of health care services directly in a non-English
            language, interpretation, translation, and non-English signage.
              (10) Limited english proficient.--The term ``limited English
            proficient'' or ``LEP'' with respect to an individual means an
            individual who speaks a primary language other than English and
            who cannot speak, read, write or understand the English
            language at a level that permits the individual to effectively
            communicate with clinical or nonclinical staff at an entity
            providing health care or health care related services.
              (11) Medicare beneficiary.--The term ``Medicare beneficiary''
            means an individual entitled to benefits under part A of title
            XVIII of the Social Security Act or enrolled under part B of
            such title.
              (12) Medicare program.--The term ``Medicare program'' means
            the programs under parts A through D of title XVIII of the
            Social Security Act.
              (13) Service provider.--The term ``service provider''
            includes all suppliers, providers of services, or entities
            under contract to provide coverage, items or services under any
            part of title XVIII of the Social Security Act.

                     Subtitle C--Miscellaneous Improvements

    SEC. 1231. EXTENSION OF THERAPY CAPS EXCEPTIONS PROCESS.

       Section 1833(g)(5) of the Social Security Act (42 U.S.C.
    1395l(g)(5)), as amended by section 141 of the Medicare Improvements
    for Patients and Providers Act of 2008 (Public Law 110-275), is amended
    by striking ``December 31, 2009'' and inserting ``December 31, 2011''.

    SEC. 1232. EXTENDED MONTHS OF COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR
                        KIDNEY TRANSPLANT PATIENTS AND OTHER RENAL DIALYSIS
                        PROVISIONS.

      (a) Provision of Appropriate Coverage of Immunosuppressive Drugs
    Under the Medicare Program for Kidney Transplant Recipients.--
              (1) Continued entitlement to immunosuppressive drugs.--
                      (A) Kidney transplant recipients.--Section 226A(b)(2)
                    of the Social Security Act (42 U.S.C. 426-1(b)(2)) is
                    amended by inserting ``(except for coverage of
                    immunosuppressive drugs under section 1861(s)(2)(J))''
                    before ``, with the thirty-sixth month''.
                      (B) Application.--Section 1836 of such Act (42 U.S.C.
                    1395o) is amended--
                              (i) by striking ``Every individual who'' and
                            inserting ``(a) In General.--Every individual
                            who''; and
                              (ii) by adding at the end the following new
                            subsection:
      ``(b) Special Rules Applicable to Individuals Only Eligible for
    Coverage of Immunosuppressive Drugs.--
              ``(1) In general.--In the case of an individual whose
            eligibility for benefits under this title has ended on or after
            January 1, 2012, except for the coverage of immunosuppressive
            drugs by reason of section 226A(b)(2), the following rules
            shall apply:
                      ``(A) The individual shall be deemed to be enrolled
                    under this part for purposes of receiving coverage of
                    such drugs.
                      ``(B) The individual shall be responsible for
                    providing for payment of the portion of the premium
                    under section 1839 which is not covered under the
                    Medicare savings program (as defined in section
                    1144(c)(7)) in order to receive such coverage.
                      ``(C) The provision of such drugs shall be subject to
                    the application of--
                              ``(i) the deductible under section 1833(b);
                            and
                              ``(ii) the coinsurance amount applicable for
                            such drugs (as determined under this part).
                      ``(D) If the individual is an inpatient of a hospital
                    or other entity, the individual is entitled to receive
                    coverage of such drugs under this part.
              ``(2) Establishment of procedures in order to implement
            coverage.--The Secretary shall establish procedures for--
                      ``(A) identifying individuals that are entitled to
                    coverage of immunosuppressive drugs by reason of
                    section 226A(b)(2); and
                      ``(B) distinguishing such individuals from
                    individuals that are enrolled under this part for the
                    complete package of benefits under this part.''.
                      (C) Technical amendment to correct duplicate
                    subsection designation.--Subsection (c) of section 226A
                    of such Act (42 U.S.C. 426-1), as added by section
                    201(a)(3)(D)(ii) of the Social Security Independence
                    and Program Improvements Act of 1994 (Public Law 103-
                    296; 108 Stat. 1497), is redesignated as subsection
                    (d).
              (2) Extension of secondary payer requirements for esrd
            beneficiaries.--Section 1862(b)(1)(C) of such Act (42 U.S.C.
            1395y(b)(1)(C)) is amended by adding at the end the following
            new sentence: ``With regard to immunosuppressive drugs
            furnished on or after the date of the enactment of the
            America's Affordable Health Choices Act of 2009, this
            subparagraph shall be applied without regard to any time
            limitation.''.
      (b) Medicare Coverage for ESRD Patients.--Section 1881 of such Act is
    further amended--
              (1) in subsection (b)(14)(B)(iii), by inserting ``, including
            oral drugs that are not the oral equivalent of an intravenous
            drug (such as oral phosphate binders and calcimimetics),''
            after ``other drugs and biologicals'';
              (2) in subsection (b)(14)(E)(ii)--
                      (A) in the first sentence--
                              (i) by striking ``a one-time election to be
                            excluded from the phase-in'' and inserting ``an
                            election, with respect to 2011, 2012, or 2013,
                            to be excluded from the phase-in (or the
                            remainder of the phase-in)''; and
                              (ii) by adding before the period at the end
                            the following: ``for such year and for each
                            subsequent year during the phase-in described
                            in clause (i)''; and
                      (B) in the second sentence--
                              (i) by striking ``January 1, 2011'' and
                            inserting ``the first date of such year''; and
                              (ii) by inserting ``and at a time'' after
                            ``form and manner''; and
              (3) in subsection (h)(4)(E), by striking ``lesser'' and
            inserting ``greater''.

    SEC. 1233. ADVANCE CARE PLANNING CONSULTATION.

      (a) Medicare.--
              (1) In general.--Section 1861 of the Social Security Act (42
            U.S.C. 1395x) is amended--
                      (A) in subsection (s)(2)--
                              (i) by striking ``and'' at the end of
                            subparagraph (DD);
                              (ii) by adding ``and'' at the end of
                            subparagraph (EE); and
                              (iii) by adding at the end the following new
                            subparagraph:
              ``(FF) advance care planning consultation (as defined in
            subsection (hhh)(1));''; and
                      (B) by adding at the end the following new
                    subsection:

                      ``Advance Care Planning Consultation

      ``(hhh)(1) Subject to paragraphs (3) and (4), the term `advance care
    planning consultation' means a consultation between the individual and
    a practitioner described in paragraph (2) regarding advance care
    planning, if, subject to paragraph (3), the individual involved has not
    had such a consultation within the last 5 years. Such consultation
    shall include the following:
              ``(A) An explanation by the practitioner of advance care
            planning, including key questions and considerations, important
            steps, and suggested people to talk to.
              ``(B) An explanation by the practitioner of advance
            directives, including living wills and durable powers of
            attorney, and their uses.
              ``(C) An explanation by the practitioner of the role and
            responsibilities of a health care proxy.
              ``(D) The provision by the practitioner of a list of national
            and State-specific resources to assist consumers and their
            families with advance care planning, including the national
            toll-free hotline, the advance care planning clearinghouses,
            and State legal service organizations (including those funded
            through the Older Americans Act of 1965).
              ``(E) An explanation by the practitioner of the continuum of
            end-of-life services and supports available, including
            palliative care and hospice, and benefits for such services and
            supports that are available under this title.
              ``(F)(i) Subject to clause (ii), an explanation of orders
            regarding life sustaining treatment or similar orders, which
            shall include--
                      ``(I) the reasons why the development of such an
                    order is beneficial to the individual and the
                    individual's family and the reasons why such an order
                    should be updated periodically as the health of the
                    individual changes;
                      ``(II) the information needed for an individual or
                    legal surrogate to make informed decisions regarding
                    the completion of such an order; and
                      ``(III) the identification of resources that an
                    individual may use to determine the requirements of the
                    State in which such individual resides so that the
                    treatment wishes of that individual will be carried out
                    if the individual is unable to communicate those
                    wishes, including requirements regarding the
                    designation of a surrogate decisionmaker (also known as
                    a health care proxy).
              ``(ii) The Secretary shall limit the requirement for
            explanations under clause (i) to consultations furnished in a
            State--
                      ``(I) in which all legal barriers have been addressed
                    for enabling orders for life sustaining treatment to
                    constitute a set of medical orders respected across all
                    care settings; and
                      ``(II) that has in effect a program for orders for
                    life sustaining treatment described in clause (iii).
              ``(iii) A program for orders for life sustaining treatment
            for a States described in this clause is a program that--
                      ``(I) ensures such orders are standardized and
                    uniquely identifiable throughout the State;
                      ``(II) distributes or makes accessible such orders to
                    physicians and other health professionals that (acting
                    within the scope of the professional's authority under
                    State law) may sign orders for life sustaining
                    treatment;
                      ``(III) provides training for health care
                    professionals across the continuum of care about the
                    goals and use of orders for life sustaining treatment;
                    and
                      ``(IV) is guided by a coalition of stakeholders
                    includes representatives from emergency medical
                    services, emergency department physicians or nurses,
                    state long-term care association, state medical
                    association, state surveyors, agency responsible for
                    senior services, state department of health, state
                    hospital association, home health association, state
                    bar association, and state hospice association.
      ``(2) A practitioner described in this paragraph is--
              ``(A) a physician (as defined in subsection (r)(1)); and
              ``(B) a nurse practitioner or physician assistant who has the
            authority under State law to sign orders for life sustaining
            treatments.
      ``(3)(A) An initial preventive physical examination under subsection
    (WW), including any related discussion during such examination, shall
    not be considered an advance care planning consultation for purposes of
    applying the 5-year limitation under paragraph (1).
      ``(B) An advance care planning consultation with respect to an
    individual may be conducted more frequently than provided under
    paragraph (1) if there is a significant change in the health condition
    of the individual, including diagnosis of a chronic, progressive, life-
    limiting disease, a life-threatening or terminal diagnosis or life-
    threatening injury, or upon admission to a skilled nursing facility, a
    long-term care facility (as defined by the Secretary), or a hospice
    program.
      ``(4) A consultation under this subsection may include the
    formulation of an order regarding life sustaining treatment or a
    similar order.
      ``(5)(A) For purposes of this section, the term `order regarding life
    sustaining treatment' means, with respect to an individual, an
    actionable medical order relating to the treatment of that individual
    that--
              ``(i) is signed and dated by a physician (as defined in
            subsection (r)(1)) or another health care professional (as
            specified by the Secretary and who is acting within the scope
            of the professional's authority under State law in signing such
            an order, including a nurse practitioner or physician
            assistant) and is in a form that permits it to stay with the
            individual and be followed by health care professionals and
            providers across the continuum of care;
              ``(ii) effectively communicates the individual's preferences
            regarding life sustaining treatment, including an indication of
            the treatment and care desired by the individual;
              ``(iii) is uniquely identifiable and standardized within a
            given locality, region, or State (as identified by the
            Secretary); and
              ``(iv) may incorporate any advance directive (as defined in
            section 1866(f)(3)) if executed by the individual.
      ``(B) The level of treatment indicated under subparagraph (A)(ii) may
    range from an indication for full treatment to an indication to limit
    some or all or specified interventions. Such indicated levels of
    treatment may include indications respecting, among other items--
              ``(i) the intensity of medical intervention if the patient is
            pulse less, apneic, or has serious cardiac or pulmonary
            problems;
              ``(ii) the individual's desire regarding transfer to a
            hospital or remaining at the current care setting;
              ``(iii) the use of antibiotics; and
              ``(iv) the use of artificially administered nutrition and
            hydration.''.
              (2) Payment.--Section 1848(j)(3) of such Act (42 U.S.C.
            1395w-4(j)(3)) is amended by inserting ``(2)(FF),'' after
            ``(2)(EE),''.
              (3) Frequency limitation.--Section 1862(a) of such Act (42
            U.S.C. 1395y(a)) is amended--
                      (A) in paragraph (1)--
                              (i) in subparagraph (N), by striking ``and''
                            at the end;
                              (ii) in subparagraph (O) by striking the
                            semicolon at the end and inserting ``, and'';
                            and
                              (iii) by adding at the end the following new
                            subparagraph:
                      ``(P) in the case of advance care planning
                    consultations (as defined in section 1861(hhh)(1)),
                    which are performed more frequently than is covered
                    under such section;''; and
                      (B) in paragraph (7), by striking ``or (K)'' and
                    inserting ``(K), or (P)''.
              (4) Effective date.--The amendments made by this subsection
            shall apply to consultations furnished on or after January 1,
            2011.
      (b) Expansion of Physician Quality Reporting Initiative for End of
    Life Care.--
              (1) Physician's quality reporting initiative.--Section
            1848(k)(2) of the Social Security Act (42 U.S.C. 1395w-4(k)(2))
            is amended by adding at the end the following new subparagraph:
                      ``(E) Physician's quality reporting initiative.--
                              ``(i) In general.--For purposes of reporting
                            data on quality measures for covered
                            professional services furnished during 2011 and
                            any subsequent year, to the extent that
                            measures are available, the Secretary shall
                            include quality measures on end of life care
                            and advanced care planning that have been
                            adopted or endorsed by a consensus-based
                            organization, if appropriate. Such measures
                            shall measure both the creation of and
                            adherence to orders for life-sustaining
                            treatment.
                              ``(ii) Proposed set of measures.--The
                            Secretary shall publish in the Federal Register
                            proposed quality measures on end of life care
                            and advanced care planning that the Secretary
                            determines are described in subparagraph (A)
                            and would be appropriate for eligible
                            professionals to use to submit data to the
                            Secretary. The Secretary shall provide for a
                            period of public comment on such set of
                            measures before finalizing such proposed
                            measures.''.
      (c) Inclusion of Information in Medicare & You Handbook.--
              (1) Medicare & you handbook.--
                      (A) In general.--Not later than 1 year after the date
                    of the enactment of this Act, the Secretary of Health
                    and Human Services shall update the online version of
                    the Medicare & You Handbook to include the following:
                              (i) An explanation of advance care planning
                            and advance directives, including--
                                      (I) living wills;
                                      (II) durable power of attorney;
                                      (III) orders of life-sustaining
                                    treatment; and
                                      (IV) health care proxies.
                              (ii) A description of Federal and State
                            resources available to assist individuals and
                            their families with advance care planning and
                            advance directives, including--
                                      (I) available State legal service
                                    organizations to assist individuals
                                    with advance care planning, including
                                    those organizations that receive
                                    funding pursuant to the Older Americans
                                    Act of 1965 (42 U.S.C. 93001 et seq.);
                                      (II) website links or addresses for
                                    State-specific advance directive forms;
                                    and
                                      (III) any additional information, as
                                    determined by the Secretary.
                      (B) Update of paper and subsequent versions.--The
                    Secretary shall include the information described in
                    subparagraph (A) in all paper and electronic versions
                    of the Medicare & You Handbook that are published on or
                    after the date that is 1 year after the date of the
                    enactment of this Act.

    SEC. 1234. PART B SPECIAL ENROLLMENT PERIOD AND WAIVER OF LIMITED
                        ENROLLMENT PENALTY FOR TRICARE BENEFICIARIES.

      (a) Part B Special Enrollment Period.--
              (1) In general.--Section 1837 of the Social Security Act (42
            U.S.C. 1395p) is amended by adding at the end the following new
            subsection:
      ``(l)(1) In the case of any individual who is a covered beneficiary
    (as defined in section 1072(5) of title 10, United States Code) at the
    time the individual is entitled to hospital insurance benefits under
    part A under section 226(b) or section 226A and who is eligible to
    enroll but who has elected not to enroll (or to be deemed enrolled)
    during the individual's initial enrollment period, there shall be a
    special enrollment period described in paragraph (2).
      ``(2) The special enrollment period described in this paragraph, with
    respect to an individual, is the 12-month period beginning on the day
    after the last day of the initial enrollment period of the individual
    or, if later, the 12-month period beginning with the month the
    individual is notified of enrollment under this section.
      ``(3) In the case of an individual who enrolls during the special
    enrollment period provided under paragraph (1), the coverage period
    under this part shall begin on the first day of the month in which the
    individual enrolls or, at the option of the individual, on the first
    day of the second month following the last month of the individual's
    initial enrollment period.
      ``(4) The Secretary of Defense shall establish a method for
    identifying individuals described in paragraph (1) and providing notice
    to them of their eligibility for enrollment during the special
    enrollment period described in paragraph (2).''.
              (2) Effective date.--The amendment made by paragraph (1)
            shall apply to elections made on or after the date of the
            enactment of this Act.
      (b) Waiver of Increase of Premium.--
              (1) In general.--Section 1839(b) of the Social Security Act
            (42 U.S.C. 1395r(b)) is amended by striking ``section
            1837(i)(4)'' and inserting ``subsection (i)(4) or (l) of
            section 1837''.
              (2) Effective date.--
                      (A) In general.--The amendment made by paragraph (1)
                    shall apply with respect to elections made on or after
                    the date of the enactment of this Act.
                      (B) Rebates for certain disabled and esrd
                    beneficiaries.--
                              (i) In general.--With respect to premiums for
                            months on or after January 2005 and before the
                            month of the enactment of this Act, no increase
                            in the premium shall be effected for a month in
                            the case of any individual who is a covered
                            beneficiary (as defined in section 1072(5) of
                            title 10, United States Code) at the time the
                            individual is entitled to hospital insurance
                            benefits under part A of title XVIII of the
                            Social Security Act under section 226(b) or
                            226A of such Act, and who is eligible to
                            enroll, but who has elected not to enroll (or
                            to be deemed enrolled), during the individual's
                            initial enrollment period, and who enrolls
                            under this part within the 12-month period that
                            begins on the first day of the month after the
                            month of notification of entitlement under this
                            part.
                              (ii) Consultation with department of
                            defense.--The Secretary of Health and Human
                            Services shall consult with the Secretary of
                            Defense in identifying individuals described in
                            this paragraph.
                              (iii) Rebates.--The Secretary of Health and
                            Human Services shall establish a method for
                            providing rebates of premium increases paid for
                            months on or after January 1, 2005, and before
                            the month of the enactment of this Act for
                            which a penalty was applied and collected.

    SEC. 1235. EXCEPTION FOR USE OF MORE RECENT TAX YEAR IN CASE OF GAINS
                        FROM SALE OF PRIMARY RESIDENCE IN COMPUTING PART B
                        INCOME-RELATED PREMIUM.

      (a) In General.--Section 1839(i)(4)(C)(ii)(II) of the Social Security
    Act (42 U.S.C. 1395r(i)(4)(C)(ii)(II)) is amended by inserting ``sale
    of primary residence,'' after ``divorce of such individual,''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to premiums and payments for years beginning with 2011.

    SEC. 1236. DEMONSTRATION PROGRAM ON USE OF PATIENT DECISIONS AIDS.

      (a) In General.--The Secretary of Health and Human Services shall
    establish a shared decision making demonstration program (in this
    subsection referred to as the ``program'') under the Medicare program
    using patient decision aids to meet the objective of improving the
    understanding by Medicare beneficiaries of their medical treatment
    options, as compared to comparable Medicare beneficiaries who do not
    participate in a shared decision making process using patient decision
    aids.
      (b) Sites.--
              (1) Enrollment.--The Secretary shall enroll in the program
            not more than 30 eligible providers who have experience in
            implementing, and have invested in the necessary infrastructure
            to implement, shared decision making using patient decision
            aids.
              (2) Application.--An eligible provider seeking to participate
            in the program shall submit to the Secretary an application at
            such time and containing such information as the Secretary may
            require.
              (3) Preference.--In enrolling eligible providers in the
            program, the Secretary shall give preference to eligible
            providers that--
                      (A) have documented experience in using patient
                    decision aids for the conditions identified by the
                    Secretary and in using shared decision making;
                      (B) have the necessary information technology
                    infrastructure to collect the information required by
                    the Secretary for reporting purposes; and
                      (C) are trained in how to use patient decision aids
                    and shared decision making.
      (c) Follow-up Counseling Visit.--
              (1) In general.--An eligible provider participating in the
            program shall routinely schedule Medicare beneficiaries for a
            counseling visit after the viewing of such a patient decision
            aid to answer any questions the beneficiary may have with
            respect to the medical care of the condition involved and to
            assist the beneficiary in thinking through how their
            preferences and concerns relate to their medical care.
              (2) Payment for follow-up counseling visit.--The Secretary
            shall establish procedures for making payments for such
            counseling visits provided to Medicare beneficiaries under the
            program. Such procedures shall provide for the establishment--
                      (A) of a code (or codes) to represent such services;
                    and
                      (B) of a single payment amount for such service that
                    includes the professional time of the health care
                    provider and a portion of the reasonable costs of the
                    infrastructure of the eligible provider such as would
                    be made under the applicable payment systems to that
                    provider for similar covered services.
      (d) Costs of Aids.--An eligible provider participating in the program
    shall be responsible for the costs of selecting, purchasing, and
    incorporating such patient decision aids into the provider's practice,
    and reporting data on quality and outcome measures under the program.
      (e) Funding.--The Secretary shall provide for the transfer from the
    Federal Supplementary Medical Insurance Trust Fund established under
    section 1841 of the Social Security Act (42 U.S.C. 1395t) of such funds
    as are necessary for the costs of carrying out the program.
      (f) Waiver Authority.--The Secretary may waive such requirements of
    titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.
    and 1395 et seq.) as may be necessary for the purpose of carrying out
    the program.
      (g) Report.--Not later than 12 months after the date of completion of
    the program, the Secretary shall submit to Congress a report on such
    program, together with recommendations for such legislation and
    administrative action as the Secretary determines to be appropriate.
    The final report shall include an evaluation of the impact of the use
    of the program on health quality, utilization of health care services,
    and on improving the quality of life of such beneficiaries.
      (h) Definitions.--In this section:
              (1) Eligible provider.--The term ``eligible provider'' means
            the following:
                      (A) A primary care practice.
                      (B) A specialty practice.
                      (C) A multispecialty group practice.
                      (D) A hospital.
                      (E) A rural health clinic.
                      (F) A Federally qualified health center (as defined
                    in section 1861(aa)(4) of the Social Security Act (42
                    U.S.C. 1395x(aa)(4)).
                      (G) An integrated delivery system.
                      (H) A State cooperative entity that includes the
                    State government and at least one other health care
                    provider which is set up for the purpose of testing
                    shared decision making and patient decision aids.
              (2) Patient decision aid.--The term ``patient decision aid''
            means an educational tool (such as the Internet, a video, or a
            pamphlet) that helps patients (or, if appropriate, the family
            caregiver of the patient) understand and communicate their
            beliefs and preferences related to their treatment options, and
            to decide with their health care provider what treatments are
            best for them based on their treatment options, scientific
            evidence, circumstances, beliefs, and preferences.
              (3) Shared decision making.--The term ``shared decision
            making'' means a collaborative process between patient and
            clinician that engages the patient in decision making, provides
            patients with information about trade-offs among treatment
            options, and facilitates the incorporation of patient
            preferences and values into the medical plan.

        TITLE III--PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES, AND
                                COORDINATED CARE

    SEC. 1301. ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM.

      Title XVIII of the Social Security Act is amended by inserting after
    section 1866D, as added by section 1152(f) of this Act, the following
    new section:
                 ``accountable care organization pilot program
      ``Sec. 1866E.  (a) In General.--The Secretary shall conduct a pilot
    program (in this section referred to as the `pilot program') to test
    different payment incentive models, including (to the extent
    practicable) the specific payment incentive models described in
    subsection (c), designed to reduce the growth of expenditures and
    improve health outcomes in the provision of items and services under
    this title to applicable beneficiaries (as defined in subsection (d))
    by qualifying accountable care organizations (as defined in subsection
    (b)(1)) in order to--
              ``(1) promote accountability for a patient population and
            coordinate items and services under parts A and B;
              ``(2) encourage investment in infrastructure and redesigned
            care processes for high quality and efficient service delivery;
            and
              ``(3) reward physician practices and other physician
            organizational models for the provision of high quality and
            efficient health care services.
      ``(b) Qualifying Accountable Care Organizations (ACOs).--
              ``(1) Qualifying aco defined.--In this section:
                      ``(A) In general.--The terms `qualifying accountable
                    care organization' and `qualifying ACO' mean a group of
                    physicians or other physician organizational model (as
                    defined in subparagraph (D)) that--
                              ``(i) is organized at least in part for the
                            purpose of providing physicians' services; and
                              ``(ii) meets such criteria as the Secretary
                            determines to be appropriate to participate in
                            the pilot program, including the criteria
                            specified in paragraph (2).
                      ``(B) Inclusion of other providers.--Nothing in this
                    subsection shall be construed as preventing a
                    qualifying ACO from including a hospital or any other
                    provider of services or supplier furnishing items or
                    services for which payment may be made under this title
                    that is affiliated with the ACO under an arrangement
                    structured so that such provider or supplier
                    participates in the pilot program and shares in any
                    incentive payments under the pilot program.
                      ``(C) Physician.--The term `physician' includes,
                    except as the Secretary may otherwise provide, any
                    individual who furnishes services for which payment may
                    be made as physicians' services.
                      ``(D) Other physician organizational model.--The term
                    `other physician organization model' means, with
                    respect to a qualifying ACO any model of organization
                    under which physicians enter into agreements with other
                    providers for the purposes of participation in the
                    pilot program in order to provide high quality and
                    efficient health care services and share in any
                    incentive payments under such program
                      ``(E) Other services.--Nothing in this paragraph
                    shall be construed as preventing a qualifying ACO from
                    furnishing items or services, for which payment may not
                    be made under this title, for purposes of achieving
                    performance goals under the pilot program.
              ``(2) Qualifying criteria.--The following are criteria
            described in this paragraph for an organized group of
            physicians to be a qualifying ACO:
                      ``(A) The group has a legal structure that would
                    allow the group to receive and distribute incentive
                    payments under this section.
                      ``(B) The group includes a sufficient number of
                    primary care physicians (regardless of specialty) for
                    the applicable beneficiaries for whose care the group
                    is accountable (as determined by the Secretary).
                      ``(C) The group reports on quality measures in such
                    form, manner, and frequency as specified by the
                    Secretary (which may be for the group, for providers of
                    services and suppliers, or both).
                      ``(D) The group reports to the Secretary (in a form,
                    manner and frequency as specified by the Secretary)
                    such data as the Secretary determines appropriate to
                    monitor and evaluate the pilot program.
                      ``(E) The group provides notice to applicable
                    beneficiaries regarding the pilot program (as
                    determined appropriate by the Secretary).
                      ``(F) The group contributes to a best practices
                    network or website, that shall be maintained by the
                    Secretary for the purpose of sharing strategies on
                    quality improvement, care coordination, and efficiency
                    that the groups believe are effective.
                      ``(G) The group utilizes patient-centered processes
                    of care, including those that emphasize patient and
                    caregiver involvement in planning and monitoring of
                    ongoing care management plan.
                      ``(H) The group meets other criteria determined to be
                    appropriate by the Secretary.
      ``(c) Specific Payment Incentive Models.--The specific payment
    incentive models described in this subsection are the following:
              ``(1) Performance target model.--Under the performance target
            model under this paragraph (in this paragraph referred to as
            the `performance target model'):
                      ``(A) In general.--A qualifying ACO qualifies to
                    receive an incentive payment if expenditures for
                    applicable beneficiaries are less than a target
                    spending level or a target rate of growth. The
                    incentive payment shall be made only if savings are
                    greater than would result from normal variation in
                    expenditures for items and services covered under parts
                    A and B.
                      ``(B) Computation of performance target.--
                              ``(i) In general.--The Secretary shall
                            establish a performance target for each
                            qualifying ACO comprised of a base amount
                            (described in clause (ii)) increased to the
                            current year by an adjustment factor (described
                            in clause (iii)). Such a target may be
                            established on a per capita basis, as the
                            Secretary determines to be appropriate.
                              ``(ii) Base amount.--For purposes of clause
                            (i), the base amount in this subparagraph is
                            equal to the average total payments (or allowed
                            charges) under parts A and B (and may include
                            part D, if the Secretary determines
                            appropriate) for applicable beneficiaries for
                            whom the qualifying ACO furnishes items and
                            services in a base period determined by the
                            Secretary. Such base amount may be determined
                            on a per capita basis.
                              ``(iii) Adjustment factor.--For purposes of
                            clause (i), the adjustment factor in this
                            clause may equal an annual per capita amount
                            that reflects changes in expenditures from the
                            period of the base amount to the current year
                            that would represent an appropriate performance
                            target for applicable beneficiaries (as
                            determined by the Secretary). Such adjustment
                            factor may be determined as an amount or rate,
                            may be determined on a national, regional,
                            local, or organization-specific basis, and may
                            be determined on a per capita basis. Such
                            adjustment factor also may be adjusted for risk
                            as determined appropriate by the Secretary.
                              ``(iv) Rebasing.--Under this model the
                            Secretary shall periodically rebase the base
                            expenditure amount described in clause (ii).
                      ``(C) Meeting target.--
                              ``(i) In general.--Subject to clause (ii), a
                            qualifying ACO that meet or exceeds annual
                            quality and performance targets for a year
                            shall receive an incentive payment for such
                            year equal to a portion (as determined
                            appropriate by the Secretary) of the amount by
                            which payments under this title for such year
                            relative are estimated to be below the
                            performance target for such year, as determined
                            by the Secretary. The Secretary may establish a
                            cap on incentive payments for a year for a
                            qualifying ACO.
                              ``(ii) Limitation.-- The Secretary shall
                            limit incentive payments to each qualifying ACO
                            under this paragraph as necessary to ensure
                            that the aggregate expenditures with respect to
                            applicable beneficiaries for such ACOs under
                            this title (inclusive of incentive payments
                            described in this subparagraph) do not exceed
                            the amount that the Secretary estimates would
                            be expended for such ACO for such beneficiaries
                            if the pilot program under this section were
                            not implemented.
                      ``(D) Reporting and other requirements.--In carrying
                    out such model, the Secretary may (as the Secretary
                    determines to be appropriate) incorporate reporting
                    requirements, incentive payments, and penalties related
                    to the physician quality reporting initiative (PQRI),
                    electronic prescribing, electronic health records, and
                    other similar initiatives under section 1848, and may
                    use alternative criteria than would otherwise apply
                    under such section for determining whether to make such
                    payments. The incentive payments described in this
                    subparagraph shall not be included in the limit
                    described in subparagraph (C)(ii) or in the performance
                    target model described in this paragraph.
              ``(2) Partial capitation model.--
                      ``(A) In general.--Subject to subparagraph (B), a
                    partial capitation model described in this paragraph
                    (in this paragraph referred to as a `partial capitation
                    model') is a model in which a qualifying ACO would be
                    at financial risk for some, but not all, of the items
                    and services covered under parts A and B, such as at
                    risk for some or all physicians' services or all items
                    and services under part B. The Secretary may limit a
                    partial capitation model to ACOs that are highly
                    integrated systems of care and to ACOs capable of
                    bearing risk, as determined to be appropriate by the
                    Secretary.
                      ``(B) No additional program expenditures.--Payments
                    to a qualifying ACO for applicable beneficiaries for a
                    year under the partial capitation model shall be
                    established in a manner that does not result in
                    spending more for such ACO for such beneficiaries than
                    would otherwise be expended for such ACO for such
                    beneficiaries for such year if the pilot program were
                    not implemented, as estimated by the Secretary.
              ``(3) Other payment models.--
                      ``(A) In general.--Subject to subparagraph (B), the
                    Secretary may develop other payment models that meet
                    the goals of this pilot program to improve quality and
                    efficiency.
                      ``(B) No additional program expenditures.--
                    Subparagraph (B) of paragraph (2) shall apply to a
                    payment model under subparagraph (A) in a similar
                    manner as such subparagraph (B) applies to the payment
                    model under paragraph (2).
      ``(d) Applicable Beneficiaries.--
              ``(1) In general.--In this section, the term `applicable
            beneficiary' means, with respect to a qualifying ACO, an
            individual who--
                      ``(A) is enrolled under part B and entitled to
                    benefits under part A;
                      ``(B) is not enrolled in a Medicare Advantage plan
                    under part C or a PACE program under section 1894; and
                      ``(C) meets such other criteria as the Secretary
                    determines appropriate, which may include criteria
                    relating to frequency of contact with physicians in the
                    ACO
              ``(2) Following applicable beneficiaries.--The Secretary may
            monitor data on expenditures and quality of services under this
            title after an applicable beneficiary discontinues receiving
            services under this title through a qualifying ACO.
      ``(e) Implementation.--
              ``(1) Starting date.--The pilot program shall begin no later
            than January 1, 2012. An agreement with a qualifying ACO under
            the pilot program may cover a multi-year period of between 3
            and 5 years.
              ``(2) Waiver.--The Secretary may waive such provisions of
            this title (including section 1877) and title XI in the manner
            the Secretary determines necessary in order implement the pilot
            program.
              ``(3) Performance results reports.--The Secretary shall
            report performance results to qualifying ACOs under the pilot
            program at least annually.
              ``(4) Limitations on review.--There shall be no
            administrative or judicial review under section 1869, section
            1878, or otherwise of--
                      ``(A) the elements, parameters, scope, and duration
                    of the pilot program;
                      ``(B) the selection of qualifying ACOs for the pilot
                    program;
                      ``(C) the establishment of targets, measurement of
                    performance, determinations with respect to whether
                    savings have been achieved and the amount of savings;
                      ``(D) determinations regarding whether, to whom, and
                    in what amounts incentive payments are paid; and
                      ``(E) decisions about the extension of the program
                    under subsection (g), expansion of the program under
                    subsection (h) or extensions under subsection (i).
              ``(5) Administration.--Chapter 35 of title 44, United States
            Code shall not apply to this section.
      ``(f) Evaluation; Monitoring.--
              ``(1) In general.--The Secretary shall evaluate the payment
            incentive model for each qualifying ACO under the pilot program
            to assess impacts on beneficiaries, providers of services,
            suppliers and the program under this title. The Secretary shall
            make such evaluation publicly available within 60 days of the
            date of completion of such report.
              ``(2) Monitoring.--The Inspector General of the Department of
            Health and Human Services shall provide for monitoring of the
            operation of ACOs under the pilot program with regard to
            violations of section 1877 (popularly known as the `Stark
            law').
      ``(g) Extension of Pilot Agreement With Successful Organizations.--
              ``(1) Reports to congress.--Not later than 2 years after the
            date the first agreement is entered into under this section,
            and biennially thereafter for six years, the Secretary shall
            submit to Congress and make publicly available a report on the
            use of authorities under the pilot program. Each report shall
            address the impact of the use of those authorities on
            expenditures, access, and quality under this title.
              ``(2) Extension.--Subject to the report provided under
            paragraph (1), with respect to a qualifying ACO, the Secretary
            may extend the duration of the agreement for such ACO under the
            pilot program as the Secretary determines appropriate if--
                      ``(A) the ACO receives incentive payments with
                    respect to any of the first 4 years of the pilot
                    agreement and is consistently meeting quality standards
                    or
                      ``(B) the ACO is consistently exceeding quality
                    standards and is not increasing spending under the
                    program.
              ``(3) Termination.--The Secretary may terminate an agreement
            with a qualifying ACO under the pilot program if such ACO did
            not receive incentive payments or consistently failed to meet
            quality standards in any of the first 3 years under the
            program.
      ``(h) Expansion to Additional ACOs.--
              ``(1) Testing and refinement of payment incentive models.--
            Subject to the evaluation described in subsection (f), the
            Secretary may enter into agreements under the pilot program
            with additional qualifying ACOs to further test and refine
            payment incentive models with respect to qualifying ACOs.
              ``(2) Expanding use of successful models to program
            implementation.--
                      ``(A) In general.--Subject to subparagraph (B), the
                    Secretary may issue regulations to implement, on a
                    permanent basis, 1 or more models if, and to the extent
                    that, such models are beneficial to the program under
                    this title, as determined by the Secretary.
                      ``(B) Certification.--The Chief Actuary of the
                    Centers for Medicare & Medicaid Services shall certify
                    that 1 or more of such models described in subparagraph
                    (A) would result in estimated spending that would be
                    less than what spending would otherwise be estimated to
                    be in the absence of such expansion.
      ``(i) Treatment of Physician Group Practice Demonstration.--
              ``(1) Extension.--The Secretary may enter in to an agreement
            with a qualifying ACO under the demonstration under section
            1866A, subject to rebasing and other modifications deemed
            appropriate by the Secretary, until the pilot program under
            this section is operational.
              ``(2) Transition.--For purposes of extension of an agreement
            with a qualifying ACO under subsection (g)(2), the Secretary
            shall treat receipt of an incentive payment for a year by an
            organization under the physician group practice demonstration
            pursuant to section 1866A as a year for which an incentive
            payment is made under such subsection, as long as such practice
            group practice organization meets the criteria under subsection
            (b)(2).
      ``(j) Additional Provisions.--
              ``(1) Authority for separate incentive arrangements.--The
            Secretary may create separate incentive arrangements (including
            using multiple years of data, varying thresholds, varying
            shared savings amounts, and varying shared savings limits) for
            different categories of qualifying ACOs to reflect natural
            variations in data availability, variation in average annual
            attributable expenditures, program integrity, and other matters
            the Secretary deems appropriate.
              ``(2) Encouragement of participation of smaller
            organizations.--In order to encourage the participation of
            smaller accountable care organizations under the pilot program,
            the Secretary may limit a qualifying ACO's exposure to high
            cost patients under the program.
              ``(3) Involvement in private payer arrangements.--Nothing in
            this section shall be construed as preventing qualifying ACOs
            participating in the pilot program from negotiating similar
            contracts with private payers.
              ``(4) Antidiscrimination limitation.--The Secretary shall not
            enter into an agreement with an entity to provide health care
            items or services under the pilot program, or with an entity to
            administer the program, unless such entity guarantees that it
            will not deny, limit, or condition the coverage or provision of
            benefits under the program, for individuals eligible to be
            enrolled under such program, based on any health status-related
            factor described in section 2702(a)(1) of the Public Health
            Service Act.
              ``(5) Construction.--Nothing in this section shall be
            construed to compel or require an organization to use an
            organization-specific target growth rate for an accountable
            care organization under this section for purposes of section
            1848.
              ``(6) Funding.--For purposes of administering and carrying
            out the pilot program, other than for payments for items and
            services furnished under this title and incentive payments
            under subsection (c)(1), in addition to funds otherwise
            appropriated, there are appropriated to the Secretary for the
            Center for Medicare & Medicaid Services Program Management
            Account $25,000,000 for each of fiscal years 2010 through 2014
            and $20,000,000 for fiscal year 2015. Amounts appropriated
            under this paragraph for a fiscal year shall be available until
            expended.''.

    SEC. 1302. MEDICAL HOME PILOT PROGRAM.

      (a) In General.--Title XVIII of the Social Security Act is amended by
    inserting after section 1866E, as inserted by section 1301, the
    following new section:
                          ``medical home pilot program
      ``Sec. 1866F.  (a) Establishment and Medical Home Models.--
              ``(1) Establishment of pilot program.--The Secretary shall
            establish a medical home pilot program (in this section
            referred to as the `pilot program') for the purpose of
            evaluating the feasibility and advisability of reimbursing
            qualified patient-centered medical homes for furnishing medical
            home services (as defined under subsection (b)(1)) to high need
            beneficiaries (as defined in subsection (d)(1)(C)) and to
            targeted high need beneficiaries (as defined in subsection
            (c)(1)(C)).
              ``(2) Scope.--Subject to subsection (g), the pilot program
            shall include urban, rural, and underserved areas.
              ``(3) Models of medical homes in the pilot program.--The
            pilot program shall evaluate each of the following medical home
            models:
                      ``(A) Independent patient-centered medical home
                    model.--Independent patient-centered medical home model
                    under subsection (c).
                      ``(B) Community-based medical home model.--Community-
                    based medical home model under subsection (d).
              ``(4) Participation of nurse practitioners and physician
            assistants.--
                      ``(A) Nothing in this section shall be construed as
                    preventing a nurse practitioner from leading a patient
                    centered medical home so long as--
                              ``(i) all the requirements of this section
                            are met; and
                              ``(ii) the nurse practitioner is acting
                            consistently with State law.
                      ``(B) Nothing in this section shall be construed as
                    preventing a physician assistant from participating in
                    a patient centered medical home so long as--
                              ``(i) all the requirements of this section
                            are met; and
                              ``(ii) the physician assistant is acting
                            consistently with State law.
      ``(b) Definitions.--For purposes of this section:
              ``(1) Patient-centered medical home services.--The term
            `patient-centered medical home services' means services that--
                      ``(A) provide beneficiaries with direct and ongoing
                    access to a primary care or principal care by a
                    physician or nurse practitioner who accepts
                    responsibility for providing first contact, continuous
                    and comprehensive care to such beneficiary;
                      ``(B) coordinate the care provided to a beneficiary
                    by a team of individuals at the practice level across
                    office, institutional and home settings led by a
                    primary care or principal care physician or nurse
                    practitioner, as needed and appropriate;
                      ``(C) provide for all the patient's health care needs
                    or take responsibility for appropriately arranging care
                    with other qualified providers for all stages of life;
                      ``(D) provide continuous access to care and
                    communication with participating beneficiaries;
                      ``(E) provide support for patient self-management,
                    proactive and regular patient monitoring, support for
                    family caregivers, use patient-centered processes, and
                    coordination with community resources;
                      ``(F) integrate readily accessible, clinically useful
                    information on participating patients that enables the
                    practice to treat such patients comprehensively and
                    systematically; and
                      ``(G) implement evidence-based guidelines and apply
                    such guidelines to the identified needs of
                    beneficiaries over time and with the intensity needed
                    by such beneficiaries.
              ``(2) Primary care.--The term `primary care' means health
            care that is provided by a physician, nurse practitioner, or
            physician assistant who practices in the field of family
            medicine, general internal medicine, geriatric medicine, or
            pediatric medicine.
              ``(3) Principal care.--The term `principal care' means
            integrated, accessible health care that is provided by a
            physician who is a medical subspecialist that addresses the
            majority of the personal health care needs of patients with
            chronic conditions requiring the subspecialist's expertise, and
            for whom the subspecialist assumes care management.
      ``(c) Independent Patient-centered Medical Home Model.--
              ``(1) In general.--
                      ``(A) Payment authority.--Under the independent
                    patient-centered medical home model under this
                    subsection, the Secretary shall make payments for
                    medical home services furnished by an independent
                    patient-centered medical home (as defined in
                    subparagraph (B)) pursuant to paragraph (3)(B) for a
                    targeted high need beneficiaries (as defined in
                    subparagraph (C)).
                      ``(B) Independent patient-centered medical home
                    defined.--In this section, the term `independent
                    patient-centered medical home' means a physician-
                    directed or nurse-practitioner-directed practice that
                    is qualified under paragraph (2) as--
                              ``(i) providing beneficiaries with patient-
                            centered medical home services; and
                              ``(ii) meets such other requirements as the
                            Secretary may specify.
                      ``(C) Targeted high need beneficiary defined.--For
                    purposes of this subsection, the term `targeted high
                    need beneficiary' means a high need beneficiary who,
                    based on a risk score as specified by the Secretary, is
                    generally within the upper 50th percentile of Medicare
                    beneficiaries.
                      ``(D) Beneficiary election to participate.--The
                    Secretary shall determine an appropriate method of
                    ensuring that beneficiaries have agreed to participate
                    in the pilot program.
                      ``(E) Implementation.--The pilot program under this
                    subsection shall begin no later than 6 months after the
                    date of the enactment of this section.
              ``(2) standard setting and qualification process for patient-
            centered medical homes.--The Secretary shall review alternative
            models for standard setting and qualification, and shall
            establish a process--
                      ``(A) to establish standards to enable medical
                    practices to qualify as patient-centered medical homes;
                    and
                      ``(B) to initially provide for the review and
                    certification of medical practices as meeting such
                    standards.
              ``(3)  Payment.--
                      ``(A) Establishment of methodology.--The Secretary
                    shall establish a methodology for the payment for
                    medical home services furnished by independent patient-
                    centered medical homes. Under such methodology, the
                    Secretary shall adjust payments to medical homes based
                    on beneficiary risk scores to ensure that higher
                    payments are made for higher risk beneficiaries.
                      ``(B) Per beneficiary per month payments.--Under such
                    payment methodology, the Secretary shall pay
                    independent patient-centered medical homes a monthly
                    fee for each targeted high need beneficiary who
                    consents to receive medical home services through such
                    medical home.
                      ``(C) Prospective payment.--The fee under
                    subparagraph (B) shall be paid on a prospective basis.
                      ``(D) Amount of payment.--In determining the amount
                    of such fee, the Secretary shall consider the
                    following:
                              ``(i) The clinical work and practice expenses
                            involved in providing the medical home services
                            provided by the independent patient-centered
                            medical home (such as providing increased
                            access, care coordination, population disease
                            management, and teaching self-care skills for
                            managing chronic illnesses) for which payment
                            is not made under this title as of the date of
                            the enactment of this section.
                              ``(ii) Allow for differential payments based
                            on capabilities of the independent patient-
                            centered medical home.
                              ``(iii) Use appropriate risk-adjustment in
                            determining the amount of the per beneficiary
                            per month payment under this paragraph in a
                            manner that ensures that higher payments are
                            made for higher risk beneficiaries.
              ``(4) Encouraging participation of variety of practices.--The
            pilot program under this subsection shall be designed to
            include the participation of physicians in practices with fewer
            than 10 full-time equivalent physicians, as well as physicians
            in larger practices, particularly in underserved and rural
            areas, as well as federally qualified community health centers,
            and rural health centers.
              ``(5) No duplication in pilot participation.--A physician in
            a group practice that participates in the accountable care
            organization pilot program under section 1866D shall not be
            eligible to participate in the pilot program under this
            subsection, unless the pilot program under this section has
            been implemented on a permanent basis under subsection (e)(3).
      ``(d) Community-based Medical Home Model.--
              ``(1) In general.--
                      ``(A) Authority for payments.--Under the community-
                    based medical home model under this subsection (in this
                    section referred to as the `CBMH model'), the Secretary
                    shall make payments for the furnishing of medical home
                    services by a community-based medical home (as defined
                    in subparagraph (B)) pursuant to paragraph (5)(B) for
                    high need beneficiaries.
                      ``(B) Community-based medical home defined.--In this
                    section, the term `community-based medical home' means
                    a nonprofit community-based or State-based organization
                    that is certified under paragraph (2) as meeting the
                    following requirements:
                              ``(i) The organization provides beneficiaries
                            with medical home services.
                              ``(ii) The organization provides medical home
                            services under the supervision of and in close
                            collaboration with the primary care or
                            principal care physician, nurse practitioner,
                            or physician assistant designated by the
                            beneficiary as his or her community-based
                            medical home provider.
                              ``(iii) The organization employs community
                            health workers, including nurses or other non-
                            physician practitioners, lay health workers, or
                            other persons as determined appropriate by the
                            Secretary, that assist the primary or principal
                            care physician, nurse practitioner, or
                            physician assistant in chronic care management
                            activities such as teaching self-care skills
                            for managing chronic illnesses, transitional
                            care services, care plan setting, medication
                            therapy management services for patients with
                            multiple chronic diseases, or help
                            beneficiaries access the health care and
                            community-based resources in their local
                            geographic area.
                              ``(iv) The organization meets such other
                            requirements as the Secretary may specify.
                      ``(C) High need beneficiary.--In this section, the
                    term `high need beneficiary' means an individual who
                    requires regular medical monitoring, advising, or
                    treatment.
              ``(2) Qualification process for community-based medical
            homes.--The Secretary shall establish a process--
                      ``(A) for the initial qualification of community-
                    based or State-based organizations as community-based
                    medical homes; and
                      ``(B) to provide for the review and qualification of
                    such community-based and State-based organizations
                    pursuant to criteria established by the Secretary.
              ``(3) Duration.--The pilot program for community-based
            medical homes under this subsection shall start no later than 2
            years after the date of the enactment of this section. Each
            demonstration site under the pilot program shall operate for a
            period of up to 5 years after the initial implementation phase,
            without regard to the receipt of a initial implementation
            funding under subsection (i).
              ``(4) Preference.--In selecting sites for the CBMH model, the
            Secretary may give preference to--
                      ``(A) applications from geographic areas that propose
                    to coordinate health care services for chronically ill
                    beneficiaries across a variety of health care settings,
                    such as primary care physician practices with fewer
                    than 10 physicians, specialty physicians, nurse
                    practitioner practices, Federally qualified health
                    centers, rural health clinics, and other settings;
                      ``(B) applications that include other payors that
                    furnish medical home services for chronically ill
                    patients covered by such payors; and
                      ``(C) applications from States that propose to use
                    the medical home model to coordinate health care
                    services for individuals enrolled under this title,
                    individuals enrolled under title XIX, and full-benefit
                    dual eligible individuals (as defined in section
                    1935(c)(6)) with chronic diseases across a variety of
                    health care settings.
              ``(5)  Payments.--
                      ``(A) Establishment of methodology.--The Secretary
                    shall establish a methodology for the payment for
                    medical home services furnished under the CBMH model.
                      ``(B) Per beneficiary per month payments.--Under such
                    payment methodology, the Secretary shall make two
                    separate monthly payments for each high need
                    beneficiary who consents to receive medical home
                    services through such medical home, as follows:
                              ``(i) Payment to community-based
                            organization.--One monthly payment to a
                            community-based or State-based organization.
                              ``(ii) Payment to primary or principal care
                            practice.--One monthly payment to the primary
                            or principal care practice for such
                            beneficiary.
                      ``(C) Prospective payment.--The payments under
                    subparagraph (B) shall be paid on a prospective basis.
                      ``(D) Amount of payment.--In determining the amount
                    of such payment, the Secretary shall consider the
                    following:
                              ``(i) The clinical work and practice expenses
                            involved in providing the medical home services
                            provided by the community-based medical home
                            (such as providing increased access, care
                            coordination, care plan setting, population
                            disease management, and teaching self-care
                            skills for managing chronic illnesses) for
                            which payment is not made under this title as
                            of the date of the enactment of this section.
                              ``(ii) Use appropriate risk-adjustment in
                            determining the amount of the per beneficiary
                            per month payment under this paragraph.
              ``(6) Initial implementation funding.--The Secretary may make
            available initial implementation funding to a community based
            or State-based organization or a State that is participating in
            the pilot program under this subsection. Such organization
            shall provide the Secretary with a detailed implementation plan
            that includes how such funds will be used.
      ``(e) Expansion of Program.--
              ``(1) Evaluation of cost and quality.--The Secretary shall
            evaluate the pilot program to determine--
                      ``(A) the extent to which medical homes result in--
                              ``(i) improvement in the quality and
                            coordination of health care services,
                            particularly with regard to the care of complex
                            patients;
                              ``(ii) improvement in reducing health
                            disparities;
                              ``(iii) reductions in preventable
                            hospitalizations;
                              ``(iv) prevention of readmissions;
                              ``(v) reductions in emergency room visits;
                              ``(vi) improvement in health outcomes,
                            including patient functional status where
                            applicable;
                              ``(vii) improvement in patient satisfaction;
                              ``(viii) improved efficiency of care such as
                            reducing duplicative diagnostic tests and
                            laboratory tests; and
                              ``(ix) reductions in health care
                            expenditures; and
                      ``(B) the feasability and advisability of reimbursing
                    medical homes for medical home services under this
                    title on a permanent basis.
              ``(2) Report.--Not later than 60 days after the date of
            completion of the evaluation under paragraph (1), the Secretary
            shall submit to Congress and make available to the public a
            report on the findings of the evaluation under paragraph (1).
              ``(3) Expansion of program.--
                      ``(A) In general.--Subject to the results of the
                    evaluation under paragraph (1) and subparagraph (B),
                    the Secretary may issue regulations to implement, on a
                    permanent basis, one or more models, if, and to the
                    extent that such model or models, are beneficial to the
                    program under this title, including that such
                    implementation will improve quality of care, as
                    determined by the Secretary.
                      ``(B) Certification requirement.--The Secretary may
                    not issue such regulations unless the Chief Actuary of
                    the Centers for Medicare & Medicaid Services certifies
                    that the expansion of the components of the pilot
                    program described in subparagraph (A) would result in
                    estimated spending under this title that would be no
                    more than the level of spending that the Secretary
                    estimates would otherwise be spent under this title in
                    the absence of such expansion.
      ``(f) Administrative Provisions.--
              ``(1) No duplication in payments.--During any month, the
            Secretary may not make payments under this section under more
            than one model or through more than one medical home under any
            model for the furnishing of medical home services to an
            individual.
              ``(2) No effect on payment for evaluation and management
            services.--Payments made under this section are in addition to,
            and have no effect on the amount of, payment for evaluation and
            management services made under this title
              ``(3) Administration.--Chapter 35 of title 44, United States
            Code shall not apply to this section.
      ``(g) Funding.--
              ``(1) Operational costs.--For purposes of administering and
            carrying out the pilot program (including the design,
            implementation, technical assistance for and evaluation of such
            program), in addition to funds otherwise available, there shall
            be transferred from the Federal Supplementary Medical Insurance
            Trust Fund under section 1841 to the Secretary for the Centers
            for Medicare & Medicaid Services Program Management Account
            $6,000,000 for each of fiscal years 2010 through 2014. Amounts
            appropriated under this paragraph for a fiscal year shall be
            available until expended.
              ``(2) Patient-centered medical home services.--In addition to
            funds otherwise available, there shall be available to the
            Secretary for the Centers for Medicare & Medicaid Services,
            from the Federal Supplementary Medical Insurance Trust Fund
            under section 1841--
                      ``(A) $200,000,000 for each of fiscal years 2010
                    through 2014 for payments for medical home services
                    under subsection (c)(3); and
                      ``(B) $125,000,000 for each of fiscal years 2012
                    through 2016, for payments under subsection (d)(5).
            Amounts available under this paragraph for a fiscal year shall
            be available until expended.
              ``(3) Initial implementation.--In addition to funds otherwise
            available, there shall be available to the Secretary for the
            Centers for Medicare & Medicaid Services, from the Federal
            Supplementary Medical Insurance Trust Fund under section 1841,
            $2,500,000 for each of fiscal years 2010 through 2012, under
            subsection (d)(6). Amounts available under this paragraph for a
            fiscal year shall be available until expended.
      ``(h) Treatment of TRHCA Medicare Medical Home Demonstration
    Funding.--
              ``(1) In addition to funds otherwise available for payment of
            medical home services under subsection (c)(3), there shall also
            be available the amount provided in subsection (g) of section
            204 of division B of the Tax Relief and Health Care Act of 2006
            (42 U.S.C. 1395b-1 note).
              ``(2) Notwithstanding section 1302(c) of the America's
            Affordable Health Choices Act of 2009, in addition to funds
            provided in paragraph (1) and subsection (g)(2)(A), the funding
            for medical home services that would otherwise have been
            available if such section 204 medical home demonstration had
            been implemented (without regard to subsection (g) of such
            section) shall be available to the independent patient-centered
            medical home model described in subsection (c).''.
      (b) Effective Date.--The amendment made by this section shall apply
    to services furnished on or after the date of the enactment of this
    Act.
      (c) Conforming Repeal.--Section 204 of division B of the Tax Relief
    and Health Care Act of 2006 (42 U.S.C. 1395b-1 note), as amended by
    section 133(a)(2) of the Medicare Improvements for Patients and
    Providers Act of 2008 (Public Law 110-275), is repealed.

    SEC. 1303. PAYMENT INCENTIVE FOR SELECTED PRIMARY CARE SERVICES.

      (a) In General.--Section 1833 of the Social Security Act is amended
    by inserting after subsection (o) the following new subsection:
      ``(p) Primary Care Payment Incentives.--
              ``(1) In general.--In the case of primary care services (as
            defined in paragraph (2)) furnished on or after January 1,
            2011, by a primary care practitioner (as defined in paragraph
            (3)) for which amounts are payable under section 1848, in
            addition to the amount otherwise paid under this part there
            shall also be paid to the practitioner (or to an employer or
            facility in the cases described in clause (A) of section
            1842(b)(6)) (on a monthly or quarterly basis) from the Federal
            Supplementary Medical Insurance Trust Fund an amount equal 5
            percent (or 10 percent if the practitioner predominately
            furnishes such services in an area that is designated (under
            section 332(a)(1)(A) of the Public Health Service Act) as a
            primary care health professional shortage area.
              ``(2) Primary care services defined.--In this subsection, the
            term `primary care services'--
                      ``(A) means services which are evaluation and
                    management services as defined in section
                    1848(j)(5)(A); and
                      ``(B) includes services furnished by another health
                    care professional that would be described in
                    subparagraph (A) if furnished by a physician.
              ``(3) Primary care practitioner defined.--In this subsection,
            the term `primary care practitioner'--
                      ``(A) means a physician or other health care
                    practitioner (including a nurse practitioner) who--
                              ``(i) specializes in family medicine, general
                            internal medicine, general pediatrics,
                            geriatrics, or obstetrics and gynecology; and
                              ``(ii) has allowed charges for primary care
                            services that account for at least 50 percent
                            of the physician's or practitioner's total
                            allowed charges under section 1848, as
                            determined by the Secretary for the most recent
                            period for which data are available; and
                      ``(B) includes a physician assistant who is under the
                    supervision of a physician described in subparagraph
                    (A).
              ``(4) Limitation on review.--There shall be no administrative
            or judicial review under section 1869, section 1878, or
            otherwise, respecting--
                      ``(A) any determination or designation under this
                    subsection;
                      ``(B) the identification of services as primary care
                    services under this subsection; and
                      ``(C) the identification of a practitioner as a
                    primary care practitioner under this subsection.
              ``(5) Coordination with other payments.--
                      ``(A) With other primary care incentives.--The
                    provisions of this subsection shall not be taken into
                    account in applying subsections (m) and (u) and any
                    payment under such subsections shall not be taken into
                    account in computing payments under this subsection.
                      ``(B) With quality incentives.--Payments under this
                    subsection shall not be taken into account in
                    determining the amounts that would otherwise be paid
                    under this part for purposes of section
                    1834(g)(2)(B).''.
      (b) Conforming Amendments.--
              (1) Section 1833(m) of such Act (42 U.S.C. 1395l(m)) is
            amended by redesignating paragraph (4) as paragraph (5) and by
            inserting after paragraph (3) the following new paragraph:
      ``(4) The provisions of this subsection shall not be taken into
    account in applying subsections (m) or (u) and any payment under such
    subsections shall not be taken into account in computing payments under
    this subsection.''.
              (2) Section 1848(m)(5)(B) of such Act (42 U.S.C. 1395w-
            4(m)(5)(B)) is amended by inserting ``, (p),'' after ``(m)''.
              (3) Section 1848(o)(1)(B)(iv) of such Act (42 U.S.C. 1395w-
            4(o)(1)(B)(iv)) is amended by inserting ``primary care'' before
            ``health professional shortage area''.

    SEC. 1304. INCREASED REIMBURSEMENT RATE FOR CERTIFIED NURSE-MIDWIVES.

      (a) In General.--Section 1833(a)(1)(K) of the Social Security Act (42
    U.S.C.1395l(a)(1)(K)) is amended by striking ``(but in no event'' and
    all that follows through ``performed by a physician)''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to services furnished on or after January 1, 2011.

    SEC. 1305. COVERAGE AND WAIVER OF COST-SHARING FOR PREVENTIVE SERVICES.

      (a) Medicare Covered Preventive Services Defined.--Section 1861 of
    the Social Security Act (42 U.S.C. 1395x), as amended by section
    1233(a)(1)(B), is amended by adding at the end the following new
    subsection:

                     ``Medicare Covered Preventive Services

      ``(iii)(1) Subject to the succeeding provisions of this subsection,
    the term `Medicare covered preventive services' means the following:
              ``(A) Prostate cancer screening tests (as defined in
            subsection (oo)).
              ``(B) Colorectal cancer screening tests (as defined in
            subsection (pp).
              ``(C) Diabetes outpatient self-management training services
            (as defined in subsection (qq)).
              ``(D) Screening for glaucoma for certain individuals (as
            described in subsection (s)(2)(U)).
              ``(E) Medical nutrition therapy services for certain
            individuals (as described in subsection (s)(2)(V)).
              ``(F) An initial preventive physical examination (as defined
            in subsection (ww)).
              ``(G) Cardiovascular screening blood tests (as defined in
            subsection (xx)(1)).
              ``(H) Diabetes screening tests (as defined in subsection
            (yy)).
              ``(I) Ultrasound screening for abdominal aortic aneurysm for
            certain individuals (as described in subsection (s)(2)(AA)).
              ``(J) Pneumococcal and influenza vaccines and their
            administration (as described in subsection (s)(10)(A)) and
            hepatitis B vaccine and its administration for certain
            individuals (as described in subsection (s)(10)(B)).
              ``(K) Screening mammography (as defined in subsection (jj)).
              ``(L) Screening pap smear and screening pelvic exam (as
            defined in subsection (nn)).
              ``(M) Bone mass measurement (as defined in subsection (rr)).
              ``(N) Kidney disease education services (as defined in
            subsection (ggg)).
              ``(O) Additional preventive services (as defined in
            subsection (ddd)).
      ``(2) With respect to specific Medicare covered preventive services,
    the limitations and conditions described in the provisions referenced
    in paragraph (1) with respect to such services shall apply.''.
      (b) Payment and Elimination of Cost-sharing.--
              (1) In general.--
                      (A) In general.--Section 1833(a) of the Social
                    Security Act (42 U.S.C. 1395l(a)) is amended by adding
                    after and below paragraph (9) the following:
    ``With respect to Medicare covered preventive services, in any case in
    which the payment rate otherwise provided under this part is computed
    as a percent of less than 100 percent of an actual charge, fee schedule
    rate, or other rate, such percentage shall be increased to 100
    percent.''.
                      (B) Application to sigmoidoscopies and
                    colonoscopies.--Section 1834(d) of such Act (42 U.S.C.
                    1395m(d)) is amended--
                              (i) in paragraph (2)(C), by amending clause
                            (ii) to read as follows:
                              ``(ii) No coinsurance.--In the case of a
                            beneficiary who receives services described in
                            clause (i), there shall be no coinsurance
                            applied.''; and
                              (ii) in paragraph (3)(C), by amending clause
                            (ii) to read as follows:
                              ``(ii) No coinsurance.--In the case of a
                            beneficiary who receives services described in
                            clause (i), there shall be no coinsurance
                            applied.''.
              (2) Elimination of coinsurance in outpatient hospital
            settings.--
                      (A) Exclusion from opd fee schedule.--Section
                    1833(t)(1)(B)(iv) of the Social Security Act (42 U.S.C.
                    1395l(t)(1)(B)(iv)) is amended by striking ``screening
                    mammography (as defined in section 1861(jj)) and
                    diagnostic mammography'' and inserting ``diagnostic
                    mammograms and Medicare covered preventive services (as
                    defined in section 1861(iii)(1))''.
                      (B) Conforming amendments.--Section 1833(a)(2) of the
                    Social Security Act (42 U.S.C. 1395l(a)(2)) is
                    amended--
                              (i) in subparagraph (F), by striking ``and''
                            after the semicolon at the end;
                              (ii) in subparagraph (G), by adding ``and''
                            at the end; and
                              (iii) by adding at the end the following new
                            subparagraph:
                      ``(H) with respect to additional preventive services
                    (as defined in section 1861(ddd)) furnished by an
                    outpatient department of a hospital, the amount
                    determined under paragraph (1)(W);''.
              (3) Waiver of application of deductible for all preventive
            services.--The first sentence of section 1833(b) of the Social
            Security Act (42 U.S.C. 1395l(b)) is amended--
                      (A) in clause (1), by striking ``items and services
                    described in section 1861(s)(10)(A)'' and inserting
                    ``Medicare covered preventive services (as defined in
                    section 1861(iii))'';
                      (B) by inserting ``and'' before ``(4)''; and
                      (C) by striking clauses (5) through (8).
              (4) Application to providers of services.--Section
            1866(a)(2)(A)(ii) of such Act (42 U.S.C. 1395cc(a)(2)(A)(ii))
            is amended by inserting ``other than for Medicare covered
            preventive services and'' after ``for such items and services
            (''.
      (c) Effective Date.--The amendments made by this section shall apply
    to services furnished on or after January 1, 2011.

    SEC. 1306. WAIVER OF DEDUCTIBLE FOR COLORECTAL CANCER SCREENING TESTS
                        REGARDLESS OF CODING, SUBSEQUENT DIAGNOSIS, OR
                        ANCILLARY TISSUE REMOVAL.

      (a) In General.--Section 1833 of the Social Security Act (42 U.S.C.
    1395l(b)), as amended by section 1305(b), is further amended--
              (1) in subsection (a), in the sentence added by section
            1305(b)(1)(A), by inserting ``(including services described in
            the last sentence of section 1833(b))'' after ``preventive
            services''; and
              (2) in subsection (b), by adding at the end the following new
            sentence: ``Clause (1) of the first sentence of this subsection
            shall apply with respect to a colorectal cancer screening test
            regardless of the code that is billed for the establishment of
            a diagnosis as a result of the test, or for the removal of
            tissue or other matter or other procedure that is furnished in
            connection with, as a result of, and in the same clinical
            encounter as, the screening test.''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to items and services furnished on or after January 1, 2011.

    SEC. 1307. EXCLUDING CLINICAL SOCIAL WORKER SERVICES FROM COVERAGE
                        UNDER THE MEDICARE SKILLED NURSING FACILITY
                        PROSPECTIVE PAYMENT SYSTEM AND CONSOLIDATED
                        PAYMENT.

      (a) In General.--Section 1888(e)(2)(A)(ii) of the Social Security Act
    (42 U.S.C. 1395yy(e)(2)(A)(ii)) is amended by inserting ``clinical
    social worker services,'' after ``qualified psychologist services,''.
      (b) Conforming Amendment.--Section 1861(hh)(2) of the Social Security
    Act (42 U.S.C. 1395x(hh)(2)) is amended by striking ``and other than
    services furnished to an inpatient of a skilled nursing facility which
    the facility is required to provide as a requirement for
    participation''.
      (c) Effective Date.--The amendments made by this section shall apply
    to items and services furnished on or after July 1, 2010.

    SEC. 1308. COVERAGE OF MARRIAGE AND FAMILY THERAPIST SERVICES AND
                        MENTAL HEALTH COUNSELOR SERVICES.

      (a) Coverage of Marriage and Family Therapist Services.--
              (1) Coverage of services.--Section 1861(s)(2) of the Social
            Security Act (42 U.S.C. 1395x(s)(2)), as amended by section
            1235, is amended--
                      (A) in subparagraph (EE), by striking ``and'' at the
                    end;
                      (B) in subparagraph (FF), by adding ``and'' at the
                    end; and
                      (C) by adding at the end the following new
                    subparagraph:
                      ``(GG) marriage and family therapist services (as
                    defined in subsection (jjj));''.
              (2) Definition.--Section 1861 of the Social Security Act (42
            U.S.C. 1395x), as amended by sections 1233 and 1305, is amended
            by adding at the end the following new subsection:

                    ``Marriage and Family Therapist Services

      ``(jjj)(1) The term `marriage and family therapist services' means
    services performed by a marriage and family therapist (as defined in
    paragraph (2)) for the diagnosis and treatment of mental illnesses,
    which the marriage and family therapist is legally authorized to
    perform under State law (or the State regulatory mechanism provided by
    State law) of the State in which such services are performed, as would
    otherwise be covered if furnished by a physician or as incident to a
    physician's professional service, but only if no facility or other
    provider charges or is paid any amounts with respect to the furnishing
    of such services.
      ``(2) The term `marriage and family therapist' means an individual
    who--
              ``(A) possesses a master's or doctoral degree which qualifies
            for licensure or certification as a marriage and family
            therapist pursuant to State law;
              ``(B) after obtaining such degree has performed at least 2
            years of clinical supervised experience in marriage and family
            therapy; and
              ``(C) is licensed or certified as a marriage and family
            therapist in the State in which marriage and family therapist
            services are performed.''.
              (3) Provision for payment under part b.--Section
            1832(a)(2)(B) of the Social Security Act (42 U.S.C.
            1395k(a)(2)(B)) is amended by adding at the end the following
            new clause:
                              ``(v) marriage and family therapist
                            services;''.
              (4) Amount of payment.--
                      (A) In general.--Section 1833(a)(1) of the Social
                    Security Act (42 U.S.C. 1395l(a)(1)) is amended--
                              (i) by striking ``and'' before ``(W)''; and
                              (ii) by inserting before the semicolon at the
                            end the following: ``, and (X) with respect to
                            marriage and family therapist services under
                            section 1861(s)(2)(GG), the amounts paid shall
                            be 80 percent of the lesser of the actual
                            charge for the services or 75 percent of the
                            amount determined for payment of a psychologist
                            under clause (L)''.
                      (B) Development of criteria with respect to
                    consultation with a health care professional.--The
                    Secretary of Health and Human Services shall, taking
                    into consideration concerns for patient
                    confidentiality, develop criteria with respect to
                    payment for marriage and family therapist services for
                    which payment may be made directly to the marriage and
                    family therapist under part B of title XVIII of the
                    Social Security Act (42 U.S.C. 1395j et seq.) under
                    which such a therapist must agree to consult with a
                    patient's attending or primary care physician or nurse
                    practitioner in accordance with such criteria.
              (5) Exclusion of marriage and family therapist services from
            skilled nursing facility prospective payment system.--Section
            1888(e)(2)(A)(ii) of the Social Security Act (42 U.S.C.
            1395yy(e)(2)(A)(ii)), as amended by section 1307(a), is amended
            by inserting ``marriage and family therapist services (as
            defined in subsection (jjj)(1)),'' after ``clinical social
            worker services,''.
              (6) Coverage of marriage and family therapist services
            provided in rural health clinics and federally qualified health
            centers.--Section 1861(aa)(1)(B) of the Social Security Act (42
            U.S.C. 1395x(aa)(1)(B)) is amended by striking ``or by a
            clinical social worker (as defined in subsection (hh)(1)),''
            and inserting ``, by a clinical social worker (as defined in
            subsection (hh)(1)), or by a marriage and family therapist (as
            defined in subsection (jjj)(2)),''.
              (7) Inclusion of marriage and family therapists as
            practitioners for assignment of claims.--Section 1842(b)(18)(C)
            of the Social Security Act (42 U.S.C. 1395u(b)(18)(C)) is
            amended by adding at the end the following new clause:
              ``(vii) A marriage and family therapist (as defined in
            section 1861(jjj)(2)).''.
      (b) Coverage of Mental Health Counselor Services.--
              (1) Coverage of services.--Section 1861(s)(2) of the Social
            Security Act (42 U.S.C. 1395x(s)(2)), as previously amended, is
            further amended--
                      (A) in subparagraph (FF), by striking ``and'' at the
                    end;
                      (B) in subparagraph (GG), by inserting ``and'' at the
                    end; and
                      (C) by adding at the end the following new
                    subparagraph:
              ``(HH) mental health counselor services (as defined in
            subsection (kkk)(1));''.
              (2) Definition.--Section 1861 of the Social Security Act (42
            U.S.C. 1395x), as previously amended, is amended by adding at
            the end the following new subsection:

                       ``Mental Health Counselor Services

      ``(kkk)(1) The term `mental health counselor services' means services
    performed by a mental health counselor (as defined in paragraph (2))
    for the diagnosis and treatment of mental illnesses which the mental
    health counselor is legally authorized to perform under State law (or
    the State regulatory mechanism provided by the State law) of the State
    in which such services are performed, as would otherwise be covered if
    furnished by a physician or as incident to a physician's professional
    service, but only if no facility or other provider charges or is paid
    any amounts with respect to the furnishing of such services.
      ``(2) The term `mental health counselor' means an individual who--
              ``(A) possesses a master's or doctor's degree which qualifies
            the individual for licensure or certification for the practice
            of mental health counseling in the State in which the services
            are performed;
              ``(B) after obtaining such a degree has performed at least 2
            years of supervised mental health counselor practice; and
              ``(C) is licensed or certified as a mental health counselor
            or professional counselor by the State in which the services
            are performed.''.
              (3) Provision for payment under part b.--Section
            1832(a)(2)(B) of the Social Security Act (42 U.S.C.
            1395k(a)(2)(B)), as amended by subsection (a)(3), is further
            amended--
                      (A) by striking ``and'' at the end of clause (iv);
                      (B) by adding ``and'' at the end of clause (v); and
                      (C) by adding at the end the following new clause:
                              ``(vi) mental health counselor services;''.
              (4) Amount of payment.--
                      (A) In general.--Section 1833(a)(1) of the Social
                    Security Act (42 U.S.C. 1395l(a)(1)), as amended by
                    subsection (a), is further amended--
                              (i) by striking ``and'' before ``(X)''; and
                              (ii) by inserting before the semicolon at the
                            end the following: ``, and (Y), with respect to
                            mental health counselor services under section
                            1861(s)(2)(HH), the amounts paid shall be 80
                            percent of the lesser of the actual charge for
                            the services or 75 percent of the amount
                            determined for payment of a psychologist under
                            clause (L)''.
                      (B) Development of criteria with respect to
                    consultation with a physician.--The Secretary of Health
                    and Human Services shall, taking into consideration
                    concerns for patient confidentiality, develop criteria
                    with respect to payment for mental health counselor
                    services for which payment may be made directly to the
                    mental health counselor under part B of title XVIII of
                    the Social Security Act (42 U.S.C. 1395j et seq.) under
                    which such a counselor must agree to consult with a
                    patient's attending or primary care physician in
                    accordance with such criteria.
              (5) Exclusion of mental health counselor services from
            skilled nursing facility prospective payment system.--Section
            1888(e)(2)(A)(ii) of the Social Security Act (42 U.S.C.
            1395yy(e)(2)(A)(ii)), as amended by section 1307(a) and
            subsection (a), is amended by inserting ``mental health
            counselor services (as defined in section 1861(kkk)(1)),''
            after ``marriage and family therapist services (as defined in
            subsection (jjj)(1)),''.
              (6) Coverage of mental health counselor services provided in
            rural health clinics and federally qualified health centers.--
            Section 1861(aa)(1)(B) of the Social Security Act (42 U.S.C.
            1395x(aa)(1)(B)), as amended by subsection (a), is amended by
            striking ``or by a marriage and family therapist (as defined in
            subsection (jjj)(2)),'' and inserting ``by a marriage and
            family therapist (as defined in subsection (jjj)(2)), or a
            mental health counselor (as defined in subsection (kkk)(2)),''.
              (7) Inclusion of mental health counselors as practitioners
            for assignment of claims.--Section 1842(b)(18)(C) of the Social
            Security Act (42 U.S.C. 1395u(b)(18)(C)), as amended by
            subsection (a)(7), is amended by adding at the end the
            following new clause:
              ``(viii) A mental health counselor (as defined in section
            1861(kkk)(2)).''.
      (c) Effective Date.--The amendments made by this section shall apply
    to items and services furnished on or after January 1, 2011.

    SEC. 1309. EXTENSION OF PHYSICIAN FEE SCHEDULE MENTAL HEALTH ADD-ON.

      Section 138(a)(1) of the Medicare Improvements for Patients and
    Providers Act of 2008 (Public Law 110-275) is amended by striking
    ``December 31, 2009'' and inserting ``December 31, 2011''.

    SEC. 1310. EXPANDING ACCESS TO VACCINES.

      (a) In General.--Paragraph (10) of section 1861(s) of the Social
    Security Act (42 U.S.C. 1395w(s)) is amended to read as follows:
              ``(10) federally recommended vaccines (as defined in
            subsection (lll)) and their respective administration;''.
      (b) Federally Recommended Vaccines Defined.--Section 1861 of such Act
    is further amended by adding at the end the following new subsection:

                        ``Federally Recommended Vaccines

      ``(lll) The term `federally recommended vaccine' means an approved
    vaccine recommended by the Advisory Committee on Immunization Practices
    (an advisory committee established by the Secretary, acting through the
    Director of the Centers for Disease Control and Prevention).''.
      (c) Conforming Amendments.--
              (1) Section 1833 of such Act (42 U.S.C. 1395l) is amended, in
            each of subsections (a)(1)(B), (a)(2)(G), and (a)(3)(A), by
            striking ``1861(s)(10)(A)'' and inserting ``1861(s)(10)'' each
            place it appears.
              (2) Section 1842(o)(1)(A)(iv) of such Act (42 U.S.C.
            1395u(o)(1)(A)(iv)) is amended--
                      (A) by striking ``subparagraph (A) or (B) of''; and
                      (B) by inserting before the period the following:
                    ``and before January 1, 2011, and influenza vaccines
                    furnished on or after January 1, 2011''.
              (3) Section 1847A(c)(6) of such Act (42 U.S.C. 1395w-
            3a(c)(6)) is amended by striking subparagraph (G) and inserting
            the following:
                      ``(G) Implementation.--Chapter 35 of title 44, United
                    States Code shall not apply to manufacturer provision
                    of information pursuant to section 1927(b)(3)(A)(iii)
                    for purposes of implementation of this section.''.
              (4) Section 1860D-2(e)(1) of such Act (42 U.S.C. 1395w-
            102(e)(1)) is amended by striking ``such term includes a
            vaccine'' and all that follows through ``its administration)
            and''.
              (5) Section 1861(ww)(2)(A) of such Act (42 U.S.C.
            1395x(ww)(2)(A))) is amended by striking ``Pneumococcal,
            influenza, and hepatitis B vaccine and administration'' and
            inserting ``Federally recommended vaccines (as defined in
            subsection (lll)) and their respective administration''.
              (6) Section 1861(iii)(1) of such Act, as added by section
            1305(a), is amended by amending subparagraph (J) to read as
            follows:
              ``(J) Federally recommended vaccines (as defined in
            subsection (lll)) and their respective administration.''.
              (7) Section 1927(b)(3)(A)(iii) of such Act (42 U.S.C. 1396r-
            8(b)(3)(A)(iii)) is amended, in the matter following subclause
            (III), by inserting ``(A)(iv) (including influenza vaccines
            furnished on or after January 1, 2011),'' after ``described in
            subparagraph''
      (d) Effective Dates.--The amendments made by--
              (1) this section (other than by subsection (c)(7)) shall
            apply to vaccines administered on or after January 1, 2011; and
              (2) by subsection (c)(7) shall apply to calendar quarters
            beginning on or after January 1, 2010.

    SEC. 1311. EXPANSION OF MEDICARE-COVERED PREVENTIVE SERVICES AT
                        FEDERALLY QUALIFIED HEALTH CENTERS.

       Section 1861(aa)(3)(A) of the Social Security Act (42 U.S.C. 1395w
    (aa)(3)(A)) is amended to read as follows:
                      ``(A) services of the type described subparagraphs
                    (A) through (C) of paragraph (1) and services described
                    in section 1861(iii); and''.

                               TITLE IV--QUALITY

                 Subtitle A--Comparative Effectiveness Research

    SEC. 1401. COMPARATIVE EFFECTIVENESS RESEARCH.

      (a) In General.--Title XI of the Social Security Act is amended by
    adding at the end the following new part:

                  ``Part D--Comparative Effectiveness Research

                      ``comparative effectiveness research
      ``Sec. 1181.  (a) Center for Comparative Effectiveness Research
    Established.--
              ``(1) In general.--The Secretary shall establish within the
            Agency for Healthcare Research and Quality a Center for
            Comparative Effectiveness Research (in this section referred to
            as the `Center') to conduct, support, and synthesize research
            (including research conducted or supported under section 1013
            of the Medicare Prescription Drug, Improvement, and
            Modernization Act of 2003) with respect to the outcomes,
            effectiveness, and appropriateness of health care services and
            procedures in order to identify the manner in which diseases,
            disorders, and other health conditions can most effectively and
            appropriately be prevented, diagnosed, treated, and managed
            clinically.
              ``(2) Duties.--The Center shall--
                      ``(A) conduct, support, and synthesize research
                    relevant to the comparative effectiveness of the full
                    spectrum of health care items, services and systems,
                    including pharmaceuticals, medical devices, medical and
                    surgical procedures, and other medical interventions;
                      ``(B) conduct and support systematic reviews of
                    clinical research, including original research
                    conducted subsequent to the date of the enactment of
                    this section;
                      ``(C) continuously develop rigorous scientific
                    methodologies for conducting comparative effectiveness
                    studies, and use such methodologies appropriately;
                      ``(D) submit to the Comparative Effectiveness
                    Research Commission, the Secretary, and Congress
                    appropriate relevant reports described in subsection
                    (d)(2); and
                      ``(E) encourage, as appropriate, the development and
                    use of clinical registries and the development of
                    clinical effectiveness research data networks from
                    electronic health records, post marketing drug and
                    medical device surveillance efforts, and other forms of
                    electronic health data.
              ``(3) Powers.--
                      ``(A) Obtaining official data.--The Center may secure
                    directly from any department or agency of the United
                    States information necessary to enable it to carry out
                    this section. Upon request of the Center, the head of
                    that department or agency shall furnish that
                    information to the Center on an agreed upon schedule.
                      ``(B) Data collection.--In order to carry out its
                    functions, the Center shall--
                              ``(i) utilize existing information, both
                            published and unpublished, where possible,
                            collected and assessed either by its own staff
                            or under other arrangements made in accordance
                            with this section,
                              ``(ii) carry out, or award grants or
                            contracts for, original research and
                            experimentation, where existing information is
                            inadequate, and
                              ``(iii) adopt procedures allowing any
                            interested party to submit information for the
                            use by the Center and Commission under
                            subsection (b) in making reports and
                            recommendations.
                      ``(C) Access of gao to information.--The Comptroller
                    General shall have unrestricted access to all
                    deliberations, records, and nonproprietary data of the
                    Center and Commission under subsection (b), immediately
                    upon request.
                      ``(D) Periodic audit.--The Center and Commission
                    under subsection (b) shall be subject to periodic audit
                    by the Comptroller General.
      ``(b) Oversight by Comparative Effectiveness Research Commission.--
              ``(1) In general.--The Secretary shall establish an
            independent Comparative Effectiveness Research Commission (in
            this section referred to as the `Commission') to oversee and
            evaluate the activities carried out by the Center under
            subsection (a), subject to the authority of the Secretary, to
            ensure such activities result in highly credible research and
            information resulting from such research.
              ``(2) Duties.--The Commission shall--
                      ``(A) determine national priorities for research
                    described in subsection (a) and in making such
                    determinations consult with a broad array of public and
                    private stakeholders, including patients and health
                    care providers and payers;
                      ``(B) monitor the appropriateness of use of the CERTF
                    described in subsection (g) with respect to the timely
                    production of comparative effectiveness research
                    determined to be a national priority under subparagraph
                    (A);
                      ``(C) identify highly credible research methods and
                    standards of evidence for such research to be
                    considered by the Center;
                      ``(D) review the methodologies developed by the
                    center under subsection (a)(2)(C);
                      ``(E) not later than one year after the date of the
                    enactment of this section, enter into an arrangement
                    under which the Institute of Medicine of the National
                    Academy of Sciences shall conduct an evaluation and
                    report on standards of evidence for such research;
                      ``(F) support forums to increase stakeholder
                    awareness and permit stakeholder feedback on the
                    efforts of the Center to advance methods and standards
                    that promote highly credible research;
                      ``(G) make recommendations for policies that would
                    allow for public access of data produced under this
                    section, in accordance with appropriate privacy and
                    proprietary practices, while ensuring that the
                    information produced through such data is timely and
                    credible;
                      ``(H) appoint a clinical perspective advisory panel
                    for each research priority determined under
                    subparagraph (A), which shall consult with patients and
                    advise the Center on research questions, methods, and
                    evidence gaps in terms of clinical outcomes for the
                    specific research inquiry to be examined with respect
                    to such priority to ensure that the information
                    produced from such research is clinically relevant to
                    decisions made by clinicians and patients at the point
                    of care;
                      ``(I) make recommendations for the priority for
                    periodic reviews of previous comparative effectiveness
                    research and studies conducted by the Center under
                    subsection (a);
                      ``(J) routinely review processes of the Center with
                    respect to such research to confirm that the
                    information produced by such research is objective,
                    credible, consistent with standards of evidence
                    established under this section, and developed through a
                    transparent process that includes consultations with
                    appropriate stakeholders; and
                      ``(K) make recommendations to the center for the
                    broad dissemination of the findings of research
                    conducted and supported under this section that enables
                    clinicians, patients, consumers, and payers to make
                    more informed health care decisions that improve
                    quality and value.
              ``(3) Composition of commission.--
                      ``(A) In general.--The members of the Commission
                    shall consist of--
                              ``(i) the Director of the Agency for
                            Healthcare Research and Quality;
                              ``(ii) the Chief Medical Officer of the
                            Centers for Medicare & Medicaid Services; and
                              ``(iii) 15 additional members who shall
                            represent broad constituencies of stakeholders
                            including clinicians, patients, researchers,
                            third-party payers, consumers of Federal and
                            State beneficiary programs.
                    Of such members, at least 9 shall be practicing
                    physicians, health care practitioners, consumers, or
                    patients.
                      ``(B) Qualifications.--
                              ``(i) Diverse representation of
                            perspectives.--The members of the Commission
                            shall represent a broad range of perspectives
                            and shall collectively have experience in the
                            following areas:
                                      ``(I) Epidemiology.
                                      ``(II) Health services research.
                                      ``(III) Bioethics.
                                      ``(IV) Decision sciences.
                                      ``(V) Health disparities.
                                      ``(VI) Economics.
                              ``(ii) Diverse representation of health care
                            community.--At least one member shall represent
                            each of the following health care communities:
                                      ``(I) Patients.
                                      ``(II) Health care consumers.
                                      ``(III) Practicing Physicians,
                                    including surgeons.
                                      ``(IV) Other health care
                                    practitioners engaged in clinical care.
                                      ``(V) Employers.
                                      ``(VI) Public payers.
                                      ``(VII) Insurance plans.
                                      ``(VIII) Clinical researchers who
                                    conduct research on behalf of
                                    pharmaceutical or device manufacturers.
                      ``(C) Limitation.--No more than 3 of the Members of
                    the Commission may be representatives of pharmaceutical
                    or device manufacturers and such representatives shall
                    be clinical researchers described under subparagraph
                    (B)(ii)(VIII).
              ``(4) Appointment.--
                      ``(A) In general.--The Secretary shall appoint the
                    members of the Commission.
                      ``(B) Consultation.--In considering candidates for
                    appointment to the Commission, the Secretary may
                    consult with the Government Accountability Office and
                    the Institute of Medicine of the National Academy of
                    Sciences.
              ``(5) Chairman; vice chairman.--The Secretary shall designate
            a member of the Commission, at the time of appointment of the
            member, as Chairman and a member as Vice Chairman for that term
            of appointment, except that in the case of vacancy of the
            Chairmanship or Vice Chairmanship, the Secretary may designate
            another member for the remainder of that member's term. The
            Chairman shall serve as an ex officio member of the National
            Advisory Council of the Agency for Health Care Research and
            Quality under section 931(c)(3)(B) of the Public Health Service
            Act.
              ``(6) Terms.--
                      ``(A) In general.--Except as provided in subparagraph
                    (B), each member of the Commission shall be appointed
                    for a term of 4 years.
                      ``(B) Terms of initial appointees.--Of the members
                    first appointed--
                              ``(i) 8 shall be appointed for a term of 4
                            years; and
                              ``(ii) 7 shall be appointed for a term of 3
                            years.
              ``(7) Coordination.--To enhance effectiveness and
            coordination, the Secretary is encouraged, to the greatest
            extent possible, to seek coordination between the Commission
            and the National Advisory Council of the Agency for Healthcare
            Research and Quality.
              ``(8) Conflicts of interest.--
                      ``(A) In general.--In appointing the members of the
                    Commission or a clinical perspective advisory panel
                    described in paragraph (2)(H), the Secretary or the
                    Commission, respectively, shall take into consideration
                    any financial interest (as defined in subparagraph
                    (D)), consistent with this paragraph, and develop a
                    plan for managing any identified conflicts.
                      ``(B) Evaluation and criteria.--When considering an
                    appointment to the Commission or a clinical perspective
                    advisory panel described paragraph (2)(H) the Secretary
                    or the Commission shall review the expertise of the
                    individual and the financial disclosure report filed by
                    the individual pursuant to the Ethics in Government Act
                    of 1978 for each individual under consideration for the
                    appointment, so as to reduce the likelihood that an
                    appointed individual will later require a written
                    determination as referred to in section 208(b)(1) of
                    title 18, United States Code, a written certification
                    as referred to in section 208(b)(3) of title 18, United
                    States Code, or a waiver as referred to in subparagraph
                    (D)(iii) for service on the Commission at a meeting of
                    the Commission.
                      ``(C) Disclosures; prohibitions on participation;
                    waivers.--
                              ``(i) Disclosure of financial interest.--
                            Prior to a meeting of the Commission or a
                            clinical perspective advisory panel described
                            in paragraph (2)(H) regarding a `particular
                            matter' (as that term is used in section 208 of
                            title 18, United States Code), each member of
                            the Commission or the clinical perspective
                            advisory panel who is a full-time Government
                            employee or special Government employee shall
                            disclose to the Secretary financial interests
                            in accordance with subsection (b) of such
                            section 208.
                              ``(ii) Prohibitions on participation.--Except
                            as provided under clause (iii), a member of the
                            Commission or a clinical perspective advisory
                            panel described in paragraph (2)(H) may not
                            participate with respect to a particular matter
                            considered in meeting of the Commission or the
                            clinical perspective advisory panel if such
                            member (or an immediate family member of such
                            member) has a financial interest that could be
                            affected by the advice given to the Secretary
                            with respect to such matter, excluding
                            interests exempted in regulations issued by the
                            Director of the Office of Government Ethics as
                            too remote or inconsequential to affect the
                            integrity of the services of the Government
                            officers or employees to which such regulations
                            apply.
                              ``(iii) Waiver.--If the Secretary determines
                            it necessary to afford the Commission or a
                            clinical perspective advisory panel described
                            in paragraph 2(H) essential expertise, the
                            Secretary may grant a waiver of the prohibition
                            in clause (ii) to permit a member described in
                            such subparagraph to--
                                      ``(I) participate as a non-voting
                                    member with respect to a particular
                                    matter considered in a Commission or a
                                    clinical perspective advisory panel
                                    meeting; or
                                      ``(II) participate as a voting member
                                    with respect to a particular matter
                                    considered in a Commission or a
                                    clinical perspective advisory panel
                                    meeting.
                              ``(iv) Limitation on waivers and other
                            exceptions.--
                                      ``(I) Determination of allowable
                                    exceptions for the commission.--The
                                    number of waivers granted to members of
                                    the Commission cannot exceed one-half
                                    of the total number of members for the
                                    Commission.
                                      ``(II) Prohibition on voting status
                                    on clinical perspective advisory
                                    panels.--No voting member of any
                                    clinical perspective advisory panel
                                    shall be in receipt of a waiver. No
                                    more than two nonvoting members of any
                                    clinical perspective advisory panel
                                    shall receive a waiver.
                      ``(D) Financial interest defined.--For purposes of
                    this paragraph, the term `financial interest' means a
                    financial interest under section 208(a) of title 18,
                    United States Code.
              ``(9) Compensation.--While serving on the business of the
            Commission (including travel time), a member of the Commission
            shall be entitled to compensation at the per diem equivalent of
            the rate provided for level IV of the Executive Schedule under
            section 5315 of title 5, United States Code; and while so
            serving away from home and the member's regular place of
            business, a member may be allowed travel expenses, as
            authorized by the Director of the Commission.
              ``(10) Availability of reports.--The Commission shall
            transmit to the Secretary a copy of each report submitted under
            this subsection and shall make such reports available to the
            public.
              ``(11) Director and staff; experts and consultants.--Subject
            to such review as the Secretary deems necessary to assure the
            efficient administration of the Commission, the Commission
            may--
                      ``(A) appoint an Executive Director (subject to the
                    approval of the Secretary) and such other personnel as
                    Federal employees under section 2105 of title 5, United
                    States Code, as may be necessary to carry out its
                    duties (without regard to the provisions of title 5,
                    United States Code, governing appointments in the
                    competitive service);
                      ``(B) seek such assistance and support as may be
                    required in the performance of its duties from
                    appropriate Federal departments and agencies;
                      ``(C) enter into contracts or make other
                    arrangements, as may be necessary for the conduct of
                    the work of the Commission (without regard to section
                    3709 of the Revised Statutes (41 U.S.C. 5));
                      ``(D) make advance, progress, and other payments
                    which relate to the work of the Commission;
                      ``(E) provide transportation and subsistence for
                    persons serving without compensation; and
                      ``(F) prescribe such rules and regulations as it
                    deems necessary with respect to the internal
                    organization and operation of the Commission.
      ``(c) Research Requirements.--Any research conducted, supported, or
    synthesized under this section shall meet the following requirements:
              ``(1) Ensuring transparency, credibility, and access.--
                      ``(A) The establishment of the agenda and conduct of
                    the research shall be insulated from inappropriate
                    political or stakeholder influence.
                      ``(B) Methods of conducting such research shall be
                    scientifically based.
                      ``(C) All aspects of the prioritization of research,
                    conduct of the research, and development of conclusions
                    based on the research shall be transparent to all
                    stakeholders.
                      ``(D) The process and methods for conducting such
                    research shall be publicly documented and available to
                    all stakeholders.
                      ``(E) Throughout the process of such research, the
                    Center shall provide opportunities for all stakeholders
                    involved to review and provide public comment on the
                    methods and findings of such research.
              ``(2) Use of clinical perspective advisory panels.--The
            research shall meet a national research priority determined
            under subsection (b)(2)(A) and shall consider advice given to
            the Center by the clinical perspective advisory panel for the
            national research priority.
              ``(3) Stakeholder input.--
                      ``(A) In general.--The Commission shall consult with
                    patients, health care providers, health care consumer
                    representatives, and other appropriate stakeholders
                    with an interest in the research through a transparent
                    process recommended by the Commission.
                      ``(B) Specific areas of consultation.--Consultation
                    shall include where deemed appropriate by the
                    Commission--
                              ``(i) recommending research priorities and
                            questions;
                              ``(ii) recommending research methodologies;
                            and
                              ``(iii) advising on and assisting with
                            efforts to disseminate research findings.
                      ``(C) Ombudsman.--The Secretary shall designate a
                    patient ombudsman. The ombudsman shall--
                              ``(i) serve as an available point of contact
                            for any patients with an interest in proposed
                            comparative effectiveness studies by the
                            Center; and
                              ``(ii) ensure that any comments from patients
                            regarding proposed comparative effectiveness
                            studies are reviewed by the Commission.
              ``(4) Taking into account potential differences.--Research
            shall--
                      ``(A) be designed, as appropriate, to take into
                    account the potential for differences in the
                    effectiveness of health care items and services used
                    with various subpopulations such as racial and ethnic
                    minorities, women, different age groups (including
                    children, adolescents, adults, and seniors), and
                    individuals with different comorbidities; and--
                      ``(B) seek, as feasible and appropriate, to include
                    members of such subpopulations as subjects in the
                    research.
      ``(d) Public Access to Comparative Effectiveness Information.--
              ``(1) In general.--Not later than 90 days after receipt by
            the Center or Commission, as applicable, of a relevant report
            described in paragraph (2) made by the Center, Commission, or
            clinical perspective advisory panel under this section,
            appropriate information contained in such report shall be
            posted on the official public Internet site of the Center and
            of the Commission, as applicable.
              ``(2) Relevant reports described.--For purposes of this
            section, a relevant report is each of the following submitted
            by the Center or a grantee or contractor of the Center:
                      ``(A) Any interim or progress reports as deemed
                    appropriate by the Secretary.
                      ``(B) Stakeholder comments.
                      ``(C) A final report.
      ``(e) Dissemination and Incorporation of Comparative Effectiveness
    Information.--
              ``(1) Dissemination.--The Center shall provide for the
            dissemination of appropriate findings produced by research
            supported, conducted, or synthesized under this section to
            health care providers, patients, vendors of health information
            technology focused on clinical decision support, appropriate
            professional associations, and Federal and private health
            plans, and other relevant stakeholders. In disseminating such
            findings the Center shall--
                      ``(A) convey findings of research so that they are
                    comprehensible and useful to patients and providers in
                    making health care decisions;
                      ``(B) discuss findings and other considerations
                    specific to certain sub-populations, risk factors, and
                    comorbidities as appropriate;
                      ``(C) include considerations such as limitations of
                    research and what further research may be needed, as
                    appropriate;
                      ``(D) not include any data that the dissemination of
                    which would violate the privacy of research
                    participants or violate any confidentiality agreements
                    made with respect to the use of data under this
                    section; and
                      ``(E) assist the users of health information
                    technology focused on clinical decision support to
                    promote the timely incorporation of such findings into
                    clinical practices and promote the ease of use of such
                    incorporation.
              ``(2) Dissemination protocols and strategies.--The Center
            shall develop protocols and strategies for the appropriate
            dissemination of research findings in order to ensure effective
            communication of findings and the use and incorporation of such
            findings into relevant activities for the purpose of informing
            higher quality and more effective and efficient decisions
            regarding medical items and services. In developing and
            adopting such protocols and strategies, the Center shall
            consult with stakeholders concerning the types of dissemination
            that will be most useful to the end users of information and
            may provide for the utilization of multiple formats for
            conveying findings to different audiences, including
            dissemination to individuals with limited English proficiency.
      ``(f) Reports to Congress.--
              ``(1) Annual reports.--Beginning not later than one year
            after the date of the enactment of this section, the Director
            of the Agency of Healthcare Research and Quality and the
            Commission shall submit to Congress an annual report on the
            activities of the Center and the Commission, as well as the
            research, conducted under this section. Each such report shall
            include a discussion of the Center's compliance with subsection
            (c)(4)(B), including any reasons for lack of compliance with
            such subsection.
              ``(2) Recommendation for fair share per capita amount for
            all-payer financing.--Beginning not later than December 31,
            2011, the Secretary shall submit to Congress an annual
            recommendation for a fair share per capita amount described in
            subsection (c)(1) of section 9511 of the Internal Revenue Code
            of 1986 for purposes of funding the CERTF under such section.
              ``(3) Analysis and review.--Not later than December 31, 2013,
            the Secretary, in consultation with the Commission, shall
            submit to Congress a report on all activities conducted or
            supported under this section as of such date. Such report shall
            include an evaluation of the overall costs of such activities
            and an analysis of the backlog of any research proposals
            approved by the Commission but not funded.
      ``(g) Funding of Comparative Effectiveness Research.--For fiscal year
    2010 and each subsequent fiscal year, amounts in the Comparative
    Effectiveness Research Trust Fund (referred to in this section as the
    `CERTF') under section 9511 of the Internal Revenue Code of 1986 shall
    be available, without the need for further appropriations and without
    fiscal year limitation, to the Secretary to carry out this section.
      ``(h) Construction.--Nothing in this section shall be construed to
    permit the Commission or the Center to mandate coverage, reimbursement,
    or other policies for any public or private payer.''.
      (b) Comparative Effectiveness Research Trust Fund; Financing for the
    Trust Fund.--For provision establishing a Comparative Effectiveness
    Research Trust Fund and financing such Trust Fund, see section 1802.

                     Subtitle B--Nursing Home Transparency

       PART 1--IMPROVING TRANSPARENCY OF INFORMATION ON SKILLED NURSING
                       FACILITIES AND NURSING FACILITIES

    SEC. 1411. REQUIRED DISCLOSURE OF OWNERSHIP AND ADDITIONAL DISCLOSABLE
                        PARTIES INFORMATION.

      (a) In General.--Section 1124 of the Social Security Act (42 U.S.C.
    1320a-3) is amended by adding at the end the following new subsection:
      ``(c) Required Disclosure of Ownership and Additional Disclosable
    Parties Information.--
              ``(1) Disclosure.--A facility (as defined in paragraph
            (7)(B)) shall have the information described in paragraph (3)
            available--
                      ``(A) during the period beginning on the date of the
                    enactment of this subsection and ending on the date
                    such information is made available to the public under
                    section 1411(b) of the America's Affordable Health
                    Choices Act of 2009, for submission to the Secretary,
                    the Inspector General of the Department of Health and
                    Human Services, the State in which the facility is
                    located, and the State long-term care ombudsman in the
                    case where the Secretary, the Inspector General, the
                    State, or the State long-term care ombudsman requests
                    such information; and
                      ``(B) beginning on the effective date of the final
                    regulations promulgated under paragraph (4)(A), for
                    reporting such information in accordance with such
                    final regulations.
            Nothing in subparagraph (A) shall be construed as authorizing a
            facility to dispose of or delete information described in such
            subparagraph after the effective date of the final regulations
            promulgated under paragraph (4)(A).
              ``(2) Public availability of information.--During the period
            described in paragraph (1)(A), a facility shall--
                      ``(A) make the information described in paragraph (3)
                    available to the public upon request and update such
                    information as may be necessary to reflect changes in
                    such information; and
                      ``(B) post a notice of the availability of such
                    information in the lobby of the facility in a prominent
                    manner.
              ``(3) Information described.--
                      ``(A) In general.--The following information is
                    described in this paragraph:
                              ``(i) The information described in
                            subsections (a) and (b), subject to
                            subparagraph (C).
                              ``(ii) The identity of and information on--
                                      ``(I) each member of the governing
                                    body of the facility, including the
                                    name, title, and period of service of
                                    each such member;
                                      ``(II) each person or entity who is
                                    an officer, director, member, partner,
                                    trustee, or managing employee of the
                                    facility, including the name, title,
                                    and date of start of service of each
                                    such person or entity; and
                                      ``(III) each person or entity who is
                                    an additional disclosable party of the
                                    facility.
                              ``(iii) The organizational structure of each
                            person and entity described in subclauses (II)
                            and (III) of clause (ii) and a description of
                            the relationship of each such person or entity
                            to the facility and to one another.
                      ``(B) Special rule where information is already
                    reported or submitted.--To the extent that information
                    reported by a facility to the Internal Revenue Service
                    on Form 990, information submitted by a facility to the
                    Securities and Exchange Commission, or information
                    otherwise submitted to the Secretary or any other
                    Federal agency contains the information described in
                    clauses (i), (ii), or (iii) of subparagraph (A), the
                    Secretary may allow, to the extent practicable, such
                    Form or such information to meet the requirements of
                    paragraph (1) and to be submitted in a manner specified
                    by the Secretary.
                      ``(C) Special rule.--In applying subparagraph
                    (A)(i)--
                              ``(i) with respect to subsections (a) and
                            (b), `ownership or control interest' shall
                            include direct or indirect interests, including
                            such interests in intermediate entities; and
                              ``(ii) subsection (a)(3)(A)(ii) shall include
                            the owner of a whole or part interest in any
                            mortgage, deed of trust, note, or other
                            obligation secured, in whole or in part, by the
                            entity or any of the property or assets
                            thereof, if the interest is equal to or exceeds
                            5 percent of the total property or assets of
                            the entirety.
              ``(4) Reporting.--
                      ``(A) In general.--Not later than the date that is 2
                    years after the date of the enactment of this
                    subsection, the Secretary shall promulgate regulations
                    requiring, effective on the date that is 90 days after
                    the date on which such final regulations are published
                    in the Federal Register, a facility to report the
                    information described in paragraph (3) to the Secretary
                    in a standardized format, and such other regulations as
                    are necessary to carry out this subsection. Such final
                    regulations shall ensure that the facility certifies,
                    as a condition of participation and payment under the
                    program under title XVIII or XIX, that the information
                    reported by the facility in accordance with such final
                    regulations is accurate and current.
                      ``(B) Guidance.--The Secretary shall provide guidance
                    and technical assistance to States on how to adopt the
                    standardized format under subparagraph (A).
              ``(5) No effect on existing reporting requirements.--Nothing
            in this subsection shall reduce, diminish, or alter any
            reporting requirement for a facility that is in effect as of
            the date of the enactment of this subsection.
              ``(6) Definitions.--In this subsection:
                      ``(A) Additional disclosable party.--The term
                    `additional disclosable party' means, with respect to a
                    facility, any person or entity who--
                              ``(i) exercises operational, financial, or
                            managerial control over the facility or a part
                            thereof, or provides policies or procedures for
                            any of the operations of the facility, or
                            provides financial or cash management services
                            to the facility;
                              ``(ii) leases or subleases real property to
                            the facility, or owns a whole or part interest
                            equal to or exceeding 5 percent of the total
                            value of such real property;
                              ``(iii) lends funds or provides a financial
                            guarantee to the facility in an amount which is
                            equal to or exceeds $50,000; or
                              ``(iv) provides management or administrative
                            services, clinical consulting services, or
                            accounting or financial services to the
                            facility.
                      ``(B) Facility.--The term `facility' means a
                    disclosing entity which is--
                              ``(i) a skilled nursing facility (as defined
                            in section 1819(a)); or
                              ``(ii) a nursing facility (as defined in
                            section 1919(a)).
                      ``(C) Managing employee.--The term `managing
                    employee' means, with respect to a facility, an
                    individual (including a general manager, business
                    manager, administrator, director, or consultant) who
                    directly or indirectly manages, advises, or supervises
                    any element of the practices, finances, or operations
                    of the facility.
                      ``(D) Organizational structure.--The term
                    `organizational structure' means, in the case of--
                              ``(i) a corporation, the officers, directors,
                            and shareholders of the corporation who have an
                            ownership interest in the corporation which is
                            equal to or exceeds 5 percent;
                              ``(ii) a limited liability company, the
                            members and managers of the limited liability
                            company (including, as applicable, what
                            percentage each member and manager has of the
                            ownership interest in the limited liability
                            company);
                              ``(iii) a general partnership, the partners
                            of the general partnership;
                              ``(iv) a limited partnership, the general
                            partners and any limited partners of the
                            limited partnership who have an ownership
                            interest in the limited partnership which is
                            equal to or exceeds 10 percent;
                              ``(v) a trust, the trustees of the trust;
                              ``(vi) an individual, contact information for
                            the individual; and
                              ``(vii) any other person or entity, such
                            information as the Secretary determines
                            appropriate.''.
      (b) Public Availability of Information.--
              (1) In general.--Not later than the date that is 1 year after
            the date on which the final regulations promulgated under
            section 1124(c)(4)(A) of the Social Security Act, as added by
            subsection (a), are published in the Federal Register, the
            information reported in accordance with such final regulations
            shall be made available to the public in accordance with
            procedures established by the Secretary.
              (2) Definitions.--In this subsection:
                      (A) Nursing facility.--The term ``nursing facility''
                    has the meaning given such term in section 1919(a) of
                    the Social Security Act (42 U.S.C. 1396r(a)).
                      (B) Secretary.--The term ``Secretary'' means the
                    Secretary of Health and Human Services.
                      (C) Skilled nursing facility.--The term ``skilled
                    nursing facility'' has the meaning given such term in
                    section 1819(a) of the Social Security Act (42 U.S.C.
                    1395i-3(a)).
      (c) Conforming Amendments.--
              (1) Skilled nursing facilities.--Section 1819(d)(1) of the
            Social Security Act (42 U.S.C. 1395i-3(d)(1)) is amended by
            striking subparagraph (B) and redesignating subparagraph (C) as
            subparagraph (B).
              (2) Nursing facilities.--Section 1919(d)(1) of the Social
            Security Act (42 U.S.C. 1396r(d)(1)) is amended by striking
            subparagraph (B) and redesignating subparagraph (C) as
            subparagraph (B).

    SEC. 1412. ACCOUNTABILITY REQUIREMENTS.

      (a) Effective Compliance and Ethics Programs.--
              (1) Skilled nursing facilities.--Section 1819(d)(1) of the
            Social Security Act (42 U.S.C. 1395i-3(d)(1)), as amended by
            section 1411(c)(1), is amended by adding at the end the
            following new subparagraph:
                      ``(C) Compliance and ethics programs.--
                              ``(i) Requirement.--On or after the date that
                            is 36 months after the date of the enactment of
                            this subparagraph, a skilled nursing facility
                            shall, with respect to the entity that operates
                            the facility (in this subparagraph referred to
                            as the `operating organization' or
                            `organization'), have in operation a compliance
                            and ethics program that is effective in
                            preventing and detecting criminal, civil, and
                            administrative violations under this Act and in
                            promoting quality of care consistent with
                            regulations developed under clause (ii).
                              ``(ii) Development of regulations.--
                                      ``(I) In general.--Not later than the
                                    date that is 2 years after such date of
                                    the enactment, the Secretary, in
                                    consultation with the Inspector General
                                    of the Department of Health and Human
                                    Services, shall promulgate regulations
                                    for an effective compliance and ethics
                                    program for operating organizations,
                                    which may include a model compliance
                                    program.
                                      ``(II) Design of regulations.--Such
                                    regulations with respect to specific
                                    elements or formality of a program may
                                    vary with the size of the organization,
                                    such that larger organizations should
                                    have a more formal and rigorous program
                                    and include established written
                                    policies defining the standards and
                                    procedures to be followed by its
                                    employees. Such requirements shall
                                    specifically apply to the corporate
                                    level management of multi-unit nursing
                                    home chains.
                                      ``(III) Evaluation.--Not later than 3
                                    years after the date of promulgation of
                                    regulations under this clause, the
                                    Secretary shall complete an evaluation
                                    of the compliance and ethics programs
                                    required to be established under this
                                    subparagraph. Such evaluation shall
                                    determine if such programs led to
                                    changes in deficiency citations,
                                    changes in quality performance, or
                                    changes in other metrics of resident
                                    quality of care. The Secretary shall
                                    submit to Congress a report on such
                                    evaluation and shall include in such
                                    report such recommendations regarding
                                    changes in the requirements for such
                                    programs as the Secretary determines
                                    appropriate.
                              ``(iii) Requirements for compliance and
                            ethics programs.--In this subparagraph, the
                            term `compliance and ethics program' means,
                            with respect to a skilled nursing facility, a
                            program of the operating organization that--
                                      ``(I) has been reasonably designed,
                                    implemented, and enforced so that it
                                    generally will be effective in
                                    preventing and detecting criminal,
                                    civil, and administrative violations
                                    under this Act and in promoting quality
                                    of care; and
                                      ``(II) includes at least the required
                                    components specified in clause (iv).
                              ``(iv) Required components of program.--The
                            required components of a compliance and ethics
                            program of an organization are the following:
                                      ``(I) The organization must have
                                    established compliance standards and
                                    procedures to be followed by its
                                    employees, contractors, and other
                                    agents that are reasonably capable of
                                    reducing the prospect of criminal,
                                    civil, and administrative violations
                                    under this Act.
                                      ``(II) Specific individuals within
                                    high-level personnel of the
                                    organization must have been assigned
                                    overall responsibility to oversee
                                    compliance with such standards and
                                    procedures and have sufficient
                                    resources and authority to assure such
                                    compliance.
                                      ``(III) The organization must have
                                    used due care not to delegate
                                    substantial discretionary authority to
                                    individuals whom the organization knew,
                                    or should have known through the
                                    exercise of due diligence, had a
                                    propensity to engage in criminal,
                                    civil, and administrative violations
                                    under this Act.
                                      ``(IV) The organization must have
                                    taken steps to communicate effectively
                                    its standards and procedures to all
                                    employees and other agents, such as by
                                    requiring participation in training
                                    programs or by disseminating
                                    publications that explain in a
                                    practical manner what is required.
                                      ``(V) The organization must have
                                    taken reasonable steps to achieve
                                    compliance with its standards, such as
                                    by utilizing monitoring and auditing
                                    systems reasonably designed to detect
                                    criminal, civil, and administrative
                                    violations under this Act by its
                                    employees and other agents and by
                                    having in place and publicizing a
                                    reporting system whereby employees and
                                    other agents could report violations by
                                    others within the organization without
                                    fear of retribution.
                                      ``(VI) The standards must have been
                                    consistently enforced through
                                    appropriate disciplinary mechanisms,
                                    including, as appropriate, discipline
                                    of individuals responsible for the
                                    failure to detect an offense.
                                      ``(VII) After an offense has been
                                    detected, the organization must have
                                    taken all reasonable steps to respond
                                    appropriately to the offense and to
                                    prevent further similar offenses,
                                    including repayment of any funds to
                                    which it was not entitled and any
                                    necessary modification to its program
                                    to prevent and detect criminal, civil,
                                    and administrative violations under
                                    this Act.
                                      ``(VIII) The organization must
                                    periodically undertake reassessment of
                                    its compliance program to identify
                                    changes necessary to reflect changes
                                    within the organization and its
                                    facilities.
                              ``(v) Coordination.--The provisions of this
                            subparagraph shall apply with respect to a
                            skilled nursing facility in lieu of section
                            1874(d).''.
              (2) Nursing facilities.--Section 1919(d)(1) of the Social
            Security Act (42 U.S.C. 1396r(d)(1)), as amended by section
            1411(c)(2), is amended by adding at the end the following new
            subparagraph:
                      ``(C) Compliance and ethics program.--
                              ``(i) Requirement.--On or after the date that
                            is 36 months after the date of the enactment of
                            this subparagraph, a nursing facility shall,
                            with respect to the entity that operates the
                            facility (in this subparagraph referred to as
                            the `operating organization' or
                            `organization'), have in operation a compliance
                            and ethics program that is effective in
                            preventing and detecting criminal, civil, and
                            administrative violations under this Act and in
                            promoting quality of care consistent with
                            regulations developed under clause (ii).
                              ``(ii) Development of regulations.--
                                      ``(I) In general.--Not later than the
                                    date that is 2 years after such date of
                                    the enactment, the Secretary, in
                                    consultation with the Inspector General
                                    of the Department of Health and Human
                                    Services, shall develop regulations for
                                    an effective compliance and ethics
                                    program for operating organizations,
                                    which may include a model compliance
                                    program.
                                      ``(II) Design of regulations.--Such
                                    regulations with respect to specific
                                    elements or formality of a program may
                                    vary with the size of the organization,
                                    such that larger organizations should
                                    have a more formal and rigorous program
                                    and include established written
                                    policies defining the standards and
                                    procedures to be followed by its
                                    employees. Such requirements may
                                    specifically apply to the corporate
                                    level management of multi-unit nursing
                                    home chains.
                                      ``(III) Evaluation.--Not later than 3
                                    years after the date of promulgation of
                                    regulations under this clause the
                                    Secretary shall complete an evaluation
                                    of the compliance and ethics programs
                                    required to be established under this
                                    subparagraph. Such evaluation shall
                                    determine if such programs led to
                                    changes in deficiency citations,
                                    changes in quality performance, or
                                    changes in other metrics of resident
                                    quality of care. The Secretary shall
                                    submit to Congress a report on such
                                    evaluation and shall include in such
                                    report such recommendations regarding
                                    changes in the requirements for such
                                    programs as the Secretary determines
                                    appropriate.
                              ``(iii) Requirements for compliance and
                            ethics programs.--In this subparagraph, the
                            term `compliance and ethics program' means,
                            with respect to a nursing facility, a program
                            of the operating organization that--
                                      ``(I) has been reasonably designed,
                                    implemented, and enforced so that it
                                    generally will be effective in
                                    preventing and detecting criminal,
                                    civil, and administrative violations
                                    under this Act and in promoting quality
                                    of care; and
                                      ``(II) includes at least the required
                                    components specified in clause (iv).
                              ``(iv) Required components of program.--The
                            required components of a compliance and ethics
                            program of an organization are the following:
                                      ``(I) The organization must have
                                    established compliance standards and
                                    procedures to be followed by its
                                    employees and other agents that are
                                    reasonably capable of reducing the
                                    prospect of criminal, civil, and
                                    administrative violations under this
                                    Act.
                                      ``(II) Specific individuals within
                                    high-level personnel of the
                                    organization must have been assigned
                                    overall responsibility to oversee
                                    compliance with such standards and
                                    procedures and has sufficient resources
                                    and authority to assure such
                                    compliance.
                                      ``(III) The organization must have
                                    used due care not to delegate
                                    substantial discretionary authority to
                                    individuals whom the organization knew,
                                    or should have known through the
                                    exercise of due diligence, had a
                                    propensity to engage in criminal,
                                    civil, and administrative violations
                                    under this Act.
                                      ``(IV) The organization must have
                                    taken steps to communicate effectively
                                    its standards and procedures to all
                                    employees and other agents, such as by
                                    requiring participation in training
                                    programs or by disseminating
                                    publications that explain in a
                                    practical manner what is required.
                                      ``(V) The organization must have
                                    taken reasonable steps to achieve
                                    compliance with its standards, such as
                                    by utilizing monitoring and auditing
                                    systems reasonably designed to detect
                                    criminal, civil, and administrative
                                    violations under this Act by its
                                    employees and other agents and by
                                    having in place and publicizing a
                                    reporting system whereby employees and
                                    other agents could report violations by
                                    others within the organization without
                                    fear of retribution.
                                      ``(VI) The standards must have been
                                    consistently enforced through
                                    appropriate disciplinary mechanisms,
                                    including, as appropriate, discipline
                                    of individuals responsible for the
                                    failure to detect an offense.
                                      ``(VII) After an offense has been
                                    detected, the organization must have
                                    taken all reasonable steps to respond
                                    appropriately to the offense and to
                                    prevent further similar offenses,
                                    including repayment of any funds to
                                    which it was not entitled and any
                                    necessary modification to its program
                                    to prevent and detect criminal, civil,
                                    and administrative violations under
                                    this Act.
                                      ``(VIII) The organization must
                                    periodically undertake reassessment of
                                    its compliance program to identify
                                    changes necessary to reflect changes
                                    within the organization and its
                                    facilities.
                              ``(v) Coordination.--The provisions of this
                            subparagraph shall apply with respect to a
                            nursing facility in lieu of section
                            1902(a)(77).''.
      (b) Quality Assurance and Performance Improvement Program.--
              (1) Skilled nursing facilities.--Section 1819(b)(1)(B) of the
            Social Security Act (42 U.S.C. 1396r(b)(1)(B)) is amended--
                      (A) by striking ``assurance'' and inserting
                    ``assurance and quality assurance and performance
                    improvement program'';
                      (B) by designating the matter beginning with ``A
                    skilled nursing facility'' as a clause (i) with the
                    heading ``In general.--'' and the appropriate
                    indentation;
                      (C) in clause (i) (as so designated by subparagraph
                    (B)), by redesignating clauses (i) and (ii) as
                    subclauses (I) and (II), respectively; and
                      (D) by adding at the end the following new clause:
                              ``(ii) Quality assurance and performance
                            improvement program.--
                                      ``(I) In general.--Not later than
                                    December 31, 2011, the Secretary shall
                                    establish and implement a quality
                                    assurance and performance improvement
                                    program (in this clause referred to as
                                    the `QAPI program') for skilled nursing
                                    facilities, including multi-unit chains
                                    of such facilities. Under the QAPI
                                    program, the Secretary shall establish
                                    standards relating to such facilities
                                    and provide technical assistance to
                                    such facilities on the development of
                                    best practices in order to meet such
                                    standards. Not later than 1 year after
                                    the date on which the regulations are
                                    promulgated under subclause (II), a
                                    skilled nursing facility must submit to
                                    the Secretary a plan for the facility
                                    to meet such standards and implement
                                    such best practices, including how to
                                    coordinate the implementation of such
                                    plan with quality assessment and
                                    assurance activities conducted under
                                    clause (i).
                                      ``(II) Regulations.--The Secretary
                                    shall promulgate regulations to carry
                                    out this clause.''.
              (2) Nursing facilities.--Section 1919(b)(1)(B) of the Social
            Security Act (42 U.S.C. 1396r(b)(1)(B)) is amended--
                      (A) by striking ``assurance'' and inserting
                    ``assurance and quality assurance and performance
                    improvement program'';
                      (B) by designating the matter beginning with ``A
                    nursing facility'' as a clause (i) with the heading
                    ``In general.--'' and the appropriate indentation; and
                      (C) by adding at the end the following new clause:
                              ``(ii) Quality assurance and performance
                            improvement program.--
                                      ``(I) In general.--Not later than
                                    December 31, 2011, the Secretary shall
                                    establish and implement a quality
                                    assurance and performance improvement
                                    program (in this clause referred to as
                                    the `QAPI program') for nursing
                                    facilities, including multi-unit chains
                                    of such facilities. Under the QAPI
                                    program, the Secretary shall establish
                                    standards relating to such facilities
                                    and provide technical assistance to
                                    such facilities on the development of
                                    best practices in order to meet such
                                    standards. Not later than 1 year after
                                    the date on which the regulations are
                                    promulgated under subclause (II), a
                                    nursing facility must submit to the
                                    Secretary a plan for the facility to
                                    meet such standards and implement such
                                    best practices, including how to
                                    coordinate the implementation of such
                                    plan with quality assessment and
                                    assurance activities conducted under
                                    clause (i).
                                      ``(II) Regulations.--The Secretary
                                    shall promulgate regulations to carry
                                    out this clause.''.
              (3) Proposal to revise quality assurance and performance
            improvement programs.--The Secretary shall include in the
            proposed rule published under section 1888(e) of the Social
            Security Act (42 U.S.C. 1395yy(e)(5)(A)) for the subsequent
            fiscal year to the extent otherwise authorized under section
            1819(b)(1)(B) or 1819(d)(1)(C) of the Social Security Act or
            other statutory or regulatory authority, one or more proposals
            for skilled nursing facilities to modify and strengthen quality
            assurance and performance improvement programs in such
            facilities. At the time of publication of such proposed rule
            and to the extent otherwise authorized under section
            1919(b)(1)(B) or 1919(d)(1)(C) of such Act or other regulatory
            authority.
              (4) Facility plan.--Not later than 1 year after the date on
            which the regulations are promulgated under subclause (II) of
            clause (ii) of sections 1819(b)(1)(B) and 1919(b)(1)(B) of the
            Social Security Act, as added by paragraphs (1) and (2), a
            skilled nursing facility and a nursing facility must submit to
            the Secretary a plan for the facility to meet the standards
            under such regulations and implement such best practices,
            including how to coordinate the implementation of such plan
            with quality assessment and assurance activities conducted
            under clause (i) of such sections.
      (c) GAO Study on Nursing Facility Undercapitalization.--
              (1) In general.--The Comptroller General of the United States
            shall conduct a study that examines the following:
                      (A) The extent to which corporations that own or
                    operate large numbers of nursing facilities, taking
                    into account ownership type (including private equity
                    and control interests), are undercapitalizing such
                    facilities.
                      (B) The effects of such undercapitalization on
                    quality of care, including staffing and food costs, at
                    such facilities.
                      (C) Options to address such undercapitalization, such
                    as requirements relating to surety bonds, liability
                    insurance, or minimum capitalization.
              (2) Report.--Not later than 18 months after the date of the
            enactment of this Act, the Comptroller General shall submit to
            Congress a report on the study conducted under paragraph (1).
              (3) Nursing facility.--In this subsection, the term ``nursing
            facility'' includes a skilled nursing facility.

    SEC. 1413. NURSING HOME COMPARE MEDICARE WEBSITE.

      (a) Skilled Nursing Facilities.--
              (1) In general.--Section 1819 of the Social Security Act (42
            U.S.C. 1395i-3) is amended--
                      (A) by redesignating subsection (i) as subsection
                    (j); and
                      (B) by inserting after subsection (h) the following
                    new subsection:
      ``(i) Nursing Home Compare Website.--
              ``(1) Inclusion of additional information.--
                      ``(A) In general.--The Secretary shall ensure that
                    the Department of Health and Human Services includes,
                    as part of the information provided for comparison of
                    nursing homes on the official Internet website of the
                    Federal Government for Medicare beneficiaries (commonly
                    referred to as the `Nursing Home Compare' Medicare
                    website) (or a successor website), the following
                    information in a manner that is prominent, easily
                    accessible, readily understandable to consumers of
                    long-term care services, and searchable:
                              ``(i) Information that is reported to the
                            Secretary under section 1124(c)(4).
                              ``(ii) Information on the `Special Focus
                            Facility program' (or a successor program)
                            established by the Centers for Medicare and
                            Medicaid Services, according to procedures
                            established by the Secretary. Such procedures
                            shall provide for the inclusion of information
                            with respect to, and the names and locations
                            of, those facilities that, since the previous
                            quarter--
                                      ``(I) were newly enrolled in the
                                    program;
                                      ``(II) are enrolled in the program
                                    and have failed to significantly
                                    improve;
                                      ``(III) are enrolled in the program
                                    and have significantly improved;
                                      ``(IV) have graduated from the
                                    program; and
                                      ``(V) have closed voluntarily or no
                                    longer participate under this title.
                              ``(iii) Staffing data for each facility
                            (including resident census data and data on the
                            hours of care provided per resident per day)
                            based on data submitted under subsection
                            (b)(8)(C), including information on staffing
                            turnover and tenure, in a format that is
                            clearly understandable to consumers of long-
                            term care services and allows such consumers to
                            compare differences in staffing between
                            facilities and State and national averages for
                            the facilities. Such format shall include--
                                      ``(I) concise explanations of how to
                                    interpret the data (such as a plain
                                    English explanation of data reflecting
                                    `nursing home staff hours per resident
                                    day');
                                      ``(II) differences in types of staff
                                    (such as training associated with
                                    different categories of staff);
                                      ``(III) the relationship between
                                    nurse staffing levels and quality of
                                    care; and
                                      ``(IV) an explanation that
                                    appropriate staffing levels vary based
                                    on patient case mix.
                              ``(iv) Links to State Internet websites with
                            information regarding State survey and
                            certification programs, links to Form 2567
                            State inspection reports (or a successor form)
                            on such websites, information to guide
                            consumers in how to interpret and understand
                            such reports, and the facility plan of
                            correction or other response to such report.
                              ``(v) The standardized complaint form
                            developed under subsection (f)(8), including
                            explanatory material on what complaint forms
                            are, how they are used, and how to file a
                            complaint with the State survey and
                            certification program and the State long-term
                            care ombudsman program.
                              ``(vi) Summary information on the number,
                            type, severity, and outcome of substantiated
                            complaints.
                              ``(vii) The number of adjudicated instances
                            of criminal violations by employees of a
                            nursing facility--
                                      ``(I) that were committed inside the
                                    facility;
                                      ``(II) with respect to such instances
                                    of violations or crimes committed
                                    inside of the facility that were the
                                    violations or crimes of abuse, neglect,
                                    and exploitation, criminal sexual
                                    abuse, or other violations or crimes
                                    that resulted in serious bodily injury;
                                    and
                                      ``(III) the number of civil monetary
                                    penalties levied against the facility,
                                    employees, contractors, and other
                                    agents.
                      ``(B) Deadline for provision of information.--
                              ``(i) In general.--Except as provided in
                            clause (ii), the Secretary shall ensure that
                            the information described in subparagraph (A)
                            is included on such website (or a successor
                            website) not later than 1 year after the date
                            of the enactment of this subsection.
                              ``(ii) Exception.--The Secretary shall ensure
                            that the information described in subparagraph
                            (A)(i) and (A)(iii) is included on such website
                            (or a successor website) not later than the
                            date on which the requirements under section
                            1124(c)(4) and subsection (b)(8)(C)(ii) are
                            implemented.
              ``(2) Review and modification of website.--
                      ``(A) In general.--The Secretary shall establish a
                    process--
                              ``(i) to review the accuracy, clarity of
                            presentation, timeliness, and comprehensiveness
                            of information reported on such website as of
                            the day before the date of the enactment of
                            this subsection; and
                              ``(ii) not later than 1 year after the date
                            of the enactment of this subsection, to modify
                            or revamp such website in accordance with the
                            review conducted under clause (i).
                      ``(B) Consultation.--In conducting the review under
                    subparagraph (A)(i), the Secretary shall consult with--
                              ``(i) State long-term care ombudsman
                            programs;
                              ``(ii) consumer advocacy groups;
                              ``(iii) provider stakeholder groups; and
                              ``(iv) any other representatives of programs
                            or groups the Secretary determines
                            appropriate.''.
              (2) Timeliness of submission of survey and certification
            information.--
                      (A) In general.--Section 1819(g)(5) of the Social
                    Security Act (42 U.S.C. 1395i-3(g)(5)) is amended by
                    adding at the end the following new subparagraph:
                      ``(E) Submission of survey and certification
                    information to the secretary.--In order to improve the
                    timeliness of information made available to the public
                    under subparagraph (A) and provided on the Nursing Home
                    Compare Medicare website under subsection (i), each
                    State shall submit information respecting any survey or
                    certification made respecting a skilled nursing
                    facility (including any enforcement actions taken by
                    the State) to the Secretary not later than the date on
                    which the State sends such information to the facility.
                    The Secretary shall use the information submitted under
                    the preceding sentence to update the information
                    provided on the Nursing Home Compare Medicare website
                    as expeditiously as practicable but not less frequently
                    than quarterly.''.
                      (B) Effective date.--The amendment made by this
                    paragraph shall take effect 1 year after the date of
                    the enactment of this Act.
              (3) Special focus facility program.--Section 1819(f) of such
            Act is amended by adding at the end the following new
            paragraph:
              ``(8) Special focus facility program.--
                      ``(A) In general.--The Secretary shall conduct a
                    special focus facility program for enforcement of
                    requirements for skilled nursing facilities that the
                    Secretary has identified as having substantially failed
                    to meet applicable requirement of this Act.
                      ``(B) Periodic surveys.--Under such program the
                    Secretary shall conduct surveys of each facility in the
                    program not less than once every 6 months.''.
      (b) Nursing Facilities.--
              (1) In general.--Section 1919 of the Social Security Act (42
            U.S.C. 1396r) is amended--
                      (A) by redesignating subsection (i) as subsection
                    (j); and
                      (B) by inserting after subsection (h) the following
                    new subsection:
      ``(i) Nursing Home Compare Website.--
              ``(1) Inclusion of additional information.--
                      ``(A) In general.--The Secretary shall ensure that
                    the Department of Health and Human Services includes,
                    as part of the information provided for comparison of
                    nursing homes on the official Internet website of the
                    Federal Government for Medicare beneficiaries (commonly
                    referred to as the `Nursing Home Compare' Medicare
                    website) (or a successor website), the following
                    information in a manner that is prominent, easily
                    accessible, readily understandable to consumers of
                    long-term care services, and searchable:
                              ``(i) Staffing data for each facility
                            (including resident census data and data on the
                            hours of care provided per resident per day)
                            based on data submitted under subsection
                            (b)(8)(C)(ii), including information on
                            staffing turnover and tenure, in a format that
                            is clearly understandable to consumers of long-
                            term care services and allows such consumers to
                            compare differences in staffing between
                            facilities and State and national averages for
                            the facilities. Such format shall include--
                                      ``(I) concise explanations of how to
                                    interpret the data (such as plain
                                    English explanation of data reflecting
                                    `nursing home staff hours per resident
                                    day');
                                      ``(II) differences in types of staff
                                    (such as training associated with
                                    different categories of staff);
                                      ``(III) the relationship between
                                    nurse staffing levels and quality of
                                    care; and
                                      ``(IV) an explanation that
                                    appropriate staffing levels vary based
                                    on patient case mix.
                              ``(ii) Links to State Internet websites with
                            information regarding State survey and
                            certification programs, links to Form 2567
                            State inspection reports (or a successor form)
                            on such websites, information to guide
                            consumers in how to interpret and understand
                            such reports, and the facility plan of
                            correction or other response to such report.
                              ``(iii) The standardized complaint form
                            developed under subsection (f)(10), including
                            explanatory material on what complaint forms
                            are, how they are used, and how to file a
                            complaint with the State survey and
                            certification program and the State long-term
                            care ombudsman program.
                              ``(iv) Summary information on the number,
                            type, severity, and outcome of substantiated
                            complaints.
                              ``(v) The number of adjudicated instances of
                            criminal violations by employees of a nursing
                            facility--
                                      ``(I) that were committed inside of
                                    the facility; and
                                      ``(II) with respect to such instances
                                    of violations or crimes committed
                                    outside of the facility, that were the
                                    violations or crimes that resulted in
                                    the serious bodily injury of an elder.
                      ``(B) Deadline for provision of information.--
                              ``(i) In general.--Except as provided in
                            clause (ii), the Secretary shall ensure that
                            the information described in subparagraph (A)
                            is included on such website (or a successor
                            website) not later than 1 year after the date
                            of the enactment of this subsection.
                              ``(ii) Exception.--The Secretary shall ensure
                            that the information described in subparagraph
                            (A)(i) and (A)(iii) is included on such website
                            (or a successor website) not later than the
                            date on which the requirements under section
                            1124(c)(4) and subsection (b)(8)(C)(ii) are
                            implemented.
              ``(2) Review and modification of website.--
                      ``(A) In general.--The Secretary shall establish a
                    process--
                              ``(i) to review the accuracy, clarity of
                            presentation, timeliness, and comprehensiveness
                            of information reported on such website as of
                            the day before the date of the enactment of
                            this subsection; and
                              ``(ii) not later than 1 year after the date
                            of the enactment of this subsection, to modify
                            or revamp such website in accordance with the
                            review conducted under clause (i).
                      ``(B) Consultation.--In conducting the review under
                    subparagraph (A)(i), the Secretary shall consult with--
                              ``(i) State long-term care ombudsman
                            programs;
                              ``(ii) consumer advocacy groups;
                              ``(iii) provider stakeholder groups;
                              ``(iv) skilled nursing facility employees and
                            their representatives; and
                              ``(v) any other representatives of programs
                            or groups the Secretary determines
                            appropriate.''.
              (2) Timeliness of submission of survey and certification
            information.--
                      (A) In general.--Section 1919(g)(5) of the Social
                    Security Act (42 U.S.C. 1396r(g)(5)) is amended by
                    adding at the end the following new subparagraph:
                      ``(E) Submission of survey and certification
                    information to the secretary.--In order to improve the
                    timeliness of information made available to the public
                    under subparagraph (A) and provided on the Nursing Home
                    Compare Medicare website under subsection (i), each
                    State shall submit information respecting any survey or
                    certification made respecting a nursing facility
                    (including any enforcement actions taken by the State)
                    to the Secretary not later than the date on which the
                    State sends such information to the facility. The
                    Secretary shall use the information submitted under the
                    preceding sentence to update the information provided
                    on the Nursing Home Compare Medicare website as
                    expeditiously as practicable but not less frequently
                    than quarterly.''.
                      (B) Effective date.--The amendment made by this
                    paragraph shall take effect 1 year after the date of
                    the enactment of this Act.
              (3) Special focus facility program.--Section 1919(f) of such
            Act is amended by adding at the end of the following new
            paragraph:
              ``(10) Special focus facility program.--
                      ``(A) In general.--The Secretary shall conduct a
                    special focus facility program for enforcement of
                    requirements for nursing facilities that the Secretary
                    has identified as having substantially failed to meet
                    applicable requirements of this Act.
                      ``(B) Periodic surveys.--Under such program the
                    Secretary shall conduct surveys of each facility in the
                    program not less often than once every 6 months.''.
      (c) Availability of Reports on Surveys, Certifications, and Complaint
    Investigations.--
              (1) Skilled nursing facilities.--Section 1819(d)(1) of the
            Social Security Act (42 U.S.C. 1395i-3(d)(1)), as amended by
            sections 1411 and 1412, is amended by adding at the end the
            following new subparagraph:
                      ``(D) Availability of survey, certification, and
                    complaint investigation reports.--A skilled nursing
                    facility must--
                              ``(i) have reports with respect to any
                            surveys, certifications, and complaint
                            investigations made respecting the facility
                            during the 3 preceding years available for any
                            individual to review upon request; and
                              ``(ii) post notice of the availability of
                            such reports in areas of the facility that are
                            prominent and accessible to the public.
                    The facility shall not make available under clause (i)
                    identifying information about complainants or
                    residents.''.
              (2) Nursing facilities.--Section 1919(d)(1) of the Social
            Security Act (42 U.S.C. 1396r(d)(1)), as amended by sections
            1411 and 1412, is amended by adding at the end the following
            new subparagraph:
                      ``(D) Availability of survey, certification, and
                    complaint investigation reports.--A nursing facility
                    must--
                              ``(i) have reports with respect to any
                            surveys, certifications, and complaint
                            investigations made respecting the facility
                            during the 3 preceding years available for any
                            individual to review upon request; and
                              ``(ii) post notice of the availability of
                            such reports in areas of the facility that are
                            prominent and accessible to the public.
                    The facility shall not make available under clause (i)
                    identifying information about complainants or
                    residents.''.
              (3) Effective date.--The amendments made by this subsection
            shall take effect 1 year after the date of the enactment of
            this Act.
      (d) Guidance to States on Form 2567 State Inspection Reports and
    Complaint Investigation Reports.--
              (1) Guidance.--The Secretary of Health and Human Services (in
            this subtitle referred to as the ``Secretary'') shall provide
            guidance to States on how States can establish electronic links
            to Form 2567 State inspection reports (or a successor form),
            complaint investigation reports, and a facility's plan of
            correction or other response to such Form 2567 State inspection
            reports (or a successor form) on the Internet website of the
            State that provides information on skilled nursing facilities
            and nursing facilities and the Secretary shall, if possible,
            include such information on Nursing Home Compare.
              (2) Requirement.--Section 1902(a)(9) of the Social Security
            Act (42 U.S.C. 1396a(a)(9)) is amended--
                      (A) by striking ``and'' at the end of subparagraph
                    (B);
                      (B) by striking the semicolon at the end of
                    subparagraph (C) and inserting ``, and''; and
                      (C) by adding at the end the following new
                    subparagraph:
                      ``(D) that the State maintain a consumer-oriented
                    website providing useful information to consumers
                    regarding all skilled nursing facilities and all
                    nursing facilities in the State, including for each
                    facility, Form 2567 State inspection reports (or a
                    successor form), complaint investigation reports, the
                    facility's plan of correction, and such other
                    information that the State or the Secretary considers
                    useful in assisting the public to assess the quality of
                    long term care options and the quality of care provided
                    by individual facilities;''.
              (3) Definitions.--In this subsection:
                      (A) Nursing facility.--The term ``nursing facility''
                    has the meaning given such term in section 1919(a) of
                    the Social Security Act (42 U.S.C. 1396r(a)).
                      (B) Secretary.--The term ``Secretary'' means the
                    Secretary of Health and Human Services.
                      (C) Skilled nursing facility.--The term ``skilled
                    nursing facility'' has the meaning given such term in
                    section 1819(a) of the Social Security Act (42 U.S.C.
                    1395i-3(a)).

    SEC. 1414. REPORTING OF EXPENDITURES.

      Section 1888 of the Social Security Act (42 U.S.C. 1395yy) is amended
    by adding at the end the following new subsection:
      ``(f) Reporting of Direct Care Expenditures.--
              ``(1) In general.--For cost reports submitted under this
            title for cost reporting periods beginning on or after the date
            that is 3 years after the date of the enactment of this
            subsection, skilled nursing facilities shall separately report
            expenditures for wages and benefits for direct care staff
            (breaking out (at a minimum) registered nurses, licensed
            professional nurses, certified nurse assistants, and other
            medical and therapy staff).
              ``(2) Modification of form.--The Secretary, in consultation
            with private sector accountants experienced with skilled
            nursing facility cost reports, shall redesign such reports to
            meet the requirement of paragraph (1) not later than 1 year
            after the date of the enactment of this subsection.
              ``(3) Categorization by functional accounts.--Not later than
            30 months after the date of the enactment of this subsection,
            the Secretary, working in consultation with the Medicare
            Payment Advisory Commission, the Inspector General of the
            Department of Health and Human Services, and other expert
            parties the Secretary determines appropriate, shall take the
            expenditures listed on cost reports, as modified under
            paragraph (1), submitted by skilled nursing facilities and
            categorize such expenditures, regardless of any source of
            payment for such expenditures, for each skilled nursing
            facility into the following functional accounts on an annual
            basis:
                      ``(A) Spending on direct care services (including
                    nursing, therapy, and medical services).
                      ``(B) Spending on indirect care (including
                    housekeeping and dietary services).
                      ``(C) Capital assets (including building and land
                    costs).
                      ``(D) Administrative services costs.
              ``(4) Availability of information submitted.--The Secretary
            shall establish procedures to make information on expenditures
            submitted under this subsection readily available to interested
            parties upon request, subject to such requirements as the
            Secretary may specify under the procedures established under
            this paragraph.''.

    SEC. 1415. STANDARDIZED COMPLAINT FORM.

      (a) Skilled Nursing Facilities.--
              (1) Development by the secretary.--Section 1819(f) of the
            Social Security Act (42 U.S.C. 1395i-3(f)), as amended by
            section 1413(a)(3), is amended by adding at the end the
            following new paragraph:
              ``(9) Standardized complaint form.--The Secretary shall
            develop a standardized complaint form for use by a resident (or
            a person acting on the resident's behalf) in filing a complaint
            with a State survey and certification agency and a State long-
            term care ombudsman program with respect to a skilled nursing
            facility.''.
              (2) State requirements.--Section 1819(e) of the Social
            Security Act (42 U.S.C. 1395i-3(e)) is amended by adding at the
            end the following new paragraph:
              ``(6) Complaint processes and whistle-blower protection.--
                      ``(A) Complaint forms.--The State must make the
                    standardized complaint form developed under subsection
                    (f)(9) available upon request to--
                              ``(i) a resident of a skilled nursing
                            facility;
                              ``(ii) any person acting on the resident's
                            behalf; and
                              ``(iii) any person who works at a skilled
                            nursing facility or is a representative of such
                            a worker.
                      ``(B) Complaint resolution process.--The State must
                    establish a complaint resolution process in order to
                    ensure that a resident, the legal representative of a
                    resident of a skilled nursing facility, or other
                    responsible party is not retaliated against if the
                    resident, legal representative, or responsible party
                    has complained, in good faith, about the quality of
                    care or other issues relating to the skilled nursing
                    facility, that the legal representative of a resident
                    of a skilled nursing facility or other responsible
                    party is not denied access to such resident or
                    otherwise retaliated against if such representative
                    party has complained, in good faith, about the quality
                    of care provided by the facility or other issues
                    relating to the facility, and that a person who works
                    at a skilled nursing facility is not retaliated against
                    if the worker has complained, in good faith, about
                    quality of care or services or an issue relating to the
                    quality of care or services provided at the facility,
                    whether the resident, legal representative, other
                    responsible party, or worker used the form developed
                    under subsection (f)(9) or some other method for
                    submitting the complaint. Such complaint resolution
                    process shall include--
                              ``(i) procedures to assure accurate tracking
                            of complaints received, including notification
                            to the complainant that a complaint has been
                            received;
                              ``(ii) procedures to determine the likely
                            severity of a complaint and for the
                            investigation of the complaint;
                              ``(iii) deadlines for responding to a
                            complaint and for notifying the complainant of
                            the outcome of the investigation; and
                              ``(iv) procedures to ensure that the identity
                            of the complainant will be kept confidential.
                      ``(C) Whistleblower protection.--
                              ``(i) Prohibition against retaliation.--No
                            person who works at a skilled nursing facility
                            may be penalized, discriminated, or retaliated
                            against with respect to any aspect of
                            employment, including discharge, promotion,
                            compensation, terms, conditions, or privileges
                            of employment, or have a contract for services
                            terminated, because the person (or anyone
                            acting at the person's request) complained, in
                            good faith, about the quality of care or
                            services provided by a nursing facility or
                            about other issues relating to quality of care
                            or services, whether using the form developed
                            under subsection (f)(9) or some other method
                            for submitting the complaint.
                              ``(ii) Retaliatory reporting.--A skilled
                            nursing facility may not file a complaint or a
                            report against a person who works (or has
                            worked at the facility with the appropriate
                            State professional disciplinary agency because
                            the person (or anyone acting at the person's
                            request) complained in good faith, as described
                            in clause (i).
                              ``(iii) Commencement of action.--Any person
                            who believes the person has been penalized,
                            discriminated , or retaliated against or had a
                            contract for services terminated in violation
                            of clause (i) or against whom a complaint has
                            been filed in violation of clause (ii) may
                            bring an action at law or equity in the
                            appropriate district court of the United
                            States, which shall have jurisdiction over such
                            action without regard to the amount in
                            controversy or the citizenship of the parties,
                            and which shall have jurisdiction to grant
                            complete relief, including, but not limited to,
                            injunctive relief (such as reinstatement,
                            compensatory damages (which may include
                            reimbursement of lost wages, compensation, and
                            benefits), costs of litigation (including
                            reasonable attorney and expert witness fees),
                            exemplary damages where appropriate, and such
                            other relief as the court deems just and
                            proper.
                              ``(iv) Rights not waivable.--The rights
                            protected by this paragraph may not be
                            diminished by contract or other agreement, and
                            nothing in this paragraph shall be construed to
                            diminish any greater or additional protection
                            provided by Federal or State law or by contract
                            or other agreement.
                              ``(v) Requirement to post notice of employee
                            rights.--Each skilled nursing facility shall
                            post conspicuously in an appropriate location a
                            sign (in a form specified by the Secretary)
                            specifying the rights of persons under this
                            paragraph and including a statement that an
                            employee may file a complaint with the
                            Secretary against a skilled nursing facility
                            that violates the provisions of this paragraph
                            and information with respect to the manner of
                            filing such a complaint.
                      ``(D) Rule of construction.--Nothing in this
                    paragraph shall be construed as preventing a resident
                    of a skilled nursing facility (or a person acting on
                    the resident's behalf) from submitting a complaint in a
                    manner or format other than by using the standardized
                    complaint form developed under subsection (f)(9)
                    (including submitting a complaint orally).
                      ``(E) Good faith defined.--For purposes of this
                    paragraph, an individual shall be deemed to be acting
                    in good faith with respect to the filing of a complaint
                    if the individual reasonably believes--
                              ``(i) the information reported or disclosed
                            in the complaint is true; and
                              ``(ii) the violation of this title has
                            occurred or may occur in relation to such
                            information.''.
      (b) Nursing Facilities.--
              (1) Development by the secretary.--Section 1919(f) of the
            Social Security Act (42 U.S.C. 1395i-3(f)), as amended by
            section 1413(b), is amended by adding at the end the following
            new paragraph:
              ``(11) Standardized complaint form.--The Secretary shall
            develop a standardized complaint form for use by a resident (or
            a person acting on the resident's behalf) in filing a complaint
            with a State survey and certification agency and a State long-
            term care ombudsman program with respect to a nursing
            facility.''.
              (2) State requirements.--Section 1919(e) of the Social
            Security Act (42 U.S.C. 1395i-3(e)) is amended by adding at the
            end the following new paragraph:
              ``(8) Complaint processes and whistleblower protection.--
                      ``(A) Complaint forms.--The State must make the
                    standardized complaint form developed under subsection
                    (f)(11) available upon request to--
                              ``(i) a resident of a nursing facility;
                              ``(ii) any person acting on the resident's
                            behalf; and
                              ``(iii) any person who works at a nursing
                            facility or a representative of such a worker.
                      ``(B) Complaint resolution process.--The State must
                    establish a complaint resolution process in order to
                    ensure that a resident, the legal representative of a
                    resident of a nursing facility, or other responsible
                    party is not retaliated against if the resident, legal
                    representative, or responsible party has complained, in
                    good faith, about the quality of care or other issues
                    relating to the nursing facility, that the legal
                    representative of a resident of a nursing facility or
                    other responsible party is not denied access to such
                    resident or otherwise retaliated against if such
                    representative party has complained, in good faith,
                    about the quality of care provided by the facility or
                    other issues relating to the facility, and that a
                    person who works at a nursing facility is not
                    retaliated against if the worker has complained, in
                    good faith, about quality of care or services or an
                    issue relating to the quality of care or services
                    provided at the facility, whether the resident, legal
                    representative, other responsible party, or worker used
                    the form developed under subsection (f)(11) or some
                    other method for submitting the complaint. Such
                    complaint resolution process shall include--
                              ``(i) procedures to assure accurate tracking
                            of complaints received, including notification
                            to the complainant that a complaint has been
                            received;
                              ``(ii) procedures to determine the likely
                            severity of a complaint and for the
                            investigation of the complaint;
                              ``(iii) deadlines for responding to a
                            complaint and for notifying the complainant of
                            the outcome of the investigation; and
                              ``(iv) procedures to ensure that the identity
                            of the complainant will be kept confidential.
                      ``(C) Whistleblower protection.--
                              ``(i) Prohibition against retaliation.--No
                            person who works at a nursing facility may be
                            penalized, discriminated, or retaliated against
                            with respect to any aspect of employment,
                            including discharge, promotion, compensation,
                            terms, conditions, or privileges of employment,
                            or have a contract for services terminated,
                            because the person (or anyone acting at the
                            person's request) complained, in good faith,
                            about the quality of care or services provided
                            by a nursing facility or about other issues
                            relating to quality of care or services,
                            whether using the form developed under
                            subsection (f)(11) or some other method for
                            submitting the complaint.
                              ``(ii) Retaliatory reporting.--A nursing
                            facility may not file a complaint or a report
                            against a person who works (or has worked at
                            the facility with the appropriate State
                            professional disciplinary agency because the
                            person (or anyone acting at the person's
                            request) complained in good faith, as described
                            in clause (i).
                              ``(iii) Commencement of action.--Any person
                            who believes the person has been penalized,
                            discriminated, or retaliated against or had a
                            contract for services terminated in violation
                            of clause (i) or against whom a complaint has
                            been filed in violation of clause (ii) may
                            bring an action at law or equity in the
                            appropriate district court of the United
                            States, which shall have jurisdiction over such
                            action without regard to the amount in
                            controversy or the citizenship of the parties,
                            and which shall have jurisdiction to grant
                            complete relief, including, but not limited to,
                            injunctive relief (such as reinstatement,
                            compensatory damages (which may include
                            reimbursement of lost wages, compensation, and
                            benefits), costs of litigation (including
                            reasonable attorney and expert witness fees),
                            exemplary damages where appropriate, and such
                            other relief as the court deems just and
                            proper.
                              ``(iv) Rights not waivable.--The rights
                            protected by this paragraph may not be
                            diminished by contract or other agreement, and
                            nothing in this paragraph shall be construed to
                            diminish any greater or additional protection
                            provided by Federal or State law or by contract
                            or other agreement.
                              ``(v) Requirement to post notice of employee
                            rights.--Each nursing facility shall post
                            conspicuously in an appropriate location a sign
                            (in a form specified by the Secretary)
                            specifying the rights of persons under this
                            paragraph and including a statement that an
                            employee may file a complaint with the
                            Secretary against a nursing facility that
                            violates the provisions of this paragraph and
                            information with respect to the manner of
                            filing such a complaint.
                      ``(D) Rule of construction.--Nothing in this
                    paragraph shall be construed as preventing a resident
                    of a nursing facility (or a person acting on the
                    resident's behalf) from submitting a complaint in a
                    manner or format other than by using the standardized
                    complaint form developed under subsection (f)(11)
                    (including submitting a complaint orally).
                      ``(E) Good faith defined.--For purposes of this
                    paragraph, an individual shall be deemed to be acting
                    in good faith with respect to the filing of a complaint
                    if the individual reasonably believes--
                              ``(i) the information reported or disclosed
                            in the complaint is true; and
                              ``(ii) the violation of this title has
                            occurred or may occur in relation to such
                            information.''.
      (c) Effective Date.--The amendments made by this section shall take
    effect 1 year after the date of the enactment of this Act.

    SEC. 1416. ENSURING STAFFING ACCOUNTABILITY.

      (a) Skilled Nursing Facilities.--Section 1819(b)(8) of the Social
    Security Act (42 U.S.C. 1395i-3(b)(8)) is amended by adding at the end
    the following new subparagraph:
                      ``(C) Submission of staffing information based on
                    payroll data in a uniform format.--Beginning not later
                    than 2 years after the date of the enactment of this
                    subparagraph, and after consulting with State long-term
                    care ombudsman programs, consumer advocacy groups,
                    provider stakeholder groups, employees and their
                    representatives, and other parties the Secretary deems
                    appropriate, the Secretary shall require a skilled
                    nursing facility to electronically submit to the
                    Secretary direct care staffing information (including
                    information with respect to agency and contract staff)
                    based on payroll and other verifiable and auditable
                    data in a uniform format (according to specifications
                    established by the Secretary in consultation with such
                    programs, groups, and parties). Such specifications
                    shall require that the information submitted under the
                    preceding sentence--
                              ``(i) specify the category of work a
                            certified employee performs (such as whether
                            the employee is a registered nurse, licensed
                            practical nurse, licensed vocational nurse,
                            certified nursing assistant, therapist, or
                            other medical personnel);
                              ``(ii) include resident census data and
                            information on resident case mix;
                              ``(iii) include a regular reporting schedule;
                            and
                              ``(iv) include information on employee
                            turnover and tenure and on the hours of care
                            provided by each category of certified
                            employees referenced in clause (i) per resident
                            per day.
                    Nothing in this subparagraph shall be construed as
                    preventing the Secretary from requiring submission of
                    such information with respect to specific categories,
                    such as nursing staff, before other categories of
                    certified employees. Information under this
                    subparagraph with respect to agency and contract staff
                    shall be kept separate from information on employee
                    staffing.''.
      (b) Nursing Facilities.--Section 1919(b)(8) of the Social Security
    Act (42 U.S.C. 1396r(b)(8)) is amended by adding at the end the
    following new subparagraph:
                      ``(C) Submission of staffing information based on
                    payroll data in a uniform format.--Beginning not later
                    than 2 years after the date of the enactment of this
                    subparagraph, and after consulting with State long-term
                    care ombudsman programs, consumer advocacy groups,
                    provider stakeholder groups, employees and their
                    representatives, and other parties the Secretary deems
                    appropriate, the Secretary shall require a nursing
                    facility to electronically submit to the Secretary
                    direct care staffing information (including information
                    with respect to agency and contract staff) based on
                    payroll and other verifiable and auditable data in a
                    uniform format (according to specifications established
                    by the Secretary in consultation with such programs,
                    groups, and parties). Such specifications shall require
                    that the information submitted under the preceding
                    sentence--
                              ``(i) specify the category of work a
                            certified employee performs (such as whether
                            the employee is a registered nurse, licensed
                            practical nurse, licensed vocational nurse,
                            certified nursing assistant, therapist, or
                            other medical personnel);
                              ``(ii) include resident census data and
                            information on resident case mix;
                              ``(iii) include a regular reporting schedule;
                            and
                              ``(iv) include information on employee
                            turnover and tenure and on the hours of care
                            provided by each category of certified
                            employees referenced in clause (i) per resident
                            per day.
                    Nothing in this subparagraph shall be construed as
                    preventing the Secretary from requiring submission of
                    such information with respect to specific categories,
                    such as nursing staff, before other categories of
                    certified employees. Information under this
                    subparagraph with respect to agency and contract staff
                    shall be kept separate from information on employee
                    staffing.''.

                         PART 2--TARGETING ENFORCEMENT

    SEC. 1421. CIVIL MONEY PENALTIES.

      (a) Skilled Nursing Facilities.--
              (1) In general.--Section 1819(h)(2)(B)(ii) of the Social
            Security Act (42 U.S.C. 1395i-3(h)(2)(B)(ii)) is amended to
            read as follows:
                              ``(ii) Authority with respect to civil money
                            penalties.--
                                      ``(I) Amount.--The Secretary may
                                    impose a civil money penalty in the
                                    applicable per instance or per day
                                    amount (as defined in subclause (II)
                                    and (III)) for each day or instance,
                                    respectively, of noncompliance (as
                                    determined appropriate by the
                                    Secretary).
                                      ``(II) Applicable per instance
                                    amount.--In this clause, the term
                                    `applicable per instance amount'
                                    means--
                                              ``(aa) in the case where the
                                            deficiency is found to be a
                                            direct proximate cause of death
                                            of a resident of the facility,
                                            an amount not to exceed
                                            $100,000.
                                              ``(bb) in each case of a
                                            deficiency where the facility
                                            is cited for actual harm or
                                            immediate jeopardy, an amount
                                            not less than $3,050 and not
                                            more than $25,000; and
                                              ``(cc) in each case of any
                                            other deficiency, an amount not
                                            less than $250 and not to
                                            exceed $3050.
                                      ``(III) Applicable per day amount.--
                                    In this clause, the term `applicable
                                    per day amount' means--
                                              ``(aa) in each case of a
                                            deficiency where the facility
                                            is cited for actual harm or
                                            immediate jeopardy, an amount
                                            not less than $3,050 and not
                                            more than $25,000 and
                                              ``(bb) in each case of any
                                            other deficiency, an amount not
                                            less than $250 and not to
                                            exceed $3,050.
                                      ``(IV) Reduction of civil money
                                    penalties in certain circumstances.--
                                    Subject to subclauses (V) and (VI), in
                                    the case where a facility self-reports
                                    and promptly corrects a deficiency for
                                    which a penalty was imposed under this
                                    clause not later than 10 calendar days
                                    after the date of such imposition, the
                                    Secretary may reduce the amount of the
                                    penalty imposed by not more than 50
                                    percent.
                                      ``(V) Prohibition on reduction for
                                    certain deficiencies.--
                                              ``(aa) Repeat deficiencies.--
                                            The Secretary may not reduce
                                            under subclause (IV) the amount
                                            of a penalty if the deficiency
                                            is a repeat deficiency.
                                              ``(bb) Certain other
                                            deficiencies.--The Secretary
                                            may not reduce under subclause
                                            (IV) the amount of a penalty if
                                            the penalty is imposed for a
                                            deficiency described in
                                            subclause (II)(aa) or (III)(aa)
                                            and the actual harm or
                                            widespread harm immediately
                                            jeopardizes the health or
                                            safety of a resident or
                                            residents of the facility, or
                                            if the penalty is imposed for a
                                            deficiency described in
                                            subclause (II)(bb).
                                      ``(VI) Limitation on aggregate
                                    reductions.--The aggregate reduction in
                                    a penalty under subclause (IV) may not
                                    exceed 35 percent on the basis of self-
                                    reporting, on the basis of a waiver or
                                    an appeal (as provided for under
                                    regulations under section 488.436 of
                                    title 42, Code of Federal Regulations),
                                    or on the basis of both.
                                      ``(VII) Collection of civil money
                                    penalties.--In the case of a civil
                                    money penalty imposed under this
                                    clause, the Secretary--
                                              ``(aa) subject to item (cc),
                                            shall, not later than 30 days
                                            after the date of imposition of
                                            the penalty, provide the
                                            opportunity for the facility to
                                            participate in an independent
                                            informal dispute resolution
                                            process which generates a
                                            written record prior to the
                                            collection of such penalty, but
                                            such opportunity shall not
                                            affect the responsibility of
                                            the State survey agency for
                                            making final recommendations
                                            for such penalties;
                                              ``(bb) in the case where the
                                            penalty is imposed for each day
                                            of noncompliance, shall not
                                            impose a penalty for any day
                                            during the period beginning on
                                            the initial day of the
                                            imposition of the penalty and
                                            ending on the day on which the
                                            informal dispute resolution
                                            process under item (aa) is
                                            completed;
                                              ``(cc) may provide for the
                                            collection of such civil money
                                            penalty and the placement of
                                            such amounts collected in an
                                            escrow account under the
                                            direction of the Secretary on
                                            the earlier of the date on
                                            which the informal dispute
                                            resolution process under item
                                            (aa) is completed or the date
                                            that is 90 days after the date
                                            of the imposition of the
                                            penalty;
                                              ``(dd) may provide that such
                                            amounts collected are kept in
                                            such account pending the
                                            resolution of any subsequent
                                            appeals;
                                              ``(ee) in the case where the
                                            facility successfully appeals
                                            the penalty, may provide for
                                            the return of such amounts
                                            collected (plus interest) to
                                            the facility; and
                                              ``(ff) in the case where all
                                            such appeals are unsuccessful,
                                            may provide that some portion
                                            of such amounts collected may
                                            be used to support activities
                                            that benefit residents,
                                            including assistance to support
                                            and protect residents of a
                                            facility that closes
                                            (voluntarily or involuntarily)
                                            or is decertified (including
                                            offsetting costs of relocating
                                            residents to home and
                                            community-based settings or
                                            another facility), projects
                                            that support resident and
                                            family councils and other
                                            consumer involvement in
                                            assuring quality care in
                                            facilities, and facility
                                            improvement initiatives
                                            approved by the Secretary
                                            (including joint training of
                                            facility staff and surveyors,
                                            technical assistance for
                                            facilities under quality
                                            assurance programs, the
                                            appointment of temporary
                                            management, and other
                                            activities approved by the
                                            Secretary).
                                      ``(VIII) Procedure.--The provisions
                                    of section 1128A (other than
                                    subsections (a) and (b) and except to
                                    the extent that such provisions require
                                    a hearing prior to the imposition of a
                                    civil money penalty) shall apply to a
                                    civil money penalty under this clause
                                    in the same manner as such provisions
                                    apply to a penalty or proceeding under
                                    section 1128A(a).''.
              (2) Conforming amendment.--The second sentence of section
            1819(h)(5) of the Social Security Act (42 U.S.C. 1395i-3(h)(5))
            is amended by inserting ``(ii),''after ``(i),''.
      (b) Nursing Facilities.--
              (1) Penalties imposed by the state.--
                      (A) In general.--Section 1919(h)(2) of the Social
                    Security Act (42 U.S.C. 1396r(h)(2)) is amended--
                              (i) in subparagraph (A)(ii), by striking the
                            first sentence and inserting the following: ``A
                            civil money penalty in accordance with
                            subparagraph (G).''; and
                              (ii) by adding at the end the following new
                            subparagraph:
                      ``(G) Civil money penalties.--
                              ``(i) In general.--The State may impose a
                            civil money penalty under subparagraph (A)(ii)
                            in the applicable per instance or per day
                            amount (as defined in subclause (II) and (III))
                            for each day or instance, respectively, of
                            noncompliance (as determined appropriate by the
                            Secretary).
                              ``(ii) Applicable per instance amount.--In
                            this subparagraph, the term `applicable per
                            instance amount' means--
                                      ``(I) in the case where the
                                    deficiency is found to be a direct
                                    proximate cause of death of a resident
                                    of the facility, an amount not to
                                    exceed $100,000.
                                      ``(II) in each case of a deficiency
                                    where the facility is cited for actual
                                    harm or immediate jeopardy, an amount
                                    not less than $3,050 and not more than
                                    $25,000; and
                                      ``(III) in each case of any other
                                    deficiency, an amount not less than
                                    $250 and not to exceed $3050.
                              ``(iii) Applicable per day amount.--In this
                            subparagraph, the term `applicable per day
                            amount' means--
                                      ``(I) in each case of a deficiency
                                    where the facility is cited for actual
                                    harm or immediate jeopardy, an amount
                                    not less than $3,050 and not more than
                                    $25,000 and
                                      ``(II) in each case of any other
                                    deficiency, an amount not less than
                                    $250 and not to exceed $3,050.
                              ``(iv) Reduction of civil money penalties in
                            certain circumstances.--Subject to clauses (v)
                            and (vi), in the case where a facility self-
                            reports and promptly corrects a deficiency for
                            which a penalty was imposed under subparagraph
                            (A)(ii) not later than 10 calendar days after
                            the date of such imposition, the State may
                            reduce the amount of the penalty imposed by not
                            more than 50 percent.
                              ``(v) Prohibition on reduction for certain
                            deficiencies.--
                                      ``(I) Repeat deficiencies.--The State
                                    may not reduce under clause (iv) the
                                    amount of a penalty if the State had
                                    reduced a penalty imposed on the
                                    facility in the preceding year under
                                    such clause with respect to a repeat
                                    deficiency.
                                      ``(II) Certain other deficiencies.--
                                    The State may not reduce under clause
                                    (iv) the amount of a penalty if the
                                    penalty is imposed for a deficiency
                                    described in clause (ii)(II) or
                                    (iii)(I) and the actual harm or
                                    widespread harm that immediately
                                    jeopardizes the health or safety of a
                                    resident or residents of the facility,
                                    or if the penalty is imposed for a
                                    deficiency described in clause (ii)(I).
                                      ``(III) Limitation on aggregate
                                    reductions.--The aggregate reduction in
                                    a penalty under clause (iv) may not
                                    exceed 35 percent on the basis of self-
                                    reporting, on the basis of a waiver or
                                    an appeal (as provided for under
                                    regulations under section 488.436 of
                                    title 42, Code of Federal Regulations),
                                    or on the basis of both.
                              ``(vi) Collection of civil money penalties.--
                            In the case of a civil money penalty imposed
                            under subparagraph (A)(ii), the State--
                                      ``(I) subject to subclause (III),
                                    shall, not later than 30 days after the
                                    date of imposition of the penalty,
                                    provide the opportunity for the
                                    facility to participate in an
                                    independent informal dispute resolution
                                    process which generates a written
                                    record prior to the collection of such
                                    penalty, but such opportunity shall not
                                    affect the responsibility of the State
                                    survey agency for making final
                                    recommendations for such penalties;
                                      ``(II) in the case where the penalty
                                    is imposed for each day of
                                    noncompliance, shall not impose a
                                    penalty for any day during the period
                                    beginning on the initial day of the
                                    imposition of the penalty and ending on
                                    the day on which the informal dispute
                                    resolution process under subclause (I)
                                    is completed;
                                      ``(III) may provide for the
                                    collection of such civil money penalty
                                    and the placement of such amounts
                                    collected in an escrow account under
                                    the direction of the State on the
                                    earlier of the date on which the
                                    informal dispute resolution process
                                    under subclause (I) is completed or the
                                    date that is 90 days after the date of
                                    the imposition of the penalty;
                                      ``(IV) may provide that such amounts
                                    collected are kept in such account
                                    pending the resolution of any
                                    subsequent appeals;
                                      ``(V) in the case where the facility
                                    successfully appeals the penalty, may
                                    provide for the return of such amounts
                                    collected (plus interest) to the
                                    facility; and
                                      ``(VI) in the case where all such
                                    appeals are unsuccessful, may provide
                                    that such funds collected shall be used
                                    for the purposes described in the
                                    second sentence of subparagraph
                                    (A)(ii).''.
                      (B) Conforming amendment.--The second sentence of
                    section 1919(h)(2)(A)(ii) of the Social Security Act
                    (42 U.S.C. 1396r(h)(2)(A)(ii)) is amended by inserting
                    before the period at the end the following: ``, and
                    some portion of such funds may be used to support
                    activities that benefit residents, including assistance
                    to support and protect residents of a facility that
                    closes (voluntarily or involuntarily) or is decertified
                    (including offsetting costs of relocating residents to
                    home and community-based settings or another facility),
                    projects that support resident and family councils and
                    other consumer involvement in assuring quality care in
                    facilities, and facility improvement initiatives
                    approved by the Secretary (including joint training of
                    facility staff and surveyors, providing technical
                    assistance to facilities under quality assurance
                    programs, the appointment of temporary management, and
                    other activities approved by the Secretary)''.
              (2) Penalties imposed by the secretary.--
                      (A) In general.--Section 1919(h)(3)(C)(ii) of the
                    Social Security Act (42 U.S.C. 1396r(h)(3)(C)) is
                    amended to read as follows:
                              ``(ii) Authority with respect to civil money
                            penalties.--
                                      ``(I) Amount.--Subject to subclause
                                    (II), the Secretary may impose a civil
                                    money penalty in an amount not to
                                    exceed $10,000 for each day or each
                                    instance of noncompliance (as
                                    determined appropriate by the
                                    Secretary).
                                      ``(II) Reduction of civil money
                                    penalties in certain circumstances.--
                                    Subject to subclause (III), in the case
                                    where a facility self-reports and
                                    promptly corrects a deficiency for
                                    which a penalty was imposed under this
                                    clause not later than 10 calendar days
                                    after the date of such imposition, the
                                    Secretary may reduce the amount of the
                                    penalty imposed by not more than 50
                                    percent.
                                      ``(III) Prohibition on reduction for
                                    repeat deficiencies.--The Secretary may
                                    not reduce the amount of a penalty
                                    under subclause (II) if the Secretary
                                    had reduced a penalty imposed on the
                                    facility in the preceding year under
                                    such subclause with respect to a repeat
                                    deficiency.
                                      ``(IV) Collection of civil money
                                    penalties.--In the case of a civil
                                    money penalty imposed under this
                                    clause, the Secretary--
                                              ``(aa) subject to item (bb),
                                            shall, not later than 30 days
                                            after the date of imposition of
                                            the penalty, provide the
                                            opportunity for the facility to
                                            participate in an independent
                                            informal dispute resolution
                                            process which generates a
                                            written record prior to the
                                            collection of such penalty;
                                              ``(bb) in the case where the
                                            penalty is imposed for each day
                                            of noncompliance, shall not
                                            impose a penalty for any day
                                            during the period beginning on
                                            the initial day of the
                                            imposition of the penalty and
                                            ending on the day on which the
                                            informal dispute resolution
                                            process under item (aa) is
                                            completed;
                                              ``(cc) may provide for the
                                            collection of such civil money
                                            penalty and the placement of
                                            such amounts collected in an
                                            escrow account under the
                                            direction of the Secretary on
                                            the earlier of the date on
                                            which the informal dispute
                                            resolution process under item
                                            (aa) is completed or the date
                                            that is 90 days after the date
                                            of the imposition of the
                                            penalty;
                                              ``(dd) may provide that such
                                            amounts collected are kept in
                                            such account pending the
                                            resolution of any subsequent
                                            appeals;
                                              ``(ee) in the case where the
                                            facility successfully appeals
                                            the penalty, may provide for
                                            the return of such amounts
                                            collected (plus interest) to
                                            the facility; and
                                              ``(ff) in the case where all
                                            such appeals are unsuccessful,
                                            may provide that some portion
                                            of such amounts collected may
                                            be used to support activities
                                            that benefit residents,
                                            including assistance to support
                                            and protect residents of a
                                            facility that closes
                                            (voluntarily or involuntarily)
                                            or is decertified (including
                                            offsetting costs of relocating
                                            residents to home and
                                            community-based settings or
                                            another facility), projects
                                            that support resident and
                                            family councils and other
                                            consumer involvement in
                                            assuring quality care in
                                            facilities, and facility
                                            improvement initiatives
                                            approved by the Secretary
                                            (including joint training of
                                            facility staff and surveyors,
                                            technical assistance for
                                            facilities under quality
                                            assurance programs, the
                                            appointment of temporary
                                            management, and other
                                            activities approved by the
                                            Secretary).
                                      ``(V) Procedure.--The provisions of
                                    section 1128A (other than subsections
                                    (a) and (b) and except to the extent
                                    that such provisions require a hearing
                                    prior to the imposition of a civil
                                    money penalty) shall apply to a civil
                                    money penalty under this clause in the
                                    same manner as such provisions apply to
                                    a penalty or proceeding under section
                                    1128A(a).''.
                      (B) Conforming amendment.--Section 1919(h)(8) of the
                    Social Security Act (42 U.S.C. 1396r(h)(5)(8)) is
                    amended by inserting ``and in paragraph (3)(C)(ii)''
                    after ``paragraph (2)(A)''.
      (c) Effective Date.--The amendments made by this section shall take
    effect 1 year after the date of the enactment of this Act.

    SEC. 1422. NATIONAL INDEPENDENT MONITOR PILOT PROGRAM.

      (a) Establishment.--
              (1) In general.--The Secretary, in consultation with the
            Inspector General of the Department of Health and Human
            Services, shall establish a pilot program (in this section
            referred to as the ``pilot program'') to develop, test, and
            implement use of an independent monitor to oversee interstate
            and large intrastate chains of skilled nursing facilities and
            nursing facilities.
              (2) Selection.--The Secretary shall select chains of skilled
            nursing facilities and nursing facilities described in
            paragraph (1) to participate in the pilot program from among
            those chains that submit an application to the Secretary at
            such time, in such manner, and containing such information as
            the Secretary may require.
              (3) Duration.--The Secretary shall conduct the pilot program
            for a two-year period.
              (4) Implementation.--The Secretary shall implement the pilot
            program not later than one year after the date of the enactment
            of this Act.
      (b) Requirements.--The Secretary shall evaluate chains selected to
    participate in the pilot program based on criteria selected by the
    Secretary, including where evidence suggests that one or more
    facilities of the chain are experiencing serious safety and quality of
    care problems. Such criteria may include the evaluation of a chain that
    includes one or more facilities participating in the ``Special Focus
    Facility'' program (or a successor program) or one or more facilities
    with a record of repeated serious safety and quality of care
    deficiencies.
      (c) Responsibilities of the Independent Monitor.--An independent
    monitor that enters into a contract with the Secretary to participate
    in the conduct of such program shall--
              (1) conduct periodic reviews and prepare root-cause quality
            and deficiency analyses of a chain to assess if facilities of
            the chain are in compliance with State and Federal laws and
            regulations applicable to the facilities;
              (2) undertake sustained oversight of the chain, whether
            publicly or privately held, to involve the owners of the chain
            and the principal business partners of such owners in
            facilitating compliance by facilities of the chain with State
            and Federal laws and regulations applicable to the facilities;
              (3) analyze the management structure, distribution of
            expenditures, and nurse staffing levels of facilities of the
            chain in relation to resident census, staff turnover rates, and
            tenure;
              (4) report findings and recommendations with respect to such
            reviews, analyses, and oversight to the chain and facilities of
            the chain, to the Secretary and to relevant States; and
              (5) publish the results of such reviews, analyses, and
            oversight.
      (d) Implementation of Recommendations.--
              (1) Receipt of finding by chain.--Not later than 10 days
            after receipt of a finding of an independent monitor under
            subsection (c)(4), a chain participating in the pilot program
            shall submit to the independent monitor a report--
                      (A) outlining corrective actions the chain will take
                    to implement the recommendations in such report; or
                      (B) indicating that the chain will not implement such
                    recommendations and why it will not do so.
              (2) Receipt of report by independent monitor.--Not later than
            10 days after the date of receipt of a report submitted by a
            chain under paragraph (1), an independent monitor shall
            finalize its recommendations and submit a report to the chain
            and facilities of the chain, the Secretary, and the State (or
            States) involved, as appropriate, containing such final
            recommendations.
      (e) Cost of Appointment.--A chain shall be responsible for a portion
    of the costs associated with the appointment of independent monitors
    under the pilot program. The chain shall pay such portion to the
    Secretary (in an amount and in accordance with procedures established
    by the Secretary).
      (f) Waiver Authority.--The Secretary may waive such requirements of
    titles XVIII and XIX of the Social Security Act (42 U.S.C. 1395 et
    seq.; 1396 et seq.) as may be necessary for the purpose of carrying out
    the pilot program.
      (g) Authorization of Appropriations.--There are authorized to be
    appropriated such sums as may be necessary to carry out this section.
      (h) Definitions.--In this section:
              (1) Facility.--The term ``facility'' means a skilled nursing
            facility or a nursing facility.
              (2) Nursing facility.--The term ``nursing facility'' has the
            meaning given such term in section 1919(a) of the Social
            Security Act (42 U.S.C. 1396r(a)).
              (3) Secretary.--The term ``Secretary'' means the Secretary of
            Health and Human Services, acting through the Assistant
            Secretary for Planning and Evaluation.
              (4) Skilled nursing facility.--The term ``skilled nursing
            facility'' has the meaning given such term in section 1819(a)
            of the Social Security Act (42 U.S.C. 1395(a)).
      (i) Evaluation and Report.--
              (1) Evaluation.--The Inspector General of the Department of
            Health and Human Services shall evaluate the pilot program.
            Such evaluation shall--
                      (A) determine whether the independent monitor program
                    should be established on a permanent basis; and
                      (B) if the Inspector General determines that the
                    independent monitor program should be established on a
                    permanent basis, recommend appropriate procedures and
                    mechanisms for such establishment.
              (2) Report.--Not later than 180 days after the completion of
            the pilot program, the Inspector General shall submit to
            Congress and the Secretary a report containing the results of
            the evaluation conducted under paragraph (1), together with
            recommendations for such legislation and administrative action
            as the Inspector General determines appropriate.

    SEC. 1423. NOTIFICATION OF FACILITY CLOSURE.

      (a) Skilled Nursing Facilities.--
              (1) In general.--Section 1819(c) of the Social Security Act
            (42 U.S.C. 1395i-3(c)) is amended by adding at the end the
            following new paragraph:
              ``(7) Notification of facility closure.--
                      ``(A) In general.--Any individual who is the
                    administrator of a skilled nursing facility must--
                              ``(i) submit to the Secretary, the State
                            long-term care ombudsman, residents of the
                            facility, and the legal representatives of such
                            residents or other responsible parties, written
                            notification of an impending closure--
                                      ``(I) subject to subclause (II), not
                                    later than the date that is 60 days
                                    prior to the date of such closure; and
                                      ``(II) in the case of a facility
                                    where the Secretary terminates the
                                    facility's participation under this
                                    title, not later than the date that the
                                    Secretary determines appropriate;
                              ``(ii) ensure that the facility does not
                            admit any new residents on or after the date on
                            which such written notification is submitted;
                            and
                              ``(iii) include in the notice a plan for the
                            transfer and adequate relocation of the
                            residents of the facility by a specified date
                            prior to closure that has been approved by the
                            State, including assurances that the residents
                            will be transferred to the most appropriate
                            facility or other setting in terms of quality,
                            services, and location, taking into
                            consideration the needs and best interests of
                            each resident.
                      ``(B) Relocation.--
                              ``(i) In general.--The State shall ensure
                            that, before a facility closes, all residents
                            of the facility have been successfully
                            relocated to another facility or an alternative
                            home and community-based setting.
                              ``(ii) Continuation of payments until
                            residents relocated.--The Secretary may, as the
                            Secretary determines appropriate, continue to
                            make payments under this title with respect to
                            residents of a facility that has submitted a
                            notification under subparagraph (A) during the
                            period beginning on the date such notification
                            is submitted and ending on the date on which
                            the resident is successfully relocated.''.
              (2) Conforming amendments.--Section 1819(h)(4) of the Social
            Security Act (42 U.S.C. 1395i-3(h)(4)) is amended--
                      (A) in the first sentence, by striking ``the
                    Secretary shall terminate'' and inserting ``the
                    Secretary, subject to subsection (c)(7), shall
                    terminate''; and
                      (B) in the second sentence, by striking ``subsection
                    (c)(2)'' and inserting ``paragraphs (2) and (7) of
                    subsection (c)''.
      (b) Nursing Facilities.--
              (1) In general.--Section 1919(c) of the Social Security Act
            (42 U.S.C. 1396r(c)) is amended by adding at the end the
            following new paragraph:
              ``(9) Notification of facility closure.--
                      ``(A) In general.--Any individual who is an
                    administrator of a nursing facility must--
                              ``(i) submit to the Secretary, the State
                            long-term care ombudsman, residents of the
                            facility, and the legal representatives of such
                            residents or other responsible parties, written
                            notification of an impending closure--
                                      ``(I) subject to subclause (II), not
                                    later than the date that is 60 days
                                    prior to the date of such closure; and
                                      ``(II) in the case of a facility
                                    where the Secretary terminates the
                                    facility's participation under this
                                    title, not later than the date that the
                                    Secretary determines appropriate;
                              ``(ii) ensure that the facility does not
                            admit any new residents on or after the date on
                            which such written notification is submitted;
                            and
                              ``(iii) include in the notice a plan for the
                            transfer and adequate relocation of the
                            residents of the facility by a specified date
                            prior to closure that has been approved by the
                            State, including assurances that the residents
                            will be transferred to the most appropriate
                            facility or other setting in terms of quality,
                            services, and location, taking into
                            consideration the needs and best interests of
                            each resident.
                      ``(B) Relocation.--
                              ``(i) In general.--The State shall ensure
                            that, before a facility closes, all residents
                            of the facility have been successfully
                            relocated to another facility or an alternative
                            home and community-based setting.
                              ``(ii) Continuation of payments until
                            residents relocated.--The Secretary may, as the
                            Secretary determines appropriate, continue to
                            make payments under this title with respect to
                            residents of a facility that has submitted a
                            notification under subparagraph (A) during the
                            period beginning on the date such notification
                            is submitted and ending on the date on which
                            the resident is successfully relocated.''.
      (c) Effective Date.--The amendments made by this section shall take
    effect 1 year after the date of the enactment of this Act.

                        PART 3--IMPROVING STAFF TRAINING

    SEC. 1431. DEMENTIA AND ABUSE PREVENTION TRAINING.

      (a) Skilled Nursing Facilities.--Section 1819(f)(2)(A)(i)(I) of the
    Social Security Act (42 U.S.C. 1395i-3(f)(2)(A)(i)(I)) is amended by
    inserting ``(including, in the case of initial training and, if the
    Secretary determines appropriate, in the case of ongoing training,
    dementia management training and resident abuse prevention training)''
    after ``curriculum''.
      (b) Nursing Facilities.--Section 1919(f)(2)(A)(i)(I) of the Social
    Security Act (42 U.S.C. 1396r(f)(2)(A)(i)(I)) is amended by inserting
    ``(including, in the case of initial training and, if the Secretary
    determines appropriate, in the case of ongoing training, dementia
    management training and resident abuse prevention training)'' after
    ``curriculum''.
      (c) Effective Date.--The amendments made by this section shall take
    effect 1 year after the date of the enactment of this Act.

    SEC. 1432. STUDY AND REPORT ON TRAINING REQUIRED FOR CERTIFIED NURSE
                        AIDES AND SUPERVISORY STAFF.

      (a) Study.--
              (1) In general.--The Secretary shall conduct a study on the
            content of training for certified nurse aides and supervisory
            staff of skilled nursing facilities and nursing facilities. The
            study shall include an analysis of the following:
                      (A) Whether the number of initial training hours for
                    certified nurse aides required under sections
                    1819(f)(2)(A)(i)(II) and 1919(f)(2)(A)(i)(II) of the
                    Social Security Act (42 U.S.C. 1395i-3(f)(2)(A)(i)(II);
                    1396r(f)(2)(A)(i)(II)) should be increased from 75 and,
                    if so, what the required number of initial training
                    hours should be, including any recommendations for the
                    content of such training (including training related to
                    dementia).
                      (B) Whether requirements for ongoing training under
                    such sections 1819(f)(2)(A)(i)(II) and
                    1919(f)(2)(A)(i)(II) should be increased from 12 hours
                    per year, including any recommendations for the content
                    of such training.
              (2) Consultation.--In conducting the analysis under paragraph
            (1)(A), the Secretary shall consult with States that, as of the
            date of the enactment of this Act, require more than 75 hours
            of training for certified nurse aides.
              (3) Definitions.--In this section:
                      (A) Nursing facility.--The term ``nursing facility''
                    has the meaning given such term in section 1919(a) of
                    the Social Security Act (42 U.S.C. 1396r(a)).
                      (B) Secretary.--The term ``Secretary'' means the
                    Secretary of Health and Human Services, acting through
                    the Assistant Secretary for Planning and Evaluation.
                      (C) Skilled nursing facility.--The term ``skilled
                    nursing facility'' has the meaning given such term in
                    section 1819(a) of the Social Security Act (42 U.S.C.
                    1395(a)).
      (b) Report.--Not later than 2 years after the date of the enactment
    of this Act, the Secretary shall submit to Congress a report containing
    the results of the study conducted under subsection (a), together with
    recommendations for such legislation and administrative action as the
    Secretary determines appropriate.

                        Subtitle C--Quality Measurements

    SEC. 1441. ESTABLISHMENT OF NATIONAL PRIORITIES FOR QUALITY
                        IMPROVEMENT.

      Title XI of the Social Security Act, as amended by section 1401(a),
    is further amended by adding at the end the following new part:

                         ``Part E--Quality Improvement

       ``establishment of national priorities for performance improvement
      ``Sec. 1191.  (a) Establishment of National Priorities by the
    Secretary.--The Secretary shall establish and periodically update, not
    less frequently than triennially, national priorities for performance
    improvement.
      ``(b) Recommendations for National Priorities.--In establishing and
    updating national priorities under subsection (a), the Secretary shall
    solicit and consider recommendations from multiple outside
    stakeholders.
      ``(c) Considerations in Setting National Priorities.--With respect to
    such priorities, the Secretary shall ensure that priority is given to
    areas in the delivery of health care services in the United States
    that--
              ``(1) contribute to a large burden of disease, including
            those that address the health care provided to patients with
            prevalent, high-cost chronic diseases;
              ``(2) have the greatest potential to decrease morbidity and
            mortality in this country, including those that are designed to
            eliminate harm to patients;
              ``(3) have the greatest potential for improving the
            performance, affordability, and patient-centeredness of health
            care, including those due to variations in care;
              ``(4) address health disparities across groups and areas; and
              ``(5) have the potential for rapid improvement due to
            existing evidence, standards of care or other reasons.
      ``(d) Definitions.--In this part:
              ``(1) Consensus-based entity.--The term `consensus-based
            entity' means an entity with a contract with the Secretary
            under section 1890.
              ``(2) Quality measure.--The term `quality measure' means a
            national consensus standard for measuring the performance and
            improvement of population health, or of institutional providers
            of services, physicians, and other health care practitioners in
            the delivery of health care services.
      ``(e) Funding.--
              ``(1) In general.--The Secretary shall provide for the
            transfer, from the Federal Hospital Insurance Trust Fund under
            section 1817 and the Federal Supplementary Medical Insurance
            Trust Fund under section 1841 (in such proportion as the
            Secretary determines appropriate), of $2,000,000, for the
            activities under this section for each of the fiscal years 2010
            through 2014.
              ``(2) Authorization of appropriations.--For purposes of
            carrying out the provisions of this section, in addition to
            funds otherwise available, out of any funds in the Treasury not
            otherwise appropriated, there are appropriated to the Secretary
            of Health and Human Services $2,000,000 for each of the fiscal
            years 2010 through 2014.''.

    SEC. 1442. DEVELOPMENT OF NEW QUALITY MEASURES; GAO EVALUATION OF DATA
                        COLLECTION PROCESS FOR QUALITY MEASUREMENT.

      Part E of title XI of the Social Security Act, as added by section
    1441, is amended by adding at the end the following new sections:

    ``SEC. 1192. DEVELOPMENT OF NEW QUALITY MEASURES.

      ``(a) Agreements With Qualified Entities.--
              ``(1) In general.--The Secretary shall enter into agreements
            with qualified entities to develop quality measures for the
            delivery of health care services in the United States.
              ``(2) Form of agreements.--The Secretary may carry out
            paragraph (1) by contract, grant, or otherwise.
              ``(3) Recommendations of consensus-based entity.--In carrying
            out this section, the Secretary shall--
                      ``(A) seek public input; and
                      ``(B) take into consideration recommendations of the
                    consensus-based entity with a contract with the
                    Secretary under section 1890(a).
      ``(b) Determination of Areas Where Quality Measures Are Required.--
    Consistent with the national priorities established under this part and
    with the programs administered by the Centers for Medicare & Medicaid
    Services and in consultation with other relevant Federal agencies, the
    Secretary shall determine areas in which quality measures for assessing
    health care services in the United States are needed.
      ``(c) Development of Quality Measures.--
              ``(1) Patient-centered and population-based measures.--
            Quality measures developed under agreements under subsection
            (a) shall be designed--
                      ``(A) to assess outcomes and functional status of
                    patients;
                      ``(B) to assess the continuity and coordination of
                    care and care transitions for patients across providers
                    and health care settings, including end of life care;
                      ``(C) to assess patient experience and patient
                    engagement;
                      ``(D) to assess the safety, effectiveness, and
                    timeliness of care;
                      ``(E) to assess health disparities including those
                    associated with individual race, ethnicity, age,
                    gender, place of residence or language;
                      ``(F) to assess the efficiency and resource use in
                    the provision of care;
                      ``(G) to the extent feasible, to be collected as part
                    of health information technologies supporting better
                    delivery of health care services;
                      ``(H) to be available free of charge to users for the
                    use of such measures; and
                      ``(I) to assess delivery of health care services to
                    individuals regardless of age.
              ``(2) Availability of measures.--The Secretary shall make
            quality measures developed under this section available to the
            public.
              ``(3) Testing of proposed measures.--The Secretary may use
            amounts made available under subsection (f) to fund the testing
            of proposed quality measures by qualified entities. Testing
            funded under this paragraph shall include testing of the
            feasibility and usability of proposed measures.
              ``(4) Updating of endorsed measures.--The Secretary may use
            amounts made available under subsection (f) to fund the
            updating (and testing, if applicable) by consensus-based
            entities of quality measures that have been previously endorsed
            by such an entity as new evidence is developed, in a manner
            consistent with section 1890(b)(3).
      ``(d) Qualified Entities.--Before entering into agreements with a
    qualified entity, the Secretary shall ensure that the entity is a
    public, nonprofit or academic institution with technical expertise in
    the area of health quality measurement.
      ``(e) Application for Grant.--A grant may be made under this section
    only if an application for the grant is submitted to the Secretary and
    the application is in such form, is made in such manner, and contains
    such agreements, assurances, and information as the Secretary
    determines to be necessary to carry out this section.
      ``(f) Funding.--
              ``(1) In general.--The Secretary shall provide for the
            transfer, from the Federal Hospital Insurance Trust Fund under
            section 1817 and the Federal Supplementary Medical Insurance
            Trust Fund under section 1841 (in such proportion as the
            Secretary determines appropriate), of $25,000,000, to the
            Secretary for purposes of carrying out this section for each of
            the fiscal years 2010 through 2014.
              ``(2) Authorization of appropriations.--For purposes of
            carrying out the provisions of this section, in addition to
            funds otherwise available, out of any funds in the Treasury not
            otherwise appropriated, there are appropriated to the Secretary
            of Health and Human Services $25,000,000 for each of the fiscal
            years 2010 through 2014.

    ``SEC. 1193. GAO EVALUATION OF DATA COLLECTION PROCESS FOR QUALITY
                        MEASUREMENT.

      ``(a) GAO Evaluations.--The Comptroller General of the United States
    shall conduct periodic evaluations of the implementation of the data
    collection processes for quality measures used by the Secretary.
      ``(b) Considerations.--In carrying out the evaluation under
    subsection (a), the Comptroller General shall determine--
              ``(1) whether the system for the collection of data for
            quality measures provides for validation of data as relevant
            and scientifically credible;
              ``(2) whether data collection efforts under the system use
            the most efficient and cost-effective means in a manner that
            minimizes administrative burden on persons required to collect
            data and that adequately protects the privacy of patients'
            personal health information and provides data security;
              ``(3) whether standards under the system provide for an
            appropriate opportunity for physicians and other clinicians and
            institutional providers of services to review and correct
            findings; and
              ``(4) the extent to which quality measures are consistent
            with section 1192(c)(1) or result in direct or indirect costs
            to users of such measures.
      ``(c) Report.--The Comptroller General shall submit reports to
    Congress and to the Secretary containing a description of the findings
    and conclusions of the results of each such evaluation.''.

    SEC. 1443. MULTI-STAKEHOLDER PRE-RULEMAKING INPUT INTO SELECTION OF
                        QUALITY MEASURES.

      Section 1808 of the Social Security Act (42 U.S.C. 1395b-9) is
    amended by adding at the end the following new subsection:
      ``(d) Multi-stakeholder Pre-rulemaking Input Into Selection of
    Quality Measures.--
              ``(1) List of measures.--Not later than December 1 before
            each year (beginning with 2011), the Secretary shall make
            public a list of measures being considered for selection for
            quality measurement by the Secretary in rulemaking with respect
            to payment systems under this title beginning in the payment
            year beginning in such year and for payment systems beginning
            in the calendar year following such year, as the case may be.
              ``(2) Consultation on selection of endorsed quality
            measures.--A consensus-based entity that has entered into a
            contract under section 1890 shall, as part of such contract,
            convene multi-stakeholder groups to provide recommendations on
            the selection of individual or composite quality measures, for
            use in reporting performance information to the public or for
            use in public health care programs.
              ``(3) Multi-stakeholder input.--Not later than February 1 of
            each year (beginning with 2011), the consensus-based entity
            described in paragraph (2) shall transmit to the Secretary the
            recommendations of multi-stakeholder groups provided under
            paragraph (2). Such recommendations shall be included in the
            transmissions the consensus-based entity makes to the Secretary
            under the contract provided for under section 1890.
              ``(4) Requirement for transparency in process.--
                      ``(A) In general.--In convening multi-stakeholder
                    groups under paragraph (2) with respect to the
                    selection of quality measures, the consensus-based
                    entity described in such paragraph shall provide for an
                    open and transparent process for the activities
                    conducted pursuant to such convening.
                      ``(B) Selection of organizations participating in
                    multi-stakeholder groups.--The process under paragraph
                    (2) shall ensure that the selection of representatives
                    of multi-stakeholder groups includes provision for
                    public nominations for, and the opportunity for public
                    comment on, such selection.
              ``(5) Use of input.--The respective proposed rule shall
            contain a summary of the recommendations made by the multi-
            stakeholder groups under paragraph (2), as well as other
            comments received regarding the proposed measures, and the
            extent to which such proposed rule follows such recommendations
            and the rationale for not following such recommendations.
              ``(6) Multi-stakeholder groups.--For purposes of this
            subsection, the term `multi-stakeholder groups' means, with
            respect to a quality measure, a voluntary collaborative of
            organizations representing persons interested in or affected by
            the use of such quality measure, such as the following:
                      ``(A) Hospitals and other institutional providers.
                      ``(B) Physicians.
                      ``(C) Health care quality alliances.
                      ``(D) Nurses and other health care practitioners.
                      ``(E) Health plans.
                      ``(F) Patient advocates and consumer groups.
                      ``(G) Employers.
                      ``(H) Public and private purchasers of health care
                    items and services.
                      ``(I) Labor organizations.
                      ``(J) Relevant departments or agencies of the United
                    States.
                      ``(K) Biopharmaceutical companies and manufacturers
                    of medical devices.
                      ``(L) Licensing, credentialing, and accrediting
                    bodies.
              ``(7) Funding.--
                      ``(A) In general.--The Secretary shall provide for
                    the transfer, from the Federal Hospital Insurance Trust
                    Fund under section 1817 and the Federal Supplementary
                    Medical Insurance Trust Fund under section 1841 (in
                    such proportion as the Secretary determines
                    appropriate), of $1,000,000, to the Secretary for
                    purposes of carrying out this subsection for each of
                    the fiscal years 2010 through 2014.
                      ``(B) Authorization of appropriations.--For purposes
                    of carrying out the provisions of this subsection, in
                    addition to funds otherwise available, out of any funds
                    in the Treasury not otherwise appropriated, there are
                    appropriated to the Secretary of Health and Human
                    Services $1,000,000 for each of the fiscal years 2010
                    through 2014.''.

    SEC. 1444. APPLICATION OF QUALITY MEASURES.

      (a) Inpatient Hospital Services.--Section 1886(b)(3)(B) of such Act
    (42 U.S.C. 1395ww(b)(3)(B)) is amended by adding at the end the
    following new clause:
      ``(x)(I) Subject to subclause (II), for purposes of reporting data on
    quality measures for inpatient hospital services furnished during
    fiscal year 2012 and each subsequent fiscal year, the quality measures
    specified under clause (viii) shall be measures selected by the
    Secretary from measures that have been endorsed by the entity with a
    contract with the Secretary under section 1890(a).
      ``(II) In the case of a specified area or medical topic determined
    appropriate by the Secretary for which a feasible and practical quality
    measure has not been endorsed by the entity with a contract under
    section 1890(a), the Secretary may specify a measure that is not so
    endorsed as long as due consideration is given to measures that have
    been endorsed or adopted by a consensus organization identified by the
    Secretary. The Secretary shall submit such a non-endorsed measure to
    the entity for consideration for endorsement. If the entity considers
    but does not endorse such a measure and if the Secretary does not
    phase-out use of such measure, the Secretary shall include the
    rationale for continued use of such a measure in rulemaking.''.
      (b) Outpatient Hospital Services.--Section 1833(t)(17) of such Act
    (42 U.S.C. 1395l(t)(17)) is amended by adding at the end the following
    new subparagraph:
                      ``(F) Use of endorsed quality measures.--The
                    provisions of clause (x) of section 1886(b)(3)(C) shall
                    apply to quality measures for covered OPD services
                    under this paragraph in the same manner as such
                    provisions apply to quality measures for inpatient
                    hospital services.''.
      (c) Physicians' Services.--Section 1848(k)(2)(C)(ii) of such Act (42
    U.S.C. 1395w-4(k)(2)(C)(ii)) is amended by adding at the end the
    following: ``The Secretary shall submit such a non-endorsed measure to
    the entity for consideration for endorsement. If the entity considers
    but does not endorse such a measure and if the Secretary does not
    phase-out use of such measure, the Secretary shall include the
    rationale for continued use of such a measure in rulemaking.''.
      (d) Renal Dialysis Services.--Section 1881(h)(2)(B)(ii) of such Act
    (42 U.S.C. 1395rr(h)(2)(B)(ii)) is amended by adding at the end the
    following: ``The Secretary shall submit such a non-endorsed measure to
    the entity for consideration for endorsement. If the entity considers
    but does not endorse such a measure and if the Secretary does not
    phase-out use of such measure, the Secretary shall include the
    rationale for continued use of such a measure in rulemaking.''.
      (e) Endorsement of Standards.--Section 1890(b)(2) of the Social
    Security Act (42 U.S.C. 1395aaa(b)(2)) is amended by adding after and
    below subparagraph (B) the following:
            ``If the entity does not endorse a measure, such entity shall
            explain the reasons and provide suggestions about changes to
            such measure that might make it a potentially endorsable
            measure.''.
      (f) Effective Date.--Except as otherwise provided, the amendments
    made by this section shall apply to quality measures applied for
    payment years beginning with 2012 or fiscal year 2012, as the case may
    be.

    SEC. 1445. CONSENSUS-BASED ENTITY FUNDING.

      Section 1890(d) of the Social Security Act (42 U.S.C. 1395aaa(d)) is
    amended by striking ``for each of fiscal years 2009 through 2012'' and
    inserting ``for fiscal year 2009, and $12,000,000 for each of the
    fiscal years 2010 through 2012''

               Subtitle D--Physician Payments Sunshine Provision

    SEC. 1451. REPORTS ON FINANCIAL RELATIONSHIPS BETWEEN MANUFACTURERS AND
                        DISTRIBUTORS OF COVERED DRUGS, DEVICES,
                        BIOLOGICALS, OR MEDICAL SUPPLIES UNDER MEDICARE,
                        MEDICAID, OR CHIP AND PHYSICIANS AND OTHER HEALTH
                        CARE ENTITIES AND BETWEEN PHYSICIANS AND OTHER
                        HEALTH CARE ENTITIES.

      (a) In General.--Part A of title XI of the Social Security Act (42
    U.S.C. 1301 et seq.), as amended by section 1631(a), is further amended
    by inserting after section 1128G the following new section:

    ``SEC. 1128H. FINANCIAL REPORTS ON PHYSICIANS' FINANCIAL RELATIONSHIPS
                        WITH MANUFACTURERS AND DISTRIBUTORS OF COVERED
                        DRUGS, DEVICES, BIOLOGICALS, OR MEDICAL SUPPLIES
                        UNDER MEDICARE, MEDICAID, OR CHIP AND WITH ENTITIES
                        THAT BILL FOR SERVICES UNDER MEDICARE.

      ``(a) Reporting of Payments or Other Transfers of Value.--
              ``(1) In general.--Except as provided in this subsection, not
            later than March 31, 2011 and annually thereafter, each
            applicable manufacturer or distributor that provides a payment
            or other transfer of value to a covered recipient, or to an
            entity or individual at the request of or designated on behalf
            of a covered recipient, shall submit to the Secretary, in such
            electronic form as the Secretary shall require, the following
            information with respect to the preceding calendar year:
                      ``(A) With respect to the covered recipient, the
                    recipient's name, business address, physician
                    specialty, and national provider identifier.
                      ``(B) With respect to the payment or other transfer
                    of value, other than a drug sample--
                              ``(i) its value and date;
                              ``(ii) the name of the related drug, device,
                            or supply, if available; and
                              ``(iii) a description of its form, indicated
                            (as appropriate for all that apply) as--
                                      ``(I) cash or a cash equivalent;
                                      ``(II) in-kind items or services;
                                      ``(III) stock, a stock option, or any
                                    other ownership interest, dividend,
                                    profit, or other return on investment;
                                    or
                                      ``(IV) any other form (as defined by
                                    the Secretary).
                      ``(C) With respect to a drug sample, the name,
                    number, date, and dosage units of the sample.
              ``(2) Aggregate reporting.--Information submitted by an
            applicable manufacturer or distributor under paragraph (1)
            shall include the aggregate amount of all payments or other
            transfers of value provided by the manufacturer or distributor
            to covered recipients (and to entities or individuals at the
            request of or designated on behalf of a covered recipient)
            during the year involved, including all payments and transfers
            of value regardless of whether such payments or transfer of
            value were individually disclosed.
              ``(3) Special rule for certain payments or other transfers of
            value.--In the case where an applicable manufacturer or
            distributor provides a payment or other transfer of value to an
            entity or individual at the request of or designated on behalf
            of a covered recipient, the manufacturer or distributor shall
            disclose that payment or other transfer of value under the name
            of the covered recipient.
              ``(4) Delayed reporting for payments made pursuant to product
            development agreements.--In the case of a payment or other
            transfer of value made to a covered recipient by an applicable
            manufacturer or distributor pursuant to a product development
            agreement for services furnished in connection with the
            development of a new drug, device, biological, or medical
            supply, the applicable manufacturer or distributor may report
            the value and recipient of such payment or other transfer of
            value in the first reporting period under this subsection in
            the next reporting deadline after the earlier of the following:
                      ``(A) The date of the approval or clearance of the
                    covered drug, device, biological, or medical supply by
                    the Food and Drug Administration.
                      ``(B) Two calendar years after the date such payment
                    or other transfer of value was made.
              ``(5) Delayed reporting for payments made pursuant to
            clinical investigations.--In the case of a payment or other
            transfer of value made to a covered recipient by an applicable
            manufacturer or distributor in connection with a clinical
            investigation regarding a new drug, device, biological, or
            medical supply, the applicable manufacturer or distributor may
            report as required under this section in the next reporting
            period under this subsection after the earlier of the
            following:
                      ``(A) The date that the clinical investigation is
                    registered on the website maintained by the National
                    Institutes of Health pursuant to section 671 of the
                    Food and Drug Administration Amendments Act of 2007.
                      ``(B) Two calendar years after the date such payment
                    or other transfer of value was made.
              ``(6) Confidentiality.--Information described in paragraph
            (4) or (5) shall be considered confidential and shall not be
            subject to disclosure under section 552 of title 5, United
            States Code, or any other similar Federal, State, or local law,
            until or after the date on which the information is made
            available to the public under such paragraph.
      ``(b) Reporting of Ownership Interest by Physicians in Hospitals and
    Other Entities That Bill Medicare.--Not later than March 31 of each
    year (beginning with 2011), each hospital or other health care entity
    (not including a Medicare Advantage organization) that bills the
    Secretary under part A or part B of title XVIII for services shall
    report on the ownership shares (other than ownership shares described
    in section 1877(c)) of each physician who, directly or indirectly, owns
    an interest in the entity. In this subsection, the term `physician'
    includes a physician's immediate family members (as defined for
    purposes of section 1877(a)).
      ``(c) Public Availability.--
              ``(1) In general.--The Secretary shall establish procedures
            to ensure that, not later than September 30, 2011, and on June
            30 of each year beginning thereafter, the information submitted
            under subsections (a) and (b), other than information regard
            drug samples, with respect to the preceding calendar year is
            made available through an Internet website that--
                      ``(A) is searchable and is in a format that is clear
                    and understandable;
                      ``(B) contains information that is presented by the
                    name of the applicable manufacturer or distributor, the
                    name of the covered recipient, the business address of
                    the covered recipient, the specialty (if applicable) of
                    the covered recipient, the value of the payment or
                    other transfer of value, the date on which the payment
                    or other transfer of value was provided to the covered
                    recipient, the form of the payment or other transfer of
                    value, indicated (as appropriate) under subsection
                    (a)(1)(B)(ii), the nature of the payment or other
                    transfer of value, indicated (as appropriate) under
                    subsection (a)(1)(B)(iii), and the name of the covered
                    drug, device, biological, or medical supply, as
                    applicable;
                      ``(C) contains information that is able to be easily
                    aggregated and downloaded;
                      ``(D) contains a description of any enforcement
                    actions taken to carry out this section, including any
                    penalties imposed under subsection (d), during the
                    preceding year;
                      ``(E) contains background information on industry-
                    physician relationships;
                      ``(F) in the case of information submitted with
                    respect to a payment or other transfer of value
                    described in subsection (a)(5), lists such information
                    separately from the other information submitted under
                    subsection (a) and designates such separately listed
                    information as funding for clinical research;
                      ``(G) contains any other information the Secretary
                    determines would be helpful to the average consumer;
                    and
                      ``(H) provides the covered recipient an opportunity
                    to submit corrections to the information made available
                    to the public with respect to the covered recipient.
              ``(2) Accuracy of reporting.--The accuracy of the information
            that is submitted under subsections (a) and (b) and made
            available under paragraph (1) shall be the responsibility of
            the applicable manufacturer or distributor of a covered drug,
            device, biological, or medical supply reporting under
            subsection (a) or hospital or other health care entity
            reporting physician ownership under subsection (b). The
            Secretary shall establish procedures to ensure that the covered
            recipient is provided with an opportunity to submit corrections
            to the manufacturer, distributor, hospital, or other entity
            reporting under subsection (a) or (b) with regard to
            information made public with respect to the covered recipient
            and, under such procedures, the corrections shall be
            transmitted to the Secretary.
              ``(3) Special rule for drug samples.--Information relating to
            drug samples provided under subsection (a) shall not be made
            available to the public by the Secretary but may be made
            available outside the Department of Health and Human Services
            by the Secretary for research or legitimate business purposes
            pursuant to data use agreements.
              ``(4) Special rule for national provider identifiers.--
            Information relating to national provider identifiers provided
            under subsection (a) shall not be made available to the public
            by the Secretary but may be made available outside the
            Department of Health and Human Services by the Secretary for
            research or legitimate business purposes pursuant to data use
            agreements.
      ``(d) Penalties for Noncompliance.--
              ``(1) Failure to report.--
                      ``(A) In general.--Subject to subparagraph (B),
                    except as provided in paragraph (2), any applicable
                    manufacturer or distributor that fails to submit
                    information required under subsection (a) in a timely
                    manner in accordance with regulations promulgated to
                    carry out such subsection, and any hospital or other
                    entity that fails to submit information required under
                    subsection (b) in a timely manner in accordance with
                    regulations promulgated to carry out such subsection
                    shall be subject to a civil money penalty of not less
                    than $1,000, but not more than $10,000, for each
                    payment or other transfer of value or ownership or
                    investment interest not reported as required under such
                    subsection. Such penalty shall be imposed and collected
                    in the same manner as civil money penalties under
                    subsection (a) of section 1128A are imposed and
                    collected under that section.
                      ``(B) Limitation.--The total amount of civil money
                    penalties imposed under subparagraph (A) with respect
                    to each annual submission of information under
                    subsection (a) by an applicable manufacturer or
                    distributor or other entity shall not exceed $150,000.
              ``(2) Knowing failure to report.--
                      ``(A) In general.--Subject to subparagraph (B), any
                    applicable manufacturer or distributor that knowingly
                    fails to submit information required under subsection
                    (a) in a timely manner in accordance with regulations
                    promulgated to carry out such subsection and any
                    hospital or other entity that fails to submit
                    information required under subsection (b) in a timely
                    manner in accordance with regulations promulgated to
                    carry out such subsection, shall be subject to a civil
                    money penalty of not less than $10,000, but not more
                    than $100,000, for each payment or other transfer of
                    value or ownership or investment interest not reported
                    as required under such subsection. Such penalty shall
                    be imposed and collected in the same manner as civil
                    money penalties under subsection (a) of section 1128A
                    are imposed and collected under that section.
                      ``(B) Limitation.--The total amount of civil money
                    penalties imposed under subparagraph (A) with respect
                    to each annual submission of information under
                    subsection (a) or (b) by an applicable manufacturer,
                    distributor, or entity shall not exceed $1,000,000, or,
                    if greater, 0.1 percentage of the total annual revenues
                    of the manufacturer, distributor, or entity.
              ``(3) Use of funds.--Funds collected by the Secretary as a
            result of the imposition of a civil money penalty under this
            subsection shall be used to carry out this section.
              ``(4) Enforcement through state attorneys general.--The
            attorney general of a State, after providing notice to the
            Secretary of an intent to proceed under this paragraph in a
            specific case and providing the Secretary with an opportunity
            to bring an action under this subsection and the Secretary
            declining such opportunity, may proceed under this subsection
            against a manufacturer or distributor in the State.
      ``(e) Annual Report to Congress.--Not later than April 1 of each year
    beginning with 2011, the Secretary shall submit to Congress a report
    that includes the following:
              ``(1) The information submitted under this section during the
            preceding year, aggregated for each applicable manufacturer or
            distributor of a covered drug, device, biological, or medical
            supply that submitted such information during such year.
              ``(2) A description of any enforcement actions taken to carry
            out this section, including any penalties imposed under
            subsection (d), during the preceding year.
      ``(f) Definitions.--In this section:
              ``(1) Applicable manufacturer; applicable distributor.--The
            term `applicable manufacturer' means a manufacturer of a
            covered drug, device, biological, or medical supply, and the
            term `applicable distributor' means a distributor of a covered
            drug, device, or medical supply.
              ``(2) Clinical investigation.--The term `clinical
            investigation' means any experiment involving one or more human
            subjects, or materials derived from human subjects, in which a
            drug or device is administered, dispensed, or used.
              ``(3) Covered drug, device, biological, or medical supply.--
            The term `covered' means, with respect to a drug, device,
            biological, or medical supply, such a drug, device, biological,
            or medical supply for which payment is available under title
            XVIII or a State plan under title XIX or XXI (or a waiver of
            such a plan).
              ``(4) Covered recipient.--The term `covered recipient' means
            the following:
                      ``(A) A physician.
                      ``(B) A physician group practice.
                      ``(C) Any other prescriber of a covered drug, device,
                    biological, or medical supply.
                      ``(D) A pharmacy or pharmacist.
                      ``(E) A health insurance issuer, group health plan,
                    or other entity offering a health benefits plan,
                    including any employee of such an issuer, plan, or
                    entity.
                      ``(F) A pharmacy benefit manager, including any
                    employee of such a manager.
                      ``(G) A hospital.
                      ``(H) A medical school.
                      ``(I) A sponsor of a continuing medical education
                    program.
                      ``(J) A patient advocacy or disease specific group.
                      ``(K) A organization of health care professionals.
                      ``(L) A biomedical researcher.
                      ``(M) A group purchasing organization.
              ``(5) Distributor of a covered drug, device, or medical
            supply.--The term `distributor of a covered drug, device, or
            medical supply' means any entity which is engaged in the
            marketing or distribution of a covered drug, device, or medical
            supply (or any subsidiary of or entity affiliated with such
            entity), but does not include a wholesale pharmaceutical
            distributor.
              ``(6) Employee.--The term `employee' has the meaning given
            such term in section 1877(h)(2).
              ``(7) Knowingly.--The term `knowingly' has the meaning given
            such term in section 3729(b) of title 31, United States Code.
              ``(8) Manufacturer of a covered drug, device, biological, or
            medical supply.--The term `manufacturer of a covered drug,
            device, biological, or medical supply' means any entity which
            is engaged in the production, preparation, propagation,
            compounding, conversion, processing, marketing, or distribution
            of a covered drug, device, biological, or medical supply (or
            any subsidiary of or entity affiliated with such entity).
              ``(9) Payment or other transfer of value.--
                      ``(A) In general.--The term `payment or other
                    transfer of value' means a transfer of anything of
                    value for or of any of the following:
                              ``(i) Gift, food, or entertainment.
                              ``(ii) Travel or trip.
                              ``(iii) Honoraria.
                              ``(iv) Research funding or grant.
                              ``(v) Education or conference funding.
                              ``(vi) Consulting fees.
                              ``(vii) Ownership or investment interest and
                            royalties or license fee.
                      ``(B) Inclusions.--Subject to subparagraph (C), the
                    term `payment or other transfer of value' includes any
                    compensation, gift, honorarium, speaking fee,
                    consulting fee, travel, services, dividend, profit
                    distribution, stock or stock option grant, or any
                    ownership or investment interest held by a physician in
                    a manufacturer (excluding a dividend or other profit
                    distribution from, or ownership or investment interest
                    in, a publicly traded security or mutual fund (as
                    described in section 1877(c))).
                      ``(C) Exclusions.--The term `payment or other
                    transfer of value' does not include the following:
                              ``(i) Any payment or other transfer of value
                            provided by an applicable manufacturer or
                            distributor to a covered recipient where the
                            amount transferred to, requested by, or
                            designated on behalf of the covered recipient
                            does not exceed $5.
                              ``(ii) The loan of a covered device for a
                            short-term trial period, not to exceed 90 days,
                            to permit evaluation of the covered device by
                            the covered recipient.
                              ``(iii) Items or services provided under a
                            contractual warranty, including the replacement
                            of a covered device, where the terms of the
                            warranty are set forth in the purchase or lease
                            agreement for the covered device.
                              ``(iv) A transfer of anything of value to a
                            covered recipient when the covered recipient is
                            a patient and not acting in the professional
                            capacity of a covered recipient.
                              ``(v) In-kind items used for the provision of
                            charity care.
                              ``(vi) A dividend or other profit
                            distribution from, or ownership or investment
                            interest in, a publicly traded security and
                            mutual fund (as described in section 1877(c)).
                              ``(vii) Compensation paid by a manufacturer
                            or distributor of a covered drug, device,
                            biological, or medical supply to a covered
                            recipient who is directly employed by and works
                            solely for such manufacturer or distributor.
                              ``(viii) Any discount or cash rebate.
              ``(10) Physician.--The term `physician' has the meaning given
            that term in section 1861(r). For purposes of this section,
            such term does not include a physician who is an employee of
            the applicable manufacturer that is required to submit
            information under subsection (a).
      ``(g) Annual Reports to States.--Not later than April 1 of each year
    beginning with 2011, the Secretary shall submit to States a report that
    includes a summary of the information submitted under subsections (a)
    and (d) during the preceding year with respect to covered recipients or
    other hospitals and entities in the State.
      ``(h) Relation to State Laws.--
              ``(1) In general.--Effective on January 1, 2011, subject to
            paragraph (2), the provisions of this section shall preempt any
            law or regulation of a State or of a political subdivision of a
            State that requires an applicable manufacturer and applicable
            distributor (as such terms are defined in subsection (f)) to
            disclose or report, in any format, the type of information
            (described in subsection (a)) regarding a payment or other
            transfer of value provided by the manufacturer to a covered
            recipient (as so defined).
              ``(2) No preemption of additional requirements.--Paragraph
            (1) shall not preempt any law or regulation of a State or of a
            political subdivision of a State that requires any of the
            following:
                      ``(A) The disclosure or reporting of information not
                    of the type required to be disclosed or reported under
                    this section.
                      ``(B) The disclosure or reporting, in any format, of
                    the type of information required to be disclosed or
                    reported under this section to a Federal, State, or
                    local governmental agency for public health
                    surveillance, investigation, or other public health
                    purposes or health oversight purposes.
                      ``(C) The discovery or admissibility of information
                    described in this section in a criminal, civil, or
                    administrative proceeding.''.
      (b) Availability of Information From the Disclosure of Financial
    Relationship Report (DFRR).--The Secretary of Health and Human Services
    shall submit to Congress a report on the full results of the Disclosure
    of Physician Financial Relationships surveys required pursuant to
    section 5006 of the Deficit Reduction Act of 2005. Such report shall be
    submitted to Congress not later than the date that is 6 months after
    the date such surveys are collected and shall be made publicly
    available on an Internet website of the Department of Health and Human
    Services.

       Subtitle E--Public Reporting on Health Care-Associated Infections

    SEC. 1461. REQUIREMENT FOR PUBLIC REPORTING BY HOSPITALS AND AMBULATORY
                        SURGICAL CENTERS ON HEALTH CARE-ASSOCIATED
                        INFECTIONS.

      (a) In General.--Title XI of the Social Security Act is amended by
    inserting after section 1138 the following section:

    ``SEC. 1138A. REQUIREMENT FOR PUBLIC REPORTING BY HOSPITALS AND
                        AMBULATORY SURGICAL CENTERS ON HEALTH CARE-
                        ASSOCIATED INFECTIONS.

      ``(a) Reporting Requirement.--
              ``(1) In general.--The Secretary shall provide that a
            hospital (as defined in subsection (g)) or ambulatory surgical
            center meeting the requirements of titles XVIII or XIX may
            participate in the programs established under such titles
            (pursuant to the applicable provisions of law, including
            sections 1866(a)(1) and 1832(a)(1)(F)(i)) only if, in
            accordance with this section, the hospital or center reports
            such information on health care-associated infections that
            develop in the hospital or center (and such demographic
            information associated with such infections) as the Secretary
            specifies.
              ``(2) Reporting protocols.-- Such information shall be
            reported in accordance with reporting protocols established by
            the Secretary through the Director of the Centers for Disease
            Control and Prevention (in this section referred to as the
            `CDC') and to the National Healthcare Safety Network of the CDC
            or under such another reporting system of such Centers as
            determined appropriate by the Secretary in consultation with
            such Director.
              ``(3) Coordination with hit.--The Secretary, through the
            Director of the CDC and the Office of the National Coordinator
            for Health Information Technology, shall ensure that the
            transmission of information under this subsection is
            coordinated with systems established under the HITECH Act,
            where appropriate.
              ``(4) Procedures to ensure the validity of information.--The
            Secretary shall establish procedures regarding the validity of
            the information submitted under this subsection in order to
            ensure that such information is appropriately compared across
            hospitals and centers. Such procedures shall address failures
            to report as well as errors in reporting.
              ``(5) Implementation.--Not later than 1 year after the date
            of enactment of this section, the Secretary, through the
            Director of CDC, shall promulgate regulations to carry out this
            section.
      ``(b) Public Posting of Information.--The Secretary shall promptly
    post, on the official public Internet site of the Department of Health
    and Human Services, the information reported under subsection (a). Such
    information shall be set forth in a manner that allows for the
    comparison of information on health care-associated infections--
              ``(1) among hospitals and ambulatory surgical centers; and
              ``(2) by demographic information.
      ``(c) Annual Report to Congress.--On an annual basis the Secretary
    shall submit to the Congress a report that summarizes each of the
    following:
              ``(1) The number and types of health care-associated
            infections reported under subsection (a) in hospitals and
            ambulatory surgical centers during such year.
              ``(2) Factors that contribute to the occurrence of such
            infections, including health care worker immunization rates.
              ``(3) Based on the most recent information available to the
            Secretary on the composition of the professional staff of
            hospitals and ambulatory surgical centers, the number of
            certified infection control professionals on the staff of
            hospitals and ambulatory surgical centers.
              ``(4) The total increases or decreases in health care costs
            that resulted from increases or decreases in the rates of
            occurrence of each such type of infection during such year.
              ``(5) Recommendations, in coordination with the Center for
            Quality Improvement established under section 931 of the Public
            Health Service Act, for best practices to eliminate the rates
            of occurrence of each such type of infection in hospitals and
            ambulatory surgical centers.
      ``(d) Non-preemption of State Laws.--Nothing in this section shall be
    construed as preempting or otherwise affecting any provision of State
    law relating to the disclosure of information on health care-associated
    infections or patient safety procedures for a hospital or ambulatory
    surgical center.
      ``(e) Health Care-associated Infection.--For purposes of this
    section:
              ``(1) In general.--The term `health care-associated
            infection' means an infection that develops in a patient who
            has received care in any institutional setting where health
            care is delivered and is related to receiving health care.
              ``(2) Related to receiving health care.--The term `related to
            receiving health care', with respect to an infection, means
            that the infection was not incubating or present at the time
            health care was provided.
      ``(f) Application to Critical Access Hospitals.--For purposes of this
    section, the term `hospital' includes a critical access hospital, as
    defined in section 1861(mm)(1).''.
      (b) Effective Date.--With respect to section 1138A of the Social
    Security Act (as inserted by subsection (a) of this section), the
    requirement under such section that hospitals and ambulatory surgical
    centers submit reports takes effect on such date (not later than 2
    years after the date of the enactment of this Act) as the Secretary of
    Health and Human Services shall specify. In order to meet such
    deadline, the Secretary may implement such section through guidance or
    other instructions.
      (c) GAO Report.--Not later than 18 months after the date of the
    enactment of this Act, the Comptroller General of the United States
    shall submit to Congress a report on the program established under
    section 1138A of the Social Security Act, as inserted by subsection
    (a). Such report shall include an analysis of the appropriateness of
    the types of information required for submission, compliance with
    reporting requirements, the success of the validity procedures
    established, and any conflict or overlap between the reporting required
    under such section and any other reporting systems mandated by either
    the States or the Federal Government.
      (d) Report on Additional Data.--Not later than 18 months after the
    date of the enactment of this Act, the Secretary of Health and Human
    Services shall submit to the Congress a report on the appropriateness
    of expanding the requirements under such section to include additional
    information (such as health care worker immunization rates), in order
    to improve health care quality and patient safety.

                  TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION

    SEC. 1501. DISTRIBUTION OF UNUSED RESIDENCY POSITIONS.

      (a) In General.--Section 1886(h) of the Social Security Act (42
    U.S.C. 1395ww(h)) is amended--
              (1) in paragraph (4)(F)(i), by striking ``paragraph (7)'' and
            inserting ``paragraphs (7) and (8)'';
              (2) in paragraph (4)(H)(i), by striking ``paragraph (7)'' and
            inserting ``paragraphs (7) and (8)'';
              (3) in paragraph (7)(E), by inserting ``and paragraph (8)''
            after ``this paragraph''; and
              (4) by adding at the end the following new paragraph:
              ``(8) Additional redistribution of unused residency
            positions.--
                      ``(A) Reductions in limit based on unused
                    positions.--
                              ``(i) Programs subject to reduction.--If a
                            hospital's reference resident level (specified
                            in clause (ii)) is less than the otherwise
                            applicable resident limit (as defined in
                            subparagraph (C)(ii)), effective for portions
                            of cost reporting periods occurring on or after
                            July 1, 2011, the otherwise applicable resident
                            limit shall be reduced by 90 percent of the
                            difference between such otherwise applicable
                            resident limit and such reference resident
                            level.
                              ``(ii) Reference resident level.--
                                      ``(I) In general.--Except as
                                    otherwise provided in a subsequent
                                    subclause, the reference resident level
                                    specified in this clause for a hospital
                                    is the highest resident level for any
                                    of the 3 most recent cost reporting
                                    periods (ending before the date of the
                                    enactment of this paragraph) of the
                                    hospital for which a cost report has
                                    been settled (or, if not, submitted
                                    (subject to audit)), as determined by
                                    the Secretary.
                                      ``(II) Use of most recent accounting
                                    period to recognize expansion of
                                    existing programs.--If a hospital
                                    submits a timely request to increase
                                    its resident level due to an expansion,
                                    or planned expansion, of an existing
                                    residency training program that is not
                                    reflected on the most recent settled or
                                    submitted cost report, after audit and
                                    subject to the discretion of the
                                    Secretary, subject to subclause (IV),
                                    the reference resident level for such
                                    hospital is the resident level that
                                    includes the additional residents
                                    attributable to such expansion or
                                    establishment, as determined by the
                                    Secretary. The Secretary is authorized
                                    to determine an alternative reference
                                    resident level for a hospital that
                                    submitted to the Secretary a timely
                                    request, before the start of the 2009-
                                    2010 academic year, for an increase in
                                    its reference resident level due to a
                                    planned expansion.
                                      ``(III) Special provider agreement.--
                                    In the case of a hospital described in
                                    paragraph (4)(H)(v), the reference
                                    resident level specified in this clause
                                    is the limitation applicable under
                                    subclause (I) of such paragraph.
                                      ``(IV) Previous redistribution.--The
                                    reference resident level specified in
                                    this clause for a hospital shall be
                                    increased to the extent required to
                                    take into account an increase in
                                    resident positions made available to
                                    the hospital under paragraph (7)(B)
                                    that are not otherwise taken into
                                    account under a previous subclause.
                              ``(iii) Affiliation.--The provisions of
                            clause (i) shall be applied to hospitals which
                            are members of the same affiliated group (as
                            defined by the Secretary under paragraph
                            (4)(H)(ii)) and to the extent the hospitals can
                            demonstrate that they are filling any
                            additional  resident slots allocated to other
                            hospitals through an affiliation agreement, the
                            Secretary shall adjust the determination of
                            available slots accordingly, or which the
                            Secretary otherwise has permitted the resident
                            positions (under section 402 of the Social
                            Security Amendments of 1967) to be aggregated
                            for purposes of applying the resident position
                            limitations under this subsection.
                      ``(B) Redistribution.--
                              ``(i) In general.--The Secretary shall
                            increase the otherwise applicable resident
                            limit for each qualifying hospital that submits
                            an application under this subparagraph by such
                            number as the Secretary may approve for
                            portions of cost reporting periods occurring on
                            or after July 1, 2011. The estimated aggregate
                            number of increases in the otherwise applicable
                            resident limit under this subparagraph may not
                            exceed the Secretary's estimate of the
                            aggregate reduction in such limits attributable
                            to subparagraph (A).
                              ``(ii) Requirements for qualifying
                            hospitals.--A hospital is not a qualifying
                            hospital for purposes of this paragraph unless
                            the following requirements are met:
                                      ``(I) Maintenance of primary care
                                    resident level.--The hospital maintains
                                    the number of primary care residents at
                                    a level that is not less than the base
                                    level of primary care residents
                                    increased by the number of additional
                                    primary care resident positions
                                    provided to the hospital under this
                                    subparagraph. For purposes of this
                                    subparagraph, the `base level of
                                    primary care residents' for a hospital
                                    is the level of such residents as of a
                                    base period (specified by the
                                    Secretary), determined without regard
                                    to whether such positions were in
                                    excess of the otherwise applicable
                                    resident limit for such period but
                                    taking into account the application of
                                    subclauses (II) and (III) of
                                    subparagraph (A)(ii).
                                      ``(II) Dedicated assignment of
                                    additional resident positions to
                                    primary care.--The hospital assigns all
                                    such additional resident positions for
                                    primary care residents.
                                      ``(III) Accreditation.--The
                                    hospital's residency programs in
                                    primary care are fully accredited or,
                                    in the case of a residency training
                                    program not in operation as of the base
                                    year, the hospital is actively applying
                                    for such accreditation for the program
                                    for such additional resident positions
                                    (as determined by the Secretary).
                              ``(iii) Considerations in redistribution.--In
                            determining for which qualifying hospitals the
                            increase in the otherwise applicable resident
                            limit is provided under this subparagraph, the
                            Secretary shall take into account the
                            demonstrated likelihood of the hospital filling
                            the positions within the first 3 cost reporting
                            periods beginning on or after July 1, 2011,
                            made available under this subparagraph, as
                            determined by the Secretary.
                              ``(iv) Priority for certain hospitals.--In
                            determining for which qualifying hospitals the
                            increase in the otherwise applicable resident
                            limit is provided under this subparagraph, the
                            Secretary shall distribute the increase to
                            qualifying hospitals based on the following
                            criteria:
                                      ``(I) The Secretary shall give
                                    preference to hospitals that had a
                                    reduction in resident training
                                    positions under subparagraph (A).
                                      ``(II) The Secretary shall give
                                    preference to hospitals with 3-year
                                    primary care residency training
                                    programs, such as family practice and
                                    general internal medicine.
                                      ``(III) The Secretary shall give
                                    preference to hospitals insofar as they
                                    have in effect formal arrangements (as
                                    determined by the Secretary) that place
                                    greater emphasis upon training in
                                    Federally qualified health centers,
                                    rural health clinics, and other
                                    nonprovider settings, and to hospitals
                                    that receive additional payments under
                                    subsection (d)(5)(F) and emphasize
                                    training in an outpatient department.
                                      ``(IV) The Secretary shall give
                                    preference to hospitals with a number
                                    of positions (as of July 1, 2009) in
                                    excess of the otherwise applicable
                                    resident limit for such period.
                                      ``(V) The Secretary shall give
                                    preference to hospitals that place
                                    greater emphasis upon training in a
                                    health professional shortage area
                                    (designated under section 332 of the
                                    Public Health Service Act) or a health
                                    professional needs area (designated
                                    under section 2211 of such Act).
                                      ``(VI) The Secretary shall give
                                    preference to hospitals in States that
                                    have low resident-to-population ratios
                                    (including a greater preference for
                                    those States with lower resident-to-
                                    population ratios).
                              ``(v) Limitation.--In no case shall more than
                            20 full-time equivalent additional residency
                            positions be made available under this
                            subparagraph with respect to any hospital.
                              ``(vi) Application of per resident amounts
                            for primary care.--With respect to additional
                            residency positions in a hospital attributable
                            to the increase provided under this
                            subparagraph, the approved FTE resident amounts
                            are deemed to be equal to the hospital per
                            resident amounts for primary care and
                            nonprimary care computed under paragraph (2)(D)
                            for that hospital.
                              ``(vii) Distribution.--The Secretary shall
                            distribute the increase in resident training
                            positions to qualifying hospitals under this
                            subparagraph not later than July 1, 2011.
                      ``(C) Resident level and limit defined.--In this
                    paragraph:
                              ``(i) The term `resident level' has the
                            meaning given such term in paragraph (7)(C)(i).
                              ``(ii) The term `otherwise applicable
                            resident limit' means, with respect to a
                            hospital, the limit otherwise applicable under
                            subparagraphs (F)(i) and (H) of paragraph (4)
                            on the resident level for the hospital
                            determined without regard to this paragraph but
                            taking into account paragraph (7)(A).
                      ``(D) Maintenance of primary care resident level.--In
                    carrying out this paragraph, the Secretary shall
                    require hospitals that receive additional resident
                    positions under subparagraph (B)--
                              ``(i) to maintain records, and periodically
                            report to the Secretary, on the number of
                            primary care residents in its residency
                            training programs; and
                              ``(ii) as a condition of payment for a cost
                            reporting period under this subsection for such
                            positions, to maintain the level of such
                            positions at not less than the sum of--
                                      ``(I) the base level of primary care
                                    resident positions (as determined under
                                    subparagraph (B)(ii)(I)) before
                                    receiving such additional positions;
                                    and
                                      ``(II) the number of such additional
                                    positions.''.
      (b) IME.--
              (1) In general.--Section 1886(d)(5)(B)(v) of the Social
            Security Act (42 U.S.C. 1395ww(d)(5)(B)(v)), in the third
            sentence, is amended--
                      (A) by striking ``subsection (h)(7)'' and inserting
                    ``subsections (h)(7) and (h)(8)''; and
                      (B) by striking ``it applies'' and inserting ``they
                    apply''.
              (2) Conforming provision.--Section 1886(d)(5)(B) of the
            Social Security Act (42 U.S.C. 1395ww(d)(5)(B)) is amended by
            adding at the end the following clause:
      ``(x) For discharges occurring on or after July 1, 2011, insofar as
    an additional payment amount under this subparagraph is attributable to
    resident positions distributed to a hospital under subsection
    (h)(8)(B), the indirect teaching adjustment factor shall be computed in
    the same manner as provided under clause (ii) with respect to such
    resident positions.''.
      (c) Conforming Amendment.--Section 422(b)(2) of the Medicare
    Prescription Drug, Improvement, and Modernization Act of 2003 (Public
    Law 108-173) is amended by striking ``section 1886(h)(7)'' and all that
    follows and inserting ``paragraphs (7) and (8) of subsection (h) of
    section 1886 of the Social Security Act.''.

    SEC. 1502. INCREASING TRAINING IN NONPROVIDER SETTINGS.

      (a) Direct GME.--Section 1886(h)(4)(E) of the Social Security Act (42
    U.S.C. 1395ww(h)) is amended--
              (1) by designating the first sentence as a clause (i) with
            the heading ``In general.--'' and appropriate indentation;
              (2) by striking ``shall be counted and that all the time''
            and inserting ``shall be counted and that--
                                      ``(I) effective for cost reporting
                                    periods beginning before July 1, 2009,
                                    all the time'';
              (3) in subclause (I), as inserted by paragraph (1), by
            striking the period at the end and inserting ``; and''; and
                      (A) by inserting after subclause (I), as so inserted,
                    the following:
                                      ``(II) effective for cost reporting
                                    periods beginning on or after July 1,
                                    2009, all the time so spent by a
                                    resident shall be counted towards the
                                    determination of full-time equivalency,
                                    without regard to the setting in which
                                    the activities are performed, if the
                                    hospital incurs the costs of the
                                    stipends and fringe benefits of the
                                    resident during the time the resident
                                    spends in that setting.
                            Any hospital claiming under this subparagraph
                            for time spent in a nonprovider setting shall
                            maintain and make available to the Secretary
                            records regarding the amount of such time and
                            such amount in comparison with amounts of such
                            time in such base year as the Secretary shall
                            specify.''.
      (b) IME.--Section 1886(d)(5)(B)(iv) of the Social Security Act (42
    U.S.C. 1395ww(d)(5)(B)(iv)) is amended--
              (1) by striking ``(iv) Effective for discharges occurring on
            or after October 1, 1997'' and inserting ``(iv)(I) Effective
            for discharges occurring on or after October 1, 1997, and
            before July 1, 2009''; and
              (2) by inserting after subclause (I), as inserted by
            paragraph (1), the following new subclause:
              ``(II) Effective for discharges occurring on or after July 1,
            2009, all the time spent by an intern or resident in patient
            care activities at an entity in a nonprovider setting shall be
            counted towards the determination of full-time equivalency if
            the hospital incurs the costs of the stipends and fringe
            benefits of the intern or resident during the time the intern
            or resident spends in that setting.''.
      (c) OIG Study on Impact on Training.--The Inspector General of the
    Department of Health and Human Services shall analyze the data
    collected by the Secretary of Health and Human Services from the
    records made available to the Secretary under section 1886(h)(4)(E) of
    the Social Security Act, as amended by subsection (a), in order to
    assess the extent to which there is an increase in time spent by
    medical residents in training in nonprovider settings as a result of
    the amendments made by this section. Not later than 4 years after the
    date of the enactment of this Act, the Inspector General shall submit a
    report to Congress on such analysis and assessment.
      (d) Demonstration Project for Approved Teaching Health Centers.--
              (1) In general.--The Secretary of Health and Human Services
            shall conduct a demonstration project under which an approved
            teaching health center (as defined in paragraph (3)) would be
            eligible for payment under subsections (h) and (k) of section
            1886 of the Social Security Act (42 U.S.C. 1395ww) of amounts
            for its own direct costs of graduate medical education
            activities for primary care residents, as well as for the
            direct costs of graduate medical education activities of its
            contracting hospital for such residents, in a manner similar to
            the manner in which such payments would be made to a hospital
            if the hospital were to operate such a program.
              (2) Conditions.--Under the demonstration project--
                      (A) an approved teaching health center shall contract
                    with an accredited teaching hospital to carry out the
                    inpatient responsibilities of the primary care
                    residency program of the hospital involved and is
                    responsible for payment to the hospital for the
                    hospital's costs of the salary and fringe benefits for
                    residents in the program;
                      (B) the number of primary care residents of the
                    center shall not count against the contracting
                    hospital's resident limit; and
                      (C) the contracting hospital shall agree not to
                    diminish the number of residents in its primary care
                    residency training program.
              (3) Approved teaching health center defined.--In this
            subsection, the term ``approved teaching health center'' means
            a nonprovider setting, such as a Federally qualified health
            center or rural health clinic (as defined in section 1861(aa)
            of the Social Security Act), that develops and operates an
            accredited primary care residency program for which funding
            would be available if it were operated by a hospital.

    SEC. 1503. RULES FOR COUNTING RESIDENT TIME FOR DIDACTIC AND SCHOLARLY
                        ACTIVITIES AND OTHER ACTIVITIES.

      (a) Direct GME.--Section 1886(h) of the Social Security Act (42
    U.S.C. 1395ww(h)) is amended--
              (1) in paragraph (4)(E), as amended by section 1502(a)--
                      (A) in clause (i), by striking ``Such rules'' and
                    inserting ``Subject to clause (ii), such rules''; and
                      (B) by adding at the end the following new clause:
                              ``(ii) Treatment of certain nonprovider and
                            didactic activities.--Such rules shall provide
                            that all time spent by an intern or resident in
                            an approved medical residency training program
                            in a nonprovider setting that is primarily
                            engaged in furnishing patient care (as defined
                            in paragraph (5)(K)) in nonpatient care
                            activities, such as didactic conferences and
                            seminars, but not including research not
                            associated with the treatment or diagnosis of a
                            particular patient, as such time and activities
                            are defined by the Secretary, shall be counted
                            toward the determination of full-time
                            equivalency.'';
              (2) in paragraph (4), by adding at the end the following new
            subparagraph:
                      ``(I) Treatment of certain time in approved medical
                    residency training programing.--In determining the
                    hospital's number of full-time equivalent residents for
                    purposes of this subsection, all the time that is spent
                    by an intern or resident in an approved medical
                    residency training program on vacation, sick leave, or
                    other approved leave, as such time is defined by the
                    Secretary, and that does not prolong the total time the
                    resident is participating in the approved program
                    beyond the normal duration of the program shall be
                    counted toward the determination of full-time
                    equivalency.''; and
              (3) in paragraph (5), by adding at the end the following new
            subparagraph:
                      ``(K) Nonprovider setting that is primarily engaged
                    in furnishing patient care.--The term `nonprovider
                    setting that is primarily engaged in furnishing patient
                    care' means a nonprovider setting in which the primary
                    activity is the care and treatment of patients, as
                    defined by the Secretary.''.
      (b) IME Determinations.--Section 1886(d)(5)(B) of such Act (42 U.S.C.
    1395ww(d)(5)(B)), as amended by section 1501(b), is amended by adding
    at the end the following new clause:
      ``(xi)(I) The provisions of subparagraph (I) of subsection (h)(4)
    shall apply under this subparagraph in the same manner as they apply
    under such subsection.
      ``(II) In determining the hospital's number of full-time equivalent
    residents for purposes of this subparagraph, all the time spent by an
    intern or resident in an approved medical residency training program in
    nonpatient care activities, such as didactic conferences and seminars,
    as such time and activities are defined by the Secretary, that occurs
    in the hospital shall be counted toward the determination of full-time
    equivalency if the hospital--
              ``(aa) is recognized as a subsection (d) hospital;
              ``(bb) is recognized as a subsection (d) Puerto Rico
            hospital;
              ``(cc) is reimbursed under a reimbursement system authorized
            under section 1814(b)(3); or
              ``(dd) is a provider-based hospital outpatient department.
      ``(III) In determining the hospital's number of full-time equivalent
    residents for purposes of this subparagraph, all the time spent by an
    intern or resident in an approved medical residency training program in
    research activities that are not associated with the treatment or
    diagnosis of a particular patient, as such time and activities are
    defined by the Secretary, shall not be counted toward the determination
    of full-time equivalency.''.
      (c) Effective Dates; Application.--
              (1) In general.--Except as otherwise provided, the Secretary
            of Health and Human Services shall implement the amendments
            made by this section in a manner so as to apply to cost
            reporting periods beginning on or after January 1, 1983.
              (2) Direct gme.--Section 1886(h)(4)(E)(ii) of the Social
            Security Act, as added by subsection (a)(1)(B), shall apply to
            cost reporting periods beginning on or after July 1, 2008.
              (3) IME.--Section 1886(d)(5)(B)(x)(III) of the Social
            Security Act, as added by subsection (b), shall apply to cost
            reporting periods beginning on or after October 1, 2001. Such
            section, as so added, shall not give rise to any inference on
            how the law in effect prior to such date should be interpreted.
              (4) Application.--The amendments made by this section shall
            not be applied in a manner that requires reopening of any
            settled hospital cost reports as to which there is not a
            jurisdictionally proper appeal pending as of the date of the
            enactment of this Act on the issue of payment for indirect
            costs of medical education under section 1886(d)(5)(B) of the
            Social Security Act or for direct graduate medical education
            costs under section 1886(h) of such Act.

    SEC. 1504. PRESERVATION OF RESIDENT CAP POSITIONS FROM CLOSED
                        HOSPITALS.

      (a) Direct GME.--Section 1886(h)(4)(H) of the Social Security Act (42
    U.S.C. Section 1395ww(h)(4)(H)) is amended by adding at the end the
    following new clause:
                              ``(vi) Redistribution of residency slots
                            after a hospital closes.--
                                      ``(I) In general.--The Secretary
                                    shall, by regulation, establish a
                                    process consistent with subclauses (II)
                                    and (III) under which, in the case
                                    where a hospital (other than a hospital
                                    described in clause (v)) with an
                                    approved medical residency program in a
                                    State closes on or after the date that
                                    is 2 years before the date of the
                                    enactment of this clause, the Secretary
                                    shall increase the otherwise applicable
                                    resident limit under this paragraph for
                                    other hospitals in the State in
                                    accordance with this clause.
                                      ``(II) Process for hospitals in
                                    certain areas.--In determining for
                                    which hospitals the increase in the
                                    otherwise applicable resident limit
                                    described in subclause (I) is provided,
                                    the Secretary shall establish a process
                                    to provide for such increase to one or
                                    more hospitals located in the State.
                                    Such process shall take into
                                    consideration the recommendations
                                    submitted to the Secretary by the
                                    senior health official (as designated
                                    by the chief executive officer of such
                                    State) if such recommendations are
                                    submitted not later than 180 days after
                                    the date of the hospital closure
                                    involved (or, in the case of a hospital
                                    that closed after the date that is 2
                                    years before the date of the enactment
                                    of this clause, 180 days after such
                                    date of enactment).
                                      ``(III) Limitation.--The estimated
                                    aggregate number of increases in the
                                    otherwise applicable resident limits
                                    for hospitals under this clause shall
                                    be equal to the estimated number of
                                    resident positions in the approved
                                    medical residency programs that closed
                                    on or after the date described in
                                    subclause (I).''.
      (b) No Effect on Temporary FTE Cap Adjustments.--The amendments made
    by this section shall not effect any temporary adjustment to a
    hospital's FTE cap under section 413.79(h) of title 42, Code of Federal
    Regulations (as in effect on the date of enactment of this Act) and
    shall not affect the application of section 1886(h)(4)(H)(v) of the
    Social Security Act.
      (c) Conforming Amendments.--
              (1) Section 422(b)(2) of the Medicare Prescription Drug,
            Improvement, and Modernization Act of 2003 (Public Law 108-
            173), as amended by section 1501(c), is amended by striking
            ``(7) and'' and inserting ``(4)(H)(vi), (7), and''.
              (2) Section 1886(h)(7)(E) of the Social Security Act (42
            U.S.C. 1395ww(h)(7)(E)) is amended by inserting ``or under
            paragraph (4)(H)(vi)'' after ``under this paragraph''.

    SEC. 1505. IMPROVING ACCOUNTABILITY FOR APPROVED MEDICAL RESIDENCY
                        TRAINING.

      (a) Specification of Goals for Approved Medical Residency Training
    Programs.--Section 1886(h)(1) of the Social Security Act (42 U.S.C.
    1395ww(h)(1)) is amended--
              (1) by designating the matter beginning with
            ``Notwithstanding'' as a subparagraph (A) with the heading ``In
            general.--'' and with appropriate indentation; and
              (2) by adding at the end the following new subparagraph:
                      ``(B) Goals and accountability for approved medical
                    residency training programs.--The goals of medical
                    residency training programs are to foster a physician
                    workforce so that physicians are trained to be able to
                    do the following:
                              ``(i) Work effectively in various health care
                            delivery settings, such as nonprovider
                            settings.
                              ``(ii) Coordinate patient care within and
                            across settings relevant to their specialties.
                              ``(iii) Understand the relevant cost and
                            value of various diagnostic and treatment
                            options.
                              ``(iv) Work in inter-professional teams and
                            multi-disciplinary team-based models in
                            provider and nonprovider settings to enhance
                            safety and improve quality of patient care.
                              ``(v) Be knowledgeable in methods of
                            identifying systematic errors in health care
                            delivery and in implementing systematic
                            solutions in case of such errors, including
                            experience and participation in continuous
                            quality improvement projects to improve health
                            outcomes of the population the physicians
                            serve.
                              ``(vi) Be meaningful EHR users (as determined
                            under section 1848(o)(2)) in the delivery of
                            care and in improving the quality of the health
                            of the community and the individuals that the
                            hospital serves.''
      (b) GAO Study on Evaluation of Training Programs.--
              (1) In general.--The Comptroller General of the United States
            shall conduct a study to evaluate the extent to which medical
            residency training programs--
                      (A) are meeting the goals described in section
                    1886(h)(1)(B) of the Social Security Act, as added by
                    subsection (a), in a range of residency programs,
                    including primary care and other specialties; and
                      (B) have the appropriate faculty expertise to teach
                    the topics required to achieve such goals.
              (2) Report.--Not later than 18 months after the date of the
            enactment of this Act, the Comptroller General shall submit to
            Congress a report on such study and shall include in such
            report recommendations as to how medical residency training
            programs could be further encouraged to meet such goals through
            means such as--
                      (A) development of curriculum requirements; and
                      (B) assessment of the accreditation processes of the
                    Accreditation Council for Graduate Medical Education
                    and the American Osteopathic Association and
                    effectiveness of those processes in accrediting medical
                    residency programs that meet the goals referred to in
                    paragraph (1)(A).

                          TITLE VI--PROGRAM INTEGRITY

         Subtitle A--Increased Funding to Fight Waste, Fraud, and Abuse

    SEC. 1601. INCREASED FUNDING AND FLEXIBILITY TO FIGHT FRAUD AND ABUSE.

      (a) In General.--Section 1817(k) of the Social Security Act (42
    U.S.C. 1395i(k)) is amended--
              (1) by adding at the end the following new paragraph:
              ``(7) Additional funding.--In addition to the funds otherwise
            appropriated to the Account from the Trust Fund under
            paragraphs (3) and (4) and for purposes described in paragraphs
            (3)(C) and (4)(A), there are hereby appropriated an additional
            $100,000,000 to such Account from such Trust Fund for each
            fiscal year beginning with 2011. The funds appropriated under
            this paragraph shall be allocated in the same proportion as the
            total funding appropriated with respect to paragraphs (3)(A)
            and (4)(A) was allocated with respect to fiscal year 2010, and
            shall be available without further appropriation until
            expended.''.
              (2) in paragraph (4)(A)--
                      (A) by inserting ``for activities described in
                    paragraph (3)(C) and'' after ``necessary''; and
                      (B) by inserting ``until expended'' after
                    ``appropriation''.
      (b) Flexibility in Pursuing Fraud and Abuse.--Section 1893(a) of the
    Social Security Act (42 U.S.C. 1395ddd(a)) is amended by inserting ``,
    or otherwise,'' after ``entities''.

               Subtitle B--Enhanced Penalties for Fraud and Abuse

    SEC. 1611. ENHANCED PENALTIES FOR FALSE STATEMENTS ON PROVIDER OR
                        SUPPLIER ENROLLMENT APPLICATIONS.

      (a) In General.--Section 1128A(a) of the Social Security Act (42
    U.S.C. 1320a-7a(a)) is amended--
              (1) in paragraph (1)(D), by striking all that follows ``in
            which the person was excluded'' and inserting ``under Federal
            law from the Federal health care program under which the claim
            was made, or'';
              (2) by striking ``or'' at the end of paragraph (6);
              (3) in paragraph (7), by inserting at the end ``or'';
              (4) by inserting after paragraph (7) the following new
            paragraph:
              ``(8) knowingly makes or causes to be made any false
            statement, omission, or misrepresentation of a material fact in
            any application, agreement, bid, or contract to participate or
            enroll as a provider of services or supplier under a Federal
            health care program, including managed care organizations under
            title XIX, Medicare Advantage organizations under part C of
            title XVIII, prescription drug plan sponsors under part D of
            title XVIII, and entities that apply to participate as
            providers of services or suppliers in such managed care
            organizations and such plans;'';
              (5) in the matter following paragraph (8), as inserted by
            paragraph (4), by striking ``or in cases under paragraph (7),
            $50,000 for each such act)'' and inserting ``in cases under
            paragraph (7), $50,000 for each such act, or in cases under
            paragraph (8), $50,000 for each false statement, omission, or
            misrepresentation of a material fact)''; and
              (6) in the second sentence, by striking ``for a lawful
            purpose)'' and inserting ``for a lawful purpose, or in cases
            under paragraph (8), an assessment of not more than 3 times the
            amount claimed as the result of the false statement, omission,
            or misrepresentation of material fact claimed by a provider of
            services or supplier whose application to participate contained
            such false statement, omission, or misrepresentation)''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to acts committed on or after January 1, 2010.

    SEC. 1612. ENHANCED PENALTIES FOR SUBMISSION OF FALSE STATEMENTS
                        MATERIAL TO A FALSE CLAIM.

      (a) In General.--Section 1128A(a) of the Social Security Act (42
    U.S.C. 1320a-7a(a)), as amended by section 1611, is further amended--
              (1) in paragraph (7), by striking ``or'' at the end;
              (2) in paragraph (8), by inserting ``or'' at the end; and
              (3) by inserting after paragraph (8), the following new
            paragraph:
              ``(9) knowingly makes, uses, or causes to be made or used, a
            false record or statement material to a false or fraudulent
            claim for payment for items and services furnished under a
            Federal health care program;''; and
              (4) in the matter following paragraph (9), as inserted by
            paragraph (3)--
                      (A) by striking ``or in cases under paragraph (8)''
                    and inserting ``in cases under paragraph (8)''; and
                      (B) by striking ``a material fact)'' and inserting
                    ``a material fact, in cases under paragraph (9),
                    $50,000 for each false record or statement)''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to acts committed on or after January 1, 2010.

    SEC. 1613. ENHANCED PENALTIES FOR DELAYING INSPECTIONS.

      (a) In General.--Section 1128A(a) of the Social Security Act (42
    U.S.C. 1320a-7a(a)), as amended by sections 1611 and 1612, is further
    amended--
              (1) in paragraph (8), by striking ``or'' at the end;
              (2) in paragraph (9), by inserting ``or'' at the end;
              (3) by inserting after paragraph (9) the following new
            paragraph:
              ``(10) fails to grant timely access, upon reasonable request
            (as defined by the Secretary in regulations), to the Inspector
            General of the Department of Health and Human Services, for the
            purpose of audits, investigations, evaluations, or other
            statutory functions of the Inspector General of the Department
            of Health and Human Services;''; and
              (4) in the matter following paragraph (10), as inserted by
            paragraph (3), by inserting ``, or in cases under paragraph
            (10), $15,000 for each day of the failure described in such
            paragraph'' after ``false record or statement''.
      (b) Ensuring Timely Inspections Relating to Contracts With MA
    Organizations.--Section 1857(d)(2) of such Act (42 U.S.C. 1395w-
    27(d)(2)) is amended--
              (1) in subparagraph (A), by inserting ``timely'' before
            ``inspect''; and
              (2) in subparagraph (B), by inserting ``timely'' before
            ``audit and inspect''.
      (c) Effective Date.--The amendments made by subsection (a) shall
    apply to violations committed on or after January 1, 2010.

    SEC. 1614. ENHANCED HOSPICE PROGRAM SAFEGUARDS.

      (a) Medicare.--Part A of title XVIII of the Social Security Act is
    amended by inserting after section 1819 the following new section:

    ``SEC. 1819A. ASSURING QUALITY OF CARE IN HOSPICE CARE.

      ``(a) In General.--If the Secretary determines on the basis of a
    survey or otherwise, that a hospice program that is certified for
    participation under this title has demonstrated a substandard quality
    of care and failed to meet such other requirements as the Secretary may
    find necessary in the interest of the health and safety of the
    individuals who are provided care and services by the agency or
    organization involved and determines--
              ``(1) that the deficiencies involved immediately jeopardize
            the health and safety of the individuals to whom the program
            furnishes items and services, the Secretary shall take
            immediate action to remove the jeopardy and correct the
            deficiencies through the remedy specified in subsection
            (b)(2)(A)(iii) or terminate the certification of the program,
            and may provide, in addition, for 1 or more of the other
            remedies described in subsection (b)(2)(A); or
              ``(2) that the deficiencies involved do not immediately
            jeopardize the health and safety of the individuals to whom the
            program furnishes items and services, the Secretary may--
                      ``(A) impose intermediate sanctions developed
                    pursuant to subsection (b), in lieu of terminating the
                    certification of the program; and
                      ``(B) if, after such a period of intermediate
                    sanctions, the program is still not in compliance with
                    such requirements, the Secretary shall terminate the
                    certification of the program.
            If the Secretary determines that a hospice program that is
            certified for participation under this title is in compliance
            with such requirements but, as of a previous period, was not in
            compliance with such requirements, the Secretary may provide
            for a civil money penalty under subsection (b)(2)(A)(i) for the
            days in which it finds that the program was not in compliance
            with such requirements.
      ``(b) Intermediate Sanctions.--
              ``(1) Development and implementation.--The Secretary shall
            develop and implement, by not later than July 1, 2012--
                      ``(A) a range of intermediate sanctions to apply to
                    hospice programs under the conditions described in
                    subsection (a), and
                      ``(B) appropriate procedures for appealing
                    determinations relating to the imposition of such
                    sanctions.
              ``(2) Specified sanctions.--
                      ``(A) In general.--The intermediate sanctions
                    developed under paragraph (1) may include--
                              ``(i) civil money penalties in an amount not
                            to exceed $10,000 for each day of noncompliance
                            or, in the case of a per instance penalty
                            applied by the Secretary, not to exceed
                            $25,000,
                              ``(ii) denial of all or part of the payments
                            to which a hospice program would otherwise be
                            entitled under this title with respect to items
                            and services furnished by a hospice program on
                            or after the date on which the Secretary
                            determines that intermediate sanctions should
                            be imposed pursuant to subsection (a)(2),
                              ``(iii) the appointment of temporary
                            management to oversee the operation of the
                            hospice program and to protect and assure the
                            health and safety of the individuals under the
                            care of the program while improvements are
                            made,
                              ``(iv) corrective action plans, and
                              ``(v) in-service training for staff.
                    The provisions of section 1128A (other than subsections
                    (a) and (b)) shall apply to a civil money penalty under
                    clause (i) in the same manner as such provisions apply
                    to a penalty or proceeding under section 1128A(a). The
                    temporary management under clause (iii) shall not be
                    terminated until the Secretary has determined that the
                    program has the management capability to ensure
                    continued compliance with all requirements referred to
                    in that clause.
                      ``(B) Clarification.--The sanctions specified in
                    subparagraph (A) are in addition to sanctions otherwise
                    available under State or Federal law and shall not be
                    construed as limiting other remedies, including any
                    remedy available to an individual at common law.
                      ``(C) Commencement of payment.--A denial of payment
                    under subparagraph (A)(ii) shall terminate when the
                    Secretary determines that the hospice program no longer
                    demonstrates a substandard quality of care and meets
                    such other requirements as the Secretary may find
                    necessary in the interest of the health and safety of
                    the individuals who are provided care and services by
                    the agency or organization involved.
              ``(3) Secretarial authority.--The Secretary shall develop and
            implement, by not later than July 1, 2011, specific procedures
            with respect to the conditions under which each of the
            intermediate sanctions developed under paragraph (1) is to be
            applied, including the amount of any fines and the severity of
            each of these sanctions. Such procedures shall be designed so
            as to minimize the time between identification of deficiencies
            and imposition of these sanctions and shall provide for the
            imposition of incrementally more severe fines for repeated or
            uncorrected deficiencies.''.
      (b) Application to Medicaid.--Section 1905(o) of the Social Security
    Act (42 U.S.C. 1396d(o)) is amended by adding at the end the following
    new paragraph:
      ``(4) The provisions of section 1819A shall apply to a hospice
    program providing hospice care under this title in the same manner as
    such provisions apply to a hospice program providing hospice care under
    title XVIII.''.
      (c) Application to CHIP.--Title XXI of the Social Security Act is
    amended by adding at the end the following new section:

    ``SEC. 2114. ASSURING QUALITY OF CARE IN HOSPICE CARE.

      ``The provisions of section 1819A shall apply to a hospice program
    providing hospice care under this title in the same manner such
    provisions apply to a hospice program providing hospice care under
    title XVIII.''.

    SEC. 1615. ENHANCED PENALTIES FOR INDIVIDUALS EXCLUDED FROM PROGRAM
                        PARTICIPATION.

      (a) In General.--Section 1128A(a) of the Social Security Act (42
    U.S.C. 1320a-7a(a)), as amended by the previous sections, is further
    amended--
              (1) by striking ``or'' at the end of paragraph (9);
              (2) by inserting ``or'' at the end of paragraph (10);
              (3) by inserting after paragraph (10) the following new
            paragraph:
              ``(11) orders or prescribes an item or service, including
            without limitation home health care, diagnostic and clinical
            lab tests, prescription drugs, durable medical equipment,
            ambulance services, physical or occupational therapy, or any
            other item or service, during a period when the person has been
            excluded from participation in a Federal health care program,
            and the person knows or should know that a claim for such item
            or service will be presented to such a program;''; and
              (4) in the matter following paragraph (11), as inserted by
            paragraph (2), by striking ``$15,000 for each day of the
            failure described in such paragraph'' and inserting ``$15,000
            for each day of the failure described in such paragraph, or in
            cases under paragraph (11), $50,000 for each order or
            prescription for an item or service by an excluded
            individual''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to violations committed on or after January 1, 2010.

    SEC. 1616. ENHANCED PENALTIES FOR PROVISION OF FALSE INFORMATION BY
                        MEDICARE ADVANTAGE AND PART D PLANS.

      (a) In General.--Section 1857(g)(2)(A) of the Social Security Act (42
    U.S.C. 1395w--27(g)(2)(A)) is amended by inserting ``except with
    respect to a determination under subparagraph (E), an assessment of not
    more than 3 times the amount claimed by such plan or plan sponsor based
    upon the misrepresentation or falsified information involved,'' after
    ``for each such determination,''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to violations committed on or after January 1, 2010.

    SEC. 1617. ENHANCED PENALTIES FOR MEDICARE ADVANTAGE AND PART D
                        MARKETING VIOLATIONS.

      (a) In General.--Section 1857(g)(1) of the Social Security Act (42
    U.S.C. 1395w--27(g)(1)), as amended by section 1221(b), is amended--
              (1) in subparagraph (G), by striking ``or'' at the end;
              (2) by inserting after subparagraph (H) the following new
            subparagraphs:
                      ``(I) except as provided under subparagraph (C) or
                    (D) of section 1860D-1(b)(1), enrolls an individual in
                    any plan under this part without the prior consent of
                    the individual or the designee of the individual;
                      ``(J) transfers an individual enrolled under this
                    part from one plan to another without the prior consent
                    of the individual or the designee of the individual or
                    solely for the purpose of earning a commission;
                      ``(K) fails to comply with marketing restrictions
                    described in subsections (h) and (j) of section 1851 or
                    applicable implementing regulations or guidance; or
                      ``(L) employs or contracts with any individual or
                    entity who engages in the conduct described in
                    subparagraphs (A) through (K) of this paragraph;''; and
              (3) by adding at the end the following new sentence: ``The
            Secretary may provide, in addition to any other remedies
            authorized by law, for any of the remedies described in
            paragraph (2), if the Secretary determines that any employee or
            agent of such organization, or any provider or supplier who
            contracts with such organization, has engaged in any conduct
            described in subparagraphs (A) through (L) of this paragraph.''
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to violations committed on or after January 1, 2010.

    SEC. 1618. ENHANCED PENALTIES FOR OBSTRUCTION OF PROGRAM AUDITS.

      (a) In General.--Section 1128(b)(2) of the Social Security Act (42
    U.S.C. 1320a-7(b)(2)) is amended--
              (1) in the heading, by inserting ``or audit'' after
            ``investigation''; and
              (2) by striking ``investigation into'' and all that follows
            through the period and inserting ``investigation or audit
            related to--''
                              ``(i) any offense described in paragraph (1)
                            or in subsection (a); or
                              ``(ii) the use of funds received, directly or
                            indirectly, from any Federal health care
                            program (as defined in section 1128B(f)).''.
      (b) Effective Date.--The amendments made by subsection (a) shall
    apply to violations committed on or after January 1, 2010.

    SEC. 1619. EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM
                        PARTICIPATION IN MEDICARE AND STATE HEALTH CARE
                        PROGRAMS.

      (a) In General.--Section 1128(c) of the Social Security Act, as
    previously amended by this division, is further amended--
              (1) in the heading, by striking ``and Period'' and inserting
            ``Period, and Effect''; and
              (2) by adding at the end the following new paragraph:
      ``(4)(A) For purposes of this Act, subject to subparagraph (C), the
    effect of exclusion is that no payment may be made by any Federal
    health care program (as defined in section 1128B(f)) with respect to
    any item or service furnished--
              ``(i) by an excluded individual or entity; or
              ``(ii) at the medical direction or on the prescription of a
            physician or other authorized individual when the person
            submitting a claim for such item or service knew or had reason
            to know of the exclusion of such individual.
      ``(B) For purposes of this section and sections 1128A and 1128B,
    subject to subparagraph (C), an item or service has been furnished by
    an individual or entity if the individual or entity directly or
    indirectly provided, ordered, manufactured, distributed, prescribed, or
    otherwise supplied the item or service regardless of how the item or
    service was paid for by a Federal health care program or to whom such
    payment was made.
      ``(C)(i) Payment may be made under a Federal health care program for
    emergency items or services (not including items or services furnished
    in an emergency room of a hospital) furnished by an excluded individual
    or entity, or at the medical direction or on the prescription of an
    excluded physician or other authorized individual during the period of
    such individual's exclusion.
      ``(ii) In the case that an individual eligible for benefits under
    title XVIII or XIX submits a claim for payment for items or services
    furnished by an excluded individual or entity, and such individual
    eligible for such benefits did not know or have reason to know that
    such excluded individual or entity was so excluded, then,
    notwithstanding such exclusion, payment shall be made for such items or
    services. In such case the Secretary shall notify such individual
    eligible for such benefits of the exclusion of the individual or entity
    furnishing the items or services. Payment shall not be made for items
    or services furnished by an excluded individual or entity to an
    individual eligible for such benefits after a reasonable time (as
    determined by the Secretary in regulations) after the Secretary has
    notified the individual eligible for such benefits of the exclusion of
    the individual or entity furnishing the items or services.
      ``(iii) In the case that a claim for payment for items or services
    furnished by an excluded individual or entity is submitted by an
    individual or entity other than an individual eligible for benefits
    under title XVIII or XIX or the excluded individual or entity, and the
    Secretary determines that the individual or entity that submitted the
    claim took reasonable steps to learn of the exclusion and reasonably
    relied upon inaccurate or misleading information from the relevant
    Federal health care program or its contractor, the Secretary may waive
    repayment of the amount paid in violation of the exclusion to the
    individual or entity that submitted the claim for the items or services
    furnished by the excluded individual or entity. If a Federal health
    care program contractor provided inaccurate or misleading information
    that resulted in the waiver of an overpayment under this clause, the
    Secretary shall take appropriate action to recover the improperly paid
    amount from the contractor.''.

             Subtitle C--Enhanced Program and Provider Protections

    SEC. 1631. ENHANCED CMS PROGRAM PROTECTION AUTHORITY.

      (a) In General.--Title XI of the Social Security Act (42 U.S.C. 1301
    et seq.) is amended by inserting after section 1128F the following new
    section:

    ``SEC. 1128G. ENHANCED PROGRAM AND PROVIDER PROTECTIONS IN THE
                        MEDICARE, MEDICAID, AND CHIP PROGRAMS.

      ``(a) Certain Authorized Screening, Enhanced Oversight Periods, and
    Enrollment Moratoria.--
              ``(1) In general.--For periods beginning after January 1,
            2011, in the case that the Secretary determines there is a
            significant risk of fraudulent activity (as determined by the
            Secretary based on relevant complaints, reports, referrals by
            law enforcement or other sources, data analysis, trending
            information, or claims submissions by providers of services and
            suppliers) with respect to a category of provider of services
            or supplier of items or services, including a category within a
            geographic area, under title XVIII, XIX, or XXI, the Secretary
            may impose any of the following requirements with respect to a
            provider of services or a supplier (whether such provider or
            supplier is initially enrolling in the program or is renewing
            such enrollment):
                      ``(A) Screening under paragraph (2).
                      ``(B) Enhanced oversight periods under paragraph (3).
                      ``(C) Enrollment moratoria under paragraph (4).
            In applying this subsection for purposes of title XIX and XXI
            the Secretary may require a State to carry out the provisions
            of this subsection as a requirement of the State plan under
            title XIX or the child health plan under title XXI. Actions
            taken and determinations made under this subsection shall not
            be subject to review by a judicial tribunal.
              ``(2) Screening.--For purposes of paragraph (1), the
            Secretary shall establish procedures under which screening is
            conducted with respect to providers of services and suppliers
            described in such paragraph. Such screening may include--
                      ``(A) licensing board checks;
                      ``(B) screening against the list of individuals and
                    entities excluded from the program under title XVIII,
                    XIX, or XXI;
                      ``(C) the excluded provider list system;
                      ``(D) background checks; and
                      ``(E) unannounced pre-enrollment or other site
                    visits.
              ``(3) Enhanced oversight period.--For purposes of paragraph
            (1), the Secretary shall establish procedures to provide for a
            period of not less than 30 days and not more than 365 days
            during which providers of services and suppliers described in
            such paragraph, as the Secretary determines appropriate, would
            be subject to enhanced oversight, such as required or
            unannounced (or required and unannounced) site visits or
            inspections, prepayment review, enhanced review of claims, and
            such other actions as specified by the Secretary, under the
            programs under titles XVIII, XIX, and XXI. Under such
            procedures, the Secretary may extend such period for more than
            365 days if the Secretary determines that after the initial
            period such additional period of oversight is necessary.
              ``(4) Moratorium on enrollment of providers and suppliers.--
            For purposes of paragraph (1), the Secretary, based upon a
            finding of a risk of serious ongoing fraud within a program
            under title XVIII, XIX, or XXI, may impose a moratorium on the
            enrollment of providers of services and suppliers within a
            category of providers of services and suppliers (including a
            category within a specific geographic area) under such title.
            Such a moratorium may only be imposed if the Secretary makes a
            determination that the moratorium would not adversely impact
            access of individuals to care under such program.
              ``(5) Clarification.--Nothing in this subsection shall be
            interpreted to preclude or limit the ability of a State to
            engage in provider screening or enhanced provider oversight
            activities beyond those required by the Secretary.''.
      (b) Conforming Amendments.--
              (1) Medicaid.--Section 1902(a) of the Social Security Act (42
            U.S.C. 42 U.S.C. 1396a(a)) is amended--
                      (A) in paragraph (23), by inserting before the
                    semicolon at the end the following: ``or by a person to
                    whom or entity to which a moratorium under section
                    1128G(a)(4) is applied during the period of such
                    moratorium'';
                      (B) in paragraph (72); by striking at the end
                    ``and'';
                      (C) in paragraph (73), by striking the period at the
                    end and inserting ``; and''; and
                      (D) by adding after paragraph (73) the following new
                    paragraph:
              ``(74) provide that the State will enforce any determination
            made by the Secretary under subsection (a) of section 1128G
            (relating to a significant risk of fraudulent activity with
            respect to a category of provider or supplier described in such
            subsection (a) through use of the appropriate procedures
            described in such subsection (a)), and that the State will
            carry out any activities as required by the Secretary for
            purposes of such subsection (a).''.
              (2) CHIP.--Section 2102 of such Act (42 U.S.C. 1397bb) is
            amended by adding at the end the following new subsection:
      ``(d) Program Integrity.--A State child health plan shall include a
    description of the procedures to be used by the State--
              ``(1) to enforce any determination made by the Secretary
            under subsection (a) of section 1128G (relating to a
            significant risk of fraudulent activity with respect to a
            category of provider or supplier described in such subsection
            through use of the appropriate procedures described in such
            subsection); and
              ``(2) to carry out any activities as required by the
            Secretary for purposes of such subsection.''.
              (3) Medicare.--Section 1866(j) of such Act (42 U.S.C.
            1395cc(j)) is amended by adding at the end the following new
            paragraph:
              ``(3) Program integrity.--The provisions of section 1128G(a)
            apply to enrollments and renewals of enrollments of providers
            of services and suppliers under this title.''.

    SEC. 1632. ENHANCED MEDICARE, MEDICAID, AND CHIP PROGRAM DISCLOSURE
                        REQUIREMENTS RELATING TO PREVIOUS AFFILIATIONS.

      (a) In General.--Section 1128G of the Social Security Act, as
    inserted by section 1631, is amended by adding at the end the following
    new subsection:
      ``(b) Enhanced Program Disclosure Requirements.--
              ``(1) Disclosure.--A provider of services or supplier who
            submits on or after July 1, 2011, an application for enrollment
            and renewing enrollment in a program under title XVIII, XIX, or
            XXI shall disclose (in a form and manner determined by the
            Secretary) any current affiliation or affiliation within the
            previous 10-year period with a provider of services or supplier
            that has uncollected debt or with a person or entity that has
            been suspended or excluded under such program, subject to a
            payment suspension, or has had its billing privileges revoked.
              ``(2) Enhanced safeguards.--If the Secretary determines that
            such previous affiliation of such provider or supplier poses a
            risk of fraud, waste, or abuse, the Secretary may apply such
            enhanced safeguards as the Secretary determines necessary to
            reduce such risk associated with such provider or supplier
            enrolling or participating in the program under title XVIII,
            XIX, or XXI. Such safeguards may include enhanced oversight,
            such as enhanced screening of claims, required or unannounced
            (or required and unannounced) site visits or inspections,
            additional information reporting requirements, and conditioning
            such enrollment on the provision of a surety bond.
              ``(3) Authority to deny participation.--If the Secretary
            determines that there has been at least one such affiliation
            and that such affiliation or affiliations, as applicable, of
            such provider or supplier poses a serious risk of fraud, waste,
            or abuse, the Secretary may deny the application of such
            provider or supplier.''.
      (b) Conforming Amendments.--
              (1) Medicaid.--Paragraph (74) of section 1902(a) of such Act
            (42 U.S.C. 1396a(a)), as added by section 1631(b)(1), is
            amended--
                      (A) by inserting ``or subsection (b) of such section
                    (relating to disclosure requirements)'' before ``, and
                    that the State''; and
                      (B) by inserting before the period the following:
                    ``and apply any enhanced safeguards, with respect to a
                    provider or supplier described in such subsection (b),
                    as the Secretary determines necessary under such
                    subsection (b)''.
              (2) CHIP.--Subsection (d) of section 2102 of such Act (42
            U.S.C. 1397bb), as added by section 1631(b)(2), is amended--
                      (A) in paragraph (1), by striking at the end ``and'';
                      (B) in paragraph (2) by striking the period at the
                    end and inserting ``; and''' and
                      (C) by adding at the end the following new paragraph:
              ``(3) to enforce any determination made by the Secretary
            under subsection (b) of section 1128G (relating to disclosure
            requirements) and to apply any enhanced safeguards, with
            respect to a provider or supplier described in such subsection,
            as the Secretary determines necessary under such subsection.''.

    SEC. 1633. REQUIRED INCLUSION OF PAYMENT MODIFIER FOR CERTAIN
                        EVALUATION AND MANAGEMENT SERVICES.

      Section 1848 of the Social Security Act (42 U.S.C. 1395w-4), as
    amended by section 4101 of the HITECH Act (Public Law 111-5), is
    amended by adding at the end the following new subsection:
      ``(p) Payment Modifier for Certain Evaluation and Management
    Services.--The Secretary shall establish a payment modifier under the
    fee schedule under this section for evaluation and management services
    (as specified in section 1842(b)(16)(B)(ii)) that result in the
    ordering of additional services (such as lab tests), the prescription
    of drugs, the furnishing or ordering of durable medical equipment in
    order to enable better monitoring of claims for payment for such
    additional services under this title, or the ordering, furnishing, or
    prescribing of other items and services determined by the Secretary to
    pose a high risk of waste, fraud, and abuse. The Secretary may require
    providers of services or suppliers to report such modifier in claims
    submitted for payment.''.

    SEC. 1634. EVALUATIONS AND REPORTS REQUIRED UNDER MEDICARE INTEGRITY
                        PROGRAM.

      (a) In General.--Section 1893(c) of the Social Security Act (42
    U.S.C. 1395ddd(c)) is amended--
              (1) in paragraph (3), by striking at the end ``and'';
              (2) by redesignating paragraph (4) as paragraph (5); and
              (3) by inserting after paragraph (3) the following new
            paragraph:
              ``(4) for the contract year beginning in 2011 and each
            subsequent contract year, the entity provides assurances to the
            satisfaction of the Secretary that the entity will conduct
            periodic evaluations of the effectiveness of the activities
            carried out by such entity under the Program and will submit to
            the Secretary an annual report on such activities; and''.
      (b) Reference to Medicaid Integrity Program.--For a similar provision
    with respect to the Medicaid Integrity Program, see section 1752.

    SEC. 1635. REQUIRE PROVIDERS AND SUPPLIERS TO ADOPT PROGRAMS TO REDUCE
                        WASTE, FRAUD, AND ABUSE.

      (a) In General.--Section 1874 of the Social Security Act (42 U.S.C.
    42 U.S.C. 1395kk) is amended by adding at the end the following new
    subsection:
      ``(e) Compliance Programs for Providers of Services and Suppliers.--
              ``(1) In general.--The Secretary may disenroll a provider of
            services or a supplier (other than a physician or a skilled
            nursing facility) under this title (or may impose any civil
            monetary penalty or other intermediate sanction under paragraph
            (4)) if such provider of services or supplier fails to, subject
            to paragraph (5), establish a compliance program that contains
            the core elements established under paragraph (2).
              ``(2) Establishment of core elements.--The Secretary, in
            consultation with the Inspector General of the Department of
            Health and Human Services, shall establish core elements for a
            compliance program under paragraph (1). Such elements may
            include written policies, procedures, and standards of conduct,
            a designated compliance officer and a compliance committee;
            effective training and education pertaining to fraud, waste,
            and abuse for the organization's employees and contractors; a
            confidential or anonymous mechanism, such as a hotline, to
            receive compliance questions and reports of fraud, waste, or
            abuse; disciplinary guidelines for enforcement of standards;
            internal monitoring and auditing procedures, including
            monitoring and auditing of contractors; procedures for ensuring
            prompt responses to detected offenses and development of
            corrective action initiatives, including responses to potential
            offenses; and procedures to return all identified overpayments
            to the programs under this title, title XIX, and title XXI.
              ``(3) Timeline for implementation.--The Secretary shall
            determine a timeline for the establishment of the core elements
            under paragraph (2) and the date on which a provider of
            services and suppliers (other than physicians) shall be
            required to have established such a program for purposes of
            this subsection.
              ``(4) CMS enforcement authority.--The Administrator for the
            Centers of Medicare & Medicaid Services shall have the
            authority to determine whether a provider of services or
            supplier described in subparagraph (3) has met the requirement
            of this subsection and to impose a civil monetary penalty not
            to exceed $50,000 for each violation. The Secretary may also
            impose other intermediate sanctions, including corrective
            action plans and additional monitoring in the case of a
            violation of this subsection.
              ``(5) Pilot program.--The Secretary may conduct a pilot
            program on the application of this subsection with respect to a
            category of providers of services or suppliers (other than
            physicians) that the Secretary determines to be a category
            which is at high risk for waste, fraud, and abuse before
            implementing the requirements of this subsection to all
            providers of services and suppliers described in paragraph
            (3).''.
      (b) Reference to Similar Medicaid Provision.--For a similar provision
    with respect to the Medicaid program under title XIX of the Social
    Security Act, see section 1753.

    SEC. 1636. MAXIMUM PERIOD FOR SUBMISSION OF MEDICARE CLAIMS REDUCED TO
                        NOT MORE THAN 12 MONTHS.

      (a) Purpose.--In general, the 36-month period currently allowed for
    claims filing under parts A, B, C, and, D of title XVIII of the Social
    Security Act presents opportunities for fraud schemes in which
    processing patterns of the Centers for Medicare & Medicaid Services can
    be observed and exploited. Narrowing the window for claims processing
    will not overburden providers and will reduce fraud and abuse.
      (b) Reducing Maximum Period for Submission.--
              (1) Part a.--Section 1814(a) of the Social Security Act (42
            U.S.C. 1395f(a)) is amended--
                      (A) in paragraph (1), by striking ``period of 3
                    calendar years'' and all that follows and inserting
                    ``period of 1 calendar year from which such services
                    are furnished; and''; and
                      (B) by adding at the end the following new sentence:
                    ``In applying paragraph (1), the Secretary may specify
                    exceptions to the 1 calendar year period specified in
                    such paragraph.''.
              (2) Part b.--Section 1835(a) of such Act (42 U.S.C. 1395n(a))
            is amended--
                      (A) in paragraph (1), by striking ``period of 3
                    calendar years'' and all that follows and inserting
                    ``period of 1 calendar year from which such services
                    are furnished; and''; and
                      (B) by adding at the end the following new sentence:
                    ``In applying paragraph (1), the Secretary may specify
                    exceptions to the 1 calendar year period specified in
                    such paragraph.''.
              (3) Parts c and d.--Section 1857(d) of such Act is amended by
            adding at the end the following new paragraph:
              ``(7) Period for submission of claims.--The contract shall
            require an MA organization or PDP sponsor to require any
            provider of services under contract with, in partnership with,
            or affiliated with such organization or sponsor to ensure that,
            with respect to items and services furnished by such provider
            to an enrollee of such organization, written request, signed by
            such enrollee, except in cases in which the Secretary finds it
            impracticable for the enrollee to do so, is filed for payment
            for such items and services in such form, in such manner, and
            by such person or persons as the Secretary may by regulation
            prescribe, no later than the close of the 1 calendar year
            period after such items and services are furnished. In applying
            the previous sentence, the Secretary may specify exceptions to
            the 1 calendar year period specified.''.
      (c) Effective Date.--The amendments made by subsection (b) shall be
    effective for items and services furnished on or after January 1, 2011.

    SEC. 1637. PHYSICIANS WHO ORDER DURABLE MEDICAL EQUIPMENT OR HOME
                        HEALTH SERVICES REQUIRED TO BE MEDICARE ENROLLED
                        PHYSICIANS OR ELIGIBLE PROFESSIONALS.

      (a) DME.--Section 1834(a)(11)(B) of the Social Security Act (42
    U.S.C. 1395m(a)(11)(B)) is amended by striking ``physician'' and
    inserting ``physician enrolled under section 1866(j) or an eligible
    professional under section 1848(k)(3)(B)''.
      (b) Home Health Services.--
              (1) Part a.--Section 1814(a)(2) of such Act (42 U.S.C.
            1395(a)(2)) is amended in the matter preceding subparagraph (A)
            by inserting ``in the case of services described in
            subparagraph (C), a physician enrolled under section 1866(j) or
            an eligible professional under section 1848(k)(3)(B),'' before
            ``or, in the case of services''.
              (2) Part b.--Section 1835(a)(2) of such Act (42 U.S.C.
            1395n(a)(2)) is amended in the matter preceding subparagraph
            (A) by inserting ``, or in the case of services described in
            subparagraph (A), a physician enrolled under section 1866(j) or
            an eligible professional under section 1848(k)(3)(B),'' after
            ``a physician''.
      (c) Discretion to Expand Application.--The Secretary may extend the
    requirement applied by the amendments made by subsections (a) and (b)
    to durable medical equipment and home health services (relating to
    requiring certifications and written orders to be made by enrolled
    physicians and health professions) to other categories of items or
    services under this title, including covered part D drugs as defined in
    section 1860D-2(e), if the Secretary determines that such application
    would help to reduce the risk of waste, fraud, and abuse with respect
    to such other categories under title XVIII of the Social Security Act.
      (d) Effective Date.--The amendments made by this section shall apply
    to written orders and certifications made on or after July 1, 2010.

    SEC. 1638. REQUIREMENT FOR PHYSICIANS TO PROVIDE DOCUMENTATION ON
                        REFERRALS TO PROGRAMS AT HIGH RISK OF WASTE AND
                        ABUSE.

      (a) Physicians and Other Suppliers.--Section 1842(h) of the Social
    Security Act, is amended by adding at the end the following new
    paragraph
      ``(10) The Secretary may disenroll, for a period of not more than one
    year for each act, a physician or supplier under section 1866(j) if
    such physician or supplier fails to maintain and, upon request of the
    Secretary, provide access to documentation relating to written orders
    or requests for payment for durable medical equipment, certifications
    for home health services, or referrals for other items or services
    written or ordered by such physician or supplier under this title, as
    specified by the Secretary.''.
      (b) Providers of Services.--Section 1866(a)(1) of such Act (42 U.S.C.
    1395cc), is amended--
              (1) in subparagraph (U), by striking at the end ``and'';
              (2) in subparagraph (V), by striking the period at the end
            and adding ``; and''; and
              (3) by adding at the end the following new subparagraph:
                      ``(W) maintain and, upon request of the Secretary,
                    provide access to documentation relating to written
                    orders or requests for payment for durable medical
                    equipment, certifications for home health services, or
                    referrals for other items or services written or
                    ordered by the provider under this title, as specified
                    by the Secretary.''.
      (c) OIG Permissive Exclusion Authority.--Section 1128(b)(11) of the
    Social Security Act (42 U.S.C. 1320a-7(b)(11)) is amended by inserting
    ``, ordering, referring for furnishing, or certifying the need for''
    after ``furnishing''.
      (d) Effective Date.--The amendments made by this section shall apply
    to orders, certifications, and referrals made on or after January 1,
    2010.

    SEC. 1639. FACE TO FACE ENCOUNTER WITH PATIENT REQUIRED BEFORE
                        PHYSICIANS MAY CERTIFY ELIGIBILITY FOR HOME HEALTH
                        SERVICES OR DURABLE MEDICAL EQUIPMENT UNDER
                        MEDICARE.

      (a) Condition of Payment for Home Health Services.--
              (1) Part a.--Section 1814(a)(2)(C) of such Act is amended--
                      (A) by striking ``and such services'' and inserting
                    ``such services''; and
                      (B) by inserting after ``care of a physician'' the
                    following: ``, and, in the case of a certification or
                    recertification made by a physician after January 1,
                    2010, prior to making such certification the physician
                    must document that the physician has had a face-to-face
                    encounter (including through use of telehealth and
                    other than with respect to encounters that are incident
                    to services involved) with the individual during the 6-
                    month period preceding such certification, or other
                    reasonable timeframe as determined by the Secretary''.
              (2) Part b.--Section 1835(a)(2)(A) of the Social Security Act
            is amended--
                      (A) by striking ``and'' before ``(iii)''; and
                      (B) by inserting after ``care of a physician'' the
                    following: ``, and (iv) in the case of a certification
                    or recertification after January 1, 2010, prior to
                    making such certification the physician must document
                    that the physician has had a face-to-face encounter
                    (including through use of telehealth and other than
                    with respect to encounters that are incident to
                    services involved) with the individual during the 6-
                    month period preceding such certification or
                    recertification, or other reasonable timeframe as
                    determined by the Secretary''.
      (b) Condition of Payment for Durable Medical Equipment.--Section
    1834(a)(11)(B) of the Social Security Act (42 U.S.C. 1395m(a)(11)(B))
    is amended by adding before the period at the end the following: ``and
    shall require that such an order be written pursuant to the physician
    documenting that the physician has had a face-to-face encounter
    (including through use of telehealth and other than with respect to
    encounters that are incident to services involved) with the individual
    involved during the 6-month period preceding such written order, or
    other reasonable timeframe as determined by the Secretary''.
      (c) Application to Other Areas Under Medicare.--The Secretary may
    apply the face-to-face encounter requirement described in the
    amendments made by subsections (a) and (b) to other items and services
    for which payment is provided under title XVIII of the Social Security
    Act based upon a finding that such an decision would reduce the risk of
    waste, fraud, or abuse.
      (d) Application to Medicaid and CHIP.--The requirements pursuant to
    the amendments made by subsections (a) and (b) shall apply in the case
    of physicians making certifications for home health services under
    title XIX or XXI of the Social Security Act, in the same manner and to
    the same extent as such requirements apply in the case of physicians
    making such certifications under title XVIII of such Act.

    SEC. 1640. EXTENSION OF TESTIMONIAL SUBPOENA AUTHORITY TO PROGRAM
                        EXCLUSION INVESTIGATIONS.

      (a) In General.--Section 1128(f) of the Social Security Act (42
    U.S.C. 1320a-7(f)) is amended by adding at the end the following new
    paragraph:
      ``(4) The provisions of subsections (d) and (e) of section 205 shall
    apply with respect to this section to the same extent as they are
    applicable with respect to title II. The Secretary may delegate the
    authority granted by section 205(d) (as made applicable to this
    section) to the Inspector General of the Department of Health and Human
    Services or the Administrator of the Centers for Medicare & Medicaid
    Services for purposes of any investigation under this section.''.
      (b) Effective Date.--The amendment made by subsection (a) shall apply
    to investigations beginning on or after January 1, 2010.

    SEC. 1641. REQUIRED REPAYMENTS OF MEDICARE AND MEDICAID OVERPAYMENTS.

      Section 1128G of the Social Security Act, as inserted by section 1631
    and amended by section 1632, is further amended by adding at the end
    the following new subsection:
      ``(c) Reports on and Repayment of Overpayments Identified Through
    Internal Audits and Reviews.--
              ``(1) Reporting and returning overpayments.--If a person
            knows of an overpayment, the person must--
                      ``(A) report and return the overpayment to the
                    Secretary, the State, an intermediary, a carrier, or a
                    contractor, as appropriate, at the correct address, and
                      ``(B) notify the Secretary, the State, intermediary,
                    carrier, or contractor to whom the overpayment was
                    returned in writing of the reason for the overpayment.
              ``(2) Timing.--An overpayment must be reported and returned
            under paragraph (1)(A) by not later than the date that is 60
            days after the date the person knows of the overpayment.
            Any known overpayment retained later than the applicable date
            specified in this paragraph creates an obligation as defined in
            section 3729(b)(3) of title 31 of the United States Code.
              ``(3) Clarification.--Repayment of any overpayments (or
            refunding by withholding of future payments) by a provider of
            services or supplier does not otherwise limit the provider or
            supplier's potential liability for administrative obligations
            such as applicable interests, fines, and specialties or civil
            or criminal sanctions involving the same claim if it is
            determined later that the reason for the overpayment was
            related to fraud by the provider or supplier or the employees
            or agents of such provider or supplier.
              ``(4) Definitions.--In this subsection:
                      ``(A) Knows.--The term `knows' has the meaning given
                    the terms `knowing' and `knowingly' in section 3729(b)
                    of title 31 of the United States Code.
                      ``(B) Overpayment.--The term ``overpayment'' means
                    any finally determined funds that a person receives or
                    retains under title XVIII, XIX, or XXI to which the
                    person, after applicable reconciliation, is not
                    entitled under such title.
                      ``(C) Person.--The term `person' means a provider of
                    services, supplier, Medicaid managed care organization
                    (as defined in section 1903(m)(1)(A)), Medicare
                    Advantage organization (as defined in section
                    1859(a)(1)), or PDP sponsor (as defined in section
                    1860D-41(a)(13)), but excluding a beneficiary.''.

    SEC. 1642. EXPANDED APPLICATION OF HARDSHIP WAIVERS FOR OIG EXCLUSIONS
                        TO BENEFICIARIES OF ANY FEDERAL HEALTH CARE
                        PROGRAM.

      Section 1128(c)(3)(B) of the Social Security Act (42 U.S.C. 1320a-
    7(c)(3)(B)) is amended by striking ``individuals entitled to benefits
    under part A of title XVIII or enrolled under part B of such title, or
    both'' and inserting ``beneficiaries (as defined in section
    1128A(i)(5)) of that program''.

    SEC. 1643. ACCESS TO CERTAIN INFORMATION ON RENAL DIALYSIS FACILITIES.

      Section 1881(b) of the Social Security Act (42 U.S.C. 1395rr(b)) is
    amended by adding at the end the following new paragraph:
      ``(15) For purposes of evaluating or auditing payments made to renal
    dialysis facilities for items and services under this section under
    paragraph (1), each such renal dialysis facility, upon the request of
    the Secretary, shall provide to the Secretary access to information
    relating to any ownership or compensation arrangement between such
    facility and the medical director of such facility or between such
    facility and any physician.''.

    SEC. 1644. BILLING AGENTS, CLEARINGHOUSES, OR OTHER ALTERNATE PAYEES
                        REQUIRED TO REGISTER UNDER MEDICARE.

      (a) Medicare.--Section 1866(j)(1) of the Social Security Act (42
    U.S.C. 1395cc(j)(1)) is amended by adding at the end the following new
    subparagraph:
                      ``(D) Billing agents and clearinghouses required to
                    be registered under medicare.--Any agent,
                    clearinghouse, or other alternate payee that submits
                    claims on behalf of a health care provider must be
                    registered with the Secretary in a form and manner
                    specified by the Secretary.''.
      (b) Medicaid.--For a similar provision with respect to the Medicaid
    program under title XIX of the Social Security Act, see section 1759.
      (c) Effective Date.--The amendment made by subsection (a) shall apply
    to claims submitted on or after January 1, 2012.

    SEC. 1645. CONFORMING CIVIL MONETARY PENALTIES TO FALSE CLAIMS ACT
                        AMENDMENTS.

      Section 1128A of the Social Security Act, as amended by sections
    1611, 1612, 1613, and 1615, is further amended--
              (1) in subsection (a)--
                      (A) in paragraph (1), by striking ``to an officer,
                    employee, or agent of the United States, or of any
                    department or agency thereof, or of any State agency
                    (as defined in subsection (i)(1))'';
                      (B) in paragraph (4)--
                              (i) in the matter preceding subparagraph (A),
                            by striking ``participating in a program under
                            title XVIII or a State health care program''
                            and inserting ``participating in a Federal
                            health care program (as defined in section
                            1128B(f))''; and
                              (ii) in subparagraph (A), by striking ``title
                            XVIII or a State health care program'' and
                            inserting ``a Federal health care program (as
                            defined in section 1128B(f))'';
                      (C) by striking ``or'' at the end of paragraph (10);
                      (D) by inserting after paragraph (11) the following
                    new paragraphs:
              ``(12) conspires to commit a violation of this section; or
              ``(13) knowingly makes, uses, or causes to be made or used, a
            false record or statement material to an obligation to pay or
            transmit money or property to a Federal health care program, or
            knowingly conceals or knowingly and improperly avoids or
            decreases an obligation to pay or transmit money or property to
            a Federal health care program;''; and
                      (E) in the matter following paragraph (13), as
                    inserted by subparagraph (D)--
                              (i) by striking ``or'' before ``in cases
                            under paragraph (11)''; and
                              (ii) by inserting ``, in cases under
                            paragraph (12), $50,000 for any violation
                            described in this section committed in
                            furtherance of the conspiracy involved; or in
                            cases under paragraph (13), $50,000 for each
                            false record or statement, or concealment,
                            avoidance, or decrease'' after ``by an excluded
                            individual''; and
                      (F) in the second sentence, by striking ``such false
                    statement, omission, or misrepresentation)'' and
                    inserting ``such false statement or misrepresentation,
                    in cases under paragraph (12), an assessment of not
                    more than 3 times the total amount that would otherwise
                    apply for any violation described in this section
                    committed in furtherance of the conspiracy involved, or
                    in cases under paragraph (13), an assessment of not
                    more than 3 times the total amount of the obligation to
                    which the false record or statement was material or
                    that was avoided or decreased)''.
              (2) in subsection (c)(1), by striking ``six years'' and
            inserting ``10 years''; and
              (3) in subsection (i)--
                      (A) by amending paragraph (2) to read as follows:
              ``(2) The term `claim' means any application, request, or
            demand, whether under contract, or otherwise, for money or
            property for items and services under a Federal health care
            program (as defined in section 1128B(f)), whether or not the
            United States or a State agency has title to the money or
            property, that--
                      ``(A) is presented or caused to be presented to an
                    officer, employee, or agent of the United States, or of
                    any department or agency thereof, or of any State
                    agency (as defined in subsection (i)(1)); or
                      ``(B) is made to a contractor, grantee, or other
                    recipient if the money or property is to be spent or
                    used on the Federal health care program's behalf or to
                    advance a Federal health care program interest, and if
                    the Federal health care program--
                              ``(i) provides or has provided any portion of
                            the money or property requested or demanded; or
                              ``(ii) will reimburse such contractor,
                            grantee, or other recipient for any portion of
                            the money or property which is requested or
                            demanded.'';
                      (B) by amending paragraph (3) to read as follows:
              ``(3) The term `item or service' means, without limitation,
            any medical, social, management, administrative, or other item
            or service used in connection with or directly or indirectly
            related to a Federal health care program.'';
                      (C) in paragraph (6)--
                              (i) in subparagraph (C), by striking at the
                            end ``or'';
                              (ii) in the first subparagraph (D), by
                            striking at the end the period and inserting
                            ``; or''; and
                              (iii) by redesignating the second
                            subparagraph (D) as a subparagraph (E);
                      (D) by amending paragraph (7) to read as follows:
              ``(7) The terms `knowing', `knowingly', and `should know'
            mean that a person, with respect to information--
                      ``(A) has actual knowledge of the information;
                      ``(B) acts in deliberate ignorance of the truth or
                    falsity of the information; or
                      ``(C) acts in reckless disregard of the truth or
                    falsity of the information;
            and require no proof of specific intent to defraud.''; and
                      (E) by adding at the end the following new
                    paragraphs:
              ``(8) The term `obligation' means an established duty,
            whether or not fixed, arising from an express or implied
            contractual, grantor-grantee, or licensor-licensee
            relationship, from a fee-based or similar relationship, from
            statute or regulation, or from the retention of any
            overpayment.
              ``(9) The term `material' means having a natural tendency to
            influence, or be capable of influencing, the payment or receipt
            of money or property.''.

     Subtitle D--Access to Information Needed to Prevent Fraud, Waste, and
                                     Abuse

    SEC. 1651. ACCESS TO INFORMATION NECESSARY TO IDENTIFY FRAUD, WASTE,
                        AND ABUSE.

      Section 1128G of the Social Security Act, as added by section 1631
    and amended by sections 1632 and 1641, is further amended by adding at
    the end the following new subsection;
      ``(d) Access to Information Necessary to Identify Fraud, Waste, and
    Abuse.--For purposes of law enforcement activity, and to the extent
    consistent with applicable disclosure, privacy, and security laws,
    including the Health Insurance Portability and Accountability Act of
    1996 and the Privacy Act of 1974, and subject to any information
    systems security requirements enacted by law or otherwise required by
    the Secretary, the Attorney General shall have access, facilitation by
    the Inspector General of the Department of Health and Human Services,
    to claims and payment data relating to titles XVIII and XIX, in
    consultation with the Centers for Medicare & Medicaid Services or the
    owner of such data.''.

    SEC. 1652. ELIMINATION OF DUPLICATION BETWEEN THE HEALTHCARE INTEGRITY
                        AND PROTECTION DATA BANK AND THE NATIONAL
                        PRACTITIONER DATA BANK.

      (a) In General.--To eliminate duplication between the Healthcare
    Integrity and Protection Data Bank (HIPDB) established under section
    1128E of the Social Security Act and the National Practitioner Data
    Bank (NPBD) established under the Health Care Quality Improvement Act
    of 1986, section 1128E of the Social Security Act (42 U.S.C. 1320a-7e)
    is amended--
              (1) in subsection (a), by striking ``Not later than'' and
            inserting ``Subject to subsection (h), not later than'';
              (2) in the first sentence of subsection (d)(2), by striking
            ``(other than with respect to requests by Federal agencies)'';
            and
              (3) by adding at the end the following new subsection:
      ``(h) Sunset of the Healthcare Integrity and Protection Data Bank;
    Transition Process.--Effective upon the enactment of this subsection,
    the Secretary shall implement a process to eliminate duplication
    between the Healthcare Integrity and Protection Data Bank (in this
    subsection referred to as the `HIPDB' established pursuant to
    subsection (a) and the National Practitioner Data Bank (in this
    subsection referred to as the `NPDB') as implemented under the Health
    Care Quality Improvement Act of 1986 and section 1921 of this Act,
    including systems testing necessary to ensure that information formerly
    collected in the HIPDB will be accessible through the NPDB, and other
    activities necessary to eliminate duplication between the two data
    banks. Upon the completion of such process, notwithstanding any other
    provision of law, the Secretary shall cease the operation of the HIPDB
    and shall collect information required to be reported under the
    preceding provisions of this section in the NPDB. Except as otherwise
    provided in this subsection, the provisions of subsections (a) through
    (g) shall continue to apply with respect to the reporting of (or
    failure to report), access to, and other treatment of the information
    specified in this section.''.
      (b) Elimination of the Responsibility of the HHS Office of the
    Inspector General.--Section 1128C(a)(1) of the Social Security Act (42
    U.S.C. 1320a-7c(a)(1)) is amended--
              (1) in subparagraph (C), by adding at the end ``and'';
              (2) in subparagraph (D), by striking at the end ``, and'' and
            inserting a period; and
              (3) by striking subparagraph (E).
      (c) Special Provision for Access to the National Practitioner Data
    Bank by the Department of Veterans Affairs.--
              (1) In general.--Notwithstanding any other provision of law,
            during the one year period that begins on the effective date
            specified in subsection (e)(1), the information described in
            paragraph (2) shall be available from the National Practitioner
            Data Bank (described in section 1921 of the Social Security
            Act) to the Secretary of Veterans Affairs without charge.
              (2) Information described.--For purposes of paragraph (1),
            the information described in this paragraph is the information
            that would, but for the amendments made by this section, have
            been available to the Secretary of Veterans Affairs from the
            Healthcare Integrity and Protection Data Bank.
      (d) Funding.--Notwithstanding any provisions of this Act, sections
    1128E(d)(2) and 1817(k)(3) of the Social Security Act, or any other
    provision of law, there shall be available for carrying out the
    transition process under section 1128E(h) of the Social Security Act
    over the period required to complete such process, and for operation of
    the National Practitioner Data Bank until such process is completed,
    without fiscal year limitation--
              (1) any fees collected pursuant to section 1128E(d)(2) of
            such Act; and
              (2) such additional amounts as necessary, from appropriations
            available to the Secretary and to the Office of the Inspector
            General of the Department of Health and Human Services under
            clauses (i) and (ii), respectively, of section 1817(k)(3)(A) of
            such Act, for costs of such activities during the first 12
            months following the date of the enactment of this Act.
      (e) Effective Date.--The amendments made--
              (1) by subsection (a)(2) shall take effect on the first day
            after the Secretary of Health and Human Services certifies that
            the process implemented pursuant to section 1128E(h) of the
            Social Security Act (as added by subsection (a)(3)) is
            complete; and
              (2) by subsection (b) shall take effect on the earlier of the
            date specified in paragraph (1) or the first day of the second
            succeeding fiscal year after the fiscal year during which this
            Act is enacted.

    SEC. 1653. COMPLIANCE WITH HIPAA PRIVACY AND SECURITY STANDARDS.

      The provisions of sections 262(a) and 264 of the Health Insurance
    Portability and Accountability Act of 1996 (and standards promulgated
    pursuant to such sections) and the Privacy Act of 1974 shall apply with
    respect to the provisions of this subtitle and amendments made by this
    subtitle.

                         [TITLE VII--MEDICAID AND CHIP]

      [For title VII of division B, see text of bill as introduced on July
    14, 2009.]

                     TITLE VIII--REVENUE-RELATED PROVISIONS

    SEC. 1801. DISCLOSURES TO FACILITATE IDENTIFICATION OF INDIVIDUALS
                        LIKELY TO BE INELIGIBLE FOR THE LOW-INCOME
                        ASSISTANCE UNDER THE MEDICARE PRESCRIPTION DRUG
                        PROGRAM TO ASSIST SOCIAL SECURITY ADMINISTRATION'S
                        OUTREACH TO ELIGIBLE INDIVIDUALS.

      (a) In General.--Paragraph (19) of section 6103(l) of the Internal
    Revenue Code of 1986 is amended to read as follows:
              ``(19) Disclosures to facilitate identification of
            individuals likely to be ineligible for low-income subsidies
            under medicare prescription drug program to assist social
            security administration's outreach to eligible individuals.--
                      ``(A) In general.--Upon written request from the
                    Commissioner of Social Security, the following return
                    information (including such information disclosed to
                    the Social Security Administration under paragraph (1)
                    or (5)) shall be disclosed to officers and employees of
                    the Social Security Administration, with respect to any
                    taxpayer identified by the Commissioner of Social
                    Security--
                              ``(i) return information for the applicable
                            year from returns with respect to wages (as
                            defined in section 3121(a) or 3401(a)) and
                            payments of retirement income (as described in
                            paragraph (1) of this subsection),
                              ``(ii) unearned income information and income
                            information of the taxpayer from partnerships,
                            trusts, estates, and subchapter S corporations
                            for the applicable year,
                              ``(iii) if the individual filed an income tax
                            return for the applicable year, the filing
                            status, number of dependents, income from
                            farming, and income from self-employment, on
                            such return,
                              ``(iv) if the individual is a married
                            individual filing a separate return for the
                            applicable year, the social security number (if
                            reasonably available) of the spouse on such
                            return,
                              ``(v) if the individual files a joint return
                            for the applicable year, the social security
                            number, unearned income information, and income
                            information from partnerships, trusts, estates,
                            and subchapter S corporations of the
                            individual's spouse on such return, and
                              ``(vi) such other return information relating
                            to the individual (or the individual's spouse
                            in the case of a joint return) as is prescribed
                            by the Secretary by regulation as might
                            indicate that the individual is likely to be
                            ineligible for a low-income prescription drug
                            subsidy under section 1860D-14 of the Social
                            Security Act.
                      ``(B) Applicable year.--For the purposes of this
                    paragraph, the term `applicable year' means the most
                    recent taxable year for which information is available
                    in the Internal Revenue Service's taxpayer information
                    records.
                      ``(C) Restriction on individuals for whom disclosure
                    may be requested.--The Commissioner of Social Security
                    shall request information under this paragraph only
                    with respect to--
                              ``(i) individuals the Social Security
                            Administration has identified, using all other
                            reasonably available information, as likely to
                            be eligible for a low-income prescription drug
                            subsidy under section 1860D-14 of the Social
                            Security Act and who have not applied for such
                            subsidy, and
                              ``(ii) any individual the Social Security
                            Administration has identified as a spouse of an
                            individual described in clause (i).
                      ``(D) Restriction on use of disclosed information.--
                    Return information disclosed under this paragraph may
                    be used only by officers and employees of the Social
                    Security Administration solely for purposes of
                    identifying individuals likely to be ineligible for a
                    low-income prescription drug subsidy under section
                    1860D-14 of the Social Security Act for use in outreach
                    efforts under section 1144 of the Social Security
                    Act.''.
      (b) Safeguards.--Paragraph (4) of section 6103(p) of such Code is
    amended--
              (1) by striking ``(19),'' each place it appears, and
              (2) by striking ``or (17)'' each place it appears and
            inserting ``(17), or (19)''.
      (c) Conforming Amendment.--Paragraph (3) of section 6103(a) of such
    Code is amended by striking ``(19),''.
      (d) Effective Date.--The amendments made by this section shall apply
    to disclosures made after the date which is 12 months after the date of
    the enactment of this Act.

    SEC. 1802. COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND; FINANCING FOR
                        TRUST FUND.

      (a) Establishment of Trust Fund.--
              (1) In general.--Subchapter A of chapter 98 of the Internal
            Revenue Code of 1986 (relating to trust fund code) is amended
            by adding at the end the following new section:

    ``SEC. 9511. HEALTH CARE COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND.

      ``(a) Creation of Trust Fund.--There is established in the Treasury
    of the United States a trust fund to be known as the `Health Care
    Comparative Effectiveness Research Trust Fund' (hereinafter in this
    section referred to as the `CERTF'), consisting of such amounts as may
    be appropriated or credited to such Trust Fund as provided in this
    section and section 9602(b).
      ``(b) Transfers to Fund.--There are hereby appropriated to the Trust
    Fund the following:
              ``(1) For fiscal year 2010, $90,000,000.
              ``(2) For fiscal year 2011, $100,000,000.
              ``(3) For fiscal year 2012, $110,000,000.
              ``(4) For each fiscal year beginning with fiscal year 2013--
                      ``(A) an amount equivalent to the net revenues
                    received in the Treasury from the fees imposed under
                    subchapter B of chapter 34 (relating to fees on health
                    insurance and self-insured plans) for such fiscal year;
                    and
                      ``(B) subject to subsection (c)(2), amounts
                    determined by the Secretary of Health and Human
                    Services to be equivalent to the fair share per capita
                    amount computed under subsection (c)(1) for the fiscal
                    year multiplied by the average number of individuals
                    entitled to benefits under part A, or enrolled under
                    part B, of title XVIII of the Social Security Act
                    during such fiscal year.
    The amounts appropriated under paragraphs (1), (2), (3), and (4)(B)
    shall be transferred from the Federal Hospital Insurance Trust Fund and
    from the Federal Supplementary Medical Insurance Trust Fund
    (established under section 1841 of such Act), and from the Medicare
    Prescription Drug Account within such Trust Fund, in proportion (as
    estimated by the Secretary) to the total expenditures during such
    fiscal year that are made under title XVIII of such Act from the
    respective trust fund or account.
      ``(c) Fair Share Per Capita Amount.--
              ``(1) Computation.--
                      ``(A) In general.--Subject to subparagraph (B), the
                    fair share per capita amount under this paragraph for a
                    fiscal year (beginning with fiscal year 2013) is an
                    amount computed by the Secretary of Health and Human
                    Services for such fiscal year that, when applied under
                    this section and subchapter B of chapter 34 of the
                    Internal Revenue Code of 1986, will result in revenues
                    to the CERTF of $375,000,000 for the fiscal year.
                      ``(B) Alternative computation.--
                              ``(i) In general.--If the Secretary is unable
                            to compute the fair share per capita amount
                            under subparagraph (A) for a fiscal year, the
                            fair share per capita amount under this
                            paragraph for the fiscal year shall be the
                            default amount determined under clause (ii) for
                            the fiscal year.
                              ``(ii) Default amount.--The default amount
                            under this clause for--
                                      ``(I) fiscal year 2013 is equal to
                                    $2; or
                                      ``(II) a subsequent year is equal to
                                    the default amount under this clause
                                    for the preceding fiscal year increased
                                    by the annual percentage increase in
                                    the medical care component of the
                                    consumer price index (United States
                                    city average) for the 12-month period
                                    ending with April of the preceding
                                    fiscal year.
                            Any amount determined under subclause (II)
                            shall be rounded to the nearest penny.
              ``(2) Limitation on medicare funding.--In no case shall the
            amount transferred under subsection (b)(4)(B) for any fiscal
            year exceed $90,000,000.
      ``(d) Expenditures From Fund.--
              ``(1) In general.--Subject to paragraph (2), amounts in the
            CERTF are available, without the need for further
            appropriations and without fiscal year limitation, to the
            Secretary of Health and Human Services for carrying out section
            1181 of the Social Security Act.
              ``(2) Allocation for commission.--Not less than the following
            amounts in the CERTF for a fiscal year shall be available to
            carry out the activities of the Comparative Effectiveness
            Research Commission established under section 1181(b) of the
            Social Security Act for such fiscal year:
                      ``(A) For fiscal year 2010, $7,000,000.
                      ``(B) For fiscal year 2011, $9,000,000.
                      ``(C) For each fiscal year beginning with 2012,
                    $10,000,000.
            Nothing in this paragraph shall be construed as preventing
            additional amounts in the CERTF from being made available to
            the Comparative Effectiveness Research Commission for such
            activities.
      ``(e) Net Revenues.--For purposes of this section, the term `net
    revenues' means the amount estimated by the Secretary based on the
    excess of--
              ``(1) the fees received in the Treasury under subchapter B of
            chapter 34, over
              ``(2) the decrease in the tax imposed by chapter 1 resulting
            from the fees imposed by such subchapter.''.
              (2) Clerical amendment.--The table of sections for such
            subchapter A is amended by adding at the end thereof the
            following new item:

    ``Sec. 9511. Health Care Comparative Effectiveness Research Trust
    Fund.''.

      (b) Financing for Fund From Fees on Insured and Self-Insured Health
    Plans.--
              (1) General rule.--Chapter 34 of the Internal Revenue Code of
            1986 is amended by adding at the end the following new
            subchapter:

             ``Subchapter B--Insured and Self-Insured Health Plans

    ``Sec. 4375. Health insurance.
    ``Sec. 4376. Self-insured health plans.
    ``Sec. 4377. Definitions and special rules.

    ``SEC. 4375. HEALTH INSURANCE.

      ``(a) Imposition of Fee.--There is hereby imposed on each specified
    health insurance policy for each policy year a fee equal to the fair
    share per capita amount determined under section 9511(c)(1) multiplied
    by the average number of lives covered under the policy.
      ``(b) Liability for Fee.--The fee imposed by subsection (a) shall be
    paid by the issuer of the policy.
      ``(c) Specified Health Insurance Policy.--For purposes of this
    section:
              ``(1) In general.--Except as otherwise provided in this
            section, the term `specified health insurance policy' means any
            accident or health insurance policy issued with respect to
            individuals residing in the United States.
              ``(2) Exemption for certain policies.--The term `specified
            health insurance policy' does not include any insurance if
            substantially all of its coverage is of excepted benefits
            described in section 9832(c).
              ``(3) Treatment of prepaid health coverage arrangements.--
                      ``(A) In general.--In the case of any arrangement
                    described in subparagraph (B)--
                              ``(i) such arrangement shall be treated as a
                            specified health insurance policy, and
                              ``(ii) the person referred to in such
                            subparagraph shall be treated as the issuer.
                      ``(B) Description of arrangements.--An arrangement is
                    described in this subparagraph if under such
                    arrangement fixed payments or premiums are received as
                    consideration for any person's agreement to provide or
                    arrange for the provision of accident or health
                    coverage to residents of the United States, regardless
                    of how such coverage is provided or arranged to be
                    provided.

    ``SEC. 4376. SELF-INSURED HEALTH PLANS.

      ``(a) Imposition of Fee.--In the case of any applicable self-insured
    health plan for each plan year, there is hereby imposed a fee equal to
    the fair share per capita amount determined under section 9511(c)(1)
    multiplied by the average number of lives covered under the plan.
      ``(b) Liability for Fee.--
              ``(1) In general.--The fee imposed by subsection (a) shall be
            paid by the plan sponsor.
              ``(2) Plan sponsor.--For purposes of paragraph (1) the term
            `plan sponsor' means--
                      ``(A) the employer in the case of a plan established
                    or maintained by a single employer,
                      ``(B) the employee organization in the case of a plan
                    established or maintained by an employee organization,
                      ``(C) in the case of--
                              ``(i) a plan established or maintained by 2
                            or more employers or jointly by 1 or more
                            employers and 1 or more employee organizations,
                              ``(ii) a multiple employer welfare
                            arrangement, or
                              ``(iii) a voluntary employees' beneficiary
                            association described in section 501(c)(9),
                    the association, committee, joint board of trustees, or
                    other similar group of representatives of the parties
                    who establish or maintain the plan, or
                      ``(D) the cooperative or association described in
                    subsection (c)(2)(F) in the case of a plan established
                    or maintained by such a cooperative or association.
      ``(c) Applicable Self-Insured Health Plan.--For purposes of this
    section, the term `applicable self-insured health plan' means any plan
    for providing accident or health coverage if--
              ``(1) any portion of such coverage is provided other than
            through an insurance policy, and
              ``(2) such plan is established or maintained--
                      ``(A) by one or more employers for the benefit of
                    their employees or former employees,
                      ``(B) by one or more employee organizations for the
                    benefit of their members or former members,
                      ``(C) jointly by 1 or more employers and 1 or more
                    employee organizations for the benefit of employees or
                    former employees,
                      ``(D) by a voluntary employees' beneficiary
                    association described in section 501(c)(9),
                      ``(E) by any organization described in section
                    501(c)(6), or
                      ``(F) in the case of a plan not described in the
                    preceding subparagraphs, by a multiple employer welfare
                    arrangement (as defined in section 3(40) of Employee
                    Retirement Income Security Act of 1974), a rural
                    electric cooperative (as defined in section
                    3(40)(B)(iv) of such Act), or a rural telephone
                    cooperative association (as defined in section
                    3(40)(B)(v) of such Act).

    ``SEC. 4377. DEFINITIONS AND SPECIAL RULES.

      ``(a) Definitions.--For purposes of this subchapter--
              ``(1) Accident and health coverage.--The term `accident and
            health coverage' means any coverage which, if provided by an
            insurance policy, would cause such policy to be a specified
            health insurance policy (as defined in section 4375(c)).
              ``(2) Insurance policy.--The term `insurance policy' means
            any policy or other instrument whereby a contract of insurance
            is issued, renewed, or extended.
              ``(3) United states.--The term `United States' includes any
            possession of the United States.
      ``(b) Treatment of Governmental Entities.--
              ``(1) In general.--For purposes of this subchapter--
                      ``(A) the term `person' includes any governmental
                    entity, and
                      ``(B) notwithstanding any other law or rule of law,
                    governmental entities shall not be exempt from the fees
                    imposed by this subchapter except as provided in
                    paragraph (2).
              ``(2) Treatment of exempt governmental programs.--In the case
            of an exempt governmental program, no fee shall be imposed
            under section 4375 or section 4376 on any covered life under
            such program.
              ``(3) Exempt governmental program defined.--For purposes of
            this subchapter, the term `exempt governmental program' means--
                      ``(A) any insurance program established under title
                    XVIII of the Social Security Act,
                      ``(B) the medical assistance program established by
                    title XIX or XXI of the Social Security Act,
                      ``(C) any program established by Federal law for
                    providing medical care (other than through insurance
                    policies) to individuals (or the spouses and dependents
                    thereof) by reason of such individuals being--
                              ``(i) members of the Armed Forces of the
                            United States, or
                              ``(ii) veterans, and
                      ``(D) any program established by Federal law for
                    providing medical care (other than through insurance
                    policies) to members of Indian tribes (as defined in
                    section 4(d) of the Indian Health Care Improvement
                    Act).
      ``(c) Treatment as Tax.--For purposes of subtitle F, the fees imposed
    by this subchapter shall be treated as if they were taxes.
      ``(d) No Cover Over to Possessions.--Notwithstanding any other
    provision of law, no amount collected under this subchapter shall be
    covered over to any possession of the United States.''.
              (2) Clerical amendments.--
                      (A) Chapter 34 of such Code is amended by striking
                    the chapter heading and inserting the following:

               ``CHAPTER 34--TAXES ON CERTAIN INSURANCE POLICIES

              ``subchapter a. policies issued by foreign insurers

             ``subchapter b. insured and self-insured health plans

             ``Subchapter A--Policies Issued By Foreign Insurers''.

                      (B) The table of chapters for subtitle D of such Code
                    is amended by striking the item relating to chapter 34
                    and inserting the following new item:

              ``Chapter 34--Taxes on Certain Insurance Policies''.

              (3) Effective date.--The amendments made by this subsection
            shall apply with respect to policies and plans for portions of
            policy or plan years beginning on or after October 1, 2012.

                       TITLE IX--MISCELLANEOUS PROVISIONS

    SEC. 1901. REPEAL OF TRIGGER PROVISION.

      Subtitle A of title VIII of the Medicare Prescription Drug,
    Improvement, and Modernization Act of 2003 (Public Law 108-173) is
    repealed and the provisions of law amended by such subtitle are
    restored as if such subtitle had never been enacted.

    SEC. 1902. REPEAL OF COMPARATIVE COST ADJUSTMENT (CCA) 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 Modernization Act of 2003 (Public Law 108-173), is repealed.

    SEC. 1903. EXTENSION OF GAINSHARING DEMONSTRATION.

      (a) In General.--Subsection (d)(3) of section 5007 of the Deficit
    Reduction Act of 2005 (Public Law 109-171) is amended by inserting
    ``(or September 30, 2011, in the case of a demonstration project in
    operation as of October 1, 2008)'' after ``December 31, 2009''.
      (b) Funding.--
              (1) In general.--Subsection (f)(1) of such section is amended
            by inserting ``and for fiscal year 2010, $1,600,000,'' after
            ``$6,000,000,''.
              (2) Availability.--Subsection (f)(2) of such section is
            amended by striking ``2010'' and inserting ``2014 or until
            expended''.
      (c) Reports.--
              (1) Quality improvement and savings.--Subsection (e)(3) of
            such section is amended by striking ``December 1, 2008'' and
            inserting ``March 31, 2011''.
              (2) Final report.--Subsection (e)(4) of such section is
            amended by striking ``May 1, 2010'' and inserting ``March 31,
            2013''.

    SEC. 1904. GRANTS TO STATES FOR QUALITY HOME VISITATION PROGRAMS FOR
                        FAMILIES WITH YOUNG CHILDREN AND FAMILIES EXPECTING
                        CHILDREN.

      Part B of title IV of the Social Security Act (42 U.S.C. 621-629i) is
    amended by adding at the end the following:

           ``Subpart 3--Support for Quality Home Visitation Programs

    ``SEC. 440. HOME VISITATION PROGRAMS FOR FAMILIES WITH YOUNG CHILDREN
                        AND FAMILIES EXPECTING CHILDREN.

      ``(a) Purpose.--The purpose of this section is to improve the well-
    being, health, and development of children by enabling the
    establishment and expansion of high quality programs providing
    voluntary home visitation for families with young children and families
    expecting children.
      ``(b) Grant Application.--A State that desires to receive a grant
    under this section shall submit to the Secretary for approval, at such
    time and in such manner as the Secretary may require, an application
    for the grant that includes the following:
              ``(1) Description of home visitation programs.--A description
            of the high quality programs of home visitation for families
            with young children and families expecting children that will
            be supported by a grant made to the State under this section,
            the outcomes the programs are intended to achieve, and the
            evidence supporting the effectiveness of the programs.
              ``(2) Results of needs assessment.--The results of a
            statewide needs assessment that describes--
                      ``(A) the number, quality, and capacity of home
                    visitation programs for families with young children
                    and families expecting children in the State;
                      ``(B) the number and types of families who are
                    receiving services under the programs;
                      ``(C) the sources and amount of funding provided to
                    the programs;
                      ``(D) the gaps in home visitation in the State,
                    including identification of communities that are in
                    high need of the services; and
                      ``(E) training and technical assistance activities
                    designed to achieve or support the goals of the
                    programs.
              ``(3) Assurances.--Assurances from the State that--
                      ``(A) in supporting home visitation programs using
                    funds provided under this section, the State shall
                    identify and prioritize serving communities that are in
                    high need of such services, especially communities with
                    a high proportion of low-income families or a high
                    incidence of child maltreatment;
                      ``(B) the State will reserve 5 percent of the grant
                    funds for training and technical assistance to the home
                    visitation programs using such funds;
                      ``(C) in supporting home visitation programs using
                    funds provided under this section, the State will
                    promote coordination and collaboration with other home
                    visitation programs (including programs funded under
                    title XIX) and with other child and family services,
                    health services, income supports, and other related
                    assistance;
                      ``(D) home visitation programs supported using such
                    funds will, when appropriate, provide referrals to
                    other programs serving children and families; and
                      ``(E) the State will comply with subsection (i), and
                    cooperate with any evaluation conducted under
                    subsection (j).
              ``(4) Other information.--Such other information as the
            Secretary may require.
      ``(c) Allotments.--
              ``(1) Indian tribes.--From the amount reserved under
            subsection (l)(2) for a fiscal year, the Secretary shall allot
            to each Indian tribe that meets the requirement of subsection
            (d), if applicable, for the fiscal year the amount that bears
            the same ratio to the amount so reserved as the number of
            children in the Indian tribe whose families have income that
            does not exceed 200 percent of the poverty line bears to the
            total number of children in such Indian tribes whose families
            have income that does not exceed 200 percent of the poverty
            line.
              ``(2) States and territories.--From the amount appropriated
            under subsection (m) for a fiscal year that remains after
            making the reservations required by subsection (l), the
            Secretary shall allot to each State that is not an Indian tribe
            and that meets the requirement of subsection (d), if
            applicable, for the fiscal year the amount that bears the same
            ratio to the remainder of the amount so appropriated as the
            number of children in the State whose families have income that
            does not exceed 200 percent of the poverty line bears to the
            total number of children in such States whose families have
            income that does not exceed 200 percent of the poverty line.
              ``(3) Reallotments.--The amount of any allotment to a State
            under a paragraph of this subsection for any fiscal year that
            the State certifies to the Secretary will not be expended by
            the State pursuant to this section shall be available for
            reallotment using the allotment methodology specified in that
            paragraph. Any amount so reallotted to a State is deemed part
            of the allotment of the State under this subsection.
      ``(d) Maintenance of Effort.--Beginning with fiscal year 2011, a
    State meets the requirement of this subsection for a fiscal year if the
    Secretary finds that the aggregate expenditures by the State from State
    and local sources for programs of home visitation for families with
    young children and families expecting children for the then preceding
    fiscal year was not less than 100 percent of such aggregate
    expenditures for the then 2nd preceding fiscal year.
      ``(e) Payment of Grant.--
              ``(1) In general.--The Secretary shall make a grant to each
            State that meets the requirements of subsections (b) and (d),
            if applicable, for a fiscal year for which funds are
            appropriated under subsection (m), in an amount equal to the
            reimbursable percentage of the eligible expenditures of the
            State for the fiscal year, but not more than the amount
            allotted to the State under subsection (c) for the fiscal year.
              ``(2) Reimbursable percentage defined.--In paragraph (1), the
            term `reimbursable percentage' means, with respect to a fiscal
            year--
                      ``(A) 85 percent, in the case of fiscal year 2010;
                      ``(B) 80 percent, in the case of fiscal year 2011; or
                      ``(C) 75 percent, in the case of fiscal year 2012 and
                    any succeeding fiscal year.
      ``(f) Eligible Expenditures.--
              ``(1) In general.--In this section, the term `eligible
            expenditures'--
                      ``(A) means expenditures to provide voluntary home
                    visitation for as many families with young children
                    (under the age of school entry) and families expecting
                    children as practicable, through the implementation or
                    expansion of high quality home visitation programs
                    that--
                              ``(i) adhere to clear evidence-based models
                            of home visitation that have demonstrated
                            positive effects on important program-
                            determined child and parenting outcomes, such
                            as reducing abuse and neglect and improving
                            child health and development;
                              ``(ii) employ well-trained and competent
                            staff, maintain high quality supervision,
                            provide for ongoing training and professional
                            development, and show strong organizational
                            capacity to implement such a program;
                              ``(iii) establish appropriate linkages and
                            referrals to other community resources and
                            supports;
                              ``(iv) monitor fidelity of program
                            implementation to ensure that services are
                            delivered according to the specified model; and
                              ``(v) provide parents with--
                                      ``(I) knowledge of age-appropriate
                                    child development in cognitive,
                                    language, social, emotional, and motor
                                    domains (including knowledge of second
                                    language acquisition, in the case of
                                    English language learners);
                                      ``(II) knowledge of realistic
                                    expectations of age-appropriate child
                                    behaviors;
                                      ``(III) knowledge of health and
                                    wellness issues for children and
                                    parents;
                                      ``(IV) modeling, consulting, and
                                    coaching on parenting practices;
                                      ``(V) skills to interact with their
                                    child to enhance age-appropriate
                                    development;
                                      ``(VI) skills to recognize and seek
                                    help for issues related to health,
                                    developmental delays, and social,
                                    emotional, and behavioral skills; and
                                      ``(VII) activities designed to help
                                    parents become full partners in the
                                    education of their children;
                      ``(B) includes expenditures for training, technical
                    assistance, and evaluations related to the programs;
                    and
                      ``(C) does not include any expenditure with respect
                    to which a State has submitted a claim for payment
                    under any other provision of Federal law.
              ``(2) Priority funding for programs with strongest
            evidence.--
                      ``(A) In general.--The expenditures, described in
                    paragraph (1), of a State for a fiscal year that are
                    attributable to the cost of programs that do not adhere
                    to a model of home visitation with the strongest
                    evidence of effectiveness shall not be considered
                    eligible expenditures for the fiscal year to the extent
                    that the total of the expenditures exceeds the
                    applicable percentage for the fiscal year of the
                    allotment of the State under subsection (c) for the
                    fiscal year.
                      ``(B) Applicable percentage defined.--In subparagraph
                    (A), the term `applicable percentage' means, with
                    respect to a fiscal year--
                              ``(i) 60 percent for fiscal year 2010;
                              ``(ii) 55 percent for fiscal year 2011;
                              ``(iii) 50 percent for fiscal year 2012;
                              ``(iv) 45 percent for fiscal year 2013; or
                              ``(v) 40 percent for fiscal year 2014.
      ``(g) No Use of Other Federal Funds for State Match.--A State to
    which a grant is made under this section may not expend any Federal
    funds to meet the State share of the cost of an eligible expenditure
    for which the State receives a payment under this section.
      ``(h) Waiver Authority.--
              ``(1) In general.--The Secretary may waive or modify the
            application of any provision of this section, other than
            subsection (b) or (f), to an Indian tribe if the failure to do
            so would impose an undue burden on the Indian tribe.
              ``(2) Special rule.--An Indian tribe is deemed to meet the
            requirement of subsection (d) for purposes of subsections (c)
            and (e) if--
                      ``(A) the Secretary waives the requirement; or
                      ``(B) the Secretary modifies the requirement, and the
                    Indian tribe meets the modified requirement.
      ``(i) State Reports.--Each State to which a grant is made under this
    section shall submit to the Secretary an annual report on the progress
    made by the State in addressing the purposes of this section. Each such
    report shall include a description of--
              ``(1) the services delivered by the programs that received
            funds from the grant;
              ``(2) the characteristics of each such program, including
            information on the service model used by the program and the
            performance of the program;
              ``(3) the characteristics of the providers of services
            through the program, including staff qualifications, work
            experience, and demographic characteristics;
              ``(4) the characteristics of the recipients of services
            provided through the program, including the number of the
            recipients, the demographic characteristics of the recipients,
            and family retention;
              ``(5) the annual cost of implementing the program, including
            the cost per family served under the program;
              ``(6) the outcomes experienced by recipients of services
            through the program;
              ``(7) the training and technical assistance provided to aid
            implementation of the program, and how the training and
            technical assistance contributed to the outcomes achieved
            through the program;
              ``(8) the indicators and methods used to monitor whether the
            program is being implemented as designed; and
              ``(9) other information as determined necessary by the
            Secretary.
      ``(j) Evaluation.--
              ``(1) In general.--The Secretary shall, by grant or contract,
            provide for the conduct of an independent evaluation of the
            effectiveness of home visitation programs receiving funds
            provided under this section, which shall examine the following:
                      ``(A) The effect of home visitation programs on child
                    and parent outcomes, including child maltreatment,
                    child health and development, school readiness, and
                    links to community services.
                      ``(B) The effectiveness of home visitation programs
                    on different populations, including the extent to which
                    the ability of programs to improve outcomes varies
                    across programs and populations.
              ``(2) Reports to the congress.--
                      ``(A) Interim report.--Within 3 years after the date
                    of the enactment of this section, the Secretary shall
                    submit to the Congress an interim report on the
                    evaluation conducted pursuant to paragraph (1).
                      ``(B) Final report.--Within 5 years after the date of
                    the enactment of this section, the Secretary shall
                    submit to the Congress a final report on the evaluation
                    conducted pursuant to paragraph (1).
      ``(k) Annual Reports to the Congress.--The Secretary shall submit
    annually to the Congress a report on the activities carried out using
    funds made available under this section, which shall include a
    description of the following:
              ``(1) The high need communities targeted by States for
            programs carried out under this section.
              ``(2) The service delivery models used in the programs
            receiving funds provided under this section.
              ``(3) The characteristics of the programs, including--
                      ``(A) the qualifications and demographic
                    characteristics of program staff; and
                      ``(B) recipient characteristics including the number
                    of families served, the demographic characteristics of
                    the families served, and family retention and duration
                    of services.
              ``(4) The outcomes reported by the programs.
              ``(5) The research-based instruction, materials, and
            activities being used in the activities funded under the grant.
              ``(6) The training and technical activities, including on-
            going professional development, provided to the programs.
              ``(7) The annual costs of implementing the programs,
            including the cost per family served under the programs.
              ``(8) The indicators and methods used by States to monitor
            whether the programs are being been implemented as designed.
      ``(l) Reservations of Funds.--From the amounts appropriated for a
    fiscal year under subsection (m), the Secretary shall reserve--
              ``(1) an amount equal to 5 percent of the amounts to pay the
            cost of the evaluation provided for in subsection (j), and the
            provision to States of training and technical assistance,
            including the dissemination of best practices in early
            childhood home visitation; and
              ``(2) after making the reservation required by paragraph (1),
            an amount equal to 3 percent of the amount so appropriated, to
            pay for grants to Indian tribes under this section.
      ``(m) Appropriations.--Out of any money in the Treasury of the United
    States not otherwise appropriated, there is appropriated to the
    Secretary to carry out this section--
              ``(1) $50,000,000 for fiscal year 2010;
              ``(2) $100,000,000 for fiscal year 2011;
              ``(3) $150,000,000 for fiscal year 2012;
              ``(4) $200,000,000 for fiscal year 2013; and
              ``(5) $250,000,000 for fiscal year 2014.
      ``(n) Indian Tribes Treated as States.--In this section, paragraphs
    (4), (5), and (6) of section 431(a) shall apply.''.

    SEC. 1905. IMPROVED COORDINATION AND PROTECTION FOR DUAL ELIGIBLES.

      Title XI of the Social Security Act is amended by inserting after
    section 1150 the following new section:
           ``improved coordination and protection for dual eligibles
      ``Sec. 1150A.  (a) In General.--The Secretary shall provide, through
    an identifiable office or program within the Centers for Medicare &
    Medicaid Services, for a focused effort to provide for improved
    coordination between Medicare and Medicaid and protection in the case
    of dual eligibles (as defined in subsection (e)). The office or program
    shall--
              ``(1) review Medicare and Medicaid policies related to
            enrollment, benefits, service delivery, payment, and grievance
            and appeals processes under parts A and B of title XVIII, under
            the Medicare Advantage program under part C of such title, and
            under title XIX;
              ``(2) identify areas of such policies where better
            coordination and protection could improve care and costs; and
              ``(3) issue guidance to States regarding improving such
            coordination and protection.
      ``(b) Elements.--The improved coordination and protection under this
    section shall include efforts--
              ``(1) to simplify access of dual eligibles to benefits and
            services under Medicare and Medicaid;
              ``(2) to improve care continuity for dual eligibles and
            ensure safe and effective care transitions;
              ``(3) to harmonize regulatory conflicts between Medicare and
            Medicaid rules with regard to dual eligibles; and
              ``(4) to improve total cost and quality performance under
            Medicare and Medicaid for dual eligibles.
      ``(c) Responsibilities.--In carrying out this section, the Secretary
    shall provide for the following:
              ``(1) An examination of Medicare and Medicaid payment systems
            to develop strategies to foster more integrated and higher
            quality care.
              ``(2) Development of methods to facilitate access to post-
            acute and community-based services and to identify actions that
            could lead to better coordination of community-based care.
              ``(3) A study of enrollment of dual eligibles in the Medicare
            Savings Program (as defined in section 1144(c)(7)), under
            Medicaid, and in the low-income subsidy program under section
            1860D-14 to identify methods to more efficiently and
            effectively reach and enroll dual eligibles.
              ``(4) An assessment of communication strategies for dual
            eligibles to determine whether additional informational
            materials or outreach is needed, including an assessment of the
            Medicare website, 1-800-MEDICARE, and the Medicare handbook.
              ``(5) Research and evaluation of areas where service
            utilization, quality, and access to cost sharing protection
            could be improved and an assessment of factors related to
            enrollee satisfaction with services and care delivery.
              ``(6) Collection (and making available to the public) of data
            and a database that describe the eligibility, benefit and cost-
            sharing assistance available to dual eligibles by State.
              ``(7) Monitoring total combined Medicare and Medicaid program
            costs in serving dual eligibles and making recommendations for
            optimizing total quality and cost performance across both
            programs.
              ``(8) Coordination of activities relating to Medicare
            Advantage plans under 1859(b)(6)(B)(ii) and Medicaid.
      ``(d) Periodic Reports.--Not later than 1 year after the date of the
    enactment of this section and every 3 years thereafter the Secretary
    shall submit to Congress a report on progress in activities conducted
    under this section.
      ``(e) Definitions.--In this section:
              ``(1) Dual eligible.--The term `dual eligible' means an
            individual who is dually eligible for benefits under title
            XVIII, and medical assistance under title XIX, including such
            individuals who are eligible for benefits under the Medicare
            Savings Program (as defined in section 1144(c)(7)).
              ``(2) Medicare; medicaid.--The terms `Medicare' and
            `Medicaid' mean the programs under titles XVIII and XIX,
            respectively.''.

    SEC. 1906. ASSESSMENT OF MEDICARE COST-INTENSIVE DISEASES AND
                        CONDITIONS.

      (a) Initial Assessment.--
              (1) In general.--The Administrator of the Centers for
            Medicare & Medicaid Services shall conduct an assessment of the
            diseases and conditions that are the most cost-intensive for
            the Medicare program. The assessment shall inform research
            priorities within the Department of Health and Human Services
            in order improve the prevention, or treatment or cure, of such
            diseases and conditions.
              (2) Report.--Not later than January 1, 2011, the
            Administrator shall submit to the Secretary of Health and Human
            Services a report on such assessment and the Secretary shall
            transmit such report to the Congress.
      (b) Updates of Assessment.--Not later than January 1, 2013, and
    biennially thereafter, the Administrator of the Centers for Medicare &
    Medicaid Services shall review and update the assessment described in
    subsection (a) and make such recommendations to the Secretary on
    changes in research priorities referred to in such subsection as may be
    appropriate. The Secretary shall submit to the Congress a report on
    such recommendations.
      (c) Medicare Cost-Intensive Research Fund.--There is established in
    the Treasury of the United States a Fund to be known as the Medicare
    Cost-Intensive Research Fund (in this subsection referred to as the
    ``Fund''), consisting of such amounts as may be appropriated or
    credited to such Fund for research priorities identified as a result of
    the assessments conducted under this section.

             [DIVISION C--PUBLIC HEALTH AND WORKFORCE DEVELOPMENT]

      [For division C, see text of bill as introduced on July 14, 2009.]

                                I. INTRODUCTION

                             A. Purpose and Summary

        The purpose of the bill, H.R. 3200, (``America's Affordable
    Health Choices Act of 2009'') is to provide affordable, quality
    health care for all Americans and reduce the rate of growth in
    health care spending.

                     B. Background and Need for Legislation

                     AFFORDABLE COVERAGE FOR ALL AMERICANS

        I am confident that we can devise a [health care] system
    which will enhance and not hinder the remarkable progress which
    has been made and is being made in practice of the professions
    of medicine and surgery in the United States.
        We have accepted, so to speak, a second Bill of Rights
    under which a new basis of security and prosperity can be
    established for all--regardless of station, race, or creed.
    Among these are . . . The right to adequate medical care and
    the opportunity to achieve and enjoy good health.--President
    Franklin D. Roosevelt

        We should resolve now that the health of this Nation is a
    national concern; that financial barriers in the way of
    attaining health shall be removed; that the health of all its
    citizens deserves the help of all the Nation.--President Harry
    S. Truman

        ``If a free society cannot help the many who are poor, it
    cannot save the few who are rich''--President John F. Kennedy

        No longer will older Americans be denied the healing
    miracle of modern medicine. No longer will illness crush and
    destroy the savings that they have so carefully put away over a
    lifetime so that they might enjoy dignity in their later years.
    No longer will young families see their own incomes, and their
    own hopes, eaten away simply because they are carrying out
    their deep moral obligations to their parents, and to their
    uncles, and their aunts. And this is not just our tradition--or
    the tradition of the Democratic Party--or even the tradition of
    the Nation. It is as old as the day it was first commanded:
    ``Thou shalt open thine hand wide unto thy brother, to thy
    poor, to thy needy, in thy land.''--President Lyndon B. Johnson

        An all-directions reform of our health care system--so that
    every citizen will be able to get quality health care at
    reasonable cost regardless of income and regardless of area of
    residence--remains an item of highest priority on my unfinished
    agenda for America in the 1970s.--President Richard Nixon

        This country spends more on health care than any other
    nation . . . We have the finest medical facilities and highly
    skilled, dedicated health professionals. Yet many of our people
    still lack adequate medical care, and the cost of care is
    rising so rapidly it jeopardizes our health goals and our other
    important social objectives.--President Jimmy Carter

        While Medicare takes care of Americans over the age of 65,
    we're the only Western industrial nation that doesn't provide a
    system of health insurance for all working people under 65 . .
    . we should provide assistance to unemployed workers to help
    them keep their health insurance until they find a new job. We
    also need to make it easier for small businesses to buy into
    insurance risk pools that are large enough to make it possible
    to offer coverage at a reasonable cost.--President Bill Clinton

        I am not the first President to take up this cause, but I
    am determined to be the last. It has now been nearly a century
    since Theodore Roosevelt first called for health care reform.
    And ever since, nearly every President and Congress, whether
    Democrat or Republican, has attempted to meet this challenge in
    some way. A bill for comprehensive health reform was first
    introduced by John Dingell Sr. in 1943. Sixty-five years later,
    his son continues to introduce that same bill at the beginning
    of each session.
        Our collective failure to meet this challenge--year after
    year, decade after decade--has led us to the breaking point.
    Everyone understands the extraordinary hardships that are
    placed on the uninsured, who live every day just one accident
    or illness away from bankruptcy. These are not primarily people
    on welfare. These are middle-class Americans. Some can't get
    insurance on the job. Others are self-employed, and can't
    afford it, since buying insurance on your own costs you three
    times as much as the coverage you get from your employer. Many
    other Americans who are willing and able to pay are still
    denied insurance due to previous illnesses or conditions that
    insurance companies decide are too risky or too expensive to
    cover.
        We are the only democracy--the only advanced democracy on
    Earth--the only wealthy nation--that allows such hardship for
    millions of its people. There are now more than 30 million
    American citizens who cannot get coverage. In just a two-year
    period, one in every three Americans goes without health care
    coverage at some point. And every day, 14,000 Americans lose
    their coverage. In other words, it can happen to anyone.
        But the problem that plagues the health care system is not
    just a problem for the uninsured. Those who do have insurance
    have never had less security and stability than they do today.
    More and more Americans worry that if you move, lose your job,
    or change your job, you'll lose your health insurance too. More
    and more Americans pay their premiums, only to discover that
    their insurance company has dropped their coverage when they
    get sick, or won't pay the full cost of care. It happens every
    day.--President Barack Obama

        This legislation fulfills a vision carried forth by
    Presidents Roosevelt, Truman, Kennedy, Nixon, Carter, Clinton,
    and now President Obama, to provide affordable, quality health
    care for all Americans.
        It ensures affordable health care for 97 percent of
    Americans, and tackles rising health care costs--a key
    component of health reform.
        To minimize disruption of the current system, the
    legislation builds on what works in today's health care system,
    while repairing the aspects that are broken.
        It enacts comprehensive insurance market reforms to ensure
    that no one is denied coverage because of a pre-existing
    condition, charged more because of their gender or denied
    coverage when they get sick.
        It limits annual out-of-pocket costs for individuals and
    families so that people will no longer be forced into
    bankruptcy because of medical expenses.
        It creates a new Health Insurance Exchange to enforce
    federal consumer protections and insurance requirements and to
    provide a transparent, fair marketplace where individuals,
    families and employers can comparison shop for high quality,
    affordable health care plans.
        It creates a public health insurance option that will
    operate on a level-playing field alongside private plans in the
    Exchange. The public health insurance option will foster
    competition, quality and choice for consumers. It will also
    reduce costs in the system as it will force private plans to
    compete on quality and price rather than by avoiding risk as
    they do in today's broken health care marketplace.
        It provides affordability credits to assist families with
    incomes below 400% of the federal poverty limit (about $88,000
    for a family of four in 2009) with premiums and cost-sharing to
    make affordable health insurance a reality for all. Annual caps
    on out-of-pocket spending add further financial protections for
    individuals and families.
        It requires shared responsibility among individuals,
    employers, and the government so that all Americans obtain
    essential health benefits.
        By building on what works, America's Affordable Health
    Choices Act will increase employer-sponsored health coverage,
    broaden Medicaid to meet the needs of those with the lowest
    incomes, make improvements to Medicare, and create a new Health
    Insurance Exchange where people can choose from public and
    private health insurance options. Under this Act, all Americans
    will have access to quality, affordable health care.

                             HEALTH DELIVERY REFORM

        This legislation institutes health delivery and payment
    system reforms both to increase quality and to reduce growth in
    health spending so that health care becomes more affordable for
    businesses, families, and government.
        The reforms are designed to make the nation's health care
    system more efficient by incentivizing providers to deliver
    high quality, coordinated, patient-centered care. It does so in
    large part by recognizing the importance of primary and
    preventive care. Ensuring that patients receive the right care
    at the right time means making sure that every American has
    access to a primary care provider, and that providers and
    patients alike have access to the best information about
    evidence-based medicine.
        These improvements will not come overnight. But programs
    such as Medicare, Medicaid and the public insurance option can
    drive innovative strategies for reforming the health care
    delivery system in a way that will improve care for every
    patient and family.

                      STRENGTHENING MEDICARE AND MEDICAID

        This legislation keeps a trust with the American people to
    preserve the sustainability of the Medicare program. It
    strengthens the program by making fiscally prudent
    modifications to provider payments, eliminating waste in the
    Medicare Advantage program, investing in prevention and
    extending the Medicare Trust Fund solvency by five years. It
    makes important investments in Medicare for our nation's
    seniors and people with disabilities by eliminating cost-
    sharing for preventive care, closing the gap in prescription
    drug coverage (the so-called ``donut'' hole), increasing access
    for low-income beneficiaries, expanding coverage of mental
    health providers so beneficiaries can better access these vital
    services, and limiting Medicare Advantage plans' ability to
    charge excessive cost sharing. The legislation also reforms the
    way Medicare updates payments to physicians in a way that is
    sustainable for providers while still holding physicians
    accountable for spending growth.
        It strengthens the Medicaid program by improving access to
    primary care services and providers, and expands eligibility so
    that all individuals under 133 percent of the federal poverty
    level are assured Medicaid coverage.

                             WORKFORCE INVESTMENTS

        Expansions in coverage will strain an already stressed
    health workforce. Under the legislation, existing scholarship,
    loan repayment, and training grant programs are strengthened to
    address the need for primary care, nursing and public health
    professionals. Medicare payments are also adjusted to increase
    reimbursements for primary care providers and to encourage the
    training of primary care providers as well.

                                   CONCLUSION

        America's Affordable Health Care Choices Act will provide
    97 percent of Americans with affordable, quality health care.
    It also begins to change the way health care is delivered in
    America to obtain better value and reduce the growth in future
    health care costs. H.R. 3200 fulfills the economic and moral
    obligation to reform the health care system to make it more
    equitable and accessible for all.

                             C. Legislative History

                                   BACKGROUND

        A discussion draft of H.R. 3200 was released to the public
    on June 19, 2009. H.R. 3200, ``America's Affordable Health
    Choices Act of 2009'' was introduced in the House of
    Representatives on July 15, 2009, and was referred to the
    Committee on Energy and Commerce, the Committee on Ways and
    Means, the Committee on Education and Labor, the Committee on
    Oversight and Government Reform and the Committee on the
    Budget.

                              SUBCOMMITTEE ACTION

        The Subcommittee on Health of the Committee on Ways and
    Means held one hearing this year on MedPAC's Annual Report to
    Congress on Medicare Payment Policy on March 17, 2009.
        In the 110th Congress, the Subcommittee on Health held a
    number of hearings on health reform and related Medicare issues
    that explored various parts of the health system and informed
    policy contained in H.R. 3200. The following is a list of these
    hearings in chronological order.
        March 8, 2007--Hearing on Medicare Program Integrity.
        March 21, 2007--Hearing on Medicare Advantage.
        May 3, 2007--Hearing on Medicare Programs for Low-Income
    Beneficiaries.
        June 12, 2007--Hearing on Strategies to Increase
    Information on Comparative Clinical Effectiveness.
        June 21, 2007--Hearing on Beneficiary Protections in
    Medicare Part D.
        October 16, 2007--Joint Hearing with the Oversight
    Subcommittee on Statutorily Required Audits of Medicare
    Advantage Plan Bids.
        November 15, 2007--Hearing on Trends in Nursing Home
    Ownership and Quality.
        February 28, 2008--Hearing on Medicare Advantage.
        April 15, 2008--Hearing on the Instability of Health
    Coverage in America.
        May 14, 2008--Hearing on Health Savings Accounts (HSAs) and
    Consumer Driven Health Care: Cost Containment or Cost-Shift?
        June 10, 2008--Addressing Disparities in Health and
    Healthcare: Issues for Reform.
        July 15, 2008--Hearing on State Coverage Initiatives.
        September 11, 2008--Hearing on Reforming Medicare's
    Physician Payment System.
        September 23, 2008--Hearing on the Health of the Private
    Health Insurance Market.

                             FULL COMMITTEE ACTION

        The Committee on Ways and Means held six hearings on health
    reform in the 111th Congress. These hearings explored the
    current state of various parts of the health system and
    opportunities through which the system could be reformed and
    strengthened. In addition, the Committee held a markup of H.R.
    3200 on July 16, 2009. The following is a list of these
    hearings and markups in chronological order.
        March 11, 2009--Health Reform in the 21st Century:
    Expanding Coverage, Improving Quality, Controlling Costs.
        April 1, 2009--Health Reform in the 21st Century: Reforming
    the Health Care Delivery System.
        April 22, 2009--Health Reform in the 21st Century:
    Insurance Market Reforms.
        April 29, 2009--Health Reform in the 21st Century: Employer
    Sponsored Insurance.
        May 6, 2009--Health Reform in the 21st Century: A
    Conversation with Health and Human Services Secretary Kathleen
    Sebelius.
        June 24, 2009--Health Reform in the 21st Century: Proposals
    to Reform the Health System.
        July 17, 2009--The Committee on Ways and Means Marked up
    the bill, and ordered, as amended, favorably reported.

                          II. EXPLANATION OF THE BILL

                   DIVISION A--AFFORDABLE HEALTH CARE CHOICES

     Title I--Protections and Standards for Qualified Health Benefits Plans

                         Subtitle A--General Standards

    Sec. 100. Purpose; Table of Contents of Division; General Definitions

                Purpose
        The purpose of this division is to provide affordable,
    quality health care for all Americans and reduce the growth in
    health care spending. This division achieves this purpose by
    building on what works in today's health care system, while
    repairing the aspects that are broken by:
         Enacting strong insurance market reforms;
         Creating a new Health Insurance Exchange, with a
    public health insurance option alongside private plans;
         Including sliding scale affordability credits; and
         Initiating shared responsibility among workers,
    employers, and the government.
        This division institutes health delivery system reforms
    both to increase quality and to reduce growth in health
    spending so that health care becomes more affordable for
    businesses, families, and government.
                General Definitions (Created within this Act)
         Acceptable Coverage.--a qualified health benefit
    plan coverage, coverage under a grandfathered health insurance
    coverage or current group health plan, Medicare Part A,
    Medicaid, Military Health System, certain coverage under
    Veteran's Health Care Program (VA), and other coverage the
    Secretary of HHS in coordination with the Health Choices
    Commissioner sees fit.
         Basic Plan.--a plan that offers the essential
    benefits package's minimum requirements to be a qualified
    health benefits plan approximately 70% of the actuarial value
    of the benefits provided.
         Cost-sharing.--includes deductibles, coinsurance,
    copayments, and similar charges but does not include premiums
    or any network payment differential for covered services or
    spending for non-covered services.
         Employment-Based Health Plan.--the term given to
    group health plans (as defined in section 733(a)(1) of ERISA
    (as an employee welfare benefit plan to the extent that plan
    provides medical care to employees or their dependents, either
    directly, through insurance or otherwise)--and is comprised of
    federal and state government plans, tribal plans and church
    plans.
         Enhanced Plan.--a plan that offers, in addition to
    the level of benefits under a basic plan, a lower level of
    cost-sharing equivalent to approximately 85% of the actuarial
    value of the benefits provided.
         Essential Benefits Package.--health benefits
    coverage, consistent with the standards set forth by the
    Secretary no later than 18 months after enactment of this Act.
         Health Benefits Plan.--health insurance coverage
    and a group health plan, including the public health insurance
    option.
         Health Insurance Exchange.--created by this bill
    to facilitate access of individuals and employers, through a
    transparent process, to a variety of choices of affordable,
    quality health insurance coverage, including a public health
    insurance option.
         Premium Plan.--a plan that offers, in addition to
    the level of benefits under a basic plan, a lower level of
    cost-sharing equivalent to approximately 95% of the actuarial
    value of the benefits provided.
         Premium Plus Plan.--a premium plan that also
    offers additional benefits, such as oral health and vision
    care, all of which is approved by the Commissioner.
         Qualified Health Benefits Plan (QHBP).--a health
    benefits plan that meets the requirements set forth in Title I
    (by the Secretary) including the public health insurance
    option.
         QHBP Offering Entity.--an entity can be any of the
    following: a health benefits plan (that is a group health plan)
    in which the employer is the main source of financing, health
    insurance coverage which the insurance issuer is offering the
    coverage, the public health insurance option, a non-federal
    government plan established by the State or political
    subdivision of a State, and a federal government plan.
         Public Health Insurance Option.--a public plan
    (only available through the Health Insurance Exchange) with
    payment rates established by the Secretary. The public option
    would be required to offer basic, enhanced, and premium plans,
    and would be allowed to offer premium-plus plans. Payment rates
    for prescription drugs not covered by Medicare Part A or B will
    be covered by the public option at prices negotiated by the
    Secretary.
         Service Area, Premium Rating Area.--with respect
    to health insurance coverage: (1) if not within the Health
    Insurance Exchange, an area established by a QHBP offering
    entity of such coverage in accordance with applicable state law
    or (2) within the Health Insurance Exchange, an area
    established by such entity in accordance with state law and
    applicable rules set forth by the Commissioner for Exchange-
    participating health benefits plans.
         ``State''.--given term for purposes of the
    Medicaid program, but only includes the 50 states and the
    District of Columbia.
         Y1, Y2, etc.--2013, 2014, etc.

    Sec. 101. Requirements Reforming Health Insurance Marketplace

                Current Law
        Regulation of the private health insurance market is
    primarily done at the state level. State regulatory authority
    is broad in scope and includes requirements related to the
    issuance and renewal of coverage, benefits, rating, consumer
    protections, and other issues. Federal regulation of the
    private market is more narrow in scope and applicable mostly to
    employer-sponsored health insurance (i.e., through the Employee
    Retirement Income Security Act of 1974 (ERISA)) and through
    established federal minimum standards (i.e., through the
    Genetic Information Nondiscrimination Act of 2008 and the Paul
    Wellstone and Pete Domenici Mental Health Parity and Addiction
    Equity Act of 2008, etc).
                Proposed Law
        This provision would require Qualified Health Benefits
    Plans (QHBPs) to meet the new federal health insurance
    standards specified in Subtitles B (relating to affordable
    coverage), C (relating to essential benefits) and D (relating
    to consumer protection) of Title I. The section also provides
    terminology for the phrases ``enrollment in employment-based
    health plans'' and ``individual and group health insurance
    coverage.''
                Reason for Change
        Lays out the purpose of the legislation.
                Effective Date
        January 1, 2013.

    Sec. 102. Protecting the Choice to Keep Current Coverage

                Current Law
        See description under Sec. 101.
                Proposed Law
        ``Grandfathered health insurance coverage'' would be
    defined as individual health insurance coverage that is in
    effect before the first day of Y1, as long as the insurance
    carrier does not (1) enroll new individuals on or after the
    first day of Y1 (would not affect subsequent enrollment of a
    dependent); (2) change any terms or conditions of the
    individual coverage, except as required by law; and (3) vary
    the percentage increase in premiums for a risk group of
    enrollees without changing the premium for all enrollees in the
    same risk group at the same rate, as specified by the
    Commissioner. The Commissioner would establish a 5-year grace
    period beginning Y1 for existing group health plans to
    transition to the new federal health insurance standards
    applied to QHBPs. Limited benefits plans specified in the
    provision, such as dental only, vision only, flexible spending
    arrangements, and others, are unaffected by these reforms and
    may continue to be sold to new applicants irrespective of other
    reforms.
        Individual health insurance coverage that is not
    grandfathered may only be offered after the first day of Y1 as
    an Exchange plan. Excepted benefits (e.g., accident or
    disability insurance) could be offered as long as they are
    offered and priced separately from health insurance coverage.
        For purposes of the individual mandate (established under
    title III of Division A), an individual would be required to
    have ``acceptable coverage.'' In order for an individual health
    insurance policy to be considered acceptable coverage, the
    policy would be either grandfathered health insurance coverage,
    in effect prior to Y1 or offered through the Exchange
    (established under title II of Division A). Group health
    coverage provided during the grace period would be considered
    acceptable coverage.
                Reason for Change
        This section ensures that people can keep current health
    coverage as long as they'd like. Employers currently offering
    coverage will have five years to meet insurance reform
    requirements and the benefit standards (which 96 percent of
    employer sponsored plans already do today according to an ARC
    Analysis of BLS National Compensation Survey). These changes
    are designed to minimize disruption in health insurance
    coverage and ensure compliance for those who are currently
    covered.
                Effective Date
        January 1, 2013.

        Subtitle B--Standards Guaranteeing Access to Affordable Coverage

    Sec. 111. Prohibiting Pre-Existing Condition Exclusions

                Current Law
        The Health Insurance Portability and Accountability Act of
    1996 (HIPAA), which amended ERISA, limits the duration that
    issuers in the group market may exclude coverage for pre-
    existing health conditions for ``HIPAA eligible'' individuals,
    among other provisions. Group plans may impose pre-existing
    condition exclusions for no longer than 12 months (18 months in
    the case of a late enrollee), and must decrease that exclusion
    period by the number of months an enrollee had prior
    ``creditable coverage.'' HIPAA outright prohibits issuers in
    the individual market from excluding coverage for pre-existing
    conditions for HIPAA eligibles.
        All states require health issuers to reduce the period of
    time when coverage for pre-existing health conditions may be
    excluded, in compliance with HIPAA. As of January 2009 in the
    small group market, 21 states had pre-existing condition
    exclusion rules that provided consumer protection above the
    federal standard. And, as of December 2008, 42 states limit the
    period of time when coverage for pre-existing health conditions
    may be excluded for non-HIPAA eligible enrollees in the
    individual market.
                Proposed Law
        This provision would prohibit a qualified health benefits
    plan from excluding coverage for pre-existing health
    conditions, or otherwise limit or condition such coverage with
    respect to an 12 individual or dependent based on any health
    status-related factors. Such factors include health status,
    medical condition (including both physical and mental
    illnesses), claims experience, receipt of health care, medical
    history, genetic information, evidence of insurability
    (including conditions arising out of acts of domestic violence)
    and disability.
                Reason for Change
        The HIPAA limitation on pre-existing conditions did not
    apply to all health plans and permitted pre-existing condition
    exclusions to be imposed or continued in certain areas.. This
    provision ends the discriminatory practice of health insurers
    denying coverage for pre-existing conditions. All plans will be
    required to meet these standards.
                Effective Date
        January 1, 2013.

    Sec. 112. Guaranteed Issue and Renewal for Insured Plans

                Current Law
        HIPAA requires that coverage sold to small groups (2-50
    employees) must be sold on a guaranteed issue basis. That is,
    the issuer must accept every small employer that applies for
    coverage. (Guaranteed issue rules do not address premiums.)
    HIPAA also guarantees that each issuer in the individual market
    make at least two policies available (``guaranteed
    availability'') to all HIPAA eligible individuals. In addition,
    HIPAA guarantees renewal or continuation of group coverage at
    the option of the plan sponsor (e.g., employer) and individual
    coverage at the option of the individual, with some exceptions.
    Insurers may not renew coverage under specified circumstances,
    such as nonpayment of premiums or fraud.
        All states require issuers to offer policies to firms with
    2-50 workers on a guaranteed issue basis, in compliance with
    HIPAA. As of January 2009 in the small group market, 13 states
    also require issuers to offer policies on a guaranteed issue
    basis to self-employed ``groups of one.'' And, as of December
    2008, 15 states require issuers in the individual market to
    offer some or all of their insurance products on a guaranteed
    issue basis to non-HIPAA eligible individuals.
                Proposed Law
        This provision would require issuers to offer all health
    insurance coverage on a guaranteed issue and renewal basis
    beginning in Y1, whether offered through the Exchange
    (established under Subtitle A of Title II), through any
    employment-based health plan, or otherwise. Rescissions of
    coverage would be prohibited, except in cases of fraud.
                Reason for Change
        This section provides consumer protections to ensure that
    people can obtain health coverage and can't have it arbitrarily
    taken away. All new plans will be required to meet these
    requirements.
                Effective Date
        January 1, 2013.

    Sec. 113. Insurance Rating Rules

                Current Law
        There are a limited number of federal rating rules
    applicable to the private group health insurance market.
    However, many states currently impose stronger rating rules on
    insurance carriers in the small group and individual markets.
    Existing state rating rules restrict an insurer's ability to
    price insurance policies according to the risk of the person or
    group seeking coverage, and vary considerably from state to
    state. Such restrictions may specify the case characteristics
    (or risk factors) that may or may not be considered when
    setting a premium, such as age. The spectrum of existing state
    rating limitations ranges from pure community rating, to
    adjusted (or modified) community rating to rate bands. Some
    states have no limits on rating practices which permits
    insurance companies to charge unlimited amounts. Pure community
    rating means that premiums cannot vary based on any
    characteristic related to a person's or group's risk, including
    health. Adjusted community rating means that premiums cannot
    vary based on health, but may vary based on other key risk
    factors, such as gender. Rate bands allow premium variation
    based on health and/or age, but such variation is limited
    according to a range specified by the state. Moreover, both
    adjusted community rating and rate bands allow premium
    variation based on any other permitted case characteristic,
    such as industry. For each characteristic, the state typically
    specifies the amount of allowable variation. As of January 2009
    in the small group market, one state has pure community rating
    rules, eleven have adjusted community rating rules, and 35 have
    rate bands. As of December 2008 in the individual market, two
    states have pure community rating rules, five have adjusted
    community rating rules, and eleven have rate bands.
        There are no federally-established rating areas in the
    private health insurance market. However, some states have
    enacted rating rules in the individual and small group markets
    that include geographic location as a factor on which premiums
    may vary. In these cases, the state has established rating
    areas. Typically, states use counties or zip codes to define
    those areas.
                Proposed Law
        This provision would impose new federal rating rules on
    qualified health benefits plans. QHBP premiums would vary only
    by age (by no more than a 2:1 ratio within age categories
    specified by the Commissioner (established under Sec. 141)),
    premium rating area (as permitted by state regulators or, in
    the case of an Exchange plan, as specified by the
    Commissioner), and family enrollment (as specified under State
    law and consistent with Commissioner rules).
        The Commissioner, in coordination with the Secretaries of
    Health and Human Services (HHS) and Labor, would conduct a
    study of the large group market to examine (1) characteristics
    of employers who purchase fully-insured health insurance
    products and employers who self-fund health benefits, including
    characteristics related to bearing risk and solvency, and (2)
    the extent to which rating rules cause adverse selection in the
    large group market or encourage small and mid-size employers to
    self-insure health benefits. The Commissioner would submit this
    report to Congress and the applicable agencies no later than 18
    months after enactment, and include any recommendations to
    ensure that the law does not provide incentives for small and
    mid-size employers to self-insure or create adverse selection
    in the risk pools of large group insurers and self-insured
    employers.
                Reason for Change
        The provision ensures that Qualified Health Benefits Plans
    and plans offered outside the exchange offer fair health
    insurance policies that don't discriminate against enrollees or
    applicants. It provides for uniform national standards, so
    employers, employees or individuals moving from state-to-state
    won't be subject to a patchwork of requirements and
    protections. It requires a study of the large group marketplace
    to establish whether these changes have any unforeseen
    consequences and to advise as to whether Congress should take
    further action in this arena. All new plans will be required to
    meet these requirements. There is nothing that prohibits states
    from requiring stricter rating limits than the federal
    requirements described here.
                Effective Date
        January 1, 2013.

    Sec. 114. Nondiscrimination in Benefits

                Current Law
        HIPAA established federal rules regarding non-
    discrimination based on health status-related factors. Group
    issuers are prohibited from establishing rules for eligibility
    and premium contributions based on health status-related
    factors. Those factors include health status, medical condition
    (including both physical and mental illnesses), claims
    experience, receipt of health care, medical history, genetic
    information, evidence of insurability (including conditions
    arising out of acts of domestic violence) and disability. In
    addition, the Genetic Information Nondiscrimination Act of 2008
    prohibits issuers in the individual health insurance market
    from establishing eligibility rules (including continued
    eligibility) based on an individual's genetic information, and
    the Mental Health Parity Act of 1996, as amended, establishes
    parity by prohibiting the placement of a dollar limit (either
    annual or aggregate lifetime) on mental health benefits that is
    less than such a limit for medical/surgical benefits for groups
    with more than 50 employees.
                Proposed Law
        This provision would require QHBPs to comply with new non-
    discrimination standards regarding health benefits or benefit
    structures established by the Commissioner, building on
    existing federal non-discrimination rules in ERISA, the Public
    Health Service Act (PHSA), and the Internal Revenue Code of
    1986. These standards would apply to plans offered to
    individuals and groups of all sizes in QHBPs, not just groups
    with over 50 employees. Existing mental health parity rules,
    specifically concerning (1) no requirement on group plans to
    provide mental health benefits, and (2) no impact of limited
    mental health parity on terms and conditions relating to the
    amount, duration, or scope of mental health benefits, apply to
    QHBPs and other policies, regardless of whether coverage is
    offered in the individual or group market.
                Reason for Change
        Currently, insurers can and do discriminate in the
    individual and group market. This section would guarantee that
    insurers could not discriminate against anyone due to a health-
    related condition. In addition, it strengthens protections
    afforded to individuals with mental health needs by extending
    the existing rules to everyone enrolled in a QHBP.
                Effective Date
        January 1, 2013.

    Sec. 115. Ensuring Adequacy of Provider Networks

                Current Law
        HIPAA established special rules for plans that develop a
    network of providers. It allows small group issuers to (1)
    limit the employers that apply for coverage to those firms with
    eligible individuals who live or work in the network service
    area, and (2) deny coverage to small employers if the issuer
    demonstrates (if required) to the State that it has limited
    provider capacity due to obligations to existing enrollees and
    it is applying this decision uniformly without regard to claims
    experience or health status-related factors. HIPAA also
    prohibits a small group issuer that has denied coverage in any
    service area to offer small group coverage in that area for 180
    days after the denial.
                Proposed Law
        This provision would require QHBPs that use provider
    networks to meet provider network standards that may be
    established by the Commissioner to ensure the adequacy of
    networks, and transparency in the cost-sharing differences
    between in- and out-of-network coverage. The term ``provider
    network'' means the providers with respect to covered benefits,
    treatments, and services available under a health benefit plan.
                Reason for Change
        This provision provides the Commissioner with the authority
    to set network adequacy requirements to ensure that plans have
    the right number of providers to meet the needs of enrollees.
                Effective Date
        January 1, 2013.

    Sec. 116. Ensuring Value and Lower Premiums

                Current Law
        Medical loss ratio (MLR) describes is the share of total
    premium revenue spent on medical claims. Medigap insurance
    policies are private supplemental health care policies that
    Medicare beneficiaries can purchase to help cover some items,
    services, and cost sharing not covered under Medicare. Medigap
    plans are required to have a MLR ratio of 65% for individual
    policies and 75% for group policies. In addition, some states
    impose MLR or related requirements on insurers in the
    individual and/or small group health insurance markets. As of
    June 2008, MLR required by states ranged from 55% to 80%.
                Proposed Law
        This provision would require QHBPs to comply with a medical
    loss ratio standard to be determined by the Commissioner. QHBPs
    that do not meet such a standard would be required to provide
    rebates to enrollees, in a manner specified by the
    Commissioner, in sufficient amounts to meet such a loss ratio.
    To establish the medical loss ratio standard, the Commissioner
    would build on the definition and methodology, developed by the
    HHS Secretary under Section 161, for determining how to
    calculate such a ratio. The methodology would set the highest
    ratio possible to ensure adequate QHBP participation,
    competition both in and out of the Exchange, and value for
    consumers so that their premium payments are used predominately
    for medical claims.
                Reason for Change
        This provision provides the Commissioner with the authority
    to ensure that premiums are used primarily to provide health
    benefits and not lost to excessive administrative costs or
    profit. The Committee is interested in establishing a minimum
    level of 85 percent.
                Effective Date
        January 1, 2013.

        Subtitle C--Standards Guaranteeing Access to Essential Benefits

    Sec. 121. Coverage of Essential Benefits Package

                Current Law
        There are very limited federal benefit mandates for health
    insurance. These standards were added to the Health Insurance
    Portability and Accountability Act of 1996 (HIPAA), and other
    Acts such as Paul Wellstone and Pete Domenici Mental Health
    Parity and Addiction Equity Act of 2008 or the Genetic
    Information Nondiscrimination Act of 2008 and are described in
    the discussion of Section 122. In addition, there are more than
    2,000 state-level benefit mandates that vary across the
    country.
                Proposed Law
        This provision would require a QHBP to cover at least an
    ``essential benefit package''. QHBPs could be offered in or
    outside of an Exchange. QHBPs offered outside of an Exchange
    would be allowed to offer additional benefits beyond those
    specified in the essential benefits package. For QHBPs offered
    through the Exchange, a plan offering a premium-plus level of
    benefits (established under Section 203) could also provide
    additional benefits.
        The requirements under Division A would not affect the
    offering of limited-purpose or ``excepted'' benefit plans,
    including policies covering dental or vision treatment, long-
    term care, workers' compensation, and other similar benefits,
    if such benefit plans are offered under a separate policy,
    contract, or certificate of insurance.
        A QHBP would not be allowed to impose coverage restrictions
    (except cost sharing) on anything unrelated to the clinical
    appropriateness of the health care items and services.
                Reason for Change
        The provision ensures the offering of minimum standard
    benefits, called the essential benefits package, to ensure that
    all plans meet basic needs and enable people to compare
    policies in the Exchange on the basis of cost and quality--not
    hidden differences in benefits. Outside of the Exchange, group
    health plans eventually have to meet the essential benefits
    package, as a minimum standard, but can offer additional
    benefits, as many do today.
                Effective Date
        January 1, 2013.

    Sec. 122. Essential Benefit Package Defined

                Current Law
        There are very few federally mandated benefits. The laws
    that provide guidance are found in the Employee Retirement
    Income Security Act (ERISA), which covers employer-sponsored
    plans; the Public Health Service Act (PHSA), which covers some
    insurance plans and state and local government plans; and the
    Internal Revenue Code (IRC), which covers Church plans in
    certain circumstances. There is no federal requirement that
    employers offer health insurance, or that any plans that are
    offered cover any specific benefits. However, the mandates that
    do exist require that if a plan (governed by ERISA, PHSA, or
    IRC) covers a particular service that is addressed in the
    statutes, then that benefit must be designed in a certain way.
    Those mandates include:
         The Paul Wellstone and Pete Domenici Mental Health
    Parity and Addiction Equity Act of 2008 (MHPA) (P.L. 110-343)
    prevents a large group health plan from placing annual or
    lifetime dollar limits on mental health benefits that are
    lower--less favorable--than annual or lifetime dollar limits
    for medical and surgical benefits offered under the plan, but
    does not require a plan to cover mental health benefits.
         The Newborns' and Mothers' Health Protection Act
    of 1996 (NMHPA) (P.L. 104-204) requires plans that offer
    maternity coverage to pay for at least a 48-hour hospital stay
    following childbirth (96-hour stay in the case of a cesarean
    section).
         The Women's Health and Cancer Rights Act of 1998
    (P.L. 105-277) contains protections for patients who elect
    breast reconstruction in connection with a mastectomy. For plan
    participants and beneficiaries receiving benefits in connection
    with a mastectomy, plans offering coverage for a mastectomy
    must also cover reconstructive surgery and other benefits
    related to a mastectomy.
         The Genetic Information Nondiscrimination Act of
    2008 (GINA) (P.L. 110-233) prohibits discrimination based on
    genetic information by health insurers and employers. GINA
    strengthens and clarifies existing HIPAA nondiscrimination and
    portability provisions. Broadly, GINA prohibits health insurers
    from engaging in three practices: (1) using genetic information
    about an individual to adjust a group plan's premiums, or, in
    the case of individual plans, to deny coverage, adjust
    premiums, or impose a pre-existing condition exclusion; (2)
    requiring or requesting genetic testing; and (3) requesting,
    requiring, or purchasing genetic information for underwriting
    purposes. It also prohibits employers from making hiring or
    firing decisions based on genetic information.
         Michelle's Law (P.L. 110-381) ensures that
    dependent post secondary education students who take a
    medically necessary leave of absence do not lose health
    insurance coverage. The law provides that a group health plan
    may not terminate a college student's health coverage simply
    because the student takes a medically necessary leave of
    absence from school or changes to part-time status. The leave
    of absence must be medically necessary, begin while the student
    is suffering from a serious illness or injury and would
    otherwise result in a loss of coverage.
        Although current federal law provides only a limited number
    of service and coverage mandates, it does provide some guidance
    toward the definition of preventive services for use by public
    programs and private insurance. The U.S. Preventive Services
    Task Force (USPSTF), administered by the Agency for Healthcare
    Research and Quality (AHRQ), reviews scientific evidence and
    makes recommendations to the health care community regarding
    the use of clinical preventive services, based on evidence of
    effectiveness and any harm associated with specific services.
    The USPSTF grades services as ``A'' through ``D,'' or notes
    that there is insufficient evidence to support a
    recommendation. Clinical services graded ``A'' or ``B'' by the
    USPSTF are recommended for use in clinical practice.
        Similarly, the Advisory Committee on Immunization Practices
    (ACIP), administered by the Centers for Disease Control and
    Prevention (CDC), reviews scientific evidence and makes 19
    recommendations to the Secretary and the CDC Director for the
    routine administration of vaccines to children, adolescents,
    and adults in the U.S. civilian population. The ACIP is not
    explicitly authorized; rather, it is based in general
    authorities of the Secretary in Titles II and III of the PHSA.
        ``Actuarial value'' is a summary measure of a health
    insurance plan's benefit generosity. It is expressed as the
    percentage of medical expenses estimated to be paid by the
    insurer for a standard population and set of allowed charges.
    Two plans that have the same actuarial value are ``actuarially
    equivalent.'' Because these are summary measures, two plans
    that are actuarially equivalent may not provide the same
    benefits for any two individuals. State health insurance
    regulations may include requirements expressed in terms of
    actuarial value.
                Proposed Law
        This provision would require the essential benefits package
    to cover specified items and services, limit cost sharing,
    prohibit annual and lifetime limits on covered services, ensure
    the adequacy of provider networks, and be equivalent (as
    certified by the Office of the Actuary of the Centers for
    Medicare and Medicaid Services) to the average prevailing
    employer-sponsored coverage.
        The essential benefits package would be required to cover
    the following items and services:
               Hospitalization;
               Outpatient hospital and clinic services,
            including emergency department services;
               Services of physicians and other health
            professionals;
               Services, equipment, and supplies incident
            to the services of a physician or health professional
            in appropriate settings;
               Prescription drugs;
               Rehabilitative and ``habilitative'' services
            (i.e., services to maintain or prevent the
            deterioration of the physical, intellectual, emotional,
            and social functioning of developmentally delayed
            individuals);
               Mental health and substance use disorder
            services;
               Preventive services, include those graded
            ``A'' or ``B'' by the Task Force on Clinical and
            Preventive Services, as established by this Act, and
            those vaccines recommended by the Director of the CDC;
               Maternity care; and
               Well-baby and well-child care and oral
            health, vision, and hearing services, equipment, and
            supplies for those under age 21.
        The essential benefits package would be subject to various
    requirements concerning cost-sharing. The package would be
    required to provide preventive items and services without cost-
    sharing (including well-baby and well-child care). The annual
    out-of-pocket limit in Y1 would be $5,000 for an individual and
    $10,000 for a family: These limits would be annually adjusted
    for inflation using the Consumer Price Index for all Urban
    Consumers (CPI-U). To the extent possible, the Secretary would
    establish cost-sharing levels using copayments (a flat dollar
    fee) and not coinsurance (a percentage fee). Cost-sharing for
    the Essential Benefits Package would result in coverage equal
    to approximately 70 percent of the actuarial value of the
    benefits if there were no cost-sharing imposed.
                Reason for Change
        To ensure that Americans will be guaranteed a defined level
    of benefits, with numerous options available in order to ease
    comparison shopping among plans based on cost and quality not
    manipulation of benefits.
                Effective date
        January 1, 2013.

    Sec. 123. Health Benefits Advisory Committee

                Current Law
        No provision.
                Proposed Law
        A Health Benefits Advisory Committee would be established
    to recommend covered benefits and cost-sharing parameters and
    the essential, enhanced, and premium plans. The Committee would
    be chaired by the Surgeon General. The Committee membership
    would be comprised of:
                Nine members, appointed by the President,
            who are neither federal employees nor officers;
                Nine members, appointed by the Comptroller
            General, who are neither federal employees nor
            officers; and
                An even number, up to eight members,
            appointed by the President, who are federal employees
            and officers.
        The initial appointments would be made within 60 days of
    enactment. Each Committee member would serve a three-year term,
    except the terms of the initial appointments would be adjusted
    to provide for staggered years of appointment. The members
    would reflect the interests of the many diverse groups of
    stakeholders so that no single interest would unduly influence
    the Committee's recommendations. At a minimum, committee
    membership would reflect physicians and other health care
    providers, consumer representatives, employers, labor, health
    insurance issuers, experts in health care delivery, and experts
    in health disparities, and government agencies. At least one
    Committee member would be a practicing physician or health
    professional, and another member would be an expert on
    children's health.
        The Committee's recommendations to the Secretary on the
    essential benefits package (as defined in Section 122), cost-
    sharing levels for the enhanced plans and premium plans (as
    defined in Section 203), and periodic updates of the package
    would be required to incorporate innovation in health care. The
    Committee members would also be required to consider how the
    package would reduce health disparities, and would allow for
    public input as part of developing its recommendations. The
    Committee's initial benefit recommendations must be made to the
    Secretary within one year of enactment.
        In developing standards for the basic, enhanced and premium
    plans, the Committee would be required to calculate cost-
    sharing such that the enhanced plan would have benefits that
    are actuarially equivalent to about 85% of the actuarial value
    of the benefits provided in the essential benefits package, and
    the premium plans would have benefits that are actuarially
    equivalent to about 95% of the actuarial value of the benefits
    provided in the essential benefits package.
        Committee members would serve without pay, but would
    receive federal travel expenses, including per diem expenses.
    In addition, the Committee would be subject to the Federal
    Advisory Committee Act (which provides sunshine and
    transparency over advisory committee actions).
        The Secretary would be required to publish all
    recommendations developed pursuant to this Section in the
    Federal Register and on the HHS website.
                Reason for Change
        This section provides for the advice of an expert panel to
    define the initial essential benefits package; cost-sharing
    parameters for the basic, enhanced and premium plans; and make
    updates to that package for the future. It ensures that experts
    who make up the array of groups impacted by the decision
    (consumers, employers, doctors, etc.) are part of developing
    the essential benefits package.
                Effective Date
        Date of enactment.

    Sec. 124. Process for Adoption of Recommendations; Adoption of Benefit
            Standards

                Current Law
        No provision.
                Proposed Law
        This Section proposes a timeline under which the Secretary
    must choose whether to adopt the recommendations of the
    Committee established under section 123 of this bill. Within 45
    days of receiving the Committee's recommendations regarding the
    essential benefits package, the Secretary would be required
    either to adopt the benefit standards as written or not adopt
    the benefit standards. If the Secretary does not wish to adopt
    the recommendations, the Secretary shall notify the Committee
    of the reasons for this decision, and provide an opportunity
    for the Committee to revise and resubmit its recommendations.
        The Secretary would be required to adopt an initial set of
    benefit standards within 18 months of enactment either by
    adopting the recommendations (and any revisions) of the
    Committee, or absent that, by proposing an initial set of
    benefit standards.
        The Secretary would be required to publish all
    determinations under this Section in the Federal Register.
        The Secretary would be required to periodically update the
    benefit standards. However, an essential benefits package that
    does not meet the essential benefits requirements specified in
    section 122 could not be adopted.
                Reason for Change
        This section lays out a timeline to ensure that the benefit
    standards are developed and adopted on a timely basis.
                Effective Date
        Date of enactment.

                  Subtitle D--Additional Consumer Protections

    Sec. 131. Requiring Fair Marketing Practices by Health Insurers

                Current Law
        States have established fair marketing standards to
    regulate insurers' marketing activities.
                Proposed Law
        This provision would require the Commissioner to establish
    uniform marketing standards for QHBPs.
                Reason for Change
        This provision prohibits insurers from using unfair
    marketing practices as a mechanism to avoid risk and ensure
    that individuals and businesses are not misled by insurance
    companies when purchasing insurance.
                Effective Date
        January 1, 2013.

    Sec. 132. Requiring Fair Grievance and Appeals Mechanisms

                Current Law
        ERISA does not require an employer to offer health
    benefits, but does mandate compliance to certain standards if
    an employer chooses to offer health benefits, such as
    procedures for appealing denied benefit claims. In addition, as
    of February 2008, 44 states and the District of Columbia
    mandate the independent review of benefit denials by an entity
    outside of the health plan (``external review'').
                Proposed Law
        This provision would require QHBPs to provide for timely
    grievance and appeals mechanisms as established by the
    Commissioner. QHBPs would provide an internal claims and
    appeals process that initially incorporates the claims and
    appeals procedures (including urgent claims) promulgated by the
    Labor Department and published in the Code of Federal
    Regulations on November 21, 2000 (65 Fed. Reg. 70246). Such a
    process would be updated in accordance with any relevant
    standards that may be established by the Commissioner. The
    Commissioner would establish standards for an external review
    process (including expedited review of urgent claims), and any
    determination made with respect to a QHBP under an external
    review process would be binding. The requirements under this
    section would not affect the availability of judicial review
    under State law for adverse decisions under either the internal
    or external review process, subject to Section 151.
                Reason for Change
        To protect patients by ensuring a fair internal and
    external appeals processes in cases in which a patient needs to
    challenge a health plan's coverage denial or determination.
                Effective Date
        January 1, 2013.

    Sec. 133. Requiring Information Transparency and Plan Disclosure

                Current Law
        ERISA requires applicable health plans (as well as other
    ``welfare benefit'' plans) to disclose and report certain plan
    information to enrollees and regulators. For example, plan
    administrators must provide to enrollees a written summary plan
    description (SPD) that contains the terms of the plan and the
    benefits offered, including any material modifications, and the
    SPD must be written in a manner that can be understood by the
    average enrollee. Certain plans must file an 24 annual report
    with the Department of Labor, containing information about the
    operation, funding, assets, and investments of those plans.
                Proposed Law
        This provision would require QHBPs to comply with
    disclosure standards established by the Commissioner concerning
    plan terms and conditions, claims payment policies, plan
    finances, claims denials, and other information as determined
    appropriate by the Commissioner. The Commissioner would require
    such disclosure to be provided in plain language. QHBPs would
    be required to comply with standards established by the
    Commissioner to ensure transparency regarding reimbursements
    between the plan and health care providers. A change in a QHBP
    could not be made without reasonable and timely advance notice
    to enrollees about the change.
                Reason for Change
        To ensure that enrollees and contracting health providers
    understand the terms and conditions of QHBP's and other health
    plans.
                Effective Date
        January 1, 2013.

    Sec. 134. Application to Qualified Health Benefits Plans Not Offered
            Through the Health Insurance Exchange

                Current Law
        No Provision.
                Proposed Law
        The previous disclosure and other standards would apply to
    QHBPs offered outside of the Exchange only to the extent
    specified by the Commissioner.
                Reason for Change
        Provides the Commissioner with flexibility with regard to
    applying the provisions of this section to plans outside of the
    Exchange.
                Effective Date
        January 1, 2013.

    Sec. 135. Timely Payment of Claims

                Current Law
        Under Medicare Advantage (MA), private health plans are
    paid a per-person amount to provide all Medicare-covered
    benefits (except hospice) to beneficiaries who enroll in their
    plans. MA plans include health maintenance organizations
    (HMO's) and private fee-for-service (PFFS) plans, among other
    plan types. MA PFFS plans that generally do not currently
    contract with providers are required to pay 95% of ``clean
    claims'' within 30 days of receipt. The Centers for Medicare
    and Medicaid Services (CMS) defines a clean claim as a claim
    that has no defect or impropriety, and is submitted with all
    the required documentation. The 30-day rule also applies to
    claims submitted to any MA organization by a provider who does
    not have a written contract with the plan. MA organizations are
    required to pay interest on clean claims that are not paid
    within 30 days. All other claims from non-contracted providers
    must be paid within 60 days. MA organizations that contract
    with providers (i.e., HMOs and PPOs) must include a prompt
    payment provision in their contracts.
                Proposed Law
        This provision would require QHBPs to comply with the
    prompt pay requirements applicable to Medicare Advantage plans.
                Reason for Change
        To ensure fair and timely payment for services rendered in
    the reformed health care system.
                Effective Date
        January 1, 2013.

    Sec. 136. Standardized Rules for Coordination and Subrogation of
            Benefits

                Current Law
        While there are no federal statutes specifying primary and
    secondary payment rules for multiple insurers in the private
    market, Section 1862(b) of the Social Security Act authorizes
    the Medicare Secondary Payer (MSP) program, which identifies
    specific conditions under which another party pays first and
    Medicare is only responsible for qualified secondary payments.
    The statute authorizes several methods to identify cases when
    an insurer other than Medicare is the primary payer and to
    facilitate recoveries when incorrect Medicare payments have
    been made. Under certain conditions, the law makes Medicare the
    secondary payer to insurance plans and programs for
    beneficiaries covered through (1) a group health plan based on
    either their own or a spouse's current employment; (2) auto and
    other liability insurance; (3) no-fault liability insurance;
    and (4) workers' compensation situations, including the Black
    Lung program. Additionally, the Medicare statutes exclude
    Medicare coverage for items and services paid for directly or
    indirectly by a government entity, subject to certain
    limitations. This includes the Department of Veterans Affairs,
    among others.
                Proposed Law
        The Commissioner would establish standards for the
    coordination of benefits and reimbursement of payments in cases
    involving individual and multiple plan coverage.
                Reason for Change
        These changes are needed to enable effective coordination
    of varying health plans.
                Effective Date
        January 1, 2013.

    Sec. 137. Application of Administrative Simplification

                Current Law
        To support the growth of electronic record keeping and
    claims processing, HIPAA's Administrative Simplification
    provisions instructed the Secretary to adopt electronic format
    and data standards for several routine administrative and
    financial transactions between health care providers and health
    plans/payers. The standards apply to health care providers (who
    transmit any health information in electronic form in
    connection with a HIPAA-specified transaction), health plans,
    and health care clearinghouses.
                Proposed Law
        This provision would require QHBP-offering entities (as
    defined in the bill) to comply with the new administrative
    simplification standards adopted under Sec. 163 (discussed
    below).
                Reason for Change
        These changes are needed to eliminate waste from today's
    health system and will provide savings for providers--ensuring
    a more efficient health care delivery system.
                Effective Date
        January 1, 2013.

                             Subtitle E--Governance

    Sec. 141. Health Choices Administration; Health Choices Commissioner

                Current Law
        No provision.
                Proposed Law
        This provision would establish an independent agency in the
    Executive Branch of the United States called the Health Choices
    Administration (``Administration''). The Administration would
    be headed by a Health Choices Commissioner (``Commissioner''),
    who would be appointed by the President, with advice and
    consent of the Senate. Section 702 of the Social Security Act
    (detailing compensation, terms, general powers, rule-making,
    and delegation as applied to the Commissioner of Social
    Security and the Social Security Administration) would apply to
    the Commissioner.
                Reason for Change
        This Act brings significant new responsibilities to the
    government. In order to ensure these duties are carried out, a
    new agency is needed to coordinate the efforts.
                Effective Date
        Date of enactment.

    Sec. 142. Duties and Authority of Commissioner

                Current Law
        No provision.
                Proposed Law
        This provision would make the Commissioner responsible for
    carrying out the following functions:
         Qualified Plan Standards--Establishing qualified
    health benefits plan (``QHBP'') standards, including the
    enforcement of such standards in coordination with State
    insurance regulators and the Secretaries of Labor and the
    Treasury.
         Health Insurance Exchange--Establishing and
    operating the Health Insurance Exchange.
         Individual Affordability Credits--Administering
    individual affordability credits, including the determination
    of eligibility for such credits.
         Promoting Accountability--Undertaking activities
    in accordance with this section to promote accountability of
    QHBP offering entities in meeting Federal health insurance
    requirements, regardless of whether such accountability is with
    respect to qualified health benefit plans offered through or
    outside the Health Insurance Exchange.
         Compliance Examination and Audits--Coordinating
    with States to conduct audits of qualified health benefits
    plans compliance with federal requirements. These audits would
    include random compliance audits and targeted audits in
    response to complaints or other suspected non-compliance.
         Recoupment of Costs in Connection with Examination
    and Audits--Authorizing the Commissioner to recoup from
    qualified health benefits plans reimbursement for costs of such
    examinations and audit of such QHBP offering entities.
         Data Collection--Collecting data for the purposes
    of carrying out the Commissioner's duties, including promoting
    quality, value, protecting consumers and addressing disparities
    in health and health care; the commissioner may share such data
    with Secretary of Health and Human Services.
         Sanctions Authority--Providing any of the
    following remedies (in addition to any other authorized by law)
    in coordination with State insurance regulators and the
    Secretary of Labor if it is determined that a QHBP offering
    entity violates a requirement:
              1. Civil money penalties of not more than the amount
            applicable under similar circumstances for similar
            violations under Medicare;
              2. Suspension of plan enrollment of individuals under
            such plan after the date the Commissioner notifies the
            entity of a decision, until the Commissioner is
            satisfied with rectification;
              3. In the case of an Exchange-participating health
            benefits plan, suspension of payment under the Health
            Insurance Exchange for individuals enrolled in the plan
            after the date the Commissioner notifies the entity of
            such decision and until the Commissioner is satisfied
            with corrective action; or
              4. Work with State insurance regulators to terminate
            plans for repeated failure by the QHBP offering entity
            to meet this title's requirements.
         Standard Definitions of Insurance and Medical
    Terms--Providing the development of standards for defining
    terms used in health insurance coverage, including insurance-
    related terms.
         Efficiency in Administration--Issuing regulations
    for the effective and efficient administration of the Health
    Insurance Exchange and affordability credits including:
              1. The determination of eligibility for affordability
            credits.
              2. The use of personnel to carry out the duties of
            the Commissioner or in the case of sections 208 and
            241(b)(2) of this Act, the use of State personnel in
            accordance with statutes.
                Reason for Change
        Authority needs to be granted to carry out the
    implementation of this Act. The Health Choices Commissioner is
    established to perform these functions as outlined above.
                Effective Date
        Date of enactment.

    Sec. 143. Consultation and Coordination

                Current Law
        No provision.
                Proposed Law
        The Commissioner, as appropriate, would be required to
    consult with, at a minimum, the National Association of
    Insurance Commissioners (for purposes of using model
    guidelines), State attorneys general, and State insurance
    regulators concerning the standards and enforcement for insured
    qualified health benefits plans described in this title.
    Concurrently, the Commissioner would be required to consult
    with, at a minimum, Indian tribes and tribal organizations,
    appropriate federal agencies, and appropriate State agencies
    concerning affordability credits and the offering of Exchange-
    participating health benefits plans (including Medicaid
    concerning standards for insured qualified health benefit
    plans).
        The Commissioner would be required to work in coordination
    with existing Federal and State entities to the maximum extent
    feasible and in a manner preventing conflicts of interests.
    Concurrently, the Commissioner would seek to achieve uniform
    standards that sufficiently protect consumers in a manner that
    does not unreasonably affect employers and insurers.
                Reason for Change
        Health care is regulated at the State and federal level and
    by a wide variety of agencies. To ensure effective
    implementation of the Act and uniform requirements across the
    country, it is important that all regulatory bodies coordinate
    efforts.
                Effective Date
        Date of enactment.

    Sec. 144. Health Insurance Ombudsman

                Current Law
        The Department of Health and Human Services houses various
    complaint handling and client-assistance ombudsmen:
        Food and Drug Administration (FDA) Ombudsman--Reviews
    marketing or investigational applications; provides information
    on import or export issues, ensures a fair hearing of claims of
    unfair or unequal treatment; also determines the jurisdiction
    of a product.
        Long-Term Care Ombudsman--Mandated by Older Americans Act
    of 1965, consists of 1,000 paid and 14,000 volunteers who
    identify, investigate, and resolve complaints made by, or on
    the behalf, of residents. They have a blend of federal and
    state oversight.
        Medicare Beneficiary Ombudsman--Created by the Medicare
    Prescription Drug, Improvement, and Modernization Act of 2003
    (P.L. 108-173), is intended to ensure those eligible for
    Medicare have reliable and current information about their
    benefits, rights and protections under the Medicare program,
    and the procedures for getting problems and disputes resolved.
    The Ombudsman is to aid Medicare recipients in filing appeals
    if their insurance did not pay proper amounts for their medical
    services or those services were denied.
        Specialized Jurisdictional Ombudsmen--The FDA also has four
    additional ombudsmen who serve as the points of contact for
    specific public complaints connected to the subject of their
    jurisdiction. They are located at the Center for Biologics
    Evaluation and Research, Center for Drug Evaluation and
    Research, Center for Devices and Radiological Health, and
    Center for Veterinary Medicine. If any of the above cannot
    resolve or rectify a complaint, the issue is then sent to the
    FDA Office of Ombudsman.
        In addition, several states (including VT, MN, and IL) have
    created State health insurance ombudsmen, with the core
    responsibilities of rectifying concerns encompassing access to
    care, billing problems, and access to health insurance. The
    Ombudsman provides information on state and federal programs
    that may be available, explains continuation rights under an
    existing health plan, provides help on how to shop for health
    insurance, and assists in appealing decisions made by their
    health insurance.
                Proposed Law
        The Commissioner would appoint within the Health Choices
    Administration a Qualified Health Benefits Ombudsman (with
    experience and expertise in the fields of health care and
    education). The Ombudsman would be required to perform the
    following duties:
         Receive and provide assistance with complaints,
    grievances, and requests for information submitted by
    individuals. The assistance would be provided more specifically
    in instances such as helping individuals determine relevant
    information for an appeal, assisting with any problems arising
    from disenrollment, choosing a qualified health benefits plan
    to enroll, and presenting information relevant to affordability
    credits.
         Submit annual reports to Congress and the
    Commissioner describing the activities of the Ombudsman,
    including recommendations for improvement in the Administration
    of this Division, as determined appropriate. The Ombudsman
    would not serve as an advocate for any increases in payments or
    new coverage of services, but would identify issues and
    problems in payment or coverage policies.
                Reason for Change
        Like the other ombudsman offices that have been
    established, this new ombudsman is created to protect
    consumers' interests and provide a consumer-oriented point of
    contact within the new agency.
                Effective Date
        Date of enactment.

           Subtitle F--Relation to Other Requirements; Miscellaneous

    Sec. 151. Relation to Other Requirements

                Current Law
        No provision.
                Proposed Law
         Coverage Not Offered Through the Exchange--The
    requirements of this provision would not supersede specified
    federal and state laws with respect to the health insurance
    coverage not offered through the Health Insurance Exchange
    (whether or not offered in connection with an employment-based
    health plan). Such laws encompass applicable requirements under
    the Public Health Service Act for certain group health plans
    and state and local employees requirements for health insurance
    coverage, group health plan standards and requirements under
    ERISA, or other applicable State laws. Nothing in this
    subsection would prevent application of State laws creating
    private rights of action with remedies or affect the
    application preemption (under Section 514 of ERISA).
         Coverage Offered Through the Exchange--The
    requirements under this title would not supersede any
    requirements relating to genetic information non-discrimination
    and mental health for such health insurance coverage (as long
    as those related do not prevent the application of requirements
    detailed in this division; as determined by the Commissioner).
    Concurrently, individual rights and remedies under State laws
    would apply. Nothing detailed in this paragraph would be
    construed as preventing the application of rights and remedies
    under State laws with respect to any referred requirement.
                Reason for Change
        This section clarifies the interaction between federal and
    state laws.
                Effective Date
        January 1, 2013.

    Sec. 152. Prohibiting Discrimination in Health Care

                Current Law
        HIPAA established federal rules regarding non-
    discrimination based on health status-related factors. It
    prohibits group issuers from establishing rules for eligibility
    and premium contributions based on health status-related
    factors. Those factors include health status, medical condition
    (including both physical and mental illnesses), claims
    experience, receipt of health care, medical history, genetic
    information, evidence of insurability (including conditions
    arising out of acts of domestic violence) and disability. In
    addition, the Genetic Information Nondiscrimination Act of 2008
    (GINA, P.L. 110-233) prohibits issuers in the individual health
    insurance market from establishing eligibility rules (including
    continued eligibility) based on an individual's genetic
    information. The Mental Health Parity Act of 1996, as amended,
    establishes parity by prohibiting the placement of a dollar
    limit (either annual or aggregate lifetime) on mental health
    benefits that is less than such a limit for medical/surgical
    benefits for group health plans with more than 50 employees.
                Proposed Law
        Unless explicitly permitted within this Act and subsequent
    related regulations, all health care and related services
    (including insurance coverage and public health activities)
    covered by this Act would be provided regardless of personal
    characteristics extraneous to the provision of high quality
    health care or related services.
        Within 18 months of enactment, the Secretary would be
    required to ensure that all health care and related services
    would be provided without regard for extraneous personal
    characteristics.
                Reason for Change
        Makes clear that civil rights protections are applicable to
    health insurance plans.
                Effective Date
        Within 18 months of enactment.

    Sec. 153. Whistleblower Protection

                Current Law
        No provision.
                Proposed Law
        No employer may discharge any employee (or otherwise
    discriminate against) with respect to his compensation, terms,
    conditions, or other privileges of employment because the
    employee (or an individual acting at the request of the
    employee):
         Provides or causes to provide to the employer,
    Federal Government, the attorney general of a relevant State,
    information relating to any violation of, or any act or
    omission the employee reasonably believes to be a violation of
    any provision, order, rule, or regulation promulgated under
    this Act.
         Testifies or is about to testify in a proceeding
    concerning such violation.
         Assists, participates or is about to assist and
    participate in such a proceeding.
         Objects to, or refused to participate in any
    activity, policy, practice, or assigned task that the employee
    reasonably believes to be in violation of any provision, order,
    rule and regulation promulgated under this Act.
        Enforcement Action--An employee covered by this section who
    alleges discrimination by an employer in violation may bring an
    action governed by the rules, procedures, legal burden of
    proof, and remedies detailed in section 40(b) of the Consumer
    Product Safety Act.
        Employer Defined--The term employer in this section means
    any person (including one or more individuals, partnerships,
    associations, corporations, trusts, professional membership
    organization including a certification, disciplinary, or other
    professional body, unincorporated organizations,
    nongovernmental organizations, or trustees) engaged in profit
    or nonprofit business or industry whose activities are governed
    by this Act, and any agent, contractor, subcontractor, grantee,
    or consultant of such person.
        Rule of Construction--The rule of construction set forth
    concerning employee protections in the United States Code would
    apply to this section.
                Reason for Change
        To ensure the provision of quality, efficient health care,
    it is vital that health care workers be protected in instances
    where they contribute to reporting of violations of this act.
    Otherwise, the fear of retaliation will discourage many to
    report such violations.
                Effective Date
        Date of enactment.

    Sec. 154. Construction Regarding Collective Bargaining

                Current Law
        No provision.
                Proposed Law
        Nothing in this division would be construed to alter or
    supersede any statutory authority (or other obligation) to
    engage in collective bargaining over the terms and conditions
    of employment related to health care.
                Reason for Change
        Preserves collective bargaining rights.
                Effective Date
        Date of enactment.

    Sec. 155. Severability

                Current Law
        No provision.
                Proposed Law
        If any provision of this Act, or the application thereof
    toward any person or circumstance, is held unconstitutional,
    the application of the remaining provisions would not be
    affected.
                Reason for Change
        To protect other sections of the act if any particular
    section is found unconstitutional.
                Effective Date
        Date of enactment.

                         Subtitle G--Early Investments

    Sec. 161. Ensuring Value and Lower Premiums

                Current Law
        Medical loss ratio is the share of total premium revenue
    spent on medical claims. Medigap insurance policies are private
    supplemental health care policies that Medicare beneficiaries
    can purchase to help cover some items, services, and cost
    sharing not covered under Medicare. Medigap plans are required
    to have a minimum medical loss ratio of 65% for individual
    policies and 75% for group policies. In addition, some states
    impose medical loss ratios or related requirements on insurers
    in the individual and/or small group health insurance markets.
    As of June 2008, minimum ratios required by states ranged from
    55% to 80%.
                Proposed Law
        Each health insurance issuer that offers health insurance
    coverage in the small or large group market would be required
    to provide rebates to enrollees if the coverage provided had a
    medical loss ratio below a level specified by the Secretary,
    for any plan year. The amount of the rebate would be sufficient
    to meet such loss ratio. The methodology would be set at the
    highest level medical loss ratio possible designed to ensure
    adequate participation by issuers, competition in the health
    insurance market, and value for consumer so that their premiums
    would be used for services. The Secretary would establish a
    uniform definition and a methodology for determining medical
    loss ratio, taking into account special circumstances of plans
    such as size, type, and longevity of the plan. These same
    provisions would also apply to health insurance coverage
    offered in the individual market.
                Reason for Change
        To ensure that plans are investing enrollee premiums in the
    provision of health benefits and not simply excessive
    administrative costs or profit.
                Effective Date
        These provisions would be effective for plan years
    beginning on or after January 1, 2011.

    Sec. 162. Ending health insurance rescission abuse

                Current Law
        In the individual health insurance market, HIPAA guarantees
    renewal or continuation of individual health coverage at the
    option of the individual, except under specified circumstances.
    Those circumstances include nonpayment of premiums, fraud
    (including intentional misrepresentation of material fact) on
    the part of the enrollee, plan terminates coverage in the
    individual market, move of enrollee outside of the network
    service area, and enrollee membership in an association ends
    (in the case of association sponsored coverage). In addition, a
    handful of states prohibit issuers from rescinding or
    cancelling an enrollee's coverage in the individual market
    without prior review and approval from the state insurance
    department.
                Proposed Law
        This provision would clarify that the existing guaranteed
    renewability rules under HIPAA include prohibition of
    rescissions. An issuer would be allowed to rescind policies
    only upon clear and convincing evidence of fraud. No later than
    July 1, 2010, the Secretary would issue guidance on
    implementing this requirement. In order for a rescission to
    take effect, the issuer would be required to provide notice to
    the enrollee of the proposed rescission and give that enrollee
    the opportunity for a review of the determination by an
    independent, external third party under procedures specified by
    the Secretary. The health coverage for an enrollee who requests
    such a review would remain in effect until the third party
    determines such coverage may be rescinded under Secretarial
    guidance. The requirements related to external review would
    apply on and after October 1, 2010 to all health insurance
    coverage, regardless of date of issue.
                Reason for Change
        This section curbs abuses by health insurers that
    retroactively deny patients their health coverage at the very
    time that coverage is most needed.
                Effective Date
        October 1, 2010.

    Sec. 163. Administrative Simplification

                Current Law
        HIPAA's Administrative Simplification provisions required
    the Secretary to adopt electronic format and data standards for
    nine specified administrative and financial transactions,
    including those related to enrollment in a health plan,
    eligibility for a plan, and health care payment and remittance.
    In addition, HIPAA directed the Secretary to adopt a standard
    for transferring standard data elements among health plans for
    the coordination of benefits and the sequential processing of
    claims. In 2000, CMS issued an initial set of standards for
    seven of the nine specified transactions and for the
    coordination of benefits. As required under HIPAA, CMS
    published an updated version of the standards in early 2009.
    The compliance date for implementing those updated standards is
    January 1, 2012.
        In September 2005, CMS published a proposed rule on a
    standard for electronic health care claims attachments, one of
    the two remaining transactions standards required to be
    adopted. A claims attachment transaction is used to request and
    supply additional data necessary to adjudicate a claim and
    typically includes specific clinical information that a plan
    needs in order to decide whether a service should be covered.
    This type of transaction is a key bridge between administrative
    transactions and clinical data. The claims attachment standard
    has yet to be finalized.
        HIPAA's Administrative Simplification provisions also
    instructed the Secretary to develop security standards to
    safeguard electronic health information from unauthorized
    access, use, and disclosure, and to issue standards to protect
    the privacy of patient information. The HIPAA privacy rule,
    which took effect in 2003, established a set of patient rights,
    including the right of access to one's medical information, and
    placed certain limitations of when and how health plans and
    health care providers may use and disclose patient information.
    The Health Information Technology for Economic and Clinical
    Health (HITECH) Act, enacted earlier this year as part of the
    Recovery Act, included a series of privacy and security
    provisions that amended and expanded the current HIPAA
    requirements. The HIPAA Administrative Simplification standards
    do not apply to the use and disclosure of information by
    financial institutions that are responsible for authorizing,
    processing, clearing, billing, transferring or collecting
    payments for premiums or health care.
                Proposed Law
        This provision would amend the HIPAA Administrative
    Simplification provisions by adding a new section requiring the
    Secretary, within two years of implementation of the updated
    HIPAA electronic transactions standards (i.e., by January
    2014), to adopt an additional set of financial and
    administrative transactions standards to help clarify,
    complete, and expand the existing requirements. The goal would
    be for the standards to be unique (with no conflicting or
    redundant standards), authoritative, and comprehensive,
    requiring minimal augmentation by paper transactions. In
    addition, the standards would describe all data elements in
    unambiguous terms and not permit optional fields. They would
    enable real-time (or near real-time) determination of a
    patient's financial responsibility at the point of service and
    adjudication of claims, and harmonize all common data elements
    across transactions standards. Finally, the standards would
    have to support electronic funds transfers as well as timely
    and transparent claim and denial management processes, enable
    providers to quickly and efficiently enroll with a health plan
    so as to conduct other electronic transactions, and provide for
    other requirements related to administrative simplification as
    identified by the Secretary.
        In developing the standards, the Secretary would be
    required to build upon existing and planned standards and
    regularly update the new standards. Within six months of
    enactment, the Secretary would be required to submit to
    Congress a plan for implementing and enforcing the new
    standards within five years of enactment. The plan would have
    to include a timetable for developing and regularly updating
    the new standards, implementation programs to help rural and
    other providers, an estimate of the funding needed to ensure
    timely completion of the implementation plan, and an
    enforcement process including timely investigation of
    complaints, random audits, and a fair and reasonable appeals
    process. The Secretary would have to ensure that all data
    collected pursuant to the new standards meets the HIPAA privacy
    and security requirements, as modified by the HITECH Act.
        The provision would require the Secretary, within one year
    of enactment, to issue a final rule to establish a standard for
    health claims attachment transactions. It also would clarify
    that the HIPAA standards do not apply to the use and disclosure
    of information by financial institutions that process payments
    unless they are business associates of health plans and health
    care providers.
                Reason for Change
        These changes are needed to eliminate waste from today's
    health system and will provide savings for providers--ensuring
    a more efficient health care delivery system.
                Effective Date
        For subsection (a), regarding new HIPAA standards for
    electronic administrative and financial transactions, within
    five years of enactment. For subsection (b), new standards for
    claims attachments and coordination of benefits, adopted within
    one year of enactment, would apply to transactions occurring on
    or after six months after enactment.

    Sec. 164. Reinsurance Program for Retirees

                Current Law
        No provision in current law. Average per capita health
    spending among the near elderly (55- to 64-year-olds) in 2004
    was $7,787, or 50% more than spending among 45- to 54-year-olds
    ($5,210), and more than double that of 19- to 44-year olds
    ($3,370). These spending levels carry over into health
    insurance costs for these age groups. In the non-group market,
    average premiums for the near elderly were nearly $1,200 more
    than 45- to 54-year-olds and triple that for 25- to 34-year
    olds. The near elderly were more likely than their younger
    adult counterparts to spend more than 10% of their after-tax
    income on health care and health insurance premiums.
                Proposed Law
        No later than 90 days after enactment, the Secretary would
    establish a temporary reinsurance program, to provide
    reimbursement to assist participating employment-based plans
    with the cost of providing health benefits to eligible retirees
    who are 55 and older and their dependents, including eligible
    and surviving spouses. Health benefits would be required to
    include medical, surgical, hospital, prescription drug, and
    other benefits determined by the Secretary. An eligible
    employment-based plan would submit an application to the
    Secretary, as required. A participating employment-based
    program would submit claims for reimbursement to the Secretary,
    documenting the actual cost of items and services for each
    claim. Each claim would be based on the actual amount expended
    by the participant. The participating employment-based plan
    would take into account any negotiated price concessions, such
    as discounts, subsidies, and rebates. The cost of deductibles
    and cost-sharing would be included in the cost of the claim,
    along with the amounts paid by the plan. For any valid claim,
    the Secretary would reimburse the plan for 80% of the portion
    of costs above $15,000 and below $90,000. This amount would be
    adjusted annually based on the percent increase in the medical
    care component of the Consumer Price Index, rounded to the
    nearest multiple of $1,000. Amounts paid to a participating
    employment-based plan would be used to lower costs directly to
    participants and beneficiaries in the form of premiums, co-
    payments, deductibles, co-insurance, or other out-of-pocket
    costs, but would not be used to reduce the costs of an employer
    maintaining the employment-based plan. The Secretary would
    establish an appeals process for denied claims, procedures to
    protect against fraud, waste, and abuse, and would conduct
    annual audits of claims data.
        The Retiree Reserve Trust Fund would be established
    consisting of such amounts as appropriated or credited to the
    Fund to enable the Secretary to carry out the reinsurance
    program. The Secretary could request such sums as necessary to
    carry out this section, not to exceed $10 billion. Amounts
    appropriated and outlays from such appropriation would not be
    taken into account for purpose of any budget enforcement
    procedures, thus exempting the Fund from the framework of the
    budget resolution and the points of order which enforce that
    framework. The Secretary would have the authority to stop
    taking applications or take other steps to reduce expenditures
    to ensure that expenditures did not exceed available funds.
                Reason for Change
        The provision of employer-sponsored retiree health benefits
    is of significant value to retirees. These investments also
    benefit the health system at large by keeping many of these
    individuals from otherwise becoming uninsured and resulting in
    higher uncompensated health care costs. This section provides
    financial assistance for those employers who continue to offer
    health benefits to their early retirees to encourage them to
    continue providing this valuable coverage.
        The Committee intends to remove the language referring to
    an exemption from budget enforcement procedures prior to
    consideration by the House.
                Effective Date
        Not later than 90 days after enactment.

           Title II--Health Insurance Exchange and Related Provisions

                     Subtitle A--Health Insurance Exchange

                Current Law
        No provision.
                Proposed Law

    Sec. 201. Establishment of Health Insurance Exchange; Outline of
            Duties; Definitions

        A Health Insurance Exchange (``Exchange'') would be
    established to facilitate access of individuals and employers
    to a variety of choices of affordable, quality health insurance
    coverage, including a public health insurance option. The
    Exchange would exist within the Health Choices Administration
    under the direction of the Health Choices Commissioner
    (described above in Sections 141 and 142). As described in
    greater detail in the following sections, regarding the
    Exchange, the Commissioner would (1) establish standards for,
    accept bids from, and negotiate and enter into contracts with
    entities seeking to offer qualified health benefits plans
    (QHBPs) through the Exchange, (2) facilitate outreach and
    enrollment of Exchange-eligible individuals and employers, and
    (3) conduct appropriate activities related to the Exchange,
    including establishment of a risk pooling mechanism and
    consumer protections.
                Reason for Change
        This provision would create a new, fair health insurance
    marketplace for individuals and families to choose from among a
    variety of plan options. The Commissioner of the Exchange will
    enforce federal minimum requirements for the individual and
    group market described in Title I. The Exchange would bring
    transparency to the health insurance marketplace so that
    individuals and families know what benefits their plan covers
    and what it will cost them.

    Sec. 202. Exchange-eligible Individuals and Employers

        Beginning in Y1, all individuals generally would be
    eligible to obtain coverage through the Exchange, unless they
    were enrolled in the following (as determined by the
    Commissioner, in coordination with the Treasury Secretary):
               a group plan through a full-time employee
            (including a self-employed person with at least one
            employee) for which the employer makes an adequate
            contribution (described below in Section 312);
               Medicare;
               Medicaid (except in certain cases, discussed
            below); or
               Military and VA coverage.
        Regarding Medicaid, individuals could still participate in
    the Exchange if their Medicaid eligibility was related to COBRA
    continuation coverage, tuberculosis, or breast or cervical
    cancer. As described in greater detail in Section 1701,
    Medicaid would be expanded to cover individuals up to 133% FPL
    who are not eligible under current state Medicaid programs--
    called ``non-traditional Medicaid eligible individuals'' per
    Section 205. A non-traditional Medicaid eligible individual
    could be Exchange-eligible if the individual was enrolled in a
    qualified health benefits plan, grandfathered health insurance
    coverage, or current group health plan during the six months
    before the individual became a non-traditional Medicaid
    eligible individual. During the period in which such an
    individual had chosen to enroll in an Exchange plan, the
    individual would be ineligible for regular Medicaid.
        Except for the Medicaid exception described above,
    individuals would lose eligibility for Exchange coverage once
    they become eligible for Medicare Part A, Medicaid (although in
    this case, the Commissioner could permit continued Exchange
    eligibility for such limited time as the Commissioner
    determines it is administratively feasible and consistent with
    minimizing disruption in the individual's access to health
    care), and other circumstances as the Commissioner provides.
    Besides those cases, once individuals enroll in an Exchange
    plan, they would continue to be eligible until they are no
    longer enrolled.
        Exchange-eligible employers could meet the requirements of
    the employer responsibility (Section 312) by offering and
    contributing adequately toward employees' enrollment through
    the Exchange. Those employees would be able to choose any of
    the available Exchange plans. Once employers are Exchange
    eligible and enroll their employees through the Exchange, they
    would continue to be Exchange eligible, unless they decided to
    then offer their own qualified health benefits plan(s).
        In Y1, only employers with 10 or fewer employees would be
    Exchange-eligible. In Y2, employers with 20 or fewer employees
    would be Exchange-eligible. Beginning in Y3, the Commissioner
    could permit larger employers to participate in the Exchange.
    These additional employers could be phased in or made eligible
    based on the number of full-time employees or other
    considerations the Commissioner deems appropriate.
    (``Employer'' and other employment-related definitions would be
    defined by the Commissioner.)
        The Commissioner would have the authority to establish
    rules to deal with special situations with regard to uninsured
    individuals participating as Exchange-eligible individuals and
    employers, such as transition periods for individuals and
    employers who gain, or lose, Exchange-eligible participation
    status, and to establish grace periods for premium payment.
        The Commissioner would be required to provide for periodic
    surveys of Exchange-eligible individuals and employers
    concerning their satisfaction with the Exchange and its plans.
        The Commissioner would conduct an Exchange Access Study--a
    study of access to the Health Insurance Exchange for
    individuals and for employers, including individuals such as
    Medicaid recipients and employers who are not eligible and
    enrolled in Exchange plans. The goal of the study would be to
    determine if there are significant groups and types of
    individuals and employers who are not Exchange eligible but who
    would have improved benefits and affordability if made
    eligible. The study also would examine the terms, conditions,
    and affordability of group health coverage offered by employers
    and QHBP-offering insurers outside of the Exchange compared to
    Exchange-participating health benefits plans, as well as the
    affordability test standard for access of certain employed
    individuals to coverage in the Health Insurance Exchange. The
    Commissioner would submit the study to Congress by January 1 of
    Y3, Y6 and thereafter, and would include in the report
    recommendations regarding changes in standards for Exchange
    eligibility for individuals and employers.
                Reason for Change
        This provision permits any individual or family to purchase
    a plan in the Exchange with their own funds if they are not
    enrolled in other coverage. This provision provides the
    Commissioner flexibility and discretion to make certain the
    Exchange operates effectively, including determinations of when
    certain sized employers could access the Exchange after the
    second year of operation. The Committee intends that the
    Commissioner open the Exchange to larger employers over time.

    Sec. 203. Benefits Package Levels

        The Commissioner would specify the benefits to be made
    available under Exchange plans during each plan year,
    consistent with this section and sections 121-134 above. The
    Commissioner could not enter into a contract with an entity
    wanting to offer coverage through the Exchange in a service
    area(s), unless the following requirements are met:
         The entity offers only one Basic plan in the
    service area.
         The entity may offer one Enhanced plan in the
    service area.
         If the entity offers an Enhanced plan in a service
    area, the entity may offer one Premium plan for the area.
         If the entity offers a Premium plan for a service
    area, the entity may offer one or more Premium-Plus plans for
    the area.
        All such plans could be offered under a single contract
    with the Commissioner.
        Consistent with the standards in Sections 101-164 above,
    the Commissioner would also establish the following standards
    for the three primary levels of Exchange plans--Basic,
    Enhanced, and Premium--and for additional benefits that may be
    offered in Premium-Plus plans. Besides offering the essential
    benefits package (Section 122 above) for a QHBP, Basic plan
    benefit packages would be modified to provide for reduced cost-
    sharing for individuals eligible for the ``affordability cost-
    sharing credit,'' described below in Section 244. Excluding the
    credit, the benefit package of a Basic plan would have an
    actuarial value representing payment for approximately 70% of
    all the covered items and services in the essential benefits
    package (Section 122 above). Enhanced plans would have lower
    cost-sharing than Basic plans, representing approximately 85%
    of the actuarial value of all the covered items and services in
    the essential benefits package. Premium plans would have lower
    cost-sharing than Enhanced plans, representing approximately
    95% of the actuarial value of all the covered items and
    services in the essential benefits package. Premium-Plus plans
    would be Premium plans that also provide additional benefits,
    such as adult oral health and vision care, approved by the
    Commissioner. The portion of the premium that is attributable
    to such additional benefits would be separately specified.
        The Commissioner would establish a permissible range of
    variation of cost-sharing for the Basic, Enhanced and Premium
    plans. Such variation would permit variations up to 10% in
    cost-sharing with respect to several benefit categories
    (Section 122); for example, with respect to a standard that
    provides for 20% coinsurance, the permissible variation would
    be between 18% and 22% coinsurance.
        If a state requires health insurers to offer benefits
    beyond the essential benefits package, such requirements would
    continue to apply to Exchange plans, but only if the state has
    entered into an arrangement satisfactory to the Commissioner to
    reimburse the Commissioner for the amount of any resulting net
    increase in affordability premium credits (Section 243).
                Reason for change
        This provision establishes consistent benefit packages so
    that consumers can easily choose among plans and so that plans
    do not use differences in benefit packages as a way to avoid
    consumers with high health care risks.

    Sec. 204. Contracts for the Offering of Exchange-participating Health
            Benefits Plans

        The Commissioner would establish standards, described
    below, for Exchange-participating entities and their health
    benefits plans. The Commissioner would certify entities and
    plans if the 43 standards are met. The Commissioner would
    solicit and review bids from QHBP-offering entities for
    offering Exchange plans, negotiate with the entities, and enter
    into contracts with the entities for offering plans through the
    Exchange under terms negotiated between the Exchange and the
    entities.
        The Federal Acquisition Regulation (the principal set of
    rules that govern the contracting process for the federal
    government) would not apply to contracts between the
    Commissioner and QHBP-offering entities for offering Exchange
    plans.
        The standards for Exchange-participating entities would
    consist of the following requirements:
         The entity must be licensed to offer health
    insurance coverage under state law for each state in which it
    offers coverage.
         The entity must provide for reporting data/
    information specified by the Commissioner, including
    information necessary to administer the risk pooling mechanism
    in Section 206 and information to address disparities in health
    and health care.
         The entity must provide for implementation of the
    affordability credits provided for enrollees (described in
    Sections 241-246 below).
         The entity must accept all applicable enrollment
    via the Exchange, subject to such exceptions (such as capacity
    limitations) in accordance with the federal requirements for
    QHBPs (discussed under Title I), and would notify the
    Commissioner if it projects or anticipates reaching a capacity
    that would result in a limitation in enrollment.
         The entity must participate in the pooling
    mechanism as established by the Commissioner (described in
    Section 206 below).
         Regarding the Basic plan offered by the entity,
    the entity must contract for outpatient services with certain
    federally supported health care providers. The Commissioner
    would also specify how this requirement would apply to Health
    Maintenance Organizations (HMOs).
         The entity must provide culturally and
    linguistically appropriate communication and health services.
         The entity must comply with other applicable
    requirements of this title specified by the Commissioner, which
    would include standards regarding billing and collection
    practices for premiums and grace periods and which may include
    standards to ensure that the entity does not use coercive
    practices to force providers not to contract with other
    entities offering coverage through the Exchange.
        For the contracting process, entities' bids would have to
    contain the information required by the Commissioner. Contracts
    would last at least one year, but could be automatically
    renewed in the absence of notice of termination by either
    party. The contract would provide that if the Commissioner
    determines that a plan's provider network is not adequate, then
    the cost-sharing charged to a person who received out-of-
    network care would be the same as if the care had been provided
    in-network.
        In coordination with state insurance regulators, the
    Commissioner would establish processes to oversee, monitor, and
    enforce applicable requirements on Exchange-participating
    entities and QHBPs, including plan marketing. In conjunction
    with state insurance regulators, the Commissioner would
    establish a process for individuals and employers to file
    complaints concerning violations. The Commissioner could
    terminate a contract with an entity if it fails to comply with
    the requirements of this title; the Commissioner could also
    impose one or more intermediate sanctions.
        Any determination by the Commissioner to terminate a
    contract would be made in accordance with formal investigation
    and compliance procedures established by the Commissioner under
    which (a) the Commissioner provides the entity with the
    reasonable opportunity to develop and implement a corrective
    action plan to correct the deficiencies that were the basis of
    the Commissioner's determination; and (b) the Commissioner
    provides the entity with reasonable notice and opportunity for
    hearing (including the right to appeal an initial decision)
    before terminating the contract. However, these procedures need
    not apply if the Commissioner determined that a delay in
    termination would pose an imminent and serious risk to the
    health of individuals enrolled under the plan.
                Reason for change
        To effectively operate an Exchange, the Commissioner will
    need to work with the States and establish the regulations
    needed to ensure plans offered in the Exchange meet federal
    requirements and certify that they meet the terms for operating
    in the Exchange.

    Sec. 205. Outreach and Enrollment of Exchange-eligible Individuals and
            Employers in Exchange-participating Health Benefits Plan

        Outreach. The Commissioner would conduct outreach
    activities to inform and educate individuals and employers
    about the Exchange and its participating health plans. Such
    outreach would include outreach specific to vulnerable
    populations, such as children, individuals with disabilities,
    individuals with mental illness, and individuals with other
    cognitive impairments. The Commissioner's required outreach
    activities would include the following:
               broadly disseminate information on Exchange-
            participating plans, provided in a comparative manner
            and including information on benefits, premiums, cost-
            sharing, quality, provider networks, and consumer
            satisfaction;
               provide assistance to Exchange-eligible
            individuals and employers via a toll-free telephone
            hotline and an Internet website;
               develop and disseminate information to
            Exchange-eligible enrollees on their rights and
            responsibilities;
               assist Exchange-eligible individuals in
            selecting plans and obtaining benefits; and
               ensure the information is developed using
            plain language (described in Section 133 above).
        Enrollment. The Commissioner would be required to make
    timely determinations of whether individuals and employers are
    eligible for Exchange coverage and to establish and carry out
    an enrollment process, including at community locations.
    Enrollment would be permitted by mail, telephone,
    electronically, or in person.
        Open enrollment for individuals and employers to enroll in
    an Exchange plan and affordability credits (described in
    Sections 241-245 below) would be at least 30 days and would be
    during September through November of each year before benefits
    would begin, or such other time that would maximize the
    timeliness of income verification. However, the Commissioner
    would also provide for special enrollment periods to take into
    account special circumstances of individuals and employers,
    such as an individual who loses acceptable coverage,
    experiences a change in marital or other dependent status,
    moves outside the plan's service area, or experiences a
    significant change in income. The Commissioner, potentially
    with other appropriate entities, would be required to broadly
    disseminate information on the enrollment process, including
    before each enrollment period.
        The Commissioner would establish a process to automatically
    enroll the following individuals into an appropriate Exchange
    plan (potentially involving a random assignment or some other
    form of assignment that takes into account the health care
    providers used by the individual, or such other relevant
    factors specified by the Commissioner):
               those who have applied for affordability
            credits, been determined eligible, have not opted out
            from receiving such credit, and do not enroll in
            another Exchange plan; and
               those enrolled in an Exchange plan that is
            terminated (during or at the end of a plan year) who do
            not enroll in another Exchange plan.
        Under the enrollment process, individuals enrolled in an
    Exchange plan would pay such plans directly, not through the
    Commissioner or the Exchange.
        Special provisions apply to newborns born in the United
    States without acceptable coverage at birth. Until other
    acceptable coverage begins, the child would be considered a
    non-traditional Medicaid-eligible individual (for whom the
    state would be paid 100% federal reimbursement) and would be
    deemed as having elected Medicaid coverage. This coverage would
    end no later than the end of the month 60 days after the
    child's birth; at the end of that period, if the child still
    does not have acceptable coverage, the child is deemed a
    traditional Medicaid-eligible individual, for whom the state
    receives the regular Medicaid federal matching rate.
        As of the day before the first day of Yl, CHIP-eligible
    children, including targeted low-income children in a Medicaid-
    expansion CHIP program, would be deemed to be Exchange
    eligible.
        The Commissioner would notify each state in Y1 whether the
    Exchange could support enrollment of these children.
        A ``traditional Medicaid eligible individual'' is a
    Medicaid-eligible individual excluding (1) those who are
    eligible because of the expansion of Medicaid in Section 1701
    of this legislation to individuals up to 133% FPL and (2) a
    childless adult who would not otherwise be classified as
    categorically needy (as per current Medicaid statute, Section
    1902(a)(10)(A)) or medically needy (as per current Medicaid
    statute, Section 1902(a)(10)(C)) as in effect as of the day
    before the date of enactment of this Act. A ``non-traditional
    Medicaid-eligible individual'' is a Medicaid-eligible
    individual who is not a traditional Medicaid-eligible
    individual. Section 202 of the legislation includes provisions
    so that a non-traditional Medicaid eligible individual could be
    Exchange-eligible if the individual was enrolled in a qualified
    health benefits plan, grandfathered health insurance coverage,
    or current group health plan during the six months before the
    individual became a non-traditional Medicaid eligible
    individual. Under this section, the Commissioner would provide
    these individuals with the option to enroll in Medicaid rather
    than an Exchange plan and to change that election during open
    enrollment periods described earlier in this section.
        An Exchange-eligible individual could apply for a Medicaid-
    eligibility determination. If the individual is determined to
    be eligible, the Commissioner would provide for the
    individual's enrollment under the state Medicaid plan in
    accordance with the Medicaid memorandum of understanding. In
    the case of such an enrollment, the state would provide for the
    same periodic redetermination of eligibility under Medicaid
    that would apply if the individual had directly applied to the
    state Medicaid agency. The legislation would require the
    Commissioner, in consultation with the HHS Secretary, to enter
    into a memorandum of understanding with each state with respect
    to coordinating enrollment of individuals in Exchange plans and
    under state Medicaid programs, and to otherwise coordinate the
    implementation of these provisions with respect to the Medicaid
    program. This memorandum would permit the exchange of
    information consistent with limitations specified in Medicaid
    statute with respect to providing safeguards that restrict the
    use or disclosure of information concerning applicants and
    recipients to purposes directly connected with the
    administration of the state Medicaid plan, and at state option,
    the exchange of information necessary to verify eligibility for
    other federal programs (e.g., for free and reduced price school
    lunches). None of these provisions could be construed as
    permitting such memorandum to modify or vitiate any requirement
    of a state Medicaid plan.
        In carrying out this section, the Commissioner would
    establish effective methods for communicating in plain language
    and a culturally and linguistically appropriate manner.
                Reason for Change
        To ensure that individuals and families are well aware of
    their rights and responsibilities under the act, the
    Commissioner must establish procedures to educate and enroll
    individuals and families.

    Sec. 206. Other Functions

        The Commissioner would be required to coordinate the
    distribution of affordability premium and cost-sharing credits
    (described below in Sections 243-244) to the Exchange plans.
    The Commissioner would also be required to establish a risk-
    pooling mechanism, to adjust premium payments to Exchange plans
    to take into account (in a manner specified by the
    Commissioner) the differences in the risk characteristics of
    individuals and employers enrolled under the Exchange plans.
        An Office of the Special Inspector General for the Exchange
    would be established, headed by a Special Inspector General
    appointed by the President and confirmed by the Senate. The
    Special Inspector General's nomination would be made as soon as
    practicable after the establishment of the Exchange.
        The duties of the Special Inspector General would consist
    of the following:
               conduct, supervise, and coordinate audits,
            evaluations and investigations of the Health Insurance
            Exchange to protect the integrity of the Exchange as
            well as the health and welfare of participants in the
            Exchange;
               report both to the Commissioner and to the
            Congress regarding program and management problems and
            recommendations to correct them;
               related to the duties above, have other
            duties described as applying to the Special Inspector
            General of the Troubled Asset Relief Program (TARP),
            per paragraphs (2) and (3) of Section 121 of P.L. 110-
            343; and
               in carrying out these duties, have the
            authorities of inspectors general in Section 6 of the
            Inspector General Act of 1978.
        Other provisions of the TARP Special Inspector General
    would also be applied, regarding the basis of the Special
    Inspector General's appointment, how s/he might be removed,
    his/her salary, and available personnel, facilities and other
    resources.
        Not later than one year after the confirmation of the
    Special Inspector General, and annually thereafter, the Special
    Inspector General would submit to the appropriate committees of
    Congress a report summarizing the activities of the Special
    Inspector General during the one year period ending on the date
    the report is submitted.
        The Office of the Special Inspector General would terminate
    five years after the date of the enactment of this Act.
                Reason for Change
        This provision ensures the Commissioner has full authority
    to operate the Exchange and creates an Inspector General to
    ensure adequate oversight and to combat waste, fraud and abuse
    within the system.

    Sec. 207. Health Insurance Exchange Trust Fund

        A ``Health Insurance Exchange Trust Fund'' would be created
    within the U.S. Treasury, consisting of such amounts as may be
    appropriated or credited to the fund. The Commissioner would
    pay from the Trust Fund amounts as determined necessary to make
    payments to operate the Exchange, including affordability
    credits.
        Dedicated payments to the Trust Fund would include the
    following:
               taxes on individuals not obtaining
            acceptable coverage (Section 401);
               taxes on employers electing to not provide
            health benefits (Section 412); and
               excise tax on employers who fail to satisfy
            health coverage participation requirements (Section
            411).
        Such additional sums as necessary would be appropriated.
    General provisions in the Internal Revenue Code regarding
    federal government trust funds would apply.
                Reason for change
        A trust fund is needed to hold the taxes collected under
    this act and to enable the payment from that fund for
    affordability credits and other costs of the Exchange.

    Sec. 208. Optional Operation of State-based Health Insurance Exchanges

        If a state (or group of states, subject to the
    Commissioner's approval) applied to the Commissioner for
    approval of a state-based Health Insurance Exchange, and if the
    Commissioner approves such state-based Exchange, then the
    state-based Exchange would operate instead of the federal
    Exchange in that state(s).
        The Commissioner could not approve a state-based Exchange
    unless the following requirements were met (and would be
    required to approve it if the conditions were met):
         The state-based Exchange must demonstrate the
    capacity to and provide assurances satisfactory to the
    Commissioner that it could carry out the functions specified
    for the federal Exchange in the state(s) including:
               negotiating and contracting with qualified plans;
               enrolling Exchange-eligible individuals and
            employers in plans;
               establishing sufficient local offices to meet the
            needs of Exchange-eligible individuals and employers;
               administering premium and cost-sharing credits
            (described below in Sections 241-246) using the same
            methodologies, and at least the same income
            verification methods, as would otherwise apply and at a
            cost to the federal government that is not greater than
            what would otherwise apply; and
               enforcement activities consistent with federal
            requirements.
         There is no more than one Exchange in operation in
    any one state.
         The state provides assurances satisfactory to the
    Commissioner that approval of such an Exchange would not result
    in any net increase in expenditures to the federal government.
         The State provides for reporting of such
    information as the Commissioner determines and assurances
    satisfactory to the Commissioner that it will vigorously
    enforce violations of applicable requirements.
         Such other requirements as the Commissioner may
    specify.
        A state-based Exchange could, at the option of the state,
    and only after providing timely and reasonable notice to the
    Commissioner, cease operation. In this case, the federal
    Exchange would be operational in the state(s).
        The Commissioner could terminate the approval (for some or
    all functions) of a state-based Exchange if the Commissioner
    determined that it no longer met the requirements listed above
    or was no longer capable of carrying out such functions. In
    lieu of terminating the state-based Exchange's approval, the
    Commissioner could temporarily assume some or all functions of
    the state-based Exchange until the Commissioner determined that
    it met the applicable requirements and was capable of carrying
    out those functions. The ceasing or termination of a state-
    based Exchange would be effective in such time and manner as
    the Commissioner would specify.
        Enforcement authorities of the Commissioner would be
    retained by the Commissioner. The Commissioner could specify
    functions of the federal Exchange that may not be performed by
    a state-based Exchange or that could be performed by both the
    Commissioner and the state-based Exchange.
        In the case of a state-based Exchange, except as the
    Commissioner may otherwise specify, any references to the
    ``Exchange'' or to the ``Commissioner'' in the area in which
    the state-based Exchange operates would be deemed a reference
    to the state-based Exchange and the head of that Exchange.
        In the case of a state-based Exchange, funding assistance
    would be provided for its operation in the form of a matching
    grant, with a state share of expenditures required.
                Reason for Change
        Ensures that States have the flexibility to choose to
    operate their own exchanges in lieu of the national Exchange.
    It also ensures that federally mandated minimum requirements
    are established and enforced across the nation and that states
    must meet federally mandated minimum requirements, but nothing
    in this title prevents a state from setting standards above the
    federal requirements.
                Effective Date
        January 1, 2013 for sections 201-208.

                   Subtitle B--Public Health Insurance Option

    Sec. 221. Establishment and Administration of a Public Health Insurance
            Option As An Exchange-Qualified Health Benefits Plan

                Current Law
        There is no federal public health insurance option that is
    currently available for the non-disabled population under age
    65. Medicare is an example of a federal public health insurance
    program for the aged and disabled. Under Medicare, Congress and
    the Department of Health and Human Services (HHS), Centers for
    Medicare and Medicaid Services (CMS) determine many parameters
    of the program including eligibility rules, financing
    (including determination of payroll taxes, and premiums),
    required benefits, payments to health care providers, and cost-
    sharing amounts.
                Proposed Law
        The provision would require the Secretary of Health and
    Human Services (Secretary) to provide for the offering of a
    public health insurance option through the Exchange starting
    Y1. The Secretary would be required to ensure that the public
    option provided choice, competition and stability of
    affordable, high quality coverage throughout the United States.
    The Secretary's primary responsibility would be to create a
    low-cost plan without compromising quality or access to care.
        The public option would only be available through the
    Health Insurance Exchange. The public option would be required
    to comply with requirements applicable to Exchange-
    participating health benefit plans, including requirements
    related to benefits, benefit levels, provider networks,
    notices, consumer protections, and cost sharing. The public
    option would be required to offer basic, enhanced, and premium
    plans, and would be allowed to offer premium-plus plans.
        The Secretary would be allowed to enter into contracts for
    the administration of the public option in the same manner as
    the Secretary is allowed to enter into contracts for the
    administration of the Medicare program. These administrative
    functions include, subject to restrictions, determination of
    payment amounts, making payments, beneficiary education and
    assistance, provider consultative services, communication with
    providers, and provider education and technical assistance. The
    provision would prohibit contracts that involve the transfer of
    insurance risk.
        The Secretary would be required to establish an office of
    the ombudsman for the public health insurance option which
    would have duties similar to those of the Medicare Beneficiary
    Ombudsman.
        The Secretary would be required to collect data necessary
    to establish premiums and payment rates and for other purposes,
    including improving quality and reducing racial and ethnic
    disparities in health and health care.
        With respect to the public health insurance option, the
    Secretary would be treated as an entity offering a Quality
    Health Benefit Plan through the Exchange.
        The provisions relating to access to Federal courts for
    enforcement of rights under Medicare would apply to the public
    option and individuals enrolled under the public option in the
    same manner that they apply to Medicare and Medicare
    beneficiaries.
                Reason for Change
        Many parts of the country have no effective competition in
    the insurance market. Health reform won't change that on its
    own. Only the creation of a national public health insurance
    option would ensure that all communities have access to a
    choice of health plans.
        In addition to expanding choice, a public health insurance
    option would inject price competition into the marketplace.
    Because the public option would not need to return profits to
    shareholders or pay exorbitant CEO salaries, the Congressional
    Budget Office estimates that it would be able to offer premiums
    slightly lower than private insurers do today. By injecting a
    lower price point into the market and providing more choice for
    people, the public option would force private insurers to seek
    efficiencies so they could lower their prices and improve their
    customer service to effectively compete.
        For health reform to prove effective, it must also change
    the way health care is delivered in our country--promoting
    primary care, encouraging coordinated care, and improving
    quality. The public health insurance option will be able to
    institute new payment structures and incentives to promote
    these critical reforms. As our experience with Medicare has
    shown, such innovations will expand access across the health
    care system as private plans adopt features that benefit their
    bottom lines. This will help cut costs across the system.
        In sum, the public health insurance option would expand
    choice, lower cost, and enhance innovation--all key components
    of health reform.
                Effective Date
        January 1, 2013.

    Sec. 222. Premiums and Financing

                Current Law
        No provision.
                Proposed Law
        The Secretary would be required to establish
    geographically-adjusted premiums for the public option in a
    manner that complies with the premium rules established by the
    Commissioner for Exchange-participating health benefit plans
    and at a level sufficient to fully finance the cost of health
    benefits and administration for the public option. Premiums
    would be required to include an appropriate amount for a
    contingency margin.
        The provision would establish an account in the Treasury
    for receipts and disbursements attributable to the public
    option, including start-up funding. The start-up funding would
    be equal to the sum of $2 billion for the establishment of the
    public option, and such sums as may be necessary to cover 90
    days worth of reserves based on projected enrollment. These
    amounts would be authorized to be appropriated to the Secretary
    out of any funds in the Treasury not otherwise appropriated.
    The Secretary would be required to provide for repayment of the
    startup funding in an amortized manner over a 10-year period
    starting in Y1. The provision specifies that nothing in this
    section could be construed as authorizing any additional
    appropriations to the account, other than amounts otherwise
    provided with respect to other Exchange-participating plans. As
    under the Medicare Advantage program, states would be
    prohibited from imposing a premium tax or similar tax with
    respect to the public option.
                Reason for Change
        This provision makes clear that HHS will have to determine
    premiums for the public option in each region similar to other
    plans in the Exchange. To ensure a level playing field with
    private plans, HHS will have to include initial start-up costs;
    however, the public option will be required to repay these
    initial funds in full. Beyond the initial appropriation (which
    will be repaid), the public option will finance costs for
    medical benefits and administration through its premiums.
                Effective Date
        January 1, 2013.

    Sec. 223. Payment Rates for Items and Services

                Current Law
        No provision.
                Proposed Law
        The Secretary would be required to establish payment rates
    for services and health care providers under the public option,
    and would have the authority to change payment rates in
    accordance with reforms under Section 224 as described below.
        In general, during the first three years of the public
    option, the Secretary would be required to base payment rates
    on the rates for similar services and providers under Medicare.
    Several exceptions to this provision would apply. First,
    payments for physicians' services otherwise established under
    Medicare would be applied to the public option without regard
    to the sustainable growth rate--one component of the formula
    used to update Medicare payments for physicians' services.
    Second, the update factor for physicians' payments for a year
    under the public option would not be less than 1%. Third, the
    Secretary would be given the authority to determine the extent
    to which adjustments applicable to the base payment rates under
    Part A and B of Medicare would apply to the public option. The
    Secretary would be required to modify the payments based on
    Medicare to accommodate payments for services not otherwise
    covered under Medicare, such as well-child visits. Under the
    public option, payments for prescription drugs that are not
    covered under Medicare Part A or B would be based on rates
    negotiated by the Secretary. As introduced and reported, H.R.
    3200 would allow the Secretary discretion to establish a
    prescription drug formulary, and use other methods, including
    those used by private sector pharmacy benefit managers, to
    reduce prescription drug costs under the public health
    insurance option, and the Committee expects that the Secretary
    would implement such a formulary.
        For services furnished in Y1, Y2, and Y3 of the public
    option, physicians and other health care practitioners who
    participate in both Medicare and the public option would
    receive payment rates 5% greater than rates otherwise
    established by the Secretary for items and professional
    services. Pediatricians and other practitioners who do not
    typically participate in Medicare--as determined by the
    Secretary--would also be eligible for the increased payment
    rates. Beginning in Y4 of the public option, the Secretary
    would be required to continue to use an administrative process
    to set payment rates to promote payment accuracy, to ensure
    adequate beneficiary access to providers, and to promote
    affordability and the efficient delivery of health care. The
    Secretary would be prohibited from setting rates at levels
    expected to increase overall medical costs for the public
    option beyond what would be expected if Medicare rates (plus
    the 5% addition) were to continue.
        Medicare participating providers would be participating
    providers under the public option unless they opted out in a
    process established by the Secretary.
        Chapter 5 of title 5 of the United States Code, dealing
    with administrative procedures in . government organizations,
    would apply to the process for initially establishing payment
    rates for the public option, but not to the specific
    methodology or calculation of those rates. Nothing in this
    section would limit the Secretary's authority to correct
    payments that were excessive or deficient, taking into account
    the amounts paid for similar health care providers and services
    under other Exchange-participating plans. Nothing in this
    section would affect the Secretary's authority to establish
    payment rates, including payments to providers for more
    efficient delivery of services, such as the initiatives under
    Section 244 of this bill, as described below. The provision
    would prohibit administrative or judicial review of a payment
    or methodology established under this section, or Section 244
    on modernized payment initiatives and delivery system reform.
                Reason for Change
        Outlines payment rates for the public option providers and
    provides the Secretary more with considerably more flexibility
    than current law Medicare to establish rates in the public
    option. Ensures that provider participation in the public
    option is voluntary.
                Effective Date
        January 1, 2013.

    Sec. 224. Modernized Payment Initiatives and Delivery System Reform

                Current Law
        No provision.
                Proposed Law
        Beginning in the first year of the public option, the
    Secretary would be given the authority to use innovative
    payment mechanisms and policies to determine payments for items
    and services under the public option. The payment mechanisms
    and policies may include the following: patient-centered
    medical home, other care management payments, accountable care
    organizations, value-based purchasing, bundling of services,
    differential payment rates, performance or utilization based
    payments, partial capitation, and direct contracting with
    providers. The Secretary would be required to design and
    implement the payment mechanisms and policies in a way that
    promotes high-quality care that is integrated, patient-centered
    and efficient, and that seeks to either (a) improve health
    outcomes, (b) reduce health disparities, (c) address geographic
    variation in the provision of health services, (d) prevent or
    manage chronic illness, or (e) provide efficient and affordable
    care. To the extent allowed under the rules for Exchange-
    participating plans, the provision would allow cost-sharing and
    payment rates under the public option to be modified to
    encourage the use of services that promote health and value.
    The provision specifies that nothing in the subtitle would
    prevent the Secretary from varying payments based on different
    payment structure models for different geographic areas.
                Reason for Change
        Provides the Secretary of HHS with broad authority to
    implement payment reforms to improve the delivery of health
    care and encourages the Secretary to build on efforts begun in
    Medicare.
                Effective Date
        January 1, 2013.

    Sec. 225. Provider Participation

                Current Law
        No provision.
                Proposed Law
        The Secretary would be required to establish conditions of
    participation for health care providers under the public
    option. The Secretary would be prohibited from allowing a
    health care provider to participate unless appropriately
    licensed or certified under State law. A health care provider
    that was excluded from participation in a Federal health care
    program (as defined in Section 1128(f) of the Social Security
    Act), would be prohibited from participating under the public
    option.
        Annually, the Secretary would be required to provide for
    physicians to participate in the public plan in one of two
    classes: (a) preferred physician, or (b) participating non-
    preferred physician. A preferred physician would be one who
    agreed to accept the established rate as payment in full. A
    participating non-preferred physician would be one who could
    impose charges that exceed the charges that may be imposed for
    such items and services in relation to the payment rate for
    such items and services under the public option (i.e. to
    ``balance bill''). The participating non-preferred physician
    would agree not to impose charges that exceed 115% of the
    amount established under Sec. 223 (consisting of the Medicare
    rate and the 5% addition). The Secretary would be required to
    provide for the participation of non-physician providers. Non-
    physician providers would only be allowed to participate if
    they accepted the established rates as payment in full.
                Reason for Change
        This provision ensures that the Secretary has the tools to
    establish the terms and conditions for providers to participate
    in the public option. The provision also defines two levels of
    physician participation and, in order to protect consumers,
    establishes rules on permissible cost sharing and payment to
    non-participating providers who treat enrollees in the public
    option.
                Effective Date
        January 1, 2013.

    Sec. 226. Application of Fraud and Abuse Provisions

                Current Law
        Title XVIII of the SSA, the Medicare statutes, requires
    activities that prevent, detect, investigate and prosecute
    health care fraud and abuse. In general, initiatives designed
    to fight fraud, waste, and abuse are considered program
    integrity activities. Program integrity is considered a
    component of the effective and efficient administration of
    government programs, which are entrusted with ensuring that
    taxpayer dollars are spent wisely. Efforts to ensure Medicare
    program integrity encompass a wide range of activities and
    require coordination among multiple private and public
    entities. This includes processes directed at reducing payment
    errors to Medicare providers, as well as activities to prevent,
    detect, investigate, and ultimately prosecute health care fraud
    and abuse.
                Proposed Law
        The provisions of law (other than criminal law) identified
    by the Secretary by regulation, in consultation with the
    Inspector General, that impose sanctions with respect to waste,
    fraud, and abuse under Medicare would also apply to the public
    health insurance option.
                Reason for Change
        Applies Medicare waste, fraud and abuse requirements in a
    similar manner to the public option.
                Effective Date
        January 1, 2013.

                  Subtitle C--Individual Affordability Credits

    Sec. 241. Availability Through Health Insurance Exchange

                Current Law
        No provision.
                Proposed Law
        This provision would provide premium and cost-sharing
    credits to ``affordable credit eligible individuals'' (defined
    in Section 242) for certain individuals enrolled in coverage
    through the Exchange. The Commissioner would pay each QHBP
    participating in the Exchange the aggregate amount of credits
    for all eligible individuals enrolled in that plan.
        An Exchange-eligible individual could apply to the
    Commissioner, through the Exchange or another entity under an
    arrangement made with the Commissioner, in a form and manner
    specified by the Commissioner. The Commissioner, through the
    Health Insurance Exchange or through another public entity
    under an arrangement made with the Commissioner, would make a
    determination as to eligibility of an individual for
    affordability credits. The Commissioner would establish a
    process whereby, on the basis of information otherwise
    available, individuals may be deemed eligible for credits. The
    Commissioner would also establish effective methods that ensure
    that individuals with limited English proficiency are able to
    apply for affordability credits.
        If the Commissioner determines that a state Medicaid agency
    has the capacity to make a determination of eligibility for
    affordability credits under the same standards as used by the
    Commissioner under the Medicaid memorandum of understanding
    (described above in Section 205), the state Medicaid agency is
    authorized to conduct such determinations for any Exchange-
    eligible individual who requests such a determination, and the
    Commissioner would reimburse the state Medicaid agency for the
    costs of conducting such determinations.
        In addition, there would be a Medicaid screen-and-enroll
    obligation, which would ensure that individuals applying for
    affordability credits, may be screened for Medicaid
    eligibility. If they are determined eligible for Medicaid, the
    Commissioner, through the Medicaid memorandum of understanding,
    would provide for their enrollment under the state Medicaid
    plan, and the state would provide for the same periodic
    redetermination of eligibility under Medicaid as would
    otherwise apply.
        During the first two years of implementation, credits would
    be allowed for coverage under a Basic plan only. Beginning in
    the third year, credits would be allowed for coverage under
    Enhanced or Premium plans by a process established by the
    Commissioner. Credits would continue to be based on the basic
    plan, the individual would be responsible for any difference
    between the premium for an Enhanced or Premium plan and the
    credit amount based on a Basic plan applicable to that
    enrollee.
        The Commissioner would be authorized to request from the
    Treasury Secretary information that may be required to carry
    out this subtitle (regarding individual affordability credits),
    consistent with existing rules regarding confidentiality and
    disclosure of tax return information. Individuals who are
    eligible to receive credits would not receive them in the form
    of cash payments.
                Reason for Change
        Establishes affordability credits for those without other
    coverage--or an offer of affordable coverage--to assist
    individuals and families with the purchase of health insurance
    coverage. These credits are key to ensuring people affordable
    health coverage. It also provides for the Exchange to
    coordinate with state Medicaid programs to ensure people are
    enrolled in the appropriate program.
                Effective Date
        January 1, 2013.

    Sec. 242. Affordable Credit Eligible Individual

                Current Law
        No provision.
                Proposed Law
        This provision would define an ``affordable credit eligible
    individual'' as an individual who (1) is lawfully present in a
    state in the United States (other than a nonimmigrant, with
    some exceptions), (2) is enrolled in an Exchange plan and is
    not enrolled through an employer plan that meets the employer
    responsibility to contribute toward employee and dependent
    coverage (described below in Section 312), (3) has family
    income below 400% FPL, and (4) who is not a Medicaid-eligible
    individual (other than some exceptions described above in
    Section 202). Family members who are eligible for credits will
    be treated as a single affordable credit eligible individual.
        Credits would not be available to full-time employees of an
    employer offering coverage consistent with the employer
    contribution rules described in Section 312. The Commissioner
    would make exceptions to this rule for divorced or separated
    individuals, or dependents of employees who would otherwise be
    eligible for credits. Exceptions would also be made, beginning
    in Y2, for full-time employees whose premium costs under a
    group health plan exceed 11% of family income.
        Income would be defined as ``modified adjusted gross
    income'' (MAGI), per the new section 59B of the Internal
    Revenue Code, added in Sec. 401. The Commissioner would conduct
    a study to examine the application of income disregards for the
    purposes of the affordability credits. The Commissioner would
    submit a report to Congress of such a study, including
    recommendations as the Commissioner determines appropriate.
    Affordability credits would not be treated as a federal means-
    tested public benefit for eligibility purposes for qualified
    aliens under the Personal Responsibility and Work Opportunity
    Reconciliation Act of 1996.
                Reason for Change
        This provision establishes that only American citizens and
    legal immigrants without an affordable offer of coverage
    (defined as premiums above 11 percent of family income) can
    apply for and receive credits toward health insurance coverage
    in the Exchange. The credits are focused on families most in
    need of assistance with the cost of health insurance coverage
    and are designed to assure that people obtain needed health
    care at an affordable price.
                Effective Date
        January 1, 2013.

    Sec. 243. Affordable Premium Credit

                Current Law
        No provision.
                Proposed Law
        This section would establish the rules for determining the
    amount of the premium credit provided to eligible individuals
    enrolled in an Exchange plan. The ``affordability premium
    credit'' would be an amount equal to the lesser of (1) the
    amount by which the enrollee's premium exceeds a specified
    level that is considered affordable (``affordable premium
    amount''), or (2) the amount by which the ``reference premium''
    (the average premium of the three least expensive Basic plans
    in the individual's premium rating area) exceeds the
    ``affordable premium amount.'' In calculating the reference
    premium, the Commissioner may exclude plans with extremely
    limited enrollments to ensure a more representative
    calculation.
        The affordable premium credit amount would be calculated on
    a monthly basis, based on the following table, to limit
    individuals' premium payments to a percentage of family income
    (MAGI) relative to the poverty level, as specified in the table
    below.

    ------------------------------------------------------------------------
                                                            Premium payment
           Federal poverty level (FPL) (in percent)           limit, as a
                                                           percent of income
    ------------------------------------------------------------------------
    133 or less..........................................                1.5
    150..................................................                  3
    200..................................................                  5
    250..................................................                  7
    300..................................................                  9
    350..................................................                 10
    400..................................................                 11
    ------------------------------------------------------------------------

        The Commissioner would establish premium percentage limits
    so whose family income is between the income tiers specified in
    the table, the percentage limits would increase on a linear
    sliding scale.
                Reason for Change
        Establishes the limits on premiums for individuals and
    families who are eligible for affordability credits. These
    limitations help ensure affordable health premiums for people
    below 400% of federal poverty who are buying coverage through
    the Exchange.
                Effective Date
        January 1, 2013

    Sec. 244. Affordability Cost-Sharing Credit.

                Current Law
        No provision.
                Proposed Law
        The affordability cost-sharing credit under this section
    would be available to those enrolled in an Exchange plan whose
    income is less than 400% FPL. The Commissioner would specify
    reductions in cost-sharing amounts and the annual limitation
    (out-of-pocket maximum) on cost-sharing under a Basic plan so
    that the average percentage of covered benefits paid by the
    plan (as estimated by the Commissioner) is equal to the
    percentages (actuarial values) in the table for each income
    tier.

    ------------------------------------------------------------------------
                                                            Actuarial value
           Federal poverty level (FPL) (in percent)            percentage
    ------------------------------------------------------------------------
    150 or less..........................................                 97
    200..................................................                 93
    250..................................................                 85
    300..................................................                 78
    350..................................................                 72
    400..................................................                 70
    ------------------------------------------------------------------------

        The Commissioner would provide payments to QHBP-offering
    entities in an amount equivalent to the increased actuarial
    value of benefits resulting from the cost-sharing reductions.
                Reason for Change
        Establishes cost sharing limitations for individuals and
    families who are eligible for affordability credits. These
    limitations help ensure affordable cost-sharing and access for
    people below 400% of federal poverty who are buying coverage
    through the Exchange.
                Effective Date
        January 1, 2013.

    Sec. 245 Income Determinations

                Current Law
        No provision.
                Proposed Law
        This provision would use an individual's adjusted gross
    income in the most recent taxable year for determination of a
    credit under this Subtitle. The Commissioner would take steps
    as may be appropriate to ensure the accuracy of determinations
    and redeterminations under this subtitle. The Commissioner
    would request information from the Treasury Secretary as may be
    permitted to verify income information submitted in
    applications for credits. The Commissioner would establish
    procedures for verification of income if no tax return is
    available for the most recent completed tax year. The
    Commissioner would establish special rules for cases when an
    individual's income is expected (in a manner specified by the
    Commissioner) to be significantly different from the income
    submitted for application for and determination of a credit.
    The Commissioner would establish rules under which an
    individual would be required to inform the Commissioner when
    there is a significant change in income. Such mechanism would
    provide for guidelines that specify the circumstances that
    qualify as a significant change, the verifiable information
    required to document such a change, and the process for
    submission of such information. If the Commissioner receives
    new information from an individual regarding the family income
    of the individual, the Commissioner would provide for a
    redetermination of the individual's eligibility to be an
    affordable credit eligible individual.
        For a CHIP-eligible child deemed to be eligible for
    coverage through the Exchange, during the first year of
    implementation the Commissioner would establish rules under
    which family income of the child is deemed to be no greater
    than the family income of that child as most recently
    determined by the State under CHIP. The Commissioner would
    examine the feasibility and implication of adjusting the
    application of the federal poverty level in this Subtitle to
    take into account geographic differences, in order to reflect
    cost-of-living variations across the country. The Commissioner
    would submit a report to Congress, no later than the first day
    of the second year of implementation, on such a study and make
    recommendations as appropriate. An individual who intentionally
    misrepresents family income or fails to disclose to the
    Commissioner a significant change in family income would be
    liable for repayment of any improperly received credit and, in
    the case of intentional misrepresentation, may be required to
    pay an additional penalty as imposed by the Commissioner.
                Reason for change
        Establishes the process for the Commissioner to determine
    income eligibility for affordability credits and directs the
    Commissioner to establish clear, enforceable procedures for
    eligibility determinations so that financial assistance is
    provided as outlined in this act.
                Effective Date
        January 1, 2013.

    Sec. 246. No Federal Payment for Undocumented Aliens

                Current Law
        No provision.
                Proposed Law
        No credits would be given to individuals who are not
    lawfully present in the country.
                Reason for change
        The provision reinforces that credits are not available for
    undocumented persons and that the Commissioner will have to
    establish a process to enforce this federal requirement.
                Effective Date
        January 1, 2013.

                        TITLE III--SHARED RESPONSIBILITY

              A. Individual Responsibility (sec. 301 of the bill)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        Individual responsibility is a key component of health
    reform. In order to control rising health care costs, it is
    vital that everyone be part of the health care system. The only
    way to ensure that almost everyone is participating is to
    require such participation by law. To that end, the bill
    institutes a tax on individuals who choose not to purchase
    qualified health insurance as the mechanism to enforce
    participation. The Committee believes that a fair tax rate is
    based on the individual's ability to pay, but capped at the
    average cost of health insurance in the national market.

                            EXPLANATION OF PROVISION

        The provision cross-references the shared responsibility
    provisions of section 59B of the Code (as added by section 401
    of the bill) which provides for a tax on an individual (or a
    husband and wife in the case of a joint return) who do not
    maintain coverage under acceptable health insurance for
    themselves and each of their qualifying children.

                                 EFFECTIVE DATE

        The provision is effective for taxable years beginning
    after December 31, 2012.

      B. Health Coverage Participation Requirements (sec. 311 of the bill)

                                  PRESENT LAW

        For employers that currently choose to provide health
    coverage for their employees, the cost to an employer of
    providing health coverage for its employees is generally
    deductible as an ordinary and necessary business expense for
    employee compensation.\1\ In addition, compensation in the form
    of employer-provided health insurance is not subject to payroll
    taxes.\2\
    ---------------------------------------------------------------------------
        \1\Sec. 162. However see special rules in section 419 and 419A for
    the deductibility of contributions to welfare benefit plans with
    respect to medical benefits for employees and their dependents.
        \2\Secs. 3121(a)(2) and 3306(b)(2).
    ---------------------------------------------------------------------------
        The Code generally provides that employees are not taxed on
    (that is, may exclude from gross income) the value of employer-
    provided health coverage under an accident or health plan.\3\
    In addition, medical care provided under an accident or health
    plan for employees, their spouses, and their dependents is
    excluded from the gross income of the employee.\4\ Employees
    participating in a cafeteria plan may be able to pay their
    share of premiums on a pre-tax basis through salary
    reduction.\5\ Such salary reduction contributions are treated
    as employer contributions and thus are also excluded from gross
    income.
    ---------------------------------------------------------------------------
        \3\Sec. 106.
        \4\Sec. 105(b).
        \5\Sec. 125.
    ---------------------------------------------------------------------------
        The Employee Retirement Income Security Act of 1974
    (``ERISA'')\6\ preempts State law relating to certain employee
    benefit plans, including employer-sponsored health plans. While
    ERISA specifically provides that its preemption rule does not
    exempt or relieve any person from any State law which regulates
    insurance, ERISA also provides that an employee benefit plan is
    not deemed to be engaged in the business of insurance for
    purposes of any State law regulating insurance companies or
    insurance contracts. As a result of this ERISA preemption,
    self-insured employer-sponsored health plans need not provide
    benefits that are mandated under State insurance law.
    ---------------------------------------------------------------------------
        \6\Pub.L. No. 93-406.
    ---------------------------------------------------------------------------
        While ERISA does not require an employer to offer health
    benefits, it does require compliance with certain rules if an
    employer chooses to offer health benefits, such as compliance
    with plan fiduciary standards, reporting and disclosure
    requirements, and procedures for appealing denied benefit
    claims. ERISA was amended (as well as the Public Health Service
    Act\7\ and the Internal Revenue Code) in the Consolidated
    Omnibus Budget Reconciliation Act of 1985 (``COBRA'')\8\ and
    the Health Insurance Portability and Accountability Act of 1996
    (``HIPAA''),\9\ adding other Federal requirements for health
    plans, including rules for health care continuation coverage,
    limitations on exclusions from coverage based on preexisting
    conditions, and a few benefit requirements such as minimum
    hospital stay requirements for mothers following the birth of a
    child.
    ---------------------------------------------------------------------------
        \7\42 U.S.C. GA.
        \8\Pub. L. No. 99-272.
        \9\Pub. L. No. 104-191.
    ---------------------------------------------------------------------------
        The Code imposes an excise tax on group health plans that
    fail to meet HIPAA and COBRA requirements. The excise tax
    generally is equal to $100 per day per failure during the
    period of noncompliance and generally is imposed on the
    employer sponsoring the plan.\10\
    ---------------------------------------------------------------------------
        \10\Secs. 4980B and 4980D.
    ---------------------------------------------------------------------------
        Under Medicaid, states may establish ``premium assistance''
    programs, which pay a Medicaid beneficiary's share of premiums
    for employer-sponsored health coverage. Besides being available
    to the beneficiary through his or her employer, the coverage
    must be comprehensive and cost-effective for the State. A 2007
    analysis showed that 12 states had Medicaid premium assistance
    programs as authorized under current law.\11\
    ---------------------------------------------------------------------------
        \11\U.S. Department of Health and Human Services, Center for
    Medicare and Medicaid Services, ``The State Children's Health Insurance
    Program,'' Powerpoint Presentation, March 5, 2007, p. 14.
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The Committee believes that individuals, employers, and the
    government share responsibility to ensure that all Americans
    have affordable coverage of essential health benefits. The
    Committee believes that employers have a particular
    responsibility to either offer coverage to their employees or
    contribute to the cost of health care coverage, and that the
    most effective means of implementing health care reform is to
    build on the current system of employer-sponsored health
    coverage that already provides coverage to many American
    families.

                            EXPLANATION OF PROVISION

        Employers offering health benefit plans are required to
    offer individual and family coverage under a qualified health
    benefits plan\12\ (or under certain grandfathered plans) and to
    make contributions to help discharge the coverage costs of
    employees enrolled in the employer-provided plan.
    ---------------------------------------------------------------------------
        \12\For a plan to be a ``qualified health benefits plan'' it needs
    to meet certain minimum coverage requirements, but it need not be
    offered through the Exchange.
    ---------------------------------------------------------------------------
        Beginning in the second year after the general effective
    date of the market reforms of the bill, employers are required
    to make contributions to the Health Insurance Exchange (the
    ``Exchange'') for employees who decline employer-provided
    coverage and instead enroll in an Exchange-participating plan.
    However contributions are not required if the employee declines
    coverage because the employee is enrolled in family coverage in
    the Exchange as a spouse or dependent of another insured.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

    C. Employer Responsibility to Contribute Towards Employee and Dependant
                        Coverage (sec. 312 of the bill)

                                  PRESENT LAW

        For employers who choose to offer coverage to their
    employees, the cost to an employer of providing health coverage
    for its employees, including the cost of employer contributions
    towards health coverage premiums, is generally deductible as an
    ordinary and necessary business expense for employee
    compensation.\13\ In addition, compensation in the form of
    employer-provided health insurance is not subject to payroll
    taxes.\14\
    ---------------------------------------------------------------------------
        \13\Sec. 162. However see special rules in section 419 and 419A for
    the deductibility of contributions to welfare benefit plans with
    respect to medical benefits for employees and their dependents.
        \14\Secs. 3121(a)(2) and 3306(b)(2).
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The Committee believes that employers have a particular
    responsibility to contribute to the cost of health care of
    their employees, and this requires substantive contributions to
    single or family health plans provided by the employer. These
    employer contributions will help in the effort to provide
    quality, affordable health coverage for all Americans.

                            EXPLANATION OF PROVISION

    Contribution requirements

        Employers that offer health benefit plans are required to
    offer individual and family coverage under a qualified health
    benefit plan\15\ (or certain grandfathered health insurance
    plans) and to make contributions to help discharge the coverage
    costs of employees (and their spouses and qualifying children,
    if any) enrolled in the employer-provided plan.
    ---------------------------------------------------------------------------
        \15\For a plan to be a ``qualified health benefits plan'' it needs
    to meet certain minimum coverage requirements, but it need not be
    offered through the Health Insurance Exchange.
    ---------------------------------------------------------------------------
        For full time employees, the contribution amount is
    required to be at least 72.5 percent of the lowest cost plan
    offered by the employer which meets the requirements of the
    essential benefits package\16\ (65 percent for eligible
    employees electing family coverage).\17\ For part time
    employees, the contribution amount is a fraction (as determined
    in accordance with rules of the Health Choices Commissioner and
    the Secretaries of Labor, Health and Human Services, and the
    Treasury, as applicable) of the minimum contributions made for
    full time employees, with such fraction being equal to a ratio
    of the average weekly hours worked by the employee compared to
    the minimum weekly hours specified by the Health Choices
    Commissioner. An employer cannot satisfy the minimum
    contribution requirement through a salary reduction arrangement
    with the employee.
    ---------------------------------------------------------------------------
        \16\The essential benefits package includes certain specified
    limits on required cost sharing, bans annual or life time limits on
    covered health care items or services and certain specified minimum
    services, and imposes certain requirements as to network adequacy as
    determined by the Health Choices Commissioner.
        \17\There is a special rule for determining the lowest cost plan
    with respect to coverage of an employee under an Exchange participating
    health benefits plan. In that case the lowest cost plan is the
    reference premium used for determining the amount of affordability
    credits.
    ---------------------------------------------------------------------------

    Automatic enrollment for employee sponsored health benefits

        An employer that elects to offer health benefit plans must
    provide each employee with a 30-day opt-out period after the
    employee becomes eligible for employer-provided coverage in
    which to either decline coverage entirely of affirmatively
    enroll in a health plan. At the end of the 30-day period, if
    the employee does not make an affirmative election with respect
    to health coverage, the employer must automatically enroll the
    employee for individual (not family) coverage in the employer-
    sponsored health benefit plan with the lowest applicable
    employee premium.
        Employers are required, within a reasonable period before
    the beginning of each plan year, to provide employees with
    written notice of employees' rights and obligations relating to
    automatic enrollment. The notice must be both comprehensive in
    scope (for example, it must explain opt-out and affirmative
    election rights) and easily understood by the average employee
    to whom it pertains. Specifically, the notice must explain an
    employee's right to make an affirmative election as to health
    coverage rather than being automatically enrolled; and, if more
    than one level of benefits or employee premium is offered by
    the employer, the notice must explain in which level of
    benefits and employee premium the employee will be
    automatically enrolled absent an affirmative election.

    Provision of information to multiple agencies

        Employers that offer health benefit plans are required to
    provide the Health Choices Commissioner, and the Secretaries of
    Labor, Health and Human Services, and the Treasury with
    information required by the Health Choices Commissioner to
    ascertain compliance with the provision's requirements.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

      D. Employer Contributions in Lieu of Coverage (sec. 313 of the bill)

                                  PRESENT LAW

        For employers who choose to provide coverage for their
    employees, the cost to an employer of providing health coverage
    for its employees is generally deductible as an ordinary and
    necessary business expense for employee compensation.\18\ In
    addition, compensation in the form of employer-provided health
    insurance is not subject to payroll taxes.\19\
    ---------------------------------------------------------------------------
        \18\Sec. 162. However, see special rules in section 419 and 419A
    for the deductibility of contributions to welfare benefit plans with
    respect to medical benefits for employees and their dependents.
        \19\Secs. 3121(a)(2) and 3306(b)(2).
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        If an employer offers coverage and some employees make an
    affirmative choice not to enroll in employer-provided plans
    because they cannot afford the provided coverage, the
    employers' responsibility to play a role in the provision of
    health care is not waived if that employee chooses coverage in
    the Exchange. Employers' contribution in lieu of coverage
    ensures that employers contribute to the provision of health
    care for all employees who either accept their employer-
    sponsored insurance or who seek more affordable coverage in the
    Exchange. For small businesses, reduced contributions help to
    ensure that small businesses continue to thrive.

                            EXPLANATION OF PROVISION

        Beginning in the second year after enactment of the
    provision, employers are required to make contributions to the
    Health Insurance Exchange for employees who decline employer-
    provided coverage and instead enroll in an Exchange-
    participating plan. The contribution amount is equal to eight
    percent of the average wages paid by the employer to its
    employee during the time the employee was enrolled in the non-
    employer-provided plan. However, contributions are not required
    if the employee declines coverage because the employee is
    enrolled in family coverage as a spouse or dependent of another
    insured. Employers with annual payrolls not exceeding $250,000
    during the preceding calendar year are not subject to the tax.
    Employers with annual payrolls between $250,000 and $400,000
    during the preceding calendar year are subject to a reduced
    rate. Employer contributions are paid to the Health Choices
    Commissioner and deposited into the Health Insurance Exchange
    Trust Fund. The contributions are not tied to a particular
    employee (i.e., the contribution does not subsidize an
    employee's premium liability). This contribution requirement
    parallels the payroll tax equal to eight percent of wages that
    applies to nonelecting employers.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

        E. Authority Related to Improper Steering (sec. 314 of the bill)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        The availability of affordability credits for qualifying
    individuals might lead employers to manipulate their offer of
    health coverage in order to encourage selection of healthier
    employees into their health plan while less healthy employees
    disproportionately join the Exchange. Consequently, the Health
    Choices Commissioner must be given tools to allow it to address
    abusive practices and ensure that both employer and Exchange
    health plans attract a broad range of risk which will promote
    efficient insurance markets and mitigate adverse selection.

                            EXPLANATION OF PROVISION

        The Health Choices Commissioner (in coordination with the
    Secretaries of Labor, Health and Human Services, and the
    Treasury) has the authority to set standards for determining
    whether employers, in the course of offering coverage, are
    undertaking any actions to affect the risk pool within the
    Health Insurance Exchange by inducing employees to enroll in
    Exchange-participating health plans rather than in employer-
    provided plans. An employer found to be violating these
    standards is treated as not meeting the provision's coverage
    requirements.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

    F. Satisfaction of Health Coverage Participation Requirements Under the
     Employee Retirement Income Security Act of 1974 (sec. 321 of the bill)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        The Committee believes that individuals, employers, and the
    government share responsibility in ensuring that all Americans
    have affordable coverage of essential health benefits. The
    Committee believes that employers have a particular
    responsibility to either offer coverage to their employees or
    contribute to the cost of health care coverage, and that the
    most effective means of implementing health care reform is to
    build on the current system of employer-sponsored health
    coverage that provides coverage to many American families.

                            EXPLANATION OF PROVISION

    Elections

        Under the provision, employers are required to make an
    affirmative election regarding whether to offer health benefit
    plans to employees. Employers electing to offer health benefit
    plans are required to have their plans meet certain minimum
    coverage requirements. Employers electing to offer health
    benefit plans are treated as having established and maintained
    a group health plan for purposes of ERISA, and the provision's
    health coverage participation requirements are deemed to be
    part of the terms and conditions of the employer-provided plan.
        The Secretary of Labor is required to conduct periodic
    audits of a representative sampling of employers and employer-
    provided group health plans in order to discover noncompliance.
    The Secretary of Labor must share findings of noncompliance
    with the Secretary of the Treasury and the Health Choices
    Commissioner, and must take timely enforcement action as
    appropriate to achieve compliance.

    Aggregation rules

        For affiliated groups of employers, the identity of the
    employer would generally be determined by applying the employer
    aggregation rules in section 414(b), (c), (m), and (o).\20\ The
    same election would apply to all employers in the aggregated
    group. Employers would be able to make separate elections for
    employees in separate lines of business, or for full time
    employees and part time employees.
    ---------------------------------------------------------------------------
        \20\Section 414(b) provides that, for specified employee benefit
    purposes, all employees of all corporations which are members of a
    controlled group of corporations are treated as employed by a single
    employer. There is a similar rule in section 414(c) under which all
    employees of trades or businesses (whether or not incorporated) which
    are under common control are treated under regulations as employed by a
    single employer, and, in section 414(m), under which employees of an
    affiliated service group (as defined in that section) are treated as
    employed by a single employer. Section 414(o) authorizes the Treasury
    to issue regulations to prevent avoidance of the requirements under
    section 414(m).
    ---------------------------------------------------------------------------

    Noncompliance with coverage requirements

                Termination of election
        The Secretary of Labor (in coordination with the Health
    Choices Commissioner) may terminate an employer's election (and
    thus subject the employer to the payroll tax imposed on
    employers that do not offer coverage) if the Secretary
    determines that the employer was substantially noncompliant
    with the health coverage participation requirements. The
    Secretary is permitted to promulgate regulations to carry out
    the provisions of these coverage requirements, and may issue
    interim final rules as appropriate.
                Civil penalties
        Employers who elect to provide coverage but whose health
    benefit plans fail to meet the provision's minimum health
    coverage participation requirements are subject to penalties of
    $100 per day for each employee to whom the failure applies.\21\
    The Secretary of Labor is required to give advance written
    notification of failure to employers prior to the assessment of
    a penalty.
    ---------------------------------------------------------------------------
        \21\The provision permits the penalties to be assessed through an
    excise tax or a civil penalty under the Employee Retirement Income
    Security Act of 1974 or the Public Health Service Act. Penalties for
    any particular failure may not be duplicated, however.
    ---------------------------------------------------------------------------
        The penalties do not apply to (1) periods during which an
    employer used reasonable diligence but did not discover any
    failures, and (2) failures that were corrected within 30 days
    of discovery (but only if such failures were due to reasonable
    cause and not willful neglect). Penalties imposed on employers
    for unintentional failures (i.e., due to reasonable cause and
    not willful neglect) are to be limited to the lesser of 10
    percent of the aggregate amount paid or incurred by the
    employer during the preceding taxable year for group health
    plans, or $500,000.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

    G. Satisfaction of Health Coverage Participation Requirements Under the
              Internal Revenue Code of 1986 (sec. 322 of the bill)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        The Committee believes that individuals, employers, and the
    government share responsibility to ensure that all Americans
    have affordable coverage of essential health benefits. The
    Committee believes that employers have a particular
    responsibility to contribute to the health care coverage of
    their employees and that such responsibility exists even on the
    part of employers who choose not to provide health care to
    their employees.

                            EXPLANATION OF PROVISION

        The provision cross-references the satisfaction of health
    coverage participation requirements in section 3111(c) of the
    Code (as added by section 412 of the bill) and the excise tax
    provisions relating to failures of electing employers to comply
    with coverage requirements in section 4980H of the Code (as
    added by section 411 of the bill).

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

    H. Satisfaction of Health Coverage Participation Requirements Under the
                Public Health Service Act (sec. 323 of the bill)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        The Committee believes that individuals, employers, and the
    government share responsibility in ensuring that all Americans
    have affordable coverage of essential health benefits. The
    Committee believes that employers have a particular
    responsibility to contribute to the health care coverage of
    their employees, and that the most effective means of
    implementing health care reform is to build on the current
    system of employer-sponsored health coverage that provides
    coverage to many American families.

                            EXPLANATION OF PROVISION

    Elections

        Under the provision, employers are required to make an
    affirmative election regarding whether to offer health benefit
    plans to employees. Employers electing to offer health benefit
    plans are required to have their plans meet certain minimum
    coverage requirements. Employers electing to offer health
    benefit plans are treated as having established and maintained
    a group health plan for purposes of the Public Health Service
    Act,\22\ and the provision's health coverage participation
    requirements are deemed to be part of the terms and conditions
    of the employer-provided plan.
    ---------------------------------------------------------------------------
        \22\42 U.S.C. 6A.
    ---------------------------------------------------------------------------
        The Secretary of Health and Human Services is required to
    conduct periodic audits of a representative sampling of
    employers and employer-provided group health plans in order to
    discover noncompliance. The Secretary of Health and Human
    Services must share findings of noncompliance with the
    Secretary of the Treasury and the Health Choices Commissioner,
    and must take timely enforcement action as appropriate to
    achieve compliance.

    Aggregation rules

        For affiliated groups of employers, the identity of the
    employer would generally be determined by applying the employer
    aggregation rules in section 414(b), (c), (m), and (o).\23\
    ---------------------------------------------------------------------------
        \23\Section 414(b) provides that, for specified employee benefit
    purposes, all employees of all corporations which are members of a
    controlled group of corporations are treated as employed by a single
    employer. There is a similar rule in section 414(c) under which all
    employees of trades or businesses (whether or not incorporated) which
    are under common control are treated under regulations as employed by a
    single employer, and, in section 414(m), under which employees of an
    affiliated service group (as defined in that section) are treated as
    employed by a single employer. Section 414(o) authorizes the Treasury
    to issue regulations to prevent avoidance of the requirements under
    section 414(m). The same election would apply to all employers in the
    aggregated group. Employers would be able to make separate elections
    for employees in separate lines of business, or for full time employees
    and part time employees.
    ---------------------------------------------------------------------------

    Noncompliance with coverage requirements

                Termination of election
        The Secretary of Health and Human Services (in coordination
    with the Health Choices Commissioner) may terminate an
    employer's election (and thus subject the employer to the
    payroll tax imposed on employers that do not offer coverage) if
    the Secretary determines that the employer was substantially
    noncompliant with the health coverage participation
    requirements. The Secretary is permitted to promulgate
    regulations to carry out the provisions of these coverage
    requirements, and may issue interim final rules as appropriate.
                Civil penalties
        Employers who elect to provide coverage but whose health
    benefit plans fail to meet the provision's minimum health
    coverage participation requirements are subject to penalties of
    $100 per day for each employee to whom the failure applies.\24\
    The Secretary of Health and Human Services is required to give
    advance written notification of failure to employers prior to
    the assessment of a penalty.
    ---------------------------------------------------------------------------
        \24\The provision permits the penalties to be assessed through an
    excise tax or a civil penalty under the Employee Retirement Income
    Security Act of 1974 or the Public Health Service Act. Penalties for
    any particular failure may not be duplicated, however.
    ---------------------------------------------------------------------------
        The penalties do not apply to (1) periods during which an
    employer used reasonable diligence but did not discover any
    failures, and (2) failures that were corrected within 30 days
    of discovery (but only if such failures were due to reasonable
    cause and not willful neglect). Penalties imposed on employers
    for unintentional failures (i.e., due to reasonable cause and
    not willful neglect) are to be limited to the lesser of 10
    percent of the aggregate amount paid or incurred by the
    employer during the preceding taxable year for group health
    plans, or $500,000.
        The Secretary of Health and Human Services is permitted to
    bring a civil action in any United States District Court to
    collect civil penalties.

    Regulations

        The Secretary of Health and Human Services is permitted to
    promulgate regulations to carry out the terms of the provision,
    and may issue interim final rules as appropriate.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

         I. Additional Rules Relating to Health Coverage Participation
                      Requirements (sec. 324 of the bill)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        The reforms implemented by the bill must be interpreted and
    enforced in a uniform and consistent manner so that American
    families and businesses can realize the benefits provided by
    comprehensive health reform. Requiring the Exchange and the
    Departments of Health and Human Services, Labor, and Treasury
    to develop coordinated interpretative and enforcement measures
    with respect to employer-provided health care furthers this
    objective.

                            EXPLANATION OF PROVISION

        The Health Choices Commissioner and the Secretaries of
    Labor, Health and Human Services, and the Treasury are required
    to execute an interagency memorandum of understanding to ensure
    coordination with respect to regulations, rulings,
    interpretations, and enforcement of the employer responsibility
    requirements relating to the offering of health insurance set
    forth in the Code and the parallel provisions in ERISA and the
    Public Health Service Act. The interagency memorandum must
    provide that in the case of multiemployer group health
    plans\25\ the health coverage participation requirements apply
    to the plan sponsor and the contributing sponsors of the plan.
    ---------------------------------------------------------------------------
        \25\A multiemployer plan is a collectively bargained plan
    maintained by more than one employer, usually within the same or
    related industries, and a labor union. ERISA sec. 3(37).
    ---------------------------------------------------------------------------

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

             TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

    A. Tax on Individuals Without Acceptable Health Care Coverage (sec. 401
                       of the bill and new Code sec. 59B)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        A tax on individuals who opt not to purchase health
    insurance creates an incentive for uninsured individuals to
    purchase insurance. Consequently, the tax will enhance the
    effects of insurance market reforms that are a critical
    component of comprehensive healthcare reform. The Committee
    believes that a fair tax is based on the individual's ability
    to pay, but should be capped at the average cost of health
    insurance premiums in the national market.

                            EXPLANATION OF PROVISION

    Maintenance of health insurance coverage

        An individual (or a husband and wife in the case of a joint
    return) who does not maintain acceptable health insurance
    coverage for themselves and each of their qualifying
    children\26\ is subject to an additional tax. The tax is equal
    to the lesser of (a) the national average premium for single or
    family coverage, as applicable, as determined by the Secretary
    of Treasury in coordination with the Health Choices
    Commissioner\27\ or (b) 2.5 percent of the excess of the
    taxpayer's adjusted gross income (``AGI'') over the threshold
    amount of income required for income tax return filing for that
    taxpayer under section 6012(a)(1).\28\ For purposes of
    calculating the tax, a taxpayer's modified AGI is calculated by
    adding any tax-exempt interest or foreign earned income to the
    individual's AGI. Any individual who is a bona fide resident of
    a possession of the United States (as determined under section
    937(a)) (and any qualifying child residing with the individual)
    is treated as maintaining acceptable coverage. This tax is in
    addition to both the regular income tax and the alternative
    minimum tax.
    ---------------------------------------------------------------------------
        \26\Under section 152(c), a child generally is a qualifying child
    of a taxpayer if the child satisfies each of five tests: (1) the child
    has the same principal place of abode as the taxpayer for more than
    one-half the taxable year; (2) the child has a specified relationship
    to the taxpayer; (3) the child has not yet attained a specified age;
    (4) the child has not provided over one-half of their own support for
    the calendar year in which the taxable year of the taxpayer begins; and
    (5) the qualifying child has not filed a joint return (other than for a
    claim of refund) with their spouse for the taxable year beginning in
    the calendar year in which the taxable year of the taxpayer begins. A
    tie-breaking rule applies if more than one taxpayer claims a child as a
    qualifying child. The specified relationship is that the child is the
    taxpayer's son, daughter, stepson, stepdaughter, brother, sister,
    stepbrother, stepsister, or a descendant of any such individual. With
    respect to the specified age, a child must be under age 19 (or under
    age 24 in the case of a full-time student). However, no age limit
    applies with respect to individuals who are totally and permanently
    disabled within the meaning of section 22(e)(3) at any time during the
    calendar year. Other rules may apply. The provision includes a special
    rule under which a child is treated as a qualifying child of an
    individual for purposes of the provision (and not the qualifying child
    of any other individual) if such individual is required to provide
    health care coverage for the child pursuant to a child support order.
        \27\Under the other provisions of the bill, a new independent
    agency is established called the Health Choices Administration which is
    headed by a Health Choices Commissioner. The Health Choices
    Commissioner will establish qualified plan standards, establish and
    operate the Health Insurance Exchange, administer the Individual
    Affordability Credits and perform other functions.
        \28\Generally, in 2009, the filing threshold is $9,350 for a single
    person or a married person filing separately and is $18,700 for married
    filing jointly. 1R-2008-117, Oct 16, 2008.
    ---------------------------------------------------------------------------
        Under the provision, acceptable coverage includes coverage
    under a qualified health plan, a grandfathered plan, Medicare,
    Medicaid, Tricare (and other Armed Services coverage), Veterans
    Administration coverage\29\ and other coverage approved by the
    Secretary of the Treasury in coordination with the Health
    Choices Commissioner.
    ---------------------------------------------------------------------------
        \29\Veterans' Administration coverage is acceptable coverage only
    if the coverage is not less than a level specified by the Secretary of
    the Treasury and the Secretary of Veterans Affairs, in coordination
    with the Health Choices Commissioner, based on the individual's
    priority for services.
    ---------------------------------------------------------------------------
        A qualified health plan generally is a health plan that
    covers at least an essential benefits package and that includes
    certain specified limits on required cost sharing, no annual or
    lifetime limit on covered health care items or services,
    certain specified minimum services, and certain requirements as
    to network adequacy as determined by the Health Choices
    Commissioner.\30\ A grandfathered plan generally is a health
    insurance plan purchased in the individual market in which the
    taxpayer was enrolled prior to date of enactment and the terms
    or conditions of which are not changed subsequent to the date
    of enactment other than to reflect area changes.\31\ Certain
    group coverage in effect on the general effective date of the
    insurance market reforms of the bill (i.e., after December 31,
    2012) also qualifies as grandfathered coverage, but only for
    the five year period following the general effective date.
    ---------------------------------------------------------------------------
        \30\These requirements are detailed in the other provisions of the
    bill.
        \31\The definition of grandfathered plan is set forth in the other
    provisions of the bill. No new enrollment is permitted in grandfathered
    plans (other than dependents of individuals already enrolled).
    ---------------------------------------------------------------------------

    Exceptions

        The additional tax applies to United States citizens and
    resident aliens.\32\ The additional tax does not apply for non-
    resident aliens or U.S. citizens and residents who satisfy the
    definition of a qualified individual, as defined by section
    911(d) (relating to individuals whose tax home is in a foreign
    country and who reside in a foreign country for certain minimum
    specified time periods). The additional tax does not apply if
    the maintenance of acceptable coverage would result in a
    hardship to the individual. The additional tax does not apply
    if the person's income is below the threshold for filing a
    Federal income tax return.\33\ The additional tax also does not
    apply to any individual (or any qualifying child of the
    individual) if the individual has in effect an exemption which
    certifies that the individual is a member of a religious sect
    described in section 1402(g)(1) and an adherent of established
    tenets of such sect or division described in section
    1402(g)(1).\34\ For taxpayers who maintain insurance for only
    part of the year, their annual tax is calculated and then pro-
    rated for the duration of time when insurance was not
    maintained. Lastly, the additional tax does not apply to an
    individual if the individual is (or may be) claimed as a
    dependent on the income tax return of another taxpayer for the
    taxable year. However, parents or guardians claiming qualified
    children as dependents on their Federal income tax returns are
    required to maintain coverage for these dependents.
    ---------------------------------------------------------------------------
        \32\Under section 7701(b)(1)(A), an alien is considered a resident
    of the United States if the individual: (1) is a lawful permanent U.S.
    resident (the ``green card test'') at any time during the relevant
    year; (2) is present in the United States for 31 or more days during
    the current calendar year and has been present in the United States for
    a substantial period of time--during a three-year period, 183 or more
    days weighted toward the present year (the ``substantial presence
    test''); or (3) makes a ``first-year election'' to be treated as a
    resident of the United States (a numerical formula under which an alien
    may pass the substantial presence test one year earlier than under
    normal rules).
        \33\Generally, in 2009, the filing threshold is $9,350 for a single
    person or a married person filing separately and is $18,700 for married
    filing jointly. IR-2008-117, Oct. 16, 2008.
        \34\Sections 1402(g) and 3127 (incorporating section 1402(g) by
    reference) provide a process for individuals (and employers for
    themselves and their employees) to file for an exemption from the self-
    employment tax and Federal Insurance Contributions Act (``FICA'') tax
    if, among other requirements, they are members of a recognized
    religious sect that has established tenets or teachings by which
    individuals are conscientiously opposed to the acceptance of any
    private or public insurance which makes payments in the event of death,
    disability, old age, retirement or makes payments toward the cost of,
    or provides services for, medical care.
    ---------------------------------------------------------------------------

    Delegation of regulatory authority

        The provision delegates authority to the Secretary of the
    Treasury to issue regulations or other guidance as necessary to
    carry out the purposes of the provision. The provision
    specifically directs the Secretary to issue guidance to provide
    an exemption from the tax for de minimis lapses of acceptable
    coverage and a process for applying for a waiver of the
    requirement to maintain coverage in cases of hardship (due to
    cost, or otherwise). The exemption for de minimis lapses of
    acceptable coverage includes lapses of a short duration that
    arise on account of a change in an individual's employer or
    employment status. For example, the additional tax is not
    intended to apply to a reservist who is deactivated from active
    duty and obtains coverage within a reasonable time period after
    the expiration of military coverage. In developing guidance in
    these two specific areas, the Secretary of the Treasury is
    directed to coordinate with the Health Choices Commissioner.

    Information reporting

        The new additional tax for failure to maintain health
    insurance is accompanied by new reporting requirements for
    providers of insurance coverage. The provider of acceptable
    coverage is required to supply information to the Department of
    the Treasury and the primary insured individual including the
    name, address and taxpayer identification numbers of all
    individuals receiving insurance under the policy by January 31
    of the year following the calendar year for which the insurance
    was provided. Failure to file the required information return
    or to include complete and correct information on the required
    return is subject to the failure to file correct information
    returns penalty of section 6721.

                                 EFFECTIVE DATE

        The new additional tax is effective for taxable years
    beginning after December 31, 2012. The information reporting is
    effective for calendar years beginning after December 31, 2012.

    B. Election to Satisfy Health Coverage Participation Requirements (sec.
                411 of the bill and new sec. 4980H of the Code)

                                  PRESENT LAW

        The Code does not require employers to provide health
    insurance to employees, and it does not provide a tax credit
    for any employer that does provide health coverage for its
    employees. The cost to an employer of providing health coverage
    for its employees is generally deductible as an ordinary and
    necessary business expense for employee compensation.\35\ In
    addition, compensation in the form of employer-provided health
    insurance is not subject to payroll taxes.\36\
    ---------------------------------------------------------------------------
        \35\Sec. 162. However, see special rules in section 419 and 419A
    for the deductibility of contributions to welfare benefit plans with
    respect to medical benefits for employees and their dependents.
        \36\Secs. 3121(a)(2) and 3306(b)(2).
    ---------------------------------------------------------------------------
        The Code generally provides that employees are not taxed on
    (that is, may exclude from gross income) the value of employer-
    provided health coverage under an accident or health plan.\37\
    In addition, medical care provided under an accident or health
    plan for employees, their spouses, and their dependents is
    excluded from the gross income of the employee.\38\ Employees
    participating in a cafeteria plan may be able to pay their
    share of premiums on a pre-tax basis through salary
    reduction.\39\ Such salary reduction contributions are treated
    as employer contributions and thus are also excluded from gross
    income.
    ---------------------------------------------------------------------------
        \37\Sec. 106.
        \38\Sec. 105(b).
        \39\Sec. 125.
    ---------------------------------------------------------------------------
        The Employee Retirement Income Security Act of 1974
    (``ERISA'')\40\ preempts State law relating to certain employee
    benefit plans, including employer-sponsored health plans. While
    ERISA specifically provides that its preemption rule does not
    exempt or relieve any person from any State law which regulates
    insurance, ERISA also provides that an employee benefit plan is
    not deemed to be engaged in the business of insurance for
    purposes of any State law regulating insurance companies or
    insurance contracts. As a result of this ERISA preemption,
    self-insured employer-sponsored health plans need not provide
    benefits that are mandated under State insurance law.
    ---------------------------------------------------------------------------
        \40\Pub. L. No. 43-406.
    ---------------------------------------------------------------------------
        While ERISA does not require an employer to offer health
    benefits, it does require compliance with certain rules if an
    employer chooses to offer health benefits, such as compliance
    with plan fiduciary standards, reporting and disclosure
    requirements, and procedures for appealing denied benefit
    claims. ERISA was amended (as well as the Public Health Service
    Act and the Internal Revenue Code) in the Consolidated Omnibus
    Budget Reconciliation Act of 1985 (``COBRA'')\41\ and the
    Health Insurance Portability and Accountability Act of 1996
    (``HIPAA''),\42\ adding other Federal requirements for health
    plans, including rules for health care continuation coverage,
    limitations on exclusions from coverage based on preexisting
    conditions, and a few benefit requirements such as minimum
    hospital stay requirements for mothers following the birth of a
    child.
    ---------------------------------------------------------------------------
        \41\Pub. L. No. 99-272.
        \42\Pub. L. No. 104-191.
    ---------------------------------------------------------------------------
        The Code imposes an excise tax on group health plans that
    fail to meet HIPAA and COBRA requirements. The excise tax
    generally is equal to $100 per day per failure during the
    period of noncompliance and generally is imposed on the
    employer sponsoring the plan.\43\
    ---------------------------------------------------------------------------
        \43\Secs. 4980B and 4980D.
    ---------------------------------------------------------------------------
        Under Medicaid, states may establish ``premium assistance''
    programs, which pay a Medicaid beneficiary's share of premiums
    for employer-sponsored health coverage. Besides being available
    to the beneficiary through his or her employer, the coverage
    must be comprehensive and cost-effective for the State. A 2007
    analysis showed that 12 states had Medicaid premium assistance
    programs as authorized under current law.\44\
    ---------------------------------------------------------------------------
        \44\U.S. Department of Health and Human Services, Center for
    Medicare and Medicaid Services, ``The State Children's Health Insurance
    Program,'' Powerpoint Presentation, March 5, 2007, p. 14.
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The Committee believes that individuals, employers, and the
    government share responsibility in ensuring that all Americans
    have affordable coverage of essential health benefits. The
    Committee believes that employers have a particular
    responsibility to contribute to the health care coverage of
    their employees, and that the most effective means of
    implementing health care reform is to build on the current
    system of employer-sponsored health coverage that provides
    coverage to many American families.

                            EXPLANATION OF PROVISION

    Elections

        Under the provision, employers are required to make an
    affirmative election regarding whether to offer health benefit
    plans to employees. Employers electing to offer health benefit
    plans must meet certain minimum benefit and contribution
    requirements. Employers choosing not to offer health benefit
    plans, or offering plans that do not meet the minimum benefit
    and contribution requirements, are subject to a payroll tax (as
    described in section 412 of the bill).\45\
    ---------------------------------------------------------------------------
        \45\There is an exception for certain small employers. Employers
    with annual payrolls not exceeding $250,000 during the preceding
    calendar year are not subject to the tax. Employers with annual
    payrolls between $250,000 and $400,000 during the preceding calendar
    year are subject to a reduced rate.
    ---------------------------------------------------------------------------
        The Secretary of the Treasury will prescribe rules for
    employer elections regarding coverage, including rules for the
    time, manner and form of elections, and the treatment of
    affiliated groups of employers, separate lines of business, and
    full versus part time employees.\46\ Employers are required to
    provide verification of their compliance with the provision's
    health coverage participation requirement to the Health Choices
    Commissioner and to the Secretaries of Labor, Health and Human
    Services, and the Treasury.
    ---------------------------------------------------------------------------
        \46\Employers electing to offer health benefit plans are to be
    treated as having established and maintained a group health plan for
    purposes of ERISA and the Public Health Service Act (``PHSA'') (42
    U.S.C. 6A) and the provision's health coverage participation
    requirements are deemed to be part of the terms and conditions of the
    employer-provided plan.
    ---------------------------------------------------------------------------
        Parallel provisions for this election (including
    termination of the election) are provided in ERISA and the
    Public Health Service Act (``PHSA'').\47\ The Secretary of the
    Treasury shares authority for providing rules for employers
    making this election, and authority to terminate the election,
    with the Secretaries of Labor and Health and Human Services.
    ---------------------------------------------------------------------------
        \47\42 U.S.C. 6A.
    ---------------------------------------------------------------------------
                Aggregation rules
        For affiliated groups of employers, the identity of the
    employer is generally determined by applying the employer
    aggregation rules in section 414(b), (c), (m), and (0).\48\ The
    same election must apply to all employers in the aggregated
    group. Employers are able to make separate elections for
    employees in separate lines of business, or for full time
    employees and part time employees.
    ---------------------------------------------------------------------------
        \48\Section 414(b) provides that, for specified employee benefit
    purposes, all employees of all corporations which are members of a
    controlled group of corporations are treated as employed by a single
    employer. There is a similar rule in section 414(c) under which all
    employees of trades or businesses (whether or not incorporated) which
    are under common control are treated under regulations as employed by a
    single employer, and, in section 414(m), under which employees of an
    affiliated service group (as defined in that section) are treated as
    employed by a single employer. Section 414(o) authorizes the Treasury
    to issue regulations to prevent avoidance of the requirements under
    section 414(m).
    ---------------------------------------------------------------------------

    Contribution requirements

        Employers that elect to offer health benefit plans are
    required to offer individual and family coverage under a
    qualified health benefit plan (or certain grandfathered health
    insurance plans)\49\ and to make contributions to help
    discharge the coverage costs of employees.\50\ For full time
    employees, the contribution amount is required to be at least
    72.5 percent of the lowest cost plan offered by the employer
    which meets the requirements of the essential benefits
    package\51\ (65 percent for eligible employees electing family
    coverage). For part time employees, the contribution amount is
    a fraction (as determined in accordance with rules of the
    Health Choices Commissioner and the Secretaries of Labor,
    Health and Human Services, and the Treasury, as applicable) of
    the minimum contributions made for full time employees, with
    such fraction being equal to a ratio of the average weekly
    hours worked by the employee compared to the minimum weekly
    hours specified by the Health Choices Commissioner. An employer
    cannot satisfy the minimum contribution requirement through a
    salary reduction arrangement with the employee.
    ---------------------------------------------------------------------------
        \49\For a plan to be a ``qualified health benefits plan'' it needs
    to meet certain minimum coverage requirements, but it need not be
    offered through the Health Insurance Exchange.
        \50\Beginning in the second year after the general effective date
    of the insurance market reforms of the bill, employers are required to
    make contributions to the Health Insurance Exchange for employees who
    decline employer-provided coverage and instead enroll in an Exchange-
    participating plan. The contribution amount is equal to eight percent
    of the average wages paid by the employer to its employee during the
    time the employee was enrolled in the non-employer-provided plan.
    Employers with annual payrolls not exceeding $250,000 during the
    preceding calendar year are not subject to the tax. Employers with
    annual payrolls between $250,000 and $400,000 during the preceding
    calendar year are subject to a reduced rate. Employer contributions are
    paid to the Health Choices Commissioner and deposited into the Health
    Insurance Exchange Trust Fund. The contributions are not tied to a
    particular employee (i.e., the contribution does not subsidize an
    employee's premium liability). This contribution requirement parallels
    the payroll tax equal to eight percent of wages that applies to
    nonelecting employers.
        \51\The essential benefits package includes certain specified
    limits on required cost sharing, bans annual or life time limits on
    covered health care items or services and certain specified minimum
    services, and imposes certain requirements as to network adequacy as
    determined by the Health Choices Commissioner.
    ---------------------------------------------------------------------------

    Noncompliance with coverage requirements

        Employers who elect to provide coverage but whose health
    benefit plans fail to meet the provision's minimum health
    coverage participation requirement are subject to an excise tax
    of $100 per day for each employee to whom the failure
    applies.\52\ The excise tax does not apply to (1) periods
    during which an employer used reasonable diligence but did not
    discover any failures, and (2) failures that are corrected
    within 30 days of discovery (but only if such failures are due
    to reasonable cause and not willful neglect). Excise taxes
    imposed on employers for unintentional failures (i.e., due to
    reasonable cause and not willful neglect) are limited to the
    lesser of 10 percent of the aggregate amount paid or incurred
    by the employer during the preceding taxable year for group
    health plans, or $500,000. There are parallel civil penalties
    provided in ERISA and PHSA.\53\ The excise tax with respect to
    any failure is reduced (but not below zero) by the amount of
    any civil penalty collected under these parallel provisions.
    The Secretary is also able to terminate an employer's election
    (and thus subject the employer to the payroll tax imposed on
    employers that do not offer coverage) if it is determined that
    the employer was substantially noncompliant with health
    coverage participation requirements.
    ---------------------------------------------------------------------------
        \52\Under the provision, there is created within the Treasury of
    the United States a trust fund known as the ``Health Insurance Exchange
    Trust Fund'' which consists of such amount as may be appropriated or
    credited to the trust fund. Under the provision, an amount equal to
    these excise taxes received from non compliant employers is
    automatically appropriated to, and thus used to fund, the new Health
    Insurance Exchange Trust Fund.
        \53\The provision permits the penalties to be assessed through an
    excise tax or through a civil penalty under ERISA or PHSA. Penalties
    for any particular failure are not to be duplicated, however. The
    Secretary of Labor or Health and Human Services, as appropriate, is
    required to give advance written notification of failure to employers
    prior to the assessment of a penalty. The Secretary of Health and Human
    Services is able to bring civil actions in Federal court to collect
    civil penalties assessed under PHSA.
    ---------------------------------------------------------------------------

    Multi-agency coordination

        The Health Choices Commissioner and the Secretaries of
    Labor, Health and Human Services, and the Treasury are required
    to execute an interagency memorandum of understanding to ensure
    coordination with respect to regulations, rulings,
    interpretations, and enforcement of the provision and the
    parallel provisions in ERISA and PHSA. The Secretaries of Labor
    and Health and Human Services are required to conduct periodic
    audits of employers in order to discover any noncompliance with
    health coverage participation requirements. The Secretaries of
    Labor, Health and Human. Services, and the Treasury, and the
    Health Choices Commissioner are all informed of audit results.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

    C. Responsibilities of Nonelecting Employers (sec. 412 of the bill and
                           sec. 3111(c) of the Code)

                                  PRESENT LAW

    In general

        An employer's payroll tax obligations are not affected by
    its determination whether to offer health insurance coverage to
    its employees.
        Under the Federal Insurance Contributions Act (``FICA''),
    separate taxes are imposed on every employer and employee with
    respect to wages paid by the employer to the employee.\54\
    These two taxes are commonly referred to as the employer's and
    the employee's share of FICA. The employee's share of FICA is
    collected by means of payroll withholding by the employee's
    employer.
    ---------------------------------------------------------------------------
        \54\Secs. 3101-3128 (FICA). Sections 3501-3510 provide additional
    rules.
    ---------------------------------------------------------------------------
        For both the employer and the employee's share of FICA, the
    tax consists of two parts: (1) old age, survivor, and
    disability insurance (``OASDI''), which correlates to the
    Social Security program that provides monthly benefits after
    retirement, disability, or death;\55\ and (2) Medicare hospital
    insurance (``HI'').\56\ The OASDI tax rate is 6.2 percent on
    both the employee and employer (for a total rate of 12.4
    percent). The OASDI tax rate applies to wages up to the OASDI
    wage base ($106,800 for 2009). The HI tax rate is 1.45 percent
    on both the employee and the employer (for a total rate of 2.9
    percent). Unlike the OASDI tax, the HI tax is not limited to a
    specific amount of wages, but applies to all wages.
    ---------------------------------------------------------------------------
        \55\Pursuant to sec. 201(a) and (b) of the Social Security Act, 42
    U.S.C. 401(a) and (b), these OASDI payroll taxes fund the Federal Old
    and Survivor Insurance Trust Fund and the Federal Disability Trust
    Fund, respectively. For each fiscal year, an amount equal to the OASDI
    payroll taxes collected is appropriated for these trust funds.
        \56\Pursuant to Sec. 1817 of the Social Security Act, 42 U.S.C.
    1395i, the HI payroll taxes fund the Federal Hospital Insurance Trust
    Fund. For each fiscal year, an amount equal to the HI payroll taxes
    collected is appropriated for this trust fund.
    ---------------------------------------------------------------------------
        For purposes of the employer's and employee's share of
    FICA, wages generally means all remuneration for employment
    including the cash value of all remuneration paid in a medium
    other than cash. However, the general definition of wages is
    subject to a number of special rules and exceptions.\57\
    ---------------------------------------------------------------------------
        \57\Sec. 3121(a).
    ---------------------------------------------------------------------------
        Employment for FICA purposes generally means any service of
    whatever nature performed by an employee for the employer
    (irrespective of the citizenship or residence of either) within
    the United States. In the case of service outside the United
    States, employment also includes service performed by a United
    States citizen or resident as an employee for an American
    employer. As in the case of the definition of wages, the
    definition of employment is also subject to a number of
    exceptions and special rules.\58\ An American employer is
    defined as an employer which is: (1) the United States or any
    instrumentality thereof; (2) an individual who is a resident of
    the United States; (3) a partnership, if at least two-thirds of
    the partners are United States residents; (4) a trust, if all
    of the trustees are United States residents; or (5) a
    corporation organized under the laws of the United States or
    any of the States.\59\
    ---------------------------------------------------------------------------
        \58\Sec. 3121(b). For example, employment for FICA purposes
    includes certain service with respect to American vessels or aircrafts
    and also includes service that is designated-as employment under an
    agreement entered into under section 233 of the Social Security Act.
        \59\Sec. 3121(h).
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The Committee believes that individuals, employers, and the
    government share responsibility to ensure that all Americans
    have affordable coverage of essential health benefits. The
    Committee believes that employers have a particular
    responsibility to contribute to the health care coverage of
    their employees and that such responsibility exists even on the
    part of employers who choose not to provide health care to
    their employees. The Committee recognizes, however, that small
    businesses face special challenges in providing health coverage
    to their employees, and thus special rules should be provided
    for small businesses.

                            EXPLANATION OF PROVISION

        Employers that elect not to provide health benefit plans to
    their employees are subject to an additional payroll tax equal
    to eight percent of wages.\60\ The provision's definitions of
    the terms wages, employment, and employer, are generally the
    same as under present FICA provisions. The provision, however,
    differs from present law in several respects. First, the tax is
    imposed as a result of a voluntary election by the employer not
    to offer an eligible health plan and not to make the required
    contribution toward each employee's premium for the plan.
    Second, as is currently the case for HI, there is no taxable
    wage base for purposes of the new payroll tax. Third, the
    definition of employment includes services performed by certain
    foreign agricultural workers, aliens performing services
    pursuant to certain nonimmigrant visas, and government workers,
    among others who are carved out under current law.
    ---------------------------------------------------------------------------
        \60\Under the provision, there is created within the Treasury of
    the United States a trust fund known as the ``Health Insurance Exchange
    Trust Fund'' which consists of such amount as may be appropriated or
    credited to the trust fund. Under the provision, an amount equal to
    these payroll taxes received from employers electing not to provide
    health benefits is automatically appropriated to, and thus used to
    fund, the new Health Insurance Exchange Trust Fund.
    ---------------------------------------------------------------------------
        Employers are permitted to make separate elections for
    separate lines of business, or full-time employees and part-
    time employees (or vice-versa). The new payroll tax applies
    only to wages paid to employees who are not offered health
    benefits by their employers.
        There is an exception and a reduced rate structure for
    certain small employers. Employers with annual payrolls not
    exceeding $250,000 during the preceding calendar year are not
    subject to the tax. Employers with annual payrolls between
    $250,000 and $400,000 during the preceding calendar year are
    subject to a reduced rate, as follows: two percent if the
    annual payroll does not exceed $300,000; four percent if the
    annual payroll exceeds $300,000 but does not exceed $350,000;
    and six percent if the annual payroll exceeds 350,000 but does
    not exceed $400,000. Annual payroll is defined as the aggregate
    wages (as defined in section 3121(a)) paid by the employer with
    respect to employment (as defined in section 3121(b)) during
    the calendar year.
        A parallel payroll tax, including the exception and a
    reduced rate structure for small employers, applies to railroad
    carriers.
        Territories and possessions of the United States are not
    treated as States for purposes of the new payroll tax.

                                 EFFECTIVE DATE

        The provision is effective for periods beginning after
    December 31, 2012.

     D. Credit For Small Business Employee Health Coverage Expenses (sec.
                 421 of the bill and new sec. 45R of the Code)

                                  PRESENT LAW

    Deduction of employer contributions for health coverage for employees

        The Code does not provide a tax credit to any employer for
    the provision of health coverage for its employees. The cost to
    an employer of providing health coverage for its employees is
    generally deductible as an ordinary and necessary business
    expense for employee compensation.\61\ In addition,
    compensation in the form of employer-provided health insurance
    is not subject to payroll taxes.\62\
    ---------------------------------------------------------------------------
        \61\Sec. 162. However see special rules in section 419 and 419A for
    the deductibility of contributions to welfare benefit plans with
    respect to medical benefits for employees and their dependents.
        \62\Secs. 3121(a)(2) and 3306(b)(2).
    ---------------------------------------------------------------------------

    Employer contributions for health coverage

        The Code generally provides that employees are not taxed on
    (that is, may ``exclude'' from gross income) the value of
    employer-provided health coverage under an accident or health
    plan.\63\ In addition, medical care provided under an accident
    or health plan for employees, their spouses, and their
    dependents is excluded from gross income of the employee.\64\
    Employees participating in a cafeteria plan may be able to pay
    their share of premiums on a pre-tax basis through salary
    reduction.\65\ Such salary reduction contributions are treated
    as employer contributions and thus also are excluded from gross
    income.
    ---------------------------------------------------------------------------
        \63\Sec. 106.
        \64\Sec. 105(b).
        \65\Sec. 125.
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The Committee supports additional incentives and assistance
    to encourage small business employers with low-wage employees
    to provide health insurance coverage to their employees.
    Providing health insurance coverage is particularly challenging
    for these small business employers. In particular, the cost of
    health insurance may be disproportionately large as a portion
    of payroll expenses. The tax credit for qualified employee
    health coverage expenses is designed to make the provision of
    health insurance coverage by small business employers of low-
    wage employees more affordable.

                            EXPLANATION OF PROVISION

    General rule

        The provision generally provides a tax credit to a
    qualified small employer for up to 50 percent of its qualified
    health coverage expenses for the taxable year. Qualified
    employee health coverage expenses are, with respect to any
    employer for any taxable year, the aggregate amount paid or
    incurred by the employer for coverage of any qualified employee
    of the employer (including any family coverage which covers the
    employee) under qualified health coverage. However, for this
    purpose, amounts paid by the employer do not include amounts
    based on a salary reduction election made by an employee under
    a cafeteria plan (although such amounts are generally treated
    as an employer contribution). The credit is a general business
    credit, eligible to be carried back for one year and carried
    forward for 20 years.

    Qualified small employer

        A qualified small employer for purposes of the provision is
    an employer with less than 25 qualified employees employed
    during the employer's taxable year, and whose average annual
    employee compensation is less than $40,000. However, the full
    amount of the credit (50 percent of qualified health coverage
    expenses) is available only to an employer with no more than 10
    qualified employees and whose average annual employee
    compensation does not exceed $20,000. Average annual employee
    compensation is determined by dividing the total aggregate
    compensation for the taxable year of all qualified employees by
    the number of qualified employees.
        Under the provision, an employee is a qualified employee of
    an employer for a taxable year if the employee receives at
    least $5,000 of compensation from the employer during the
    taxable year for services as an employee of a trade or
    business. Self-employed individuals, including partners and
    sole proprietors, are treated as employees with respect to a
    business or partnership that generates net earnings from self
    employment for the individual but only if the business or
    partnership also has common law employees who are qualified
    employees.
        For a common law employee, compensation means wages for
    purposes of income tax withholding plus elective deferrals
    within the meaning of section 402(g) and compensation deferred
    under an eligible deferred compensation plan under section 457.
    For a self-employed individual, compensation means net earnings
    from self employment, prior to subtracting any elective
    contributions. These definitions of compensation\66\ are used
    to determine both whether an individual is a qualified employee
    and to determine average annual employee compensation.
    ---------------------------------------------------------------------------
        \66\The provision specifies that compensation has the same meaning
    as the definition of compensation for simple plans under section
    408(p)(6)(A).
    ---------------------------------------------------------------------------

    Qualified health coverage and expenses

        Qualified health coverage includes two elements. First, the
    coverage must be acceptable coverage as defined for purposes of
    the individual responsibility requirement for obtaining health
    coverage. Second, the coverage must be provided by the employer
    pursuant to its election to satisfy the employer responsibility
    requirement by offering coverage, and the employer's
    contribution toward the cost of the coverage must be at least
    the minimum required for that purpose.\67\ The credit is only
    available for qualified health expenses paid or incurred by the
    employer for the purchase of health care coverage.
    ---------------------------------------------------------------------------
        \67\Under the provision, for employers that elect to provide
    coverage rather than pay an additional payroll tax, employers are
    required to make contributions to help discharge the coverage costs of
    employees enrolled in the employer-provided plan. For example, for
    full-time employees, the contribution amount is required to be at least
    72.5 percent of the lowest cost plan meeting the requirements of the
    essential benefits package (reduced to 65 percent for eligible
    employees electing family coverage).
    ---------------------------------------------------------------------------

    Phase out of the credit

        If an employer's average annual employee compensation
    exceeds $20,000, the credit percentage phases out from the
    maximum available credit of 50 percent. The percentage is
    reduced by one percentage point for each $400 by which average
    annual employee compensation exceeds $20,000. For example, a
    firm with average compensation of $24,000 and 10 or fewer
    employees is entitled to a 40-percent credit. In general, if
    such firm had qualified employee health coverage expenses of
    $50,000, the credit amount would equal 40 percent of $50,000,
    or $20,000.
        The credit amount determined above is subject to a further
    phaseout for employers with more than 10 qualified employees.
    For employers with more than 10 qualified employees, the credit
    amount is reduced by an amount which bears the same ratio to
    the amount of the credit as the number of qualified employees
    of the employer in excess of 10 bears to 15. For example, if a
    firm has 16 qualified employees, the credit amount is reduced
    by 40 percent.\68\ In the example above, the $20,000 credit is
    thus reduced by $8,000 (40 percent of $20,000) to a credit of
    $12,000.
    ---------------------------------------------------------------------------
        \68\(16-10)/115 = 40 percent.
    ---------------------------------------------------------------------------

    Special rules

        The employer is determined by applying the employer
    aggregations rules in section 414(b), (c), (m), and (o) and
    treating the aggregated group of employers as a single
    employer.\69\ Thus, all employees of the aggregated group are
    taken into account in determining if the employer is a
    qualified small employer. The credit is not available with
    respect to qualified employee health coverage expenses for any
    employee if the employee's compensation for the taxable year
    exceeds $80,000. Under the provision, the employer generally is
    allowed a deduction under section 162 for qualified employee
    health coverage expenses equal to total health coverage
    expenses minus the dollar amount of the credit. The $5,000
    compensation threshold for identifying qualified employees, the
    $20,000 average annual compensation limit, and the $80,000
    compensation amount are indexed to changes in the consumer
    price index for all urban consumers (``CPI-U''). However, in
    each case, if the resulting amount is not a multiple of $50,
    the amount is rounded down to the next lowest multiple of $50.
    ---------------------------------------------------------------------------
        \69\Section 414(b) provides that, for specified employee benefit
    purposes, all employees of all corporations which are members of a
    controlled group of corporations are treated as employed by a single
    employer. There is a similar rule in section 414(c) under which all
    employees of trades or businesses (whether or not incorporated) which
    are under common control are treated under regulations as employed by a
    single employer, and, in section 414(m), under which employees of an
    affiliated service group (as defined in that section) are treated as
    employed by a single employer. Section 414(o) authorizes the Treasury
    to issue regulations to prevent avoidance of the requirements of
    section 414(m).
    ---------------------------------------------------------------------------

                                 EFFECTIVE DATE

        The provision is effective for taxable years beginning
    after December 31, 2012.

     E. Disclosures to Carry Out Health Insurance Exchange Subsidies (sec.
               431 of the bill and sec. 6103(1)(21) of the Code)

                                  PRESENT LAW

        Section 6103 provides that returns and return information
    are confidential and may not be disclosed by the Internal
    Revenue Service (``IRS''), other Federal employees, State
    employees, and certain others having access to such information
    except as provided in the Internal Revenue Code. Section 6103
    contains a number of exceptions to the general rule of
    nondisclosure that authorize disclosure in specifically
    identified circumstances. For example, section 6103 provides
    for the disclosure of certain return information for purposes
    of establishing the appropriate amount of any Medicare Part B
    Premium Subsidy Adjustment.\70\
    ---------------------------------------------------------------------------
        \70\Sec. 6103(1)(20).
    ---------------------------------------------------------------------------
        Section 6103(p)(4) requires, as a condition of receiving
    returns and return information, that Federal and State agencies
    (and certain other recipients) provide safeguards as prescribed
    by the Secretary of the Treasury by regulation to be necessary
    or appropriate to protect the confidentiality of returns or
    return information.\71\ Unauthorized disclosure of a return or
    return information is a felony punishable by a fine not
    exceeding $5,000 or imprisonment of not more than five years,
    or both, together with the costs of prosecution.\72\ The
    unauthorized inspection of a return or return information is
    punishable by a fine not exceeding $1,000 or imprisonment of
    not more than one year, or both, together with the costs of
    prosecution.\73\ An action for civil damages also may be
    brought for unauthorized disclosure.\74\
    ---------------------------------------------------------------------------
        \71\Sec. 6103(p)(4)(D).
        \72\Sec. 7213.
        \73\Sec. 7213A.
        \74\Sec. 7431.
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The bill creates within the Health Choices Administration a
    National Health Insurance Exchange (``Exchange'') to facilitate
    the purchase of health insurance. A State has the option of
    forming its own health insurance exchange at the State level
    that must be approved for operation by the Federal government
    (``approved State Exchange''). The bill provides for
    ``affordability credits,'' administered by the Exchanges, which
    subsidize the purchase of health insurance through the
    Exchanges and the cost of paying for medical care. The
    affordability credits generally are available on a sliding
    scale for persons and families with incomes between Medicaid
    eligibility and 400 percent of the poverty level. To ensure the
    appropriate level of subsidy is delivered to American families,
    the Committee believes it is appropriate to allow for the
    disclosure of certain tax return information to the Exchange,
    or approved State Exchange to administer the affordability
    credits.

                            EXPLANATION OF PROVISION

        Upon receipt of a valid written request from the Health
    Choices Commissioner or the head of the approved State
    Exchange, the IRS is authorized to disclose limited return
    information of any taxpayer whose income is relevant in
    determining the amount of the affordability credit(s). Such
    return information is limited to (1) taxpayer identity
    information, (2) filing status, (3) modified adjusted gross
    income, (4) the number of dependents of the taxpayer, (5) such
    other information as is prescribed by the Secretary by
    regulation as might indicate that the taxpayer is eligible for
    such affordability credit(s) (and the amount thereof), and (6)
    the taxable year with respect to which the preceding
    information relates or, if applicable, the fact that such
    information is not available.
        The return information disclosed is to be used by officers
    and employees of the Health Choices Administration, or approved
    State Exchange, only for the purposes of and to the extent
    necessary in establishing and verifying the appropriate amount
    of any affordability credit and providing for the repayment of
    any such credit that was in excess of the appropriate amount.
        The general rule of confidentiality applies to the
    information disclosed, as well as the safeguard requirements,
    penalties, and civil damage remedies for unauthorized
    disclosure or inspection.

                                 EFFECTIVE DATE

        The provision is effective on the date of enactment.

     F. Surcharge on High-Income Individuals (sec. 441 of the bill and new
                             sec. 59C of the Code)

                                  PRESENT LAW

    In general

        An individual who is a citizen or resident of the United
    States is subject to income tax on his or her taxable
    income.\75\ An individual computes taxable income by reducing
    gross income by the sum of (i) the deductions allowable in
    computing adjusted gross income, (ii) the standard deduction
    (or itemized deductions, at the election of the taxpayer), and
    (iii) the deduction for personal exemptions. Graduated tax
    rates are then applied to a taxpayer's taxable income to
    determine his or her individual income tax liability. Lower
    rates apply to net capital gain and qualified dividend income.
    A taxpayer may also be subject to an alternative minimum tax. A
    taxpayer may reduce his or her income tax liability by certain
    tax credits.
    ---------------------------------------------------------------------------
        \75\Foreign tax credits generally are available against U.S. income
    tax imposed on foreign source income to the extent of foreign income
    taxes paid on that income. A nonresident alien generally is subject to
    the U.S. individual income tax only on income with a sufficient nexus
    to the United States.
    ---------------------------------------------------------------------------

    Gross income

        Gross income means income from whatever source derived
    other than certain items excluded from gross income. Sources of
    gross income generally include, among other things,
    compensation for services, interest, dividends, capital gains,
    rents, royalties, alimony and separate maintenance payments,
    annuities, income from life insurance and endowment contracts
    (other than certain death benefits), pensions, gross profits
    from a trade or business, income in respect of a decedent, and
    income from S corporations, partnerships,\76\ trusts or
    estates.\77\ Exclusions from gross income include death
    benefits payable under a life insurance contract, interest on
    certain State and local bonds, employer-provided health
    insurance, employer-provided pension contributions, and certain
    other employer-provided benefits.
    ---------------------------------------------------------------------------
        \76\In general, partnerships and S corporations are treated as
    pass-through entities for Federal income tax purposes. Thus, no Federal
    income tax is imposed at the entity level. Rather, income of these
    entities is passed through and taxed to the owners at the individual
    level.
        \77\In general, estates and most trusts pay tax on income at the
    entity level, unless the income is distributed or required to be
    distributed under governing law or under the terms of the governing
    instrument. These entities determine their tax liability using a
    special tax rate schedule and may be subject to the alternative minimum
    tax. Other trusts are treated as being owned by grantors in whole or in
    part for tax purposes; in such cases, the grantors are taxed on the
    income of the trust.
    ---------------------------------------------------------------------------

    Adjusted gross income

        An individual's adjusted gross income (``AGI'') is
    determined by subtracting certain allowable deductions from
    gross income. These deductions are known as ``above-the line''
    deductions. These deductions are generally the deductions
    incurred to produce gross income. For example, these deductions
    include trade or business deductions (such as cost of goods
    sold, small business expensing, depreciation, the domestic
    production activities deduction, and compensation paid to
    employees), losses from the sale or exchange of property,
    deductions attributable to rents and royalties, contributions
    to pensions and other retirement plans, and moving expenses.
    Thus, AGI generally is an approximation of ``economic income.''
        Some deductions are not allowable in computing adjusted
    gross income. These deductions generally are referred to as
    itemized deductions. The principal itemized deductions are the
    deductions for interest on a personal residence and investment
    interest, taxes, charitable contributions, nonbusiness casualty
    and theft losses, investment expenses, medical and dental
    expenses, and certain employee expenses. An individual who does
    not elect to deduct itemized deductions is allowed a standard
    deduction, which also is not allowable in computing adjusted
    gross income.

                               REASONS FOR CHANGE

        The Committee strongly believes that health care reform
    should not add to the Federal deficit. The Committee also
    believes that a surcharge on the highest income individuals
    increases fairness and progressivity in the tax Code. It also
    fulfills the goal of not adding to the tax burden of the large
    majority of taxpayers. The Committee also believes that the
    lower levels of the surcharge should not apply if cost savings
    from health care reform satisfy certain goals.

                            EXPLANATION OF PROVISION

        The bill imposes a tax at the rates of one percent, 1.5
    percent, and 5.4 percent on certain income of high-income
    individuals. In the case of a joint return or return of a
    surviving spouse, the one percent rate applies to so much of
    the taxpayer's modified adjusted gross income as exceeds
    $350,000 but does not exceed $500,000; the 1.5 percent rate
    applies to so much of the taxpayer's modified adjusted gross
    income as exceeds $500,000 but does not exceed $1,000,000; and
    the 5.4 percent rate applies to so much of the modified
    adjusted gross income as exceeds $1,000,000. In the case of a
    married individual filing a separate return, the dollar amounts
    are 50 percent of the above dollar amounts. In the case of
    unmarried individuals, heads of households and trusts and
    estates, the dollar amounts are 80 percent of the above dollar
    amounts. The dollar amounts are indexed for inflation for
    taxable years beginning after December 31, 2011.
        The bill directs the Director of the Office of Management
    and Budget (``OMB'') to determine before December 1, 2012
    whether the Federal health reform savings under division B of
    this bill for the period beginning October 1, 2009 and ending
    before October 1, 2019, exceed the $525 billion of savings
    currently estimated by the Congressional Budget Office
    (``CBO''). If these savings (over $525 billion) do not exceed
    $150 billion, then the one percent and 1.5 percent rates will
    become two percent and three percent, respectively, for taxable
    years beginning after December 31, 2012. If the Director of OMB
    determines these savings exceed CBO's current estimated savings
    by more than $150 billion for the period, then the one percent
    and 1.5 percent rates shall not increase after December 31,
    2012. If Director of OMB determines these savings exceed the
    CBO's current estimated savings by more than $175 billion for
    the period, then neither the one percent nor 1.5 percent rates
    shall apply after December 31, 2012. The Committee anticipates
    that OMB will provide an explanation of its estimate (including
    a discussion of its key assumptions and estimating techniques)
    as part of its final determination.
        Modified adjusted gross income is the taxpayer's adjusted
    gross income reduced by the itemized deduction for investment
    interest.
        In the case of a nonresident alien, only amounts taken into
    account in computing taxable income are taken into account in
    computing this tax.
        In the case of a taxpayer with an amount excluded under
    section 911 (relating to income earned outside the United
    States), the dollar amounts applicable to the taxpayer are
    reduced by the amount of the exclusion (net of disallowed
    deductions and exclusions).
        Charitable trusts are not subject to the tax.
        No credits are allowed against this tax and this tax is not
    taken into account in computing alternative minimum tax
    liability.

                                 EFFECTIVE DATE

        The provision applies to taxable years beginning after
    December 31, 2010.

    G. Distributions for Medicine Qualified Only If for Prescribed Drug or
     Insulin (sec. 442 of the bill and secs. 105, 106, 220, and 223 of the
                                     Code)

                                  PRESENT LAW

    Individual deduction for medical expenses

        Expenses for medical care, not compensated for by insurance
    or otherwise, are deductible by an individual under the rules
    relating to itemized deductions to the extent the expenses
    exceed 7.5 percent of AGI.\78\ Medical care generally is
    defined broadly as amounts paid for diagnoses, cure,
    mitigation, treatment or prevention of disease, or for the
    purpose of affecting any structure of the body.\79\ However,
    any amount paid during a taxable year for medicine or drugs is
    explicitly deductible as a medical expense only if the medicine
    or drug is a prescribed drug or is insulin.\80\ Thus, any
    amount paid for over-the-counter medicine is not deductible as
    a medical expense.
    ---------------------------------------------------------------------------
        \78\Sec. 213(a).
        \79\Sec. 213(d). There are certain limitations on the general
    definition including a rule that cosmetic surgery or similar procedures
    are generally not medical care.
        \80\Sec. 213(b).
    ---------------------------------------------------------------------------

    Exclusion for employer-provided health care

        The Code generally provides that employees are not taxed on
    (that is, may exclude from gross income) the value of employer-
    provided health coverage under an accident or health plan.\81\
    In addition, any reimbursements under an accident or health
    plan for medical care expenses for employees, their spouses,
    and their dependents generally are excluded from gross
    income.\82\ An employer may agree to reimburse expenses for
    medical care of its employees (and their spouses and
    dependents), not covered by a health insurance plan, through a
    flexible spending arrangement (``FSA'') which allows
    reimbursement not in excess of a specified dollar amount. Such
    dollar amount is either elected by an employee under a
    cafeteria plan (``Health FSA'') or otherwise specified by the
    employer under an arrangement called a health reimbursement
    arrangement (``HRA''). Reimbursements under these arrangements
    are also excludible from gross income as employer-provided
    health coverage. The general definition of medical care without
    the explicit limitation on medicine applies for purposes of the
    exclusion for employer-provided health coverage and medical
    care.\83\ Thus, under an HRA or under a Health FSA, amounts
    paid for over-the-counter medicine are treated as medical
    expenses, and reimbursements for such amounts are excludible
    from gross income.
    ---------------------------------------------------------------------------
        \81\Sec 106.
        \82\Sec. 105(b).
        \83\Sec. 105(b) provides that reimbursements for medical care
    within the meaning of section 213(d) pursuant to employer-provided
    health coverage are excludible from gross income. The definition of
    medical care in section 213(d) does not include the prescription drug
    limitation in section 213(b).
    ---------------------------------------------------------------------------

    Medical savings arrangements

        Present law provides that individuals with a high
    deductible health plan (and generally no other health plan)
    purchased either through the individual market or through an
    employer may establish and make tax-deductible contributions to
    a health savings account (``HSA'').\84\ Subject to certain
    limitations,\85\ contributions made to an HSA by an employer,
    including contributions made through a cafeteria plan through
    salary reduction, are excluded from income (and from wages for
    payroll tax purposes). Contributions made by individuals are
    deductible for income tax purposes, regardless of whether the
    individuals itemize. Distributions from an HSA that are used
    for qualified medical expenses are excludible from gross
    income.\86\ The general definition of medical care without the
    explicit limitation on medicine also applies for purposes of
    this exclusion.\87\ Similar rules apply for another type of
    medical savings arrangement called an Archer MSA.\88\ Thus, a
    distribution from a HSA or an Archer MSA used to purchase over-
    the-counter medicine also is excludible as an amount used for
    qualified medical expenses.
    ---------------------------------------------------------------------------
        \84\Sec. 223.
        \85\For 2009, the maximum aggregate annual contribution that can be
    made to an HSA is $3,000 in the case of self-only coverage and $5,950
    in the case of family coverage ($3,050 and $6,150 for 2010). The annual
    contribution limits are increased for individuals who have attained age
    55 by the end of the taxable year (referred to as ``catch-up
    contributions''). In the case of policyholders and covered spouses who
    are age 55 or older, the HSA annual contribution limit is greater than
    the otherwise applicable limit by $1,000 in 2009 and thereafter.
    Contributions, including catch-up contributions, cannot be made once an
    individual is enrolled in Medicare.
        \86\Sec. 223(f).
        \87\Sec. 223(d)(2).
        \88\Sec. 220.
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        In 1982, Congress eliminated the individual medical expense
    deduction for over-the counter medicine (other than insulin) to
    simplify the deduction, to conform the coverage of the
    deduction more closely to the coverage of private health
    insurance policies, and because expenses for over-the-counter
    medicine are more likely to represent expenses for ordinary
    consumption than ``extraordinary'' medical expenses that should
    be deductible.\89\ However, Congress did not similarly remove
    the cost of over-the-counter medicine from the eligibility for
    excludible reimbursements under Health FSAs (and in later
    years, HRAs, HSAs, and Archer MSAs) even though similar reasons
    for not treating reimbursement for these expenses as excludible
    from gross income apply. The Committee believes that the
    treatment of reimbursements for over-the-counter medicine under
    HRAs, Health FSAs, HSAs, and Archer MSAs should be conformed to
    the treatment of over-the-counter medicine under the itemized
    deduction for medical expenses.
    ---------------------------------------------------------------------------
        \89\Sec. 213(b) was added by sec. 202 of the Tax Equity and Fiscal
    Responsibility Act of 1982, Pub. L. 97-248. The reasons for the change
    to limit the deduction to prescription medicine are described in JCS-
    38-82 at 24-25.
    ---------------------------------------------------------------------------

                            EXPLANATION OF PROVISION

        Under the provision, with respect to medicines, the
    definition of medical expense for purposes of employer-provided
    health coverage (including HRAs and Health FSAs), HSAs, and
    Archer MSAs, is conformed to the definition for purposes of the
    itemized deduction for medical expenses. Thus, under the
    provision, the cost of over-the-counter medicines may not be
    reimbursed with excludible income through a Health FSA, HRA,
    HSA, or Archer MSA.

                                 EFFECTIVE DATE

        The provision is effective for expenses incurred after
    December 31, 2009.

     H. Delay in Application of Worldwide Allocation of Interest (sec. 443
                     of the bill and sec. 864 of the Code)

                                  PRESENT LAW

    In general

        To compute the foreign tax credit limitation, a taxpayer
    must determine the amount of its taxable income from foreign
    sources. Thus, the taxpayer must allocate and apportion
    deductions between items of U.S.-source gross income, on the
    one hand, and items of foreign-source gross income, on the
    other.
        In the case of interest expense, the rules generally are
    based on the approach that money is fungible and that interest
    expense is properly attributable to all business activities and
    property of a taxpayer, regardless of any specific purpose for
    incurring an obligation on which interest is paid.\90\ For
    interest allocation purposes, all members of an affiliated
    group of corporations generally are treated as a single
    corporation (the so-called ``one-taxpayer rule'') and
    allocation must be made on the basis of assets rather than
    gross income. The term ``affiliated group'' in this context
    generally is defined by reference to the rules for determining
    whether corporations are eligible to file consolidated returns.
    ---------------------------------------------------------------------------
        \90\However, exceptions to the fungibility principle are provided
    in particular cases, some of which are described below.
    ---------------------------------------------------------------------------
        For consolidation purposes, the term ``affiliated group''
    means one or more chains of includible corporations connected
    through stock ownership with a common parent corporation that
    is an includible corporation, but only if: (1) the common
    parent owns directly stock possessing at least 80 percent of
    the total voting power and at least 80 percent of the total
    value of at least one other includible corporation; and (2)
    stock meeting the same voting power and value standards with
    respect to each includible corporation (excluding the common
    parent) is directly owned by one or more other includible
    corporations.
        Generally, the term ``includible corporation'' means any
    domestic corporation except certain corporations exempt from
    tax under section 501 (for example, corporations organized and
    operated exclusively for charitable or educational purposes),
    certain life insurance companies, corporations electing
    application of the possession tax credit, regulated investment
    companies, real estate investment trusts, and domestic
    international sales corporations. A foreign corporation
    generally is not an includible corporation.
        Subject to exceptions, the consolidated return and interest
    allocation definitions of affiliation generally are consistent
    with each other.\91\ For example, both definitions generally
    exclude all foreign corporations from the affiliated group.
    Thus, while debt generally is considered fungible among the
    assets of a group of domestic affiliated corporations, the same
    rules do not apply as between the domestic and foreign members
    of a group with the same degree of common control as the
    domestic affiliated group.
    ---------------------------------------------------------------------------
        \91\One such exception is that the affiliated group for interest
    allocation purposes includes section 936 corporations (certain electing
    domestic corporations that have income from the active conduct of a
    trade or business in Puerto Rico or another U.S. possession) that are
    excluded from the consolidated group.
    ---------------------------------------------------------------------------
                Banks, savings institutions, and other financial affiliates
        The affiliated group for interest allocation purposes
    generally excludes what are referred to in the Treasury
    regulations as financial corporations.\92\ A financial
    corporation includes any corporation, otherwise a member of the
    affiliated group for consolidation purposes, that is a
    financial institution (described in section 581 or section
    591), the business of which is predominantly with persons other
    than related persons or their customers, and which is required
    by State or Federal law to be operated separately from any
    other entity that is not a financial institution.\93\ The
    category of financial corporations also includes, to the extent
    provided in regulations, bank holding companies (including
    financial holding companies), subsidiaries of banks and bank
    holding companies (including financial holding companies), and
    savings institutions predominantly engaged in the active
    conduct of a banking, financing, or similar business.\94\
    ---------------------------------------------------------------------------
        \92\Treas. Reg. sec. 1.861-11T(d)(4).
        \93\Sec. 864(e)(5)(C).
        \94\Sec. 864(e)(5)(D).
    ---------------------------------------------------------------------------
        A financial corporation is not treated as a member of the
    regular affiliated group for purposes of applying the one-
    taxpayer rule to other non-financial members of that group.
    Instead, all such financial corporations that would be so
    affiliated are treated as a separate single corporation for
    interest allocation purposes.

    Worldwide interest allocation

                In general
        The American Jobs Creation Act of 2004 (``AJCA'')\95\
    modified the interest expense allocation rules described above
    (which generally apply for purposes of computing the foreign
    tax credit limitation) by providing a one-time election (the
    ``worldwide affiliated group election'') under which the
    taxable income of the domestic members of an affiliated group
    from sources outside the United States generally is determined
    by allocating and apportioning interest expense of the domestic
    members of a worldwide affiliated group on a worldwide-group
    basis (i.e., as if all members of the worldwide group were a
    single corporation). If a group makes this election, the
    taxable income of the domestic members of a worldwide
    affiliated group from sources outside the United States is
    determined by allocating and apportioning the third-party
    interest expense of those domestic members to foreign-source
    income in an amount equal to the excess (if any) of (1) the
    worldwide affiliated group's worldwide third-party interest
    expense multiplied by the ratio that the foreign assets of the
    worldwide affiliated group bears to the total assets of the
    worldwide affiliated group,\96\ over (2) the third-party
    interest expense incurred by foreign members of the group to
    the extent such interest would be allocated to foreign sources
    if the principles of worldwide interest allocation were applied
    separately to the foreign members of the group.\97\
    ---------------------------------------------------------------------------
        \95\Pub. L. No. 108-357, sec. 401.
        \96\For purposes of determining the assets of the worldwide
    affiliated group, neither stock in corporations within the group nor
    indebtedness (including receivables) between members of the group is
    taken into account.
        \97\Although the interest expense of a foreign subsidiary is taken
    into account for purposes of allocating the interest expense of the
    domestic members of the electing worldwide affiliated group for foreign
    tax credit limitation purposes, the interest expense incurred by a
    foreign subsidiary is not deductible on a U.S. return.
    ---------------------------------------------------------------------------
        For purposes of the new elective rules based on worldwide
    fungibility, the worldwide affiliated group means all
    corporations in an affiliated group as well as all controlled
    foreign corporations that, in the aggregate, either directly or
    indirectly,\98\ would be members of such an affiliated group if
    section 1504(b)(3) did not apply (i.e., in which at least 80
    percent of the vote and value of the stock of such corporations
    is owned by one or more other corporations included in the
    affiliated group). Thus, if an affiliated group makes this
    election, the taxable income from sources outside the United
    States of domestic group members generally is determined by
    allocating and apportioning interest expense of the domestic
    members of the worldwide affiliated group as if all of the
    interest expense and assets of 80-percent or greater owned
    domestic corporations (i.e., corporations that are part of the
    affiliated group, as modified to include insurance companies)
    and certain controlled foreign corporations were attributable
    to a single corporation.
    ---------------------------------------------------------------------------
        \98\Indirect ownership is determined under the rules of section
    958(a)(2) or through applying rules similar to those of section
    958(a)(2) to stock owned directly or indirectly by domestic
    partnerships, trusts, or estates.
    ---------------------------------------------------------------------------
                Financial institution group election
        Taxpayers are allowed to apply the bank group rules to
    exclude certain financial institutions from the affiliated
    group for interest allocation purposes under the worldwide
    fungibility approach. The rules also provide a one-time
    financial institution group election that expands the bank
    group. At the election of the common parent of the preelection
    worldwide affiliated group, the interest expense allocation
    rules are applied separately to a subgroup of the worldwide
    affiliated group that consists of (1) all corporations that are
    part of the bank group, and (2) all financial corporations. For
    this purpose, a corporation is a financial corporation if at
    least 80 percent of its gross income is financial services
    income (as described in section 904(d)(2)(C)(i) and the
    regulations thereunder) that is derived from transactions with
    unrelated persons.\99\ For these purposes, items of income or
    gain from a transaction or series of transactions are
    disregarded if a principal purpose for the transaction or
    transactions is to qualify any corporation as a financial
    corporation.
    ---------------------------------------------------------------------------
        \99\See Treas. Reg. sec. 1.904-4(e)(2).
    ---------------------------------------------------------------------------
        In addition, anti-abuse rules are provided under which
    certain transfers from one member of a financial institution
    group to a member of the worldwide affiliated group outside of
    the financial institution group are treated as reducing the
    amount of indebtedness of the separate financial institution
    group. Regulatory authority is provided with respect to the
    election to provide for the direct allocation of interest
    expense in circumstances in which such allocation is
    appropriate to carry out the purposes of these rules, to
    prevent assets or interest expense from being taken into
    account more than once, or to address changes in members of any
    group (through acquisitions or otherwise) treated as affiliated
    under these rules.
                Effective date of worldwide interest allocation
        The common parent of the domestic affiliated group must
    make the worldwide affiliated group election. It must be made
    for the first taxable year beginning after December 31, 2010,
    in which a worldwide affiliated group exists that includes at
    least one foreign corporation that meets the requirements for
    inclusion in a worldwide affiliated group.\100\ The common
    parent of the pre-election worldwide affiliated group must make
    the election for the first taxable year beginning after
    December 31, 2010, in which a worldwide affiliated group
    includes a financial corporation. Once either election is made,
    it applies to the common parent and all other members of the
    worldwide affiliated group or to all members of the financial
    institution group, as applicable, for the taxable year for
    which the election is made and all subsequent taxable years,
    unless revoked with the consent of the Secretary of the
    Treasury.
    ---------------------------------------------------------------------------
        \100\As originally enacted under AJCA, the worldwide interest
    allocation rules were effective for taxable years beginning after
    December 31, 2008. However, the Housing and Economic Recovery Act of
    2008 (``HERA'') delayed the implementation of the worldwide interest
    allocation rules for two years, until taxable years beginning after
    December 31, 2010. Pub. L. No. 110-289, sec. 3093.
    ---------------------------------------------------------------------------
                Phase-in rule
        HERA also provided a special phase-in rule in the case of
    the first taxable year to which the worldwide interest
    allocation rules apply. For that year, the amount of the
    taxpayer's taxable income from foreign sources is reduced by 70
    percent of the excess of (i) the amount of its taxable income
    from foreign sources as calculated using the worldwide interest
    allocation rules over (ii) the amount of its taxable income
    from foreign sources as calculated using the present-law
    interest allocation rules. For that year, the amount of the
    taxpayer's taxable income from domestic sources is increased by
    a corresponding amount. Any foreign tax credits disallowed by
    virtue of this reduction in foreign-source taxable income may
    be carried back or forward under the normal rules for
    carrybacks and carryforwards of excess foreign tax credits.

                               REASONS FOR CHANGE

        The Committee believes that it is appropriate to delay
    implementation of the worldwide interest allocation rules.

                            EXPLANATION OF PROVISION

        The provision delays the effective date of worldwide
    interest allocation rules for nine years, until taxable years
    beginning after December 31, 2019. The required dates for
    making the worldwide affiliated group election and the
    financial institution group election are changed accordingly.
        The provision also eliminates the special phase-in rule
    that applies in the case of the first taxable year to which the
    worldwide interest allocation rules apply.

                                 EFFECTIVE DATE

        The provision is effective for taxable years beginning
    after December 31, 2010.

    I. Limitation on Treaty Benefits for Certain Deductible Payments (sec.
                   451 of the bill and sec. 894 of the Code)

                                  PRESENT LAW

    In general

        The United States taxes foreign corporations only on income
    that has a sufficient nexus to the United States. Thus, a
    foreign corporation is generally subject to net-basis U.S. tax
    only on income that is effectively connected with the conduct
    of a trade or business in the United States. Such effectively
    connected income generally is taxed in the same manner and at
    the same rates as the income of a U.S. corporation. An
    applicable tax treaty may limit the imposition of U.S. tax on
    business operations of a foreign corporation to cases in which
    the business is conducted through a permanent establishment in
    the United States.
        In addition, foreign corporations generally are subject to
    a gross-basis U.S. tax at a flat 30-percent rate on the receipt
    of interest, dividends, rents, royalties, and certain similar
    types of income derived from U.S. sources, subject to certain
    exceptions. The tax (``U.S. withholding tax'') generally is
    collected by means of withholding by the person making the
    payment. U.S. withholding tax may be reduced or eliminated
    under an applicable tax treaty, subject to the conditions
    discussed below.

    Tax treaties

        A foreign corporation may not benefit from a provision of a
    U.S. tax treaty with a foreign country that eliminates or
    reduces U.S. withholding tax unless the foreign corporation is
    both a resident of such foreign country and qualifies under any
    limitation-on-benefits provision contained in the U.S. tax
    treaty with such foreign country. In general, a foreign
    corporation is a resident of a foreign country under a U.S. tax
    treaty with that foreign country if it is liable to tax in that
    country by reason of its domicile, residence, citizenship,
    place of management, place of incorporation, or other criterion
    of a similar nature.\101\
    ---------------------------------------------------------------------------
        \101\United States Model Income Tax Convention of November 15,
    2006, Art. 4, par. 1.
    ---------------------------------------------------------------------------
                Limitation-on-benefits provisions generally
        Limitation-on-benefits provisions in income tax treaties
    are intended to deny treaty benefits in certain cases of treaty
    shopping or income stripping engaged in by third-country
    residents. Treaty shopping is said to occur when an entity that
    is resident in a country with respect to which there is no
    relevant tax treaty in force (or there is such a treaty in
    force but the taxpayer desires better benefits than those
    offered under that treaty) becomes resident in a treaty country
    or conducts a transaction in such a country for the purpose of
    qualifying for treaty benefits. For example, treaty shopping by
    a third-country resident may involve organizing in a treaty
    country a corporation that is entitled to the benefits of the
    treaty. Alternatively, a third-country resident eligible for
    favorable treatment under the tax rules of its country of
    residency may attempt to reduce the income base of a related
    treaty-country resident by having that treaty country resident
    pay to it, directly or indirectly, interest, royalties, or
    other amounts that are deductible in the treaty country from
    which the payments are made.
        U.S. tax treaties contain a variety of limitation-on-
    benefits provisions due to the continued and recently
    accelerated development of limitation-on-benefits concepts, and
    the negotiated nature of tax treaties in general. Although many
    older U.S. tax treaties may lack limitation-on-benefits
    provisions\102\ or lack the refinements now thought essential
    to such provisions, the U.S. model income tax treaty, as most
    recently revised in 2006 (``U.S. model treaty''),\103\ and the
    newer U.S. treaties include limitation-on-benefits provisions
    that limit treaty benefits to resident taxpayers that meet
    certain detailed requirements intended to minimize these
    abuses. Present Treasury Department policy, which has been
    repeatedly ratified by the Senate, is broadly to revise older
    treaties by tightening limitation-on-benefits provisions to
    prevent treaty shopping.
    ---------------------------------------------------------------------------
        \102\U.S. income tax treaties with Greece, Hungary, Pakistan, the
    Philippines, Poland, and Romania are examples of such treaties, each of
    which entered into force more than 25 years ago. The United States
    recently concluded negotiations for a new income tax treaty with
    Hungary that contains a modern limitation-on-benefits provision; the
    U.S. Senate must still ratify that treaty before it may enter into
    force.
        \103\United States Model Income Tax Convention of November 15,
    2006, Art. 22.
    ---------------------------------------------------------------------------
        The limitation-on-benefits rules included in U.S. income
    tax treaties and protocols signed since 2001 generally
    correspond with the limitation-on-benefits provisions of the
    U.S. model treaty. Certain features of the limitation-on-
    benefits provisions in recent treaties and protocols, however,
    differ from the rules in the U.S. model treaty, and some recent
    treaties and protocols include additional limitation-on-
    benefits rules not included in the U.S. model treaty. Some of
    the additions and differences make limitation-on-benefits
    provisions more restrictive than the rules in the U.S. model
    treaty, and others make the provisions less restrictive.
                The U.S. model treaty limitation-on-benefits provision
        The limitation-on-benefits rules of the U.S. model treaty
    include three provisions under which a resident of a treaty
    country may qualify for treaty benefits. First, a treaty-
    country resident may qualify for all treaty benefits if it has
    any one of several listed attributes. Second, a treaty-country
    resident that does not have one of the listed attributes may
    qualify for treaty benefits for income items that are derived
    from the other treaty country and that are related to a trade
    or business carried on in the residence country. Third, a
    treaty-country resident that would not be eligible for treaty
    benefits under either of the preceding two provisions may
    qualify for treaty benefits at the discretion of the competent
    authority of the other treaty country. These three provisions
    are described in more detail below.
                Listed attributes qualifying a treaty-country resident for
                        treaty benefits
        A treaty-country resident may qualify for treaty benefits
    under the U.S. model treaty if it has one of the following
    attributes: it is (1) an individual; (2) a contracting state or
    a political subdivision or a local authority of the contracting
    state; (3) a company that satisfies either a public trading or
    ownership test described below; (4) a pension fund or other
    tax-exempt organization (if, in the case of a pension fund,
    more than 50 percent of the fund's beneficiaries, members, or
    participants are individuals resident in either treaty
    country); or (5) a person other than an individual that
    satisfies the ownership and base erosion test described below.
        Public trading and ownership tests.--A company satisfies
    the public trading test if its principal class of shares (and
    any disproportionate class of shares) is regularly traded on
    one or more recognized stock exchanges and either its principal
    class of shares is primarily traded on one or more recognized
    stock exchanges located in the treaty country in which the
    company is a resident or the company's primary place of
    management and control is in its country of residence. A
    company may satisfy the ownership test if at least 50 percent
    of the aggregate vote and value of the company's shares (and at
    least 50 percent of any disproportionate class of the company's
    shares) is owned directly or indirectly by five or fewer
    companies entitled to benefits under the public trading test
    described above. This ownership test may be satisfied by
    indirect ownership only if each intermediate owner is a
    resident of either treaty country.
        Ownership and base erosion test.--A resident of a treaty
    country satisfies the ownership prong of the ownership and base
    erosion test if on at least half the days of the taxable year,
    persons that are residents of that country and that are
    entitled to treaty benefits as individuals, governments,
    companies that satisfy the public trading test, or pension
    funds or other tax-exempt organizations own, directly or
    indirectly, stock representing at least 50 percent of the
    aggregate voting power and value (and at least 50 percent of
    any disproportionate class of shares) of the resident for whom
    treaty benefit eligibility is being tested. This ownership
    requirement may be satisfied by indirect ownership only if each
    intermediate owner is a resident of the country of residence of
    the person for which entitlement to treaty benefits is being
    tested. A resident of a treaty country satisfies the base
    erosion prong of the ownership and base erosion test if less
    than 50 percent of the person's gross income for the taxable
    year, as determined in the person's country of residence, is
    paid or accrued, directly or indirectly, in the form of
    deductible payments to persons who are not residents of either
    treaty country entitled to treaty benefits as individuals,
    governments, companies that satisfy the public trading test, or
    pension funds or other tax-exempt organizations (other than
    arm's-length payments in the ordinary course of business for
    services or tangible property).
                Items of income derived from an active trade or business
        Under the U.S. model treaty, a resident of a treaty country
    that is not eligible for all treaty benefits under any of the
    rules described above may be entitled to treaty benefits with
    respect to a particular item of income derived from the other
    treaty country. A resident is entitled to treaty benefits for
    such an income item if the resident is engaged in the active
    conduct of a trade or business in its country of residence
    (other than the business of making or managing investments for
    the resident's own account, unless these activities are
    banking, insurance, or securities activities carried on by a
    bank, an insurance company, or a registered securities dealer)
    and the income derived from the other treaty country is derived
    in connection with, or is incidental to, that trade or
    business. If a resident of a treaty country derives an item of
    income from a trade or business activity that it conducts in
    the other treaty country, or derives an income item arising in
    that other country from a related person, the income item
    eligibility rule just described is considered satisfied for
    that income item only if the trade or business activity carried
    on by the resident in its country of residence is substantial
    in relation to the trade or business activity carried on by the
    resident or the related person in the other country. The
    determination whether a trade or business activity is
    substantial is based on all the facts and circumstances.
                Discretionary grant of benefits by competent authority
        A resident of a treaty country not otherwise eligible for
    treaty benefits under the U.S. model treaty may be eligible for
    the benefits of the treaty generally or eligible for the
    benefits with respect to a specific item of income, based on a
    determination by the competent authority of the other treaty
    country. The competent authority may grant such benefits if it
    determines that the establishment, acquisition, or maintenance
    of the person for whom treaty benefits eligibility is being
    tested, and the conduct of that person's operations, did not
    have as one of its principal purposes the obtaining of benefits
    under the treaty.

                               REASONS FOR CHANGE

        The Committee is aware that even though many recent U.S.
    income tax treaties include limitation-on-benefits provisions
    intended to ensure that only persons with sufficient nexus to
    the treaty partner countries may obtain treaty benefits,
    foreign multinational taxpayers residing in countries with
    which the United States does not have comprehensive tax
    treaties (including tax havens) may engage in treaty shopping.
    Treaty shopping by foreign multinational companies may involve
    organizing, in jurisdictions that have income tax treaties with
    the United States that offer favorable U.S. withholding rates
    on deductible payments, subsidiaries with no substantial
    business activities or other connections to those
    jurisdictions.\104\ Such payments may ultimately be distributed
    to the foreign parent corporations in the non-tax-treaty
    jurisdictions, although payments made directly to the parent
    companies would not have been eligible for reduced treaty
    withholding rates. The Committee believes that some instances
    of treaty shopping of the sort described above involve formerly
    U.S.-based companies that engaged in corporate inversion
    transactions prior to the enactment of the anti-inversion rules
    of section 7874. As a result of these inversion transactions,
    U.S. parent corporations of multinational groups became
    subsidiaries of foreign corporations organized in low- or no-
    tax jurisdictions. The Committee believes that it is
    inappropriate to allow treaty benefits for deductible payments
    in cases in which a foreign parent corporation would not have
    qualified for benefits under a U.S. tax treaty if the payment
    had been made directly to the parent, including in cases in
    which the parent is resident in a tax haven.
    ---------------------------------------------------------------------------
        \104\As documented in the Department of the Treasury Report to the
    Congress on Earnings Stripping, Transfer Pricing and U.S. Income Tax
    Treaties, some of the older U.S. income treaties that do not have
    limitation-on-benefits provisions, or treaties that lack all of the
    recent refinements to such provisions, provide for zero or low rates of
    U.S. withholding on certain deductible payments, including interest.
    Department of the Treasury, Report to the Congress on Earnings
    Stripping, Transfer Pricing and U.S. Income Tax Treaties 82 (2007).
    ---------------------------------------------------------------------------

                            EXPLANATION OF PROVISION

        The provision limits tax treaty benefits with respect to
    U.S. withholding tax imposed on deductible related-party
    payments. Under the provision, the amount of U.S. withholding
    tax imposed on deductible related-party payments may not be
    reduced under any U.S. income tax treaty unless such
    withholding tax would have been reduced under a U.S. income tax
    treaty if the payment were made directly to the foreign parent
    corporation of the payee. A payment is a deductible related-
    party payment if it is made directly or indirectly by any
    entity to any other entity, it is allowable as a deduction for
    U.S. tax purposes, and both entities are members of the same
    foreign controlled group of entities.
        For purposes of the provision, a foreign controlled group
    of entities is a controlled group of corporations as defined in
    section 1563(a)(1), modified as described below, in which the
    common parent company is a foreign corporation. Such common
    parent company is referred to as the ``foreign parent
    corporation.'' A controlled group of corporations consists of a
    chain or chains of corporations connected through direct stock
    ownership of at least 80 percent of the total combined voting
    power of all classes of stock entitled to vote or at least 80
    percent of the total value of shares of all classes of stock of
    each of the corporations. For purposes of the provision, the
    relevant ownership threshold is lowered from ``at least 80
    percent'' to more than 50 percent, certain members of the
    controlled group of corporations that would otherwise be
    treated as excluded members are not treated as excluded
    members,\105\ and insurance companies are not treated as
    members of a separate controlled group of corporations. In
    addition, a partnership or other noncorporate entity is treated
    as a member of a controlled group of corporations if such
    entity is controlled by members of the group.
    ---------------------------------------------------------------------------
        \105\Under section 1563(b)(2), a corporation that is a member of a
    controlled group of corporations on December 31 of a taxable year is
    treated as an excluded member of the group for the taxable year that
    includes such December 31 if such corporation--
        (A) is a member of the group for less than one-half the number of
    days in such taxable year which precedes such December 31;
        (B) is exempt from taxation under section 501(a) for such taxable
    year;
        (C) is a foreign corporation subject to tax under section 881 for
    such taxable year;
        (D) is an insurance company subject to taxation under section 801;
    or
        (E) is a franchised corporation (as defined in section 1563(f)(4)).
    ---------------------------------------------------------------------------
        The Secretary may prescribe regulations that are necessary
    or appropriate to carry out the purposes of the provision,
    including regulations providing for the treatment of two or
    more persons as members of a foreign controlled group of
    entities if such persons would be the common parent of such
    group if treated as one corporation, and regulations providing
    for the treatment of any member of a foreign controlled group
    of entities as the common parent of that group if such
    treatment is appropriate taking into account the economic
    relationships among the group entities.
        For example, under the provision, a deductible payment made
    by a U.S. entity to a foreign entity with a foreign parent
    corporation that is resident in a country with respect to which
    the United States does not have an income tax treaty is always
    subject to the statutory U.S. withholding tax rate of 30
    percent, irrespective of whether the payee qualifies for
    benefits under a tax treaty. If, instead, the foreign parent
    corporation is a resident of a country with respect to which
    the United States does have an income tax treaty that would
    reduce the withholding tax rate on a payment made directly to
    the foreign parent corporation (regardless of the amount of
    such reduction), and the payment would qualify for benefits
    under that treaty if the payment were made directly to the
    foreign parent corporation, then the payee entity will continue
    to be eligible for the reduced withholding tax rate under the
    U.S. income tax treaty with the payee entity's residence
    country (even if such reduced treaty rate is lower than the
    rate that would be imposed on a hypothetical direct payment to
    the foreign parent corporation).

                                 EFFECTIVE DATE

        The provision is effective for payments made after the date
    of enactment.

     J. Codification of Economic Substance Doctrine (sec. 452 of the bill
                           and sec. 7701 of the Code)

                                  PRESENT LAW

    In general

        The Code provides detailed rules specifying the computation
    of taxable income, including the amount, timing, source, and
    character of items of income, gain, loss, and deduction. These
    rules permit both taxpayers and the government to compute
    taxable income with reasonable accuracy and predictability.
    Taxpayers generally may plan their transactions in reliance on
    these rules to determine the federal income tax consequences
    arising from the transactions.
        In addition to the statutory provisions, courts have
    developed several doctrines that can be applied to deny the tax
    benefits of a tax-motivated transaction, notwithstanding that
    the transaction may satisfy the literal requirements of a
    specific tax provision. These common-law doctrines are not
    entirely distinguishable, and their application to a given set
    of facts is often blurred by the courts, the IRS, and
    litigants. Although these doctrines serve an important role in
    the administration of the tax system, they can be seen as at
    odds with an objective, rule-based system of taxation.
        One common-law doctrine applied over the years is the
    economic substance doctrine. In general, this doctrine denies
    tax benefits arising from transactions that do not result in a
    meaningful change to the taxpayer's economic position other
    than a purported reduction in federal income tax.\106\
    ---------------------------------------------------------------------------
        \106\See, e.g., ACM Partnership v. Commissioner, 157 F.3d 231 (3d
    Cir. 1998), aff'g 73 T.C.M. (CCH) 2189 (1997), cert. denied 526 U.S.
    1017 (1999); Klamath Strategic Investment Fund, LLC v. United States,
    472 F. Supp. 2d 885 (E.D. Texas 2007), aff'd 568 F.3d 537 (5th Cir.
    2009); Coltec Industries, Inc. v. United States, 454 F.3d 1340 (Fed.
    Cir. 2006), vacating and remanding 62 Fed. Cl. 716 (2004) (slip opinion
    at 123-124, 128); cert. denied, 127 S. Ct. 1261 (Mem.) (2007).
        Closely related doctrines also applied by the courts (sometimes
    interchangeably with the economic substance doctrine) include the
    ``sham transaction doctrine'' and the ``business purpose doctrine.''
    See, e.g., Knetsch v. United States, 364 U.S. 361 (1960) (denying
    interest deductions on a ``sham transaction'' whose only purpose was to
    create the deductions). Certain ``substance over form'' cases involving
    tax-indifferent parties, in which courts have found that the substance
    of the transaction did not comport with the form asserted by the
    taxpayer, have also involved examination of whether the change in
    economic position that occurred, if any, was consistent with the form
    asserted, and whether the claimed business purpose supported the
    particular tax benefits that were claimed. See, e.g., TIFD- III-E, Inc.
    v. United States, 459 F.3d 220 (2d Cir. 2006); BB&T Corporation v.
    United States, 2007-1 USTC P 50,130 (M.D.N.C. 2007), aff'd 523 F.3d 461
    (4th Cir. 2008).
    ---------------------------------------------------------------------------
                Economic substance doctrine
        Courts generally deny claimed tax benefits if the
    transaction that gives rise to those benefits lacks economic
    substance independent of U.S. federal income tax
    considerations--notwithstanding that the purported activity
    actually occurred. The Tax Court has described the doctrine as
    follows:
        The tax law . . . requires that the intended transactions
    have economic substance separate and distinct from economic
    benefit achieved solely by tax reduction. The doctrine of
    economic substance becomes applicable, and a judicial remedy is
    warranted, where a taxpayer seeks to claim tax benefits,
    unintended by Congress, by means of transactions that serve no
    economic purpose other than tax savings.\107\
    ---------------------------------------------------------------------------
        \107\ACM Partnership v. Commissioner, 73 T.C.M. at 2215.
    ---------------------------------------------------------------------------
                Business purpose doctrine
        A common law doctrine that often is considered together
    with the economic substance doctrine is the business purpose
    doctrine. The business purpose doctrine involves an inquiry
    into the subjective motives of the taxpayer--that is, whether
    the taxpayer intended the transaction to serve some useful non-
    tax purpose. In making this determination, some courts have
    bifurcated a transaction in which activities with non-tax
    objectives have been combined with unrelated activities having
    only tax-avoidance objectives, in order to disallow the tax
    benefits of the overall transaction.\108\
    ---------------------------------------------------------------------------
        \108\See ACM Partnership v. Commissioner, 157 F.3d at 256 n.48.
    ---------------------------------------------------------------------------

    Application by the courts

                Elements of the doctrine
        There is a lack of uniformity regarding the proper
    application of the economic substance doctrine.\109\ Some
    courts apply a conjunctive test that requires a taxpayer to
    establish the presence of both economic substance (i.e., the
    objective component) and business purpose (i.e., the subjective
    component) in order for the transaction to survive judicial
    scrutiny.\110\ A narrower approach used by some courts is to
    conclude that either a business purpose or economic substance
    is sufficient to respect the transaction.\111\ A third approach
    regards economic substance and business purpose as ``simply
    more precise factors to consider'' in determining whether a
    transaction has any practical economic effects other than the
    creation of tax benefits.\112\
    ---------------------------------------------------------------------------
        \109\''The casebooks are glutted with [economic substance] tests.
    Many such tests proliferate because they give the comforting illusion
    of consistency and precision. They often obscure rather than clarify.''
    Collins v. Commissioner, 857 F.2d 1383, 1386 (9th Cir. 1988).
        \110\See, e.g., Pasternak v. Commissioner, 990 F.2d 893, 898 (6th
    Cir. 1993) (``The threshold question is whether the transaction has
    economic substance. If the answer is yes, the question becomes whether
    the taxpayer was motivated by profit to participate in the
    transaction.''). See also, Klamath Strategic Investment Fund v. United
    States, 568 F. 3d 537 (5th Cir. 2009) (even if taxpayers may have had a
    profit motive, a transaction was disregarded where it did not in fact
    have any realistic possibility of profit and funding was never at
    risk).
        \111\See, e.g., Rice's Toyota World v. Commissioner, 752 F.2d 89,
    91-92 (4th Cir. 1985) (``To treat a transaction as a sham, the court
    must find that the taxpayer was motivated by no business purposes other
    than obtaining tax benefits in entering the transaction, and, second,
    that the transaction has no economic substance because no reasonable
    possibility of a profit exists.''); IES Industries v. United States,
    253 F.3d 350, 358 (8th Cir. 2001) (``In determining whether a
    transaction is a sham for tax purposes [under the Eighth Circuit test],
    a transaction will be characterized as a sham if it is not motivated by
    any economic purpose out of tax considerations (the business purpose
    test), and if it is without economic substance because no real
    potential for profit exists (the economic substance test).''). As noted
    earlier, the economic substance doctrine and the sham transaction
    doctrine are similar and sometimes are applied interchangeably. For a
    more detailed discussion of the sham transaction doctrine, see, e.g.,
    Joint Committee on Taxation, Study of Present-Law Penalty and Interest
    Provisions as Required by Section 3801 of the Internal Revenue Service
    Restructuring and Reform Act of 1998 (including Provisions Relating to
    Corporate Tax Shelters) (JCS-3-99) at 182.
        \112\See, e.g., ACM Partnership v. Commissioner, 157 F.3d at 247;
    James v. Commissioner, 899 F.2d 905, 908 (10th Cir. 1995); Sacks v.
    Commissioner, 69 F.3d 982, 985 (9th Cir. 1995) (``Instead, the
    consideration of business purpose and economic substance are simply
    more precise factors to consider . . . We have repeatedly and carefully
    noted that this formulation cannot be used as a 'rigid two-step
    analysis'.'')
    ---------------------------------------------------------------------------
        One decision by the Court of Federal Claims questioned the
    continuing viability of the doctrine. That court also stated
    that ``the use of the economic substance doctrine to trump mere
    compliance with the Code would violate the separation of
    powers'' though that court also found that the particular
    transaction at issue in the case did not lack economic
    substance. The Court of Appeals for the Federal Circuit
    (``Federal Circuit Court'') overruled the Court of Federal
    Claims decision, reiterating the viability of the economic
    substance doctrine and concluding that the transaction in
    question violated that doctrine.\113\ The Federal Circuit Court
    stated that ``[w]hile the doctrine may well also apply if the
    taxpayer's sole subjective motivation is tax avoidance even if
    the transaction has economic substance, [footnote omitted], a
    lack of economic substance is sufficient to disqualify the
    transaction without proof that the taxpayer's sole motive is
    tax avoidance.''\114\
    ---------------------------------------------------------------------------
        \113\Coltec Industries, Inc. v. United States, 62 Fed. Cl. 716
    (2004) (slip opinion at 123-124, 128); vacated and remanded, 454 F.3d
    1340 (Fed. Cir. 2006), cert. denied, 127 S. Ct. 1261 (Mem.) (2007).
        \114\The Federal Circuit Court stated that ``when the taxpayer
    claims a deduction, it is the taxpayer who bears the burden of proving
    that the transaction has economic substance.'' The Federal Circuit
    Court quoted a decision of its predecessor court, stating that
    ``Gregory v. Helvering requires that a taxpayer carry an unusually
    heavy burden when he attempts to demonstrate that Congress intended to
    give favorable tax treatment to the kind of transaction that would
    never occur absent the motive of tax avoidance.'' The Court also stated
    that ``while the taxpayer's subjective motivation may be pertinent to
    the existence of a tax avoidance purpose, all courts have looked to the
    objective reality of a transaction in assessing its economic
    substance.'' Coltec Industries, Inc. v. United States, 454 F.3d at
    1355, 1356.
    ---------------------------------------------------------------------------
                Nontax economic benefits
        There also is a lack of uniformity regarding the type of
    non-tax economic benefit a taxpayer must establish in order to
    demonstrate that a transaction has economic substance. Some
    courts have denied tax benefits on the grounds that a stated
    business benefit of a particular structure was not in fact
    obtained by that structure.\115\ Several courts have denied tax
    benefits on the grounds that the subject transactions lacked
    profit potentia1.\116\ In addition, some courts have applied
    the economic substance doctrine to disallow tax benefits in
    transactions in which a taxpayer was exposed to risk and the
    transaction had a profit potential, but the court concluded
    that the economic risks and profit potential were insignificant
    when compared to the tax benefits.\117\ Under this analysis,
    the taxpayer's profit potential must be more than nominal.
    Conversely, other courts view the application of the economic
    substance doctrine as requiring an objective determination of
    whether a ``reasonable possibility of profit'' from the
    transaction existed apart from the tax benefits.\118\ In these
    cases, in assessing whether a reasonable possibility of profit
    exists, it may be sufficient if there is a nominal amount of
    pre-tax profit as measured against expected tax benefits.
    ---------------------------------------------------------------------------
        \115\See, e.g., Coltec Industries v. United States, 454 F.3d 1340
    (Fed. Cir. 2006). The court analyzed the transfer to a subsidiary of a
    note purporting to provide high stock basis in exchange for a purported
    assumption of liabilities, and held these transactions unnecessary to
    accomplish any business purpose of using a subsidiary to manage
    asbestos liabilities. The court also held that the purported business
    purpose of adding a barrier to veil-piercing claims by third parties
    was not accomplished by the transaction. 454 F.3d at 1358-1360 (Fed.
    Cir. 2006).
        \116\See, e.g., Knetsch, 364 U.S. at 361; Goldstein v.
    Commissioner, 364 F.2d 734 (2d Cir. 1966) (holding that an
    unprofitable, leveraged acquisition of Treasury bills, and accompanying
    prepaid interest deduction, lacked economic substance).
        \117\See, e.g., Goldstein v. Commissioner, 364 F.2d at 739-40
    (disallowing deduction even though taxpayer had a possibility of small
    gain or loss by owning Treasury bills); Sheldon v. Commissioner, 94
    T.C. 738, 768 (1990) (stating that ``potential for gain . . . is
    infinitesimally nominal and vastly insignificant when considered in
    comparison with the claimed deductions'').
        \118\See, e.g., Rice's Toyota World v. Commissioner, 752 F. 2d 89,
    94 (4th Cir. 1985) (the economic substance inquiry requires an
    objective determination of whether a reasonable possibility of profit
    from the transaction existed apart from tax benefits); Compaq Computer
    Corp. v. Commissioner, 277 F.3d 778, 781 (5th Cir. 2001) (applied the
    same test, citing Rice's Toyota World); IES Industries v. United
    States, 253 F.3d 350, 354 (8th Cir. 2001).
    ---------------------------------------------------------------------------
                Financial accounting benefits
        In determining whether a taxpayer had a valid business
    purpose for entering into a transaction, at least one court has
    concluded that financial accounting benefits arising from tax
    savings do not qualify as a non-tax business purpose.\119\
    However, based on court decisions that recognize the importance
    of financial accounting treatment, taxpayers have asserted that
    financial accounting benefits arising from tax savings can
    satisfy the business purpose test.\120\
    ---------------------------------------------------------------------------
        \119\See American Electric Power, Inc. v. United States, 136 F.
    Supp. 2d 762, 791-92 (S.D. Ohio 2001), aff'd, 326 F.3d.737 (6th Cir.
    2003).
        \120\See, e.g., Joint Committee on Taxation, Report of
    Investigation of Enron Corporation and Related Entities Regarding
    Federal Tax and Compensation Issues, and Policy Recommendations (JCX-3-
    03) February, 2003 (``Enron Report''), Volume III at C-93, 289. Enron
    Corporation relied on Frank Lyon Co. v. United States, 435 U.S. 561,
    577-78 (1978), and Newman v. Commissioner, 902 F.2d 159, 163 (2d Cir.
    1990), to argue that financial accounting benefits arising from tax
    savings constitute a good business purpose.
    ---------------------------------------------------------------------------
                Tax-indifferent parties
        A number of cases have involved transactions structured to
    allocate income for Federal tax purposes to a tax-indifferent
    party, with a corresponding deduction, or favorable basis
    result, to a taxable person. The income allocated to the tax-
    indifferent party for tax purposes was structured to exceed any
    actual economic income to be received by the tax indifferent
    party from the transaction. Courts have sometimes concluded
    that a particular type of transaction did not satisfy the
    economic substance doctrine.\121\ In other cases, courts have
    indicated that the substance of a transaction did not support
    the form of income allocations asserted by the taxpayer and
    have questioned whether asserted business purpose or other
    standards were met.\122\
    ---------------------------------------------------------------------------
        \121\See, e.g., ACM Partnership v. Commissioner, 157 F.3d 231 (3d
    Cir. 1998), aff'g 73 T.C.M. (CCH) 2189 (1997), cert. denied 526 U.S.
    1017 (1999).
        \122\See, e.g., TIFD-III-E, Inc. v. United States, 459 F.3d 220 (2d
    Cir. 2006).
    ---------------------------------------------------------------------------

                               REASONS FOR CHANCE

        Tax avoidance transactions have relied upon the interaction
    of highly technical tax law provisions to produce tax
    consequences not contemplated by Congress. When successful,
    taxpayers who engage in these transactions enlarge the tax gap
    by gaining unintended tax relief and by undermining the overall
    integrity of the tax system.
        A strictly rule-based tax system cannot efficiently
    prescribe the appropriate outcome of every conceivable
    transaction that might be devised and is, as a result,
    incapable of preventing all unintended consequences. Thus, many
    courts have long recognized the need to supplement tax rules
    with anti-tax-avoidance standards, such as the economic
    substance doctrine, in order to assure the Congressional
    purpose is achieved. The Committee recognizes that the IRS has
    achieved a number of recent successes in litigation. The
    Committee believes it is still desirable to provide greater
    clarity and uniformity in the application of the economic
    substance doctrine in order to improve its effectiveness at
    deterring unintended consequences.

                            EXPLANATION OF PROVISION

        The provision clarifies and enhances the application of the
    economic substance doctrine. Under the provision, in the case
    of any transaction to which the economic substance doctrine is
    relevant, such transaction shall be treated as having economic
    substance only if (1) the transaction changes in a meaningful
    way (apart from Federal income tax effects) the taxpayer's
    economic position, and (2) the taxpayer has a substantial
    purpose (apart from Federal income tax effects) for entering
    into such transaction.\123\ The provision provides a uniform
    definition of economic substance, but does not alter the
    flexibility of the courts in other respects.
    ---------------------------------------------------------------------------
        \123\In applying these tests, any State or local income tax effect
    which is related to a Federal income tax effect shall be treated in the
    same manner as a Federal income tax effect.
    ---------------------------------------------------------------------------
        The determination of whether the economic substance
    doctrine is relevant to a transaction shall be made in the same
    manner as if the provision had never been enacted. Thus, the
    provision does not change current law standards in determining
    when to utilize an economic substance analysis.\124\
    ---------------------------------------------------------------------------
        \124\If the tax benefits are clearly consistent with all applicable
    provisions of the Code and the purposes of such provisions, it is not
    intended that such tax benefits be disallowed if the only reason for
    such disallowance is that the transaction fails the economic substance
    doctrine as defined in this provision. See, e.g., Treas. Reg. sec.
    1.269-2, stating that characteristic of circumstances in which a
    deduction otherwise allowed will be disallowed are those in which the
    effect of the deduction, credit, or other allowance would be to distort
    the liability of the particular taxpayer when the essential nature of
    the transaction or situation is examined in the light of the basic
    purpose or plan which the deduction, credit, or other allowance was
    designed by the Congress to effectuate.
    ---------------------------------------------------------------------------
        The provision is not intended to alter the tax treatment of
    certain basic business transactions that, under longstanding
    judicial and administrative practice are respected, merely
    because the choice between meaningful economic alternatives is
    largely or entirely based on comparative tax advantages.
    Among\125\ these basic transactions are (1) the choice between
    capitalizing a business enterprise with debt or equity;\126\
    (2) a U.S. person's choice between utilizing a foreign
    corporation or a domestic corporation to make a foreign
    investment;\127\ (3) the choice to enter a transaction or
    series of transactions that constitute a corporate organization
    or reorganization under subchapter C;\128\ and (4) the choice
    to utilize a related-party entity in a transaction, provided
    that the arm's length standard of section 482 and other
    applicable concepts are satisfied.\129\ Leasing transactions,
    like all other types of transactions, will continue to be
    analyzed in light of all the facts and circumstances.\130\ As
    under present law, whether a particular transaction meets the
    requirements for specific treatment under any of these
    provisions can be a question of facts and circumstances. Also,
    the fact that a transaction does meet the requirements for
    specific treatment under any provision of the Code is not
    determinative of whether a transaction or series of
    transactions of which it is a part has economic substance.\131\
    ---------------------------------------------------------------------------
        \125\The examples are illustrative and not exclusive.
        \126\See, e.g., John Kelley Co. v. Commissioner, 326 U.S. 521
    (1946) (respecting debt characterization in one case and not in the
    other, based on all the facts and circumstances).
        \127\See, e.g., Sam Siegel v. Commissioner, 45. T.C. 566 (1966),
    acq. 1966-2 C.B. 3. But see Commissioner v. Bollinger, 485 U.S. 340
    (1988) (agency principles applied to title-holding corporation under
    the facts and circumstances).
        \128\See, e.g., Rev. Proc. 2009-3 2009-11R.B. 108, Secs. 3.01(38),
    (39), and (41) (IRS will not rule on certain matters relating to
    incorporations or reorganizations unless there is a ``significant
    issue''); compare Gregory v. Helvering, 293 U.S. 465 (1935).
        \129\See, e.g., National Carbide v. Commissioner, 336 U.S. 422
    (1949), Moline Properties v. Commissioner, 319 U.S. 435 (1943);
    compare, e.g. Aiken Industries, Inc. v. Commissioner, 56 T.C. 925
    (1971), acq., 19722 C.B. 1; Commissioner v. Bollinger, 485 U.S. 340
    (1988); see also sec. 7701(1).
        \130\See, e.g., Frank Lyon v. Commissioner, 435 U.S. 561 (1978);
    Hilton v. Commissioner, 74 T.C. 305, aff'd, 671 F. 2d 316 (9th Cir.
    1982), cert. denied, 459 U.S. 907 (1982); Coltec Industries v. United
    States, 454 F.3d 1340 (Fed. Cir. 2006), cert. denied, 127 S. Ct. 1261
    (Mem.) (2007); BB&T Corporation v. United States, 2007-1 USTC P 50,130
    (M.D.N.C. 2007), aff'd, 523 F.3d 461 (4th Cir. 2008).
        \131\As examples of cases in which courts have found that a
    transaction does not meet the requirements for the treatment claimed by
    the taxpayer under the Code, or does not have economic substance, see
    e.g., TIFD- III-E, Inc. v. United States, 459 F.3d 220 (2d Cir. 2006);
    BB&T Corporation v. United States, 2007-1 USTC P 50,130 (M.D.N.C. 2007)
    aff'd, 523 F.3d 461 (4th Cir. 2008); Tribune Company and Subsidiaries
    v. Commissioner, 125 T.C. 110 (2005); H.J. Heinz Company and
    Subsidiaries v. United States, 76 Fed. Cl. 570 (2007); Coltec
    Industries, Inc. v. United States, 454 F.3d 1340 (Fed. Cir. 2006),
    cert. denied 127 S. Ct. 1261 (Mem.) (2007); Long Term Capital Holdings
    LP v. United States, 330 F. Supp. 2d 122 (D. Conn. 2004), aff'd, 150
    Fed. Appx. 40 (2d Cir. 2005); Klamath Strategic Investment Fund, LLC v.
    United States, 472 F. Supp. 2d 885 (E.D. Texas 2007); aff'd, 568 F.3D
    537 (5th Cir. 2009); Santa Monica Pictures LLC v. Commissioner, 89
    T.C.M. 1157 (2005).
    ---------------------------------------------------------------------------
        The provision does not alter the court's ability to
    aggregate, disaggregate, or otherwise recharacterize a
    transaction when applying the doctrine. For example, the
    provision reiterates the present-law ability of the courts to
    bifurcate a transaction in which independent activities with
    non-tax objectives are combined with an unrelated item having
    only tax-avoidance objectives in order to disallow those tax-
    motivated benefits.\132\
    ---------------------------------------------------------------------------
        \132\See, e.g., Coltec Industries, Inc. v. United States, 454 F.3d
    1340 (Fed. Cir. 2006), cert. denied 127 S. Ct. 1261 (Mem.) (2007)
    (``the first asserted business purpose focuses on the wrong
    transaction--the creation of Garrison as a separate subsidiary to
    manage asbestos liabilities. . . . [W]e must focus on the transaction
    that gave the taxpayer a high basis in the stock and thus gave rise to
    the alleged benefit upon sale...'') 454 F.3d 1340, 1358 (Fed. Cir.
    2006). See also ACM Partnership v. Commissioner, 157 F.3d at 256 n.48;
    Minnesota Tea Co. v. Helvering, 302 U.S. 609, 613 (1938) (``A given
    result at the end of a straight path is not made a different result
    because reached by following a devious path.'').
    ---------------------------------------------------------------------------

    Conjunctive analysis

        The provision clarifies that the economic substance
    doctrine involves a conjunctive analysis--there must be an
    inquiry regarding the objective effects of the transaction on
    the taxpayer's economic position as well as an inquiry
    regarding the taxpayer's subjective motives for engaging in the
    transaction. Under the provision, a transaction must satisfy
    both tests, i.e., the transaction must change in a meaningful
    way (apart from Federal income tax effects) the taxpayer's
    economic position, and the taxpayer must have a substantial
    non-Federal-income-tax purpose\133\ for entering into such
    transaction, in order to satisfy the economic substance
    doctrine. This clarification eliminates the disparity that
    exists among the Federal circuit courts regarding the
    application of the doctrine, and modifies its application in
    those circuits in which either a change in economic position or
    a non-tax business purpose (without having both) is sufficient
    to satisfy the economic substance doctrine.\134\
    ---------------------------------------------------------------------------
        \133\For purposes of these tests, any State or local income tax
    effect which is related to a Federal income tax effect shall be treated
    in the same manner as a Federal income tax effect.
        \134\The provision defines ``economic substance doctrine'' as the
    common law doctrine under which tax benefits under subtitle A with
    respect to a transaction are not allowable if the transaction does not
    have economic substance or lacks a business purpose. Thus, the
    definition includes any doctrine that denies tax benefits for lack of
    economic substance, for lack of business purpose, or for lack of both.
    ---------------------------------------------------------------------------

    Non-Federal-tax business purpose

        Under the provision, a taxpayer's non-Federal-income-tax
    purpose for entering into a transaction (the second prong in
    the analysis) must be substantial.\135\ For purposes of this
    analysis, any State or local income tax effect which is related
    to a Federal income tax effect shall be treated in the same
    manner as a Federal income tax effect. Also, a purpose of
    achieving a favorable accounting treatment for financial
    reporting purposes shall not be taken into account as a non-
    Federal-income-tax purpose if the origin of such financial
    accounting benefit is a reduction of Federal income tax.\136\
    ---------------------------------------------------------------------------
        \135\See, e.g., Treas. Reg. sec. 1.269-2(b) (stating that a
    distortion of tax liability indicating the principal purpose of tax
    evasion or avoidance might be evidenced by the fact that ``the
    transaction was not undertaken for reasons germane to the conduct of
    the business of the taxpayer''). Similarly, in ACM Partnership v.
    Commissioner, 73 T.C.M. (CCH) 2189 (1997), the court stated:
        Key to [the determination of whether a transaction has economic
    substance] is that the transaction must be rationally related to a
    useful nontax purpose that is plausible in light of the taxpayer's
    conduct and useful in light of the taxpayer's economic situation and
    intentions. Both the utility of the stated purpose and the rationality
    of the means chosen to effectuate it must be evaluated in accordance
    with commercial practices in the relevant industry. A rational
    relationship between purpose and means ordinarily will not be found
    unless there was a reasonable expectation that the nontax benefits
    would be at least commensurate with the transaction costs. [Citations
    omitted.]
        \136\Claiming that a financial accounting benefit constitutes a
    substantial non-tax purpose fails to consider the origin of the
    accounting benefit (i.e., reduction of taxes) and significantly
    diminishes the purpose for having a substantial non-tax purpose
    requirement. See, e.g., American Electric Power, Inc. v. United States,
    136 F. Supp. 2d 762, 791-92 (S.D. Ohio 2001) (``AEP's intended use of
    the cash flows generated by the [corporate-owned life insurance] plan
    is irrelevant to the subjective prong of the economic substance
    analysis. If a legitimate business purpose for the use of the tax
    savings 'were sufficient to breathe substance into a transaction whose
    only purpose was to reduce taxes, [then] every sham tax-shelter device
    might succeed,'. . .'') (citing Winn-Dixie v. Commissioner, 113 T.C.
    254, 287 (1999)); aff'd, 326 Fad 737 (6th Cir. 2003).
    ---------------------------------------------------------------------------

    Profit potential

        Under the provision, a taxpayer may rely on factors other
    than profit potential to demonstrate that a transaction results
    in a meaningful change in the taxpayer's economic position or
    that the taxpayer has a substantial non-Federal-tax purpose for
    entering into such transaction. The provision does not require
    or establish a specified minimum return that will satisfy the
    profit potential test. However, if a taxpayer relies on a
    profit potential, the present value of the reasonably expected
    pre-tax profit must be substantial in relation to the present
    value of the expected net tax benefits that would be allowed if
    the transaction were respected.\137\ Fees and other transaction
    expenses and foreign taxes shall be taken into account as
    expenses in determining pre-tax profit.
    ---------------------------------------------------------------------------
        \137\Thus, a ``reasonable possibility of profit'' alone will not be
    sufficient to establish that a transaction has economic substance.
    ---------------------------------------------------------------------------

    Personal transactions of individuals

        In the case of an individual, the provision applies only to
    transactions entered into in connection with a trade or
    business or an activity engaged in for the production of
    income.

    Other rules

        The Secretary shall prescribe such regulations as may be
    necessary or appropriate to carry out the purposes of the
    provision.
        No inference is intended as to the proper application of
    the economic substance doctrine under present law. In addition,
    the provision shall not be construed as alter or supplanting
    any other rule of law, including any common-law doctrine or
    provision of the Code or regulations or other guidance
    thereunder; and the provision shall be construed as being
    additive to any such other rule of law.

                                 EFFECTIVE DATE

        The provision applies to transactions entered into after
    the date of enactment.

      K. Penalties for Underpayments Attributable to Transactions Lacking
    Economic Substance (sec. 453 of the bill and sec. 6662 and sec. 6664 of
                                   the Code)

                                  PRESENT LAW

    General accuracy-related penalty

        An accuracy-related penalty under section 6662 applies to
    the portion of any underpayment that is attributable to (1)
    negligence, (2) any substantial understatement of income tax,
    (3) any substantial valuation misstatement, (4) any substantial
    overstatement of pension liabilities, or (5) any substantial
    estate or gift tax valuation understatement. If the correct
    income tax liability exceeds that reported by the taxpayer by
    the greater of 10 percent of the correct tax or $5,000 (or, in
    the case of corporations, by the lesser of (a) 10 percent of
    the correct tax (or $10,000 if greater) or (b) $10 million),
    then a substantial understatement exists and a penalty may be
    imposed equal to 20 percent of the underpayment of tax
    attributable to the understatement.\138\ Except in the case of
    tax shelters,\139\ the amount of any understatement is reduced
    by any portion attributable to an item if (1) the treatment of
    the item is supported by substantial authority, or (2) facts
    relevant to the tax treatment of the item were adequately
    disclosed and there was a reasonable basis for its tax
    treatment. The Treasury Secretary may prescribe a list of
    positions which the Secretary believes do not meet the
    requirements for substantial authority under this provision.
    ---------------------------------------------------------------------------
        \138\Sec. 6662.
        \139\A tax shelter is defined for this purpose as a partnership or
    other entity, an investment plan or arrangement, or any other plan or
    arrangement if a significant purpose of such partnership, other entity,
    plan, or arrangement is the avoidance or evasion of Federal income tax.
    Sec. 6662(d)(2)(C).
    ---------------------------------------------------------------------------
        The section 6662 penalty generally is abated (even with
    respect to tax shelters) in cases in which the taxpayer can
    demonstrate that there was ``reasonable cause'' for the
    underpayment and that the taxpayer acted in good faith.\140\
    The relevant regulations for a tax shelter provide that
    reasonable cause exists where the taxpayer ``reasonably relies
    in good faith on an opinion based on a professional tax
    advisor's analysis of the pertinent facts and authorities
    [that] . . . unambiguously concludes that there is a greater
    than 50-percent likelihood that the tax treatment of the item
    will be upheld if challenged'' by the IRS.\141\ For
    transactions other than tax shelters, the relevant regulations
    provide a facts and circumstances test, the most important
    factor generally being the extent of the taxpayer's effort to
    assess the proper tax liability. If a taxpayer relies on an
    opinion, reliance is not reasonable if the taxpayer knows or
    should have known that the advisor lacked knowledge in the
    relevant aspects of Federal tax law, or if the taxpayer fails
    to disclose a fact that it knows or should have known is
    relevant. Certain additional requirements apply with respect to
    the advice.\142\
    ---------------------------------------------------------------------------
        \140\Sec. 6664(c).
        \141\Treas. Reg. sec. 1.6662-4(g)(4)(i)(B); Treas. Reg. sec.
    1.6664-4(c).
        \142\See Treas. Reg. Sec. 1.6664-4(c). In addition to the
    requirements applicable to taxpayers under the regulations, advisors
    may be subject to potential penalties under section 6694 (applicable to
    return preparers), and to monetary penalties and other sanctions under
    Circular 230 (which provides rules governing persons practicing before
    the IRS). Under Circular 230, if a transaction is a ``covered
    transaction'' (a term that includes listed transactions and certain
    non-listed reportable transactions) a ``more likely than not''
    confidence level is required for written tax advice that may be relied
    upon by a taxpayer for the purpose of avoiding penalties, and certain
    other standards must also be met. Treasury Dept. Circular 230 (Rev. 4-
    2008) Sec. 10.35. For other tax advice, Circular 230 generally requires
    a lower ``realistic possibility'' confidence level or a ``non-
    frivolous'' confidence level coupled with advising the client of any
    opportunity to avoid the accuracy related penalty under section 6662 by
    adequate disclosure. Treasury Dept. Circular 230 (Rev. 4-2008) Sec.
    10.34.
    ---------------------------------------------------------------------------

    Listed transactions and reportable avoidance transactions

                In general
        A separate accuracy-related penalty under section 6662A
    applies to any listed transaction and to any other reportable
    transaction that is not a listed transaction, if a significant
    purpose of such transaction is the avoidance or evasion of
    Federal income tax\143\ (``reportable avoidance transaction'').
    The penalty rate and defenses available to avoid the penalty
    vary depending on whether the transaction was adequately
    disclosed.
    ---------------------------------------------------------------------------
        \143\Sec. 6662A(b)(2).
    ---------------------------------------------------------------------------
        Both listed transactions and other reportable transactions
    are allowed to be described by the Treasury Department under
    section 6011 as transactions that must be reported, and section
    6707A(c) imposes a penalty for failure to adequately report
    such transactions under section 6011. A reportable transaction
    is defined as one that the Treasury Secretary determines is
    required to be disclosed because it is determined to have a
    potential for tax avoidance or evasion.\144\ A listed
    transaction is defined as a reportable transaction which is the
    same as, or substantially similar to, a transaction
    specifically identified by the Secretary as a tax avoidance
    transaction for purposes of the reporting disclosure
    requirements.\145\
    ---------------------------------------------------------------------------
        \144\Sec. 6707A(c)(1).
        \145\Sec. 6707A(c)(2).
    ---------------------------------------------------------------------------
                Disclosed transactions
        In general, a 20-percent accuracy-related penalty is
    imposed on any understatement attributable to an adequately
    disclosed listed transaction or reportable avoidance
    transaction.\146\ The only exception to the penalty is if the
    taxpayer satisfies a more stringent reasonable cause and good
    faith exception (``strengthened reasonable cause exception''),
    which is described below. The strengthened reasonable cause
    exception is available only if the relevant facts affecting the
    tax treatment were adequately disclosed, there is or was
    substantial authority for the claimed tax treatment, and the
    taxpayer reasonably believed that the claimed tax treatment was
    more likely than not the proper treatment. A reasonable belief
    must be based on the facts and law as they exist at the time
    that the return in question is filed, and not take into account
    the possibility that a return would not be audited. Moreover,
    reliance on professional advice may support a reasonable belief
    only in certain circumstances.\147\
    ---------------------------------------------------------------------------
        \146\Sec. 6662A(a).
        \147\Section 6664(d)(3)(B) would not allow a reasonable belief to
    be based on a ``disqualified opinion'' or on an opinion from a
    ``disqualified tax advisor''.
    ---------------------------------------------------------------------------
                Undisclosed transactions
        If the taxpayer does not adequately disclose the
    transaction, the strengthened-reasonable-cause exception is not
    available (i.e., a strict-liability penalty generally applies),
    and the taxpayer is subject to an increased penalty equal to 30
    percent of the understatement.\148\ However, a taxpayer will be
    treated as having adequately disclosed a transaction for this
    purpose if the IRS Commissioner has separately rescinded the
    separate penalty under section 6707A for failure to disclose a
    reportable transaction.\149\ The IRS Commissioner is authorized
    to do this only if the failure does not relate to a listed
    transaction and only if rescinding the penalty would promote
    compliance and effective tax administration.\150\
    ---------------------------------------------------------------------------
        \148\Sec. 6662A(c).
        \149\Sec. 6664(d).
        \150\Sec. 6707A(d).
    ---------------------------------------------------------------------------
        A public entity that is required to pay a penalty for an
    undisclosed listed or reportable transaction must disclose the
    imposition of the penalty in reports to the SEC for such
    periods as the Secretary shall specify. The disclosure to the
    SEC applies without regard to whether the taxpayer determines
    the amount of the penalty to be material to the reports in
    which the penalty must appear, and any failure to disclose such
    penalty in the reports is treated as a failure to disclose a
    listed transaction. A taxpayer must disclose a penalty in
    reports to the SEC once the taxpayer has exhausted its
    administrative and judicial remedies with respect to the
    penalty (or if earlier, when paid).\151\
    ---------------------------------------------------------------------------
        \151\Sec. 6707A(e).
    ---------------------------------------------------------------------------
                Determination of the understatement amount
        The penalty is applied to the amount of any understatement
    attributable to the listed or reportable avoidance transaction
    without regard to other items on the tax return. For purposes
    of this provision, the amount of the understatement is
    determined as the sum of: (1) the product of the highest
    corporate or individual tax rate (as appropriate) and the
    increase in taxable income resulting from the difference
    between the taxpayer's treatment of the item and the proper
    treatment of the item (without regard to other items on the tax
    return);\152\ and (2) the amount of any decrease in the
    aggregate amount of credits which results from a difference
    between the taxpayer's treatment of an item and the proper tax
    treatment of such item.
    ---------------------------------------------------------------------------
        \152\For this purpose, any reduction in the excess of deductions
    allowed for the taxable year over gross income for such year, and any
    reduction in the amount of capital losses which would (without regard
    to section 1211) be allowed for such year, shall be treated as an
    increase in taxable income. Sec. 6662A(b).
    ---------------------------------------------------------------------------
        Except as provided in regulations, a taxpayer's treatment
    of an item shall not take into account any amendment or
    supplement to a return if the amendment or supplement is filed
    after the earlier of when the taxpayer is first contacted
    regarding an examination of the return or such other date as
    specified by the Secretary.\153\
    ---------------------------------------------------------------------------
        \153\Sec. 6662A(e)(3).
    ---------------------------------------------------------------------------
                Strengthened reasonable cause exception
        A penalty is not imposed under section 6662A with respect
    to any portion of an understatement if it is shown that there
    was reasonable cause for such portion and the taxpayer acted in
    good faith. Such a showing requires: (1) adequate disclosure of
    the facts affecting the transaction in accordance with the
    regulations under section 6011;\154\ (2) that there is or was
    substantial authority for such treatment; and (3) that the
    taxpayer reasonably believed that such treatment was more
    likely than not the proper treatment. For this purpose, a
    taxpayer will be treated as having a reasonable belief with
    respect to the tax treatment of an item only if such belief:
    (1) is based on the facts and law that exist at the time the
    tax return (that includes the item) is filed; and (2) relates
    solely to the taxpayer's chances of success on the merits and
    does not take into account the possibility that (a) a return
    will not be audited, (b) the treatment will not be raised on
    audit, or (c) the treatment will be resolved through settlement
    if raised.\155\
    ---------------------------------------------------------------------------
        \154\See the previous discussion regarding the penalty for failing
    to disclose a reportable transaction.
        \155\Sec. 6664(d).
    ---------------------------------------------------------------------------
        A taxpayer may (but is not required to) rely on an opinion
    of a tax advisor in establishing its reasonable belief with
    respect to the tax treatment of the item. However, a taxpayer
    may not rely on an opinion of a tax advisor for this purpose if
    the opinion (1) is provided by a disqualified tax advisor or
    (2) is a disqualified opinion.
                Disqualified tax advisor
        A disqualified tax advisor is any advisor who: (1) is a
    material advisor\156\ and who participates in the organization,
    management, promotion, or sale of the transaction or is related
    (within the meaning of section 267(b) or 707(b)(1)) to any
    person who so participates; (2) is compensated directly or
    indirectly\157\ by a material advisor with respect to the
    transaction; (3) has a fee arrangement with respect to the
    transaction that is contingent on all or part of the intended
    tax benefits from the transaction being sustained; or (4) as
    determined under regulations prescribed by the Secretary, has a
    disqualifying financial interest with respect to the
    transaction.
    ---------------------------------------------------------------------------
        \156\The term ``material advisor'' means any person who provides
    any material aid, assistance, or advice with respect to organizing,
    managing, promoting, selling, implementing, or carrying out any
    reportable transaction, and who derives gross income in excess of
    $50,000 in the case of a reportable transaction substantially all of
    the tax benefits from which are provided to natural persons ($250,000
    in any other case). Sec. 6111(b)(1).
        \157\This situation could arise, for example, when an advisor has
    an arrangement or understanding (oral or written) with an organizer,
    manager, or promoter of a reportable transaction that such party will
    recommend or refer potential participants to the advisor for an opinion
    regarding the tax treatment of the transaction.
    ---------------------------------------------------------------------------
        A material advisor is considered as participating in the
    organization of a transaction if the advisor performs acts
    relating to the development of the transaction. This may
    include, for example, preparing documents: (1) establishing a
    structure used in connection with the transaction (such as a
    partnership agreement); (2) describing the transaction (such as
    an offering memorandum or other statement describing the
    transaction); or (3) relating to the registration of the
    transaction with any Federal, State, or local government
    body.\158\ Participation in the management of a transaction
    means involvement in the decision-making process regarding any
    business activity with respect to the transaction.
    Participation in the promotion or sale of a transaction means
    involvement in the marketing or solicitation of the transaction
    to others. Thus, an advisor who provides information about the
    transaction to a potential participant is involved in the
    promotion or sale of a transaction, as is any advisor who
    recommends the transaction to a potential participant.
    ---------------------------------------------------------------------------
        \158\An advisor should not be treated as participating in the
    organization of a transaction if the advisor's only involvement with
    respect to the organization of the transaction is the rendering of an
    opinion regarding the tax consequences of such transaction. However,
    such an advisor may be a ``disqualified tax advisor'' with respect to
    the transaction if the advisor participates in the management,
    promotion, or sale of the transaction (or if the advisor is compensated
    by a material advisor, has a fee arrangement that is contingent on the
    tax benefits of the transaction, or as determined by the Secretary, has
    a continuing financial interest with respect to the transaction). See
    Notice 2005-12, 2005-1 C.B. 494 regarding disqualified compensation
    arrangements.
    ---------------------------------------------------------------------------
                Disqualified opinion
        An opinion may not be relied upon if the opinion: (1) is
    based on unreasonable factual or legal assumptions (including
    assumptions as to future events); (2) unreasonably relies upon
    representations, statements, finding or agreements of the
    taxpayer or any other person; (3) does not identify and
    consider all relevant facts; or (4) fails to meet any other
    requirement prescribed by the Secretary.
                Coordination with other penalties
        To the extent a penalty on an understatement is imposed
    under section 6662A, that same amount of understatement is not
    also subject to the accuracy-related penalty under section
    6662(a) or to the valuation misstatement penalties under
    section 6662(e) or 6662(h). However, such amount of
    understatement is included for purposes of determining whether
    any understatement (as defined in section 6662(d)(2)) is a
    substantial understatement as defined under section 6662(d)(1)
    and for purposes of identifying an underpayment under the
    section 6663 fraud penalty.
        The penalty imposed under section 6662A does not apply to
    any portion of an understatement to which a fraud penalty is
    applied under section 6663.

    Erroneous claim for refund or credit

        If a claim for refund or credit with respect to income tax
    (other than a claim relating to the earned income tax credit)
    is made for an excessive amount, unless it is shown that the
    claim for such excessive amount has a reasonable basis, the
    person making such claim is subject to a penalty in an amount
    equal to 20 percent of the excessive amount.\159\
    ---------------------------------------------------------------------------
        \159\Sec. 6676.
    ---------------------------------------------------------------------------
        The term ``excessive amount'' means the amount by which the
    amount of the claim for refund for any taxable year exceeds the
    amount of such claim allowable for the taxable year.
        This penalty does not apply to any portion of the excessive
    amount of a claim for refund or credit which is subject to a
    penalty imposed under the accuracy related or fraud penalty
    provisions (including the general accuracy related penalty, or
    the penalty with respect to listed and reportable transactions,
    described above).

                               REASONS FOR CHANGE

        The Committee believes that a stronger penalty under
    section 6662 should be imposed on understatements attributable
    to non-economic substance and similar transactions, to improve
    compliance by deterring taxpayers from entering such
    transactions. The Committee is concerned that under present law
    there is a potential to avoid penalties in such cases (based
    for example on certain levels of tax advice), and that the
    potential that a taxpayer in such cases may pay only the tax
    due plus interest is not a sufficient deterrent. The Committee
    therefore believes it is appropriate to impose a new strict
    liability penalty in such cases. The Committee also believes
    that a similar strict liability standard should apply to tax
    shelter transactions.
        In addition, the Committee believes that for large
    corporations, and for persons required to file reports under
    section 13 of the Securities Exchange Act of 1934, any position
    for which a reasonable cause and good faith defense to
    penalties is still available should satisfy a confidence level
    of being at least more likely than not to prevail, and the same
    level of confidence should be required of such taxpayers in
    determining whether there is a substantial understatement of
    income tax.

                            EXPLANATION OF PROVISION

        The provision imposes a new, stronger penalty under section
    6662 for an understatement attributable to any disallowance of
    claimed tax benefits by reason of a transaction lacking
    economic substance, as defined in new section 7701(p),\160\ or
    failing to meet the requirements of any similar rule of
    law.\161\ The penalty rate is 20 percent (increased to 40
    percent if the taxpayer does not adequately disclose the
    relevant facts affecting the tax treatment in the return or a
    statement attached to the return). Except as provided in
    regulations, an amended return or supplement to a return is not
    taken into account if filed after the taxpayer has been
    contacted for audit or such other date as is specified by the
    Secretary. No exceptions (including the reasonable cause rules)
    to the penalty are available (i.e., the penalty is a strict-
    liability penalty). Thus, under the provision, outside opinions
    or in-house analysis would not protect a taxpayer from
    imposition of a penalty if it is determined that the
    transaction lacks economic substance or fails to meet the
    requirements of any similar rule of law. Similarly, a claim for
    refund that is excessive under section 6676 due to a claim that
    is lacking in economic substance or failing to meet the
    requirements of any similar rule of law is subject to the 20
    percent penalty under that section, and the reasonable basis
    exception is not available.
    ---------------------------------------------------------------------------
        \160\That provision generally provides that in any case in which a
    court determines that the economic substance doctrine is relevant, a
    transaction has economic substance only if: (1) the transaction changes
    in a meaningful way (apart from Federal income tax effects) the
    taxpayer's economic position, and (2) the taxpayer has a substantial
    purpose (apart from Federal income tax effects) for entering into such
    transaction. Specific other rules also apply. See ``Explanation of
    Provision'' for the immediately preceding provision, ``Codification of
    the economic substance doctrine.''.
        \161\For example, the penalty would apply to a transaction that is
    disregarded as a result of the application of the same factors and
    analysis that is required under the provision for an economic substance
    analysis, even if a different term is used to describe the doctrine.
    ---------------------------------------------------------------------------
        The penalty does not apply to any portion of an
    underpayment on which a fraud penalty is imposed.\162\ The new
    20-percent penalty (and 40-percent penalty for nondisclosed
    transactions) is also added to the penalties to which section
    6662A will not also apply.\163\
    ---------------------------------------------------------------------------
        \162\I.e., section 6662(b) of present law applies to the new
    penalty as well.
        \163\As under present law, the penalties under section 6662
    (including the new penalty) do not apply to any portion of an
    underpayment on which a fraud penalty is imposed.
    ---------------------------------------------------------------------------
        As described above, under the provision, the reasonable
    cause and good faith exception of present law section
    6664(c)(1) does not apply to any portion of an underpayment
    which is attributable to a transaction lacking economic
    substance, as defined in section 7701(p), or failing to meet
    the requirements of any similar rule of law, or to any tax
    shelter (as defined in present law section 6662(d)(2)(C)). In
    addition, the reasonable cause and good faith exception of
    present law section 6664(c)(1) also does not apply to any
    underpayment in which the taxpayer is a specified person. A
    specified person is defined as (i) any person required to file
    periodic or other reports under section 13 of the Securities
    and Exchange Act of 1934, and (ii) any corporation with gross
    receipts in excess of $100 million for the taxable year
    involved.\164\
    ---------------------------------------------------------------------------
        \164\For purposes of this rule, all persons treated as a single
    employer under section 52(a) are treated as one person.
    ---------------------------------------------------------------------------
        In the case of a substantial understatement of income tax
    (which is a separate type of understatement under new section
    6662(b) than an understatement attributable to a transaction
    lacking economic substance or failing to meet the requirements
    of any similar rule of law),\165\ the rules of section 6662(d)
    still apply, but are changed in the case of a specified person
    (as defined above). In the case of such a person, it is no
    longer the case that a substantial understatement is reduced if
    there is or was substantial authority for the taxpayer's
    treatment, or if the relevant facts were disclosed and there is
    a reasonable basis for the taxpayer's tax treatment. Under the
    provision, a substantial understatement of a specified person
    can be reduced only by that portion attributable to any item
    with respect to which the taxpayer had a reasonable belief that
    the tax treatment by the taxpayer is more likely than not the
    proper treatment.
    ---------------------------------------------------------------------------
        \165\The rules and exceptions of section 6662(d) do not apply to
    any understatement attributable to a transaction that lacks economic
    substance or fails to meet the requirements of any similar rule of law.
    ---------------------------------------------------------------------------

                                 EFFECTIVE DATE

        The provision applies to transactions entered into after
    the date of enactment.

    L. Certain Health Related Benefits Applicable to Spouses and Dependents
    Extended to Eligible Designated Beneficiaries (sec. 461 of the bill and
          secs. 105, 106, 162, 501, 3121, 3306, and 3401 of the Code)

                                  PRESENT LAW

    Definition of dependent for exclusion for employer-provided health
            coverage

        The Code generally provides that employees are not taxed on
    (that is, may exclude from gross income) the value of employer-
    provided health coverage for employees, their spouses, and
    their dependents under an accident or health plan.\166\ In
    addition, any reimbursements under the accident or health plan
    for medical care expenses for employees, their spouses, and
    their dependents generally are excluded from gross income.\167\
    For purposes of these exclusions, dependents are determined
    under section 152, but without regard to section 152(b)(1),
    (b)(2), and (d)(1)(B). Section 152 defines a dependent as a
    qualifying child or qualifying relative.
    ---------------------------------------------------------------------------
        \166\Sec. 106 and proposed Treas. Reg. sec. 1.106-1.
        \167\Sec. 105(b).
    ---------------------------------------------------------------------------
        Under section 152(c), a child generally is a qualifying
    child of a taxpayer if the child satisfies each of five tests
    for the taxable year: (1) the child has the same principal
    place of abode as the taxpayer for more than one-half of the
    taxable year; (2) the child has a specified relationship to the
    taxpayer; (3) the child has not yet attained a specified age;
    (4) the child has not provided over one-half of their own
    support for the calendar year in which the taxable year of the
    taxpayer begins; and (5) the qualifying child has not filed a
    joint return (other than for a claim of refund) with their
    spouse for the taxable year beginning in the calendar year in
    which the taxable year of the taxpayer begins. A tie-breaking
    rule applies if more than one taxpayer claims a child as a
    qualifying child. The specified relationship is that the child
    is the taxpayer's son, daughter, stepson, stepdaughter,
    brother, sister, stepbrother, stepsister, or a descendant of
    any such individual. With respect to the specified age, a child
    must be under age 19 (or under age 24 in the case of a full-
    time student). However, no age limit applies with respect to
    individuals who are totally and permanently disabled within the
    meaning of section 22(e)(3) at any time during the calendar
    year. Other rules may apply.
        Under section 152(d) a qualifying relative means an
    individual that satisfies four tests for the taxable year: (1)
    the individual bears a specified relationship to the taxpayer;
    (2) the individual's gross income for the calendar year in
    which such taxable year begins is less than the exemption
    amount under section 151(d);\168\ (3) the taxpayer provides
    more than one-half the individual's support for the calendar
    year in which the taxable year begins; and (4) the individual
    is not a qualifying child of the taxpayer--or any other
    taxpayer for any taxable year beginning in the calendar year in
    which such taxable year begins. The specified relationship test
    for a qualifying relative is satisfied if that individual is
    the taxpayer's: (1) child or descendant of a child; (2)
    brother, sister, stepbrother or stepsister; (3) father, mother
    or ancestor of either; (4) stepfather or stepmother; (5) niece
    or nephew; (6) aunt or uncle; (7) in-law; or (8) certain other
    individuals, who for the taxable year of the taxpayer, have the
    same principal place of abode as the taxpayer and are members
    of the taxpayer's household.\169\
    ---------------------------------------------------------------------------
        \168\This requirement is provide in section 152(d)(l)(B) and thus
    is disregarded for purposes of determining whether an individual is a
    taxpayer's dependent for purposes of the exclusions for employer-
    provided health coverage.
        \169\Generally, same-sex partners do not qualify as dependents
    under section 152. In addition, same-sex partners are not recognized as
    spouses for purposes of the Code. Defense of Marriage Act, Pub. L. No.
    104-199.
    ---------------------------------------------------------------------------
        Employers may agree to reimburse medical expenses of their
    employees (and their spouses and dependents), not covered by a
    health insurance plan, through flexible spending arrangements
    which allow reimbursement not in excess of a specified dollar
    amount (either elected by an employee under a cafeteria plan or
    otherwise specified by the employer). Reimbursements under
    these arrangements are also excludible from gross income as
    employer-provided health coverage. The same definition of
    dependent applies for purposes of flexible spending
    arrangements.
        A similar rule excludes employer-provided health insurance
    coverage and reimbursements for medical expenses for employees,
    their spouses, and their dependents from the employees' wages
    for payroll tax purposes.\170\ The same definition of dependent
    applies for purposes of this exclusion.
    ---------------------------------------------------------------------------
        \170\Secs. 3121(a)(2) and 3306(b)(2).
    ---------------------------------------------------------------------------

    Deduction for health insurance premiums of self-employed individuals

        Under present law, self-employed individuals may deduct the
    cost of health insurance for themselves and their spouses and
    dependents. The deduction is not available for any month in
    which the self-employed individual is eligible to participate
    in an employer-subsidized health plan. Moreover, the deduction
    may not exceed the individual's self-employment income. The
    deduction applies only to the cost of insurance (i.e., it does
    not apply to out-of-pocket expenses that are not reimbursed by
    insurance). The deduction does not apply for self-employment
    tax purposes. For purposes of the deduction, a more than two
    percent shareholder-employee of an S corporation is treated the
    same as a self-employed individual. Thus, the exclusion for
    employer-provided health care coverage does not apply to such
    individuals, but they are entitled to the deduction for health
    insurance costs as if they were self-employed.

    Voluntary employees' beneficiary associations

        A voluntary employees' beneficiary association (``VEBA'')
    is a tax-exempt entity that is a part of a plan for providing
    life, sick or accident benefits to its members or their
    dependents or designated beneficiaries.\171\ No part of the net
    earnings of the association inures (other than through the
    payment of life, sick, accident or other benefits) to the
    benefit of any private shareholder or individual. A VEBA may be
    funded with employer contributions or employee contributions or
    a combination of employer contributions and employee
    contributions. The same definition of dependent applies for
    purposes of receipt of medical benefits through a VEBA.
    ---------------------------------------------------------------------------
        \171\Secs. 419(e) and 501(c)(9).
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The Committee recognizes that an increasing number of
    employers and self-employed individuals offer or desire to
    offer health coverage and reimbursements for medical expenses
    to non-spouse, non-dependent beneficiaries, such as same- and
    opposite-sex domestic partners and their children. Under
    current law, the provision of these benefits results in
    additional Federal income tax for the employee or self-employed
    individual and additional Federal payroll taxes for the
    employer and the employee. As a result of these additional
    costs, employers and self-employed individuals may decline to
    provide coverage to non-spouse, non-dependent beneficiaries or,
    in cases where such coverage is offered, employees may decline
    it. Either case results in an increase in the number of
    individuals and families who are not covered by employer-
    provided health insurance. The provision will end these tax
    inequities, thereby encouraging employers and self-employed
    individuals to expand coverage and increase the number of
    Americans covered by employer-sponsored health plans.

                            EXPLANATION OF PROVISION

    Exclusion for employer-provided health coverage

        The provision amends sections 105 and 106 to extend the
    general exclusion for employer-provided health coverage to
    eligible beneficiaries.\172\ The parallel provisions for
    excluding employer-provided health care from payroll taxes are
    also amended.\173\ An eligible beneficiary is defined as any
    individual who is eligible to receive benefits or coverage
    under an accident or health plan. The provision does not place
    a limit on the number of eligible beneficiaries an individual
    is able to claim for purposes of the exclusion.
    ---------------------------------------------------------------------------
        \172\The provision does not modify the present law dependency
    exemption.
        \173\Secs. 3121(a)(2), 3231(e)(1), 3306(b)(2), 3401(a)(24).
    ---------------------------------------------------------------------------
        The provision directs the Secretary of the Treasury to
    issue guidance providing that eligibility for reimbursements
    from FSAs and HRAs is extended to otherwise qualifying medical
    expenses of any eligible beneficiary.
        A parallel change is made for VEBAs.

    Deduction for health insurance premiums of self-employed individuals

        The provision amends section 162(l) to permit self-employed
    individuals to take a deduction for an individual who meets the
    following criteria: (1) younger than age 19 (24 for full-time
    students); (2) has the same principal abode as the taxpayer and
    is a member of the taxpayer's household for the taxable year;
    and (3) receives more than one-half of his or her support from
    the taxpayer for the calendar year in which the taxable year
    begins. The provision does not place a limit on the number of
    such individuals that a taxpayer is able to claim for purposes
    of the deduction.
        The provision also permits a self-employed individual to
    take a deduction for an individual who is (1) older than age 19
    (or 24 for students); (2) has the same principal abode as the
    taxpayer and is a member of the taxpayer's household for the
    taxable year; and (3) is not the individual's spouse,
    qualifying child or qualifying relative. Self-employed
    individuals may only take a deduction for one such individual
    in any tax year.

                                 EFFECTIVE DATE

        The provision is effective for taxable years beginning
    after December 31, 2009.

                 DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

                      TITLE I--IMPROVING HEALTH CARE VALUE

               Subtitle A--Provisions Related to Medicare Part A

                         Part 1--Market Basket Updates

    Sec. 1101. Skilled Nursing Facility Payment Update

                Current Law
        Skilled nursing facilities (SNFs) are paid through a
    prospective payment system (PPS) which is composed of a daily
    (``per-diem'') urban or rural base payment amount that is then
    adjusted for case mix and area wages. The federal per diem
    payment is intended to cover all the services provided to the
    beneficiary that day, including room and board, nursing,
    therapy, and prescription drugs. The urban and rural federal
    per diem payment rates are increased annually by an update
    factor that is determined, in part, by the projected increase
    in the SNF market basket (MB) index. This index measures
    changes in the costs of goods and services purchased by SNFs.
    Each year, the update of the payment rate also includes, as
    appropriate, an adjustment to account for the MB forecast error
    for previous years.
                Proposed Law
        The provision would eliminate the MB update for FY 2010.
    For each subsequent fiscal year, the rate would be increased by
    the skilled nursing facility MB percentage change for the
    fiscal year involved. This provision would not apply to
    payments for days before January 1, 2010.
                Reason for Change
        The Medicare Payment Advisory Commission (MedPAC) makes
    annual recommendations regarding automatic payment updates in
    the law for Medicare providers. In MedPAC's assessment, the SNF
    industry is healthy as the supply of facilities has remained
    relatively constant over the last four years. The average
    Medicare margin for free-standing SNFs was 14.5 percent in 2007
    and is projected to be 12.6 percent in 2009. Medicare spending
    on SNFs grew 12 percent from 2006 to 2007, with average annual
    growth rates of 11 percent from 2000 to 2007. In light of these
    facts, MedPAC recommended a zero percent update for skilled
    nursing facilities for FY2010 and the Committee followed this
    recommendation. The Committee notes that this market basket
    change is effective for only the last three quarters of FY2010,
    thus resulting in a small positive update overall. Preliminary
    estimates are that even with this change, SNFs will yield
    positive Medicare margins of 7 to 8 percent in FY2010.
        The Committee would note that while overall margins may be
    lower, it is not appropriate to use Medicare Part A Trust Fund
    dollars to cross-subsidize Medicaid payment rates, which are
    set at the state level, independently by each state governor.
        The Committee would also highlight that skilled nursing
    facilities directly benefit by the extension of the exceptions
    process for therapy services included in this Act and by
    removing clinical social workers from the SNF consolidated
    billing requirement.
                Effective Date
        October 1, 2010.

    Sec. 1102. Inpatient Rehabilitation Facility Payment Update

                Current Law
        Starting January 1, 2002, payments to inpatient
    rehabilitation facilities (IRFs) are made under a discharge-
    based prospective payment system where one payment covers
    capital and operating costs. Typically, the per discharge
    payment amount is increased each fiscal year by an update
    factor based on the increase in the market basket index.
    However, for fiscal years 2008 and 2009, the update factor has
    been set at zero percent, starting for discharges as of April
    1, 2008.
                Proposed Law
        The zero update factor would be extended until September
    30, 2010 (the end of fiscal year 2010) but would not apply to
    payment units occurring before January 1, 2010.
                Explanation of Change
        MedPAC recommends a zero update for IRFs for FY2010, as
    indicators of Medicare payment adequacy on net are more
    positive than negative, capacity remains adequate to meet
    demand, and MedPAC's assessment is that IRFs can absorb cost
    increases and continue to provide care to clinically
    appropriate Medicare cases with no update to payments in 2010.
    The Committee followed the MedPAC recommendation. The Committee
    notes that this market basket change is effective for only the
    last three quarters of FY2010, thus resulting in a small
    positive update overall.
                Effective Date
        October 1, 2010.

    Sec. 1103. Incorporating Productivity Improvements into Market Basket
            Updates That Do Not Already Incorporate Such Improvements

                Current Law
        Currently, most providers in fee-for-service (or
    traditional) Medicare, including acute care hospitals, skilled
    nursing facilities (SNFs), long term care hospitals (LTCHs),
    inpatient rehabilitation facilities (IRFs), inpatient
    psychiatric facilities (IPFs), and hospice care receive
    predetermined payment amounts established under different,
    unique prospective payment systems. Each year, the base payment
    amounts in the different Medicare payment systems are increased
    by an update factor to reflect the increase in the unit costs
    associated with providing health care services. Generally,
    Medicare's annual updates are linked to projected changes in
    specific market basket (MB) indices which are designed to
    measure the change in the price of goods and services purchased
    by the provider. Annual updates to the Medicare physician fee
    schedule are determined by a separate method that includes the
    sustainable growth rate (SGR) formula, which already
    incorporates adjustments for gains in physician productivity.
        Each year, the Medicare Payment Advisory Commission
    (MedPAC) makes payment update recommendations for the different
    payment systems. In its view, Medicare's payment systems should
    encourage efficiency: providers should be able to reduce the
    quantity of inputs to produce a unit of service while
    maintaining quality. Accordingly, MedPAC begins its update
    deliberations with an assumption that all providers can achieve
    efficiency gains similar to the economy and examines the Bureau
    of Labor Statistics' estimate of the 10-year moving average
    rate of past growth in total factor productivity for the
    economy as a whole. This policy target links Medicare's
    expectations for efficiency improvements to the productivity
    gains achieved by firms and workers who pay taxes that fund
    Medicare. MedPAC's annual update recommendation will depend on
    its overall assessment of the circumstances of a given set of
    providers in any year. These MedPAC recommendations are not
    binding on Medicare payment policies.
        Starting in FY2007, acute care hospitals paid under
    Medicare's inpatient prospective payment system (IPPS) that do
    not submit required quality data will have the applicable MB
    percentage reduced by two percentage points. The reduction
    would apply for that year and would not be taken into account
    in subsequent years. Beginning in FY2015, one quarter of the
    applicable MB update will be reduced if the required quality
    data are not submitted. Unless significant hardship is
    demonstrated, the remainder of the MB update (or three-quarters
    of the MB update) is subject to reduction in IPPS hospitals
    that are not meaningful electronic health record (EHR) users by
    FY2015. This reduction will be increased over a three year
    period. In FY2015, three-quarters of the applicable MB update
    will be reduced by 31.33%; in FY2016 three-quarters of the
    applicable MB update will be reduced by 66.66% and in FY2017
    and beyond it will be reduced by 100%. These reductions would
    apply only to the fiscal year involved and would not be taken
    into account in subsequent fiscal years.
                Proposed Law
        The update factors for certain providers would include a
    productivity adjustment. The productivity offset would equal
    the percentage change in 10-year moving average of annual
    economy-wide private nonfarm business multi-factor
    productivity. The estimate used would be that published before
    the promulgation of the regulation establishing increases in
    the Medicare rates for the year or period. The productivity
    adjustment would be included in annual updates for IPPS
    hospitals, SNFs, IRFs, and hospice care for fiscal years
    beginning in 2010. To the extent that the base rate for LTCHs
    would be subject to an annual update, the update factor would
    be subject to a productivity adjustment starting for rate year
    2010. To the extent that the base rate for IPFs would be
    subject to an annual update, the update factor would be subject
    to a productivity adjustment starting for rate year 2011.
        The percentage of the IPPS update that is reduced by 2
    percentage points when the acute care hospital does not submit
    quality data would not be reduced below zero.
        For IPPS hospitals, starting in FY2015, the productivity
    adjustment would not apply to 75% of the otherwise applicable
    MB update that is subject to reduction if the hospital is not a
    meaningful EHR user. In no case would an IPPS hospital receive
    an annual update for this component of the update that was less
    than zero.
                Reason for Change
        The annual update to the Medicare physician fee schedule
    already incorporates adjustments for gains in productivity.
    This provision creates uniformity across Medicare providers by
    creating a productivity adjustment for all Part A providers.
    This adjustment will encourage greater efficiency in health
    care provision, hold Medicare providers accountable for
    achieving productivity gains on par with the overall economy,
    and more accurately align Medicare payments with provider
    costs.
                Effective Date
        October 1, 2010.

                    Part 2--Other Medicare Part A Provisions

    Sec. 1111. Payments to Skilled Nursing Facilities

                Current Law
        Skilled nursing facilities (SNFs) are paid through a
    prospective payment system (PPS) which is composed of a daily
    (``per-diem'') urban or rural base payment amount that is then
    adjusted for case mix and area wages. The federal per diem
    payment is intended to cover all the services provided to the
    beneficiary that day, including room and board, nursing,
    therapy, and prescription drugs.
        The ``federal per diem rate'' is adjusted for treatment
    type and care needs of the beneficiary based on the resource
    utilization group (RUG) assignment of the beneficiary. The
    beneficiary is classified into one of 53 RUG categories. Each
    RUG represents a payment adjusted for case mix and is composed
    of three parts. For RUGs used to pay for the care of patients
    who require intensive therapy, the three parts include (a) a
    nursing component; (b) a variable therapy component; and (c) a
    non-case mix adjusted flat rate component. For RUGs used to pay
    for the care of patients who do not require intensive therapy,
    the three components are: (a) a nursing component; (b) a flat
    therapy component; and (c) a non-case mix adjusted flat rate
    component. The nursing component also includes payment for non-
    therapy ancillary (NTA) services.
        On October 1, 2005, refinements to the SNF PPS became
    effective. As reported in the SNF FY2009 Proposed Rule, these
    refinements updated and recalibrated (using FY 2001 claims
    data) the therapy and nursing case-mix indices associated with
    all of the RUGs and added nine new Rehabilitation plus
    Extensive Services groups into the RUG classification system
    (increasing the number of RUGs from 44 to 53). At the time, the
    Centers for Medicare and Medicaid Services (CMS) applied a
    parity adjustment to ensure that estimated total payments under
    the 53-group model would maintain parity to those that would
    have been made under the 44-group model in a budget neutral
    manner. CMS also applied an adjustment to account for the
    variability in the use of NTA services. After noting that
    actual utilization patterns differed from what CMS projected,
    CMS used actual claims data to update its calibrations and its
    parity adjustment so as to reestablish budget neutrality (using
    CY 2006 payment data) and its NTA adjustment component.
    According to CMS, the total impact of this change for FY 2009,
    accounting for the market basket increase of 3.1 percentage
    points, would have resulted in a decrease of 0.3%, assuming
    facilities do not change their care delivery and billing
    practices in response. However, this change was never
    implemented in the final regulation.
        The proposed PPS and Consolidated Billing SNF payment
    regulation for FY 2010 describes how the Secretary would
    recalibrate the case-mix indexes (CMIs) for 2010 to more
    accurately match the service needs of beneficiaries, resulting
    in a $390 million, or 1.2 percent payment reduction from
    FY2009.
                Proposed Law
        The proposal would require the Secretary to conduct, using
    FY2006 claims data, an initial analysis comparing total
    Medicare SNF payments under the RUG-53 and RUG-44
    classification systems. Based on this initial analysis, the
    Secretary would be required to adjust the case mix indexes for
    FY2010 by the appropriate recalibration factor, as proposed in
    the SNF proposed rule issued by the Secretary on May 12, 2009.
        In general, the Secretary would be required to increase
    payments by 10% for non-therapy ancillary services and would be
    required to decrease payments for the therapy case mix
    component of such rates by 5.5%. Such payment changes would be
    required to apply for days on or after January 1, 2010, and
    until the Secretary implements an alternative case mix
    classification system for the SNF PPS.
        The Secretary would be required to analyze payments for
    non-therapy ancillary (NTA) services under a future SNF
    classification system to ensure the accuracy of payments for
    NTA services. Such analysis would be required to consider use
    of appropriate predictors which may include age, physical and
    mental status, ability to perform activities of daily living,
    prior nursing home stay diagnoses, broad RUG category, and a
    proxy for length of stay. Such analysis would be required to be
    conducted such that the future SNF classification system would
    apply to services furnished during a fiscal year beginning with
    FY 2011.
        In conducting the analysis, the Secretary would be required
    to consult with interested parties, including the Medicare
    Payment Advisory Commission and other interested stakeholders,
    to identify appropriate predictors of NTA costs.
        The Secretary would be required to include the result of
    this analysis in the fiscal year 2011 rulemaking cycle for
    purposes of implementation beginning for such fiscal year.
        The Secretary would also be required to implement changes
    to payments for NTA services (which would be required to
    include a separate rate component for NTA services and may
    include use of a model that predicts payment amounts applicable
    for NTA services) under such future SNF services classification
    system as the Secretary determines appropriate based on this
    analysis. These changes would be required to be implemented
    such that the estimated expenditures for a fiscal year,
    beginning with fiscal year 2011, with such changes, would be
    equal to the estimated expenditures that would otherwise occur
    under Medicare under such future SNF services classification
    system for such year without such changes.
        With respect to SNF PPS outlier payments for unusual
    variations in the type or amount of medically necessary care,
    the Secretary, beginning with October 1, 2010, would be
    required to provide for an addition or adjustment to the
    payment amount with respect to NTA services; and may provide
    for an addition or adjustment to the payment amount otherwise
    made with respect to therapy services in the case of outliers.
        Outlier adjustments or additional payments would be based
    on aggregate costs during a SNF stay and not on the number of
    days in such stays. The Secretary would be required to reduce
    estimated payments that would otherwise be made under the PPS
    with respect to a fiscal year by 2 percent. The total amount of
    additional payments or payment adjustments for these outliers
    with respect to a fiscal year could not exceed 2 percent of
    total payments projected or estimated based on the SNF PPS.
        No administrative or judicial review would be permitted to
    be conducted regarding these payment changes for NTA or
    outliers.
                Reason for Change
        The Committee believes that multiple reforms to the SNF PPS
    are necessary to improve patient access and quality of care,
    and ensure payment accuracy and fiscal sustainability in the
    Medicare program.
        In moving from the RUG-44 to the RUG-53 classification
    system for SNF payments in FY2006, CMS overestimated the
    adjustment that would be necessary to remain budget neutral--as
    intended--between these classification systems. This section
    requires the Secretary to prospectively adjust the payments to
    account for this error. The Committee notes that the provision
    does not recollect the overpayments made to SNFs in the past
    three years. The Secretary proposed this change via regulation
    in FY2009, but the change was not included in the final
    regulation for FY2009. In the proposed regulation for FY2010,
    CMS again proposed to make the adjustment, stating that ``. . .
    the 2006 adjustment inadvertently triggered a significant
    increase in overall payment levels, representing substantial
    overpayments to SNFs''. According to CMS's analysis, the
    adjustment necessary to achieve budget neutrality was 9.68
    percent, much lower than the actual adjustment provided of 17.9
    percent. The Committee intends that moving forward, payments to
    SNFs should be restored to the appropriate levels by accounting
    for this error.
        MedPAC, CMS and the GAO have identified that the SNF PPS
    does not accurately account for variability in costs for NTA
    services, such as intravenous medication or ventilator support.
    Currently, the SNF PPS pays for NTA services through the
    nursing component of the PPS, yet NTA costs vary more
    dramatically than costs for nursing care across stays. For
    instance, while NTA costs may vary 18-fold for costs per day,
    the nursing component of the payment only varies by 2-fold.
    This results in overpayments for beneficiaries who do not need
    NTA services, and underpayment for those beneficiaries who need
    expensive NTA services.
        Hospitals have reported difficulty placing patients
    expected to need expensive NTA services in SNFs because
    facilities expect to be underpaid. While CMS made adjustments
    for 2006 to account for this payment inaccuracy, including an
    across-the-board increase to the nursing component, MedPAC
    advises that the payment is still poorly targeted to accurately
    pay for NTA services. The current PPS explains 5 percent of the
    variation in NTA services; a revised system would explain 23
    percent of the variance. In order to improve payment accuracy
    and improve beneficiary access to NTA services, the Committee
    is providing this short-term adjustment directing the Secretary
    to conduct an analysis of NTA payments in order to incorporate
    accurate payments into a future SNF classification system which
    shall be implemented by FY2011.
        At the same time, the current SNF PPS payments for therapy
    services encourages increased utilization of these services.
    The share of days grouped into the categories with intensive
    therapy services has increased from 32 percent in 2001 to 60
    percent in 2007. MedPAC reports that some publicly traded
    nursing homes have increased their focus on patients that need
    these types of services in order to increase Medicare revenues.
    The underpayments for patients who need NTA services and the
    financial incentive to provide therapy services cause a wide
    divergence in Medicare margins for different facilities,
    depending on their mix of patients. For instance, for-profit
    SNFs have Medicare margins of 17.5 percent, while non-profit
    SNFs have an average Medicare margin of only 4.5 percent. This
    section would begin to remedy this discrepancy by increasing
    and better targeting payments for NTA services, and decreasing
    payments for therapy services.
        The Committee is also following MedPAC recommendations by
    creating an outlier adjustment for NTA services. Medicare has
    outlier policies for most of its prospective payment systems
    except SNFs. An outlier policy would increase the accuracy of
    payments for stays that are exceptionally costly; MedPAC
    projects that outlier payments would be made for fewer than 2
    percent of stays, only after the loss attributable to ancillary
    services exceeds $3,000. By minimizing financial risks for
    SNFs, the outlier policy will ensure that potentially high-cost
    beneficiaries do not experience barriers to access and that
    costly beneficiaries admitted to the SNF are not denied
    necessary care. The Committee also notes that reforming the SNF
    PPS to better capture differences in use of NTA services and
    adopting an outlier policy would improve the financial
    situation for hospital-based SNFs.
                Effective Date
        Subsection (a), pertaining to the recalibration factor, is
    effective for October 1, 2010. Subsection (b)(1), pertaining to
    the payment for NTA and therapy services, is effective January
    1, 2010. Subsections (b)(2) and (c) are effective for October
    1, 2011.

    Sec. 1112. Medicare DSH Report

                Current Law
        Since 1986, an increasing number of acute care hospitals
    have received additional Medicare payments because they serve a
    disproportionate share of low-income patients. The original
    legislative intent of the DSH adjustment was to compensate
    hospitals for the higher Medicare costs associated with
    treating a large proportion of low-income patients. The
    adjustment is now also considered as a way to protect access to
    care for vulnerable populations. Most DSH hospitals receive the
    additional payments based on a formula calculated using the
    proportion of the hospital's Medicare inpatient days provided
    to poor Medicare beneficiaries (those who receive Supplemental
    Security Income or SSI) added to the proportion of total
    hospital days provided to Medicaid recipients. A few urban
    hospitals receive DSH payments under an alternative formula
    that considers the proportion of a hospital's patient care
    revenues that are received from State and local indigent care
    funds.
                Proposed Law
        No later than July 1, 2016, the Secretary would be required
    to submit a report on Medicare DSH that would take into account
    the impact of health reform in reducing the number of uninsured
    individuals. The report would include recommendations
    concerning the appropriate amount, targeting, and distribution
    of Medicare DSH payments to compensate hospitals for their
    higher Medicare costs associated with serving low-income
    beneficiaries, consistent with the original intent of Medicare
    DSH adjustment, taking into account variations in the empirical
    justification for Medicare DSH attributable to hospital
    characteristics, including bed size. The report would also
    address the appropriate amount, targeting, and distribution of
    Medicare DSH to hospitals given their continued uncompensated
    care costs, to the extent that such costs remain. The Secretary
    would coordinate the issuance of this report with this
    legislation's required report on Medicaid DSH.
        If there is a significant decrease in the national rate of
    uninsurance as a result of this legislation, starting in
    FY2017, the Secretary would implement a Medicare DSH adjustment
    based on the recommendations of the required report that would
    take into account variation in the empirical justification for
    Medicare DSH attributable to hospital characteristics,
    including bed size. An additional hospital payment would be
    made based on the estimated amount of uncompensated care,
    excluding bad debt, provided by the hospital.
        A significant decrease in the national rate of uninsurance
    would be established if there is a decrease in the uninsured
    under-65 population from 2012 to 2014 that exceeds eight
    percentage points. This rate for a year would be determined by
    the Bureau of Census in its Current Population Survey that is
    published in or about September of the succeeding year.
        For each fiscal year (starting in FY2017) the Secretary
    would estimate the aggregate reduction in the amount of the
    Medicare DSH payments by implementing the empirically justified
    DSH adjustment. The Secretary would compute the additional
    hospital payments for uncompensated care so that the estimated
    aggregate amounts for the fiscal year do not exceed 50% of the
    aggregate DSH reduction. Also, hospitals with higher levels of
    uncompensated care would receive higher uncompensated care
    payments.
                Reason for Change
        The reforms provided under Division A are expected to
    expand health insurance coverage and lower the number of
    individuals who lack insurance. To the extent there are fewer
    uninsured individuals, the need for Medicare DSH may be
    somewhat lessened. However, the Committee is very concerned
    that some individuals will still lack access to health
    insurance, presenting a continued and strong need for Medicare
    DSH. The committee is reluctant for any Medicare DSH cuts to go
    into effect until a drop in the uninsured rate occurs.
        Furthermore, the Committee notes that the original
    statutory intent for Medicare DSH still exists, and Medicare
    must continue to compensate hospitals for the additional costs
    per Medicare case that are linked to serving low-income
    patients in a hospital. According to analysis in its June 2007
    report, MedPAC found a stronger and much larger relationship
    between Medicare costs and the share of low-income patients
    observed at urban hospitals with more than 100 beds. MedPAC
    found no positive cost relationship between care to the poor
    and costs per case for rural hospitals and urban hospitals with
    fewer than 100 beds. It is the Committee's intent that in
    continuing to compensate for the empirically justified level of
    Medicare DSH, the Secretary shall set, and vary, the amount in
    a manner such that differences in hospital size are taken into
    account.
                Effective Date
        July 1, 2016.

    Sec. 1113. Extension of Hospice Regulation Moratorium

                Current Law
        The prospective payment methodology for hospice was
    established in 1983. This prospective payment system (PPS) pays
    hospices according to the general type of care provided to a
    beneficiary on a daily basis. This rate attempts to adjust for
    geographic differences through a wage index adjustment. The
    current hospice wage index methodology was implemented in 1997
    through the rule making process. The hospice wage index is
    updated annually and based upon the most current hospital wage
    data and any changes to the Office of Management and Budget's
    (OMB) Metropolitan Statistical Areas (MSA) definitions. Prior
    to this date, the wage adjustment used a hospice wage index
    based upon 1981 hospital data collected by the Bureau of Labor
    Statistics (BLS). The change in 1997 was intended to improve
    the data used to account for disparities in geographic location
    and improve accuracy, reliability, and equity of Medicare
    payments to hospices across the country.
        When the data source used to adjust hospice payments for
    differences in the cost of labor across geographic area was
    changed in 1997 from the 1983 Bureau of Labor Statistics data
    to the hospital wage data, a budget neutrality adjustment
    factor (BNAF) was instituted by the Secretary to prevent
    participating hospices from experiencing reductions in total
    payments as a result of the change. This BNAF increases
    payments to those hospices that would otherwise experience a
    payment reduction by boosting hospice payments to these
    providers by amounts that would make overall payments budget
    neutral to the levels that they would have received had the
    Secretary used the 1983 Bureau of Labor Statistics wage
    adjustment. According to the proposed rule published by the
    Department of Health and Human Services (HHS) in the Federal
    Register on May 1, 2008, the BNAF boosts total payments to
    hospice providers by about 4%.
        According to the Hospice FY 2010 final rule, published in
    the Federal Register on August 6, 2009, the BNAF was modified
    to be phased out over 7 years instead of 3 years. The BNAF
    phase-out would begin with a 10 percent reduction in FY 2010
    and an additional 15 percent reduction for each year over the
    next 6 years.
        The BNAF phase-out has been controversial. Many
    policymakers rejected the prospect of payment reductions for
    hospice. As a result, the American Recovery and Reinvestment
    Act of 2009 (P.L. 111-5) included a provision that delayed the
    implementation of the phase-out of the budget neutrality
    adjustment factor during FY2009. Consequently, Medicare
    payments to 145 hospice during FY2009 will contain budget
    neutrality adjustments similar to those in previous years.
    Without changes to current law, the phase-out will begin in
    FY2010, starting on October 2, 2009. Industry groups have also
    filed a lawsuit to block implementation of the final hospice
    payment rule.
                Proposed Law
        The provision would extend the delay on the implementation
    of the phase-out of the budget neutrality adjustment factor
    until October 1, 2010.
                Reason for Change
        Hospice programs served nearly one million Medicare
    beneficiaries and their families in 2007, providing
    compassionate end-of-life care. A moratorium on the Medicare
    regulation for fiscal year 2010 would ensure that hospices
    continue to receive the same reimbursement rate for wages.

                    Subtitle B--Provisions Related to Part B

                          Part 1--Physicians Services

    Sec. 1121. Sustainable Growth Rate Reform

                Current Law
        Medicare payments for services of physicians and certain
    nonphysician practitioners are made on the basis of a fee
    schedule. The fee schedule assigns relative values to services
    that reflect physician work (i.e., time, skill, and intensity
    it takes to provide the service), practice expenses, and
    malpractice costs. The relative values are adjusted for
    geographic variation in costs. The adjusted relative values are
    then converted into a dollar payment amount by a conversion
    factor. The law specifies a formula, commonly referred to as
    the sustainable growth rate (SGR) system, for calculating the
    annual update to the conversion factors and the resulting fees.
        If cumulative physician expenditures are below the
    expenditure target, then an annual update is increased by at
    least the Medicare Economic Index (MEI). (Created in 1975, the
    MEI is an inflation index similar to the CPI that includes the
    prices of inputs required for the production of physician
    services including the physician's time, the cost of hiring
    employees such as technicians and clerical staff, rent, medical
    equipment, supplies, and drugs.) However, if cumulative
    physician expenditures exceed the expenditure target, then the
    annual update factor for all physician payments under the fee
    schedule are reduced in an attempt to bring expenditures in
    line with the target.
        Reductions resulting from application of the SGR have been
    frequently overridden by legislation. Section 101 of the
    Medicare, Medicaid, and SCHIP Extension Act of 2007 (P.L. 110-
    173, MMSEA) increased the update to the conversion factor for
    Medicare physician 146 payment by 0.5% compared with 2007 rates
    for the first six months of 2008. The Medicare Improvements for
    Patients and Providers Act of 2008 (MIPPA, P.L. 110-275)
    extended the 0.5% increase in the physician fee schedule that
    was set to expire on June 30, 2008, through the end of 2008 and
    set the update to the conversion factor to 1.1% for 2009. The
    conversion factor for 2010 and subsequent years will be
    computed as if this modification had never applied, so unless
    further legislation is passed, the update formula will require
    a 21% reduction in physician fees beginning January 1, 2010 and
    by additional amounts annually for at least several years
    thereafter.
        The calculation of the expenditure target has been
    criticized for including items that are not reimbursed under
    the Medicare physician fee schedule. Specifically, MedPAC and
    various physician organizations have suggested removing Part B
    drugs from the calculation of the baseline and growth targets.
    In its proposed rule for payment for physicians' services in
    2010, CMS proposed removing Part B drugs from those targets.
                Proposed Law
        The bill would make a number of substantial revisions to
    the SGR formula. Instead of grouping all physician expenditures
    together in the calculation of the annual update to the fee
    schedule, the bill would establish two separate target growth
    rates, one for evaluation and management services and
    preventive services and another for all other physician
    services.
        The bill would also rebase the revised formula for the
    purposes of calculating future expenditure targets. Instead of
    setting the expenditure target using physician expenditures
    since April 1, 1996, the proposal would base the new physician
    expenditure targets on physician expenditures beginning January
    1, 2009, with future targets determined under a revised
    formula. The proposal would also exclude ``incident to''
    services such as prescription drugs from the formula, limiting
    services included in the target growth rate computation to
    services paid for under the physician fee schedule.
        The bill would modify how updates to the fee schedule would
    be determined. For 2010, the update to the single conversion
    factor would be the percentage increase in the MEI. To
    calculate future updates, separate target growth rates would be
    established for two categories of services: evaluation and
    management services and all other services. Evaluation and
    management services would include procedure codes for Medicare
    covered services in the category designated Evaluation and
    Management in the Health Care Common Procedure Coding and
    Medicare covered preventive services. The service categories
    would apply without regard to the specialty of the physician
    providing the service. The calculation of the update factors
    would be based on physician expenditures in these categories
    beginning January 1, 2009.
        The application of multiple conversion factors would begin
    with 2011. The initial conversion factors for 2011 would be
    based upon the single conversion factor for 2010 multiplied by
    the update factors for such category for 2011. To update the
    conversion factors for the two service categories in subsequent
    years, the conversion factor for each category for the previous
    year would be adjusted by the update established for the
    category.
        In determining the allowed expenditures for 2010, total
    2009 actual expenditures for all services included in the
    target spending formula computation for each service category
    would be increased by the growth rate to obtain 2010 allowed
    expenditures for each service category. In subsequent years,
    the amount of allowed expenditures for such category would be
    the allowed expenditures for the preceding year increased by
    the target growth rate (as described below) for such category
    and year.
        Each category would have a separate target growth rate. The
    target growth rate for a given year, beginning with 2010, would
    be computed and applied separately for each service category
    (as defined above) and would be computed using the same method
    for computing the target growth rate except that the update to
    the conversion factor for evaluation and management services as
    well as Medicare covered preventive services would be allowed
    to increase by the percentage growth rate of Gross Domestic
    Product (GDP) per capita plus two percentage points, while the
    increase for all other physicians' services would be allowed to
    grow at the percentage rate of increase in GDP per capita plus
    one percentage point. The Secretary would publish the target
    growth rate for such succeeding year and each of the two
    preceding years by November 1 of each year.
        Providers participating in the accountable care
    organization (ACO) pilot program would have the option of
    pursuing separate target growth amounts applicable only that
    organization. No later than January 1, 2012, the Secretary
    would develop a method that would (1) allow each ACO to have
    its own Medicare physician fee schedule expenditure targets and
    updates that would be consistent with the methodologies
    described above, and (2) provide that the target growth rate
    applicable to other physicians would not apply to physicians to
    the extent that their services are furnished through the ACO.
    This method would apply beginning with 2012. In determining the
    expenditure targets and updates for physicians in the ACO pilot
    program, the Secretary could apply the difference in the update
    on a claim-by-claim or lump sum basis and such a payment would
    be taken into account under the pilot program.
                Reason for Change
        Despite recommendations from MedPAC and others overhaul the
    SGR mechanism, Congress has consistently failed to make
    substantive changes to the formula. Since 2002, Congress has
    enacted a series of short-term fixes that have avoided payment
    reductions called for by the SGR, but failed to address the
    fundamental flaws with the formula. Meanwhile, the projected
    budgetary cost of comprehensive reform to the SGR has soared
    and the depth of required payment rate reductions have
    deepened.
        The Committee has long recognized that the current update
    methodology is unsustainable and must be replaced. This
    legislation makes needed reforms that reflect more realistic
    allowances for growth in spending on physician services, while
    still holding physicians accountable for overall spending on
    the services they provide.
        Creating two separate expenditure targets and allowing
    higher growth for evaluation and management and preventive
    services infuses additional resources into these services to
    encourage their use. Furthermore, removing labs, drugs, and
    other ``incident to'' services from the calculation will result
    in the targets being more closely aligned with actual spending
    for physician services, rather than drug price inflation.
        When developing the evaluation and management service
    category, the Secretary should give strong consideration to
    including codes described as medical examination, evaluation,
    and management services that do not fall in the traditional
    grouping of evaluation and management services. For example,
    certain ophthalmology services are not included in the
    evaluation and management procedure codes, but encompass a
    similar array of services described by the evaluation and
    management codes.
        In addition, the Secretary should make appropriate
    adjustments to the each of the spending targets following any
    administrative adjustments to relative value units for services
    under the fee schedule. Such adjustments will avoid confounding
    actual growth for each spending category with administrative
    changes how physician services are valued.
        Allowing Accountable Care Organizations to have their own
    unique spending targets will increase the incentive for
    physicians to form or join such organizations. Physicians who
    participate in ACOs and choose to have their own spending
    targets will be held harmless from spending growth on physician
    services that occurs outside the ACO, further incentivizing
    those physicians to provide efficient, coordinated care. The
    Committee believes the connection between these two payment
    policies has great potential to reduce the rate of spending
    growth in the Medicare program and result in better care for
    Medicare beneficiaries.
                Effective Date
        January 1, 2010.

    Sec. 1122. Misvalued Codes Under the Physician Fee Schedule

                Current Law
        The Medicare physician fee schedule is based on assigning
    relative weights to each of the approximately 7,500 physician
    service codes used to bill Medicare. The relative value for a
    service compares the relative work involved in performing one
    service with the work involved in 149 providing other
    physicians' services. The scale used to compare the value of
    one service with another is known as a resource-based relative
    value scale (RBRVS).
        The Centers for Medicare and Medicaid Services (CMS), which
    is responsible for maintaining and updating the fee schedule,
    continually modifies and refines the methodology for estimating
    relative value units (RVUs). CMS relies on advice and
    recommendations from the American Medical Association/Specialty
    Society Relative Value Scale Update Committee (RUC) in its
    assessments. In general, as currently implemented, increases in
    RVUs for a service or number of services lowers the resultant
    fees for other physician services. One consequence has been
    that the payments for evaluation and management codes, whose
    RVUs typically are not increased over time, have fallen
    relative to other codes whose RVUs have increased; new
    technologies that have been introduced into coverage with
    relatively high RVUs also contribute to this problem. CMS is
    required to review the RVUs no less than every five years.
        In determining adjustments to RVUs used as the basis for
    calculating Medicare physician reimbursement under the fee
    schedule, the Secretary has authority to adjust the number of
    RVUs for any service code to take into account changes in
    medical practice, coding changes, new data on relative value
    components, or the addition of new procedures. The Secretary is
    required publish an explanation of the basis for such
    adjustments.
        These adjustments are subject to a budget neutrality
    condition. With the exception of certain expenditures that are
    exempt by statute, the adjustments may not cause the amount of
    expenditures made under the Medicare physician fee schedule to
    differ from year to year by more than $20,000,000 from the
    expenditures that would have been incurred without such an
    adjustment.
        Under current law, the Secretary appoints 15 physicians
    (nominated by physicians organizations) to form the Practicing
    Physicians Advisory Council, including both participating and
    nonparticipating physicians and physicians practicing in rural
    areas and underserved urban areas. This council meets each
    quarter to discuss certain proposed changes in regulations and
    carrier manual instructions related to physician services
    identified by the Secretary.
        Section 4505(d) of the Balanced Budget Act of 1997 (P.L.
    105-33, BBA) requires that, in developing the resource based
    practice expense RVUs, the Secretary (1) use generally accepted
    cost accounting principles, to the maximum extent possible,
    that recognize all staff, equipment, supplies, and expenses,
    not solely those that can be linked to specific procedures and
    actual data on equipment utilization, (2) develop a refinement
    method to be used during the transition, and (3) consider, in
    the course of notice and comment rulemaking, impact projections
    that compare new proposed payment amounts to data on actual
    physician practice expense.
                Proposed Law
        The Secretary would periodically identify and make
    appropriate adjustments to the relative values for the services
    identified as being potentially misvalued. The Secretary would
    examine the following, as appropriate: (1) codes (and families
    of codes as appropriate) for which there has been the fastest
    growth; (2) codes (and families of codes as appropriate) that
    have experienced substantial changes in practice expenses; (3)
    codes for new technologies or services within an appropriate
    period (such as three years) after the relative values are
    initially established for such codes; (4) multiple codes that
    are frequently billed in conjunction with furnishing a single
    service; (5) codes with low relative values, particularly those
    that are often billed multiple times for a single treatment;
    (6) codes that have not been subject to review since the
    implementation of the RBRVS (the so-called `Harvard-valued
    codes'); and (7) such other codes determined to be appropriate
    by the Secretary.
        In conducting the review and adjustments, (1) the Secretary
    could use existing processes to receive recommendations on the
    review and appropriate adjustment of potentially misvalued
    services; (2) the Secretary could conduct surveys, other data
    collection activities, studies, or other analyses as
    appropriate to facilitate the review and appropriate
    adjustment; (3) the Secretary could use analytic contractors to
    identify and analyze potentially misvalued services identified,
    conduct surveys or collect data, and make recommendations on
    the review and appropriate adjustment of services; (4) the
    Secretary could coordinate the review and appropriate
    adjustment with the existing periodic (no less often than every
    5 years) review of the relative values; (5) the Secretary could
    make appropriate coding revisions (including using existing
    processes for consideration of coding changes) that could
    include consolidation of individual services into bundled codes
    for payment under the fee schedule; and (6) the Secretary would
    apply the existing budget neutrality condition that applies to
    relative value adjustments to this proposal.
        The Secretary would establish a process to validate
    relative value units under the fee schedule. The evaluation
    process could include validation of work elements (such as
    time, mental effort and professional judgment, technical skill
    and physical effort, and stress due to risk) involved with
    furnishing a service and could include validation of the pre,
    post, and intra-service components of work. The validation of
    work relative value units would include a sampling of codes for
    services that is the same as the potentially misvalued codes
    described above.
        The Secretary could conduct the validation using methods
    described above to identify potentially misvalued services, as
    the Secretary determines to be appropriate. Following the
    evaluation, the Secretary would make appropriate adjustments to
    the work relative value units under the fee schedule. The same
    budget neutrality provision would apply to adjustments to
    relative value units made as a result of the evaluation.
        For FY2010 and each subsequent fiscal year, $20 million
    would be appropriated for the CMS Program Management Account to
    carry out the provisions described above. The amounts
    appropriated for a fiscal year would be available until
    expended.
        The provision also clarifies how certain existing statutes
    might pertain to the proposals contained in this section.
    Chapter 35 of title 44 of the United States Code, pertaining to
    the Coordination of Federal Information Policy, and the
    provisions of the Federal Advisory Committee Act (5 U.S.C.
    App.) would not apply to the modifications proposed in this
    section. Notwithstanding any other provision of law, the
    Secretary could implement the proposed modifications in order
    to identify, adjust, and evaluate potentially misvalued codes
    by program instruction or otherwise. Section 4505(d) of BBA,
    which placed requirements on how the Secretary developed the
    practice expense RVUs, would be repealed. Except for provisions
    related to confidentiality of information, the provisions of
    the Federal Acquisition Regulation would not apply to this
    section or the amendment made by this section. Finally, the
    statute establishing the Practicing Physicians Advisory Council
    would be repealed.
                Reason for Change
        Traditionally the five-year review has led to more
    increases in work RVUs than decreases. MedPAC and other
    observers have stated that more attention needs to be given to
    the accurate valuation of services in order to maintain the
    integrity of the fee schedule.
        The provision gives clearer direction to the Secretary to
    maintain accurate valuation of services and prioritizes
    identification of potentially misvalued codes. For instance,
    rapid rises in the volume of administratively priced services
    can be a warning sign of incorrect incentives; this problem can
    be addressed by giving the Secretary authority to impose a
    downward adjustment in the price of rapidly rising services
    (after taking into account evidence of clinical benefit that
    would justify growth) to be reconsidered by outside consultants
    during the five year review. The provision also addresses
    concerns that CMS does not have sufficient resources or
    administrative authority to conduct such reviews; among other
    improvements, providing additional resources will promote
    collection of more timely and accurate data that can be used to
    improve valuation of services.
                Effective Date
        Date of enactment.

    Sec. 1123. Payments for Efficient Areas

                Current Law
        Medicare uses a fee schedule to reimburse physicians for
    the services they provide. In certain circumstances, physicians
    receive an additional payment to encourage targeted activities.
    These bonuses, typically a percentage increase above the
    Medicare fee schedule amounts, can be awarded for a number of
    activities including demonstrating quality achievements,
    participating in electronic prescribing, or practicing in
    underserved areas.
                Proposed Law
        The proposal would create new incentive payments for
    ``efficient'' areas. Providers delivering services on or after
    January 1, 2011, and before January 1, 2013 who practice in an
    area identified as an ``efficient'' area would receive an
    additional payment (on a monthly or quarterly basis) equal to
    5% of the payment amount for the Medicare Part B services.
        Based upon available data, the Secretary would identify
    those counties or equivalent areas in the United States in the
    lowest fifth percentile of utilization based on per capita
    spending for Medicare Part A and part B services provided in
    the most recent year for which data are available as of the
    date of the enactment. The Secretary would standardize per
    capita spending to eliminate the effect of geographic
    adjustments in payment rates.
        For purposes of the additional payment for providers in
    ``efficient'' areas, if the Secretary were to use the 5-digit
    postal ZIP Code where the service is furnished, the dominant
    county of the postal ZIP Code would be used to determine
    whether the postal ZIP Code is in a county described as an
    ``efficient'' area. There would be no administrative or
    judicial review respecting (1) the identification of a county
    or other area as an efficient area; or (2) the assignment of a
    postal ZIP Code to a county or other area designated as an
    efficient area.
        The Secretary would identify counties or areas designated
    as ``efficient'' as part of the proposed and final rule to
    implement the physician fee schedule for the applicable year.
    The Secretary would post the list of counties identified as
    ``efficient'' on the CMS website.
                Reason for Change
        In certain regions of the country, Medicare beneficiaries
    use a very low volume of services. This could be caused by
    problems with access to physician services or highly efficient
    practice by local physicians. The incentive payments would
    either address problems with access or reward efficient
    practice.
                Effective Date
        January 1, 2011.

    Sec. 1124. Modifications to the Physician Quality Reporting Initiative
            (PQRI)

                Current Law
        Tax Relief and Health Care Act of 2006 (TRHCA, P.L. 109-
    432) required the establishment of a physician quality
    reporting system that would include an incentive payment, based
    on a percentage of the allowed Medicare charges for all such
    covered professional services, to eligible professionals who
    satisfactorily report data on quality measures. CMS named this
    program the Physician Quality Reporting Initiative (PQRI). The
    Medicare Improvements for Patients and Providers Act of 2008
    (MIPPA, P.L. 110-275) made this program permanent and extended
    the bonuses through 2010; the incentive payment was increased
    from 1.5% of total allowable charges under the physician fee
    schedule in 2007 and 2008 to 2% in 2009 and 2010.
        Providers that successfully report for services provided in
    calendar year 2009 will receive an incentive payment of two
    percent of total allowable charges for the physician fee
    schedule. Providers may choose claims-based reporting or
    registry-based reporting. For claims-based reporting, providers
    seeking incentive payments for the entire calendar year may
    meet the requirement by reporting on one measures group for a
    sample of 30 consecutive Medicare Part B fee-for-service
    patients (FFS), or report for one measures group for 80% of
    applicable Medicare Part B FFS patients. For providers seeking
    to report for the six-month period beginning July 1, 2009,
    similar criteria apply for those that report through CMS
    approved registries.
                Proposed Law
        The bill would modify the PQRI to include a feedback
    program for physicians, integrate PQRI and electronic health
    record (EHR) reporting, and extend the years of bonus payments.
    Not later than January 1, 2011, the Secretary would develop and
    implement a mechanism to provide timely feedback to eligible
    professionals on the performance of the eligible professional
    with respect to satisfactorily submitting data on quality
    measures under the PQRI program.
        Not later than January 1, 2011, the Secretary would
    establish and have in place an informal process for eligible
    professionals to appeal the determination that an eligible
    professional did not satisfactorily submit data on quality
    measures for the PQRI program.
        The bill would integrate physician quality reporting under
    the PQRI and EHR reporting relating to the meaningful use of
    EHR. The integration would consist of the following: (1) the
    development of measures that would both demonstrate meaningful
    use of an electronic health record for purposes of EHR
    reporting and provide information on the clinical quality of
    the care furnished to an individual; (2) the collection of
    health data to identify deficiencies in the quality and
    coordination of care for Medicare beneficiaries; and (3) other
    activities as specified by the Secretary. The Secretary would
    develop such a plan no later than January 1, 2012.
        Incentive payments under the PQRI program would be extended
    through 2012; for each of the years 2009 through 2012, the
    bonus would be 2% of Part B payments.
                Reason for Change
        The PQRI program has the potential to be a valuable tool in
    measuring the quality of services furnished by physicians to
    Medicare beneficiaries. However, its potential usefulness has
    been undermined by problems with the way the initiative has
    been implemented. This section addresses those problems,
    extends the payment initiative for several years, and improves
    the program by integrating it with the incentive program for
    the adoption and use of health information technology.
                Effective Date
        Date of enactment.

    Sec. 1125. Adjustment to Medicare Payment Localities

                Current Law
        The Medicare fee schedule pays providers differently
    according to the geographic location, known as a Medicare
    physician payment locality, in which the provider practices. At
    the time when they were originally defined the costs of
    providing physician services were relatively consistent within
    each payment locality; sub-regions of a state were designated
    as separate payment localities only if the data showed a marked
    difference between the costs in that area compared with the
    rest of the state.
        Each year, the Centers for Medicare and Medicaid Services
    (CMS) uses data from a number of sources to calculate separate
    geographic practice cost indices (GPCIs) for each payment
    locality for each of three component inputs required to produce
    physician services (physician work, practice expense, and
    medical malpractice insurance). For each locality, these 3
    GPCIs are then combined to produce a weighted average index of
    relative costs, called the geographic adjustment factor (GAF).
        In constructing the payment localities, the Health Care
    Financing Administration (HCFA, now CMS) used an iterative
    criteria that compared the relative cost (the GAF) of a
    potentially distinct locality with the weighted average costs
    (GAFs) in the rest of the state. Localities that had GAFs at
    least 5% higher than the rest of the state were designated as a
    separate locality; this process was repeated until this
    condition was not met, whereupon the remaining regions of the
    state were combined into one locality. In 1996, HCFA reduced
    the number of Medicare localities for physician payment by
    aggregating several existing contiguous localities with similar
    costs and combining other localities to create a single payment
    area for the entire state. As a result, there are currently 89
    Medicare physician payment localities based on counties or
    aggregates of counties across the 50 states; some localities
    are the entirety of the state while other states may have
    several payment localities. None of the payment localities
    cross state lines.
        Economic conditions have affected parts of the country
    differently in the years since the payment localities were
    created. If localities were to be created based on data from
    recent years using the original methodology, the resulting
    number and composition of the payment localities might not be
    the same as the ones that currently exist.
                Proposed Law
        The payment localities used as the basis for the geographic
    adjustment of Medicare physician payments under the fee
    schedule would be changed in the state of California. Under the
    proposal, payments to California physicians would transition
    from a system based on the current localities to one based on
    Metropolitan Statistical Areas (MSAs). For services furnished
    on or after January 1, 2011, the Secretary would revise the
    Medicare physician payment areas for the State of California to
    be based on Metropolitan Statistical Areas (MSA).
        The methodology for constructing the new payment areas
    would be similar to the original methodology, but the Core-
    Based Statistical Areas-Metropolitan Statistical Areas, as
    defined by the Office of Management and Budget (OMB), would be
    used as the geographic units for comparing GAFs. First, the
    Secretary would list all MSAs within California by their GAFs
    in descending order. In the first iteration, the Secretary
    would compare the GAF of the highest cost MSA in the State to
    the weighted-average GAF of the group of remaining MSAs in the
    State. If the ratio of the GAF of the highest cost MSA to the
    weighted-average GAF of the rest of State is 1.05 or greater
    than the highest cost MSA becomes a separate fee schedule area.
    In each subsequent iteration, the Secretary would compare the
    MSA of the next-highest GAF to the weighted-average GAF of the
    group of remaining MSAs. If the ratio of the next-highest MSA's
    GAF to the weighted-average of the remaining lower cost MSAs is
    1.05 or greater, that MSA would become a separate fee schedule
    area. The iterative process would continue until the ratio of
    the GAF of the highest-cost remaining MSA to the weighted-
    average of the remaining lower-cost MSAs is less than 1.05, and
    the remaining group of lower cost MSAs would form a single fee
    schedule area. If two MSAs were to have identical GAFs, they
    would be combined in that step of the iterative comparison.
        The provision would require that no GPCIs be reduced during
    the first 5 years of the transition from the former county-
    based payment localities to the MSA-based fee schedule areas.
    For services furnished in California on or after January 1,
    2011 and before January 1, 2016, the Secretary would increase
    any such index to the county-based fee schedule area value on
    December 31, 2009, if the index under the new calculation would
    be less than the value on January 1, 2010.
        The new fee schedule areas would be subject to periodic
    review and adjustments. Not less often than every 3 years, the
    Secretary would review and update the California Rest-of-State
    fee schedule area using MSAs as defined by the OMB applying the
    iterative methodology described above. This revision would be
    made effective concurrently with the application of the
    periodic review of the adjustment factors required under
    current law for California for 2012 and subsequent periods and
    would be linked to the review of the GPCIs for all fee schedule
    areas that occurs not less often than every 3 years. Upon
    request, the Secretary would make any county-level or MSA-
    derived data used to calculate the geographic practice cost
    index available to the public.
                Reason for Change
        A GAO report issued July 2007 confirmed significant
    problems with inaccurate pricing that result from current
    methodology used to establish Medicare's payment localities.
    While the problem is not limited to California, during the last
    15 years that state has experienced some of the largest
    economic and demographic shifts, leading to large disparities
    between local costs and geographic price adjustments. Revising
    and updating the state's payment localities to reflect costs at
    the MSA level will achieve the greatest balance between price
    accuracy and administrative feasibility. In order to minimize
    the effect of resources shifting from one area of the state to
    another that result from this change, the legislation provides
    temporary relief to counties in California that would be
    adjusted downward.
                Effective Date
        January 1, 2010.

                         Part 2--Market Basket Updates

    Sec. 1131. Incorporating Productivity Improvements into Market Basket
            Updates That Do Not Already Incorporate Such Improvements

                Current Law
        Medicare pays for hospital outpatient department services
    under its outpatient prospective payment system (OPPS).
    Generally, Medicare's OPPS base payment amount is increased
    each year by an annual update that is linked to projected
    changes in specific market basket (MB) indices which are
    designed to measure the change in the price of goods and
    services purchased by the provider. Starting in CY2009,
    hospitals paid under OPPS that do not submit required quality
    data will have the applicable MB percentage reduced by two
    percentage points. The reduction would apply for that year and
    would not be taken into account in subsequent years.
        Ambulance services are paid on the basis of a national fee
    schedule, which is being phased-in. The national fee schedule
    is fully phased-in for air ambulance services. For ground
    ambulance services, payments through 2009 are equal to the
    greater of the national fee schedule or a blend of the national
    and regional fee schedule amounts. The portion of the blend
    based on national rates is 80% for 2007-2009. In 2010 and
    subsequently, the payments in all areas will be based on the
    national fee schedule amount. The fee schedule amounts are
    updated each year by the consumer price index for all urban
    consumers (CPI-U).
        Starting January 1, 2008, Medicare will pay for surgery-
    related facility services provided in an ambulatory surgery
    center (ASC) using a payment system based on the hospital OPPS.
    The new payment system will be implemented over a four-year
    transition period. Beginning in CY2010, the ASC conversion
    factor will be updated annually using the CPI-U. This update
    will be subject to a 2 percentage point reduction if required
    quality data are not provided.
        Clinical lab services are paid on the basis of area-wide
    fee schedules. The fee schedule amounts are periodically
    updated. The annual clinical laboratory test fee schedule
    update adjustment for 2009-2013 will be the percentage increase
    or decrease in the CPI-U minus 0.5 percentage points.
        Except in Competitive Acquisition Areas where payments for
    items and services are to be based on suppliers' bids, Medicare
    pays for durable medical equipment (DME) on the basis of fee
    schedules. Items are classified into five groups for
    determining the fee schedules and making payments: (1)
    inexpensive or other routinely purchased equipment (defined as
    items costing less than $150 or which are purchased at least
    75% of the time); (2) items requiring frequent and substantial
    servicing; (3) customized items; (4) oxygen and oxygen
    equipment; and (5) other items referred to as capped rental
    items. In general, fee schedule rates are established locally
    and are subject to national limits. In general, fee schedule
    amounts are updated annually by the CPI-U. Updates were
    eliminated for 1998-2000; payments were increased by the CPI-U
    for 2001; and payments were frozen for 2002. MMA eliminated the
    updates for 2004-2008. In 2009, for items and services selected
    before July 1, 2008 to be part of a Competitive Acquisition
    Program for durable medical equipment, prosthetics, orthotics,
    and supplies (DMEPOS), the update was a decrease of 9.5
    percent. This decrease applied across geographic areas and was
    not restricted to Competitive Acquisition Areas. This
    adjustment allowed provisions in the Medicare Improvements for
    Patients and Providers Act of 2008 (MIPPA, P.L.110-275)
    delaying the implementation of the Competitive Acquisition
    Program to be budget neutral. For items and services that had
    not been selected before July 1, 2008 to be part of the
    Competitive Acquisition Program, the payment update for 2009
    was the CPI-U. For 2010 through 2013, the updates are to be the
    CPI-U. In 2014, if an item received a payment decrease in 2009,
    the update is to be equal to the CPI-U plus 2 percentage
    points, otherwise the update is to be the CPI-U. Starting in
    2015, the update is to be the CPI-U. Payment updates for DME do
    not include an adjustment for productivity.
                Proposed Law
        Starting in CY2010, the OPPS, ambulance services, clinical
    laboratory services updates would be subject to the
    productivity adjustment established earlier in the legislation
    and applicable to certain Part A providers, including IPPS
    hospitals. Starting in CY2010, to the extent an annual
    percentage change factor applies to ASC services, it would
    include the productivity factor established earlier in
    legislation.
                Reason for Change
        The annual update to the Medicare physician fee schedule
    already incorporates adjustments for gains in productivity.
    This provision creates uniformity across Medicare providers by
    creating a productivity adjustment for other Part B providers.
    This adjustment will encourage greater efficiency in health
    care provision, hold Medicare providers accountable for
    achieving productivity gains on par with the overall economy,
    and more accurately align Medicare payments with provider
    costs.
                Effective Date
        January 1, 2010.

                            Part 3--Other Provisions

    Sec. 1141. Rental and Purchase of Power-driven Wheelchairs

                Current Law
        Wheelchairs, including power-driven wheelchairs, are
    covered by Medicare Part B under the capped-rental category of
    the durable medical equipment (DME) benefit. Medicare pays for
    power-driven wheelchairs in one of two ways: either Medicare
    will pay the supplier a monthly rental amount during the
    beneficiary's period of medical need (though payments are not
    to exceed 13 continuous months), or payment is made on a lump-
    sum basis at the time the supplier furnishes the chair, if the
    beneficiary chooses the lump-sum payment option. The same
    payment choice applies to replacement power-driven wheelchairs
    as well.
        Medicare covers over 600 power wheelchair models under 42
    procedure codes (Healthcare Common Procedure Coding System,
    HCPCS). Power wheelchairs are further classified into 3 broad
    groups based on their reported performance in categories such
    as speed, range of travel and the height of the vertical
    obstruction they can climb. Group 3 must meet the highest
    performance standards. Group 2 and Group 1 must meet
    intermediate and the lowest performance requirements,
    respectively. For example, a group 3 wheelchair must be able to
    travel a minimum of 12 miles on a single charge of its
    batteries, while the minimum travel requirements for Group 2
    and Group 1 chairs are 7 and 5 miles, respectively.
        The Secretary is required to establish a competitive
    acquisition program for specified durable medical equipment;
    the competitive acquisition program would replace the Medicare
    fee schedule payments. The program is to be phased in, starting
    in 10 of the largest metropolitan statistical areas (MSAs) in
    2009; expanding to 80 of the largest MSAs in 2011 and remaining
    areas after 2011. The Secretary is permitted to phase in first
    items and services with the highest cost and highest volume, or
    those items and services that the Secretary determines to have
    the largest savings potential first, which includes power-
    driven wheelchairs.
                Proposed Law
        This provision would restrict the `lump-sum' payment
    provision for new and replacement power-driven wheelchairs to
    those recognized by the Secretary as classified within group 3
    or higher. The provision would be effective for chairs
    furnished on or after January 1, 2010, but would not apply to
    competitive bidding areas where bids had been submitted before
    October 1, 2010.
                Reason for Change
        By eliminating the first month full purchase option, the
    provision reduces waste in the Medicare program as there are a
    sizeable number of wheelchairs which are purchased in the first
    month, but end up not needed by the beneficiary beyond the 13-
    month window during which rental payments would otherwise be
    made. Furthermore, this change protects beneficiaries from the
    burden of paying the cost-sharing associated with the
    wheelchair in one lump sum, as would be the case under a first-
    month purchase.
        The Committee is concerned about the practical requirements
    of this provision for patients whose complex medical conditions
    justify the outright purchase of mobility devices rather than
    short- or long-term rentals. These special needs patients will
    require wheelchairs that are highly customized, use complex
    technologies, and are in use for very long periods--if not for
    the rest of the patient's life. As such, the provision
    continues to allow for first-month purchase of complex mobility
    devices classified as group 3 or higher.
                Effective Date
        January 1, 2011.

    Sec. 1142. Extension of Payment Rule for Brachytherapy

                Current Law
        The Medicare Prescription Drug, Improvement and
    Modernization Act (MMA, P.L. 108-173) required Medicare's
    outpatient prospective payment system to make separate payments
    for specified brachytherapy sources. As mandated by the Tax
    Relief and Health Care Act of 2006 (TRHCA, P.L. 109-432), this
    separate payment will be made using hospitals' charges adjusted
    to their costs until January 1, 2008. The Medicare, Medicaid,
    and SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173) extended
    cost reimbursement for brachytherapy services until July 1,
    2008. The Medicare Improvements for Patients and Providers Act
    of 2008 (MIPPA, P.L. 110-275) extended cost reimbursement for
    brachytherapy until January 1, 2010.
                Proposed Law
        The provision would extend cost reimbursement for
    brachytherapy until January 1, 2012.
                Reason for Change
        This section guarantees access to care for beneficiaries
    who need brachytherapy.
                Effective Date
        Date of enactment.

    Sec. 1143. Home Infusion Therapy Report to Congress

                Current Law
        Infusion therapy involves the administration of medication
    through a needle or a catheter. If a physician determines that
    it is medically appropriate for a particular patient, some
    infusion therapies may be provided in a patient's home.
    Infusion therapies that can be provided in the home include
    such things as antibiotic therapy, chemotherapy, pain
    management, and hydration therapy.
        Infusion drugs administered in a patient's home are covered
    under the Medicare Part D drug benefit. Medicare Part D does
    not, however, cover supplies, equipment or professional
    services associated with home infusion therapy.
                Proposed Law
        The provision would require the Medicare Payment Advisory
    Commission (MedPAC) to submit a report to Congress not later
    than 12 months after the date of enactment. The report would be
    required to include (a) an analysis of the scope of coverage
    for home infusion therapy services (and the scope of services
    provided) in traditional Medicare, Medicare Advantage, the
    Veterans Health Administration, and among private payers; (b)
    the benefits and costs of providing such coverage under the
    Medicare program, including a calculation of the potential
    savings achieved through avoided or shortened hospital or
    nursing home stays; (c) an assessment of data on home infusion
    therapy that might be used to construct payment mechanisms
    under Medicare; and (d) recommendations, if any, on the
    structure of a payment system under the Medicare program for
    home infusion therapy services, including an analysis of MA and
    private plan payment methodologies for home infusion therapy
    and their applicability to the Medicare program.
                Reason for Change
        The Committee is concerned about beneficiary access to home
    infusion therapy services under Medicare. While Part D pays for
    the infusion therapy medications, it does not cover the
    associated supplies or services to administer the medications.
    The Secretary has directed Part D plans to ensure that
    beneficiaries have access to an entity--such as a home health
    agency or outpatient facility--where these supplies and
    services are available before dispensing home infusion drugs.
    But receiving infusion drugs through a home health agency or
    outpatient facility may not be optimal for many beneficiaries.
    This study would assist the Committee in understanding the most
    appropriate course of action to ensure that beneficiaries have
    proper access to home infusion therapy services.
                Effective Date
        Date of enactment.

    Sec. 1144. Require Ambulatory Surgical Centers (ASCs) to Submit Cost
            Data and Other Data

                Current Law
        Ambulatory surgery centers (ASCs) must meet certain health,
    safety, and other specified standards in order to participate
    in Medicare. The Centers for Medicare and Medicaid Services is
    implementing a new payment system for ASCs starting in January
    1, 2008. The new payment system, which will be phased in over a
    4-year period, uses the ambulatory payment classification
    groups that are the basis for Medicare's outpatient prospective
    payment system (OPPS) for hospital outpatient departments. ASCs
    have never been required to submit cost reports. In March 2009,
    the Medicare Payment Advisory Commission recommended that
    Congress require ASCs to submit cost data and quality data that
    would allow for an effective evaluation of the adequacy of
    Medicare's payment rates.
                Proposed Law
        The Secretary would require ASCs to submit reports on their
    facility costs as a condition for agreeing to participate in
    Medicare. The specifications for this data would take into
    account the requirements for hospital cost data. No later than
    3 years from enactment, an ASC cost reporting form would be
    developed. The ASC cost reports would be periodically audited.
    The requirements would apply to agreements applicable to cost
    reporting periods beginning 18 months after the date the
    Secretary develops the cost reporting form. The Secretary would
    require ASCs to report quality data, including data on health
    care associated infections. The amendment would apply starting
    2012.
                Reason for Change
        The number of Medicare-certified ASCs has increased
    substantially in recent years, growing at an annual rate of 6.7
    percent from 2002 to 2007. Spending per beneficiary also
    increased substantially during that time period, growing at an
    average annual rate of 8.4 percent. ASCs received $2.9 billion
    in payments from Medicare and beneficiary cost-sharing in 2007.
    Ninety-one percent of ASCs have at least one physician owner
    and MedPAC has advised that the presence of physician ownership
    of ASCs may influence referral patterns.
        MedPAC uses cost data to analyze the adequacy of Medicare
    payments in many areas. However, cost data are not available
    for ASCs, thus limiting MedPAC's ability to assess payment
    adequacy. This provision requires collection of cost report
    data, which will allow for proper assessments of Medicare's
    payment adequacy for ASCs. This provision also follows MedPAC's
    recommendation to require reporting of quality data.
                Effective Date
        The requirement to submit cost reports is effective 18
    months after the Secretary develops a cost report. The quality
    reporting requirement is effective January 1, 2012.

    Sec. 1145. Treatment of Certain Cancer Hospitals

                Current Law
        Eleven cancer hospitals are exempt from the inpatient
    prospective payment system (IPPS) used to pay inpatient
    hospital services provided by acute care hospitals.
    Historically, they have been paid on a reasonable cost basis,
    subject to certain payment limitations and incentives. These
    hospitals are also held harmless under the outpatient
    prospective payment system (OPPS) and will not receive less
    from Medicare under this payment system than under the prior
    outpatient payment system. Under OPPS, Medicare pays for
    outpatient services using ambulatory payment classification
    (APC) groups.
                Proposed Law
        The Secretary would be required to determine if the costs
    incurred by cancer hospitals with respect to APCs exceed those
    costs incurred by other hospitals reimbursed under OPPS. If the
    costs in cancer hospitals exceed the costs incurred by other
    hospitals, the Secretary would be required to provide for an
    appropriate adjustment for cancer hospitals for services
    furnished starting January 1, 2011.
                Reason for Change
        The Committee is concerned that the cost of outpatient
    services at PPS-exempt cancer hospitals is greater than that at
    other outpatient hospitals and that these higher costs are not
    currently reflected and adequately reimbursed under the current
    payment system. This provision directs CMS to assess whether
    such a cost differential exists, and if so, to remedy it. The
    Committee notes that this provision is in addition to the
    existing hold harmless provision under 1833(t)(7)(D)(ii) of the
    Social Security Act as the hold harmless will continue to apply
    in the situation where the combination of existing payments and
    any payment change under this section results in a payment less
    than the pre-BBA amount.
                Effective Date
        January 1, 2011.

    Sec. 1146. Medicare Improvement Fund

                Current Law
        Section 188 of MIPPA established the Medicare Improvement
    Fund (MIF), available to the Secretary to make improvements
    under the original fee-for-service program under Parts A and B
    for Medicare beneficiaries. Under current law, $2.29 billion
    from the fund are available for services furnished during
    FY2014 and an additional $19.9 billion are available for FY2014
    through FY2017.
                Proposed Law
        The proposal would modify the amount of monies in the fund
    so that $8 billion would be available for the period beginning
    with fiscal year 2011 and ending with fiscal year 2019.
                Reason for Change
        Over the course of several years, money has been set aside
    in the MIF to fund policies that would improve and modernize
    the Medicare program. This provision would fulfill this intent
    by using the MIF to offset important investments in Medicare
    made by this bill. The remaining $8 billion will be available
    to fund increases in payment rates implemented under Section
    1158, regarding Medicare geographic payment adjustments.
                Effective Date
        Date of enactment.

    Sec. 1147. Payment for Imaging Services

                Current Law
        Under the Medicare fee schedule, some services have
    separate payments for the technical component and the
    professional component. For example, imaging procedures
    generally have two parts: the actual taking of the image (the
    technical component), and the interpretation of the image (the
    professional component). Medicare pays for each of these
    components separately when the technical component is furnished
    by one provider and the professional component by another. When
    both components are furnished by one provider, Medicare makes a
    single global payment that is equal to the sum of the payment
    for each of the components.
        CMS's method for calculating the Medicare fee schedule
    reimbursement rate for advanced imaging services assumes that
    imaging machines are operated 25 hours per week, or 50% of the
    time that practices are open for business. Setting the
    equipment use factor at a lower--rather than at a higher--rate
    has led to higher payment for these services. Citing evidence
    showing that the utilization rate is 90%, rather than the 50%
    previously assumed, MedPAC is urging CMS to use the higher
    utilization rate in the calculation of fee schedule payments
    for advanced imaging services.
        According to MedPAC and the Government Accountability
    Office (GAO), there are opportunities to improve the efficiency
    of the Medicare fee schedule. In 2005, MedPAC recommended
    reducing certain fees to account for efficiencies and savings
    from the technical preparation and supplies achieved when
    multiple imaging services are furnished sequentially on
    contiguous body parts during the same visit. Starting January
    1, 2006, physicians receive the full technical component fee
    for the highest paid imaging service in a visit, but technical
    component fees for additional imaging services are reduced by
    25%.
        The work relative value units in the Medicare physician fee
    schedule are developed with input from the physician community.
    Refinements in existing values and the establishment of values
    for new services are included in the annual fee schedule
    updates. The refinement and update process is based in part on
    recommendations made by the American Medical Association's
    Specialty Society Relative Value Update Committee (RUC), which
    receives input from many physician specialty societies. Current
    law requires a review of the relative values every five years.
        Section 1834(e)(1)(B) of the SSA defines advanced
    diagnostic imaging services to include diagnostic magnetic
    resonance imaging, computed tomography, and nuclear medicine
    (including positron emission tomography), and other diagnostic
    imaging services as specified by the Secretary in consultation
    with physician specialty organizations and other stakeholders.
                Proposed Law
        The utilization rate for calculating the payment for
    advanced diagnostic imaging equipment as defined under current
    law would be increased from 50% to 75%. For single session
    imaging involving continuous body parts, the proposal would
    reduce the technical component fees for additional imaging
    services to 50%. These modifications would apply to services
    furnished on or after January 1, 2011.
                Reason for Change
        MedPAC and other observers have expressed concerns that
    sizeable increases in the volume of physician services,
    particularly for imaging services, need to be addressed. Recent
    MedPAC analysis found problems with the current calculation of
    practice expenses for certain imaging services. CMS assumes
    that the equipment is used half the time the practice is open
    for business. MedPAC found that most advanced imaging equipment
    is actually in use close to 90 percent of the time. Low
    assumptions about equipment use artificially inflate the price
    Medicare pays for imaging services. MedPAC has recommended
    increasing the utilization assumption for advanced imaging
    equipment to more accurately reflect actual utilization rates.
        MedPAC has also recommended reducing the technical
    component for a second image on a contiguous body part. When a
    second image on an adjacent body part is taken, the clerical
    time, preparation, and supplies needed for the second image are
    significantly reduced. In 2006, CMS administratively proposed
    to reduce payment for the second image by 50 percent, but
    eventually implemented a smaller 25 percent discount. By
    increasing the discount to 50 percent, this provision would
    better reflect costs of performing studies on multiple body
    parts and bring Medicare payment policy in line with private
    payers.
                Effective Date
        January 1, 2011.

    Sec. 1148. Durable Medical Equipment Program Improvements

                Current Law
        The Secretary is prohibited from issuing or renewing a
    provider number for payment of Medicare durable medical
    equipment, prosthetics, orthotics, and supplies (DMEPOS) claims
    for a supplier unless the supplier provides the Secretary with
    a surety bond of not less than 550,000. The Secretary may waive
    this requirement in the case of a supplier that provides a
    comparable surety bond under State law. The final regulation
    exempts certain individuals from the surety bond requirement,
    including certain physicians and non-physician practitioners,
    physical and occupational therapists, state-licensed orthotic
    and prosthetic personnel, and government-owned suppliers.
        Medicare Part B pays for certain items of durable medical
    equipment (DME) including oxygen and oxygen equipment. The
    Deficit Reduction Act (DRA, P.L. 109-171) changed how long
    Medicare would make rental payments for oxygen equipment. It
    changed from the entire period of medical need, to a rental
    period of 36 months. The Medicare Improvements for Patients and
    Providers Act of 2008 (MIPPA, P.L. 110-275) requires suppliers
    to continue furnishing the equipment during any period of
    medical need for the remainder of the reasonable useful
    lifetime of the equipment, which is defined by the Secretary as
    5 years (or 60 months).
        The Medicare Prescription Drug, Improvement, and
    Modernization Act of 2003 (MMA, P.L. 108-173) required the
    Secretary to establish and implement quality and accreditation
    requirements for Medicare suppliers of DMEPOS. The Medicare
    Improvements for Patients and Providers Act of 2008 (MIPPA,
    P.L. 110-275) exempted a group of health care professionals
    from having to become accredited unless the Secretary
    determined the standards were designed specifically to be
    applied to those professionals. The Secretary was given
    authority to exempt certain professionals from the
    accreditation requirement if the Secretary determined that
    licensing, accreditation, or other mandatory quality
    requirements applied to those professionals. The provision
    identified some of the professionals subject to the provision,
    including: physicians; physical or occupational therapists;
    physicians assistants; nurse practitioners; clinical nurse
    specialists; orthotists; and prosthetists.
                Proposed Law
        Surety Bond: This provision would waive the surety bond
    requirement for a pharmacy that (1) supplies durable medical
    equipment, prosthetics, orthotics, and supplies, (2) has been
    issued a provider number for at least 5 years, and (3) has not
    received an adverse action, as defined in the `Special payment
    rules for items furnished by DMEPOS suppliers and issuance of
    DMEPOS supplier billing privileges' in the Code of Federal
    Regulations.
        Oxygen Equipment: This provision would modify the time
    period during which the supplier would be required to furnish
    medically necessary oxygen and oxygen equipment. As of the 27th
    month of the 36 month rental period, the supplier furnishing
    the equipment would be required to continue furnishing the
    equipment (either directly or through arrangements with other
    suppliers) during any subsequent period of medical need for the
    remainder of the reasonable useful lifetime of the equipment,
    as determined by the Secretary, regardless of the location of
    the individual, unless another supplier accepted the
    responsibility to furnish equipment during the remainder of the
    period. This provision would be effective upon enactment and
    would apply to equipment furnished to individuals for whom the
    27th month of a continuous period of use occurred on or after
    July 1, 2010.
        This provision would also allow a beneficiary to begin a
    new 36-month rental period if the supplier who had been
    furnishing oxygen and oxygen equipment to the beneficiary was
    declared bankrupt and its assets were liquidated and at the
    time of the declaration and liquidation more than 24 months of
    rental payments had been made.
        Accreditation: This provision would exempt pharmacies
    enrolled as Medicare DMEPOS suppliers from the accreditation
    requirement for the purposes of supplying diabetic testing
    supplies, canes, and crutches. Any supplier that had submitted
    an application for accreditation before August 1, 2009 would be
    deemed as meeting applicable standards and accreditation
    requirements under the subparagraph until the independent
    accreditation organization took action on the suppliers
    application.
                Reason for Change
        This section will make a number of changes to the durable
    medical equipment program that will improve the program for
    beneficiaries. The provisions regarding surety bonds and
    accreditation recognize the fact that very few pharmacies are
    involved in fraud associated with the DME program, and the
    important role pharmacies play in ensuring beneficiaries have
    access to certain types of medical equipment. Given that income
    from DME represents a small portion of total revenues for most
    pharmacies, the Committee is concerned that the cost of
    complying with the surety bond and accreditation requirements
    could cause many pharmacies to stop furnishing these items to
    Medicare beneficiaries.
        In addition, this section will make needed changes to the
    way CMS has implemented the 36 month rental cap on oxygen
    equipment. Right now, when a beneficiary moves from one area of
    the country to another after reaching the 36-month rental cap,
    the supplier is obligated to continue servicing the equipment
    through the remainder of the useful life of the equiptment.
    Beneficiaries who move just prior to hitting the 36-month
    rental cap are not afforded the same protection. Extending the
    requirement that suppliers continue servicing equipment to
    earlier in the rental period will protect beneficiaries who
    move shortly before hitting the 36-month rental cap. This
    section also provides critical beneficiary protections in
    instances where an oxygen supplier goes out of business.
                Effective Date
        Date of enactment.

    Sec. 1149. MedPAC Study and Report on Bone Mass Measurement

                Current Law
        No provision.
                Proposed Law
        The Medicare Payment Advisory Commission would conduct a
    study regarding bone mass measurement, including computed
    tomography, duel-energy x-ray absorptiometry, and vertebral
    fracture assessment. The study would focus on the following:
    (1) an assessment of the adequacy of Medicare payment rates for
    such services, taking into account costs of acquiring the
    necessary equipment, professional work time, and practice
    expense costs; (2) the impact of Medicare payment changes since
    2006 on beneficiary access to bone mass measurement benefits in
    general and in rural and minority communities specifically; (3)
    a review of the clinically appropriate and recommended use
    among Medicare beneficiaries and how usage rates among such
    beneficiaries compares to such recommendations; and (4) in
    conjunction with the findings under (3), recommendations, if
    necessary, regarding methods for reaching appropriate use of
    bone mass measurement studies among Medicare beneficiaries. Not
    later than 9 months after enactment, the Commission would
    submit a report to the Congress containing a description of the
    results of the aforementioned study and the conclusions and
    recommendations, if any, regarding each of the issues described
    above.
                Reason for change
        Dual-energy absorptiometry and vertebral fracture
    assessment are important in the early detection of osteoporosis
    and bone fractures. Recent changes in the way that these two
    tests are valued by Medicare has caused fees to drop and raised
    questions about whether the program is adequately paying
    physicians for these services. This policy directs MedPAC to
    create a study that would evaluate the impact of the Medicare
    payment changes and will review issues of access in rural and
    minority communities and the usage rates among Medicare
    beneficiaries.
                Effective Date
        Date of enactment.

            Subtitle C--Provisions Related to Medicare Parts A and B

    Sec. 1151. Reducing Potentially Preventable Hospital Readmissions

                Current Law
        Medicare pays for most acute care hospital stays using a
    prospectively determined payment for each discharge. Payment
    also depends on the relative resource use associated with a
    patient classification group, referred to as the Medicare
    Severity diagnosis related groups (MS-DRGs), to which the
    patient is assigned based on an estimate of the relative
    resources needed to care for a patient with a specific
    diagnosis and set of care needs. Medicare's inpatient
    prospective payment system (IPPS) includes adjustments that
    reflect certain characteristics of the hospital. For instance,
    a hospital with an approved resident training program would
    qualify for an indirect medical education (IME) adjustment;
    hospitals that serve a sufficient number of poor Medicare or
    Medicaid patients would receive higher Medicare payments
    because of their disproportionate share hospital (DSH)
    adjustment. Hospitals in Maryland are not paid using IPPS;
    rather they receive Medicare payments based on a state-specific
    Medicare reimbursement system.
        Critical Access Hospitals (CAHs) are limited-service
    facilities that are located more than 35 miles from another
    hospital (15 miles in certain circumstances) or designated by
    the state as a necessary provider of health care; offer 24-hour
    emergency care; have no more than 25 acute care inpatient beds;
    and have a 96-hour average length of stay. Medicare pays CAHs
    on the basis of 101% of the reasonable costs of the facility
    for inpatient and outpatient services. Certain aspects of the
    CAH payment system are not subject to administrative or
    judicial review.
        According to Medicare Payment Advisory Commission's
    (MedPAC) analysis of 2005 Medicare data, 6.2% of
    hospitalizations of Medicare beneficiaries resulted in
    readmission within 7 days and 17.6% of hospitalizations
    resulted in readmission within 30 days. The 17.6% of hospital
    readmission accounts for $15 billion in Medicare spending.
    These readmission rates reflect the total number of
    readmissions, including those that may not have been related to
    the initial diagnosis and may not have been preventable.
    MedPAC, CMS, and others have expressed concern that providers
    do not have financial incentives to reduce potentially
    preventable readmissions. In addition, MedPAC, in its June 2008
    report, recommended that Medicare's payments to hospitals with
    relatively high readmission rates for select conditions be
    reduced.
                Proposed Law
                Penalties for Hospitals
        IPPS hospitals and those hospitals in Maryland paid under a
    state-specific Medicare payment system would receive reduced
    payments for potentially preventable hospital readmissions
    occurring on or after October 1, 2011. Under this proposal,
    hospitals with lower potentially preventable readmission rates
    would receive smaller payment reductions while hospitals with
    higher potentially preventable readmission rates would receive
    higher payment reductions. Certain components of Medicare
    hospital payments would be exempt from these payment
    reductions.
        Reduced hospital payments for readmissions would calculated
    by multiplying the base operating DRG payment amount by an
    adjustment amount. The base operating DRG payment amount is the
    base amount that would have been paid under IPPS, reduced by
    payments associated with IME and DSH. In the case of hospitals
    in Maryland, the base amount would be the payment amount under
    their state system.
        The adjustment factor for a hospital in a fiscal year would
    be the greater of (1) a floor adjustment factor equal to a
    reduced percentage of the discharge payment or (2) the excess
    readmissions ratio for the applicable fiscal year. The floor
    adjustment factor would be 0.99 of the discharge payments in
    FY2012, 0.98 of the discharge in FY 2013, 0.97 in FY 2014 or
    0.95 in subsequent fiscal years. The excess readmissions ratio
    would equal 1 minus the ratio of the aggregate payments for
    excess readmissions for the hospital divided by the aggregate
    payments for all discharges.
        Aggregate payments for excess readmissions for a hospital
    for a fiscal year would be the sum of the applicable conditions
    of the product of the base operating DRG payment for each
    applicable condition multiplied by the number of admissions for
    each condition multiplied by the excess readmissions ratio
    minus one. The excess readmissions ratio is the ratio of the
    risk adjusted readmissions based on actual readmissions divided
    by the risk adjusted expected readmissions. This number would
    not be less than one. The ratio would be calculated for each
    applicable condition for a hospital for the applicable period.
    The aggregate payments for all discharges would be calculated
    as the sum of the hospital's base operating DRG payments for
    all discharges for all conditions for such a fiscal year.
        Under the readmissions policy, the Secretary would be
    prohibited from including conditions for which there are fewer
    than a certain minimum number (as determined by the Secretary)
    of discharges within a certain time period. To encourage
    hospitals to continue to do reduce their potentially
    preventable readmission rates over time, beginning with
    discharges for FY2014, the Secretary would be able to determine
    the excess readmissions ratio based on a ranking of hospitals
    by readmission ratios (from lower to higher readmissions)
    normalized to a benchmark that is lower than the 50th
    percentile.
        An applicable condition would be defined as a condition or
    procedure that represents high volume or high expenditures for
    Medicare or meets other specified criteria that also satisfies
    certain measures of readmissions. These measures of readmission
    would be those that have been endorsed by a consensus based
    entity with a performance measurement contract under 1890 of
    the Social Security Act, excluding readmissions that are
    unrelated to the prior discharge (such as a planned readmission
    or transfer to another applicable hospital). Readmission would
    be defined as an admission to the hospital of an individual who
    had been discharged from either the same or another applicable
    hospital within a time period from the date of discharge as
    specified by the Secretary.
        Starting in FY2012, the Secretary would select 3 applicable
    conditions that have been endorsed by the consensus based
    entity as of the date of enactment. Beginning with FY2013, the
    Secretary would be required to expand the list of applicable
    conditions for such readmissions to include 4 conditions
    identified by the MedPAC in its June 2007 Report to Congress.
    The Secretary would also be able to include an appropriate all-
    condition measure of readmissions. In expanding the list of
    conditions, the Secretary would be required to seek the
    endorsement by a consensus-based entity, but would be able to
    apply such conditions with such endorsement.
        The Secretary would be required to monitor activities of
    applicable hospitals to determine if such hospitals took the
    steps to avoid patients at risk to reduce the likelihood of
    increasing readmissions for applicable conditions. If the
    Secretary determined that such a hospital had taken such steps,
    the Secretary could impose an appropriate sanction after having
    provided notice to the hospital and the opportunity for that
    hospital to alleviate such steps. It is the intent of the
    Committee that the Secretary would monitor, and impose
    appropriate sanctions, to hospitals that took inappropriate
    steps in an effort to avoid the readmissions policy such as
    transferring patients inappropriately to other hospitals or
    ``planning'' inappropriate rehospitalizations.
        For fiscal years beginning on or after FY2011, the
    Secretary would be required to increase DSH payments to
    targeted hospitals that received $10 million or more in
    disproportionate share payments in their most recently settled
    cost report. These targeted hospitals would be required to
    provide satisfactory assurances that the increased payments
    would be used for transitional care activities. These would be
    activities designed to address the patient noncompliance issues
    that result in higher than normal readmission rates, such as
    one or more of the following: (1) providing care coordination
    services to assist in transitions from the targeted hospital to
    another setting; (2) hiring translators and interpreters; (3)
    increasing services offered by discharge planners; (4) ensuring
    that individuals receive a summary of care and medication
    orders upon discharge; (5) developing a quality improvement
    plan to assess and remedy preventable readmission rates; and
    (6) assigning discharged individuals to a medical home; and (7)
    doing other activities as determined by the Secretary.
        The Secretary would estimate the percent of the DSH
    increase subject to aggregate and hospital-specific caps. In
    the aggregate, increases would not exceed 5% of the estimated
    savings that would occur in a fiscal year from hospital
    readmissions policies described above. For specific hospitals,
    DSH increases would not exceed the estimated difference in
    spending that would occur in a fiscal year for a hospital due
    to the application of the excess readmissions policy. The
    Secretary would make these additional DSH payments on a lump
    sum basis, a periodic basis, a claim by claim basis or in any
    other form deemed appropriate. Not later than 3 years after
    funds are first made available, GAO would be required to submit
    a report on the use of such funds.
        No administrative or judicial review could be conducted of
    the determination of the base operating DRG amounts; the
    methodology for determining the adjustment factor and its
    various components (excess readmissions ratio, aggregate
    payments for excess readmissions and aggregate payments for all
    discharges, applicable conditions, and applicable periods);
    measures of readmissions; the determination of a targeted
    hospital for additional DSH payments, the increase in DSH
    payments, the aggregate DSH cap, the hospital-specific DSH
    limit, and the form of DSH payment.

    Application to Critical Access Hospitals (CAHs)

        CAHs would receive reduced payments for preventable
    hospital readmissions starting for cost reporting periods
    beginning in FY2012 and in subsequent fiscal years. The
    adjustment factor for acute care hospitals would be applied.
    The methodology for determining the adjustment factor,
    including the determination of aggregate payments for actual
    and expected readmissions, applicable periods, applicable
    conditions and measures of readmission would not be subject to
    administrative or judicial review.

    Application to Post-Acute Care Providers

        The proposal would also reduce Medicare payments on claims
    from post-acute care providers (skilled nursing facilities,
    inpatient rehabilitation facilities, home health agencies, and
    long-term care hospitals) for patients readmitted to an
    applicable hospital or a CAH within 30 days of an initial
    discharge from a hospital or a CAH. Payments to post-acute
    providers would be reduced by 0.996 for the fiscal year or rate
    year 2011; 0.993 for the fiscal or rate year 2013; and 0.99 for
    fiscal or rate year 2014. This policy would apply to the
    discharges or services furnished on or after the first day of
    the rate year, beginning on or after October 1, 2011.
        The Secretary would be required to develop appropriate
    measures of readmissions rates for post-acute care providers
    and to submit such measures for endorsement through a
    consensus-based entity, such as the National Quality Forum. The
    Secretary would be required to adopt, expand and apply such
    measures, in the same manner as for applicable hospitals
    established earlier in the legislation. To the extent such
    measures would be adopted, the Secretary would adopt similar
    payment policies for post-acute providers on or after October
    1, 2013 that have been established for applicable hospitals and
    CAHs earlier in this proposed legislation. Post-acute providers
    would also be subject to the monitoring and penalties
    established for applicable hospitals and CAHs earlier in this
    proposed legislation.

    Physicians

        The Secretary would be required to conduct a study to
    determine how this readmissions policy could be applied to
    physicians and issue a public report no later than one year
    after enactment. Such approaches would be required to be
    considered: (1) creating a code (or codes) and budget neutral
    payment amount(s) under the fee schedule for services furnished
    by an appropriate physicians who sees an individual within the
    first week after discharge from a hospital or CAH; (2)
    developing measures of readmissions rates for individuals
    treated by physicians; (3) applying a payment reduction for
    physicians who treat the patient during the initial admissions
    that results in a readmission; and (4) methods for attributing
    payments or payment reductions to the appropriate physician or
    physicians.

    Funding

        In addition to funds otherwise available, out of any funds
    in the Treasury not otherwise appropriated, there would be
    appropriated, to the CMS Program Management Account, $25
    million for each fiscal year beginning with 2010. Amounts
    appropriated for a fiscal year would be required to be
    available until expended.
                Reason for Change
        Hospital readmissions for Medicare beneficiaries are costly
    and prevalent. Studies have demonstrated that almost 20% of
    Medicare beneficiaries who had been discharged from a hospital
    were rehospitalized within 30 days and accounted for almost $15
    billion in spending in a year. A number of interventions at the
    time of discharge have been shown to decrease the frequency of
    readmissions. Researchers have suggested that supportive
    palliative care and increased efforts to coordinate prompt and
    reliable follow-up care with primary care physicians by
    hospital providers would reduce readmissions and increase
    patient satisfaction.
        MedPAC has pointed out that high readmission rates
    sometimes indicate poor care or missed opportunities to better
    coordinate care. Their report highlights that seven medical and
    surgical conditions (heart failure, chronic obstructive
    pulmonary disease, pneumonia, acute myocardial infarction,
    coronary artery bypass graft, percutaneous transluminal
    coronary angioplasty, and other vascular procedures) account
    for almost 30% of readmissions in the 15-day window after
    discharge. Of these, three measures (heart failure, pneumonia
    and acute myocardial infarction) have been endorsed by the
    National Quality Forum (NQF) as risk-adjusted measures for
    hospital readmission events.
        Various factors that may increase readmission rates include
    medical errors in the initial admission, improper discharge
    directions regarding medications and follow-up appointments, or
    inadequate access to follow-up care within the community.
    However, despite the clinical risk-adjustment of these
    measures, factors such as cultural paradigms of health, limited
    English proficiency, health literacy levels, and lack of access
    to proper follow-up care or medications are factors that may be
    barriers to lowering readmissions rates and are additive to
    patient nonadherence to follow-up discharge. Another element
    that contributes to rehospitalizations is the management of
    discharged patients by the post-acute care providers such as
    nursing homes, rehabilitation providers or community providers.
        To reduce readmission rates, enhance quality of care and
    improve coordination during discharge planning, MedPAC has
    recommended certain policies for the reduction of readmission
    rates. This provision takes into account the recommendations
    set forth by MedPAC regarding payment policies pegged to
    readmission rates. The policy adjusts payments for hospitals,
    critical access hospitals and hospitals paid under section
    1814(b)(3) of the SSA based on the dollar value of each
    hospital percentage of potentially preventable Medicare
    readmissions for 3 conditions that have been endorsed by NQF as
    risk-adjusted readmission measures. It also directs the
    Secretary to expand the policy to additional conditions in
    future years and authorizes the Secretary to modify the
    adjustment based on a hospital's performance in readmission
    rates compared to a ranking of hospitals nationally.
        The policy provides assistance to certain hospitals for
    transitional care activities to address patient non-adherence
    issues that may result in high readmission rates. Some of the
    factors that may contribute to higher rates of admissions and
    readmissions include (1) patients lack of understanding about
    medications and directions for follow-up care due to low health
    literacy levels or limited English proficiency; (2) patients'
    inability to navigate through a complex tertiary care center to
    arrange for follow-up appointments for specialists or
    diagnostic tests; (3) lack of access to medications or
    providers; and (4) lack of appropriate cultural or linguistic
    discharge directions.
        The above conditions are more prevalent in safety net
    hospitals and in communities which they serve. Hospitals
    eligible to receive assistance would receive additional
    disproportionate share payments and are required to provide
    transitional care activities to address patient nonadherence
    issues such as translators for discharge planning and patient
    education. This provision includes an interim policy for post-
    acute providers beginning in fiscal year 2012, and directs the
    Secretary to develop risk-adjusted readmission rates for post-
    acute providers.
        Physicians' role in patient care management also can affect
    the rate of potentially preventable hospital readmissions.
    However, the process of determining the responsible provider
    and accountability for the rehospitalization is complicated.
    This provision charges the Secretary with evaluating how this
    policy could be applied to physicians.
                Effective Date
        October 1, 2011.

    Sec. 1152. Post Acute Care Services Payment Reform Plan and Bundling
            Pilot Program

                Current Law
        Medicare pays for most post-acute care (PAC) services,
    including skilled nursing facilities (SNF), long-term care
    hospitals (LTCH), inpatient rehabilitation facilities (IRF),
    and home health, under prospective payment systems (PPS)
    established for each type of provider. Under each PPS, a
    predetermined rate is paid for each unit of service, such as a
    hospital discharge or a payment classification group. As some
    Medicare beneficiaries with complex health conditions and
    multiple co-morbidities move between hospital stays and a range
    of PAC providers, Medicare makes separate payments to each
    provider for covered services. Payments across PAC settings may
    differ considerably even though the clinical characteristics of
    the patient and the services delivered may be very similar.
        The Deficit Reduction Act of 2005 (P.L. 109-171) required
    the Centers for Medicare and Medicaid Services (CMS) to develop
    a Post Acute Care Payment Reform Demonstration (PAC
    demonstration). The goal of this initiative is to standardize
    patient assessment information from PAC settings and to use
    these data to guide payment policy in the Medicare program.
    This demonstration began in 2008 and a report is expected to be
    submitted to Congress by the Secretary in 2011. CMS has also
    established a 3-year Acute Care Episode (ACE) Demonstration to
    test the effects of using a bundled payment for hospital and
    physician services for a set of 9 orthopedic and 28
    cardiovascular conditions. There are 5 participants in the ACE
    demonstration which began early in 2009.
        The Medicare Payment Advisory Commission (MedPAC), among
    others, has expressed concern that providers do not have
    financial incentives to coordinate across episodes of care nor
    to evaluate the full spectrum of care a patient may receive. In
    its June 2008 report, MedPAC recommended that a bundled payment
    system for an episode of care where separate payments for
    distinct types of providers would be eliminated be explored in
    a pilot program. Under this voluntary program, a single
    provider entity would receive a bundled payment intended to
    cover the costs of the full range of care needed over the
    hospitalization episode, including 30 days post-discharge. The
    pilot program should have clearly established guidelines for
    determining whether it should be discontinued or expanded to
    the entire Medicare program.
                Proposed Law
        The Secretary would be required to develop a detailed plan
    to reform payment for Medicare's PAC services, including
    specifications for a bundled payment, to improve their
    coordination, quality, and efficiency and outcomes for
    individuals, such as reducing the need for readmission to
    hospitals from such PAC providers. For this plan, PAC services
    would include those services provided by SNFs, IRFs, LTCHs,
    hospital-based outpatient rehabilitation facilities, and home
    health agencies to individuals after discharge from a hospital
    and such other services as determined appropriate by the
    Secretary.
        The plan would be required to include consideration of the
    following issues: (1) the nature of payments under a PAC
    bundle, including the type of provider or entity to whom
    payment should be made, the scope of activities and services
    included in the bundle, whether payment for physicians'
    services would be included, and the period covered by the
    bundle; (2) whether the payment should be consolidated with the
    payment under the inpatient prospective system or a separate
    payment established for such bundle, and if a separate payment
    is established, whether it should be made only upon use of PAC
    services or for every discharge; (3) whether the bundle should
    be applied across all categories of providers of inpatient
    services and PAC services or whether it should be limited to
    certain categories of providers, services, or discharges, such
    as high volume or high cost MS-DRGs; (4) the extent to which
    payment rates could be established to achieve offsets for
    efficiencies that could be expected to be achieved with a
    bundle payment, whether such rates should be established on a
    national basis or, for different geographic areas, should vary
    according to discharge, case mix, outliers, and geographic
    differences; (5) the nature of protections needed for
    individuals under a system of bundled payments to ensure that
    individuals receive quality care, are furnished the level and
    amount of services needed, as determined by an appropriate
    assessment instrument, and the extent to which transitional
    care services would improve quality of care for individuals and
    the functioning of a bundled post-acute system; (6) the nature
    of relationships that may be required between hospitals and
    providers of PAC services to facilitate bundled payments,
    including the application of gainsharing, anti-referral, anti-
    kickback, and anti-trust laws; (7) quality measures that would
    be appropriate for reporting by hospitals and post-acute
    providers; (8) how cost-sharing for a PAC bundle should be
    treated relative to current rules for cost-sharing for
    inpatient hospital, home health, skilled nursing facility, and
    other services; (9) how other programmatic issues should be
    treated in a PAC bundle; and (10) such other issues as the
    Secretary would deem appropriate.
        In the development of this plan, the Secretary would be
    required to consult relevant stakeholders and to consider
    experience with such research studies and demonstrations that
    the Secretary determines appropriate. In addition, the
    Secretary would be required to analyze the impacts (including
    geographic impacts) of PAC reform approaches, including the
    effect on beneficiaries, hospitals, PAC providers, and
    physicians; use existing data (such as data submitted on
    claims) and collect such data as the Secretary would determine
    appropriate; and if patient functional status measures are
    appropriate for the analysis, to the extent practical, build
    upon the Continuity Assessment Record and Evaluation (CARE)
    tool being developed to measure the health and functional
    status of Medicare acute discharges and changes in severity and
    other outcomes for Medicare PAC patients under CMS' PAC
    demonstration plan.
        Out of any funds in the Treasury not otherwise
    appropriated, there would be appropriated to the Secretary for
    the CMS Program Management Account $15 million for each of the
    fiscal years 2010 through 2012. These amounts appropriated for
    a fiscal years would be required to be 176 available until
    expended. Provisions concerning the coordination of federal
    information policy contained in the U.S. code would not apply.
        The Secretary would be required to issue interim public
    reports on a periodic basis and, not later than 3 years after
    enactment, issue a final public report on this plan and its
    impact.

    Conversion of Acute Care Episode Demonstration to Pilot Program and
            Expansion to Include Post-Acute Services

        This provision would require the Secretary, by no later
    than January 1, 2011 and for the purpose of promoting bundled
    payments to promote efficient and high quality delivery of
    care, to convert the acute care episode demonstration into a
    pilot program and expand it to include post-acute services and
    such other services the Secretary determines to be appropriate
    (which may include transitional services). Under this pilot
    program, the Secretary could apply bundled payments to: (i)
    hospitals and physicians; (ii) hospitals and post-acute-care
    providers; (iii) hospitals, physicians, and post-acute care
    providers; or (iv) combinations of post-acute providers.
    Bundled payments would be applied in manner as to include
    collaborative care networks and continuing care hospitals.
        A collaborative care network would be defined as a
    consortium of health care providers that would provide a range
    of coordinated and integrated health care services to low-
    income patient populations (including the uninsured) which may
    include coordinated and comprehensive care by safety net
    providers to reduce any unnecessary use of items and services
    furnished in emergency departments, manage chronic conditions,
    improve quality and efficiency of care, increase preventive
    services, and promote adherence to post-acute and follow-up
    care plans.
        A continuing care hospital would mean an entity that has
    demonstrated the ability to meet patient care and patient
    safety standards and that would provide, under common
    management, the medical and rehabilitation services provided in
    inpatient rehabilitation hospitals and units, longterm care
    hospitals, and SNFs that are located in a hospital.
        The pilot program could include additional geographic areas
    and conditions which account for significant program spending,
    as defined by the Secretary. No number limit would be imposed
    on hospital and physician groups or the number of hospital and
    post-acute provider groups that may participate in the pilot
    program. The Secretary would be required to only expand the
    pilot program if the CMS' Chief Actuary certifies that the
    demonstration and pilot programs maintain or increase the
    quality of care received by individuals and such demonstration
    program and pilot program reduce program expenditures and
    result in estimated spending that would be less than otherwise.
    Participation in this pilot program would be voluntary.
        The Secretary would be required to conduct an evaluation of
    the pilot program to study its effect on costs and quality of
    care. Findings would be included in the final report required
    under section 1152(e)(2) of America's Affordable Health Choices
    Act of 2009.

    Study of Additional Bundling and Episode-Based Payment for Physicians'
            Services

        The Secretary would also be required to provide a study of
    and development of a plan to test additional ways to increase
    bundling of payments for physicians in connection with an
    episode of care, such as with outpatient hospital services or
    services rendered in physicians' offices, other than those
    provided under the pilot program. This plan could be
    implemented by the Secretary in a demonstration.
                Reason for Change
        According to MedPAC, the fee-for-service payment system
    encourages volume growth and fails to encourage care
    coordination delivered across an episode of care. Ideally, the
    payment system should incentivize hospitals, post-acute
    institutions and physicians to collaborate in coordinating care
    for Medicare beneficiaries and to work efficiently together.
    However, under the current feefor-service payment structure,
    each sector of the healthcare delivery system functions
    independently in terms of delivery of care And with respect to
    reimbursement of services.
        Currently, hospitals are paid a single amount that is based
    on the patient's diagnosis which covers all hospital costs
    associated with the stay except for the physician fee portions.
    Surgeons are also paid a bundled fee called a global surgical
    fee that includes the post-surgical follow up visits. MedPAC
    suggests that while these payment innovations may have improved
    providers' efficiency (e.g. shorter length of stay) during the
    episode of care, they apply to only one provider and therefore
    have a limited effect in reducing the aggregate volume of
    services paid for by Medicare.
        Health policy experts have recommended that under a bundled
    payment structure, Medicare would pay a single provider entity
    an amount intended to cover the costs of providing a full range
    of care needed over a hospitalization episode, including the
    acute care and the post-acute care setting. However, a bundled
    payment system has significant implications pertaining to
    future delivery of care for Medicare beneficiaries. Such a
    broad policy has never been tested for post-acute care
    services, though the ACE demonstration model has tested the
    concept with physicians for specific procedures. Issues
    include: (1) potential reduction of services or ``stinting'' of
    care as providers take on greater risk in the system; (2) how
    payments are consolidated and which entity receives the
    payment; (3) the quality measures used to evaluate such an
    innovative payment and delivery of care model; and (4) anti-
    trust issues as well as other competitive issues as outlined in
    the provision.
        This legislation directs the Secretary to create a payment
    plan that will consider these critical issues. The Secretary
    shall also conduct a study on bundling payments for physician
    services in the outpatient setting that could lead to a
    demonstration project. The ACE demonstration is extended to
    evaluate different provider combination entities that would
    receive a bundled payment and considers a collaborative care
    network for coordinated care. This provision also directs the
    Secretary to support Collaborative Care Networks in replicating
    effective models that reduce avoidable use of emergency rooms
    for non-urgent care while improving health status and care
    coordination for vulnerable populations. The new pilot
    structure would allow the Secretary to expand the program if
    budget neutrality and quality of care is maintained or
    improved.
                Effective Date
        January 1, 2011.

    Sec. 1153. Home Health Payment Update for 2010

                Current Law
        Home health agencies (HHAs) are paid under a prospective
    payment system (PPS) that began on October 1, 2000. Payment is
    based on 60-day episodes of care for beneficiaries, subject to
    several adjustments, with unlimited episodes of care in a year.
    The payment covers skilled nursing, therapy, medical social
    services, aide visits, medical supplies, and others. Durable
    medical equipment is not included in the home health PPS. The
    base payment amount, or national standardized 60-day episode
    rate, is increased annually by an update factor that is
    determined, in part, by the projected increase in the home
    health market basket (MB) index. This index measures changes in
    the costs of goods and services purchased by HHAs. Starting in
    2007, HHAs are required to submit to the Secretary health care
    quality data. A HHA that does not submit the required quality
    data will receive an update of the MB minus two percentage
    points. This reduction only applies to the fiscal year in
    question.
                Proposed Law
        The provision would eliminate the MB update for home health
    payments for 2010. Home health agencies would still be subject
    to the data quality provision for subsequent years.
                Reason for Change
        This section implements a MedPAC recommendation to freeze
    payment rates for home health agencies (HHAs) for 2010. Not
    only do HHAs have extremely healthy Medicare margins--
    indicating that they are paid significantly above costs--
    beneficiaries have ample access to HHAs, volume of services
    continues to rise, quality of care remains largely stable and
    the entry of new agencies suggests that access to capital is
    robust. All of these indicators of payment adequacy are
    positive, and the Committee believes that the freeze in payment
    rates will not adversely affect beneficiary access to or
    quality of home health care.
                Effective Date
        January 1, 2010.

    Sec. 1154. Payment Adjustments for Home Health Care

                Current Law
        Home health agencies (HHAs) are paid under a prospective
    payment system (PPS). Payment is based on 60-day episodes of
    care for beneficiaries, subject to several adjustments, with
    unlimited episodes of care in a year. The payment covers
    skilled nursing, therapy, medical social services, aide visits,
    medical supplies, and others. Durable medical equipment is not
    included in the home health PPS. The base payment amount, or
    national standardized 60-day episode rate, is increased
    annually by an update factor that is determined, in part, by
    the projected increase in the home health market basket (MB)
    index. This index measures changes in the costs of goods and
    services purchased by HHAs. HHAs are required to submit to the
    Secretary health care quality data. A HHA that does not submit
    the required quality data will receive an update of the MB
    minus two percentage points for that fiscal year.
        In calendar year (CY) 2008, CMS made refinements to the
    home health (HH) PPS to try to improve payment efficiencies.
    These refinements included a reduction in the national
    standardized 60-day episode payment rate for 4 years to account
    for changes in case mix that are not related to HH patients'
    actual clinical conditions; changes to the case-mix model to
    account differently for comorbidities and the differing health
    characteristics of longer-stay patients, including increasing
    the HH resource groups from 80 to 153 case mix groups; changes
    to the way the PPS accounts for the impact of rehabilitation
    services on resource use to reduce the impact of financial
    incentives on the delivery of therapy visits; and an increased
    payment for low utilization payment adjustment (LUPA) episodes
    that occur as the only episode or the first episode during a
    period of HH to account for front-loading of costs; among other
    changes. These refinements resulted in payment reductions
    described in Federal Regulation Sec. 484.220 issued on Aug. 29,
    2007 (72 FR 49879).
        Specifically, this regulation established changes to the
    HHA case-mix index to account for the relative resource
    utilization of different patients. These changes modified the
    coding or classification of different units of service that do
    not reflect real changes in case-mix. As a result, the national
    prospective 60-day episode payment rate was adjusted downward
    by 2.75% for CY 2008; by 2.75% for each year of CY 2009 and CY
    2010, and by 2.71% and for CY 2011.
                Proposed Law
        The provision would accelerate the case-mix adjustments
    described in 42 FR Sec. 484.220 by implementing both the
    planned CY 2011 adjustment of 2.71% and the planned CY 2010 of
    2.75% at the same time in CY 2010, for a total CY2010 downward
    adjustment of 5.46%. The 180 amounts of these adjustments would
    not be limited if more recent data were to indicate that a
    greater adjustment would be appropriate.
        Starting in 2011, HH prospective payment amounts would be
    adjusted by a uniform percentage determined appropriate by the
    Secretary and based on analysis of factors such as changes in
    the average number and types of visits in an episode, changes
    in the intensity of visits in an episode, growth in cost per
    episodes, and other factors that the Secretary would consider
    to be relevant. For years after 2011, such amounts would be
    required to be equal to the amount paid for the previous year
    updated by the HH market basket.
        If the Secretary is not able to compute the changed
    prospective payment amounts for 2011 on a timely basis, then
    the Secretary would be required to pay 95% of what the
    prospective payment amount would have been had this provision
    not applied. And, under such circumstances, the Secretary would
    be required to compare, before July 1, 2011, amounts paid to
    the amount that would have been paid had the Secretary been
    able to compute the adjustment on a timely basis. For 2012, the
    Secretary would be required to decrease or increase the
    prospective payment amount (or at the Secretary's discretion,
    over a period of several years beginning with 2012), by the
    amount (if any) by which the amount applied is greater or less,
    respectively, than the amount that should have been applied.
                Reason for Change
        Nine percent of Medicare beneficiaries used home health
    services in 2007, an increase of 23 percent since 2002, and
    Medicare spending on home health services grew 12 percent from
    2006, to $16 billion. Home health agencies (HHAs) have Medicare
    margins of almost 17 percent, suggesting that Medicare payments
    significantly exceed costs for agencies. Ninety-seven percent
    of Medicare beneficiaries live in areas served by two or more
    HHAs. MedPAC concludes that agencies should be able to absorb
    cost increases without an increase in base payments and without
    negative effects on beneficiary access to care or quality of
    treatment.
        This section would implement a MedPAC recommendation to
    reduce payments to HHAs in FY2010 and advance a planned payment
    reduction for FY2011. These payment reductions will bring
    Medicare payments more in line with costs, restoring payment
    accuracy fiscal responsibility to home health payments. Given
    currently robust beneficiary access to care at home health
    agencies, the Committee is confident that these payment
    reductions will not adversely affect access to care.
        One source of Medicare overpayments to HHAs results from an
    assumption in the payment rates that agencies provide 32 visits
    per 60-day episode. However, this measurement is based on data
    from 1998; since then, the number of visits per episode has
    dropped by 30 percent, to an average of 22 visits. Other
    changes in utilization of home health--such as types of visits,
    intensity of visits, growth in cost per episode--affect payment
    rates, and the Committee intends that those rates should be
    updated to reflect more recent data. MedPAC advises that
    rebasing payments to providers' actual costs will limit
    exorbitant profit margins and help restore efficiency to the
    home health sector.
        Recognizing that the Secretary may not be able to complete
    the rebasing analysis in a timely fashion to implement for
    2011--but also that absent a payment change in addition to the
    annual updates, HHAs will continue to be overpaid by the
    Medicare program--the Committee intends that the Secretary
    implement a fall-back payment adjustment if the rebasing
    analysis is not complete. This would ensure that fiscal
    responsibility is restored to the home health sector.
                Effective Date
        January 1, 2010.

    Sec. 1155. Incorporating Productivity Improvements Into Market Basket
            Update For Home Health Services

                Current Law
        Home health agencies (HHAs) are paid under a prospective
    payment system (PPS) based on 60-day episodes of care for
    beneficiaries, subject to several adjustments, with unlimited
    episodes of care in a year. The payment covers skilled nursing,
    therapy, medical social services, aide visits, medical
    supplies, and others. Durable medical equipment is not included
    in the home health PPS.
        The base payment amount, or national standardized 60-day
    episode rate, is increased annually by an update factor that is
    determined, in part, by the projected increase in the home
    health market basket (MB) index. This index measures changes in
    the costs of goods and services purchased by HHAs. HHAs are
    required to submit to the Secretary health care quality data. A
    HHA that does not submit the required quality data will receive
    an update of the MB minus two percentage points.
        Each year, the Medicare Payment Advisory Commission
    (MedPAC) makes payment update recommendations for the different
    payment systems. In its view, Medicare's payment systems should
    encourage efficiency: providers should be able to reduce the
    quantity of inputs to produce a unit of service while
    maintaining quality. Accordingly, MedPAC begins its update
    deliberations with an assumption that all providers can achieve
    efficiency gains similar to the economy and examines the Bureau
    of Labor Statistics' estimate of the 10-year moving average
    rate of past growth in total factor productivity for the
    economy as a whole. This policy target links Medicare's
    expectations for efficiency improvements to the productivity
    gains achieved by firms and workers who pay taxes that fund
    Medicare. MedPAC's annual update recommendation will depend on
    its overall assessment of the circumstances of a given set of
    providers in any year. These MedPAC recommendations are not
    binding on Medicare payment policies.
                Proposed Law
        The provision would make annual updates by the HH MB
    subject to a productivity adjustment as long as the annual
    update would not be less than zero. The productivity adjustment
    would equal the 10-year moving average of changes in annual
    economy-wide private non-farm business multi-factor
    productivity. The estimate used would be that published before
    the promulgation of the regulation establishing the Medicare
    rates for the year or period. This provision would be required
    to apply to home health market basket percentage increases for
    years beginning with 2010.
                Reason for Change
        The annual update to the Medicare physician fee schedule
    already incorporates adjustments for gains in productivity.
    This provision creates uniformity across Medicare providers by
    creating a productivity adjustment for home health agencies.
    This adjustment will encourage greater efficiency in health
    care provision, hold Medicare providers accountable for
    achieving productivity gains on par with the overall economy,
    and more accurately align Medicare payments with provider
    costs.
                Effective Date
        January 1, 2010.

    Sec. 1156. Limitation on Medicare Exception to the Prohibition on
            Certain Physician Referrals for Hospitals

                Current Law
        Physicians are generally prohibited from referring Medicare
    patients for certain services to facilities in which they (or
    their immediate family members) have financial interests.
    However, among other exceptions, physicians are not prohibited
    from referring patients to whole hospitals in which they have
    ownership or investment interests. Providers that furnish
    substantially all of designated health services to individuals
    residing in rural areas are exempt as well.
        Entities receiving Medicare payment for covered items and
    services are required to provide the information on the
    entities' ownership, investment, and compensation arrangements.
    This information includes the covered items and services
    provided by the entity, and the names and unique physician
    identification numbers of all physicians (or those whose
    immediate relatives) who have an ownership or investment
    interest, or certain compensation arrangements.
                Proposed Law
        Only hospitals meeting certain requirements would be exempt
    from the prohibition on self-referral. Hospitals (including
    rural providers) that have physician ownership and a provider
    agreement in operation on January 1, 2009 and that met other
    specified reporting and disclosure requirements would be exempt
    from this self-referral ban. Hospitals would be allowed to
    maintain the percentage of the total ownership or investment
    held in the hospital (or in an entity whose assets include the
    hospital) by physician owners or investors in the aggregate at
    the level that existed as of date of enactment. Hospitals would
    be allowed to expand the number of operating rooms, procedure
    rooms, or beds of the hospital if certain criteria are met. The
    hospital could not have converted from an ambulatory surgical
    center to a hospital after enactment.
        To qualify for the self-referral exemption, entities
    receiving Medicare payment for covered items and services would
    be required to provide the information on the entities'
    ownership, investment, and compensation arrangements. This
    information would include the covered items and services
    provided by the entity, and the names and unique physician
    identification numbers of all physicians (or those with
    immediate relatives) who have an ownership or investment
    interest, or certain compensation arrangements. Such
    information would be provided in the form, manner, and at such
    times as specified. This requirement would not apply to
    designated health services provided outside of the United
    States or to entities deemed to provide infrequent services
    paid by Medicare.
        An exempt entity would also be required to (1) submit an
    initial report and periodic updates at specified intervals that
    contain a detailed description of the identity of each
    physician owner and investor as well as any other owners and
    investors in the hospital, and any other information on the
    nature and extent of all ownership interests in the hospital;
    (2) disclose to each patient of any referring physician owner
    or investor (by a time that permits the patient to make a
    meaningful decision regarding the receipt of care) their
    ownership interest in the hospital and, if applicable, any such
    ownership interest of the treating physician; and (3) disclose
    the fact that the hospital is partially or wholly owned by one
    or more physician investors on any public website for the
    hospital and in any public advertising for the hospital. This
    requirement would not apply to designated health services
    provided outside of the United States or to entities deemed to
    provide infrequent services paid by Medicare. Information
    provided by hospitals would be published and periodically
    updated on the Internet website of the Centers for Medicare and
    Medicaid Services (CMS). Any person who fails to meet required
    reporting and disclosure requirements would be subject to a
    civil monetary penalty of not more than $10,000 for each day
    for which reporting is required to have been made or for each
    case in which disclosure is required to have been made.
        Exempt hospitals would ensure bona fide ownership and
    investment by meeting the following requirements (1) any
    ownership or investment interest offered to a physician could
    not be offered on more favorable terms than those offered to a
    person who is not in a position to refer patients or otherwise
    generate hospital business; (2) the hospital (or investors in
    the hospital) could not directly or indirectly provide loans or
    financing for physician owners or investors in the hospital;
    (3) the hospital or its investors could not guarantee a loan,
    make a payment toward a loan, or otherwise subsidize a loan to
    any individual physician owner, investor, group of physician
    owners or investors that is related to acquiring an ownership
    or investment interest in the hospital; (4) ownership or
    investment returns would have to be distributed to investors in
    the hospital in an amount that is directly proportional to the
    investment or ownership by the hospital investor; (5) the
    investment interest of the owner or investor would be required
    to be directly proportional to the capital contributions made
    at the time the ownership or investment interest is obtained;
    (6) physician owners and investors could not receive any
    guaranteed receipt or right to purchase other business related
    interests in the hospital, including the purchase or lease of
    any property under the control of other investors in the
    hospital or located near the premises of the hospital; (7) the
    hospital could not offer a physician owner the opportunity to
    purchase or lease any property under hospital control on more
    favorable terms than those offered to others and (8) the
    hospital could not condition any physician ownership or
    investment interests on the physician making or influencing
    referrals to the hospital or generating business for the
    hospital.
        To ensure patient safety, those exempt hospitals that do
    not offer emergency services would have to have the capacity to
    (1) provide assessment and initial treatment for medical
    emergencies; and (2) refer and transfer the patient with the
    medical emergency to a hospital with the required capability if
    the exempt hospital lacks the capabilities to treat the
    involved emergency. Those hospitals that do not have any
    physician available on the premises 24 hours per day, 7 days a
    week would have to disclose such a fact to the patient before
    admitting the patient. Following such a disclosure, the
    hospital would receive a signed acknowledgement from the
    patient that the patient understands that fact. The Secretary
    would retain the ability to terminate a hospital's provider
    agreement if the hospital is not in compliance with Medicare's
    conditions of participation.
        Exempt hospitals would be permitted to increase the number
    of operating rooms, procedure rooms or beds after the date of
    enactment under certain criteria. A procedure room includes a
    room in which catheterizations, angiographies, angiograms, and
    endoscopies are furnished. This would not include emergency
    rooms or departments (except for rooms in which
    catheterizations, angiographies, angiograms, and endoscopies
    are furnished). Hospitals meeting certain criteria would be
    allowed to expand, with these criteria including (1) a hospital
    that is located in a county where the population increased
    during the most recent 5 year period at a rate that is at least
    150% of the State's population increase; (2) a hospital whose
    Medicaid inpatient admission percentage is equal to or greater
    than average percentage for all hospitals located in the
    county; (3) a hospital that does not discriminate against
    beneficiaries of Federal health care programs and does not
    permit physicians practicing at the hospital to discriminate
    against such beneficiaries; (4) a hospital that is located in a
    State with an average bed capacity less than the national
    average; (5) a hospital that has an average bed occupancy rate
    that is greater than the State average bed occupancy rate; and
    (6) meets other established requirements.
        This capacity increase would be limited to facilities on
    the main campus of the hospital and could not exceed 200% of
    the number of operating rooms, procedure rooms and beds at the
    time of enactment. The process for expansion should allow the
    opportunity for community input and should permit an applicable
    hospital to apply for the expansion exception up to once every
    two years. The Secretary would be required to promulgate
    regulations establishing an appeals process no later than the
    first day of the month beginning 18 months after the date of
    enactment. The appeals process would be implemented one month
    after the date of regulations are promulgated. These
    regulations could be issued as interim final regulations. The
    final decision regarding an expansion request should be posted
    on the CMS website no later than 120 days after a complete
    application is received. There would be no administrative or
    judicial review of this process.
        The Secretary would be required to establish policies and
    procedures to ensure compliance with these requirements.
    Enforcement efforts could include unannounced site reviews of
    hospitals. In addition to funds otherwise available, starting
    in FY2010, $5 million would be appropriated in each fiscal year
    from not otherwise appropriated funds in the Treasury for
    purposes of carrying out this section. Appropriated funds would
    be available until expended. Certain federal laws with respect
    to the coordination of federal information policy established
    by Chapter 35 of Title 44 of the United States Code would not
    apply to these requirements.
                Reason for Change
        When originally enacted, the physician self-referral laws
    included an allowance for physicians to have ownership in a
    whole hospital. It was included because, at the time, there
    were a number of rural hospitals in particular where such
    ownership arrangements were in effect. Ownership in a whole
    hospital was not then viewed as a significant incentive for
    self-referral because these hospitals were usually the only
    hospitals in the area and they provided a breadth of services.
    The original physician self-referral law did explicitly
    prohibit ownership in ``a subdivision of a hospital'' because
    of the concern that if physicians owned only their particular
    part of a hospital--like a cardiac wing--there would be an
    incentive for self-referral.
        Since enactment of the self-referral laws, entities have
    been created that identify and license themselves as
    ``hospitals'' under state law. However, many of these
    facilities no longer provide the full range of services a
    layperson would expect from a hospital. Instead, they limit
    their services to a narrow band of services. These bands have
    also tended to be profit centers for hospitals--most commonly
    cardiac procedures and orthopedic procedures. In effect,
    they've taken a ``subdivision of a hospital'' and made it a
    free-standing hospital in order to circumvent the prohibition
    in the physician self-referral laws which prohibit self-
    referral when the ownership is ``merely in a subdivision of a
    hospital.''
        There have also been a number of facilities that have
    converted from ambulatory surgical centers to hospitals. These
    entities may provide more than one subset of services and
    appear to look more like a typical hospital, but they too often
    focus on high-profit services, fail to have fully-staffed
    emergency rooms, and treat low percentages of Medicaid patients
    or uncompensated care patients compared to other hospitals in
    their communities.
        Many of these new physician-owned hospitals are called
    ``specialty hospitals'' or ``limited service hospitals''. The
    Medicare Payment Advisory Commission and other experts have
    studied these facilities and raised concerns that they result
    in unnecessary procedures, increasing health care spending, and
    selecting more profitable patients. In a report to Congress,
    MedPAC found that ``entrance of a physician owned cardiac
    hospital was associated with a 6% increase in the number of
    cardiac surgeries per 1000 patients.'' They also found that the
    profit margins for these facilities far exceed those of full-
    service community hospitals--averaging 34% return on capital at
    the average orthopedic hospital. Finally, MedPAC raised
    concerns that these facilities focus on patients with private
    insurance, low-severity cases, and perform many outpatient
    services at these facilities where they get reimbursed at a
    higher rate than would an ambulatory surgical center which can
    also safely perform these services.
        In the past several years, there have been at least three
    publicized instances in which patients have died in these
    facilities because there was no doctor to provide care when
    they had complications post-surgery.
        While most research has focused on the specialty hospitals,
    concerns are being raised about physician ownership of any
    hospital. Recently, a highly regarded surgeon and health policy
    expert, Dr. Atul Gawande, wrote an article in the New Yorker
    about the medical care provided in McAllen, Texas, one of the
    poorest counties in our nation, yet is second only to Miami,
    Florida in health care spending. Referring to a new physician-
    owned hospital in the county, Dr. Gawande writes:

              It is the newest hospital in the area. It is
            physician-owned. And it has a reputation (which it
            disclaims) for aggressively recruiting high-volume
            physicians to become investors and send patients there.
            Physicians who do so receive not only their fee for
            whatever service they provide but also a percentage of
            the hospital's profits from the tests, surgery, or
            other care patients are given. (In 2007, its profits
            totaled thirty-four million dollars.) Romero and others
            argued that this gives physicians an unholy temptation
            to overorder.

        It is no longer the case that most rural community
    hospitals have financial arrangements that include physician
    ownership. Given that change, and the concern about self-
    referral to these physician-owned hospitals, this provision
    eliminates the whole hospital exception all together. The
    provision grandfathers existing facilities if they are willing
    to meet a strong set of financial and quality standards going
    forward. This provision also allows for growth of the hospital
    in circumstances of community need.
        The Committee notes that Congress has been confronting
    concerns about physician-owned hospitals for most of the
    decade. The Medicare Modernization Act of 2003 enacted a
    temporary moratorium on the entrance of new physician-owned
    specialty hospitals into the Medicare program.
        Since then, the House has passed legislation to prohibit
    physician self-referrals to hospitals in which they have
    ownership three times. In its original inception, passed as
    part of the Children's Health and Medicare Protection Act on
    August 1, 2007 (H.R. 3162 in 110th Congress), the provision
    would have required most physician-owned hospitals to
    restructure their ownership arrangements in order to continue
    participating in Medicare. It would have limited aggregate
    physician ownership to forty percent of the hospital and
    limited individual ownerships to two percent. In addition, it
    would have prohibited any growth of the facilities that were
    allowed to continue with this more limited ownership
    arrangement. That provision was scored by the Congressional
    Budget Office as saving $2.9 billion over 10 years.
        The House next passed a similar provision on March 5, 2008
    as a financing mechanism for H.R. 1424, the Paul Wellstone
    Mental Health and Addiction Equity Act. That version was
    modified from the original language and the savings reduced to
    $2.4 billion over 10 years. The Senate passed a further revised
    provision on May 22, 2008 as part of the Iraq Supplemental
    legislation. The House most recently passed a version very
    similar to the Senate as part of the CHIP Reauthorization Act
    on January 14, 2009. The savings were reduced to $1.2 billion
    due to the passage of time and modifications that had been made
    in the Senate. The provisions in H.R. 3200 are similar to that
    bill, with changes only reflecting technical improvements, and
    savings are now only $1 billion over 10 years.
        As Congress has grappled with this issue during the last
    several years, modifications have been made to address the
    concerns of existing physician-owned hospitals. As drafted, the
    bill protects all physician-owned hospitals that were
    participating in Medicare as of January 1, 2009. That date is
    the same as the legislation passed earlier this Congress. It
    also modifies the original language by permitting them to
    pursue limited growth when there is clear community need.
                Effective Date
        Date of enactment.

    Sec. 1157. Institute of Medicine Study of Geographic Adjustment Factors
            Under Medicare

                Current Law
        Generally, Medicare's payment systems include adjustment
    factors to account for the geographic differences in the costs
    of providing health care services. For example, Medicare's
    physician fee schedule (which with modifications is used to
    reimburse other health care practitioners) uses the geographic
    practice cost index (GPCI) for this purpose; Medicare's
    inpatient prospective payment system (IPPS) uses a hospital
    wage index to adjust payments for acute care hospitals. With
    modifications, the IPPS wage index is used to calculate
    payments for inpatient rehabilitation hospitals, inpatient
    psychiatric hospitals, long term care hospitals, skilled
    nursing facilities, and home health agencies.
                Proposed Law
        The Secretary would enter into a contract with the
    Institutes of Medicine of the National Academy of Sciences
    (IOM) to conduct a comprehensive empirical study with
    appropriate recommendations on the accuracy of the geographic
    adjustment factors established for Medicare's physician fee
    schedule and for Medicare's IPPS. The study would include an
    evaluation of the empirical validity of the adjustments,
    methodology used to determine the adjustments, and measures
    used for the adjustments. The latter would take into account
    the timeliness of the data and frequency of data revisions,
    data sources and validity, and operational costs of
    participating providers. The study would also examine the
    effect of the adjustment factors on the level and distribution
    of the health workforce within the United States. This would
    include the recruitment and retention accounting for workforce
    mobility between urban and rural areas; ability of hospital and
    other facilities to maintain an adequate and skilled workforce;
    patient access to providers and needed medical technology. The
    study would also examine the effect of the adjustment factors
    on population health and quality of care and the ability of
    providers to furnish efficient, high-value care. The IOM report
    would be submitted to the Secretary and to Congress no later
    than one year from enactment. Necessary funds would be
    authorized to be appropriated to carry out this study.
                Reason for Change
        This provision addresses concerns about the methodology and
    data used to geographically adjust Medicare payment rates. Such
    adjustments, which are mandated by the Social Security Act, are
    intended to reflect geographic differences in input costs faced
    by practitioners and hospitals, such as wage rates, overhead
    costs, rent, and malpractice insurance. The IOM will conduct an
    empirical study into whether CMS is using valid methods and
    data to make these adjustments, and directs IOM to take factors
    such as provider recruitment and retention into consideration.
    To the extent this study finds that the methods and data being
    used to make these adjustments are not optimal or appropriate,
    IOM is directed to make recommendations on changes.
                Effective Date
        Date of enactment.

    Sec. 1158. Revision of Medicare Payment Systems to Address Geographic
            Inequities

                Current Law
        Generally, Medicare's payment systems include adjustment
    factors to account for the geographic differences in the costs
    of providing health care services. In the previous section, IOM
    is required to conduct a study of the geographic practice cost
    index (GPCI) used to adjust Medicare's physician fee schedule
    and the hospital wage index used in Medicare's inpatient
    prospective payment system (IPPS). With modifications,
    Medicare's physician fee schedule and the hospital wage index
    are used to reimburse other practitioners and providers.
        Generally, the Centers for Medicare and Medicare Services
    promulgates changes to Medicare's physician fee schedule and
    IPPS through an annual rulemaking process where proposed
    changes and a notice of a public comment period are published
    in the Federal Register with the final rule establishing the
    payment polices and responding to the public comments issued
    subsequently in the Federal Register. Medicare's IPPS and
    physician payments are on different payment years and therefore
    rulemaking schedules. Generally the new IPPS payment rates are
    effective October 1st of each year and new physician fee
    schedule is effective as of January 1st of each year.
                Proposed Law
        The Secretary would be required to take into account the
    IOM recommendations included in their report on the adequacy of
    Medicare's geographic adjustments established in the previous
    section. Appropriate proposals to revise the respective
    geographic adjustments would be included in the proposed rules
    applicable to the rulemaking process for Medicare's payments
    for physicians' services and IPPS hospitals. The proposals
    would be included in the next applicable rulemaking cycle after
    submission of the IOM report to the Secretary. The Secretary
    would be able to change the geographic adjustments accordingly,
    but could not reduce an adjustment below that which applied in
    the payment system in the prior payment year. These adjustments
    for services furnished before January 1, 2014 could not exceed
    the amounts in the Medicare Improvement Fund as amended in this
    legislation. No more than half of that $8 billion would be
    available in any one payment year.
                Reason for Change
        Any recommendations made by the IOM in the study mandated
    by section 1157 must be immediately taken into account by CMS.
    The study under section 1157 is intended to improve the methods
    and data used by CMS to adjust Medicare payment rates for
    practitioners and hospitals for geographic differences in input
    costs. To the extent that such recommendations result in
    payment rates being increased, $4 billion a year for two years
    is provided to fund additional spending resulting from the rate
    increases in any area. To facilitate the transition to revised
    payment adjustments, payment rates may not be decreased as a
    result of the study's recommendations for a period of two
    years. After the two-year transition period, payment rates will
    be adjusted on a budget neutral basis.
                Effective Date
        Date of enactment.

    Sec. 1159. Institute of Medicine Study of Geographic Variation in
            Health Care Spending and Promoting High-Value Health Care

                Current Law
        No current law. Significant geographic variation in the
    medical spending has been well documented in the health care
    literature. However, the underlying causes of these spending
    differences, but more importantly, the appropriate policy
    responses to such variation has been the subject of much
    debate.
                Proposed Law
        The Secretary would enter into an agreement with the
    Institutes of Medicine (IOM) to conduct a study on the
    geographic variation of per capita health spending among both
    the Medicare and privately insured populations. The studies
    would include evaluations of (1) the extent and range of such
    variation using various units of geographic measurement; (2)
    the extent to which geographic variation can be attributed to
    differences in input prices, practice patterns, access to
    medical services, supply of medical services, socio-economic
    factors, and provider organizational models; (3) the extent to
    which variation are correlated with patient access to care,
    distribution of health care resources and consensus-based
    measures of health care quality; (4) the extent to which
    variation can be attributed to physician and practitioner
    discretion in making treatment decisions, and the degree to
    which these discretionary treatment decisions are made without
    regard to the best available medical evidence; (5) the degree
    to which variation cannot be explained by empirical evidence;
    and (6) other appropriate factors.
        IOM would recommend strategies for addressing variation in
    per capita spending by promoting high-value care, by
    considering measurement and reporting on quality and population
    health, reducing fragmented and duplicative care; promoting the
    practice of evidence-based medicine; empowering patients to
    make value-based medical decisions; leveraging the use of
    health information technology, the role of financial and other
    incentives as well as other appropriate topics. High-value care
    would be defined as the efficient delivery of high quality,
    evidence-based, patient-centered care.
        In making the recommendations, IOM would address whether
    Medicare's physician and hospital payment systems should be
    further modified to provide incentives for high-value care. IOM
    would consider the adoption of a value based index based on a
    composite of appropriate measures of quality and cost that
    would adjust provider payments on a regional or provider-level
    basis. If adoption is deemed appropriate, IOM would make
    specific recommendation on the design and implementation of the
    index, including the identification of specific measures of
    quality and cost and a thorough analysis of how Medicare
    payments and spending on a geographic basis would be affected.
    The IOM report would be submitted to Congress no later than 3
    years after the date of enactment. Necessary sums to conduct
    the study would be authorized to be appropriated.
                Reason for Change
        The Committee is interested in knowing more about variation
    in the utilization of health care services throughout the
    country. Studies indicate there is a significant amount of
    variation in health care spending between different regions of
    the country, as well as between providers within each region.
    This provision will direct IOM to conduct a thorough empirical
    examination of variation in health care spending attributable
    to differences in utilization patterns rather than in payment
    rates or special payments that are largely unrelated to care
    for individual patients.
        The study under this section is intended to provide a
    better understanding of how much and why utilization varies
    from provider-to-provider and region-to-region. This will help
    shed light on the extent to which variation can be attributed
    to differences in patient health status, socio-economic
    factors, patient compliance or other similar factors that are
    largely outside the control of providers. It will also look at
    variation in treatment patterns that can be traced to the
    discretion of individual providers, and whether such variation
    is justified or, as some analysts have contended, represent
    provision of services that do not result in improved health
    outcomes.
        Taking the findings of this study into account, the IOM is
    directed to consider whether Medicare's payment systems should
    be changed to better incentivize the delivery of high-value
    health care. To the extent that IOM finds Medicare's payment
    systems should be changed, it is directed to make specific
    recommendations on how to do so. In making any recommendations,
    IOM should consider a ``value index'' approach that would
    adjust payment rates according to measures of quality and per-
    capita spending, but IOM is not required to recommend use of
    the value index. Furthermore, it is the Committee's intent that
    any recommendations be directed toward changing the way
    Medicare pays for care and should not include changes to
    special programs designed to achieve specific policy goals,
    such as payments for graduate medical education, indirect
    medical education, and health information technology. This
    approach is consistent with legislation introduced in the House
    to institute a value index adjustment in the Medicare program.
        To maximize the utility and reliability of the study and
    any recommendations, the study should be conducted by
    individuals who have a wide and balanced range of expertise in
    areas such as clinical medicine, economics, academic medicine,
    and health care management. The Committee also urges IOM to
    make recommendations that are consistent with the core goals of
    the Medicare program to provide accessible, affordable health
    care to every Medicare beneficiary. As such, to the extent the
    IOM recommends substantial payment changes, the IOM report
    shall include an appropriate phase-in that takes into account
    the impact of such changes on providers and facilities and
    preserves access to care for Medicare beneficiaries.
                Effective Date
        Date of enactment.

                     Subtitle D--Medicare Advantage Reforms

                       Part 1--Payment and Administration

    Sec. 1161. Phase-in of Payment Based on Fee-for-Service Costs

                Current Law
        Medicare Advantage (MA) is an alternative way for Medicare
    beneficiaries to receive covered benefits. Under MA, private
    health plans are paid a per-person amount to provide all
    Medicare-covered benefits (except hospice) to beneficiaries who
    enroll in their plan. Beginning in 2006, the Secretary began
    determining MA payment rates by comparing plan bids to a
    benchmark. Each bid represents the plan's estimated revenue
    requirement for providing required Parts A and B Medicare
    services to an average Medicare beneficiary. The benchmark
    amounts represent the maximum amount the federal government
    will pay a plan for providing required Medicare benefits. If a
    plan's bid is less than the benchmark, its payment equals its
    bid plus a rebate of 75% of the difference between the
    benchmark and the bid. The rebate must be used to provide
    additional benefits, reduce enrollees' Medicare cost sharing
    expenses, or reduce enrollees' monthly Part B, Part D, or
    supplemental premiums (for services beyond required Medicare
    benefits). The remaining 25% of the difference is retained by
    the federal government. If a plan's bid is equal to or above
    the benchmark, its payment is equal to the benchmark amount,
    and each enrollee in that plan will pay an additional premium
    equal to the amount by which the bid exceeds the benchmark.
        In general, the MA benchmarks in each local area (county)
    are updated annually by the overall growth in Medicare
    expenditures, otherwise known as the National MA Growth
    Percentage. In certain years (known as rebasing years), plan
    payments are updated by the greater of the growth percentage or
    100% of fee-for-service (FFS) costs, with adjustments.
    Beginning in 2010, the benchmarks are adjusted to phase-out the
    value of indirect medical education costs.
        MA benchmarks are based, in part, on historical Medicare
    private plan payment rates. The Balanced Budget Act of 1997
    (P.L. 105-33, BBA) increased payments to private plans above
    rates of per capita FFS costs in some areas. Subsequent
    legislation also increased payment rates to private plans. The
    historical payment rates were used as the basis for the
    benchmark amounts, as specified in the Medicare Prescription
    Drug, Improvements, and Modernization Act of 2003, (P.L. 108-
    173, MMA). As a result, current MA benchmarks exceed per capita
    FFS costs in almost all areas.
                Proposed Law
        Starting in 2011, the provision would phase-in MA
    benchmarks equal to per capita FFS spending in each county.
    Starting in 2013, MA benchmarks would be equal to per capita
    FFS spending in each county. In no event would a benchmark be
    less than per capita FFS spending. This provision would not
    apply to Programs of All-Inclusive Care for the Elderly (PACE).
                Reason for Change
        Private plans were initially included in the Medicare
    program to test whether managed care would improve efficiency
    and innovation and reduce costs, especially in parts of the
    country where traditional, or fee-for-service (FFS), Medicare
    was an inefficient purchaser. Reflecting this goal, Medicare
    Health Maintenance Organizations were originally paid at 95
    percent of the average adjusted per capita costs (AAPCC) in
    fee-for-service Medicare at the county level. New Medicare
    policies enacted in 1997, 2000, and 2003 now result in
    overpayments to Medicare Advantage (MA) plans. The Medicare
    Payment Advisory Commission (MedPAC) estimates that, on
    average, payments to plans are 14 percent higher than costs in
    fee-for-service Medicare in 2009. The current MA payment system
    encourages participation of inefficient private plans and
    unnecessarily drives up costs to the Medicare program.
        Overpayments to MA plans exceed $1,000 per MA enrollee per
    year and MedPAC estimates that in 2009, the Medicare program
    will pay MA plans $12 billion more for their enrollees than if
    the same enrollees were in traditional Medicare. These
    overpayments increase all Medicare beneficiaries' Part B
    premiums by $4 per month, and cause the Part A Trust Fund to
    become insolvent a year and a half sooner than it otherwise
    would. The fact and amount of overpayments to MA plans are
    indisputable. CBO, MedPAC and others have documented these
    amounts in testimony before the Committee and in numerous
    reports. MedPAC has recommended since 2001 that overpayments to
    MA plans be eliminated and advises that the Congress establish
    a level playing field where MA plans are paid the same--not
    more but not less--than the cost for the same beneficiaries in
    traditional Medicare.
        Phasing MA payments down to FFS costs in each county over
    three years gives MA plans time to adjust, if necessary, to the
    new payment rates. This policy simply returns to the way that
    plans used to be paid, based on local FFS costs, or the cost of
    doing business. Private plans that can achieve efficiencies
    greater than traditional Medicare--such as HMOs which on
    average project their costs at 98 percent of the cost of
    traditional Medicare--are rewarded with a rebate to offer extra
    benefits to their enrollees. Private plans that are inefficient
    relative to traditional Medicare should not be subsidized by
    taxpayers and other Medicare beneficiaries. The phase-out of
    overpayments to MA plans would result in savings to the
    Medicare program and taxpayers of $48 billion over five years
    and $156 billion over 10 years.
        The phase-down of MA payments to FFS costs applies equally
    to all 50 states and the territories, however, Puerto Rico is a
    unique situation that the Committee expects that the Secretary
    will use authority under current law to examine. Specifically,
    very few Medicare beneficiaries in Puerto Rico choose to enroll
    in Part B; instead, MA plans buy down the Part B premium for
    enrollees and therefore many Medicare beneficiaries enroll in
    MA to receive all of their Medicare services.
        With only a small population enrolled in Part B through
    traditional Medicare, the county FFS expenditures calculated by
    the Secretary are artificially low and unstable from year-to-
    year. Therefore, the Committee expects that when calculating
    county FFS rates for Puerto Rico, the Secretary will use
    utilization and expenditure data from MA plans under current
    authority and adjust these rates and risk scores appropriately.
        The Program for All-Inclusive Care for the Elderly (PACE)
    is a very small program in Medicare that covers the most frail
    elderly beneficiaries who would otherwise be in nursing homes.
    Unlike other MA plans, PACE providers fully integrate Medicare
    and Medicaid benefits, including long-term care. They are also
    unable to alter benefits or raise premiums on their
    beneficiaries. Because of its unique nature, the PACE programs
    would continue to be paid at current levels.
                Effective Date
        January 1, 2011.

    Sec. 1162. Quality Bonus Payments

                Current Law
        No provision.
                Proposed Law
        For plan years starting with 2011, a qualifying plan in a
    qualifying county would receive an increase in their benchmark
    amounts equal to 2.6% in 2011, 5.3% in 2012 and 8.0% in
    subsequent years.
        A qualifying plan would be defined as a plan that, in a
    preceding year specified by the Secretary, had a quality
    ranking (based on the quality ranking system established by
    CMS) of 4 stars or higher. A qualifying county would be defined
    as a county, for a year, (a) that was within the lowest quarter
    of counties with respect to per capita spending in original
    Medicare, and (b) within which, 50 percent of individuals were
    enrolled in MA and of the residents enrolled, at least 50
    percent were enrolled in a plan with a quality ranking of 4
    stars or higher. Starting in 2010, the Secretary would be
    required to notify the qualifying MA organization that is
    offering a qualified plan in a qualifying county of their
    status through the annual announcement of benchmark rates and
    through publication on the Medicare program website. The
    Secretary would have the authority to disqualify a plan if the
    Secretary identifies deficiencies in the plan's compliance with
    MA rules under this part.
                Reason for Change
        In certain areas of the country, MA plans have achieved a
    high penetration rate and have received high quality ratings
    from CMS. Both criteria indicate that plans are offering
    beneficiaries a valuable benefit and have high patient
    satisfaction; low FFS spending in the same area may also
    indicate that efficiencies gained by the MA plans have spilled
    over into the traditional Medicare program.
                Effective Date
        January 1, 2011.

    Sec. 1163. Extension of Secretarial Coding Intensity Adjustment
            Authority

                Current Law
        In general, Medicare payments to MA plans are risk-adjusted
    to account for the variation in the cost of providing care.
    Risk adjustment is designed to compensate plans for the
    increased cost of treating older and sicker beneficiaries, and
    thus discourage plans from preferential enrollment of healthier
    individuals. The Medicare risk adjustment models take into
    account the variation in expected medical expenditures of the
    Medicare population associated with demographic characteristics
    (age, sex, current Medicaid eligibility, original Medicare
    eligibility due to a disability), as well as medical diagnoses.
    The Deficit Reduction Act of 2005 (Pl. 109-171, DRA) required
    the Secretary, when risk adjusting payments to MA plans during
    2008, 2009, and 2010, to adjust for patterns of diagnosis
    coding differences between MA plans and providers under parts A
    and B of Medicare, to the extent that the Secretary identified
    such differences based on an analysis of data submitted for
    2004 and subsequent years.
                Proposed Law
        The provision would extend the requirement that MA plan
    payments be adjusted for differences in coding patterns beyond
    2010. The provision would require the Secretary to conduct
    analyses of coding differences periodically and incorporate the
    findings on a timely basis.
                Reason for Change
        When the Deficit Reduction Act gave the Secretary explicit
    authority to adjust MA payment rates to account for differences
    in the intensity of diagnosis codes between MA and traditional
    Medicare that are attributable to inaccurate coding, it limited
    this authority to three years. For two out of the three years,
    CMS studied and identified a difference in coding intensity,
    yet did not adjust MA payments to account for this difference.
    For 2010, CMS will make a downward adjustment to all MA plan
    payments to account for its findings of inaccurate coding.
    While the MA payment system appropriately pays more to plans
    that enroll a riskier population, CMS' finding suggests that MA
    plans assign more severe risk codes than the same beneficiary
    would be assigned in traditional Medicare, possibly increasing
    the plan payment without clinical justification. Giving the
    Secretary permanent authority to address this inequity allows
    the Agency to make appropriate and accurate payments to MA
    plans, and discourages any practice of ``upcoding''.
                Effective Date
        Date of enactment.

    Sec. 1164. Simplification of Annual Beneficiary Election Periods

                Current Law
        Medicare beneficiaries may enroll in or change their
    enrollment in MA from November 15 to December 31 each year (the
    annual, coordinated election period). Changes go into effect
    January 1st of the next year. During the first three months of
    the year, beneficiaries can enroll in an MA plan, and
    individuals enrolled in an MA plan can either switch to a
    different MA plan or return to original Medicare. This period
    is known as the continuous open enrollment and disenrollment
    period. However, during the three-month period, beneficiaries
    cannot change their drug coverage.
                Proposed Law
        The provision would move the annual, coordinated election
    period to 15 days earlier in the year--November 1st to December
    15th, rather than from November 15th to December 30th. The
    provision would eliminate the continuous open enrollment and
    disenrollment period (during the first three months of the
    year.)
                Reason for Change
        The current annual election period, from November 15
    through December 31, gives MA and Part D plans very little, if
    any, time to process enrollment requests and ensure that on
    January 1, each beneficiary is properly enrolled in the plan.
    Allowing for a two-week processing period between the end of
    the annual election period and the start of the plan year
    better ensures that enrollees do not experience any gaps in
    coverage, and that plans are able to process enrollments in
    time for the start of the plan year.
        The open enrollment period has been a source of confusion
    for beneficiaries and very few have chosen to take advantage of
    this three-month opportunity. Only one out of every five annual
    enrollments takes place during the open enrollment period, even
    though it is twice as long as the annual election period.
    Though it was originally conceived of as a beneficiary
    protection, giving enrollees an opportunity to switch plans
    after the year began if they discovered a problem with their
    plan, the confusing restrictions on which plans enrollees are
    permitted to switch into have severely limited its utility.
    Moreover, other sections of this bill and CMS have established
    numerous special enrollment periods that allow enrollees to
    switch plans if they have exceptional circumstances.
                Effective Date
        January 1, 2011.

    Sec. 1165. Extension of Reasonable Cost Contracts

                Current Law
        Reasonable Cost plans are MA plans that are reimbursed by
    Medicare for the actual cost of providing services to
    enrollees. Cost plans were created in the Tax Equity and Fiscal
    Responsibility Act (P.L. 97-248, TEFRA) of 1982. Balanced
    Budget Act of 1997 (P.L. 105-33, BBA) included a provision to
    phase-out the reasonable cost contracts, however, the phase-out
    has been delayed over the years through Congressional action.
    These plans are allowed to operate indefinitely, unless two
    other plans of the same type (i.e., either 2 local or 2
    regional plans) offered by different organizations operate for
    the entire year in the cost contract's service area. After
    January 1, 2010, the Secretary may not extend or renew a
    reasonable cost contract for a service area if (1) during the
    entire previous year there were either two or more MA regional
    plans or two or more MA local plans in the service area offered
    by different MA organizations; and (2) these regional or local
    plans meet minimum enrollment requirements.
                Proposed Law
        This provision would extend for two years--from January 1,
    2010, to January 1, 2012--the length of time reasonable cost
    plans could continue operating regardless of any other MA plans
    serving the area. The provision would modify the minimum
    enrollment requirement used as one of the criteria the
    Secretary considers when determining whether to renew or extend
    a reasonable cost plan. The enrollment criteria would apply to
    the portion of the MA regional or local plan's service area for
    the year that it was within the service area of the reasonable
    cost contract (and not the total service area of the MA
    regional or local plan).
                Reason for Change
        Cost plan enrollees are older than the average Medicare
    beneficiary and are particularly vulnerable to the type of
    confusion that results from Medicare program changes. Extending
    cost plan authority through 2011 will ensure that Cost plan
    beneficiaries--many of whom have been in their plans for
    years--can maintain a stable Medicare health plan choice. This
    provision also clarifies Congressional intent with regard to
    how CMS counts enrollment for the purpose of prohibiting new
    Cost plans.
                Effective Date
        Date of enactment.

    Sec. 1166. Limitation of Waiver Authority for Employer Group Plans

                Current Law
        The Secretary has the authority to waive or modify
    requirements that hinder the design of, the offering of, or the
    enrollment in employer or union sponsored MA plans. Such plans
    can be offered either under contracts between the union or
    employer group and a Medicare Advantage organization, or
    directly by the employer or union group.
                Proposed Law
        For employers or unions that sponsor an MA plan directly
    and for employers that contract with a private MA organization,
    the Secretary would only have authority to waive or modify MA
    requirements for the plan if 90% of eligible individuals
    enrolled in the plan live in a county in which the MA
    organization offers an MA local plan. This provision would
    apply to plan years on or after January 1, 2011. The provision
    would not apply to plans in effect as of December 31, 2010.
                Reason for Change
        The MMA gave broad authority to CMS to waive virtually any
    requirement in order to encourage employers to provide retiree
    coverage through Medicare Advantage. While some requirements of
    MA plans marketing in the individual market may not be
    applicable to employers contracting with or offering an MA
    plan, and can appropriately be waived, it is crucial that
    retirees enrolling in such an MA plan have adequate access to a
    provider network. Requiring that MA plans offer local plans
    alongside employer group plans ensures that they are meeting
    network adequacy requirements and enrollees are protected.
                Effective Date
        January 1, 2011.

    Sec. 1167. Improving Risk Adjustment for MA Payments

                Current Law
        In general, Medicare payments to MA plans are risk adjusted
    to account for the variation in the cost of providing care.
    Risk adjustment is designed to compensate plans for the
    increased cost of treating older and sicker beneficiaries, and
    thus discourage plans from preferential enrollment of healthier
    individuals. The Medicare risk adjustment models take into
    account the variation in expected medical expenditures of the
    Medicare population associated with demographic characteristics
    (age, sex, current Medicaid eligibility, original Medicare
    eligibility due to a disability), as well as medical diagnoses,
    and differences in coding practices between MA and providers
    under Medicare Part A and B.
                Proposed Law
        Not later than 1 year after enactment, the Secretary would
    be required to submit a report to Congress evaluating the
    adequacy of the Medicare Advantage risk adjustment system at
    predicting costs for beneficiaries with chronic or co-morbid
    conditions, beneficiaries dually-eligible for Medicare and
    Medicaid, and non-Medicaid eligible low-income beneficiaries.
    The report would also be required to address the need and
    feasibility of including further gradations of diseases or
    conditions and multiple years of beneficiary data. Taking this
    report into account, not later than January 1, 2012, the
    Secretary would be required to implement necessary improvements
    to the MA risk adjustment system.
                Reason for Change
        The Committee is concerned that the Medicare Advantage (MA)
    risk adjustment system does not adequately account for a
    variety of factors, such as costs associated with low income
    and chronic conditions, and that multiple years of beneficiary
    data and further gradations of disease are not included in the
    system yet could improve the system's accuracy. This evaluation
    will allow the Secretary to determine if, accounting for these
    factors, the risk adjustment system can be improved to better
    project enrollees' costs.
                Effective Date
        Date of enactment.

    Sec. 1168. Elimination of the MA Regional Plan Stabilization Fund

                Current Law
        MMA created the MA Regional Program and established the MA
    Regional Plan Stabilization Fund to encourage plans to enter
    into and/or remain in the MA Regional Program. The fund was
    originally set at $10 billion with additional money added to
    the fund from savings in the bidding process. Funds were to be
    available from 2007 through the end of 2013. Subsequent
    legislation decreased the amount of funds available and delayed
    their availability. Most recently, MIPPA reduced the initial
    funding of the program to one dollar. Money from the regional
    plan bidding process continues to flow into the Fund.
    Expenditures from the Fund are delayed until 2014.
                Proposed Law
        The provision would eliminate the MA Regional Plan
    Stabilization Fund. Any amounts contained in the Fund would be
    transferred to the Federal Supplementary Medical Insurance
    Trust Fund.
                Reason for Change
        Regional PPOs are no longer a new plan type and the
    Medicare Advantage program is a relatively stable market. This
    fund is not necessary.
                Effective Date
        Date of enactment.

                  Part 2--Consumer Protections and Anti-Fraud

    Sec. 1171. Limitation on Out-of-pocket Costs for Individual Health
            Services

                Current Law
        Each MA plan must provide all required Part A and B
    Medicare benefits (other than hospice) to individuals entitled
    to Medicare Part A and enrolled in Part B. The aggregate amount
    of cost sharing in a MA plan must be equal to the aggregate
    amount of cost sharing in traditional Medicare. Cost sharing
    per enrollee (excluding premiums) for covered services cannot
    be more than the actuarial value of the deductibles,
    coinsurance, and co-payments under traditional Medicare. Dual
    eligibles are persons also entitled to the full range of
    benefits under their state's Medicaid program. Qualified
    Medicare beneficiaries (QMBs) are those aged or disabled
    individuals that are entitled to have some of their Medicare
    cost sharing and Part B premiums paid by the federal-state
    Medicaid program, but are not entitled to coverage of Medicaid
    plan services.
                Proposed Law
        For plan years beginning on or after January 1, 2011, MA
    plans would be prohibited from offering benefits with cost
    sharing requirements that are greater than the cost sharing
    requirements imposed under the traditional Medicare program.
    The ``actuarially equivalent'' standard in the statute would be
    eliminated. Medicare private plans would not be prohibited from
    using flat co-payments or per diem rates in lieu of the cost
    sharing amounts imposed under Part A and B Medicare, as long as
    they did not exceed the level of cost sharing under traditional
    Medicare. This provision would also prohibit plans from
    imposing cost-sharing for dual-eligible individuals or
    qualified Medicare beneficiaries enrolled in an MA plan that
    exceeds the cost-sharing amounts permitted under the Medicare
    and Medicaid statutes.
                Reason for Change
        Using a standard of actuarial equivalence across cost
    sharing for all services leaves an opportunity for MA plans to
    increase cost sharing for infrequently-used services that
    enrollees may not scrutinize--like home health or cancer
    drugs--while lowering cost sharing for more commonly used
    services, like physician visits. While this may be attractive
    for enrollees who are relatively healthy, it has potentially
    devastating out-of-pocket cost implications for those enrollees
    who fall sick. MA plans that receive a rebate, because their
    bid is below the county benchmark, can use this rebate to lower
    cost sharing for certain services, either to attract enrollment
    or to encourage use of certain services (e.g. visits to a
    primary care physician). Setting a maximum cost sharing that
    does not exceed cost sharing under traditional Medicare ensures
    that no beneficiary will have higher out-of-pocket costs just
    because they choose to receive Medicare services through a
    private plan.
                Effective Date
        January 1, 2011.

    Sec. 1172. Continuous Open Enrollment for Enrollees in Plans with
            Enrollment Suspension

                Current Law
        Special Election Periods (SEPs) allow beneficiaries the
    option to discontinue their enrollment in a MA plan and enroll
    in a different MA plan or traditional Medicare outside of the
    annual coordinated election period. The circumstances in which
    an enrollee can exercise this option include (1) an MA plan
    terminates its participation in the MA program or in a specific
    area, (2) an individual's place of residence changes, (3) the
    MA plan violates a provision of its contract or misrepresents
    the plan's provisions in marketing the plan, or (4) other
    exceptional conditions as provided by the Secretary.
                Proposed Law
        This provision would require the Secretary to take into
    account the health or well-being of an individual when
    determining what constitutes eligibility for a SEP. This
    provision would expand the categories of beneficiaries eligible
    to participate in a SEP to include beneficiaries enrolled in
    private plans that have been suspended for not meeting the
    terms of their contract.
                Reason for Change
        The Secretary has authority to suspend enrollment in MA
    plans that are not in compliance with various program
    requirements. The Committee believes that if an MA plan's
    behavior is egregious enough that the Secretary would prohibit
    new enrollees, the current enrollees should be allowed an
    opportunity to disenroll, either for another MA plan or to
    traditional Medicare. Furthermore, the Secretary has wide
    latitude to establish additional SEPs, and the Committee
    believes that the Secretary should consider the health and
    well-being of beneficiaries when establishing these SEPs.
                Effective Date
        Date of enactment.

    Sec. 1173. Information for Beneficiaries on MA Plan Administrative
            Costs

                Current Law
        The Secretary must provide for activities to disseminate
    information to current and prospective Medicare beneficiaries
    about MA plans, including, but not limited to benefits, cost
    sharing, service area, access, out-of-area coverage, emergency
    coverage, and supplemental benefits.
        By the first Monday in June, each local MA plan must submit
    to the Secretary an aggregate monthly bid amount (which
    includes separate bids for required services, any offered
    supplemental benefits, and any offered drug benefits) for each
    MA plan it intends to offer in the upcoming calendar year. The
    bid is based on the average revenue requirements in the payment
    area for an enrollee with a national average risk profile. The
    Secretary has the authority to evaluate and negotiate the
    plan's bid amounts and its proposed benefit packages.
                Proposed Law
        This provision would require the publication of
    administrative cost information, including the medical loss
    ratio (MLR), for MA plans. Plans that fail to meet a minimum
    MLR would be subject to sanctions, such as enrollment
    suspension and potential termination.
        Beginning in 2011, the Secretary would be required to
    publish the MLR for the previous year by November 1st for each
    MA plan contract. MLRs would be defined by the Secretary,
    taking into account the definition adopted by the Health
    Choices Commissioner under section 116 of this Act. Each MA
    plan would be required to submit to the Secretary, in a manner
    and form specified by the Secretary, the necessary data for
    publishing MLR information on a timely basis. For 2010 and
    2011, the data submitted would be required to be consistent in
    content with the data reported as part of the MA plan bid in
    June 2009 for 2010.
        For contract years beginning in 2010, the Secretary would
    be required to develop and implement standardized elements and
    definitions for reporting the data necessary to calculate a
    MLR. The elements and definitions would be developed in
    consultation with the Health Choices Commissioner,
    representatives of MA organizations, experts on health plan
    accounting systems, and representatives of the National
    Association of Insurance Commissioners. The Secretary would be
    required to publish a report describing the elements and
    definitions no later than December 31, 2010.
        Beginning in 2014, if the Secretary determines that a MA
    plan failed to have a MLR of at least 0.85, the Secretary would
    be required to mandate that the MA plan provide enrollees with
    a rebate of their Part C premiums (or Part B or D, if
    applicable) by the amount necessary to meet a MLR of at least
    0.85. The Secretary would also be required to restrict
    enrollment in the MA plan for 3 consecutive years and terminate
    the plan's contract if the plan failed to meet the MLR
    requirements for 5 consecutive years.
                Reason for Change
        Medicare Advantage plans claim to provide significant extra
    benefits, but neither the plans nor CMS quantify whether any of
    the revenue plans receive from the government is actually spent
    on enhanced benefits. According to MedPAC, MA plans on average
    currently spend more than 13 percent of their Medicare payments
    on administrative costs and profits.
        The Medical Loss Ratio is the percentage of health plan
    revenue actually spent on direct patient care versus profit and
    administrative overhead. In the annual MA bidding process,
    plans report data on administrative costs and the other factors
    necessary for the calculation of a Medical Loss Ratio. Though
    currently unavailable, disclosure of these ratios will help
    beneficiaries choose efficient plans and will help the Congress
    make future program improvements.
        MA plans should provide care in an efficient manner. This
    section provides for a minimum MLR of 0.85 for MA plans
    beginning in 2014 so that beneficiaries and taxpayers would not
    pay more than 15 cents per dollar for administrative costs and
    profits. The Health Choices Commissioner will enact standards
    for minimum MLRs for qualifying plans in the Health Insurance
    Exchange.
                Effective Date
        Date of enactment.

    Sec. 1174. Strengthening Audit Authority

                Current Law
        The Secretary is required to provide for the annual
    auditing of the financial records of at least \1/3\ of MA
    plans. Each contract with an MA plan is required to provide
    that the Secretary has the right to inspect or evaluate the
    quality, appropriateness and timeliness of services performed
    under the contract. Contracts must also provide the Secretary
    with the right to audit any plan's books and records related to
    the plan's ability to bear risk, the services delivered, or any
    amounts payable under the contract.
                Proposed Law
        Each contract with an MA plan would be required to include
    a provision that the Secretary have the authority to take
    necessary action, including the pursuit of financial
    recoveries, to address deficiencies identified during an annual
    audit. The provision would apply to Part D Prescription Drug
    Plans (PDPs) in the same manner as certain other MA contract
    provisions apply to PDP plans. The provision would apply to
    audits conducted for contract years beginning on or after
    January 1, 2011.
                Reason for Change
        The Committee believes that if the Secretary identifies
    deficiencies in MA plans or PDPs, the Secretary should have the
    authority to act to remedy those deficiencies.
                Effective Date
        January 1, 2011.

    Sec. 1175. Authority to Deny Plan Bids

                Current Law
        By the first Monday in June, each local MA plan must submit
    to the Secretary an aggregate monthly bid amount (which
    includes separate bids for required services, any offered
    supplemental benefits, and any offered drug benefits) for each
    MA plan it intends to offer in the upcoming calendar year. The
    bid is based on the average revenue requirements in the payment
    area for an enrollee with a national average risk profile. The
    Secretary has the authority to evaluate and negotiate the
    plan's bid amounts and its proposed benefit packages.
        Potential PDP sponsors are also required to submit bids by
    the first Monday in June of the year prior to the plan benefit
    year. The following information must be included with the bid:
    (1) coverage to be provided; (2) actuarial value of qualified
    prescription drug coverage in the region for a beneficiary with
    a national average risk profile; (3) information on the bid,
    including the basis for the actuarial value, the portion of the
    bid attributable to basic coverage and, if applicable, the
    portion attributable to enhanced coverage, and assumptions
    regarding the reinsurance subsidy; and (4) service area. The
    bid also includes costs (including administrative costs and
    return on investment/profit) for which the plan is responsible.
    The bid must exclude costs paid by enrollees, payments expected
    to be made by CMS for reinsurance, and any other costs for
    which the sponsor is not responsible.
                Proposed Law
        Beginning January 1, 2011, the Secretary would not be
    required to accept any or every bid submitted by an MA or PDP
    plan.
                Reason for Change
        Under current law, the Secretary has the authority to
    negotiate bids with most MA plans and PDPs. The Committee
    believes that this negotiation process can be an important part
    of the annual bid process, however the Committee also believes
    that the Secretary should have explicit authority to reject
    bids from plans with which it cannot negotiate satisfactorily,
    or for other reasons. The Secretary should hold private plans
    wishing to provide care to Medicare beneficiaries to a high
    standard and should be permitted to exclude plans that do not
    meet that standard.
                Effective Date
        January 1, 2011.

                    Part 3--Treatment of Special Needs Plans

    Sec. 1176. Limitation on Enrollment Outside Open Enrollment Period of
            Individuals into Chronic Care Specialized MA plans for Special
            Needs Individuals

                Current Law
        Under the Medicare Prescription Drug, Improvement, and
    Modernization Act of 2003 (MMA, P.L. 108-173), Congress created
    a new type of Medicare Advantage (MA) coordinated care plan
    focused on individuals with special needs. Special Needs Plans
    (SNPs) are allowed to target enrollment to one or more types of
    special needs individuals identified by Congress as 1)
    institutionalized; 2) dually eligible; and/or 3) individuals
    with severe or disabling chronic conditions.
        The number of SNPs has increased dramatically since 2004,
    the first year of operation. In 2004, CMS approved 11 SNPs, but
    by January 2008, CMS had approved 787 SNPs, including 442 dual-
    eligible SNPs, 256 chronic care SNPs, and 89 institutional
    SNPs. In September 2008, there were 1.2 million beneficiaries
    in SNPs.
        Under current law, Medicare beneficiaries may enroll in or
    change their enrollment in MA plans from November 15th to
    December 31st each year. Changes go into effect January 1st of
    the next year. During the first three months of the year,
    beneficiaries can enroll in an MA plan, and individuals
    enrolled in an MA plan can either switch to a different MA plan
    or return to original Medicare. Beneficiaries may also enroll
    in MA or switch their enrollment if they qualify for a Special
    Election Period (SEP) as defined in statute or by the
    Secretary. One SEP specified by the Secretary in the Medicare
    Managed Care Manual allows individuals with severe or disabling
    chronic conditions to enroll in an SNP designed for individuals
    with those conditions. This SEP applies as long as the
    individual has the qualifying condition and ends once the
    beneficiary enrolls in an SNP. Once the SEP ends, that
    individual may make enrollment changes only during applicable
    MA election periods.
                Proposed Law
        This provision would require that beginning on January 1,
    2011, SNPs serving beneficiaries with severe or disabling
    conditions could only enroll eligible individuals during an
    annual, coordinated open enrollment period or at the time of
    diagnosis of the disease or condition that would qualify an
    individual for a chronic care SNP.
                Reason for Change
        The Committee is concerned that the current SEP for
    beneficiaries eligible for a chronic condition SNP encourages
    aggressive marketing by plans and is confusing for
    beneficiaries accustomed to annual enrollment periods. The new
    SEP must be more narrowly targeted to the time around a
    beneficiary's diagnosis, but the Committee gives authority to
    the Secretary to determine how long after a diagnosis the
    beneficiary is permitted to elect an SNP. The Committee intends
    that this be a length of time sufficient for the beneficiary to
    understand the consequences of a diagnosis and learn about
    options for specialized plans.
                Effective Date
        January 1, 2011.

    Sec. 1177. Extension of Authority of Special Needs Plans to Restrict
            Enrollment

                Current Law
        Prior to January 1, 2011, SNPs may restrict enrollment to
    those who are in one or more classes of special needs
    individuals. Starting January 1, 2010, new SNP enrollment must
    be limited exclusively to individuals that meet the criteria
    for which the SNP is designated: dual eligible, chronic care,
    and institutional care. Further, MIPPA required that dual
    eligible SNPs contract with state Medicaid agencies to provide
    medical assistance services (Medicaid), which may include long-
    term care services. If SNPs do not have contracts with Medicaid
    agencies by January 1, 2010, then they can continue to operate,
    but are prohibited from expanding their service areas. However,
    state Medicaid agencies are not required to enter into
    contracts with SNPs.
                Proposed Law
        This provision would extend the time period, from January
    1, 2011, to January 1, 2013, during which SNPs may restrict
    current enrollment to individuals who meet the definition of
    the respective SNP. In addition, selected SNPs that had
    contracts with states that had a state program to operate an
    integrated Medicaid-Medicare program that was approved by CMS
    as of January 1, 2004, would be allowed to restrict enrollment
    to beneficiaries who meet the definition of special needs
    individuals through January 1, 2016.
        Through a contract with an independent health services
    evaluation organization, the Secretary would be required to
    provide an analysis of the SNPs that were approved by CMS as of
    January 1, 2004. The analysis of these grandfathered SNPs would
    include the impact of such plans on cost, quality of care,
    patient satisfaction, and other subjects as specified by the
    Secretary. By December 31, 2011, the Secretary would be
    required to submit a report to Congress on the analysis of the
    grandfathered SNPs, which would include recommendations on the
    appropriate treatment of these plans.
                Reason for Change
        Congress and the Secretary have taken legislative and
    regulatory steps to ensure that SNPs truly offer specialized
    services for the populations enrolled. The Committee believes
    that SNP authority should be extended for a limited number of
    years in order to allow plans to meet these requirements.
        A small subset of SNPs that have fully integrated Medicare
    and Medicaid services for dually eligible beneficiaries would
    receive a longer extension, as these plans have demonstrated an
    ability to integrate care, as originally envisioned for the SNP
    program.
                Effective Date
        Date of enactment.

                  Subtitle E--Improvements to Medicare Part D

    Sec. 1181. Elimination of Coverage Gap

                Current Law
        Medicare law sets out a defined standard benefit structure
    under the Part D prescription drug benefit. In 2009, the
    standard benefit includes a $295 deductible and a 25%
    coinsurance until the enrollee reaches $2,700 in total covered
    drug spending. After this initial coverage limit is reached,
    there is a gap in coverage in which the enrollee is responsible
    for the full cost of the drugs until total costs hit the
    catastrophic threshold, $6,153.75 in 2009. Each year, the
    deductible, co-payments, and coverage thresholds are increased
    by the annual percentage increase in average per-capita
    aggregate expenditures for covered outpatient drugs for
    Medicare beneficiaries for the 12-month period ending in July
    of the previous year.
        Part D plan sponsors are allowed to offer plans that differ
    in benefit design, but are actuarially equivalent, or they may
    offer ``enhanced'' plans that offer more generous coverage.
    Currently, almost all plans include a coverage gap in their
    benefit designs. CMS estimates that 31.7% (8.3 million) Part D
    enrollees reached the initial coverage limit of their drug
    plans in 2007.
        Some beneficiaries with limited income and resources may
    qualify for assistance with a portion of their Part D premiums,
    cost-sharing, and other out-of-pocket expenses. Medicare
    beneficiaries who qualify for Medicaid based on their income
    and assets (dual eligibles) are automatically deemed eligible
    for the full low-income subsidy. Prior to the implementation of
    the Medicare Part D outpatient prescription drug benefit,
    established by the Medicare Prescription Drug Improvement and
    Modernization Act of 2003 (MMA, P.L. 108-173), Medicaid was the
    primary payer for drugs for full-benefit dual-eligible
    beneficiaries.
        The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-
    508) requires drug manufacturers who wish to have their drugs
    available for Medicaid enrollees to enter into rebate
    agreements with the Secretary of HHS, on behalf of the states.
    Under the agreements, pharmaceutical manufacturers must provide
    state Medicaid programs with rebates on drugs paid for Medicaid
    beneficiaries. The formulas used to compute the rebates are
    intended to ensure that Medicaid pays the lowest price that the
    manufacturers offer for the drugs. In return for entering into
    agreements with the Secretary, state Medicaid programs are
    required to cover all of the drugs marketed by those
    manufacturers (with possible exceptions for the 11 categories
    of drugs that states are allowed to exclude from coverage).
        The rebates are computed and remitted by pharmaceutical
    manufacturers each quarter based on utilization information
    supplied by the state programs. States collect the rebates from
    the manufacturers. The federal share of the rebates are
    subtracted from states' claims for their federal share of
    program costs. In setting the amount of required rebates, the
    law distinguishes between two classes of drugs. The first
    includes single source drugs (generally, those still under
    patent) and ``innovator'' multiple source drugs (drugs
    originally marketed under a patent or original new drug
    application (NDA) but for which generic competition now
    exists). The second class includes all other, ``non-innovator''
    multiple source drugs (generics).
        Manufacturers are required to pay state Medicaid programs a
    basic rebate for single source and innovator multiple source
    drugs. Basic rebate amounts are determined by comparing the
    Average Manufacturer Price (AMP) for a drug to the ``best
    price,'' which is the lowest price offered by the manufacturer
    in the same period to any wholesaler, retailer, nonprofit, or
    public entity. Under current law, the basic rebate is the
    greater of 15.1% of the AMP or the difference between the AMP
    and the best price. For non-innovator multiple source drugs,
    basic rebates are equal to 11% of the AMP. Manufacturers are
    also required to pay an additional Medicaid inflation rebate
    for single source drugs. This rebate is equal to the amount by
    which the increase in the AMP of the single source drug exceeds
    the increase in the consumer price index.
                Proposed Law

    Coverage Gap

        This provision would phase in an elimination of the
    coverage gap. For each year beginning with 2011, the Secretary
    would progressively increase the initial coverage limit and
    decrease the annual out-of-pocket threshold until there is a
    continuation of coverage from the initial coverage limit up to
    the expenditure threshold at which catastrophic coverage
    begins. Starting in 2011, the initial coverage limit for each
    year, as determined using current annual percentage increase
    methodology, would be increased by Y2 of the cumulative phase-
    in percentage (the sum of the annual phase-in percentage for
    the year and the annual phase-in percentages for each previous
    year) times the out-of-pocket gap amount (the amount by which
    the annual out-of-pocket threshold for the year exceeds the sum
    of the annual deductible for the year and \1/4\ the amount by
    which the initial coverage limit for the year exceeds the
    annual deductible). Also beginning in 2011, the annual out-of-
    pocket threshold would be decreased by \1/2\ of the cumulative
    phase-in percentage of the out-of pocket gap amount for the
    year multiplied by 1.75.
        The annual phase in percentage would be 13% for 2011; 5%
    for years 2012 through 2015; 7.5% for years 2016 through 2018,
    and 10% for 2019 and each subsequent year.

    Requiring Drug Manufacturers to Provide Rebates for Full-Benefit Dual
            Eligibles

        Under this provision, drug manufacturers would be required
    to provide the Secretary a rebate for any covered Part D drug
    of the manufacturer dispensed after December 31, 2010 to any
    full-benefit dual eligible individual for which payment was
    made by a prescription drug plan (PDP) sponsor or a Medicare
    Advantage (MA) organization.
        The amount of the rebate for a rebate period would be equal
    to the product of the total number of units of such dosage form
    and strength of the drug dispensed and the amount, if any, by
    which the Medicaid rebate, as modified by this statute, and
    including both the basic and inflation rebate, for such form,
    strength, and period, exceeds the average Medicare drug program
    full-benefit dual eligible rebate amount for such form,
    strength, and period.
        The average Medicare drug program full-benefit dual
    eligible rebate amount means, with respect to each dosage form
    and strength of a covered outpatient drug provided by a
    manufacturer for a rebate period, the sum for all PDP sponsors
    and MA organizations administering a Medicare Advantage drug
    plan (MA-PD), of the product for each such sponsor or
    organization of: the sum of all rebates, discounts, or other
    price concessions, calculated on a per unit basis (but only to
    the extent that any such rebate, discount, or other price
    concession applies equally to drugs dispensed to full-benefit
    dual eligible Medicare drug plan enrollees and drugs dispensed
    to PDP and MA-PD enrollees who are not full-benefit dual
    eligible enrollees), and the number of units of such dosage and
    strength of the drug dispensed during the rebate period to
    full-benefit dual eligible enrollees, divided by the total
    number of units of the drug dispensed during the rebate period
    to all full-benefit dual eligible PDP and MA-PD enrollees.
        In general, a rebate agreement would be effective for an
    initial period of not less than 1 year and would be
    automatically renewed for a period of not less than 1 year. The
    Secretary would be required to establish other terms and
    conditions of the rebate agreement including terms and
    conditions related to compliance.
        For contract years beginning on or after January 1, 2011,
    each drug plan contract entered into with a PDP sponsor or a MA
    organization would require that the sponsor or organization
    report to each manufacturer not later than 60 days after the
    end of each rebate period, information on the total number of
    units of each dosage, form, and strength of each drug the
    manufacturer dispensed to full-benefit dual eligible Medicare
    drug plan enrollees under any PDPs or MA-PDs operated by the
    sponsor during the rebate period; information on the price
    discounts, price concessions, and rebates for such drugs for
    such form, strength, and period; information on the extent to
    which such price discounts, price concessions, and rebates
    apply equally to full-benefit dual eligible Medicare drug plan
    enrollees and enrollees who are not full-benefit dual eligible
    plan enrollees; and any additional information that the
    Secretary determines is necessary to enable the Secretary to
    calculate the average Medicare drug program full-benefit dual
    eligible rebate amount. The report would be in a form
    consistent with a standard reporting format established by the
    Secretary, and a copy of the information would be reported to
    the Secretary for the purpose of oversight and evaluation. The
    information submitted would be treated as confidential. The
    rebate would be paid by the manufacturer to the Secretary not
    later than 30 days after the date of receipt of this
    information.
        The provision would allow the Medicare Payment Advisory
    Commission, the Congressional Budget Office and the GAO access
    to the information, and the information reported may be used by
    the HHS Office of Inspector general for audits, investigations,
    and evaluations. Additional confidentiality provisions (with
    the exception of clause iv) from the Medicaid rebate section
    (1927(b)(3)) of the Social Security Act also apply to the
    Medicare Part D rebate data reported under this section.
        In cases where information was not submitted timely or if
    false information is submitted, penalties would be imposed. PDP
    sponsors and MA organizations would be subject to a civil money
    penalty in the amount of $10,000 for each day in which such
    information has not been provided. If the sponsor or
    organization knowingly provides false information, the sponsor
    or organization would be subject to a civil money penalty in an
    amount not to exceed $100,000 for each item of false
    information. Such penalties would be in addition to any other
    civil money penalties as may be prescribed by law.
        The rebates for full-benefit dual eligible Medicare drug
    plan enrollees would be paid into the Medicare Prescription
    Drug Account in the Supplementary Medical Insurance Trust Fund
    and used to pay for all or part of the gradual elimination of
    the coverage gap.
                Reason for Change
        When prescription drug coverage for six million dually
    eligible beneficiaries was switched from Medicaid to Medicare
    Part D in 2006, drug manufacturers received a windfall
    amounting to almost $4 billion in just the first two years of
    the program. While Medicaid rebates are statutorily required at
    a certain level, rebates in the Part D program are entirely
    negotiated between plans and manufacturers, giving the federal
    government and taxpayers who pay for the Part D program--no
    control over the level of rebate provided. Requiring that
    rebates from drug manufacturers in the Part D program match the
    rebates required under Medicaid ensures that for the same
    beneficiary, manufacturers are not permitted to charge higher
    prices to the government under Part D than under Medicaid.
    Manufacturers will continue to enter into rebate agreements
    with the Part D plans, however, if that rebate amount does not
    equal the Medicaid rebate amount for a particular drug, the
    manufacturer would be required to make up the difference in
    rebate payments directly to the federal government. With
    respect to GAO, the confidentiality provision that incorporates
    section 1927(b)(3) of the Social Security Act is intended to
    reflect and confirm GAO's existing right to access Part D
    information in light of its broad authority at 31 U.S.C. 716.
        Funds received from the new rebate requirement will be used
    to pay for, in whole or in part, the elimination of the Part D
    coverage gap. Since the program's inception, this mid-year gap
    in benefits has plagued millions of beneficiaries who continue
    to pay their monthly premium, yet also have to pay 100 percent
    of the cost of their drugs out-of-pocket. This section would
    eliminate the gap over time, ensuring that beneficiaries are
    insured against the full cost of drugs throughout the entire
    benefit year.
                Effective Date
        January 1, 2011.

    Sec. 1182. Discounts for Certain Part D Drugs in Original Coverage Gap

                Current Law
        No provision.
                Proposed Law
        Manufacturers of prescription drugs would, as a condition
    of allowing any of the drugs they manufacture to be treated as
    covered drugs under Medicare Part D, be required to enter into
    agreements with Medicare Part D drug plan sponsors to provide
    discounts on covered Part D drugs provided to plan enrollees in
    the coverage gap period. This provision would be applicable to
    drugs dispensed after December 31, 2010.
        Under a discount agreement, a drug manufacturer would be
    required to provide to each PDP or MA-PD plan a discount for
    qualifying drugs of the manufacturer dispensed to a qualifying
    enrollee when in the original Part D coverage gap. A qualifying
    drug would be defined as drug that is produced under an
    original new drug application approved by the FDA, or a drug
    that was initially marketed under such an application, or a
    biological product approved under Section 351(a) of the Public
    Health Service Act, and that is covered under the plan's
    formulary and is dispensed to an individual who is in the
    original coverage gap.
        The Secretary would establish the terms and conditions of
    the discount agreement, including those relating to compliance,
    similar to the terms and conditions for rebate agreements
    between states and drug manufacturers for drugs provided to
    Medicaid recipients. However, the discounts would be applied to
    PDPs and MA-PD plans rather than to states; PDP sponsors and MA
    organizations, instead of states, would be required to provide
    the necessary utilization information to drug manufacturers;
    and PDP sponsors and MA organizations would be responsible for
    reporting information on drug-component negotiated prices
    instead of other manufacturer prices used in calculating
    Medicaid rebates.
        The amount of the discount for a discount period for a plan
    would be equal to 50 percent of the amount of the negotiated
    price for qualifying drugs, excluding any dispensing fee for
    the period involved. The sponsor or plan would provide the
    discount to the enrollee at the time the enrollee pays for the
    drug if the enrollee is in the actual gap in coverage, and in
    such cases the amount of the discount, in addition to the
    amount actually paid by the enrollee, would count toward costs
    incurred by the plan enrollee. If the enrollee is in the
    portion of the original gap in coverage that is not in the
    actual gap in coverage, the discount shall not be applied
    against the negotiated price for the purpose of calculating the
    beneficiary payment.
        A qualifying enrollee is defined as an individual who is
    enrolled in a PDP or an MA-PD plan who is not a subsidy-
    eligible individual as defined in section 1860-D-14(a)(3). The
    original gap in coverage is defined as the gap that would occur
    between the initial coverage limit and the out-of-pocket
    threshold if the phase-out of the coverage gap described in
    Section 1181 did not apply. The actual gap in coverage refers
    to the gap between the initial coverage limit and the out-of-
    pocket threshold as modified by Section 1181.
        With regard to payments to pharmacists, discounts under
    this section are to be treated in a similar fashion to any
    other discounts, rebates, or price concessions provided to PDP
    sponsors, and payments to pharmacists in conjunction with these
    discounts are to be made consistent with prompt payment
    requirements under Section 1860D-12(b)(4), with the pharmacist
    to be fully reimbursed for clean claims within 14 days.
                Reason for Change
        In June 2009, the trade association representing brand-name
    pharmaceutical manufacturers--PhRMA--pledged to provide a 50
    percent discount to seniors in the Part D coverage gap to
    alleviate the high costs that seniors currently faced. This
    section would enact that promise into law. All Medicare
    beneficiaries who would otherwise face 100 percent cost sharing
    in the coverage gap, would receive a 50 percent discount on
    brand-name drugs. While this discount is important and will
    provide immediate relief for millions of seniors, it will still
    leave many beneficiaries with high out-of-pocket costs in the
    gap. Simultaneously, the act gradually closes the coverage gap
    so seniors' drug costs will be more consistent throughout the
    benefit year.
                Effective Date
        January 1, 2011.

    Sec. 1183. Repeal of Provision Relating To Submission of Claims by
            Pharmacies Located in or Contracting With Long-Term Care
            Facilities

                Current Law
        Section 172 of the Medicare Improvements for Patients and
    Providers Act of 2008 (MIPPA; P.L. 110-275) provided for a new
    set of requirements for contracts between Part D drug plan
    sponsors and pharmacies located in or contracting with long-
    term care facilities for plan years beginning on or after
    January 1, 2010. Under this section, each contract entered into
    with a PDP sponsor or MA-PD plan is required to provide that a
    pharmacy located in or having a contract with a longterm care
    facility would have between 30 and 90 days to submit claims for
    reimbursement.
                Proposed Law
        Section 172 of MIPPA would be repealed. This provision
    would be applicable for contract years beginning with 2010.
                Reason for Change
        This provision is repealed to allow long-term pharmacies
    and nursing homes more time to coordinate with state Medicaid
    programs.
                Effective Date
        January 1, 2010.

    Sec. 1184. Including Costs Incurred by AIDS Drug Assistance Programs
            and Indian Health Service in Providing Prescription Drugs
            Toward the Annual Out of Pocket Threshold Under Part D

                Current Law
        Under a standard Medicare Part D plan design, beneficiaries
    must incur a certain level of out-of-pocket costs ($4,350 in
    2009) before catastrophic protection begins. These include
    costs that are incurred for the deductible, cost-sharing, or
    benefits not paid because they fall in the coverage gap. Costs
    are counted as incurred, and thus treated as true out-of-pocket
    (TrOOP) costs only if they are paid by the individual (or by
    another family member on behalf of the individual), paid on
    behalf of a low-income individual under the subsidy provisions,
    or paid under a State Pharmaceutical Assistance Program.
    Incurred costs do not include amounts for which no benefits are
    provided--for example, because a drug is excluded under a
    particular plan's formulary. Additional payments that do not
    count toward TrOOP include Part D premiums and coverage by
    other insurance, including group health plans, workers'
    compensation, Part D plans' supplemental or enhanced benefits,
    or other third parties.
                Proposed Law
        The provision would treat as incurred those costs that are
    borne or paid by the Indian Health Service, Indian tribe or
    tribal organization or an urban Indian organization (as defined
    in Section 4 of the Indian Health Care Improvement Act) to
    count toward the out-of-pocket threshold. Costs paid under an
    AIDS Drug Assistance Program under Part B of Title XXVI of the
    Public Health Service Act would also count toward the out-of-
    pocket threshold. The provision would apply costs incurred on
    or after January 1, 2011.
                Reason for Change
        This requires the Secretary to count contributions from
    other programs designed to help beneficiaries with their drug
    costs for the purpose of a beneficiary reaching the
    catastrophic cap.
        This change will lower costs for beneficiaries who receive
    assistance from other sources from continuing to paying higher
    costs for prescription drugs.
                Effective Date
        January 1, 2011.

    Sec. 1185. Permitting Mid-Year Changes in Enrollment for Formulary
            Changes That Adversely Impact an Enrollee

                Current Law
        Part D plans are permitted to operate formularies--lists of
    drugs that a plan chooses to cover and the terms under which
    they are covered. By law, Part D plans may not change the
    therapeutic categories and classes in a formulary other than at
    the beginning of each plan year except as the Secretary may
    permit, to take into account new therapeutic uses and newly-
    approved covered Part D drugs. The law further stipulates that
    any removal of a covered Part D drug from a formulary and any
    change in the preferred or tiered cost-sharing status of such a
    drug shall take effect only after appropriate notice is made
    available to the Secretary, affected enrollees, physicians,
    pharmacies, and pharmacists.
        Under current regulations, a Part D sponsor may not remove
    a covered Part D drug from its Part D plan's formulary or make
    any change in the preferred or tiered cost-sharing status of a
    covered Part D drug on its plan's formulary between the
    beginning of the open enrollment period and 60 days after the
    beginning of the contract year associated with that open
    enrollment period except under certain circumstances, for
    example, when a covered drug has been deemed unsafe by the FDA
    or removed from the market by its manufacturer. After March 1
    of a given plan year, Part D sponsors may make maintenance
    changes to their formularies, such as replacing brand name
    drugs with new generic drugs or modifying formularies as a
    result of new information on drug safety or effectiveness.
    According to CMS policy, if Part D sponsors remove Part D drugs
    for their formularies, move covered Part D drugs to a less
    preferred tier status, or add utilization management
    requirements, these changes must be approved by CMS and
    sponsors may make such changes only if enrollees currently
    taking the affected drug are exempt from the formulary change
    for the remainder of the contract year.
        Part D sponsors may expand formularies by adding drugs to
    their formularies, reducing copayments or coinsurance by
    placing a drug on a lower cost-sharing tier, or deleting
    utilization management requirements at any time during the
    year.
                Proposed Law
        The provision would establish a special open enrollment
    period for an individual to change plans during a period other
    than during the annual open enrollment period. The provision
    would apply to an individual enrolled in a prescription drug
    plan (or an MA-PD plan) who has been prescribed and is using a
    drug while enrolled in the plan in the case where the formulary
    of the plan materially changed (other than at the end of the
    contract year) such as to reduce coverage or increase the cost-
    sharing of the drug. The provision would not apply in cases
    where the drug was removed from the formulary because of a
    recall or withdrawal issued by the Food and Drug Administration
    or because the drug was replaced with a therapeutically
    equivalent generic drug. The provision would also not apply in
    instances where utilization management was applied for drugs
    for which FDA required a boxed warning or drugs subject to a
    Risk Evaluation and Management Strategy under subsection (f) of
    Section 505-1 of the Federal Food, Drug, and Cosmetic Act. The
    provision would apply to contract years beginning on or after
    January 1, 2011.
                Reason for Change
        Beneficiaries choose prescription drug plans based on a
    number of factors, not the least of which is whether a plan
    covers the drugs they are currently taking. Though CMS has
    imposed certain restrictions on plan formulary changes, there
    is no protection for beneficiaries who are nonetheless harmed
    by a mid-year formulary change. This provision will allow
    adversely affected beneficiaries to choose a new plan, and will
    discourage plans from making mid-year formulary changes for
    highly prescribed drugs.
                Effective Date
        January 1, 2011.

                 Subtitle F--Medicare Rural Access Protections

    Sec. 1191. Telehealth Expansion and Enhancements

                Current Law
        Medicare covers certain services including professional
    consultations, office and other outpatient visits, individual
    psychotherapy, pharmacological management, psychiatric
    diagnostic interview examinations, neurobehavioral status
    exams, and end stage renal disease related services delivered
    via an eligible telecommunications system. An interactive
    telecommunications system is required as a condition of
    payment. The originating site (the location of the beneficiary
    receiving the telehealth service) can be a physician or
    practitioner's office, a critical access hospital, a rural
    health clinic, a federally qualified health center, a hospital-
    based renal dialysis center, a skilled nursing facility, a
    community mental health center or a hospital. The originating
    site must be in a rural health professional shortage area or in
    a county that is not in a metropolitan statistical area or at
    an entity that participates in a specified federal telemedicine
    demonstration project.
                Proposed Law
        A renal dialysis facility would be included as a covered
    originating site for telehealth services effective for services
    starting January 1, 2011.
        The Secretary would appoint a Telehealth Advisory Committee
    to make policy recommendations concerning/regarding telehealth
    services including the appropriate addition or deletion of
    covered services and procedure codes for authorized payments.
        The Advisory Committee would be composed of 9 members: 5
    would be practicing physicians; 2 would be practicing
    nonphysician health care practitioners, and 2 shall be
    administrators of telehealth programs. In appointing the
    committee members, the Secretary would be required to ensure
    that each member has prior experience with the practice of
    telemedicine or telehealth; would give preference to
    individuals who are currently providing telemedicine or
    telehealth services or who are involved in telemedicine or
    telehealth programs; would ensure that committee membership
    represents a balance of specialties and geographic regions; and
    would take into account the recommendations of stakeholders.
        The Telehealth Advisory Committee would meet at least twice
    each calendar year and at other times provided by the
    Secretary. The committee members would serve for the term
    specified by the Secretary. An advisory committee member would
    not be able to participate in a particular matter considered in
    meeting if such a member (or an immediate family member) had a
    financial interest that could be affected by the advice given
    to the Secretary. Section 14 of the Federal Advisory Committee
    Act governing termination, renewal and continuation of
    committees would not apply. The Secretary would establish this
    committee regardless of any limitation that would apply to the
    number of advisory committees that may be established with the
    Department of Health and Human Services or otherwise.
        In making determinations with respect to covered services,
    the Secretary would be required to take into account the
    recommendations of the Telehealth Advisory Committee. If the
    Secretary does not implement a recommendation, the Secretary
    would publish a statement providing the reason for such
    decision in the Federal Register.
        A telemedicine practitioner that is credentialed by a
    hospital in compliance with the Joint Commission Standards for
    Telemedicine would be considered in compliance with conditions
    of participation and reimbursement credentialing requirements
    for Medicare.
                Reason for Change
        Telehealth services can be a valuable way of delivering
    high quality care to underserved and other areas. This
    provision expands Medicare's telehealth benefit and ensures
    that CMS receives valuable outside expertise in the
    administration of the benefit.
                Effective Date
        January 1, 2011 for services provided by renal dialysis
    facilities; date of enactment for all other provisions.

    Sec. 1192. Extension of Outpatient Hold Harmless Provision

                Current Law
        Small rural hospitals (with no more than 100 beds) that are
    not sole community hospitals (SCHs) can receive additional
    Medicare payments if their outpatient payments under the
    prospective payment system are less than under the prior
    reimbursement system. For calendar year (CY) 2006, these
    hospitals received 95% of the difference between payments under
    the prospective payment system and those that would have been
    made under the prior reimbursement system. The hospitals
    receive 90% of the difference in CY2007 and 85% of the
    difference in CY2008 and CY2009. Sole community hospitals with
    not more than 100 beds receive 85% of the payment difference
    for covered HOPD services furnished on or after January 1,
    2009, and before January 1, 2010.
                Proposed Law
        Small rural hospitals and sole community hospitals with not
    more than 100 beds would receive 85% of the payment difference
    for covered HOPD services furnished until January 1, 2012.
                Reason for Change
        This provision protects small rural hospitals from the
    financial losses they would face under the outpatient
    prospective payment system. Eligible hospitals will receive a
    partial hold harmless payment until the end of CY2011.
                Effective Date
        January 1, 2010.

    Sec. 1193. Extension of Section 508 Hospital Reclassifications

                Current Law
        Section 508 of the Medicare Prescription Drug, Improvement
    and Modernization Act of 2003 (MMA, P.L. 108-173) provided $900
    million for a one-time, 3-year geographic reclassification of
    certain hospitals that were otherwise unable to qualify for
    administrative reclassification to areas with higher wage index
    values. These reclassifications were extended from March 31,
    2006 to September 30, 2007 by the Tax Relief and Health Care
    Act of 2006 (P.L. 109-432). The Medicare, Medicaid and SCHIP
    Extension Act (P.L. 110-173) extended the reclassifications to
    September 30, 2008. The Medicare Improvements for Patients and
    Providers Act of 2008 (MIPPA, P.L. 110-275) extended the
    reclassifications until September 30, 2009. These extensions
    are exempt from any budget neutrality requirements.
                Proposed Law
        The Section 508 reclassifications would be extended until
    September 30, 2011.
                Reason for Change
        This provision extends the MMA Section 508 geographic
    reclassification designations, and allows for other geographic
    reclassification designations, so that these hospitals may
    better compete with neighboring hospitals. The Committee notes
    that there are some hospitals that are eligible for
    reclassification both under the Medicare Geographic
    Classification Review Board (MGCRB) process as set forth at
    Section 1886(d)(10) of the Social Security Act and under
    Section 508. When publication of the final regulation for the
    Medicare inpatient prospective payment system precedes
    enactment of a Section 508 extension, these hospitals' wages
    are included into the reclassified wage index of the area to
    which they are being reclassified. The Committee does not see
    the need to provide further adjustments to these hospitals as
    the reclassified wage index they receive in such a scenario
    reflects inclusion of their own wages.
                Effective Date
        October 1, 2010.

    Sec. 1194. Extension of Geographic Floor for Work

                Current Law
        The Medicare fee schedule is adjusted geographically for
    three factors to reflect differences in the cost of resources
    needed to produce physician services: physician work, practice
    expense, and medical malpractice insurance. The geographic
    adjustments are indices that reflect how each area compares to
    the national average in a ``market basket'' of goods. A
    geographic practice cost index (GPCI) with a value of 1.00
    represents an average across all areas. A series of bills set a
    temporary floor value of 1.00 on the physician work index
    beginning January 2004; most recently, Section 134 of the MIPPA
    extended the application of this floor when calculating
    Medicare physician reimbursement through December 2009. The
    other geographic indices (for practice expense and medical
    malpractice) were not modified by these Acts.
                Proposed Law
        The proposal would extend the 1.00 floor for the geographic
    index for physician work for an additional 2 years through
    December 2011.
                Reason for Change
        Rural physicians put in as much time, skill, and intensity
    into their work as physicians in urban areas. This provision
    ensures that rural physicians are paid at least the average
    rate for their work.
                Effective Date
        January 1, 2010.

    Sec. 1195. Extension of Payment for Technical Component of Certain
            Physician Pathology Services

                Current Law
        Legislation enacted in 1997 specified that independent labs
    that had agreements with hospitals on July 22, 1999 to bill
    directly for the technical component of pathology services
    could continue to do so in 2001 and 2002. The provision has
    been periodically extended, most recently through December 31,
    2009 by MIPPA.
                Proposed Law
        The bill would extend this provision through 2011.
                Reason for Change
        This provision is needed in order to continue allowing
    direct billing for the technical component for independent labs
    that have agreements with hospitals. Without this extension,
    hospitals will incur an additional cost that is not included in
    the payment rate under the prospective payment system. This
    provision protects rural beneficiaries' access to laboratory
    services.
                Effective Date
        January 1, 2010.

    Sec. 1196. Extension of Ambulance Add-Ons

                Current Law
        Ambulance services are paid on the basis of a national fee
    schedule, which is being phased in. The fee schedule
    establishes seven categories of ground ambulance services and
    two categories of air ambulance services. The national fee
    schedule is fully phased in for air ambulance services. For
    ground ambulance services, payments through 2009 are equal to
    the greater of the national fee schedule or a blend of the
    national and regional fee schedule amounts. The portion of the
    blend based on national rates is 80% for 2007-2009. In 2010 and
    subsequently, the payments in all areas will be based on the
    national fee schedule amount.
        The fee schedule payment for an ambulance service equals a
    base rate for the level of service plus payment for mileage.
    Geographic adjustments are made to a portion of the base rate.
    For the period July 2004 to December 2009, mileage payments are
    increased for ground ambulance services originating in rural
    low population density areas. For the period July 1, 2004 until
    December 31, 2008, there is a 25% bonus on the mileage rate for
    trips of 51 miles and more. Payments for ground transports
    originating in rural areas or rural census tracts are increased
    by 3% for the period of October 1, 2008 through December 31,
    2009.
        MIPPA specifies that any area designated as rural for the
    purposes of making payments for air ambulance services on
    December 31, 2006, will be treated as rural for the purpose of
    making air ambulance payments during the period July 1, 2008
    until December 31, 2009.
                Proposed Law
        The provision would maintain the 3% higher payments for
    ground transports originating in rural areas or rural census
    tracts until December 31, 2011. The MIPPA provision maintaining
    the designation of certain areas as rural for the purposes of
    Medicare's payments for air ambulance services would be
    maintained until December 31, 2011.
                Reason for Change
        This provision helps to cover the cost of providing
    ambulance services in rural areas.
                Effective Date
        January 1, 2010.

                  TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS

      Subtitle A--Improving and Simplifying Financial Assistance for Low-
                         Income Medicare Beneficiaries

    Sec. 1201. Improving Assets Tests for Medicare Savings Program and Low-
            income Subsidy Program

                Current Law
        Federal assistance is provided to certain low-income
    persons to help them meet Medicare Part D premium and cost-
    sharing charges. To qualify for the Part D low-income subsidy,
    Medicare beneficiaries must have resources no greater than the
    income and resource limits established by the Medicare
    Prescription Drug, Improvement, and Modernization Act of 2003
    (P.L.108-173, MMA).
        Individuals may qualify for the full subsidy in two ways:
    1) if they are eligible for Medicaid or one of the Medicare
    Savings Programs (Qualified Medicare Beneficiary (QMB),
    Specified Low Income Medicare Beneficiary (SLMB), or Qualifying
    Individual (QI)), or are recipients of Supplemental Security
    Income (SSI) benefits, they are deemed automatically eligible;
    or 2) if they apply for the benefit, through their State
    Medicaid agency or through the Social Security Administration
    (SSA) and are determined to have an annual income below 135% of
    the federal poverty level (FPL) and have resources below a
    certain limit (in 2009, $6,600 for an individual or $9,910 if
    married). Beneficiaries may qualify for a partial subsidy if
    they apply and are determined to have an annual income below
    150% of the FPL and whose resources do not exceed a certain
    limit (in 2009, $11,010 for individuals or $22,010 if married).
    (When determining whether a beneficiary qualifies for the
    Medicare Part D low-income subsidy, $1,500 per person in
    resources are excluded from consideration if the beneficiary
    indicates that he/she expects to use resources for burial
    expenses; otherwise $1,500 should be added to the above asset
    limits for an individual and $3,000 for a couple.)
                Proposed Law
        Under this provision, the maximum resources levels used to
    determine eligibility for the low income subsidy would be
    increased. In 2012, the level would be $17,000 for an
    individual and $34,000 for a couple. In subsequent years, the
    asset level would be increased by the annual percent increase
    in the Consumer Price Index (all items, U.S. city average) as
    of September of the previous year.
        These maximum resources levels would also apply for
    determining eligibility for Medicare Savings Programs,
    beginning January 1, 2012.
                Reason for Change
        Millions of low-income Medicare beneficiaries do not
    qualify for financial assistance under the Part D low-income
    subsidy (LIS) or the Medicare Savings Program (MSP) because
    they have a small nest egg that exceeds the maximum resource
    limits permitted by the programs. Even the presence of an asset
    test can be a barrier to applicants because of the daunting
    application process. This section harmonizes the asset tests
    for eligibility for all LIS eligible individuals--full and
    partial Part D subsidy--and the MSP to simplify the test, and
    raises the maximum level to prevent seniors with nest eggs from
    being disqualified from receiving the subsidy.
                Effective Date
        January 1, 2012.

    Sec. 1202. Elimination of Part D) Cost-sharing for Certain Non-
            Institutionalized Full-Benefit Dual Eligible Individuals

                Current Law
        Cost-sharing subsidies for LIS enrollees are linked to the
    standard prescription drug coverage. Full-subsidy eligibles
    have no deductible, minimal cost sharing during the initial
    coverage period and coverage gap, and no cost-sharing over the
    catastrophic threshold.
        Full-benefit dual eligibles who are residents of medical
    institutions or nursing facilities have no cost-sharing. Other
    full-benefit dual-eligible individuals with incomes up to 100%
    of poverty have cost-sharing, for all costs up to the out-of-
    pocket threshold, of $1.10 in 2009 for a generic drug
    prescription or preferred multiple source drug prescription and
    $3.20 in 2009 for any other drug prescription. All other full-
    subsidy-eligible individuals have cost-sharing for all costs up
    to the out-of-pocket threshold, of $2.40 in 2009 for a generic
    drug or preferred multiple source drug and $6.00 in 2009 for
    any other drug.
                Proposed Law
        Under this provision, cost-sharing would not apply to
    persons who were full benefit dual eligibles and for whom a
    determination was made that but for the provision of home and
    community based care, the individual would require the level of
    care provided in a hospital or a nursing facility or
    intermediate care facility for the mentally retarded and such
    care would be paid for by Medicaid. Such home and community
    based care would be that provided under Section 1915 or 1932 of
    the SSA or under a waiver under Section 1115 of the Act. The
    provision would apply to drugs dispensed on or after January 1,
    2011.
                Reason for Change
        For decades, policymakers at the state and federal level
    have made efforts to eliminate the bias toward
    institutionalization for those needing long-term care services
    by providing benefits for needed health care services in
    community-based settings. Studies have shown that people
    needing long-term care prefer to receive benefits in the
    community and that often such benefits can be provided at less
    cost than similar benefits in an institution (e.g. a nursing
    home).
        The Medicare Modernization Act, for purposes of the Part D
    benefit, distinguished between beneficiaries who receive care
    in a community setting and those in an institution.
    Beneficiaries in institutions were exempted from Part D cost
    sharing, but those in the community--who were equally poor and
    needed an equivalent level of care--were not. This provision in
    the Medicare drug bill was a setback to decades of federal and
    state policy to encourage, or at least be neutral toward,
    beneficiaries receiving care in home or community settings.
        Extending the protection against cost-sharing to dually
    eligible beneficiaries who are eligible to be institutionalized
    in a hospital or facility for the mentally retarded ensures
    that these most vulnerable beneficiaries are not penalized for
    choosing to receive care in a home or community-based setting.
                Effective Date
        January 1, 2011.

    Sec. 1203. Eliminating Barriers to Enrollment

                Current Law
        In general, federal law stipulates few documentation
    requirements for Medicaid applicants, including persons who
    apply for coverage under the Medicare Savings Program (MSP).
    Although states have flexibility to collect income and asset
    information through self-declaration alone, they also have the
    ability to require supporting documentation. State policies on
    this issue vary based on the eligibility group, but a
    considerable amount of documentation may be required to
    determine whether an individual meets financial eligibility
    requirements for Medicaid.
        Under the Medicare Part D low-income subsidy program, full-
    benefit dual eligibles, those receiving assistance through
    Medicare Savings Programs, and recipients of SSI are deemed
    subsidy-eligible individuals for up to one year; other persons,
    or their personal representatives, have to apply for
    assistance. Applicants may apply either at state Medicaid
    offices or Social Security offices. Applicants are required to
    provide information from financial institutions, as requested,
    to support information in the application, and to certify as to
    the accuracy of the information provided.
                Proposed Law
        Medicare beneficiaries applying for a low-income subsidy
    under the prescription drug program would be permitted to apply
    on the basis of self-certification of income and resources. The
    information provided would be subject to verification; however,
    and except in extraordinary situations as determined by the
    Commissioner of SSA, the individual would not be required to
    provide additional documentation. Verification would be
    accomplished through data-sharing between the SSA and the
    Internal Revenue Service described under existing authority.
    This provision would be effective beginning January 1, 2010.
                Reason for Change
        Administrative barriers often prevent low-income Medicare
    beneficiaries from accessing the Part D low-income subsidy
    (LIS) that they might be eligible for under the law. This
    section requires the Social Security Administration (SSA) to
    administratively verify a beneficiary's income and assets,
    without requiring submission of burdensome paperwork or
    financial documentation. SSA already has authority to verify
    eligibility for the LIS through data it obtains directly from
    the Internal Revenue Service without requiring seniors, many of
    whom are frail or have limited mobility, to present financial
    documents.
                Effective Date
        January 1, 2010.

    Sec. 1204. Enhanced Oversight Relating to Reimbursements for
            Retroactive Low Income Subsidy Enrollment

                Current Law
        Certain groups of Medicare beneficiaries automatically
    qualify (and are deemed eligible) for the full low-income
    subsidy. Dual eligibles who qualify for Medicaid based on their
    income and assets are automatically deemed eligible for
    Medicare prescription drug low-income subsidies. Additionally,
    those who receive premium and/or cost-sharing assistance
    through the Medicare Savings Programs (MSP), plus those
    eligible for SSI cash assistance, are automatically deemed
    eligible for low-income subsidies and need not apply for them.
    CMS deems individuals automatically eligible for LIS effective
    as of the first day of the month that the individual attains
    the qualifying status (e.g., becomes eligible for Medicaid,
    MSP, or SSI). The end date is, at a minimum, through the end of
    the calendar year within which the individual becomes eligible.
        These individuals' Medicaid prescription drug coverage
    ceases as soon as the individual is eligible for Part D,
    regardless of whether the individual is enrolled in a Part D
    plan. This creates the risk of gaps in coverage. To prevent
    gaps between the end of Medicaid prescription drug coverage and
    the start of Medicare prescription drug coverage, CMS
    regulation specifies that auto-enrollment is effective the
    month in which the person becomes full-benefit dual eligible.
    Because Medicaid eligibility is often retroactive, CMS randomly
    auto-enrolls new full-benefit dual eligibles into Part D plans
    retroactive to the start of their full dual status.
        Other individuals with limited income and resources who do
    not automatically qualify may apply for the low-income subsidy
    and have their eligibility determined by either the SSA or
    their state Medicaid agency. An individual who applies and is
    determined eligible for the LIS is eligible effective the first
    day of the month in which the individual submitted an
    application. In most cases, this means that LIS status is
    applied retroactively. If a beneficiary is already enrolled in
    a Part D plan, the Part D sponsor must take steps to ensure
    that the beneficiary has been reimbursed for any premiums or
    cost-sharing the member had paid that should have been covered
    by the subsidy.
        The Centers for Medicare & Medicaid Services (CMS) issued a
    request for proposals (RFP) on February 17, 2009 to solicit a
    contractor (a national prescription drug plan sponsor) to cover
    Part D prescription drug claims for retroactive periods of
    coverage for full-benefit dual eligible and SSI-eligible
    individuals, as well as point-of-sale coverage at a pharmacy
    for certain individuals with the Part D low-income subsidy who
    are not yet enrolled in a Part D plan. Beginning in 2010, CMS
    has the demonstration authority to test a revised approach for
    providing retroactive and immediate need coverage. Under the
    demonstration, CMS will contract with a single PDP sponsor to
    pay for all claims for retroactive auto-enrollment periods plus
    current and immediate need claims for all LIS eligibles. CMS
    will modify its auto and facilitated enrollment process so that
    all those with retroactive effective dates are assigned to the
    demonstration for those retroactive periods, but continue to be
    randomly assigned for prospective periods to standard LIS PDPs.
                Proposed Law
        In the case of a retroactive LIS enrollment, the
    beneficiary, or a third party that is owed payment on behalf of
    the beneficiary, would be entitled to be reimbursed for covered
    drug costs incurred by the beneficiary during the retroactive
    coverage period. The retroactive coverage period is defined as
    the period beginning on the effective date of LIS assistance
    for which the individual is eligible and ending on the date the
    plan effectuates the status of such individual as eligible.
    Covered drug costs would be defined as the amount by which the
    costs incurred by the beneficiary for covered part D drugs,
    premiums and cost sharing exceeds such costs that would have
    been incurred if the beneficiary had been receiving a low-
    income subsidy to which the individual was entitled.
        The reimbursement would be made automatically by the Part D
    plan sponsor upon appropriate notice that the beneficiary is
    eligible for assistance and no further information would need
    to be submitted to the plan by the beneficiary. For each such
    reimbursement, the PDP or MA-PD plan would be required to
    include a line-item description of the items for which the
    reimbursement is made. Additionally, the provision would
    require that reimbursement be submitted not later than 45 days
    after the date on which the plan receives notice from the
    Secretary that the beneficiary is eligible for assistance or
    the date on which the beneficiary files the claim with the
    plan.
        A retroactive LIS enrollment beneficiary would be defined
    as an individual who is enrolled in a PDP or an MA-PD plan and
    subsequently becomes eligible as a full-benefit dual eligible
    individual, Medicare Savings Program eligible, or eligible for
    SSI, or is a full-benefit dual eligible individual who is
    automatically enrolled in such a plan. Beneficiaries who
    enrolled in a plan whose sponsor entered into a contract with
    the Secretary, pursuant to CMS's request for proposals (RFP)
    issued on February 17, 2009 relating to Medicare Part D
    retroactive coverage for certain low-income beneficiaries, or a
    similar subsequent request for such proposals, would not be
    included in this definition.
        For each month, beginning with January 2011, each PDP and
    MA-PD plan would be required to report to the Secretary
    information on the number and value of claims the plan has re-
    adjudicated on behalf of a beneficiary due to the beneficiary
    becoming retroactively eligible for the subsidy, the affected
    beneficiaries' Medicare identification number, and an
    attestation to the Administrator of CMS regarding the total
    amount of reimbursement the plan has provided to beneficiaries
    for premiums and cost-sharing that the beneficiary overpaid and
    for which the plan received payment.
                Reason for Change
        Through existing authority under current law, the Secretary
    has established a requirement that Part D plans make
    appropriate retroactive reimbursements to beneficiaries and
    third parties. This provision would enact and clarify that
    process. It also would implement oversight procedures of the
    retroactive reimbursement process to allow the Secretary to
    better determine whether the payments for this retroactive
    coverage from CMS to the Part D plans are accurately and
    consistently reimbursed to beneficiaries and third parties.
                Effective Date
        January 1, 2011.

    Sec. 1205. Intelligent Assignment in Enrollment

                Current Law
        Special enrollment rules apply to individuals eligible for
    the Part D low income subsidy. Generally, there is a two-step
    process for low-income persons to gain Part D coverage. First,
    a determination must be made that they qualify for the
    assistance; second, they must enroll, or be enrolled, in a
    specific Part D plan.
        According to Section 1860D-14 of the SSA, full-benefit
    dual-eligible individuals who have not elected a Part D plan
    are to be auto-enrolled into one by CMS. If there is more than
    one plan available that has a monthly beneficiary premium that
    does not exceed the premium assistance amount under the low-
    income subsidy, the beneficiary is to be enrolled on a random
    basis among all such plans in the PDP region. The individual
    has the option of declining or changing such enrollment.
        Some dual eligibles may find that they are auto-enrolled in
    a plan that may not best meet their needs. For example, it is
    possible that the specific drug(s) that a beneficiary is
    currently taking is not covered by the new plan. For this
    reason, beneficiaries are able to change enrollment at any
    time, with the new coverage effective the following month.
                Proposed Law
        The Secretary would be given the option to use an
    ``intelligent assignment'' process as an alternative to the
    random assignment process. The intelligent assignment process
    would be designed to maximize the access of full-benefit dual
    eligibles to necessary prescription drugs while minimizing
    costs to the individual and to the program to the greatest
    extent possible. The process would need to take into account
    the extent to which prescription drugs necessary for the
    individual are covered, the use of prior authorization or other
    restrictions on access to coverage of drugs, and the overall
    quality of a prescription drug plan.
                Reason for Change
        The Medicare Modernization Act prohibited CMS from using
    any methodology other than random assignment when automatically
    enrolling full benefit dual eligibles into Part D plans. While
    this process results in beneficiaries enrolled in the lowest
    cost plans based on monthly premium, it does not take into
    consideration whether this vulnerable population is enrolled in
    quality plans that cover the beneficiaries' necessary
    medications. While dual eligibles have the option of enrolling
    in a different plan, this is a particularly frail population
    that may not have the capacity to evaluate and choose among all
    of the available plans. The Committee's intention is that CMS
    evaluate methodologies for intelligently assigning dual
    eligibles to Part D plans based on cost--but also on formulary
    coverage for beneficiaries' needed prescriptions, use of prior
    authorization and other restrictions, and quality measures--and
    to implement if the Secretary determines that a methodology
    could both minimize cost to the program and maximize access of
    dual eligibles to needed prescription drugs.
                Effective Date
        January 1, 2012.

    Sec. 1206. Special Enrollment Period and Automatic Enrollment Process
            for Certain Subsidy Eligible Individuals

                Current Law
        In general, a Medicare beneficiary who does not enroll in
    Part D during his or her initial enrollment period may enroll
    only during the annual open enrollment period, which occurs
    from November 15 to December 31 each year. Coverage begins the
    following January 1. Beneficiaries already enrolled in a Part D
    plan may change their plans during the annual open enrollment
    period.
        There are a few additional, limited occasions when an
    individual may enroll in or disenroll from a Part D plan or
    switch from one Part D plan to another, called special
    enrollment periods (SEPs). For example, SEPs are allowed for
    individuals who involuntarily lose creditable coverage, are
    subject to a federal error in enrollment, meet certain
    exceptional conditions as established by the Secretary, or are
    a full-benefit dual eligible individual.
                Proposed Law
        The provision would establish a new special enrollment
    period for persons deemed to be low-income subsidy eligible
    individuals. The provision would also require the Secretary to
    use an automatic assignment process to enroll low-income
    beneficiaries who failed to enroll in a prescription drug plan
    or MA-PD plan during the special enrollment period. This
    assignment process would be identical to that used for full-
    benefit dual eligibles. The individual would have the option of
    declining or changing such enrollment.
                Reason for Change
        Under current statutory authority, the Secretary has
    established a continuous SEP whereby upon becoming eligible for
    Part D, the Secretary automatically enrolls full benefit dual
    eligibles into a Part D plan; the individual retains the right
    to decline or change enrollment in any month. The Secretary has
    also expanded this SEP to include all individuals who are
    eligible for the Part D low-income subsidy (LIS). This
    provision codifies CMS' interpretation of current law with
    regard to allowing an SEP and automatic enrollment process for
    all LIS-eligible beneficiaries, and harmonizes the auto-
    enrollment process created in section 1205 of the Act for full-
    benefit dual eligibles with other LIS-eligible beneficiaries
    (i.e. permitting CMS to use an intelligent assignment process).
    Although the MMA limited the statutory SEP to full-benefit dual
    eligibles, the Committee agrees with CMS that this SEP and
    subsequent automatic enrollment into a Part D plan should also
    apply to other LIS-eligible beneficiaries as a guarantee that
    individuals are properly enrolled in a Part D plan and able to
    access needed medications.
                Effective Date
        Subsidy determination made for months beginning with
    January 2011.

    Sec. 1207. Application of MA Premiums Prior to Rebate in Calculation of
            Low Income Subsidy Benchmark

                Current Law
        The federal government pays up to 100% of the Part D
    premiums for LIS beneficiaries who are enrolled in
    ``benchmark'' plans. A Part D plan qualifies as a benchmark
    plan if it offers basic Part D coverage with premiums equal to
    or lower than the regional low-income premium subsidy amount.
    The regional low-income benchmark premium amount, calculated
    annually, is the weighted average of all premiums in each of
    the 34 prescription drug plan (PDP) regions for basic
    prescription drug coverage, or the actuarial value of basic
    prescription drug coverage for plans that offer enhanced
    coverage options, or for Medicare Advantage Prescription Drug
    (MA-PD) plans, the portion of the premium attributable to basic
    prescription drug benefits.
        Under the Medicare Advantage program (Part C), plans bid to
    offer Parts A and B coverage to beneficiaries. CMS bases the
    Medicare payment for a MA plan on the relationship between its
    bid and a benchmark (different from the LIS benchmark). The MA
    benchmark represents the maximum amount the federal government
    will pay a plan for providing required Medicare benefits. If a
    plan's bid is less than the benchmark, its payment equals its
    bid plus a rebate of 75% of the difference between the
    benchmark and the bid. The rebate must be used to provide
    additional benefits to enrollees, reduce Medicare cost sharing
    expenses, or reduce a beneficiary's monthly Part B,
    prescription drug, or supplemental premium (for services beyond
    the required Medicare benefits).
        MA plans offering prescription drug coverage submit a
    separate bid for the Part D portion. Payment for the portion of
    the premium attributable to basic prescription drug benefits is
    calculated in the same way as that for stand-alone PDPs;
    however the MA plan may choose to apply some of its Part C
    rebate payments to lower the Part D premium.
                Proposed Law
        The statute would be modified to exclude the Part C rebate
    amounts from the MA-PD plan premiums when calculating the low-
    income regional benchmark for subsidy determinations made for
    months beginning with January 2011.
                Reason for Change
        CMS' current methodology for determining which plans are
    eligible for automatic enrollment of LIS-eligible beneficiaries
    results in millions of beneficiaries being switched into
    different Part D plans each year. This is disruptive and
    confusing for beneficiaries. Excluding the rebate portion of
    the premium--which goes solely to providing extra benefits,
    like gym memberships--from the calculation of the LIS benchmark
    which determines the plans eligible for auto-enrollment, will
    lessen the number of beneficiaries who have to switch plans
    each year because their plan's premium exceeds the LIS
    benchmark. This is one step toward ensuring that frail
    beneficiaries have continuity in their Part D plan from year-
    to-year and maintain adequate access to needed prescription
    drugs.
                Effective Date
        Subsidy determination made for months beginning with
    January 2011.

                    Subtitle B--Reducing Health Disparities

    Sec. 1221. Ensuring Effective Communication in Medicare

                Current Law
        Congress passed Title VI of the Civil Rights Act of 1964 to
    ensure that federal money is not used to support programs or
    activities that discriminate on the basis of race, color, or
    national origin. The United States Supreme Court has treated
    discrimination based on language as national origin
    discrimination. Therefore, recipients of federal funds
    (including hospitals, nursing homes, state Medicaid agencies,
    managed care organizations, home health agencies, health
    service providers, human service organizations, and any other
    health or human services federal fund recipient, as well as
    subcontractors, vendors, and subrecipients) are required to
    take reasonable steps to ensure that persons with limited
    English proficiency have meaningful access to programs and
    activities. The Department of Health and Human Services has
    issued guidance, including a four-factor analysis, that
    implicates the ``mix'' of language services that should be
    offered, including oral and written interpretation services.
                Proposed Law
        The provision would require the Secretary of the Department
    of Health and Human Services to conduct a study to examine the
    extent to which Medicare providers utilize, offer, or make
    available language services for beneficiaries who are limited
    English proficient and ways that Medicare should develop
    payment systems for language services. The study would include
    an analysis of: ways to develop and structure appropriate
    payment systems for language services for Medicare providers;
    the feasibility of adopting a payment methodology for on-site
    interpreters; the feasibility of Medicare contracting directly
    with agencies that provide off-site interpretation, including
    telephonic and video interpretation; the feasibility of
    modifying the existing Medicare resource-based relative value
    scale (RBRVS) by using adjustments when a patient is LEP; and
    how each of these options would be funded. The study would also
    include an analysis of the extent to which providers under
    Medicare Parts A, B, C, and D utilize, offer, or make available
    language services for beneficiaries with LEP; and the nature
    and type of language services provided by states for Medicaid
    recipients, and the extent to which such services could be
    utilized by Medicare providers.
        The potential payment systems included in the analysis
    could allow variations based on types of service providers,
    available delivery methods, and costs for providing language
    services. Factors could include: the type of language service
    provided, such as the provision of health care or health care
    related services directly in a non-English language by a
    bilingual provider or use of an interpreter; the type of
    interpretation provided, such as in-person, telephonic, video
    interpretation; the methods and costs of providing language
    services, including the costs of providing language services
    with internal staff and/or through contract with external
    independent contractors or agencies; providing services for
    languages not frequently encountered in the United States; and
    providing services in rural areas.
        The Secretary would be required to submit a report to
    appropriate committees of Congress not later than 12 months
    after the date of enactment of this Act. The Paperwork
    Reduction Act would not apply for purposes of carrying out this
    study. The necessary funds to conduct the study would be
    authorized to be appropriated.
        This provision also would authorize the Secretary to apply
    sanctions, such as civil money penalties, suspension of
    enrollment, and suspension or payments, to Medicare Advantage
    organizations that substantially fail to provide required
    language services to LEP beneficiaries enrolled in their plans.
                Reason for Change
        Studies have shown that language barriers can have
    deleterious effects on patient care. Patients who face such
    barriers are less likely than others to have a usual source of
    medical care; they receive preventive services at reduced
    rates; and they have an increased risk of nonadherence to
    medication. Ad hoc interpreters, including family members,
    friends, untrained members of the support staff, and strangers
    found in waiting rooms or on the street, are commonly used in
    clinical encounters. However, such interpreters are
    considerably more likely than professional interpreters to
    commit errors that may have adverse clinical consequences. This
    policy is intended to evaluate the effectiveness of culturally
    and linguistically appropriate care by directing the Secretary
    to conduct a study that examines the extent to which Medicare
    providers utilize, offer or make available language services
    for beneficiaries who are limited English proficient. The study
    will also evaluate ways that Medicare should develop payment
    systems for language services.
                Effective Date
        Date of enactment.

    Sec. 1222. Demonstration to Promote Access for Medicare Beneficiaries
            with Limited English Proficiency by Providing Reimbursement for
            Culturally and Linguistically Appropriate Services

                Current Law
        No provision.
                Proposed Law
        Not later than 6 months after the completion of the study
    described in section 1221, the Secretary, acting through the
    CMS, would be required to carry out a demonstration program
    under which the Secretary would award no fewer than 24 three-
    year grants to eligible Medicare providers to improve effective
    communication between providers and Medicare beneficiaries
    living in communities where racial and ethnic minorities,
    including populations that face language barriers, are
    underserved with respect to such services. Using the results of
    the completed study, the Secretary would adjust, as
    appropriate, the distribution of grants to target Medicare
    beneficiaries who are in the greatest need of language
    services. The Secretary would be required to not authorize a
    grant larger than $500,000 over three years for any grantee.
        To be eligible to receive a grant, an entity would be
    required to be a Medicare provider of services under Parts A or
    B, a Medicare Advantage organization offering a Medicare part C
    plan, or a sponsor of a part D prescription drug plan (PDP). To
    the extent feasible, the Secretary would award at least 6
    grants each to part A providers, part B providers, part C
    organizations, and to prescription drug sponsors. The Secretary
    would be required to give priority to applicants that have
    developed partnerships with community organizations or agencies
    with experience in language access. The Secretary would also
    need to ensure that grantees represent variations in types of
    language services, languages needed and their frequency of use,
    urban and rural settings, at least two geographic regions as
    defined by the Secretary, and at least two large urban areas
    with diverse populations.
        The grantee would be required to use the grant funds to pay
    for the provision of competent language services to LEP
    Medicare beneficiaries. Such services may be provided through
    on-site interpretation, telephonic interpretation, video
    interpretation, or direct provision of health care or health
    care-related services by a bilingual health care provider. The
    grantee may also use bilingual providers, staff, or contract
    interpreters. The grantee may use up to 10% of the grant funds
    to pay for administrative costs associated with the provision
    of competent language services and for required reporting.
    Grantees that are part C organizations or PDP sponsors would be
    required to ensure that their network providers, including
    physicians and pharmacies, receive at least 50% of the grant
    funds to pay for the provision of language services.
        The payments to grantees would be calculated based on the
    estimated numbers of LEP Medicare beneficiaries in a grantee's
    service area, using the most recently available data from the
    Bureau of Census or other state-based study on the number of
    individuals served by the grantee who speak English less than
    ``very well'', or using the grantee's own data on Medicare
    beneficiaries primary language if the Secretary determines such
    data to be reliable. Payment would only be provided to grantees
    that report their costs of providing language services and may
    be modified annually at the discretion of the Secretary. If the
    grantee does not provide the reports for the first year of a
    grant, the Secretary would be able to terminate the grant and
    to solicit applications from new grantees to participate in the
    subsequent two years of the demonstration program.
        Payments would only be provided to grantees that utilize
    competent bilingual staff or competent interpreter or
    translation services which meet the state standards currently
    in effect if the grantee operates in a state that has statewide
    health care interpreter standards. For grantees operating in
    states without such standards, the grantee would be required to
    utilize interpreters who follow the National Council on
    Interpreting in Health Care's Code of Ethics and Standards of
    Practice. This requirement would not apply if a beneficiary
    requests the use of family, friends, or other persons untrained
    in interpretation and the grantee documents the request in the
    beneficiary's record. This requirement would also not apply in
    the case of a medical emergency where the delay associated with
    obtaining an interpreter would jeopardize the health of the
    patient. Emergency rooms and other entities that regularly
    provide health care services in medical emergencies, would,
    however not be exempt from the requirement to provide
    interpreter and translation services without undue delay.
        Grantees would also be required to: ensure that appropriate
    clinical and support staff receive ongoing education and
    training in linguistically appropriate service delivery; ensure
    the linguistic competence of bilingual providers; offer and
    provide appropriate language services at no additional charge
    to each LEP patient at all points of contact, in a timely
    manner during all hours of operation; notify Medicare
    beneficiaries of their right to receive language services in
    their primary language; post signage in the languages of the
    commonly encountered group or groups present in the
    organization's service area; and ensure that primary language
    data are collected for recipients of language services (if the
    recipient of language services is a minor or is incapacitated,
    the primary language of the parent or legal guardian would be
    collected and utilized).
        Grantees would be required to provide the Secretary with
    reports at the end of each year of the grant. The report would
    include (1) the number of Medicare beneficiaries to whom
    language services are provided; (2) the languages of those
    Medicare beneficiaries; (3) the types of language services
    provided; (4) the type of interpretation; (5) the methods of
    providing language services; (6) the length of time for each
    interpretation encounter; and (7) the costs of providing
    language services.
        LEP Medicare beneficiaries would not be required to pay
    cost-sharing or co-pays for language services provided under
    this demonstration.
        The Secretary would be required to conduct an evaluation of
    the demonstration program and submit a report to the
    appropriate committees of Congress not later than 1 year after
    the completion of the program. The report would include an
    analysis of the patient outcomes and costs of furnishing care
    to the LEP Medicare beneficiaries participating in the project
    compared to those not participating; the effect of delivering
    culturally and linguistically appropriate services on
    beneficiary access to care, utilization of services, efficiency
    and cost-effectiveness of health care delivery, patient
    satisfaction, and health outcomes; and recommendations
    regarding the extension of the project to the entire Medicare
    program.
        This provision would not limit existing obligations of
    recipients of federal financial assistance under title VI of
    the Civil Rights Act of 1964. An amount of $16 million would be
    authorized to be appropriated for each fiscal year of the
    demonstration program.
                Reason for Change
        Although certain recipients of federal funds are required
    to offer language services, Medicare does not reimburse for
    these services. Testing alternative methods of delivering
    culturally and linguistically appropriate services will enable
    Medicare to apply best practices and vastly improve both access
    to and quality of services to beneficiaries with limited
    English proficiency.
                Effective Date
        The demonstration would begin not later than 6 months after
    the completion study described in section 1221.

    Sec. 1223. IOM report on Impact of Language Access Services

                Current Law
        No Provision.
                Proposed Law
        Under this provision, the Secretary of HHS would be
    required to enter into an arrangement with the Institute of
    Medicine (IOM) under which the IOM would prepare a report on
    the impact of language access services on the health and health
    care of limited English proficient populations. The report
    would be issued not later than 3 years after the date of the
    enactment of the Act.
        The report would include recommendations on the development
    and implementation of policies and practices by health care
    organizations and providers for limited English proficient
    patient populations, a description of the effect of providing
    language access services on quality of health care and access
    to care and reduced medical error, and a description of the
    costs associated with, or savings related to, the provision of
    language access services.

    Sec. 1224. Definitions

                Current Law
        No provision.
                Proposed Law
        This provision provides the following definitions to be
    applied in sections 1221 through 1223.
        The term bilingual would mean a person who has a sufficient
    degree of proficiency in two languages and can ensure that
    effective communication can occur in both languages.
        The term competent interpreter services would be defined as
    a trans-language rendition of a spoken message in which the
    interpreter comprehends the source language and can speak
    comprehensively in the target language to convey the intended
    meaning. The interpreter would be required to know health and
    health-related terminology.
        The term competent translation services would mean a trans-
    language rendition of a written document in which the
    translator comprehends the source language and can write
    comprehensively in the target language to convey the meaning
    intended in the source language. The translator would be
    required to know health and health-related terminology.
        The term effective communication would mean an exchange of
    information between the provider of health care or health care-
    related services and the LEP recipient of such services that
    enables the LEP individual to access, understand, and benefit
    from health care or health care-related services.
        The terms interpreting/interpretation would be defined as
    the transmission of a spoken message from one language into
    another, faithfully, accurately, and objectively.
        The term health care services would mean services that
    address physical as well as mental health conditions in all
    care settings.
        The term health care-related services would be defined as
    human or social services programs or activities that provide
    access, referrals or links to health care.
        The term language access would mean the provision of
    language services to an LEP individual designed to enhance that
    individual's access to, understanding of or benefit from health
    care or health care-related services.
        The term language services would be defined as the
    provision of health care services directly in a non-English
    language, interpretation, translation, and non-English signage.
        The term limited English proficient (LEP) would be defined
    as an individual who speaks a primary language other than
    English and who cannot speak, read, write or understand the
    English language at a level that permits the individual to
    effectively communicate with clinical or nonclinical staff at
    an entity providing health care or health care-related
    services.
        The term Medicare beneficiary would mean an individual
    entitled to benefits under Medicare part A or enrolled in
    Medicare part B.
        The term Medicare program would mean the programs under
    parts A through D of title XVIII of the Social Security Act
    (SSA).
        The term service provider would be defined as all
    suppliers, providers of services, or entities under contract to
    provide coverage, items or services under any part of title
    XVIII of the SSA.
                Reason for Change
        To provide definitions for certain terms used in Subtitle
    B.

                     Subtitle C--Miscellaneous Improvements

    Sec. 1231. Extension of Therapy Caps Exceptions Process

                Current Law
        Current law places two annual per beneficiary payment
    limits for all outpatient therapy services provided by non-
    hospital providers. For 2009, the annual limit on the allowed
    amount for outpatient physical therapy and speech-language
    pathology combined is $1,840, and there is a separate limit for
    occupational therapy of $1,840. The Secretary was required to
    implement an exceptions process for 2006, 2007, and the first
    half of 2008 for cases in which the provision of additional
    therapy services was determined to be medically necessary.
    Section 141 of the Medicare Improvements for Patients and
    Providers Act of 2008 (MIPPA, P.L. 110-275) extended the
    exceptions process for therapy caps through December 31, 2009.
                Proposed Law
        The proposal would extend the exceptions process for
    therapy caps for 2 years, through December 31, 2011.
                Reason for Change
        There is wide consensus that the therapy cap created in the
    Balanced Budget Act of 1997 is not good health policy, yet to
    permanently repeal the cap is a very costly proposition.
    Extending the exceptions process for two additional years will
    provide Congress with an opportunity to consider alternative
    options to the current process.
                Effective Date
        January 1, 2010.

    Sec. 1232. Extended Months of Coverage of Immunosuppressive Drugs for
            Kidney Transplant Patients and Other Renal Dialysis Provisions

                Current Law
        To be eligible for Medicare, one must be (1) 65 years or
    older and eligible to receive Social Security; or (2) under 65,
    permanently disabled, and have received Social Security
    disability insurance payments for at least 2 years; or (3) have
    Amyotrophic Lateral Sclerosis (ALS-Lou Gehrig's disease); or
    (4) have end-stage renal disease (ESRD).
        Coverage for beneficiaries with ESRD generally begins in
    the fourth month of dialysis treatments or the month of a
    kidney transplant. After receiving a kidney transplant,
    individuals are prescribed immunosuppressive drugs to reduce
    the risk of their immune system rejecting the new organ. These
    drugs generally need to be taken for the rest of the
    individual's life.
        Under Medicare Secondary Payer (MSP) rules, Medicare is
    prohibited from making payments for any item or service when
    payment has been made or can reasonably be expected to be made
    by a third party payer. For individuals with Medicare
    entitlement based solely on ESRD, MSP rules apply for those
    covered by an employer-sponsored group plan, regardless of the
    employer size or current employment status. Any group health
    plan coverage these beneficiaries receive through their
    employer or their spouse's employer is the primary payer for
    the first 30 months of ESRD benefit eligibility. After 30
    months, Medicare becomes the primary insurer.
        If a beneficiary already had Medicare because of age or
    disability before the onset of end-stage renal disease, or if
    an individual became eligible for Medicare because of age or
    disability after receiving a transplant paid for by Medicare,
    Medicare will continue to pay for immunosuppressive drugs with
    no time limit. However, if a beneficiary qualifies for Medicare
    only because of kidney failure, Medicare, together with
    coverage of the immunosuppressive drugs, ends 36 months after
    the month of the successful transplant. After that period,
    kidney recipients must pay for immunosuppressive drugs through
    private insurance, public or pharmaceutical programs, or pay
    out-of-pocket until they reach 65 and qualify for Medicare
    because of age.
        Individuals with ESRD are eligible for all Part B Services.
    Part B also covers their dialysis services, drugs, and
    biologicals, including erythropoiesis stimulating agents,
    diagnostic laboratory tests, and other items and services
    furnished to individuals for the treatment of ESRD.
        Dialysis services are offered in three outpatient settings:
    hospital-based facilities, independent facilities, and the
    patient's home. There are two methods for payment. Under Method
    I, facilities are paid a prospectively set amount, known as the
    composite rate, for each dialysis session, regardless of
    whether services are provided at a facility or in the patient's
    home. Beneficiaries electing home dialysis may choose not to be
    associated with a facility and may make independent
    arrangements with a supplier for equipment, supplies, and
    support services. Payment to these suppliers, known as Method
    II, is made on the basis of reasonable charges.
        The Medicare Improvements for Patients and Providers Act of
    2008 (MIPPA, P.L. 110-275) requires the Secretary to implement
    a bundled payment system, making a single payment for Medicare
    renal dialysis services, to be phased in over 4 years beginning
    January 1, 2011. The bundled payment will include (1) items and
    services included in the composite rate as of December 31,
    2010; (2) erythropoiesis stimulating agents for the treatment
    of ESRD; (3) injectable biologicals and medications that were
    paid for separately under Part B, (before bundling) and any
    oral equivalent to such medications; and (4) diagnostic
    laboratory tests and other items and services furnished to
    individuals for the treatment of ESRD. Dialysis facilities will
    have the opportunity to opt out of the phase-in and be paid
    under the new bundled system starting in 2011. The new law also
    creates a quality incentive payment program that ties payments
    to certain quality measures including anemia management,
    dialysis adequacy, patient satisfaction, and bone mineral
    metabolism.
                Proposed Law
        This provision would amend SSA title II (Old Age, Survivors
    and Disability Insurance) to (1) continue entitlement to
    prescription drugs used in immunosuppressive therapy furnished
    to an individual who receives a kidney transplant for which
    payment is made under Medicare, and (2) extend Medicare
    secondary payer requirements for ESRD beneficiaries.
        It would also amend title XVIII (Medicare) of SSA to apply
    special rules to kidney transplant recipients who receive
    additional coverage for immunosuppressive drugs whose
    eligibility for benefits would have ended on or after January
    1, 2012, except for the coverage of immunosuppressive drugs.
    Such individuals would be deemed to be enrolled under Medicare
    Part B and would be responsible for the full amount of the
    applicable premiums, deductibles, and co-insurance payments
    that are not covered under the Medicare savings program.
        The provision makes several changes to Medicare coverage
    for ESRD patients under Section 1881 of SSA. The provision
    specifies that oral drugs that are not the oral equivalent of
    an intravenous drug would be included in the drugs and
    biologicals provided as part of the renal dialysis services
    covered by Medicare. The provision also would allow providers
    of renal dialysis services to make an election with respect to
    2011, 2012, or 2013, prior to the first date of such year, to
    be excluded from the phase in of the prospective rate (or the
    remainder of the phase in) and be paid entirely based on the
    prospective rate. Additionally, the provision changes the
    performance standards of ESRD providers from the ``lesser of''
    to the ``greater of'' the performance of such provider or
    facility or a performance standard based on the national
    performance rates for such measures in a period determined by
    the Secretary.
                Reason for Change
        Under current law, Medicare coverage for patients who have
    had a kidney transplant ends after 36 months, unless the
    patients are otherwise eligible for Medicare because of age or
    disability. The Committee believes this is a penny-wise, pound-
    foolish policy. Patients who receive a kidney transplant must
    continue taking immunosuppressive drugs for the rest of their
    lives in order to avoid rejecting the new organ. However, when
    Medicare coverage ends, beneficiaries must find another way to
    pay for immunosuppressive drugs, which cost $5,000 to $13,000
    per year. A recent survey of professionals treating kidney
    transplant patients found that almost 90 percent of patients
    have difficulty paying for these drugs once Medicare coverage
    ends, and 65 percent fail to take their drugs as prescribed.
    Once a patient stops taking the drugs, his or her body will
    almost immediately reject the transplanted kidney and the
    patient will either need another kidney transplant or require
    dialysis treatments for the rest of his or her life. These are
    costs that would also be incurred by the Medicare program.
        A recent GAO study found that the Medicare cost for a
    beneficiary who has a failed transplant is five times greater
    per year ($50,938) than a patient with a functioning transplant
    ($8,550). This cost, as well as quality of life for the
    patient, underscores the benefits to the Medicare program and
    kidney transplant patients from the extension of coverage of
    immunosuppressive drug coverage in this section.
        This section also includes a technical clarification that
    oral drugs furnished to individuals for treatment of ESRD are
    included in the bundled payment. This authority already exists
    under current law (see statement of Health Subcommittee
    Chairman Pete Stark in the Congressional Record on June 24,
    2008), however, clarification of existing authority ensures
    that clinical and financial decision-making for dialysis
    patients are aligned, so that providers put patients before
    profits; advances better adherence to drug regimens; lowers
    beneficiary cost-sharing; and is consistent with statements
    made by MedPAC.
        As stated by MedPAC in questions submitted for the record
    to the Committee on Ways and Means, providers otherwise will
    have a financial incentive to shift patients to Part D drugs
    even though that may not be in the clinical best interest of
    the patient. Beneficiaries would then be subject to a double-
    payment, as they would have to pay coinsurance for the ESRD
    bundle and a second coinsurance for the drugs under Part D.
    Medicare would also be paying twice, once for drugs in the
    bundle and once for drugs under Part D. It is for this reason
    that CBO estimates savings for this provision: the Medicare
    program will successfully avoid a doublepayment. MedPAC also
    points out that including these oral drugs in the bundle may
    improve dialysis quality for patients by improving patient
    adherence to drug regimens.
        The Committee notes that some providers are concerned about
    their ability to provide these drugs. The Committee understands
    that the two large dialysis providers have in-house pharmacies,
    and thus dispensing these drugs is not a problem. Dialysis
    providers who do not have in-house pharmacies will already need
    to find a way to provide oral drugs since oral drugs that have
    IV equivalents are also in the bundle. They can do so by
    contracting out for pharmacy services, as they currently do for
    lab services. The original statute recognized the potential
    cost burden of this activity when it created a 10 percent
    adjustment for low-volume providers--the purpose of this
    adjustment is to help low-volume providers cover additional
    costs such as possible contracting out of services.
        This section also modifies the restriction around when
    facilities can decide to opt into receiving the bundled payment
    during the four years before it is fully implemented in 2014.
    Currently, facilities can only opt-in during the first year.
    The Committee believes that bundled payments encourage more
    efficient provision of care and will improve quality of care.
    To the extent that a provider decides after one year of phased-
    in payments that they would like to opt fully into the bundle,
    there is no reason to stop them from doing so. Therefore, this
    section would permit all facilities to opt-in during any year
    of the four year phase-in. The Committee understands from the
    CMS Office of the Actuary that this change will lower the
    budget neutrality adjustment needed because of the phase-in, so
    any concerns about uncertainty in payment rates due to this
    change will only move in the direction of improving payment
    rates.
        The Committee believes that implementation of an ESRD
    bundle must be accompanied by a rigorous system of quality
    measurement and incentives in order to ensure patients receive
    appropriate levels of care. However, the Committee is concerned
    that the performance measure in the existing statute for the
    initial period for anemia management sets the bar so low that
    there is no requirement for facilities to improve performance.
    The Committee notes that by the time bundling is implemented,
    providers will have had several years to adjust practice
    patterns in response to FDA black box label changes that
    occurred in 2007 and 2008, and thus has strengthened the
    quality measurement in the initial period.
                Effective Date
        Subsection (a) is effective January 1, 2012. Subsection (b)
    is effective January 1, 2011.

    Sec. 1233. Advance Care Planning Consultation

                Current Law
        Section 1866(f) of Title XVIII of the SSA requires certain
    institutional providers and prepaid plans that participate in
    Medicare to follow specified policies and procedures in regard
    to advance directives. Specifically, it requires states to
    develop written descriptions of relevant state law concerning
    advance directives that would be distributed by Medicare
    participating institutional providers or organizations. Current
    law also mandates that Medicare participating providers
    distribute information about advance directives according to
    the timing of certain medical or health-related events.
    Hospitals and nursing homes must provide this information to
    individuals at the time of admission; home health agencies must
    provide it in advance of the individual coming under the care
    of such agencies; hospice providers must provide this
    information at the time of the initial receipt of hospice care;
    and prepaid health plans must provide it to individuals upon
    enrollment. Medicare-certified providers that do not comply
    with these requirements may have payments withheld by the
    Secretary. Furthermore, state laws that allow for an objection
    on the basis of conscience for any health care provider or any
    agent of such provider which, as a matter of conscience, cannot
    implement an advance directive, shall supersede these
    requirements.
        The Medicare Improvements for Patients and Providers Act of
    2008 (MIPPA, P.L. 110-275) added ``end-of-life planning'' to
    the initial preventive physical exam that Medicare
    beneficiaries receive upon enrollment in Medicare. MIPPA also
    defines ``end-of-life planning'' to mean verbal or written
    information regarding: an individual's ability to prepare an
    advance directive in the case that an injury or illness causes
    the individual to be unable to make health care decisions; and
    whether or not the physician is willing to follow the
    individual's wishes as expressed in an advance directive.
        The Physician Quality Reporting Initiative (PQRI), the
    voluntary individual reporting program that provides an
    incentive payment to eligible professionals (EPs) who
    satisfactorily report data on quality measures for covered
    Medicare Physician Fee Schedule (PFS) services, was established
    by Section 1848(k)(1) of the SSA. PQRI requires eligible
    professionals to report on certain quality measures in order to
    receive an incentive payment equal to 2.0% of covered
    professional services. The payment incentives were established
    by Section 1848(m)(1)(A) and (B) of the SSA. Participation in
    PQRI is voluntary. The PQRI program is not specific to end-of-
    life care, but it does include several geriatrics measures,
    including one measure which specifically addresses advance care
    plans. This measure aims to assess whether a patient has an
    advance care plan or surrogate decision maker documented in
    their medical record.
        CMS was mandated by the Balanced Budget Act of 1997 (P.L.
    105-33) to develop and organize activities to educate
    beneficiaries about the Medicare program. Specifically, the Act
    mandated that CMS establish a toll-free helpline, mail written
    information to beneficiaries on Medicare and their options to
    enroll in private plans, create a Medicare website, and support
    a community outreach program to help beneficiaries and their
    caregivers make informed health care decisions. CMS conducts
    these activities as part of its National Medicare and You
    Education Program (NMEP). The Medicare & You Handbook is one
    component of the agency's NMEP program.
        The Handbook, which is produced in English and Spanish, is
    updated on an annual basis and mailed to beneficiaries every
    Fall. Handbooks are mailed monthly to newly eligible
    beneficiaries.
                Proposed Law
        The provision would amend Section 1861 of Title XVIII of
    the SSA under Medicare to add new language concerning an
    advance care planning consultation and add a new subsection
    describing these consultations. It would amend Section
    1848(j)(3) to provide payment to physicians for an advance care
    planning consultation under Medicare. The provision would also
    expand the physician quality reporting initiative for end-of-
    life care. The Medicare & You Handbook would be updated to
    include an explanation of various end-of-life care planning
    terms and resources.
        The term ``advance care planning consultation'' would mean
    a consultation between the individual and an individual's
    physician, nurse practitioner or physician assistant as
    specified regarding advance care planning if the individual
    involved has not had such consultation within the last 5 years.
    Medicare's initial preventative physical examination would not
    be considered an advance care planning consultation for
    purposes of applying the 5-year limitation. Such consultation
    would be authorized to be conducted more frequently if there is
    a significant change in an individual's health.
        Such a consultation would be required to include an
    explanation by the practitioner of advance care planning;
    advance directives and their uses; role and responsibilities of
    a health care proxy; the continuum of end-of-life care services
    and supports available and Medicare benefits that are
    available. Practitioners would be required to provide a list of
    national and State-specific resources to assist consumers and
    their families with advance care planning. The advance care
    planning consultation would also be required to include an
    explanation of orders regarding life sustaining treatment or
    similar orders as specified. The Secretary would be required to
    limit this requirement to consultations furnished in a State in
    which all legal barriers for such orders have been addressed
    and that has a program in effect as specified. Such
    consultation is authorized to include the formulation of an
    order regarding life-sustaining treatment or similar order.
        The term ``order regarding life sustaining treatment''
    would mean, with respect to an individual, an actionable
    medical order relating to the treatment of that individual that
    (1) is signed and dated by a physician or another health care
    professional as specified and is in a form that permits it to
    stay with the individual and be followed by health care
    professionals and providers across the continuum of care; (2)
    effectively communicates the individual's preferences regarding
    life sustaining treatment; (3) is uniquely identifiable and
    standardized within a given locality, region, or State (as
    identified by the Secretary); and (4) may incorporate any
    advance directive if executed by the individual.
        The level of life treatment indicated may range from an
    indication for full treatment to an indication to limit some or
    all or specified interventions. Such indicated levels of
    treatment may include indications respecting, among other items
    (1) the intensity of medical intervention if the patient is
    pulseless, apneic, or has serious cardiac or pulmonary
    problems; (2) the individual's desire regarding transfer to a
    hospital or remaining at the current care setting; (3) the use
    of antibiotics; and (4) the use of artificially administered
    nutrition and hydration.
        The provision would modify Section 1848(j)(3) of the SSA
    (concerning definitions for physicians' services) to include
    Medicare payment for physicians' services with respect to an
    advance care planning consultation. It would amend Section
    1862(a)(1) of the SSA (concerning exclusions from coverage and
    Medicare as secondary payer) to add that no Medicare payment
    would be authorized for expenses incurred in the case of an
    advance care planning consultation which is performed more
    frequently than covered under such section. It would also amend
    Section 1862(a)(7) to include an advance care planning
    consultation as an otherwise allowable expense, among the list
    of certain expenses excluded from coverage. The amendments
    would apply to advance care planning consultations furnished on
    or after January 1, 2011.
        The provision would amend Section 1848(k)(2) of the SSA to
    add new language that would require the Secretary, for the
    purposes of reporting data on quality measures for covered
    professional services furnished during 2011 and any subsequent
    year, to include quality measures on end of life care and
    advanced care planning that have been adopted or endorsed by a
    consensus-based organization, if available and appropriate.
    Such measures would be required to measure both creation and
    adherence to orders for life-sustaining treatment. The
    Secretary would be required to publish these proposed measures
    in the Federal Register and provide for a period of public
    comment before finalization.
        No later than 1 year after the date of enactment, the
    Secretary would be required to update the online version of the
    Medicare & You Handbook to include an explanation of advance
    care planning and advance directives, including living wills,
    durable power of attorney, orders of life-sustaining treatment,
    and health care proxies. It would also be updated to include a
    description of Federal and State resources available to assist
    individuals and their families with advance care planning and
    advance directives, including available State legal service
    organizations to assist individuals with advance care planning,
    including those organizations that receive funding pursuant to
    the Older Americans Act of 1965; website links or addresses for
    State-specific advance directive forms; and any additional
    information, as determined by the Secretary. The Secretary
    would also be required to include the above information in all
    paper and electronic versions of the Medicare & You Handbook
    that are published on or after the date that is 1 year after
    the date of enactment.
                Reason for Change
        It is vitally important that physicians provide patient-
    centered care that follows the express wishes of each patient.
    Unfortunately, in some circumstances patient preferences may
    not be known by the treating physician and the patient is
    unable to express his or her wishes to that physician.
    Moreover, patients are often unaware of the different treatment
    options available in the event they need life sustaining
    treatment.
        Adding advanced care planning consultation to the list of
    Medicare covered services will help address those problems.
    These consultations are designed to assist patients to make
    informed decisions about the full range of life sustaining
    treatment options available and ensure that treating physicians
    are fully aware of patients' wishes. The provision does not
    require any beneficiary to receive such consultations and does
    not prescribe or restrict the advanced care treatment options
    available to any beneficiary.
        Adding quality measures on advance care planning to
    Medicare's quality reporting initiatives will provide important
    data about the use of such counseling. Adding information about
    advance care planning, living wills and advance directives to
    the Medicare & You Handbook will support efforts to ensure that
    patient wishes are followed regarding life sustaining
    treatment.
                Effective Date
        January 1, 2011, for advance care planning consultations
    and reporting data; one year after date of enactment for
    changes to Medicare & You Handbook.

    Sec. 1234. Part B Special Enrollment Period and Waiver of Limited
            Enrollment Penalty for TRICARE Beneficiaries

                Current Law
        TRICARE beneficiaries who are eligible for Medicare Part A
    must accept and pay for voluntary Medicare Part B in order to
    retain their TRICARE Coverage. Medicare functions as the
    primary payer and TRICARE serves as a supplement. This
    requirement is the result of many changes in the law the last
    of which came in the National Defense Authorization Act of 2001
    (P.L. 106-386) which created the TRICARE for Life program. With
    the establishment of TRICARE for Life and the concomitant need
    to enroll in Medicare Part B, there became concern about
    coordination between the two programs and the potential for
    penalties for late enrollment in Part B. To address this
    concern, section 625 of the Medicare Prescription Drug,
    Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173)
    waived the Part B enrollment penalty for eligible retirees who
    enrolled in Part B prior to December 31, 2004.
                Explanation of Provision
        This provision creates a special 12 month enrollment period
    in which military retirees who are eligible for Medicare by
    reason of disability or End Stage Renal Disease (ESRD) who have
    not yet enrolled in Medicare Part B can enroll in Part B, thus
    becoming eligible for TRICARE for Life, without incurring a
    Medicare late enrollment penalty. The provision would apply to
    elections made on or after the date of enactment of the Act.
        This provision would also require the Secretary of HHS to
    establish a method for providing rebates for late enrollment
    penalties that were charged to certain disabled and End Stage
    Renal Disease (ESRD) beneficiaries who enrolled during or after
    January 2005 and before the month of enactment of this Act.
                Reason for Change
        When beneficiaries refuse Medicare Part B coverage, they
    are quickly disenrolled from Medicare and TRICARE and are left
    without any insurance coverage except for Medicare Part A
    Hospital coverage. Often, beneficiaries refuse Medicare Part B
    without proper knowledge and understanding of the consequences
    and only realize that they do not have comprehensive health
    insurance when they present at the doctor's office. Once
    beneficiaries have refused their Part B coverage, they must
    wait many months until the next Medicare general enrollment
    period to reenroll. This issue has become a particular concern
    for the severely disabled population who refuse Medicare Part B
    after receiving Medicare coverage retroactively because of a
    delayed disability determination. The provision is designed to
    provide a permanent grace period and allow certain service
    members to quickly reenroll in Medicare without penalty after
    initially refusing Part B to ensure that they have access to
    the vital medical services that they need.
                Effective Date
        The special enrollment period and waiver of penalty will be
    effective for elections made on or after the date of enactment
    of this Act.

    Sec. 1235. Exception for Use of More Recent Tax Year in Case of Gains
            From Sale of Primary Residence in Computing Part B Income-
            Related Premium

                Current Law
        Physician and outpatient services provided under Part B are
    financed through a combination of beneficiary premiums,
    deductibles, and federal general revenues. In general, Part B
    beneficiary premiums equal 25% of estimated program costs for
    the aged, with federal general revenues accounting for the
    remaining 75%. Beginning in 2007, Part B premiums are income
    related, requiring higher-income enrollees to pay a higher
    percentage of Part B costs. Beneficiaries experiencing major
    life events may apply to use a more recent tax year for
    determination of the income-related premium. Beginning in 2007,
    higher-income enrollees pay a higher percentage of Part B
    costs.
                Proposed Law
        This provision treats the sale of a primary residence as a
    major life event for purposes of qualifying for the use of a
    more recent tax year. This modification would apply to premiums
    and payments for years beginning with 2011.
                Reason for Change
        The Committee is aware of situations where Medicare
    beneficiaries are subject to the income related Part B premium
    due to a capital gain from the sale of a primary residence.
    These gains may be incurred after owning the home for several
    decades, and regardless of whether the beneficiary puts the
    proceeds into an annuity that pays them a monthly amount. This
    provision appropriately recognizes that sale of a primary
    residence should be treated as a major life changing event for
    purposes of determining whether a beneficiary is subject to the
    income related premium.
                Effective Date
        October 1, 2011.

    Sec. 1236. Demonstration Program on Use of Patient Decisions Aids

                Current Law
        Current law does not explicitly address patient decision
    aids, which are information tools to help patients understand
    health care options, and make informed choices that take into
    account their lifestyle, preferences, and beliefs. A related
    concept is shared decision making (referred to by many other
    names as well), meaning the cooperation of providers and
    patients in making health care decisions.
        Section 646 of the Medicare Prescription Drug, Improvement,
    and Modernization Act of 2003 (MMA, P.L. 108-173) requires the
    Secretary to carry out a Medicare quality demonstration
    program, which would, among other things, encourage shared
    decision making. Eligible entities include physician groups,
    integrated health systems, or regional coalitions of the same.
    Projects approved under this demonstration are expected to
    achieve significant improvements in safety, effectiveness,
    efficiency, patient-centeredness (i.e., shared decision
    making), timeliness, and equity, the six aims for quality
    improvement identified by the Institute of Medicine. Two
    demonstrations have been approved and will begin in 2009. Two
    others are in the final review process.
        In addition, under their general authorities, the Agency
    for Healthcare Research and Quality (AHRQ) and Centers for
    Disease Control and Prevention (CDC) conduct research on the
    application and use of shared decision making, including the
    use of patient decision aids.
                Proposed Law
        This section would require the Secretary to conduct a
    Medicare demonstration program to determine if using patient
    decision aids would improve beneficiaries' understanding of
    their medical treatment options. The program would enroll not
    more than 30 eligible providers, with preference given to
    providers that have documented experience in using patient
    decision aids, and that have the necessary information
    technology infrastructure. Eligible providers would be required
    to provide follow-up counseling visits after beneficiaries have
    viewed decision aids, to address questions about subsequent
    medical care and the beneficiary's preferences. The Secretary
    would have to provide for the development of a code(s) and
    reimbursement amounts for the follow-up counseling. Eligible
    providers would be responsible for the costs of selecting,
    purchasing, and delivering patient decision aids, and reporting
    data on quality and outcome measures.
        To carry out the program, the Secretary would be required
    to use funds from the Federal Supplementary Medical Insurance
    Trust Fund, and would be authorized to waive requirements under
    SSA Titles XI (general and administrative provisions) and XVIII
    (Medicare). Within 12 months of program completion, the
    Secretary would be required to report to Congress regarding the
    effects of the program on health quality, utilization of health
    care services, and quality of life; and any recommendations for
    legislation and administrative action.
        Eligible providers would be: (A) a primary care practice;
    (B) a specialty practice; (C) a multispecialty group practice;
    (D) a hospital; (E) a rural health clinic; (F) a Federally
    Qualified Health Center; (G) an integrated delivery system;
    [or] (H) a State cooperative entity that includes the State
    government and at least one other health care provider which is
    set up for the purpose of testing shared decision making and
    patient decision aids. The provision would define ``patient
    decision aid'' to mean ``an educational tool (such as the
    Internet, a video, or a pamphlet) that helps patients (or, if
    appropriate, the family caregiver of the patient) understand
    and communicate their beliefs and preferences related to their
    treatment options, and to decide with their health care
    provider what treatments are best for them based on their
    treatment options, scientific evidence, circumstances, beliefs,
    and preferences;'' and ``shared decision making'' to mean ``a
    collaborative process between patient and clinician that
    engages the patient in decision making, provides patients with
    information about trade-offs among treatment options, and
    facilitates the incorporation of patient preferences and values
    into the medical plan.''
                Reason for Change
        Studies have suggested that quality of care is improved and
    costs can be reduced when patients facing medical procedures
    use decision aids such as pamphlets and videos to receive
    information about treatment options available. The
    demonstration program under this section would test this
    approach within the Medicare population, with an emphasis on
    physician follow-up visits to discuss information disseminated
    by such decision aids.
                Effective Date
        Date of enactment.

         Title III--Promoting Primary Care, Mental Health Services and
                               Coordinating Care

    Sec. 1301. Accountable Care Organization Pilot Program

                Current Law
        No current provision. In April 2005, the Centers for
    Medicare and Medicaid Services initiated the Physician Group
    Practice demonstration, which offers 10 large practices the
    opportunity to earn performance payments for improving the
    quality and cost-efficiency of health care delivered to
    Medicare fee-for-service beneficiaries.
                Proposed Law
        A new section 1866D would be added to the Social Security
    Act (SSA) to establish the accountable care organization pilot
    program. The Secretary would conduct a pilot program to test
    different payment incentive models intended to reduce
    Medicare's expenditure growth and improve health outcomes. The
    pilot would promote accountability for services provided to a
    Medicare patient population, coordinate Medicare's part A and B
    items and services, encourage investment in infrastructure and
    the redesign of care processes, and reward high quality,
    efficient physician practices.
        A qualifying accountable care organization (qualifying ACO)
    would be a group of physicians or other physician
    organizational model which is organized, at least in part, for
    the purpose of providing physician services and meet other
    specified standards. A qualifying ACO could include other
    practitioners such as nurse practitioners or physician
    assistants, a hospital or multiple hospitals or any other
    provider or supplier (furnishing Medicare covered services)
    that is affiliated with the ACO under an arrangement structured
    to coordinate care. A physician would include any individual
    who furnishes services for which payment may be made as
    physicians' services except as otherwise determined by the
    Secretary. With respect to a qualifying ACO, other physician
    organizational model would mean any model of organization under
    which physicians enter into agreements with other providers for
    the purposes of participation in the pilot program in order to
    provide high quality, efficient health care services and share
    in the program's incentive payments. No requirements under this
    section would prevent a qualifying ACO from furnishing items or
    services for which Medicare payment is not made in order to
    achieve performance goals under the pilot program.
        A qualifying ACO would meet the following requirements: (1)
    have a legal structure that would allow the group to receive
    and distribute incentive payments; (2) include a sufficient
    number of primary care physicians regardless of specialty for
    the applicable beneficiaries for whose care the group is
    accountable (as determined by the Secretary); (3) report on
    required quality measures in the specified form, manner, and
    frequency; (4) report required data to monitor and evaluate the
    pilot program; (5) provide notice to applicable beneficiaries
    regarding the pilot program; (6) contribute to a best practices
    network or website to share strategies on quality improvement,
    care coordination, and efficiency; (7) utilize patient-centered
    processes of care, and (8) meet other criteria determined to be
    appropriate by the Secretary.
        Specific payment incentive models to be tested include: a
    performance target model, a partial capitation model, and other
    payment models.
        Under the performance target model, a qualifying ACO would
    receive an incentive payment if expenditures for applicable
    beneficiaries are less than a target spending level or a target
    rate of growth. The incentive payment would be made only if
    savings are greater than would result from normal variation in
    Medicare expenditures for Part A and B items and services. In
    general the Secretary would establish a base amount increased
    to the current year by an adjustment factor. The target may be
    established on a per capita basis. The base amount would equal
    the average total payments (or allowed charges) under parts A
    and B for applicable beneficiaries for whom the qualifying ACO
    furnishes items and services. The base amount may include
    Medicare Part D services if deemed appropriate. The adjustment
    factor would equal an annual per capita amount that reflects
    changes in expenditures from the base period to the current
    year. The factor could be determined as an amount or rate,
    determined on a national, regional, local or organization-
    specific basis, and may be determined on a per capita basis. It
    could also include an risk adjustment factor as determined by
    the Secretary. The base amount would be periodically
    recalculated.
        A qualifying ACO that meets or exceeds annual quality and
    performance targets for a year would receive an incentive
    payment equal to an appropriate portion of the amount by which
    Medicare payments are estimated to be below the performance
    target. The Secretary could establish a cap on incentive
    payments for a year for a qualifying ACO. Incentive payments to
    qualifying ACOs would be limited to ensure that the aggregate
    expenditures do not exceed the amount that the Secretary
    estimates would be expended for such ACO for such beneficiaries
    if the pilot program were not implemented.
        The Secretary would be able to incorporate reporting
    requirements, incentive payments, and penalties related to the
    physician quality reporting initiative (PQRI), electronic
    prescribing, electronic health records, and other similar
    physician payment initiatives under section 1848 of the SSA.
    Alternative criteria than would otherwise apply could be used
    when determining whether to make these payments so as to
    streamline administration of the overlapping monitoring and
    reporting requirements for ACOs and fee-for-service Medicare.
    Also, these incentive payments would not be included in the
    aggregate expenditure test described previously or in the
    performance target model.
        Under the partial capitation model, a qualifying ACO would
    be at financial risk for some, but not all, of the part A and B
    items and services. The Secretary would be able to limit a
    partial capitation model to ACOs that are highly integrated
    systems of care and to ACOs capable of bearing risk. Payments
    under the partial capitation model would be established in a
    manner that does not result in spending more for such ACO for
    such beneficiaries than would otherwise be expended if the
    pilot were not implemented. Partial capitation would not
    constrain beneficiaries' to seeing any particular provider;
    beneficiaries would retain the ability to choose their doctor
    or practitioner and could leave the ACO at any time.
        The Secretary may develop other payment models that meet
    the goals of this pilot program to improve quality and
    efficiency. Payments under these models would be established in
    a manner that does not result in spending more for such ACO for
    such beneficiaries than would otherwise be expended if the
    pilot were not implemented.
        An applicable beneficiary would be an individual who is
    enrolled under Part B and entitled to Part A benefits; is not
    enrolled in a Medicare Advantage plan under Part C or a PACE
    program under Section 1894 of the SSA; and meets other
    appropriate criteria.
        The Secretary would monitor data on Medicare expenditures
    and quality of services after an applicable beneficiary
    discontinues receiving services through a qualifying ACO.
        The pilot program would begin no later than January 1,
    2012. An agreement with a qualifying ACO under this pilot would
    cover a multi-year period of between 3 and 5 years. The
    Secretary would be able to waive Medicare provisions and the
    general provisions established under Title XI of the SSA as
    necessary.
        The Secretary would be required to report performance
    results to qualifying ACOs under the pilot program at least
    annually. There would be no administrative or judicial review
    of the (1) elements, parameters, scope, and duration of the
    pilot program; (2) the selection of qualifying ACOs for the
    pilot program; (3) the establishment of targets, measurement of
    performance, determinations with respect to whether savings
    have been achieved and the amount of savings; (4)
    determinations regarding whether, to whom, and in what amounts
    incentive payments are paid; and (5) decisions about the
    extension of the program with successful ACOs, expansion of the
    program to additional ACOs or transitional extension of the
    existing physician group practice demonstration project.
        Also, Chapter 35 of Title 44 of the United States Code
    (concerning the coordination of Federal information policy)
    would not apply to this pilot.
        The Secretary would evaluate the payment incentive model
    for each qualifying ACO to assess the pilot's impact on
    beneficiaries, providers of services, suppliers and the
    program. The evaluation would be publicly available within 60
    days of the date of completion of such report.
        The OIG would be responsible for monitoring of the
    operation of ACOs under the pilot program with regard to
    violations of the Stark self referral prohibition (Section 1877
    of the SSA).
        No later than 2 years after the date the first pilot
    agreement is established, and every 2 years thereafter for 6
    years, the Secretary would report to Congress on the use of
    authorities under the pilot program and its impact on
    expenditures, access, and quality. Subject to monitoring of the
    qualifying ACO, the Secretary would be able to extend the
    duration of the agreement if (1) the ACO receives incentive
    payments with respect to any of the first 4 years of the pilot
    agreement and is consistently meeting quality standards or (2)
    the ACO is consistently exceeding quality standards and is not
    increasing spending under the program. The Secretary would be
    able to terminate an agreement if the ACO did not receive
    incentive payments or consistently failed to meet quality
    standards in any of the first 3 years under the program.
        Subject to the evaluation of the pilot, the Secretary would
    be able to enter into agreements with additional qualifying
    ACOs to further test and refine payment incentive models. The
    Secretary would be able issue regulations to implement on a
    permanent basis 1 or more models of the pilot program that are
    beneficial to Medicare. However, to do so, the Chief Actuary of
    the CMS would be required to certify that the expansion of the
    program's components would result in estimated spending that
    would be less than what spending would otherwise be estimated
    to be in the absence of such expansion.
        The Secretary would be able to enter into an agreement with
    an organization participating in the physician group practice
    demonstration as a qualifying ACO. Participation as a
    qualifying ACO would be subject to rebasing and other
    appropriate modifications, until the pilot program under this
    section is operational.
        The Secretary would be able to create separate incentive
    arrangements (including using multiple years of data, varying
    thresholds, varying shared savings amounts, and varying shared
    savings limits) for different categories of qualifying ACOs to
    reflect natural variations in data availability, variation in
    average annual attributable expenditures, program integrity,
    and other matters the Secretary deems appropriate.
        The Secretary would be able to limit a qualifying ACO's
    exposure to high cost patients in order to encourage the
    participation of smaller accountable care organizations in the
    pilot.
        Nothing in this section would be construed as preventing
    qualifying ACOs participating in the pilot program from
    negotiating similar contracts with private payers. The
    Secretary would not be able to enter into an agreement with an
    entity to provide health care items or services under the pilot
    program, or with an entity to administer the program, unless
    such entity guarantees that it will not deny, limit, or
    condition the coverage or provision of benefits under the
    program, for individuals eligible to be enrolled under such
    program, based on any health status-related factor described in
    section 2702(a)(1) of the Public Health Service Act, including
    health status, medical condition, claims experience, receipt of
    health care, medical history, genetic information, evidence of
    insurability and disability.
        Nothing in this section would be construed to compel an
    organization to use an organization-specific target growth rate
    for an accountable care organization under this section for
    purposes of Medicare's physician fee schedule established under
    section 1848 of the SSA.
        The program management account of CMS would be appropriated
    $25 million for FY2010 through FY2014 and $20 million in
    FY2015. The funds would be in addition to those otherwise
    appropriated and would be for the purposes of administering and
    carrying out the pilot program, but not for payments for
    Medicare covered items and services or for incentive payments.
                Reason for Change
        The Physician Group Practice (PGP) demonstration program
    has shown promise in incentivizing physicians and other
    providers to reduce health care costs and improve quality. The
    ACO pilot program will build on progress that has been made to
    date in the PGP demonstration and gives CMS a flexible platform
    on which to continue to test, adjust and expand the shared
    savings concept.
        Witnesses testified at an April hearing before the
    Committee that Medicare would be well served by rewarding
    providers who provide coordinated, efficient, high quality care
    by using the Accountable Care Organization shared savings
    model. Witnesses advised that by sharing a portion of spending
    reductions realized through efficient delivery of quality care,
    Medicare could move from simply paying physicians for the
    volume of care they provide toward paying for the value of care
    delivered. They expressed confidence that widespread use of
    ACOs, as facilitated by Medicare, would greatly improve the way
    care is organized and delivered throughout much of the health
    care system.
        The ACO pilot program is designed to be flexible enough
    that a variety of physicians and other providers can
    participate. Many large, multispecialty group practices are
    well positioned to participate in the pilot program since most
    already provide integrated, coordinated care for their
    patients. The ACO pilot will recognize and reward efforts
    already underway by such groups, often in conjunction with
    hospitals, to provide efficient, high quality care. It will
    also allow providers to be rewarded for using advances in
    health information technology such as electronic medical
    records, telemedicine, and home monitoring equipment in ways
    that improve patient care. The Secretary should allow for the
    use of such technologies in order to facilitate coordinated,
    patient-centered care.
        The Committee also recognizes that the majority of doctors
    in this country care for patients in practices of fewer than 10
    physicians. The pilot is designed to allow physicians in small-
    and mid-sized practices to form an ACO without disrupting care
    for their patients. By joining together in ACOs, it is the
    Committee's hope that physicians in independent practices will
    better coordinate care and reduce the amount of duplicative
    care that is sometimes provided under the current payment
    system. The Committee recognizes that smaller practices face
    unique challenges in forming and sustaining ACOs, and urges the
    Secretary to use authority granted under the legislation to
    mitigate such challenges.
        It is also the intent of the Committee that the Secretary
    should exercise flexibility in entering into participation
    agreements with a variety of ACO models to maximize the
    potential for innovation. The Committee believes that
    physicians, regardless of specialty, who play a central role in
    managing the care of their patient populations, and who are
    willing and able to be held accountable for the overall quality
    and costs of care for their patients across all care settings,
    should be allowed to form ACOs.
        For example, the Secretary could permit the formation of
    ACOs that are principally composed of primary care physicians
    whose specialties are oncology, cardiology, nephrology, or
    other specialties that serve beneficiaries being treated for
    chronic conditions; physicians in the ACO would be held
    accountable for the overall quality and costs of care for
    beneficiaries, including care not directly related to the
    beneficiaries' principle diagnoses. The legislation also allows
    for physicians who are employed or otherwise affiliated with
    hospitals to form ACOs, as long as such physicians can be held
    accountable for the preponderance of care furnished to a given
    patient population. The availability of such organizational
    models is especially important in regions where a large portion
    of physicians are employed by hospitals.
        In addition to sharing savings that accrue to the Medicare
    program, physicians who participate in ACOs could have their
    own set of spending targets under the reformed physician
    payment update system in section 1121 of the legislation. This
    option is intended to give physicians an additional reason to
    form and join ACOs, and give providers within each ACO even
    more incentive to provide efficient, high-value care.
    Physicians who do so are likely to receive payments under the
    shared savings program and see regular positive updates to
    payment rates for physician services. It is the Committee's
    belief that this ``virtuous cycle'' has great potential to
    reduce the rate of spending growth in the Medicare program and
    result in better care for Medicare beneficiaries.
        The Committee is aware that concerns have been raised about
    the possibility that providers in ACOs will attempt to meet the
    savings targets by selecting against beneficiaries that are
    more likely to require expensive care or under-provide needed
    care. No evidence of this behavior has been observed under the
    PGP demonstration, and the legislation calls for the use of
    risk adjusted spending targets and rigorous use of quality
    measures to mitigate such problems. Nevertheless, the Committee
    expects that the Secretary will take all appropriate steps to
    ensure that providers do not engage in activities that are
    contrary to the interest of Medicare beneficiaries. It is
    important to emphasize that providers are not required to take
    part in the ACO pilot program and providers who do participate
    must notify their patients.

    Sec. 1302. Medical Home Pilot Program

                Current Law
        The Tax Relief and Health Care Act of 2006 (P.L. 109-432),
    as modified by the Medicare Improvements for Patients and
    Providers Act of 2008 (MIPPA), requires the Secretary to
    establish a three-year demonstration in up to eight states with
    urban, rural and underserved areas, to redesign the health care
    delivery system to provide targeted, accessible, continuous,
    and coordinated family-centered care to high need Medicare
    populations with chronic or prolonged illnesses requiring
    regular medical monitoring, advising or treatment.
                Proposed Law
        A new section 1866E would be added to the SSA to establish
    the medical home pilot program for the purpose of evaluating
    the feasibility and advisability of reimbursing qualified
    patient-centered medical homes for furnishing medical home
    services to high need beneficiaries in urban, rural, and
    underserved areas. New subsection 1866E(a) would require the
    Secretary to establish pilot programs to evaluate two medical
    home models: (1) the independent patient-centered medical home
    model; and (2) the community-based medical home model.
        Subsection (b) of the new section would establish the
    following definitions. ``Patient-centered medical home
    services'' would be those services that (1) provide
    beneficiaries with direct, ongoing access to primary care or
    principal care provided by a physician or nurse practitioner;
    (2) coordinate the care provided to a beneficiary by a team of
    individuals at the practice level across office, institutional
    and home settings; (3) provide for all the patient's health
    care needs or take responsibility for appropriately arranging
    care with other qualified providers; (4) provide continuous
    access to care and communication with participating
    beneficiaries; (5) provide support for patient self-management,
    proactive and regular patient monitoring, support for family
    caregivers, and coordination with community resources; (6)
    integrate readily accessible, clinically useful information
    into the care plans for participating patients; and (7)
    implement evidence-based guidelines, applying them to the
    identified needs of beneficiaries over time and with the
    intensity needed by such beneficiaries. ``Primary care'' would
    mean health care that is provided by a physician, nurse
    practitioner, or physician assistant who practices in the field
    of family medicine, general internal medicine, geriatric
    medicine, or pediatric medicine. ``Principal care'' would mean
    integrated, accessible health care provided by a physician who
    is a medical subspecialist that addresses the majority of the
    personal health care needs of patients with chronic conditions,
    and for whom the subspecialist assumes care management.
        Subsection (c) of the new section establishes requirements
    for the independent patient-centered medical home pilot
    program. Under this program, the Secretary would be required to
    make payments for medical home services provided to targeted
    high need beneficiaries. An independent patient-centered
    medical home would be a physician-directed or nurse-
    practitioner-directed practice that is qualified to provide
    beneficiaries with patient-centered medical home services, and
    meets such other requirements as the Secretary may specify. A
    targeted high need beneficiary would be defined as a
    beneficiary who, based on a chronic disease risk score as
    specified by the Secretary, is generally within the upper 50th
    percentile of Medicare beneficiaries.
        The Secretary would be required to determine an appropriate
    method to ensure that beneficiaries in the independent patient-
    centered medical home pilot program have agreed to participate.
    The program would have to begin within 6 months of enactment.
    The Secretary would be required to review alternative models
    for standard setting and qualification, and to establish a
    process to develop standards (1) to enable medical practices to
    qualify as patient-centered medical homes; and (2) to provide
    for the review and certification of medical practices as
    meeting such standards.
        The Secretary would be required to establish a methodology
    for payment of services provided by independent patient-
    centered medical homes, and to adjust payments based on
    beneficiary risk scores to ensure that higher payments are made
    for higher risk beneficiaries. Moreover, the Secretary would be
    required to pay independent patient-centered medical homes a
    monthly fee, paid prospectively, for each targeted high need
    beneficiary who consents to receive services. In setting the
    fee amount, the Secretary would be required to: (1) consider
    the clinical work and practice expenses involved in providing
    the service (including services not currently reimbursable
    under Medicare, such as care coordination, population disease
    management, and teaching self-care skills); (2) allow for
    differential monthly payments, depending on the capabilities of
    the independent patient-centered medical home; and (3) use
    appropriate risk-adjustment methods to ensure that higher
    payments are made for higher risk beneficiaries.
        The independent patient-centered medical home pilot program
    would have to be designed to include the participation of
    physicians in practices with fewer than 10 full-time equivalent
    physicians, as well as physicians in larger practices,
    particularly in underserved and rural areas, as well as
    federally qualified community health centers, and rural health
    centers. A physician in a group practice that participates in
    the Accountable Care Organization pilot program established in
    section 1866D of the SSA would not be eligible to participate
    in this pilot program, unless this program is ultimately made
    permanent.
        Subsection (d) of the new section would establish
    requirements for the community-based medical home (CBMH) model
    pilot program. Under this program, the Secretary would be
    required to make payments to a CBMH for providing medical home
    services to a high need beneficiary. A CBMH would mean an
    appropriately qualified nonprofit community-based or State-
    based organization that provides beneficiaries with medical
    home services under the supervision of and in close
    collaboration with the primary care or principal care
    physician, nurse practitioner or physician assistant designated
    by the beneficiary as his or her CBMH provider. A CBMH would
    employ community health workers, including nurses or other non-
    physician practitioners, lay health workers, or other
    appropriate persons (as determined by the Secretary) that
    assist the primary or principal care physician or nurse
    practitioner in chronic care management activities, such as
    teaching self-care skills for managing chronic illnesses,
    transitional care services, care plan setting, medication
    therapy management services for patients with multiple chronic
    conditions; or that help beneficiaries access health care or
    community-based services in their area. A CBMH would also have
    to meet other requirements as the Secretary may specify. In
    this section, the term ``high need beneficiary'' means an
    individual who requires regular medical monitoring, advising,
    or treatment.
        The Secretary would be required to establish a process: (1)
    to determine the necessary qualifications for community-based
    or State-based organizations to function as CBMHs; and (2) to
    provide for the review and assessment of these qualifications
    pursuant to criteria to be established by the Secretary.
        The Secretary would be required to start CBMH pilot program
    within 2 years of enactment. Demonstration sites under the
    pilot program would operate for up to 5 years after the initial
    implementation phase. In selecting sites, the Secretary would
    be authorized to give preference to (1) applications from
    geographic areas that propose to coordinate health care
    services for chronically ill beneficiaries across a variety of
    health care settings, practices with fewer than 10 physicians,
    rural health clinics, and federally qualified health centers;
    (2) payors that provide medical homes for chronically ill
    patients; or (3) States that propose to use the medical home
    model to coordinate health care services for individuals with
    chronic diseases who are enrolled under Medicare, Medicaid, or
    fully dual-eligible for Medicare and Medicaid, across a variety
    of health care settings.
        The Secretary would be required to establish a methodology
    for payment for medical home services furnished under the CBMH
    model, to include two separate prospective monthly payments for
    each high need beneficiary: one to a community-based or State-
    based organization, and one to the primary or principal care
    practice. In determining the amount of the payment, the
    Secretary would be required to consider the clinical work and
    practice expenses involved in providing the service (including
    services not currently reimbursable under Medicare, such as
    care coordination, population disease management, and teaching
    self-care skills); and to use appropriate risk-adjustment. The
    Secretary would be authorized to provide initial implementation
    funding to a community-based or State-based organization or a
    State participating in the CBMH pilot.
        Subsection (e) of the new section would require the
    Secretary to evaluate the dual pilot program regarding (1) the
    extent to which medical homes result in a number of specified
    improvements in the quality and coordination of health care
    services delivered to complex patients, including reductions in
    health care expenditures; and (2) the feasibility and
    advisability of reimbursing medical homes for medical home
    services under Medicare on a permanent basis. The Secretary
    would be required, within 60 days of its completion, to publish
    and submit to Congress a report on the findings of such
    evaluation.
        Subject to the results of the evaluation, the Secretary
    would be authorized to issue regulations to implement one or
    more models on a permanent basis, to the extent that such
    models are beneficial to Medicare, but only if the Chief
    Actuary of CMS were to first certify that the expansion would
    not result in higher estimated Medicare spending.
        Subsection (f) of the new section would prohibit the
    Secretary from making payments under more than one model, or
    through more than one medical home under any model, for the
    furnishing of medical home services to an individual. Also,
    payments made under this pilot are in addition to, and have no
    effect on the amount of, payment for evaluation and management
    services made under this title. Chapter 35 of Title 44 of the
    U.S. Code (regarding federal information policy) would not
    apply to this section.
        Subsection (g) of the new section would require the
    transfer of $6 million for each of fiscal years 2010 through
    2014 from the Federal Supplementary Medical Insurance Trust
    Fund to the CMS Program Management Account, to carry out this
    section. In addition to funds otherwise available, $200 million
    for each of fiscal years 2010 through 2014 for payments for
    independent patient-centered medical home services, and $125
    million for each of fiscal years 2012 through 2016 for CBMH
    services, would be available for CMS from the Federal
    Supplementary Medical Insurance Trust Fund. In addition to
    funds otherwise available, $2.5 million for each of fiscal
    years 2010 through 2012 would be available to CMS from the
    Federal Supplementary Medical Insurance Trust Fund for initial
    implementation costs. Any amounts made available under this
    subsection for a fiscal year would be available until expended.
        Subsection (h) of the new section would provide that in
    addition to funds otherwise available for payment of medical
    home services, there would also be available, for the
    independent patient-centered medical home model, $100 million
    established by The Tax Relief and Health Care Act of 2006 (P.L.
    109-432) for the existing Medicare Medical Home Demonstration,
    and authority for the Medicare Medical Home Demonstration
    project would be repealed.
        Amendments made by this section would apply to services
    furnished on or after the date of enactment.
                Reason for Change
        Over 83 percent of Medicare beneficiaries have a chronic
    illness and over 95 percent of total spending in Medicare is
    linked to chronically ill patients. The medical home concept
    envisions a health care system where patient care is
    coordinated and integrated through a provider guided
    multidisciplinary team. The medical home model promotes
    accessible, continuous, patient-oriented, team-based and
    comprehensive care delivered in the context of a patient's
    family and community. The approach would manage care across a
    variety of settings according to the needs of the patient
    through the promotion of continuous care relationships as well
    as application of the chronic care model, use of evidence
    based-medicine, care coordination, and patient empowerment. The
    idea was described as early as 1967 by the American Academy of
    Pediatrics' Council on Pediatric Practice. The model has shown
    to be successful in improving outcomes for patients with
    chronic illnesses through improved care coordination. Many
    local pilot programs such as North Carolina's Community Care
    Program and Johns Hopkins' Guided Care Program have shown
    improved outcomes and potential for long term cost-savings.
    Vermont's Patient Centered Medical Home included payments to
    community entities for support of population-based health
    management.
        Recent research has shown that patient populations at risk
    for health disparities may particularly benefit from the
    accessible, coordinated, comprehensive care delivered through
    the patient-centered medical home. Transforming practices
    serving high risk and chronically ill populations is a major
    focus of the revised and expanded pilot.
        Systematic changes such as the use of evidence-based
    medicine and health-information technology offer new
    opportunities to achieve even better coordination, disease
    management, and patient empowerment. These goals would be
    achieved through practice transformation supported by new care-
    coordination payment models to the medical home to support the
    delivery of enhanced primary care services provided by a
    multidisciplinary team composed of care managers, pharmacists,
    physician assistants, mental health professionals, palliative
    care experts, clinical nurse educators, nutritionists or health
    educators.
        This pilot program builds on the medical home approach
    currently being developed by Medicare and allows for a broader
    application of the medical home model to meet the needs of
    different patient populations and provider arrangements. It
    directs the Secretary to establish a ``community-based medical
    home model'' in addition to the ``independent patient-centered
    medical home model'' already under development. There are
    currently 25 active demonstrations with payment reform in 17
    States. This legislation will provide Medicare beneficiaries
    the ability to participate in locally based programs with an
    infrastructure that could facilitate practice transformation to
    become a medical home. Studies have indicated that such
    alternative models, that use community care teams within the
    medical home, can achieve cost savings and quality
    improvements. The independent patient-centered medical home
    model refers to the patient centered medical home demonstration
    program as legislated by MIPPA.
        Regardless of what model is used, the pilot program
    requires that to be eligible the personal provider must provide
    accessible, continuous, coordinated and comprehensive care. In
    most cases, primary care providers would be best suited to the
    role of leading a multidisciplinary team to manage the care
    coordination, but specialists who can perform the medical home
    functions set forth by the Secretary are not precluded. In
    giving the Secretary flexibility in developing the monthly
    medical home care management fee payment, the Secretary can
    expand this program if certain criteria such as budget
    neutrality and quality improvements are met.
                Effective Date
        Date of enactment.

    Sec. 1303. Payment Incentive for Selected Primary Care Services

                Current Law
        Section 1833(m) of the Social Security Act provides bonus
    payments for physicians who furnish medical care services in
    geographic areas that are designated by the Health Resources
    and Services Administration (HRSA) as primary medical care
    health professional shortage areas (HPSAs) under section 332
    (a)(1)(A) of the Public Health Service (PHS) Act. In addition,
    for claims with dates of service on or after July 1, 2004,
    psychiatrists furnishing services in mental health HPSAs are
    also eligible to receive bonus payments.
        The bonus payment equals 10% of what would otherwise be
    paid under the fee schedule. HPSAs may be designated as having
    a shortage of primary medical care, dental or mental health
    providers. They may be urban or rural areas, population groups
    or medical or other public facilities
                Proposed Law
        The provision would establish payment incentives for
    primary care services furnished on or after January 1, 2011 by
    a primary care practitioner. The amount of the payment
    incentive would be 5 percent (or 10 percent if the practitioner
    provides the services predominately in an area that is
    designated as a primary care health professional shortage area)
    and would be paid from the Part B trust fund.
        Primary care services would be defined as physicians'
    services in section 1848(j)(5)(A) as well as services furnished
    by another health care professional that would be described
    above if furnished by a physician. A primary care practitioner
    would be defined as (1) a physician or other health care
    practitioner (including a nurse practitioner) who specializes
    in family medicine, general internal medicine, general
    pediatrics, geriatrics, or obstetrics and gynecology and has
    allowed charges for primary care services that account for at
    least 50 percent of the physician's or practitioner's total
    allowed charges under (Medicare Part B) section 1848, as
    determined by the Secretary for the most recent period for
    which data are available, or (2) a physician assistant who is
    under the supervision of a practitioner described above.
        There would be no administrative or judicial review
    respecting (1) any determination or designation of the primary
    care services payment incentive; (2) the identification of
    services as primary care services for the purpose of this
    payment incentive; or (3) the identification of a practitioner
    as a primary care practitioner for the purposes of this payment
    incentive.
        The primary care services incentive payments would not be
    taken into account in determining the additional payments for
    physicians in health professions shortage areas or in physician
    scarcity areas. Furthermore, any bonus payment to physicians in
    health professions shortage areas or physician scarcity areas
    would not be taken into account in computing incentive payments
    for primary care services, nor would the primary care incentive
    payments be taken into account in determining the amounts that
    would otherwise be paid to physicians providing outpatient
    critical access hospital (CAH) services.
                Reason for Change
        Studies show that health systems emphasizing primary care
    have lower costs and better quality. Access to health insurance
    does not ensure access to timely medical care, particularly in
    places where doctors are in short supply like rural and inner-
    city urban areas. Currently, primary care accounts for about
    one third of the physician workforce, but far fewer U.S.
    medical students are pursuing careers in adult primary care
    than a decade ago. This provision is intended to encourage
    primary care providers who are currently practicing to remain
    in practice and incentivize additional physicians to choose a
    career in primary care. The provision also recognizes the
    challenges that certain areas of the country face in attracting
    a sufficient primary care workforce by providing an additional
    incentive to physicians who practice in health professional
    shortage areas.
                Effective Date
        January 1, 2011.

    Sec. 1304. Increased Reimbursement Rate for Certified Nurse-Midwives

                Current law
        In general, Medicare pays 80% of the reasonable charges
    (the lesser of the actual charge for the services or the amount
    determined by the fee schedule) for provider services covered
    under Medicare Part B. However, Medicare payments for services
    performed by certified nurse-midwives to Medicare beneficiaries
    are currently limited to no more than 65% of the fee schedule
    amount for the same service performed by a physician.
                Proposed Law
        The proposal would remove the 65% restriction for Medicare
    payments to certified nurse-midwives. The modification would
    apply to services furnished on or after January 1, 2011.
                Reason for Change
        Nurse midwives are currently one of the lowest paid non-
    providers in Medicare. Yet, they practice independently and
    provide access to needed services in communities where
    gynecologists or obstetricians may not be readily available. In
    order to increase access to women's health services for
    Medicare beneficiaries, the provision increases the
    reimbursement for nurse midwife services from 65 percent of the
    fee schedule to 100 percent.
                Effective Date
        January 1, 2011.

    Sec. 1305. Coverage and Waiver of Cost-Sharing for Preventive Services

                Current law
        In general, Medicare law authorizes the Secretary to cover
    services for the diagnosis and treatment of illness, while
    coverage of preventive services (i.e., services provided in the
    absence of illness) has generally required legislation. Section
    1861 of the SSA requires coverage of a number of specified
    preventive services under Part B (often with specified
    conditions for coverage) in language interspersed throughout
    the section. There is no definition of ``preventive services''
    in the law that refers to them collectively. Also, in Section
    101 of the Medicare Improvements for Patients and Providers Act
    of 2008 (P.L. 110-275), Congress provided administrative
    authority for the Secretary to add coverage of new preventive
    services, under certain conditions.
        Section 1833(a) of the SSA establishes coinsurance for the
    beneficiary, requiring Medicare to cover 80% of the costs of
    covered services under Part B, with specified exceptions.
    Section 1833(b) establishes an annual deductible for which the
    beneficiary is responsible. These sections have been amended
    over the years to waive coinsurance and/or the deductible for
    many, but not all, covered preventive services.
                Proposed law
        Subsection (a) of this section would add a new subsection
    to SSA Section 1861, which would define ``Medicare covered
    preventive services'' to mean a specified list of currently
    covered services. The list would also include any new services
    that were covered under the Secretary's administrative
    authority. Coverage would be subject to all conditions and
    limitations that apply to each listed service under current
    law.
        With respect to Medicare covered preventive services (as
    defined by this bill), subsection (b) of this section would
    amend Section 1833(a) of the SSA to require Medicare to cover
    100% of their costs. It would also amend several additional SSA
    sections to require the waiver of coinsurance for specified
    sigmoidoscopy and colonoscopy services, and, in outpatient
    hospital settings, for diagnostic mammograms and Medicare
    clinical preventive services. This subsection would also amend
    Section 1833(b) of the SSA to waive the application of the
    deductible for Medicare covered preventive services. Finally,
    it would amend the SSA to remove the authority of providers to
    charge coinsurance when providing Medicare covered preventive
    services.
        The amendments made by this section would apply to services
    furnished on or after January 1, 2011.
                Reason for Change
        Preventive benefits are vital to early detection and
    treatment of diseases, which can reduce the need for more
    serious treatments later.
        However, utilization rates for Medicare's preventive
    benefits are very low. To help address that problem, the
    provision eliminates both the coinsurance and application of
    the deductible for preventive services. By eliminating all
    beneficiary cost-sharing for these services, more people should
    utilize the services.
                Effective Date
        January 1, 2011.

    Sec. 1306. Waiver of Deductible for Colorectal Cancer Screening Tests
            Regardless of Coding, Subsequent Diagnosis, or Ancillary Tissue
            Removal

                Current Law
        Section 1833(a) of the SSA establishes coinsurance for the
    beneficiary, requiring Medicare to cover 80% of the costs of
    covered services under Part B, with specified exceptions.
    Section 1833(b) of the SSA requires the application of an
    annual deductible, for which the beneficiary is responsible,
    for some Part B services. Under current law, coinsurance is
    applied to colorectal cancer screening services, but the
    deductible is not.
                Proposed Law
        This section would amend Sections 1833(a) and 1833(b) of
    the SSA (as amended by Section 1305 of this bill) to clarify
    that coinsurance and the deductible would be waived for
    colorectal cancer screening services regardless of the code
    applied, of the establishment of a diagnosis, or of the removal
    of tissue or other matter or other procedure that is performed
    in connection with and as a result of the screening test. This
    provision would apply to items and services furnished on or
    after January 1, 2011.
                Reason for Change
        Current law prohibits the application of the Medicare Part
    B deductible for screening colonscopies. However, if a patient
    has a screening colonscopy and the physician finds polyps that
    need to be removed during the screening exam, it is relabeled a
    diagnostic procedure and the deductible is applied. This policy
    is unfair to beneficiaries who are told that the screening
    colonscopy would bypass the deductible. This provision would
    therefore ensure that a screening colonscopy avoids the
    deductible and the coinsurance regardless of whether the
    procedure becomes diagnostic.
                Effective Date
        January 1, 2011.

    Sec. 1307. Excluding Clinical Social Worker Services From Coverage
            Under the Medicare Skilled Nursing Facility Prospective Payment
            System and Consolidated Payment

                Current Law
        The majority of services provided to beneficiaries in a
    Medicare covered skilled nursing facility (SNF) stay are
    included in the bundled prospective payment made to the SNF.
    Certain services have been specifically excluded from SNF
    consolidated billing. In these instances, Medicare will pay the
    entity providing the service directly. Currently, the items and
    services provided by a clinical social worker are included in
    the SNF consolidated billing.
                Proposed Law
        Items and services provided by clinical social workers to
    Medicare beneficiaries in a SNF would receive separate Medicare
    payment on or after July 1, 2011.
                Reason for Change
        Numerous reports suggest that mental illness is highly
    prevalent in nursing homes, with mental health problems
    affecting more than 80% of the residents. These mental
    disorders including major depression, anxiety, and severe
    cognitive impairment or Alzheimer's disease interfere with a
    person's ability to carry out activities of daily living.
    Furthermore, older people have the highest rate of suicide of
    any age group, accounting for 20% of all suicide deaths.
    Clinical social workers are fundamental providers who
    facilitate care-planning and care-coordination. The provision
    treats clinical social workers identically to psychologists and
    psychiatrists with regard to their treatment of Medicare
    beneficiaries in nursing homes. Making this change will ensure
    better access to mental health services for Medicare
    beneficiaries in nursing homes.
                Effective Date
        July 1, 2010.

    Sec. 1308. Coverage of Marriage and Family Therapist Services and
            Mental Health Counselor Services

                Current Law
        Section 1861(s)(2) of the SSA (42 U.S.C. 1395x(s)(2))
    defines services covered under the term ``medical and other
    health services.'' These services include medical supplies,
    hospital services, diagnostic services, outpatient physical
    therapy services, rural health clinic services, home dialysis
    services and supplies, antigens and physician assistant and
    nurse practitioner services. Marriage and family therapists and
    mental health counselors are not included under current law.
                Proposed Law
        The proposal would add two subcategories of services to be
    covered under the term ``medical and health services.'' These
    are (1) marriage and family therapists, and (2) mental health
    counselors.
        The proposal would stipulate the required qualifications
    for a marriage and family therapist, and mental health
    counselor. It would define these providers' services as the
    diagnosis and treatment of mental illnesses, as permitted by
    his or her state license, if no other provider or facility is
    also paid for those services. The proposal would add a payment
    provision for marriage and family therapists, and mental health
    counselors. The amount paid would be 80% of the lesser of the
    actual charge for services or 75% of the amount that would be
    paid for a psychologist's services. The proposal would require
    the Secretary to consider confidentiality issues while
    developing criteria allowing for direct payment of the
    therapist and medical information sharing with the patient's
    primary care physician. The proposal would exclude marriage and
    family therapists and mental health counselors from the
    prospective payment system for skilled nursing facilities. The
    proposal would include marriage and family therapists and
    mental health counselors as providers in rural health clinics
    and federally qualified health centers. The proposed law would
    include marriage and family therapists and mental health
    counselors as one of the practitioner categories who can file
    claims for services provided.
                Reason for Change
        In states that have licensed or certified marriage and
    family therapists and mental health counselors, these
    practitioners provide mental health services to people under
    age 65. Few states did so when Medicare was first created in
    1965. This provision updates Medicare coverage by allowing them
    to treat Medicare beneficiaries as well, subject to state law.

    Sec. 1309. Extension of Physician Fee Schedule Mental Health Add-on

                Current Law
        By law, every five years CMS examines Medicare billing
    codes under the physician fee schedule to determine whether
    they are overvalued or undervalued. Subsequent to the most
    recent evaluation, Medicare increased the rates for the codes
    used by physicians to bill for ``evaluation and management''
    (E/M) services (face-to-face visits with patients), effective
    January 1, 2007. To maintain budget neutrality, rates for
    certain other codes, including some used to bill for
    psychotherapy services, were reduced.
        The Medicare Improvements for Patients and Providers Act of
    2008 (MIPPA, P.L. 110-275) increased Medicare payments under
    the fee schedule for psychotherapy services by 5% beginning on
    July 1, 2008, and ending on December 31, 2009. Psychiatric
    therapeutic procedures that involve insight oriented, behavior
    modifying, or supportive psychotherapy or interactive
    psychotherapy furnished in an office or other outpatient
    facility setting or in an inpatient hospital or residential
    care facility are reimbursed at this higher amount.
                Proposed Law
        This proposal would extend the increased payments provided
    by MIPPA for psychotherapy services for an additional two years
    (ending December 31, 2011).
                Reason for Change
        Studies reveal that between 15-25% of elderly people in the
    U.S. suffer from significant symptoms of mental illness. Of the
    direct costs for treating mental illness, less than 1.5% is
    spent on behalf of the elderly. The highest suicide rate in
    America is among those aged 65 and older. Access to mental
    health services is limited to Medicare beneficiaries in many
    areas. This provision is intended to provide mental health
    parity and increase much needed mental health services to the
    Medicare beneficiary.
                Effective Date
        January 1, 2011.

    Sec. 1310. Expanding Access to Vaccines

                Current Law
        Medicare Part B covers influenza, pneumococcal, and, for
    individuals at increased risk, hepatitis B vaccinations. This
    coverage includes both the costs of these vaccines and their
    administration by recognized providers. Medicare Part D covers
    all vaccines licensed by the FDA, and their administration,
    when prescribed by recognized providers.
                Proposed Law
        Under this provision, Medicare Part B would cover all
    federally recommended vaccines, defined as any licensed vaccine
    that is recommended by the Advisory Committee on Immunization
    Practices (an advisory committee established by the Secretary,
    acting through the Director of the Centers for Disease Control
    and Prevention). The provision would also include all federally
    recommended vaccines in the suite of Medicare covered
    preventive services defined under section 1305 of this Act, and
    make several conforming amendments.
                Reason for Change
        Currently, a limited number of vaccines are covered by
    Medicare Part B while the rest are covered by Medicare Part D.
    This is confusing for beneficiaries and providers. For vaccines
    covered by Part D, beneficiaries may have to fill the vaccine
    prescription at a pharmacy and carry it with them to a
    physician's office for administration. This is burdensome for
    beneficiaries and providers alike and could lead beneficiaries
    to avoid getting needed immunizations. Moving coverage for all
    vaccines to Part B will simplify the vaccination process and
    improve access for beneficiaries.
                Effective Date
        January 1, 2010.

    Sec. 1311. Expansion of Medicare-Covered Preventive Services at
            Federally Qualified Health Centers

                Current Law
        SSA Section 1861(aa)(3) establishes that Federally
    qualified health centers may receive Medicare reimbursement for
    providing specified services, namely: diabetes outpatient self-
    management training services (DSMT); medical nutrition therapy
    (MNT) services; and preventive services that community health
    centers must provide under Section 330 of the Public Health
    Service Act (PHS Act). The latter services are: prenatal and
    perinatal services; appropriate cancer screening; well-child
    services; immunizations against vaccine-preventable diseases;
    screenings for elevated blood lead levels, communicable
    diseases, and cholesterol; pediatric eye, ear, and dental
    screenings to determine the need for vision and hearing
    correction and dental care; voluntary family planning services;
    and preventive dental services.
                Proposed Law
        This provision would amend SSA Section 1861(aa)(3) to
    remove the reference to DSMT and MNT services, replacing it
    with a reference to the package of Medicare covered preventive
    services established in Section 1305 of this Act (which
    includes DSMT and MNT services, and others). The list of
    preventive services required under Section 330 of the PHS Act
    would continue to apply.
                Reason for Change
        Disease prevention plays a critical role in maintaining the
    health of Medicare beneficiaries and is also a core service
    delivered at Federally Qualified Health Centers (FQHCs). This
    provision would update the preventive benefits covered by
    Medicare in FQHCs to include the range of preventative services
    covered by the rest of the Medicare program.
                Effective Date
        Date of enactment.

                               TITLE IV--QUALITY

                 Subtitle A--Comparative Effectiveness Research

    Sec. 1401. Comparative Effectiveness Research

                Current Law
        The need for more and better information about which
    clinical strategies work best and under what conditions has
    been widely recognized by clinicians, patients, researchers and
    policy makers. Most recently, comparative effectiveness
    research was addressed in the Medicare Prescription Drug,
    Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173)
    and the American Recovery and Reinvestment Act (ARRA, P.L. 111-
    5). Section 1013 of the MMA authorizes the Agency for
    Healthcare Research and Quality (AHRQ) to conduct and support
    research on the outcomes, comparative clinical effectiveness,
    and appropriateness of health care items and services. In ARRA
    Congress provided $1.1 billion for comparative effectiveness
    research, with $400 million going to the National Institutes of
    Health and $300 million to the Agency for Health Care Research
    and Quality to support comparative effectiveness research
    efforts at those agencies and $400 million to the Office of the
    Secretary to 1) conduct, support, or synthesize research that
    compares the clinical outcomes, effectiveness, and
    appropriateness of items, services, and procedures that are
    used to prevent, diagnose, or treat diseases, disorders, and
    other health conditions; and (2) encourage the development and
    use of clinical registries, clinical data networks, and other
    forms of electronic health data that can be used to generate or
    obtain outcomes data.
                Proposed Law
        The provision would establish a Center for Comparative
    Effectiveness Research within the Agency for Healthcare
    Research and Quality under title XI of the Social Security Act.
    The Center would conduct, support, and synthesize research with
    respect to the outcomes, effectiveness, and appropriateness of
    health care services and procedures in order to identify the
    manner in which diseases, disorders, and other health
    conditions can most effectively and appropriately be prevented,
    diagnosed, treated, and managed clinically.
        The duties of the Center would be to (1) conduct, support,
    and synthesize research relevant to the comparative
    effectiveness of the full spectrum of health care items,
    services, and systems, including pharmaceuticals, medical
    devices, medical and surgical procedures, and other medical
    interventions; (2) conduct and support systematic reviews of
    clinical research, including original research conducted
    subsequent to the date of the enactment of this section; (3)
    continuously develop rigorous scientific methodologies for
    conducting comparative effectiveness studies, and use such
    methodologies appropriately; (4) submit to the Comparative
    Effectiveness Research Commission (see below), the Secretary,
    and Congress relevant reports produced by the Center or a
    grantee or contractor of the Center; and (5) encourage, as
    appropriate, the development and use of clinical registries and
    the development of clinical effectiveness research data
    networks from electronic health records, post-marketing drug
    and medical device surveillance efforts, and other forms of
    electronic health data.
        The Center could secure information necessary to enable it
    to carry out its duties directly from any department or agency
    of the United States. Upon request of the Center, the head of
    that department or agency would furnish the information to the
    Center on an agreed upon schedule. In order to carry out its
    functions, the Center would (i) utilize existing information,
    both published and unpublished, where possible, collected and
    assessed either by its own staff or under other arrangements;
    (ii) carry out, or award grants or contracts for, original
    research and experimentation, where existing information is
    inadequate; and (iii) adopt procedures allowing any interested
    party to submit information for the Center or the Commission to
    use in making reports and recommendations. The Comptroller
    General would have unrestricted access to all deliberations,
    records, and nonproprietary data of the Center and Commission,
    immediately upon request, and both the Center and the
    Commission would be subject to periodic audit by the
    Comptroller General.
        The Secretary would establish an independent Comparative
    Effectiveness Research Commission to oversee and evaluate the
    activities carried out by the Center to ensure that the
    Center's activities result in highly credible research and
    information produced from such research. The duties of the
    Commission would include the following:
              (1) determine national priorities for research to be
            conducted, supported or synthesized by the center, and
            in making such determinations consult with a broad
            array of public and private stakeholders, including
            patients and health care providers and payers;
              (2) monitor the appropriateness of use of the
            Comparative Effectiveness Research Trust Fund (CERTF)
            (described below) with respect to the timely production
            of comparative effectiveness research determined to be
            a national priority;
              (3) identify highly credible research methods and
            standards of evidence for such research to be
            considered by the Center;
              (4) review the methodologies developed by the Center
            (5) not later than one year after the date of the
    enactment, enter into an arrangement under which the Institute
    of Medicine of the National Academy of Sciences would conduct
    an evaluation and report on standards of evidence for such
    comparative effectiveness research;
              (6) support forums to increase stakeholder awareness
            and permit stakeholder feedback on the efforts of the
            Center to advance methods and standards that promote
            highly credible research;
              (7) make recommendations for policies that would
            allow for public access of data produced under this
            section, in accordance with appropriate privacy and
            proprietary practices, while ensuring that the
            information produced through such data is timely and
            credible;
              (8) appoint a clinical perspective advisory panel for
            each national research priority, which would consult
            with patients and advise the Center on research
            questions, methods and evidence gaps in terms of
            clinical outcomes for the specific research inquiry to
            be examined with respect to such priority to ensure
            that the information produced from such research is
            clinically relevant to decisions made by clinicians and
            patients at the point of care;
              (9) make recommendations for the priority for
            periodic reviews of previous comparative effectiveness
            research and studies conducted by the Center;
              (10) routinely review processes of the Center with
            respect to such research to confirm that the
            information produced by such research is objective,
            credible, consistent with standards of evidence
            established under this section, and developed through a
            transparent process that includes consultations with
            appropriate stakeholders; and
              (11) make recommendations to the Center for the broad
            dissemination of the findings of research conducted and
            supported under this section that enables clinicians,
            patients, consumers, and payers to make more informed
            health care decisions that improve quality and value.
        The members of the Commission would consist of the Director
    of the Agency for Healthcare Research and Quality, the Chief
    Medical Officer of the Centers for Medicare & Medicaid
    Services, and 15 additional members who would represent broad
    constituencies of stakeholders, including clinicians, patients,
    researchers, third-party payers, and consumers of federal and
    state beneficiary programs. At least 9 of the 17 members would
    be practicing physicians, health care practitioners, consumers,
    or patients. The members of the Commission would represent a
    broad range of perspectives and collectively would have
    experience in epidemiology, health services research,
    bioethics, decision sciences, health disparities, and
    economics. To ensure a diverse representation of the health
    care community, at least one member would represent each of the
    following: (1) patients, (2) health care consumers, (3)
    practicing physicians, including surgeons, (4) other health
    care practitioners engaged in clinical care, (5) employers, (6)
    public payers, (7) insurance plans, and (8) clinical
    researchers who conduct research on behalf of pharmaceutical or
    device manufacturers. No more than 3 of the members of the
    Commission could be representatives of pharmaceutical or device
    manufacturers and these representatives could only be clinical
    researchers as described in (8).
        The Secretary would appoint the members of the Commission;
    in considering candidates for appointment to the Commission,
    the Secretary could consult with the Government Accountability
    Office and the Institute of Medicine of the National Academy of
    Sciences. The Secretary would designate a member of the
    Commission, at the time of appointment, as Chairman and a
    member as Vice Chairman for that term of appointment, except
    that in the case of vacancy of the Chairmanship or Vice
    Chairmanship, the Secretary could designate another member for
    the remainder of that member's term. The Chairman would serve
    as an ex officio member of the National Advisory Council of the
    Agency for Healthcare Research and Quality. Of the members
    first appointed, 8 would be appointed for a term of 4 years,
    and 7 would be appointed for a term of three years.
    Subsequently, each member of the Commission would be appointed
    for a term of four years.
        To enhance effectiveness and coordination, the Secretary
    would be encouraged, to the greatest extent possible, to seek
    coordination between the Commission and the National Advisory
    Council of the Agency for Healthcare Research and Quality.
        The bill includes provisions to protect against potential
    conflicts of interest. In appointing the members of the
    Commission or a clinical perspective advisory panel, the
    Secretary or the Commission, respectively, would take into
    consideration any financial interest and develop a plan for
    managing any identified conflicts. When considering an
    appointment to the Commission or a clinical perspective
    advisory panel, the Secretary or the Commission would review
    the expertise of the individual and the financial disclosure
    report filed by the individual pursuant to the Ethics in
    Government Act of 1978 for each individual under consideration
    for the appointment, so as to reduce the likelihood that an
    appointed individual would later require any pertinent waivers.
        Prior to a meeting of the Commission or a clinical
    perspective advisory panel, each member of the Commission or
    the clinical perspective advisory panel who is a full-time
    government employee or special government employee would
    disclose any relevant financial interests to the Secretary. A
    member of the Commission or a clinical perspective advisory
    panel could not participate with respect to a particular matter
    considered in a meeting of the Commission or the clinical
    perspective advisory panel if the member (or an immediate
    family member of the member) were to have a financial interest
    that could be affected by the advice given to the Secretary
    regarding the matter, excluding interests exempted in
    regulations issued by the Director of the Office of Government
    Ethics as too remote or inconsequential to affect the integrity
    of the services of the government officers or employees to
    which such regulations apply. The Secretary could grant a
    waiver if the Secretary were to determine it necessary to
    afford the Commission or a clinical perspective advisory panel
    the essential expertise of the member. The waiver would permit
    such a member to participate as a voting or nonvoting member
    with respect to a particular matter under consideration in a
    Commission or a clinical perspective advisory panel meeting.
    The number of waivers granted to members of the Commission
    could not exceed one-half of the total number of members for
    the Commission. However, no voting member of any clinical
    perspective advisory panel would be in receipt of a waiver, and
    no more than two nonvoting members of any clinical perspective
    advisory panel would be serving under waiver. For purposes of
    determining conflict of interest under this section, the term
    ``financial interest'' would mean a financial interest under
    section 208(a) of title 18, United States Code.
        While serving on the business of the Commission (including
    travel time), a member of the Commission would be entitled to
    compensation at the per diem equivalent of the rate provided
    for level IV of the Executive Schedule, and while serving away
    from home and the member's regular place of business, a member
    could be allowed travel expenses, as authorized by the Director
    of the Commission.
        The Commission would transmit a copy of each report
    submitted to the Secretary and would make the reports available
    to the public.
        The Commission could (1) appoint an executive director
    (subject to the approval of the Secretary) and other personnel
    as Federal employees under section 2105 of title 5, United
    States Code as may be necessary to carry out its duties
    (without regard to the provisions of Title 5, United States
    Code, governing appointments in the competitive service); (2)
    seek assistance and support from appropriate federal
    departments and agencies as might be required in the
    performance of its duties; (3) enter into contracts or make
    other arrangements for the conduct of the work of the
    Commission, as may be necessary; (4) make advance payments, and
    other payments that relate to the work of the Commission; (5)
    provide transportation and subsistence for persons serving
    without compensation; and (6) prescribe such rules and
    regulations as it were to deem necessary with respect to the
    internal organization and operation of the Commission.
        Any research conducted, supported, or synthesized by the
    Center would (1) be required to meet certain transparency,
    credibility and access conditions; (2) consider advice given by
    clinical perspective advisory panels; (3) consider stakeholder
    input; and (4) take into account potential differences across
    subgroups of populations. To ensure transparency, credibility,
    and access, the research would meet the following conditions:
    (a) the establishment of the agenda and the conduct of the
    research would be insulated from inappropriate political or
    stakeholder influence; (b) the methods of conducting the
    research would be scientifically based; (c) all aspects of the
    prioritization of research, conduct of the research, and
    development of conclusions based on the research would be
    transparent to all stakeholders; (d) the process and methods
    for conducting such research would be publicly documented and
    available to all stakeholders; and (e) throughout the process
    of the research, the Center would provide opportunities for all
    stakeholders involved to review and provide public comment on
    the methods and findings of such research.
        The research would meet a national research priority as
    determined above and would consider advice given to the Center
    by the clinical perspective advisory panel for the national
    research priority.
        The Commission would consult with patients, health care
    providers, health care consumer representatives, and other
    appropriate stakeholders with an interest in the research
    through a transparent process recommended by the Commission.
    Specifically, where deemed appropriate by the Commission, the
    consultation would include (1) recommending research priorities
    and questions, (2) recommending research methodologies, and (3)
    advising on and assisting with efforts to disseminate research
    findings. The Secretary would designate a patient ombudsman who
    would serve as an available point of contact for any patients
    with an interest in proposed comparative effectiveness studies
    by the Center and ensure that any comments from patients
    regarding proposed comparative effectiveness studies are
    reviewed by the Commission.
        Research falling under the activities of this Center would
    (1) be designed, as appropriate, to take into account the
    potential for differences in the effectiveness of health care
    items and services used with various subpopulations such as
    racial and ethnic minorities, women, different age groups
    (including children, adolescents, adults, and seniors), and
    individuals with different comorbidities; and (2) seek, as
    feasible and appropriate, to include members of such
    subpopulations as subjects in the research.
        The proposal would require public access to comparative
    effectiveness information. Not later than 90 days after receipt
    by the Center or Commission, as applicable, of a relevant
    report made by the Center, Commission, or clinical perspective
    advisory panel under this section, the appropriate information
    contained in the report would be posted on the official public
    Internet site of the Center and of the Commission, as
    applicable. For purposes of this section, a relevant report
    would be each of the following submitted by the Center or a
    grantee or contractor of the Center: (1) any interim progress
    report as deemed appropriate by the Secretary, (2) stakeholder
    comments, and (3) a final report.
        To disseminate and assist in the incorporation of
    comparative effectiveness information, the Center would provide
    for the dissemination of appropriate findings produced by
    research supported, conducted, or synthesized under this
    section to health care providers, patients, vendors of health
    information technology focused on clinical decision support,
    appropriate professional associations, and federal and private
    health plans, and other relevant stakeholders. In disseminating
    such findings the Center would (1) convey findings of research
    so that they are comprehensible and useful to patients and
    providers in making health care decisions; (2) discuss findings
    and other considerations specific to certain sub-populations,
    risk factors, and comorbidities as appropriate; (3) include
    considerations such as limitations of research and what further
    research may be needed, as appropriate; (4) not include any
    data the dissemination of which would violate the privacy of
    research participants or violate any confidentiality agreements
    made with respect to the use of data under this section; and
    (5) assist the users of health information technology focused
    on clinical decision support to promote the timely
    incorporation of such findings into clinical practices and
    promote the ease of use of such incorporation.
        The Center would develop protocols and strategies for the
    appropriate dissemination of research findings in order to
    ensure effective communication of the findings and the use and
    incorporation of the findings into relevant activities for the
    purpose of informing higher quality and more effective and
    efficient decisions regarding medical items and services. In
    developing and adopting the protocols and strategies, the
    Center would consult with stakeholders concerning the types of
    dissemination that would be most useful to the end users of
    information and could provide for the utilization of multiple
    formats for conveying findings to different audiences,
    including dissemination to individuals with limited English
    proficiency.
        The provision would establish a number of reporting
    requirements. (1) Beginning not later than one year after the
    date of the enactment, the Director of the Agency of Healthcare
    Research and Quality and the Commission would submit an annual
    report on the activities of the Center and the Commission and
    research conducted under this section to Congress. Each report
    would include a discussion of the Center's compliance with the
    requirements for inclusion of subpopulations in research,
    including any reasons for lack of compliance. (2) Not later
    than December 31, 2011, the Secretary would submit to Congress
    an annual recommendation for a fair share per capita amount
    described below for purposes of funding the CERTF. (3) Not
    later than December 31, 2013, the Secretary, in consultation
    with the Commission, would submit to Congress a report on all
    activities conducted or supported under this section as of such
    date. The report would include an evaluation of the overall
    costs of such activities and an analysis of the backlog of any
    research proposals approved by the Commission but not funded.
        The proposal would establish the Health Care Comparative
    Effectiveness Research Trust Fund (``CERTF'') under the
    Internal Revenue Code (the ``Code'') to carry out the
    proposal's provisions relating to comparative effectiveness
    research. For fiscal year 2010 and in each subsequent fiscal
    year, amounts in the CERTF under section 9511 of the Internal
    Revenue Code of 1986 would be available to the Secretary to
    carry out this section without the need for further
    appropriations and without fiscal year limitation.
        Nothing in this section would be construed to permit the
    Commission or the Center to mandate coverage, reimbursement, or
    other policies for any public or private payer.
        For information regarding the establishment and financing
    the Comparative Effectiveness Research Trust Fund, see section
    1802.
                Reason for Change
        All too often physicians and patients struggle to
    understand when a new drug, diagnostic test, surgical procedure
    or method of care delivery will be most helpful compared to the
    existing one, or how to choose among existing courses of
    treatment. This lack of clear information can create great
    confusion when it comes to difficult medical decisions. Health
    policy experts, researchers, consumers, and physician groups
    advocate that comparative effectiveness information (CER) is a
    needed public good and that greater investment in CER is
    critical to assuring high-quality care.
        Better information about the relative strengths and
    weaknesses of various health care items, services and systems
    will help physicians and patients make more informed decisions
    regarding patient care.
        Great variation exists in patient outcomes after a
    particular treatment. Currently, clinicians do not have
    evidence of these differences in patient outcomes or the
    effectiveness of different interventions for the same condition
    until after patients have been treated. Original research,
    systematic reviews, and synthesis of evidence must be designed,
    as appropriate, to take into account the potential for
    differences in effectiveness of health care items, services and
    systems with various subpopulations of patients such as racial
    and ethnic minorities, women, different age groups and
    individuals with different comorbidities. CER should not be
    viewed as one-size-fits-all medicine; rather, research should
    be designed to increase the amount and quality of evidence
    regarding what works, for whom, in what situation and why.
        The dearth of knowledge about the comparative benefits of
    different interventions underscores the need for an objective
    entity to consider the evidence on all available interventions
    for a particular condition and their impact on different
    patient populations. Such an inquiry is a public good that
    could benefit all stakeholders and as such, there is a need for
    a sustained investment in comparative effectiveness research to
    improve the base of knowledge from which patients and
    physicians make important medical decisions.
        To accomplish this sustained investment, the legislation
    establishes a Center at the Agency for Healthcare Research and
    Quality to conduct, support and synthesize research relevant to
    the comparative effectiveness of the full spectrum of health
    care items, services and systems and to aid in the
    dissemination of such research. The center will build on
    infrastructure and expertise already in place and work with
    public and private entities to conduct CER. The legislation
    also creates a public/private stakeholder commission to oversee
    the activities of the center, determine national priorities for
    research, appoint advisory panels for specific national
    priorities, review methodologies and standards of evidence for
    research, conduct outreach to stakeholders and make
    recommendations for the dissemination of research findings. In
    order to ensure the integrity of the research process, the
    commission and advisory panels it appoints will be subject to
    strict conflict of interest requirements. These requirements
    are designed to ensure that the process for setting research
    priorities and evaluating research questions and methodologies
    will be free from inappropriate political and industry
    influence. Proper dissemination of research findings is an
    integral aspect of future investments in CER. The legislation
    reflects the importance of dissemination efforts to ensure that
    the research is comprehensible and useful to patients and
    providers in making health care decisions. In order to provide
    a consistent stream of public and private funding for CER
    through a mechanism insulated from outside influence, the
    legislation creates the Comparative Effectiveness Research
    Trust Fund (CERTF). The monies in the fund are derived from
    fees assessed to Medicare and private health insurance plans.
                Effective Date
        Date of enactment.

                     Subtitle B--Nursing Home Transparency

       Part 1--Improving Transparency of Information on Skilled Nursing
                       Facilities and Nursing Facilities

    Sec. 1411. Required Disclosure of Ownership and Additional Disclosable
            Parties Information

                Current Law
        In general, Medicare and Medicaid require that skilled
    nursing facilities (SNF) and nursing facilities to be
    administered in a manner that maintains residents' well-being
    and safety. SNFs and nursing facilities are also required to
    report certain changes in ownership or controlling interest; in
    those individuals who are officers, directors, agents or
    managing employees; in the corporation, association or other
    company responsible for facility management; or when a change
    occurs in the SNF or nursing facility administrator position.
    SNFs and nursing facilities also are required to disclose
    ownership and other information as a condition of
    participation, and of certification or re-certification. In
    general, administrators must meet standards established by the
    Secretary.
        Under Title XI of the Social Security Act, Section 1124, a
    person is considered to have an ownership or controlling
    interest, directly or indirectly, when (1) they own 5% or more
    of an entity, or they hold a whole or part of any mortgage,
    deed of trust, note or other obligation secured by the entity
    (nursing facility) or any property or assets that equal 5% of
    the total property; (2) are an officer or director of the
    entity, if the entity is organized as a corporation; or (3) are
    a partner in the entity if it is organized as a partnership. To
    a limited extent as determined feasible by the Secretary,
    nursing facility entities also are required to report other
    ownership and control interests for any persons named as owners
    or having a control interest.
                Proposed Law
        This provision would amend Section 1124 to require SNFs and
    nursing facilities to make available upon request by the
    Secretary, the Health and Human Services Office of the
    Inspector General (OIG), the state where the entity is located,
    and the state long-term care ombudsman, information on
    ownership (including direct and indirect ownership),
    information on additional disclosable parties and information
    describing the governing body and organizational structure of
    the facility. SNFs and nursing facilities would be required to
    update disclosure information whenever changes occur.
    Information would need to be made available to the Secretary,
    OIG, the state where the entity is located, or the state long-
    term care ombudsman upon request until such time as this
    information became available publicly in accordance with final
    regulations promulgated by the Secretary. Facilities would not
    need to disclose and report vendors with which they do business
    on a routine basis that are independent third parties and do
    not have the ability to control the finances, operation,
    management or administration of a facility.
        In addition, SNFs and nursing facilities would be required
    to post prominent notices in facility lobbies that ownership
    and additional disclosable party information are available upon
    request.
        Facilities would be required to disclose the identity of
    and information on (1) each member of a facility's governing
    body including their name, title, date of start, and period of
    service for each SNF or nursing facility; (2) each person or
    entity who is an officer, director, member, partner, trustee,
    or managing employee, including their name, title, and period
    of service; (3) each person or entity who is an additional
    disclosable party; and (4) the organizational structure and
    relationship of the organizational entities to each SNF or
    nursing facility and each other for each ownership and
    governing individual or entity.
        To the extent practicable, the Secretary may allow SNFs and
    nursing facilities in a manner specified by the Secretary to
    submit information using existing reporting mechanisms on
    ownership interest, governance, and organizational structure if
    they already report such information to other oversight
    agencies, such as to the Internal Revenue Service (IRS), using
    Form 990, the Securities and Exchange Commission, the
    Secretary, or through information otherwise submitted to any
    other federal agency.
        Ownership or controlling interest would include direct or
    indirect interests through any number of intermediate entities
    and would include owners of a whole or part interest in any
    mortgage, deed of trust, note, or other obligation secured (in
    whole or in part) by the entity or any of the property or
    assets, if the ownership interest is at least 5%.
        Not later than two years after enactment, the Secretary
    would promulgate final regulations requiring SNFs and nursing
    facilities to report, in a standardized format, information
    about ownership, governing board, and organizational structure.
    The final regulations would require that as a condition of
    participation and payment, SNFs and nursing facilities certify
    that reported information is current and accurate. These
    regulations would take effect 90 days after the Secretary
    published the final regulations in the Federal Register.
        The Secretary would provide technical assistance and
    guidance to states on how to adopt and implement the reporting
    requirements in the standardized format. This provision would
    not reduce, diminish, or alter any existing facility reporting
    requirements.
        The following definitions would apply to this provision:
        (1) ``Additional disclosable party'' would be any
    individual or entity who (a) exercises operational, financial,
    or managerial control over the facility or any part of the
    facility; (b) provides policies or procedures for any facility
    operations or provides financial or cash management services to
    the facility; (c) leases or subleases real property to the
    facility; or owns a whole or part interest of at least 5% of
    the total value of such real property; (d) lends funds or
    provides a financial guarantee to the facility of at least
    $50,000; (e) provides management or administrative services,
    management or clinical consulting services, or accounting or
    financial services to the facility.
         (2) The facility is defined as a ``disclosing entity,''
    which is a SNF operating under Medicare or a nursing facility
    operating under Medicaid.
         (3) ``Managing employees'' include any employees, such as
    a general manager, business manager, administrator, director,
    or consultant, who directly or indirectly manages, advises, or
    supervises any element of a SNF or nursing facility's
    practices, finances, or operations.
         (4) ``Organizational structure'' consists of the
    following: (a) the corporations, the officers, directors, and
    shareholders of corporations, who own at least 5% of the
    corporation; (b) the limited liability companies, the ownership
    interest of members and managers of limited liability companies
    (including the percentage owned by each member and manager);
    (c) the general partnerships, the general partners, the limited
    partnerships, the general and limited partners who own at least
    10% of the partnership; (d) a trust, the trustees of the trust;
    (e) an individual, contact information for the individual; (f)
    and any other person or entity, as the Secretary determines
    appropriate.
        Within one year of publication of the final regulations in
    the Federal Register, the Secretary shall make ownership
    disclosure and additional disclosable party information for SNF
    and nursing facilities available to the public as determined by
    the Secretary.
                Reason for Change
        Over the last 10 to 15 years, it has become clear that
    state and federal regulators are increasingly unable to
    effectively and quickly investigate complex webs of
    interlocking corporate relationships. When serious safety and
    quality problems become evident, sometimes in conjunction with
    financial irregularities, the response of regulators and law
    enforcement needs to be as swift as possible to protect the
    well-being of residents. However, under current law, regulators
    have increasingly encountered difficulties in identifying and
    holding accountable those persons and entities who are
    responsible for providing good resident care.
        This is illustrated in a case recently settled by the HHS
    Office of Inspector General under the False Claims Act for
    serious quality of care deficiencies involving a facility in
    the District of Columbia. During the OIG's investigation, the
    nursing home fought hard to avoid disclosing both the
    intermediate companies linking the facility to its parent
    company, and the parent company itself. This information was
    not disclosed on the form that CMS requires to be submitted,
    and which informs the agency's database known as the Provider
    Enrollment Chain and Ownership System, or PECOs. Even after an
    extensive investigation, the HHS OIG was still not able to
    uncover all of the multiple layers of limited liability
    companies and other structures that hid the true owners and
    operators--those who were calling the shots when it came to
    making decisions about the resources available for resident
    care.
        State regulators have encountered similar problems. In
    2008, the Connecticut Attorney General testified before the
    House Energy and Commerce Oversight and Investigations
    Subcommittee about a New England nursing home chain embroiled
    in a series of controversies and legal actions involving
    various allegations, including siphoning of Medicaid funds. The
    lack of transparency in the operations of the chain led to
    large legal expenditures by the State in order to try to
    identify the parties responsible for good resident care.
    Regrettably, issues of poor care and financial disarray
    continued even as investigators worked to try to identify those
    parties who should have been held accountable for providing
    good-quality services and overseeing proper management of
    fiscal resources, which include taxpayer funds, for those
    services.
        Such situations highlight the need for making improvements
    in disclosure and reporting requirements. Current disclosure
    and reporting rules for nursing homes to divulge key ownership
    and non-ownership relationships with persons and entities that
    are in a position to control the resources and operations
    essential to good resident care are inadequate. This lack of
    transparency hinders the ability of regulators to enforce basic
    safety and quality standards, and obscures adequate disclosure
    about how public funds that are intended for resident care are
    actually being spent. The proposed provisions in Section 1411,
    which call for nursing homes to divulge those persons and
    entities that are in a position to make decisions about the
    operation, management and financing of services for resident
    care, will restore a measure of appropriate public
    accountability.
                Effective Date
        Date of enactment.

    Sec. 1412. Accountability Requirements

                Current Law
        There are no comparable requirements in current law for
    SNFs and nursing facilities to implement compliance and ethics
    training programs for their employees.
                Proposed Law
        (1) Thirty-six months after enactment of this provision,
    SNFs and nursing facilities would be required to have complied
    with regulations developed by the Secretary governing the
    operation of compliance and ethics programs. The compliance and
    ethics programs would need to be effective in preventing and
    detecting criminal, civil, and administrative violations and in
    promoting quality of care. Operating organizations (entities
    that operate SNFs and nursing facilities) would be required to
    comply with the compliance and ethics programs regulations,
    including corporate-level management of multi-unit nursing home
    chains.
        Within two years of the effective date of this provision,
    the. Secretary, in consultation with the HHS OIG, would
    promulgate regulations for effective compliance and ethics
    programs for operating organizations. These regulations may
    include a model compliance program, and would permit the design
    of the compliance and ethics programs to vary depending on an
    organization's size. Larger operating organizations would have
    more formal and rigorous programs with established written
    policies and procedures to guide employees. Regulations also
    would specifically address requirements for employees and
    managers of multi-nursing home chains.
        Within three years after promulgation of final regulations,
    the Secretary would be required to evaluate the compliance and
    ethics programs and submit a report to Congress to determine if
    the compliance and ethics programs led to changes in deficiency
    citations, quality performance, or other patient care quality
    metrics. The Secretary's report to Congress would include
    recommendations to change the requirements of the compliance
    and ethics program, as the Secretary determined appropriate.
        Compliance and ethics programs would need to be reasonably
    designed, implemented, and enforced to be generally effective
    in preventing and detecting civil, criminal, and administrative
    violations under the Social Security Act as well as in
    promoting quality of care, and would include the following
    required components:
              (A) compliance standards and procedures that would
            guide employees and other agents and would reduce
            criminal, civil, and administrative violations.
              (B) responsibility by senior individuals within
            operating organizations for overseeing compliance with
            the standards and procedures the entity establishes for
            their compliance and ethics program. These individuals
            would have resources and authority to assure
            compliance.
              (C) diligence in ensuring that individuals who are at
            risk for engaging in criminal, civil, or administrative
            violations are not delegated responsibility for
            implementing or monitoring an organization's compliance
            and ethics program.
              (D) effective communication of standards and
            procedures to employees (and other agents), through
            training programs or explanatory publications that
            practically illustrate what is required.
              (E) assurance that the standards for their compliance
            and ethics programs are met by using procedures to
            detect criminal, civil, and administrative violations.
            Organizations can use procedures such as monitoring and
            auditing systems as well as installing a reporting
            system that enables employees (and other agents) to
            report violations by others without fear of
            retribution.
              (F) appropriate disciplinary mechanisms that are
            consistently followed to enforce the compliance and
            ethics program standards. Operating organizations also
            must demonstrate that they have used, where
            appropriate, disciplinary measures for individuals
            failing to detect offenses.
              (G) appropriate mechanisms to respond to detected
            offenses and strategies to prevent future similar
            offenses, including repayment of any funds to which an
            organization was not entitled, and modification of
            compliance and ethics programs to detect criminal,
            civil, and administrative violations.
              (H) periodic reassessment of their compliance and
            ethics program standards to ensure that the programs
            continue to be effective as the organization and
            facilities change.
        (2) Before December 31, 2011, the Secretary would be
    required to establish and implement a quality assurance and
    performance improvement (QAPI) program. The QAPI program would
    include multi-unit chains. Under the QAPI program, the
    Secretary would establish facility standards and provide
    technical assistance to SNFs and nursing facilities on the
    development of best practices to meet the QAPI standards
    through regulation. Within one year after the Secretary
    promulgates such regulations--SNFs and nursing facilities would
    be required to submit plans to the Secretary describing how
    they will meet the QAPI standards and implement best practices.
        (3) The Comptroller General of the Government
    Accountability Office (GAO) would be required to conduct a
    study that examined the following: (A) the extent to which
    corporations that operate large numbers of SNFs and nursing
    facilities are undercapitalized, taking into account ownership
    type (including private equity and control interests) are
    undercapitalized; (B) the effects of undercapitalization on
    quality of care, including staffing and food costs; and (C)
    options to address undercapitalization issues, such as
    requirements for surety bonds, liability insurance, or minimum
    capitalization. Within 18 months after this provision became
    effective, GAO would submit a report to Congress.
                Reason for Change
        For more than a decade, the HHS OIG and other Federal
    agencies charged with responsibility for enforcement of Federal
    law have emphasized the importance of compliance plans. In
    1998, the OIG began offering guidance on the elements of a
    model compliance plan, noting in initial guidance for clinical
    labs that ``compliance plans offer the health care provider an
    opportunity to participate in a nationwide effort to reduce
    fraud and abuse in our national health care programs.''
        Compliance program guidance for nursing homes was
    subsequently published in 2000, with supplemental guidance
    published in April 2008. In its supplemental guidance, the OIG
    observed that ``a successful compliance program addresses the
    public and private sectors' common goals of reducing fraud and
    abuse, enhancing health care providers' operations, improving
    the quality of health care services, and reducing their overall
    cost. Meeting these goals benefits the nursing facility
    industry, the government, and residents alike. Compliance
    programs help nursing facilities fulfill their legal duty to
    provide quality care; to refrain from submitting false or
    inaccurate claims or cost information to the Federal health
    care programs; and to avoid engaging in other illegal
    practices''.
        Yet not all nursing homes have voluntarily implemented
    compliance and ethics programs. The OIG believes that the
    incidence of fraud and abuse in the nursing home industry,
    which costs the government tens of millions of dollars
    annually, will decrease if all facilities are required to
    develop and implement effective internal programs that aim to
    achieve better control of claims submissions, while also
    reducing the risk of criminal and civil liabilities.
        Accordingly, and because the Federal government has a zero
    tolerance policy towards fraud and abuse, the proposed
    provisions in Section 1412 are designed to outline those
    elements of an effective and comprehensive compliance and
    ethics programs that nursing homes can use and adapt to fit the
    scale and scope of their operations.
        In addition, this Section proposes that nursing homes
    develop Quality Assurance and Performance Improvement (QAPI)
    programs, which are vital for health care providers of all
    types. QAPI programs are designed to make health care
    organizations recognize and establish comprehensive systems
    that aim to deliver patient-centered care encompassing all
    individuals in an organization, from board to bedside, in an
    environment that promotes and demonstrates measurable improved
    outcomes for patients and families.
        To achieve this, QAPI programs that have been developed to
    date involve a range of activities, including: setting
    expectations for patient safety; setting priorities for areas
    requiring improvement, and approving policies and procedures
    used to organize those efforts; collecting objective data to
    demonstrate actual improvements in care, safety, and prevention
    and reduction of medical errors; development of strategies for
    reviewing and acting on quality and safety indicators; and
    documentation of evidence that staff at all levels are involved
    in quality efforts.
        Finally, Section 1412 asks the Government Accountability
    Office to undertake a study to shed light on reports that some
    nursing homes lack sufficient cash to carry on daily business
    at a level that is adequate for good patient care, which may in
    part be due to complex arrangements in which homes that are
    owned or operated by publicly or privately-held companies are
    stripped of assets to shield them from liability.

    Sec. 1413. Nursing Home Compare Medicare Website

                Current Law
        There is no requirement in current law for Medicare's
    Nursing Home Compare website. The Nursing Home Compare website
    was developed by the Centers for Medicare and Medicaid Services
    (CMS) and launched in November 2002. The website was intended
    to bolster the agency's efforts to improve SNF and nursing
    facility quality of care and to make information on nursing
    home quality more accessible for long-term care consumers and
    their families. Since its launch, CMS has enhanced the website
    by adding or improving quality measures and website navigation.
    Medicare Nursing Home Compare includes national data on all
    nursing facilities that participate in Medicare and Medicaid.
    The data featured on Nursing Home Compare includes facility
    ratings, selected results from survey and certification
    inspections, and limited staffing information on SNFs and
    nursing facilities.
                Proposed Law
        The Secretary would ensure that the Nursing Home Compare
    website (or a successor website) contains additional
    information for SNFs and nursing facilities that is searchable
    and displayed in a manner that is prominent, easily accessible,
    and clearly understandable for consumers, including:
              (1) information on ownership and affiliated parties
            as would be required under Sec. 1411 above, Required
            Disclosure of Ownership and Affiliated Parties
            Information, that identifies SNF and SNF facility
            chains' ownership, governing boards, and organizational
            structure;
              (2) information on CMS' Special Focus Facility
            facilities (or a successor program), including the
            names and locations of facilities that since the
            previous quarter that were, (a) newly enrolled in the
            program, (b) enrolled but failed to significantly
            improve, (c) enrolled and significantly improved, (d)
            graduated from the program, and (e) have closed
            voluntarily or been terminated by the Secretary;
              (3) staffing data for each facility, including
            resident census, hours of care provided per resident
            per day, staff turnover, and tenure. These data would
            need to be displayed in formats that are clearly
            understandable to consumers and would permit them to
            compare staffing differences between facilities. This
            staffing information also would need to assist
            consumers in comparing an individual facility's
            staffing with state and national facility averages by
            providing: (a) concise explanations of how to interpret
            data (i.e., nursing home staff hours per resident day),
            (b) differences between staffing categories and, their
            associated training requirements, (c) the relationship
            between staff levels and quality of care, and (d) an
            explanation that residents with greater care needs can
            require greater staff levels or more staff training;
              (4) links to state websites where state survey and
            certification program information can be found,
            including Form 2567 state inspection reports (or
            successor forms) and facility correction plans or other
            facility responses, along with information to guide
            consumers in interpreting and understanding survey and
            certification reports;
              (5) the standardized complaint form developed by the
            Secretary under Sec. 1415 (below), which includes an
            explanation of how complaint forms are used and how to
            file a complaint with states' LTC ombudsman programs
            and survey and certification programs;
              (6) summary information on the number, type,
            severity, and outcome of substantiated complaints; and
              (7) the number of adjudicated criminal violations by
            the nursing facility or crimes committed by nursing
            facility employees (a) that were committed inside a
            facility; (b) for crimes or violations committed
            outside a facility, the instances where these were
            elder abuse, neglect, exploitation, criminal sexual
            abuse of an elder, or other violations that resulted in
            serious bodily injury; and (c) the number of civil
            monetary penalties levied against the facility,
            employees, contractors, and other agents.
        The Secretary is further directed to undertake a Nursing
    Home Compare review and modification process that would: (1)
    address the accuracy, clarity of presentation, timeliness, and
    comprehensiveness of the information reported on the website;
    and (2) within one year after the review's completion, a
    process to modify or revamp the website in accordance with the
    Secretary's findings. In addition, this website review process
    would include consultation with the following organizations:
    (1) state LTC ombudsman programs, (2) consumer advocacy groups,
    (3) provider stakeholder groups, and (4) representatives of
    programs or groups the Secretary determines appropriate.
        To improve the public's access to timely information on
    state survey and certification inspections, states would be
    required to submit information, including any enforcement
    actions, to the Secretary at the same time or before the state
    nursing home surveyors sent that information to facilities.
    Corrections to prior information submitted to the state also
    would need to be submitted to the Secretary in a timely manner.
    The Secretary is directed to update the Nursing Home Compare
    website with the information from states' survey and
    certification inspections as expeditiously as practicable, but
    at least quarterly. This requirement would be required within
    one year after this provision became effective.
        The Secretary is also directed to conduct a Special Focus
    Facility program for enforcement of requirements for SNFs and
    nursing facilities that the Secretary identified as having
    substantially failed to meet applicable requirements of this
    provision. Under the Special Focus Facility program, the
    Secretary would conduct a survey of each facility in the
    program at least every six months.
        Within one year of the effective date of this provision,
    SNFs and nursing facilities would be required to make available
    for any individual's review reports on surveys, certifications,
    and complaint investigations for the past three years and to
    post notices in prominent and accessible facility areas that
    these reports are available for inspection. These reports would
    need to exclude information identifying complainants or
    residents.
        The Secretary would be required to provide guidance to
    states on how to establish Internet links to Form 2567 state
    inspection reports (or successor forms), complaint
    investigation reports, and facilities' correction plans or
    other responses to Form 2567. This information would be
    available on the state website for SNFs and nursing facilities.
    These reports also would be required to exclude information
    that identifies complainants or residents.
        States would be required to maintain a consumer-oriented
    website that provided useful information on all SNF and nursing
    facilities operating within that state. The information on each
    facility would include Form 2567 state inspection reports (or
    successor forms), complaint investigation reports, facilities'
    plans of correction, and other information as determined useful
    by the Secretary or the state for consumers to use in assessing
    the quality of LTC options and the quality of care in
    individual facilities.
                Reason for Change
        The Federal website, Nursing Home Compare, is visited
    annually by tens of thousands of individuals looking for
    reliable, accurate information about a suitable facility for a
    loved one. While already a valuable resource, this website
    would greatly benefit from the addition of certain critical
    information--e.g., staffing levels in facilities based on real-
    time data; information about who the owners and affiliated
    business partners of nursing homes are; links to state websites
    where electronic copies of annual inspection reports can be
    found; and information about any substantiated complaints filed
    against the facility, as well as criminal violations committed
    by staff.
        Consumers would also benefit from the proposal in this
    Section that calls for states to develop clear information
    about the quality and safety of nursing homes as part of their
    websites, including explanations of how to interpret State
    inspection reports and plans of correction submitted by
    facilities when inspectors find deficiencies in quality and
    safety.
                Effective Date
        The modifications of Nursing Home Compare described in this
    section would become effective within one year of enactment,
    except that the Secretary would ensure that Ownership and
    Affiliated Parties, and Accountability Information as described
    in Sec. 1411, would be included on the website within one year
    of the date when those requirements were implemented.

    Sec. 1414. Reporting of Expenditures

                Current Law
        There are no comparable provisions in current law that
    require SNFs or nursing facilities to report expenditures.
                Proposed Law
        Within one year of the effective date of this provision,
    the Secretary would consult with private sector accountants
    with knowledge of SNF cost reports to re-design cost report
    forms to separately capture wages and benefit expenditures for
    direct care staff.
        Beginning with cost reports submitted three years after the
    effective date of this provision, SNFs would need to separately
    report direct care staff wages and benefits including (at least
    breaking out) (1) registered nurses, (2) licensed professional
    nurses, (3) certified nurse assistants, and (4) other medical
    and therapy staff.
        Within 30 months (2\1/2\ years) of the effective date of
    this provision, the Secretary, in consultation with OIG,
    Medicare Payment Advisory Commission (MedPAC), and other
    experts identified by the Secretary, would categorize SNF's
    newly collected annual expenditure data for each facility,
    regardless of payment source, into the following functional
    accounts: spending on direct care services, including nursing,
    therapy, and medical services; spending on indirect care,
    including housekeeping and dietary services; capital assets,
    including building and land costs; and administrative services
    costs. The Secretary would establish procedures to make the
    expenditure data submitted under this provision, readily
    available to interested parties upon request, subject to
    requirements established by the Secretary.
                Reason for Change
        This provision would make it possible for policymakers and
    other interested parties to accurately determine and analyze
    how much funding a facility or chain dedicates to one of the
    most important aspects of resident care--staffing. Medicare
    cost reports do not currently capture this information, with
    the result that facilities may, if they wish, easily save money
    by making decisions to cut staff. While research has
    established that staffing levels below a certain threshold are
    detrimental to good resident care, no consensus among
    policymakers has yet been achieved about the level of staffing
    that should be in place to assure good or optimal care. This
    new source of data on what facilities spend on staffing, in
    conjunction with Section 1416 below on reporting of staffing
    levels, would allow facilities to assess the amount of total
    funding that they dedicate to nurse aides with overall quality
    of care.

    Sec. 1415. Standardized Complaint Form

                Current Law
        There are no provisions in current law requiring use of a
    standardized complaint form. Oversight of nursing homes is a
    shared federal-state responsibility. Based on statutory
    requirements, CMS defines standards that nursing homes must
    meet to participate in the Medicare and Medicaid programs and
    contracts with states to assess whether homes meet these
    standards through annual surveys and complaint investigations.
    A range of statutorily defined sanctions is available to CMS
    and the states to help ensure that homes maintain compliance
    with federal quality requirements. CMS also is responsible for
    monitoring the adequacy of state survey activities.
        Every nursing home receiving Medicare or Medicaid payment
    must undergo a standard survey not less than once every 15
    months, and the statewide average interval for these surveys
    must not exceed 12 months. During a standard survey, separate
    teams of surveyors conduct a comprehensive assessment of
    federal quality-of-care and fire safety requirements. In
    contrast, complaint investigations generally focus on a
    specific allegation regarding resident care or safety.
        The quality-of-care component of a survey focuses on
    determining whether (1) the care and services provided meet the
    assessed needs of the residents and (2) the home is providing
    adequate quality care, including preventing avoidable pressure
    sores, weight loss, and accidents. Nursing homes that
    participate in Medicare and Medicaid are required to
    periodically assess residents' care needs in 17 areas, such as
    mood and behavior, physical functioning, and skin conditions,
    in order to develop an appropriate plan of care. Such resident-
    assessment data are known as the minimum data set (MDS). To
    assess the care provided by SNF and nursing facilities,
    surveyors select a sample of residents and (1) review data
    derived from the residents' MDS assessments and medical
    records; (2) interview nursing home staff, residents, and
    family members; and (3) observe care provided to residents
    during the course of the survey. CMS establishes specific
    investigative protocols for state survey teams--generally
    consisting of RNs, social workers, dieticians, and other
    specialists--to use in conducting surveys. These procedural
    instructions are intended to make the on-site surveys thorough
    and consistent across states.
        Complaint investigations provide an opportunity for state
    surveyors to intervene promptly if problems arise between
    standard surveys. Complaints may be filed against a home by a
    resident, the resident's family, or a nursing home employee
    either verbally, via a complaint hotline, or in writing.
    Surveyors generally follow state procedures when investigating
    complaints but must comply with certain federal guidelines and
    time frames. In cases involving resident abuse, such as
    pushing, slapping, beating, or otherwise assaulting a resident
    by individuals to whom their care has been entrusted, state
    survey agencies may notify state or local law enforcement
    agencies that can initiate criminal investigations. States must
    maintain a registry of qualified nurse aides, the primary
    caregivers in nursing homes, that includes any findings that an
    aide has been responsible for abuse, neglect, or theft of a
    resident's property. The inclusion of such a finding
    constitutes a ban on nursing home employment.
                Proposed Law
        The Secretary would be required to develop a standardized
    complaint form for SNF and nursing facility residents or their
    representatives to use in filing complaints on SNFs and nursing
    facilities to state survey and certification agencies and state
    LTC ombudsman programs. States would be required to make the
    new standardized complaint form available on request to SNF
    residents, people acting on behalf of residents, and employees
    or representatives of SNF and nursing facility employees.
        States also would be required to establish a complaint
    resolution process that ensures that SNF and nursing facility
    residents, their representatives, or employees are not denied
    access to residents or retaliated against for complaining, in
    good faith, about quality of care or other issues in a
    facility, regardless of whether residents, their
    representatives or employees used the standardized form or some
    other method to submit their complaint. The state complaint
    resolution procedures would be required to include (a)
    procedures to ensure accurate tracking of complaints, (b)
    procedures to determine the likely severity of the complaint
    and procedures to investigate complaints, (c) deadlines for
    responding to complaints and procedures that would enable a
    complainant to track the complaint and investigation, and (d)
    procedures to ensure that the identity of complainants would be
    kept confidential.
        The complaint resolution process would be required to
    include prohibitions against retaliation to ensure that SNF and
    nursing facility employees would not be penalized,
    discriminated, or retaliated against because they or anyone
    they requested to act on their behalf, in good faith,
    complained about the quality of care, services provided, or
    other issues related to quality of care or service in a nursing
    facility. This retaliatory prohibition applies regardless
    whether employees used the new standard or some other complaint
    method. In addition, retaliatory actions would not affect any
    aspect of complainants' employment, including discharge,
    promotion, compensation, terms, conditions, or employment
    privileges, or termination of a contract for services. SNFs
    would not be permitted to file complaints or reports with state
    professional disciplinary agencies against current or former
    employees because they (or their agents), acting in good faith,
    submitted complaints about quality of care or services in their
    employers' facility.
        SNF and nursing facility employees who believed they were
    penalized, discriminated, or retaliated against, or lost
    service contracts because they submitted a quality-of-care
    complaint against a SNF, would be able to seek remedy in an
    appropriate U.S. district court. U.S. district courts would
    have jurisdiction to grant complete relief, regardless of
    citizenship or amount in question, but not limited to
    injunction, such as reinstatement, compensatory damages
    (reimbursement of lost wages, compensation, and benefits),
    costs of litigation (including attorney's and expert witnesses'
    fees), exemplary damages, and other relief deemed proper by the
    court.
        SNF and nursing facility employees' rights under this
    provision would not be diminished by contract or other
    agreement and would not diminish greater protection through
    other federal or state laws, contracts, or agreements. Nothing
    in this provision would prevent a resident, an agent acting on
    their behalf, or an employee from submitting a complaint in any
    manner and not necessarily by using the standardized complaint
    form. SNFs and nursing facilities would be required to
    conspicuously post in an appropriate location a sign as
    specified by the Secretary, that identifies employees' rights
    to bring complaints against the facility. Individuals would be
    considered to be acting in ``good faith'' when submitting
    complaints if they believe (1) their complaint is true, and (2)
    a violation has or may have occurred related to Medicare
    provisions of the Social Security Act. These amendments would
    apply one year after the effective date of this provision.
                Reason for Change
        Currently, there is inadequate documentation by the Federal
    government and by states of the number and type of complaints
    that residents and families file, the processes used to examine
    these complaints, and how and if they are resolved. Section
    1415 is designed to address these flaws by requiring states to
    establish more standardized, uniform processes and procedures
    for handling and addressing complaints, and in so doing, to
    improve resident care. This Section also puts in place
    protections for nursing home employees who could--but who may
    in some instances today decide not to bring a serious quality
    or safety issue to the attention of supervisors or owners--for
    fear of facing discrimination, intimidation or threat of
    termination.

    Sec. 1416. Ensuring Staffing Accountability

                Current Law
        There are no comparable provisions in current law for SNF
    and nursing facilities to report staff levels that are derived
    from payroll data in a uniform format.
                Proposed Law
        Within two years after enactment SNFs and nursing
    facilities would be required to electronically submit to the
    Secretary direct care staffing information, including agency
    and contract staff. In developing specifications and direct
    care staffing data requirements, the Secretary would consult
    with state long-term care ombudsman programs, consumer advocacy
    groups, provider stakeholder groups, employees and their
    representatives, and other parties deemed appropriate by the
    Secretary. The direct care staffing specifications would be
    based on payroll and other verifiable data provided by SNFs and
    nursing facilities to the Secretary in a uniform format, and
    reporting on contract staff would be separate from information
    on employees. Specifications would include (1) work categories
    of certified employees, including registered nurses, licensed
    practical nurses, licensed vocational nurses, certified nursing
    assistants, therapists, or other medical personnel; (2)
    resident census data and information on resident case mix; (3)
    an established reporting schedule; and (4) employee tenure and
    turnover, as well as hours of care provided by each certified
    employee category, per resident per day.
                Reason for Change
        Congress and the States have long debated the merits of
    instituting minimum staffing levels for nursing homes in order
    to provide a level of consistent care that cannot otherwise be
    maintained. However, such discussions have frequently been
    hampered by a lack of sound data on actual staffing levels in
    facilities across the country. By requiring CMS to develop an
    electronic system that facilities would use to report staffing
    data extracted from their payroll systems several times a
    year--and that is categorized to distinguish staff providing
    direct care from other types of work--Section 1416 will make it
    possible to more precisely quantify and analyze what level of
    staffing correlates to high-quality services. The information
    from Section 1414 above on what facilities spend on staffing,
    as compared to other types of costs, will further inform
    policymakers and facilities about the costs associated with
    providing optimal staffing in different types of facilities
    with varying case mix.

                         Part 2--Targeting Enforcement

    Sec. 1421. Civil Money Penalties

                Current Law
        Under Medicaid law, states have authority either by
    regulation or law to impose money penalties, deny payments,
    appoint temporary management to bring facilities into
    compliance, and close facilities if nursing facilities fail to
    meet state plan requirements or have deficiencies that
    jeopardize residents' health or safety. State expenses for
    enforcement may be funded under the proper and efficient state
    plan administration provision of the Medicaid Statute (Title
    XIX of the Social Security Act). States also have authority to
    establish reward programs for nursing facilities that deliver
    the highest quality care to medical assistance patients and
    fund these incentive rewards programs under Medicaid's proper
    and efficient administration provisions.
                Proposed Law
        For SNFs and nursing facilities, the Secretary--and for
    nursing facilities, states--would have the authority to impose
    per instance or per day civil money penalties (CMPs) for each
    instance or each day of noncompliance (as determined
    appropriate by the Secretary). The amounts of the per instance
    CMPs would be the following: (1) in the case where a deficiency
    is the direct proximate cause of a resident's death, the
    penalty would not exceed $100,000; (2) in each case where a
    facility is cited for a resident's actual harm or immediate
    jeopardy, an amount equal to or greater than $3,050, but not
    more than $25,000; and (3) in each case of any other
    deficiency, penalty amounts per deficiency would range from not
    less than $250 to not more than $3,050. The amount of the
    applicable per day CMPs would be the following: (1) an amount
    equal to or greater than $3,050 up to $25,000 where facilities
    were cited for deficiencies that caused actual harm or
    immediate jeopardy to residents; and (2) an amount between $250
    and $3,050 for each case of any other deficiency.
        Subject to limitations where reductions are prohibited if
    SNFs and nursing facilities self-report and promptly correct
    deficiencies within 10 calendar days after imposition of a CMP,
    the Secretary--or the state if applicable--may reduce the
    amount of the imposed CMP by up to 50%. The Secretary--or the
    state if applicable--would be prohibited from reducing CMPs for
    SNFs where the Secretary had previously reduced a penalty for
    that facility in the last year, with respect to a repeat
    deficiency. The Secretary--or the state if applicable--would be
    prohibited from reducing CMPs for other deficiencies: (1) where
    the deficiency was found to result in a pattern of harm or
    widespread harm that immediately jeopardizes residents' safety
    or health; or (2) where a deficiency resulted in the death of a
    patient.
        Aggregate CMP reductions would not be permitted to exceed
    35% on the basis of self-reporting, on the basis of a waiver or
    an appeal, or on the basis of both a waiver and an appeal. In
    collecting CMPs, the Secretary--or the state if applicable--
    must provide for the facility to participate in an independent
    informal dispute resolution process that generates a written
    record prior to penalty collection, and cannot impose
    additional per-day penalties during the pendency of the dispute
    resolution process; may provide an escrow account for fees to
    be held beginning on the earlier of 90 days after fees are
    imposed or the date the informal resolution process was
    completed; may provide that penalty fees are held in escrow
    accounts until appeals are resolved.
        In situations where appeals are resolved in favor of
    facilities, the Secretary--or the state if applicable--may
    provide, if escrow accounts are established, that penalty fees
    would be returned to facilities with interest; and may provide,
    when facility appeals are unsuccessful, that some portion of
    penalty amounts are used to support state LTC ombudsman
    activities and to protect residents, including residents who
    reside in facilities that voluntarily or involuntarily close or
    are decertified.
        The activities funded with CMPs may include using the
    penalty funds to offset costs of relocating residents to home-
    and community-based settings and other facilities, as well as
    projects to support resident and family councils and other
    consumer quality of care involvement (including joint training
    of staff and surveyors, technical assistance for facilities
    under quality assurance programs, the appointment of temporary
    management, and other activities approved by the Secretary).
        Provisions of the Social Security Act, Section 1128A
    (except subsections (a) and (b)) and provisions that require a
    hearing prior to imposing CMPs, also would apply to the CMPs
    described here.
        The CMP amendments would apply one year after the effective
    date of the provision.
                Reason for Change
        Multiple reports issued by the Government Accountability
    Office have suggested that the penalties originally legislated
    as part of the 1987 Nursing Home Reform Act, and which took
    effect in 1994, may not be having a significant deterrent
    effect for several reasons. For example, a GAO report issued in
    December 2005, ``Nursing Homes: Despite Increased Oversight,
    Challenges Remain in Ensuring High-Quality Care and Resident
    Safety,'' noted that ``state surveyors continue to understate
    serious deficiencies, as shown by the larger number of serious
    deficiencies identified in federal comparative surveys than in
    state surveys of the same homes.''
        Earlier GAO work found that the impact of monetary
    penalties was often weak due to large backlogs of appeals filed
    by providers. Those backlogs in turn had the effect of
    encouraging the federal government ``to settle appealed cases,
    often reducing the size of the fine, and delay the imposition
    of the fine even if it is ultimately upheld after appeal. As a
    result,'' the agency's 1999 report concluded, ``it is not
    surprising that some nursing home owners routinely appeal
    imposed penalties.''
        More recently, the HHS Office of Inspector General
    testified before the House Energy and Commerce Oversight and
    Investigations Subcommittee in May 2008 that CMPs ``are an
    important element of an effective enforcement strategy,
    especially in cases when nursing homes are out of compliance
    for designated time periods or have deficiencies that put
    residents in immediate jeopardy,'' but also noted that ``this
    tool has not been used to its full potential. For example, in
    an April 2005 report, OIG found that although $81.7 million in
    CMPs were imposed during 2000 and 2001, CMS had collected only
    $34.6 million (42 percent) by the end of 2002. We found that
    CMS did not utilize the full dollar range allowed for CMPs and
    that impositions were frequently at the lower end of the
    allowed ranges.''
        In addition, a 2009 analysis by the Center for Medicare
    Advocacy argued that fines for very serious deficiencies are
    too low to affect provider behavior. The Center's study of all
    federal administrative decisions issued in 2007 for nursing
    home enforcement cases found that the fines levied were low in
    relation to the harm suffered: For example, in one case, a fine
    of only $4,050 was assigned for the strangulation death of a
    resident on a bedrail. In response, the Center notes, some
    states have enacted laws with far higher penalties: California,
    for example, has a penalty of up to $100,000 for causing the
    death of a resident.
        The provisions in this Section are designed to update and
    more effectively target CMP authority by focusing higher
    penalties only on serious quality of care and safety
    deficiencies that cause harm to residents, that put their
    health in immediate jeopardy, or that are life-threatening.
    Other modifications would allow facilities that self-report and
    promptly correct deficiencies to receive a reduction in their
    CMP of 50%. Finally, the Section aims to make collection of
    CMPs much more timely, by allowing the Federal government and
    States to collect fines following an initial independent
    dispute resolution process (IIDR) and to escrow these funds,
    pending the results of any further appeals.
        To implement IIDR, the Secretary shall promulgate
    regulations pursuant to notice and comment rulemaking under the
    Administrative Procedures Act. Such regulations shall allow
    IIDR to be conducted by an independent state agency (including
    an umbrella agency, such as the Health and Human Services
    Commission), a Quality Improvement Organization, or the state
    survey agency, so long as the participants in IIDR are not
    involved in the initial decision to cite the deficiency(ies)
    and impose the remedy(ies). Whoever is authorized to conduct
    IIDR must not have any conflicts of interest. The regulations
    may address the type of IIDR available to SNFs and NFs (desk
    review or in-person meeting) and the circumstances of each; may
    determine whether and when attorneys may represent the parties
    before IIDR; and may limit the duration of in-person meetings,
    depending on the scope and severity of deficiencies and other
    factors as determined by the Secretary.
        As under current informal dispute resolution (IDR)
    processes, facilities may challenge only the factual basis of
    the deficiency. They may not challenge issues related to
    surveyors' compliance with the survey process or the scope and
    severity of the deficiencies. Also as under current IDR
    processes, states and the Secretary retain the right to reject
    the IIDR recommendations and to cite deficiencies and to impose
    remedies, as the states and the Secretary determine
    appropriate. Finally, as authorized by regulations governing
    informal review procedures of the Office of Surface Mining, 30
    C.F.R. 723,18(b)(2), any person shall have the right to attend
    and participate in the conference.

    Sec. 1422. National Independent Monitor Pilot Program

                Current Law
        No provision.
                Proposed Law
        Within one year of the effective date of this provision,
    the Secretary in consultation with CMG would establish a pilot
    program to develop, test, and implement use of an independent
    monitor to oversee interstate and large intrastate SNF and
    nursing facility chains. The Secretary would select SNF and
    nursing facility chains to participate in a pilot independent
    monitor program from among those chains that apply to
    participate. The pilot independent monitor program would be
    conducted over two years. The pilot independent monitor program
    would commence within one year of the effective date of this
    provision.
        The Secretary shall evaluate a chain to participate in the
    pilot program based on criteria selected by the Secretary,
    including chains with one or more facilities in CMS' Special
    Focus Facility program (or a successor program) or one or more
    facilities with a record of repeated serious safety and quality
    of care deficiencies.
        An independent monitor that enters into a contract to
    participate in the pilot program would have the following
    responsibilities: conduct periodic reviews and root-cause
    deficiency analyses of chains to assess their compliance with
    state and federal laws and regulations; sustained oversight of
    chains (whether public or private) to involve chain owners and
    principal partners in facilitating compliance with state and
    federal laws and regulations applicable to facilities; analyze
    management structure, expenditure distribution, and nurse staff
    levels of facilities of the chain compared to resident census,
    staff turnover rates, and tenure; report findings and
    recommendations with respect to reviews, analyses, and
    oversight to the chain and facilities in the chain, to the
    Secretary and to relevant states; and publish the results of
    these reviews, analyses, and oversight.
        Within 10 days of a chain receiving a finding (of
    deficiency) from the independent monitor, the chain would be
    required submit a report to the independent monitor (1) that
    outlines corrective actions the chain will take to address the
    independent monitor's recommendations or (2) indicates that the
    chain will not implement the recommendations and why it will
    not do so.
        Within 10 days after receiving the chain's response-report,
    the independent monitor would be required to submit a report
    containing the monitor's final recommendations to: the chain,
    the chain's facilities, the Secretary, and the state or states
    where the facilities in question operate.
        The chain would be responsible for a portion of the costs
    associated with the appointment of the pilot program
    independent monitors. The chain would pay their portion of the
    costs to the Secretary. The Secretary would determine the
    amount and procedures for collecting the independent pilot
    program costs. The Secretary would have authority to waive
    provisions of the Medicare and Medicaid statutes (Titles XVIII
    and XIX of the Social Security Act) if necessary to implement
    the independent monitor pilot program. Appropriations necessary
    to carry out the independent monitor pilot program would be
    authorized.
        The OIG would evaluate the independent monitor program
    within six months of completion of the program. The OIG would
    submit a report to Congress on the independent monitor program
    that included recommendations for legislative and
    administrative action.
                Reason for Change
        Promising work pioneered by the HHS OIG in the context of
    agreements with nursing home chains that have chronic, severe
    quality and safety problems, and which agree to a system of
    close monitoring by independent contractors with expertise to
    undertake ``root cause analyses'' provide a model for CMS, as
    the principal regulatory agency, to develop a similar mechanism
    of oversight.

    Sec. 1423. Notification of Facility Closure

                Current Law
        Medicare and Medicaid law identifies patients' rights and
    SNF and nursing home requirements in ensuring residents are
    aware of their rights. Residents have specific discharge and
    transfer rights, which include advance notification in cases
    where facilities close.
                Proposed Law
        SNF and nursing facility administrators would be required
    to issue written notification of intent to close to the
    Secretary, LTC Ombudsman programs in the state where facilities
    are located, facility residents, and facility residents' legal
    representatives or other responsible parties. SNF and nursing
    facility administrators would need to provide 60 days' notice
    of their pending closure or, if closed by the Secretary, within
    the time frame specified by the Secretary. SNF and nursing
    facility administrators would be required not to admit new
    patients on or after written notice of planned closure; and to
    include in the closure notices the plans to transfer and
    adequately relocate facility residents by a specified date
    prior to closure that has been approved by the state, and which
    also would include assurances that residents will be
    transferred to the most appropriate facilities or settings in
    terms of quality, services, and location as determined by
    residents' needs, best interests, and preferences.
        The state would ensure that before SNFs and nursing
    facilities close, all residents would be relocated to
    alternative settings, such as home- and community-based
    settings or other facilities, taking into consideration the
    needs and best interests of each resident. The Secretary may
    determine the appropriate payment and whether and for how long
    to continue payments to closing facilities during the period
    after the notification of impending closure is submitted and
    the date when residents are transferred to other facilities or
    alternative settings.
                Reason for Change
        When nursing homes close, residents and their families are
    left to quickly find an alternative setting for care, a task
    that can be challenging under a tight timeframe and if there is
    limited availability or variable quality in neighboring
    institutions. This provision ensures that residents and their
    families have proper advance notice of a closure, and that
    residents are relocated prior to closure. The Committee
    recognizes the importance of making sure that the needs and
    best interests of each resident are taken into account during
    the relocation process.
                Effective Date
        One year after the date of enactment of this Act.

                        Part 3--Improving Staff Training

    Sec. 1431. Dementia and Abuse Prevention Training

                Current Law
        Under Medicare law, the Secretary establishes SNF
    requirements for nurse aide training and competency evaluation
    programs and requirements for states to follow in evaluating
    and reevaluating these training programs. Similarly under
    Medicaid law, the Secretary establishes nursing facility
    requirements for nurse aide training and competency evaluation
    programs and requirements for states to follow in evaluating
    and re-evaluating these training programs.
                Proposed Law
        This provision would add dementia and abuse prevention
    training to staff training requirements for SNF and nursing
    facilities. The Secretary would revise initial nurse aide
    training, competency, and evaluation program requirements to
    include dementia management and patient abuse prevention
    training. If determined to be appropriate, the Secretary also
    may include dementia management training and patient abuse
    prevention in ongoing nurse aide training, competency, and
    evaluation program requirements.
                Reason for Change
        It has been reported that the majority of older nursing
    home residents have some form of psychiatric illness, with
    dementia affecting 1 out of 5 residents. Timely recognition and
    intervention are key to the optimal care of older adults with
    dementia, which may be attributable to a number of causes.
    Additionally, the frail elderly are some of the most vulnerable
    members of our society particularly when patients have co-
    morbid conditions that will prohibit them from articulating
    maltreatment by others. This provision will direct the
    Secretary to include dementia and abuse prevention training of
    nursing home staff.
                Effective Date
        One year after the date of enactment of this Act.

    Sec. 1432. Study and Report on Training Required for Certified Nurse
            Aides and Supervisory Staff

                Current Law
        Medicare and Medicaid law have provisions that govern
    training for nurse aides for both SNF and nursing facilities.
    These laws require the Secretary to establish requirements for
    nurse aide training and competency evaluation programs as well
    as parameters for states to use in monitoring these programs.
                Proposed Law
        The Secretary would be required to conduct a study within
    two years of the effective date of this provision on the
    content of certified nurse aide and supervisory staff training
    in SNFs and nursing facilities. The report shall include the
    following: whether the 75 hours of initial nurse aide training
    required should be increased and if so, what the required
    number of recommended initial training hours should be
    (including dementia related training); and whether the 12 hours
    per year of ongoing nurse aide training should be increased and
    what content changes are recommended. In assessing the number
    of hours of initial nurse aide training required, the Secretary
    would consult with states that already have increased the
    number of hours of initial training above 75 hours. Within two
    years from the effective date of this provision, the Secretary
    would be required to submit a report to Congress on the
    certified nurse aide and supervisory training requirements. The
    report would include recommendations for legislative and
    administrative action.
                Reason for Change
        Certified Nurse Aides and supervisory staff are some of the
    primary caregivers in a skilled nursing facility. It is
    important to know whether existing training requirements are
    sufficient to ensure appropriate care for the patient
    population in these facilities.

                        Subtitle C--Quality Measurements

    Sec. 1441. Establishment of National Priorities for Quality Improvement

                Current Law
        There are no provisions in current law that require the
    development of national priorities for performance improvement
    (directed either at the Secretary of Health and Human Services
    or the Agency for Healthcare Research and Quality).
        However, Section 1890 of the Social Security Act requires
    the Secretary to identify and have in effect a contract with a
    consensus-based entity, such as the National Quality Forum, to
    perform the following duties: (1) synthesize evidence and
    convene stakeholders to make recommendations, with respect to
    activities conducted under this Act, on an integrated national
    strategy and priorities for health care performance measurement
    in all applicable settings; (2) provide for the endorsement of
    standardized health care performance measures; (3) establish
    and implement a process to ensure that endorsed measures are
    updated or retired based on new evidence; (4) promote the
    development of electronic health records that facilitate the
    collection of performance measurement data; and (5) report
    annually to Congress.
        The National Quality Forum has been awarded this contract
    and recently released its first report, Improving Healthcare
    Performance: Setting Priorities and Enhancing Measurement
    Capacity, in fulfillment of this statutory requirement.
                Proposed Law
        This provision would amend Title XI of the Social Security
    Act, as amended by section 1401(a), by adding a new Part E-
    Quality Improvement- Establishment of National Priorities for
    Performance Improvement. Specifically, it would add a new
    section 1191 to establish national priorities for performance
    improvement.
        This Section would require the Secretary to establish and
    periodically update (not less frequently than triennially)
    national priorities for performance improvement. Specifically,
    it would require the Secretary, when establishing and updating
    national priorities, to solicit and consider recommendations
    from multiple outside stakeholders.
        This provision would require, with respect to the national
    priorities for performance improvement, the Secretary to give
    priority to areas in the delivery of health care services that
    (1) address a large burden of disease, as specified; (2) have
    the greatest potential to decrease morbidity and mortality in
    the United States, as specified; (3) have the greatest
    potential for improving the performance, affordability, and
    patient-centeredness of health care; (4) address health
    disparities across groups and areas; and (5) have the potential
    for rapid improvement due to existing evidence or standards of
    care.
        For the purposes of this Section: (1) consensus-based
    entity would mean an entity with a contract with the Secretary
    under Section 1890 of the Social Security Act; and (2) quality
    measure would mean a national consensus standard for measuring
    the performance and improvement of population health, or of
    institutional providers of services, physicians, and other
    health care practitioners in the delivery of health care
    services.
        This provision would require the Secretary to provide for
    the transfer, from the Federal Hospital Insurance Trust Fund
    and the Federal Supplementary Medical Insurance Trust Fund, of
    $2 million for each of the fiscal years 2010 through 2014. It
    would also authorize the appropriation of $2 million for each
    of the fiscal years 2010 through 2014 from any funds in the
    Treasury not already appropriated.
                Reason for Change
        Currently, there is no coordinated effort at the national
    level for prioritizing efforts to improve performance of the
    care delivery system or to measure those efforts. Section 1890
    of the Social Security Act establishes a process to prioritize
    performance improvement and measurement within the Medicare
    program. This provision would expand and build on those efforts
    by establishing priorities for health performance improvement
    at the national level. It is the Committee's intent that the
    priorities established by the Secretary will have wide
    applicability and help direct health improvement activities
    across the nation's health care system.
                Effective Date
        Date of enactment.

    Sec. 1442. Development of New Quality Measures; GAO Evaluation of Data
            Collection Process for Quality Measurement

                Current Law
        Section 1110(a)(1) of Title XI of the Social Security Act
    provides general authority to appropriate such sums as may be
    necessary for making grants to States and public and other
    organizations and agencies for research that will help improve
    the administration and effectiveness of the programs carried
    out under the Social Security Act, among other things.
        The Agency for Healthcare Research and Quality (AHRQ) has
    significant existing statutory authorities with respect to the
    development of quality measures. Specifically, the Agency's
    mission, among other things, is to promote health care quality
    improvement by conducting and supporting research that develops
    and presents scientific evidence regarding all aspects of
    health care, including methods for measuring quality and
    strategies for improving quality (Sec. 901 of the PHSA).
        Section 912 of the PHSA requires AHRQ to provide support
    for public and private efforts to improve health care quality,
    and that the role of the Agency shall specifically include the
    ongoing development, testing, and dissemination of quality
    measures, including Measures of health and functional outcomes
    and the compilation and dissemination of health care quality
    measures developed in the private and public sector. To comply
    with this last requirement, the Agency has established the
    National Quality Measures Clearinghouse, an online resource
    that compiles and catalogues quality measures.
        Finally, Section 917 of the PHSA requires AHRQ to
    coordinate all research, evaluations, and demonstrations
    related to health services research, quality measurement and
    quality improvement activities undertaken and supported by the
    Federal Government.
                Proposed Law
        This section would amend Part E of Title XI of the Social
    Security Act, as added by section 1441, by adding two new
    sections: Section 1192: development of new quality measures and
    Section 1193: GAO evaluation of data collection process for
    quality measurement.
                Section 1192
        This Section would require the Secretary to enter into
    agreements with qualified entities to develop quality measures
    for the delivery of health care services in the United States.
    The Secretary would be authorized to carry out these agreements
    by contract, grant, or otherwise. In addition, this Section
    would require the Secretary to seek public input and take into
    consideration recommendations of the consensus-based entity
    with a contract with the Secretary under Section 1890(a) of the
    Social Security Act. The Secretary would be required, as
    specified, to determine areas in which quality measures for
    assessing health care services in the United States are needed.
        Quality measures developed under these agreements would be
    required to be designed (1) to assess outcomes and functional
    status of patients; (2) to assess the continuity and
    coordination of care and care transitions, as specified; (3) to
    assess patient experience and patient engagement; (4) to assess
    the safety, effectiveness, and timeliness of care; (5) to
    assess health disparities as specified; (6) to assess the
    efficiency and resource use in the provision of care; (7) to
    the extent feasible, to be collected as part of health
    information technologies supporting better delivery of health
    care services; (8) to be available free of charge to users for
    the use of such measures; and (9) to assess delivery of health
    care service to individuals regardless of age.
        This provision would also require the Secretary to make
    proposed quality measures available to the public; would
    authorize the Secretary to use amounts made available under
    this Section to fund the testing of proposed quality measures
    by qualified entities, as specified; and would authorize the
    Secretary to use amounts made available under this Section to
    fund the updating, by consensus-based entities, of quality
    measures that have been previously endorsed by such an entity
    as new evidence is developed (consistent with Section
    1890(b)(3) of the Social Security Act).
        Grants would be authorized to be made under this Section
    only if an application for the grant would be submitted to the
    Secretary as specified and the Secretary would be required to
    ensure, before entering into agreements with qualified
    entities, that the entity is a public, nonprofit or academic
    institution with technical expertise in the area of health
    quality measurement.
        For purposes of carrying out this section, the Secretary
    would be required to provide for the transfer, from the Federal
    Hospital Insurance Trust Fund and the Federal Supplementary
    Medical Insurance Trust Fund, of $25 million each year from
    fiscal years 2010 through 2014. In addition, this section would
    authorize the appropriation of $25 million for each of the
    fiscal years 2010 through 2014 from any funds in the Treasury
    not otherwise appropriated.
                Section 1193
        This Section would require the Comptroller General of the
    United States to conduct periodic evaluations of the
    implementation of the data collection processes for quality
    measures used by the Secretary.
        It would require the Comptroller General to determine: (1)
    whether the system for the collection of data for quality
    measures provides for validation of data as relevant and
    scientifically credible; (2) whether data collection efforts
    under the system use the most efficient and cost-effective
    means in a manner that minimizes administrative burden on
    persons required to collect data and that adequately protects
    the privacy of patients' personal health information and
    provides data security; (3) whether standards under the system
    provide for an opportunity for physicians and other clinicians
    and institutional providers of services to review and correct
    findings; and (4) the extent to which quality measures are
    consistent with requirements for quality measures developed
    under this Act, as specified, or result in direct or indirect
    costs to users of such measures.
        This section would require the Comptroller General to
    report to Congress and to the Secretary on the findings and
    conclusions of the results of each such evaluation.
                Reason for Change
        Robust, accurate, and appropriate measures of health care
    quality are a critical component of improving the delivery
    system and health outcomes. It is difficult to develop and
    implement strategies to improve patient health without such
    measures, but in many cases measures do not exist or have yet
    to be fully developed. In other cases, measures do exist but
    need to be updated or modernized. Putting additional resources
    into quality measure development will speed the development of
    new measures and address shortcomings of existing measures. The
    requirement that the Comptroller General monitor the
    development and application of health quality measures will
    help ensure that such measures are being used properly.
                Effective Date
        Date of enactment.

    Sec. 1443. Multi-Stakeholder Pre-Rulemaking Input Into Selection of
            Quality Measures

                Current Law
        No provision.
                Proposed Law
        This section would amend section 1808 of the Social
    Security Act by adding a new subsection (d): Multi-Stakeholder
    Pre-Rulemaking Input into Selection of Quality Measures.
        The new subsection would require the Secretary, not later
    than December 1 before each year (beginning with 2011), to
    publish a list of measures being considered for selection for
    quality measurement by the Secretary in rulemaking with respect
    to payment systems under Title XVIII of the Social Security
    Act, as specified. This section would also require the
    consensus-based entity that has entered into a contract under
    section 1890 of the Social Security Act to convene multi-
    stakeholder groups to provide recommendations on the selection
    of individual or composite quality measures, for use in public
    reporting of performance information or in public health care
    programs. The section would also require the consensus-based
    entity, not later than February 1 of each year (beginning with
    2011), to transmit to the Secretary the recommendations of
    these multi-stakeholder groups, as specified.
        This section would require the consensus-based entity, in
    convening multi-stakeholder groups, to provide for an open and
    transparent process for the activities conducted pursuant to
    such convening. This process would have to ensure that the
    selection of representatives of multi-stakeholder groups
    includes provision for public nominations for, and the
    opportunity for public comment on, such selection. This section
    would require the respective proposed rule to contain a summary
    of the recommendations made by the multi-stakeholder groups
    under this section, as well as other comments received
    regarding the proposed measures, and the extent to which such
    proposed rule follows such recommendations and the rationale
    for not following such recommendations.
        The provision would define the term ``multi-stakeholder
    groups'' to mean, with respect to a quality measure, a
    voluntary collaborative of organizations representing persons
    interested in or affected by the use of such quality measure,
    such as the following: (1) hospitals and other institutional
    providers; (2) physicians; (3) health care quality alliances;
    (4) nurses and other health care practitioners; (5) health
    plans; (6) patient advocates and consumer groups; (7)
    employers; (8) public and private purchasers of health care
    items and services; (9) labor organizations; (10) relevant
    departments or agencies of the United States; (11)
    biopharmaceutical companies and manufacturers of medical
    devices; (12) licensing, credentialing, and accrediting bodies.
        For purposes of carrying out this section, the Secretary
    would be required to provide for the transfer, from the Federal
    Hospital Insurance Trust Fund and the Federal Supplementary
    Medical Insurance Trust Fund under, of $1 million each year
    from fiscal years 2010 through 2014. In addition, this section
    would authorize the appropriation of $1 million for each of the
    fiscal years 2010 through 2014 from any funds in the Treasury
    not otherwise appropriated.
                Reason for Change
        The Medicare program is increasingly making use of health
    care quality measures in administration of its payment systems.
    As the program continues to evolve, the Committee expects this
    trend will continue and that a larger portion of provider
    payments will eventually become linked to performance on such
    measures. For instance, the Accountable Care Organization pilot
    program in section 1301 of this legislation will make extensive
    use of quality measures.
        Given the greater reliance on quality measures within
    Medicare, the process for selecting such measures should be an
    open and collaborative one. This section provides the Medicare
    program with a process for engaging with a wide array of
    stakeholders and interested parties, including patient advocacy
    organizations, employers, private purchasers, and providers.
    Such engagement will help ensure that Medicare selects the most
    appropriate measures for each of its payment systems and
    promote consistent use of measures among other stakeholders.
                Effective Date
        Date of enactment.

    Sec. 1444. Application of Quality Measures

                Current Law
        Section 1886(b)(3)(B)(vii) of the Social Security Act
    requires hospitals to submit specified quality data to the
    Secretary in order to receive a full annual payment update.
    Section 1886(b)(3)(B)(viii)(V) provides that beginning with
    payments in fiscal year 2008, the Secretary shall add
    additional quality measures that reflect consensus among
    affected parties and, to the extent feasible and practicable,
    shall include measures set forth by one or more national
    consensus building entities.
        Section 1833(t)(17)(A)(i) of the Social Security Act
    requires hospitals to submit data on outpatient quality
    measures to the Secretary in order to receive a full outpatient
    department (OPD) fee schedule increase. In addition, section
    1833(t)(17)(C)(i) requires the Secretary to 302 develop
    measures that reflect consensus among affected parties, and to
    the extent feasible and practicable, to include measures set
    forth by one or more national consensus building entities.
        Section 1848(k) of the Social Security Act requires the
    Secretary to implement a system for the reporting by eligible
    professionals of data on specified quality measures. Section
    1848(k)(2)(C)(i) requires that for 2010 and subsequent years,
    the quality measures specified under this section will be such
    measures selected by the Secretary from measures that have been
    endorsed by the consensus-based entity with a contract under
    section 1890(a) of the Social Security Act. Section
    1848(k)(2)(C)(ii) provides an exception in the case of a
    specified area or medical topic for which feasible and
    practical measures have not been endorsed, stipulating that
    such measures may be used as long as due consideration has been
    given to measures that have been endorsed or adopted by a
    consensus organization.
        Section 1881(h)(1) of the Social Security Act requires
    renal dialysis facilities to meet (or exceed) a total
    performance score, based on quality measures as specified, in
    order to receive full payment for services furnished on or
    after January 1, 2012. In addition, section 1881(h)(2)(B)
    requires the Secretary to specify measures that have been
    endorsed by the consensus-based entity with a contract under
    section 1890(a), and authorizes the Secretary, where endorsed
    measures are not available, to use such measures provided that
    due consideration has been given to measures that have been
    endorsed or adopted by a consensus organization.
        Section 1890 of the Social Security Act requires the
    Secretary to identify and have in effect a contract with a
    consensus-based entity, such as the National Quality Forum, to
    perform certain duties. Included in these, at section
    1890(b)(2) of the Social Security Act, is a requirement that
    the consensus-based entity provide for the endorsement of
    standardized health care performance measures, as specified.
                Proposed Law
        Generally, this section places requirements on the
    Secretary when selecting quality measures for use in existing
    quality programs for inpatient, outpatient, physician and renal
    dialysis services. These requirements relate to the endorsement
    of quality measures.
        Specifically, this section would amend section
    1886(b)(3)(B) of the Social Security Act to require the
    Secretary to select measures for purposes of reporting data for
    inpatient hospital services furnished during fiscal year 2012
    and each subsequent year, that have been endorsed by the
    consensus-based entity with a contract with the Secretary under
    section 1890 of the Social Security Act. If feasible and
    practical measures were not available, the Secretary would be
    authorized to select a non-endorsed measure, providing the
    Secretary gives due consideration to endorsed or adopted
    measures. The Secretary would be required to submit non-
    endorsed measures to the entity for consideration for
    endorsement, and if the entity were to not endorse the measure,
    and the Secretary were to continue to use the measure, the
    Secretary would be required to include the rationale for its
    continued use in rulemaking. This section would also amend
    section 1833(t)(17) of the Social Security Act to require that
    the provisions added to section 1886 (above) would also apply
    to quality measures for covered outpatient department services.
        This section would also amend sections 1848(k)(2)(C)(ii)
    and 1881(h)(2)(B)(ii) of the Social Security Act, to require
    the Secretary to submit non-endorsed measures for physicians'
    services and renal dialysis services, respectively, to the
    consensus-based entity for consideration for endorsement. It
    would further require the Secretary, if the measure does not
    gain endorsement and if the Secretary continues to use the
    measure, to provide a rationale for continued use in
    rulemaking.
        This section would, by amending section 1890(b)(2) of the
    Social Security Act, require the consensus-based entity with a
    contract with the Secretary in section 1890 to explain the
    reasons underlying non-endorsement of a given measure, and to
    provide suggestions about changes to such measure that might
    make such a measure potentially endorsable.
        This section would apply to quality measures applied for
    payment years beginning with 2012 or fiscal year 2012, as the
    case may be.
                Reason for Change
        To the extent feasible, the Medicare program should use
    measures of health quality that have been endorsed by a
    consensus-based organization, such as the National Quality
    Forum. The use of endorsed measures will help ensure that
    Medicare is utilizing the most appropriate and robust measures,
    while also using measures that have widespread support among
    various health care stakeholders. However, the Committee
    recognizes it is critical that the Medicare program maintain
    its independence and retain the flexibility to use non-endorsed
    measures when it deems necessary.
                Effective Date
        Date of enactment.

    Sec. 1445. Consensus-Based Entity Funding

                Current Law
        Section 1890 of the Social Security Act requires the
    Secretary to identify and have in effect a contract with a
    consensus-based entity, such as the National Quality Foram, to
    perform the following duties: (1) synthesize evidence and
    convene stakeholders to make recommendations, with respect to
    activities conducted under this Act, on an integrated national
    strategy and priorities for health care performance measurement
    in all applicable settings; (2) provide for the endorsement of
    standardized health care performance measures; (3) establish
    and implement a process to ensure that endorsed measures are
    updated or retired based on new evidence; (4) promote the
    development of electronic health records that facilitate the
    collection of performance measurement data; and (5) report
    annually to Congress.
        Section 1890(d) of the Social Security Act provides for $10
    million to fund the activities of the consensus-based entity
    under contract in this section for each of fiscal years 2009
    through 2012.
                Proposed Law
        This section would amend section 1890(d) of the Social
    Security Act to provide for $10 million only for fiscal year
    2009, and $12 million for each of the fiscal years 2010 through
    2012.
                Reason for Change
        This provision is needed to provide funding available under
    CMS's current contract with the National Quality Forum to cover
    additional expenses related to implementation of section 1441
    of this legislation, regarding multi-stakeholder input on the
    selection of quality measures.
                Effective Date
        Date of enactment.

               Subtitle D--Physician Payments Sunshine Provision

    Sec. 1451. Reports on Financial Relationships Between Manufacturers and
            Distributors of Covered Drugs, Devices, Biologics, or Medical
            Supplies Under Medicare, Medicaid, or CHIP and Physicians and
            Other Health Care Entities and Between Physicians and Other
            Health Care Entities

                Current Law
        Under section 1128B(b) of the Social Security Act, referred
    to as the federal anti-kickback statute, it is a felony for a
    person to knowingly and willfully offer, pay, solicit, or
    receive anything of value (i.e., ``remuneration'') in return
    for a referral or to induce generation of business reimbursable
    under a federal health care program. The statute prohibits both
    the offer or payment of remuneration for patient referrals, as
    well as the offer or payment of anything of value in return for
    purchasing, leasing, ordering, or arranging for, or
    recommending the purchase, lease, or ordering of any item or
    service that is reimbursable by a federal health care program.
    Persons found guilty of violating the anti-kickback statute may
    be subject to a fine of up to $25,000, imprisonment of up to
    five years, and exclusion from participation in federal health
    care programs for up to one year. However, a number of
    statutory and regulatory ``safe harbors'' to the anti-kickback
    statute protect various business arrangements from prosecution.
    Safe harbors include certain types of investment interests,
    personal services and management contracts, referral services,
    space rental or equipment rental arrangements, warranties,
    discounts, and employment arrangements.
        In 2003, OIG issued ``Compliance Program Guidance for
    Pharmaceutical Manufacturers'' (68 Federal Register 23731),
    which stated that pharmaceutical companies and their employees
    and agents often engage in a number of arrangements that offer
    benefits to physicians or others in a position to make or
    influence prohibited referrals under the anti-kickback statute.
    Examples of remunerative arrangements between pharmaceutical
    manufacturers and parties in a position to influence referrals
    that were cited by OIG included entertainment, recreation,
    travel, meals, or other benefits in association with
    information or marketing presentations, as well as gifts,
    gratuities, and other business courtesies. OIG indicated these
    arrangements potentially implicate the anti-kickback statute if
    any one purpose of the arrangement is to generate business for
    the pharmaceutical company.
        Under section 1877 of the Social Security Act, the federal
    prohibition on physician self-referrals, if a physician (or an
    immediate family member of a physician) has a ``financial
    relationship'' with an entity, the physician may not make a
    referral to the entity for the furnishing of designated health
    services (DHS) for which payment may be made under Medicare or
    Medicaid, and the entity may not present (or cause to be
    presented) a claim to the federal health care program or bill
    to any individual or entity for DHS furnished pursuant to a
    prohibited referral. ``Financial relationship'' is defined as
    either an ownership or investment interest or a compensation
    arrangement. An ownership or investment interest may be equity,
    debt, or other means; however, Section 1877(c) specifies that
    an ownership interest does not include certain investment
    securities which may be purchased on terms generally available
    to the public and meet additional requirements, or that are
    shares of certain regulated investment companies. A
    compensation arrangement means an arrangement involving
    remuneration between a physician or an immediate family member
    of such physician and an entity. Section 1877(f) requires an
    entity that provides covered services for which payment may be
    made under Medicare to report to the Secretary information on
    the entity's ownership, investment, and compensation
    arrangements, including the covered items and services provided
    by the entity, and the names and unique physician
    identification numbers of all physicians who have an ownership
    or investment interest in, or a compensation arrangement with
    the entity, or whose immediate relatives have such an ownership
    or investment interest or compensation relationship with the
    entity.
        Multiple states and the District of Columbia have enacted
    legislation requiring pharmaceutical and other companies to
    disclose gifts and payments made to physicians and other
    entities. These state laws generally require annual disclosures
    to the states of such gifts and payments. Certain categories of
    gifts and payments are exempted from reporting requirements
    under most of the state laws. For example, state laws may
    exempt product samples intended for free distribution to
    patients and gifts worth less than a certain amount. While
    companies may make a voluntary disclosure of these gifts and
    other payments, there are currently no similar federal
    reporting requirements.
                Proposed Law
        The bill would add a new Section 1128H of the Social
    Security Act to create certain reporting requirements
    applicable to manufacturers or distributors of a drug, device,
    biological, or medical supply for which payment may be made
    available under Medicare, Medicaid, or the State Children's
    Health Insurance Program, as well as hospitals or other
    entities that bill Medicare.
        Under the section, beginning in 2011, a manufacturer or
    distributor that provides a payment or other transfer of value
    to a covered recipient (e.g., a physician, a pharmacist, a
    hospital, a medical school, or a group purchasing organization)
    or a recipient's designee would be required to annually submit
    specified information to the Secretary regarding the
    recipients, any payments or other transfers of value, and
    information about a provided drug sample. Payments or transfers
    of value include, among other things, gifts, food, or
    entertainment, travel or trips, honoraria, research funding or
    grants, education or conference funding and consulting fees,
    profit distribution, stock or stock option grant, or any
    ownership or investment interest held by a physician in a
    manufacturer (subject to exclusion), but do not include
    payments or transfers of five dollars or less, a loan of a
    covered device for a short-term trial period for evaluation
    purposes, items or services provided under a contractual
    warranty where the terms are specified in a purchase or lease
    agreement, items given to a patient who is not acting in a
    professional capacity, in-kind items for the provision of
    charity care, a dividend or other profit distribution from or
    ownership or investment interest in a publicly traded security
    and mutual fund, compensation paid by a manufacturer or
    distributor to an employee who works solely for a manufacturer
    or distributor, and any discount or cash rebate. The
    information submitted must include the aggregate amount of all
    payments or transfers of value from manufacturers to covered
    recipients, regardless of whether such payments or transfers
    were individually disclosed. If a manufacturer or distributor
    provides a payment to another entity or individual at the
    request of or designated on behalf of a covered recipient, the
    manufacturer or distributor must disclose the payment or
    transfer under the name of the covered recipient.
        Section 1128H would allow manufacturers and distributors to
    delay submission of their reports to the Secretary of payments
    and transfers of value made to covered recipients pursuant to
    certain services furnished as part of a product development
    agreement, or in connection with a clinical investigation of a
    new drug, device, biological, or medical supply. The
    information subject to delayed reporting would be considered
    confidential and would not be subject to disclosure under the
    Freedom of Information Actor other similar federal, state, or
    local law until the date on which the information is reported.
        Manufacturers and distributors that fail to submit the
    required information in a timely manner in accordance with
    regulations would be subject to a civil monetary penalty of at
    least $1,000 but not more than $10,000 for each payment or
    transfer of value not reported, up to a maximum of $150,000 for
    each annual submission of information. Any manufacturer or
    distributor that knowingly fails to submit information would be
    subject to a civil monetary penalty of at least $10,000 but not
    more than $100,000 for each payment or transfer of value, and
    may not exceed $1 million or, if greater, 0.1 percent of the
    total annual revenue of the manufacturer or distributor.
        Each hospital or other health care entity, excluding a
    Medicare Advantage organization, that bills the Secretary under
    Medicare Part A or Part B would have to report on the ownership
    shares (other than shares generally available to the public or
    shares of certain regulated investment companies as described
    in Section 1877(c) of the Social Security Act) of each
    physician and the physician's immediate family members.
    Hospitals and other entities that fail to submit the required
    information in a timely manner in accordance with regulations
    would be subject to a civil monetary penalty of at least $1,000
    but not more than $10,000 for each ownership or investment
    interest not reported. Any hospital or other entity that
    knowingly fails to submit information would be subject to a
    civil monetary penalty of at least $10,000, but not more than
    $100,000 for each ownership or investment interest not
    reported. All funds collected by the Secretary under section
    1128H from the imposition of civil monetary penalties would be
    used to carry out the requirements of the section.
        The bill would require the Secretary to establish
    procedures no later than September 30, 2011 and on June 30 each
    year after to ensure public availability of the submitted
    information through an Internet web site that is searchable,
    has a clear and understandable format, and that meets various
    other requirements. Manufacturer and distributors would be
    responsible for the accuracy of the information that is
    submitted to the Secretary and made available on the web site,
    and the Secretary would be required to establish procedures to
    ensure that a covered recipient has an opportunity to submit
    corrections to the manufacturer with regard to information made
    public with respect to the covered recipient. Under such
    procedures, the corrections must be transmitted to the
    Secretary. Information relating to drug samples and provider
    identification numbers would not be made available to the
    public by the Secretary, but may be made available outside of
    the Department of Health and Human Services for research or
    legitimate business purposes pursuant to data use agreements.
        Under the bill, if a state attorney general has provided
    notice to the Secretary of the intent to proceed on a specific
    case and the Secretary has had an opportunity to bring an
    action and has declined to do so, the attorney general of a
    state would be permitted to bring an action against a
    manufacturer or distributor in the state for a violation of the
    section.
        Section 1128H would require the Secretary to submit a
    report to Congress no later than April 1 of each year,
    beginning in 2011, that includes information submitted in the
    preceding year by manufacturers and distributors and a
    description of any enforcement actions taken to carry out the
    section (including penalties imposed during the preceding
    year). The Secretary would also be required to submit to
    Congress a report on the results of the Disclosure of Physician
    Financial Relationships surveys required pursuant to section
    5006 of the Deficit Reduction Act of 2005. This report would be
    submitted to Congress not later than 6 months after the date
    such surveys are collected and would be made publicly available
    on an Internet web site of the Department of Health and Human
    Services. In addition, no later than April 1 of each year,
    beginning in 2011, the Secretary would be required to submit to
    states a report that includes information submitted by
    manufacturers and distributors in the preceding year, as well
    as other information.
        Additionally, beginning on January 1, 2011, Section 1128H
    would preempt any law or regulation of a state or its political
    subdivision that requires a manufacturer or distributor to
    disclose or report information regarding a payment or other
    transfer of value to a covered recipient, in accordance with
    the section. However, the section would not preempt state laws
    or regulations under which (A) the disclosure or reporting of
    information is not of the type required to be disclosed or
    reported under Section 1128H, (B) the information reported is
    required to be disclosed or reported to a Federal, State, or
    local governmental agency for public health surveillance,
    investigation, or other public health purposes or health
    oversight purposes, or (C) the state requires the discovery or
    admissibility of the information in a criminal, civil, or
    administrative proceeding.

        Subtitle E--Public Reporting on Health Care-Acquired Infections

    Sec. 1461. Requirement for public reporting by hospitals and ambulatory
            surgical centers on health care-associated infections

                Current Law
        Current law does not, in general, require the reporting of
    health care-associated infections (HAIs), although such
    reporting is required in a number of states. Several provisions
    in current federal law have established programs that are
    somewhat related.
        First, Section 5001(c) of the Deficit Reduction Act (P.L.
    109-171) requires the Secretary, by regulation, to identify
    certain preventable conditions that are not present on
    admission, and that therefore are acquired in the health care
    facility. Medicare Part A reimbursement is not provided for the
    care of these secondary conditions. This provision is
    implemented in CMS's annual Inpatient Prospective Payment
    System (IPPS) rule for hospitals. At this time, listed
    conditions include some that are unrelated to infection (such
    as incompatible blood transfusions, and trauma resulting from
    falls in the facility), as well as specific types of catheter-
    associated and surgical site infections. The rules explain that
    some other infections (such as infection with methicillin-
    resistant Staph. aureus, or MRSA) are not included because,
    among other things, it can be hard to determine, in an
    individual patient, whether an infection is associated with
    health care or was acquired previously.
        Also, two voluntary CMS reporting programs established
    under current law may capture information related to HAIs. The
    Physician Quality Reporting Initiative (PQRI), established
    under Section 101(b) of the Tax Relief and Healthcare Act of
    2006 (P.L. 109-432), provides incentive payments to physicians
    who report certain quality measures, which include instances of
    catheter-associated or surgical site infection. Information
    from this program is not publicly reported. The Reporting
    Hospital Quality Data for Annual Payment Update (RHQDAPU)
    Program, originally established under Section 501(b) of the
    Medicare Prescription Drug, Improvement, and Modernization Act
    of 2003 (MMA, P.L. 108-173), requires participating hospitals
    to report quality data to CMS in order to receive a full annual
    payment update. Selected measures are publicly reported on the
    CMS Hospital Compare website. However, regarding infections,
    this program uses process measures (e.g., antibiotics were used
    properly in surgical patients) rather than outcome measures
    (e.g., a patient developed a surgical site infection).
        The Health Information Technology for Economic and Clinical
    Health (HITECH) Act, which was incorporated into the American
    Recovery and Reinvestment Act of 2009 (P.L. 111-5), promotes
    the widespread adoption of health information technology (HIT).
    Among its provisions, the HITECH Act established a process for
    the development of interoperability standards that support the
    nationwide electronic exchange of health information among
    doctors, hospitals, patients, health plans, the federal
    government, and other health care stakeholders.
                Proposed Law
        This section would require the Secretary to provide, by
    regulation, that in order to participate in Medicare and
    Medicaid, hospitals and ambulatory surgical centers would have
    to report certain health care-associated infections (HAIs) that
    develop in the facility. The Secretary would specify the types
    of information that must be reported, and develop reporting
    protocols through the Centers for Disease Control and
    Prevention (CDC), assuring that such protocols are coordinated
    with systems established under the HITECH Act. The Secretary
    would be required: to establish procedures regarding the
    validity of reported data to assure appropriate comparisons
    between facilities; to promulgate, through the Director of CDC,
    regulations to carry out this section, within one year of
    enactment; and to post information from the system on the HHS
    website in a manner that permits comparisons by facility and by
    patient demographic characteristics.
        This section would also require the Secretary annually to
    report to Congress on specified aspects of the program, and
    would provide that this section should not be construed as
    preempting or otherwise affecting State laws relating to the
    disclosure of information on HAIs or patient safety procedures
    for a hospital or ambulatory surgical center. It would also
    define an HAI and its relationship to the receipt of care, and
    would clarify that for the purposes of this section, hospitals
    include critical access hospitals.
        For hospitals and ambulatory surgical centers, reporting
    requirements would take effect when specified by the Secretary,
    but not later than 2 years after enactment. Within 18 months of
    enactment, the Comptroller General would be required to report
    to Congress regarding the reporting program, and the Secretary
    would be required to report to Congress regarding the
    appropriateness of expanding reporting requirements to include
    additional information, such as health care worker immunization
    rates.
                Reason for change
        Health care-associated infections (HAIs) are a result of
    treatment in a healthcare service setting such as a hospital or
    an ambulatory surgery center, but secondary to the patient's
    original condition. Studies have shown that such infections
    have been increasing over the past few years due to factors
    such as increasing drug resistance of bacteria and improper
    infection control measures. Collection of data is critical as a
    public health measure so as to identify and respond to emerging
    threats. Over 20 States now have mandatory reporting for health
    facilities on health care-associated infections. This policy
    would require hospital, critical access hospitals and
    ambulatory surgery centers that participate in Medicare and
    Medicaid to report HAIs to the CDC to improve public health.
    The Secretary would determine what infections information would
    be collected and how it is collected.

                  TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION

    Sec. 1501. Distribution of Unused Residency Positions

                Current Law
        With certain exceptions, the Balanced Budget Act of 1997
    (BBA, P.L. 105-33) limited the number of allopathic and
    osteopathic residents for which Medicare would reimburse a
    teaching hospital at the level reported in its cost report
    ending on or before December 31, 1996. The limit does not
    include dental or podiatry residents. The Medicare Prescription
    Drug, Improvement and Modernization Act of 2003 (P.L. 108-173,
    MMA) authorized the redistribution of up to 75% of each
    teaching hospital's unused resident positions to hospitals
    seeking to increase their medical residency training programs.
    Any adjustments made to teaching hospitals' resident limits
    were permanent. Rural teaching hospitals with less than 250
    beds were exempt from the redistribution of any of their
    unfilled positions. Under the redistribution program, teaching
    hospitals were allowed to request up to an additional 25 full
    time equivalent (FTE) positions for direct graduate medical
    education (DGME) and indirect medical education (IME) payments.
    Hospitals were required to demonstrate the likelihood that the
    redistributed positions would be filled within 3 cost reporting
    periods beginning July 1, 2005. MMA required that the unused
    slots be redistributed according to specific priorities: rural
    hospitals, urban hospitals located in areas with a population
    of one million or less, specialty training programs that are
    the only specialty program in a state, and all other hospitals.
    The redistribution was effective for portions of cost reporting
    periods starting July 1, 2005. The redistributed resident slots
    have different IME and DGME payment formulas from those used to
    reimburse hospitals' previous residents.
                Proposed Law
        The Secretary would reduce the otherwise applicable
    resident limit for a hospital that has residency positions that
    were unused. Unused positions would be established when a
    hospital's reference residence level is less than its otherwise
    applicable resident limit. The reduction would be effective for
    portions of cost reporting periods occurring on or after July
    1, 2011. Hospitals that are members of the same affiliated
    group would be subject to redistribution. The Secretary would
    adjust the determination of available slots for affiliated
    hospitals depending upon the extent that these hospitals could
    demonstrate that they are filling any additional residents
    slots allocated to other hospitals through an affiliation
    agreement. Ninety percent of unused slots would be
    redistributed to qualifying hospitals. The increase in resident
    training positions would be distributed to qualifying hospitals
    not later than July 1, 2011.
        A hospital's reference residence level would be established
    as the highest resident level of any of the 3 most recent cost
    reporting periods (ending before the date of enactment).
    Hospital cost reports that had been settled or those that had
    been submitted, subject to audit, would be used to establish
    the residence level. Also, upon timely request, a hospital's
    reference resident level could be increased to reflect an
    expansion or planned expansion of an existing residency
    training program that is not reflected on the most recent
    settled or submitted cost report. The increase would occur
    after audit and would include the previous redistribution of
    unused resident positions that occurred under MMA. The
    Secretary would be authorized to determine an alternative
    resident reference level for hospitals that submit a timely
    request for an increase in their reference resident level due
    to a planned expansion before the start of the 2009-2010
    academic year. A hospital's resident reference level would
    reflect any increases in slots granted under the prior
    redistribution of resident slots under the MMA.
        The Secretary would be required to increase the otherwise
    applicable resident limit for each qualifying hospital that
    submits a timely application by such number for portions of
    cost reporting periods that occur on or after July 1, 2011. The
    aggregate number of increases in resident limits may not exceed
    the estimated aggregate reduction in resident limits. In no
    case would more than 20 FTE additional residents be made
    available to a qualifying hospital.
        A hospital that qualifies for an increase in its otherwise
    applicable resident limit would be required to ensure that its
    base level of primary care residents is increased by the number
    of additional primary care residents provided to the hospital
    under this section. The hospital would have to assign all
    additional resident positions to primary care residents. The
    hospital's residency programs would have to be fully accredited
    or, if not yet in operation as of the base year, the hospital
    would have to be actively applying for such accreditation for
    the program. A hospital's base level of primary care residents
    is the level of such residents in a base period determined
    without regard to whether such positions were in excess of the
    otherwise applicable resident limits. Hospitals receiving
    positions would be required to maintain records and
    periodically report on the number of primary care residents in
    its training programs. As a condition of continuing payment for
    a cost reporting period, the hospitals would be required to
    maintain the base level of positions at not less than the sum
    of the level of primary care resident positions before
    receiving additional positions plus the number of additional
    positions.
        When determining which qualifying hospitals would receive
    an increase in their otherwise applicable resident limit, the
    Secretary would take into account the demonstrated likelihood
    that a hospital would fill the positions within the first 3
    cost reporting periods beginning on or after July 1, 2011.
    Also, the Secretary would distribute the resident slots based
    on the following criteria: (1) the hospital had a reduction in
    the resident training positions under this section; (2) the
    hospital has a 3-year primary care residency training program,
    such as family practice and general internal medicine; (3) the
    hospital has formal arrangements, as determined by the
    Secretary, that place greater emphasis upon training in
    federally qualified health centers, rural health clinics, and
    other nonprovider settings and to hospitals that receive
    additional disproportionate share hospital payments and
    emphasize training in an outpatient department; (4) the
    hospital has resident training positions in excess of its
    otherwise applicable resident level as of July 1, 2009; (5) the
    hospital has formal arrangements that place greater emphasis on
    training in a health professional shortage area or health
    professions needs area; or (6) the hospital is in a State with
    a low resident-to-population ratio (including a greater
    preference for those States with lower resident-to-population
    ratios).
        The per resident amounts (PRAs) for the resident positions
    distributed under this provision would equal the hospitals'
    PRAs for primary and nonprimary care positions for the purposes
    of calculating direct graduate medical payments. The indirect
    medical education adjustment for the resident positions
    distributed under this provision would be computed in the same
    fashion as the hospital's existing resident positions.
                Reasons for change
        The healthcare system is increasingly uncoordinated and
    complex, but a solid primary care workforce can help to support
    a well coordinated and integrated delivery model. Despite clear
    advantages of a strong primary care workforce, the number of
    primary care slots and medical students choosing primary care
    as a specialty has decreased over the past decade. This is the
    case even though the total amount of the physician workforce
    has remained stable Studies have recently shown that while 35
    percent of the current physician workforce is in primary care,
    21 to 24 percent of graduating medical students choose primary
    care medicine as a career specialty. According to the Council
    of Graduate Medical Education (COGME), since the Graduate
    Medical Education (GME) cap was put in place in 1996, primary
    care internal medicine positions in the annual student match
    have fallen 57 percent, primary care pediatric positions have
    fallen by 34 percent, and family medicine positions have fallen
    by 18 percent. Over the past ten years, nearly all graduate
    medical expansion in teaching hospitals has been in
    subspecialty medicine. Family practice residency programs, and
    three year training programs that emphasize a generalist
    training have decreased or have shut down as well.
        In their May 2009 report, COGME stated that graduate
    medical education should be realigned to meet society's
    evolving healthcare needs. COGME recommended an emphasis on
    training more primary care physicians, training residents
    capable of practicing in innovative delivery care models such
    as patient-centered medical homes and accountable care
    organizations, and increasing the accountability of graduate
    medical education's role in public health. Similarly, in its
    June 2009 report, MedPAC's recognized that residents will best
    learn the skills needed to provide high-quality, efficient care
    when medical education occurs in settings where such care is
    actually performed and will explore policies in their future
    work that might link medical education incentives with delivery
    system reforms. This policy is intended to increase training of
    primary care physicians in a broader array of settings in order
    to meet the future healthcare needs of the American public.
        The Committee notes that some policymakers point to earlier
    COGME reports to argue for the need for more residency slots;
    however, COGME now recognizes that earlier calls for increased
    residency slots focused on the growth in medical schools, and
    failed to take into account the fact that GME positions already
    exceed allopathic medical school slots by 30 percent. For
    instance, in 2007-2008, the U.S. graduated about 17,500
    allopathic students, but had more than 25,000 first year
    residency positions. COGME points out that first year residency
    positions grew 8 percent from 2002 and 2007 and that this
    expansion will accommodate increases in medical school
    production. The shortcoming is not in the number of medical
    residents being trained, but that nearly all of this expansion
    is in subspecialty training, resulting in a drop in primary
    care physicians.
        The legislation increases primary care physicians by
    directing the Secretary to redistribute residency positions
    that have been unfilled for the prior 3 cost reports and direct
    those slots for training of primary care physicians. Special
    preference will be given to programs that saw a reduction in
    their slots under this section, have formal arrangements to
    train residents in ambulatory settings or shortage areas,
    operate three year primary care residency programs, currently
    operate residency programs over their cap, or are located in
    states with low resident to population ratios. Primary
    physicians are trained via three year general medicine,
    pediatrics or family practice residency programs. Within this
    universe of residency programs are a select number of programs
    that place emphasis on a generalist curriculum (such as family
    practice programs) and referred to as ``three-year primary care
    residency training programs, as compared to the ``categorical''
    or basic programs where a resident will then go on to
    specialize. This provision directs the Secretary to give
    preference to these ``three year primary care'' programs in
    general internal medicine or family practice. The increase in
    resident training positions would be distributed to qualifying
    hospitals not later than July 1, 2011.
                Effective date
        Cost reporting periods beginning on or after July 1, 2011.

    Section 1502. Increasing Training in Non-Provider Settings

                Current Law
        Medicare reimburses the direct costs of graduate medical
    education (DGME) for approved residency training programs
    without regard for the setting where the residents' activities
    relating to patient care are performed as long as the hospital
    incurs all, or substantially all, of the costs for the training
    program in that setting. Through regulation, CMS has defined
    all, or substantially all costs, as 90% of resident stipends
    and fringe benefits and costs associated with a supervising
    physician. However, as presently administered, a hospital
    cannot include the time spent by residents working at a non-
    hospital site if it incurs all, or substantially all, of the
    costs for only a portion of the residents in that program at
    the non-hospital site.
        Section 1886(k) provides for payment to qualified
    nonhospital providers, such as FQHCs and rural health clinics,
    for their direct costs of medical educations if those costs are
    incurred in the operation of an approved medical residency
    training program.
                Proposed Law
        Effective for cost reporting periods beginning on or after
    July 1, 2009, all time spent by a resident would count towards
    the determination of a FTE resident with respect to Medicare's
    direct graduate education payment, without regard to the
    setting where the activities are performed, if the hospital
    incurs the costs of the stipends and the fringe benefits of the
    resident during the time the resident spends in that setting.
    Any hospital claiming payment for the time spent in a non-
    provider setting would be required to maintain and make
    available necessary records regarding the amount of time and
    this amount in comparison to the amounts of time in a specified
    base year.
        Effective for discharges on or after July 1, 2009, all the
    time spent by a resident in patient care activities in a non-
    provider setting would be counted towards the determination of
    a FTE resident with respect to Medicare's indirect medical
    education payment if the hospital incurs the costs of the
    stipends and fringe benefits of the resident during the time
    spent in that setting.
        The Office of the Inspector General (OIG) would be required
    to analyze the resident data to assess the extent to which
    there is an increase in time spent by medical residents
    training in non-provider settings. No later than 4 years after
    the date of enactment the OIG would submit a report to Congress
    its analysis and assessment.
        The Secretary would conduct a demonstration project where
    an approved teaching health center would be eligible for direct
    medical education payments for its own direct cost of graduate
    medical education activities for primary care residents as well
    as for the direct costs of such graduate medical education
    activities of its contracting hospital for such residents.
    Under the project, an approved teaching health center would
    contract with an accredited teaching hospital to carry out the
    inpatient responsibilities of the primary care residency
    program. The center would be responsible for payment of the
    hospital's costs of the salary and fringe benefits for
    residents. The hospital's full-time equivalent resident amount
    would not affect the contracting hospital's resident limit. The
    contracting hospital would not reduce the number of residents
    in its primary care residency training program. An approved
    teaching health center would be a non-provider setting, such as
    a Federally qualified health center or rural health center that
    develops and operates an accredited primary care residency
    program for which funding would be available if it were
    operated by a hospital in connection with a hospital.
                Reason for change
        MedPAC and COGME have recommended that physicians be
    trained at alternative care settings such as ambulatory
    settings. COGME called for a ``broadening of the definition of
    the training venue'' and emphasized preparing a physician
    workforce for outpatient care, where most of the health care
    takes place, and to consider placing physicians at rural and
    community health centers and physician offices. Residents
    should also be exposed to patient care coordination in a
    variety of health care settings. Teaching hospitals face
    considerable financial incentives and regulatory barriers that
    discourage them from rotating residents to nonhospital
    settings.
        The intent of this legislation is to decrease the
    regulatory barriers so that residents can increase their
    training in non-provider settings (i.e., outside the acute care
    hospital). This policy modifies the rules that govern when
    hospitals can receive indirect medical education (IME) and
    direct graduate medical education (DGME) funding for residents
    who train in non-provider settings so that any time spent by
    the resident in a non-provider setting shall be counted toward
    DGME and IME if the hospital incurs any costs such as fringe
    and benefits. A study by the Office of the Inspector General
    shall assess the impact of this policy on increasing physician
    training in non-provider settings. The changes are effective
    for discharges on or after July 1, 2009 and the OIG study is
    scheduled to report to Congress 4 years after the date of
    enactment.
        A demonstration project is established to allow community
    health centers to host an approved primary care residency
    program and receive DGME for itself and for the hospital that
    it will contract with to provide the inpatient training. This
    demonstration project will inform the Secretary and Congress on
    the feasibility of health centers hosting a residency program
    and inform possible alternative payment methodologies for
    nonhospital teaching sites. While the Committee recognizes the
    importance of training in non-provider settings, including
    Federally Qualified Health Centers, the Committee does not
    think it is appropriate for teaching health centers to receive
    a hospital's IME payments since the payment methodology is
    based on Medicare patient activities that occur in the
    inpatient setting. The Committee also questions whether
    indirect medical education costs are incurred by an FQHC and
    notes that the average Medicare share for FQHCs is less than 10
    percent. While the Committee supports the need for more
    training in the non-provider setting, this must be balanced
    against the competing priority of ensuring that Medicare
    dollars are spent on Medicare patients.
                Effective date
        Cost reporting periods beginning on or after July 1, 2009.

    Sec. 1503. Rules for Counting Resident Time for Didactic and Scholarly
            Activities and Other Activities

                Current Law
        Medicare pays teaching hospitals the costs of approved
    medical residency training programs through two mechanisms: an
    indirect medical education (IME) adjustment within the
    inpatient prospective payment system (IPPS) and direct graduate
    medical education (DGME) payments made outside of IPPS. Certain
    non-patient care activities that are part of an approved
    training program are not allowable for DGME or IME payment
    purposes. With respect to training that occurs in hospital
    settings, Medicare does not include the time that residents
    spend in non-patient care activities, including didactic
    activities, when calculating IME payments. With respect to
    training that occurs in nonhospital settings, Medicare would
    not count the time that residents spend in non-patient care
    activities, including didactic activities, when calculating
    DGME or IME payments.
                Proposed Law
        When calculating DGME payments, Medicare would count the
    time that residents in approved training programs spend in
    certain non-direct patient care activities in a nonhospital
    setting that is primarily engaged in furnishing patient care.
    The term ``nonprovider setting that is primarily engaged in
    furnishing patient care'' would be a nonprovider setting in
    which the primary activity is the care and treatment of
    patients as defined by the Secretary. Reimbursable nonpatient
    care activities would include didactic conferences and seminars
    but would not include research that is not associated with the
    treatment or diagnosis of a particular patient. In addition,
    Medicare would count all the vacation, sick leave and other
    approved leave spent by resident in an approved training
    program as long as the leave time does not extend the program's
    duration.
        When calculating IME payments, Medicare would adopt the
    same rules about counting residents' leave time. Medicare would
    also include all the time spent by residents in approved
    training programs on certain nonpatient care activities
    (including didactic conferences and seminars, but not in
    certain research activities that are not associated with the
    treatment or diagnosis of an particular patient) if the
    hospital is an IPPS hospital, a hospital paid under the IPPS
    for Puerto Rico, is a hospital paid under a state specific
    hospital reimbursement system, or is a provider-based hospital
    outpatient department.
        Except as otherwise provided, these provisions would be
    effective for cost reporting periods beginning on or after
    January 1, 1983. The provisions affecting DGME would apply to
    cost reporting periods on or after July 1, 2008. The provisions
    affecting IME would apply to cost 317 reporting periods on or
    after October 1, 2001. This section would not affect the
    interpretation of the law in effect prior to that date. The
    provisions would not be implemented in a manner that would
    require reopening of any settled hospital cost reports where
    there is not a jurisdictionally proper appeal pending on IME
    and DGME payments as of the date of enactment.
                Reason for change
        Physicians in training need to learn critical evidenced
    based medicine and participate in scholarly activities related
    to the management of their patients. They devote time during
    their residency training to participate in didactic and
    scholarly activities that broadens their clinical knowledge
    base. The policy is to modify the rules to allow for inclusion
    of didactic and scholarly activities and other activities such
    as research related to the care of their patients. The
    provisions affecting IME would apply to cost reporting periods
    on or after October 1, 2001 and the provisions affecting DGME
    would apply to cost reporting periods on or after July 1, 2008.
                Effective date
        Subsection (a)(1)(B) pertaining to direct graduate medical
    education is effective for cost reporting periods beginning on
    or after July 1, 2008. Subsection (b), pertaining to indirect
    medical education is effective for cost reporting periods
    beginning on or after October 1, 2001. All other provisions are
    effective for cost reporting periods beginning on or after
    January 1, 1983.

    Sec. 1504. Preservation of Resident Cap Positions from Closed and
            Acquired Hospitals

                Current law
        With certain exceptions, the Balanced Budget Act (BBA) of
    1997 limited the number of allopathic and osteopathic residents
    for which Medicare would reimburse a teaching hospital at the
    level reported in its cost report ending on or before December
    31, 1996. If a teaching hospital closes (defined as withdrawing
    participation in the Medicare program), CMS permits a temporary
    cap increase to other teaching hospitals to accommodate
    residents suddenly displaced from the closed hospital. Upon
    completion of their training, the residency slots cease to
    exist.
        A hospital with a newly established residency program may
    receive an adjustment to its FTE cap (which otherwise would be
    zero) if it establishes one or more new medical residency
    training programs, but only for new programs established within
    3 academic years after residents begin training in the first
    new program. CMS recently put forth a final rule on July 31,
    2009 that clarifies that a ``newly established'' residency
    program for Medicare GME purposes is not a program that existed
    previously at another hospital. In determining that a program
    is truly new, CMS will use certain ``supporting factors,'' such
    as whether the program director, teaching staff, and residents
    are different. CMS will also consider whether the program
    relocated from a hospital that closed, and whether that program
    is part of any existing hospital's FTE cap determination. If
    the program did relocate from a closed hospital and that
    program is not part of any existing hospital's FTE cap
    determination, then even if there are significant similarities
    between the program in terms of the program director, teaching
    staff, or residents, CMS could consider the program that was
    transferred from the closed hospital to be new for Medicare
    direct GME and IME, since there would be no danger that an FTE
    cap adjustment to reflect a new program would result in
    duplicative FTE caps. CMS also has established certain
    regulations governing Medicare's provider enrollment
    requirements that determine under what circumstances providers
    can bill the Medicare program including those involved in
    change of ownership (CHOW) transactions. Very generally, in
    order to acquire a teaching hospital's resident cap under a
    CHOW transaction, the acquiring entity must retain the original
    provider agreement of the provider it is acquiring. However,
    the acquiring entity would also assume all liabilities
    associated with that provider agreement.
        Starting August 29, 2005 (the day after Hurricane Katrina),
    hospitals were permitted to form emergency affiliation
    agreements if located in federally declared disaster areas
    starting the first day of a Section 1135 emergency period.
    Under 42 Code of Federal Regulations (CFR) 413.79, a home
    hospital located in such an area that experiences at least a
    20% decline in inpatient occupancy can temporarily transfer its
    resident cap to a host hospital.
                Proposed Law
        The Secretary would promulgate regulations to establish a
    process where the FTE residency cap slots in a hospital with an
    approved medical residency program that closes on or after a
    date that is 2 years before the date of enactment could be used
    to increase the otherwise applicable residency limit for other
    hospitals in the State. The increase in residency programs
    would be distributed to one or more hospitals in the State in a
    manner specified by the Secretary. This process would be
    consistent with any recommendations submitted by the senior
    health official designated by the chief executive officer of
    the state in question provided that the recommendations are not
    submitted later than 180 days after the date of a hospital
    closure. In cases where a hospital closed before date of
    enactment, the time limit would be 180 days from the date of
    enactment. The aggregate number of increased residency limits
    in the state would equal the number of FTE resident cap slots
    from the hospital(s) that closed. These provisions would not
    affect any temporary adjustment to a hospital's FTE resident
    cap established under 42 CFR 413.79 as in effect on the date of
    enactment.
                Reason for change
        When hospitals close, the residency slots previously
    associated with those hospitals are no longer eligible for
    further Medicare reimbursement once the existing residents
    complete their training. This occurs regardless of any
    continued need for those residency slots to meet current or
    future workforce needs in the community or state. This
    provision allows for continued funding of those slots at other
    hospitals within the state, taking into consideration
    recommendations from the senior health official in the state
    when determining which hospitals shall receive upward
    adjustments or new residency caps.

    Sec. 1505. Improving Accountability for Approved Medical Residency
            Training

                Current law
        Medicare will reimburse teaching hospitals for the direct
    and indirect costs associated with an approved teaching program
    accredited by an independent entity, such as the Accreditation
    Council for Graduate Medical Education or the American
    Osteopathic Association. Medicare has never linked its payments
    to promoting or fostering any goals in medical education.
                Proposed law
        Certain goals of medical residency training programs would
    be established. Specifically, resident training would be
    designed so that physicians would be able to: (1) work
    effectively in various non-provider settings; (2) coordinate
    patient care within and across settings; (3) understand the
    relevant cost and value of various diagnostic and treatment
    options; (4) work effectively in inter-professional and multi-
    disciplinary teams in provider and non-provider settings; (5)
    identify systematic errors in health care delivery and
    implement solutions for such errors; and (6) be meaningful
    electronic health record users.
        GAO would be required to evaluate the extent to which
    medical residency training programs are meeting the above
    workforce goals in a range of residency programs, including
    primary care and specialties; and have the appropriate faculty
    expertise to teach the topics required to achieve such goals.
    The study would be submitted to Congress no later than 18
    months after the date of the enactment. The study would include
    recommendations with respect to the development of curriculum
    requirements and an assessment of the accreditation processes
    of the Accreditation Council for Graduate Medical Education and
    the American Osteopathic Association.
                Reason for change
        MedPAC recommends that the residency training experience
    should encourage physicians to increase care coordination and
    assume greater accountability for quality of care. Graduate
    medical education should train a future physician workforce
    exposed to innovative delivery models that would support more
    integration. A MedPAC sponsored study conducted by RAND pointed
    out that the curricula of residency training programs fall
    short of recommendations by the Institute of Medicine and other
    experts on items such as formal training or experience in
    multidisciplinary teamwork, cost-awareness in clinical
    decision-making, comprehensive health information technology,
    and patient care in nonhospital settings. Residents should be
    trained in innovation delivery systems that will support
    coordinated care and enhance an integrated approach. The
    Accreditation Council for Graduate Medical Education has also
    included similar goals for residency programs to improve the
    training of residents. The COGME report calls for ``making
    accountability for the public's health the driving force for
    graduate medical education.'' The report further states that
    the $10 billion spent annually on GME should have parameters on
    how our physician workforce should be trained and the type of
    training residents should receive.
        This policy is intended to highlight broad goals for
    residency programs to improve their accountability. Such goals
    include: (1) work effectively in various non-provider settings;
    (2) coordinate patient care within and across settings; (3)
    understand the relevant cost and value of various diagnostic
    and treatment options; (4) work effectively in inter-
    professional and multidisciplinary teams in provider and non-
    provider settings; (5) identify systematic errors in health
    care delivery and implement solutions for such errors; and (6)
    be meaningful electronic health record users.
        The Comptroller General shall conduct a study to evaluate
    the extent to which residency training programs will meet the
    goals described in this provision and will report to Congress
    not later than 18 months after the enactment of this
    legislation.

                          TITLE VI--PROGRAM INTEGRITY

         Subtitle A--Increased Funding to Fight Fraud, Waste, and Abuse

    Sec. 1601. Increased Funding and Flexibility to Fight Fraud and Abuse

                Current Law
        The Health Care Fraud and Abuse Control (HCFAC) account
    funds activities to fight health care fraud. The HCFAC program
    along with the Medicare Integrity Program (MIP) were both
    established by the Health Insurance Portability and
    Accountability Act of 1996 (HIPAA, P.L. 104-191) which sought
    to increase and stabilize federal funding for health care anti-
    fraud activities. Specifically, HCFAC funds are directed to the
    enforcement and prosecution of health care fraud. MIP funding
    supports the program integrity activities undertaken by CMS
    contractors.
        For HCFAC, HIPAA appropriated funds to the Department of
    Health and Human Services (HHS), the Department of Justice
    (DOJ), and the Federal Bureau of Investigation (FBI) for
    antifraud activities undertaken for fiscal years 1997 through
    2003. Funds are appropriated to the Account from the Medicare
    Part A Trust Fund in amounts as the Secretary and the Attorney
    General certify are necessary to support audits,
    investigations, evaluations, and prosecutions related to health
    care fraud. For HHS and DOJ, the legislation authorized an
    amount, beginning at $104 million for FY1997, equal to the
    limit for the preceding year increased by 15%. Within this
    amount, the legislation authorized minimum and maximum
    appropriations for the HHS OIG. The maximum OIG appropriation
    increased from $70 million in FY1997 to $160 million in FY2003.
    For each fiscal year after 2003, the amount was capped at the
    2003 level. In December 2006, Congress passed the Tax Relief
    and Health Care Act of 2006 (TRHCA, P.L. 109-432) which
    extended the mandatory annual appropriation for HCFAC to 2010.
    For fiscal years 2007 through 2010, the mandatory annual
    appropriation is the limit for the preceding year plus the
    percentage increase in the consumer price index for all urban
    consumers (CPI-U). For years after FY2010, the annual
    appropriation remains at the FY2010 level.
        The MIP program authorizes the Secretary of HHS to enter
    into contracts with private organizations to conduct program
    integrity activities such as provider audits and medical review
    of claims. The largest share of the HIPAA appropriation was
    dedicated to the MIP program. Funding for MIP increased from
    $440 million in FY1997 to $720 million in FY2003. For fiscal
    years 2004 and 2005, the annual MIP appropriation remained at
    the FY2003 level. In 2005, Congress passed the Deficit
    Reduction Act (DRA, P.L. 109-171) which raised funding for the
    MIP program by $112 million for FY2006 to implement program
    integrity and oversight activities for the Medicare
    prescription drug benefit. This increased the annual MIP
    appropriation from $720 million to $832 million for FY2006
    only. Congress did not increase funding for MIP in TRHCA.
    Therefore the mandatory annual appropriation for MIP remains at
    $720 million.
                Proposed Law
        The provision would increase funding for HCFAC by $100
    million annually beginning with FY2011. Funding would be
    appropriated to HHS, the DOJ, and MIP in the same manner as is
    currently appropriated in statute. Funding allocated to MIP
    would be authorized for HCFAC activities as well as MIP
    activities and would not have to be distributed solely to
    private organizations to conduct program integrity activities.
    Funding for both HCFAC and MIP would be available without
    further appropriation until expended.
                Reason for Change
        According to the Congressional Budget Office, for every
    $1.00 that the government spends in increased funding for
    HCFAC, there is a $1.75 return on that investment. This
    increased funding will allow for the implementation of the
    measures in this bill aimed at fighting waste, fraud, and
    abuse; and will result in an overall increase in program
    integrity.
                Effective Date
        January 1, 2010.

               Subtitle B--Enhanced Penalties for Fraud and Abuse

    Sec. 1611. Enhanced Penalties for False Statements on Provider or
            Supplier Enrollment Applications

                Current Law
        Medicare statute provides the Secretary with general
    authority to prescribe regulations for the efficient
    administration of the Medicare program. Under this authority,
    the Center for Medicare and Medicaid Services (CMS) has
    implemented regulations requiring Medicare providers and
    suppliers to submit an application to enroll in the Medicare
    program and receive billing privileges. Providers and suppliers
    must resubmit and recertify the accuracy of their enrollment
    information every 5 years. Medicare enrollment activities, such
    as processing and reviewing applications, are handled by
    private contractors. CMS may deny a provider or supplier's
    enrollment in Medicare or revoke a provider's billing
    privileges for the following reasons: noncompliance with
    enrollment requirements, exclusion from participation in
    Federal health care programs, conviction of a felony, or the
    submission of false or misleading information on the enrollment
    application.
        Medicaid statute delegates the administration of the
    Medicaid program to the states. There is considerable variation
    in how states administer their provider enrollment processes.
    State Medicaid agencies determine whether a provider or
    supplier is eligible to participate in the Medicaid program by
    providing for written agreements with providers and suppliers.
    Written agreements require that providers and suppliers
    maintain specific records, disclose certain ownership
    information, and grant access to federal and state auditors to
    books and records.
        Section 1128A(a) of the Social Security Act (SSA)
    authorizes the imposition of Civil Monetary Penalties (CMPs)
    and assessments on a person, including an organization, agency,
    or other entity, who engages in various types of improper
    conduct with respect to federal health care programs. Under
    section 1128A(a)(1)(D) of the Act, a person who knowingly
    presents or causes to be presented a claim to federal or state
    agencies that the Secretary determines is for an item or
    service furnished during a period when the person was excluded
    from participation in the federal health care program under
    which the claim was made is subject to a civil monetary penalty
    of up to $10,000 for each item or service furnished, and an
    assessment of up to three times the amount claimed for each
    item or service.
                Proposed Law
        This provision would subject providers and suppliers
    applying to enroll or renewing enrollment in federal health
    care programs to CMPs for providing false information on an
    enrollment application. Medicaid managed care plans, MA plans,
    and PDP plans would also be subject to CMPs for providing false
    information on applications to participate in federal health
    care programs.
        Specifically, the provision would provide that a person who
    knowingly makes or causes to be made any false statement,
    omission, or misrepresentation of a material fact on an
    application, agreement, bid, or contract to participate or
    enroll as a provider of services or supplier under a federal
    health care program would be subject to a CMP of $50,000 for
    each violation. In addition to providers and suppliers, the
    provision would also apply to Medicaid managed care
    organizations, Medicare Advantage (MA) organizations and MA
    plans, Prescription Drug Plan (PDP) sponsors and plans, and
    providers and suppliers that participate in these Medicare or
    Medicaid plans. In addition, such a person may be subject to an
    assessment of not more than 3 times the amount claimed as the
    result of the false statement, omission, or misrepresentation.
        The provision would also eliminate the requirement for a
    determination by the Secretary when a person knowingly presents
    or causes to be presented a claim for an item or service
    furnished during a period when the person was excluded under
    federal law from the federal health care program under which
    the claim was made.
                Reason for Change
        The new provisions will increase the quality of data
    supplied on an application, agreement, bid, or contract when
    providers or suppliers enroll in a federal health care program.
                Effective Date
        These amendments would apply to acts committed on or after
    January 1, 2010.

    Sec. 1612. Enhanced Penalties for Submission of False Statements
            Material to a False Claim

                Current Law
        Section 1128A (a) of the SSA authorizes the imposition of
    CMPs (CMPs) and assessments on a person, including an
    organization, agency, or other entity, who engages in various
    types of improper conduct with respect to federal health care
    programs, including the imposition of penalties against a
    person who knowingly presents or causes to be presented false
    or fraudulent claims. This section generally provides for CMPs
    of up to $10,000 for each item or service claimed, $15,000 or
    $50,000 under other circumstances, and an assessment of up to
    three times the amount claimed.
                Proposed Law
        The bill would create a new section 1128A (a) (9) of the
    SSA, providing that persons who knowingly make, use, or cause
    to be made or used any false statement or record material to a
    false or fraudulent claim submitted for payment to a federal
    health care program would be subject to a civil monetary
    penalty of $50,000 for each violation.
                Reason for Change
        The new provisions will increase the quality of data
    supplied on claims submitted for payment and will deter false
    or fraudulent claims.
                Effective Date
        These amendments would apply to violations committed on or
    after January 1, 2010.

    Sec. 1613. Enhanced Penalties for Delaying Investigations

                Current Law
        Section 1128A (a) of the SSA authorizes the imposition of
    CMPs and assessments on a person, including an organization,
    agency, or other entity, who engages in various types of
    improper conduct with respect to federal health care programs,
    including the imposition of penalties against a person who
    knowingly presents or causes to be presented false or
    fraudulent claims. This section generally provides for CMPs of
    up to $10,000 for each item or service claimed, $15,000 or
    $50,000 under other circumstances, and an assessment of up to
    three times the amount claimed.
        The Secretary is required to provide for the annual
    auditing of the financial records of at least \1/3\ of MA
    plans. Each contract with a MA plan is required to provide that
    the Secretary have the right to inspect or evaluate the
    quality, appropriateness and timeliness of services performed
    under the contract. Contracts must also provide the Secretary
    with right to audit any plan's books and records related to the
    plan's ability to bear risk or to the services performed,
    including determinations of amounts payable under the contract.
                Proposed Law
        The bill would create a new provision, section 1128A (a)
    (10), providing that persons who fail to grant timely access,
    upon reasonable request (as defined by the Secretary in
    regulations), to the Office of the Inspector General (OIG), for
    the purpose of audits, investigations, evaluations, or other
    statutory functions of the OIG, be subject to CMPs of $15,000
    for each day of failure. The provision would also modify the
    contractual requirements for MA plans to allow the Secretary to
    conduct timely audits and inspections of MA plans.
                Reason for Change
        According to an October 2007 report by the Government
    Accountability Office (GAO), the Centers for Medicare and
    Medicaid Services (CMS) did not fulfill its statutory mandate
    to audit the financial records of \1/3\ of MA plans for the
    years 2001-2006. Of the audits that were conducted, GAO found
    that CMS was limited in its ability to pursue financial
    recoveries based on the audits that were performed, because CMS
    did not use its statutory authority to include in contracts
    with MA plans an explanation of its audit authority and
    description of the steps to be taken to pursue deficiencies
    identified by these audits. This section requires that future
    contracts with MA plans contain this language, and imposes
    stronger daily penalties for the obstruction of audits, in
    order to facilitate more timely and efficient performance of
    this statutory duty by CMS in addition to audits,
    investigations or
                Effective Date
        These amendments would apply to violations committed on or
    after January 1, 2010.

    Sec. 1614. Enhanced Hospice Program Safeguards

                Current Law
        Medicare statute mandates the establishment of minimum
    health and safety standards that must be met by providers
    participating in the Medicare and Medicaid programs (i.e.
    hospitals, hospices, nursing homes, and home health agencies).
    In order to receive payment, providers and suppliers must meet
    these health and safety standards, often referred to as
    Conditions of Participation (CoPs). Generally, state agencies,
    under contract with CMS, survey providers to determine
    compliance with CoPs. Alternatively, a provider can be deemed
    to meet these requirements if it has been accredited by an
    approved national accreditation body. If a provider has been
    found to be non-compliant with its CoPs, CMS has the authority
    to impose certain sanctions, including revoking the provider's
    participation agreement. States also have the authority to
    impose sanctions on Medicare and Medicaid participating
    facilities found to be noncompliant with CoPs.
                Proposed Law
        This provision would add a new section, Section 1819A, to
    the SSA that would require the Secretary to develop and
    implement intermediate sanctions to apply to hospices that,
    based on a determination by the Secretary, demonstrate a
    substandard quality of care and fail to meet such other
    requirements as the Secretary may find necessary in the
    interest of the health and safety of the individuals provided
    care and services by the agency or organization involved. The
    sanctions may include CMPs of up to $10,000 for each day of
    non-compliance or in the case of a per instance penalty not
    more than $25,000, a denial of all or part of future Medicare
    or Medicaid payments to which the hospice is entitled (which
    would terminate upon the Secretary's finding that the hospice
    program no longer demonstrated substandard quality and met
    other requirements as determined by the Secretary), requiring
    the appointment of managers to oversee the operation of the
    hospice program, correction plans, and staff training The
    sanctions could be imposed in addition to those imposed under
    State or Federal law and would not be construed as limiting
    other available remedies. The Secretary would have until
    January 1, 2012 to develop and implement the sanctions.
        By July 1, 2011, the Secretary would be required to create
    the specific procedures and conditions under which the relevant
    sanctions would apply, including the amount of any fines and
    severity of the sanctions. The conditions would be required to
    minimize the time between the identification of deficiencies
    and imposition of sanctions, and would provide for more severe
    fines for repeated deficiencies. The due process protections
    provided in the CMP law (SSA, Section 1128A), such as written
    notice and the right to a hearing, would apply in the same
    manner to the imposition of a CMP for hospices.
        This provision would also require the Secretary to take
    immediate action to correct any identified deficiencies that
    immediately jeopardize the health and safety of patients being
    cared for in a I hospice. The action would consist of either
    appointing managers to oversee the operations of the hospice or
    terminating the hospice's participation in federal health care
    programs. The Secretary would be authorized to impose
    additional remedies if necessary. If the Secretary determines
    that identified deficiencies do not immediately jeopardize the
    patients' health and safety, the Secretary, in lieu of
    terminating the providers' participation in the program, may
    impose other intermediate sanctions. If after a period of
    intermediate sanctions, the deficiencies have not been
    corrected, the Secretary would be required to terminate the
    providers' participation in federal health programs. The
    Secretary would also be authorized to impose CMPs on hospice
    providers for any former days of non-compliance with federal
    health and safety standards.
        These provisions would also apply to hospice programs
    participating in Medicaid and CHIP.
                Reason for Change
        The new provisions will enable CMS to take intermediate
    action in the case of poorly performing hospices, when
    previously the only option was exclusion. The section also
    instructs and authorizes the Secretary to take immediate action
    if deficiencies immediately jeopardize the health and safety of
    beneficiaries.
                Effective Date
        Date of enactment.

    Sec. 1615. Enhanced Penalties for Individuals Excluded from Program
            Participation

                Current Law
        Section 1128A (a) of the SSA authorizes the imposition of
    CMPs and assessments on a person, including an organization,
    agency, or other entity, who engages in various types of
    improper conduct with respect to federal health care programs,
    including the imposition of penalties against a person who
    knowingly presents or causes to be presented false or
    fraudulent claims. This section generally provides for CMPs of
    up to $10,000 for each item or service claimed, $15,000 or
    $50,000 under other circumstances, and an assessment of up to
    three times the amount claimed.
                Proposed Law
        The bill would create a new provision, section 1128A(a)(11)
    of the SSA, providing that a person who orders or prescribes an
    item or service, including without limitation home health care,
    diagnostic and clinical lab tests, prescription drugs, durable
    medical equipment, ambulance services, physical or occupational
    therapy, or any other item or service, during a period when the
    person has been excluded from participation in a federal health
    care program, and the person knows or should know that a claim
    for such item or service will be presented to such a program,
    be subject to a civil monetary penalty of $50,000 for each
    order or prescription. This amendment would apply to violations
    committed on or after January 1, 2010.
                Reason for Change
        The new provision will create a disincentive for excluded
    persons to violate that exclusion by continuing to prescribe
    services payable by a federal health program.
                Effective Date
        These amendments apply to violations committed on or after
    January 1, 2010.

    Sec. 1616. Enhanced Penalties for Provision of False Information by
            Medicare Advantage and Part D Plans

                Current Law
        MA plans enter into contracts with the Secretary to
    participate in the Medicare program. The Secretary has the
    authority to impose sanctions and CMPs on MA plans that violate
    the terms of the contract. Among the violations are failing to
    provide medically necessary care; imposing excess beneficiary
    premiums; expelling or refusing to re-enroll beneficiaries;
    discouraging or denying enrollment among eligible individuals
    expected to require future medical services; misrepresenting or
    falsifying information; failing to comply with balance billing
    requirements; interfering with a provider's advice to
    beneficiaries; and contracting with providers excluded from the
    Medicare program. For violations related to discouraging or
    denying enrollment or misrepresenting information provided to
    the Secretary, the Secretary can impose a maximum penalty of
    $100,000. For all other violations, the maximum penalty is
    $25,000. The Secretary has the authority to impose additional
    penalties for imposing excess beneficiary premiums and engaging
    in activities that discourage enrollment.
                Proposed Law
        This provision would enhance penalties for MA and Part D
    plans that misrepresent or falsify information to include an
    assessment of up to three times the amount claimed by a plan or
    plan sponsor based on the misrepresentation or falsified
    information. The provision would apply to violations committed
    on or after January 1, 2010.
                Reason for Change
        The new provision will improve the accuracy of information
    submitted by MA and Part D plans.
                Effective Date
        These amendments apply to violations committed on or after
    January 1, 2010.

    Sec. 1617. Enhanced Penalties for Medicare Advantage and Part D
            Marketing Violations

                Current Law
        MA plans enter into contracts with the Secretary to
    participate in the Medicare program. The Secretary has the
    authority to impose sanctions and CMPs on MA plans that violate
    the terms of the contract. Among the violations are failing to
    provide medically necessary care; imposing excess beneficiary
    premiums; expelling or refusing to re-enroll beneficiaries;
    discouraging or denying enrollment among eligible individuals
    expected to require future medical services; misrepresenting or
    falsifying information; failing to comply with balance billing
    requirements; interfering with a provider's advice to
    beneficiaries; and contracting with providers excluded from the
    Medicare program. For violations related to discouraging or
    denying enrollment or misrepresenting information provided to
    the Secretary, the Secretary can impose a maximum penalty of
    $100,000. For all other violations, the maximum penalty is
    $25,000. The Secretary has the authority to impose additional
    penalties for imposing excess beneficiary premiums and engaging
    in activities that discourage enrollment.
                Proposed Law
        This provision would increase the number of violations that
    could be subject to the imposition of sanctions and CMPs by the
    Secretary. Beginning January 1, 2010, plans that: (1) enroll
    individuals in a MA or Part D plan without their consent
    (except Part D dual eligibles), (2) transfer an individual from
    one plan to another for the purpose of earning a commission,
    (3) fail to comply with marketing requirements, including CMS
    guidance, or (4) employ or contract with an individual or
    entity that commits a violation would be subject to sanctions
    imposed by the Secretary. Sanctions would apply to any employee
    or agent of a MA or Part D plan, or any provider or supplier
    who contracts with a MA or Part D plan.
                Reason for Change
        The new provision will reduce the ``churning'' of
    beneficiaries by agents or brokers and clarifies that plans may
    be sanctioned for actions undertaken by their employees,
    agents, brokers. Providers, or suppliers.
                Effective Date
        These amendments apply to violations committed on or after
    January 1, 2010.

    Sec. 1618. Enhanced Penalties for Obstruction of Program Audits

                Current Law
        The OIG has permissive authority (i.e. discretion) to
    exclude an entity or individual from a federal health program
    for a conviction related to the obstruction of a health care
    fraud investigation.
                Proposed Law
        This provision would expand the OIG's permissive exclusion
    authority to include a conviction related to the obstruction of
    an audit related to health care fraud as well as an
    investigation or audit related to the use of funds received
    from any health care program. The provision would apply to
    violations committed on or after January 1, 2010.
                Reason for Change
        The new provision will create a strong disincentive for the
    obstruction of program audits.
                Effective Date
        These amendments apply to violations committed on or after
    January 1, 2010.

    Sec. 1619. Exclusion of Certain Individuals and Entities from
            Participation in Medicare and State Health Care Programs

                Current Law
        Section 1128 of the Social Security Act provides that the
    Secretary (and through delegation, OIG) has the authority to
    exclude individuals and entities from participation in federal
    health care programs under a variety of circumstances.
    Exclusion is mandatory for those convicted of certain criminal
    offenses, and generally the exclusion cannot be for a period of
    less than five years. OIG also has permissive authority exclude
    an individual or entity from a federal health program, which
    includes the discretion to determine whether and for how long
    to impose an exclusion. A permissive exclusion may be imposed
    under numerous circumstances, including conviction of certain
    misdemeanors relating to fraud, theft, embezzlement, breach of
    fiduciary duty or other financial misconduct; a conviction
    based on an interference with or obstruction of an
    investigation into a criminal offense; and revocation or
    suspension of a health care practitioner's license for reasons
    bearing on the individual's or entity's professional
    competence, professional performance, or financial integrity.
        Under 42 C.F.R. Sec. 1001.1901, unless and until an
    excluded individual or entity is reinstated into a federal
    health care program, no payment will be made by a program for
    any item or service furnished by the individual or entity, or
    at the medical direction or on the prescription of a physician
    or other authorized individual who is excluded when the person
    furnishing such item or service knew or had reason to know of
    the exclusion.
                Proposed Law
        The bill would amend section 1128(c) to clarify the effect
    of an exclusion of an individual or entity on payment made
    under a federal health care program. The section would provide
    that payment cannot be made from any federal health care
    program with respect to an item or service furnished (1) by an
    excluded individual or entity, or (2) at the medical direction,
    or on the prescription of an authorized individual (e.g., a
    physician) when the person submitting a claim for the item or
    service knew or had reason to know of an individual's
    exclusion. Despite this prohibition, the bill would permit
    payment to be made for emergency items or services (not
    including items or services furnished in an emergency room of a
    hospital) that are furnished by these individuals and entities.
    For purposes of this section, as well as sections 1128A and
    1128B (dealing with civil and criminal penalties in federal
    health care programs), an item or service would be considered
    ``furnished'' if the individual or entity directly or
    indirectly provided, ordered, manufactured, distributed,
    prescribed, or otherwise supplied the item or service
    regardless of how the item or service was paid for by a federal
    health care program or to whom such payment was made.
        Section 1128(c) would also provide that if a person
    eligible for benefits under Medicare or Medicaid submits a
    claim for payment for items or services furnished by an
    excluded individual or entity, and the eligible person did not
    know or have reason to know that such individual or entity was
    excluded, then payment must be made for the items or services.
    In this case, the Secretary must notify the eligible person of
    the exclusion of the individual or entity, and payment must not
    be made for items or services furnished by an excluded
    individual or entity to an eligible person after a reasonable
    time after this notification.
        The section would also provide that if claim for payment
    for items or services furnished by an excluded individual or
    entity is submitted by an individual or entity other than a
    person eligible for benefits under Medicare or Medicaid or that
    excluded individual or entity itself, and the Secretary
    determines that the individual or entity that submitted the
    claim took reasonable steps to learn of the exclusion and
    reasonably relied upon inaccurate or misleading information
    from the relevant federal health care program or its
    contractor, the Secretary may waive repayment of the amount
    paid in violation of the exclusion to the individual or entity
    that submitted the claim. If a federal health care program
    contractor provided inaccurate or misleading information
    resulting in the waiver of an overpayment under this section,
    the Secretary must take appropriate action to recover the
    improperly paid amount from the contractor.
                Reason for Change
        The new provision clarifies current practice.
                Effective Date
        Date of enactment.

             Subtitle C--Enhanced Program and Provider Protections

    Sec. 1631. Enhanced CMS Program Protection Authority

                Current Law
        CMS has implemented regulations requiring providers and
    suppliers to complete an application to enroll in the Medicare
    program and receive billing privileges. As part of the
    enrollment process, providers and suppliers are required to
    submit information necessary to verify identity and state
    licensure. CMS reserves the right to perform on-site
    inspections of a provider or supplier to verify compliance with
    standards. If enrollment requirements are not met, CMS may
    revoke Medicare billing privileges. Providers and suppliers
    must resubmit and recertify the accuracy of their enrollment
    information every 5 years. CMS may deny a provider's or
    supplier's enrollment in Medicare or revoke a provider's
    billing privileges for the following reasons: noncompliance
    with enrollment requirements, exclusion from participation in
    Federal health care programs, conviction of a felony, or the
    submission of false or misleading information on the enrollment
    application.
        CMS manual instructions require that Medicare contractors
    query the following databases prior to approving an application
    for enrollment in Medicare: Qualifier.net, the Medicare
    Exclusions Database (List of Excluded Individuals/Entities or
    LEIE), and the Government Services Administration (GSA)
    debarment list. All Medicare contractors are required to query
    these databases when enrolling providers in the program.
        Medicaid beneficiaries may obtain services from any
    Medicaid participating provider recognized by the state. In
    addition, Medicaid beneficiaries enrolled in primary care case
    management system, a Medicaid managed care organization, or
    similar entities must not restrict the choice of a qualified
    provider of family planning services and supplies (with some
    other exceptions). States are not required to provide Medicaid
    coverage for such services when offered by persons or entities
    convicted of felonies.
                Proposed Law
        This provision would add a new section to the SSA, section
    1128G that would authorize the Secretary, in cases where there
    is a significant risk of fraud, to subject providers and
    suppliers to enhanced screening, oversight, or a moratorium on
    enrollment. The provision would take effect on January 1, 2011.
    The Secretary would determine what constitutes a significant
    risk of fraud by reviewing complaints, reports, referrals from
    law enforcement or other sources, and the results from data
    analysis, trend information, or claims review. Risk could be
    determined with respect to a single category of providers or
    suppliers or a single category of providers or suppliers
    operating within a specific geographic area.
        This provision would apply to providers or suppliers
    initially enrolling in Medicare, Medicaid, or CHIP as well as
    those renewing their enrollment. The Secretary would be
    authorized to require states to implement these program
    safeguards as a requirement in their Medicaid or CHIP state
    plans. State CHIP plans would also be required to include their
    procedures for enforcing these requirements. Any actions taken
    or determinations made by the Secretary in imposing these
    requirements would not be subject to judicial review.
    Additionally, states would be allowed to conduct enhanced
    oversight activities beyond those required by the Secretary.
        This provision would require the Secretary to establish
    procedures for screening and enhanced oversight. Screening
    procedures may include licensing board checks, reviews against
    the LEIE, background checks, and unannounced pre-enrollment or
    other site visits. During periods of enhanced oversight
    (between 30 days and one year) the Secretary would be
    authorized to take certain actions against providers, including
    required or unannounced site visits or inspections, prepayment
    review, enhanced review of claims, and other actions as
    specified by the Secretary. The Secretary would be allowed to
    extend these periods to more than one year if necessary.
        In instances where the Secretary determines that there is
    risk of serious ongoing fraud, the Secretary would have the
    authority to impose a moratorium on enrolling providers within
    a category of providers and suppliers, including a category
    within a specific geographic area. Moratoriums could not be
    imposed if the Secretary makes a determination that the
    moratorium would adversely impact access to care. Medicaid
    providers would be prohibited from providing coverage for
    services delivered by providers under a moratorium.
                Reason for Change
        The new provision will allow the Secretary to screen
    providers before they join the program to put in place
    additional safeguards when there is a heightened risk of waste,
    fraud, and abuse.
                Effective Date
        These amendments apply to applications submitted after
    January 1, 2011.

    Sec. 1632. Enhanced Medicare, Medicaid, and CHIP Program Disclosure
            Requirements Relating to Previous Affiliations

                Current Law
        In order to receive payment from Medicare, providers must
    enroll in the Medicare program CMS regulations mandate that
    enrollment applications contain information necessary to
    uniquely identify the provider (i.e. proof of business name,
    social security number, or Tax ID number) and include
    documentation necessary to verify licensure or eligibility to
    furnish Medicare covered items or services. Persons who sign
    the enrollment applications are required to have an ownership
    or control interest in the provider or supplier. Upon initial
    enrollment in the program, the signature on the enrollment
    application must be that of an authorized official. Renewal or
    updated applications may be signed by a delegated official. CMS
    has the authority to perform on-site inspections of a provider
    to verify enrollment information and determine compliance with
    Medicare enrollment requirements. CMS has established an
    internet database called the Provider Enrollment, Chain and
    Ownership System (PECOS) for providers to submit enrollment
    information.
        Medicaid statute delegates the administration of the
    Medicaid program to the states. There is considerable variation
    in how states' administer their provider enrollment processes.
    State Medicaid agencies determine whether a provider or
    supplier is eligible to participate in the Medicaid program by
    providing for written agreements with providers and suppliers.
    Written agreements require that providers and suppliers
    maintain specific records, disclose certain ownership
    information, and grant access to federal and state auditors to
    books and records.
                Proposed Law
        Providers or suppliers submitting applications for
    enrollment or renewing enrollment in Medicare, Medicaid, or
    CHIP after January 1, 2011 would be required to disclose
    information related to any current or previous affiliation
    (within the last 10 years) with providers or suppliers that
    have uncollected debt, or with persons or entities that have
    been suspended or excluded, been placed on payment suspension,
    or had their billing privileges revoked. The Secretary would
    have the authority to apply program safeguards to providers and
    suppliers, such as enhanced screening of claims, required or
    unannounced site visits and inspections, additional reporting
    requirements, and surety bonds, if the Secretary determines
    that certain affiliations pose a risk of fraud, waste, and
    abuse. The provision would also provide the Secretary with the
    authority to deny enrollment in Medicare, Medicaid, or CHIP in
    instances when at least one affiliation or affiliations poses a
    serious risk of fraud, waste or abuse.
                Reason for Change
        The new provision will allow the Secretary to take into
    account past affiliations with persons or entities that owe or
    posed past risk to the program, and will allow the Secretary to
    take steps to protect the program.
                Effective Date
        These amendments apply to applications submitted after July
    1, 2011.

    Sec. 1633. Required Inclusion of Payment Modifier for Certain
            Evaluation and Management Services

                Current Law
        Evaluation and management services include certain primary
    care services, hospital inpatient medical services,
    consultations, other visits, preventive medicine visits,
    psychiatric services, emergency care facility services, and
    critical care services.
                Proposed Law
        The provision would require the Secretary to establish a
    payment modifier for evaluation and management services that
    result in the ordering of additional services (i.e. lab tests),
    prescription drugs, durable medical equipment, or other
    services determined by the Secretary to be at high risk of
    fraud, waste, and abuse. The Secretary would be authorized to
    require providers and suppliers to report the payment modifier
    on claims.
                Reason for Change
        The new payment modifier will allow for greater analysis
    and data collection in areas at risk of fraud and abuse.
                Effective Date
        Date of enactment.

    Sec. 1634. Evaluations and Reports Required Under Medicare Integrity
            Program.

                Current Law
        Medicare statute authorizes the establishment of the MIP
    program. MIP requires the Secretary to enter into contracts
    with private entities to conduct a variety of program integrity
    activities for the Medicare program including auditing
    providers, reviewing claims for medical necessity, and
    identifying and investigating alleged fraud. MIP was
    established along with the HCFAC program by HIPAA, which sought
    to increase and stabilize federal funding for health care anti-
    fraud activities.
        Established by the DRA, the Medicaid Integrity Program is
    modeled after Medicare's MIP program. The Medicaid Integrity
    Program provides HHS with dedicated resources to promote
    Medicaid integrity to contract with entities to reduce fraud,
    waste, and abuse and to add 100 full-time equivalent staff.
    Annual reports to Congress on program accomplishments and use
    of funds are required. In addition, the Secretary is required
    to develop comprehensive 5-year plans for the program.
                Proposed Law
        For the contract year beginning in 2011, this provision
    would require MIP contractors to assure the Secretary that they
    will conduct periodic evaluations of the effectiveness of their
    activities. Annual reports would be required to be submitted to
    the Secretary. A similar provision with respect to the Medicaid
    Integrity Program would be included in Section 1752 of this
    bill.
                Reason for Change
        The new provision will incease the accountability and
    effectiveness of MIP contractors.
                Effective Date
        Date of enactment.

    Sec. 1635. Require Providers and Suppliers to Adopt Programs to Reduce
            Waste, Fraud, and Abuse

                Current Law
        Since 1998, the OIG has been issuing a series of compliance
    guidance documents for providers participating in federal
    health care programs to assist in preventing fraud, waste, and
    abuse. The purpose of the documents is to encourage health care
    providers to adopt compliance programs and internal control
    measures to monitor their adherence to applicable rules,
    regulations, and requirements. The adoption of these programs
    is not mandatory. There is no current law explicitly directing
    health care providers to adopt compliance programs.
                Proposed Law
        This provision would require providers and suppliers to
    establish compliance programs to reduce fraud, waste, and
    abuse. Providers and suppliers that do not meet requirements
    for establishing these programs would be subject to certain
    sanctions. The provision would also authorize the Secretary to
    conduct a pilot program, prior to mandating these requirements
    to all providers, to test the establishment of compliance
    programs for providers that the Secretary has determined to be
    a high risk for fraud, waste, and abuse.
        The Secretary, in consultation with the OIG, would be
    required to establish the core requirements for provider
    compliance programs. Requirements may include written policies,
    procedures, and standards of conduct; a designated compliance
    officer and compliance committee; training and education on
    fraud, waste and abuse for employees and contractors; a
    confidential mechanism (i.e. hotline) for receiving compliance
    questions and reports; guidelines for enforcing standards;
    internal monitoring and auditing procedures applicable to
    providers and contractors; and procedures for (1) ensuring
    prompt responses to detected and potential offenses, (2)
    developing corrective action initiatives, and (3) returning all
    identified Medicare, Medicaid, and CHIP overpayments. The
    Secretary would be required to develop a timeline for the
    establishment of these requirements and the date by which
    providers and suppliers would be required to have a compliance
    program in place.
        The CMS Administrator would have the authority to assess
    whether or not a provider or supplier has met these
    requirements and impose a CMP of up to $50,000 for each
    violation. The Secretary would have the authority to impose
    other intermediate sanctions, such as corrective action plans
    and additional monitoring, on providers and suppliers for
    failing to meet these requirements. The provision would also
    give the Secretary the authority to disenroll a Medicare
    provider or supplier or impose a CMP or intermediate sanction
    on any provider or supplier who fails to establish a compliance
    program.
        The provisions of this section would not apply to
    individual physicians or skilled nursing facilities, although
    skilled nursing facilities would be required to develop
    compliance programs under Section 1412 of this Act.
                Reason for Change
        The new provisions will improve compliance and
    accountability of Medicare providers and suppliers.
                Effective Date
        Date of enactment.

    Sec. 1636. Maximum Period for Submission of Medicare Claims Reduced to
            Not More Than 12 Months

                Current Law
        Medicare statute requires that payments only be made,
    except in certain circumstances, to Medicare eligible providers
    and only if a written request for payment is filed within three
    calendar years after the year in which the services were
    provided. The Secretary is authorized to reduce this period to
    no less than one year if it deems it necessary for the
    efficient administration of the program.
        As established by CMS regulations, in general, the time
    limit on submitting a claim for payment is the close of the
    calendar year after the year in which the services were
    furnished. For services furnished in the first nine months of
    the year, claims must be submitted on or before December 31st
    of the following year. For services furnished in the last three
    months of a calendar year, claims must be submitted to the
    contractor on or before December 31st of the second year
    following the year services were furnished.
                Proposed Law
        The provision would reduce the time period for filing a
    written request for payment from three calendar years to one
    calendar year for services provided under Medicare Parts A and
    B. The Secretary would have the authority to specify exceptions
    to this one year period. The provision would eliminate the
    current statutory requirement that the Secretary must give
    Medicare Part A and B eligible providers at least one year to
    submit a claim for payment. The provision would also add a new
    requirement for MA and PDP plans. Contracts with MA
    organizations and PDP sponsors would be required to mandate
    that any provider under contract with, in partnership with, or
    affiliated with the MA organization or PDP sponsor ensure that
    a written request for payment be submitted no later than one
    calendar year after the date the services were furnished. The
    Secretary would have the authority to specify exceptions to
    this one year period.
        The provision would apply to services furnished on or after
    January 1, 2011.
                Reason for Change
        CMS has found that the current 36-month period for filing
    claims leads to fraudulent gaming of payment systems.
    Legitimate filers do not need this extended time to file
    claims--they prefer to receive payment sooner rather than
    later, while those persons and entities undertaking fraudulent
    filing will use the long period to watch to see which claims
    are approved and tailor their filings to reflect that. The
    reduced time for claims filing will reduce fraudulent claims.
                Effective Date
        These amendments apply to items and services furnished on
    or after January 1, 2011.

    Sec. 1637. Physicians who Order Durable Medical Equipment or Home
            Health Services Required to be Medicare Enrolled Physicians or
            Eligible Professionals

                Current Law
        Medicare statute defines eligible professional as a
    physician, certain types of practitioners (i.e. physician
    assistant, nurse practitioner, clinical social worker, and
    others), a physical or occupational therapist, qualified speech
    language pathologist, or a qualified audiologist.
        CMS has implemented regulations requiring Medicare
    providers and suppliers to submit an application to enroll in
    the Medicare program in order to receive billing privileges.
    Providers and suppliers must resubmit and recertify the
    accuracy of their enrollment information every 5 years. CMS may
    deny a provider or supplier's enrollment in Medicare or revoke
    a provider's billing privileges for the following reasons: non-
    compliance with enrollment requirements, exclusion from
    participation in Federal health care programs, conviction of a
    felony, or the submission of false or misleading information on
    the enrollment application.
        In order to receive payment from Medicare, physicians are
    required to certify that specified services (i.e. inpatient
    psychiatric services, post-hospital extended care services, and
    home health services) meet certain conditions. In the case of
    home health services, physicians are required to certify that
    such services were required because the individual was confined
    to his home and needs skilled nursing care or physical, speech,
    or occupational therapy; a plan for furnishing services to the
    individual has been established; and such services were
    provided under the care of a physician.
        In the case of DME, the Secretary is authorized to require,
    for specified covered items, that payment be made for items and
    services only if a physician has communicated to the supplier a
    written order for the item.
                Proposed Law
        Beginning January 1, 2010, this provision would require
    physicians who order durable medical equipment or home health
    services to be a Medicare eligible professional or enrolled in
    the Medicare program. The Secretary would have the authority to
    extend these requirements to other Medicare items and services,
    including covered Part D drugs, based on a determination that
    such application would help to reduce the risk of fraud, waste,
    and abuse.
                Reason for Change
        The new requirement that physicians ordering DME or home
    health services be Medicare-enrolled will ensure that all
    physicians prescribing these services undergo the new screening
    requirements provided in this section, and will reduce waste,
    fraud, and abuse.
                Effective Date
        Date of enactment.

    Sec. 1638. Requirement for Physicians to Provide Documentation on
            Referrals to Programs at High Risk of Waste and Abuse

                Current Law
        OIG has ``permissive'' authority to exclude an entity or an
    individual from a federal health program under numerous
    circumstances, including failing to supply documentation
    related to payment for items and services.
                Proposed Law
        Beginning January 1, 2010 the Secretary would have the
    authority to disenroll, for no more than one year, a Medicare
    enrolled physician or supplier that fails to maintain and
    provide access to written orders or requests for payment for
    DME, certification for home health services, or referrals for
    other items and services as specified by the Secretary.
    Medicare providers would be required to maintain and provide
    access to documentation relating to written orders or requests
    for payment for DME, certifications for home health services,
    or referrals for items and services as specified by the
    Secretary. The provision would also extend the OIG's permissive
    exclusion authority to include individuals or entities that
    order, refer, or certify the need for health care services that
    fail to provide adequate documentation to the Secretary to
    verify payment.
                Reason for Change
        The new requirement will improve the quality of
    documentation provided for areas at risk for waste, fraud, and
    abuse.
                Effective Date
        These amendments apply to orders, certifications, and
    referrals made on or after January 1, 2010.

    Sec. 1639. Face to Face Encounter with Patient Required Before
            Physicians May Certify Eligibility for Home Health Services or
            Durable Medical Equipment under Medicare

                Current Law
        Home health services are covered under Medicare Parts A and
    B. In order to receive payment from Medicare, physicians are
    required to certify and re-certify that specified services
    (i.e. inpatient psychiatric services, post-hospital extended
    care services, and home health services) meet certain
    conditions. In the case of home health services, physicians are
    required to certify that such services were required because
    the individual was confined to his home and needs skilled
    nursing care or physical, speech, or occupational therapy; a
    plan for furnishing services to the individual has been
    established; and such services were provided under the care of
    a physician.
        In the case of DME, the Secretary is authorized to require,
    for specified covered items, that payment be made for items and
    services only if a physician has communicated to the supplier a
    written order for the item.
                Proposed Law
        This provision would require that after January 1, 2010,
    physicians have a face-to-face encounter (including through
    telehealth and other than with respect to encounters that are
    incident to services involved) with the individual prior to
    issuing a certification or re-certification for home health
    services or durable medical equipment as a condition for
    payment under Medicare Parts A and B. The provision would also
    apply to physicians making home health certifications in
    Medicaid and CHIP. Physicians must document that they had the
    face-to-face encounter with the individual during the 6-month
    period preceding the certification, or other reasonable
    timeframe as determined by the Secretary.
        The Secretary would be authorized to apply the face-to-face
    encounter requirement to other Medicare items and services
    based upon a finding that doing so would reduce the risk of
    waste, fraud, and abuse.
                Reason for Change
        The new requirement will ensure that a physician oversees
    the prescription of services in areas of high risk.
                Effective Date
        These amendments apply to certifications or
    recertifications made after January 1, 2010.

    Sec. 1640. Extension of Testimonial Subpoena Authority to Program
            Exclusion Investigations

                Current Law
        Section 1128 of the SSA provides that the Secretary (and
    through delegation, OIG) has the authority to exclude
    individuals and entities from participation in federal health
    care programs under a variety of circumstances. Exclusion is
    mandatory for those convicted of certain criminal offenses, and
    generally the exclusion cannot be for a period of less than
    five years. OIG also has permissive authority under numerous
    circumstances to exclude an individual or entity from a federal
    health program, including the discretion to determine whether
    and for how long to impose an exclusion.
                Proposed Law
        The provisions of 205(d) and (e) of the SSA would apply
    with respect to the Secretary's program exclusion authority.
    The Secretary would be able to issue subpoenas and require the
    attendance and testimony of witnesses and the production of any
    other evidence that relates to matters under investigation or
    in question by the Secretary. The Secretary would also have the
    ability to delegate this authority to the OIG and the
    Administrator of CMS for the purposes of a program exclusion
    investigation. Certain requirements regarding the serving of
    subpoenas and compensation for subpoenaed witnesses may apply.
    This section would also provide for judicial enforcement of
    subpoenas, including in cases where a person refuses to obey a
    properly served subpoena. This provision would apply to
    investigations beginning on or after January 1, 2010.
                Reason for Change
        The new provision will increase the ability of the
    Secretary to conduct investigations and reduce waste, fraud,
    and abuse.
                Effective Date
        These amendments apply to investigations beginning on or
    after January 1, 2010.

    Sec. 1641. Required Repayments of Medicare and Medicaid Overpayments

                Current Law
        The Secretary is authorized to enter into contracts with
    private entities to conduct administrative functions, including
    audits of Medicare participating providers and suppliers to
    identify alleged overpayments. These entities are generally
    referred to as Medicare program integrity or MIP contractors.
        Medicare statute specifies that identified overpayments to
    providers or suppliers that are not paid within 30 days of the
    date of the overpayment determination will accrue interest on
    the balance of the overpayment at the rate applicable to late
    payments established by the Secretary of the Treasury. The
    Secretary is required to enter into repayment plans with
    providers for which payment within 30 days would constitute a
    financial hardship. In the case of a provider or supplier for
    which an overpayment has been identified seeks a
    reconsideration (the 2nd level of the Medicare appeals
    process), the Secretary is prohibited from recouping the
    overpayment until a decision on the reconsideration has been
    rendered.
                Proposed Law
        This provision would require the repayment of overpayments
    identified through an internal audit by Medicare and Medicaid
    participating providers, including private health plans. The
    term ``overpayment'' would be defined as any funds that a
    person receives or retains under Medicare or Medicaid of which
    they are not entitled. Person would be defined as any
    ``person'' including a provider of services, supplier, Medicaid
    managed care organization, MA organization, or PDP sponsor. Any
    person who knows of an overpayment would be required to report
    and return the overpayment, along with notification for the
    reason for the overpayment, to the Secretary, the State, an
    intermediary, a carrier, or a contractor. ``Knows,'' which is
    referred to as knowing and knowingly in the statute, means that
    a person with respect to information has actual knowledge of
    the information, acts in deliberate ignorance of the truth or
    falsity of the information, or acts in reckless disregard of
    the truth or falsity of the information. An overpayment is
    defined as any finally determined funds that a person receives
    or retains under Medicare, Medicaid, or CHIP to which the
    person, after applicable reconciliation is not entitled. The
    reference to applicable reconciliation in this definition
    refers to reconciliations procedures that may already be in
    place for the relevant programs and payments, and is not
    intended to create any new required reconciliation procedures
    or rights to reconciliation or appeal. Overpayments would be
    required to be reported and returned within 60 days of the date
    of the overpayment determination. Overpayments returned after
    the 60 days would create an obligation as defined in section
    3729(b)(3) of title 31 of the U.S.C. If it is determined that
    the reason for the overpayment was related to fraud, repayment
    would not limit the provider or supplier's liability for
    additional administrative obligations such as interest, fines,
    specialties, or civil and criminal sanctions.
                Reason for Change
        The new requirement will encourage the timely repayment of
    overpayments.
                Effective Date
        Date of enactment.

    Sec. 1642. Expanded Application of Hardship Waivers for OIG Exclusions
            to Beneficiaries of any Federal Health Care Program

                Current Law
        Under section 1128 of the SSA, the Secretary (and, through
    delegation, OIG) has the authority to exclude individuals and
    entities from participation in federal health care programs.
    Exclusions from federal health programs are mandatory under
    certain circumstances, and permissive in others (i.e., OIG has
    discretion in whether to exclude an entity or individual). For
    purposes of section 1128, the term ``federal health care
    program'' means (1) any plan or program that provides health
    benefits, whether directly, through insurance, or otherwise,
    which is funded directly, in whole or in part, by the United
    States Government other than the health insurance program under
    chapter 89 of title 5, United States Code (governing health
    insurance for federal employees); or (2) any State health care
    program, as defined by the Social Security Act.
        Subject to exceptions, in the case of a mandatory
    exclusion, the minimum period of exclusion cannot be less than
    five years. However, under section 1128(c)(3)(B) of the Social
    Security Act, upon the request of a federal health care program
    administrator who determines that the exclusion would impose a
    hardship on individuals entitled to benefits under Medicare
    Part A or enrolled under Medicare Part B (or both), the
    Secretary may waive the exclusion under certain circumstances
    with respect to that program, in the case of an individual or
    entity that is the sole community physician or sole source of
    essential specialized services in a community.
                Proposed Law
        Under section 1128(c)(3)(B) of the SSA, the Secretary
    would, in accordance with the requirements of the section, be
    able to waive a mandatory exclusion period where a hardship is
    imposed on beneficiaries of federal health care programs, in
    addition to Medicare Part A and Part B beneficiaries.
                Reason for Change
        The new section increases the ability for the Secretary to
    use discretion to protect beneficiaries.
                Effective Date
        Date of enactment.

    Sec. 1643. Access to Certain Information on Renal Dialysis Facilities

                Current Law
        No provision.
                Proposed Law
        This provision would require End State Renal Disease
    Facilities to provide the Secretary with access to information
    relating to any ownership or compensation arrangement between
    the facility and the medical director of such facility or
    between the facility and any physician for the purposes of an
    audit or evaluation.
                Reason for Change
        The Committee has been very concerned for several years
    about the financial relationships between medical directors and
    the dialysis organizations where they serve and the extent to
    which prescribing decisions are influenced by those financial
    arrangements or are independent of dosing guidelines,
    standards, protocols, and algorithms created by dialysis
    organizations. This authority is necessary so that the OIG may
    properly investigate these issues.
                Effective date
        Date of enactment.

    Sec. 1644. Billing Agents, Clearinghouses, or Other Alternate Payees
            Required to Register Under Medicare

                Current Law
        CMS has implemented regulations requiring Medicare
    providers and suppliers to submit an application to enroll in
    the Medicare program in order to receive billing privileges.
    Providers and suppliers must resubmit and recertify the
    accuracy of their enrollment information every 5 years. The
    enrollment application requires that providers and suppliers
    include the names, addresses, and tax ID numbers for billing
    agencies on their applications.
                Proposed Law
        Beginning January 1, 2012, this provision would require
    billing agencies, clearinghouses, or other payees that submit
    claims on behalf of a health care provider to register with the
    Secretary in a form and manner as determined by the Secretary.
    A similar provision is put in place with respect to the
    Medicaid program by section 1759 of this Act.
                Reason for Change
        By requiring that payees under Medicare are enrolled in the
    program, these entities will be subject to the enhanced
    screening procedures established in this section, which will
    reduce waste, fraud, and abuse in the program.
                Effective date
        This section applies to claims submitted on or after
    January 2012.

    Sec. 1645. Conforming CMPs to False Claims Act Amendments

                Current Law
        Section 1128A(a) of the SSA authorizes the imposition of
    CMPs on any person, including an organization, agency, or other
    entity, who engages in various types of improper conduct with
    respect to federal health care programs. Under 1128A(a)(1),
    CMPs may be imposed on any person who knowingly presents or
    causes to be presented to certain government officers,
    employees, agents, or agencies certain false or fraudulent
    claims for items or services. As defined by section 1128A(i),
    an item or service is defined to include any particular item,
    device, medical supply, or service purportedly provided to a
    patient and listed in an itemized claim for payment. A claim is
    defined by this section as an application for payments for
    items and services under a federal health care program.
        Section 1128A generally provides for monetary penalties of
    up to $10,000 for each item or service claimed, and $15,000 or
    $50,000 under other circumstances, as well as additional
    assessments. Under Section 1128(a)(4), certain persons excluded
    from participating in Medicare or a State health care program
    who retain a direct or indirect ownership or control interest
    in an entity that is participating in Medicare or a State
    health care program and know or should know of the action
    constituting the basis for the exclusion, or who are an officer
    or managing such an entity, may be subject to civil penalties.
        Section 1128A(c)(1) of the SSA provides that the Secretary
    may initiate a proceeding to determine whether to impose a
    civil monetary penalty, assessment, or exclusion under the
    section only as authorized by the Attorney General pursuant to
    procedures agreed upon by them. The Secretary may not initiate
    an action with respect to any claim, request for payment, or
    other occurrence described in this section later than six years
    after the date the claim was presented, the request for payment
    was made, or the occurrence took place.
        The federal False Claims Act (FCA), codified at 31 U.S.C.
    Sec. Sec. 3729-3733, provides for judicial imposition of CMPs
    and damages for the knowing submission of false claims to the
    United States government. The recently enacted Fraud
    Enforcement and Recovery Act of 2009 (FERA), P.L. 111-21, made
    several amendments to the False Claims Act that, according to
    legislative history, were intended to clarify the meaning of
    several provisions of the FCA in light of judicial
    interpretations of the statute that were said to run contrary
    to congressional intent and limit the scope of the law. Among
    the changes made by FERA, the Act removed a requirement under
    30 U.S.C. 3729(a)(1) that provided that in order for liability
    to attach, a false claim must be presented ``to an officer or
    employee of the United States Government or a member of the
    Armed Forces of the United States.'' In addition, FERA expanded
    the definition of the term ``claim'' to include ``any request
    or demand, whether under a contract or otherwise, for money or
    property and whether or not the United States has title to the
    money or property, that . . . is made to a contractor, grantee,
    or other recipient, if the money or property is to be spent or
    used on the Government's behalf or to advance a Government
    program or interest, and if the Government provided or has
    provided any portion of the money or property requested or
    demanded . . .''.
                Proposed Law
        Similar to FERA, the bill would amend section 1128A(a)(1)
    to remove the requirement for presentment of a claim to a
    government officer, employees, agents, or agencies in order to
    be liable for CMPs. The bill would also expand the reach of
    section 1128A(a)(4), under which a person excluded from
    participating in a federal health care program (in addition to
    Medicare or a State health care program) who retains ownership
    in an entity participating in the program, or is an officer or
    managing employee of such an entity, would be subject to CMPs.
    The bill would create a new section 1128A(a)(12), which would
    impose CMPs on a person who conspires to commit a violation of
    section 1128A. Persons violating section 1128A(a)(12) would be
    subject to a $50,000 penalty for violations of the section and
    an additional assessment of no more than three times the total
    amount that would otherwise apply. In addition, a new section
    1128A(a)(13) would provide that a person who knowingly makes,
    uses, or causes to be made or used, a false record or statement
    material to an obligation to pay or transmit money or property
    to a federal health care program, or knowingly conceals or
    knowingly and improperly avoids or decreases an obligation to
    pay or transmit money or property to a federal health care
    program can be subject to CMPs. Penalties under this section
    would be $50,000 for each false record or statement,
    concealment, avoidance, or decrease. Persons would also be
    subject to an assessment of no more than three times the total
    amount of the obligation under certain circumstances.
        Under section 1128A(c)(1), the Secretary could initiate a
    proceeding to determine whether to impose a civil monetary
    penalty, assessment, or exclusion for an occurrence up to ten
    years, instead of six, after the occurrence took place.
        The bill would also amend certain definitions in section
    1128A(i). For example, under 1128(i)(2), the definition of a
    claim would be broadened to include any application, request,
    or demand, whether under contract, or otherwise, for money or
    property for items and services under a federal health care
    program, whether or not the United States or a State agency has
    title to the money or property, that is presented or caused to
    be presented to a government officer, employee, agent or
    agency. A claim under this section would also include
    applications, requests, or demands made to a contractor,
    grantee, or other recipient, if the money or property is to be
    spent or used on the federal health care program's behalf or to
    advance a federal health care program interest, and if the
    federal health care program (1) provides or has provided any
    portion of the money or property requested or demanded; or (2)
    will reimburse such contractor, grantee, or other recipient for
    any portion of the money or property which is requested or
    demanded. In addition, an ``item or service'' would include,
    without limitation, any medical, social, management,
    administrative, or other item or service used in connection
    with or directly or indirectly related to a federal health care
    program.
                Reason for Change
        The changes ensure consistency with amendments made
    recently to the False Calims Act.
                Effective date
        Date of enactment.

      Subtitle D--Access to Information Needed to Prevent Fraud and Abuse

    Sec. 1651. Access to Information Necessary to Identify Waste and Abuse

                Current Law
        Statutory offices of inspectors general (OIG) consolidate
    responsibility for audits and investigations within a federal
    agency. The Inspector General Act of 1978 and its amendments of
    1988 granted inspectors general substantial independence and
    powers to carry out their mandate to combat waste, fraud, and
    abuse. In carrying out their functions, IGs have relatively
    unlimited authority, including subpoena power, to access all
    records and information of an agency.
        Every contract with a PDP or MA-PD (Medicare Advantage
    Prescription Drug Plan) is required to provide the Secretary
    with the right to inspect and audit any books and records of
    the plan related to costs. Information obtained or disclosed
    during an audit may be used by officers, employees, and HHS
    contractors for the purposes of conducting the audit only.
                Proposed Law
        The provision would establish that the Attorney General
    have access to all Medicare and Medicaid claims and payment
    databases facilitated by the OIG and in consultation with CMS
    or the owner of any such database. Access would be required to
    be carried out for the purposes of law enforcement activity and
    in a manner consistent with any applicable disclosure, privacy,
    and security laws, including the HIPAA and Privacy Act of 1974,
    and subject to any statutory information systems security
    requirements in statute or mandated by the Secretary.
                Reason for Change
        The provision clarifies access to Medicare and Medicaid
    claims and payment database in order to facilitate
    investigations and enforcement, and reduce waste, fraud, and
    abuse.
                Effective date
        Date of enactment.

    Sec. 1652. Elimination of Duplication Between the Healthcare Integrity
            and Protection Databank and the National Practitioner Databank

                Current Law
        Medicare statute requires the Secretary to develop and
    maintain a national health care fraud and abuse data collection
    program for the reporting of adverse actions taken against
    health care providers or suppliers. The OIG issues regulations
    implementing the Health Care Integrity and Protection Data Bank
    (HIPDB). The statute requires the following types of health
    care related adverse actions be reported--civil judgments,
    federal or state criminal convictions, actions taken by federal
    or state licensing agencies, and provider exclusions from
    Medicare and Medicaid. Only final adverse actions are
    reportable to the HIPDB. Administrative fines, citations,
    corrective action plans, and other personnel actions are not
    reportable except under certain circumstances. Settlements, in
    which a finding of liability has not been established, are also
    not reportable. Both federal and state government agencies as
    well as health plans are required to report to the HIPDB.
    Health plans that fail to report are subject to a civil
    monetary penalty of $25,000. The Secretary is authorized to
    charge fees to access information in the database. However,
    fees cannot apply to requests from federal entities. HIPDB
    cannot duplicate the reporting requirements established for the
    National Practitioner Data Bank.
        Title IV of the Health Care Quality Improvement Act of
    1986, as amended, established the National Practitioner Data
    Bank (NPDB). The NPDB collects and releases data related to the
    professional competence of physicians, dentists, and certain
    healthcare practitioners. The types of information included in
    the NPDB are medical malpractice payments, certain adverse
    licensure actions, adverse clinical privileging actions,
    adverse professional society membership actions, and exclusions
    from Medicare and Medicaid. The statute defines the entities
    eligible to report and query the databank. Malpractice payers
    that fail to report are subject to a civil monetary penalty.
    Section 1921 of the Social Security Act expanded the scope of
    reporting requirements for the NPDB to encompass additional
    adverse licensure actions and actions taken by State licensing
    and certification agencies, peer review organizations, and
    private accreditation organizations. Section 1921 also required
    that actions taken against all health care practitioners be
    included in the databank. States are required to have a system
    for reporting adverse actions to the NPDB. Both databases are
    overseen by the Health Resources and Services Administration
    (HRSA) within HHS.
                Proposed Law
        Upon enactment of this Act, this provision would require
    the Secretary to establish a process to terminate the HIPDB.
    The Secretary would be required to ensure that the information
    that was formerly collected in the HIPDB is transferred to the
    NPDB. Requirements pertaining to the establishment of the
    HIPDB, such as rules for reporting information, the types of
    information that are reported, and rules for disclosure, would
    all apply to the NPDB upon termination of the HIPDB. The
    provision would eliminate the OIG's responsibility for
    reporting adverse actions to the database. After the Secretary
    certifies that the transition of information from the HIPDB to
    the NIPD is complete, any fees charged by the Secretary for
    access to the database would apply to federal agencies. The
    Department of Veterans Affairs (VA) would be exempted from
    these charges for one year. The transition would be funded from
    the fees collected to access the database and from additional
    amounts as necessary from the annual HCFAC appropriation
    available to the Secretary and the OIG. Funding would be
    available for one year after the enactment date of this
    legislation.
                Reason for Change
        The section establishes a timeline for the process already
    underway of consolidating databases. This will ensure the
    efficient use of resources and greater access to data necessary
    for preserving program integrity.
                Effective date
        Upon certification by the Secretary according to the
    provision or the first day of the second year after enactment.

    Sec. 1653. Compliance with HIPAA Privacy and Security Standards

                Current Law
        The HIPAA Privacy and Security Rules were promulgated by
    HHS pursuant to sections 262(a) and 264 of the Health Insurance
    Portability and Accountability Act of 1996 (HIPAA) to establish
    national standards for the privacy and security of protected
    health information.
        The HIPAA Privacy and Security Rules apply primarily to
    covered entities--health plans, health care clearinghouses, and
    health care providers who transmit financial and administrative
    transactions electronically. Failure to comply with these
    regulations may result in civil or criminal penalties for
    covered entities. The HITECH Act, enacted as part of the
    American Recovery and Reinvestment Act, extends civil and
    criminal liability to business associates of covered entities
    for violations that occur on or after February 17, 2010.
    Business associates are defined as persons who perform, or
    assist in the performance of a function or activity involving
    the use or disclosure of individually identifiable health
    information on behalf of a covered entity. Examples of business
    associates include persons who perform legal, actuarial,
    accounting, consulting, data aggregation, management,
    administrative, accreditation, or financial services to or for
    such covered entity where the provision of the service involves
    the disclosure of individually identifiable health information
    from such covered entity or arrangement, or from another
    business associate of such covered entity or arrangement, to
    the person.
        The HIPAA Privacy Rule governs the disclosure of protected
    health information (PHI)--that is, individually identifiable
    health information ``created or received by a [covered
    entity]'' that ``[r]elates to the . . . health or condition of
    an individual'' or to the provision of or payment for health
    care. A covered entity is permitted to use or disclose PHI
    without patient authorization for treatment, payment, or health
    care operations. For other purposes, a covered entity may only
    use or disclose PHI with patient authorization subject to
    certain exceptions. Exceptions permit the use or disclosure of
    PHI without patient authorization or prior agreement for public
    health, judicial, law enforcement, and other narrow purposes.
    The HIPAA Privacy Rule also requires covered entities and
    business associates to provide an accounting of certain
    disclosures; to make reasonable efforts to disclose only the
    minimum information necessary; to safeguard PHI from
    inappropriate use or disclosure; and to provide a notice of
    their privacy practices. Individuals also have a right to
    review and obtain copies of their PHI and to request
    corrections.
        The HIPAA Security Rule, applies only to PHI in electronic
    form (EPHI), and requires a covered entity or business
    associate to maintain administrative, technical, and physical
    safeguards to ensure the confidentiality, integrity, and
    availability of all EPHI the covered entity creates, receives,
    maintains, or transmits.
        The HITECH Act will also impose a breach notification
    requirement that is triggered when unsecured PHI or EPHI is
    compromised. This requirement is applicable to both covered
    entities and business associates and will become effective 30
    days after HHS issues final regulations implementing this
    requirement.
        The Privacy Act of 1974 generally prohibits disclosures of
    records contained in a system of records maintained by a
    federal agency without the written request or consent of the
    individual to whom the record pertains. A system of records is
    a group of records under the control of an agency from which
    information is retrieved by the name of the individual or by
    some identifier assigned to the individual, such as a Social
    Security Number. The Privacy Act contains certain statutory
    exceptions, and a list of agency systems of records, including
    the routine uses of those records, is published in the Federal
    Register.
                Proposed Law
        The provision would mandate compliance with HIPAA privacy
    and security requirements and the Privacy Act of 1974 in
    carrying out the provisions of this subtitle.
                Reason for Change
        The provision clarifies that all provisions must protect
    privacy and security as outlined in HIPAA.
                Effective date
        Date of enactment.

                          TITLE VII--MEDICAID AND CHIP

        (Not Within the Jurisdiction of the Committee on Ways and Means)

                     TITLE VIII--REVENUE-RELATED PROVISIONS

    A. DISCLOSURES TO FACILITATE IDENTIFICATION OF INDIVIDUALS LIKELY TO BE
      INELIGIBLE FOR LOW-INCOME SUBSIDIES UNDER THE MEDICARE PRESCRIPTION
      DRUG PROGRAM TO ASSIST SOCIAL SECURITY ADMINISTRATION'S OUTREACH TO
                              ELIGIBLE INDIVIDUALS

            (Sec. 1801 of the bill and Sec. 6103(0(19) of the Code)

                                  PRESENT LAW

    Outreach efforts to increase awareness of the availability of Part D
            subsidies for low-income individuals

        Under Medicare Part D (the prescription drug program),
    beneficiaries with incomes and assets below certain levels may
    be eligible for Low Income Subsidy (``LIS'') benefits. Section
    1144 of the Social Security Act requires the Commissioner of
    Social Security to conduct outreach efforts to inform potential
    LIS beneficiaries about the additional premium and cost-sharing
    subsidies. The Social Security Administration (``SSA''), from
    its own records and other non-tax records available to SSA, is
    able to determine a potential pool of LIS beneficiaries, but
    such pool includes many persons ineligible for the LIS benefits
    due to excess income or resources.
        For example, prior to the beginning of the Part D program,
    SSA identified and conducted outreach to 18.6 million
    potentially eligible individuals; of these, 6.2 million applied
    by March 2007 and 2.2 million were found to be eligible. The
    Centers for Medicare and Medicaid Services (``CMS'') believes
    that some of the remaining 12.4 million that did not apply
    could be eligible for LIS benefits. The SSA has contacted these
    individuals a number of times, but has had limited success
    identifying additional potentially eligible individuals and
    securing applications from them.

    Confidentiality of returns and return information

        Section 6103 provides that returns and return information
    are confidential and may not be disclosed by the IRS, other
    Federal employees, State employees, and certain others having
    access to such information except as provided in the Code.
    Section 6103 contains a number of exceptions to the general
    rule of nondisclosure that authorize disclosure in specifically
    identified circumstances.
        For example, the Code provides for the disclosure of
    returns and return information to the SSA for several nontax
    administration purposes. For purposes of administering the
    Social Security Act, section 6103(1)(1)(A) authorizes the
    disclosure to the SSA of returns and return information
    relating to self-employment taxes, Federal Insurance
    Contributions Act taxes, and taxes withheld at the source on
    wages.\174\ Section 6103(1)(5) provides for the disclosure to
    the SSA of certain information returns for purposes of carrying
    out an effective return processing program, the Combined Annual
    Wage Reporting Program, and for providing mortality status of
    individuals for certain epidemiological and similar
    research.\175\ In addition, the Code provides for the
    disclosure of certain return information for purposes of
    establishing the appropriate amount of any Medicare Part B
    Premium Subsidy Adjustment.\176\
    ---------------------------------------------------------------------------
        \174\Documents which may be disclosed under this provision include
    but are not limited to:
         Schedule C, Form 1040, Profit (or Loss) from Business or
    Profession
         Schedule E, Form 1040, Supplemental Income Schedule-Part
    111, Income or Loss from Partnerships
         Schedule F, Form 1040, Farm Income and Expenses
         Schedule SE, Form 1040, Computation of Social Security
    Self-Employment Tax
         Form 1065, U.S. Partnership Return of Income
         Form 941, Employer's Quarterly Federal Tax Return
         Form 942, Employer's Quarterly Tax Return for Household
    Employees or portions Schedule H, Form 1040
         Form 943, Employer's Annual Tax Return for Agricultural
    Employees
         Form W-2, Wage and Tax Statement.
        See Internal Revenue Service, Internal Revenue Manual, sec.
    11.3.29.3--Administration of the Social Security Act--Social Security
    Administration (May 27, 2005).
        \175\The information returns that may be disclosed under section
    6103(1)(5) are those filed under Part Subchapter A, Chapter 61 of the
    Code. These include, primarily, Form W-2, Form W-3, and Form 1099-R.
    See Internal Revenue Service, Internal Revenue Manual, sec.
    11.3.29.3.2--Disclosure of Information Returns to Social Security
    Administration (May 27, 2005).
        \176\Sec. 6103(1)(20).
    ---------------------------------------------------------------------------
        A December 2008 Treasury study conducted jointly with the
    SSA found that certain income information in IRS's possession,
    and, through imputation, some asset information, could be used
    to narrow the pool of potentially eligible LIS beneficiaries
    identified by the SSA, thereby allowing the SSA to better
    target its outreach efforts. Specifically, tax information
    could be used to screen out some individuals whose income or
    resources make them likely to be ineligible for LIS
    benefits.\177\
    ---------------------------------------------------------------------------
        \177\Department of the Treasury, Office of Tax Analysis, Value of
    IRS Information for Determining Eligibility for the Low Income Subsidy
    Program (LIS) of the Medicare Prescription Drug Program (Medicare Part
    D) (December 2008) at 1 and 3.
    ---------------------------------------------------------------------------

                               REASONS FOR CHANGE

        The Committee believes additional income and asset
    information will assist the SSA in narrowing the pool of
    identified individuals by excluding those persons likely to
    ineligible for LIS benefits. With a narrower pool, the SSA
    could better target its future efforts toward those individuals
    more likely to be eligible and not expend resources contacting
    persons that tax records indicate are probably ineligible for
    LIS benefits.

                            EXPLANATION OF PROVISION

        Under the provision, upon written request from the
    Commissioner of Social Security, officers and employees of the
    SSA will have access to the following information (including
    information available under sections 6103(l)(1) and (l)(5))
    with respect to any individual identified by the Commissioner
    of Social Security:
              1. return information for the applicable year from
            returns with respect to wages and payments of
            retirement income;
              2. unearned income information and income information
            of the taxpayer from partnerships, trusts, estates, and
            subchapter S corporations for the applicable year;
              3. if the individual filed an income tax return for
            the applicable year, the filing status, number of
            dependents, income from farming, and income from self
            employment on such return;
              4. if the taxpayer's return status was married filing
            separately, the social security number of the
            taxpayer's spouse;
              5. if the taxpayer filed a joint return, the social
            security number, unearned income information, and
            income information from partnerships, trusts, estates,
            and Subchapter S corporations of the taxpayer's spouse;
            and
              6. such other return information relating to the
            taxpayer (and, in the case of a joint return, the
            taxpayer's spouse) as is prescribed by the Secretary by
            regulation as might indicate that the taxpayer is
            likely to be ineligible for a low-income prescription
            drug subsidy under section 1860D-14 of the Social
            Security Act.
        For purposes of the provision, ``applicable year'' means
    the most recent taxable year for which information is available
    in the IRS's taxpayer information records. Under the provision,
    the SSA may only request tax information with respect to
    individuals the SSA has identified, through the use of all
    other reasonably available information, as likely to be
    eligible for a low-income prescription drug subsidy under
    section 1860D-14 of the Social Security Act and who have not
    applied for such subsidy. In the case of an identified
    individual whose return status was married filing separately
    and whose spouse was not identified by the SSA as likely to be
    eligible for a low-income prescription drug subsidy, the SSA
    may make a separate request for information related to such
    spouse.
        The information disclosed under the provision can only be
    used by the SSA for purposes of identifying those individuals
    likely to be ineligible for a low-income prescription drug
    subsidy for purposes of its outreach efforts under section 1144
    of the Social Security Act.

                                 EFFECTIVE DATE

        The provision is effective for disclosures made after the
    date that is 12 months after the date of enactment.

     B. COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND; FINANCING FOR TRUST
                                      FUND

    (Sec. 1802 of the bill and new Secs. 4375, 4376, 4377, and 9511 of the
                                     Code)

                                  PRESENT LAW

        No provision.

                               REASONS FOR CHANGE

        The Committee believes that comparative effectiveness
    research is a public good and that a sustained investment in
    such research is needed to improve the quality of information
    about the relative strengths and weaknesses of various health
    care items, services and systems to allow physicians and
    patients to make more informed health care decisions. To ensure
    that there are sufficient amounts of public and private funds
    dedicated to this purpose, and to insulate such funding from
    inappropriate outside influence, the Committee believes that it
    is appropriate to establish a trust fund, impose fees on health
    insurance plans and receive transfer payments from Medicare,
    and have such amounts in the fund dedicated to finance
    comparative effectiveness research.

                            EXPLANATION OF PROVISION

    In general

        The provision establishes the Health Care Comparative
    Effectiveness Research Trust Fund (``CERTF'') to carry out the
    provisions in the bill relating to comparative effectiveness
    research.
        The following amounts are appropriated to the CERTF:
    $90,000,000 for fiscal year 2010; $100,000,000 for fiscal year
    2011; and $110,000,000 for fiscal year 2012. For each fiscal
    year beginning with fiscal year 2013, the amount appropriated
    to the CERTF is (1) an amount equal to the net revenues
    received in the Treasury from the fees imposed on health
    insurance and self-insured plans under new Code sections 4375,
    4376 and 4377 for such fiscal year, and (2) amounts determined
    by the Secretary of Health and Human Services to be equivalent
    to the fair share per capita amount for the fiscal year
    multiplied by the average number of individuals entitled to
    benefits under Medicare part A, or enrolled under Medicare part
    B, for such fiscal year. The amount transferred under (2) is
    limited to $90,000,000. Net revenues means the amount, as
    estimated by the Secretary of the Treasury, equaling the excess
    of the fees received in the Treasury on account of the new fee
    on health insurance and self-insured plans under new Code
    sections 4375, 4376 and 4377, over the decrease in tax imposed
    by chapter one of the Code relating to the fees imposed by such
    sections.
        The amounts appropriated for fiscal years 2011 through
    2013, as well as the amounts transferred under (2), above, are
    to be transferred from the Federal Hospital Insurance Trust
    Fund and from the Federal Supplementary Medical Insurance Trust
    Fund, and from the Medicare Prescription Drug Account within
    such Trust Fund, in proportion to the total expenditures during
    such year that are made under Medicare for the respective trust
    fund or account.
        The fair share per capita amount is an amount computed by
    the Secretary of Health and Human Services for such fiscal year
    that will result in revenues to the CERTF of $375,000,000 for
    the fiscal year. If the Secretary is unable to compute the fair
    share per capita amount for a fiscal year, a default amount is
    used. The default amount is $2 for fiscal year 2013. For a
    subsequent year, the default amount is equal to the default
    amount for the preceding fiscal year increased by the annual
    percentage increase in the medical care component of the
    consumer price index for the 12-month period ending with April
    of the preceding fiscal year. Beginning not later than December
    31, 2011, the Secretary of Health and Human Services must
    submit to Congress an annual recommendation for a fair share
    per capita amount for purposes of funding the CERTF.
        At least the following amounts in the CERTF must be
    available to carry out the activities of the Comparative
    Effectiveness Research Commission established under the bill:
    $7,000,000 for fiscal year 2010; $9,000,000 for fiscal year
    2011; and $10,000,000 for each fiscal year beginning with 2012.

    Financing CERTF from fees on health plans

        As discussed above, the CERTF is funded in part from fees
    imposed on health plans under new Code sections 4375 through
    4377. Under the provision, a fee is imposed on each specified
    health insurance policy equal to the fair share per capita
    amount multiplied by the average number of lives covered under
    the policy. The issuer of the policy is liable for payment of
    the fee. A specified health insurance policy includes any
    accident or health insurance policy\178\ issued with respect to
    individuals residing in the United States.\179\ An arrangement
    under which fixed payments of premiums are received as
    consideration for a person's agreement to provide or arrange
    for the provision of accident or health coverage to residents
    of the United States, regardless of how such coverage is
    provided or arranged to be provided, is treated as a specified
    health insurance policy. The person agreeing to provide or
    arrange for the provision of coverage is treated as the issuer.
    ---------------------------------------------------------------------------
        \178\A specified health insurance policy does not include insurance
    if substantially all of the coverage provided under such policy
    consists of excepted benefits described in section 9832(c) of the Code.
    Examples of excepted benefits described in section 9832(c) are coverage
    for only accident, or disability insurance, or any combination thereof;
    liability insurance, including general liability insurance and
    automobile liability insurance; workers' compensation or similar
    insurance; automobile medical payment insurance; coverage for on-site
    medical clinics; limited scope dental or vision benefits; benefits for
    long term care, nursing home care, community based care, or any
    combination thereof; coverage only for a specified disease or illness;
    hospital indemnity or other fixed indemnity insurance; and Medicare
    supplemental coverage.
        \179\Under the provision, the United States includes any possession
    of the United States.
    ---------------------------------------------------------------------------
        In the case of an applicable self-insured health plan, a
    fee is imposed equal to the fair share per capita amount
    multiplied by the average number of lives covered under the
    plan. The plan sponsor is liable for payment of the fee. For
    purposes of the provision, the plan sponsor is: the employer in
    the case of a plan established or maintained by a single
    employer or the employee organization in the case of a plan
    established or maintained by an employee organization. In the
    case of (1) a plan established or maintained by two or more
    employers or jointly by one of more employers and one or more
    employee organizations, (2) a multiple employer welfare
    arrangement, or (3) a voluntary employees' beneficiary
    association described in Code section 501(c)(9), the plan
    sponsor is the association, committee, joint board of trustees,
    or other similar group of representatives of the parties who
    establish or maintain the plan. In the case of a rural electric
    cooperative or a rural telephone cooperative, the plan sponsor
    is the cooperative or association.
        Under the provision, an applicable self-insured health plan
    is any plan providing accident or health coverage if any
    portion of such coverage is provided other than through an
    insurance policy if such plan is established or maintained (1)
    by one or more employers for the benefit of their employees or
    former employees, (2) by one or more employee organizations for
    the benefit of their members or former members, (3) jointly by
    one or more employers and one or more employee organizations
    for the benefit of employees or former employees, (4) by a
    voluntary employees' beneficiary association described in
    section 501(c)(9) of the Code, (5) by any organization
    described in section 501(c)(6) of the Code, or (6) in the case
    of a plan not previously described, by a multiple employer
    welfare arrangement (as defined in section 3(40) of the
    Employee Retirement Income Security Act of 1974 (``ERISA'')), a
    rural electric cooperative (as defined in section 3(40) of
    ERISA), or a rural telephone cooperative association (as
    defined in section 3(40)(B)(v) of ERISA).
        Governmental entities are not exempt from the fees imposed
    under the provision except in the case of certain exempt
    governmental programs. Exempt governmental programs include
    Medicare, Medicaid, SCHIP, and any program established by
    Federal law for providing medical care (other than through
    insurance policies) to members of the Armed Forces, veterans,
    or members of Indian tribes.
        No amount collected from the fee on health insurance and
    self insurance plans is covered over to any possession of the
    United States. For purposes of the procedure and administration
    rules under the Code, the fee imposed under the provision is
    treated as a tax.

                                 EFFECTIVE DATE

        The fee on health insurance and self-insured plans is
    effective with respect to policies and plans for portions of
    policy or plan years beginning on or after October 1, 2012.

                       TITLE IX--MISCELLANEOUS PROVISIONS

    Sec. 1901. Repeal of the Trigger Provision

                Current Law
        The Hospital Insurance (HI) and Supplementary Medical
    Insurance (SMI) trust funds are overseen by a board of trustees
    which reports annually to Congress. The Medicare Prescription
    Drug, Improvement, and Modernization Act of 2003 (P.L. 108-173,
    MMA), Subtitle A of title VIII requires the trustees' report to
    include an expanded analysis of Medicare expenditures and
    revenues. Specifically, a determination must be made as to
    whether or not general revenue financing will exceed 45% of
    total Medicare outlays within the next seven years. General
    revenue financing is defined as total Medicare outlays minus
    dedicated financing sources (i.e., HI payroll taxes; income
    from taxation of Social Security benefits; state transfers for
    prescription drug benefits; premiums paid under Parts A, B, and
    D; and any gifts received by the trust funds). MMA requires
    that if an excess general revenue funding determination is made
    for two successive years, the President must submit a
    legislative proposal to respond to the warning. The Congress is
    required to consider the proposals on an expedited basis.
    However, passage of legislation within a specific time frame is
    not required. On January 6, 2009, the House approved a rules
    package (H.Res. 5) that nullifies the trigger provision in the
    House for the 111th Congress.
                Proposed Law
        The trigger provision would be repealed.
                Reason for Change
        The 45 percent threshold is an artificial and misleading
    measure of Medicare's fiscal health. Its continuation builds a
    case for unnecessary and radical changes to the Medicare
    program and makes it more difficult to address any future
    funding shortfalls.
                Effective date
        Date of enactment.

    Sec. 1902. Repeal of the Comparative Cost Adjustment (CCA) Program

                Current Law
        The Medicare Prescription Drug, Improvement, and
    Modernization Act of 2003 (P.L. 108-173, MMA) requires the
    Secretary to establish a program for the application of
    comparative cost adjustment (CCA) in CCA areas beginning in
    2010. The six-year program will begin January 1, 2010, and end
    December 31, 2015. The program is designed to test direct
    competition among local MA plans, as well as competition
    between local MA plans and fee-for-service Medicare. This
    program will occur only in a limited number of statutorily
    qualifying areas in the country.
        The benchmark for MA local plans in a CCA area will be
    calculated using a formula that weights (1) the projected FFS
    spending in an area (with certain adjustments for demographics
    and health status) and (2) a weighted average of plan bids.
        For Medicare beneficiaries in traditional Medicare, Part B
    premiums in CCA areas will be adjusted either up or down,
    depending on whether the FFS amount is more or less than the
    CCA area benchmark. If the FFS amount is greater than the
    benchmark, beneficiaries in traditional Medicare FFS will pay a
    higher Part B premium than other FFS beneficiaries in non-CCA
    areas. If the FFS amount is less than the benchmark, the Part B
    premium for FFS beneficiaries will be reduced by 75% of the
    difference. These increases and decreases are subject to a 5%
    limit; that is, adjustments to Part B premiums in CCA areas
    cannot exceed 5% of the national part B premium. Beneficiaries
    in traditional Medicare FFS with incomes below 150% of poverty,
    who qualify for low-income subsidies under the Medicare
    prescription drug program, will not have their Part B premium
    increased.
                Proposed Law
        The provision would repeal the comparative cost adjustment
    program.
                Reason for Change
        The CCA is an ideological attempt to fundamentally change
    Medicare from an entitlement to benefits to a defined
    contribution program. This concept was rejected by the
    Bipartisan Commission on the Future of Medicare in 1999.
                Effective date
        Date of enactment.

    Sec. 1903. Extension of Gainsharing Demonstration

                Current Law
        Section 5007 of the Deficit Reduction Act of 2005 (P.L.109-
    171; DRA) authorizes a gainsharing demonstration to evaluate
    arrangements between hospitals and physicians designed to
    improve the quality and the efficiency of care provided to
    beneficiaries. In the absence of this DRA authority,
    gainsharing arrangements are restricted by the Civil Monetary
    Penalty law. CMS is operating two projects, each consisting of
    one hospital in New York and West Virginia. Although authorized
    to begin on January 1, 2007, the project began on October 1,
    2008 and will end as mandated on December 31, 2009. The
    Secretary was required to submit a report on quality
    improvement and achieved savings as a result of the
    demonstration no later than December 1, 2009. The final report
    on these issues was due on May 1, 2010. The project was
    appropriated $6 million in FY2006 to be available for
    expenditure through FY2010.
                Proposed Law
        The authority to conduct the gainsharing demonstration
    would be extended until September 30, 2011. The due date of the
    quality improvement and achieved savings report would be
    extended from December 1, 2009, to March 31, 2011. The final
    report would be due March 31, 2013, instead of May 1, 2010. An
    additional $1.6 million would be appropriated in FY2010. All
    appropriations would be available for expenditure through
    FY201.
                Reason for change
        A key issue with many hospital-focused pay-for-performance
    initiatives is that physicians--crucial to generating changes
    in hospital care--often do not participate in the financial
    rewards of a hospital's quality improvement efforts. The
    hospitals can increase quality improvement with close
    collaboration of physicians by reducing adverse events and
    reducing length of stay. The gainsharing demonstration project
    authorized in the DRA was delayed in its start by 21 months.
    This provision allows for completion of the project so Congress
    can have a full evaluation report on the arrangements between
    hospitals and physicians in the context of quality improvement
    and cost-control.

    Sec. 1904. Grants to States for Quality Home Visitation Programs for
            Families with Young Children and Families Expecting Children

                                HOME VISITATION

                Current Law
        Title IV-B of the Social Security Act authorizes formula
    grants to states, territories and tribes for the provision of a
    range of child and family services. Those services are
    generally intended to improve children's safety, ensure them a
    permanent home, and, overall, support the well-being of
    children and their families. Subpart 1 authorizes the Stephanie
    Tubbs Jones Child Welfare Services program. Subpart 2
    authorizes the Promoting Safe and Stable Families program. Both
    programs are administered at the federal level by the
    Administration for Children and Families (ACF), within the U.S.
    Department of Health and Human Services (HHS). To receive funds
    under these programs states are required to submit state plans
    and to meet multiple requirements related to how the funds are
    used, including provision of certain protections for children
    in foster care (Subpart 1); expenditures of ``significant''
    portions of funds for each of four broad categories of services
    to children and families: family support, family preservation,
    time-limited reunification, and adoption promotion and support
    (Subpart 2), and limits on spending for administrative purposes
    (both subparts). States must provide no less than 25% of the
    total program funding for child and family services under both
    of these programs.
        Title IV-B of the Social Security Act also authorizes funds
    for competitive grants to eligible entities to support child
    welfare related research and demonstration activities and
    Family Connections grants (Subpart 1) as well as Mentoring
    Children of Prisoners grants (Subpart 2). Funds appropriated
    for these purposes are also administered by HHS/ACF.
                Proposed Law
        Would create a new Subpart 3 of Title IV-B of the Social
    Security Act to provide funds to states, territories and tribes
    for the establishment and expansion of voluntary home
    visitation programs for families with young children (under
    school age) and families expecting children. The purpose of
    this support would be to improve the well-being, health, and
    development of children. The bill would appropriate a total of
    $750 million for this purpose over five years, as follows: $50
    million for FY2010; $100 million for FY2011; $150 million for
    FY2012; $200 million for FY2013; and $250 million for FY2014.
        State Application and Reporting Requirements: To receive a
    grant, states, territories, and tribes would be required to
    submit an application containing:
               A description of the programs to be
            supported, outcomes intended to be achieved and
            evidence to support effectiveness of the programs;
               Results of a statewide needs assessment
            detailing current- services, sources and amount of
            funding provided to these programs, capacity of home
            visitation programs, gaps in services, and training and
            technical assistance offered to support goals of
            current program;
               An assurance that the state will identify
            and give priority to funding home visitation programs
            serving high-need communities;
               An assurance that the state will reserve 5%
            of funding for training and technical assistance;
               An assurance that the state will promote
            coordination and collaboration with other home
            visitation programs, child and family services, health
            services, and income supports, and other related
            assistance; and will support programs that provide
            referrals to other programs serving children and
            families, as appropriate;
               An assurance that the state will submit an
            annual report to HHS describing services delivered by
            programs funded under this grant; and
               An assurance that the state will cooperate
            with a national independent evaluation of the home
            visitation program conducted by HHS (or by another
            entity under contract with or via a grant from HHS).
        Maintenance of Effort: Beginning with FY2011, a state would
    not be eligible for these funds unless HHS determines that the
    state's spending (i.e., aggregate expenditures from state and
    local sources) for home visitation programs serving families
    with young children or those expecting children was no less in
    the immediately preceding fiscal year than in the second
    preceding fiscal year. (For example, for a state to receive
    FY2011 funding, HHS would need to find that the state's
    spending for home visitation in FY2010 was no less than it had
    been in FY2009; for a state to receive this home visitation
    funding in FY2012 funding, HHS must find that the state's home
    visitation spending in FY2011 was no less than it had been in
    FY2010, etc.)
        Payments to States and Territories and State Match: HHS
    must make a grant to each state, territory, or tribe that
    submits an application meeting the specified requirements,
    provided that the state also meets the applicable maintenance
    of effort requirement. A state is entitled to an annual
    allotment of funds under this program that is equal to the
    amount appropriated for the home visitation program in a given
    year (minus funds reserved for training and technical
    assistance and for tribal home visitation programs) multiplied
    by the state's relative share of all children in the nation who
    are living in families with income at or below 200% of the
    federal poverty line. From the available allotments for a given
    year, the Secretary would award grants in an amount equal to
    the reimbursable percentage of the eligible expenditures for
    the state in a given year. The reimbursable percentage would be
    equal to 85% for FY2010; 80% for FY2011, 75% for FY2010 and any
    succeeding fiscal year.
        States may not use any federal funds to meet the state
    share of total spending. Any federal funds that a state
    certifies to HHS that it will not use may be re-allotted to
    other states.
        Eligible Expenditures: To be eligible for federal
    reimbursement, a state's home visitation expenditures would
    need to be used only in support of voluntary home visitation
    programs for families with children under the age of entry to
    school or for families expecting children--provided those
    programs met certain criteria--and for training, technical
    assistance, and evaluations related to those programs. Also if
    a state had claimed reimbursement for a home visitation
    expenditure under another provision of federal law it could not
    also claim that expenditure for reimbursement under the home
    visitation program.
        Finally the bill provides that a declining share of
    expenditures for home visitation programs that do not meet the
    ``strongest evidence of effectiveness'' may be claimed as
    eligible expenditures. Specifically no more than 60% of a
    state's total eligible home visitation expenditures in FY2010
    may be for programs that do not meet the strongest level of
    evidence and this share declines by 5 percentage points each
    year until it reaches 40% in FY2014.
        Evaluation, Training and Technical Assistance: Five percent
    of federal funding for the program ($2.5 million, FY2010; $5.0
    million, FY2011; $7.5 million, FY2012; $10.0 million, FY2013;
    and $12.5 million, FY2014) must be reserved by HHS for--
               training and technical assistance to states,
            including dissemination of best practices in early
            childhood home visitation; and
               an independent evaluation (conducted by HHS,
            or by another entity under grant or contract with HHS)
            of the effectiveness of home visitation programs funded
            under this program.
        Tribal home visitation programs: After making reservation
    for evaluation, training and technical assistance, 3% of
    remaining funds are to be reserved for tribal home visitation
    programs ($1.425 million, FY2010; $2.850 million, FY2011;
    $4.275 million, FY2012; $5.700 million, FY2013; $7.125 million,
    FY2014). The amount appropriated for tribal home visitation
    programs in a given year would be distributed based on a
    formula that takes into account the tribe's relative share of
    all children in all Indian tribes who are living in families
    with income at or below 200% of the federal poverty line.
    Tribes must meet all of the grant application requirements and
    eligible expenditure rules made of states. However, HHS,
    generally, may waive or modify any other requirement for
    receipt of these home visitation funds, including the
    maintenance of effort requirement. For purposes of this program
    Indian tribes are defined to include any tribe, band, nation,
    or organized group or community of Indians that is federally
    recognized and for which there is a reservation (including
    Indian reservations, former Indian reservations in Oklahoma,
    and public domain Indian allotments), or any Alaska Native
    organization that is eligible to operate a federal program
    under the Indian Self-Determination and Education Assistance
    Act.
        State Reports and Reports to Congress: State's receiving
    grants for nurse home visitation programs under this provision
    would be required to submit an annual report to the Secretary
    of HHS on the progress made by State in improving the well-
    being, health, and development of children through nurse home
    visitation programs. HHS would be required to provide an
    interim report on the independent evaluation of the home
    visitation program within three years of enactment of the home
    visitation program and a final report on the evaluation within
    five years. Further, HHS would be required to submit a report
    to Congress, annually, on activities carried out with funds
    provided under the home visitation program.

    Sec. 1905. Improved Coordination and Protection for Dual Eligibles

                Current Law
        There are no specific provisions in current law for
    coordination and protection of dual eligibles.
                Proposed Law
        The Secretary would be required to create an identifiable
    office or program within the Centers for Medicare and Medicaid
    Services (CMS) to improve coordination between Medicare and
    Medicaid and to improve protections for dual eligibles. Dual
    eligibles would be defined as individuals eligible for both
    Medicare and Medicaid and would include those individuals who
    are eligible for benefits under the Medicare Savings Program
    (MSP). The CMS office or program would: (1) review Medicare
    (Parts A, B, and C) and Medicaid policies on enrollment,
    benefits, service delivery, payment, and grievance and appeals
    processes; (2) identify areas of Medicare and Medicaid policies
    where better coordination or protection could improve care and
    reduce costs for duals; (3) issue guidance to states on how to
    improve coordination and protection for dual eligibles.
        The elements of improved coordination and protection would
    include efforts (1) to simplify dual eligibles' access to
    benefits and services under Medicare and Medicaid, (2) to
    improve care continuity for dual eligibles and ensure safe and
    effective care transitions, (3) to harmonize regulatory
    conflicts between Medicare and Medicaid rules affecting dual
    eligibles, and (4) to improve Medicare and Medicaid's combined
    total cost and quality performance for dual eligibles.
        The Secretary's responsibilities for implementing the CMS
    office or program for coordination and protection for dual
    eligibles would include: (1) examination of Medicare and
    Medicaid payment systems to develop strategies to foster more
    integrated and higher quality care; (2) development of methods
    to facilitate dual eligibles' access to post-acute and
    community-based services and to identify actions to improve
    coordination of community-based care; (3) a study of enrollment
    in MSP (for both Medicare and Medicaid) to identify methods to
    more efficiently and effectively reach and enroll dual
    eligibles; (4) an assessment of communication strategies aimed
    at dual eligibles, including the Medicare website, 1-800-
    MEDICARE, and the Medicare handbook; (5) research and
    evaluation of areas where service utilization, quality, and
    access to cost sharing protection could be improved and an
    assessment of factors relating to enrollee satisfaction with
    services and delivery; (6) collection and dissemination to the
    public of data and a database that describes eligibility,
    benefits, and cost-sharing assistance available to dual
    eligibles by state; (7) monitoring total combined Medicare and
    Medicaid program expenditures in serving dual eligibles and
    making recommendations to optimize total quality and cost
    performance across both programs; and (8) coordination of
    Medicare Advantage plan activities under Medicare and Medicaid.
        Within one year after enactment of this provision and then
    every three years thereafter, the Secretary would be required
    to submit a report to Congress on the progress in improving
    coordination and protection for dual eligibles as described in
    this provision.
                Reason for Change
        Individuals who become dually eligible for Medicare and
    Medicaid--through age, disability or low income--are among the
    frailest and sickest beneficiaries. These nearly 9 million
    individuals are more likely than other Medicare beneficiaries
    to have low incomes, be disabled or in poor health, lack a high
    school diploma and live in an institution. Dual eligibles are
    more likely than non-dually eligible Medicare beneficiaries to
    have a mental illness--33% of duals compared with 15% of non-
    duals are living with a mental illness--and have higher rates
    of diabetes, pulmonary disease, stroke and Alzheimer's disease.
    These characteristics lead to high utilization and spending; in
    a year, 26% of dual eligibles had an inpatient hospital visit,
    compared with 16% of non-duals, and per capita spending on dual
    eligibles' medical care is nearly five times higher than
    spending on non-dual eligibles.
        Medicare is the primary payer for dual eligibles' health
    care and Medicaid fills in the gaps, including paying for
    Medicare premiums and cost sharing, and covering certain
    services not included in the Medicare benefit (e.g., long-term
    care). Though dual eligibles are served by both programs, there
    is very little coordination between Medicare and the 50 state
    Medicaid programs to ensure that individuals' health needs are
    covered and services are coordinated. Furthermore, policy
    discussions around Medicare and Medicaid often occur in
    isolation, with little regard for coordinating the two
    programs. The Committee is concerned about this lack of
    coordination because of the serious implications it can have
    both for dual eligibles' access to quality health care, and on
    spending in both programs. MedPAC has found that the current
    arrangement creates incentives for cost shifting between the
    programs and may be detrimental to quality care and access.
        The Committee believes that a dedicated office or program
    within CMS will allow for true program coordination between
    policymakers. The act specifies many areas which the Committee
    expects that coordination between programs would improve dual
    eligibles' quality of care and may decrease costs to both
    programs, including outreach and communication policies, access
    to post-acute and community-based care and increased data
    collection and dissemination. Regular reports to the Congress
    will ensure that the Congress is informed as to the progress
    made under this section and can take appropriate legislative
    actions.
                Effective Date
        Date of enactment.

    Sec. 1906. Assessment of Medicare Cost-Intensive Diseases and
            Conditions

                Current Law
        No provision.
                Proposed Law
        The CMS Administrator would conduct an assessment of the
    diseases and conditions that are the most cost-intensive for
    the Medicare program. The assessment would inform research
    priorities within HHS in order to improve the prevention, or
    treatment or cure, of such diseases and conditions. Not later
    than January 1, 2011, the Administrator would submit the report
    to the Secretary of Health and Human Services and the Secretary
    would transmit the report to the Congress.
        Not later than January 1, 2013, and biennially thereafter,
    the CMS Administrator would review and update the assessment
    described above and make such recommendations to the Secretary
    on changes in research priorities as appropriate. The Secretary
    would submit a report on such recommendations to the Congress.
        A new fund would be established in the Treasury of the
    United States, to be known as the Medicare Cost-Intensive
    Research Fund. The Fund would consist of such amounts as may be
    appropriated or credited to the Fund for research priorities
    identified as a result of the assessments conducted under this
    section.
                Reason for Change
        This provision will help to identify the most cost-
    intensive diseases and conditions in the Medicare program with
    the goal of informing research priorities throughout the
    Department of Health and Human Services to improve the quality
    of care the Medicare beneficiaries receive and enhance the
    prevention, or treatment or cure of such diseases and
    conditions.

              DIVISION C--PUBLIC HEALTH AND WORKFORCE DEVELOPMENT

        (Not Within the Jurisdiction of the Committee on Ways and Means)

                          III. VOTES OF THE COMMITTEE

        In compliance with clause 3(b) of rule XIII of the Rules of
    the House of Representatives, the following statements are made
    concerning the votes of the Committee on Ways and Means in its
    consideration of H.R. 3200, ``America's Affordable Health
    Choices Act.''

                        MOTION TO REPORT RECOMMENDATIONS

        The Chairman's Amendment in the Nature of a Substitute, as
    amended, was ordered favorably reported by a rollcall vote of
    23 yeas to 18 nays (with a quorum being present). The vote was
    as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................        X   ........  .........  Mr. Camp.........  ........        X   .........
    Mr. Stark......................        X   ........  .........  Mr. Herger.......  ........        X   .........
    Mr. Levin......................        X   ........  .........  Mr. Johnson......  ........        X   .........
    Mr. McDermott..................        X   ........  .........  Mr. Brady........  ........        X   .........
    Mr. Lewis (GA).................        X   ........  .........  Mr. Ryan.........  ........        X   .........
    Mr. Neal.......................        X   ........  .........  Mr. Cantor.......  ........        X   .........
    Mr. Tanner.....................  ........        X   .........  Mr. Linder.......  ........        X   .........
    Mr. Becerra....................        X   ........  .........  Mr. Nunes........  ........        X   .........
    Mr. Doggett....................        X   ........  .........  Mr. Tiberi.......  ........        X   .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..  ........        X   .........
    Mr. Thompson...................        X   ........  .........  Mr. Davis (KY)...  ........        X   .........
    Mr. Larson.....................        X   ........  .........  Mr. Reichert.....  ........        X   .........
    Mr. Blumenauer.................        X   ........  .........  Mr. Boustany.....  ........        X   .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......  ........        X   .........
    Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......  ........        X   .........
    Ms. Berkley....................        X   ........  .........
    Mr. Van Hollen.................        X   ........  .........
    Mr. Meek.......................        X   ........  .........
    Ms. Schwartz...................        X   ........  .........
    Mr. Davis (AL).................        X   ........  .........
    Mr. Etheridge..................        X   ........  .........
    Ms. Sanchez....................        X   ........  .........
    Mr. Higgins....................        X   ........  .........
    Mr. Yarmuth....................        X   ........  .........
    ----------------------------------------------------------------------------------------------------------------

                              VOTES ON AMENDMENTS

        A rollcall vote was conducted on the following amendments
    to the Chairman's Amendment in the Nature of a Substitute.
        A motion offered by Mr. Stark to table the motion offered
    by Mr. Camp to postpone proceedings was agreed to by a rollcall
    vote of 24 yeas to 14 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................        X   ........  .........  Mr. Camp.........  ........        X   .........
    Mr. Stark......................        X   ........  .........  Mr. Herger.......  ........        X   .........
    Mr. Levin......................        X   ........  .........  Mr. Johnson......  ........        X   .........
    Mr. McDermott..................        X   ........  .........  Mr. Brady........  ........        X   .........
    Mr. Lewis (GA).................        X   ........  .........  Mr. Ryan.........  ........        X   .........
    Mr. Neal.......................        X   ........  .........  Mr. Cantor.......  ........        X   .........
    Mr. Tanner.....................        X   ........  .........  Mr. Linder.......  ........        X   .........
    Mr. Becerra....................        X   ........  .........  Mr. Nunes........  ........        X   .........
    Mr. Doggett....................        X   ........  .........  Mr. Tiberi.......  ........        X   .........
    Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..  ........        X   .........
    Mr. Thompson...................        X   ........  .........  Mr. Davis (KY)...  ........        X   .........
    Mr. Larson.....................        X   ........  .........  Mr. Reichert.....  ........        X   .........
    Mr. Blumenauer.................        X   ........  .........  Mr. Boustany.....  ........        X   .........
    Mr. Kind.......................        X   ........  .........  Mr. Heller.......  ........        X   .........
    Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......  ........        X   .........
    Ms. Berkley....................        X   ........  .........
    Mr. Crowley....................        X   ........  .........
    Mr. Van Hollen.................        X   ........  .........
    Mr. Meek.......................        X   ........  .........
    Ms. Schwartz...................        X   ........  .........
    Mr. Davis (AL).................        X   ........  .........
    Mr. Davis (IL).................        X   ........  .........
    Mr. Etheridge..................        X   ........  .........
    Ms. Sanchez....................        X   ........  .........
    Mr. Higgins....................        X   ........  .........
    Mr. Yarmuth....................        X   ........  .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Ryan which would eliminate
    the public health insurance option which was defeated by a
    rollcall vote of 15 yeas to 25 nays. the vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........  ........  .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Heller which would require
    Members of Congress and their dependents who are exchange-
    eligible and who enroll in health coverage to enroll in the
    public health insurance option which was defeated by a rollcall
    vote of 18 yeas to 21 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................        X   ........  .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................        X   ........  .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................        X   ........  .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Herger and Mr. Boustany
    which would prohibit CMS from making coverage determinations
    using comparative effectiveness research on the basis of cost
    was defeated by a rollcall vote of 15 yeas to 26 nays. The vote
    was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Brady which would eliminate
    the public health insurance option if the Secretary of Health
    and Human Services determines that the public plan option's
    average wait time for obtaining appointments with physicians
    exceeds the average private insurance plan wait time was
    defeated by a rollcall vote of 15 yeas to 26 nays. The vote was
    as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Brady and Mr. Johnson which
    would strike the employer responsibility requirement was
    defeated by a rollcall vote of 15 yeas to 25 nays. The vote was
    as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................  ........  ........  .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Linder, Mr. Brady, and Mr.
    Heller which would prohibit the Health Insurance Exchange from
    operating in states that do not have malpractice rules similar
    to malpractice rules in the State of California was defeated by
    a rollcall vote of 15 yeas and 26 nays. The vote was as
    follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Heller which would require
    that an individual's eligibility for the affordability credit
    requires the individual's approval under the Income and
    Eligibility Verification System and the Systematic Alien
    Verification for Entitlements programs under Section 1137 of
    the Social Security Act was defeated by a rollcall vote of 15
    yeas to 26 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Mr. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Mr. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Johnson and Mr. Ryan which
    would prohibit abortions from being a mandated benefit in the
    essential benefit standard, except in the cases of rape, incest
    or to save the life of the mother was defeated by a rollcall
    vote of 18 yeas to 23 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......        X   ........  .........
    Mr. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Mr. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Boustany which would
    prohibit the Secretary from requiring that health care
    providers participate in the public health insurance option was
    defeated by a rollcall vote of 19 yeas to 22 nays. The vote was
    as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................        X   ........  .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Mr. Berkley....................        X   ........  .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Mr. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Boustany which would
    prohibit the use of Federal funds in maintaining reserves for
    the public health insurance option and require that the public
    health insurance option maintain reserves consistent with the
    National Association of Insurance Commissioners standards was
    defeated by a rollcall vote of 16 yeas to 25 nays. The vote was
    as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Mr. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Mr. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........  ........  .........
    Mr. Davis (IL).................  ........  ........  .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Reichert which would allow
    the sale of individual insurance policies without the
    protections afforded by the bill which was defeated by a
    rollcall vote of 15 yeas to 26 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Camp which would delay the
    effective date of additional revenue offsets until the GAO
    certifies that the Medicare fraud rate has been reduced to
    below 1% of total claims and which was defeated by a rollcall
    vote of 15 yeas to 25 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........  ........  .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Herger which would strike
    section 1121 of the bill (relating to Medicare physicians
    payment reform) and substitutes an identical provision and
    provides student loan forgiveness for certain primary care
    physicians and which was defeated by a rollcall vote of 18 yeas
    to 22 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................        X   ........  .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................        X   ........  .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................        X   ........  .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........  ........  .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Brady which would eliminate
    the following provisions in the subtitle containing the non-
    health related revenue offsets: the healthcare surcharge, delay
    of the implementation of the worldwide interest allocation
    rules, limitation on treaty benefits for certain deductible
    payments, codification of economic substance doctrine, and
    penalties for underpayments was defeated by a rollcall vote of
    15 yeas to 26 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Ryan which would eliminate
    the Medicare solvency trigger, require the GAO to report an
    assessment of the impact of the Act on the Federal government's
    financial position, and require CBO to issue an annual report
    with a 75 year cost estimate on the act and which was defeated
    by a rollcall vote of 14 yeas to 26 nays. The vote was as
    follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Cantor which would prohibit
    funds from this bill to be used to pay for abortion or plans
    that cover abortion, except in the case of rape, incest, or if
    there exists a danger to the life of the mother was defeated by
    a rollcall vote of 19 yeas to 22 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................        X   ........  .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Ms. Brown-Waite which would
    prohibit the Health Choices Commissioner or any other
    government employee from automatically enrolling any individual
    or family in the public health insurance option was defeated by
    a rollcall vote of 16 yeas to 25 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Davis of Kentucky which
    would eliminate the provision that requires an employer to pay
    a penalty if that employer offers creditable health insurance
    and the employee declines that insurance and obtains coverage
    from the Health Insurance Exchange was defeated by a rollcall
    vote of 17 yeas to 24 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................        X   ........  .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Boustany which would
    require CMS to seek a recommendation of the Medicare Coverage
    Advisory Committee with respect to certain Medicare national
    coverage decisions was defeated by a rollcall vote of 15 yeas
    to 26 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
             Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
    Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
    Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
    Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
    Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
    Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
    Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
    Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
    Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
    Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
    Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
    Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
    Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
    Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
    Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
    Ms. Berkley....................  ........        X   .........
    Mr. Crowley....................  ........        X   .........
    Mr. Van Hollen.................  ........        X   .........
    Mr. Meek.......................  ........        X   .........
    Ms. Schwartz...................  ........        X   .........
    Mr. Davis (AL).................  ........        X   .........
    Mr. Davis (IL).................  ........        X   .........
    Mr. Etheridge..................  ........        X   .........
    Ms. Sanchez....................  ........        X   .........
    Mr. Higgins....................  ........        X   .........
    Mr. Yarmuth....................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Roskam which would require
    the public health insurance option to base payment rates on
    fair-market rates was defeated by a rollcall vote of 19 yeas to
    21 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................        X   ........  .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................        X   ........  .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................        X   ........  .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................        X   ........  .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Brady which would repeal
    the public health insurance option if enrollees in the option
    have poorer 5-year cancer survival rates than those enrolled in
    private health insurance offered through the Health Insurance
    Exchange was defeated by a rollcall vote of 15 yeas to 25 nays.
    The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................  ........  ........  .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Ryan which would exempt the
    first $200,000 ($250,000 for joint filers) in adjusted gross
    income from the individual responsibility payment that applies
    to uninsured individuals and exempt the first $250,000 of each
    employee's wages from the employer responsibility payment that
    applies to employers that do not provide health coverage was
    defeated by a rollcall vote of 15 yeas to 26 nays. The vote was
    as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................  ........        X   .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

        An amendment was offered by Mr. Cantor which would prohibit
    the Secretary of Health and Human Services from implementing
    rules or regulations that would restrict individuals from
    enrolling or purchasing a high deductible health plan that
    includes a health savings account, and eliminate the provision
    that would limit excludable reimbursements from a health
    savings account or an Archer Medical savings account, or under
    a health reimbursement or flexible spending arrangement, to
    prescribed drugs or insulin was defeated by a rollcall vote of
    16 yeas to 25 nays. The vote was as follows:

    ----------------------------------------------------------------------------------------------------------------
            Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
    ----------------------------------------------------------------------------------------------------------------
    Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
    Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
    Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
    Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
    Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
    Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
    Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
    Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
    Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
    Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
    Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
    Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
    Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
    Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
    Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
    Ms. Berkley...................        X   ........  .........
    Mr. Crowley...................  ........        X   .........
    Mr. Van Hollen................  ........        X   .........
    Mr. Meek......................  ........        X   .........
    Ms. Schwartz..................  ........        X   .........
    Mr. Davis (AL)................  ........        X   .........
    Mr. Davis (IL)................  ........        X   .........
    Mr. Etheridge.................  ........        X   .........
    Ms. Sanchez...................  ........        X   .........
    Mr. Higgins...................  ........        X   .........
    Mr. Yarmuth...................  ........        X   .........
    ----------------------------------------------------------------------------------------------------------------

                         IV. BUDGET EFECTS OF THE BILL

                   A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

        In compliance with clause 3(d)(2) of rule XIII of the Rules
    of the House of Representatives, the following statement is
    made concerning the effects on the budget of the revenue
    provisions of the bill, H.R. 3200 as reported. The Committee
    anticipates that a CBO cost estimate letter will address these
    issues when the bill proceeds to consideration on the House
    floor.

    B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES BUDGET
                                   AUTHORITY

        With respect to the requirements of clause 3(c)(2) of House
    rule XIII and section 308(a) of the Congressional Budget Act of
    1974, the Committee anticipates that a CBO cost estimate letter
    on H.R. 3200 will address these issues when the bill proceeds
    to consideration on the House floor. CBO is unable to provide a
    cost estimate prior to the reconciliation of the versions of
    the bill as amended and reported by the three committees of
    jurisdiction.

          C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

        With respect to the requirements of 3(c)(3) of rule XIII of
    the House of Representatives and section 402 of the
    Congressional Budget Act of 1974, the Committee anticipates
    that a CBO cost estimate will address these issues when the
    bill proceeds to consideration on the House floor.

                        D. MACROECONOMIC IMPACT ANALYSIS

        In compliance with clause 3(h)(2) of rule XIII of the Rules
    of the House of Representatives, the staff of the Joint
    Committee on Taxation provides the following macroeconomic
    analysis of H.R. 3200, ``America's Affordable Choices Act of
    2009,'' as reported by the Ways and Means Committee.

    Summary

        The analysis examines the effects of the different parts of
    the bill on incentives that could affect either long-run growth
    or short-term fluctuations in economic activity, progressively
    incorporating three aspects of the bill in the analysis. All of
    the analysis is of expected effects within the standard Federal
    ten-year budget period. The first section looks at changes to
    the Internal Revenue Code in Title IV of the bill. Next, the
    effects of low income subsidies for the purchase of health
    insurance are added to the analysis. Finally, net changes in
    spending on Medicare and Medicaid are incorporated to provide a
    picture of the fiscal impacts of the bill as a whole. This
    analysis uses the Joint Committee staff's Macroeconomic
    Equilibrium Growth (``MEG'') model to evaluate these
    effects.\180\ The Joint Committee staff does not have a model
    designed to analyze possible efficiency, productivity, or labor
    market impacts of changes in the health sector of the economy,
    and thus this analysis will not include consideration of such
    impacts.\181\
    ---------------------------------------------------------------------------
        \180\Descriptions of the macroeconomic equilibrium growth model and
    other models used by the Joint Committee staff may be found in Joint
    Committee on Taxation, Overview of the Work of the Staff of the Joint
    Committee on Taxation to Model the Macroeconomic Effects of Proposed
    Tax Legislation to Comply with House Rule XIII.3(h)(2), JCX-105-03,
    December 22, 2003, and Background Information about the Dynamic
    Stochastic General Equilibrium Model Used by the staff of the Joint
    Committee on Taxation in the Macroeconomic Analysis of Tax Policy, JCX-
    52-06, December 14, 2006.
        \181\For a thorough discussion of the issues and empirical evidence
    of the likely impacts of reforms similar to those in this bill, see
    Congressional Budget Office, Key Issues in Analyzing Major Health
    Insurance Proposals, December, 2008, and Effects of Changes to the
    Health Insurance System on Labor Markets, Economic and Budget Issue
    Brief, July 13, 2009.
    ---------------------------------------------------------------------------
        Tax and expenditure policy can affect economic growth
    through several different channels. Long-term growth is
    determined by the availability of labor, capital and materials
    for the production process. In addition, in the short-run,
    during periods when available resources are not being fully
    used, growth can also be affected by changes in demand for
    goods and services. Changes in taxes and government spending
    can affect the availability of labor and capital by influencing
    peoples' incentives to work, save, and invest. Fiscal policy,
    or net changes in Federal debt, can influence long-run growth
    to the extent that it constrains the amount of capital
    available for private investment; and, it can influence short-
    run demand by affecting the amount of after-tax income people
    have to spend. In terms of the tax policy effects of the bill,
    H.R. 3200 contains provisions that slightly reduce incentives
    to work, save, and invest, resulting in a projected slight
    decline in GDP due to these incentives. From a fiscal policy
    standpoint, the bill would also result in a slight increase in
    Federal government debt, which may further reduce, or crowd
    out, the availability of funds for private investment.

    Models and data

        The primary focus of Joint Committee staff macroeconomic
    analysis is to determine the effects of changes in tax policy
    on the economy. In order to determine the effects of tax policy
    on average and marginal tax rates, the Joint Committee staff
    uses large micro- simulation models based on large samples of
    individual, corporate, and other income tax returns provided by
    the Statistics of Income division of the Internal Revenue
    Service.\182\
    ---------------------------------------------------------------------------
        \182\These models are described in Joint Committee on Taxation,
    Overview of Revenue Estimating Procedures and Methodologies Used by the
    Staff of the Joint Committee on Taxation, JCX-1-05, February 2, 2005.
    ---------------------------------------------------------------------------
        To analyze the effects of these tax policy changes on the
    economy, the current analysis relies on the Joint Committee's
    Macroeconomic Equilibrium Growth model.\183\ The MEG model is a
    reduced form macroeconomic model with neoclassical foundations
    and myopic expectations. Peoples' willingness to work is
    determined by their after-tax wages and by the after-tax rate
    of return on additional hours of work. Changes in average and
    marginal tax rates affect these decisions. These labor supply
    decisions are modeled separately for four groups: low income
    primary workers, low- income secondary workers, high income
    primary workers, and high income secondary workers. Investment
    is determined by the after-tax return to capital, which is
    affected by changes in taxes on business and investment income.
    The taxation of corporate profits, proprietors' income,
    dividends, capital gains, and rents are each separately modeled
    in the MEG model.
    ---------------------------------------------------------------------------
        \183\To get a more complete picture of the range of possible
    macroeconomic effects from policy changes, it would generally be
    optimal to use additional models that are designed to examine the long-
    term growth effects of tax policy in a computable, general equilibrium
    framework, with either partial or perfect foresight. The Joint
    Committee staff has used such models in past analyses. But given the
    current size and projected present-law growth of deficits, the use of
    such models would require making very strong counterfactual assumptions
    about present law fiscal policy that may distort the analysis. That is,
    there would have to be an assumption that the Federal debt is reduced
    to sustainable levels in the foreseeable future in a computable general
    equilibrium framework. Because the policy being implemented either
    reduces the debt (in the case of the revenue provisions analyzed by
    themselves) or is close to deficit neutral (in the case of the revenue
    items combined with the spending provisions), in a simulation that
    assumed some additional provision that would reduce Federal government
    debt by the required amount, the effects of the debt-closing policy
    would overwhelm the effects of the provision being analyzed.
    ---------------------------------------------------------------------------
        The MEG model can be operated in an equilibrium mode, or
    used to simulate disequilibrium growth paths, by varying
    monetary policy assumptions. The equilibrium mode assumes the
    Federal Reserve Board omnisciently counteracts any short-term
    demand effects of fiscal policy to maintain the existing
    equilibrium. The disequilibrium growth path reflects the
    effects of short-term fluctuations in demand. An increase in
    government spending or reduction in tax rates, all else equal,
    would increase the amount of disposable income available to
    consumers, and would generally be expected to increase consumer
    demand. In contrast, an increase in taxes or decrease in
    spending or transfer payments would reduce disposable income,
    and thus would be likely to decrease consumer demand. Often,
    the Federal Reserve Board (``Fed'') influences the interaction
    between fiscal policy and fluctuations in demand for goods and
    services by managing interest rates and the money supply.
        The following analysis is presented using alternate
    assumptions about whether the Federal Reserve Board intervenes
    to influence the demand consequences of the policy. In the
    first case, the Federal Reserve Board is assumed to swiftly
    counteract any demand effects of the policy. In the second
    case, the Federal Reserve Board is assumed not to change its
    monetary policy at all. Generally, the Federal Reserve Board
    would be expected to counter the demand effects of a policy if
    the policy were likely to accelerate a swing in the business
    cycle. If the policy is counter-cyclical, or neutral, the
    Federal Reserve Board would be less likely to intervene.
    Because of current economic conditions, with the economy in a
    recession and the Federal Reserve Board actively engaged in
    providing liquidity to the economy to encourage economy
    expansion, it is difficult to predict how much flexibility it
    would have in reacting to major fiscal policy initiatives in
    the near future. However, since most of the provisions of H.R.
    3200 would not take effect until 2013, this consideration
    should be of less relevance than it would be in the current
    year.

    Analysis

        Effects of the revenue provisions.--Title IV of H.R. 3200
    includes several provisions to provide incentives to increase
    health insurance coverage, and several provisions to raise
    revenues to finance the increases in health insurance coverage.
    The coverage-related revenue provisions include taxes on
    certain individuals who fail to obtain coverage, and taxes on
    employers who fail to offer health insurance to their employees
    or who offer insurance that is not deemed ``affordable'' and
    whose employees obtain subsidized coverage through the new
    health insurance exchange. The following analysis first
    examines the macroeconomic effects of these revenue provisions.
    The provisions are projected to result in a net increase in
    Federal revenues of approximately $790 billion between 2010 and
    2019. Figure 1 illustrates the effects of these provisions on
    aggregate average and marginal tax rates on various sources of
    income. While the average and marginal tax rates of four
    different labor groups are separately modeled, for ease of
    exposition, Figure 1 shows combined wage tax effects. These
    rates are calculated including some of the behavioral responses
    to tax changes (such as timing, portfolio effects, and other
    shifting of income to minimize taxation) that are included in
    conventional Joint Committee staff revenue estimates.

        The most significant of the revenue provisions in this bill
    is the imposition of a surcharge on adjusted gross incomes
    (``AGI'') above $350,000 for joint filers and $280,000 for
    single filers, and heads of households. The surcharge is
    graduated. In 2011, the surtax begins at a rate of one percent
    on amounts up to $500,000 for joint filers, and $400,000 for
    individual filers, and increases to 5.4 percent on amounts
    above $1 million and $800,000 respectively. In 2013, the surtax
    rates range from two percent to 5.4 percent. Average and
    marginal tax rates on wages of high income earners are
    increased by roughly equivalent amounts due to this provision.
    The increase in average tax rates reduces disposable income,
    providing some incentive to increase labor supply, while the
    increase in marginal tax rates on wages reduces the after-tax
    earnings of additional labor; on net the tax changes provide an
    incentive for affected taxpayers to reduce their labor supply.
    Because the surtax applies to all income above the AGI
    threshold, it also taxes income generated from business
    activities of sole proprietors, partners, S-Corporation
    shareholders, and other individuals receiving income from
    capital. The increased tax on business income reduces the
    return to business activities, thus reducing incentives to
    invest in business activities.
        Additional provisions affecting individual taxpayers
    include a penalty on individuals with income above the income
    tax filing threshold who fail to purchase health insurance, a
    provision to conform the definition of qualified medical
    expenditures for Flexible Spending Arrangements, Individual
    Health Arrangements, Health Savings Accounts, and Medical
    Savings Accounts to the definition provided under Code section
    223, and a provision to provide for certain health benefits
    currently applicable to a taxpayer's spouse and dependents to
    certain other beneficiaries. The net effect of these provisions
    is to slightly increase average and marginal tax rates on
    individual income.
        Additional business-related provisions that are part of
    health reform include employer responsibility payments assessed
    on employers with payrolls above $250,000 in 2013 that fail to
    provide health insurance for their employees, and tax credits
    for up to 50 percent of the cost of employee health insurance
    by businesses with fewer than 26 employees and average wages
    less than $40,000. Additional business tax provisions that
    contribute to raising revenues include delaying the
    implementation of worldwide interest allocation for
    multinational firms until 2020, limiting eligibility for
    reduced withholding under certain treaties, and codification of
    the economic substance doctrine for assessing whether certain
    transactions should generate tax liabilities. The net effect of
    these additional business tax provisions is to slightly
    increase average and marginal tax rates on businesses with more
    than 25 employees.
        Table 1 shows the effects of the revenue provisions
    contained in Title W of H.R. 3200 on economic growth, measured
    as percent changes in Gross Domestic Product (``GDP'') relative
    to present-law baseline projections, and other key
    macroeconomic aggregates.

             TABLE 1.--EFFECTS OF REVENUE PROVISIONS PERCENT CHANGE RELATIVE TO PROJECTED PRESENT LAW LEVELS
    ----------------------------------------------------------------------------------------------------------------
                                                                     Fed Counters Demand         No Fed Reaction
                                                                     Response [Percent]             [Percent]
                                                                 ---------------------------------------------------
                                                                    2010-14      2015-19      2010-14      2015-19
    ----------------------------------------------------------------------------------------------------------------
    Nominal GDP.................................................         -0.1         -0.4         -0.4         -1.5
    Real GDP....................................................         -0.1         -0.2         -0.2         -0.3
    Real producers' capital stock...............................         -0.2         -0.6         -0.2         -0.7
    Labor force participation...................................         -0.1         -0.1         -0.1         -0.1
    Employment..................................................         -0.1         -0.2         -0.2         -0.3
    Real consumption............................................         -0.3         -0.5         -0.4         -0.7
    ----------------------------------------------------------------------------------------------------------------
    Change in long-term interest rates (basis points)...........           -3          -32           -5          -39
    ----------------------------------------------------------------------------------------------------------------
    Receipts feedback (percent change in receipts due to change          -0.1         -0.4         -0.2         -0.6
     in GDP)....................................................
    ----------------------------------------------------------------------------------------------------------------

        Consistent with the negative incentives for both labor
    supply and business investment described above, relative to
    present law, labor force participation is projected to fall by
    about 0.1 percent relative to the baseline, and business
    capital stock is projected to fall by 0.2 percent in the early
    years, and by up to 0.7 percent in the longer run. Because the
    policy reduces disposable income, it also exerts a downward
    pressure on demand. Nominal GDP is projected to fall by 0.1 to
    0.4 percent in the 2010-2014 and by 0.4 percent to 1.5 percent
    in 2015-2019, depending on whether the Federal Reserve Board
    counteracts the downward pressure on demand. Real (inflation-
    adjusted) GDP would decline by 0.1 to 0.4 percent in 2010-14
    and 0.2 to 0.3 percent in 2015-19. Consumption is also
    projected to fall relative to the baseline by 0.3 to 0.4
    percent in 2010-14 and 0.5 to 0.7 percent in 2015-19. One
    positive effect of these provisions on the economy is a decline
    in long-term interest rates by up to 39 basis points in the
    long run due to the reduction in Federal debt. Because of the
    decline in GDP relative to the baseline, the taxable income
    base is reduced, and receipts would be 0.1 percent to 0.6
    percent lower taking growth effects into account.
        Effects of revenue provisions and health insurance
    subsidies combined.--Beginning in 2013, Title II of H.R. 3200
    also provides for subsidies for the purchase of certain
    qualified health insurance through new health insurance
    exchanges. These subsidies, referred to as ``affordability
    credits,'' along with out-of-pocket cost sharing assistance are
    available to individuals and families with adjusted gross
    incomes below 400 percent of the Federal poverty level. The
    affordability credits and subsidies, cost approximately $840
    billion from 2010-2019. On net, the subsidies and tax
    provisions together increase Federal government debt by
    approximately $50 billion from 2010-2019.
        Because of the way the affordability credits are
    structured, they have incentive effects similar to those of
    refundable tax credits. The subsidies themselves increase
    disposable income, just as reductions in average tax rates
    would for eligible individuals, reducing incentives to work.
    Because the credits are phased out by income levels, they have
    the same incentive effect with respect to income-producing
    activities as increasing marginal tax rates for eligible
    individuals reducing the return to additional income
    generation, and thus reducing incentives to work and invest.
    The affordability credits are designed to assist low-income
    individuals in purchasing qualified health insurance in
    compliance with a requirement that everyone have health
    insurance coverage. The increased health coverage could lead to
    increased consumption of medical services, which could in turn
    lead both to changes in individual health status and
    productivity. In addition, changes in demand for health care
    services within the context of the health market reforms
    included in the bill could produce significant changes in the
    health service delivery system, which could impact the
    efficiency of the health sector and/or the productivity of the
    population. The availability of subsidized, risk-pooled health
    insurance outside of the employment context could also affect
    people's decisions regarding job changes and retirement. Such
    effects are beyond the scope of this analysis.
        Figure 2 shows the combined effects of the revenue
    provisions of Title IV and the subsidy provisions of Title II
    of H.R. 3200. Overall, the effective marginal rate on aggregate
    wage income continues to increase, while the aggregate average
    rate declines. In particular, effective marginal tax rates
    increase for individuals qualifying for the subsidy (whose
    income is below 400 percent of the Federal poverty level), and
    for those subject to the surtax (whose adjusted gross income is
    above $350,000). While the average rate for those subject to
    the surtax increases, effective average rates (accounting for
    the subsidy) for subsidy-eligible individuals decrease by a
    greater amount.

        Similarly, Table 2 shows the combined macroeconomic effects
    of these two Titles of H.R. 3200. Relative to the present law
    baseline, real GDP is projected to decrease by slightly more
    from 2015-19, 0.4 percent under the combined tax and subsidy
    proposal than the with the revenue provisions alone. The
    combination of tax increases and affordability credits is
    projected to reduce labor force participation by 0.3 percent
    between 2015-2019, more than the effects of the revenue
    provisions alone. Employment is also projected to be reduced
    relative to what it would be under present law. Because Federal
    debt is only slightly increased under this scenario, there is
    little change in long-term interest rates; thus more private
    investment is displaced by public debt in this scenario
    relative to the tax provisions alone, and producers' capital
    stock falls by 0.2 percent in 2010-14 and 1.3 percent in 2015-
    2019. Conversely, because disposable income is not being
    contracted, there is little short-run demand effect, with
    little difference between the effects of the proposal on
    nominal versus real GDP. The decline in GDP and associated
    macroeconomic aggregates relative to the present law baseline
    would result in receipts decreasing by 0.1 to 0.5 percent.

       TABLE 2.--EFFECTS OF TAX PROVISIONS AND EXCHANGE SUBSIDIES PERCENT CHANGE RELATIVE TO PROJECTED PRESENT LAW
                                                         LEVELS
    ----------------------------------------------------------------------------------------------------------------
                                                                     Fed Counters Demand         No Fed Reaction
                                                                     Response [Percent]             [Percent]
                                                                 ---------------------------------------------------
                                                                    2010-14      2015-19      2010-14      2015-19
    ----------------------------------------------------------------------------------------------------------------
    Nominal GDP.................................................         -0.1         -0.4         -0.3         -0.3
    Real GDP....................................................         -0.1         -0.4         -0.2         -0.2
    Real producers' capital stock...............................         -0.2         -1.3         -0.2         -1.2
    Labor force participation...................................         -0.1         -0.3         -0.1         -0.3
    Employment..................................................         -0.1         -0.3         -0.2         -0.1
    Real consumption............................................         -0.2         -0.3         -0.2         -0.3
    ----------------------------------------------------------------------------------------------------------------
    Change in long-term interest rates (basis points)...........           -1           -3           -5           -2
    ----------------------------------------------------------------------------------------------------------------
    Receipts feedback (percent change in receipts due to change          -0.1         -0.5         -0.2         -0.4
     in GDP)....................................................
    ----------------------------------------------------------------------------------------------------------------

        Fiscal effects of the entire bill.--Finally, H.R. 3200
    makes many changes to the Medicare and Medicaid programs. The
    net effect of these changes, in combination with the revenue
    provisions and the exchange subsidies, is to increase the
    Federal deficit by approximately $220 billion from 2010-2019.
    The Joint Committee staff models the Medicaid and Medicare
    changes as changes in untaxed transfer payments received by
    taxpayers. As with the affordability subsidies for the purchase
    of health insurance, these program changes could have effects
    on the health care delivery system, but these effects are not
    incorporated in this analysis.
        Because any income phase-outs associated with the changes
    to Medicare and Medicaid have not been modeled, the changes in
    effective marginal tax rates and average tax rates in this
    scenario are the same as in the second scenario, shown in
    Figure 2 above. Only the net effects of these changes on
    personal disposable income and Federal government debt are
    considered in this analysis. Table 3 shows the growth effects
    of the combined revenue provisions, affordability subsidies,
    and changes to Medicare and Medicaid.

         TABLE 3.--EFFECTS OF TAX PROVISIONS, SUBSIDIES, AND CHANGES IN OTHER OUTLAYS PERCENT CHANGE RELATIVE TO
                                              PROJECTED PRESENT LAW LEVELS
    ----------------------------------------------------------------------------------------------------------------
                                                                     Fed Counters Demand         No Fed Reaction
                                                                     Response [Percent]             [Percent]
                                                                 ---------------------------------------------------
                                                                    2010-14      2015-19      2010-14      2015-19
    ----------------------------------------------------------------------------------------------------------------
    Nominal GDP.................................................         -0.1         -0.4         -0.2          0.1
    Real GDP....................................................         -0.1         -0.4         -0.1         -0.1
    Real producers' capital stock...............................         -0.2         -1.5         -0.2         -1.4
    Labor force participation...................................         -0.1         -0.3         -0.1         -0.3
    Employment..................................................         -0.1         -0.3         -0.1          0.0
    Real consumption............................................         -0.2         -0.2         -0.3          0.0
    ----------------------------------------------------------------------------------------------------------------
    Change in long-term interest rates (basis points)...........            1            8           -1           11
    ----------------------------------------------------------------------------------------------------------------
    Receipts feedback (percent change in receipts due to change          -0.1         -0.6         -0.2         -0.3
     in GDP)....................................................
    ----------------------------------------------------------------------------------------------------------------

        Because effective tax rates are the same in this scenario
    as in the one above, incentives for work remain the same, and
    labor force participation is again projected to decline
    relative to the present law baseline by 0.1 percent from 2010-
    14 and by 0.3 percent in 2015-19. One noticeable difference
    between this scenario and the others is the increase in long-
    term interest rates that results from the increase in Federal
    government debt. The increased debt crowds out more private
    investment, reducing business capital stock by up to 1.5
    percent in 2015-19. The increase in disposable income also
    leads to more short-term demand pressure, resulting in smaller
    declines from the baseline in GDP in the case where the Fed
    does not attempt to counteract the demand effect. Changes in
    GDP continue to reduce Federal receipts by modest amounts, by
    0.1 to 0.2 percent in 2010-14 and 0.3 to 0.6 percent in 2015-
    19.
        Conclusion.--The revenue, subsidy, and overall fiscal
    effects of H.R. 3200 create moderately negative growth
    incentives through raising marginal tax rates on labor and
    capital and through the interest-rate increase owing to
    increased deficits. When the revenue provisions are considered
    alone, the negative incentive effects are somewhat offset by
    the reduction in long run interest rates.

                                 E. PAY-GO RULE

        In compliance with clause 10 of rule XXI of the Rules of
    the House of Representatives, the following statement is made
    concerning the effects on the budget of the revenue provisions
    of the bill, H.R. 3200 as reported: the Committee anticipates
    that a CBO cost estimate letter on H.R. 3200 will address these
    issues when the bill proceeds to consideration on the House
    floor. CBO is unable to provide a cost estimate prior to the
    reconciliation of the versions of the bill as amended and
    reported by the three committees of jurisdiction.

         V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

              A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

        With respect to clause 3(c)(1) of rule XIII of the Rules of
    the House of Representatives (relating to oversight findings),
    the Committee advises that it was a result of the Committee's
    oversight review concerning the tax burden on taxpayers that
    the Committee concluded that it is appropriate and timely to
    enact the revenue provision included in the bill as reported.

            B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

        With respect to clause 3(c)(4) of rule XIII of the Rules of
    the House of Representatives, the goal of H.R. 3200, America's
    Affordable Health Choices Act of 2009 is to provide affordable,
    quality health care for all Americans and reduce the rate of
    growth in health care spending.

                     C. CONSTITUTIONAL AUTHORITY STATEMENT

        With respect to clause 3(d)(1) of the rule XIII of the
    Rules of the House of Representatives (relating to
    Constitutional Authority), the Committee states that the
    Committee's action in reporting this bill is derived from
    Article I of the Constitution, Section 8 (``The Congress shall
    have Power To lay and collect Taxes, Duties, Imposts and
    Excises. . . ''), and from the 16th Amendment to the
    Constitution.

                  D. INFORMATION RELATING TO UNFUNDED MANDATES

        This information is provided in accordance with section 423
    of the Unfunded Mandates Act of 1995 (Pub. L. No. 104-4).
        The Committee has determined that the bill contains nine
    private sector mandates: (i) Tax on individual without
    acceptable health care coverage; (ii) Election to satisfy
    health coverage participation requirements; (iii)
    Responsibilities of nonelecting employers; (iv) Comparative
    effectiveness research trust fund; financing for trust fund;
    (v) Impose a surcharge for certain AGI; (vi) Modify the
    definition of qualified medical expenses for purposes of HRAs,
    health FSAs, HSAs, and Archer MSAs; (vii) Delay implementation
    of worldwide interest allocation until 2020; (viii) Limit
    eligibility for reduced treaty withholding rates based on
    residency of foreign parent; and (ix) Codification of economic
    substance doctrine and penalties for underpayments.
        The Committee has determined that the bill contains one
    intergovernmental mandate on State, local, or tribal
    governments: Responsibilities of nonelecting employers.

                    E. APPLICABILITY OF HOUSE RULE XXI 5(B)

        Rule XXI 5(b) of the Rules of the House of Representatives
    provides, in part, that ``A bill or joint resolution,
    amendment, or conference report carrying a Federal income tax
    rate increase may not be considered as passed or agreed to
    unless so determined by a vote of not less than three-fifths of
    the Members voting, a quorum being present.'' The Committee has
    carefully reviewed the provisions of the bill, and states that
    the provisions of the bill do not involve any Federal income
    tax rate increases within the meaning of the rule.

                           F. TAX COMPLEXITY ANALYSIS

        Section 4022(b) of the Internal Revenue Service Reform and
    Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
    staff of the Joint Committee on Taxation (in consultation with
    the Internal Revenue Service and the Treasury Department) to
    provide a tax complexity analysis. The complexity analysis is
    required for all legislation reported by the Senate Committee
    on Finance, the House Committee on Ways and Means, or any
    committee of conference if the legislation includes a provision
    that directly or indirectly amends the Internal Revenue Code
    and has widespread applicability to individuals or small
    businesses. For each such provision identified by the staff of
    the Joint Committee on Taxation a summary description of the
    provision is provided along with an estimate of the number and
    type of affected taxpayers, and a discussion regarding the
    relevant complexity and administrative issues.
        Following the analysis of the staff of the Joint Committee
    on Taxation are the comments of the IRS and Treasury regarding
    each of the provisions included in the complexity analysis.

    1. Tax on individuals without acceptable health care coverage

    Summary description of the provision

        The provision taxes individuals who do not maintain
    coverage under acceptable health insurance for themselves and
    their qualifying children. The tax is equal to the lesser of
    (a) the national average premium for single or family coverage,
    as applicable, or (b) 2.5 percent of the excess of the
    taxpayer's adjusted gross income (``AGI'') over the threshold
    filing amount. Acceptable coverage includes a health plan that
    covers at least an essential benefits package and that includes
    certain specified limits on required cost sharing, no annual or
    lifetime limit on covered health care items or services,
    certain specified minimum services, and certain requirements as
    to network adequacy as determined by the newly appointed Health
    Choices Commissioner. Acceptable coverage also includes a
    grandfathered plan, Medicare, Medicaid, Tricare (and other
    Armed Services coverage), Veterans Administration coverage, and
    certain other coverage. Those exempt from the penalty include:
    nonresident aliens, U.S. citizens and residents living abroad,
    those who can claim health insurance would cause financial
    hardship, those whose income is below the threshold for filing
    a Federal income tax return, and those who are properly claimed
    as dependents on the income tax return of another taxpayer for
    the taxable year. Individuals maintaining health insurance for
    part of the year are required to pay a pro-rated tax.
        The new additional tax for failure to maintain health
    insurance is accompanied by new reporting requirements for
    insurance providers. Any insurance provider is required to
    provide information to the Department of Treasury and the
    primary insured individual. The return is required to supply
    the name, address, and taxpayer identification numbers of all
    individuals receiving. insurance under the policy by January 31
    of the year following the calendar year the insurance was
    provided. Failure to file the required information return or to
    include complete and correct information on the required return
    is subject to the failure to file correct information returns
    penalty of section 6721.

    Number of affected taxpayers

        It is estimated that the provision will affect more than 10
    percent of individual or small business tax returns.

    Discussion

        The provision creates a reporting requirement for providers
    of insurance coverage. The reporting requirement obliges the
    provision of the following information to both the insured
    individual and the Department of Treasury directly: the name of
    all insured on the policy, the dates of insurance coverage
    during the tax year, the Taxpayer Identification Numbers
    (``TINs'') and any other information required by the Secretary.
    In addition, the insurer will have the added responsibility of
    determining which insurance plan offerings meet the standard of
    ``qualified coverage.''
        For individuals for whom there is no additional tax, while
    the statute creates no requirement for the filing of insurance
    information by the taxpayer, the taxpayer will receive this
    information and discretion is left to the Secretary of Treasury
    for prescribing regulations to carry out the statute, which
    could include a supplemental reporting requirement from the
    individual. The 1040, 1040A and 1040-EZ must be amended to add
    a new line to reflect any additional tax. Individuals owing
    additional tax will be required to include the amount of the
    tax owed both on a new form and on the 1040, 1040A or 1040-EZ.
        The Internal Revenue Service (``IRS'') will be required to
    reprogram computers to reflect the additional rules, forms and
    information from employers, insurers and individuals. In
    addition, regulations would be needed to reflect statutory
    exemptions from the additional tax and resources needed to
    resolve disputes regarding maintenance of acceptable coverage
    and eligibility for exemption from additional tax.

    2. Election to satisfy health coverage participation requirements and
            responsibilities of nonelecting employers

    Summary description of the provision

        The provisions create a system under which employers must
    elect whether to offer health benefits to employees. For
    employers that elect not to offer health benefits to their
    employees, the provisions establish a payroll tax equal to
    eight percent of the wages paid to employees.
        Employers that elect to offer health benefits are not
    required to pay the payroll tax. However, employers that elect
    to offer health benefits but fail to comply with the rules
    governing offers of coverage are subject to an excise tax. In
    addition, beginning in the second year after enactment of the
    provisions, employers that elect to offer health benefits are
    required to make contributions, in the amount of eight percent
    of the average wages paid to employees, to the Health Insurance
    Exchange for employees who decline employer-provided coverage
    and instead enroll in an Exchange-participating plan. Finally,
    employers that elect to offer health benefits to their
    employees must file an additional return with the IRS
    containing information about the insured, the period for which
    coverage was provided, and such other information as the
    Secretary of the Treasury may require. Similar returns must be
    filed with the insured employees as well.
        Special rules apply for certain small businesses. An
    employer with an annual payroll that does not exceed $250,000
    is exempt from the requirement to offer health benefits or pay
    a payroll tax and the requirement to make contributions to the
    Health Insurance Exchange for employees who decline employer-
    provided coverage in the event that such coverage is offered.
    For an employer with an annual payroll from $250,000 through
    $400,000, the eight-percent payroll tax applicable to
    nonelecting employers, or the eight-percent of wages
    contribution to the Health Exchange Fund for coverage-declining
    employees, phases in ratably.

    Number of affected taxpayers

        It is estimated that the provision will affect more than 10
    percent of small business tax returns.

    Discussion

        It is anticipated that small businesses will have to keep
    additional records and perform additional analysis to comply
    with the new election and coverage requirements. Small
    businesses will need to make an affirmative election regarding
    whether to be subject to the national health coverage
    participation requirements. Small businesses that elect to
    offer health benefits will be required to set up provisions for
    auto-enrolling their employees in one of the employer-offered
    health plans, and must develop and disseminate written notices
    informing employees of their rights and obligations relating to
    the automatic enrollment, including the ability to opt-out of
    enrollment in the employer-provided plan. Small businesses that
    elect to provide health coverage to their employees will be
    required to file an additional return with the IRS containing
    information about the insured, the period for which coverage
    was provided, and such other information as the Secretary of
    the Treasury may require. Similar returns must be filed with
    the insured employees as well. Small businesses will have to
    maintain records documenting their election, which employees
    were provided coverage, whether appropriate taxes for non-
    covered employees were paid, and that the business filed all
    necessary reports with the IRS.
        It is anticipated that the IRS will have to develop new
    forms to capture the election by employers whether to provide
    qualifying health care coverage. The IRS will also have to
    amend existing forms to implement the provision imposing a tax
    on employers who fail to satisfy the health coverage
    participation requirement, and revise several publications to
    explain the election, participation requirements, and tax
    imposed by the provisions.
        It is anticipated that the IRS will be required to make
    numerous computer programming changes to tax systems that
    support employment and excise tax forms required to be filed by
    employers. The computer systems will also need to be changed to
    accommodate the new payroll tax and excise taxes requirements.
    Computer programming changes will be required to accommodate
    the new information return that will be filed with the IRS by
    employers.
        The Department of the Treasury will have to issue
    regulations or other guidance regarding employers' elections,
    the application of the new tax, and the exceptions for failure
    to comply with the applicable coverage rules and the new
    reporting requirements (including details as to content and how
    to report).
        The Secretary of the Treasury will be required to
    coordinate enforcement of the provision with the Secretaries of
    Labor and Health and Human Services and the Health Choices
    Commissioner to ensure uniform interpretation and enforcement
    of the provision. The four agencies will be required to execute
    an interagency memorandum of understanding.

    3. Distribution for medicine qualified only if for prescribed drug or
            insulin

    Summary description of the provision

        Under the provision, the cost of over-the-counter medicines
    may not be reimbursed with excludible income through health
    flexible spending arrangements under a cafeteria plan (``Health
    FSAs''), health reimbursement arrangements (``HRAs''), Health
    Savings Accounts (``HSAs''), or Archer MSAs.

    Number of affected taxpayers

        It is estimated that the provision will affect more than 10
    percent of individual tax returns.

    Discussion

        Many taxpayers currently use account balances in Health
    FSAs, HRAs, HSAs, and Archer MSAs to purchase over-the-counter
    medicine such as ibuprofen, acetaminophen, cold medicine, and
    suntan lotion with pre-tax dollars. Some taxpayers make these
    purchases at the end of the year, or the end of the grace
    period, to avoid forfeiting amounts in Health FSAs. Taxpayers
    will no longer be able to use these amounts in these accounts
    for this purpose. As a result, less money will be allocated to
    these accounts and more money will be allocated to taxable
    wages. This change will also increase the amount of
    compensation subject to payroll taxes.
        It is anticipated that the IRS will be required to revise
    the instructions to several forms and to revise several
    publications to reflect the changes to present law made by the
    provision. In addition, guidance will need to be issued
    withdrawing at least one Revenue Ruling and guidance may need
    to be issued on substantiation rules for reimbursement
    arrangements.

                            G. LIMITED TAX BENEFITS

        Pursuant to clause 9 of rule XXI of the Rules of the House
    of Representatives, the Ways and Means Committee has determined
    that the bill as reported contains no congressional earmarks,
    limited tax benefits or limited tariff benefits within the
    meaning of that rule.

           VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

        In compliance with clause 3(e) of rule XIII of the Rule of
    the House of Representatives, changes in existing law made by
    the bill, as reported, are shown as follows (existing law
    proposed to be omitted is enclosed in black brackets, new
    matter is printed in italic, existing law in which no change is
    proposed is shown in roman):

                              SOCIAL SECURITY ACT

    TITLE II--FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE BENEFITS

               *       *       *       *       *       *       *

    SPECIAL PROVISIONS RELATING TO COVERAGE UNDER MEDICARE PROGRAM FOR END
                              STAGE RENAL DISEASE

      Sec. 226A. (a) * * *
      (b) Subject to subsection (c), entitlement of an individual
    to benefits under part A and eligibility to enroll under part B
    of title XVIII by reasons of this section on the basis of end
    stage renal disease--
              (1) * * *
              (2) shall end, in the case of an individual who
            receives a kidney transplant (except for coverage of
            immunosuppressive drugs under section 1861(s)(2)(J)),
            with the thirty-sixth month after the month in which
            such individual receives such transplant or, in the
            case of an individual who has not received a kidney
            transplant and no longer requires a regular course of
            dialysis, with the twelfth month after the month in
            which such course of dialysis is terminated.

               *       *       *       *       *       *       *

      [(c)] (d) For purposes of this section, each person whose
    monthly insurance benefit for any month is terminated or is
    otherwise not payable solely by reason of paragraph (1) or (7)
    of section 225(c) shall be treated as entitled to such benefit
    for such month.

               *       *       *       *       *       *       *

    TITLE IV--GRANTS TO STATES FOR AID AND SERVICES TO NEEDY FAMILIES WITH
    CHILDREN AND FOR CHILD-WELFARE SERVICES

               *       *       *       *       *       *       *

    Part B--Child and Family Services

               *       *       *       *       *       *       *

            Subpart 3--Support for Quality Home Visitation Programs

    SEC. 440. HOME VISITATION PROGRAMS FOR FAMILIES WITH YOUNG CHILDREN AND
                        FAMILIES EXPECTING CHILDREN.

      (a) Purpose.--The purpose of this section is to improve the
    well-being, health, and development of children by enabling the
    establishment and expansion of high quality programs providing
    voluntary home visitation for families with young children and
    families expecting children.
      (b) Grant Application.--A State that desires to receive a
    grant under this section shall submit to the Secretary for
    approval, at such time and in such manner as the Secretary may
    require, an application for the grant that includes the
    following:
              (1) Description of home visitation programs.--A
            description of the high quality programs of home
            visitation for families with young children and
            families expecting children that will be supported by a
            grant made to the State under this section, the
            outcomes the programs are intended to achieve, and the
            evidence supporting the effectiveness of the programs.
              (2) Results of needs assessment.--The results of a
            statewide needs assessment that describes--
                      (A) the number, quality, and capacity of home
                    visitation programs for families with young
                    children and families expecting children in the
                    State;
                      (B) the number and types of families who are
                    receiving services under the programs;
                      (C) the sources and amount of funding
                    provided to the programs;
                      (D) the gaps in home visitation in the State,
                    including identification of communities that
                    are in high need of the services; and
                      (E) training and technical assistance
                    activities designed to achieve or support the
                    goals of the programs.
              (3) Assurances.--Assurances from the State that--
                      (A) in supporting home visitation programs
                    using funds provided under this section, the
                    State shall identify and prioritize serving
                    communities that are in high need of such
                    services, especially communities with a high
                    proportion of low-income families or a high
                    incidence of child maltreatment;
                      (B) the State will reserve 5 percent of the
                    grant funds for training and technical
                    assistance to the home visitation programs
                    using such funds;
                      (C) in supporting home visitation programs
                    using funds provided under this section, the
                    State will promote coordination and
                    collaboration with other home visitation
                    programs (including programs funded under title
                    XIX) and with other child and family services,
                    health services, income supports, and other
                    related assistance;
                      (D) home visitation programs supported using
                    such funds will, when appropriate, provide
                    referrals to other programs serving children
                    and families; and
                      (E) the State will comply with subsection
                    (i), and cooperate with any evaluation
                    conducted under subsection (j).
              (4) Other information.--Such other information as the
            Secretary may require.
      (c) Allotments.--
              (1) Indian tribes.--From the amount reserved under
            subsection (l)(2) for a fiscal year, the Secretary
            shall allot to each Indian tribe that meets the
            requirement of subsection (d), if applicable, for the
            fiscal year the amount that bears the same ratio to the
            amount so reserved as the number of children in the
            Indian tribe whose families have income that does not
            exceed 200 percent of the poverty line bears to the
            total number of children in such Indian tribes whose
            families have income that does not exceed 200 percent
            of the poverty line.
              (2) States and territories.--From the amount
            appropriated under subsection (m) for a fiscal year
            that remains after making the reservations required by
            subsection (l), the Secretary shall allot to each State
            that is not an Indian tribe and that meets the
            requirement of subsection (d), if applicable, for the
            fiscal year the amount that bears the same ratio to the
            remainder of the amount so appropriated as the number
            of children in the State whose families have income
            that does not exceed 200 percent of the poverty line
            bears to the total number of children in such States
            whose families have income that does not exceed 200
            percent of the poverty line.
              (3) Reallotments.--The amount of any allotment to a
            State under a paragraph of this subsection for any
            fiscal year that the State certifies to the Secretary
            will not be expended by the State pursuant to this
            section shall be available for reallotment using the
            allotment methodology specified in that paragraph. Any
            amount so reallotted to a State is deemed part of the
            allotment of the State under this subsection.
      (d) Maintenance of Effort.--Beginning with fiscal year 2011,
    a State meets the requirement of this subsection for a fiscal
    year if the Secretary finds that the aggregate expenditures by
    the State from State and local sources for programs of home
    visitation for families with young children and families
    expecting children for the then preceding fiscal year was not
    less than 100 percent of such aggregate expenditures for the
    then 2nd preceding fiscal year.
      (e) Payment of Grant.--
              (1) In general.--The Secretary shall make a grant to
            each State that meets the requirements of subsections
            (b) and (d), if applicable, for a fiscal year for which
            funds are appropriated under subsection (m), in an
            amount equal to the reimbursable percentage of the
            eligible expenditures of the State for the fiscal year,
            but not more than the amount allotted to the State
            under subsection (c) for the fiscal year.
              (2) Reimbursable percentage defined.--In paragraph
            (1), the term ``reimbursable percentage'' means, with
            respect to a fiscal year--
                      (A) 85 percent, in the case of fiscal year
                    2010;
                      (B) 80 percent, in the case of fiscal year
                    2011; or
                      (C) 75 percent, in the case of fiscal year
                    2012 and any succeeding fiscal year.
      (f) Eligible Expenditures.--
              (1) In general.--In this section, the term ``eligible
            expenditures''--
                      (A) means expenditures to provide voluntary
                    home visitation for as many families with young
                    children (under the age of school entry) and
                    families expecting children as practicable,
                    through the implementation or expansion of high
                    quality home visitation programs that--
                              (i) adhere to clear evidence-based
                            models of home visitation that have
                            demonstrated positive effects on
                            important program-determined child and
                            parenting outcomes, such as reducing
                            abuse and neglect and improving child
                            health and development;
                              (ii) employ well-trained and
                            competent staff, maintain high quality
                            supervision, provide for ongoing
                            training and professional development,
                            and show strong organizational capacity
                            to implement such a program;
                              (iii) establish appropriate linkages
                            and referrals to other community
                            resources and supports;
                              (iv) monitor fidelity of program
                            implementation to ensure that services
                            are delivered according to the
                            specified model; and
                              (v) provide parents with--
                                      (I) knowledge of age-
                                    appropriate child development
                                    in cognitive, language, social,
                                    emotional, and motor domains
                                    (including knowledge of second
                                    language acquisition, in the
                                    case of English language
                                    learners);
                                      (II) knowledge of realistic
                                    expectations of age-appropriate
                                    child behaviors;
                                      (III) knowledge of health and
                                    wellness issues for children
                                    and parents;
                                      (IV) modeling, consulting,
                                    and coaching on parenting
                                    practices;
                                      (V) skills to interact with
                                    their child to enhance age-
                                    appropriate development;
                                      (VI) skills to recognize and
                                    seek help for issues related to
                                    health, developmental delays,
                                    and social, emotional, and
                                    behavioral skills; and
                                      (VII) activities designed to
                                    help parents become full
                                    partners in the education of
                                    their children;
                      (B) includes expenditures for training,
                    technical assistance, and evaluations related
                    to the programs; and
                      (C) does not include any expenditure with
                    respect to which a State has submitted a claim
                    for payment under any other provision of
                    Federal law.
              (2) Priority funding for programs with strongest
            evidence.--
                      (A) In general.--The expenditures, described
                    in paragraph (1), of a State for a fiscal year
                    that are attributable to the cost of programs
                    that do not adhere to a model of home
                    visitation with the strongest evidence of
                    effectiveness shall not be considered eligible
                    expenditures for the fiscal year to the extent
                    that the total of the expenditures exceeds the
                    applicable percentage for the fiscal year of
                    the allotment of the State under subsection (c)
                    for the fiscal year.
                      (B) Applicable percentage defined.--In
                    subparagraph (A), the term ``applicable
                    percentage'' means, with respect to a fiscal
                    year--
                              (i) 60 percent for fiscal year 2010;
                              (ii) 55 percent for fiscal year 2011;
                              (iii) 50 percent for fiscal year
                            2012;
                              (iv) 45 percent for fiscal year 2013;
                            or
                              (v) 40 percent for fiscal year 2014.
      (g) No Use of Other Federal Funds for State Match.--A State
    to which a grant is made under this section may not expend any
    Federal funds to meet the State share of the cost of an
    eligible expenditure for which the State receives a payment
    under this section.
      (h) Waiver Authority.--
              (1) In general.--The Secretary may waive or modify
            the application of any provision of this section, other
            than subsection (b) or (f), to an Indian tribe if the
            failure to do so would impose an undue burden on the
            Indian tribe.
              (2) Special rule.--An Indian tribe is deemed to meet
            the requirement of subsection (d) for purposes of
            subsections (c) and (e) if--
                      (A) the Secretary waives the requirement; or
                      (B) the Secretary modifies the requirement,
                    and the Indian tribe meets the modified
                    requirement.
      (i) State Reports.--Each State to which a grant is made under
    this section shall submit to the Secretary an annual report on
    the progress made by the State in addressing the purposes of
    this section. Each such report shall include a description of--
              (1) the services delivered by the programs that
            received funds from the grant;
              (2) the characteristics of each such program,
            including information on the service model used by the
            program and the performance of the program;
              (3) the characteristics of the providers of services
            through the program, including staff qualifications,
            work experience, and demographic characteristics;
              (4) the characteristics of the recipients of services
            provided through the program, including the number of
            the recipients, the demographic characteristics of the
            recipients, and family retention;
              (5) the annual cost of implementing the program,
            including the cost per family served under the program;
              (6) the outcomes experienced by recipients of
            services through the program;
              (7) the training and technical assistance provided to
            aid implementation of the program, and how the training
            and technical assistance contributed to the outcomes
            achieved through the program;
              (8) the indicators and methods used to monitor
            whether the program is being implemented as designed;
            and
              (9) other information as determined necessary by the
            Secretary.
      (j) Evaluation.--
              (1) In general.--The Secretary shall, by grant or
            contract, provide for the conduct of an independent
            evaluation of the effectiveness of home visitation
            programs receiving funds provided under this section,
            which shall examine the following:
                      (A) The effect of home visitation programs on
                    child and parent outcomes, including child
                    maltreatment, child health and development,
                    school readiness, and links to community
                    services.
                      (B) The effectiveness of home visitation
                    programs on different populations, including
                    the extent to which the ability of programs to
                    improve outcomes varies across programs and
                    populations.
              (2) Reports to the congress.--
                      (A) Interim report.--Within 3 years after the
                    date of the enactment of this section, the
                    Secretary shall submit to the Congress an
                    interim report on the evaluation conducted
                    pursuant to paragraph (1).
                      (B) Final report.--Within 5 years after the
                    date of the enactment of this section, the
                    Secretary shall submit to the Congress a final
                    report on the evaluation conducted pursuant to
                    paragraph (1).
      (k) Annual Reports to the Congress.--The Secretary shall
    submit annually to the Congress a report on the activities
    carried out using funds made available under this section,
    which shall include a description of the following:
              (1) The high need communities targeted by States for
            programs carried out under this section.
              (2) The service delivery models used in the programs
            receiving funds provided under this section.
              (3) The characteristics of the programs, including--
                      (A) the qualifications and demographic
                    characteristics of program staff; and
                      (B) recipient characteristics including the
                    number of families served, the demographic
                    characteristics of the families served, and
                    family retention and duration of services.
              (4) The outcomes reported by the programs.
              (5) The research-based instruction, materials, and
            activities being used in the activities funded under
            the grant.
              (6) The training and technical activities, including
            on-going professional development, provided to the
            programs.
              (7) The annual costs of implementing the programs,
            including the cost per family served under the
            programs.
              (8) The indicators and methods used by States to
            monitor whether the programs are being been implemented
            as designed.
      (l) Reservations of Funds.--From the amounts appropriated for
    a fiscal year under subsection (m), the Secretary shall
    reserve--
              (1) an amount equal to 5 percent of the amounts to
            pay the cost of the evaluation provided for in
            subsection (j), and the provision to States of training
            and technical assistance, including the dissemination
            of best practices in early childhood home visitation;
            and
              (2) after making the reservation required by
            paragraph (1), an amount equal to 3 percent of the
            amount so appropriated, to pay for grants to Indian
            tribes under this section.
      (m) Appropriations.--Out of any money in the Treasury of the
    United States not otherwise appropriated, there is appropriated
    to the Secretary to carry out this section--
              (1) $50,000,000 for fiscal year 2010;
              (2) $100,000,000 for fiscal year 2011;
              (3) $150,000,000 for fiscal year 2012;
              (4) $200,000,000 for fiscal year 2013; and
              (5) $250,000,000 for fiscal year 2014.
      (n) Indian Tribes Treated as States.--In this section,
    paragraphs (4), (5), and (6) of section 431(a) shall apply.

               *       *       *       *       *       *       *

         TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE
                                 SIMPLIFICATION

    Part A--General Provisions

               *       *       *       *       *       *       *

                DISCLOSURE OF OWNERSHIP AND RELATED INFORMATION

      Sec. 1124. (a) * * *

               *       *       *       *       *       *       *

      (c) Required Disclosure of Ownership and Additional
    Disclosable Parties Information.--
              (1) Disclosure.--A facility (as defined in paragraph
            (7)(B)) shall have the information described in
            paragraph (3) available--
                      (A) during the period beginning on the date
                    of the enactment of this subsection and ending
                    on the date such information is made available
                    to the public under section 1411(b) of the
                    America's Affordable Health Choices Act of
                    2009, for submission to the Secretary, the
                    Inspector General of the Department of Health
                    and Human Services, the State in which the
                    facility is located, and the State long-term
                    care ombudsman in the case where the Secretary,
                    the Inspector General, the State, or the State
                    long-term care ombudsman requests such
                    information; and
                      (B) beginning on the effective date of the
                    final regulations promulgated under paragraph
                    (4)(A), for reporting such information in
                    accordance with such final regulations.
            Nothing in subparagraph (A) shall be construed as
            authorizing a facility to dispose of or delete
            information described in such subparagraph after the
            effective date of the final regulations promulgated
            under paragraph (4)(A).
              (2) Public availability of information.--During the
            period described in paragraph (1)(A), a facility
            shall--
                      (A) make the information described in
                    paragraph (3) available to the public upon
                    request and update such information as may be
                    necessary to reflect changes in such
                    information; and
                      (B) post a notice of the availability of such
                    information in the lobby of the facility in a
                    prominent manner.
              (3) Information described.--
                      (A) In general.--The following information is
                    described in this paragraph:
                              (i) The information described in
                            subsections (a) and (b), subject to
                            subparagraph (C).
                              (ii) The identity of and information
                            on--
                                      (I) each member of the
                                    governing body of the facility,
                                    including the name, title, and
                                    period of service of each such
                                    member;
                                      (II) each person or entity
                                    who is an officer, director,
                                    member, partner, trustee, or
                                    managing employee of the
                                    facility, including the name,
                                    title, and date of start of
                                    service of each such person or
                                    entity; and
                                      (III) each person or entity
                                    who is an additional
                                    disclosable party of the
                                    facility.
                              (iii) The organizational structure of
                            each person and entity described in
                            subclauses (II) and (III) of clause
                            (ii) and a description of the
                            relationship of each such person or
                            entity to the facility and to one
                            another.
                      (B) Special rule where information is already
                    reported or submitted.--To the extent that
                    information reported by a facility to the
                    Internal Revenue Service on Form 990,
                    information submitted by a facility to the
                    Securities and Exchange Commission, or
                    information otherwise submitted to the
                    Secretary or any other Federal agency contains
                    the information described in clauses (i), (ii),
                    or (iii) of subparagraph (A), the Secretary may
                    allow, to the extent practicable, such Form or
                    such information to meet the requirements of
                    paragraph (1) and to be submitted in a manner
                    specified by the Secretary.
                      (C) Special rule.--In applying subparagraph
                    (A)(i)--
                              (i) with respect to subsections (a)
                            and (b), ``ownership or control
                            interest'' shall include direct or
                            indirect interests, including such
                            interests in intermediate entities; and
                              (ii) subsection (a)(3)(A)(ii) shall
                            include the owner of a whole or part
                            interest in any mortgage, deed of
                            trust, note, or other obligation
                            secured, in whole or in part, by the
                            entity or any of the property or assets
                            thereof, if the interest is equal to or
                            exceeds 5 percent of the total property
                            or assets of the entirety.
              (4) Reporting.--
                      (A) In general.--Not later than the date that
                    is 2 years after the date of the enactment of
                    this subsection, the Secretary shall promulgate
                    regulations requiring, effective on the date
                    that is 90 days after the date on which such
                    final regulations are published in the Federal
                    Register, a facility to report the information
                    described in paragraph (3) to the Secretary in
                    a standardized format, and such other
                    regulations as are necessary to carry out this
                    subsection. Such final regulations shall ensure
                    that the facility certifies, as a condition of
                    participation and payment under the program
                    under title XVIII or XIX, that the information
                    reported by the facility in accordance with
                    such final regulations is accurate and current.
                      (B) Guidance.--The Secretary shall provide
                    guidance and technical assistance to States on
                    how to adopt the standardized format under
                    subparagraph (A).
              (5) No effect on existing reporting requirements.--
            Nothing in this subsection shall reduce, diminish, or
            alter any reporting requirement for a facility that is
            in effect as of the date of the enactment of this
            subsection.
              (6) Definitions.--In this subsection:
                      (A) Additional disclosable party.--The term
                    ``additional disclosable party'' means, with
                    respect to a facility, any person or entity
                    who--
                              (i) exercises operational, financial,
                            or managerial control over the facility
                            or a part thereof, or provides policies
                            or procedures for any of the operations
                            of the facility, or provides financial
                            or cash management services to the
                            facility;
                              (ii) leases or subleases real
                            property to the facility, or owns a
                            whole or part interest equal to or
                            exceeding 5 percent of the total value
                            of such real property;
                              (iii) lends funds or provides a
                            financial guarantee to the facility in
                            an amount which is equal to or exceeds
                            $50,000; or
                              (iv) provides management or
                            administrative services, clinical
                            consulting services, or accounting or
                            financial services to the facility.
                      (B) Facility.--The term ``facility'' means a
                    disclosing entity which is--
                              (i) a skilled nursing facility (as
                            defined in section 1819(a)); or
                              (ii) a nursing facility (as defined
                            in section 1919(a)).
                      (C) Managing employee.--The term ``managing
                    employee'' means, with respect to a facility,
                    an individual (including a general manager,
                    business manager, administrator, director, or
                    consultant) who directly or indirectly manages,
                    advises, or supervises any element of the
                    practices, finances, or operations of the
                    facility.
                      (D) Organizational structure.--The term
                    ``organizational structure'' means, in the case
                    of--
                              (i) a corporation, the officers,
                            directors, and shareholders of the
                            corporation who have an ownership
                            interest in the corporation which is
                            equal to or exceeds 5 percent;
                              (ii) a limited liability company, the
                            members and managers of the limited
                            liability company (including, as
                            applicable, what percentage each member
                            and manager has of the ownership
                            interest in the limited liability
                            company);
                              (iii) a general partnership, the
                            partners of the general partnership;
                              (iv) a limited partnership, the
                            general partners and any limited
                            partners of the limited partnership who
                            have an ownership interest in the
                            limited partnership which is equal to
                            or exceeds 10 percent;
                              (v) a trust, the trustees of the
                            trust;
                              (vi) an individual, contact
                            information for the individual; and
                              (vii) any other person or entity,
                            such information as the Secretary
                            determines appropriate.

               *       *       *       *       *       *       *

      EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM PARTICIPATION IN
                    MEDICARE AND STATE HEALTH CARE PROGRAMS

      Sec. 1128. (a) * * *
      (b) Permissive Exclusion.--The Secretary may exclude the
    following individuals and entities from participation in any
    Federal health care program (as defined in section 1128B(f)):
              (1) * * *
              (2) Conviction relating to obstruction of an
            investigation or audit.--Any individual or entity that
            has been convicted, under Federal or State law, in
            connection with the interference with or obstruction of
            any [investigation into any criminal offense described
            in paragraph (1) or in subsection (a).] investigation
            or audit related to--
                              (i) any offense described in
                            paragraph (1) or in subsection (a); or
                              (ii) the use of funds received,
                            directly or indirectly, from any
                            Federal health care program (as defined
                            in section 1128B(f)).

               *       *       *       *       *       *       *

              (11) Failure to supply payment information.--Any
            individual or entity furnishing, ordering, referring
            for furnishing, or certifying the need for items or
            services for which payment may be made under title
            XVIII or a State health care program that fails to
            provide such information as the Secretary or the
            appropriate State agency finds necessary to determine
            whether such payments are or were due and the amounts
            thereof, or has refused to permit such examination of
            its records by or on behalf of the Secretary or that
            agency as may be necessary to verify such information.

               *       *       *       *       *       *       *

      (c) Notice, Effective Date, [and Period] Period, and Effect
    of Exclusion.--(1) * * *

               *       *       *       *       *       *       *

      (3)(A) * * *
      (B) Subject to subparagraph (G), in the case of an exclusion
    under subsection (a), the minimum period of exclusion shall be
    not less than five years, except that, upon the request of the
    administrator of a Federal health care program (as defined in
    section 1128B(f)) who determines that the exclusion would
    impose a hardship on [individuals entitled to benefits under
    part A of title XVIII or enrolled under part B of such title,
    or both] beneficiaries (as defined in section 1128A(i)(5)) of
    that program, the Secretary may, after consulting with the
    Inspector General of the Department of Health and Human
    Services, waive the exclusion under subsection (a)(1), (a)(3),
    or (a)(4) with respect to that program in the case of an
    individual or entity that is the sole community physician or
    sole source of essential specialized services in a community.
    The Secretary's decision whether to waive the exclusion shall
    not be reviewable.

               *       *       *       *       *       *       *

      (4)(A) For purposes of this Act, subject to subparagraph (C),
    the effect of exclusion is that no payment may be made by any
    Federal health care program (as defined in section 1128B(f))
    with respect to any item or service furnished--
              (i) by an excluded individual or entity; or
              (ii) at the medical direction or on the prescription
            of a physician or other authorized individual when the
            person submitting a claim for such item or service knew
            or had reason to know of the exclusion of such
            individual.
      (B) For purposes of this section and sections 1128A and
    1128B, subject to subparagraph (C), an item or service has been
    furnished by an individual or entity if the individual or
    entity directly or indirectly provided, ordered, manufactured,
    distributed, prescribed, or otherwise supplied the item or
    service regardless of how the item or service was paid for by a
    Federal health care program or to whom such payment was made.
      (C)(i) Payment may be made under a Federal health care
    program for emergency items or services (not including items or
    services furnished in an emergency room of a hospital)
    furnished by an excluded individual or entity, or at the
    medical direction or on the prescription of an excluded
    physician or other authorized individual during the period of
    such individual's exclusion.
      (ii) In the case that an individual eligible for benefits
    under title XVIII or XIX submits a claim for payment for items
    or services furnished by an excluded individual or entity, and
    such individual eligible for such benefits did not know or have
    reason to know that such excluded individual or entity was so
    excluded, then, notwithstanding such exclusion, payment shall
    be made for such items or services. In such case the Secretary
    shall notify such individual eligible for such benefits of the
    exclusion of the individual or entity furnishing the items or
    services. Payment shall not be made for items or services
    furnished by an excluded individual or entity to an individual
    eligible for such benefits after a reasonable time (as
    determined by the Secretary in regulations) after the Secretary
    has notified the individual eligible for such benefits of the
    exclusion of the individual or entity furnishing the items or
    services.
      (iii) In the case that a claim for payment for items or
    services furnished by an excluded individual or entity is
    submitted by an individual or entity other than an individual
    eligible for benefits under title XVIII or XIX or the excluded
    individual or entity, and the Secretary determines that the
    individual or entity that submitted the claim took reasonable
    steps to learn of the exclusion and reasonably relied upon
    inaccurate or misleading information from the relevant Federal
    health care program or its contractor, the Secretary may waive
    repayment of the amount paid in violation of the exclusion to
    the individual or entity that submitted the claim for the items
    or services furnished by the excluded individual or entity. If
    a Federal health care program contractor provided inaccurate or
    misleading information that resulted in the waiver of an
    overpayment under this clause, the Secretary shall take
    appropriate action to recover the improperly paid amount from
    the contractor.

               *       *       *       *       *       *       *

      (f) Notice, Hearing, and Judicial Review.--(1) * * *

               *       *       *       *       *       *       *

      (4) The provisions of subsections (d) and (e) of section 205
    shall apply with respect to this section to the same extent as
    they are applicable with respect to title II. The Secretary may
    delegate the authority granted by section 205(d) (as made
    applicable to this section) to the Inspector General of the
    Department of Health and Human Services or the Administrator of
    the Centers for Medicare & Medicaid Services for purposes of
    any investigation under this section.

               *       *       *       *       *       *       *

                            CIVIL MONETARY PENALTIES

      Sec. 1128A. (a) Any person (including an organization,
    agency, or other entity, but excluding a beneficiary, as
    defined in subsection (i)(5)) that--
              (1) knowingly presents or causes to be presented [to
            an officer, employee, or agent of the United States, or
            of any department or agency thereof, or of any State
            agency (as defined in subsection (i)(1))], a claim (as
            defined in subsection (i)(2)) that the Secretary
            determines--
                      (A) * * *

               *       *       *       *       *       *       *

                      (D) is for a medical or other item or service
                    furnished during a period in which the person
                    was excluded [from the program under which the
                    claim was made pursuant to a determination by
                    the Secretary under this section or under
                    section 1128, 1156, 1160(b) (as in effect on
                    September 2, 1982), 1862(d) (as in effect on
                    the date of the enactment of the Medicare and
                    Medicaid Patient and Program Protection Act of
                    1987), or 1866(b) or as a result of the
                    application of the provisions of section
                    1842(j)(2), or] under Federal law from the
                    Federal health care program under which the
                    claim was made, or

               *       *       *       *       *       *       *

              (4) in the case of a person who is not an
            organization, agency, or other entity, is excluded from
            [participating in a program under title XVIII or a
            State health care program] participating in a Federal
            health care program (as defined in section 1128B(f)) in
            accordance with this subsection or under section 1128
            and who, at the time of a violation of this
            subsection--
                      (A) retains a direct or indirect ownership or
                    control interest in an entity that is
                    participating in a program under [title XVIII
                    or a State health care program] a Federal
                    health care program (as defined in section
                    1128B(f)), and who knows or should know of the
                    action constituting the basis for the
                    exclusion; or

               *       *       *       *       *       *       *

              (6) arranges or contracts (by employment or
            otherwise) with an individual or entity that the person
            knows or should know is excluded from participation in
            a Federal health care program (as defined in section
            1128B(f)), for the provision of items or services for
            which payment may be made under such a program; [or]
              (7) commits an act described in paragraph (1) or (2)
            of section 1128B(b);
              (8) knowingly makes or causes to be made any false
            statement, omission, or misrepresentation of a material
            fact in any application, agreement, bid, or contract to
            participate or enroll as a provider of services or
            supplier under a Federal health care program, including
            managed care organizations under title XIX, Medicare
            Advantage organizations under part C of title XVIII,
            prescription drug plan sponsors under part D of title
            XVIII, and entities that apply to participate as
            providers of services or suppliers in such managed care
            organizations and such plans;
              (9) knowingly makes, uses, or causes to be made or
            used, a false record or statement material to a false
            or fraudulent claim for payment for items and services
            furnished under a Federal health care program;
              (10) fails to grant timely access, upon reasonable
            request (as defined by the Secretary in regulations),
            to the Inspector General of the Department of Health
            and Human Services, for the purpose of audits,
            investigations, evaluations, or other statutory
            functions of the Inspector General of the Department of
            Health and Human Services;
              (11) orders or prescribes an item or service,
            including without limitation home health care,
            diagnostic and clinical lab tests, prescription drugs,
            durable medical equipment, ambulance services, physical
            or occupational therapy, or any other item or service,
            during a period when the person has been excluded from
            participation in a Federal health care program, and the
            person knows or should know that a claim for such item
            or service will be presented to such a program;
              (12) conspires to commit a violation of this section;
            or
              (13) knowingly makes, uses, or causes to be made or
            used, a false record or statement material to an
            obligation to pay or transmit money or property to a
            Federal health care program, or knowingly conceals or
            knowingly and improperly avoids or decreases an
            obligation to pay or transmit money or property to a
            Federal health care program;
    shall be subject, in addition to any other penalties that may
    be prescribed by law, to a civil money penalty of not more than
    $10,000 for each item or service (or, in cases under paragraph
    (3), $15,000 for each individual with respect to whom false or
    misleading information was given; in cases under paragraph (4),
    $10,000 for each day the prohibited relationship occurs; [or in
    cases under paragraph (7), $50,000 for each such act)] in cases
    under paragraph (7), $50,000 for each such act, [or in cases
    under paragraph (8)] in cases under paragraph (8), $50,000 for
    each false statement, omission, or misrepresentation of a
    [material fact)] a material fact, in cases under paragraph (9),
    $50,000 for each false record or statement, or in cases under
    paragraph (10), $15,000 for each day of the failure described
    in such paragraph, in cases under paragraph (11), $50,000 for
    each order or prescription for an item or service by an
    excluded individual, in cases under paragraph (12), $50,000 for
    any violation described in this section committed in
    furtherance of the conspiracy involved; or in cases under
    paragraph (13), $50,000 for each false record or statement, or
    concealment, avoidance, or decrease). In addition, such a
    person shall be subject to an assessment of not more than 3
    times the amount claimed for each such item or service in lieu
    of damages sustained by the United States or a State agency
    because of such claim (or, in cases under paragraph (7),
    damages of not more than 3 times the total amount of
    remuneration offered, paid, solicited, or received, without
    regard to whether a portion of such remuneration was offered,
    paid, solicited, or received [for a lawful purpose)] for a
    lawful purpose, in cases under paragraph (8), an assessment of
    not more than 3 times the amount claimed as the result of the
    false statement, omission, or misrepresentation of material
    fact claimed by a provider of services or supplier whose
    application to participate contained such false statement or
    misrepresentation, in cases under paragraph (12), an assessment
    of not more than 3 times the total amount that would otherwise
    apply for any violation described in this section committed in
    furtherance of the conspiracy involved, or in cases under
    paragraph (13), an assessment of not more than 3 times the
    total amount of the obligation to which the false record or
    statement was material or that was avoided or decreased). In
    addition the Secretary may make a determination in the same
    proceeding to exclude the person from participation in the
    Federal health care programs (as defined in section
    1128B(f)(1)) and to direct the appropriate State agency to
    exclude the person from participation in any State health care
    program.

               *       *       *       *       *       *       *

      (c)(1) The Secretary may initiate a proceeding to determine
    whether to impose a civil money penalty, assessment, or
    exclusion under subsection (a) or (b) only as authorized by the
    Attorney General pursuant to procedures agreed upon by them.
    The Secretary may not initiate an action under this section
    with respect to any claim, request for payment, or other
    occurrence described in this section later than [six years] 10
    years after the date the claim was presented, the request for
    payment was made, or the occurrence took place. The Secretary
    may initiate an action under this section by serving notice of
    the action in any manner authorized by Rule 4 of the Federal
    Rules of Civil Procedure.

               *       *       *       *       *       *       *

      (i) For the purposes of this section:
              (1) * * *
              [(2) The term ``claim'' means an application for
            payments for items and services under a Federal health
            care program (as defined in section 1128B(f)).
              [(3) The term ``item or service'' includes (A) any
            particular item, device, medical supply, or service
            claimed to have been provided to a patient and listed
            in an itemized claim for payment, and (B) in the case
            of a claim based on costs, any entry in the cost
            report, books of account or other documents sup-
            porting such claim.]
              (2) The term ``claim'' means any application,
            request, or demand, whether under contract, or
            otherwise, for money or property for items and services
            under a Federal health care program (as defined in
            section 1128B(f)), whether or not the United States or
            a State agency has title to the money or property,
            that--
                      (A) is presented or caused to be presented to
                    an officer, employee, or agent of the United
                    States, or of any department or agency thereof,
                    or of any State agency (as defined in
                    subsection (i)(1)); or
                      (B) is made to a contractor, grantee, or
                    other recipient if the money or property is to
                    be spent or used on the Federal health care
                    program's behalf or to advance a Federal health
                    care program interest, and if the Federal
                    health care program--
                              (i) provides or has provided any
                            portion of the money or property
                            requested or demanded; or
                              (ii) will reimburse such contractor,
                            grantee, or other recipient for any
                            portion of the money or property which
                            is requested or demanded.
              (3) The term ``item or service'' means, without
            limitation, any medical, social, management,
            administrative, or other item or service used in
            connection with or directly or indirectly related to a
            Federal health care program.

               *       *       *       *       *       *       *

              (6) The term ``remuneration'' includes the waiver of
            coinsurance and deductible amounts (or any part
            thereof), and transfers of items or services for free
            or for other than fair market value. The term
            ``remuneration'' does not include--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) differentials in coinsurance and
                    deductible amounts as part of a benefit plan
                    design as long as the differentials have been
                    disclosed in writing to all beneficiaries,
                    third party payers, and providers, to whom
                    claims are presented and as long as the
                    differentials meet the standards as defined in
                    regulations promulgated by the Secretary not
                    later than 180 days after the date of the
                    enactment of the Health Insurance Portability
                    and Accountability Act of 1996; [or]
                      (D) incentives given to individuals to
                    promote the delivery of preventive care as
                    determined by the Secretary in regulations so
                    promulgated[.]; or
                      [(D)] (E) a reduction in the copayment amount
                    for covered OPD services under section
                    1833(t)(5)(B).
              [(7) The term ``should know'' means that a person,
            with respect to information--
                      [(A) acts in deliberate ignorance of the
                    truth or falsity of the information; or
                      [(B) acts in reckless disregard of the truth
                    or falsity of the information,
            and no proof of specific intent to defraud is
            required.]
              (7) The terms ``knowing'', ``knowingly'', and
            ``should know'' mean that a person, with respect to
            information--
                      (A) has actual knowledge of the information;
                      (B) acts in deliberate ignorance of the truth
                    or falsity of the information; or
                      (C) acts in reckless disregard of the truth
                    or falsity of the information;
            and require no proof of specific intent to defraud.
              (8) The term ``obligation'' means an established
            duty, whether or not fixed, arising from an express or
            implied contractual, grantor-grantee, or licensor-
            licensee relationship, from a fee-based or similar
            relationship, from statute or regulation, or from the
            retention of any overpayment.
              (9) The term ``material'' means having a natural
            tendency to influence, or be capable of influencing,
            the payment or receipt of money or property.

               *       *       *       *       *       *       *

                        FRAUD AND ABUSE CONTROL PROGRAM

      Sec. 1128C. (a) Establishment of Program.--
              (1) In general.--Not later than January 1, 1997, the
            Secretary, acting through the Office of the Inspector
            General of the Department of Health and Human Services,
            and the Attorney General shall establish a program--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) to facilitate the enforcement of the
                    provisions of sections 1128, 1128A, and 1128B
                    and other statutes applicable to health care
                    fraud and abuse, and
                      (D) to provide for the modification and
                    establishment of safe harbors and to issue
                    advisory opinions and special fraud alerts
                    pursuant to section 1128D[, and].
                      [(E) to provide for the reporting and
                    disclosure of certain final adverse actions
                    against health care providers, suppliers, or
                    practitioners pursuant to the data collection
                    system established under section 1128E.]

               *       *       *       *       *       *       *

              HEALTH CARE FRAUD AND ABUSE DATA COLLECTION PROGRAM

      Sec. 1128E. (a) General Purpose.--[Not later than] Subject to
    subsection (h), not later than January 1, 1997, the Secretary
    shall establish a national health care fraud and abuse data
    collection program for the reporting of final adverse actions
    (not including settlements in which no findings of liability
    have been made) against health care providers, suppliers, or
    practitioners as required by subsection (b), with access as set
    forth in subsection (c), and shall maintain a database of the
    information collected under this section.

               *       *       *       *       *       *       *

      (d) Access to Reported Information.--
              (1) * * *
              (2) Fees for disclosure.--The Secretary may establish
            or approve reasonable fees for the disclosure of
            information in such database [(other than with respect
            to requests by Federal agencies)]. The amount of such a
            fee shall be sufficient to recover the full costs of
            operating the database. Such fees shall be available to
            the Secretary or, in the Secretary's discretion to the
            agency designated under this section to cover such
            costs.

               *       *       *       *       *       *       *

      (h) Sunset of the Healthcare Integrity and Protection Data
    Bank; Transition Process.--Effective upon the enactment of this
    subsection, the Secretary shall implement a process to
    eliminate duplication between the Healthcare Integrity and
    Protection Data Bank (in this subsection referred to as the
    ``HIPDB'' established pursuant to subsection (a) and the
    National Practitioner Data Bank (in this subsection referred to
    as the ``NPDB'') as implemented under the Health Care Quality
    Improvement Act of 1986 and section 1921 of this Act, including
    systems testing necessary to ensure that information formerly
    collected in the HIPDB will be accessible through the NPDB, and
    other activities necessary to eliminate duplication between the
    two data banks. Upon the completion of such process,
    notwithstanding any other provision of law, the Secretary shall
    cease the operation of the HIPDB and shall collect information
    required to be reported under the preceding provisions of this
    section in the NPDB. Except as otherwise provided in this
    subsection, the provisions of subsections (a) through (g) shall
    continue to apply with respect to the reporting of (or failure
    to report), access to, and other treatment of the information
    specified in this section.

               *       *       *       *       *       *       *

    SEC. 1128G. ENHANCED PROGRAM AND PROVIDER PROTECTIONS IN THE MEDICARE,
                        MEDICAID, AND CHIP PROGRAMS.

      (a) Certain Authorized Screening, Enhanced Oversight Periods,
    and Enrollment Moratoria.--
              (1) In general.--For periods beginning after January
            1, 2011, in the case that the Secretary determines
            there is a significant risk of fraudulent activity (as
            determined by the Secretary based on relevant
            complaints, reports, referrals by law enforcement or
            other sources, data analysis, trending information, or
            claims submissions by providers of services and
            suppliers) with respect to a category of provider of
            services or supplier of items or services, including a
            category within a geographic area, under title XVIII,
            XIX, or XXI, the Secretary may impose any of the
            following requirements with respect to a provider of
            services or a supplier (whether such provider or
            supplier is initially enrolling in the program or is
            renewing such enrollment):
                      (A) Screening under paragraph (2).
                      (B) Enhanced oversight periods under
                    paragraph (3).
                      (C) Enrollment moratoria under paragraph (4).
            In applying this subsection for purposes of title XIX
            and XXI the Secretary may require a State to carry out
            the provisions of this subsection as a requirement of
            the State plan under title XIX or the child health plan
            under title XXI. Actions taken and determinations made
            under this subsection shall not be subject to review by
            a judicial tribunal.
              (2) Screening.--For purposes of paragraph (1), the
            Secretary shall establish procedures under which
            screening is conducted with respect to providers of
            services and suppliers described in such paragraph.
            Such screening may include--
                      (A) licensing board checks;
                      (B) screening against the list of individuals
                    and entities excluded from the program under
                    title XVIII, XIX, or XXI;
                      (C) the excluded provider list system;
                      (D) background checks; and
                      (E) unannounced pre-enrollment or other site
                    visits.
              (3) Enhanced oversight period.--For purposes of
            paragraph (1), the Secretary shall establish procedures
            to provide for a period of not less than 30 days and
            not more than 365 days during which providers of
            services and suppliers described in such paragraph, as
            the Secretary determines appropriate, would be subject
            to enhanced oversight, such as required or unannounced
            (or required and unannounced) site visits or
            inspections, prepayment review, enhanced review of
            claims, and such other actions as specified by the
            Secretary, under the programs under titles XVIII, XIX,
            and XXI. Under such procedures, the Secretary may
            extend such period for more than 365 days if the
            Secretary determines that after the initial period such
            additional period of oversight is necessary.
              (4) Moratorium on enrollment of providers and
            suppliers.--For purposes of paragraph (1), the
            Secretary, based upon a finding of a risk of serious
            ongoing fraud within a program under title XVIII, XIX,
            or XXI, may impose a moratorium on the enrollment of
            providers of services and suppliers within a category
            of providers of services and suppliers (including a
            category within a specific geographic area) under such
            title. Such a moratorium may only be imposed if the
            Secretary makes a determination that the moratorium
            would not adversely impact access of individuals to
            care under such program.
              (5) Clarification.--Nothing in this subsection shall
            be interpreted to preclude or limit the ability of a
            State to engage in provider screening or enhanced
            provider oversight activities beyond those required by
            the Secretary.
      (b) Enhanced Program Disclosure Requirements.--
              (1) Disclosure.--A provider of services or supplier
            who submits on or after July 1, 2011, an application
            for enrollment and renewing enrollment in a program
            under title XVIII, XIX, or XXI shall disclose (in a
            form and manner determined by the Secretary) any
            current affiliation or affiliation within the previous
            10-year period with a provider of services or supplier
            that has uncollected debt or with a person or entity
            that has been suspended or excluded under such program,
            subject to a payment suspension, or has had its billing
            privileges revoked.
              (2) Enhanced safeguards.--If the Secretary determines
            that such previous affiliation of such provider or
            supplier poses a risk of fraud, waste, or abuse, the
            Secretary may apply such enhanced safeguards as the
            Secretary determines necessary to reduce such risk
            associated with such provider or supplier enrolling or
            participating in the program under title XVIII, XIX, or
            XXI. Such safeguards may include enhanced oversight,
            such as enhanced screening of claims, required or
            unannounced (or required and unannounced) site visits
            or inspections, additional information reporting
            requirements, and conditioning such enrollment on the
            provision of a surety bond.
              (3) Authority to deny participation.--If the
            Secretary determines that there has been at least one
            such affiliation and that such affiliation or
            affiliations, as applicable, of such provider or
            supplier poses a serious risk of fraud, waste, or
            abuse, the Secretary may deny the application of such
            provider or supplier.
      (c) Reports on and Repayment of Overpayments Identified
    Through Internal Audits and Reviews.--
              (1) Reporting and returning overpayments.--If a
            person knows of an overpayment, the person must--
                      (A) report and return the overpayment to the
                    Secretary, the State, an intermediary, a
                    carrier, or a contractor, as appropriate, at
                    the correct address, and
                      (B) notify the Secretary, the State,
                    intermediary, carrier, or contractor to whom
                    the overpayment was returned in writing of the
                    reason for the overpayment.
              (2) Timing.--An overpayment must be reported and
            returned under paragraph (1)(A) by not later than the
            date that is 60 days after the date the person knows of
            the overpayment.
            Any known overpayment retained later than the
            applicable date specified in this paragraph creates an
            obligation as defined in section 3729(b)(3) of title 31
            of the United States Code.
              (3) Clarification.--Repayment of any overpayments (or
            refunding by withholding of future payments) by a
            provider of services or supplier does not otherwise
            limit the provider or supplier's potential liability
            for administrative obligations such as applicable
            interests, fines, and specialties or civil or criminal
            sanctions involving the same claim if it is determined
            later that the reason for the overpayment was related
            to fraud by the provider or supplier or the employees
            or agents of such provider or supplier.
              (4) Definitions.--In this subsection:
                      (A) Knows.--The term ``knows'' has the
                    meaning given the terms ``knowing'' and
                    ``knowingly'' in section 3729(b) of title 31 of
                    the United States Code.
                      (B) Overpayment.--The term ``overpayment''
                    means any finally determined funds that a
                    person receives or retains under title XVIII,
                    XIX, or XXI to which the person, after
                    applicable reconciliation, is not entitled
                    under such title.
                      (C) Person.--The term ``person'' means a
                    provider of services, supplier, Medicaid
                    managed care organization (as defined in
                    section 1903(m)(1)(A)), Medicare Advantage
                    organization (as defined in section
                    1859(a)(1)), or PDP sponsor (as defined in
                    section 1860D-41(a)(13)), but excluding a
                    beneficiary.
      (d) Access to Information Necessary to Identify Fraud, Waste,
    and Abuse.--For purposes of law enforcement activity, and to
    the extent consistent with applicable disclosure, privacy, and
    security laws, including the Health Insurance Portability and
    Accountability Act of 1996 and the Privacy Act of 1974, and
    subject to any information systems security requirements
    enacted by law or otherwise required by the Secretary, the
    Attorney General shall have access, facilitation by the
    Inspector General of the Department of Health and Human
    Services, to claims and payment data relating to titles XVIII
    and XIX, in consultation with the Centers for Medicare &
    Medicaid Services or the owner of such data.

    SEC. 1128H. FINANCIAL REPORTS ON PHYSICIANS' FINANCIAL RELATIONSHIPS
                        WITH MANUFACTURERS AND DISTRIBUTORS OF COVERED
                        DRUGS, DEVICES, BIOLOGICALS, OR MEDICAL SUPPLIES
                        UNDER MEDICARE, MEDICAID, OR CHIP AND WITH ENTITIES
                        THAT BILL FOR SERVICES UNDER MEDICARE.

      (a) Reporting of Payments or Other Transfers of Value.--
              (1) In general.--Except as provided in this
            subsection, not later than March 31, 2011 and annually
            thereafter, each applicable manufacturer or distributor
            that provides a payment or other transfer of value to a
            covered recipient, or to an entity or individual at the
            request of or designated on behalf of a covered
            recipient, shall submit to the Secretary, in such
            electronic form as the Secretary shall require, the
            following information with respect to the preceding
            calendar year:
                      (A) With respect to the covered recipient,
                    the recipient's name, business address,
                    physician specialty, and national provider
                    identifier.
                      (B) With respect to the payment or other
                    transfer of value, other than a drug sample--
                              (i) its value and date;
                              (ii) the name of the related drug,
                            device, or supply, if available; and
                              (iii) a description of its form,
                            indicated (as appropriate for all that
                            apply) as--
                                      (I) cash or a cash
                                    equivalent;
                                      (II) in-kind items or
                                    services;
                                      (III) stock, a stock option,
                                    or any other ownership
                                    interest, dividend, profit, or
                                    other return on investment; or
                                      (IV) any other form (as
                                    defined by the Secretary).
                      (C) With respect to a drug sample, the name,
                    number, date, and dosage units of the sample.
              (2) Aggregate reporting.--Information submitted by an
            applicable manufacturer or distributor under paragraph
            (1) shall include the aggregate amount of all payments
            or other transfers of value provided by the
            manufacturer or distributor to covered recipients (and
            to entities or individuals at the request of or
            designated on behalf of a covered recipient) during the
            year involved, including all payments and transfers of
            value regardless of whether such payments or transfer
            of value were individually disclosed.
              (3) Special rule for certain payments or other
            transfers of value.--In the case where an applicable
            manufacturer or distributor provides a payment or other
            transfer of value to an entity or individual at the
            request of or designated on behalf of a covered
            recipient, the manufacturer or distributor shall
            disclose that payment or other transfer of value under
            the name of the covered recipient.
              (4) Delayed reporting for payments made pursuant to
            product development agreements.--In the case of a
            payment or other transfer of value made to a covered
            recipient by an applicable manufacturer or distributor
            pursuant to a product development agreement for
            services furnished in connection with the development
            of a new drug, device, biological, or medical supply,
            the applicable manufacturer or distributor may report
            the value and recipient of such payment or other
            transfer of value in the first reporting period under
            this subsection in the next reporting deadline after
            the earlier of the following:
                      (A) The date of the approval or clearance of
                    the covered drug, device, biological, or
                    medical supply by the Food and Drug
                    Administration.
                      (B) Two calendar years after the date such
                    payment or other transfer of value was made.
              (5) Delayed reporting for payments made pursuant to
            clinical investigations.--In the case of a payment or
            other transfer of value made to a covered recipient by
            an applicable manufacturer or distributor in connection
            with a clinical investigation regarding a new drug,
            device, biological, or medical supply, the applicable
            manufacturer or distributor may report as required
            under this section in the next reporting period under
            this subsection after the earlier of the following:
                      (A) The date that the clinical investigation
                    is registered on the website maintained by the
                    National Institutes of Health pursuant to
                    section 671 of the Food and Drug Administration
                    Amendments Act of 2007.
                      (B) Two calendar years after the date such
                    payment or other transfer of value was made.
              (6) Confidentiality.--Information described in
            paragraph (4) or (5) shall be considered confidential
            and shall not be subject to disclosure under section
            552 of title 5, United States Code, or any other
            similar Federal, State, or local law, until or after
            the date on which the information is made available to
            the public under such paragraph.
      (b) Reporting of Ownership Interest by Physicians in
    Hospitals and Other Entities That Bill Medicare.--Not later
    than March 31 of each year (beginning with 2011), each hospital
    or other health care entity (not including a Medicare Advantage
    organization) that bills the Secretary under part A or part B
    of title XVIII for services shall report on the ownership
    shares (other than ownership shares described in section
    1877(c)) of each physician who, directly or indirectly, owns an
    interest in the entity. In this subsection, the term
    ``physician'' includes a physician's immediate family members
    (as defined for purposes of section 1877(a)).
      (c) Public Availability.--
              (1) In general.--The Secretary shall establish
            procedures to ensure that, not later than September 30,
            2011, and on June 30 of each year beginning thereafter,
            the information submitted under subsections (a) and
            (b), other than information regard drug samples, with
            respect to the preceding calendar year is made
            available through an Internet website that--
                      (A) is searchable and is in a format that is
                    clear and understandable;
                      (B) contains information that is presented by
                    the name of the applicable manufacturer or
                    distributor, the name of the covered recipient,
                    the business address of the covered recipient,
                    the specialty (if applicable) of the covered
                    recipient, the value of the payment or other
                    transfer of value, the date on which the
                    payment or other transfer of value was provided
                    to the covered recipient, the form of the
                    payment or other transfer of value, indicated
                    (as appropriate) under subsection
                    (a)(1)(B)(ii), the nature of the payment or
                    other transfer of value, indicated (as
                    appropriate) under subsection (a)(1)(B)(iii),
                    and the name of the covered drug, device,
                    biological, or medical supply, as applicable;
                      (C) contains information that is able to be
                    easily aggregated and downloaded;
                      (D) contains a description of any enforcement
                    actions taken to carry out this section,
                    including any penalties imposed under
                    subsection (d), during the preceding year;
                      (E) contains background information on
                    industry-physician relationships;
                      (F) in the case of information submitted with
                    respect to a payment or other transfer of value
                    described in subsection (a)(5), lists such
                    information separately from the other
                    information submitted under subsection (a) and
                    designates such separately listed information
                    as funding for clinical research;
                      (G) contains any other information the
                    Secretary determines would be helpful to the
                    average consumer; and
                      (H) provides the covered recipient an
                    opportunity to submit corrections to the
                    information made available to the public with
                    respect to the covered recipient.
              (2) Accuracy of reporting.--The accuracy of the
            information that is submitted under subsections (a) and
            (b) and made available under paragraph (1) shall be the
            responsibility of the applicable manufacturer or
            distributor of a covered drug, device, biological, or
            medical supply reporting under subsection (a) or
            hospital or other health care entity reporting
            physician ownership under subsection (b). The Secretary
            shall establish procedures to ensure that the covered
            recipient is provided with an opportunity to submit
            corrections to the manufacturer, distributor, hospital,
            or other entity reporting under subsection (a) or (b)
            with regard to information made public with respect to
            the covered recipient and, under such procedures, the
            corrections shall be transmitted to the Secretary.
              (3) Special rule for drug samples.--Information
            relating to drug samples provided under subsection (a)
            shall not be made available to the public by the
            Secretary but may be made available outside the
            Department of Health and Human Services by the
            Secretary for research or legitimate business purposes
            pursuant to data use agreements.
              (4) Special rule for national provider identifiers.--
            Information relating to national provider identifiers
            provided under subsection (a) shall not be made
            available to the public by the Secretary but may be
            made available outside the Department of Health and
            Human Services by the Secretary for research or
            legitimate business purposes pursuant to data use
            agreements.
      (d) Penalties for Noncompliance.--
              (1) Failure to report.--
                      (A) In general.--Subject to subparagraph (B),
                    except as provided in paragraph (2), any
                    applicable manufacturer or distributor that
                    fails to submit information required under
                    subsection (a) in a timely manner in accordance
                    with regulations promulgated to carry out such
                    subsection, and any hospital or other entity
                    that fails to submit information required under
                    subsection (b) in a timely manner in accordance
                    with regulations promulgated to carry out such
                    subsection shall be subject to a civil money
                    penalty of not less than $1,000, but not more
                    than $10,000, for each payment or other
                    transfer of value or ownership or investment
                    interest not reported as required under such
                    subsection. Such penalty shall be imposed and
                    collected in the same manner as civil money
                    penalties under subsection (a) of section 1128A
                    are imposed and collected under that section.
                      (B) Limitation.--The total amount of civil
                    money penalties imposed under subparagraph (A)
                    with respect to each annual submission of
                    information under subsection (a) by an
                    applicable manufacturer or distributor or other
                    entity shall not exceed $150,000.
              (2) Knowing failure to report.--
                      (A) In general.--Subject to subparagraph (B),
                    any applicable manufacturer or distributor that
                    knowingly fails to submit information required
                    under subsection (a) in a timely manner in
                    accordance with regulations promulgated to
                    carry out such subsection and any hospital or
                    other entity that fails to submit information
                    required under subsection (b) in a timely
                    manner in accordance with regulations
                    promulgated to carry out such subsection, shall
                    be subject to a civil money penalty of not less
                    than $10,000, but not more than $100,000, for
                    each payment or other transfer of value or
                    ownership or investment interest not reported
                    as required under such subsection. Such penalty
                    shall be imposed and collected in the same
                    manner as civil money penalties under
                    subsection (a) of section 1128A are imposed and
                    collected under that section.
                      (B) Limitation.--The total amount of civil
                    money penalties imposed under subparagraph (A)
                    with respect to each annual submission of
                    information under subsection (a) or (b) by an
                    applicable manufacturer, distributor, or entity
                    shall not exceed $1,000,000, or, if greater,
                    0.1 percentage of the total annual revenues of
                    the manufacturer, distributor, or entity.
              (3) Use of funds.--Funds collected by the Secretary
            as a result of the imposition of a civil money penalty
            under this subsection shall be used to carry out this
            section.
              (4) Enforcement through state attorneys general.--The
            attorney general of a State, after providing notice to
            the Secretary of an intent to proceed under this
            paragraph in a specific case and providing the
            Secretary with an opportunity to bring an action under
            this subsection and the Secretary declining such
            opportunity, may proceed under this subsection against
            a manufacturer or distributor in the State.
      (e) Annual Report to Congress.--Not later than April 1 of
    each year beginning with 2011, the Secretary shall submit to
    Congress a report that includes the following:
              (1) The information submitted under this section
            during the preceding year, aggregated for each
            applicable manufacturer or distributor of a covered
            drug, device, biological, or medical supply that
            submitted such information during such year.
              (2) A description of any enforcement actions taken to
            carry out this section, including any penalties imposed
            under subsection (d), during the preceding year.
      (f) Definitions.--In this section:
              (1) Applicable manufacturer; applicable
            distributor.--The term ``applicable manufacturer''
            means a manufacturer of a covered drug, device,
            biological, or medical supply, and the term
            ``applicable distributor'' means a distributor of a
            covered drug, device, or medical supply.
              (2) Clinical investigation.--The term ``clinical
            investigation'' means any experiment involving one or
            more human subjects, or materials derived from human
            subjects, in which a drug or device is administered,
            dispensed, or used.
              (3) Covered drug, device, biological, or medical
            supply.--The term ``covered'' means, with respect to a
            drug, device, biological, or medical supply, such a
            drug, device, biological, or medical supply for which
            payment is available under title XVIII or a State plan
            under title XIX or XXI (or a waiver of such a plan).
              (4) Covered recipient.--The term ``covered
            recipient'' means the following:
                      (A) A physician.
                      (B) A physician group practice.
                      (C) Any other prescriber of a covered drug,
                    device, biological, or medical supply.
                      (D) A pharmacy or pharmacist.
                      (E) A health insurance issuer, group health
                    plan, or other entity offering a health
                    benefits plan, including any employee of such
                    an issuer, plan, or entity.
                      (F) A pharmacy benefit manager, including any
                    employee of such a manager.
                      (G) A hospital.
                      (H) A medical school.
                      (I) A sponsor of a continuing medical
                    education program.
                      (J) A patient advocacy or disease specific
                    group.
                      (K) A organization of health care
                    professionals.
                      (L) A biomedical researcher.
                      (M) A group purchasing organization.
              (5) Distributor of a covered drug, device, or medical
            supply.--The term ``distributor of a covered drug,
            device, or medical supply'' means any entity which is
            engaged in the marketing or distribution of a covered
            drug, device, or medical supply (or any subsidiary of
            or entity affiliated with such entity), but does not
            include a wholesale pharmaceutical distributor.
              (6) Employee.--The term ``employee'' has the meaning
            given such term in section 1877(h)(2).
              (7) Knowingly.--The term ``knowingly'' has the
            meaning given such term in section 3729(b) of title 31,
            United States Code.
              (8) Manufacturer of a covered drug, device,
            biological, or medical supply.--The term ``manufacturer
            of a covered drug, device, biological, or medical
            supply'' means any entity which is engaged in the
            production, preparation, propagation, compounding,
            conversion, processing, marketing, or distribution of a
            covered drug, device, biological, or medical supply (or
            any subsidiary of or entity affiliated with such
            entity).
              (9) Payment or other transfer of value.--
                      (A) In general.--The term ``payment or other
                    transfer of value'' means a transfer of
                    anything of value for or of any of the
                    following:
                              (i) Gift, food, or entertainment.
                              (ii) Travel or trip.
                              (iii) Honoraria.
                              (iv) Research funding or grant.
                              (v) Education or conference funding.
                              (vi) Consulting fees.
                              (vii) Ownership or investment
                            interest and royalties or license fee.
                      (B) Inclusions.--Subject to subparagraph (C),
                    the term ``payment or other transfer of value''
                    includes any compensation, gift, honorarium,
                    speaking fee, consulting fee, travel, services,
                    dividend, profit distribution, stock or stock
                    option grant, or any ownership or investment
                    interest held by a physician in a manufacturer
                    (excluding a dividend or other profit
                    distribution from, or ownership or investment
                    interest in, a publicly traded security or
                    mutual fund (as described in section 1877(c))).
                      (C) Exclusions.--The term ``payment or other
                    transfer of value'' does not include the
                    following:
                              (i) Any payment or other transfer of
                            value provided by an applicable
                            manufacturer or distributor to a
                            covered recipient where the amount
                            transferred to, requested by, or
                            designated on behalf of the covered
                            recipient does not exceed $5.
                              (ii) The loan of a covered device for
                            a short-term trial period, not to
                            exceed 90 days, to permit evaluation of
                            the covered device by the covered
                            recipient.
                              (iii) Items or services provided
                            under a contractual warranty, including
                            the replacement of a covered device,
                            where the terms of the warranty are set
                            forth in the purchase or lease
                            agreement for the covered device.
                              (iv) A transfer of anything of value
                            to a covered recipient when the covered
                            recipient is a patient and not acting
                            in the professional capacity of a
                            covered recipient.
                              (v) In-kind items used for the
                            provision of charity care.
                              (vi) A dividend or other profit
                            distribution from, or ownership or
                            investment interest in, a publicly
                            traded security and mutual fund (as
                            described in section 1877(c)).
                              (vii) Compensation paid by a
                            manufacturer or distributor of a
                            covered drug, device, biological, or
                            medical supply to a covered recipient
                            who is directly employed by and works
                            solely for such manufacturer or
                            distributor.
                              (viii) Any discount or cash rebate.
              (10) Physician.--The term ``physician'' has the
            meaning given that term in section 1861(r). For
            purposes of this section, such term does not include a
            physician who is an employee of the applicable
            manufacturer that is required to submit information
            under subsection (a).
      (g) Annual Reports to States.--Not later than April 1 of each
    year beginning with 2011, the Secretary shall submit to States
    a report that includes a summary of the information submitted
    under subsections (a) and (d) during the preceding year with
    respect to covered recipients or other hospitals and entities
    in the State.
      (h) Relation to State Laws.--
              (1) In general.--Effective on January 1, 2011,
            subject to paragraph (2), the provisions of this
            section shall preempt any law or regulation of a State
            or of a political subdivision of a State that requires
            an applicable manufacturer and applicable distributor
            (as such terms are defined in subsection (f)) to
            disclose or report, in any format, the type of
            information (described in subsection (a)) regarding a
            payment or other transfer of value provided by the
            manufacturer to a covered recipient (as so defined).
              (2) No preemption of additional requirements.--
            Paragraph (1) shall not preempt any law or regulation
            of a State or of a political subdivision of a State
            that requires any of the following:
                      (A) The disclosure or reporting of
                    information not of the type required to be
                    disclosed or reported under this section.
                      (B) The disclosure or reporting, in any
                    format, of the type of information required to
                    be disclosed or reported under this section to
                    a Federal, State, or local governmental agency
                    for public health surveillance, investigation,
                    or other public health purposes or health
                    oversight purposes.
                      (C) The discovery or admissibility of
                    information described in this section in a
                    criminal, civil, or administrative proceeding.

               *       *       *       *       *       *       *

    SEC. 1138A. REQUIREMENT FOR PUBLIC REPORTING BY HOSPITALS AND
                        AMBULATORY SURGICAL CENTERS ON HEALTH CARE-
                        ASSOCIATED INFECTIONS.

      (a) Reporting Requirement.--
              (1) In general.--The Secretary shall provide that a
            hospital (as defined in subsection (g)) or ambulatory
            surgical center meeting the requirements of titles
            XVIII or XIX may participate in the programs
            established under such titles (pursuant to the
            applicable provisions of law, including sections
            1866(a)(1) and 1832(a)(1)(F)(i)) only if, in accordance
            with this section, the hospital or center reports such
            information on health care-associated infections that
            develop in the hospital or center (and such demographic
            information associated with such infections) as the
            Secretary specifies.
              (2) Reporting protocols.-- Such information shall be
            reported in accordance with reporting protocols
            established by the Secretary through the Director of
            the Centers for Disease Control and Prevention (in this
            section referred to as the ``CDC'') and to the National
            Healthcare Safety Network of the CDC or under such
            another reporting system of such Centers as determined
            appropriate by the Secretary in consultation with such
            Director.
              (3) Coordination with hit.--The Secretary, through
            the Director of the CDC and the Office of the National
            Coordinator for Health Information Technology, shall
            ensure that the transmission of information under this
            subsection is coordinated with systems established
            under the HITECH Act, where appropriate.
              (4) Procedures to ensure the validity of
            information.--The Secretary shall establish procedures
            regarding the validity of the information submitted
            under this subsection in order to ensure that such
            information is appropriately compared across hospitals
            and centers. Such procedures shall address failures to
            report as well as errors in reporting.
              (5) Implementation.--Not later than 1 year after the
            date of enactment of this section, the Secretary,
            through the Director of CDC, shall promulgate
            regulations to carry out this section.
      (b) Public Posting of Information.--The Secretary shall
    promptly post, on the official public Internet site of the
    Department of Health and Human Services, the information
    reported under subsection (a). Such information shall be set
    forth in a manner that allows for the comparison of information
    on health care-associated infections--
              (1) among hospitals and ambulatory surgical centers;
            and
              (2) by demographic information.
      (c) Annual Report to Congress.--On an annual basis the
    Secretary shall submit to the Congress a report that summarizes
    each of the following:
              (1) The number and types of health care-associated
            infections reported under subsection (a) in hospitals
            and ambulatory surgical centers during such year.
              (2) Factors that contribute to the occurrence of such
            infections, including health care worker immunization
            rates.
              (3) Based on the most recent information available to
            the Secretary on the composition of the professional
            staff of hospitals and ambulatory surgical centers, the
            number of certified infection control professionals on
            the staff of hospitals and ambulatory surgical centers.
              (4) The total increases or decreases in health care
            costs that resulted from increases or decreases in the
            rates of occurrence of each such type of infection
            during such year.
              (5) Recommendations, in coordination with the Center
            for Quality Improvement established under section 931
            of the Public Health Service Act, for best practices to
            eliminate the rates of occurrence of each such type of
            infection in hospitals and ambulatory surgical centers.
      (d) Non-Preemption of State Laws.--Nothing in this section
    shall be construed as preempting or otherwise affecting any
    provision of State law relating to the disclosure of
    information on health care-associated infections or patient
    safety procedures for a hospital or ambulatory surgical center.
      (e) Health Care-Associated Infection.--For purposes of this
    section:
              (1) In general.--The term ``health care-associated
            infection'' means an infection that develops in a
            patient who has received care in any institutional
            setting where health care is delivered and is related
            to receiving health care.
              (2) Related to receiving health care.--The term
            ``related to receiving health care'', with respect to
            an infection, means that the infection was not
            incubating or present at the time health care was
            provided.
      (f) Application to Critical Access Hospitals.--For purposes
    of this section, the term ``hospital'' includes a critical
    access hospital, as defined in section 1861(mm)(1).

               *       *       *       *       *       *       *

            IMPROVED COORDINATION AND PROTECTION FOR DUAL ELIGIBLES

      Sec. 1150A. (a) In General.--The Secretary shall provide,
    through an identifiable office or program within the Centers
    for Medicare & Medicaid Services, for a focused effort to
    provide for improved coordination between Medicare and Medicaid
    and protection in the case of dual eligibles (as defined in
    subsection (e)). The office or program shall--
              (1) review Medicare and Medicaid policies related to
            enrollment, benefits, service delivery, payment, and
            grievance and appeals processes under parts A and B of
            title XVIII, under the Medicare Advantage program under
            part C of such title, and under title XIX;
              (2) identify areas of such policies where better
            coordination and protection could improve care and
            costs; and
              (3) issue guidance to States regarding improving such
            coordination and protection.
      (b) Elements.--The improved coordination and protection under
    this section shall include efforts--
              (1) to simplify access of dual eligibles to benefits
            and services under Medicare and Medicaid;
              (2) to improve care continuity for dual eligibles and
            ensure safe and effective care transitions;
              (3) to harmonize regulatory conflicts between
            Medicare and Medicaid rules with regard to dual
            eligibles; and
              (4) to improve total cost and quality performance
            under Medicare and Medicaid for dual eligibles.
      (c) Responsibilities.--In carrying out this section, the
    Secretary shall provide for the following:
              (1) An examination of Medicare and Medicaid payment
            systems to develop strategies to foster more integrated
            and higher quality care.
              (2) Development of methods to facilitate access to
            post-acute and community-based services and to identify
            actions that could lead to better coordination of
            community-based care.
              (3) A study of enrollment of dual eligibles in the
            Medicare Savings Program (as defined in section
            1144(c)(7)), under Medicaid, and in the low-income
            subsidy program under section 1860D-14 to identify
            methods to more efficiently and effectively reach and
            enroll dual eligibles.
              (4) An assessment of communication strategies for
            dual eligibles to determine whether additional
            informational materials or outreach is needed,
            including an assessment of the Medicare website, 1-800-
            MEDICARE, and the Medicare handbook.
              (5) Research and evaluation of areas where service
            utilization, quality, and access to cost sharing
            protection could be improved and an assessment of
            factors related to enrollee satisfaction with services
            and care delivery.
              (6) Collection (and making available to the public)
            of data and a database that describe the eligibility,
            benefit and cost-sharing assistance available to dual
            eligibles by State.
              (7) Monitoring total combined Medicare and Medicaid
            program costs in serving dual eligibles and making
            recommendations for optimizing total quality and cost
            performance across both programs.
              (8) Coordination of activities relating to Medicare
            Advantage plans under 1859(b)(6)(B)(ii) and Medicaid.
      (d) Periodic Reports.--Not later than 1 year after the date
    of the enactment of this section and every 3 years thereafter
    the Secretary shall submit to Congress a report on progress in
    activities conducted under this section.
      (e) Definitions.--In this section:
              (1) Dual eligible.--The term ``dual eligible'' means
            an individual who is dually eligible for benefits under
            title XVIII, and medical assistance under title XIX,
            including such individuals who are eligible for
            benefits under the Medicare Savings Program (as defined
            in section 1144(c)(7)).
              (2) Medicare; medicaid.--The terms ``Medicare'' and
            ``Medicaid'' mean the programs under titles XVIII and
            XIX, respectively.

               *       *       *       *       *       *       *

                     Part C--Administrative Simplification

                                  DEFINITIONS

      Sec. 1171. For purposes of this part:
              (1) * * *

               *       *       *       *       *       *       *

              (7) Standard.--The term ``standard'', when used [with
            reference to a data element of health information or a
            transaction referred to in section 1173(a)(1), means
            any such data element or transaction that meets each of
            the standards and implementation specifications adopted
            or established by the Secretary with respect to the
            data element or transaction under sections 1172 through
            1174.] with reference to a transaction or data element
            of health information in section 1173 means
            implementation specifications, certification criteria,
            operating rules, messaging formats, codes, and code
            sets adopted or established by the Secretary for the
            electronic exchange and use of information.

               *       *       *       *       *       *       *

              (9) Operating rules.--The term ``operating rules''
            means business rules for using and processing
            transactions. Operating rules should address the
            following:
                      (A) Requirements for data content using
                    available and established national standards.
                      (B) Infrastructure requirements that
                    establish best practices for streamlining data
                    flow to yield timely execution of transactions.
                      (C) Policies defining the transaction related
                    rights and responsibilities for entities that
                    are transmitting or receiving data.

               *       *       *       *       *       *       *

    SEC. 1173A. STANDARDIZE ELECTRONIC ADMINISTRATIVE TRANSACTIONS.

      (a) Standards for Financial and Administrative
    Transactions.--
              (1) In general.--The Secretary shall adopt and
            regularly update standards consistent with the goals
            described in paragraph (2).
              (2) Goals for financial and administrative
            transactions.--The goals for standards under paragraph
            (1) are that such standards shall--
                      (A) be unique with no conflicting or
                    redundant standards;
                      (B) be authoritative, permitting no additions
                    or constraints for electronic transactions,
                    including companion guides;
                      (C) be comprehensive, efficient and robust,
                    requiring minimal augmentation by paper
                    transactions or clarification by further
                    communications;
                      (D) enable the real-time (or near real-time)
                    determination of an individual's financial
                    responsibility at the point of service and, to
                    the extent possible, prior to service,
                    including whether the individual is eligible
                    for a specific service with a specific
                    physician at a specific facility, which may
                    include utilization of a machine-readable
                    health plan beneficiary identification card;
                      (E) enable, where feasible, near real-time
                    adjudication of claims;
                      (F) provide for timely acknowledgment,
                    response, and status reporting applicable to
                    any electronic transaction deemed appropriate
                    by the Secretary;
                      (G) describe all data elements (such as
                    reason and remark codes) in unambiguous terms,
                    not permit optional fields, require that data
                    elements be either required or conditioned upon
                    set values in other fields, and prohibit
                    additional conditions; and
                      (H) harmonize all common data elements across
                    administrative and clinical transaction
                    standards.
              (3) Time for adoption.--Not later than 2 years after
            the date of implementation of the X12 Version 5010
            transaction standards implemented under this part, the
            Secretary shall adopt standards under this section.
              (4) Requirements for specific standards.--The
            standards under this section shall be developed,
            adopted, and enforced so as to--
                      (A) clarify, refine, complete, and expand, as
                    needed, the standards required under section
                    1173;
                      (B) require paper versions of standardized
                    transactions to comply with the same standards
                    as to data content such that a fully compliant,
                    equivalent electronic transaction can be
                    populated from the data from a paper version;
                      (C) enable electronic funds transfers, in
                    order to allow automated reconciliation with
                    the related health care payment and remittance
                    advice;
                      (D) require timely and transparent claim and
                    denial management processes, including
                    tracking, adjudication, and appeal processing ;
                      (E) require the use of a standard electronic
                    transaction with which health care providers
                    may quickly and efficiently enroll with a
                    health plan to conduct the other electronic
                    transactions provided for in this part; and
                      (F) provide for other requirements relating
                    to administrative simplification as identified
                    by the Secretary, in consultation with
                    stakeholders.
              (5) Building on existing standards.--In developing
            the standards under this section, the Secretary shall
            build upon existing and planned standards.
              (6) Implementation and enforcement.--Not later than 6
            months after the date of the enactment of this section,
            the Secretary shall submit to the appropriate
            committees of Congress a plan for the implementation
            and enforcement, by not later than 5 years after such
            date of enactment, of the standards under this section.
            Such plan shall include--
                      (A) a process and timeframe with milestones
                    for developing the complete set of standards;
                      (B) an expedited upgrade program for
                    continually developing and approving additions
                    and modifications to the standards as often as
                    annually to improve their quality and extend
                    their functionality to meet evolving
                    requirements in health care;
                      (C) programs to provide incentives for, and
                    ease the burden of, implementation for certain
                    health care providers, with special
                    consideration given to such providers serving
                    rural or underserved areas and ensure
                    coordination with standards, implementation
                    specifications, and certification criteria
                    being adopted under the HITECH Act;
                      (D) programs to provide incentives for, and
                    ease the burden of, health care providers who
                    volunteer to participate in the process of
                    setting standards for electronic transactions;
                      (E) an estimate of total funds needed to
                    ensure timely completion of the implementation
                    plan; and
                      (F) an enforcement process that includes
                    timely investigation of complaints, random
                    audits to ensure compliance, civil monetary and
                    programmatic penalties for non-compliance
                    consistent with existing laws and regulations,
                    and a fair and reasonable appeals process
                    building off of enforcement provisions under
                    this part.
      (b) Limitations on Use of Data.--Nothing in this section
    shall be construed to permit the use of information collected
    under this section in a manner that would adversely affect any
    individual.
      (c) Protection of Data.--The Secretary shall ensure (through
    the promulgation of regulations or otherwise) that all data
    collected pursuant to subsection (a) are--
              (1) used and disclosed in a manner that meets the
            HIPAA privacy and security law (as defined in section
            3009(a)(2) of the Public Health Service Act), including
            any privacy or security standard adopted under section
            3004 of such Act; and
              (2) protected from all inappropriate internal use by
            any entity that collects, stores, or receives the data,
            including use of such data in determinations of
            eligibility (or continued eligibility) in health plans,
            and from other inappropriate uses, as defined by the
            Secretary.

               *       *       *       *       *       *       *

           PROCESSING PAYMENT TRANSACTIONS BY FINANCIAL INSTITUTIONS

      Sec. 1179. To the extent that an entity is engaged in
    activities of a financial institution (as defined in section
    1101 of the Right to Financial Privacy Act of 1978) on behalf
    of an individual, [or is engaged] and is engaged in
    authorizing, processing, clearing, settling, billing,
    transferring, reconciling, or collecting payments, for a
    financial institution on behalf of an individual (other than as
    a business associate for a covered entity), this part, and any
    standard adopted under this part, shall not apply to the entity
    with respect to such activities, including the following:
              (1) The use or disclosure of information by the
            entity for authorizing, processing, clearing, settling,
            billing, transferring, reconciling or collecting, a
            payment for, or related to, health plan premiums or
            health care, where such payment is made by any means,
            including a credit, debit, or other payment card, an
            account, check, or electronic funds transfer.

               *       *       *       *       *       *       *

                   Part D--Comparative Effectiveness Research

                       COMPARATIVE EFFECTIVENESS RESEARCH

      Sec. 1181.  (a) Center for Comparative Effectiveness Research
    Established.--
              (1) In general.--The Secretary shall establish within
            the Agency for Healthcare Research and Quality a Center
            for Comparative Effectiveness Research (in this section
            referred to as the ``Center'') to conduct, support, and
            synthesize research (including research conducted or
            supported under section 1013 of the Medicare
            Prescription Drug, Improvement, and Modernization Act
            of 2003) with respect to the outcomes, effectiveness,
            and appropriateness of health care services and
            procedures in order to identify the manner in which
            diseases, disorders, and other health conditions can
            most effectively and appropriately be prevented,
            diagnosed, treated, and managed clinically.
              (2) Duties.--The Center shall--
                      (A) conduct, support, and synthesize research
                    relevant to the comparative effectiveness of
                    the full spectrum of health care items,
                    services and systems, including
                    pharmaceuticals, medical devices, medical and
                    surgical procedures, and other medical
                    interventions;
                      (B) conduct and support systematic reviews of
                    clinical research, including original research
                    conducted subsequent to the date of the
                    enactment of this section;
                      (C) continuously develop rigorous scientific
                    methodologies for conducting comparative
                    effectiveness studies, and use such
                    methodologies appropriately;
                      (D) submit to the Comparative Effectiveness
                    Research Commission, the Secretary, and
                    Congress appropriate relevant reports described
                    in subsection (d)(2); and
                      (E) encourage, as appropriate, the
                    development and use of clinical registries and
                    the development of clinical effectiveness
                    research data networks from electronic health
                    records, post marketing drug and medical device
                    surveillance efforts, and other forms of
                    electronic health data.
              (3) Powers.--
                      (A) Obtaining official data.--The Center may
                    secure directly from any department or agency
                    of the United States information necessary to
                    enable it to carry out this section. Upon
                    request of the Center, the head of that
                    department or agency shall furnish that
                    information to the Center on an agreed upon
                    schedule.
                      (B) Data collection.--In order to carry out
                    its functions, the Center shall--
                              (i) utilize existing information,
                            both published and unpublished, where
                            possible, collected and assessed either
                            by its own staff or under other
                            arrangements made in accordance with
                            this section,
                              (ii) carry out, or award grants or
                            contracts for, original research and
                            experimentation, where existing
                            information is inadequate, and
                              (iii) adopt procedures allowing any
                            interested party to submit information
                            for the use by the Center and
                            Commission under subsection (b) in
                            making reports and recommendations.
                      (C) Access of gao to information.--The
                    Comptroller General shall have unrestricted
                    access to all deliberations, records, and
                    nonproprietary data of the Center and
                    Commission under subsection (b), immediately
                    upon request.
                      (D) Periodic audit.--The Center and
                    Commission under subsection (b) shall be
                    subject to periodic audit by the Comptroller
                    General.
      (b) Oversight by Comparative Effectiveness Research
    Commission.--
              (1) In general.--The Secretary shall establish an
            independent Comparative Effectiveness Research
            Commission (in this section referred to as the
            ``Commission'') to oversee and evaluate the activities
            carried out by the Center under subsection (a), subject
            to the authority of the Secretary, to ensure such
            activities result in highly credible research and
            information resulting from such research.
              (2) Duties.--The Commission shall--
                      (A) determine national priorities for
                    research described in subsection (a) and in
                    making such determinations consult with a broad
                    array of public and private stakeholders,
                    including patients and health care providers
                    and payers;
                      (B) monitor the appropriateness of use of the
                    CERTF described in subsection (g) with respect
                    to the timely production of comparative
                    effectiveness research determined to be a
                    national priority under subparagraph (A);
                      (C) identify highly credible research methods
                    and standards of evidence for such research to
                    be considered by the Center;
                      (D) review the methodologies developed by the
                    center under subsection (a)(2)(C);
                      (E) not later than one year after the date of
                    the enactment of this section, enter into an
                    arrangement under which the Institute of
                    Medicine of the National Academy of Sciences
                    shall conduct an evaluation and report on
                    standards of evidence for such research;
                      (F) support forums to increase stakeholder
                    awareness and permit stakeholder feedback on
                    the efforts of the Center to advance methods
                    and standards that promote highly credible
                    research;
                      (G) make recommendations for policies that
                    would allow for public access of data produced
                    under this section, in accordance with
                    appropriate privacy and proprietary practices,
                    while ensuring that the information produced
                    through such data is timely and credible;
                      (H) appoint a clinical perspective advisory
                    panel for each research priority determined
                    under subparagraph (A), which shall consult
                    with patients and advise the Center on research
                    questions, methods, and evidence gaps in terms
                    of clinical outcomes for the specific research
                    inquiry to be examined with respect to such
                    priority to ensure that the information
                    produced from such research is clinically
                    relevant to decisions made by clinicians and
                    patients at the point of care;
                      (I) make recommendations for the priority for
                    periodic reviews of previous comparative
                    effectiveness research and studies conducted by
                    the Center under subsection (a);
                      (J) routinely review processes of the Center
                    with respect to such research to confirm that
                    the information produced by such research is
                    objective, credible, consistent with standards
                    of evidence established under this section, and
                    developed through a transparent process that
                    includes consultations with appropriate
                    stakeholders; and
                      (K) make recommendations to the center for
                    the broad dissemination of the findings of
                    research conducted and supported under this
                    section that enables clinicians, patients,
                    consumers, and payers to make more informed
                    health care decisions that improve quality and
                    value.
              (3) Composition of commission.--
                      (A) In general.--The members of the
                    Commission shall consist of--
                              (i) the Director of the Agency for
                            Healthcare Research and Quality;
                              (ii) the Chief Medical Officer of the
                            Centers for Medicare & Medicaid
                            Services; and
                              (iii) 15 additional members who shall
                            represent broad constituencies of
                            stakeholders including clinicians,
                            patients, researchers, third-party
                            payers, consumers of Federal and State
                            beneficiary programs.
                    Of such members, at least 9 shall be practicing
                    physicians, health care practitioners,
                    consumers, or patients.
                      (B) Qualifications.--
                              (i) Diverse representation of
                            perspectives.--The members of the
                            Commission shall represent a broad
                            range of perspectives and shall
                            collectively have experience in the
                            following areas:
                                      (I) Epidemiology.
                                      (II) Health services
                                    research.
                                      (III) Bioethics.
                                      (IV) Decision sciences.
                                      (V) Health disparities.
                                      (VI) Economics.
                              (ii) Diverse representation of health
                            care community.--At least one member
                            shall represent each of the following
                            health care communities:
                                      (I) Patients.
                                      (II) Health care consumers.
                                      (III) Practicing Physicians,
                                    including surgeons.
                                      (IV) Other health care
                                    practitioners engaged in
                                    clinical care.
                                      (V) Employers.
                                      (VI) Public payers.
                                      (VII) Insurance plans.
                                      (VIII) Clinical researchers
                                    who conduct research on behalf
                                    of pharmaceutical or device
                                    manufacturers.
                      (C) Limitation.--No more than 3 of the
                    Members of the Commission may be
                    representatives of pharmaceutical or device
                    manufacturers and such representatives shall be
                    clinical researchers described under
                    subparagraph (B)(ii)(VIII).
              (4) Appointment.--
                      (A) In general.--The Secretary shall appoint
                    the members of the Commission.
                      (B) Consultation.--In considering candidates
                    for appointment to the Commission, the
                    Secretary may consult with the Government
                    Accountability Office and the Institute of
                    Medicine of the National Academy of Sciences.
              (5) Chairman; vice chairman.--The Secretary shall
            designate a member of the Commission, at the time of
            appointment of the member, as Chairman and a member as
            Vice Chairman for that term of appointment, except that
            in the case of vacancy of the Chairmanship or Vice
            Chairmanship, the Secretary may designate another
            member for the remainder of that member's term. The
            Chairman shall serve as an ex officio member of the
            National Advisory Council of the Agency for Health Care
            Research and Quality under section 931(c)(3)(B) of the
            Public Health Service Act.
              (6) Terms.--
                      (A) In general.--Except as provided in
                    subparagraph (B), each member of the Commission
                    shall be appointed for a term of 4 years.
                      (B) Terms of initial appointees.--Of the
                    members first appointed--
                              (i) 8 shall be appointed for a term
                            of 4 years; and
                              (ii) 7 shall be appointed for a term
                            of 3 years.
              (7) Coordination.--To enhance effectiveness and
            coordination, the Secretary is encouraged, to the
            greatest extent possible, to seek coordination between
            the Commission and the National Advisory Council of the
            Agency for Healthcare Research and Quality.
              (8) Conflicts of interest.--
                      (A) In general.--In appointing the members of
                    the Commission or a clinical perspective
                    advisory panel described in paragraph (2)(H),
                    the Secretary or the Commission, respectively,
                    shall take into consideration any financial
                    interest (as defined in subparagraph (D)),
                    consistent with this paragraph, and develop a
                    plan for managing any identified conflicts.
                      (B) Evaluation and criteria.--When
                    considering an appointment to the Commission or
                    a clinical perspective advisory panel described
                    paragraph (2)(H) the Secretary or the
                    Commission shall review the expertise of the
                    individual and the financial disclosure report
                    filed by the individual pursuant to the Ethics
                    in Government Act of 1978 for each individual
                    under consideration for the appointment, so as
                    to reduce the likelihood that an appointed
                    individual will later require a written
                    determination as referred to in section
                    208(b)(1) of title 18, United States Code, a
                    written certification as referred to in section
                    208(b)(3) of title 18, United States Code, or a
                    waiver as referred to in subparagraph (D)(iii)
                    for service on the Commission at a meeting of
                    the Commission.
                      (C) Disclosures; prohibitions on
                    participation; waivers.--
                              (i) Disclosure of financial
                            interest.--Prior to a meeting of the
                            Commission or a clinical perspective
                            advisory panel described in paragraph
                            (2)(H) regarding a ``particular
                            matter'' (as that term is used in
                            section 208 of title 18, United States
                            Code), each member of the Commission or
                            the clinical perspective advisory panel
                            who is a full-time Government employee
                            or special Government employee shall
                            disclose to the Secretary financial
                            interests in accordance with subsection
                            (b) of such section 208.
                              (ii) Prohibitions on participation.--
                            Except as provided under clause (iii),
                            a member of the Commission or a
                            clinical perspective advisory panel
                            described in paragraph (2)(H) may not
                            participate with respect to a
                            particular matter considered in meeting
                            of the Commission or the clinical
                            perspective advisory panel if such
                            member (or an immediate family member
                            of such member) has a financial
                            interest that could be affected by the
                            advice given to the Secretary with
                            respect to such matter, excluding
                            interests exempted in regulations
                            issued by the Director of the Office of
                            Government Ethics as too remote or
                            inconsequential to affect the integrity
                            of the services of the Government
                            officers or employees to which such
                            regulations apply.
                              (iii) Waiver.--If the Secretary
                            determines it necessary to afford the
                            Commission or a clinical perspective
                            advisory panel described in paragraph
                            2(H) essential expertise, the Secretary
                            may grant a waiver of the prohibition
                            in clause (ii) to permit a member
                            described in such subparagraph to--
                                      (I) participate as a non-
                                    voting member with respect to a
                                    particular matter considered in
                                    a Commission or a clinical
                                    perspective advisory panel
                                    meeting; or
                                      (II) participate as a voting
                                    member with respect to a
                                    particular matter considered in
                                    a Commission or a clinical
                                    perspective advisory panel
                                    meeting.
                              (iv) Limitation on waivers and other
                            exceptions.--
                                      (I) Determination of
                                    allowable exceptions for the
                                    commission.--The number of
                                    waivers granted to members of
                                    the Commission cannot exceed
                                    one-half of the total number of
                                    members for the Commission.
                                      (II) Prohibition on voting
                                    status on clinical perspective
                                    advisory panels.--No voting
                                    member of any clinical
                                    perspective advisory panel
                                    shall be in receipt of a
                                    waiver. No more than two
                                    nonvoting members of any
                                    clinical perspective advisory
                                    panel shall receive a waiver.
                      (D) Financial interest defined.--For purposes
                    of this paragraph, the term ``financial
                    interest'' means a financial interest under
                    section 208(a) of title 18, United States Code.
              (9) Compensation.--While serving on the business of
            the Commission (including travel time), a member of the
            Commission shall be entitled to compensation at the per
            diem equivalent of the rate provided for level IV of
            the Executive Schedule under section 5315 of title 5,
            United States Code; and while so serving away from home
            and the member's regular place of business, a member
            may be allowed travel expenses, as authorized by the
            Director of the Commission.
              (10) Availability of reports.--The Commission shall
            transmit to the Secretary a copy of each report
            submitted under this subsection and shall make such
            reports available to the public.
              (11) Director and staff; experts and consultants.--
            Subject to such review as the Secretary deems necessary
            to assure the efficient administration of the
            Commission, the Commission may--
                      (A) appoint an Executive Director (subject to
                    the approval of the Secretary) and such other
                    personnel as Federal employees under section
                    2105 of title 5, United States Code, as may be
                    necessary to carry out its duties (without
                    regard to the provisions of title 5, United
                    States Code, governing appointments in the
                    competitive service);
                      (B) seek such assistance and support as may
                    be required in the performance of its duties
                    from appropriate Federal departments and
                    agencies;
                      (C) enter into contracts or make other
                    arrangements, as may be necessary for the
                    conduct of the work of the Commission (without
                    regard to section 3709 of the Revised Statutes
                    (41 U.S.C. 5));
                      (D) make advance, progress, and other
                    payments which relate to the work of the
                    Commission;
                      (E) provide transportation and subsistence
                    for persons serving without compensation; and
                      (F) prescribe such rules and regulations as
                    it deems necessary with respect to the internal
                    organization and operation of the Commission.
      (c) Research Requirements.--Any research conducted,
    supported, or synthesized under this section shall meet the
    following requirements:
              (1) Ensuring transparency, credibility, and access.--
                      (A) The establishment of the agenda and
                    conduct of the research shall be insulated from
                    inappropriate political or stakeholder
                    influence.
                      (B) Methods of conducting such research shall
                    be scientifically based.
                      (C) All aspects of the prioritization of
                    research, conduct of the research, and
                    development of conclusions based on the
                    research shall be transparent to all
                    stakeholders.
                      (D) The process and methods for conducting
                    such research shall be publicly documented and
                    available to all stakeholders.
                      (E) Throughout the process of such research,
                    the Center shall provide opportunities for all
                    stakeholders involved to review and provide
                    public comment on the methods and findings of
                    such research.
              (2) Use of clinical perspective advisory panels.--The
            research shall meet a national research priority
            determined under subsection (b)(2)(A) and shall
            consider advice given to the Center by the clinical
            perspective advisory panel for the national research
            priority.
              (3) Stakeholder input.--
                      (A) In general.--The Commission shall consult
                    with patients, health care providers, health
                    care consumer representatives, and other
                    appropriate stakeholders with an interest in
                    the research through a transparent process
                    recommended by the Commission.
                      (B) Specific areas of consultation.--
                    Consultation shall include where deemed
                    appropriate by the Commission--
                              (i) recommending research priorities
                            and questions;
                              (ii) recommending research
                            methodologies; and
                              (iii) advising on and assisting with
                            efforts to disseminate research
                            findings.
                      (C) Ombudsman.--The Secretary shall designate
                    a patient ombudsman. The ombudsman shall--
                              (i) serve as an available point of
                            contact for any patients with an
                            interest in proposed comparative
                            effectiveness studies by the Center;
                            and
                              (ii) ensure that any comments from
                            patients regarding proposed comparative
                            effectiveness studies are reviewed by
                            the Commission.
              (4) Taking into account potential differences.--
            Research shall--
                      (A) be designed, as appropriate, to take into
                    account the potential for differences in the
                    effectiveness of health care items and services
                    used with various subpopulations such as racial
                    and ethnic minorities, women, different age
                    groups (including children, adolescents,
                    adults, and seniors), and individuals with
                    different comorbidities; and--
                      (B) seek, as feasible and appropriate, to
                    include members of such subpopulations as
                    subjects in the research.
      (d) Public Access to Comparative Effectiveness Information.--
              (1) In general.--Not later than 90 days after receipt
            by the Center or Commission, as applicable, of a
            relevant report described in paragraph (2) made by the
            Center, Commission, or clinical perspective advisory
            panel under this section, appropriate information
            contained in such report shall be posted on the
            official public Internet site of the Center and of the
            Commission, as applicable.
              (2) Relevant reports described.--For purposes of this
            section, a relevant report is each of the following
            submitted by the Center or a grantee or contractor of
            the Center:
                      (A) Any interim or progress reports as deemed
                    appropriate by the Secretary.
                      (B) Stakeholder comments.
                      (C) A final report.
      (e) Dissemination and Incorporation of Comparative
    Effectiveness Information.--
              (1) Dissemination.--The Center shall provide for the
            dissemination of appropriate findings produced by
            research supported, conducted, or synthesized under
            this section to health care providers, patients,
            vendors of health information technology focused on
            clinical decision support, appropriate professional
            associations, and Federal and private health plans, and
            other relevant stakeholders. In disseminating such
            findings the Center shall--
                      (A) convey findings of research so that they
                    are comprehensible and useful to patients and
                    providers in making health care decisions;
                      (B) discuss findings and other considerations
                    specific to certain sub-populations, risk
                    factors, and comorbidities as appropriate;
                      (C) include considerations such as
                    limitations of research and what further
                    research may be needed, as appropriate;
                      (D) not include any data that the
                    dissemination of which would violate the
                    privacy of research participants or violate any
                    confidentiality agreements made with respect to
                    the use of data under this section; and
                      (E) assist the users of health information
                    technology focused on clinical decision support
                    to promote the timely incorporation of such
                    findings into clinical practices and promote
                    the ease of use of such incorporation.
              (2) Dissemination protocols and strategies.--The
            Center shall develop protocols and strategies for the
            appropriate dissemination of research findings in order
            to ensure effective communication of findings and the
            use and incorporation of such findings into relevant
            activities for the purpose of informing higher quality
            and more effective and efficient decisions regarding
            medical items and services. In developing and adopting
            such protocols and strategies, the Center shall consult
            with stakeholders concerning the types of dissemination
            that will be most useful to the end users of
            information and may provide for the utilization of
            multiple formats for conveying findings to different
            audiences, including dissemination to individuals with
            limited English proficiency.
      (f) Reports to Congress.--
              (1) Annual reports.--Beginning not later than one
            year after the date of the enactment of this section,
            the Director of the Agency of Healthcare Research and
            Quality and the Commission shall submit to Congress an
            annual report on the activities of the Center and the
            Commission, as well as the research, conducted under
            this section. Each such report shall include a
            discussion of the Center's compliance with subsection
            (c)(4)(B), including any reasons for lack of compliance
            with such subsection.
              (2) Recommendation for fair share per capita amount
            for all-payer financing.--Beginning not later than
            December 31, 2011, the Secretary shall submit to
            Congress an annual recommendation for a fair share per
            capita amount described in subsection (c)(1) of section
            9511 of the Internal Revenue Code of 1986 for purposes
            of funding the CERTF under such section.
              (3) Analysis and review.--Not later than December 31,
            2013, the Secretary, in consultation with the
            Commission, shall submit to Congress a report on all
            activities conducted or supported under this section as
            of such date. Such report shall include an evaluation
            of the overall costs of such activities and an analysis
            of the backlog of any research proposals approved by
            the Commission but not funded.
      (g) Funding of Comparative Effectiveness Research.--For
    fiscal year 2010 and each subsequent fiscal year, amounts in
    the Comparative Effectiveness Research Trust Fund (referred to
    in this section as the ``CERTF'') under section 9511 of the
    Internal Revenue Code of 1986 shall be available, without the
    need for further appropriations and without fiscal year
    limitation, to the Secretary to carry out this section.
      (h) Construction.--Nothing in this section shall be construed
    to permit the Commission or the Center to mandate coverage,
    reimbursement, or other policies for any public or private
    payer.

                          Part E--Quality Improvement

        ESTABLISHMENT OF NATIONAL PRIORITIES FOR PERFORMANCE IMPROVEMENT

      Sec. 1191. (a) Establishment of National Priorities by the
    Secretary.--The Secretary shall establish and periodically
    update, not less frequently than triennially, national
    priorities for performance improvement.
      (b) Recommendations for National Priorities.--In establishing
    and updating national priorities under subsection (a), the
    Secretary shall solicit and consider recommendations from
    multiple outside stakeholders.
      (c) Considerations in Setting National Priorities.--With
    respect to such priorities, the Secretary shall ensure that
    priority is given to areas in the delivery of health care
    services in the United States that--
              (1) contribute to a large burden of disease,
            including those that address the health care provided
            to patients with prevalent, high-cost chronic diseases;
              (2) have the greatest potential to decrease morbidity
            and mortality in this country, including those that are
            designed to eliminate harm to patients;
              (3) have the greatest potential for improving the
            performance, affordability, and patient-centeredness of
            health care, including those due to variations in care;
              (4) address health disparities across groups and
            areas; and
              (5) have the potential for rapid improvement due to
            existing evidence, standards of care or other reasons.
      (d) Definitions.--In this part:
              (1) Consensus-based entity.--The term ``consensus-
            based entity'' means an entity with a contract with the
            Secretary under section 1890.
              (2) Quality measure.--The term ``quality measure''
            means a national consensus standard for measuring the
            performance and improvement of population health, or of
            institutional providers of services, physicians, and
            other health care practitioners in the delivery of
            health care services.
      (e) Funding.--
              (1) In general.--The Secretary shall provide for the
            transfer, from the Federal Hospital Insurance Trust
            Fund under section 1817 and the Federal Supplementary
            Medical Insurance Trust Fund under section 1841 (in
            such proportion as the Secretary determines
            appropriate), of $2,000,000, for the activities under
            this section for each of the fiscal years 2010 through
            2014.
              (2) Authorization of appropriations.--For purposes of
            carrying out the provisions of this section, in
            addition to funds otherwise available, out of any funds
            in the Treasury not otherwise appropriated, there are
            appropriated to the Secretary of Health and Human
            Services $2,000,000 for each of the fiscal years 2010
            through 2014.

    SEC. 1192. DEVELOPMENT OF NEW QUALITY MEASURES.

      (a) Agreements With Qualified Entities.--
              (1) In general.--The Secretary shall enter into
            agreements with qualified entities to develop quality
            measures for the delivery of health care services in
            the United States.
              (2) Form of agreements.--The Secretary may carry out
            paragraph (1) by contract, grant, or otherwise.
              (3) Recommendations of consensus-based entity.--In
            carrying out this section, the Secretary shall--
                      (A) seek public input; and
                      (B) take into consideration recommendations
                    of the consensus-based entity with a contract
                    with the Secretary under section 1890(a).
      (b) Determination of Areas Where Quality Measures Are
    Required.--Consistent with the national priorities established
    under this part and with the programs administered by the
    Centers for Medicare & Medicaid Services and in consultation
    with other relevant Federal agencies, the Secretary shall
    determine areas in which quality measures for assessing health
    care services in the United States are needed.
      (c) Development of Quality Measures.--
              (1) Patient-centered and population-based measures.--
            Quality measures developed under agreements under
            subsection (a) shall be designed--
                      (A) to assess outcomes and functional status
                    of patients;
                      (B) to assess the continuity and coordination
                    of care and care transitions for patients
                    across providers and health care settings,
                    including end of life care;
                      (C) to assess patient experience and patient
                    engagement;
                      (D) to assess the safety, effectiveness, and
                    timeliness of care;
                      (E) to assess health disparities including
                    those associated with individual race,
                    ethnicity, age, gender, place of residence or
                    language;
                      (F) to assess the efficiency and resource use
                    in the provision of care;
                      (G) to the extent feasible, to be collected
                    as part of health information technologies
                    supporting better delivery of health care
                    services;
                      (H) to be available free of charge to users
                    for the use of such measures; and
                      (I) to assess delivery of health care
                    services to individuals regardless of age.
              (2) Availability of measures.--The Secretary shall
            make quality measures developed under this section
            available to the public.
              (3) Testing of proposed measures.--The Secretary may
            use amounts made available under subsection (f) to fund
            the testing of proposed quality measures by qualified
            entities. Testing funded under this paragraph shall
            include testing of the feasibility and usability of
            proposed measures.
              (4) Updating of endorsed measures.--The Secretary may
            use amounts made available under subsection (f) to fund
            the updating (and testing, if applicable) by consensus-
            based entities of quality measures that have been
            previously endorsed by such an entity as new evidence
            is developed, in a manner consistent with section
            1890(b)(3).
      (d) Qualified Entities.--Before entering into agreements with
    a qualified entity, the Secretary shall ensure that the entity
    is a public, nonprofit or academic institution with technical
    expertise in the area of health quality measurement.
      (e) Application for Grant.--A grant may be made under this
    section only if an application for the grant is submitted to
    the Secretary and the application is in such form, is made in
    such manner, and contains such agreements, assurances, and
    information as the Secretary determines to be necessary to
    carry out this section.
      (f) Funding.--
              (1) In general.--The Secretary shall provide for the
            transfer, from the Federal Hospital Insurance Trust
            Fund under section 1817 and the Federal Supplementary
            Medical Insurance Trust Fund under section 1841 (in
            such proportion as the Secretary determines
            appropriate), of $25,000,000, to the Secretary for
            purposes of carrying out this section for each of the
            fiscal years 2010 through 2014.
              (2) Authorization of appropriations.--For purposes of
            carrying out the provisions of this section, in
            addition to funds otherwise available, out of any funds
            in the Treasury not otherwise appropriated, there are
            appropriated to the Secretary of Health and Human
            Services $25,000,000 for each of the fiscal years 2010
            through 2014.

    SEC. 1193. GAO EVALUATION OF DATA COLLECTION PROCESS FOR QUALITY
                        MEASUREMENT.

      (a) GAO Evaluations.--The Comptroller General of the United
    States shall conduct periodic evaluations of the implementation
    of the data collection processes for quality measures used by
    the Secretary.
      (b) Considerations.--In carrying out the evaluation under
    subsection (a), the Comptroller General shall determine--
              (1) whether the system for the collection of data for
            quality measures provides for validation of data as
            relevant and scientifically credible;
              (2) whether data collection efforts under the system
            use the most efficient and cost-effective means in a
            manner that minimizes administrative burden on persons
            required to collect data and that adequately protects
            the privacy of patients' personal health information
            and provides data security;
              (3) whether standards under the system provide for an
            appropriate opportunity for physicians and other
            clinicians and institutional providers of services to
            review and correct findings; and
              (4) the extent to which quality measures are
            consistent with section 1192(c)(1) or result in direct
            or indirect costs to users of such measures.
      (c) Report.--The Comptroller General shall submit reports to
    Congress and to the Secretary containing a description of the
    findings and conclusions of the results of each such
    evaluation.

               *       *       *       *       *       *       *

    TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

               *       *       *       *       *       *       *

                     PROVISIONS RELATING TO ADMINISTRATION

      Sec. 1808. (a) * * *

               *       *       *       *       *       *       *

      (d) Multi-Stakeholder Pre-Rulemaking Input Into Selection of
    Quality Measures.--
              (1) List of measures.--Not later than December 1
            before each year (beginning with 2011), the Secretary
            shall make public a list of measures being considered
            for selection for quality measurement by the Secretary
            in rulemaking with respect to payment systems under
            this title beginning in the payment year beginning in
            such year and for payment systems beginning in the
            calendar year following such year, as the case may be.
              (2) Consultation on selection of endorsed quality
            measures.--A consensus-based entity that has entered
            into a contract under section 1890 shall, as part of
            such contract, convene multi-stakeholder groups to
            provide recommendations on the selection of individual
            or composite quality measures, for use in reporting
            performance information to the public or for use in
            public health care programs.
              (3) Multi-stakeholder input.--Not later than February
            1 of each year (beginning with 2011), the consensus-
            based entity described in paragraph (2) shall transmit
            to the Secretary the recommendations of multi-
            stakeholder groups provided under paragraph (2). Such
            recommendations shall be included in the transmissions
            the consensus-based entity makes to the Secretary under
            the contract provided for under section 1890.
              (4) Requirement for transparency in process.--
                      (A) In general.--In convening multi-
                    stakeholder groups under paragraph (2) with
                    respect to the selection of quality measures,
                    the consensus-based entity described in such
                    paragraph shall provide for an open and
                    transparent process for the activities
                    conducted pursuant to such convening.
                      (B) Selection of organizations participating
                    in multi-stakeholder groups.--The process under
                    paragraph (2) shall ensure that the selection
                    of representatives of multi-stakeholder groups
                    includes provision for public nominations for,
                    and the opportunity for public comment on, such
                    selection.
              (5) Use of input.--The respective proposed rule shall
            contain a summary of the recommendations made by the
            multi-stakeholder groups under paragraph (2), as well
            as other comments received regarding the proposed
            measures, and the extent to which such proposed rule
            follows such recommendations and the rationale for not
            following such recommendations.
              (6) Multi-stakeholder groups.--For purposes of this
            subsection, the term ``multi-stakeholder groups''
            means, with respect to a quality measure, a voluntary
            collaborative of organizations representing persons
            interested in or affected by the use of such quality
            measure, such as the following:
                      (A) Hospitals and other institutional
                    providers.
                      (B) Physicians.
                      (C) Health care quality alliances.
                      (D) Nurses and other health care
                    practitioners.
                      (E) Health plans.
                      (F) Patient advocates and consumer groups.
                      (G) Employers.
                      (H) Public and private purchasers of health
                    care items and services.
                      (I) Labor organizations.
                      (J) Relevant departments or agencies of the
                    United States.
                      (K) Biopharmaceutical companies and
                    manufacturers of medical devices.
                      (L) Licensing, credentialing, and accrediting
                    bodies.
              (7) Funding.--
                      (A) In general.--The Secretary shall provide
                    for the transfer, from the Federal Hospital
                    Insurance Trust Fund under section 1817 and the
                    Federal Supplementary Medical Insurance Trust
                    Fund under section 1841 (in such proportion as
                    the Secretary determines appropriate), of
                    $1,000,000, to the Secretary for purposes of
                    carrying out this subsection for each of the
                    fiscal years 2010 through 2014.
                      (B) Authorization of appropriations.--For
                    purposes of carrying out the provisions of this
                    subsection, in addition to funds otherwise
                    available, out of any funds in the Treasury not
                    otherwise appropriated, there are appropriated
                    to the Secretary of Health and Human Services
                    $1,000,000 for each of the fiscal years 2010
                    through 2014.

               *       *       *       *       *       *       *

    Part A--Hospital Insurance Benefits for the Aged and Disabled

               *       *       *       *       *       *       *

             CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES

      Sec. 1814. (a) Requirement of Requests and Certifications.--
    Except as provided in subsections (d) and (g) and in section
    1876, payment for services furnished an individual may be made
    only to providers of services which are eligible therefor under
    section 1866 and only if--
              (1) written request, signed by such individual,
            except in cases in which the Secretary finds it
            impracticable for the individual to do so, is filed for
            such payment in such form, in such manner, and by such
            person or persons as the Secretary may by regulation
            prescribe, no later than the close of the [period of 3
            calendar years following the year in which such
            services are furnished (deeming any services furnished
            in the last 3 calendar months of any calendar year to
            have been furnished in the succeeding calendar year)
            except that where the Secretary deems that efficient
            administration so requires, such period may be reduced
            to not less than 1 calendar year;] period of 1 calendar
            year from which such services are furnished; and
              (2) a physician, in the case of services described in
            subparagraph (C), a physician enrolled under section
            1866(j) or an eligible professional under section
            1848(k)(3)(B), or, in the case of services described in
            subparagraph (B), a physician, or a nurse practitioner
            or clinical nurse specialist who does not have a direct
            or indirect employment relationship with the facility
            but is working in collaboration with a physician,
            certifies (and recertifies, where such services are
            furnished over a period of time, in such cases, with
            such frequency, and accompanied by such supporting
            material, appropriate to the case involved, as may be
            provided by regulations, except that the first of such
            recertifications shall be required in each case of
            inpatient hospital services not later than the 20th day
            of such period) that--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) in the case of home health services, such
                    services are or were required because the
                    individual is or was confined to his home
                    (except when receiving items and services
                    referred to in section 1861(m)(7)) and needs or
                    needed skilled nursing care (other than solely
                    venipuncture for the purpose of obtaining a
                    blood sample) on an intermittent basis or
                    physical or speech therapy or, in the case of
                    an individual who has been furnished home
                    health services based on such a need and who no
                    longer has such a need for such care or
                    therapy, continues or continued to need
                    occupational therapy; a plan for furnishing
                    such services to such individual has been
                    established and is periodically reviewed by a
                    physician; [and such services] such services
                    are or were furnished while the individual was
                    under the care of a physician, and, in the case
                    of a certification or recertification made by a
                    physician after January 1, 2010, prior to
                    making such certification the physician must
                    document that the physician has had a face-to-
                    face encounter (including through use of
                    telehealth and other than with respect to
                    encounters that are incident to services
                    involved) with the individual during the 6-
                    month period preceding such certification, or
                    other reasonable timeframe as determined by the
                    Secretary; or

               *       *       *       *       *       *       *

    To the extent provided by regulations, the certification and
    recertification requirements of paragraph (2) shall be deemed
    satisfied where, at a later date, a physician, nurse
    practitioner, or clinical nurse specialist (as the case may be)
    makes certification of the kind provided in subparagraph (A),
    (B), (C), or (D) of paragraph (2) (whichever would have
    applied), but only where such certification is accompanied by
    such medical and other evidence as may be required by such
    regulations. With respect to the physician certification
    required by paragraph (2) for home health services furnished to
    any individual by a home health agency (other than an agency
    which is a governmental entity) and with respect to the
    establishment and review of a plan for such services, the
    Secretary shall prescribe regulations which shall become
    effective no later than July 1, 1981, and which prohibit a
    physician who has a significant ownership interest in, or a
    significant financial or contractual relationship with, such
    home health agency from performing such certification and from
    establishing or reviewing such plan, except that such
    prohibition shall not apply with respect to a home health
    agency which is a sole community home health agency (as
    determined by the Secretary). For purposes of the preceding
    sentence, service by a physician as an uncompensated officer or
    director of a home health agency shall not constitute having a
    significant ownership interest in, or a significant financial
    or contractual relationship with, such agency. For purposes of
    paragraph (2)(C), an individual shall be considered to be
    ``confined to his home'' if the individual has a condition, due
    to an illness or injury, that restricts the ability of the
    individual to leave his or her home except with the assistance
    of another individual or the aid of a supportive device (such
    as crutches, a cane, a wheelchair, or a walker), or if the
    individual has a condition such that leaving his or her home is
    medically contraindicated. While an individual does not have to
    be bedridden to be considered ``confined to his home'', the
    condition of the individual should be such that there exists a
    normal inability to leave home and that leaving home requires a
    considerable and taxing effort by the individual. Any absence
    of an individual from the home attributable to the need to
    receive health care treatment, including regular absences for
    the purpose of participating in therapeutic, psychosocial, or
    medical treatment in an adult day-care program that is licensed
    or certified by a State, or accredited, to furnish adult day-
    care services in the State shall not disqualify an individual
    from being considered to be ``confined to his home''. Any other
    absence of an individual from the home shall not so disqualify
    an individual if the absence is of infrequent or of relatively
    short duration. For purposes of the preceding sentence, any
    absence for the purpose of attending a religious service shall
    be deemed to be an absence of infrequent or short duration. In
    applying paragraph (1), the Secretary may specify exceptions to
    the 1 calendar year period specified in such paragraph.

               *       *       *       *       *       *       *

      (i) Payment for Hospice Care.--(1)(A) * * *

               *       *       *       *       *       *       *

      (C)(i) * * *
      (ii) With respect to routine home care and other services
    included in hospice care furnished during a subsequent fiscal
    year, the payment rates for such care and services shall be the
    payment rates in effect under this subparagraph during the
    previous fiscal year increased by--
              (I) * * *

               *       *       *       *       *       *       *

              (VII) for a subsequent fiscal year, the market basket
            percentage increase (which is subject to the
            productivity adjustment described in section
            1886(b)(3)(B)(iii)(II)) for the fiscal year.

               *       *       *       *       *       *       *

      (l) Payment for Inpatient Critical Access Hospital
    Services.--(1) * * *

               *       *       *       *       *       *       *

      (5) The adjustment factor described in section 1886(p)(3)
    shall apply to payments with respect to a critical access
    hospital with respect to a cost reporting period beginning in
    fiscal year 2012 and each subsequent fiscal year (after
    application of paragraph (4) of this subsection) in a manner
    similar to the manner in which such section applies with
    respect to a fiscal year to an applicable hospital as described
    in section 1886(p)(2).
      [(5)] (6) There shall be no administrative or judicial review
    under section 1869, section 1878, or otherwise, of--
              (A) * * *

               *       *       *       *       *       *       *

              (C) the specification of EHR reporting periods under
            section 1886(n)(6)(B) as applied under paragraphs (3)
            and (4); [and]
              (D) the identification of costs for purposes of
            paragraph (3)(C)[.]; and
              (E) the methodology for determining the adjustment
            factor under paragraph (5), including the determination
            of aggregate payments for actual and expected
            readmissions, applicable periods, applicable conditions
            and measures of readmissions.

               *       *       *       *       *       *       *

                     FEDERAL HOSPITAL INSURANCE TRUST FUND

      Sec. 1817. (a) * * *

               *       *       *       *       *       *       *

      (k) Health Care Fraud and Abuse Control Account.--
              (1) * * *

               *       *       *       *       *       *       *

              (4) Appropriated amounts to account for medicare
            integrity program.--
                      (A) In general.--There are hereby
                    appropriated to the Account from the Trust Fund
                    for each fiscal year such amounts as are
                    necessary for activities described in paragraph
                    (3)(C) and to carry out the Medicare Integrity
                    Program under section 1893, subject to
                    subparagraphs (B), (C), and (D) and to be
                    available without further appropriation until
                    expended.

               *       *       *       *       *       *       *

              (7) Additional funding.--In addition to the funds
            otherwise appropriated to the Account from the Trust
            Fund under paragraphs (3) and (4) and for purposes
            described in paragraphs (3)(C) and (4)(A), there are
            hereby appropriated an additional $100,000,000 to such
            Account from such Trust Fund for each fiscal year
            beginning with 2011. The funds appropriated under this
            paragraph shall be allocated in the same proportion as
            the total funding appropriated with respect to
            paragraphs (3)(A) and (4)(A) was allocated with respect
            to fiscal year 2010, and shall be available without
            further appropriation until expended.

               *       *       *       *       *       *       *

      REQUIREMENTS FOR, AND ASSURING QUALITY OF CARE IN, SKILLED NURSING
                                   FACILITIES

      Sec. 1819. (a) * * *
      (b) Requirements Relating to Provision of Services.--
              (1) Quality of life.--
                      (A) * * *
                      (B) Quality assessment and [assurance]
                    assurance and quality assurance and performance
                    improvement program.--
                              (i) In general.--A skilled nursing
                            facility must maintain a quality
                            assessment and assurance committee,
                            consisting of the director of nursing
                            services, a physician designated by the
                            facility, and at least 3 other members
                            of the facility's staff, which [(i)]
                            (I) meets at least quarterly to
                            identify issues with respect to which
                            quality assessment and assurance
                            activities are necessary and [(ii)]
                            (II) develops and implements
                            appropriate plans of action to correct
                            identified quality deficiencies. A
                            State or the Secretary may not require
                            disclosure of the records of such
                            committee except insofar as such
                            disclosure is related to the compliance
                            of such committee with the requirements
                            of this subparagraph.
                              (ii) Quality assurance and
                            performance improvement program.--
                                      (I) In general.--Not later
                                    than December 31, 2011, the
                                    Secretary shall establish and
                                    implement a quality assurance
                                    and performance improvement
                                    program (in this clause
                                    referred to as the ``QAPI
                                    program'') for skilled nursing
                                    facilities, including multi-
                                    unit chains of such facilities.
                                    Under the QAPI program, the
                                    Secretary shall establish
                                    standards relating to such
                                    facilities and provide
                                    technical assistance to such
                                    facilities on the development
                                    of best practices in order to
                                    meet such standards. Not later
                                    than 1 year after the date on
                                    which the regulations are
                                    promulgated under subclause
                                    (II), a skilled nursing
                                    facility must submit to the
                                    Secretary a plan for the
                                    facility to meet such standards
                                    and implement such best
                                    practices, including how to
                                    coordinate the implementation
                                    of such plan with quality
                                    assessment and assurance
                                    activities conducted under
                                    clause (i).
                                      (II) Regulations.--The
                                    Secretary shall promulgate
                                    regulations to carry out this
                                    clause.

               *       *       *       *       *       *       *

              (8) Information on nurse staffing.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Submission of staffing information based
                    on payroll data in a uniform format.--Beginning
                    not later than 2 years after the date of the
                    enactment of this subparagraph, and after
                    consulting with State long-term care ombudsman
                    programs, consumer advocacy groups, provider
                    stakeholder groups, employees and their
                    representatives, and other parties the
                    Secretary deems appropriate, the Secretary
                    shall require a skilled nursing facility to
                    electronically submit to the Secretary direct
                    care staffing information (including
                    information with respect to agency and contract
                    staff) based on payroll and other verifiable
                    and auditable data in a uniform format
                    (according to specifications established by the
                    Secretary in consultation with such programs,
                    groups, and parties). Such specifications shall
                    require that the information submitted under
                    the preceding sentence--
                              (i) specify the category of work a
                            certified employee performs (such as
                            whether the employee is a registered
                            nurse, licensed practical nurse,
                            licensed vocational nurse, certified
                            nursing assistant, therapist, or other
                            medical personnel);
                              (ii) include resident census data and
                            information on resident case mix;
                              (iii) include a regular reporting
                            schedule; and
                              (iv) include information on employee
                            turnover and tenure and on the hours of
                            care provided by each category of
                            certified employees referenced in
                            clause (i) per resident per day.
                    Nothing in this subparagraph shall be construed
                    as preventing the Secretary from requiring
                    submission of such information with respect to
                    specific categories, such as nursing staff,
                    before other categories of certified employees.
                    Information under this subparagraph with
                    respect to agency and contract staff shall be
                    kept separate from information on employee
                    staffing.
      (c) Requirements Relating to Residents' Rights.--
              (1) * * *

               *       *       *       *       *       *       *

              (7) Notification of facility closure.--
                      (A) In general.--Any individual who is the
                    administrator of a skilled nursing facility
                    must--
                              (i) submit to the Secretary, the
                            State long-term care ombudsman,
                            residents of the facility, and the
                            legal representatives of such residents
                            or other responsible parties, written
                            notification of an impending closure--
                                      (I) subject to subclause
                                    (II), not later than the date
                                    that is 60 days prior to the
                                    date of such closure; and
                                      (II) in the case of a
                                    facility where the Secretary
                                    terminates the facility's
                                    participation under this title,
                                    not later than the date that
                                    the Secretary determines
                                    appropriate;
                              (ii) ensure that the facility does
                            not admit any new residents on or after
                            the date on which such written
                            notification is submitted; and
                              (iii) include in the notice a plan
                            for the transfer and adequate
                            relocation of the residents of the
                            facility by a specified date prior to
                            closure that has been approved by the
                            State, including assurances that the
                            residents will be transferred to the
                            most appropriate facility or other
                            setting in terms of quality, services,
                            and location, taking into consideration
                            the needs and best interests of each
                            resident.
                      (B) Relocation.--
                              (i) In general.--The State shall
                            ensure that, before a facility closes,
                            all residents of the facility have been
                            successfully relocated to another
                            facility or an alternative home and
                            community-based setting.
                              (ii) Continuation of payments until
                            residents relocated.--The Secretary
                            may, as the Secretary determines
                            appropriate, continue to make payments
                            under this title with respect to
                            residents of a facility that has
                            submitted a notification under
                            subparagraph (A) during the period
                            beginning on the date such notification
                            is submitted and ending on the date on
                            which the resident is successfully
                            relocated.
      (d) Requirements Relating to Administration and Other
    Matters.--
              (1) Administration.--
                      (A) * * *
                      [(B) Required notices.--If a change occurs
                    in--
                              [(i) the persons with an ownership or
                            control interest (as defined in section
                            1124(a)(3)) in the facility,
                              [(ii) the persons who are officers,
                            directors, agents, or managing
                            employees (as defined in section
                            1126(b)) of the facility,
                              [(iii) the corporation, association,
                            or other company responsible for the
                            management of the facility, or
                              [(iv) the individual who is the
                            administrator or director of nursing of
                            the facility,--the skilled nursing
                            facility must provide notice to the
                            State agency responsible for the
                            licensing of the facility, at the time
                            of the change, of the change and of the
                            identity of each new person, company,
                            or individual described in the
                            respective clause.]
                      [(C)] (B) Skilled nursing facility
                    administrator.--The administrator of a skilled
                    nursing facility must meet standards
                    established by the Secretary under subsection
                    (f)(4).
                      (C) Compliance and ethics programs.--
                              (i) Requirement.--On or after the
                            date that is 36 months after the date
                            of the enactment of this subparagraph,
                            a skilled nursing facility shall, with
                            respect to the entity that operates the
                            facility (in this subparagraph referred
                            to as the ``operating organization'' or
                            ``organization''), have in operation a
                            compliance and ethics program that is
                            effective in preventing and detecting
                            criminal, civil, and administrative
                            violations under this Act and in
                            promoting quality of care consistent
                            with regulations developed under clause
                            (ii).
                              (ii) Development of regulations.--
                                      (I) In general.--Not later
                                    than the date that is 2 years
                                    after such date of the
                                    enactment, the Secretary, in
                                    consultation with the Inspector
                                    General of the Department of
                                    Health and Human Services,
                                    shall promulgate regulations
                                    for an effective compliance and
                                    ethics program for operating
                                    organizations, which may
                                    include a model compliance
                                    program.
                                      (II) Design of regulations.--
                                    Such regulations with respect
                                    to specific elements or
                                    formality of a program may vary
                                    with the size of the
                                    organization, such that larger
                                    organizations should have a
                                    more formal and rigorous
                                    program and include established
                                    written policies defining the
                                    standards and procedures to be
                                    followed by its employees. Such
                                    requirements shall specifically
                                    apply to the corporate level
                                    management of multi-unit
                                    nursing home chains.
                                      (III) Evaluation.--Not later
                                    than 3 years after the date of
                                    promulgation of regulations
                                    under this clause, the
                                    Secretary shall complete an
                                    evaluation of the compliance
                                    and ethics programs required to
                                    be established under this
                                    subparagraph. Such evaluation
                                    shall determine if such
                                    programs led to changes in
                                    deficiency citations, changes
                                    in quality performance, or
                                    changes in other metrics of
                                    resident quality of care. The
                                    Secretary shall submit to
                                    Congress a report on such
                                    evaluation and shall include in
                                    such report such
                                    recommendations regarding
                                    changes in the requirements for
                                    such programs as the Secretary
                                    determines appropriate.
                              (iii) Requirements for compliance and
                            ethics programs.--In this subparagraph,
                            the term ``compliance and ethics
                            program'' means, with respect to a
                            skilled nursing facility, a program of
                            the operating organization that--
                                      (I) has been reasonably
                                    designed, implemented, and
                                    enforced so that it generally
                                    will be effective in preventing
                                    and detecting criminal, civil,
                                    and administrative violations
                                    under this Act and in promoting
                                    quality of care; and
                                      (II) includes at least the
                                    required components specified
                                    in clause (iv).
                              (iv) Required components of
                            program.--The required components of a
                            compliance and ethics program of an
                            organization are the following:
                                      (I) The organization must
                                    have established compliance
                                    standards and procedures to be
                                    followed by its employees,
                                    contractors, and other agents
                                    that are reasonably capable of
                                    reducing the prospect of
                                    criminal, civil, and
                                    administrative violations under
                                    this Act.
                                      (II) Specific individuals
                                    within high-level personnel of
                                    the organization must have been
                                    assigned overall responsibility
                                    to oversee compliance with such
                                    standards and procedures and
                                    have sufficient resources and
                                    authority to assure such
                                    compliance.
                                      (III) The organization must
                                    have used due care not to
                                    delegate substantial
                                    discretionary authority to
                                    individuals whom the
                                    organization knew, or should
                                    have known through the exercise
                                    of due diligence, had a
                                    propensity to engage in
                                    criminal, civil, and
                                    administrative violations under
                                    this Act.
                                      (IV) The organization must
                                    have taken steps to communicate
                                    effectively its standards and
                                    procedures to all employees and
                                    other agents, such as by
                                    requiring participation in
                                    training programs or by
                                    disseminating publications that
                                    explain in a practical manner
                                    what is required.
                                      (V) The organization must
                                    have taken reasonable steps to
                                    achieve compliance with its
                                    standards, such as by utilizing
                                    monitoring and auditing systems
                                    reasonably designed to detect
                                    criminal, civil, and
                                    administrative violations under
                                    this Act by its employees and
                                    other agents and by having in
                                    place and publicizing a
                                    reporting system whereby
                                    employees and other agents
                                    could report violations by
                                    others within the organization
                                    without fear of retribution.
                                      (VI) The standards must have
                                    been consistently enforced
                                    through appropriate
                                    disciplinary mechanisms,
                                    including, as appropriate,
                                    discipline of individuals
                                    responsible for the failure to
                                    detect an offense.
                                      (VII) After an offense has
                                    been detected, the organization
                                    must have taken all reasonable
                                    steps to respond appropriately
                                    to the offense and to prevent
                                    further similar offenses,
                                    including repayment of any
                                    funds to which it was not
                                    entitled and any necessary
                                    modification to its program to
                                    prevent and detect criminal,
                                    civil, and administrative
                                    violations under this Act.
                                      (VIII) The organization must
                                    periodically undertake
                                    reassessment of its compliance
                                    program to identify changes
                                    necessary to reflect changes
                                    within the organization and its
                                    facilities.
                              (v) Coordination.--The provisions of
                            this subparagraph shall apply with
                            respect to a skilled nursing facility
                            in lieu of section 1874(d).
                      (D) Availability of survey, certification,
                    and complaint investigation reports.--A skilled
                    nursing facility must--
                              (i) have reports with respect to any
                            surveys, certifications, and complaint
                            investigations made respecting the
                            facility during the 3 preceding years
                            available for any individual to review
                            upon request; and
                              (ii) post notice of the availability
                            of such reports in areas of the
                            facility that are prominent and
                            accessible to the public.
                    The facility shall not make available under
                    clause (i) identifying information about
                    complainants or residents.

               *       *       *       *       *       *       *

      (e) State Requirements Relating to Skilled Nursing Facility
    Requirements.--The requirements, referred to in section
    1864(d), with respect to a State are as follows:
              (1) * * *

               *       *       *       *       *       *       *

              (6) Complaint processes and whistle-blower
            protection.--
                      (A) Complaint forms.--The State must make the
                    standardized complaint form developed under
                    subsection (f)(9) available upon request to--
                              (i) a resident of a skilled nursing
                            facility;
                              (ii) any person acting on the
                            resident's behalf; and
                              (iii) any person who works at a
                            skilled nursing facility or is a
                            representative of such a worker.
                      (B) Complaint resolution process.--The State
                    must establish a complaint resolution process
                    in order to ensure that a resident, the legal
                    representative of a resident of a skilled
                    nursing facility, or other responsible party is
                    not retaliated against if the resident, legal
                    representative, or responsible party has
                    complained, in good faith, about the quality of
                    care or other issues relating to the skilled
                    nursing facility, that the legal representative
                    of a resident of a skilled nursing facility or
                    other responsible party is not denied access to
                    such resident or otherwise retaliated against
                    if such representative party has complained, in
                    good faith, about the quality of care provided
                    by the facility or other issues relating to the
                    facility, and that a person who works at a
                    skilled nursing facility is not retaliated
                    against if the worker has complained, in good
                    faith, about quality of care or services or an
                    issue relating to the quality of care or
                    services provided at the facility, whether the
                    resident, legal representative, other
                    responsible party, or worker used the form
                    developed under subsection (f)(9) or some other
                    method for submitting the complaint. Such
                    complaint resolution process shall include--
                              (i) procedures to assure accurate
                            tracking of complaints received,
                            including notification to the
                            complainant that a complaint has been
                            received;
                              (ii) procedures to determine the
                            likely severity of a complaint and for
                            the investigation of the complaint;
                              (iii) deadlines for responding to a
                            complaint and for notifying the
                            complainant of the outcome of the
                            investigation; and
                              (iv) procedures to ensure that the
                            identity of the complainant will be
                            kept confidential.
                      (C) Whistleblower protection.--
                              (i) Prohibition against
                            retaliation.--No person who works at a
                            skilled nursing facility may be
                            penalized, discriminated, or retaliated
                            against with respect to any aspect of
                            employment, including discharge,
                            promotion, compensation, terms,
                            conditions, or privileges of
                            employment, or have a contract for
                            services terminated, because the person
                            (or anyone acting at the person's
                            request) complained, in good faith,
                            about the quality of care or services
                            provided by a nursing facility or about
                            other issues relating to quality of
                            care or services, whether using the
                            form developed under subsection (f)(9)
                            or some other method for submitting the
                            complaint.
                              (ii) Retaliatory reporting.--A
                            skilled nursing facility may not file a
                            complaint or a report against a person
                            who works (or has worked at the
                            facility with the appropriate State
                            professional disciplinary agency
                            because the person (or anyone acting at
                            the person's request) complained in
                            good faith, as described in clause (i).
                              (iii) Commencement of action.--Any
                            person who believes the person has been
                            penalized, discriminated , or
                            retaliated against or had a contract
                            for services terminated in violation of
                            clause (i) or against whom a complaint
                            has been filed in violation of clause
                            (ii) may bring an action at law or
                            equity in the appropriate district
                            court of the United States, which shall
                            have jurisdiction over such action
                            without regard to the amount in
                            controversy or the citizenship of the
                            parties, and which shall have
                            jurisdiction to grant complete relief,
                            including, but not limited to,
                            injunctive relief (such as
                            reinstatement, compensatory damages
                            (which may include reimbursement of
                            lost wages, compensation, and
                            benefits), costs of litigation
                            (including reasonable attorney and
                            expert witness fees), exemplary damages
                            where appropriate, and such other
                            relief as the court deems just and
                            proper.
                              (iv) Rights not waivable.--The rights
                            protected by this paragraph may not be
                            diminished by contract or other
                            agreement, and nothing in this
                            paragraph shall be construed to
                            diminish any greater or additional
                            protection provided by Federal or State
                            law or by contract or other agreement.
                              (v) Requirement to post notice of
                            employee rights.--Each skilled nursing
                            facility shall post conspicuously in an
                            appropriate location a sign (in a form
                            specified by the Secretary) specifying
                            the rights of persons under this
                            paragraph and including a statement
                            that an employee may file a complaint
                            with the Secretary against a skilled
                            nursing facility that violates the
                            provisions of this paragraph and
                            information with respect to the manner
                            of filing such a complaint.
                      (D) Rule of construction.--Nothing in this
                    paragraph shall be construed as preventing a
                    resident of a skilled nursing facility (or a
                    person acting on the resident's behalf) from
                    submitting a complaint in a manner or format
                    other than by using the standardized complaint
                    form developed under subsection (f)(9)
                    (including submitting a complaint orally).
                      (E) Good faith defined.--For purposes of this
                    paragraph, an individual shall be deemed to be
                    acting in good faith with respect to the filing
                    of a complaint if the individual reasonably
                    believes--
                              (i) the information reported or
                            disclosed in the complaint is true; and
                              (ii) the violation of this title has
                            occurred or may occur in relation to
                            such information.
      (f) Responsibilities of Secretary Relating to Skilled Nursing
    Facility Requirements.--
              (1) * * *
              (2) Requirements for nurse aide training and
            competency evaluation programs and for nurse aide
            competency evaluation programs.--
                      (A) In general.--For purposes of subsections
                    (b)(5) and (e)(1)(A), the Secretary shall
                    establish, by not later than September 1,
                    1988--
                              (i) requirements for the approval of
                            nurse aide training and competency
                            evaluation programs, including
                            requirements relating to (I) the areas
                            to be covered in such a program
                            (including at least basic nursing
                            skills, personal care skills,
                            recognition of mental health and social
                            service needs, care of cognitively
                            impaired residents, basic restorative
                            services, and residents' rights) and
                            content of the curriculum (including,
                            in the case of initial training and, if
                            the Secretary determines appropriate,
                            in the case of ongoing training,
                            dementia management training and
                            resident abuse prevention training),
                            (II) minimum hours of initial and
                            ongoing training and retraining
                            (including not less than 75 hours in
                            the case of initial training), (III)
                            qualifications of instructors, and (IV)
                            procedures for determination of
                            competency;

               *       *       *       *       *       *       *

              (8) Special focus facility program.--
                      (A) In general.--The Secretary shall conduct
                    a special focus facility program for
                    enforcement of requirements for skilled nursing
                    facilities that the Secretary has identified as
                    having substantially failed to meet applicable
                    requirement of this Act.
                      (B) Periodic surveys.--Under such program the
                    Secretary shall conduct surveys of each
                    facility in the program not less than once
                    every 6 months.
              (9) Standardized complaint form.--The Secretary shall
            develop a standardized complaint form for use by a
            resident (or a person acting on the resident's behalf)
            in filing a complaint with a State survey and
            certification agency and a State long-term care
            ombudsman program with respect to a skilled nursing
            facility.
      (g) Survey and Certification Process.--
              (1) * * *

               *       *       *       *       *       *       *

              (5) Disclosure of results of inspections and
            activities.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Submission of survey and certification
                    information to the secretary.--In order to
                    improve the timeliness of information made
                    available to the public under subparagraph (A)
                    and provided on the Nursing Home Compare
                    Medicare website under subsection (i), each
                    State shall submit information respecting any
                    survey or certification made respecting a
                    skilled nursing facility (including any
                    enforcement actions taken by the State) to the
                    Secretary not later than the date on which the
                    State sends such information to the facility.
                    The Secretary shall use the information
                    submitted under the preceding sentence to
                    update the information provided on the Nursing
                    Home Compare Medicare website as expeditiously
                    as practicable but not less frequently than
                    quarterly.
      (h) Enforcement Process.--
              (1) * * *
              (2) Secretarial authority.--
                      (A) * * *
                      (B) Specified remedies.--The Secretary may
                    take the following actions with respect to a
                    finding that a facility has not met an
                    applicable requirement:
                              (i) * * *
                              [(ii) Authority with respect to civil
                            money penalties.--The Secretary may
                            impose a civil money penalty in an
                            amount not to exceed $10,000 for each
                            day of noncompliance. The provisions of
                            section 1128A (other than subsections
                            (a) and (b)) shall apply to a civil
                            money penalty under the previous
                            sentence in the same manner as such
                            provisions apply to a penalty or
                            proceeding under section 1128A(a).]
                              (ii) Authority with respect to civil
                            money penalties.--
                                      (I) Amount.--The Secretary
                                    may impose a civil money
                                    penalty in the applicable per
                                    instance or per day amount (as
                                    defined in subclause (II) and
                                    (III)) for each day or
                                    instance, respectively, of
                                    noncompliance (as determined
                                    appropriate by the Secretary).
                                      (II) Applicable per instance
                                    amount.--In this clause, the
                                    term ``applicable per instance
                                    amount'' means--
                                              (aa) in the case
                                            where the deficiency is
                                            found to be a direct
                                            proximate cause of
                                            death of a resident of
                                            the facility, an amount
                                            not to exceed $100,000.
                                              (bb) in each case of
                                            a deficiency where the
                                            facility is cited for
                                            actual harm or
                                            immediate jeopardy, an
                                            amount not less than
                                            $3,050 and not more
                                            than $25,000; and
                                              (cc) in each case of
                                            any other deficiency,
                                            an amount not less than
                                            $250 and not to exceed
                                            $3050.
                                      (III) Applicable per day
                                    amount.--In this clause, the
                                    term ``applicable per day
                                    amount'' means--
                                              (aa) in each case of
                                            a deficiency where the
                                            facility is cited for
                                            actual harm or
                                            immediate jeopardy, an
                                            amount not less than
                                            $3,050 and not more
                                            than $25,000 and
                                              (bb) in each case of
                                            any other deficiency,
                                            an amount not less than
                                            $250 and not to exceed
                                            $3,050.
                                      (IV) Reduction of civil money
                                    penalties in certain
                                    circumstances.--Subject to
                                    subclauses (V) and (VI), in the
                                    case where a facility self-
                                    reports and promptly corrects a
                                    deficiency for which a penalty
                                    was imposed under this clause
                                    not later than 10 calendar days
                                    after the date of such
                                    imposition, the Secretary may
                                    reduce the amount of the
                                    penalty imposed by not more
                                    than 50 percent.
                                      (V) Prohibition on reduction
                                    for certain deficiencies.--
                                              (aa) Repeat
                                            deficiencies.--The
                                            Secretary may not
                                            reduce under subclause
                                            (IV) the amount of a
                                            penalty if the
                                            deficiency is a repeat
                                            deficiency.
                                              (bb) Certain other
                                            deficiencies.--The
                                            Secretary may not
                                            reduce under subclause
                                            (IV) the amount of a
                                            penalty if the penalty
                                            is imposed for a
                                            deficiency described in
                                            subclause (II)(aa) or
                                            (III)(aa) and the
                                            actual harm or
                                            widespread harm
                                            immediately jeopardizes
                                            the health or safety of
                                            a resident or residents
                                            of the facility, or if
                                            the penalty is imposed
                                            for a deficiency
                                            described in subclause
                                            (II)(bb).
                                      (VI) Limitation on aggregate
                                    reductions.--The aggregate
                                    reduction in a penalty under
                                    subclause (IV) may not exceed
                                    35 percent on the basis of
                                    self-reporting, on the basis of
                                    a waiver or an appeal (as
                                    provided for under regulations
                                    under section 488.436 of title
                                    42, Code of Federal
                                    Regulations), or on the basis
                                    of both.
                                      (VII) Collection of civil
                                    money penalties.--In the case
                                    of a civil money penalty
                                    imposed under this clause, the
                                    Secretary--
                                              (aa) subject to item
                                            (cc), shall, not later
                                            than 30 days after the
                                            date of imposition of
                                            the penalty, provide
                                            the opportunity for the
                                            facility to participate
                                            in an independent
                                            informal dispute
                                            resolution process
                                            which generates a
                                            written record prior to
                                            the collection of such
                                            penalty, but such
                                            opportunity shall not
                                            affect the
                                            responsibility of the
                                            State survey agency for
                                            making final
                                            recommendations for
                                            such penalties;
                                              (bb) in the case
                                            where the penalty is
                                            imposed for each day of
                                            noncompliance, shall
                                            not impose a penalty
                                            for any day during the
                                            period beginning on the
                                            initial day of the
                                            imposition of the
                                            penalty and ending on
                                            the day on which the
                                            informal dispute
                                            resolution process
                                            under item (aa) is
                                            completed;
                                              (cc) may provide for
                                            the collection of such
                                            civil money penalty and
                                            the placement of such
                                            amounts collected in an
                                            escrow account under
                                            the direction of the
                                            Secretary on the
                                            earlier of the date on
                                            which the informal
                                            dispute resolution
                                            process under item (aa)
                                            is completed or the
                                            date that is 90 days
                                            after the date of the
                                            imposition of the
                                            penalty;
                                              (dd) may provide that
                                            such amounts collected
                                            are kept in such
                                            account pending the
                                            resolution of any
                                            subsequent appeals;
                                              (ee) in the case
                                            where the facility
                                            successfully appeals
                                            the penalty, may
                                            provide for the return
                                            of such amounts
                                            collected (plus
                                            interest) to the
                                            facility; and
                                              (ff) in the case
                                            where all such appeals
                                            are unsuccessful, may
                                            provide that some
                                            portion of such amounts
                                            collected may be used
                                            to support activities
                                            that benefit residents,
                                            including assistance to
                                            support and protect
                                            residents of a facility
                                            that closes
                                            (voluntarily or
                                            involuntarily) or is
                                            decertified (including
                                            offsetting costs of
                                            relocating residents to
                                            home and community-
                                            based settings or
                                            another facility),
                                            projects that support
                                            resident and family
                                            councils and other
                                            consumer involvement in
                                            assuring quality care
                                            in facilities, and
                                            facility improvement
                                            initiatives approved by
                                            the Secretary
                                            (including joint
                                            training of facility
                                            staff and surveyors,
                                            technical assistance
                                            for facilities under
                                            quality assurance
                                            programs, the
                                            appointment of
                                            temporary management,
                                            and other activities
                                            approved by the
                                            Secretary).
                                      (VIII) Procedure.--The
                                    provisions of section 1128A
                                    (other than subsections (a) and
                                    (b) and except to the extent
                                    that such provisions require a
                                    hearing prior to the imposition
                                    of a civil money penalty) shall
                                    apply to a civil money penalty
                                    under this clause in the same
                                    manner as such provisions apply
                                    to a penalty or proceeding
                                    under section 1128A(a).

               *       *       *       *       *       *       *

              (4) Immediate termination of participation for
            facility where secretary finds noncompliance and
            immediate jeopardy.--If the Secretary finds that a
            skilled nursing facility has not met a requirement of
            subsection (b), (c), or (d), and finds that the failure
            immediately jeopardizes the health or safety of its
            residents, the Secretary shall take immediate action to
            remove the jeopardy and correct the deficiencies
            through the remedy specified in paragraph (2)(B)(iii),
            or [the Secretary shall terminate] the Secretary,
            subject to subsection (c)(7), shall terminate the
            facility's participation under this title. If the
            facility's participation under this title is
            terminated, the State shall provide for the safe and
            orderly transfer of the residents eligible under this
            title consistent with the requirements of [subsection
            (c)(2)] paragraphs (2) and (7) of subsection (c).
              (5) Construction.--The remedies provided under this
            subsection are in addition to those otherwise available
            under State or Federal law and shall not be construed
            as limiting such other remedies, including any remedy
            available to an individual at common law. The remedies
            described in clauses (i), (ii), and (iii) of paragraph
            (2)(B) may be imposed during the pendency of any
            hearing.

               *       *       *       *       *       *       *

      (i) Nursing Home Compare Website.--
              (1) Inclusion of additional information.--
                      (A) In general.--The Secretary shall ensure
                    that the Department of Health and Human
                    Services includes, as part of the information
                    provided for comparison of nursing homes on the
                    official Internet website of the Federal
                    Government for Medicare beneficiaries (commonly
                    referred to as the ``Nursing Home Compare''
                    Medicare website) (or a successor website), the
                    following information in a manner that is
                    prominent, easily accessible, readily
                    understandable to consumers of long-term care
                    services, and searchable:
                              (i) Information that is reported to
                            the Secretary under section 1124(c)(4).
                              (ii) Information on the ``Special
                            Focus Facility program'' (or a
                            successor program) established by the
                            Centers for Medicare and Medicaid
                            Services, according to procedures
                            established by the Secretary. Such
                            procedures shall provide for the
                            inclusion of information with respect
                            to, and the names and locations of,
                            those facilities that, since the
                            previous quarter--
                                      (I) were newly enrolled in
                                    the program;
                                      (II) are enrolled in the
                                    program and have failed to
                                    significantly improve;
                                      (III) are enrolled in the
                                    program and have significantly
                                    improved;
                                      (IV) have graduated from the
                                    program; and
                                      (V) have closed voluntarily
                                    or no longer participate under
                                    this title.
                              (iii) Staffing data for each facility
                            (including resident census data and
                            data on the hours of care provided per
                            resident per day) based on data
                            submitted under subsection (b)(8)(C),
                            including information on staffing
                            turnover and tenure, in a format that
                            is clearly understandable to consumers
                            of long-term care services and allows
                            such consumers to compare differences
                            in staffing between facilities and
                            State and national averages for the
                            facilities. Such format shall include--
                                      (I) concise explanations of
                                    how to interpret the data (such
                                    as a plain English explanation
                                    of data reflecting ``nursing
                                    home staff hours per resident
                                    day'');
                                      (II) differences in types of
                                    staff (such as training
                                    associated with different
                                    categories of staff);
                                      (III) the relationship
                                    between nurse staffing levels
                                    and quality of care; and
                                      (IV) an explanation that
                                    appropriate staffing levels
                                    vary based on patient case mix.
                              (iv) Links to State Internet websites
                            with information regarding State survey
                            and certification programs, links to
                            Form 2567 State inspection reports (or
                            a successor form) on such websites,
                            information to guide consumers in how
                            to interpret and understand such
                            reports, and the facility plan of
                            correction or other response to such
                            report.
                              (v) The standardized complaint form
                            developed under subsection (f)(8),
                            including explanatory material on what
                            complaint forms are, how they are used,
                            and how to file a complaint with the
                            State survey and certification program
                            and the State long-term care ombudsman
                            program.
                              (vi) Summary information on the
                            number, type, severity, and outcome of
                            substantiated complaints.
                              (vii) The number of adjudicated
                            instances of criminal violations by
                            employees of a nursing facility--
                                      (I) that were committed
                                    inside the facility;
                                      (II) with respect to such
                                    instances of violations or
                                    crimes committed inside of the
                                    facility that were the
                                    violations or crimes of abuse,
                                    neglect, and exploitation,
                                    criminal sexual abuse, or other
                                    violations or crimes that
                                    resulted in serious bodily
                                    injury; and
                                      (III) the number of civil
                                    monetary penalties levied
                                    against the facility,
                                    employees, contractors, and
                                    other agents.
                      (B) Deadline for provision of information.--
                              (i) In general.--Except as provided
                            in clause (ii), the Secretary shall
                            ensure that the information described
                            in subparagraph (A) is included on such
                            website (or a successor website) not
                            later than 1 year after the date of the
                            enactment of this subsection.
                              (ii) Exception.--The Secretary shall
                            ensure that the information described
                            in subparagraph (A)(i) and (A)(iii) is
                            included on such website (or a
                            successor website) not later than the
                            date on which the requirements under
                            section 1124(c)(4) and subsection
                            (b)(8)(C)(ii) are implemented.
              (2) Review and modification of website.--
                      (A) In general.--The Secretary shall
                    establish a process--
                              (i) to review the accuracy, clarity
                            of presentation, timeliness, and
                            comprehensiveness of information
                            reported on such website as of the day
                            before the date of the enactment of
                            this subsection; and
                              (ii) not later than 1 year after the
                            date of the enactment of this
                            subsection, to modify or revamp such
                            website in accordance with the review
                            conducted under clause (i).
                      (B) Consultation.--In conducting the review
                    under subparagraph (A)(i), the Secretary shall
                    consult with--
                              (i) State long-term care ombudsman
                            programs;
                              (ii) consumer advocacy groups;
                              (iii) provider stakeholder groups;
                            and
                              (iv) any other representatives of
                            programs or groups the Secretary
                            determines appropriate.
      [(i)] (j) Construction.--Where requirements or obligations
    under this section are identical to those provided under
    section 1919 of this Act, the fulfillment of those requirements
    or obligations under section 1919 shall be considered to be the
    fulfillment of the corresponding requirements or obligations
    under this section.

    SEC. 1819A. ASSURING QUALITY OF CARE IN HOSPICE CARE.

      (a) In General.--If the Secretary determines on the basis of
    a survey or otherwise, that a hospice program that is certified
    for participation under this title has demonstrated a
    substandard quality of care and failed to meet such other
    requirements as the Secretary may find necessary in the
    interest of the health and safety of the individuals who are
    provided care and services by the agency or organization
    involved and determines--
              (1) that the deficiencies involved immediately
            jeopardize the health and safety of the individuals to
            whom the program furnishes items and services, the
            Secretary shall take immediate action to remove the
            jeopardy and correct the deficiencies through the
            remedy specified in subsection (b)(2)(A)(iii) or
            terminate the certification of the program, and may
            provide, in addition, for 1 or more of the other
            remedies described in subsection (b)(2)(A); or
              (2) that the deficiencies involved do not immediately
            jeopardize the health and safety of the individuals to
            whom the program furnishes items and services, the
            Secretary may--
                      (A) impose intermediate sanctions developed
                    pursuant to subsection (b), in lieu of
                    terminating the certification of the program;
                    and
                      (B) if, after such a period of intermediate
                    sanctions, the program is still not in
                    compliance with such requirements, the
                    Secretary shall terminate the certification of
                    the program.
            If the Secretary determines that a hospice program that
            is certified for participation under this title is in
            compliance with such requirements but, as of a previous
            period, was not in compliance with such requirements,
            the Secretary may provide for a civil money penalty
            under subsection (b)(2)(A)(i) for the days in which it
            finds that the program was not in compliance with such
            requirements.
      (b) Intermediate Sanctions.--
              (1) Development and implementation.--The Secretary
            shall develop and implement, by not later than July 1,
            2012--
                      (A) a range of intermediate sanctions to
                    apply to hospice programs under the conditions
                    described in subsection (a), and
                      (B) appropriate procedures for appealing
                    determinations relating to the imposition of
                    such sanctions.
              (2) Specified sanctions.--
                      (A) In general.--The intermediate sanctions
                    developed under paragraph (1) may include--
                              (i) civil money penalties in an
                            amount not to exceed $10,000 for each
                            day of noncompliance or, in the case of
                            a per instance penalty applied by the
                            Secretary, not to exceed $25,000,
                              (ii) denial of all or part of the
                            payments to which a hospice program
                            would otherwise be entitled under this
                            title with respect to items and
                            services furnished by a hospice program
                            on or after the date on which the
                            Secretary determines that intermediate
                            sanctions should be imposed pursuant to
                            subsection (a)(2),
                              (iii) the appointment of temporary
                            management to oversee the operation of
                            the hospice program and to protect and
                            assure the health and safety of the
                            individuals under the care of the
                            program while improvements are made,
                              (iv) corrective action plans, and
                              (v) in-service training for staff.
                    The provisions of section 1128A (other than
                    subsections (a) and (b)) shall apply to a civil
                    money penalty under clause (i) in the same
                    manner as such provisions apply to a penalty or
                    proceeding under section 1128A(a). The
                    temporary management under clause (iii) shall
                    not be terminated until the Secretary has
                    determined that the program has the management
                    capability to ensure continued compliance with
                    all requirements referred to in that clause.
                      (B) Clarification.--The sanctions specified
                    in subparagraph (A) are in addition to
                    sanctions otherwise available under State or
                    Federal law and shall not be construed as
                    limiting other remedies, including any remedy
                    available to an individual at common law.
                      (C) Commencement of payment.--A denial of
                    payment under subparagraph (A)(ii) shall
                    terminate when the Secretary determines that
                    the hospice program no longer demonstrates a
                    substandard quality of care and meets such
                    other requirements as the Secretary may find
                    necessary in the interest of the health and
                    safety of the individuals who are provided care
                    and services by the agency or organization
                    involved.
              (3) Secretarial authority.--The Secretary shall
            develop and implement, by not later than July 1, 2011,
            specific procedures with respect to the conditions
            under which each of the intermediate sanctions
            developed under paragraph (1) is to be applied,
            including the amount of any fines and the severity of
            each of these sanctions. Such procedures shall be
            designed so as to minimize the time between
            identification of deficiencies and imposition of these
            sanctions and shall provide for the imposition of
            incrementally more severe fines for repeated or
            uncorrected deficiencies.

               *       *       *       *       *       *       *

       Part B--Supplementary Medical Insurance Benefits for the Aged and
    Disabled

               *       *       *       *       *       *       *

                               SCOPE OF BENEFITS

      Sec. 1832. (a) The benefits provided to an individual by the
    insurance program established by this part shall consist of--
              (1) * * *
              (2) entitlement to have payment made on his behalf
            (subject to the provisions of this part) for--
                      (A) * * *
                      (B) medical and other health services (other
                    than items described in subparagraph (G) or
                    subparagraph (I)) furnished by a provider of
                    services or by others under arrangement with
                    them made by a provider of services,
                    excluding--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iv) services of a nurse practitioner
                            or clinical nurse specialist but only
                            if no facility or other provider
                            charges or is paid any amounts with
                            respect to the furnishing of such
                            services; [and]
                              (v) marriage and family therapist
                            services; and
                              (vi) mental health counselor
                            services;

               *       *       *       *       *       *       *

                              PAYMENT OF BENEFITS

      Sec. 1833. (a) Except as provided in section 1876, and
    subject to the succeeding provisions of this section, there
    shall be paid from the Federal Supplementary Medical Insurance
    Trust Fund, in the case of each individual who is covered under
    the insurance program established by this part and incurs
    expenses for services with respect to which benefits are
    payable under this part, amounts equal to--
              (1) in the case of services described in section
            1832(a)(1)--80 percent of the reasonable charges for
            the services; except that (A) an organization which
            provides medical and other health services (or arranges
            for their availability) on a prepayment basis (and
            either is sponsored by a union or employer, or does not
            provide, or arrange for the provision of, any inpatient
            hospital services) may elect to be paid 80 percent of
            the reasonable cost of services for which payment may
            be made under this part on behalf of individuals
            enrolled in such organization in lieu of 80 percent of
            the reasonable charges for such services if the
            organization undertakes to charge such individuals no
            more than 20 percent of such reasonable cost plus any
            amounts payable by them as a result of subsection (b),
            (B) with respect to items and services described in
            section [1861(s)(10)(A)] 1861(s)(10), the amounts paid
            shall be 100 percent of the reasonable charges for such
            items and services, (C) with respect to expenses
            incurred for those physicians' services for which
            payment may be made under this part that are described
            in section 1862(a)(4), the amounts paid shall be
            subject to such limitations as may be prescribed by
            regulations, (D) with respect to clinical diagnostic
            laboratory tests for which payment is made under this
            part (i) on the basis of a fee schedule under
            subsection (h)(1) or section 1834(d)(1), the amount
            paid shall be equal to 80 percent (or 100 percent, in
            the case of such tests for which payment is made on an
            assignment-related basis) of the lesser of the amount
            determined under such fee schedule, the limitation
            amount for that test determined under subsection
            (h)(4)(B), or the amount of the charges billed for the
            tests, or (ii) on the basis of a negotiated rate
            established under subsection (h)(6), the amount paid
            shall be equal to 100 percent of such negotiated rate,,
            (E) with respect to services furnished to individuals
            who have been determined to have end stage renal
            disease, the amounts paid shall be determined subject
            to the provisions of section 1881, (F) with respect to
            clinical social worker services under section
            1861(s)(2)(N), the amounts paid shall be 80 percent of
            the lesser of (i) the actual charge for the services or
            (ii) 75 percent of the amount determined for payment of
            a psychologist under clause (L),
                      (G) * * *
              (H) with respect to services of a certified
            registered nurse anesthetist under section 1861(s)(11),
            the amounts paid shall be 80 percent of the least of
            the actual charge, the prevailing charge that would be
            recognized (or, for services furnished on or after
            January 1, 1992, the fee schedule amount provided under
            section 1848) if the services had been performed by an
            anesthesiologist, or the fee schedule for such services
            established by the Secretary in accordance with
            subsection (l), (I) with respect to covered items
            (described in section 1834(a)(13)), the amounts paid
            shall be the amounts described in section 1834(a)(1),
            and (J) with respect to expenses incurred for
            radiologist services (as defined in section
            1834(b)(6)), subject to section 1848, the amounts paid
            shall be 80 percent of the lesser of the actual charge
            for the services or the amount provided under the fee
            schedule established under section 1834(b), (K) with
            respect to certified nurse-midwife services under
            section 1861(s)(2)(L), the amounts paid shall be 80
            percent of the lesser of the actual charge for the
            services or the amount determined by a fee schedule
            established by the Secretary for the purposes of this
            subparagraph [(but in no event shall such fee schedule
            exceed 65 percent of the prevailing charge that would
            be allowed for the same service performed by a
            physician, or, for services furnished on or after
            January 1, 1992, 65 percent of the fee schedule amount
            provided under section 1848 for the same service
            performed by a physician)], (L) with respect to
            qualified psychologist services under section
            1861(s)(2)(M), the amounts paid shall be 80 percent of
            the lesser of the actual charge for the services or the
            amount determined by a fee schedule established by the
            Secretary for the purposes of this subparagraph, (M)
            with respect to prosthetic devices and orthotics and
            prosthetics (as defined in section 1834(h)(4)), the
            amounts paid shall be the amounts described in section
            1834(h)(1), (N) with respect to expenses incurred for
            physicians' services (as defined in section
            1848(j)(3)), the amounts paid shall be 80 percent of
            the payment basis determined under section 1848(a)(1),
            (O) with respect to services described in section
            1861(s)(2)(K) (relating to services furnished by
            physician assistants, nurse practitioners, or clinic
            nurse specialists), the amounts paid shall be equal to
            80 percent of (i) the lesser of the actual charge or 85
            percent of the fee schedule amount provided under
            section 1848, or (ii) in the case of services as an
            assistant at surgery, the lesser of the actual charge
            or 85 percent of the amount that would otherwise be
            recognized if performed by a physician who is serving
            as an assistant at surgery, (P) with respect to
            surgical dressings, the amounts paid shall be the
            amounts determined under section 1834(i), (Q) with
            respect to items or services for which fee schedules
            are established pursuant to section 1842(s), the
            amounts paid shall be 80 percent of the lesser of the
            actual charge or the fee schedule established in such
            section, (R) with respect to ambulance services, (i)
            the amounts paid shall be 80 percent of the lesser of
            the actual charge for the services or the amount
            determined by a fee schedule established by the
            Secretary under section 1834(l) and (ii) with respect
            to ambulance services described in section 1834(l)(8),
            the amounts paid shall be the amounts determined under
            section 1834(g) for outpatient critical access hospital
            services, (S) with respect to drugs and biologicals
            (including intravenous immune globulin (as defined in
            section 1861(zz))) not paid on a cost or prospective
            payment basis as otherwise provided in this part (other
            than items and services described in subparagraph (B)),
            the amounts paid shall be 80 percent of the lesser of
            the actual charge or the payment amount established in
            section 1842(o) (or, if applicable, under section 1847,
            1847A, or 1847B), (T) with respect to medical nutrition
            therapy services (as defined in section 1861(vv)), the
            amount paid shall be 80 percent of the lesser of the
            actual charge for the services or 85 percent of the
            amount determined under the fee schedule established
            under section 1848(b) for the same services if
            furnished by a physician, (U) with respect to facility
            fees described in section 1834(m)(2)(B), the amounts
            paid shall be 80 percent of the lesser of the actual
            charge or the amounts specified in such section, (V)
            notwithstanding subparagraphs (I) (relating to durable
            medical equipment), (M) (relating to prosthetic devices
            and orthotics and prosthetics), and (Q) (relating to
            1842(s) items), with respect to competitively priced
            items and services (described in section 1847(a)(2))
            that are furnished in a competitive area, the amounts
            paid shall be the amounts described in section
            1847(b)(5), [and] (W) with respect to additional
            preventive services (as defined in section
            1861(ddd)(1)), the amount paid shall be (i) in the case
            of such services which are clinical diagnostic
            laboratory tests, the amount determined under
            subparagraph (D), and (ii) in the case of all other
            such services, 80 percent of the lesser of the actual
            charge for the service or the amount determined under a
            fee schedule established by the Secretary for purposes
            of this subparagraph, (X) with respect to marriage and
            family therapist services under section 1861(s)(2)(GG),
            the amounts paid shall be 80 percent of the lesser of
            the actual charge for the services or 75 percent of the
            amount determined for payment of a psychologist under
            clause (L), and (Y), with respect to mental health
            counselor services under section 1861(s)(2)(HH), the
            amounts paid shall be 80 percent of the lesser of the
            actual charge for the services or 75 percent of the
            amount determined for payment of a psychologist under
            clause (L);
              (2) in the case of services described in section
            1832(a)(2) (except those services described in
            subparagraphs (C), (D), (E), (F), (G), (H), and (I) of
            such section and unless otherwise specified in section
            1881)--
                      (A) * * *

               *       *       *       *       *       *       *

                      (F) with respect to a covered osteoporosis
                    drug (as defined in section 1861(kk)) furnished
                    by a home health agency, 80 percent of the
                    reasonable cost of such service, as determined
                    under section 1861(v); [and]
                      (G) with respect to items and services
                    described in section [1861(s)(10)(A)]
                    1861(s)(10), the lesser of--
                              (i) * * *
                              (ii) the customary charges with
                            respect to such services,
                    or, if such services are furnished by a public
                    provider of services, or by another provider
                    which demonstrates to the satisfaction of the
                    Secretary that a significant portion of its
                    patients are low-income (and requests that
                    payment be made under this provision), free of
                    charge or at nominal charges to the public, the
                    amount determined in accordance with section
                    1814(b)(2); and
                      (H) with respect to additional preventive
                    services (as defined in section 1861(ddd))
                    furnished by an outpatient department of a
                    hospital, the amount determined under paragraph
                    (1)(W);
              (3) in the case of services described in section
            1832(a)(2)(D)--
                      (A) except as provided in subparagraph (B),
                    the costs which are reasonable and related to
                    the cost of furnishing such services or which
                    are based on such other tests of reasonableness
                    as the Secretary may prescribe in regulations,
                    including those authorized under section
                    1861(v)(1)(A), less the amount a provider may
                    charge as described in clause (ii) of section
                    1866(a)(2)(A), but in no case may the payment
                    for such services (other than for items and
                    services described in section [1861(s)(10)(A)]
                    1861(s)(10)) exceed 80 percent of such costs;
                    or

               *       *       *       *       *       *       *

    With respect to Medicare covered preventive services (including
    services described in the last sentence of section 1833(b)), in
    any case in which the payment rate otherwise provided under
    this part is computed as a percent of less than 100 percent of
    an actual charge, fee schedule rate, or other rate, such
    percentage shall be increased to 100 percent.
      (b) Before applying subsection (a) with respect to expenses
    incurred by an individual during any calendar year, the total
    amount of the expenses incurred by such individual during such
    year (which would, except for this subsection, constitute
    incurred expenses from which benefits payable under subsection
    (a) are determinable) shall be reduced by a deductible of $75
    for calendar years before 1991, $100 for 1991 through 2004,
    $110 for 2005, and for a subsequent year the amount of such
    deductible for the previous year increased by the annual
    percentage increase in the monthly actuarial rate under section
    1839(a)(1) ending with such subsequent year (rounded to the
    nearest $1); except that (1) such total amount shall not
    include expenses incurred for [items and services described in
    section 1861(s)(10)(A)] Medicare covered preventive services
    (as defined in section 1861(iii)), (2) such deductible shall
    not apply with respect to home health services (other than a
    covered osteoporosis drug (as defined in section 1861(kk))),
    (3) such deductible shall not apply with respect to clinical
    diagnostic laboratory tests for which payment is made under
    this part (A) under subsection (a)(1)(D)(i) or (a)(2)(D)(i) on
    an assignment-related basis, or to a provider having an
    agreement under section 1866, or (B) on the basis of a
    negotiated rate determined under subsection (h)(6), and (4)
    such deductible shall not apply to Federally qualified health
    center services, [(5) such deductible shall not apply with
    respect to screening mammography (as described in section
    1861(jj)), (6) such deductible shall not apply with respect to
    screening pap smear and screening pelvic exam (as described in
    section 1861(nn)), (7) such deductible shall not apply with
    respect to ultrasound screening for abdominal aortic aneurysm
    (as defined in section 1861(bbb)), (8) such deductible shall
    not apply with respect to colorectal cancer screening tests (as
    described in section 1861(pp)(1)), and] (9) such deductible
    shall not apply with respect to an initial preventive physical
    examination (as defined in section 1861(ww)). The stotal amount
    of the expenses incurred by an individual as determined under
    the preceding sentence shall, after the reduction specified in
    such sentence, be further reduced by an amount equal to the
    expenses incurred for the first three pints of whole blood (or
    equivalent quantities of packed red blood cells, as defined
    under regulations) furnished to the individual during the
    calendar year, except that such deductible for such blood shall
    in accordance with regulations be appropriately reduced to the
    extent that there has been a replacement of such blood (or
    equivalent quantities of packed red blood cells, as so
    defined); and for such purposes blood (or equivalent quantities
    of packed red blood cells, as so defined) furnished such
    individual shall be deemed replaced when the institution or
    other person furnishing such blood (or such equivalent
    quantities of packed red blood cells, as so defined) is given
    one pint of blood for each pint of blood (or equivalent
    quantities of packed red blood cells, as so defined) furnished
    such individual with respect to which a deduction is made under
    this sentence. The deductible under the previous sentence for
    blood or blood cells furnished an individual in a year shall be
    reduced to the extent that a deductible has been imposed under
    section 1813(a)(2) to blood or blood cells furnished the
    individual in the year. Clause (1) of the first sentence of
    this subsection shall apply with respect to a colorectal cancer
    screening test regardless of the code that is billed for the
    establishment of a diagnosis as a result of the test, or for
    the removal of tissue or other matter or other procedure that
    is furnished in connection with, as a result of, and in the
    same clinical encounter as, the screening test.

               *       *       *       *       *       *       *

      (g)(1) * * *

               *       *       *       *       *       *       *

      (5) With respect to expenses incurred during the period
    beginning on January 1, 2006, and ending on [December 31, 2009]
    December 31, 2011, for services, the Secretary shall implement
    a process under which an individual enrolled under this part
    may, upon request of the individual or a person on behalf of
    the individual, obtain an exception from the uniform dollar
    limitation specified in paragraph (2), for services described
    in paragraphs (1) and (3) if the provision of such services is
    determined to be medically necessary. Under such process, if
    the Secretary does not make a decision on such a request for an
    exception within 10 business days of the date of the
    Secretary's receipt of the request, the Secretary shall be
    deemed to have found the services to be medically necessary.
      (h)(1) * * *
      (2)(A)(i) Except as provided in paragraph (4), the Secretary
    shall set the fee schedules at 60 percent (or, in the case of a
    test performed by a qualified hospital laboratory (as defined
    in paragraph (1)(D)) for outpatients of such hospital, 62
    percent) of the prevailing charge level determined pursuant to
    the third and fourth sentences of section 1842(b)(3) for
    similar clinical diagnostic laboratory tests for the applicable
    region, State, or area for the 12-month period beginning July
    1, 1984, adjusted annually (to become effective on January 1 of
    each year) by a percentage increase or decrease equal to the
    percentage increase or decrease in the Consumer Price Index for
    All Urban Consumers (United States city average) minus, [for
    each of the years 2009 through 2013] for 2009, 0.5 percentage
    points, and subject to such other adjustments as the Secretary
    determines are justified by technological changes.
      (ii) Notwithstanding clause (i)--
              (I) * * *

               *       *       *       *       *       *       *

              (III) the annual adjustment in the fee schedules
            determined under clause (i) for each of the years 1991,
            1992, and 1993 shall be 2 percent, [and]
              (IV) the annual adjustment in the fee schedules
            determined under clause (i) for each of the years 1994
            and 1995, 1998 through 2002, and 2004 through 2008
            shall be 0 percent[.]; and
              (V) the annual adjustment in the fee schedules
            determined under clause (i) for years beginning with
            2010 shall be subject to the productivity adjustment
            described in section 1886(b)(3)(B)(iii)(II).

               *       *       *       *       *       *       *

      (i)(1) * * *
      (2)(A) * * *

               *       *       *       *       *       *       *

      (D)(i) * * *

               *       *       *       *       *       *       *

      (v) In implementing the system described in clause (i), for
    services furnished during 2010 or any subsequent year, to the
    extent that an annual percentage change factor applies, such
    factor shall be subject to the productivity adjustment
    described in section 1886(b)(3)(B)(iii)(II).
      [(v)] (vi) There shall be no administrative or judicial
    review under section 1869, 1878, or otherwise, of the
    classification system, the relative weights, payment amounts,
    and the geographic adjustment factor, if any, under this
    subparagraph.

               *       *       *       *       *       *       *

      (7)(A) * * *
      (B) Except as the Secretary may otherwise provide, subject to
    subparagraph (C), the provisions of subparagraphs (B), (C),
    (D), and (E) of paragraph (17) of section 1833(t) shall apply
    with respect to services of ambulatory surgical centers under
    this paragraph in a similar manner to the manner in which they
    apply under such paragraph and, for purposes of this
    subparagraph, any reference to a hospital, outpatient setting,
    or outpatient hospital services is deemed a reference to an
    ambulatory surgical center, the setting of such a center, or
    services of such a center, respectively.
      (C) Under subparagraph (B) the Secretary shall require the
    reporting of such additional data relating to quality of
    services furnished in an ambulatory surgical facility,
    including data on health care associated infections, as the
    Secretary may specify.
      (8) The Secretary shall require, as a condition of the
    agreement described in section 1832(a)(2)(F)(i), the submission
    of such cost report as the Secretary may specify, taking into
    account the requirements for such reports under section 1815 in
    the case of a hospital.

               *       *       *       *       *       *       *

      (m)(1) * * *

               *       *       *       *       *       *       *

      (4) The provisions of this subsection shall not be taken into
    account in applying subsections (m) or (u) and any payment
    under such subsections shall not be taken into account in
    computing payments under this subsection.
      [(4)] (5) There shall be no administrative or judicial review
    under section 1869, section 1878, or otherwise, respecting--
              (A) * * *

               *       *       *       *       *       *       *

      (p) Primary Care Payment Incentives.--
              (1) In general.--In the case of primary care services
            (as defined in paragraph (2)) furnished on or after
            January 1, 2011, by a primary care practitioner (as
            defined in paragraph (3)) for which amounts are payable
            under section 1848, in addition to the amount otherwise
            paid under this part there shall also be paid to the
            practitioner (or to an employer or facility in the
            cases described in clause (A) of section 1842(b)(6))
            (on a monthly or quarterly basis) from the Federal
            Supplementary Medical Insurance Trust Fund an amount
            equal 5 percent (or 10 percent if the practitioner
            predominately furnishes such services in an area that
            is designated (under section 332(a)(1)(A) of the Public
            Health Service Act) as a primary care health
            professional shortage area.
              (2) Primary care services defined.--In this
            subsection, the term ``primary care services''--
                      (A) means services which are evaluation and
                    management services as defined in section
                    1848(j)(5)(A); and
                      (B) includes services furnished by another
                    health care professional that would be
                    described in subparagraph (A) if furnished by a
                    physician.
              (3) Primary care practitioner defined.--In this
            subsection, the term ``primary care practitioner''--
                      (A) means a physician or other health care
                    practitioner (including a nurse practitioner)
                    who--
                              (i) specializes in family medicine,
                            general internal medicine, general
                            pediatrics, geriatrics, or obstetrics
                            and gynecology; and
                              (ii) has allowed charges for primary
                            care services that account for at least
                            50 percent of the physician's or
                            practitioner's total allowed charges
                            under section 1848, as determined by
                            the Secretary for the most recent
                            period for which data are available;
                            and
                      (B) includes a physician assistant who is
                    under the supervision of a physician described
                    in subparagraph (A).
              (4) Limitation on review.--There shall be no
            administrative or judicial review under section 1869,
            section 1878, or otherwise, respecting--
                      (A) any determination or designation under
                    this subsection;
                      (B) the identification of services as primary
                    care services under this subsection; and
                      (C) the identification of a practitioner as a
                    primary care practitioner under this
                    subsection.
              (5) Coordination with other payments.--
                      (A) With other primary care incentives.--The
                    provisions of this subsection shall not be
                    taken into account in applying subsections (m)
                    and (u) and any payment under such subsections
                    shall not be taken into account in computing
                    payments under this subsection.
                      (B) With quality incentives.--Payments under
                    this subsection shall not be taken into account
                    in determining the amounts that would otherwise
                    be paid under this part for purposes of section
                    1834(g)(2)(B).

               *       *       *       *       *       *       *

      (t) Prospective Payment System for Hospital Outpatient
    Department Services.--
              (1) Amount of payment.--
                      (A) * * *
                      (B) Definition of covered opd services.--For
                    purposes of this subsection, the term ``covered
                    OPD services''--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iv) does not include any therapy
                            services described in subsection (a)(8)
                            or ambulance services, for which
                            payment is made under a fee schedule
                            described in section 1834(k) or section
                            1834(l) and does not include [screening
                            mammography (as defined in section
                            1861(jj)) and diagnostic mammography]
                            diagnostic mammograms and Medicare
                            covered preventive services (as defined
                            in section 1861(iii)(1)).

               *       *       *       *       *       *       *

              (3) Calculation of base amounts.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Calculation of conversion factors.--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iv) OPD fee schedule increase
                            factor.--For purposes of this
                            subparagraph, subject to paragraph
                            (17), the ``OPD fee schedule increase
                            factor'' for services furnished in a
                            year is equal to the market basket
                            percentage increase applicable under
                            section 1886(b)(3)(B)(iii) (which is
                            subject to the productivity adjustment
                            described in subclause (II) of such
                            section) to hospital discharges
                            occurring during the fiscal year ending
                            in such year, reduced (but not below 0)
                            by 1 percentage point for such factor
                            for services furnished in each of 2000
                            and 2002. In applying the previous
                            sentence for years beginning with 2000,
                            the Secretary may substitute for the
                            market basket percentage increase an
                            annual percentage increase that is
                            computed and applied with respect to
                            covered OPD services furnished in a
                            year in the same manner as the market
                            basket percentage increase is
                            determined and applied to inpatient
                            hospital services for discharges
                            occurring in a fiscal year.

               *       *       *       *       *       *       *

              (7) Transitional adjustment to limit decline in
            payment.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (D) Hold harmless provisions.--
                              (i) Temporary treatment for certain
                            rural hospitals.--(I) * * *
                              (II) In the case of a hospital
                            located in a rural area and that has
                            not more than 100 beds and that is not
                            a sole community hospital (as defined
                            in section 1886(d)(5)(D)(iii)), for
                            covered OPD services furnished on or
                            after January 1, 2006, and before
                            January 1, [2010] 2012, for which the
                            PPS amount is less than the pre-BBA
                            amount, the amount of payment under
                            this subsection shall be increased by
                            the applicable percentage of the amount
                            of such difference. For purposes of the
                            preceding sentence, the applicable
                            percentage shall be 95 percent with
                            respect to covered OPD services
                            furnished in 2006, 90 percent with
                            respect to such services furnished in
                            2007, and 85 percent with respect to
                            such services furnished in 2008 [or
                            2009], 2009, 2010, or 2011.
                              (III) In the case of a sole community
                            hospital (as defined in section
                            1886(d)(5)(D)(iii)) that has not more
                            than 100 beds, for covered OPD services
                            furnished on or after January 1, 2009,
                            and before [January 1, 2010] January 1,
                            2012, for which the PPS amount is less
                            than the pre-BBA amount, the amount of
                            payment under this subsection shall be
                            increased by 85 percent of the amount
                            of such difference.

               *       *       *       *       *       *       *

              (16) Miscellaneous provisions.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Payment for devices of brachytherapy and
                    therapeutic radiopharmaceuticals at charges
                    adjusted to cost.--Notwithstanding the
                    preceding provisions of this subsection, for a
                    device of brachytherapy consisting of a seed or
                    seeds (or radioactive source) furnished on or
                    after January 1, 2004, and before [January 1,
                    2010] January 1, 2012, and for therapeutic
                    radiopharmaceuticals furnished on or after
                    January 1, 2008, and before January 1, 2010,
                    the payment basis for the device or therapeutic
                    radiopharmaceutical under this subsection shall
                    be equal to the hospital's charges for each
                    device or therapeutic radiopharmaceutical
                    furnished, adjusted to cost. Charges for such
                    devices or therapeutic radiopharmaceuticals
                    shall not be included in determining any
                    outlier payment under this subsection.
              (17) Quality reporting.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (F) Use of endorsed quality measures.--The
                    provisions of clause (x) of section
                    1886(b)(3)(C) shall apply to quality measures
                    for covered OPD services under this paragraph
                    in the same manner as such provisions apply to
                    quality measures for inpatient hospital
                    services.
              (18) Authorization of adjustment for cancer
            hospitals.--
                      (A) Study.--The Secretary shall conduct a
                    study to determine if, under the system under
                    this subsection, costs incurred by hospitals
                    described in section 1886(d)(1)(B)(v) with
                    respect to ambulatory payment classification
                    groups exceed those costs incurred by other
                    hospitals furnishing services under this
                    subsection (as determined appropriate by the
                    Secretary).
                      (B) Authorization of adjustment.--Insofar as
                    the Secretary determines under subparagraph (A)
                    that costs incurred by hospitals described in
                    section 1886(d)(1)(B)(v) exceed those costs
                    incurred by other hospitals furnishing services
                    under this subsection, the Secretary shall
                    provide for an appropriate adjustment under
                    paragraph (2)(E) to reflect those higher costs
                    effective for services furnished on or after
                    January 1, 2011.

               *       *       *       *       *       *       *

      (x) Incentive Payments for Efficient Areas.--
              (1) In general.--In the case of services furnished
            under the physician fee schedule under section 1848 on
            or after January 1, 2011, and before January 1, 2013,
            by a supplier that is paid under such fee schedule in
            an efficient area (as identified under paragraph (2)),
            in addition to the amount of payment that would
            otherwise be made for such services under this part,
            there also shall be paid (on a monthly or quarterly
            basis) an amount equal to 5 percent of the payment
            amount for the services under this part.
              (2) Identification of efficient areas.--
                      (A) In general.--Based upon available data,
                    the Secretary shall identify those counties or
                    equivalent areas in the United States in the
                    lowest fifth percentile of utilization based on
                    per capita spending under this part and part A
                    for services provided in the most recent year
                    for which data are available as of the date of
                    the enactment of this subsection, as
                    standardized to eliminate the effect of
                    geographic adjustments in payment rates.
                      (B) Identification of counties where service
                    is furnished.--For purposes of paying the
                    additional amount specified in paragraph (1),
                    if the Secretary uses the 5-digit postal ZIP
                    Code where the service is furnished, the
                    dominant county of the postal ZIP Code (as
                    determined by the United States Postal Service,
                    or otherwise) shall be used to determine
                    whether the postal ZIP Code is in a county
                    described in subparagraph (A).
                      (C) Limitation on review.--There shall be no
                    administrative or judicial review under section
                    1869, 1878, or otherwise, respecting--
                              (i) the identification of a county or
                            other area under subparagraph (A); or
                              (ii) the assignment of a postal ZIP
                            Code to a county or other area under
                            subparagraph (B).
                      (D) Publication of list of counties; posting
                    on website.--With respect to a year for which a
                    county or area is identified under this
                    paragraph, the Secretary shall identify such
                    counties or areas as part of the proposed and
                    final rule to implement the physician fee
                    schedule under section 1848 for the applicable
                    year. The Secretary shall post the list of
                    counties identified under this paragraph on the
                    Internet website of the Centers for Medicare &
                    Medicaid Services.

            SPECIAL PAYMENT RULES FOR PARTICULAR ITEMS AND SERVICES

      Sec. 1834. (a) Payment for Durable Medical Equipment.--
              (1) * * *

               *       *       *       *       *       *       *

              (5) Payment for oxygen and oxygen equipment.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (F) Rental cap.--
                              (i) * * *
                              (ii) Payments and rules after rental
                            cap.--[After the] Except as provided in
                            clause (iii), after the 36th continuous
                            month during which payment is made for
                            the equipment under this paragraph--
                                      (I) * * *

               *       *       *       *       *       *       *

                              (iii) Continuation of supply.--In the
                            case of a supplier furnishing such
                            equipment to an individual under this
                            subsection as of the 27th month of the
                            36 months described in clause (i), the
                            supplier furnishing such equipment as
                            of such month shall continue to furnish
                            such equipment to such individual
                            (either directly or though arrangements
                            with other suppliers of such equipment)
                            during any subsequent period of medical
                            need for the remainder of the
                            reasonable useful lifetime of the
                            equipment, as determined by the
                            Secretary, regardless of the location
                            of the individual, unless another
                            supplier has accepted responsibility
                            for continuing to furnish such
                            equipment during the remainder of such
                            period.
                              (iv) Exception for bankruptcy.--If a
                            supplier who furnishes oxygen and
                            oxygen equipment to an individual is
                            declared bankrupt and its assets are
                            liquidated and at the time of such
                            declaration and liquidation more than
                            24 months of rental payments have been
                            made, such individual may begin a new
                            36-month rental period under this
                            subparagraph with another supplier of
                            oxygen.

               *       *       *       *       *       *       *

              (7) Payment for other items of durable medical
            equipment.--
                      (A) Payment.--In the case of an item of
                    durable medical equipment not described in
                    paragraphs (2) through (6), the following rules
                    shall apply:
                              (i) * * *

               *       *       *       *       *       *       *

                              (iii) Purchase agreement option for
                            certain complex rehabilitative power-
                            driven wheelchairs.--In the case of a
                            [power-driven wheelchair] complex
                            rehabilitative power-driven wheelchair
                            recognized by the Secretary as
                            classified within group 3 or higher, at
                            the time the supplier furnishes the
                            item, the supplier shall offer the
                            individual the option to purchase the
                            item, and payment for such item shall
                            be made on a lump-sum basis if the
                            individual exercises such option.

               *       *       *       *       *       *       *

              (11) Improper billing and requirement of physician
            order.--
                      (A) * * *
                      (B) Requirement of physician order.--The
                    Secretary is authorized to require, for
                    specified covered items, that payment may be
                    made under this subsection with respect to the
                    item only if a [physician] physician enrolled
                    under section 1866(j) or an eligible
                    professional under section 1848(k)(3)(B) has
                    communicated to the supplier, before delivery
                    of the item, a written order for the item and
                    shall require that such an order be written
                    pursuant to the physician documenting that the
                    physician has had a face-to-face encounter
                    (including through use of telehealth and other
                    than with respect to encounters that are
                    incident to services involved) with the
                    individual involved during the 6-month period
                    preceding such written order, or other
                    reasonable timeframe as determined by the
                    Secretary.

               *       *       *       *       *       *       *

              (14) Covered item update.--In this subsection, the
            term ``covered item update'' means, with respect to a
            year--
                      (A) * * *

               *       *       *       *       *       *       *

                      (K) for 2010, 2011, 2012, and 2013, the
                    percentage increase in the consumer price index
                    for all urban consumers (U.S. urban average)
                    for the 12-month period ending with June of the
                    previous year, subject to the productivity
                    adjustment described in section
                    1886(b)(3)(B)(iii)(II);
                      (L) for 2014--
                              (i) in the case of items and services
                            described in subparagraph (J)(i) for
                            which a payment adjustment has not been
                            made under subsection (a)(1)(F)(ii) in
                            any previous year, the percentage
                            increase in the consumer price index
                            for all urban consumers (U.S. urban
                            average) for the 12-month period ending
                            with June 2013, subject to the
                            productivity adjustment described in
                            section 1886(b)(3)(B)(iii)(II), plus
                            2.0 percentage points; or
                              (ii) in the case of other items and
                            services, the percentage increase in
                            the consumer price index for all urban
                            consumers (U.S. urban average) for the
                            12-month period ending with June 2013,
                            subject to the productivity adjustment
                            described in section
                            1886(b)(3)(B)(iii)(II); and
                      (M) for a subsequent year, the percentage
                    increase in the consumer price index for all
                    urban consumers (U.S. urban average) for the
                    12-month period ending with June of the
                    previous year, subject to the productivity
                    adjustment described in section
                    1886(b)(3)(B)(iii)(II).

               *       *       *       *       *       *       *

              (16) Disclosure of information and surety bond.--The
            Secretary shall not provide for the issuance (or
            renewal) of a provider number for a supplier of durable
            medical equipment, for purposes of payment under this
            part for durable medical equipment furnished by the
            supplier, unless the supplier provides the Secretary on
            a continuing basis--
                      (A) * * *

               *       *       *       *       *       *       *

            The Secretary may waive the requirement of a bond under
            subparagraph (B) in the case of a supplier that
            provides a comparable surety bond under State law. The
            Secretary, at the Secretary's discretion, may impose
            the requirements of the first sentence with respect to
            some or all providers of items or services under part A
            or some or all suppliers or other persons (other than
            physicians or other practitioners, as defined in
            section 1842(b)(18)(C)) who furnish items or services
            under this part. The requirement for a surety bond
            described in subparagraph (B) shall not apply in the
            case of a pharmacy (i) that has been enrolled under
            section 1866(j) as a supplier of durable medical
            equipment, prosthetics, orthotics, and supplies and has
            been issued (which may include renewal of) a provider
            number (as described in the first sentence of this
            paragraph) for at least 5 years, and (ii) for which a
            final adverse action (as defined in section 424.57(a)
            of title 42, Code of Federal Regulations) has never
            been imposed.

               *       *       *       *       *       *       *

              (20) Identification of quality standards.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (F) Application of accreditation
                    requirement.--In implementing quality standards
                    under this paragraph--
                              (i) subject to [clause (ii)] clauses
                            (ii) and (iii), the Secretary shall
                            require suppliers furnishing items and
                            services described in subparagraph (D)
                            on or after October 1, 2009, directly
                            or as a subcontractor for another
                            entity, to have submitted to the
                            Secretary evidence of accreditation by
                            an accreditation organization
                            designated under subparagraph (B) as
                            meeting applicable quality standards;
                            [and]
                              (ii) in applying such standards and
                            the accreditation requirement of clause
                            (i) with respect to eligible
                            professionals (as defined in section
                            1848(k)(3)(B)), and including such
                            other persons, such as orthotists and
                            prosthetists, as specified by the
                            Secretary, furnishing such items and
                            services--
                                      (I) * * *
                                      (II) the Secretary may exempt
                                    such professionals and persons
                                    from such standards and
                                    requirement if the Secretary
                                    determines that licensing,
                                    accreditation, or other
                                    mandatory quality requirements
                                    apply to such professionals and
                                    persons with respect to the
                                    furnishing of such items and
                                    services[.]; and
                              (iii) the requirement for
                            accreditation described in clause (i)
                            shall not apply for purposes of
                            supplying diabetic testing supplies,
                            canes, and crutches in the case of a
                            pharmacy that is enrolled under section
                            1866(j) as a supplier of durable
                            medical equipment, prosthetics,
                            orthotics, and supplies.
                    Any supplier that has submitted an application
                    for accreditation before August 1, 2009, shall
                    be deemed as meeting applicable standards and
                    accreditation requirement under this
                    subparagraph until such time as the independent
                    accreditation organization takes action on the
                    supplier's application.

               *       *       *       *       *       *       *

      (d) Frequency Limits and Payment for Colorectal Cancer
    Screening Tests.--
              (1) * * *
              (2) Screening flexible sigmoidoscopies.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Facility payment limit.--
                              (i) * * *
                              [(ii) Limitation on coinsurance.--
                            Notwithstanding any other provision of
                            this title, in the case of a
                            beneficiary who receives the services
                            described in clause (i)--
                                      [(I) in computing the amount
                                    of any applicable copayment,
                                    the computation of such
                                    coinsurance shall be based upon
                                    the fee schedule under which
                                    payment is made for the
                                    services, and
                                      [(II) the amount of such
                                    coinsurance is equal to 25
                                    percent of the payment amount
                                    under the fee schedule
                                    described in subclause (I).]
                              (ii) No coinsurance.--In the case of
                            a beneficiary who receives services
                            described in clause (i), there shall be
                            no coinsurance applied.

               *       *       *       *       *       *       *

              (3) Screening colonoscopy.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Facility payment limit.--
                              (i) * * *
                              [(ii) Limitation on coinsurance.--
                            Notwithstanding any other provision of
                            this title, in the case of a
                            beneficiary who receives the services
                            described in clause (i)--
                                      [(I) in computing the amount
                                    of any applicable coinsurance,
                                    the computation of such
                                    coinsurance shall be based upon
                                    the fee schedule under which
                                    payment is made for the
                                    services, and
                                      [(II) the amount of such
                                    coinsurance is equal to 25
                                    percent of the payment amount
                                    under the fee schedule
                                    described in subclause (I).]
                              (ii) No coinsurance.--In the case of
                            a beneficiary who receives services
                            described in clause (i), there shall be
                            no coinsurance applied.

               *       *       *       *       *       *       *

      (l) Establishment of Fee Schedule for Ambulance Services.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Savings.--In establishing such fee schedule, the
            Secretary shall--
                      (A) * * *
                      (B) set the payment amounts provided under
                    the fee schedule for services furnished in 2001
                    and each subsequent year at amounts equal to
                    the payment amounts under the fee schedule for
                    services furnished during the previous year,
                    increased by the percentage increase in the
                    consumer price index for all urban consumers
                    (U.S. city average) for the 12-month period
                    ending with June of the previous year reduced
                    in the case of 2002 by 1.0 percentage points
                    and, in the case of years beginning with 2010,
                    subject to the productivity adjustment
                    described in section 1886(b)(3)(B)(iii)(II).

               *       *       *       *       *       *       *

              (13) Temporary increase for ground ambulance
            services.--
                      (A) In general.--After computing the rates
                    with respect to ground ambulance services under
                    the other applicable provisions of this
                    subsection, in the case of such services
                    furnished on or after July 1, 2004, and before
                    January 1, 2007, and for such services
                    furnished on or after July 1, 2008, and [before
                    January 1, 2010] before January 1, 2012 for
                    which the transportation originates in--
                              (i) a rural area described in
                            paragraph (9) or in a rural census
                            tract described in such paragraph, the
                            fee schedule established under this
                            section shall provide that the rate for
                            the service otherwise established,
                            after the application of any increase
                            under paragraphs (11) and (12), shall
                            be increased by 2 percent (or 3 percent
                            if such service is furnished on or
                            after July 1, 2008, and [before January
                            1, 2010] before January 1, 2012); and
                              (ii) an area not described in clause
                            (i), the fee schedule established under
                            this subsection shall provide that the
                            rate for the service otherwise
                            established, after the application of
                            any increase under paragraph (11),
                            shall be increased by 1 percent (or 2
                            percent if such service is furnished on
                            or after July 1, 2008, and [before
                            January 1, 2010] before January 1,
                            2012).

               *       *       *       *       *       *       *

      (m) Payment for Telehealth Services.--
              (1) * * *

               *       *       *       *       *       *       *

              (4) Definitions.--For purposes of this subsection:
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Originating site.--
                              (i) * * *
                              (ii) Sites described.--The sites
                            referred to in clause (i) are the
                            following sites:
                                      (I) * * *

               *       *       *       *       *       *       *

                                      (IX) A renal dialysis
                                    facility.

               *       *       *       *       *       *       *

                      (F) Telehealth service.--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iii) Recommendations of the
                            telehealth advisory committee.--In
                            making determinations under clauses (i)
                            and (ii), the Secretary shall take into
                            account the recommendations of the
                            Telehealth Advisory Committee
                            (established under section 1868(c))
                            when adding or deleting services (and
                            HCPCS codes) and in establishing
                            policies of the Centers for Medicare &
                            Medicaid Services regarding the
                            delivery of telehealth services. If the
                            Secretary does not implement such a
                            recommendation, the Secretary shall
                            publish in the Federal Register a
                            statement regarding the reason such
                            recommendation was not implemented.
              (5) Hospital credentialing of telemedicine
            practitioners.--A telemedicine practitioner that is
            credentialed by a hospital in compliance with the Joint
            Commission Standards for Telemedicine shall be
            considered in compliance with conditions of
            participation and reimbursement credentialing
            requirements under this title for telemedicine
            services.

            PROCEDURE FOR PAYMENT OF CLAIMS OF PROVIDERS OF SERVICES

      Sec. 1835. (a) Except as provided in subsections (b), (c),
    and (e), payment for services described in section 1832(a)(2)
    furnished an individual may be made only to providers of
    services which are eligible therefor under section 1866(a), and
    only if--
              (1) written request, signed by such individual,
            except in cases in which the Secretary finds it
            impracticable for the individual to do so, is filed for
            such payment in such form, in such manner and by such
            person or persons as the Secretary may by regulation
            prescribe, no later than the close of the [period of 3
            calendar years following the year in which such
            services are furnished (deeming any services furnished
            in the last 3 calendar months of any calendar year to
            have been furnished in the succeeding calendar year)
            except that, where the Secretary deems that efficient
            administration so requires, such period may be reduced
            to not less than 1 calendar year; and] period of 1
            calendar year from which such services are furnished;
            and
              (2) a physician, or in the case of services described
            in subparagraph (A), a physician enrolled under section
            1866(j) or an eligible professional under section
            1848(k)(3)(B), certifies (and recertifies, where such
            services are furnished over a period of time, in such
            cases, with such frequency, and accompanied by such
            supporting material, appropriate to the case involved,
            as may be provided by regulations) that--
                      (A) in the case of home health services (i)
                    such services are or were required because the
                    individual is or was confined to his home
                    (except when receiving items and services
                    referred to in section 1861(m)(7)) and needs or
                    needed skilled nursing care (other than solely
                    venipuncture for the purpose of obtaining a
                    blood sample) on an intermittent basis or
                    physical or speech therapy or, in the case of
                    an individual who has been furnished home
                    health services based on such a need and who no
                    longer has such a need for such care or
                    therapy, continues or continued to need
                    occupational therapy, (ii) a plan for
                    furnishing such services to such individual has
                    been established and is periodically reviewed
                    by a physician, [and] (iii) such services are
                    or were furnished while the individual is or
                    was under the care of a physician, and (iv) in
                    the case of a certification or recertification
                    after January 1, 2010, prior to making such
                    certification the physician must document that
                    the physician has had a face-to-face encounter
                    (including through use of telehealth and other
                    than with respect to encounters that are
                    incident to services involved) with the
                    individual during the 6-month period preceding
                    such certification or recertification, or other
                    reasonable timeframe as determined by the
                    Secretary;

               *       *       *       *       *       *       *

    To the extent provided by regulations, the certification and
    recertification requirements of paragraph (2) shall be deemed
    satisfied where, at a later date, a physician makes a
    certification of the kind provided in subparagraph (A) or (B)
    of paragraph (2) (whichever would have applied), but only where
    such certification is accompanied by such medical and other
    evidence as may be required by such regulations. With respect
    to the physician certification required by paragraph (2) for
    home health services furnished to any individual by a home
    health agency (other than an agency which is a governmental
    entity) and with respect to the establishment and review of a
    plan for such services, the Secretary shall prescribe
    regulations which shall become effective no later than July 1,
    1981, and which prohibit a physician who has a significant
    ownership interest in, or a significant financial or
    contractual relationship with, such home health agency from
    performing such certification and from establishing or
    reviewing such plan, except that such prohibition shall not
    apply with respect to a home health agency which is a sole
    community home health agency (as determined by the Secretary).
    For purposes of the preceding sentence, service by a physician
    as an uncompensated officer or director of a home health agency
    shall not constitute having a significant ownership interest
    in, or a significant financial or contractual relationship
    with, such agency. For purposes of paragraph (2)(A), an
    individual shall be considered to be ``confined to his home''
    if the individual has a condition, due to an illness or injury,
    that restricts the ability of the individual to leave his or
    her home except with the assistance of another individual or
    the aid of a supportive device (such as crutches, a cane, a
    wheelchair, or a walker), or if the individual has a condition
    such that leaving his or her home is medically contraindicated.
    While an individual does not have to be bedridden to be
    considered ``confined to his home'', the condition of the
    individual should be such that there exists a normal inability
    to leave home and that leaving home requires a considerable and
    taxing effort by the individual. Any absence of an individual
    from the home attributable to the need to receive health care
    treatment, including regular absences for the purpose of
    participating in therapeutic, psychosocial, or medical
    treatment in an adult day-care program that is licensed or
    certified by a State, or accredited, to furnish adult day-care
    services in the State shall not disqualify an individual from
    being considered to be ``confined to his home''. Any other
    absence of an individual from the home shall not so disqualify
    an individual if the absence is of infrequent or of relatively
    short duration. For purposes of the preceding sentence, any
    absence for the purpose of attending a religious service shall
    be deemed to be an absence of infrequent or short duration. In
    applying paragraph (1), the Secretary may specify exceptions to
    the 1 calendar year period specified in such paragraph.

               *       *       *       *       *       *       *

                              ELIGIBLE INDIVIDUALS

      Sec. 1836. [Every individual who] (a) In General.--Every
    individual who--
              (1) * * *

               *       *       *       *       *       *       *

      (b) Special Rules Applicable to Individuals Only Eligible for
    Coverage of Immunosuppressive Drugs.--
              (1) In general.--In the case of an individual whose
            eligibility for benefits under this title has ended on
            or after January 1, 2012, except for the coverage of
            immunosuppressive drugs by reason of section
            226A(b)(2), the following rules shall apply:
                      (A) The individual shall be deemed to be
                    enrolled under this part for purposes of
                    receiving coverage of such drugs.
                      (B) The individual shall be responsible for
                    providing for payment of the portion of the
                    premium under section 1839 which is not covered
                    under the Medicare savings program (as defined
                    in section 1144(c)(7)) in order to receive such
                    coverage.
                      (C) The provision of such drugs shall be
                    subject to the application of--
                              (i) the deductible under section
                            1833(b); and
                              (ii) the coinsurance amount
                            applicable for such drugs (as
                            determined under this part).
                      (D) If the individual is an inpatient of a
                    hospital or other entity, the individual is
                    entitled to receive coverage of such drugs
                    under this part.
              (2) Establishment of procedures in order to implement
            coverage.--The Secretary shall establish procedures
            for--
                      (A) identifying individuals that are entitled
                    to coverage of immunosuppressive drugs by
                    reason of section 226A(b)(2); and
                      (B) distinguishing such individuals from
                    individuals that are enrolled under this part
                    for the complete package of benefits under this
                    part.

                               ENROLLMENT PERIODS

      Sec. 1837. (a) * * *

               *       *       *       *       *       *       *

      (l)(1) In the case of any individual who is a covered
    beneficiary (as defined in section 1072(5) of title 10, United
    States Code) at the time the individual is entitled to hospital
    insurance benefits under part A under section 226(b) or section
    226A and who is eligible to enroll but who has elected not to
    enroll (or to be deemed enrolled) during the individual's
    initial enrollment period, there shall be a special enrollment
    period described in paragraph (2).
      (2) The special enrollment period described in this
    paragraph, with respect to an individual, is the 12-month
    period beginning on the day after the last day of the initial
    enrollment period of the individual or, if later, the 12-month
    period beginning with the month the individual is notified of
    enrollment under this section.
      (3) In the case of an individual who enrolls during the
    special enrollment period provided under paragraph (1), the
    coverage period under this part shall begin on the first day of
    the month in which the individual enrolls or, at the option of
    the individual, on the first day of the second month following
    the last month of the individual's initial enrollment period.
      (4) The Secretary of Defense shall establish a method for
    identifying individuals described in paragraph (1) and
    providing notice to them of their eligibility for enrollment
    during the special enrollment period described in paragraph
    (2).

               *       *       *       *       *       *       *

                              AMOUNTS OF PREMIUMS

      Sec. 1839. (a) * * *
      (b) In the case of an individual whose coverage period began
    pursuant to an enrollment after his initial enrollment period
    (determined pursuant to subsection (c) or (d) of section 1837)
    and not pursuant to a special enrollment period under [section
    1837(i)(4)] subsection (i)(4) or (l) of section 1837, the
    monthly premium determined under subsection (a) (without regard
    to any adjustment under subsection (i)) shall be increased by
    10 percent of the monthly premium so determined for each full
    12 months (in the same continuous period of eligibility) in
    which he could have been but was not enrolled. For purposes of
    the preceding sentence, there shall be taken into account (1)
    the months which elapsed between the close of his initial
    enrollment period and the close of the enrollment period in
    which he enrolled, plus (in the case of an individual who
    reenrolls) (2) the months which elapsed between the date of
    termination of a previous coverage period and the close of the
    enrollment period in which he reenrolled, but there shall not
    be taken into account months for which the individual can
    demonstrate that the individual was enrolled in a group health
    plan described in section 1862(b)(1)(A)(v) by reason of the
    individual's (or the individual's spouse's) current employment
    or months during which the individual has not attained the age
    of 65 and for which the individual can demonstrate that the
    individual was enrolled in a large group health plan as an
    active individual (as those terms are defined in section
    1862(b)(1)(B)(iii)) or months for which the individual can
    demonstrate that the individual was an individual described in
    section 1837(k)(3). Any increase in an individual's monthly
    premium under the first sentence of this subsection with
    respect to a particular continuous period of eligibility shall
    not be applicable with respect to any other continuous period
    of eligibility which such individual may have. No increase in
    the premium shall be effected for a month in the case of an
    individual who enrolls under this part during 2001, 2002, 2003,
    or 2004 and who demonstrates to the Secretary before December
    31, 2004, that the individual is a covered beneficiary (as
    defined in section 1072(5) of title 10, United States Code).
    The Secretary of Health and Human Services shall consult with
    the Secretary of Defense in identifying individuals described
    in the previous sentence.

               *       *       *       *       *       *       *

      (i) Reduction in Premium Subsidy Based on Income.--
              (1) * * *

               *       *       *       *       *       *       *

              (4) Modified adjusted gross income.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Use of more recent taxable year.--
                              (i) * * *
                              (ii) Standard for granting
                            requests.--A request under clause
                            (i)(I) to use a more recent taxable
                            year may be granted only if--
                                      (I) * * *
                                      (II) the individual's
                                    modified adjusted gross income
                                    for such year is significantly
                                    less than such income for the
                                    taxable year determined under
                                    subparagraph (B) by reason of
                                    the death of such individual's
                                    spouse, the marriage or divorce
                                    of such individual, sale of
                                    primary residence, or other
                                    major life changing events
                                    specified in regulations
                                    prescribed by the Commissioner
                                    in consultation with the
                                    Secretary.

               *       *       *       *       *       *       *

              PROVISIONS RELATING TO THE ADMINISTRATION OF PART B

      Sec. 1842. (a) * * *
      (b)
              (2) * * *

               *       *       *       *       *       *       *

      (18)(A) * * *

               *       *       *       *       *       *       *

      (C) A practitioner described in this subparagraph is any of
    the following:
              (i) * * *

               *       *       *       *       *       *       *

              (vii) A marriage and family therapist (as defined in
            section 1861(jjj)(2)).
              (viii) A mental health counselor (as defined in
            section 1861(kkk)(2)).

               *       *       *       *       *       *       *

      (h)(1) * * *

               *       *       *       *       *       *       *

      (10) The Secretary may disenroll, for a period of not more
    than one year for each act, a physician or supplier under
    section 1866(j) if such physician or supplier fails to maintain
    and, upon request of the Secretary, provide access to
    documentation relating to written orders or requests for
    payment for durable medical equipment, certifications for home
    health services, or referrals for other items or services
    written or ordered by such physician or supplier under this
    title, as specified by the Secretary.

               *       *       *       *       *       *       *

      (o)(1) If a physician's, supplier's, or any other person's
    bill or request for payment for services includes a charge for
    a drug or biological for which payment may be made under this
    part and the drug or biological is not paid on a cost or
    prospective payment basis as otherwise provided in this part,
    the amount payable for the drug or biological is equal to the
    following:
              (A) In the case of any of the following drugs or
            biologicals, 95 percent of the average wholesale price:
                      (i) * * *

               *       *       *       *       *       *       *

                      (iv) A vaccine described in [subparagraph (A)
                    or (B) of] section 1861(s)(10) furnished on or
                    after January 1, 2004 and before January 1,
                    2011, and influenza vaccines furnished on or
                    after January 1, 2011.

               *       *       *       *       *       *       *

                 USE OF AVERAGE SALES PRICE PAYMENT METHODOLOGY

      Sec. 1847A. (a) * * *

               *       *       *       *       *       *       *

      (c) Manufacturer's Average Sales Price.--
              (1) * * *

               *       *       *       *       *       *       *

              (6) Definitions and other rules.--In this section:
                      (A) * * *

               *       *       *       *       *       *       *

                      [(G) Inclusion of vaccines.--In applying
                    provisions of section 1927 under this section,
                    ``other than a vaccine'' is deemed deleted from
                    section 1927(k)(2)(B).]
                      (G) Implementation.--Chapter 35 of title 44,
                    United States Code shall not apply to
                    manufacturer provision of information pursuant
                    to section 1927(b)(3)(A)(iii) for purposes of
                    implementation of this section.

               *       *       *       *       *       *       *

                        PAYMENT FOR PHYSICIANS' SERVICES

      Sec. 1848. (a) * * *
      (b) Establishment of Fee Schedules.--
              (1) * * *

               *       *       *       *       *       *       *

              (4) Special rule for imaging services.--
                      (A) * * *
                      (B) Imaging services described.--For purposes
                    of [subparagraph (A)] this paragraph, imaging
                    services described in this subparagraph are
                    imaging and computer-assisted imaging services,
                    including X-ray, ultrasound (including
                    echocardiography), nuclear medicine (including
                    positron emission tomography), magnetic
                    resonance imaging, computed tomography, and
                    fluoroscopy, but excluding diagnostic and
                    screening mammography.
                      (C) Adjustment in practice expense to reflect
                    higher presumed utilization.--In computing the
                    number of practice expense relative value units
                    under subsection (c)(2)(C)(ii) with respect to
                    advanced diagnostic imaging services (as
                    defined in section 1834(e)(1)(B)) , the
                    Secretary shall adjust such number of units so
                    it reflects a 75 percent (rather than 50
                    percent) presumed rate of utilization of
                    imaging equipment.
                      (D) Adjustment in technical component
                    discount on single-session imaging involving
                    consecutive body parts.--The Secretary shall
                    increase the reduction in expenditures
                    attributable to the multiple procedure payment
                    reduction applicable to the technical component
                    for imaging under the final rule published by
                    the Secretary in the Federal Register on
                    November 21, 2005 (part 405 of title 42, Code
                    of Federal Regulations) from 25 percent to 50
                    percent.

               *       *       *       *       *       *       *

      (c) Determination of Relative Values for Physicians'
    Services.--
              (1) * * *
              (2) Determination of relative values.--
                      (A) * * *
                      (B) Periodic review and adjustments in
                    relative values.--
                              (i) * * *

               *       *       *       *       *       *       *

                              (v) Exemption of certain reduced
                            expenditures from budget-neutrality
                            calculation.--The following reduced
                            expenditures, as estimated by the
                            Secretary, shall not be taken into
                            account in applying clause (ii)(II):
                                      (I) * * *
                                      (II) OPD payment cap and
                                    other provisions for imaging
                                    services.--Effective for fee
                                    schedules established beginning
                                    with 2007, reduced expenditures
                                    attributable to subsection
                                    (b)(4).

               *       *       *       *       *       *       *

                      (K) Potentially misvalued codes.--
                              (i) In general.--The Secretary
                            shall--
                                      (I) periodically identify
                                    services as being potentially
                                    misvalued using criteria
                                    specified in clause (ii); and
                                      (II) review and make
                                    appropriate adjustments to the
                                    relative values established
                                    under this paragraph for
                                    services identified as being
                                    potentially misvalued under
                                    subclause (I).
                              (ii) Identification of potentially
                            misvalued codes.--For purposes of
                            identifying potentially misvalued
                            services pursuant to clause (i)(I), the
                            Secretary shall examine (as the
                            Secretary determines to be appropriate)
                            codes (and families of codes as
                            appropriate) for which there has been
                            the fastest growth; codes (and families
                            of codes as appropriate) that have
                            experienced substantial changes in
                            practice expenses; codes for new
                            technologies or services within an
                            appropriate period (such as three
                            years) after the relative values are
                            initially established for such codes;
                            multiple codes that are frequently
                            billed in conjunction with furnishing a
                            single service; codes with low relative
                            values, particularly those that are
                            often billed multiple times for a
                            single treatment; codes which have not
                            been subject to review since the
                            implementation of the RBRVS (the so-
                            called ``Harvard-valued codes''); and
                            such other codes determined to be
                            appropriate by the Secretary.
                              (iii) Review and adjustments.--
                                      (I) The Secretary may use
                                    existing processes to receive
                                    recommendations on the review
                                    and appropriate adjustment of
                                    potentially misvalued services
                                    described clause (i)(II).
                                      (II) The Secretary may
                                    conduct surveys, other data
                                    collection activities, studies,
                                    or other analyses as the
                                    Secretary determines to be
                                    appropriate to facilitate the
                                    review and appropriate
                                    adjustment described in clause
                                    (i)(II).
                                      (III) The Secretary may use
                                    analytic contractors to
                                    identify and analyze services
                                    identified under clause (i)(I),
                                    conduct surveys or collect
                                    data, and make recommendations
                                    on the review and appropriate
                                    adjustment of services
                                    described in clause (i)(II).
                                      (IV) The Secretary may
                                    coordinate the review and
                                    appropriate adjustment
                                    described in clause (i)(II)
                                    with the periodic review
                                    described in subparagraph (B).
                                      (V) As part of the review and
                                    adjustment described in clause
                                    (i)(II), including with respect
                                    to codes with low relative
                                    values described in clause
                                    (ii), the Secretary may make
                                    appropriate coding revisions
                                    (including using existing
                                    processes for consideration of
                                    coding changes) which may
                                    include consolidation of
                                    individual services into
                                    bundled codes for payment under
                                    the fee schedule under
                                    subsection (b).
                                      (VI) The provisions of
                                    subparagraph (B)(ii)(II) shall
                                    apply to adjustments to
                                    relative value units made
                                    pursuant to this subparagraph
                                    in the same manner as such
                                    provisions apply to adjustments
                                    under subparagraph (B)(ii)(II).
                      (L) Validating relative value units.--
                              (i) In general.--The Secretary shall
                            establish a process to validate
                            relative value units under the fee
                            schedule under subsection (b).
                              (ii) Components and elements of
                            work.--The process described in clause
                            (i) may include validation of work
                            elements (such as time, mental effort
                            and professional judgment, technical
                            skill and physical effort, and stress
                            due to risk) involved with furnishing a
                            service and may include validation of
                            the pre, post, and intra-service
                            components of work.
                              (iii) Scope of codes.--The validation
                            of work relative value units shall
                            include a sampling of codes for
                            services that is the same as the codes
                            listed under subparagraph (K)(ii)
                              (iv) Methods.--The Secretary may
                            conduct the validation under this
                            subparagraph using methods described in
                            subclauses (I) through (V) of
                            subparagraph (K)(iii) as the Secretary
                            determines to be appropriate.
                              (v) Adjustments.--The Secretary shall
                            make appropriate adjustments to the
                            work relative value units under the fee
                            schedule under subsection (b). The
                            provisions of subparagraph (B)(ii)(II)
                            shall apply to adjustments to relative
                            value units made pursuant to this
                            subparagraph in the same manner as such
                            provisions apply to adjustments under
                            subparagraph (B)(ii)(II).

               *       *       *       *       *       *       *

      (d) Conversion Factors.--
              (1) Establishment.--
                      (A) In general.--
                              [The conversion factor] (i)
                            Application of single conversion
                            factor.--Subject to clause (ii), the
                            conversion factor for each year shall
                            be the conversion factor established
                            under this subsection for the previous
                            year (or, in the case of 1992,
                            specified in subparagraph (B)) adjusted
                            by the update (established under
                            paragraph (3)) for the year involved
                            (for years before 2001) and, for years
                            beginning with 2001, multiplied by the
                            update (established under paragraph
                            (4)) for the year involved.
                              (ii) Application of multiple
                            conversion factors beginning with
                            2011.--
                                      (I) In general.--In applying
                                    clause (i) for years beginning
                                    with 2011, separate conversion
                                    factors shall be established
                                    for each service category of
                                    physicians' services (as
                                    defined in subsection (j)(5))
                                    and any reference in this
                                    section to a conversion factor
                                    for such years shall be deemed
                                    to be a reference to the
                                    conversion factor for each of
                                    such categories.
                                      (II) Initial conversion
                                    factors.--Such factors for 2011
                                    shall be based upon the single
                                    conversion factor for the
                                    previous year multiplied by the
                                    update established under
                                    paragraph (11) for such
                                    category for 2011.
                                      (III) Updating of conversion
                                    factors.--Such factor for a
                                    service category for a
                                    subsequent year shall be based
                                    upon the conversion factor for
                                    such category for the previous
                                    year and adjusted by the update
                                    established for such category
                                    under paragraph (11) for the
                                    year involved.

               *       *       *       *       *       *       *

                      (D) Special rules for anesthesia services.--
                    The separate conversion factor for anesthesia
                    services for a year shall be equal to 46
                    percent of the single conversion factor
                    established for [other physicians' services]
                    for physicians' services described in the
                    service category described in subsection
                    (j)(5)(B), except as adjusted for changes in
                    work, practice expense, or malpractice relative
                    value units.
                      (E) Publication and dissemination of
                    information.--The Secretary shall--
                              (i) * * *
                              (ii) make available to the Medicare
                            Payment Advisory Commission and the
                            public by March 1 of each year
                            (beginning with 2000) an estimate of
                            the sustainable or target growth rate
                            and of the conversion factor which will
                            apply to physicians' services for the
                            succeeding year and data used in making
                            such estimate.

               *       *       *       *       *       *       *

              (4) Update for years beginning with 2001.--
                      (A) * * *
                      (B) Update adjustment factor.--For purposes
                    of subparagraph (A)(ii), subject to
                    [subparagraph (D)] subparagraphs (D) and (G)
                    and the succeeding paragraphs of this
                    subsection, the ``update adjustment factor''
                    for a year is equal (as estimated by the
                    Secretary) to the sum of the following:
                              (i) * * *
                              (ii) Cumulative adjustment
                            component.--An amount determined by--
                                      (I) * * *
                                      (II) dividing that difference
                                    by actual expenditures for such
                                    services for the prior year as
                                    increased by the sustainable or
                                    target growth rate under
                                    subsection (f) for the year for
                                    which the update adjustment
                                    factor is to be determined; and

               *       *       *       *       *       *       *

                      (C) Determination of allowed expenditures.--
                    For purposes of this paragraph:
                              (i) * * *

               *       *       *       *       *       *       *

                              (iii) Years beginning with 2000.--
                            [The allowed] Subject to paragraph
                            (11)(B), the allowed expenditures for a
                            year (beginning with 2000) is equal to
                            the allowed expenditures for
                            physicians' services for the previous
                            year, increased by the sustainable
                            growth rate under subsection (f) for
                            the year involved.

               *       *       *       *       *       *       *

                      (G) Rebasing using 2009 for future update
                    adjustments.--In determining the update
                    adjustment factor under subparagraph (B) for
                    2011 and subsequent years--
                              (i) the allowed expenditures for 2009
                            shall be equal to the amount of the
                            actual expenditures for physicians'
                            services during 2009; and
                              (ii) the reference in subparagraph
                            (B)(ii)(I) to ``April 1, 1996'' shall
                            be treated as a reference to ``January
                            1, 2009 (or, if later, the first day of
                            the fifth year before the year
                            involved)''.

               *       *       *       *       *       *       *

              (10) Update for 2010.--The update to the single
            conversion factor established in paragraph (1)(C) for
            2010 shall be the percentage increase in the MEI (as
            defined in section 1842(i)(3)) for that year.
              (11) Updates for service categories beginning with
            2011.--
                      (A) In general.--In applying paragraph (4)
                    for a year beginning with 2011, the following
                    rules apply:
                              (i) Application of separate update
                            adjustments for each service
                            category.--Pursuant to paragraph
                            (1)(A)(ii)(I), the update shall be made
                            to the conversion factor for each
                            service category (as defined in
                            subsection (j)(5)) based upon an update
                            adjustment factor for the respective
                            category and year and the update
                            adjustment factor shall be computed,
                            for a year, separately for each service
                            category.
                              (ii) Computation of allowed and
                            actual expenditures based on service
                            categories.--In computing the prior
                            year adjustment component and the
                            cumulative adjustment component under
                            clauses (i) and (ii) of paragraph
                            (4)(B), the following rules apply:
                                      (I) Application based on
                                    service categories.--The
                                    allowed expenditures and actual
                                    expenditures shall be the
                                    allowed and actual expenditures
                                    for the service category, as
                                    determined under subparagraph
                                    (B).
                                      (II) Application of category
                                    specific target growth rate.--
                                    The growth rate applied under
                                    clause (ii)(II) of such
                                    paragraph shall be the target
                                    growth rate for the service
                                    category involved under
                                    subsection (f)(5).
                      (B) Determination of allowed expenditures.--
                    In applying paragraph (4) for a year beginning
                    with 2010, notwithstanding subparagraph
                    (C)(iii) of such paragraph, the allowed
                    expenditures for a service category for a year
                    is an amount computed by the Secretary as
                    follows:
                              (i) For 2010.--For 2010:
                                      (I) Total 2009 actual
                                    expenditures for all services
                                    included in sgr computation for
                                    each service category.--Compute
                                    total actual expenditures for
                                    physicians' services (as
                                    defined in subsection
                                    (f)(4)(A)) for 2009 for each
                                    service category.
                                      (II) Increase by growth rate
                                    to obtain 2010 allowed
                                    expenditures for service
                                    category.--Compute allowed
                                    expenditures for the service
                                    category for 2010 by increasing
                                    the allowed expenditures for
                                    the service category for 2009
                                    computed under subclause (I) by
                                    the target growth rate for such
                                    service category under
                                    subsection (f) for 2010.
                              (ii) For subsequent years.--For a
                            subsequent year, take the amount of
                            allowed expenditures for such category
                            for the preceding year (under clause
                            (i) or this clause) and increase it by
                            the target growth rate determined under
                            subsection (f) for such category and
                            year.
      (e) Geographic Adjustment Factors.--
              (1) Establishment of geographic indices.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Floor at 1.0 on work geographic index.--
                    After calculating the work geographic index in
                    subparagraph (A)(iii), for purposes of payment
                    for services furnished on or after January 1,
                    2004, and [before January 1, 2010] before
                    January 1, 2012, the Secretary shall increase
                    the work geographic index to 1.00 for any
                    locality for which such work geographic index
                    is less than 1.00.

               *       *       *       *       *       *       *

              (6) Transition to use of msas as fee schedule areas
            in california.--
                      (A) In general.--
                              (i) Revision.--Subject to clause (ii)
                            and notwithstanding the previous
                            provisions of this subsection, for
                            services furnished on or after January
                            1, 2011, the Secretary shall revise the
                            fee schedule areas used for payment
                            under this section applicable to the
                            State of California using the
                            Metropolitan Statistical Area (MSA)
                            iterative Geographic Adjustment Factor
                            methodology as follows:
                                      (I) The Secretary shall
                                    configure the physician fee
                                    schedule areas using the Core-
                                    Based Statistical Areas-
                                    Metropolitan Statistical Areas
                                    (each in this paragraph
                                    referred to as an ``MSA''), as
                                    defined by the Director of the
                                    Office of Management and
                                    Budget, as the basis for the
                                    fee schedule areas. The
                                    Secretary shall employ an
                                    iterative process to transition
                                    fee schedule areas. First, the
                                    Secretary shall list all MSAs
                                    within the State by Geographic
                                    Adjustment Factor described in
                                    paragraph (2) (in this
                                    paragraph referred to as a
                                    ``GAF'') in descending order.
                                    In the first iteration, the
                                    Secretary shall compare the GAF
                                    of the highest cost MSA in the
                                    State to the weighted-average
                                    GAF of the group of remaining
                                    MSAs in the State. If the ratio
                                    of the GAF of the highest cost
                                    MSA to the weighted-average GAF
                                    of the rest of State is 1.05 or
                                    greater then the highest cost
                                    MSA becomes a separate fee
                                    schedule area.
                                      (II) In the next iteration,
                                    the Secretary shall compare the
                                    MSA of the second-highest GAF
                                    to the weighted-average GAF of
                                    the group of remaining MSAs. If
                                    the ratio of the second-highest
                                    MSA's GAF to the weighted-
                                    average of the remaining lower
                                    cost MSAs is 1.05 or greater,
                                    the second-highest MSA becomes
                                    a separate fee schedule area.
                                    The iterative process continues
                                    until the ratio of the GAF of
                                    the highest-cost remaining MSA
                                    to the weighted-average of the
                                    remaining lower-cost MSAs is
                                    less than 1.05, and the
                                    remaining group of lower cost
                                    MSAs form a single fee schedule
                                    area, If two MSAs have
                                    identical GAFs, they shall be
                                    combined in the iterative
                                    comparison.
                              (ii) Transition.--For services
                            furnished on or after January 1, 2011,
                            and before January 1, 2016, in the
                            State of California, after calculating
                            the work, practice expense, and
                            malpractice geographic indices
                            described in clauses (i), (ii), and
                            (iii) of paragraph (1)(A) that would
                            otherwise apply through application of
                            this paragraph, the Secretary shall
                            increase any such index to the county-
                            based fee schedule area value on
                            December 31, 2009, if such index would
                            otherwise be less than the value on
                            January 1, 2010.
                      (B) Subsequent revisions.--
                              (i) Periodic review and adjustments
                            in fee schedule areas.--Subsequent to
                            the process outlined in paragraph
                            (1)(C), not less often than every three
                            years, the Secretary shall review and
                            update the California Rest-of-State fee
                            schedule area using MSAs as defined by
                            the Director of the Office of
                            Management and Budget and the iterative
                            methodology described in subparagraph
                            (A)(i).
                              (ii) Link with geographic index data
                            revision.--The revision described in
                            clause (i) shall be made effective
                            concurrently with the application of
                            the periodic review of the adjustment
                            factors required under paragraph (1)(C)
                            for California for 2012 and subsequent
                            periods. Upon request, the Secretary
                            shall make available to the public any
                            county-level or MSA derived data used
                            to calculate the geographic practice
                            cost index.
                      (C) References to fee schedule areas.--
                    Effective for services furnished on or after
                    January 1, 2010, for the State of California,
                    any reference in this section to a fee schedule
                    area shall be deemed a reference to an MSA in
                    the State.
      (f) Sustainable Growth Rate and Target Growth Rate.--
              (1) Publication.--The Secretary shall cause to have
            published in the Federal Register not later than--
                      (A) November 1, 2000, the sustainable growth
                    rate for 2000 and 2001; [and]
                      (B) November 1 of each succeeding year before
                    2010 the sustainable growth rate for such
                    succeeding year and each of the preceding 2
                    years[.]; and
                      (C) November 1 of each succeeding year the
                    target growth rate for such succeeding year and
                    each of the 2 preceding years.
              (2) Specification of growth rate.--The sustainable
            growth rate for all physicians' services for a fiscal
            year (beginning with fiscal year 1998 and ending with
            fiscal year 2000) and a year beginning with 2000 and
            ending with 2009 shall be equal to the product of--
                      (A) * * *

               *       *       *       *       *       *       *

              (4) Definitions.--In this subsection:
                      (A) Services included in physicians'
                    services.--The term ``physicians' services''
                    includes other items and services [(such as
                    clinical diagnostic laboratory tests and
                    radiology services), specified by the
                    Secretary, that are commonly performed or
                    furnished by a physician or in a physician's
                    office] for which payment under this part is
                    made under the fee schedule under this section,
                    for services for practitioners described in
                    section 1842(b)(18)(C) on a basis related to
                    such fee schedule, or for services described in
                    section 1861(p) (other than such services when
                    furnished in the facility of a provider of
                    services), but does not include services
                    furnished to a Medicare+Choice plan enrollee.

               *       *       *       *       *       *       *

              (5) Application of separate target growth rates for
            each service category beginning with 2010.--The target
            growth rate for a year beginning with 2010 shall be
            computed and applied separately under this subsection
            for each service category (as defined in subsection
            (j)(5)) and shall be computed using the same method for
            computing the target growth rate except that the factor
            described in paragraph (2)(C) for--
                      (A) the service category described in
                    subsection (j)(5)(A) shall be increased by
                    0.02; and
                      (B) the service category described in
                    subsection (j)(5)(B) shall be increased by
                    0.01.

               *       *       *       *       *       *       *

      (j) Definitions.--In this section:
              (1) * * *
              (2) Fee schedule area.--[The term] Except as provided
            in subsection (e)(6)(C), the term ``fee schedule area''
            means a locality used under section 1842(b) for
            purposes of computing payment amounts for physicians'
            services.
              (3) Physicians' services.--The term ``physicians'
            services'' includes items and services described in
            paragraphs (1), (2)(A), (2)(D), (2)(G), (2)(P) (with
            respect to services described in subparagraphs (A) and
            (C) of section 1861(oo)(2)), (2)(R) (with respect to
            services described in suparagraphs (B), (C), and (D) of
            section 1861(pp)(1)), (2)(S), (2)(W), (2)(AA), (2)(DD),
            (2)(EE), (2)(FF), (3), (4), (13), (14) (with respect to
            services described in section 1861(nn)(2)), and (15) of
            section 1861(s) (other than clinical diagnostic
            laboratory tests and, except for purposes of subsection
            (a)(3), (g), and (h) such other items and services as
            the Secretary may specify).

               *       *       *       *       *       *       *

              (5) Service categories.--For services furnished on or
            after January 1, 2009, each of the following categories
            of physicians' services (as defined in paragraph (3))
            shall be treated as a separate ``service category'':
                      (A) Evaluation and management services that
                    are procedure codes (for services covered under
                    this title) for--
                              (i) services in the category
                            designated Evaluation and Management in
                            the Health Care Common Procedure Coding
                            System (established by the Secretary
                            under subsection (c)(5) as of December
                            31, 2009, and as subsequently modified
                            by the Secretary); and
                              (ii) preventive services (as defined
                            in section 1861(iii)) for which payment
                            is made under this section.
                      (B) All other services not described in
                    subparagraph (A).
            Service categories established under this paragraph
            shall apply without regard to the specialty of the
            physician furnishing the service.
      (k) Quality Reporting System.--
              (1) * * *
              (2) Use of consensus-based quality measures.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) For 2010 and subsequent years.--
                              (i) * * *
                              (ii) Exception.--In the case of a
                            specified area or medical topic
                            determined appropriate by the Secretary
                            for which a feasible and practical
                            measure has not been endorsed by the
                            entity with a contract under section
                            1890(a), the Secretary may specify a
                            measure that is not so endorsed as long
                            as due consideration is given to
                            measures that have been endorsed or
                            adopted by a consensus organization
                            identified by the Secretary, such as
                            the AQA alliance. The Secretary shall
                            submit such a non-endorsed measure to
                            the entity for consideration for
                            endorsement. If the entity considers
                            but does not endorse such a measure and
                            if the Secretary does not phase-out use
                            of such measure, the Secretary shall
                            include the rationale for continued use
                            of such a measure in rulemaking.

               *       *       *       *       *       *       *

                      (E) Physician's quality reporting
                    initiative.--
                              (i) In general.--For purposes of
                            reporting data on quality measures for
                            covered professional services furnished
                            during 2011 and any subsequent year, to
                            the extent that measures are available,
                            the Secretary shall include quality
                            measures on end of life care and
                            advanced care planning that have been
                            adopted or endorsed by a consensus-
                            based organization, if appropriate.
                            Such measures shall measure both the
                            creation of and adherence to orders for
                            life-sustaining treatment.
                              (ii) Proposed set of measures.--The
                            Secretary shall publish in the Federal
                            Register proposed quality measures on
                            end of life care and advanced care
                            planning that the Secretary determines
                            are described in subparagraph (A) and
                            would be appropriate for eligible
                            professionals to use to submit data to
                            the Secretary. The Secretary shall
                            provide for a period of public comment
                            on such set of measures before
                            finalizing such proposed measures.

               *       *       *       *       *       *       *

      (m) Incentive Payments for Quality Reporting.--
              (1) Incentive payments.--
                      (A) In general.--For 2007 through [2010]
                    2012, with respect to covered professional
                    services furnished during a reporting period by
                    an eligible professional, if--
                              (i) * * *

               *       *       *       *       *       *       *

                      (B) Applicable quality percent.--For purposes
                    of subparagraph (A), the term ``applicable
                    quality percent'' means--
                              (i) * * *
                              (ii) for [2009 and 2010] for each of
                            the years 2009 through 2012, 2.0
                            percent.

               *       *       *       *       *       *       *

              (5) Application.--
                      (A) * * *
                      (B) Coordination with other bonus payments.--
                    The provisions of this subsection shall not be
                    taken into account in applying subsections (m),
                    (p), and (u) of section 1833 and any payment
                    under such subsections shall not be taken into
                    account in computing allowable charges under
                    this subsection.

               *       *       *       *       *       *       *

                      (E) Limitations on review.--
                              [There shall be] Subject to
                            subparagraph (I), there shall be no
                            administrative or judicial review under
                            1869, section 1878, or otherwise of
                              (i) * * *

               *       *       *       *       *       *       *

                      (H) Feedback.--The Secretary shall provide
                    timely feedback to eligible professionals on
                    the performance of the eligible professional
                    with respect to satisfactorily submitting data
                    on quality measures under this subsection.
                      (I) Informal appeals process.--
                    Notwithstanding subparagraph (E), by not later
                    than January 1, 2011, the Secretary shall
                    establish and have in place an informal process
                    for eligible professionals to appeal the
                    determination that an eligible professional did
                    not satisfactorily submit data on quality
                    measures under this subsection.

               *       *       *       *       *       *       *

              (7) Integration of physician quality reporting and
            ehr reporting.--Not later than January 1, 2012, the
            Secretary shall develop a plan to integrate clinical
            reporting on quality measures under this subsection
            with reporting requirements under subsection (o)
            relating to the meaningful use of electronic health
            records. Such integration shall consist of the
            following:
                      (A) The development of measures, the
                    reporting of which would both demonstrate--
                              (i) meaningful use of an electronic
                            health record for purposes of
                            subsection (o); and
                              (ii) clinical quality of care
                            furnished to an individual.
                      (B) The collection of health data to identify
                    deficiencies in the quality and coordination of
                    care for individuals eligible for benefits
                    under this part.
                      (C) Such other activities as specified by the
                    Secretary.

               *       *       *       *       *       *       *

      (o) Incentives for Adoption and Meaningful Use of Certified
    EHR Technology.--
              (1) Incentive payments.--
                      (A) * * *
                      (B) Limitations on amounts of incentive
                    payments.--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iv) Increase for certain eligible
                            professionals.--In the case of an
                            eligible professional who predominantly
                            furnishes services under this part in
                            an area that is designated by the
                            Secretary (under section 332(a)(1)(A)
                            of the Public Health Service Act) as a
                            primary care health professional
                            shortage area, the amount that would
                            otherwise apply for a payment year for
                            such professional under subclauses (I)
                            through (V) of clause (ii) shall be
                            increased by 10 percent. In
                            implementing the preceding sentence,
                            the Secretary may, as determined
                            appropriate, apply provisions of
                            subsections (m) and (u) of section 1833
                            in a similar manner as such provisions
                            apply under such subsection.

               *       *       *       *       *       *       *

      (p) Payment Modifier for Certain Evaluation and Management
    Services.--The Secretary shall establish a payment modifier
    under the fee schedule under this section for evaluation and
    management services (as specified in section
    1842(b)(16)(B)(ii)) that result in the ordering of additional
    services (such as lab tests), the prescription of drugs, the
    furnishing or ordering of durable medical equipment in order to
    enable better monitoring of claims for payment for such
    additional services under this title, or the ordering,
    furnishing, or prescribing of other items and services
    determined by the Secretary to pose a high risk of waste,
    fraud, and abuse. The Secretary may require providers of
    services or suppliers to report such modifier in claims
    submitted for payment.

                        Part C--Medicare+choice Program

                     ELIGIBILITY, ELECTION, AND ENROLLMENT

      Sec. 1851. (a) * * *

               *       *       *       *       *       *       *

      (e) Coverage Election Periods.--
              (1) * * *
              (2) Open enrollment and disenrollment
            opportunities.--Subject to paragraph (5)--
                      (A) * * *

               *       *       *       *       *       *       *

                      [(C) Continuous open enrollment and
                    disenrollment for first 3 months in subsequent
                    years.--
                              [(i) In general.--Subject to clauses
                            (ii) and (iii) and subparagraph (D), at
                            any time during the first 3 months of a
                            year after 2006, or, if the individual
                            first becomes a Medicare+Choice
                            eligible individual during a year after
                            2006, during the first 3 months of such
                            year in which the individual is a
                            Medicare+Choice eligible individual, a
                            Medicare+Choice eligible individual may
                            change the election under subsection
                            (a)(1).
                              [(ii) Limitation of one change during
                            open enrollment period each year.--An
                            individual may exercise the right under
                            clause (i) only once during the
                            applicable 3-month period described in
                            such clause in each year. The
                            limitation under this clause shall not
                            apply to changes in elections effected
                            during an annual, coordinated election
                            period under paragraph (3) or during a
                            special enrollment period under
                            paragraph (4).
                              [(iii) Limitation on exercise of
                            right with respect to prescription drug
                            coverage.--Effective for plan years
                            beginning on or after January 1, 2006,
                            in applying clause (i) (and clause (i)
                            of subparagraph (B)) in the case of an
                            individual who--
                                      [(I) is enrolled in an MA
                                    plan that does provide
                                    qualified prescription drug
                                    coverage, the individual may
                                    exercise the right under such
                                    clause only with respect to
                                    coverage under the original
                                    fee-for-service plan or
                                    coverage under another MA plan
                                    that does not provide such
                                    coverage and may not exercise
                                    such right to obtain coverage
                                    under an MA-PD plan or under a
                                    prescription drug plan under
                                    part D; or
                                      [(II) is enrolled in an MA-PD
                                    plan, the individual may
                                    exercise the right under such
                                    clause only with respect to
                                    coverage under another MA-PD
                                    plan (and not an MA plan that
                                    does not provide qualified
                                    prescription drug coverage) or
                                    under the original fee-for-
                                    service plan and coverage under
                                    a prescription drug plan under
                                    part D.]

               *       *       *       *       *       *       *

              (3) Annual, coordinated election period.--
                      (A) * * *
                      (B) Annual, coordinated election period.--For
                    purposes of this section, the term ``annual,
                    coordinated election period'' means--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iii) with respect to 2006, the
                            period beginning on November 15, 2005,
                            and ending on May 15, 2006; [and]
                              (iv) with respect to 2007 [and
                            succeeding years], 2008, 2009, and
                            2010, the period beginning on November
                            15 and ending on December 31 of the
                            year before such year[.]; and
                              (v) with respect to 2011 and
                            succeeding years, the period beginning
                            on November 1 and ending on December 15
                            of the year before such year.

               *       *       *       *       *       *       *

              (4) Special election periods.--Effective as of
            January 1, 2006, an individual may discontinue an
            election of a Medicare+Choice plan offered by a
            Medicare+Choice organization other than during an
            annual, coordinated election period and make a new
            election under this section if--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) the individual demonstrates (in
                    accordance with guidelines established by the
                    Secretary) that--
                              (i) * * *
                              (ii) the organization (or an agent or
                            other entity acting on the
                            organization's behalf) materially
                            misrepresented the plan's provisions in
                            marketing the plan to the individual;
                            [or]
                      (D) the individual is enrolled in an MA plan
                    and enrollment in the plan is suspended under
                    paragraph (2)(B) or (3)(C) of section 1857(g)
                    because of a failure of the plan to meet
                    applicable requirements; or
                      [(D)] (E) the individual meets such other
                    exceptional conditions as the Secretary may
                    provide, taking into account the health or
                    well-being of the individual.

               *       *       *       *       *       *       *

      (p) Publication of Medical Loss Ratios and Other Cost-Related
    Information.--
              (1) In general.--The Secretary shall publish, not
            later than November 1 of each year (beginning with
            2011), for each MA plan contract, the medical loss
            ratio of the plan in the previous year.
              (2) Submission of data.--
                      (A) In general.--Each MA organization shall
                    submit to the Secretary, in a form and manner
                    specified by the Secretary, data necessary for
                    the Secretary to publish the medical loss ratio
                    on a timely basis.
                      (B) Data for 2010 and 2011.--The data
                    submitted under subparagraph (A) for 2010 and
                    for 2011 shall be consistent in content with
                    the data reported as part of the MA plan bid in
                    June 2009 for 2010.
                      (C) Use of standardized elements and
                    definitions.--The data to be submitted under
                    subparagraph (A) relating to medical loss ratio
                    for a year, beginning with 2012, shall be
                    submitted based on the standardized elements
                    and definitions developed under paragraph (3).
              (3) Development of data reporting standards.--
                      (A) In general.--The Secretary shall develop
                    and implement standardized data elements and
                    definitions for reporting under this
                    subsection, for contract years beginning with
                    2012, of data necessary for the calculation of
                    the medical loss ratio for MA plans. Not later
                    than December 31, 2010, the Secretary shall
                    publish a report describing the elements and
                    definitions so developed.
                      (B) Consultation.--The Secretary shall
                    consult with the Health Choices Commissioner,
                    representatives of MA organizations, experts on
                    health plan accounting systems, and
                    representatives of the National Association of
                    Insurance Commissioners, in the development of
                    such data elements and definitions.
              (4) Medical loss ratio to be defined.--For purposes
            of this part, the term ``medical loss ratio'' has the
            meaning given such term by the Secretary, taking into
            account the meaning given such term by the Health
            Choices Commissioner under section 116 of the America's
            Affordable Health Choices Act of 2009.

                      BENEFITS AND BENEFICIARY PROTECTIONS

      Sec. 1852. (a) Basic Benefits.--
              (1) Requirement.--
                      (A) In general.--Except as provided in
                    section 1859(b)(3) for MSA plans and except as
                    provided in paragraph (6) for MA regional
                    plans, each Medicare+Choice plan shall provide
                    to members enrolled under this part, through
                    providers and other persons that meet the
                    applicable requirements of this title and part
                    A of title XI, benefits under the original
                    medicare fee-for-service program option (and,
                    for plan years before 2006, additional benefits
                    required under section 1854(f)(1)(A)) with
                    cost-sharing that is no greater (and may be
                    less) than the cost-sharing that would
                    otherwise be imposed under such program option.
                      (B) Benefits under the original medicare fee-
                    for-service program option defined.--
                              (i) In general.--For purposes of this
                            part, the term ``benefits under the
                            original medicare fee-for-service
                            program option'' means those items and
                            services (other than hospice care) for
                            which benefits are available under
                            parts A and B to individuals entitled
                            to benefits under part A and enrolled
                            under part B, with cost-sharing for
                            those services as required under parts
                            A and B [or an actuarially equivalent
                            level of cost-sharing as determined in
                            this part].
                              [(ii) Special rule for regional
                            plans.--In the case of an MA regional
                            plan in determining an actuarially
                            equivalent level of cost-sharing with
                            respect to benefits under the original
                            medicare fee-for-service program
                            option, there shall only be taken into
                            account, with respect to the
                            application of section 1858(b)(2), such
                            expenses only with respect to
                            subparagraph (A) of such section.]
                              (ii) Permitting use of flat copayment
                            or per diem rate.--Nothing in clause
                            (i) shall be construed as prohibiting a
                            Medicare Advantage plan from using a
                            flat copayment or per diem rate, in
                            lieu of the cost-sharing that would be
                            imposed under part A or B, so long as
                            the amount of the cost-sharing imposed
                            does not exceed the amount of the cost-
                            sharing that would be imposed under the
                            respective part if the individual were
                            not enrolled in a plan under this part.

               *       *       *       *       *       *       *

              [(7) Limitation on cost-sharing for dual eligibles
            and qualified medicare beneficiaries.--In the case of
            an individual who is a full-benefit dual eligible
            individual (as defined in section 1935(c)(6)) or a
            qualified medicare beneficiary (as defined in section
            1905(p)(1)) and who is enrolled in a specialized
            Medicare Advantage plan for special needs individuals
            described in section 1859(b)(6)(B)(ii), the plan may
            not impose cost-sharing that exceeds the amount of
            cost-sharing that would be permitted with respect to
            the individual under title XIX if the individual were
            not enrolled in such plan.]
              (7) Limitation on cost-sharing for dual eligibles and
            qualified medicare beneficiaries.--In the case of a
            individual who is a full-benefit dual eligible
            individual (as defined in section 1935(c)(6)) or a
            qualified medicare beneficiary (as defined in section
            1905(p)(1)) who is enrolled in a Medicare Advantage
            plan, the plan may not impose cost-sharing that exceeds
            the amount of cost-sharing that would be permitted with
            respect to the individual under this title and title
            XIX if the individual were not enrolled with such plan.

               *       *       *       *       *       *       *

                   PAYMENTS TO MEDICARE+CHOICE ORGANIZATIONS

      Sec. 1853. (a) Payments to Organizations.--
              (1) Monthly payments.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Demographic adjustment, including
                    adjustment for health status.--
                              (i) * * *
                              (ii) Application during phase-out of
                            budget neutrality factor.--For 2006
                            [through 2010] and each subsequent
                            year:
                                      (I)  * * *
                                      (II) In order to ensure
                                    payment accuracy, the Secretary
                                    shall periodically conduct an
                                    analysis of the differences
                                    described in subclause (I). The
                                    Secretary shall complete such
                                    analysis by a date necessary to
                                    ensure that the results of such
                                    analysis are incorporated on a
                                    timely basis into the risk
                                    scores [only for 2008, 2009,
                                    and 2010] for 2008 and
                                    subsequent years. In conducting
                                    such analysis, the Secretary
                                    shall use data submitted with
                                    respect to 2004 and subsequent
                                    years, as available.

               *       *       *       *       *       *       *

      (j) Computation of Benchmark Amounts.--For purposes of this
    part, subject to subsection (o), the term ``MA area-specific
    non-drug monthly benchmark amount'' means for a month in a
    year--
              (1) with respect to--
                      (A) a service area that is entirely within an
                    MA local area, subject to section 1860C-
                    1(d)(2)(A), an amount equal to \1/12\ of the
                    annual MA capitation rate under section
                    1853(c)(1) (or, [beginning with 2007] for 2007,
                    2008, 2009, and 2010, \1/12\ of the applicable
                    amount determined under subsection (k)(1), or,
                    beginning with 2011, \1/12\ of the blended
                    benchmark amount determined under subsection
                    (n)(1)) for the area for the year, adjusted as
                    appropriate (for years before 2007) for the
                    purpose of risk adjustment; or

               *       *       *       *       *       *       *

      (n) Determination of Blended Benchmark Amount.--
              (1) In general.--For purposes of subsection (j),
            subject to paragraphs (3) and (4), the term ``blended
            benchmark amount'' means for an area--
                      (A) for 2011 the sum of--
                              (i) \2/3\ of the applicable amount
                            (as defined in subsection (k)) for the
                            area and year; and
                              (ii) \1/3\ of the amount specified in
                            paragraph (2) for the area and year;
                      (B) for 2012 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) for the area and year;
                            and
                      (C) for a subsequent year the amount
                    specified in paragraph (2) for the area and
                    year.
              (2) Specified amount.--The amount specified in this
            paragraph for an area and year is the amount specified
            in subsection (c)(1)(D)(i) for the area and year
            adjusted (in a manner specified by the Secretary) to
            take into account the phase-out in the indirect costs
            of medical education from capitation rates described in
            subsection (k)(4).
              (3) Fee-for-service payment floor.--In no case shall
            the blended benchmark amount for an area and year be
            less than the amount specified in paragraph (2).
              (4) Exception for pace plans.--This subsection shall
            not apply to payments to a PACE program under section
            1894.
      (o) Quality Based Payment Adjustment.--
              (1) In general.--In the case of a qualifying plan in
            a qualifying county with respect to a year beginning
            with 2011, the blended benchmark amount under
            subsection (n)(1) shall be increased--
                      (A) for 2011, by 2.6 percent;
                      (B) for 2012, by 5.3 percent; and
                      (C) for a subsequent year, by 8.0 percent.
              (2) Qualifying plan and qualifying county defined.--
            For purposes of this subsection:
                      (A) Qualifying plan.--The term ``qualifying
                    plan'' means, for a year and subject to
                    paragraph (4), a plan that, in a preceding year
                    specified by the Secretary, had a quality
                    ranking (based on the quality ranking system
                    established by the Centers for Medicare &
                    Medicaid Services for Medicare Advantage plans)
                    of 4 stars or higher.
                      (B) Qualifying county.--The term ``qualifying
                    county'' means, for a year, a county--
                              (i) that ranked within the lowest
                            quartile of counties in the amount
                            specified in subsection (n)(2) for the
                            year specified by the Secretary under
                            subparagraph (A); and
                              (ii) for which, as of June of such
                            specified year, of the Medicare
                            Advantage eligible individuals residing
                            in the county--
                                      (I) at least 50 percent of
                                    such individuals were enrolled
                                    in Medicare Advantage plans;
                                    and
                                      (II) of the residents so
                                    enrolled at least 50 percent of
                                    such individuals were enrolled
                                    in such plans with a quality
                                    ranking (based on the quality
                                    ranking system established by
                                    the Centers for Medicare &
                                    Medicaid Services for Medicare
                                    Advantage plans) of 4 stars or
                                    higher.
              (3) Notification.--The Secretary, in the annual
            announcement required under subsection (b)(1)(B) in
            2010 and each succeeding year, shall notify the
            Medicare Advantage organization that is offering a
            qualifying plan in a qualifying county of such
            identification for the year. The Secretary shall
            provide for publication on the website for the Medicare
            program of the information described in the previous
            sentence.
              (4) Authority to disqualify deficient plans.--The
            Secretary may determine that a Medicare Advantage plan
            is not a qualifying plan if the Secretary has
            identified deficiencies in the plan's compliance with
            rules for Medicare Advantage plans under this part.

                            PREMIUMS AND BID AMOUNTS

      Sec. 1854. (a) Submission of Proposed Premiums, Bid Amounts,
    and Related Information.--
              (1) * * *

               *       *       *       *       *       *       *

              (5) Review.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Rejection of bids.--Nothing in this
                    section shall be construed as requiring the
                    Secretary to accept any or every bid by an MA
                    organization under this subsection.

               *       *       *       *       *       *       *

                  CONTRACTS WITH MEDICARE+CHOICE ORGANIZATIONS

      Sec. 1857. (a) * * *

               *       *       *       *       *       *       *

      (d) Protections Against Fraud and Beneficiary Protections.--
              (1) Periodic auditing.--The Secretary shall provide
            for the annual auditing of the financial records
            (including data relating to medicare utilization and
            costs, including allowable costs under section
            1858(c)), and data submitted with respect to risk
            adjustment under section 1853(a)(3) of at least one-
            third of the Medicare+Choice organizations offering
            Medicare+Choice plans under this part. The Comptroller
            General shall monitor auditing activities conducted
            under this subsection.
              (2) Inspection and audit.--Each contract under this
            section shall provide that the Secretary, or any person
            or organization designated by the Secretary--
                      (A) shall have the right to timely inspect or
                    otherwise evaluate (i) the quality,
                    appropriateness, and timeliness of services
                    performed under the contract, and (ii) the
                    facilities of the organization when there is
                    reasonable evidence of some need for such
                    inspection, and
                      (B) shall have the right to timely audit and
                    inspect any books and records of the
                    Medicare+Choice organization that pertain (i)
                    to the ability of the organization to bear the
                    risk of potential financial losses, or (ii) to
                    services performed or determinations of amounts
                    payable under the contract.

               *       *       *       *       *       *       *

              (7) Period for submission of claims.--The contract
            shall require an MA organization or PDP sponsor to
            require any provider of services under contract with,
            in partnership with, or affiliated with such
            organization or sponsor to ensure that, with respect to
            items and services furnished by such provider to an
            enrollee of such organization, written request, signed
            by such enrollee, except in cases in which the
            Secretary finds it impracticable for the enrollee to do
            so, is filed for payment for such items and services in
            such form, in such manner, and by such person or
            persons as the Secretary may by regulation prescribe,
            no later than the close of the 1 calendar year period
            after such items and services are furnished. In
            applying the previous sentence, the Secretary may
            specify exceptions to the 1 calendar year period
            specified.
      (e) Additional Contract Terms.--
              (1) * * *

               *       *       *       *       *       *       *

              (4) Requirement for minimum medical loss ratio.--If
            the Secretary determines for a contract year (beginning
            with 2014) that an MA plan has failed to have a medical
            loss ratio (as defined in section 1851(p)(4)) of at
            least .85--
                      (A) the Secretary shall require the Medicare
                    Advantage organization offering the plan to
                    give enrollees a rebate (in the second
                    succeeding contract year) of premiums under
                    this part (or part B or part D, if applicable)
                    by such amount as would provide for a benefits
                    ratio of at least .85;
                      (B) for 3 consecutive contract years, the
                    Secretary shall not permit the enrollment of
                    new enrollees under the plan for coverage
                    during the second succeeding contract year; and
                      (C) the Secretary shall terminate the plan
                    contract if the plan fails to have such a
                    medical loss ratio for 5 consecutive contract
                    years.
              (5) Enforcement of audits and deficiencies.--
                      (A) Information in contract.--The Secretary
                    shall require that each contract with an MA
                    organization under this section shall include
                    terms that inform the organization of the
                    provisions in subsection (d).
                      (B) Enforcement authority.--The Secretary is
                    authorized, in connection with conducting
                    audits and other activities under subsection
                    (d), to take such actions, including pursuit of
                    financial recoveries, necessary to address
                    deficiencies identified in such audits or other
                    activities.
      (f) Prompt Payment by Medicare+choice Organization.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Incorporation of certain prescription drug plan
            contract requirements.--The following provisions shall
            apply to contracts with a Medicare Advantage
            organization offering an MA-PD plan in the same manner
            as they apply to contracts with a PDP sponsor offering
            a prescription drug plan under part D:
                      (A) * * *
                      [(B) Submission of claims by pharmacies
                    located in or contracting with long-term care
                    facilities.--Section 1860D-12(b)(5).]
                      [(C)] (B) Regular update of prescription drug
                    pricing standard.--Section 1860D-12(b)(6).
                      (C) Reporting requirement related to rebate
                    for full-benefit dual eligible medicare drug
                    plan enrollees.--Section 1860D-12(b)(7).
      (g) Intermediate Sanctions.--
              (1) In general.--If the Secretary determines that a
            Medicare+Choice organization with a contract under this
            section--
                      (A) * * *

               *       *       *       *       *       *       *

                      (F) fails to comply with the applicable
                    requirements of section 1852(j)(3) or
                    1852(k)(2)(A)(ii); [or]
                      (G) employs or contracts with any individual
                    or entity that is excluded from participation
                    under this title under section 1128 or 1128A
                    for the provision of health care, utilization
                    review, medical social work, or administrative
                    services or employs or contracts with any
                    entity for the provision (directly or
                    indirectly) through such an excluded individual
                    or entity of such services;
                      (H) fails substantially to provide language
                    services to limited English proficient
                    beneficiaries enrolled in the plan that are
                    required under law;
                      (I) except as provided under subparagraph (C)
                    or (D) of section 1860D-1(b)(1), enrolls an
                    individual in any plan under this part without
                    the prior consent of the individual or the
                    designee of the individual;
                      (J) transfers an individual enrolled under
                    this part from one plan to another without the
                    prior consent of the individual or the designee
                    of the individual or solely for the purpose of
                    earning a commission;
                      (K) fails to comply with marketing
                    restrictions described in subsections (h) and
                    (j) of section 1851 or applicable implementing
                    regulations or guidance; or
                      (L) employs or contracts with any individual
                    or entity who engages in the conduct described
                    in subparagraphs (A) through (K) of this
                    paragraph;
            the Secretary may provide, in addition to any other
            remedies authorized by law, for any of the remedies
            described in paragraph (2). The Secretary may provide,
            in addition to any other remedies authorized by law,
            for any of the remedies described in paragraph (2), if
            the Secretary determines that any employee or agent of
            such organization, or any provider or supplier who
            contracts with such organization, has engaged in any
            conduct described in subparagraphs (A) through (L) of
            this paragraph.
              (2) Remedies.--The remedies described in this
            paragraph are--
                      (A) civil money penalties of not more than
                    $25,000 for each determination under paragraph
                    (1) or, with respect to a determination under
                    subparagraph (D) or (E)(i) of such paragraph,
                    of not more than $100,000 for each such
                    determination, except with respect to a
                    determination under subparagraph (E), an
                    assessment of not more than 3 times the amount
                    claimed by such plan or plan sponsor based upon
                    the misrepresentation or falsified information
                    involved, plus, with respect to a determination
                    under paragraph (1)(B), double the excess
                    amount charged in violation of such paragraph
                    (and the excess amount charged shall be
                    deducted from the penalty and returned to the
                    individual concerned), and plus, with respect
                    to a determination under paragraph (1)(D),
                    $15,000 for each individual not enrolled as a
                    result of the practice involved,

               *       *       *       *       *       *       *

      (i) Medicare+choice Program Compatibility With Employer or
    Union Group Health Plans.--
              (1) * * *
              (2) Employer sponsored ma plans.--To facilitate the
            offering of MA plans by employers, labor organizations,
            or the trustees of a fund established by one or more
            employers or labor organizations (or combination
            thereof) to furnish benefits to the entity's employees,
            former employees (or combination thereof) or members or
            former members (or combination thereof) of the labor
            organizations, the Secretary may waive or modify
            requirements that hinder the design of, the offering
            of, or the enrollment in such MA plans, but only if 90
            percent of the Medicare Advantage eligible individuals
            enrolled under such plan reside in a county in which
            the MA organization offers an MA local plan.
            Notwithstanding section 1851(g), an MA plan described
            in the previous sentence may restrict the enrollment of
            individuals under this part to individuals who are
            beneficiaries and participants in such plan.

                      SPECIAL RULES FOR MA REGIONAL PLANS

      Sec. 1858. (a) * * *

               *       *       *       *       *       *       *

      [(e) Stabilization Fund.--
              [(1) Establishment.--The Secretary shall establish
            under this subsection an MA Regional Plan Stabilization
            Fund (in this subsection referred to as the ``Fund'')
            which shall be available for two purposes:
                      [(A) Plan entry.--To provide incentives to
                    have MA regional plans offered in each MA
                    region under paragraph (3).
                      [(B) Plan retention.--To provide incentives
                    to retain MA regional plans in certain MA
                    regions with below-national-average MA market
                    penetration under paragraph (4).
              [(2) Funding.--
                      [(A) Initial funding.--
                              [(i) In general.--There shall be
                            available to the Fund, for expenditures
                            from the Fund during 2014, $1.
                              [(ii) Payment from trust funds.--Such
                            amount shall be available to the Fund,
                            as expenditures are made from the Fund,
                            from the Federal Hospital Insurance
                            Trust Fund and the Federal
                            Supplementary Medical Insurance Trust
                            Fund in the proportion specified in
                            section 1853(f).
                      [(B) Additional funding from savings.--
                              [(i) In general.--There shall also be
                            made available to the Fund, 50 percent
                            of savings described in clause (ii).
                              [(ii) Savings.--The savings described
                            in this clause are 25 percent of the
                            average per capita savings described in
                            section 1854(b)(4)(C) for which monthly
                            rebates are provided under section
                            1854(b)(1)(C) in the fiscal year
                            involved that are attributable to MA
                            regional plans.
                              [(iii) Availability.--Funds made
                            available under this subparagraph shall
                            be transferred into a special account
                            in the Treasury from the Federal
                            Hospital Insurance Trust Fund and the
                            Federal Supplementary Medical Insurance
                            Trust Fund in the proportion specified
                            in section 1853(f) on a monthly basis.
                      [(C) Obligations.--Amounts in the Fund shall
                    be available in advance of appropriations to MA
                    regional plans in qualifying MA regions only in
                    accordance with paragraph (5).
                      [(D) Ordering.--Expenditures from the Fund
                    shall first be made from amounts made available
                    under subparagraph (A).
              [(3) Plan entry funding.--
                      [(A) In general.--Funding is available under
                    this paragraph for a year only as follows:
                              [(i) National plan.--For a national
                            bonus payment described in subparagraph
                            (B) for the offering by a single MA
                            organization of an MA regional plan in
                            each MA region in the year, but only if
                            there was not such a plan offered in
                            each such region in the previous year.
                            Funding under this clause is only
                            available with respect to any
                            individual MA organization for a single
                            year, but may be made available to more
                            than one such organization in the same
                            year.
                              [(ii) Regional plans.--Subject to
                            clause (iii), for an increased amount
                            under subparagraph (C) for an MA
                            regional plan offered in an MA region
                            which did not have any MA regional plan
                            offered in the prior year.
                              [(iii) Limitation on regional plan
                            funding in case of national plan.--In
                            no case shall there be any payment
                            adjustment under subparagraph (C) for a
                            year for which a national payment
                            adjustment is made under subparagraph
                            (B).
                      [(B) National bonus payment.--The national
                    bonus payment under this subparagraph shall--
                              [(i) be available to an MA
                            organization only if the organization
                            offers MA regional plans in every MA
                            region;
                              [(ii) be available with respect to
                            all MA regional plans of the
                            organization regardless of whether any
                            other MA regional plan is offered in
                            any region; and
                              [(iii) subject to amounts available
                            under paragraph (5) for a year, be
                            equal to 3 percent of the benchmark
                            amount otherwise applicable for each MA
                            regional plan offered by the
                            organization.
                      [(C) Regional payment adjustment.--
                              [(i) In general.--The increased
                            amount under this subparagraph for an
                            MA regional plan in an MA region for a
                            year shall be an amount, determined by
                            the Secretary, based on the bid
                            submitted for such plan (or plans) and
                            shall be available to all MA regional
                            plans offered in such region and year.
                            Such amount may be based on the mean,
                            mode, or median, or other measure of
                            such bids and may vary from region to
                            region. The Secretary may not limit the
                            number of plans or bids in a region.
                              [(ii) Multi-year funding.--
                                      [(I) In general.--Subject to
                                    amounts available under
                                    paragraph (5), funding under
                                    this subparagraph shall be
                                    available for a period
                                    determined by the Secretary.
                                      [(II) Report.--If the
                                    Secretary determines that
                                    funding will be provided for a
                                    second consecutive year with
                                    respect to an MA region, the
                                    Secretary shall submit to the
                                    Congress a report that
                                    describes the underlying market
                                    dynamics in the region and that
                                    includes recommendations
                                    concerning changes in the
                                    payment methodology otherwise
                                    provided for MA regional plans
                                    under this part.
                              [(iii) Application to all plans in a
                            region.--Funding under this
                            subparagraph with respect to an MA
                            region shall be made available with
                            respect to all MA regional plans
                            offered in the region.
                              [(iv) Limitation on availability of
                            plan retention funding in next year.--
                            If an increased amount is made
                            available under this subparagraph with
                            respect to an MA region for a period
                            determined by the Secretary under
                            clause (ii)(I), in no case shall
                            funding be available under paragraph
                            (4) with respect to MA regional plans
                            offered in the region in the year
                            following such period.
                      [(D) Application.--Any additional payment
                    under this paragraph provided for an MA
                    regional plan for a year shall be treated as if
                    it were an addition to the benchmark amount
                    otherwise applicable to such plan and year, but
                    shall not be taken into account in the
                    computation of any benchmark amount for any
                    subsequent year.
              [(4) Plan retention funding.--
                      [(A) In general.--Funding is available under
                    this paragraph for a year with respect to MA
                    regional plans offered in an MA region for the
                    increased amount specified in subparagraph (B)
                    but only if the region meets the requirements
                    of subparagraphs (C) and (E).
                      [(B) Payment increase.--The increased amount
                    under this subparagraph for an MA regional plan
                    in an MA region for a year shall be an amount,
                    determined by the Secretary, that does not
                    exceed the greater of--
                              [(i) 3 percent of the benchmark
                            amount applicable in the region; or
                              [(ii) such amount as (when added to
                            the benchmark amount applicable to the
                            region) will result in the ratio of--
                                      [(I) such additional amount
                                    plus the benchmark amount
                                    computed under section
                                    1854(b)(4)(B)(i) for the region
                                    and year, to the adjusted
                                    average per capita cost for the
                                    region and year, as estimated
                                    by the Secretary under section
                                    1876(a)(4) and adjusted as
                                    appropriate for the purpose of
                                    risk adjustment; being equal to
                                      [(II) the weighted average of
                                    such benchmark amounts for all
                                    the regions and such year, to
                                    the average per capita cost for
                                    the United States and such
                                    year, as estimated by the
                                    Secretary under section
                                    1876(a)(4) and adjusted as
                                    appropriate for the purpose of
                                    risk adjustment.
                      [(C) Regional requirements.--The requirements
                    of this subparagraph for an MA region for a
                    year are as follows:
                              [(i) Notification of plan exit.--The
                            Secretary has received notice (in such
                            form and manner as the Secretary
                            specifies) before a year that one or
                            more MA regional plans that were
                            offered in the region in the previous
                            year will not be offered in the
                            succeeding year.
                              [(ii) Regional plans available from
                            fewer than 2 ma organizations in the
                            region.--The Secretary determines that
                            if the plans referred to in clause (i)
                            are not offered in the year, fewer than
                            2 MA organizations will be offering MA
                            regional plans in the region in the
                            year involved.
                              [(iii) Percentage enrollment in ma
                            regional plans below national
                            average.--For the previous year, the
                            Secretary determines that the average
                            percentage of MA eligible individuals
                            residing in the region who are enrolled
                            in MA regional plans is less than the
                            average percentage of such individuals
                            in the United States enrolled in such
                            plans.
                      [(D) Application.--Any additional payment
                    under this paragraph provided for an MA
                    regional plan for a year shall be treated as if
                    it were an addition to the benchmark amount
                    otherwise applicable to such plan and year, but
                    shall not be taken into account in the
                    computation of any benchmark amount for any
                    subsequent year.
                      [(E) 2-consecutive-year limitation.--
                              [(i) In general.--In no case shall
                            any funding be available under this
                            paragraph in an MA region in a period
                            of consecutive years that exceeds 2
                            years.
                              [(ii) Report.--If the Secretary
                            determines that funding will be
                            provided under this paragraph for a
                            second consecutive year with respect to
                            an MA region, the Secretary shall
                            submit to the Congress a report that
                            describes the underlying market
                            dynamics in the region and that
                            includes recommendations concerning
                            changes in the payment methodology
                            otherwise provided for MA regional
                            plans under this part.
              [(5) Funding limitation.--
                      [(A) In general.--The total amount expended
                    from the Fund as a result of the application of
                    this subsection through the end of a calendar
                    year may not exceed the amount available to the
                    Fund as of the first day of such year. For
                    purposes of this subsection, amounts that are
                    expended under this title insofar as such
                    amounts would not have been expended but for
                    the application of this subsection shall be
                    counted as amounts expended as a result of such
                    application.
                      [(B) Application of limitation.--The
                    Secretary may obligate funds from the Fund for
                    a year only if the Secretary determines (and
                    the Chief Actuary of the Centers for Medicare &
                    Medicaid Services and the appropriate budget
                    officer certify) that there are available in
                    the Fund at the beginning of the year
                    sufficient amounts to cover all such
                    obligations incurred during the year consistent
                    with subparagraph (A). The Secretary shall take
                    such steps, in connection with computing
                    additional payment amounts under paragraphs (3)
                    and (4) and including limitations on enrollment
                    in MA regional plans receiving such payments,
                    as will ensure that sufficient funds are
                    available to make such payments for the entire
                    year. Funds shall only be made available from
                    the Fund pursuant to an apportionment made in
                    accordance with applicable procedures.
              [(6) Secretary reports.--Not later than April 1 of
            each year (beginning in 2008), the Secretary shall
            submit a report to Congress and the Comptroller General
            of the United States that includes--
                      [(A) a detailed description of--
                              [(i) the total amount expended as a
                            result of the application of this
                            subsection in the previous year
                            compared to the total amount that would
                            have been expended under this title in
                            the year if this subsection had not
                            been enacted;
                              [(ii) the projections of the total
                            amount that will be expended as a
                            result of the application of this
                            subsection in the year in which the
                            report is submitted compared to the
                            total amount that would have been
                            expended under this title in the year
                            if this subsection had not been
                            enacted;
                              [(iii) amounts remaining within the
                            funding limitation specified in
                            paragraph (5); and
                              [(iv) the steps that the Secretary
                            will take under paragraph (5)(B) to
                            ensure that the application of this
                            subsection will not cause expenditures
                            to exceed the amount available in the
                            Fund; and
                      [(B) a certification from the Chief Actuary
                    of the Centers for Medicare & Medicaid Services
                    that the description provided under
                    subparagraph (A) is reasonable, accurate, and
                    based on generally accepted actuarial
                    principles and methodologies.]

               *       *       *       *       *       *       *

                     DEFINITIONS; MISCELLANEOUS PROVISIONS

      Sec. 1859. (a) * * *

               *       *       *       *       *       *       *

      (f) Requirements Regarding Enrollment in Specialized MA Plans
    for Special Needs Individuals.--
              (1) Requirements for enrollment.--In the case of a
            specialized MA plan for special needs individuals (as
            defined in subsection (b)(6)), notwithstanding any
            other provision of this part and in accordance with
            regulations of the Secretary and for periods before
            [January 1, 2011] January 1, 2013 (or January 1, 2016,
            in the case of a plan described in section 1177(b)(1)
            of the America's Affordable Health Choices Act of
            2009), the plan may restrict the enrollment of
            individuals under the plan to individuals who are
            within one or more classes of special needs
            individuals.

               *       *       *       *       *       *       *

              (4) Additional requirements for severe or disabling
            chronic condition snps.--In the case of a specialized
            MA plan for special needs individuals described in
            subsection (b)(6)(B)(iii), the applicable requirements
            described in this paragraph are as follows:
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) The plan does not enroll an individual on
                    or after January 1, 2011, other than during an
                    annual, coordinated open enrollment period or
                    when at the time of the diagnosis of the
                    disease or condition that qualifies the
                    individual as an individual described in
                    subsection (b)(6)(B)(iii).

               *       *       *       *       *       *       *

                   [COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM

      [Sec. 1860C-1. (a) Establishment of Program.--
              [(1) In general.--The Secretary shall establish a
            program under this section (in this section referred to
            as the ``CCA program'') for the application of
            comparative cost adjustment in CCA areas selected under
            this section.
              [(2) Duration.--The CCA program shall begin January
            1, 2010, and shall extend over a period of 6 years, and
            end on December 31, 2015.
              [(3) Report.--Upon the completion of the CCA program,
            the Secretary shall submit a report to Congress. Such
            report shall include the following, with respect to
            both this part and the original medicare fee-for-
            service program:
                      [(A) An evaluation of the financial impact of
                    the CCA program.
                      [(B) An evaluation of changes in access to
                    physicians and other health care providers.
                      [(C) Beneficiary satisfaction.
                      [(D) Recommendations regarding any extension
                    or expansion of the CCA program.
      [(b) Requirements for Selection of CCA Areas.--
              [(1) CCA area defined.--
                      [(A) In general.--For purposes of this
                    section, the term ``CCA area'' means an MSA
                    that meets the requirements of paragraph (2)
                    and is selected by the Secretary under
                    subsection (c).
                      [(B) MSA defined.--For purposes of this
                    section, the term ``MSA'' means a Metropolitan
                    Statistical Area (or such similar area as the
                    Secretary recognizes).
              [(2) Requirements for cca areas.--The requirements of
            this paragraph for an MSA to be a CCA area are as
            follows:
                      [(A) MA enrollment requirement.--For the
                    reference month (as defined under section
                    1858(f)(4)(B)) with respect to 2010, at least
                    25 percent of the total number of MA eligible
                    individuals who reside in the MSA were enrolled
                    in an MA local plan described in section
                    1851(a)(2)(A)(i).
                      [(B) 2 plan requirement.--There will be
                    offered in the MSA during the annual,
                    coordinated election period under section
                    1851(e)(3)(B) before the beginning of 2010 at
                    least 2 MA local plans described in section
                    1851(a)(2)(A)(i) (in addition to the fee-for-
                    service program under parts A and B), each
                    offered by a different MA organization and each
                    of which met the minimum enrollment
                    requirements of paragraph (1) of section
                    1857(b) (as applied without regard to paragraph
                    (3) thereof) as of the reference month.
      [(c) Selection of CCA Areas.--
              [(1) General selection criteria.--The Secretary shall
            select CCA areas from among those MSAs qualifying under
            subsection (b) in a manner that--
                      [(A) seeks to maximize the opportunity to
                    test the application of comparative cost
                    adjustment under this title;
                      [(B) does not seek to maximize the number of
                    MA eligible individuals who reside in such
                    areas; and
                      [(C) provides for geographic diversity
                    consistent with the criteria specified in
                    paragraph (2).
              [(2) Selection criteria.--With respect to the
            selection of MSAs that qualify to be CCA areas under
            subsection (b), the following rules apply, to the
            maximum extent feasible:
                      [(A) Maximum number.--The number of such MSAs
                    selected may not exceed the lesser of (i) 6, or
                    (ii) 25 percent of the number of MSAs that meet
                    the requirement of subsection (b)(2)(A).
                      [(B) One of 4 largest areas by population.--
                    At least one such qualifying MSA shall be
                    selected from among the 4 such qualifying MSAs
                    with the largest total population of MA
                    eligible individuals.
                      [(C) One of 4 areas with lowest population
                    density.--At least one such qualifying MSA
                    shall be selected from among the 4 such
                    qualifying MSAs with the lowest population
                    density (as measured by residents per square
                    mile or similar measure of density).
                      [(D) Multistate area.--At least one such
                    qualifying MSA shall be selected that includes
                    a multi-State area. Such an MSA may be an MSA
                    described in subparagraph (B) or (C).
                      [(E) Limitation within same geographic
                    region.--No more than 2 such MSAs shall be
                    selected that are, in whole or in part, within
                    the same geographic region (as specified by the
                    Secretary) of the United States.
                      [(F) Priority to areas not within certain
                    demonstration projects.--Priority shall be
                    provided for those qualifying MSAs that do not
                    have a demonstration project in effect as of
                    the date of the enactment of this section for
                    medicare preferred provider organization plans
                    under this part.
      [(d) Application of Comparative Cost Adjustment.--
              [(1) In general.--In the case of a CCA area for a
            year--
                      [(A) for purposes of applying this part with
                    respect to payment for MA local plans, any
                    reference to an MA area-specific non-drug
                    monthly benchmark amount shall be treated as a
                    reference to such benchmark computed as if the
                    CCA area-specific non-drug monthly benchmark
                    amount (as defined in subsection (e)(1)) were
                    substituted for the amount described in section
                    1853(j)(1)(A) for the CCA area and year
                    involved, as phased in under paragraph (3); and
                      [(B) with respect to months in the year for
                    individuals residing in the CCA area who are
                    not enrolled in an MA plan, the amount of the
                    monthly premium under section 1839 is subject
                    to adjustment under subsection (f).
              [(2) Exclusion of ma local areas with fewer than 2
            organizations offering ma plans.--
                      [(A) In general.--In no case shall an MA
                    local area that is within an MSA be included as
                    part of a CCA area unless for 2010 (and, except
                    as provided in subparagraph (B), for a
                    subsequent year) there is offered in each part
                    of such MA local area at least 2 MA local plans
                    described in section 1851(a)(2)(A)(i) each of
                    which is offered by a different MA
                    organization.
                      [(B) Continuation.--If an MA local area meets
                    the requirement of subparagraph (A) and is
                    included in a CCA area for 2010, such local
                    area shall continue to be included in such CCA
                    area for a subsequent year notwithstanding that
                    it no longer meets such requirement so long as
                    there is at least one MA local plan described
                    in section 1851(a)(2)(A)(i) that is offered in
                    such local area.
              [(3) Phase-in of cca benchmark.--
                      [(A) In general.--In applying this section
                    for a year before 2013, paragraph (1)(A) shall
                    be applied as if the phase-in fraction under
                    subparagraph (B) of the CCA non-drug monthly
                    benchmark amount for the year were substituted
                    for such fraction of the MA area-specific non-
                    drug monthly benchmark amount.
                      [(B) Phase-in fraction.--The phase-in
                    fraction under this subparagraph is--
                              [(i) for 2010 \1/4\; and
                              [(ii) for a subsequent year is the
                            phase-in fraction under this
                            subparagraph for the previous year
                            increased by \1/4\, but in no case more
                            than 1.
      [(e) Computation of CCA Benchmark Amount.--
              [(1) CCA non-drug monthly benchmark amount.--For
            purposes of this section, the term ``CCA non-drug
            monthly benchmark amount'' means, with respect to a CCA
            area for a month in a year, the sum of the 2 components
            described in paragraph (2) for the area and year. The
            Secretary shall compute such benchmark amount for each
            such CCA area before the beginning of each annual,
            coordinated election period under section 1851(e)(3)(B)
            for each year (beginning with 2010) in which the CCA
            area is so selected.
              [(2) 2 Components.--For purposes of paragraph (1),
            the 2 components described in this paragraph for a CCA
            area and a year are the following:
                      [(A) MA local component.--The product of the
                    following:
                              [(i) Weighted average of medicare
                            advantage plan bids in area.--The
                            weighted average of the plan bids for
                            the area and year (as determined under
                            paragraph (3)(A)).
                              [(ii) Non-ffs market share.--One
                            minus the fee-for-service market share
                            percentage, determined under paragraph
                            (4) for the area and year.
                      [(B) Fee-for-service component.--The product
                    of the following:
                              [(i) Fee-for-service area-specific
                            non-drug amount.--The fee-for-service
                            area-specific non-drug amount (as
                            defined in paragraph (5)) for the area
                            and year.
                              [(ii) Fee-for-service market share.--
                            The fee-for-service market share
                            percentage, determined under paragraph
                            (4) for the area and year.
              [(3) Determination of weighted average ma bids for a
            cca area.--
                      [(A) In general.--For purposes of paragraph
                    (2)(A)(i), the weighted average of plan bids
                    for a CCA area and a year is, subject to
                    subparagraph (D), the sum of the following
                    products for MA local plans described in
                    subparagraph (C) in the area and year:
                              [(i) Monthly medicare advantage
                            statutory non-drug bid amount.--The
                            accepted unadjusted MA statutory non-
                            drug monthly bid amount.
                              [(ii) Plan's share of medicare
                            advantage enrollment in area.--The
                            number of individuals described in
                            subparagraph (B), divided by the total
                            number of such individuals for all MA
                            plans described in subparagraph (C) for
                            that area and year.
                      [(B) Counting of individuals.--The Secretary
                    shall count, for each MA local plan described
                    in subparagraph (C) for an area and year, the
                    number of individuals who reside in the area
                    and who were enrolled under such plan under
                    this part during the reference month for that
                    year.
                      [(C) Exclusion of plans not offered in
                    previous year.--For an area and year, the MA
                    local plans described in this subparagraph are
                    MA local plans described in section
                    1851(a)(2)(A)(i) that are offered in the area
                    and year and were offered in the CCA area in
                    the reference month.
                      [(D) Computation of weighted average of plan
                    bids.--In calculating the weighted average of
                    plan bids for a CCA area under subparagraph
                    (A)--
                              [(i) in the case of an MA local plan
                            that has a service area only part of
                            which is within such CCA area, the MA
                            organization offering such plan shall
                            submit a separate bid for such plan for
                            the portion within such CCA area; and
                              [(ii) the Secretary shall adjust such
                            separate bid (or, in the case of an MA
                            local plan that has a service area
                            entirely within such CCA area, the plan
                            bid) as may be necessary to take into
                            account differences between the service
                            area of such plan within the CCA area
                            and the entire CCA area and the
                            distribution of plan enrollees of all
                            MA local plans offered within the CCA
                            area.
              [(4) Computation of fee-for-service market share
            percentage.--The Secretary shall determine, for a year
            and a CCA area, the proportion (in this subsection
            referred to as the ``fee-for-service market share
            percentage'') equal to--
                      [(A) the total number of MA eligible
                    individuals residing in such area who during
                    the reference month for the year were not
                    enrolled in any MA plan; divided by
                      [(B) the sum of such number and the total
                    number of MA eligible individuals residing in
                    such area who during such reference month were
                    enrolled in an MA local plan described in
                    section 1851(a)(2)(A)(i),
            or, if greater, such proportion determined for
            individuals nationally.
              [(5) Fee-for-service area-specific non-drug amount.--
                      [(A) In general.--For purposes of paragraph
                    (2)(B)(i) and subsection (f)(2)(A), subject to
                    subparagraph (C), the term ``fee-for-service
                    area-specific non-drug amount'' means, for a
                    CCA area and a year, the adjusted average per
                    capita cost for such area and year involved,
                    determined under section 1876(a)(4) and
                    adjusted as appropriate for the purpose of risk
                    adjustment for benefits under the original
                    medicare fee-for-service program option for
                    individuals entitled to benefits under part A
                    and enrolled under part B who are not enrolled
                    in an MA plan for the year, but adjusted to
                    exclude costs attributable to payments under
                    section 1886(h).
                      [(B) Use of full risk adjustment to
                    standardize fee-for-service costs to typical
                    beneficiary.--In determining the adjusted
                    average per capita cost for an area and year
                    under subparagraph (A), such costs shall be
                    adjusted to fully take into account the
                    demographic and health status risk factors
                    established under section 1853(a)(1)(A)(iv) so
                    that such per capita costs reflect the average
                    costs for a typical beneficiary residing in the
                    CCA area.
                      [(C) Inclusion of costs of va and dod
                    military facility services to medicare-eligible
                    beneficiaries.--In determining the adjusted
                    average per capita cost under subparagraph (A)
                    for a year, such cost shall be adjusted to
                    include the Secretary's estimate, on a per
                    capita basis, of the amount of additional
                    payments that would have been made in the area
                    involved under this title if individuals
                    entitled to benefits under this title had not
                    received services from facilities of the
                    Department of Veterans Affairs or the
                    Department of Defense.
      [(f) Premium Adjustment.--
              [(1) Application.--
                      [(A) In general.--Except as provided in
                    subparagraph (B), in the case of an individual
                    who is enrolled under part B, who resides in a
                    CCA area, and who is not enrolled in an MA plan
                    under this part, the monthly premium otherwise
                    applied under part B (determined without regard
                    to subsections (b), (f), and (i) of section
                    1839 or any adjustment under this subsection)
                    shall be adjusted in accordance with paragraph
                    (2), but only in the case of premiums for
                    months during the period in which the CCA
                    program under this section for such area is in
                    effect.
                      [(B) No premium adjustment for subsidy
                    eligible beneficiaries.--No premium adjustment
                    shall be made under this subsection for a
                    premium for a month if the individual is
                    determined to be a subsidy eligible individual
                    (as defined in section 1860D-14(a)(3)(A)) for
                    the month.
              [(2) Amount of adjustment.--
                      [(A) In general.--Under this paragraph,
                    subject to the exemption under paragraph (1)(B)
                    and the limitation under subparagraph (B), if
                    the fee-for-service area-specific non-drug
                    amount (as defined in section (e)(5)) for a CCA
                    area in which an individual resides for a
                    month--
                              [(i) does not exceed the CCA non-drug
                            monthly benchmark amount (as determined
                            under subsection (e)(1)) for such area
                            and month, the amount of the premium
                            for the individual for the month shall
                            be reduced, by an amount equal to 75
                            percent of the amount by which such CCA
                            benchmark exceeds such fee-for-service
                            area-specific non-drug amount; or
                              [(ii) exceeds such CCA non-drug
                            benchmark, the amount of the premium
                            for the individual for the month shall
                            be adjusted to ensure, that--
                                      [(I) the sum of the amount of
                                    the adjusted premium and the
                                    CCA non-drug benchmark for the
                                    area; is equal to
                                      [(II) the sum of the
                                    unadjusted premium plus the
                                    amount of such fee-for-service
                                    area-specific non-drug amount
                                    for the area.
                      [(B) Limitation.--In no case shall the actual
                    amount of an adjustment under subparagraph (A)
                    for an area and month in a year result in an
                    adjustment that exceeds the maximum adjustment
                    permitted under subparagraph (C) for the area
                    and year, or, if less, the maximum annual
                    adjustment permitted under subparagraph (D) for
                    the area and year.
                      [(C) Phase-in of adjustment.--The amount of
                    an adjustment under subparagraph (A) for a CCA
                    area and year may not exceed the product of the
                    phase-in fraction for the year under subsection
                    (d)(3)(B) multiplied by the amount of the
                    adjustment otherwise computed under
                    subparagraph (A) for the area and year,
                    determined without regard to this subparagraph
                    and subparagraph (D).
                      [(D) 5-percent limitation on adjustment.--The
                    amount of the adjustment under this subsection
                    for months in a year shall not exceed 5 percent
                    of the amount of the monthly premium amount
                    determined for months in the year under section
                    1839 without regard to subsections (b), (f),
                    and (i) of such section and this subsection.]

              Part D--Voluntary Prescription Drug Benefit Program

     Subpart 1--Part D Eligible Individuals and Prescription Drug Benefits

                    ELIGIBILITY, ENROLLMENT, AND INFORMATION

      Sec. 1860D-1. (a) * * *
      (b) Enrollment Process for Prescription Drug Plans.--
              (1) Establishment of process.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Special rule.--The process established
                    under subparagraph (A) shall include, in the
                    case of a part D eligible individual who is a
                    full-benefit dual eligible individual (as
                    defined in section 1935(c)(6)) who has failed
                    to enroll in a prescription drug plan or an MA-
                    PD plan, for the enrollment in a prescription
                    drug plan that has a monthly beneficiary
                    premium that does not exceed the premium
                    assistance available under section 1860D-
                    14(a)(1)(A)). If there is more than one such
                    plan available, the Secretary shall enroll such
                    an individual on a random basis among all such
                    plans in the PDP region or through use of an
                    intelligent assignment process that is designed
                    to maximize the access of such individual to
                    necessary prescription drugs while minimizing
                    costs to such individual and to the program
                    under this part to the greatest extent
                    possible. In the case the Secretary enrolls
                    such individuals through use of an intelligent
                    assignment process, such process shall take
                    into account the extent to which prescription
                    drugs necessary for the individual are covered
                    in the case of a PDP sponsor of a prescription
                    drug plan that uses a formulary, the use of
                    prior authorization or other restrictions on
                    access to coverage of such prescription drugs
                    by such a sponsor, and the overall quality of a
                    prescription drug plan as measured by quality
                    ratings established by the Secretary. Nothing
                    in the previous sentence shall prevent such an
                    individual from declining or changing such
                    enrollment.
                      (D) Special rule for subsidy eligible
                    individuals.--The process established under
                    subparagraph (A) shall include, in the case of
                    an individual described in section 1860D-
                    1(b)(3)(D) who fails to enroll in a
                    prescription drug plan or an MA-PD plan during
                    the special enrollment established under such
                    section applicable to such individual, the
                    application of the assignment process described
                    in subparagraph (C) to such individual in the
                    same manner as such assignment process applies
                    to a part D eligible individual described in
                    such subparagraph (C). Nothing in the previous
                    sentence shall prevent an individual described
                    in such sentence from declining enrollment in a
                    plan determined appropriate by the Secretary
                    (or in the program under this part) or from
                    changing such enrollment.

               *       *       *       *       *       *       *

              (3) Additional special enrollment periods.--The
            Secretary shall establish special enrollment periods,
            including the following:
                      (A) * * *

               *       *       *       *       *       *       *

                      [(D) Medicaid coverage.--In the case of an
                    individual (as determined by the Secretary) who
                    is a full-benefit dual eligible individual (as
                    defined in section 1935(c)(6)).]
                      (D) Subsidy eligible individuals.--In the
                    case of an individual (as determined by the
                    Secretary) who is determined under subparagraph
                    (B) of section 1860D-14(a)(3) to be a subsidy
                    eligible individual.

               *       *       *       *       *       *       *

                      (F) Change in formulary resulting in increase
                    in cost-sharing.--
                              (i) In general.--Except as provided
                            in clause (ii), in the case of an
                            individual enrolled in a prescription
                            drug plan (or MA-PD plan) who has been
                            prescribed and is using a covered part
                            D drug while so enrolled, if the
                            formulary of the plan is materially
                            changed (other than at the end of a
                            contract year) so to reduce the
                            coverage (or increase the cost-sharing)
                            of the drug under the plan.
                              (ii) Exception.--Clause (i) shall not
                            apply in the case that a drug is
                            removed from the formulary of a plan
                            because of a recall or withdrawal of
                            the drug issued by the Food and Drug
                            Administration, because the drug is
                            replaced with a generic drug that is a
                            therapeutic equivalent, or because of
                            utilization management applied to--
                                      (I) a drug whose labeling
                                    includes a boxed warning
                                    required by the Food and Drug
                                    Administration under section
                                    210.57(c)(1) of title 21, Code
                                    of Federal Regulations (or a
                                    successor regulation); or
                                      (II) a drug required under
                                    subsection (c)(2) of section
                                    505-1 of the Federal Food,
                                    Drug, and Cosmetic Act to have
                                    a Risk Evaluation and
                                    Management Strategy that
                                    includes elements under
                                    subsection (f) of such section.

               *       *       *       *       *       *       *

                           PRESCRIPTION DRUG BENEFITS

      Sec. 1860D-2. (a) * * *
      (b) Standard Prescription Drug Coverage.--For purposes of
    this part and part C, the term ``standard prescription drug
    coverage'' means coverage of covered part D drugs that meets
    the following requirements:
              (1) * * *

               *       *       *       *       *       *       *

              (3) Initial coverage limit.--
                      (A) In general.--Except as provided in
                    [paragraph (4)] paragraphs (4) and (7), the
                    coverage has an initial coverage limit on the
                    maximum costs that may be recognized for
                    payment purposes (including the annual
                    deductible)--
                              (i) * * *

               *       *       *       *       *       *       *

              (4) Protection against high out-of-pocket
            expenditures.--
                      (A) * * *
                      (B) Annual out-of-pocket threshold.--
                              (i) In general.--For purposes of this
                            part subject to paragraph (7), the
                            ``annual out-of-pocket threshold''
                            specified in this subparagraph--
                                      (I) * * *

               *       *       *       *       *       *       *

                      (C) Application.--In applying subparagraph
                    (A)--
                              (i) incurred costs shall only include
                            costs incurred with respect to covered
                            part D drugs for the annual deductible
                            described in paragraph (1), for cost-
                            sharing described in paragraph (2), and
                            for amounts for which benefits are not
                            provided because of the application of
                            the initial coverage limit described in
                            paragraph (3), but does not include any
                            costs incurred for covered part D drugs
                            which are not included (or treated as
                            being included) in the plan's
                            formulary; [and]
                              (ii) [such costs shall be treated as
                            incurred only if] subject to subsection
                            (g)(2)(C), subject to clause (iii),
                            such costs shall be treated as incurred
                            only if they are paid by the part D
                            eligible individual (or by another
                            person, such as a family member, on
                            behalf of the individual)[, under
                            section 1860D-14, or under a State
                            Pharmaceutical Assistance Program] and
                            the part D eligible individual (or
                            other person) is not reimbursed through
                            insurance or otherwise, a group health
                            plan, or other third-party payment
                            arrangement (other than under such
                            section or such a Program) for such
                            costs[.]; and
                              (iii) such costs shall be treated as
                            incurred and shall not be considered to
                            be reimbursed under clause (ii) if such
                            costs are borne or paid--
                                      (I) under section 1860D-14;
                                      (II) under a State
                                    Pharmaceutical Assistance
                                    Program;
                                      (III) by the Indian Health
                                    Service, an Indian tribe or
                                    tribal organization, or an
                                    urban Indian organization (as
                                    defined in section 4 of the
                                    Indian Health Care Improvement
                                    Act); or
                                      (IV) under an AIDS Drug
                                    Assistance Program under part B
                                    of title XXVI of the Public
                                    Health Service Act.

               *       *       *       *       *       *       *

              (7) Phased-in elimination of coverage gap.--
                      (A) In general.--For each year beginning with
                    2011, the Secretary shall consistent with this
                    paragraph progressively increase the initial
                    coverage limit (described in subsection (b)(3))
                    and decrease the annual out-of-pocket threshold
                    from the amounts otherwise computed until there
                    is a continuation of coverage from the initial
                    coverage limit for expenditures incurred
                    through the total amount of expenditures at
                    which benefits are available under paragraph
                    (4).
                      (B) Increase in initial coverage limit.--For
                    a year beginning with 2011, the initial
                    coverage limit otherwise computed without
                    regard to this paragraph shall be increased by
                    \1/2\ of the cumulative phase-in percentage (as
                    defined in subparagraph (D)(ii) for the year)
                    times the out-of-pocket gap amount (as defined
                    in subparagraph (E)) for the year.
                      (C) Decrease in annual out-of-pocket
                    threshold.--For a year beginning with 2011, the
                    annual out-of-pocket threshold otherwise
                    computed without regard to this paragraph shall
                    be decreased by \1/2\ of the cumulative phase-
                    in percentage of the out-of-pocket gap amount
                    for the year multiplied by 1.75.
                      (D) Phase-in.--For purposes of this
                    paragraph:
                              (i) Annual phase-in percentage.--The
                            term ``annual phase-in percentage''
                            means--
                                      (I) for 2011, 13 percent;
                                      (II) for 2012, 2013, 2014,
                                    and 2015, 5 percent;
                                      (III) for 2016 through 2018,
                                    7.5 percent; and
                                      (IV) for 2019 and each
                                    subsequent year, 10 percent.
                              (ii) Cumulative phase-in
                            percentage.--The term ``cumulative
                            phase-in percentage'' means for a year
                            the sum of the annual phase-in
                            percentage for the year and the annual
                            phase-in percentages for each previous
                            year beginning with 2011, but in no
                            case more than 100 percent.
                      (E) Out-of-pocket gap amount.--For purposes
                    of this paragraph, the term ``out-of-pocket gap
                    amount'' means for a year the amount by which--
                              (i) the annual out-of-pocket
                            threshold specified in paragraph (4)(B)
                            for the year (as determined as if this
                            paragraph did not apply), exceeds
                              (ii) the sum of--
                                      (I) the annual deductible
                                    under paragraph (1) for the
                                    year; and
                                      (II) \1/4\ of the amount by
                                    which the initial coverage
                                    limit under paragraph (3) for
                                    the year (as determined as if
                                    this paragraph did not apply)
                                    exceeds such annual deductible.

               *       *       *       *       *       *       *

      (e) Covered Part D Drug Defined.--
              (1) In general.--Except as provided in this
            subsection and subsections (f) and (g), for purposes of
            this part, the term ``covered part D drug'' means--
                      (A)  * * *
                      (B) a biological product described in clauses
                    (i) through (iii) of subparagraph (B) of such
                    section or insulin described in subparagraph
                    (C) of such section and medical supplies
                    associated with the injection of insulin (as
                    defined in regulations of the Secretary),
            and [such term includes a vaccine licensed under
            section 351 of the Public Health Service Act (and, for
            vaccines administered on or after January 1, 2008, its
            administration) and] any use of a covered part D drug
            for a medically accepted indication (as defined in
            paragraph (4)).

               *       *       *       *       *       *       *

      (f) Prescription Drug Rebate Agreement for Full-Benefit Dual
    Eligible Individuals.--
              (1) In general.--In this part, the term ``covered
            part D drug'' does not include any drug or biologic
            that is manufactured by a manufacturer that has not
            entered into and have in effect a rebate agreement
            described in paragraph (2).
              (2) Rebate agreement.--A rebate agreement under this
            subsection shall require the manufacturer to provide to
            the Secretary a rebate for each rebate period (as
            defined in paragraph (6)(B)) ending after December 31,
            2010, in the amount specified in paragraph (3) for any
            covered part D drug of the manufacturer dispensed after
            December 31, 2010, to any full-benefit dual eligible
            individual (as defined in paragraph (6)(A)) for which
            payment was made by a PDP sponsor under part D or a MA
            organization under part C for such period. Such rebate
            shall be paid by the manufacturer to the Secretary not
            later than 30 days after the date of receipt of the
            information described in section 1860D-12(b)(7),
            including as such section is applied under section
            1857(f)(3).
              (3) Rebate for full-benefit dual eligible medicare
            drug plan enrollees.--
                      (A) In general.--The amount of the rebate
                    specified under this paragraph for a
                    manufacturer for a rebate period, with respect
                    to each dosage form and strength of any covered
                    part D drug provided by such manufacturer and
                    dispensed to a full-benefit dual eligible
                    individual, shall be equal to the product of--
                              (i) the total number of units of such
                            dosage form and strength of the drug so
                            provided and dispensed for which
                            payment was made by a PDP sponsor under
                            part D or a MA organization under part
                            C for the rebate period (as reported
                            under section 1860D-12(b)(7), including
                            as such section is applied under
                            section 1857(f)(3)); and
                              (ii) the amount (if any) by which--
                                      (I) the Medicaid rebate
                                    amount (as defined in
                                    subparagraph (B)) for such
                                    form, strength, and period,
                                    exceeds
                                      (II) the average Medicare
                                    drug program full-benefit dual
                                    eligible rebate amount (as
                                    defined in subparagraph (C))
                                    for such form, strength, and
                                    period.
                      (B) Medicaid rebate amount.--For purposes of
                    this paragraph, the term ``Medicaid rebate
                    amount'' means, with respect to each dosage
                    form and strength of a covered part D drug
                    provided by the manufacturer for a rebate
                    period--
                              (i) in the case of a single source
                            drug or an innovator multiple source
                            drug, the amount specified in paragraph
                            (1)(A)(ii) of section 1927(b) plus the
                            amount, if any, specified in paragraph
                            (2)(A)(ii) of such section, for such
                            form, strength, and period; or
                              (ii) in the case of any other covered
                            outpatient drug, the amount specified
                            in paragraph (3)(A)(i) of such section
                            for such form, strength, and period.
                      (C) Average medicare drug program full-
                    benefit dual eligible rebate amount.--For
                    purposes of this subsection, the term ``average
                    Medicare drug program full-benefit dual
                    eligible rebate amount'' means, with respect to
                    each dosage form and strength of a covered part
                    D drug provided by a manufacturer for a rebate
                    period, the sum, for all PDP sponsors under
                    part D and MA organizations administering a MA-
                    PD plan under part C, of--
                              (i) the product, for each such
                            sponsor or organization, of--
                                      (I) the sum of all rebates,
                                    discounts, or other price
                                    concessions (not taking into
                                    account any rebate provided
                                    under paragraph (2) for such
                                    dosage form and strength of the
                                    drug dispensed, calculated on a
                                    per-unit basis, but only to the
                                    extent that any such rebate,
                                    discount, or other price
                                    concession applies equally to
                                    drugs dispensed to full-benefit
                                    dual eligible Medicare drug
                                    plan enrollees and drugs
                                    dispensed to PDP and MA-PD
                                    enrollees who are not full-
                                    benefit dual eligible
                                    individuals; and
                                      (II) the number of the units
                                    of such dosage and strength of
                                    the drug dispensed during the
                                    rebate period to full-benefit
                                    dual eligible individuals
                                    enrolled in the prescription
                                    drug plans administered by the
                                    PDP sponsor or the MA-PD plans
                                    administered by the MA-PD
                                    organization; divided by
                              (ii) the total number of units of
                            such dosage and strength of the drug
                            dispensed during the rebate period to
                            full-benefit dual eligible individuals
                            enrolled in all prescription drug plans
                            administered by PDP sponsors and all
                            MA-PD plans administered by MA-PD
                            organizations.
              (4) Length of agreement.--The provisions of paragraph
            (4) of section 1927(b) (other than clauses (iv) and (v)
            of subparagraph (B)) shall apply to rebate agreements
            under this subsection in the same manner as such
            paragraph applies to a rebate agreement under such
            section.
              (5) Other terms and conditions.--The Secretary shall
            establish other terms and conditions of the rebate
            agreement under this subsection, including terms and
            conditions related to compliance, that are consistent
            with this subsection.
              (6) Definitions.--In this subsection and section
            1860D-12(b)(7):
                      (A) Full-benefit dual eligible individual.--
                    The term ``full-benefit dual eligible
                    individual'' has the meaning given such term in
                    section 1935(c)(6).
                      (B) Rebate period.--The term ``rebate
                    period'' has the meaning given such term in
                    section 1927(k)(8).
      (g) Requirement for Manufacturer Discount Agreement for
    Certain Qualifying Drugs.--
              (1) In general.--In this part, the term ``covered
            part D drug'' does not include any drug or biologic
            that is manufactured by a manufacturer that has not
            entered into and have in effect for all qualifying
            drugs (as defined in paragraph (5)(A)) a discount
            agreement described in paragraph (2).
              (2) Discount agreement.--
                      (A) Periodic discounts.--A discount agreement
                    under this paragraph shall require the
                    manufacturer involved to provide, to each PDP
                    sponsor with respect to a prescription drug
                    plan or each MA organization with respect to
                    each MA-PD plan, a discount in an amount
                    specified in paragraph (3) for qualifying drugs
                    (as defined in paragraph (5)(A)) of the
                    manufacturer dispensed to a qualifying enrollee
                    after December 31, 2010, insofar as the
                    individual is in the original gap in coverage
                    (as defined in paragraph (5)(E)).
                      (B) Discount agreement.--Insofar as not
                    inconsistent with this subsection, the
                    Secretary shall establish terms and conditions
                    of such agreement, including terms and
                    conditions relating to compliance, similar to
                    the terms and conditions for rebate agreements
                    under paragraphs (2), (3), and (4) of section
                    1927(b), except that--
                              (i) discounts shall be applied under
                            this subsection to prescription drug
                            plans and MA-PD plans instead of State
                            plans under title XIX;
                              (ii) PDP sponsors and MA
                            organizations shall be responsible,
                            instead of States, for provision of
                            necessary utilization information to
                            drug manufacturers; and
                              (iii) sponsors and MA organizations
                            shall be responsible for reporting
                            information on drug-component
                            negotiated price, instead of other
                            manufacturer prices.
                      (C) Counting discount toward true out-of-
                    pocket costs.--Under the discount agreement, in
                    applying subsection (b)(4), with regard to
                    subparagraph (C)(i) of such subsection, if a
                    qualified enrollee purchases the qualified drug
                    insofar as the enrollee is in an actual gap of
                    coverage (as defined in paragraph (5)(D)), the
                    amount of the discount under the agreement
                    shall be treated and counted as costs incurred
                    by the plan enrollee.
              (3) Discount amount.--The amount of the discount
            specified in this paragraph for a discount period for a
            plan is equal to 50 percent of the amount of the drug-
            component negotiated price (as defined in paragraph
            (5)(C)) for qualifying drugs for the period involved.
              (4) Additional terms.--In the case of a discount
            provided under this subsection with respect to a
            prescription drug plan offered by a PDP sponsor or an
            MA-PD plan offered by an MA organization, if a
            qualified enrollee purchases the qualified drug--
                      (A) insofar as the enrollee is in an actual
                    gap of coverage (as defined in paragraph
                    (5)(D)), the sponsor or plan shall provide the
                    discount to the enrollee at the time the
                    enrollee pays for the drug; and
                      (B) insofar as the enrollee is in the portion
                    of the original gap in coverage (as defined in
                    paragraph (5)(E)) that is not in the actual gap
                    in coverage, the discount shall not be applied
                    against the negotiated price (as defined in
                    subsection (d)(1)(B)) for the purpose of
                    calculating the beneficiary payment.
              (5) Definitions.--In this subsection:
                      (A) Qualifying drug.--The term ``qualifying
                    drug'' means, with respect to a prescription
                    drug plan or MA-PD plan, a drug or biological
                    product that--
                              (i)(I) is a drug produced or
                            distributed under an original new drug
                            application approved by the Food and
                            Drug Administration, including a drug
                            product marketed by any cross-licensed
                            producers or distributors operating
                            under the new drug application;
                              (II) is a drug that was originally
                            marketed under an original new drug
                            application approved by the Food and
                            Drug Administration; or
                              (III) is a biological product as
                            approved under Section 351(a) of the
                            Public Health Services Act;
                              (ii) is covered under the formulary
                            of the plan; and
                              (iii) is dispensed to an individual
                            who is in the original gap in coverage.
                      (B) Qualifying enrollee.--The term
                    ``qualifying enrollee'' means an individual
                    enrolled in a prescription drug plan or MA-PD
                    plan other than such an individual who is a
                    subsidy-eligible individual (as defined in
                    section 1860D-14(a)(3)).
                      (C) Drug-component negotiated price.--The
                    term ``drug-component negotiated price'' means,
                    with respect to a qualifying drug, the
                    negotiated price (as defined in subsection
                    (d)(1)(B)), as determined without regard to any
                    dispensing fee, of the drug under the
                    prescription drug plan or MA-PD plan involved.
                      (D) Actual gap in coverage.--The term
                    ``actual gap in coverage'' means the gap in
                    prescription drug coverage that occurs between
                    the initial coverage limit (as modified under
                    subparagraph (B) of subsection (b)(7)) and the
                    annual out-of-pocket threshold (as modified
                    under subparagraph (C) of such subsection).
                      (E) Original gap in coverage.--The term
                    ``original in gap coverage'' means the gap in
                    prescription drug coverage that would occur
                    between the initial coverage limit (described
                    in subsection (b)(3)) and the out-of-pocket
                    threshold (as defined in subsection (b)(4))(B)
                    if subsection (b)(7) did not apply.

               *       *       *       *       *       *       *

          Subpart 2--Prescription Drug Plans; PDP Sponsors; Financing

                 PDP REGIONS; SUBMISSION OF BIDS; PLAN APPROVAL

      Sec. 1860D-11. (a) * * *

               *       *       *       *       *       *       *

      (d) Review of Information and Negotiation.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Rejection of bids.--Paragraph (5)(C) of section
            1854(a) shall apply with respect to bids under this
            section in the same manner as it applies to bids by an
            MA organization under such section.

               *       *       *       *       *       *       *

       REQUIREMENTS FOR AND CONTRACTS WITH PRESCRIPTION DRUG PLAN (PDP)
                                    SPONSORS

      Sec. 1860D-12. (a) * * *
      (b) Contract Requirements.--
              (1) * * *

               *       *       *       *       *       *       *

              [(5) Submission of claims by pharmacies located in or
            contracting with long-term care facilities.--Each
            contract entered into with a PDP sponsor under this
            part with respect to a prescription drug plan offered
            by such sponsor shall provide that a pharmacy located
            in, or having a contract with, a long-term care
            facility shall have not less than 30 days (but not more
            than 90 days) to submit claims to the sponsor for
            reimbursement under the plan.]
              [(6)] (5) Regular update of prescription drug pricing
            standard.--If the PDP sponsor of a prescription drug
            plan uses a standard for reimbursement of pharmacies
            based on the cost of a drug, each contract entered into
            with such sponsor under this part with respect to the
            plan shall provide that the sponsor shall update such
            standard not less frequently than once every 7 days,
            beginning with an initial update on January 1 of each
            year, to accurately reflect the market price of
            acquiring the drug.
              (6) Reporting requirement for the determination and
            payment of rebates by manufacturers related to rebate
            for full-benefit dual eligible medicare drug plan
            enrollees.--
                      (A) In general.--For purposes of the rebate
                    under section 1860D-2(f) for contract years
                    beginning on or after January 1, 2011, each
                    contract entered into with a PDP sponsor under
                    this part with respect to a prescription drug
                    plan shall require that the sponsor comply with
                    subparagraphs (B) and (C).
                      (B) Report form and contents.--Not later than
                    60 days after the end of each rebate period (as
                    defined in section 1860D-2(f)(6)(B)) within
                    such a contract year to which such section
                    applies, a PDP sponsor of a prescription drug
                    plan under this part shall report to each
                    manufacturer--
                              (i) information (by National Drug
                            Code number) on the total number of
                            units of each dosage, form, and
                            strength of each drug of such
                            manufacturer dispensed to full-benefit
                            dual eligible Medicare drug plan
                            enrollees under any prescription drug
                            plan operated by the PDP sponsor during
                            the rebate period;
                              (ii) information on the price
                            discounts, price concessions, and
                            rebates for such drugs for such form,
                            strength, and period;
                              (iii) information on the extent to
                            which such price discounts, price
                            concessions, and rebates apply equally
                            to full-benefit dual eligible Medicare
                            drug plan enrollees and PDP enrollees
                            who are not full-benefit dual eligible
                            Medicare drug plan enrollees; and
                              (iv) any additional information that
                            the Secretary determines is necessary
                            to enable the Secretary to calculate
                            the average Medicare drug program full-
                            benefit dual eligible rebate amount (as
                            defined in paragraph (3)(C) of such
                            section), and to determine the amount
                            of the rebate required under this
                            section, for such form, strength, and
                            period.
                    Such report shall be in a form consistent with
                    a standard reporting format established by the
                    Secretary.
                      (C) Submission to secretary.--Each PDP
                    sponsor shall promptly transmit a copy of the
                    information reported under subparagraph (B) to
                    the Secretary for the purpose of audit
                    oversight and evaluation.
                      (D) Confidentiality of information.--The
                    provisions of subparagraph (D) of section
                    1927(b)(3), relating to confidentiality of
                    information, shall apply to information
                    reported by PDP sponsors under this paragraph
                    in the same manner that such provisions apply
                    to information disclosed by manufacturers or
                    wholesalers under such section, except--
                              (i) that any reference to ``this
                            section'' in clause (i) of such
                            subparagraph shall be treated as being
                            a reference to this section;
                              (ii) the reference to the Director of
                            the Congressional Budget Office in
                            clause (iii) of such subparagraph shall
                            be treated as including a reference to
                            the Medicare Payment Advisory
                            Commission; and
                              (iii) clause (iv) of such
                            subparagraph shall not apply.
                      (E) Oversight.--Information reported under
                    this paragraph may be used by the Inspector
                    General of the Department of Health and Human
                    Services for the statutorily authorized
                    purposes of audit, investigation, and
                    evaluations.
                      (F) Penalties for failure to provide timely
                    information and provision of false
                    information.--In the case of a PDP sponsor--
                              (i) that fails to provide information
                            required under subparagraph (B) on a
                            timely basis, the sponsor is subject to
                            a civil money penalty in the amount of
                            $10,000 for each day in which such
                            information has not been provided; or
                              (ii) that knowingly (as defined in
                            section 1128A(i)) provides false
                            information under such subparagraph,
                            the sponsor is subject to a civil money
                            penalty in an amount not to exceed
                            $100,000 for each item of false
                            information.
                    Such civil money penalties are in addition to
                    other penalties as may be prescribed by law.
                    The provisions of section 1128A (other than
                    subsections (a) and (b)) shall apply to a civil
                    money penalty under this subparagraph in the
                    same manner as such provisions apply to a
                    penalty or proceeding under section 1128A(a).

               *       *       *       *       *       *       *

         PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME INDIVIDUALS

      Sec. 1860D-14. (a) Income-Related Subsidies for Individuals
    With Income Up to 150 Percent of Poverty Line.--
              (1) Individuals with income below 135 percent of
            poverty line.--In the case of a subsidy eligible
            individual (as defined in paragraph (3)) who is
            determined to have income that is below 135 percent of
            the poverty line applicable to a family of the size
            involved and who meets the resources requirement
            described in paragraph (3)(D) (or, beginning with 2012,
            paragraph (3)(E)) or who is covered under this
            paragraph under paragraph (3)(B)(i), the individual is
            entitled under this section to the following:
                      (A)  * * *

               *       *       *       *       *       *       *

                      (D) Reduction in cost-sharing below out-of-
                    pocket threshold.--
                              (i) [Institutionalized individuals.--
                            In] Elimination of cost-sharing for
                            certain full-benefit dual eligible
                            individuals.--
                                      (I) Institutionalized
                                    individuals.--In the case of an
                                    individual who is a full-
                                    benefit dual eligible
                                    individual and who is an
                                    institutionalized individual or
                                    couple (as defined in section
                                    1902(q)(1)(B)), the elimination
                                    of any beneficiary coinsurance
                                    described in section 1860D-
                                    2(b)(2) (for all amounts
                                    through the total amount of
                                    expenditures at which benefits
                                    are available under section
                                    1860D-2(b)(4)).
                                      (II) Certain other
                                    individuals.--In the case of an
                                    individual who is a full-
                                    benefit dual eligible
                                    individual and with respect to
                                    whom there has been a
                                    determination that but for the
                                    provision of home and community
                                    based care (whether under
                                    section 1915, 1932, or under a
                                    waiver under section 1115) the
                                    individual would require the
                                    level of care provided in a
                                    hospital or a nursing facility
                                    or intermediate care facility
                                    for the mentally retarded the
                                    cost of which could be
                                    reimbursed under the State plan
                                    under title XIX, the
                                    elimination of any beneficiary
                                    coinsurance described in
                                    section 1860D-2(b)(2) (for all
                                    amounts through the total
                                    amount of expenditures at which
                                    benefits are available under
                                    section 1860D-2(b)(4)).

               *       *       *       *       *       *       *

              (3) Determination of eligibility.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Alternative resource standard.--
                              (i) In general.--The resources
                            requirement of this subparagraph is
                            that an individual's resources (as
                            determined under section 1613 for
                            purposes of the supplemental security
                            income program subject to the life
                            insurance policy exclusion provided
                            under subparagraph (G)) do not exceed--
                                      (I) for 2006, $10,000 (or
                                    $20,000 in the case of the
                                    combined value of the
                                    individual's assets or
                                    resources and the assets or
                                    resources of the individual's
                                    spouse); [and]
                                      (II) for a subsequent year
                                    (before 2012) the dollar
                                    amounts specified in this
                                    subclause (or subclause (I))
                                    for the previous year increased
                                    by the annual percentage
                                    increase in the consumer price
                                    index (all items; U.S. city
                                    average) as of September of
                                    such previous year[.];
                                      (III) for 2012, $17,000 (or
                                    $34,000 in the case of the
                                    combined value of the
                                    individual's assets or
                                    resources and the assets or
                                    resources of the individual's
                                    spouse); and
                                      (IV) for a subsequent year,
                                    the dollar amounts specified in
                                    this subclause (or subclause
                                    (III)) for the previous year
                                    increased by the annual
                                    percentage increase in the
                                    consumer price index (all
                                    items; U.S. city average) as of
                                    September of such previous
                                    year.
                            Any dollar amount established under
                            subclause (II) or (IV) that is not a
                            multiple of $10 shall be rounded to the
                            nearest multiple of $10.

               *       *       *       *       *       *       *

                              [(iii) Documentation and
                            safeguards.--Under such process--
                                      [(I) the application form
                                    shall consist of an attestation
                                    under penalty of perjury
                                    regarding the level of assets
                                    or resources (or combined
                                    assets and resources in the
                                    case of a married part D
                                    eligible individual) and
                                    valuations of general classes
                                    of assets or resources;
                                      [(II) such form shall be
                                    accompanied by copies of recent
                                    statements (if any) from
                                    financial institutions in
                                    support of the application; and
                                      [(III) matters attested to in
                                    the application shall be
                                    subject to appropriate methods
                                    of verification.]
                              (iii) Certification of income and
                            resources.--For purposes of applying
                            this section--
                                      (I) an individual shall be
                                    permitted to apply on the basis
                                    of self-certification of income
                                    and resources; and
                                      (II) matters attested to in
                                    the application shall be
                                    subject to appropriate methods
                                    of verification without the
                                    need of the individual to
                                    provide additional
                                    documentation, except in
                                    extraordinary situations as
                                    determined by the Commissioner.

               *       *       *       *       *       *       *

      (b) Premium Subsidy Amount.--
              (1) * * *
              (2) Low-income benchmark premium amount defined.--
                      (A) * * *
                      (B) Premium amounts described.--The premium
                    amounts described in this subparagraph are, in
                    the case of--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iii) an MA-PD plan, the portion of
                            the MA monthly prescription drug
                            beneficiary premium that is
                            attributable to basic prescription drug
                            benefits (described in section
                            1852(a)(6)(B)(ii)) before the
                            application of the monthly rebate
                            computed under section 1854(b)(1)(C)(i)
                            for that plan and year involved.

               *       *       *       *       *       *       *

    MEDICARE PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL SUPPLEMENTARY MEDICAL
                              INSURANCE TRUST FUND

      Sec. 1860D-16. (a) * * *

               *       *       *       *       *       *       *

      (c) Deposits Into Account.--
              (1) * * *

               *       *       *       *       *       *       *

              (6) Rebate for full-benefit dual eligible medicare
            drug plan enrollees.--Amounts paid under a rebate
            agreement under section 1860D-2(f) shall be deposited
            into the Account and shall be used to pay for all or
            part of the gradual elimination of the coverage gap
            under section 1860D-2(b)(7).

               *       *       *       *       *       *       *

                        Part E--Miscellaneous Provisions

                  DEFINITIONS OF SERVICES, INSTITUTIONS, ETC.

      Sec. 1861. For purposes of this title--
      (a) * * *

               *       *       *       *       *       *       *

      (s) Medical and Other Health Services.--The term ``medical
    and other health services'' means any of the following items or
    services:
              (1) * * *
              (2)(A) * * *

               *       *       *       *       *       *       *

              (DD) items and services furnished under an intensive
            cardiac rehabilitation program (as defined in
            subsection (eee)(4)); [and]
              (EE) kidney disease education services (as defined in
            subsection (ggg));
              (FF) advance care planning consultation (as defined
            in subsection (hhh)(1));
              (GG) marriage and family therapist services (as
            defined in subsection (jjj)); and
              (HH) mental health counselor services (as defined in
            subsection (kkk)(1));

               *       *       *       *       *       *       *

              [(10)(A) pneumococcal vaccine and its administration
            and, subject to section 4071(b) of the Omnibus Budget
            Reconciliation Act of 1987, influenza vaccine and its
            administration; and
              [(B) hepatitis B vaccine and its administration,
            furnished to an individual who is at high or
            intermediate risk of contracting hepatitis B (as
            determined by the Secretary under regulations);]
              (10) federally recommended vaccines (as defined in
            subsection (lll)) and their respective administration;

               *       *       *       *       *       *       *

      (aa) Rural Health Clinic Services and Federally Qualified
    Health Center Services.--(1) The term ``rural health clinic
    services'' means --
              (A) * * *
              (B) such services furnished by a physician assistant
            or a nurse practitioner (as defined in paragraph (5)),
            by a clinical psychologist (as defined by the
            Secretary) [or by a clinical social worker (as defined
            in subsection (hh)(1)),], by a clinical social worker
            (as defined in subsection (hh)(1)), by a marriage and
            family therapist (as defined in subsection (jjj)(2)),
            or a mental health counselor (as defined in subsection
            (kkk)(2)), and such services and supplies furnished as
            an incident to his service as would otherwise be
            covered if furnished by a physician or as an incident
            to a physician's service, and

               *       *       *       *       *       *       *

      (3) The term ``Federally qualified health center services''
    means--
              [(A) services of the type described in subparagraphs
            (A) through (C) of paragraph (1) and services described
            in subsections (qq) and (vv); and]
              (A) services of the type described subparagraphs (A)
            through (C) of paragraph (1) and services described in
            section 1861(iii); and

               *       *       *       *       *       *       *

      (hh) Clinical Social Worker; Clinical Social Worker
    Services.--(1) * * *
      (2) The term ``clinical social worker services'' means
    services performed by a clinical social worker (as defined in
    paragraph (1)) for the diagnosis and treatment of mental
    illnesses (other than services furnished to an inpatient of a
    hospital [and other than services furnished to an inpatient of
    a skilled nursing facility which the facility is required to
    provide as a requirement for participation]) which the clinical
    social worker is legally authorized to perform under State law
    (or the State regulatory mechanism provided by State law) of
    the State in which such services are performed as would
    otherwise be covered if furnished by a physician or as an
    incident to a physician's professional service.

               *       *       *       *       *       *       *

      (ww) Initial Preventive Physical Examination.--(1) * * *
      (2) The screening and other preventive services described in
    this paragraph include the following:
              (A) [Pneumococcal, influenza, and hepatitis B vaccine
            and administration] Federally recommended vaccines (as
            defined in subsection (lll)) and their respective
            administration under subsection (s)(10).

               *       *       *       *       *       *       *

                       Advance Care Planning Consultation

      (hhh)(1) Subject to paragraphs (3) and (4), the term
    ``advance care planning consultation'' means a consultation
    between the individual and a practitioner described in
    paragraph (2) regarding advance care planning, if, subject to
    paragraph (3), the individual involved has not had such a
    consultation within the last 5 years. Such consultation shall
    include the following:
              (A) An explanation by the practitioner of advance
            care planning, including key questions and
            considerations, important steps, and suggested people
            to talk to.
              (B) An explanation by the practitioner of advance
            directives, including living wills and durable powers
            of attorney, and their uses.
              (C) An explanation by the practitioner of the role
            and responsibilities of a health care proxy.
              (D) The provision by the practitioner of a list of
            national and State-specific resources to assist
            consumers and their families with advance care
            planning, including the national toll-free hotline, the
            advance care planning clearinghouses, and State legal
            service organizations (including those funded through
            the Older Americans Act of 1965).
              (E) An explanation by the practitioner of the
            continuum of end-of-life services and supports
            available, including palliative care and hospice, and
            benefits for such services and supports that are
            available under this title.
              (F)(i) Subject to clause (ii), an explanation of
            orders regarding life sustaining treatment or similar
            orders, which shall include--
                              (I) the reasons why the development
                            of such an order is beneficial to the
                            individual and the individual's family
                            and the reasons why such an order
                            should be updated periodically as the
                            health of the individual changes;
                              (II) the information needed for an
                            individual or legal surrogate to make
                            informed decisions regarding the
                            completion of such an order; and
                              (III) the identification of resources
                            that an individual may use to determine
                            the requirements of the State in which
                            such individual resides so that the
                            treatment wishes of that individual
                            will be carried out if the individual
                            is unable to communicate those wishes,
                            including requirements regarding the
                            designation of a surrogate
                            decisionmaker (also known as a health
                            care proxy).
              (ii) The Secretary shall limit the requirement for
            explanations under clause (i) to consultations
            furnished in a State--
                      (I) in which all legal barriers have been
                    addressed for enabling orders for life
                    sustaining treatment to constitute a set of
                    medical orders respected across all care
                    settings; and
                      (II) that has in effect a program for orders
                    for life sustaining treatment described in
                    clause (iii).
              (iii) A program for orders for life sustaining
            treatment for a States described in this clause is a
            program that--
                      (I) ensures such orders are standardized and
                    uniquely identifiable throughout the State;
                      (II) distributes or makes accessible such
                    orders to physicians and other health
                    professionals that (acting within the scope of
                    the professional's authority under State law)
                    may sign orders for life sustaining treatment;
                      (III) provides training for health care
                    professionals across the continuum of care
                    about the goals and use of orders for life
                    sustaining treatment; and
                      (IV) is guided by a coalition of stakeholders
                    includes representatives from emergency medical
                    services, emergency department physicians or
                    nurses, state long-term care association, state
                    medical association, state surveyors, agency
                    responsible for senior services, state
                    department of health, state hospital
                    association, home health association, state bar
                    association, and state hospice association.
      (2) A practitioner described in this paragraph is--
              (A) a physician (as defined in subsection (r)(1));
            and
              (B) a nurse practitioner or physician assistant who
            has the authority under State law to sign orders for
            life sustaining treatments.
      (3)(A) An initial preventive physical examination under
    subsection (WW), including any related discussion during such
    examination, shall not be considered an advance care planning
    consultation for purposes of applying the 5-year limitation
    under paragraph (1).
      (B) An advance care planning consultation with respect to an
    individual may be conducted more frequently than provided under
    paragraph (1) if there is a significant change in the health
    condition of the individual, including diagnosis of a chronic,
    progressive, life-limiting disease, a life-threatening or
    terminal diagnosis or life-threatening injury, or upon
    admission to a skilled nursing facility, a long-term care
    facility (as defined by the Secretary), or a hospice program.
      (4) A consultation under this subsection may include the
    formulation of an order regarding life sustaining treatment or
    a similar order.
      (5)(A) For purposes of this section, the term ``order
    regarding life sustaining treatment'' means, with respect to an
    individual, an actionable medical order relating to the
    treatment of that individual that--
                      (i) is signed and dated by a physician (as
                    defined in subsection (r)(1)) or another health
                    care professional (as specified by the
                    Secretary and who is acting within the scope of
                    the professional's authority under State law in
                    signing such an order, including a nurse
                    practitioner or physician assistant) and is in
                    a form that permits it to stay with the
                    individual and be followed by health care
                    professionals and providers across the
                    continuum of care;
                      (ii) effectively communicates the
                    individual's preferences regarding life
                    sustaining treatment, including an indication
                    of the treatment and care desired by the
                    individual;
                      (iii) is uniquely identifiable and
                    standardized within a given locality, region,
                    or State (as identified by the Secretary); and
                      (iv) may incorporate any advance directive
                    (as defined in section 1866(f)(3)) if executed
                    by the individual.
      (B) The level of treatment indicated under subparagraph
    (A)(ii) may range from an indication for full treatment to an
    indication to limit some or all or specified interventions.
    Such indicated levels of treatment may include indications
    respecting, among other items--
              (i) the intensity of medical intervention if the
            patient is pulse less, apneic, or has serious cardiac
            or pulmonary problems;
              (ii) the individual's desire regarding transfer to a
            hospital or remaining at the current care setting;
              (iii) the use of antibiotics; and
              (iv) the use of artificially administered nutrition
            and hydration.

                      Medicare Covered Preventive Services

      (iii)(1) Subject to the succeeding provisions of this
    subsection, the term ``Medicare covered preventive services''
    means the following:
              (A) Prostate cancer screening tests (as defined in
            subsection (oo)).
              (B) Colorectal cancer screening tests (as defined in
            subsection (pp).
              (C) Diabetes outpatient self-management training
            services (as defined in subsection (qq)).
              (D) Screening for glaucoma for certain individuals
            (as described in subsection (s)(2)(U)).
              (E) Medical nutrition therapy services for certain
            individuals (as described in subsection (s)(2)(V)).
              (F) An initial preventive physical examination (as
            defined in subsection (ww)).
              (G) Cardiovascular screening blood tests (as defined
            in subsection (xx)(1)).
              (H) Diabetes screening tests (as defined in
            subsection (yy)).
              (I) Ultrasound screening for abdominal aortic
            aneurysm for certain individuals (as described in
            subsection (s)(2)(AA)).
              (J) Federally recommended vaccines (as defined in
            subsection (lll)) and their respective administration.
              (K) Screening mammography (as defined in subsection
            (jj)).
              (L) Screening pap smear and screening pelvic exam (as
            defined in subsection (nn)).
              (M) Bone mass measurement (as defined in subsection
            (rr)).
              (N) Kidney disease education services (as defined in
            subsection (ggg)).
              (O) Additional preventive services (as defined in
            subsection (ddd)).
      (2) With respect to specific Medicare covered preventive
    services, the limitations and conditions described in the
    provisions referenced in paragraph (1) with respect to such
    services shall apply.

                     Marriage and Family Therapist Services

      (jjj)(1) The term ``marriage and family therapist services''
    means services performed by a marriage and family therapist (as
    defined in paragraph (2)) for the diagnosis and treatment of
    mental illnesses, which the marriage and family therapist is
    legally authorized to perform under State law (or the State
    regulatory mechanism provided by State law) of the State in
    which such services are performed, as would otherwise be
    covered if furnished by a physician or as incident to a
    physician's professional service, but only if no facility or
    other provider charges or is paid any amounts with respect to
    the furnishing of such services.
      (2) The term ``marriage and family therapist'' means an
    individual who--
              (A) possesses a master's or doctoral degree which
            qualifies for licensure or certification as a marriage
            and family therapist pursuant to State law;
              (B) after obtaining such degree has performed at
            least 2 years of clinical supervised experience in
            marriage and family therapy; and
              (C) is licensed or certified as a marriage and family
            therapist in the State in which marriage and family
            therapist services are performed.

                        Mental Health Counselor Services

      (kkk)(1) The term ``mental health counselor services'' means
    services performed by a mental health counselor (as defined in
    paragraph (2)) for the diagnosis and treatment of mental
    illnesses which the mental health counselor is legally
    authorized to perform under State law (or the State regulatory
    mechanism provided by the State law) of the State in which such
    services are performed, as would otherwise be covered if
    furnished by a physician or as incident to a physician's
    professional service, but only if no facility or other provider
    charges or is paid any amounts with respect to the furnishing
    of such services.
      (2) The term ``mental health counselor'' means an individual
    who--
              (A) possesses a master's or doctor's degree which
            qualifies the individual for licensure or certification
            for the practice of mental health counseling in the
            State in which the services are performed;
              (B) after obtaining such a degree has performed at
            least 2 years of supervised mental health counselor
            practice; and
              (C) is licensed or certified as a mental health
            counselor or professional counselor by the State in
            which the services are performed.

                         Federally Recommended Vaccines

      (lll) The term ``federally recommended vaccine'' means an
    approved vaccine recommended by the Advisory Committee on
    Immunization Practices (an advisory committee established by
    the Secretary, acting through the Director of the Centers for
    Disease Control and Prevention).

            EXCLUSIONS FROM COVERAGE AND MEDICARE AS SECONDARY PAYER

      Sec. 1862. (a) Notwithstanding any other provision of this
    title, no payment may be made under part A or part B for any
    expenses incurred for items or services--
              (1)(A) * * *

               *       *       *       *       *       *       *

              (N) in the case of ultrasound screening for abdominal
            aortic aneurysm which is performed more frequently than
            is provided for under section 1861(s)(2)(AA), [and]
              (O) in the case of kidney disease education services
            (as defined in paragraph (1) of section 1861(ggg)),
            which are furnished in excess of the number of sessions
            covered under paragraph (4) of such section[;], and
              (P) in the case of advance care planning
            consultations (as defined in section 1861(hhh)(1)),
            which are performed more frequently than is covered
            under such section;

               *       *       *       *       *       *       *

              (7) where such expenses are for routine physical
            checkups, eyeglasses (other than eyewear described in
            section 1861(s)(8)) or eye examinations for the purpose
            of prescribing, fitting, or changing eyeglasses,
            procedures performed (during the course of any eye
            examination) to determine the refractive state of the
            eyes, hearing aids or examinations therefor, or
            immunizations (except as otherwise allowed under
            section 1861(s)(10) and subparagraph (B), (F), (G),
            (H), [or (K)] (K), or (P) of paragraph (1));

               *       *       *       *       *       *       *

      (b) Medicare as Secondary Payer.--
              (1) Requirements of group health plans.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Individuals with end stage renal
                    disease.--A group health plan (as defined in
                    subparagraph (A)(v))--
                              (i) * * *

               *       *       *       *       *       *       *

                    except that clause (ii) shall not prohibit a
                    plan from paying benefits secondary to this
                    title when an individual is entitled to or
                    eligible for benefits under this title under
                    section 226A after the end of the 12-month
                    period described in clause (i). Effective for
                    items and services furnished on or after
                    February 1, 1991, and before the date of
                    enactment of the Balanced Budget Act of 1997
                    (with respect to periods beginning on or after
                    February 1, 1990), this subparagraph shall be
                    applied by substituting ``18- month'' for ``12-
                    month'' each place it appears. Effective for
                    items and services furnished on or after the
                    date of enactment of the Balanced Budget Act of
                    1997, (with respect to periods beginning on or
                    after the date that is 18 months prior to such
                    date), clauses (i) and (ii) shall be applied by
                    substituting ``30-month'' for ``12-month'' each
                    place it appears. With regard to
                    immunosuppressive drugs furnished on or after
                    the date of the enactment of the America's
                    Affordable Health Choices Act of 2009, this
                    subparagraph shall be applied without regard to
                    any time limitation.

               *       *       *       *       *       *       *

          AGREEMENTS WITH PROVIDERS OF SERVICES; ENROLLMENT PROCESSES

      Sec. 1866. (a)(1) Any provider of services (except a fund
    designated for purposes of section 1814(g) and section 1835(e))
    shall be qualified to participate under this title and shall be
    eligible for payments under this title if it files with the
    Secretary an agreement--
              (A) * * *

               *       *       *       *       *       *       *

              (U) in the case of hospitals which furnish inpatient
            hospital services for which payment may be made under
            this title, to be a participating provider of medical
            care both--
                      (i)  * * *

               *       *       *       *       *       *       *

            in accordance with regulations promulgated by the
            Secretary regarding admission practices, payment
            methodology, and rates of payment (including the
            acceptance of no more than such payment rate as payment
            in full for such items and services, [and]
              (V) in the case of hospitals that are not otherwise
            subject to the Occupational Safety and Health Act of
            1970 (or a State occupational safety and health plan
            that is approved under 18(b) of such Act), to comply
            with the Bloodborne Pathogens standard under section
            1910.1030 of title 29 of the Code of Federal
            Regulations (or as subsequently redesignated)[.]; and

               *       *       *       *       *       *       *

              (W) maintain and, upon request of the Secretary,
            provide access to documentation relating to written
            orders or requests for payment for durable medical
            equipment, certifications for home health services, or
            referrals for other items or services written or
            ordered by the provider under this title, as specified
            by the Secretary.

               *       *       *       *       *       *       *

      (2)(A) A provider of services may charge such individual or
    other person (i) the amount of any deduction or coinsurance
    amount imposed pursuant to section 1813(a)(1), (a)(3), or
    (a)(4), section 1833(b), or section 1861(y)(3) with respect to
    such items and services (not in excess of the amount
    customarily charged for such items and services by such
    provider), and (ii) an amount equal to 20 per centum of the
    reasonable charges for such items and services (other than for
    Medicare covered preventive services and not in excess of 20
    per centum of the amount customarily charged for such items and
    services by such provider) for which payment is made under part
    B or which are durable medical equipment furnished as home
    health services (but in the case of items and services
    furnished to individuals with end-stage renal disease, an
    amount equal to 20 percent of the estimated amounts for such
    items and services calculated on the basis established by the
    Secretary). In the case of items and services described in
    section 1833(c), clause (ii) of the preceding sentence shall be
    applied by substituting for 20 percent the proportion which is
    appropriate under such section. A provider of services may not
    impose a charge under clause (ii) of the first sentence of this
    subparagraph with respect to items and services described in
    section 1861(s)(10)(A) and with respect to clinical diagnostic
    laboratory tests for which payment is made under part B.
    Notwithstanding the first sentence of this subparagraph, a home
    health agency may charge such an individual or person, with
    respect to covered items subject to payment under section
    1834(a), the amount of any deduction imposed under section
    1833(b) and 20 percent of the payment basis described in
    section 1834(a)(1)(B). In the case of items and services for
    which payment is made under part B under the prospective
    payment system established under section 1833(t), clause (ii)
    of the first sentence shall be applied by substituting for 20
    percent of the reasonable charge, the applicable copayment
    amount established under section 1833(t)(5). In the case of
    services described in section 1833(a)(8) or section 1833(a)(9)
    for which payment is made under part B under section 1834(k),
    clause (ii) of the first sentence shall be applied by
    substituting for 20 percent of the reasonable charge for such
    services 20 percent of the lesser of the actual charge or the
    applicable fee schedule amount (as defined in such section) for
    such services.

               *       *       *       *       *       *       *

      (j) Enrollment Process for Providers of Services and
    Suppliers.--
              (1) Enrollment process.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (D) Billing agents and clearinghouses
                    required to be registered under medicare.--Any
                    agent, clearinghouse, or other alternate payee
                    that submits claims on behalf of a health care
                    provider must be registered with the Secretary
                    in a form and manner specified by the
                    Secretary.

               *       *       *       *       *       *       *

              (3) Program integrity.--The provisions of section
            1128G(a) apply to enrollments and renewals of
            enrollments of providers of services and suppliers
            under this title.

               *       *       *       *       *       *       *

                   HEALTH CARE QUALITY DEMONSTRATION PROGRAM

      Sec. 1866C. (a) * * *
      (b) Demonstration Projects.--[The Secretary] Subject to
    section 1866D, the Secretary shall establish a 5-year
    demonstration program under which the Secretary shall approve
    demonstration projects that examine health delivery factors
    that encourage the delivery of improved quality in patient
    care, including--
              (1) * * *

               *       *       *       *       *       *       *

      CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION TO PILOT PROGRAM AND
                    EXPANSION TO INCLUDE POST ACUTE SERVICES

      Sec. 1866D.  (a) Conversion and Expansion.--
              (1) In general.--By not later than January 1, 2011,
            the Secretary shall, for the purpose of promoting the
            use of bundled payments to promote efficient and high
            quality delivery of care--
                      (A) convert the acute care episode
                    demonstration program conducted under section
                    1866C to a pilot program; and
                      (B) subject to subsection (c), expand such
                    program as so converted to include post acute
                    services and such other services the Secretary
                    determines to be appropriate, which may include
                    transitional services.
              (2) Bundled payment structures.--
                      (A) In general.--In carrying out paragraph
                    (1), the Secretary may apply bundled payments
                    with respect to--
                              (i) hospitals and physicians;
                              (ii) hospitals and post-acute care
                            providers;
                              (iii) hospitals, physicians, and
                            post-acute care providers; or
                              (iv) combinations of post-acute
                            providers.
                      (B) Further application.--
                              (i) In general.--In carrying out
                            paragraph (1), the Secretary shall
                            apply bundled payments in a manner so
                            as to include collaborative care
                            networks and continuing care hospitals.
                              (ii) Collaborative care network
                            defined.--For purposes of this
                            subparagraph, the term ``collaborative
                            care network'' means a consortium of
                            health care providers that provides a
                            comprehensive range of coordinated and
                            integrated health care services to low-
                            income patient populations (including
                            the uninsured) which may include
                            coordinated and comprehensive care by
                            safety net providers to reduce any
                            unnecessary use of items and services
                            furnished in emergency departments,
                            manage chronic conditions, improve
                            quality and efficiency of care,
                            increase preventive services, and
                            promote adherence to post-acute and
                            follow-up care plans.
                              (iii) Continuing care hospital
                            defined.--For purposes of this
                            subparagraph, the term ``continuing
                            care hospital'' means an entity that
                            has demonstrated the ability to meet
                            patient care and patient safety
                            standards and that provides under
                            common management the medical and
                            rehabilitation services provided in
                            inpatient rehabilitation hospitals and
                            units (as defined in section
                            1886(d)(1)(B)(ii)), long-term care
                            hospitals (as defined in section
                            1886(d)(1)(B)(iv)(I)), and skilled
                            nursing facilities (as defined in
                            section 1819(a)) that are located in a
                            hospital described in section 1886(d).
      (b) Scope.--The pilot program under subsection (a) may
    include additional geographic areas and additional conditions
    which account for significant program spending, as defined by
    the Secretary. Nothing in this subsection shall be construed as
    limiting the number of hospital and physician groups or the
    number of hospital and post-acute provider groups that may
    participate in the pilot program.
      (c) Limitation.--The Secretary shall only expand the pilot
    program under subsection (a) if the Secretary finds that--
              (1) the demonstration program under section 1866C and
            pilot program under this section maintain or increase
            the quality of care received by individuals enrolled
            under this title; and
              (2) such demonstration program and pilot program
            reduce program expenditures and, based on the
            certification under subsection (d), that the expansion
            of such pilot program would result in estimated
            spending that would be less than what spending would
            otherwise be in the absence of this section.
      (d) Certification.--For purposes of subsection (c), the Chief
    Actuary of the Centers for Medicare & Medicaid Services shall
    certify whether expansion of the pilot program under this
    section would result in estimated spending that would be less
    than what spending would otherwise be in the absence of this
    section.
      (e) Voluntary Participation.--Nothing in this paragraph shall
    be construed as requiring the participation of an entity in the
    pilot program under this section.
      (f) Evaluation on Cost and Quality of Care.--The Secretary
    shall conduct an evaluation of the pilot program under
    subsection (a) to study the effect of such program on costs and
    quality of care. The findings of such evaluation shall be
    included in the final report required under section 1152(e)(2)
    of America's Affordable Health Choices Act of 2009.
      (g) Study of Additional Bundling and Episode-based Payment
    for Physicians' Services.--
              (1) In general.--The Secretary shall provide for a
            study of and development of a plan for testing
            additional ways to increase bundling of payments for
            physicians in connection with an episode of care, such
            as in connection with outpatient hospital services or
            services rendered in physicians' offices, other than
            those provided under the pilot program.
              (2) Application.--The Secretary may implement such a
            plan through a demonstration program.

                  ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM

      Sec. 1866E. (a) In General.--The Secretary shall conduct a
    pilot program (in this section referred to as the ``pilot
    program'') to test different payment incentive models,
    including (to the extent practicable) the specific payment
    incentive models described in subsection (c), designed to
    reduce the growth of expenditures and improve health outcomes
    in the provision of items and services under this title to
    applicable beneficiaries (as defined in subsection (d)) by
    qualifying accountable care organizations (as defined in
    subsection (b)(1)) in order to--
              (1) promote accountability for a patient population
            and coordinate items and services under parts A and B;
              (2) encourage investment in infrastructure and
            redesigned care processes for high quality and
            efficient service delivery; and
              (3) reward physician practices and other physician
            organizational models for the provision of high quality
            and efficient health care services.
      (b) Qualifying Accountable Care Organizations (Acos).--
              (1) Qualifying aco defined.--In this section:
                      (A) In general.--The terms ``qualifying
                    accountable care organization'' and
                    ``qualifying ACO'' mean a group of physicians
                    or other physician organizational model (as
                    defined in subparagraph (D)) that--
                              (i) is organized at least in part for
                            the purpose of providing physicians'
                            services; and
                              (ii) meets such criteria as the
                            Secretary determines to be appropriate
                            to participate in the pilot program,
                            including the criteria specified in
                            paragraph (2).
                      (B) Inclusion of other providers.--Nothing in
                    this subsection shall be construed as
                    preventing a qualifying ACO from including a
                    hospital or any other provider of services or
                    supplier furnishing items or services for which
                    payment may be made under this title that is
                    affiliated with the ACO under an arrangement
                    structured so that such provider or supplier
                    participates in the pilot program and shares in
                    any incentive payments under the pilot program.
                      (C) Physician.--The term ``physician''
                    includes, except as the Secretary may otherwise
                    provide, any individual who furnishes services
                    for which payment may be made as physicians'
                    services.
                      (D) Other physician organizational model.--
                    The term ``other physician organization model''
                    means, with respect to a qualifying ACO any
                    model of organization under which physicians
                    enter into agreements with other providers for
                    the purposes of participation in the pilot
                    program in order to provide high quality and
                    efficient health care services and share in any
                    incentive payments under such program
                      (E) Other services.--Nothing in this
                    paragraph shall be construed as preventing a
                    qualifying ACO from furnishing items or
                    services, for which payment may not be made
                    under this title, for purposes of achieving
                    performance goals under the pilot program.
              (2) Qualifying criteria.--The following are criteria
            described in this paragraph for an organized group of
            physicians to be a qualifying ACO:
                      (A) The group has a legal structure that
                    would allow the group to receive and distribute
                    incentive payments under this section.
                      (B) The group includes a sufficient number of
                    primary care physicians (regardless of
                    specialty) for the applicable beneficiaries for
                    whose care the group is accountable (as
                    determined by the Secretary).
                      (C) The group reports on quality measures in
                    such form, manner, and frequency as specified
                    by the Secretary (which may be for the group,
                    for providers of services and suppliers, or
                    both).
                      (D) The group reports to the Secretary (in a
                    form, manner and frequency as specified by the
                    Secretary) such data as the Secretary
                    determines appropriate to monitor and evaluate
                    the pilot program.
                      (E) The group provides notice to applicable
                    beneficiaries regarding the pilot program (as
                    determined appropriate by the Secretary).
                      (F) The group contributes to a best practices
                    network or website, that shall be maintained by
                    the Secretary for the purpose of sharing
                    strategies on quality improvement, care
                    coordination, and efficiency that the groups
                    believe are effective.
                      (G) The group utilizes patient-centered
                    processes of care, including those that
                    emphasize patient and caregiver involvement in
                    planning and monitoring of ongoing care
                    management plan.
                      (H) The group meets other criteria determined
                    to be appropriate by the Secretary.
      (c) Specific Payment Incentive Models.--The specific payment
    incentive models described in this subsection are the
    following:
              (1) Performance target model.--Under the performance
            target model under this paragraph (in this paragraph
            referred to as the ``performance target model''):
                      (A) In general.--A qualifying ACO qualifies
                    to receive an incentive payment if expenditures
                    for applicable beneficiaries are less than a
                    target spending level or a target rate of
                    growth. The incentive payment shall be made
                    only if savings are greater than would result
                    from normal variation in expenditures for items
                    and services covered under parts A and B.
                      (B) Computation of performance target.--
                              (i) In general.--The Secretary shall
                            establish a performance target for each
                            qualifying ACO comprised of a base
                            amount (described in clause (ii))
                            increased to the current year by an
                            adjustment factor (described in clause
                            (iii)). Such a target may be
                            established on a per capita basis, as
                            the Secretary determines to be
                            appropriate.
                              (ii) Base amount.--For purposes of
                            clause (i), the base amount in this
                            subparagraph is equal to the average
                            total payments (or allowed charges)
                            under parts A and B (and may include
                            part D, if the Secretary determines
                            appropriate) for applicable
                            beneficiaries for whom the qualifying
                            ACO furnishes items and services in a
                            base period determined by the
                            Secretary. Such base amount may be
                            determined on a per capita basis.
                              (iii) Adjustment factor.--For
                            purposes of clause (i), the adjustment
                            factor in this clause may equal an
                            annual per capita amount that reflects
                            changes in expenditures from the period
                            of the base amount to the current year
                            that would represent an appropriate
                            performance target for applicable
                            beneficiaries (as determined by the
                            Secretary). Such adjustment factor may
                            be determined as an amount or rate, may
                            be determined on a national, regional,
                            local, or organization-specific basis,
                            and may be determined on a per capita
                            basis. Such adjustment factor also may
                            be adjusted for risk as determined
                            appropriate by the Secretary.
                              (iv) Rebasing.--Under this model the
                            Secretary shall periodically rebase the
                            base expenditure amount described in
                            clause (ii).
                      (C) Meeting target.--
                              (i) In general.--Subject to clause
                            (ii), a qualifying ACO that meet or
                            exceeds annual quality and performance
                            targets for a year shall receive an
                            incentive payment for such year equal
                            to a portion (as determined appropriate
                            by the Secretary) of the amount by
                            which payments under this title for
                            such year relative are estimated to be
                            below the performance target for such
                            year, as determined by the Secretary.
                            The Secretary may establish a cap on
                            incentive payments for a year for a
                            qualifying ACO.
                              (ii) Limitation.-- The Secretary
                            shall limit incentive payments to each
                            qualifying ACO under this paragraph as
                            necessary to ensure that the aggregate
                            expenditures with respect to applicable
                            beneficiaries for such ACOs under this
                            title (inclusive of incentive payments
                            described in this subparagraph) do not
                            exceed the amount that the Secretary
                            estimates would be expended for such
                            ACO for such beneficiaries if the pilot
                            program under this section were not
                            implemented.
                      (D) Reporting and other requirements.--In
                    carrying out such model, the Secretary may (as
                    the Secretary determines to be appropriate)
                    incorporate reporting requirements, incentive
                    payments, and penalties related to the
                    physician quality reporting initiative (PQRI),
                    electronic prescribing, electronic health
                    records, and other similar initiatives under
                    section 1848, and may use alternative criteria
                    than would otherwise apply under such section
                    for determining whether to make such payments.
                    The incentive payments described in this
                    subparagraph shall not be included in the limit
                    described in subparagraph (C)(ii) or in the
                    performance target model described in this
                    paragraph.
              (2) Partial capitation model.--
                      (A) In general.--Subject to subparagraph (B),
                    a partial capitation model described in this
                    paragraph (in this paragraph referred to as a
                    ``partial capitation model'') is a model in
                    which a qualifying ACO would be at financial
                    risk for some, but not all, of the items and
                    services covered under parts A and B, such as
                    at risk for some or all physicians' services or
                    all items and services under part B. The
                    Secretary may limit a partial capitation model
                    to ACOs that are highly integrated systems of
                    care and to ACOs capable of bearing risk, as
                    determined to be appropriate by the Secretary.
                      (B) No additional program expenditures.--
                    Payments to a qualifying ACO for applicable
                    beneficiaries for a year under the partial
                    capitation model shall be established in a
                    manner that does not result in spending more
                    for such ACO for such beneficiaries than would
                    otherwise be expended for such ACO for such
                    beneficiaries for such year if the pilot
                    program were not implemented, as estimated by
                    the Secretary.
              (3) Other payment models.--
                      (A) In general.--Subject to subparagraph (B),
                    the Secretary may develop other payment models
                    that meet the goals of this pilot program to
                    improve quality and efficiency.
                      (B) No additional program expenditures.--
                    Subparagraph (B) of paragraph (2) shall apply
                    to a payment model under subparagraph (A) in a
                    similar manner as such subparagraph (B) applies
                    to the payment model under paragraph (2).
      (d) Applicable Beneficiaries.--
              (1) In general.--In this section, the term
            ``applicable beneficiary'' means, with respect to a
            qualifying ACO, an individual who--
                      (A) is enrolled under part B and entitled to
                    benefits under part A;
                      (B) is not enrolled in a Medicare Advantage
                    plan under part C or a PACE program under
                    section 1894; and
                      (C) meets such other criteria as the
                    Secretary determines appropriate, which may
                    include criteria relating to frequency of
                    contact with physicians in the ACO
              (2) Following applicable beneficiaries.--The
            Secretary may monitor data on expenditures and quality
            of services under this title after an applicable
            beneficiary discontinues receiving services under this
            title through a qualifying ACO.
      (e) Implementation.--
              (1) Starting date.--The pilot program shall begin no
            later than January 1, 2012. An agreement with a
            qualifying ACO under the pilot program may cover a
            multi-year period of between 3 and 5 years.
              (2) Waiver.--The Secretary may waive such provisions
            of this title (including section 1877) and title XI in
            the manner the Secretary determines necessary in order
            implement the pilot program.
              (3) Performance results reports.--The Secretary shall
            report performance results to qualifying ACOs under the
            pilot program at least annually.
              (4) Limitations on review.--There shall be no
            administrative or judicial review under section 1869,
            section 1878, or otherwise of--
                      (A) the elements, parameters, scope, and
                    duration of the pilot program;
                      (B) the selection of qualifying ACOs for the
                    pilot program;
                      (C) the establishment of targets, measurement
                    of performance, determinations with respect to
                    whether savings have been achieved and the
                    amount of savings;
                      (D) determinations regarding whether, to
                    whom, and in what amounts incentive payments
                    are paid; and
                      (E) decisions about the extension of the
                    program under subsection (g), expansion of the
                    program under subsection (h) or extensions
                    under subsection (i).
              (5) Administration.--Chapter 35 of title 44, United
            States Code shall not apply to this section.
      (f) Evaluation; Monitoring.--
              (1) In general.--The Secretary shall evaluate the
            payment incentive model for each qualifying ACO under
            the pilot program to assess impacts on beneficiaries,
            providers of services, suppliers and the program under
            this title. The Secretary shall make such evaluation
            publicly available within 60 days of the date of
            completion of such report.
              (2) Monitoring.--The Inspector General of the
            Department of Health and Human Services shall provide
            for monitoring of the operation of ACOs under the pilot
            program with regard to violations of section 1877
            (popularly known as the ``Stark law'').
      (g) Extension of Pilot Agreement With Successful
    Organizations.--
              (1) Reports to congress.--Not later than 2 years
            after the date the first agreement is entered into
            under this section, and biennially thereafter for six
            years, the Secretary shall submit to Congress and make
            publicly available a report on the use of authorities
            under the pilot program. Each report shall address the
            impact of the use of those authorities on expenditures,
            access, and quality under this title.
              (2) Extension.--Subject to the report provided under
            paragraph (1), with respect to a qualifying ACO, the
            Secretary may extend the duration of the agreement for
            such ACO under the pilot program as the Secretary
            determines appropriate if--
                      (A) the ACO receives incentive payments with
                    respect to any of the first 4 years of the
                    pilot agreement and is consistently meeting
                    quality standards or
                      (B) the ACO is consistently exceeding quality
                    standards and is not increasing spending under
                    the program.
              (3) Termination.--The Secretary may terminate an
            agreement with a qualifying ACO under the pilot program
            if such ACO did not receive incentive payments or
            consistently failed to meet quality standards in any of
            the first 3 years under the program.
      (h) Expansion to Additional Acos.--
              (1) Testing and refinement of payment incentive
            models.--Subject to the evaluation described in
            subsection (f), the Secretary may enter into agreements
            under the pilot program with additional qualifying ACOs
            to further test and refine payment incentive models
            with respect to qualifying ACOs.
              (2) Expanding use of successful models to program
            implementation.--
                      (A) In general.--Subject to subparagraph (B),
                    the Secretary may issue regulations to
                    implement, on a permanent basis, 1 or more
                    models if, and to the extent that, such models
                    are beneficial to the program under this title,
                    as determined by the Secretary.
                      (B) Certification.--The Chief Actuary of the
                    Centers for Medicare & Medicaid Services shall
                    certify that 1 or more of such models described
                    in subparagraph (A) would result in estimated
                    spending that would be less than what spending
                    would otherwise be estimated to be in the
                    absence of such expansion.
      (i) Treatment of Physician Group Practice Demonstration.--
              (1) Extension.--The Secretary may enter in to an
            agreement with a qualifying ACO under the demonstration
            under section 1866A, subject to rebasing and other
            modifications deemed appropriate by the Secretary,
            until the pilot program under this section is
            operational.
              (2) Transition.--For purposes of extension of an
            agreement with a qualifying ACO under subsection
            (g)(2), the Secretary shall treat receipt of an
            incentive payment for a year by an organization under
            the physician group practice demonstration pursuant to
            section 1866A as a year for which an incentive payment
            is made under such subsection, as long as such practice
            group practice organization meets the criteria under
            subsection (b)(2).
      (j) Additional Provisions.--
              (1) Authority for separate incentive arrangements.--
            The Secretary may create separate incentive
            arrangements (including using multiple years of data,
            varying thresholds, varying shared savings amounts, and
            varying shared savings limits) for different categories
            of qualifying ACOs to reflect natural variations in
            data availability, variation in average annual
            attributable expenditures, program integrity, and other
            matters the Secretary deems appropriate.
              (2) Encouragement of participation of smaller
            organizations.--In order to encourage the participation
            of smaller accountable care organizations under the
            pilot program, the Secretary may limit a qualifying
            ACO's exposure to high cost patients under the program.
              (3) Involvement in private payer arrangements.--
            Nothing in this section shall be construed as
            preventing qualifying ACOs participating in the pilot
            program from negotiating similar contracts with private
            payers.
              (4) Antidiscrimination limitation.--The Secretary
            shall not enter into an agreement with an entity to
            provide health care items or services under the pilot
            program, or with an entity to administer the program,
            unless such entity guarantees that it will not deny,
            limit, or condition the coverage or provision of
            benefits under the program, for individuals eligible to
            be enrolled under such program, based on any health
            status-related factor described in section 2702(a)(1)
            of the Public Health Service Act.
              (5) Construction.--Nothing in this section shall be
            construed to compel or require an organization to use
            an organization-specific target growth rate for an
            accountable care organization under this section for
            purposes of section 1848.
              (6) Funding.--For purposes of administering and
            carrying out the pilot program, other than for payments
            for items and services furnished under this title and
            incentive payments under subsection (c)(1), in addition
            to funds otherwise appropriated, there are appropriated
            to the Secretary for the Center for Medicare & Medicaid
            Services Program Management Account $25,000,000 for
            each of fiscal years 2010 through 2014 and $20,000,000
            for fiscal year 2015. Amounts appropriated under this
            paragraph for a fiscal year shall be available until
            expended.

                           MEDICAL HOME PILOT PROGRAM

      Sec. 1866F. (a) Establishment and Medical Home Models.--
              (1) Establishment of pilot program.--The Secretary
            shall establish a medical home pilot program (in this
            section referred to as the ``pilot program'') for the
            purpose of evaluating the feasibility and advisability
            of reimbursing qualified patient-centered medical homes
            for furnishing medical home services (as defined under
            subsection (b)(1)) to high need beneficiaries (as
            defined in subsection (d)(1)(C)) and to targeted high
            need beneficiaries (as defined in subsection
            (c)(1)(C)).
              (2) Scope.--Subject to subsection (g), the pilot
            program shall include urban, rural, and underserved
            areas.
              (3) Models of medical homes in the pilot program.--
            The pilot program shall evaluate each of the following
            medical home models:
                      (A) Independent patient-centered medical home
                    model.--Independent patient-centered medical
                    home model under subsection (c).
                      (B) Community-based medical home model.--
                    Community-based medical home model under
                    subsection (d).
              (4) Participation of nurse practitioners and
            physician assistants.--
                      (A) Nothing in this section shall be
                    construed as preventing a nurse practitioner
                    from leading a patient centered medical home so
                    long as--
                              (i) all the requirements of this
                            section are met; and
                              (ii) the nurse practitioner is acting
                            consistently with State law.
                      (B) Nothing in this section shall be
                    construed as preventing a physician assistant
                    from participating in a patient centered
                    medical home so long as--
                              (i) all the requirements of this
                            section are met; and
                              (ii) the physician assistant is
                            acting consistently with State law.
      (b) Definitions.--For purposes of this section:
              (1) Patient-centered medical home services.--The term
            ``patient-centered medical home services'' means
            services that--
                      (A) provide beneficiaries with direct and
                    ongoing access to a primary care or principal
                    care by a physician or nurse practitioner who
                    accepts responsibility for providing first
                    contact, continuous and comprehensive care to
                    such beneficiary;
                      (B) coordinate the care provided to a
                    beneficiary by a team of individuals at the
                    practice level across office, institutional and
                    home settings led by a primary care or
                    principal care physician or nurse practitioner,
                    as needed and appropriate;
                      (C) provide for all the patient's health care
                    needs or take responsibility for appropriately
                    arranging care with other qualified providers
                    for all stages of life;
                      (D) provide continuous access to care and
                    communication with participating beneficiaries;
                      (E) provide support for patient self-
                    management, proactive and regular patient
                    monitoring, support for family caregivers, use
                    patient-centered processes, and coordination
                    with community resources;
                      (F) integrate readily accessible, clinically
                    useful information on participating patients
                    that enables the practice to treat such
                    patients comprehensively and systematically;
                    and
                      (G) implement evidence-based guidelines and
                    apply such guidelines to the identified needs
                    of beneficiaries over time and with the
                    intensity needed by such beneficiaries.
              (2) Primary care.--The term ``primary care'' means
            health care that is provided by a physician, nurse
            practitioner, or physician assistant who practices in
            the field of family medicine, general internal
            medicine, geriatric medicine, or pediatric medicine.
              (3) Principal care.--The term ``principal care''
            means integrated, accessible health care that is
            provided by a physician who is a medical subspecialist
            that addresses the majority of the personal health care
            needs of patients with chronic conditions requiring the
            subspecialist's expertise, and for whom the
            subspecialist assumes care management.
      (c) Independent Patient-Centered Medical Home Model.--
              (1) In general.--
                      (A) Payment authority.--Under the independent
                    patient-centered medical home model under this
                    subsection, the Secretary shall make payments
                    for medical home services furnished by an
                    independent patient-centered medical home (as
                    defined in subparagraph (B)) pursuant to
                    paragraph (3)(B) for a targeted high need
                    beneficiaries (as defined in subparagraph (C)).
                      (B) Independent patient-centered medical home
                    defined.--In this section, the term
                    ``independent patient-centered medical home''
                    means a physician-directed or nurse-
                    practitioner-directed practice that is
                    qualified under paragraph (2) as--
                              (i) providing beneficiaries with
                            patient-centered medical home services;
                            and
                              (ii) meets such other requirements as
                            the Secretary may specify.
                      (C) Targeted high need beneficiary defined.--
                    For purposes of this subsection, the term
                    ``targeted high need beneficiary'' means a high
                    need beneficiary who, based on a risk score as
                    specified by the Secretary, is generally within
                    the upper 50th percentile of Medicare
                    beneficiaries.
                      (D) Beneficiary election to participate.--The
                    Secretary shall determine an appropriate method
                    of ensuring that beneficiaries have agreed to
                    participate in the pilot program.
                      (E) Implementation.--The pilot program under
                    this subsection shall begin no later than 6
                    months after the date of the enactment of this
                    section.
              (2) Standard setting and qualification process for
            patient-centered medical homes.--The Secretary shall
            review alternative models for standard setting and
            qualification, and shall establish a process--
                      (A) to establish standards to enable medical
                    practices to qualify as patient-centered
                    medical homes; and
                      (B) to initially provide for the review and
                    certification of medical practices as meeting
                    such standards.
              (3) Payment.--
                      (A) Establishment of methodology.--The
                    Secretary shall establish a methodology for the
                    payment for medical home services furnished by
                    independent patient-centered medical homes.
                    Under such methodology, the Secretary shall
                    adjust payments to medical homes based on
                    beneficiary risk scores to ensure that higher
                    payments are made for higher risk
                    beneficiaries.
                      (B) Per beneficiary per month payments.--
                    Under such payment methodology, the Secretary
                    shall pay independent patient-centered medical
                    homes a monthly fee for each targeted high need
                    beneficiary who consents to receive medical
                    home services through such medical home.
                      (C) Prospective payment.--The fee under
                    subparagraph (B) shall be paid on a prospective
                    basis.
                      (D) Amount of payment.--In determining the
                    amount of such fee, the Secretary shall
                    consider the following:
                              (i) The clinical work and practice
                            expenses involved in providing the
                            medical home services provided by the
                            independent patient-centered medical
                            home (such as providing increased
                            access, care coordination, population
                            disease management, and teaching self-
                            care skills for managing chronic
                            illnesses) for which payment is not
                            made under this title as of the date of
                            the enactment of this section.
                              (ii) Allow for differential payments
                            based on capabilities of the
                            independent patient-centered medical
                            home.
                              (iii) Use appropriate risk-adjustment
                            in determining the amount of the per
                            beneficiary per month payment under
                            this paragraph in a manner that ensures
                            that higher payments are made for
                            higher risk beneficiaries.
              (4) Encouraging participation of variety of
            practices.--The pilot program under this subsection
            shall be designed to include the participation of
            physicians in practices with fewer than 10 full-time
            equivalent physicians, as well as physicians in larger
            practices, particularly in underserved and rural areas,
            as well as federally qualified community health
            centers, and rural health centers.
              (5) No duplication in pilot participation.--A
            physician in a group practice that participates in the
            accountable care organization pilot program under
            section 1866D shall not be eligible to participate in
            the pilot program under this subsection, unless the
            pilot program under this section has been implemented
            on a permanent basis under subsection (e)(3).
      (d) Community-Based Medical Home Model.--
              (1) In general.--
                      (A) Authority for payments.--Under the
                    community-based medical home model under this
                    subsection (in this section referred to as the
                    ``CBMH model''), the Secretary shall make
                    payments for the furnishing of medical home
                    services by a community-based medical home (as
                    defined in subparagraph (B)) pursuant to
                    paragraph (5)(B) for high need beneficiaries.
                      (B) Community-based medical home defined.--In
                    this section, the term ``community-based
                    medical home'' means a nonprofit community-
                    based or State-based organization that is
                    certified under paragraph (2) as meeting the
                    following requirements:
                              (i) The organization provides
                            beneficiaries with medical home
                            services.
                              (ii) The organization provides
                            medical home services under the
                            supervision of and in close
                            collaboration with the primary care or
                            principal care physician, nurse
                            practitioner, or physician assistant
                            designated by the beneficiary as his or
                            her community-based medical home
                            provider.
                              (iii) The organization employs
                            community health workers, including
                            nurses or other non-physician
                            practitioners, lay health workers, or
                            other persons as determined appropriate
                            by the Secretary, that assist the
                            primary or principal care physician,
                            nurse practitioner, or physician
                            assistant in chronic care management
                            activities such as teaching self-care
                            skills for managing chronic illnesses,
                            transitional care services, care plan
                            setting, medication therapy management
                            services for patients with multiple
                            chronic diseases, or help beneficiaries
                            access the health care and community-
                            based resources in their local
                            geographic area.
                              (iv) The organization meets such
                            other requirements as the Secretary may
                            specify.
                      (C) High need beneficiary.--In this section,
                    the term ``high need beneficiary'' means an
                    individual who requires regular medical
                    monitoring, advising, or treatment.
              (2) Qualification process for community-based medical
            homes.--The Secretary shall establish a process--
                      (A) for the initial qualification of
                    community-based or State-based organizations as
                    community-based medical homes; and
                      (B) to provide for the review and
                    qualification of such community-based and
                    State-based organizations pursuant to criteria
                    established by the Secretary.
              (3) Duration.--The pilot program for community-based
            medical homes under this subsection shall start no
            later than 2 years after the date of the enactment of
            this section. Each demonstration site under the pilot
            program shall operate for a period of up to 5 years
            after the initial implementation phase, without regard
            to the receipt of a initial implementation funding
            under subsection (i).
              (4) Preference.--In selecting sites for the CBMH
            model, the Secretary may give preference to--
                      (A) applications from geographic areas that
                    propose to coordinate health care services for
                    chronically ill beneficiaries across a variety
                    of health care settings, such as primary care
                    physician practices with fewer than 10
                    physicians, specialty physicians, nurse
                    practitioner practices, Federally qualified
                    health centers, rural health clinics, and other
                    settings;
                      (B) applications that include other payors
                    that furnish medical home services for
                    chronically ill patients covered by such
                    payors; and
                      (C) applications from States that propose to
                    use the medical home model to coordinate health
                    care services for individuals enrolled under
                    this title, individuals enrolled under title
                    XIX, and full-benefit dual eligible individuals
                    (as defined in section 1935(c)(6)) with chronic
                    diseases across a variety of health care
                    settings.
              (5) Payments.--
                      (A) Establishment of methodology.--The
                    Secretary shall establish a methodology for the
                    payment for medical home services furnished
                    under the CBMH model.
                      (B) Per beneficiary per month payments.--
                    Under such payment methodology, the Secretary
                    shall make two separate monthly payments for
                    each high need beneficiary who consents to
                    receive medical home services through such
                    medical home, as follows:
                              (i) Payment to community-based
                            organization.--One monthly payment to a
                            community-based or State-based
                            organization.
                              (ii) Payment to primary or principal
                            care practice.--One monthly payment to
                            the primary or principal care practice
                            for such beneficiary.
                      (C) Prospective payment.--The payments under
                    subparagraph (B) shall be paid on a prospective
                    basis.
                      (D) Amount of payment.--In determining the
                    amount of such payment, the Secretary shall
                    consider the following:
                              (i) The clinical work and practice
                            expenses involved in providing the
                            medical home services provided by the
                            community-based medical home (such as
                            providing increased access, care
                            coordination, care plan setting,
                            population disease management, and
                            teaching self-care skills for managing
                            chronic illnesses) for which payment is
                            not made under this title as of the
                            date of the enactment of this section.
                              (ii) Use appropriate risk-adjustment
                            in determining the amount of the per
                            beneficiary per month payment under
                            this paragraph.
              (6) Initial implementation funding.--The Secretary
            may make available initial implementation funding to a
            community based or State-based organization or a State
            that is participating in the pilot program under this
            subsection. Such organization shall provide the
            Secretary with a detailed implementation plan that
            includes how such funds will be used.
      (e) Expansion of Program.--
              (1) Evaluation of cost and quality.--The Secretary
            shall evaluate the pilot program to determine--
                      (A) the extent to which medical homes result
                    in--
                              (i) improvement in the quality and
                            coordination of health care services,
                            particularly with regard to the care of
                            complex patients;
                              (ii) improvement in reducing health
                            disparities;
                              (iii) reductions in preventable
                            hospitalizations;
                              (iv) prevention of readmissions;
                              (v) reductions in emergency room
                            visits;
                              (vi) improvement in health outcomes,
                            including patient functional status
                            where applicable;
                              (vii) improvement in patient
                            satisfaction;
                              (viii) improved efficiency of care
                            such as reducing duplicative diagnostic
                            tests and laboratory tests; and
                              (ix) reductions in health care
                            expenditures; and
                      (B) the feasability and advisability of
                    reimbursing medical homes for medical home
                    services under this title on a permanent basis.
              (2) Report.--Not later than 60 days after the date of
            completion of the evaluation under paragraph (1), the
            Secretary shall submit to Congress and make available
            to the public a report on the findings of the
            evaluation under paragraph (1).
              (3) Expansion of program.--
                      (A) In general.--Subject to the results of
                    the evaluation under paragraph (1) and
                    subparagraph (B), the Secretary may issue
                    regulations to implement, on a permanent basis,
                    one or more models, if, and to the extent that
                    such model or models, are beneficial to the
                    program under this title, including that such
                    implementation will improve quality of care, as
                    determined by the Secretary.
                      (B) Certification requirement.--The Secretary
                    may not issue such regulations unless the Chief
                    Actuary of the Centers for Medicare & Medicaid
                    Services certifies that the expansion of the
                    components of the pilot program described in
                    subparagraph (A) would result in estimated
                    spending under this title that would be no more
                    than the level of spending that the Secretary
                    estimates would otherwise be spent under this
                    title in the absence of such expansion.
      (f) Administrative Provisions.--
              (1) No duplication in payments.--During any month,
            the Secretary may not make payments under this section
            under more than one model or through more than one
            medical home under any model for the furnishing of
            medical home services to an individual.
              (2) No effect on payment for evaluation and
            management services.--Payments made under this section
            are in addition to, and have no effect on the amount
            of, payment for evaluation and management services made
            under this title
              (3) Administration.--Chapter 35 of title 44, United
            States Code shall not apply to this section.
      (g) Funding.--
              (1) Operational costs.--For purposes of administering
            and carrying out the pilot program (including the
            design, implementation, technical assistance for and
            evaluation of such program), in addition to funds
            otherwise available, there shall be transferred from
            the Federal Supplementary Medical Insurance Trust Fund
            under section 1841 to the Secretary for the Centers for
            Medicare & Medicaid Services Program Management Account
            $6,000,000 for each of fiscal years 2010 through 2014.
            Amounts appropriated under this paragraph for a fiscal
            year shall be available until expended.
              (2) Patient-centered medical home services.--In
            addition to funds otherwise available, there shall be
            available to the Secretary for the Centers for Medicare
            & Medicaid Services, from the Federal Supplementary
            Medical Insurance Trust Fund under section 1841--
                      (A) $200,000,000 for each of fiscal years
                    2010 through 2014 for payments for medical home
                    services under subsection (c)(3); and
                      (B) $125,000,000 for each of fiscal years
                    2012 through 2016, for payments under
                    subsection (d)(5).
            Amounts available under this paragraph for a fiscal
            year shall be available until expended.
              (3) Initial implementation.--In addition to funds
            otherwise available, there shall be available to the
            Secretary for the Centers for Medicare & Medicaid
            Services, from the Federal Supplementary Medical
            Insurance Trust Fund under section 1841, $2,500,000 for
            each of fiscal years 2010 through 2012, under
            subsection (d)(6). Amounts available under this
            paragraph for a fiscal year shall be available until
            expended.
      (h) Treatment of Trhca Medicare Medical Home Demonstration
    Funding.--
              (1) In addition to funds otherwise available for
            payment of medical home services under subsection
            (c)(3), there shall also be available the amount
            provided in subsection (g) of section 204 of division B
            of the Tax Relief and Health Care Act of 2006 (42
            U.S.C. 1395b-1 note).
              (2) Notwithstanding section 1302(c) of the America's
            Affordable Health Choices Act of 2009, in addition to
            funds provided in paragraph (1) and subsection
            (g)(2)(A), the funding for medical home services that
            would otherwise have been available if such section 204
            medical home demonstration had been implemented
            (without regard to subsection (g) of such section)
            shall be available to the independent patient-centered
            medical home model described in subsection (c).

               *       *       *       *       *       *       *

      PRACTICING PHYSICIANS ADVISORY COUNCIL; COUNCIL FOR TECHNOLOGY AND
                    INNOVATION TELEHEALTH ADVISORY COMMITTEE

      Sec. 1868. [(a) Practicing Physicians Advisory Council.--(1)
    The Secretary shall appoint, based upon nominations submitted
    by medical organizations representing physicians, a Practicing
    Physicians Advisory Council (in this subsection referred to as
    the ``Council'') to be composed of 15 physicians, each of whom
    has submitted at least 250 claims for physicians' services
    under this title in the previous year. At least 11 of the
    members of the Council shall be physicians described in section
    1861(r)(1) and the members of the Council shall include both
    participating and nonparticipating physicians and physicians
    practicing in rural areas and underserved urban areas.
      [(2) The Council shall meet once during each calendar quarter
    to discuss certain proposed changes in regulations and carrier
    manual instructions related to physician services identified by
    the Secretary. To the extent feasible and consistent with
    statutory deadlines, such consultation shall occur before the
    publication of such proposed changes.
      [(3) Members of the Council shall be entitled to receive
    reimbursement of expenses and per diem in lieu of subsistence
    in the same manner as other members of advisory councils
    appointed by the Secretary are provided such reimbursement and
    per diem under this title.]

               *       *       *       *       *       *       *

      (c) Telehealth Advisory Committee.--
              (1) In general.--The Secretary shall appoint a
            Telehealth Advisory Committee (in this subsection
            referred to as the ``Advisory Committee'') to make
            recommendations to the Secretary on policies of the
            Centers for Medicare & Medicaid Services regarding
            telehealth services as established under section
            1834(m), including the appropriate addition or deletion
            of services (and HCPCS codes) to those specified in
            paragraphs (4)(F)(i) and (4)(F)(ii) of such section and
            for authorized payment under paragraph (1) of such
            section.
              (2) Membership; terms.--
                      (A) Membership.--
                              (i) In general.--The Advisory
                            Committee shall be composed of 9
                            members, to be appointed by the
                            Secretary, of whom--
                                      (I) 5 shall be practicing
                                    physicians;
                                      (II) 2 shall be practicing
                                    non-physician health care
                                    practitioners; and
                                      (III) 2 shall be
                                    administrators of telehealth
                                    programs.
                              (ii) Requirements for appointing
                            members.--In appointing members of the
                            Advisory Committee, the Secretary
                            shall--
                                      (I) ensure that each member
                                    has prior experience with the
                                    practice of telemedicine or
                                    telehealth;
                                      (II) give preference to
                                    individuals who are currently
                                    providing telemedicine or
                                    telehealth services or who are
                                    involved in telemedicine or
                                    telehealth programs;
                                      (III) ensure that the
                                    membership of the Advisory
                                    Committee represents a balance
                                    of specialties and geographic
                                    regions; and
                                      (IV) take into account the
                                    recommendations of
                                    stakeholders.
                      (B) Terms.--The members of the Advisory
                    Committee shall serve for such term as the
                    Secretary may specify.
                      (C) Conflicts of interest.--An advisory
                    committee member may not participate with
                    respect to a particular matter considered in an
                    advisory committee meeting if such member (or
                    an immediate family member of such member) has
                    a financial interest that could be affected by
                    the advice given to the Secretary with respect
                    to such matter.
              (3) Meetings.--The Advisory Committee shall meet
            twice each calendar year and at such other times as the
            Secretary may provide.
              (4) Permanent committee.--Section 14 of the Federal
            Advisory Committee Act (5 U.S.C. App.) shall not apply
            to the Advisory Committee.

               *       *       *       *       *       *       *

                                 ADMINISTRATION

      Sec. 1874. (a) * * *

               *       *       *       *       *       *       *

      (e) Compliance Programs for Providers of Services and
    Suppliers.--
              (1) In general.--The Secretary may disenroll a
            provider of services or a supplier (other than a
            physician or a skilled nursing facility) under this
            title (or may impose any civil monetary penalty or
            other intermediate sanction under paragraph (4)) if
            such provider of services or supplier fails to, subject
            to paragraph (5), establish a compliance program that
            contains the core elements established under paragraph
            (2).
              (2) Establishment of core elements.--The Secretary,
            in consultation with the Inspector General of the
            Department of Health and Human Services, shall
            establish core elements for a compliance program under
            paragraph (1). Such elements may include written
            policies, procedures, and standards of conduct, a
            designated compliance officer and a compliance
            committee; effective training and education pertaining
            to fraud, waste, and abuse for the organization's
            employees and contractors; a confidential or anonymous
            mechanism, such as a hotline, to receive compliance
            questions and reports of fraud, waste, or abuse;
            disciplinary guidelines for enforcement of standards;
            internal monitoring and auditing procedures, including
            monitoring and auditing of contractors; procedures for
            ensuring prompt responses to detected offenses and
            development of corrective action initiatives, including
            responses to potential offenses; and procedures to
            return all identified overpayments to the programs
            under this title, title XIX, and title XXI.
              (3) Timeline for implementation.--The Secretary shall
            determine a timeline for the establishment of the core
            elements under paragraph (2) and the date on which a
            provider of services and suppliers (other than
            physicians) shall be required to have established such
            a program for purposes of this subsection.
              (4) CMS enforcement authority.--The Administrator for
            the Centers of Medicare & Medicaid Services shall have
            the authority to determine whether a provider of
            services or supplier described in subparagraph (3) has
            met the requirement of this subsection and to impose a
            civil monetary penalty not to exceed $50,000 for each
            violation. The Secretary may also impose other
            intermediate sanctions, including corrective action
            plans and additional monitoring in the case of a
            violation of this subsection.
              (5) Pilot program.--The Secretary may conduct a pilot
            program on the application of this subsection with
            respect to a category of providers of services or
            suppliers (other than physicians) that the Secretary
            determines to be a category which is at high risk for
            waste, fraud, and abuse before implementing the
            requirements of this subsection to all providers of
            services and suppliers described in paragraph (3).

               *       *       *       *       *       *       *

     PAYMENTS TO HEALTH MAINTENANCE ORGANIZATIONS AND COMPETITIVE MEDICAL
                                     PLANS

      Sec. 1876. (a) * * *

               *       *       *       *       *       *       *

      (h)(1) * * *

               *       *       *       *       *       *       *

      (5)(A) * * *

               *       *       *       *       *       *       *

      (C)(i) * * *
      (ii) For any period beginning on or after [January 1, 2010]
    January 1, 2012, a reasonable cost reimbursement contract under
    this subsection may not be extended or renewed for a service
    area insofar as such area during the entire previous year was
    within the service area of--
              (I) * * *

               *       *       *       *       *       *       *

      (iii) A plan described in this clause for a year for a
    service area is a plan described in section 1851(a)(2)(A)(i) if
    [the service area for the year] the portion of the plan's
    service area for the year that is within the service area of a
    reasonable cost reimbursement contract meets the following
    minimum enrollment requirements:
              (I) * * *

               *       *       *       *       *       *       *

                   LIMITATION ON CERTAIN PHYSICIAN REFERRALS

      Sec. 1877. (a) * * *

               *       *       *       *       *       *       *

      (d) Additional Exceptions Related Only to Ownership or
    Investment Prohibition.--The following, if not otherwise
    excepted under subsection (b), shall not be considered to be an
    ownership or investment interest described in subsection
    (a)(2)(A):
              (1) * * *
              (2) Rural providers.--In the case of designated
            health services furnished in a rural area (as defined
            in section 1886(d)(2)(D)) by an entity, if--
                      (A) substantially all of the designated
                    health services furnished by the entity are
                    furnished to individuals residing in such a
                    rural area; [and]
                      (B) effective for the 18-month period
                    beginning on the date of the enactment of the
                    Medicare Prescription Drug, Improvement, and
                    Modernization Act of 2003, the entity is not a
                    specialty hospital (as defined in subsection
                    (h)(7))[.]; and
                      (C) in the case where the entity is a
                    hospital, the hospital meets the requirements
                    of paragraph (3)(D).
              (3) Hospital ownership.--In the case of designated
            health services provided by a hospital (other than a
            hospital described in paragraph (1)) if--
                      (A) * * *
                      (B) effective for the 18-month period
                    beginning on the date of the enactment of the
                    Medicare Prescription Drug, Improvement, and
                    Modernization Act of 2003, the hospital is not
                    a specialty hospital (as defined in subsection
                    (h)(7)); [and]
                      (C) the ownership or investment interest is
                    in the hospital itself (and not merely in a
                    subdivision of the hospital)[.]; and
                      (D) the hospital meets the requirements
                    described in subsection (i)(1).

               *       *       *       *       *       *       *

      [(f) Reporting Requirements.--Each entity providing covered
    items or services for which payment may be made under this
    title shall provide the Secretary with the information
    concerning the entity's ownership, investment, and compensation
    arrangements, including--
              [(1) the covered items and services provided by the
            entity, and
              [(2) the names and unique physician identification
            numbers of all physicians with an ownership or
            investment interest (as described in subsection
            (a)(2)(A)), or with a compensation arrangement (as
            described in subsection (a)(2)(B)), in the entity, or
            whose immediate relatives have such an ownership or
            investment interest or who have such a compensation
            relationship with the entity.
    Such information shall be provided in such form, manner, and at
    such times as the Secretary shall specify. The requirement of
    this subsection shall not apply to designated health services
    provided outside the United States or to entities which the
    Secretary determines provides services for which payment may be
    made under this title very infrequently.]
      (f) Reporting and Disclosure Requirements.--
              (1) In general.--Each entity providing covered items
            or services for which payment may be made under this
            title shall provide the Secretary with the information
            concerning the entity's ownership, investment, and
            compensation arrangements, including--
                      (A) the covered items and services provided
                    by the entity, and
                      (B) the names and unique physician
                    identification numbers of all physicians with
                    an ownership or investment interest (as
                    described in subsection (a)(2)(A)), or with a
                    compensation arrangement (as described in
                    subsection (a)(2)(B)), in the entity, or whose
                    immediate relatives have such an ownership or
                    investment interest or who have such a
                    compensation relationship with the entity.
            Such information shall be provided in such form,
            manner, and at such times as the Secretary shall
            specify. The requirement of this subsection shall not
            apply to designated health services provided outside
            the United States or to entities which the Secretary
            determines provide services for which payment may be
            made under this title very infrequently.
              (2) Requirements for hospitals with physician
            ownership or investment.--In the case of a hospital
            that meets the requirements described in subsection
            (i)(1), the hospital shall--
                      (A) submit to the Secretary an initial
                    report, and periodic updates at a frequency
                    determined by the Secretary, containing a
                    detailed description of the identity of each
                    physician owner and physician investor and any
                    other owners or investors of the hospital;
                      (B) require that any referring physician
                    owner or investor discloses to the individual
                    being referred, by a time that permits the
                    individual to make a meaningful decision
                    regarding the receipt of services, as
                    determined by the Secretary, the ownership or
                    investment interest, as applicable, of such
                    referring physician in the hospital; and
                      (C) disclose the fact that the hospital is
                    partially or wholly owned by one or more
                    physicians or has one or more physician
                    investors--
                              (i) on any public website for the
                            hospital; and
                              (ii) in any public advertising for
                            the hospital.
            The information to be reported or disclosed under this
            paragraph shall be provided in such form, manner, and
            at such times as the Secretary shall specify. The
            requirements of this paragraph shall not apply to
            designated health services furnished outside the United
            States or to entities which the Secretary determines
            provide services for which payment may be made under
            this title very infrequently.
              (3) Publication of information.--The Secretary shall
            publish, and periodically update, the information
            submitted by hospitals under paragraph (2)(A) on the
            public Internet website of the Centers for Medicare &
            Medicaid Services.
      (g) Sanctions.--
              (1) * * *

               *       *       *       *       *       *       *

              [(5) Failure to report information.--Any person who
            is required, but fails, to meet a reporting requirement
            of subsection (f) is subject to a civil money penalty
            of not more than $10,000 for each day for which
            reporting is required to have been made. The provisions
            of section 1128A (other than the first sentence of
            subsection (a) and other than subsection (b)) shall
            apply to a civil money penalty under the previous
            sentence in the same manner as such provisions apply to
            a penalty or proceeding under section 1128A(a).]
              (5) Failure to report or disclose information.--
                      (A) Reporting.--Any person who is required,
                    but fails, to meet a reporting requirement of
                    paragraphs (1) and (2)(A) of subsection (f) is
                    subject to a civil money penalty of not more
                    than $10,000 for each day for which reporting
                    is required to have been made.
                      (B) Disclosure.--Any physician who is
                    required, but fails, to meet a disclosure
                    requirement of subsection (f)(2)(B) or a
                    hospital that is required, but fails, to meet a
                    disclosure requirement of subsection (f)(2)(C)
                    is subject to a civil money penalty of not more
                    than $10,000 for each case in which disclosure
                    is required to have been made.
                      (C) Application.--The provisions of section
                    1128A (other than the first sentence of
                    subsection (a) and other than subsection (b))
                    shall apply to a civil money penalty under
                    subparagraphs (A) and (B) in the same manner as
                    such provisions apply to a penalty or
                    proceeding under section 1128A(a).

               *       *       *       *       *       *       *

      (i) Requirements to Qualify for Rural Provider and Hospital
    Ownership Exceptions to Self-Referral Prohibition.--
              (1) Requirements described.--For purposes of
            subsection (d)(3)(D), the requirements described in
            this paragraph are as follows:
                      (A) Provider agreement.--The hospital had--
                              (i) physician ownership or investment
                            on January 1, 2009; and
                              (ii) a provider agreement under
                            section 1866 in effect on such date.
                      (B) Prohibition on physician ownership or
                    investment.--The percentage of the total value
                    of the ownership or investment interests held
                    in the hospital, or in an entity whose assets
                    include the hospital, by physician owners or
                    investors in the aggregate does not exceed such
                    percentage as of the date of enactment of this
                    subsection.
                      (C) Prohibition on expansion of facility
                    capacity.--Except as provided in paragraph (2),
                    the number of operating rooms, procedure rooms,
                    or beds of the hospital at any time on or after
                    the date of the enactment of this subsection
                    are no greater than the number of operating
                    rooms, procedure rooms, or beds, respectively,
                    as of such date.
                      (D) Ensuring bona fide ownership and
                    investment.--
                              (i) Any ownership or investment
                            interests that the hospital offers to a
                            physician are not offered on more
                            favorable terms than the terms offered
                            to a person who is not in a position to
                            refer patients or otherwise generate
                            business for the hospital.
                              (ii) The hospital (or any investors
                            in the hospital) does not directly or
                            indirectly provide loans or financing
                            for any physician owner or investor in
                            the hospital.
                              (iii) The hospital (or any investors
                            in the hospital) does not directly or
                            indirectly guarantee a loan, make a
                            payment toward a loan, or otherwise
                            subsidize a loan, for any physician
                            owner or investor or group of physician
                            owners or investors that is related to
                            acquiring any ownership or investment
                            interest in the hospital.
                              (iv) Ownership or investment returns
                            are distributed to each owner or
                            investor in the hospital in an amount
                            that is directly proportional to the
                            ownership or investment interest of
                            such owner or investor in the hospital.
                              (v) The investment interest of the
                            owner or investor is directly
                            proportional to the owner's or
                            investor's capital contributions made
                            at the time the ownership or investment
                            interest is obtained.
                              (vi) Physician owners and investors
                            do not receive, directly or indirectly,
                            any guaranteed receipt of or right to
                            purchase other business interests
                            related to the hospital, including the
                            purchase or lease of any property under
                            the control of other owners or
                            investors in the hospital or located
                            near the premises of the hospital.
                              (vii) The hospital does not offer a
                            physician owner or investor the
                            opportunity to purchase or lease any
                            property under the control of the
                            hospital or any other owner or investor
                            in the hospital on more favorable terms
                            than the terms offered to a person that
                            is not a physician owner or investor.
                              (viii) The hospital does not
                            condition any physician ownership or
                            investment interests either directly or
                            indirectly on the physician owner or
                            investor making or influencing
                            referrals to the hospital or otherwise
                            generating business for the hospital.
                      (E) Patient safety.--In the case of a
                    hospital that does not offer emergency
                    services, the hospital has the capacity to--
                              (i) provide assessment and initial
                            treatment for medical emergencies; and
                              (ii) if the hospital lacks additional
                            capabilities required to treat the
                            emergency involved, refer and transfer
                            the patient with the medical emergency
                            to a hospital with the required
                            capability.
                      (F) Limitation on application to certain
                    converted facilities.--The hospital was not
                    converted from an ambulatory surgical center to
                    a hospital on or after the date of enactment of
                    this subsection.
              (2) Exception to prohibition on expansion of facility
            capacity.--
                      (A) Process.--
                              (i) Establishment.--The Secretary
                            shall establish and implement a process
                            under which a hospital may apply for an
                            exception from the requirement under
                            paragraph (1)(C).
                              (ii) Opportunity for community
                            input.--The process under clause (i)
                            shall provide persons and entities in
                            the community in which the hospital
                            applying for an exception is located
                            with the opportunity to provide input
                            with respect to the application.
                              (iii) Timing for implementation.--The
                            Secretary shall implement the process
                            under clause (i) on the date that is
                            one month after the promulgation of
                            regulations described in clause (iv).
                              (iv) Regulations.--Not later than the
                            first day of the month beginning 18
                            months after the date of the enactment
                            of this subsection, the Secretary shall
                            promulgate regulations to carry out the
                            process under clause (i). The Secretary
                            may issue such regulations as interim
                            final regulations.
                      (B) Frequency.--The process described in
                    subparagraph (A) shall permit a hospital to
                    apply for an exception up to once every 2
                    years.
                      (C) Permitted increase.--
                              (i) In general.--Subject to clause
                            (ii) and subparagraph (D), a hospital
                            granted an exception under the process
                            described in subparagraph (A) may
                            increase the number of operating rooms,
                            procedure rooms, or beds of the
                            hospital above the baseline number of
                            operating rooms, procedure rooms, or
                            beds, respectively, of the hospital
                            (or, if the hospital has been granted a
                            previous exception under this
                            paragraph, above the number of
                            operating rooms, procedure rooms, or
                            beds, respectively, of the hospital
                            after the application of the most
                            recent increase under such an
                            exception).
                              (ii) 100 percent increase
                            limitation.--The Secretary shall not
                            permit an increase in the number of
                            operating rooms, procedure rooms, or
                            beds of a hospital under clause (i) to
                            the extent such increase would result
                            in the number of operating rooms,
                            procedure rooms, or beds of the
                            hospital exceeding 200 percent of the
                            baseline number of operating rooms,
                            procedure rooms, or beds of the
                            hospital.
                              (iii) Baseline number of operating
                            rooms, procedure rooms, or beds.--In
                            this paragraph, the term ``baseline
                            number of operating rooms, procedure
                            rooms, or beds'' means the number of
                            operating rooms, procedure rooms, or
                            beds of a hospital as of the date of
                            enactment of this subsection.
                      (D) Increase limited to facilities on the
                    main campus of the hospital.--Any increase in
                    the number of operating rooms, procedure rooms,
                    or beds of a hospital pursuant to this
                    paragraph may only occur in facilities on the
                    main campus of the hospital.
                      (E) Conditions for approval of an increase in
                    facility capacity.--The Secretary may grant an
                    exception under the process described in
                    subparagraph (A) only to a hospital--
                              (i) that is located in a county in
                            which the percentage increase in the
                            population during the most recent 5-
                            year period for which data are
                            available is estimated to be at least
                            150 percent of the percentage increase
                            in the population growth of the State
                            in which the hospital is located during
                            that period, as estimated by Bureau of
                            the Census and available to the
                            Secretary;
                              (ii) whose annual percent of total
                            inpatient admissions that represent
                            inpatient admissions under the program
                            under title XIX is estimated to be
                            equal to or greater than the average
                            percent with respect to such admissions
                            for all hospitals located in the county
                            in which the hospital is located;
                              (iii) that does not discriminate
                            against beneficiaries of Federal health
                            care programs and does not permit
                            physicians practicing at the hospital
                            to discriminate against such
                            beneficiaries;
                              (iv) that is located in a State in
                            which the average bed capacity in the
                            State is estimated to be less than the
                            national average bed capacity;
                              (v) that has an average bed occupancy
                            rate that is estimated to be greater
                            than the average bed occupancy rate in
                            the State in which the hospital is
                            located; and
                              (vi) that meets other conditions as
                            determined by the Secretary.
                      (F) Procedure rooms.--In this subsection, the
                    term ``procedure rooms'' includes rooms in
                    which catheterizations, angiographies,
                    angiograms, and endoscopies are furnished, but
                    such term shall not include emergency rooms or
                    departments (except for rooms in which
                    catheterizations, angiographies, angiograms,
                    and endoscopies are furnished).
                      (G) Publication of final decisions.--Not
                    later than 120 days after receiving a complete
                    application under this paragraph, the Secretary
                    shall publish on the public Internet website of
                    the Centers for Medicare & Medicaid Services
                    the final decision with respect to such
                    application.
                      (H) Limitation on review.--There shall be no
                    administrative or judicial review under section
                    1869, section 1878, or otherwise of the
                    exception process under this paragraph,
                    including the establishment of such process,
                    and any determination made under such process.
              (3) Physician owner or investor defined.--For
            purposes of this subsection and subsection (f)(2), the
            term ``physician owner or investor'' means a physician
            (or an immediate family member of such physician) with
            a direct or an indirect ownership or investment
            interest in the hospital.
              (4) Patient safety requirement.--In the case of a
            hospital to which the requirements of paragraph (1)
            apply, insofar as the hospital admits a patient and
            does not have any physician available on the premises
            24 hours per day, 7 days per week, before admitting the
            patient--
                      (A) the hospital shall disclose such fact to
                    the patient; and
                      (B) following such disclosure, the hospital
                    shall receive from the patient a signed
                    acknowledgment that the patient understands
                    such fact.
              (5) Clarification.--Nothing in this subsection shall
            be construed as preventing the Secretary from
            terminating a hospital's provider agreement if the
            hospital is not in compliance with regulations pursuant
            to section 1866.

               *       *       *       *       *       *       *

             MEDICARE COVERAGE FOR END STAGE RENAL DISEASE PATIENTS

      Sec. 1881. (a) * * *
      (b)(1) * * *

               *       *       *       *       *       *       *

      (14)(A) * * *
      (B) For purposes of this paragraph, the term ``renal dialysis
    services'' includes--
                      (i) * * *

               *       *       *       *       *       *       *

                      (iii) other drugs and biologicals, including
                    oral drugs that are not the oral equivalent of
                    an intravenous drug (such as oral phosphate
                    binders and calcimimetics), that are furnished
                    to individuals for the treatment of end stage
                    renal disease and for which payment was (before
                    the application of this paragraph) made
                    separately under this title, and any oral
                    equivalent form of such drug or biological; and

               *       *       *       *       *       *       *

      (E)(i) * * *
      (ii) A provider of services or renal dialysis facility may
    make [a one-time election to be excluded from the phase-in] an
    election, with respect to 2011, 2012, or 2013, to be excluded
    from the phase-in (or the remainder of the phase-in) under
    clause (i) and be paid entirely based on the payment amount
    under the payment system under this paragraph for such year and
    for each subsequent year during the phase-in described in
    clause (i). Such an election shall be made prior to [January 1,
    2011] the first date of such year, in a form and manner and at
    a time specified by the Secretary, and is final and may not be
    rescinded.

               *       *       *       *       *       *       *

      (15) For purposes of evaluating or auditing payments made to
    renal dialysis facilities for items and services under this
    section under paragraph (1), each such renal dialysis facility,
    upon the request of the Secretary, shall provide to the
    Secretary access to information relating to any ownership or
    compensation arrangement between such facility and the medical
    director of such facility or between such facility and any
    physician.

               *       *       *       *       *       *       *

      (h) Quality Incentives in the End-Stage Renal Disease
    Program.--
              (1) * * *
              (2) Measures.--
                      (A) * * *
                      (B) Use of endorsed measures.--
                              (i) * * *
                              (ii) Exception.--In the case of a
                            specified area or medical topic
                            determined appropriate by the Secretary
                            for which a feasible and practical
                            measure has not been endorsed by the
                            entity with a contract under section
                            1890(a), the Secretary may specify a
                            measure that is not so endorsed as long
                            as due consideration is given to
                            measures that have been endorsed or
                            adopted by a consensus organization
                            identified by the Secretary. The
                            Secretary shall submit such a non-
                            endorsed measure to the entity for
                            consideration for endorsement. If the
                            entity considers but does not endorse
                            such a measure and if the Secretary
                            does not phase-out use of such measure,
                            the Secretary shall include the
                            rationale for continued use of such a
                            measure in rulemaking.

               *       *       *       *       *       *       *

              (4) Performance standards.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Special rule.--The Secretary shall
                    initially use as the performance standard for
                    the measures specified under paragraph
                    (2)(A)(i) for a provider of services or a renal
                    dialysis facility the [lesser] greater of--
                              (i) * * *

               *       *       *       *       *       *       *

              PAYMENT TO HOSPITALS FOR INPATIENT HOSPITAL SERVICES

      Sec. 1886. (a) * * *
      (b)(1) * * *

               *       *       *       *       *       *       *

      (3)(A) * * *
      (B)(i) * * *

               *       *       *       *       *       *       *

      [(iii) For purposes of this subparagraph,] (iii)(I) For
    purposes of this subparagraph, subject to the productivity
    adjustment described in subclause (II), the term ``market
    basket percentage increase'' means, with respect to cost
    reporting periods and discharges occurring in a fiscal year,
    the percentage, estimated by the Secretary before the beginning
    of the period or fiscal year, by which the cost of the mix of
    goods and services (including personnel costs but excluding
    nonoperating costs) comprising routine, ancillary, and special
    care unit inpatient hospital services, based on an index of
    appropriately weighted indicators of changes in wages and
    prices which are representative of the mix of goods and
    services included in such inpatient hospital services, for the
    period or fiscal year will exceed the cost of such mix of goods
    and services for the preceding 12-month cost reporting period
    or fiscal year.
      (II) The productivity adjustment described in this subclause,
    with respect to an increase or change for a fiscal year or year
    or cost reporting period, or other annual period, is a
    productivity offset equal to the percentage change in the 10-
    year moving average of annual economy-wide private nonfarm
    business multi-factor productivity (as recently published
    before the promulgation of such increase for the year or period
    involved). Except as otherwise provided, any reference to the
    increase described in this clause shall be a reference to the
    percentage increase described in subclause (I) minus the
    percentage change under this subclause.

               *       *       *       *       *       *       *

      (viii)(I) For purposes of clause (i) for fiscal year 2007 and
    each subsequent fiscal year, in the case of a subsection (d)
    hospital that does not submit, to the Secretary in accordance
    with this clause, data required to be submitted on measures
    selected under this clause with respect to such a fiscal year,
    the applicable percentage increase under clause (i) for such
    fiscal year shall be reduced (but not below zero) by 2.0
    percentage points (or, beginning with fiscal year 2015, by one-
    quarter). Such reduction shall apply only with respect to the
    fiscal year involved and the Secretary shall not take into
    account such reduction in computing the applicable percentage
    increase under clause (i) for a subsequent fiscal year, and the
    Secretary and the Medicare Payment Advisory Commission shall
    carry out the requirements under section 5001(b) of the Deficit
    Reduction Act of 2005.

               *       *       *       *       *       *       *

      (ix)(I) For purposes of clause (i) for fiscal year 2015 and
    each subsequent fiscal year, in the case of an eligible
    hospital (as defined in subsection (n)(6)(A)) that is not a
    meaningful EHR user (as defined in subsection (n)(3)) for an
    EHR reporting period for such fiscal year, three-quarters of
    the applicable percentage increase otherwise applicable under
    clause (i) (determined without regard to clause (iii)(II) for
    such fiscal year shall be reduced (but not below zero) by 33\1/
    3\ percent for fiscal year 2015, 66\2/3\ percent for fiscal
    year 2016, and 100 percent for fiscal year 2017 and each
    subsequent fiscal year. Such reduction shall apply only with
    respect to the fiscal year involved and the Secretary shall not
    take into account such reduction in computing the applicable
    percentage increase under clause (i) for a subsequent fiscal
    year.

               *       *       *       *       *       *       *

      (x)(I) Subject to subclause (II), for purposes of reporting
    data on quality measures for inpatient hospital services
    furnished during fiscal year 2012 and each subsequent fiscal
    year, the quality measures specified under clause (viii) shall
    be measures selected by the Secretary from measures that have
    been endorsed by the entity with a contract with the Secretary
    under section 1890(a).
      (II) In the case of a specified area or medical topic
    determined appropriate by the Secretary for which a feasible
    and practical quality measure has not been endorsed by the
    entity with a contract under section 1890(a), the Secretary may
    specify a measure that is not so endorsed as long as due
    consideration is given to measures that have been endorsed or
    adopted by a consensus organization identified by the
    Secretary. The Secretary shall submit such a non-endorsed
    measure to the entity for consideration for endorsement. If the
    entity considers but does not endorse such a measure and if the
    Secretary does not phase-out use of such measure, the Secretary
    shall include the rationale for continued use of such a measure
    in rulemaking.

               *       *       *       *       *       *       *

      (d)(1) * * *

               *       *       *       *       *       *       *

      (5)(A) * * *
      (B) The Secretary shall provide for an additional payment
    amount for subsection (d) hospitals with indirect costs of
    medical education, in an amount computed in the same manner as
    the adjustment for such costs under regulations (in effect as
    of January 1, 1983) under subsection (a)(2), except as follows:
              (i) * * *

               *       *       *       *       *       *       *

              [(iv) Effective for discharges occurring on or after
            October 1, 1997] (iv)(I) Effective for discharges
            occurring on or after October 1, 1997, and before July
            1, 2009, all the time spent by an intern or resident in
            patient care activities under an approved medical
            residency training program at an entity in a
            nonhospital setting shall be counted towards the
            determination of full-time equivalency if the hospital
            incurs all, or substantially all, of the costs for the
            training program in that setting.
              (II) Effective for discharges occurring on or after
            July 1, 2009, all the time spent by an intern or
            resident in patient care activities at an entity in a
            nonprovider setting shall be counted towards the
            determination of full-time equivalency if the hospital
            incurs the costs of the stipends and fringe benefits of
            the intern or resident during the time the intern or
            resident spends in that setting.
              (v) In determining the adjustment with respect to a
            hospital for discharges occurring on or after October
            1, 1997, the total number of full-time equivalent
            interns and residents in the fields of allopathic and
            osteopathic medicine in either a hospital or
            nonhospital setting may not exceed the number (or, 130
            percent of such number in the case of a hospital
            located in a rural area) of such full-time equivalent
            interns and residents in the hospital with respect to
            the hospital's most recent cost reporting period ending
            on or before December 31, 1996. Rules similar to the
            rules of subsection (h)(4)(F)(ii) shall apply for
            purposes of this clause. The provisions of [subsection
            (h)(7)] subsections (h)(7) and (h)(8) shall apply with
            respect to the first sentence of this clause in the
            same manner as [it applies] they apply with respect to
            subsection (h)(4)(F)(i).

               *       *       *       *       *       *       *

      (x) For discharges occurring on or after July 1, 2011,
    insofar as an additional payment amount under this subparagraph
    is attributable to resident positions distributed to a hospital
    under subsection (h)(8)(B), the indirect teaching adjustment
    factor shall be computed in the same manner as provided under
    clause (ii) with respect to such resident positions.
      (xi)(I) The provisions of subparagraph (I) of subsection
    (h)(4) shall apply under this subparagraph in the same manner
    as they apply under such subsection.
      (II) In determining the hospital's number of full-time
    equivalent residents for purposes of this subparagraph, all the
    time spent by an intern or resident in an approved medical
    residency training program in nonpatient care activities, such
    as didactic conferences and seminars, as such time and
    activities are defined by the Secretary, that occurs in the
    hospital shall be counted toward the determination of full-time
    equivalency if the hospital--
              (aa) is recognized as a subsection (d) hospital;
              (bb) is recognized as a subsection (d) Puerto Rico
            hospital;
              (cc) is reimbursed under a reimbursement system
            authorized under section 1814(b)(3); or
              (dd) is a provider-based hospital outpatient
            department.
      (III) In determining the hospital's number of full-time
    equivalent residents for purposes of this subparagraph, all the
    time spent by an intern or resident in an approved medical
    residency training program in research activities that are not
    associated with the treatment or diagnosis of a particular
    patient, as such time and activities are defined by the
    Secretary, shall not be counted toward the determination of
    full-time equivalency.

               *       *       *       *       *       *       *

      (h) Payments for Direct Graduate Medical Education Costs.--
              (1) Substitution of special payment rules.--
                      (A) In general.--Notwithstanding section
                    1861(v), instead of any amounts that are
                    otherwise payable under this title with respect
                    to the reasonable costs of hospitals for direct
                    graduate medical education costs, the Secretary
                    shall provide for payments for such costs in
                    accordance with paragraph (3) of this
                    subsection.
                      (B) Goals and accountability for approved
                    medical residency training programs.--The goals
                    of medical residency training programs are to
                    foster a physician workforce so that physicians
                    are trained to be able to do the following:
                              (i) Work effectively in various
                            health care delivery settings, such as
                            nonprovider settings.
                              (ii) Coordinate patient care within
                            and across settings relevant to their
                            specialties.
                              (iii) Understand the relevant cost
                            and value of various diagnostic and
                            treatment options.
                              (iv) Work in inter-professional teams
                            and multi-disciplinary team-based
                            models in provider and nonprovider
                            settings to enhance safety and improve
                            quality of patient care.
                              (v) Be knowledgeable in methods of
                            identifying systematic errors in health
                            care delivery and in implementing
                            systematic solutions in case of such
                            errors, including experience and
                            participation in continuous quality
                            improvement projects to improve health
                            outcomes of the population the
                            physicians serve.
                              (vi) Be meaningful EHR users (as
                            determined under section 1848(o)(2)) in
                            the delivery of care and in improving
                            the quality of the health of the
                            community and the individuals that the
                            hospital serves.

               *       *       *       *       *       *       *

              (4) Determination of full-time-equivalent
            residents.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Counting time spent in outpatient
                    settings.--
                              [Such rules] (i) In general.--Subject
                            to clause (ii), such rules shall
                            provide that only time spent in
                            activities relating to patient care
                            [shall be counted and that all the
                            time] shall be counted and that--
                                      (I) effective for cost
                                    reporting periods beginning
                                    before July 1, 2009, all the
                                    time so spent by a resident
                                    under an approved medical
                                    residency training program
                                    shall be counted towards the
                                    determination of full-time
                                    equivalency, without regard to
                                    the setting in which the
                                    activities are performed, if
                                    the hospital incurs all, or
                                    substantially all, of the costs
                                    for the training program in
                                    that setting[.]; and
                                      (II) effective for cost
                                    reporting periods beginning on
                                    or after July 1, 2009, all the
                                    time so spent by a resident
                                    shall be counted towards the
                                    determination of full-time
                                    equivalency, without regard to
                                    the setting in which the
                                    activities are performed, if
                                    the hospital incurs the costs
                                    of the stipends and fringe
                                    benefits of the resident during
                                    the time the resident spends in
                                    that setting.
                            Any hospital claiming under this
                            subparagraph for time spent in a
                            nonprovider setting shall maintain and
                            make available to the Secretary records
                            regarding the amount of such time and
                            such amount in comparison with amounts
                            of such time in such base year as the
                            Secretary shall specify.
                              (ii) Treatment of certain nonprovider
                            and didactic activities.--Such rules
                            shall provide that all time spent by an
                            intern or resident in an approved
                            medical residency training program in a
                            nonprovider setting that is primarily
                            engaged in furnishing patient care (as
                            defined in paragraph (5)(K)) in
                            nonpatient care activities, such as
                            didactic conferences and seminars, but
                            not including research not associated
                            with the treatment or diagnosis of a
                            particular patient, as such time and
                            activities are defined by the
                            Secretary, shall be counted toward the
                            determination of full-time equivalency.
                      (F) Limitation on number of residents in
                    allopathic and osteopathic medicine.--
                              (i) In general.--Such rules shall
                            provide that for purposes of a cost
                            reporting period beginning on or after
                            October 1, 1997, subject to [paragraph
                            (7)] paragraphs (7) and (8), the total
                            number of full-time equivalent
                            residents before application of
                            weighting factors (as determined under
                            this paragraph) with respect to a
                            hospital's approved medical residency
                            training program in the fields of
                            allopathic medicine and osteopathic
                            medicine may not exceed the number (or,
                            130 percent of such number in the case
                            of a hospital located in a rural area)
                            of such full-time equivalent residents
                            for the hospital's most recent cost
                            reporting period ending on or before
                            December 31, 1996.

               *       *       *       *       *       *       *

                      (H) Special rules for application of
                    subparagraphs (f) and (g).--
                              (i) New facilities.--The Secretary
                            shall, consistent with the principles
                            of subparagraphs (F) and (G) and
                            subject to [paragraph (7)] paragraphs
                            (7) and (8), prescribe rules for the
                            application of such subparagraphs in
                            the case of medical residency training
                            programs established on or after
                            January 1, 1995. In promulgating such
                            rules for purposes of subparagraph (F),
                            the Secretary shall give special
                            consideration to facilities that meet
                            the needs of underserved rural areas.

               *       *       *       *       *       *       *

                              (vi) Redistribution of residency
                            slots after a hospital closes.--
                                      (I) In general.--The
                                    Secretary shall, by regulation,
                                    establish a process consistent
                                    with subclauses (II) and (III)
                                    under which, in the case where
                                    a hospital (other than a
                                    hospital described in clause
                                    (v)) with an approved medical
                                    residency program in a State
                                    closes on or after the date
                                    that is 2 years before the date
                                    of the enactment of this
                                    clause, the Secretary shall
                                    increase the otherwise
                                    applicable resident limit under
                                    this paragraph for other
                                    hospitals in the State in
                                    accordance with this clause.
                                      (II) Process for hospitals in
                                    certain areas.--In determining
                                    for which hospitals the
                                    increase in the otherwise
                                    applicable resident limit
                                    described in subclause (I) is
                                    provided, the Secretary shall
                                    establish a process to provide
                                    for such increase to one or
                                    more hospitals located in the
                                    State. Such process shall take
                                    into consideration the
                                    recommendations submitted to
                                    the Secretary by the senior
                                    health official (as designated
                                    by the chief executive officer
                                    of such State) if such
                                    recommendations are submitted
                                    not later than 180 days after
                                    the date of the hospital
                                    closure involved (or, in the
                                    case of a hospital that closed
                                    after the date that is 2 years
                                    before the date of the
                                    enactment of this clause, 180
                                    days after such date of
                                    enactment).
                                      (III) Limitation.--The
                                    estimated aggregate number of
                                    increases in the otherwise
                                    applicable resident limits for
                                    hospitals under this clause
                                    shall be equal to the estimated
                                    number of resident positions in
                                    the approved medical residency
                                    programs that closed on or
                                    after the date described in
                                    subclause (I).
                      (I) Treatment of certain time in approved
                    medical residency training programing.--In
                    determining the hospital's number of full-time
                    equivalent residents for purposes of this
                    subsection, all the time that is spent by an
                    intern or resident in an approved medical
                    residency training program on vacation, sick
                    leave, or other approved leave, as such time is
                    defined by the Secretary, and that does not
                    prolong the total time the resident is
                    participating in the approved program beyond
                    the normal duration of the program shall be
                    counted toward the determination of full-time
                    equivalency.
              (5) Definitions and special rules.--As used in this
            subsection:
                      (A) * * *

               *       *       *       *       *       *       *

                      (K) Nonprovider setting that is primarily
                    engaged in furnishing patient care.--The term
                    ``nonprovider setting that is primarily engaged
                    in furnishing patient care'' means a
                    nonprovider setting in which the primary
                    activity is the care and treatment of patients,
                    as defined by the Secretary.

               *       *       *       *       *       *       *

              (7) Redistribution of unused resident positions.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Judicial review.--There shall be no
                    administrative or judicial review under section
                    1869, 1878, or otherwise, with respect to
                    determinations made under this paragraph or
                    under paragraph (4)(H)(vi) and paragraph (8).
              (8) Additional redistribution of unused residency
            positions.--
                      (A) Reductions in limit based on unused
                    positions.--
                              (i) Programs subject to reduction.--
                            If a hospital's reference resident
                            level (specified in clause (ii)) is
                            less than the otherwise applicable
                            resident limit (as defined in
                            subparagraph (C)(ii)), effective for
                            portions of cost reporting periods
                            occurring on or after July 1, 2011, the
                            otherwise applicable resident limit
                            shall be reduced by 90 percent of the
                            difference between such otherwise
                            applicable resident limit and such
                            reference resident level.
                              (ii) Reference resident level.--
                                      (I) In general.--Except as
                                    otherwise provided in a
                                    subsequent subclause, the
                                    reference resident level
                                    specified in this clause for a
                                    hospital is the highest
                                    resident level for any of the 3
                                    most recent cost reporting
                                    periods (ending before the date
                                    of the enactment of this
                                    paragraph) of the hospital for
                                    which a cost report has been
                                    settled (or, if not, submitted
                                    (subject to audit)), as
                                    determined by the Secretary.
                                      (II) Use of most recent
                                    accounting period to recognize
                                    expansion of existing
                                    programs.--If a hospital
                                    submits a timely request to
                                    increase its resident level due
                                    to an expansion, or planned
                                    expansion, of an existing
                                    residency training program that
                                    is not reflected on the most
                                    recent settled or submitted
                                    cost report, after audit and
                                    subject to the discretion of
                                    the Secretary, subject to
                                    subclause (IV), the reference
                                    resident level for such
                                    hospital is the resident level
                                    that includes the additional
                                    residents attributable to such
                                    expansion or establishment, as
                                    determined by the Secretary.
                                    The Secretary is authorized to
                                    determine an alternative
                                    reference resident level for a
                                    hospital that submitted to the
                                    Secretary a timely request,
                                    before the start of the 2009-
                                    2010 academic year, for an
                                    increase in its reference
                                    resident level due to a planned
                                    expansion.
                                      (III) Special provider
                                    agreement.--In the case of a
                                    hospital described in paragraph
                                    (4)(H)(v), the reference
                                    resident level specified in
                                    this clause is the limitation
                                    applicable under subclause (I)
                                    of such paragraph.
                                      (IV) Previous
                                    redistribution.--The reference
                                    resident level specified in
                                    this clause for a hospital
                                    shall be increased to the
                                    extent required to take into
                                    account an increase in resident
                                    positions made available to the
                                    hospital under paragraph (7)(B)
                                    that are not otherwise taken
                                    into account under a previous
                                    subclause.
                              (iii) Affiliation.--The provisions of
                            clause (i) shall be applied to
                            hospitals which are members of the same
                            affiliated group (as defined by the
                            Secretary under paragraph (4)(H)(ii))
                            and to the extent the hospitals can
                            demonstrate that they are filling any
                            additional resident slots allocated to
                            other hospitals through an affiliation
                            agreement, the Secretary shall adjust
                            the determination of available slots
                            accordingly, or which the Secretary
                            otherwise has permitted the resident
                            positions (under section 402 of the
                            Social Security Amendments of 1967) to
                            be aggregated for purposes of applying
                            the resident position limitations under
                            this subsection.
                      (B) Redistribution.--
                              (i) In general.--The Secretary shall
                            increase the otherwise applicable
                            resident limit for each qualifying
                            hospital that submits an application
                            under this subparagraph by such number
                            as the Secretary may approve for
                            portions of cost reporting periods
                            occurring on or after July 1, 2011. The
                            estimated aggregate number of increases
                            in the otherwise applicable resident
                            limit under this subparagraph may not
                            exceed the Secretary's estimate of the
                            aggregate reduction in such limits
                            attributable to subparagraph (A).
                              (ii) Requirements for qualifying
                            hospitals.--A hospital is not a
                            qualifying hospital for purposes of
                            this paragraph unless the following
                            requirements are met:
                                      (I) Maintenance of primary
                                    care resident level.--The
                                    hospital maintains the number
                                    of primary care residents at a
                                    level that is not less than the
                                    base level of primary care
                                    residents increased by the
                                    number of additional primary
                                    care resident positions
                                    provided to the hospital under
                                    this subparagraph. For purposes
                                    of this subparagraph, the
                                    ``base level of primary care
                                    residents'' for a hospital is
                                    the level of such residents as
                                    of a base period (specified by
                                    the Secretary), determined
                                    without regard to whether such
                                    positions were in excess of the
                                    otherwise applicable resident
                                    limit for such period but
                                    taking into account the
                                    application of subclauses (II)
                                    and (III) of subparagraph
                                    (A)(ii).
                                      (II) Dedicated assignment of
                                    additional resident positions
                                    to primary care.--The hospital
                                    assigns all such additional
                                    resident positions for primary
                                    care residents.
                                      (III) Accreditation.--The
                                    hospital's residency programs
                                    in primary care are fully
                                    accredited or, in the case of a
                                    residency training program not
                                    in operation as of the base
                                    year, the hospital is actively
                                    applying for such accreditation
                                    for the program for such
                                    additional resident positions
                                    (as determined by the
                                    Secretary).
                              (iii) Considerations in
                            redistribution.--In determining for
                            which qualifying hospitals the increase
                            in the otherwise applicable resident
                            limit is provided under this
                            subparagraph, the Secretary shall take
                            into account the demonstrated
                            likelihood of the hospital filling the
                            positions within the first 3 cost
                            reporting periods beginning on or after
                            July 1, 2011, made available under this
                            subparagraph, as determined by the
                            Secretary.
                              (iv) Priority for certain
                            hospitals.--In determining for which
                            qualifying hospitals the increase in
                            the otherwise applicable resident limit
                            is provided under this subparagraph,
                            the Secretary shall distribute the
                            increase to qualifying hospitals based
                            on the following criteria:
                                      (I) The Secretary shall give
                                    preference to hospitals that
                                    had a reduction in resident
                                    training positions under
                                    subparagraph (A).
                                      (II) The Secretary shall give
                                    preference to hospitals with 3-
                                    year primary care residency
                                    training programs, such as
                                    family practice and general
                                    internal medicine.
                                      (III) The Secretary shall
                                    give preference to hospitals
                                    insofar as they have in effect
                                    formal arrangements (as
                                    determined by the Secretary)
                                    that place greater emphasis
                                    upon training in Federally
                                    qualified health centers, rural
                                    health clinics, and other
                                    nonprovider settings, and to
                                    hospitals that receive
                                    additional payments under
                                    subsection (d)(5)(F) and
                                    emphasize training in an
                                    outpatient department.
                                      (IV) The Secretary shall give
                                    preference to hospitals with a
                                    number of positions (as of July
                                    1, 2009) in excess of the
                                    otherwise applicable resident
                                    limit for such period.
                                      (V) The Secretary shall give
                                    preference to hospitals that
                                    place greater emphasis upon
                                    training in a health
                                    professional shortage area
                                    (designated under section 332
                                    of the Public Health Service
                                    Act) or a health professional
                                    needs area (designated under
                                    section 2211 of such Act).
                                      (VI) The Secretary shall give
                                    preference to hospitals in
                                    States that have low resident-
                                    to-population ratios (including
                                    a greater preference for those
                                    States with lower resident-to-
                                    population ratios).
                              (v) Limitation.--In no case shall
                            more than 20 full-time equivalent
                            additional residency positions be made
                            available under this subparagraph with
                            respect to any hospital.
                              (vi) Application of per resident
                            amounts for primary care.--With respect
                            to additional residency positions in a
                            hospital attributable to the increase
                            provided under this subparagraph, the
                            approved FTE resident amounts are
                            deemed to be equal to the hospital per
                            resident amounts for primary care and
                            nonprimary care computed under
                            paragraph (2)(D) for that hospital.
                              (vii) Distribution.--The Secretary
                            shall distribute the increase in
                            resident training positions to
                            qualifying hospitals under this
                            subparagraph not later than July 1,
                            2011.
                      (C) Resident level and limit defined.--In
                    this paragraph:
                              (i) The term ``resident level'' has
                            the meaning given such term in
                            paragraph (7)(C)(i).
                              (ii) The term ``otherwise applicable
                            resident limit'' means, with respect to
                            a hospital, the limit otherwise
                            applicable under subparagraphs (F)(i)
                            and (H) of paragraph (4) on the
                            resident level for the hospital
                            determined without regard to this
                            paragraph but taking into account
                            paragraph (7)(A).
                      (D) Maintenance of primary care resident
                    level.--In carrying out this paragraph, the
                    Secretary shall require hospitals that receive
                    additional resident positions under
                    subparagraph (B)--
                              (i) to maintain records, and
                            periodically report to the Secretary,
                            on the number of primary care residents
                            in its residency training programs; and
                              (ii) as a condition of payment for a
                            cost reporting period under this
                            subsection for such positions, to
                            maintain the level of such positions at
                            not less than the sum of--
                                      (I) the base level of primary
                                    care resident positions (as
                                    determined under subparagraph
                                    (B)(ii)(I)) before receiving
                                    such additional positions; and
                                      (II) the number of such
                                    additional positions.

               *       *       *       *       *       *       *

      (j) Prospective Payment for Inpatient Rehabilitation
    Services.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Payment rate.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Increase factor.--For purposes of this
                    subsection for payment units in each fiscal
                    year (beginning with fiscal year 2001), the
                    Secretary shall establish an increase factor.
                    Such factor shall be based on an appropriate
                    percentage increase (subject to the
                    productivity adjustment described in subsection
                    (b)(3)(B)(iii)(II)) in a market basket of goods
                    and services comprising services for which
                    payment is made under this subsection, which
                    may be the market basket percentage increase
                    described in subsection (b)(3)(B)(iii). The
                    increase factor to be applied under this
                    subparagraph for each of fiscal years 2008 [and
                    2009] through 2010 shall be 0 percent.

               *       *       *       *       *       *       *

      (m) Prospective Payment for Long-Term Care Hospitals.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Productivity adjustment.--In implementing the
            system described in paragraph (1) for discharges
            occurring during the rate year ending in 2010 or any
            subsequent rate year for a hospital, to the extent that
            an annual percentage increase factor applies to a base
            rate for such discharges for the hospital, such factor
            shall be subject to the productivity adjustment
            described in subsection (b)(3)(B)(iii)(II).

               *       *       *       *       *       *       *

      (o) Prospective Payment for Psychiatric Hospitals.--
              (1) Reference to establishment and implementation of
            system.--For provisions related to the establishment
            and implementation of a prospective payment system for
            payments under this title for inpatient hospital
            services furnished by psychiatric hospitals (as
            described in clause (i) of subsection (d)(1)(B) and
            psychiatric units (as described in the matter following
            clause (v) of such subsection), see section 124 of the
            Medicare, Medicaid, and SCHIP Balanced Budget
            Refinement Act of 1999.
              (2) Productivity adjustment.--In implementing the
            system described in paragraph (1) for discharges
            occurring during the rate year ending in 2011 or any
            subsequent rate year for a psychiatric hospital or unit
            described in such paragraph, to the extent that an
            annual percentage increase factor applies to a base
            rate for such discharges for the hospital or unit,
            respectively, such factor shall be subject to the
            productivity adjustment described in subsection
            (b)(3)(B)(iii)(II).
      (p) Adjustment to Hospital Payments for Excess
    Readmissions.--
              (1) In general.--With respect to payment for
            discharges from an applicable hospital (as defined in
            paragraph (5)(C)) occurring during a fiscal year
            beginning on or after October 1, 2011, in order to
            account for excess readmissions in the hospital, the
            Secretary shall reduce the payments that would
            otherwise be made to such hospital under subsection (d)
            (or section 1814(b)(3), as the case may be) for such a
            discharge by an amount equal to the product of--
                      (A) the base operating DRG payment amount (as
                    defined in paragraph (2)) for the discharge;
                    and
                      (B) the adjustment factor (described in
                    paragraph (3)(A)) for the hospital for the
                    fiscal year.
              (2) Base operating drg payment amount.--
                      (A) In general.--Except as provided in
                    subparagraph (B), for purposes of this
                    subsection, the term ``base operating DRG
                    payment amount'' means, with respect to a
                    hospital for a fiscal year, the payment amount
                    that would otherwise be made under subsection
                    (d) for a discharge if this subsection did not
                    apply, reduced by any portion of such amount
                    that is attributable to payments under
                    subparagraphs (B) and (F) of paragraph (5).
                      (B) Adjustments.--For purposes of
                    subparagraph (A), in the case of a hospital
                    that is paid under section 1814(b)(3), the term
                    ``base operating DRG payment amount'' means the
                    payment amount under such section.
              (3) Adjustment factor.--
                      (A) In general.--For purposes of paragraph
                    (1), the adjustment factor under this paragraph
                    for an applicable hospital for a fiscal year is
                    equal to the greater of--
                              (i) the ratio described in
                            subparagraph (B) for the hospital for
                            the applicable period (as defined in
                            paragraph (5)(D)) for such fiscal year;
                            or
                              (ii) the floor adjustment factor
                            specified in subparagraph (C).
                      (B) Ratio.--The ratio described in this
                    subparagraph for a hospital for an applicable
                    period is equal to 1 minus the ratio of--
                              (i) the aggregate payments for excess
                            readmissions (as defined in paragraph
                            (4)(A)) with respect to an applicable
                            hospital for the applicable period; and
                              (ii) the aggregate payments for all
                            discharges (as defined in paragraph
                            (4)(B)) with respect to such applicable
                            hospital for such applicable period.
                      (C) Floor adjustment factor.--For purposes of
                    subparagraph (A), the floor adjustment factor
                    specified in this subparagraph for--
                              (i) fiscal year 2012 is 0.99;
                              (ii) fiscal year 2013 is 0.98;
                              (iii) fiscal year 2014 is 0.97; or
                              (iv) a subsequent fiscal year is
                            0.95.
              (4) Aggregate payments, excess readmission ratio
            defined.--For purposes of this subsection:
                      (A) Aggregate payments for excess
                    readmissions.--The term ``aggregate payments
                    for excess readmissions'' means, for a hospital
                    for a fiscal year, the sum, for applicable
                    conditions (as defined in paragraph (5)(A)), of
                    the product, for each applicable condition,
                    of--
                              (i) the base operating DRG payment
                            amount for such hospital for such
                            fiscal year for such condition;
                              (ii) the number of admissions for
                            such condition for such hospital for
                            such fiscal year; and
                              (iii) the excess readmissions ratio
                            (as defined in subparagraph (C)) for
                            such hospital for the applicable period
                            for such fiscal year minus 1.
                      (B) Aggregate payments for all discharges.--
                    The term ``aggregate payments for all
                    discharges'' means, for a hospital for a fiscal
                    year, the sum of the base operating DRG payment
                    amounts for all discharges for all conditions
                    from such hospital for such fiscal year.
                      (C) Excess readmission ratio.--
                              (i) In general.--Subject to clauses
                            (ii) and (iii), the term ``excess
                            readmissions ratio'' means, with
                            respect to an applicable condition for
                            a hospital for an applicable period,
                            the ratio (but not less than 1.0) of--
                                      (I) the risk adjusted
                                    readmissions based on actual
                                    readmissions, as determined
                                    consistent with a readmission
                                    measure methodology that has
                                    been endorsed under paragraph
                                    (5)(A)(ii)(I), for an
                                    applicable hospital for such
                                    condition with respect to the
                                    applicable period; to
                                      (II) the risk adjusted
                                    expected readmissions (as
                                    determined consistent with such
                                    a methodology) for such
                                    hospital for such condition
                                    with respect to such applicable
                                    period.
                              (ii) Exclusion of certain
                            readmissions.--For purposes of clause
                            (i), with respect to a hospital, excess
                            readmissions shall not include
                            readmissions for an applicable
                            condition for which there are fewer
                            than a minimum number (as determined by
                            the Secretary) of discharges for such
                            applicable condition for the applicable
                            period and such hospital.
                              (iii) Adjustment.--In order to
                            promote a reduction over time in the
                            overall rate of readmissions for
                            applicable conditions, the Secretary
                            may provide, beginning with discharges
                            for fiscal year 2014, for the
                            determination of the excess
                            readmissions ratio under subparagraph
                            (C) to be based on a ranking of
                            hospitals by readmission ratios (from
                            lower to higher readmission ratios)
                            normalized to a benchmark that is lower
                            than the 50th percentile.
              (5) Definitions.--For purposes of this subsection:
                      (A) Applicable condition.--The term
                    ``applicable condition'' means, subject to
                    subparagraph (B), a condition or procedure
                    selected by the Secretary among conditions and
                    procedures for which--
                              (i) readmissions (as defined in
                            subparagraph (E)) that represent
                            conditions or procedures that are high
                            volume or high expenditures under this
                            title (or other criteria specified by
                            the Secretary); and
                              (ii) measures of such readmissions--
                                      (I) have been endorsed by the
                                    entity with a contract under
                                    section 1890(a); and
                                      (II) such endorsed measures
                                    have appropriate exclusions for
                                    readmissions that are unrelated
                                    to the prior discharge (such as
                                    a planned readmission or
                                    transfer to another applicable
                                    hospital).
                      (B) Expansion of applicable conditions.--
                    Beginning with fiscal year 2013, the Secretary
                    shall expand the applicable conditions beyond
                    the 3 conditions for which measures have been
                    endorsed as described in subparagraph
                    (A)(ii)(I) as of the date of the enactment of
                    this subsection to the additional 4 conditions
                    that have been so identified by the Medicare
                    Payment Advisory Commission in its report to
                    Congress in June 2007 and to other conditions
                    and procedures which may include an all-
                    condition measure of readmissions, as
                    determined appropriate by the Secretary. In
                    expanding such applicable conditions, the
                    Secretary shall seek the endorsement described
                    in subparagraph (A)(ii)(I) but may apply such
                    measures without such an endorsement.
                      (C) Applicable hospital.--The term
                    ``applicable hospital'' means a subsection (d)
                    hospital or a hospital that is paid under
                    section 1814(b)(3).
                      (D) Applicable period.--The term ``applicable
                    period'' means, with respect to a fiscal year,
                    such period as the Secretary shall specify for
                    purposes of determining excess readmissions.
                      (E) Readmission.--The term ``readmission''
                    means, in the case of an individual who is
                    discharged from an applicable hospital, the
                    admission of the individual to the same or
                    another applicable hospital within a time
                    period specified by the Secretary from the date
                    of such discharge. Insofar as the discharge
                    relates to an applicable condition for which
                    there is an endorsed measure described in
                    subparagraph (A)(ii)(I), such time period (such
                    as 30 days) shall be consistent with the time
                    period specified for such measure.
              (6) Limitations on review.--There shall be no
            administrative or judicial review under section 1869,
            section 1878, or otherwise of--
                      (A) the determination of base operating DRG
                    payment amounts;
                      (B) the methodology for determining the
                    adjustment factor under paragraph (3),
                    including excess readmissions ratio under
                    paragraph (4)(C), aggregate payments for excess
                    readmissions under paragraph (4)(A), and
                    aggregate payments for all discharges under
                    paragraph (4)(B), and applicable periods and
                    applicable conditions under paragraph (5);
                      (C) the measures of readmissions as described
                    in paragraph (5)(A)(ii); and
                      (D) the determination of a targeted hospital
                    under paragraph (8)(B)(i), the increase in
                    payment under paragraph (8)(B)(ii), the
                    aggregate cap under paragraph (8)(C)(i), the
                    hospital-specific limit under paragraph
                    (8)(C)(ii), and the form of payment made by the
                    Secretary under paragraph (8)(D).
              (7) Monitoring inappropriate changes in admissions
            practices.--The Secretary shall monitor the activities
            of applicable hospitals to determine if such hospitals
            have taken steps to avoid patients at risk in order to
            reduce the likelihood of increasing readmissions for
            applicable conditions. If the Secretary determines that
            such a hospital has taken such a step, after notice to
            the hospital and opportunity for the hospital to
            undertake action to alleviate such steps, the Secretary
            may impose an appropriate sanction.
              (8) Assistance to certain hospitals.--
                      (A) In general.--For purposes of providing
                    funds to applicable hospitals to take steps
                    described in subparagraph (E) to address
                    factors that may impact readmissions of
                    individuals who are discharged from such a
                    hospital, for fiscal years beginning on or
                    after October 1, 2011, the Secretary shall make
                    a payment adjustment for a hospital described
                    in subparagraph (B), with respect to each such
                    fiscal year, by a percent estimated by the
                    Secretary to be consistent with subparagraph
                    (C).
                      (B) Targeted hospitals.--Subparagraph (A)
                    shall apply to an applicable hospital that--
                              (i) received (or, in the case of an
                            1814(b)(3) hospital, otherwise would
                            have been eligible to receive)
                            $10,000,000 or more in disproportionate
                            share payments using the latest
                            available data as estimated by the
                            Secretary; and
                              (ii) provides assurances satisfactory
                            to the Secretary that the increase in
                            payment under this paragraph shall be
                            used for purposes described in
                            subparagraph (E).
                      (C) Caps.--
                              (i) Aggregate cap.--The aggregate
                            amount of the payment adjustment under
                            this paragraph for a fiscal year shall
                            not exceed 5 percent of the estimated
                            difference in the spending that would
                            occur for such fiscal year with and
                            without application of the adjustment
                            factor described in paragraph (3) and
                            applied pursuant to paragraph (1).
                              (ii) Hospital-specific limit.--The
                            aggregate amount of the payment
                            adjustment for a hospital under this
                            paragraph shall not exceed the
                            estimated difference in spending that
                            would occur for such fiscal year for
                            such hospital with and without
                            application of the adjustment factor
                            described in paragraph (3) and applied
                            pursuant to paragraph (1).
                      (D) Form of payment.--The Secretary may make
                    the additional payments under this paragraph on
                    a lump sum basis, a periodic basis, a claim by
                    claim basis, or otherwise.
                      (E) Use of additional payment.--Funding under
                    this paragraph shall be used by targeted
                    hospitals for transitional care activities
                    designed to address the patient noncompliance
                    issues that result in higher than normal
                    readmission rates, such as one or more of the
                    following:
                              (i) Providing care coordination
                            services to assist in transitions from
                            the targeted hospital to other
                            settings.
                              (ii) Hiring translators and
                            interpreters.
                              (iii) Increasing services offered by
                            discharge planners.
                              (iv) Ensuring that individuals
                            receive a summary of care and
                            medication orders upon discharge.
                              (v) Developing a quality improvement
                            plan to assess and remedy preventable
                            readmission rates.
                              (vi) Assigning discharged individuals
                            to a medical home.
                              (vii) Doing other activities as
                            determined appropriate by the
                            Secretary.
                      (F) GAO report on use of funds.--Not later
                    than 3 years after the date on which funds are
                    first made available under this paragraph, the
                    Comptroller General of the United States shall
                    submit to Congress a report on the use of such
                    funds.
                      (G) Disproportionate share hospital
                    payment.--In this paragraph, the term
                    ``disproportionate share hospital payment''
                    means an additional payment amount under
                    subsection (d)(5)(F).

               *       *       *       *       *       *       *

        PAYMENT TO SKILLED NURSING FACILITIES FOR ROUTINE SERVICE COSTS

      Sec. 1888. (a) * * *

               *       *       *       *       *       *       *

      (e) Prospective Payment.--
              (1) * * *
              (2) Definitions.--For purposes of this subsection:
                      (A) Covered skilled nursing facility
                    services.--
                              (i) * * *
                              (ii) Services excluded.--Services
                            described in this clause are
                            physicians' services, services
                            described by clauses (i) and (ii) of
                            section 1861(s)(2)(K), certified nurse-
                            midwife services, qualified
                            psychologist services, clinical social
                            worker services, marriage and family
                            therapist services (as defined in
                            subsection (jjj)(1)), mental health
                            counselor services (as defined in
                            section 1861(kkk)(1)), services of a
                            certified registered nurse anesthetist,
                            items and services described in
                            subparagraphs (F) and (O) of section
                            1861(s)(2), telehealth services
                            furnished under section
                            1834(m)(4)(C)(ii)(VII), and, only with
                            respect to services furnished during
                            1998, the transportation costs of
                            electrocardiogram equipment for
                            electrocardiogram test services (HCPCS
                            Code R0076). Services described in this
                            clause do not include any physical,
                            occupational, or speech-language
                            therapy services regardless of whether
                            or not the services are furnished by,
                            or under the supervision of, a
                            physician or other health care
                            professional.

               *       *       *       *       *       *       *

              (4) Federal per diem rate.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Updating.--
                              (i) * * *
                              (ii) Subsequent fiscal years.--The
                            Secretary shall compute an unadjusted
                            Federal per diem rate equal to the
                            Federal per diem rate computed under
                            this subparagraph--
                                      (I) * * *

               *       *       *       *       *       *       *

                                      (III) for each of fiscal
                                    years 2002 and 2003, the rate
                                    computed for the previous
                                    fiscal year increased by the
                                    skilled nursing facility market
                                    basket percentage change for
                                    the fiscal year involved minus
                                    0.5 percentage points; [and]
                                      (IV) for each of fiscal years
                                    2004 through 2009, the rate
                                    computed for the previous
                                    fiscal year increased by the
                                    skilled nursing facility market
                                    basket percentage change for
                                    the fiscal year involved;
                                      (V) for fiscal year 2010, the
                                    rate computed for the previous
                                    fiscal year; and
                                      [(IV)] (VI) for each
                                    subsequent fiscal year, the
                                    rate computed for the previous
                                    fiscal year increased by the
                                    skilled nursing facility market
                                    basket percentage change for
                                    the fiscal year involved.

               *       *       *       *       *       *       *

              (5) Skilled nursing facility market basket index and
            percentage.--For purposes of this subsection:
                      (A) * * *
                      (B) Skilled nursing facility market basket
                    percentage.--The term ``skilled nursing
                    facility market basket percentage'' means, for
                    a fiscal year or other annual period and as
                    calculated by the Secretary subject to the
                    productivity adjustment described in section
                    1886(b)(3)(B)(iii)(II), the percentage change
                    in the skilled nursing facility market basket
                    index (established under subparagraph (A)) from
                    the midpoint of the prior fiscal year (or
                    period) to the midpoint of the fiscal year (or
                    other period) involved.

               *       *       *       *       *       *       *

              (8) Limitation on review.--There shall be no
            administrative or judicial review under section 1869,
            1878, or otherwise of--
                      (A) the establishment of Federal per diem
                    rates under paragraph (4), including the
                    computation of the standardized per diem rates
                    under paragraph (4)(C), adjustments and
                    corrections for case mix under paragraphs
                    (4)(F) and (4)(G)(i), adjustments for
                    variations in labor-related costs under
                    paragraph (4)(G)(ii), [and] adjustments under
                    paragraph (4)(G)(iii), and adjustment under
                    section 1111(b) of the America's Affordable
                    Health Choices Act of 2009;
                      (B) the establishment of facility specific
                    rates before July 1, 1999 (except any
                    determination of costs paid under part A of
                    this title); [and]
                      (C) the establishment of transitional amounts
                    under paragraph (7)[.]; and
                      (D) the establishment of outliers under
                    paragraph (13).

               *       *       *       *       *       *       *

              (13) Outliers for nta and therapy.--
                      (A) In general.--With respect to outliers
                    because of unusual variations in the type or
                    amount of medically necessary care, beginning
                    with October 1, 2010, the Secretary--
                              (i) shall provide for an addition or
                            adjustment to the payment amount
                            otherwise made under this section with
                            respect to non-therapy ancillary
                            services in the case of such outliers;
                            and
                              (ii) may provide for such an addition
                            or adjustment to the payment amount
                            otherwise made under this section with
                            respect to therapy services in the case
                            of such outliers.
                      (B) Outliers based on aggregate costs.--
                    Outlier adjustments or additional payments
                    described in subparagraph (A) shall be based on
                    aggregate costs during a stay in a skilled
                    nursing facility and not on the number of days
                    in such stay.
                      (C) Budget neutrality.--The Secretary shall
                    reduce estimated payments that would otherwise
                    be made under the prospective payment system
                    under this subsection with respect to a fiscal
                    year by 2 percent. The total amount of the
                    additional payments or payment adjustments for
                    outliers made under this paragraph with respect
                    to a fiscal year may not exceed 2 percent of
                    the total payments projected or estimated to be
                    made based on the prospective payment system
                    under this subsection for the fiscal year.
      (f) Reporting of Direct Care Expenditures.--
              (1) In general.--For cost reports submitted under
            this title for cost reporting periods beginning on or
            after the date that is 3 years after the date of the
            enactment of this subsection, skilled nursing
            facilities shall separately report expenditures for
            wages and benefits for direct care staff (breaking out
            (at a minimum) registered nurses, licensed professional
            nurses, certified nurse assistants, and other medical
            and therapy staff).
              (2) Modification of form.--The Secretary, in
            consultation with private sector accountants
            experienced with skilled nursing facility cost reports,
            shall redesign such reports to meet the requirement of
            paragraph (1) not later than 1 year after the date of
            the enactment of this subsection.
              (3) Categorization by functional accounts.--Not later
            than 30 months after the date of the enactment of this
            subsection, the Secretary, working in consultation with
            the Medicare Payment Advisory Commission, the Inspector
            General of the Department of Health and Human Services,
            and other expert parties the Secretary determines
            appropriate, shall take the expenditures listed on cost
            reports, as modified under paragraph (1), submitted by
            skilled nursing facilities and categorize such
            expenditures, regardless of any source of payment for
            such expenditures, for each skilled nursing facility
            into the following functional accounts on an annual
            basis:
                      (A) Spending on direct care services
                    (including nursing, therapy, and medical
                    services).
                      (B) Spending on indirect care (including
                    housekeeping and dietary services).
                      (C) Capital assets (including building and
                    land costs).
                      (D) Administrative services costs.
              (4) Availability of information submitted.--The
            Secretary shall establish procedures to make
            information on expenditures submitted under this
            subsection readily available to interested parties upon
            request, subject to such requirements as the Secretary
            may specify under the procedures established under this
            paragraph.

               *       *       *       *       *       *       *

         CONTRACT WITH A CONSENSUS-BASED ENTITY REGARDING PERFORMANCE
                                  MEASUREMENT

      Sec. 1890. (a) * * *
      (b) Duties.--The duties described in this subsection are the
    following:
              (1) * * *
              (2) Endorsement of measures.--The entity shall
            provide for the endorsement of standardized health care
            performance measures. The endorsement process under the
            preceding sentence shall consider whether a measure--
                      (A) * * *

               *       *       *       *       *       *       *

            If the entity does not endorse a measure, such entity
            shall explain the reasons and provide suggestions about
            changes to such measure that might make it a
            potentially endorsable measure.

               *       *       *       *       *       *       *

      (d) Funding.--For purposes of carrying out this section, the
    Secretary shall provide for the transfer, from the Federal
    Hospital Insurance Trust Fund under section 1817 and the
    Federal Supplementary Medical Insurance Trust Fund under
    section 1841 (in such proportion as the Secretary determines
    appropriate), of $10,000,000 to the Centers for Medicare &
    Medicaid Services Program Management Account [for each of
    fiscal years 2009 through 2012] for fiscal year 2009, and
    $12,000,000 for each of the fiscal years 2010 through 2012.

               *       *       *       *       *       *       *

                           MEDICARE INTEGRITY PROGRAM

      Sec. 1893. (a) Establishment of Program.--There is hereby
    established the Medicare Integrity Program (in this section
    referred to as the ``Program'') under which the Secretary shall
    promote the integrity of the medicare program by entering into
    contracts in accordance with this section with eligible
    entities, or otherwise, to carry out the activities described
    in subsection (b).

               *       *       *       *       *       *       *

      (c) Eligibility of Entities.--An entity is eligible to enter
    into a contract under the Program to carry out any of the
    activities described in subsection (b) if--
              (1) * * *

               *       *       *       *       *       *       *

              (3) the entity complies with such conflict of
            interest standards as are generally applicable to
            Federal acquisition and procurement; [and]
              (4) for the contract year beginning in 2011 and each
            subsequent contract year, the entity provides
            assurances to the satisfaction of the Secretary that
            the entity will conduct periodic evaluations of the
            effectiveness of the activities carried out by such
            entity under the Program and will submit to the
            Secretary an annual report on such activities; and
              [(4)] (5) the entity meets such other requirements as
            the Secretary may impose.

               *       *       *       *       *       *       *

                  PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES

      Sec. 1895. (a) * * *
      (b) System of Prospective Payment for Home Health Services.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Payment basis.--
                      (A) Initial basis.--
                              (i) In general.--Under such system
                            the Secretary shall provide for
                            computation of a standard prospective
                            payment amount (or amounts) as follows:
                                      (I) * * *

               *       *       *       *       *       *       *

                                      (III) For periods beginning
                                    after the period described in
                                    subclause (II) and before 2011,
                                    such amount (or amounts) shall
                                    be equal to the amount (or
                                    amounts) that would have been
                                    determined under subclause (I)
                                    that would have been made for
                                    fiscal year 2001 if the system
                                    had not been in effect and if
                                    section 1861(v)(1)(L)(ix) had
                                    not been enacted but if the
                                    reduction in limits described
                                    in clause (ii) had been in
                                    effect, updated under
                                    subparagraph (B).
                                      (IV) Subject to clause
                                    (iii)(I), for 2011, such amount
                                    (or amounts) shall be adjusted
                                    by a uniform percentage
                                    determined to be appropriate by
                                    the Secretary based on analysis
                                    of factors such as changes in
                                    the average number and types of
                                    visits in an episode, the
                                    change in intensity of visits
                                    in an episode, growth in cost
                                    per episode, and other factors
                                    that the Secretary considers to
                                    be relevant.
                                      (V) Subject to clause
                                    (iii)(II), for a year after
                                    2011, such a amount (or
                                    amounts) shall be equal to the
                                    amount (or amounts) determined
                                    under this clause for the
                                    previous year, updated under
                                    subparagraph (B).

               *       *       *       *       *       *       *

                              (iii) Special rule in case of
                            inability to effect timely rebasing.--
                                      (I) Application of proxy
                                    amount for 2011.--If the
                                    Secretary is not able to
                                    compute the amount (or amounts)
                                    under clause (i)(IV) so as to
                                    permit, on a timely basis, the
                                    application of such clause for
                                    2011, the Secretary shall
                                    substitute for such amount (or
                                    amounts) 95 percent of the
                                    amount (or amounts) that would
                                    otherwise be specified under
                                    clause (i)(III) if it applied
                                    for 2011.
                                      (II) Adjustment for
                                    subsequent years based on
                                    data.--If the Secretary applies
                                    subclause (I), the Secretary
                                    before July 1, 2011, shall
                                    compare the amount (or amounts)
                                    applied under such subclause
                                    with the amount (or amounts)
                                    that should have been applied
                                    under clause (i)(IV). The
                                    Secretary shall decrease or
                                    increase the prospective
                                    payment amount (or amounts)
                                    under clause (i)(V) for 2012
                                    (or, at the Secretary's
                                    discretion, over a period of
                                    several years beginning with
                                    2012) by the amount (if any) by
                                    which the amount (or amounts)
                                    applied under subclause (I) is
                                    greater or less, respectively,
                                    than the amount (or amounts)
                                    that should have been applied
                                    under clause (i)(IV).
                      (B) Annual update.--
                              (i) * * *
                              (ii) Home health applicable increase
                            percentage.--For purposes of this
                            subparagraph, the term ``home health
                            applicable increase percentage'' means,
                            with respect to--
                                      (I) * * *

               *       *       *       *       *       *       *

                                      (IV) 2006, 0 percent; [and]
                                      (V) 2007, 2008, and 2009,
                                    subject to clause (v), the home
                                    health market basket percentage
                                    increase;
                                      (VI) 2010, subject to clause
                                    (v), 0 percent; and
                                      [(V)] (VII) any subsequent
                                    year, subject to clause (v),
                                    the home health market basket
                                    percentage increase.
                              (iii) Home health market basket
                            percentage increase.--For purposes of
                            this subsection, the term ``home health
                            market basket percentage increase''
                            means, with respect to a fiscal year or
                            year, a percentage (estimated by the
                            Secretary before the beginning of the
                            fiscal year or year) determined and
                            applied with respect to the mix of
                            goods and services included in home
                            health services in the same manner
                            (including being subject to the
                            productivity adjustment described in
                            section 1886(b)(3)(B)(iii)(II)) as the
                            market basket percentage increase under
                            section 1886(b)(3)(B)(iii) is
                            determined and applied to the mix of
                            goods and services comprising inpatient
                            hospital services for the fiscal year
                            or year.
                              (iv) Adjustment for case mix
                            changes.--[Insofar as] Subject to
                            clause (vi), insofar as the Secretary
                            determines that the adjustments under
                            paragraph (4)(A)(i) for a previous
                            fiscal year or year (or estimates that
                            such adjustments for a future fiscal
                            year or year) did (or are likely to)
                            result in a change in aggregate
                            payments under this subsection during
                            the fiscal year or year that are a
                            result of changes in the coding or
                            classification of different units of
                            services that do not reflect real
                            changes in case mix, the Secretary may
                            adjust the standard prospective payment
                            amount (or amounts) under paragraph (3)
                            for subsequent fiscal years or years so
                            as to eliminate the effect of such
                            coding or classification changes.
                              (v) Adjustment if quality data not
                            submitted.--
                                      (I) Adjustment.--For purposes
                                    of clause (ii)(V), for 2007 and
                                    each subsequent year, in the
                                    case of a home health agency
                                    that does not submit data to
                                    the Secretary in accordance
                                    with subclause (II) with
                                    respect to such a year, the
                                    home health market basket
                                    percentage increase applicable
                                    under such clause for such year
                                    shall be reduced (but not below
                                    0) by 2 percentage points. Such
                                    reduction shall apply only with
                                    respect to the year involved,
                                    and the Secretary shall not
                                    take into account such
                                    reduction in computing the
                                    prospective payment amount
                                    under this section for a
                                    subsequent year, and the
                                    Medicare Payment Advisory
                                    Commission shall carry out the
                                    requirements under section
                                    5201(d) of the Deficit
                                    Reduction Act of 2005.

               *       *       *       *       *       *       *

                              (vi) Special rule for case mix
                            changes for 2011.--
                                      (I) In general.--With respect
                                    to the case mix adjustments
                                    established in section
                                    484.220(a) of title 42, Code of
                                    Federal Regulations, the
                                    Secretary shall apply, in 2010,
                                    the adjustment established in
                                    paragraph (3) of such section
                                    for 2011, in addition to
                                    applying the adjustment
                                    established in paragraph (2)
                                    for 2010.
                                      (II) Construction.--Nothing
                                    in this clause shall be
                                    construed as limiting the
                                    amount of adjustment for case
                                    mix for 2010 or 2011 if more
                                    recent data indicate an
                                    appropriate adjustment that is
                                    greater than the amount
                                    established in the section
                                    described in subclause (I).

               *       *       *       *       *       *       *

                           MEDICARE IMPROVEMENT FUND

      Sec. 1898. (a) * * *
      (b) Funding.--
              (1) In general.--There shall be available to the
            Fund, for expenditures from the Fund for services
            furnished during--
                      [(A) fiscal year 2014, $22,290,000,000; and]
                      (A) the period beginning with fiscal year
                    2011 and ending with fiscal year 2019,
                    $8,000,000,000; and

               *       *       *       *       *       *       *

    TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

               *       *       *       *       *       *       *

                       STATE PLANS FOR MEDICAL ASSISTANCE

      Sec. 1902. (a) A State plan for medical assistance must--
              (1) * * *

               *       *       *       *       *       *       *

              (9) provide--
                      (A) * * *
                      (B) for the establishment or designation of a
                    State authority or authorities which shall be
                    responsible for establishing and maintaining
                    standards, other than those relating to health,
                    for such institutions, [and]
                      (C) that any laboratory services paid for
                    under such plan must be provided by a
                    laboratory which meets the applicable
                    requirements of section 1861(e)(9) or
                    paragraphs (16) and (17) of section 1861(s),
                    or, in the case of a laboratory which is in a
                    rural health clinic, of section
                    1861(aa)(2)(G)[;], and
                      (D) that the State maintain a consumer-
                    oriented website providing useful information
                    to consumers regarding all skilled nursing
                    facilities and all nursing facilities in the
                    State, including for each facility, Form 2567
                    State inspection reports (or a successor form),
                    complaint investigation reports, the facility's
                    plan of correction, and such other information
                    that the State or the Secretary considers
                    useful in assisting the public to assess the
                    quality of long term care options and the
                    quality of care provided by individual
                    facilities;

               *       *       *       *       *       *       *

              (23) provide that (A) any individual eligible for
            medical assistance (including drugs) may obtain such
            assistance from any institution, agency, community
            pharmacy, or person, qualified to perform the service
            or services required (including an organization which
            provides such services, or arranges for their
            availability, on a prepayment basis), who undertakes to
            provide him such services, and (B) an enrollment of an
            individual eligible for medical assistance in a primary
            care case-management system (described in section
            1915(b)(1)), a medicaid managed care organization, or a
            similar entity shall not restrict the choice of the
            qualified person from whom the individual may receive
            services under section 1905(a)(4)(C), except as
            provided in subsection (g) and in section 1915, except
            that this paragraph shall not apply in the case of
            Puerto Rico, the Virgin Islands, and Guam, and except
            that nothing in this paragraph shall be construed as
            requiring a State to provide medical assistance for
            such services furnished by a person or entity convicted
            of a felony under Federal or State law for an offense
            which the State agency determines is inconsistent with
            the best interests of beneficiaries under the State
            plan or by a person to whom or entity to which a
            moratorium under section 1128G(a)(4) is applied during
            the period of such moratorium;

               *       *       *       *       *       *       *

              (72) provide that the State will not prevent a
            Federally-qualified health center from entering into
            contractual relationships with private practice dental
            providers in the provision of Federally-qualified
            health center services; [and]
              (73) in the case of any State in which 1 or more
            Indian Health Programs or Urban Indian Organizations
            furnishes health care services, provide for a process
            under which the State seeks advice on a regular,
            ongoing basis from designees of such Indian Health
            Programs and Urban Indian Organizations on matters
            relating to the application of this title that are
            likely to have a direct effect on such Indian Health
            Programs and Urban Indian Organizations and that--
                      (A)  * * *
                      (B) may include appointment of an advisory
                    committee and of a designee of such Indian
                    Health Programs and Urban Indian Organizations
                    to the medical care advisory committee advising
                    the State on its State plan under this
                    title[.]; and
              (74) provide that the State will enforce any
            determination made by the Secretary under subsection
            (a) of section 1128G (relating to a significant risk of
            fraudulent activity with respect to a category of
            provider or supplier described in such subsection (a)
            through use of the appropriate procedures described in
            such subsection (a)) or subsection (b) of such section
            (relating to disclosure requirements), and that the
            State will carry out any activities as required by the
            Secretary for purposes of such subsection (a) and apply
            any enhanced safeguards, with respect to a provider or
            supplier described in such subsection (b), as the
            Secretary determines necessary under such subsection
            (b).

               *       *       *       *       *       *       *

                                  DEFINITIONS

      Sec. 1905. For purposes of this title--
      (a) * * *

               *       *       *       *       *       *       *

      (o)(1) * * *

               *       *       *       *       *       *       *

      (4) The provisions of section 1819A shall apply to a hospice
    program providing hospice care under this title in the same
    manner as such provisions apply to a hospice program providing
    hospice care under title XVIII.
      (p)(1) The term ``qualified medicare beneficiary'' means an
    individual--
              (A) * * *

               *       *       *       *       *       *       *

              (C) whose resources (as determined under section 1613
            for purposes of the supplemental security income
            program) do not exceed twice the maximum amount of
            resources that an individual may have and obtain
            benefits under that program or, [effective beginning
            with January 1, 2010] effective for the period
            beginning with January 1, 2010, and ending with
            December 31, 2011, whose resources (as so determined)
            do not exceed the maximum resource level applied for
            the year under subparagraph (D) of section 1860D-
            14(a)(3) (determined without regard to the life
            insurance policy exclusion provided under subparagraph
            (G) of such section) applicable to an individual or to
            the individual and the individual's spouse (as the case
            may be) or, effective beginning with January 1, 2012,
            whose resources (as so determined) do not exceed the
            maximum resource level applied for the year under
            subparagraph (E) of section 1860D-14(a)(3) (determined
            without regard to the life insurance policy exclusion
            provided under subparagraph (G) of such section)
            applicable to an individual or to the individual and
            the individual's spouse (as the case may be).

               *       *       *       *       *       *       *

                      REQUIREMENTS FOR NURSING FACILITIES

      Sec. 1919. (a) * * *
      (b) Requirements Relating to Provision of Services.--
              (1) Quality of life.--
                      (A) * * *
                      (B) Quality assessment and [assurance]
                    assurance and quality assurance and performance
                    improvement program.--
                              (i) In general.--A nursing facility
                            must maintain a quality assessment and
                            assurance committee, consisting of the
                            director of nursing services, a
                            physician designated by the facility,
                            and at least 3 other members of the
                            facility's staff, which (i) meets at
                            least quarterly to identify issues with
                            respect to which quality assessment and
                            assurance activities are necessary and
                            (ii) develops and implements
                            appropriate plans of action to correct
                            identified quality deficiencies.
                              (ii) Quality assurance and
                            performance improvement program.--
                                      (I) In general.--Not later
                                    than December 31, 2011, the
                                    Secretary shall establish and
                                    implement a quality assurance
                                    and performance improvement
                                    program (in this clause
                                    referred to as the ``QAPI
                                    program'') for nursing
                                    facilities, including multi-
                                    unit chains of such facilities.
                                    Under the QAPI program, the
                                    Secretary shall establish
                                    standards relating to such
                                    facilities and provide
                                    technical assistance to such
                                    facilities on the development
                                    of best practices in order to
                                    meet such standards. Not later
                                    than 1 year after the date on
                                    which the regulations are
                                    promulgated under subclause
                                    (II), a nursing facility must
                                    submit to the Secretary a plan
                                    for the facility to meet such
                                    standards and implement such
                                    best practices, including how
                                    to coordinate the
                                    implementation of such plan
                                    with quality assessment and
                                    assurance activities conducted
                                    under clause (i).
                                      (II) Regulations.--The
                                    Secretary shall promulgate
                                    regulations to carry out this
                                    clause.

               *       *       *       *       *       *       *

              (8) Information on nurse staffing.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Submission of staffing information based
                    on payroll data in a uniform format.--Beginning
                    not later than 2 years after the date of the
                    enactment of this subparagraph, and after
                    consulting with State long-term care ombudsman
                    programs, consumer advocacy groups, provider
                    stakeholder groups, employees and their
                    representatives, and other parties the
                    Secretary deems appropriate, the Secretary
                    shall require a nursing facility to
                    electronically submit to the Secretary direct
                    care staffing information (including
                    information with respect to agency and contract
                    staff) based on payroll and other verifiable
                    and auditable data in a uniform format
                    (according to specifications established by the
                    Secretary in consultation with such programs,
                    groups, and parties). Such specifications shall
                    require that the information submitted under
                    the preceding sentence--
                              (i) specify the category of work a
                            certified employee performs (such as
                            whether the employee is a registered
                            nurse, licensed practical nurse,
                            licensed vocational nurse, certified
                            nursing assistant, therapist, or other
                            medical personnel);
                              (ii) include resident census data and
                            information on resident case mix;
                              (iii) include a regular reporting
                            schedule; and
                              (iv) include information on employee
                            turnover and tenure and on the hours of
                            care provided by each category of
                            certified employees referenced in
                            clause (i) per resident per day.
                    Nothing in this subparagraph shall be construed
                    as preventing the Secretary from requiring
                    submission of such information with respect to
                    specific categories, such as nursing staff,
                    before other categories of certified employees.
                    Information under this subparagraph with
                    respect to agency and contract staff shall be
                    kept separate from information on employee
                    staffing.
      (c) Requirements Relating to Residents' Rights.--
              (1) * * *

               *       *       *       *       *       *       *

              (9) Notification of facility closure.--
                      (A) In general.--Any individual who is an
                    administrator of a nursing facility must--
                              (i) submit to the Secretary, the
                            State long-term care ombudsman,
                            residents of the facility, and the
                            legal representatives of such residents
                            or other responsible parties, written
                            notification of an impending closure--
                                      (I) subject to subclause
                                    (II), not later than the date
                                    that is 60 days prior to the
                                    date of such closure; and
                                      (II) in the case of a
                                    facility where the Secretary
                                    terminates the facility's
                                    participation under this title,
                                    not later than the date that
                                    the Secretary determines
                                    appropriate;
                              (ii) ensure that the facility does
                            not admit any new residents on or after
                            the date on which such written
                            notification is submitted; and
                              (iii) include in the notice a plan
                            for the transfer and adequate
                            relocation of the residents of the
                            facility by a specified date prior to
                            closure that has been approved by the
                            State, including assurances that the
                            residents will be transferred to the
                            most appropriate facility or other
                            setting in terms of quality, services,
                            and location, taking into consideration
                            the needs and best interests of each
                            resident.
                      (B) Relocation.--
                              (i) In general.--The State shall
                            ensure that, before a facility closes,
                            all residents of the facility have been
                            successfully relocated to another
                            facility or an alternative home and
                            community-based setting.
                              (ii) Continuation of payments until
                            residents relocated.--The Secretary
                            may, as the Secretary determines
                            appropriate, continue to make payments
                            under this title with respect to
                            residents of a facility that has
                            submitted a notification under
                            subparagraph (A) during the period
                            beginning on the date such notification
                            is submitted and ending on the date on
                            which the resident is successfully
                            relocated.
      (d) Requirements Relating to Administration and Other
    Matters.--
              (1) Administration.--
                      (A) * * *
                      [(B) Required notices.--If a change occurs
                    in--
                              [(i) the persons with an ownership or
                            control interest (as defined in section
                            1124(a)(3)) in the facility,
                              [(ii) the persons who are officers,
                            directors, agents, or managing
                            employees (as defined in section
                            1126(b)) of the facility,
                              [(iii) the corporation, association,
                            or other company responsible for the
                            management of the facility, or
                              [(iv) the individual who is the
                            administrator or director of nursing of
                            the facility,
                    nursing facility must provide notice to the
                    State agency responsible for the licensing of
                    the facility, at the time of the change, of the
                    change and of the identity of each new person,
                    company, or individual described in the
                    respective clause.]
                      [(C)] (B) Nursing facility administrator.--
                    The administrator of a nursing facility must
                    meet standards established by the Secretary
                    under subsection (f)(4).
                      (C) Compliance and ethics program.--
                              (i) Requirement.--On or after the
                            date that is 36 months after the date
                            of the enactment of this subparagraph,
                            a nursing facility shall, with respect
                            to the entity that operates the
                            facility (in this subparagraph referred
                            to as the ``operating organization'' or
                            ``organization''), have in operation a
                            compliance and ethics program that is
                            effective in preventing and detecting
                            criminal, civil, and administrative
                            violations under this Act and in
                            promoting quality of care consistent
                            with regulations developed under clause
                            (ii).
                              (ii) Development of regulations.--
                                      (I) In general.--Not later
                                    than the date that is 2 years
                                    after such date of the
                                    enactment, the Secretary, in
                                    consultation with the Inspector
                                    General of the Department of
                                    Health and Human Services,
                                    shall develop regulations for
                                    an effective compliance and
                                    ethics program for operating
                                    organizations, which may
                                    include a model compliance
                                    program.
                                      (II) Design of regulations.--
                                    Such regulations with respect
                                    to specific elements or
                                    formality of a program may vary
                                    with the size of the
                                    organization, such that larger
                                    organizations should have a
                                    more formal and rigorous
                                    program and include established
                                    written policies defining the
                                    standards and procedures to be
                                    followed by its employees. Such
                                    requirements may specifically
                                    apply to the corporate level
                                    management of multi-unit
                                    nursing home chains.
                                      (III) Evaluation.--Not later
                                    than 3 years after the date of
                                    promulgation of regulations
                                    under this clause the Secretary
                                    shall complete an evaluation of
                                    the compliance and ethics
                                    programs required to be
                                    established under this
                                    subparagraph. Such evaluation
                                    shall determine if such
                                    programs led to changes in
                                    deficiency citations, changes
                                    in quality performance, or
                                    changes in other metrics of
                                    resident quality of care. The
                                    Secretary shall submit to
                                    Congress a report on such
                                    evaluation and shall include in
                                    such report such
                                    recommendations regarding
                                    changes in the requirements for
                                    such programs as the Secretary
                                    determines appropriate.
                              (iii) Requirements for compliance and
                            ethics programs.--In this subparagraph,
                            the term ``compliance and ethics
                            program'' means, with respect to a
                            nursing facility, a program of the
                            operating organization that--
                                      (I) has been reasonably
                                    designed, implemented, and
                                    enforced so that it generally
                                    will be effective in preventing
                                    and detecting criminal, civil,
                                    and administrative violations
                                    under this Act and in promoting
                                    quality of care; and
                                      (II) includes at least the
                                    required components specified
                                    in clause (iv).
                              (iv) Required components of
                            program.--The required components of a
                            compliance and ethics program of an
                            organization are the following:
                                      (I) The organization must
                                    have established compliance
                                    standards and procedures to be
                                    followed by its employees and
                                    other agents that are
                                    reasonably capable of reducing
                                    the prospect of criminal,
                                    civil, and administrative
                                    violations under this Act.
                                      (II) Specific individuals
                                    within high-level personnel of
                                    the organization must have been
                                    assigned overall responsibility
                                    to oversee compliance with such
                                    standards and procedures and
                                    has sufficient resources and
                                    authority to assure such
                                    compliance.
                                      (III) The organization must
                                    have used due care not to
                                    delegate substantial
                                    discretionary authority to
                                    individuals whom the
                                    organization knew, or should
                                    have known through the exercise
                                    of due diligence, had a
                                    propensity to engage in
                                    criminal, civil, and
                                    administrative violations under
                                    this Act.
                                      (IV) The organization must
                                    have taken steps to communicate
                                    effectively its standards and
                                    procedures to all employees and
                                    other agents, such as by
                                    requiring participation in
                                    training programs or by
                                    disseminating publications that
                                    explain in a practical manner
                                    what is required.
                                      (V) The organization must
                                    have taken reasonable steps to
                                    achieve compliance with its
                                    standards, such as by utilizing
                                    monitoring and auditing systems
                                    reasonably designed to detect
                                    criminal, civil, and
                                    administrative violations under
                                    this Act by its employees and
                                    other agents and by having in
                                    place and publicizing a
                                    reporting system whereby
                                    employees and other agents
                                    could report violations by
                                    others within the organization
                                    without fear of retribution.
                                      (VI) The standards must have
                                    been consistently enforced
                                    through appropriate
                                    disciplinary mechanisms,
                                    including, as appropriate,
                                    discipline of individuals
                                    responsible for the failure to
                                    detect an offense.
                                      (VII) After an offense has
                                    been detected, the organization
                                    must have taken all reasonable
                                    steps to respond appropriately
                                    to the offense and to prevent
                                    further similar offenses,
                                    including repayment of any
                                    funds to which it was not
                                    entitled and any necessary
                                    modification to its program to
                                    prevent and detect criminal,
                                    civil, and administrative
                                    violations under this Act.
                                      (VIII) The organization must
                                    periodically undertake
                                    reassessment of its compliance
                                    program to identify changes
                                    necessary to reflect changes
                                    within the organization and its
                                    facilities.
                              (v) Coordination.--The provisions of
                            this subparagraph shall apply with
                            respect to a nursing facility in lieu
                            of section 1902(a)(77).
                      (D) Availability of survey, certification,
                    and complaint investigation reports.--A nursing
                    facility must--
                              (i) have reports with respect to any
                            surveys, certifications, and complaint
                            investigations made respecting the
                            facility during the 3 preceding years
                            available for any individual to review
                            upon request; and
                              (ii) post notice of the availability
                            of such reports in areas of the
                            facility that are prominent and
                            accessible to the public.
                    The facility shall not make available under
                    clause (i) identifying information about
                    complainants or residents.

               *       *       *       *       *       *       *

      (e) State Requirements Relating to Nursing Facility
    Requirements.--As a condition of approval of its plan under
    this title, a State must provide for the following:
              (1) * * *

               *       *       *       *       *       *       *

              (8) Complaint processes and whistleblower
            protection.--
                      (A) Complaint forms.--The State must make the
                    standardized complaint form developed under
                    subsection (f)(11) available upon request to--
                              (i) a resident of a nursing facility;
                              (ii) any person acting on the
                            resident's behalf; and
                              (iii) any person who works at a
                            nursing facility or a representative of
                            such a worker.
                      (B) Complaint resolution process.--The State
                    must establish a complaint resolution process
                    in order to ensure that a resident, the legal
                    representative of a resident of a nursing
                    facility, or other responsible party is not
                    retaliated against if the resident, legal
                    representative, or responsible party has
                    complained, in good faith, about the quality of
                    care or other issues relating to the nursing
                    facility, that the legal representative of a
                    resident of a nursing facility or other
                    responsible party is not denied access to such
                    resident or otherwise retaliated against if
                    such representative party has complained, in
                    good faith, about the quality of care provided
                    by the facility or other issues relating to the
                    facility, and that a person who works at a
                    nursing facility is not retaliated against if
                    the worker has complained, in good faith, about
                    quality of care or services or an issue
                    relating to the quality of care or services
                    provided at the facility, whether the resident,
                    legal representative, other responsible party,
                    or worker used the form developed under
                    subsection (f)(11) or some other method for
                    submitting the complaint. Such complaint
                    resolution process shall include--
                              (i) procedures to assure accurate
                            tracking of complaints received,
                            including notification to the
                            complainant that a complaint has been
                            received;
                              (ii) procedures to determine the
                            likely severity of a complaint and for
                            the investigation of the complaint;
                              (iii) deadlines for responding to a
                            complaint and for notifying the
                            complainant of the outcome of the
                            investigation; and
                              (iv) procedures to ensure that the
                            identity of the complainant will be
                            kept confidential.
                      (C) Whistleblower protection.--
                              (i) Prohibition against
                            retaliation.--No person who works at a
                            nursing facility may be penalized,
                            discriminated, or retaliated against
                            with respect to any aspect of
                            employment, including discharge,
                            promotion, compensation, terms,
                            conditions, or privileges of
                            employment, or have a contract for
                            services terminated, because the person
                            (or anyone acting at the person's
                            request) complained, in good faith,
                            about the quality of care or services
                            provided by a nursing facility or about
                            other issues relating to quality of
                            care or services, whether using the
                            form developed under subsection (f)(11)
                            or some other method for submitting the
                            complaint.
                              (ii) Retaliatory reporting.--A
                            nursing facility may not file a
                            complaint or a report against a person
                            who works (or has worked at the
                            facility with the appropriate State
                            professional disciplinary agency
                            because the person (or anyone acting at
                            the person's request) complained in
                            good faith, as described in clause (i).
                              (iii) Commencement of action.--Any
                            person who believes the person has been
                            penalized, discriminated, or retaliated
                            against or had a contract for services
                            terminated in violation of clause (i)
                            or against whom a complaint has been
                            filed in violation of clause (ii) may
                            bring an action at law or equity in the
                            appropriate district court of the
                            United States, which shall have
                            jurisdiction over such action without
                            regard to the amount in controversy or
                            the citizenship of the parties, and
                            which shall have jurisdiction to grant
                            complete relief, including, but not
                            limited to, injunctive relief (such as
                            reinstatement, compensatory damages
                            (which may include reimbursement of
                            lost wages, compensation, and
                            benefits), costs of litigation
                            (including reasonable attorney and
                            expert witness fees), exemplary damages
                            where appropriate, and such other
                            relief as the court deems just and
                            proper.
                              (iv) Rights not waivable.--The rights
                            protected by this paragraph may not be
                            diminished by contract or other
                            agreement, and nothing in this
                            paragraph shall be construed to
                            diminish any greater or additional
                            protection provided by Federal or State
                            law or by contract or other agreement.
                              (v) Requirement to post notice of
                            employee rights.--Each nursing facility
                            shall post conspicuously in an
                            appropriate location a sign (in a form
                            specified by the Secretary) specifying
                            the rights of persons under this
                            paragraph and including a statement
                            that an employee may file a complaint
                            with the Secretary against a nursing
                            facility that violates the provisions
                            of this paragraph and information with
                            respect to the manner of filing such a
                            complaint.
                      (D) Rule of construction.--Nothing in this
                    paragraph shall be construed as preventing a
                    resident of a nursing facility (or a person
                    acting on the resident's behalf) from
                    submitting a complaint in a manner or format
                    other than by using the standardized complaint
                    form developed under subsection (f)(11)
                    (including submitting a complaint orally).
                      (E) Good faith defined.--For purposes of this
                    paragraph, an individual shall be deemed to be
                    acting in good faith with respect to the filing
                    of a complaint if the individual reasonably
                    believes--
                              (i) the information reported or
                            disclosed in the complaint is true; and
                              (ii) the violation of this title has
                            occurred or may occur in relation to
                            such information.
      (f) Responsibilities of Secretary Relating to Nursing
    Facility Requirements.--
              (1) * * *
              (2) Requirements for nurse aide training and
            competency evaluation programs and for nurse aide
            competency evaluation programs.--
                      (A) In general.--For purposes of subsections
                    (b)(5) and (e)(1)(A), the Secretary shall
                    establish, by not later than September 1,
                    1988--
                              (i) requirements for the approval of
                            nurse aide training and competency
                            evaluation programs, including
                            requirements relating to (I) the areas
                            to be covered in such a program
                            (including at least basic nursing
                            skills, personal care skills,
                            recognition of mental health and social
                            service needs, care of cognitively
                            impaired residents, basic restorative
                            services, and residents' rights) and
                            content of the curriculum (including,
                            in the case of initial training and, if
                            the Secretary determines appropriate,
                            in the case of ongoing training,
                            dementia management training and
                            resident abuse prevention training),
                            (II) minimum hours of initial and
                            ongoing training and retraining
                            (including not less than 75 hours in
                            the case of initial training), (III)
                            qualifications of instructors, and (IV)
                            procedures for determination of
                            competency;

               *       *       *       *       *       *       *

              (10) Special focus facility program.--
                      (A) In general.--The Secretary shall conduct
                    a special focus facility program for
                    enforcement of requirements for nursing
                    facilities that the Secretary has identified as
                    having substantially failed to meet applicable
                    requirements of this Act.
                      (B) Periodic surveys.--Under such program the
                    Secretary shall conduct surveys of each
                    facility in the program not less often than
                    once every 6 months.
              (11) Standardized complaint form.--The Secretary
            shall develop a standardized complaint form for use by
            a resident (or a person acting on the resident's
            behalf) in filing a complaint with a State survey and
            certification agency and a State long-term care
            ombudsman program with respect to a nursing facility.
      (g) Survey and Certification Process.--
              (1) * * *

               *       *       *       *       *       *       *

              (5) Disclosure of results of inspections and
            activities.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (E) Submission of survey and certification
                    information to the secretary.--In order to
                    improve the timeliness of information made
                    available to the public under subparagraph (A)
                    and provided on the Nursing Home Compare
                    Medicare website under subsection (i), each
                    State shall submit information respecting any
                    survey or certification made respecting a
                    nursing facility (including any enforcement
                    actions taken by the State) to the Secretary
                    not later than the date on which the State
                    sends such information to the facility. The
                    Secretary shall use the information submitted
                    under the preceding sentence to update the
                    information provided on the Nursing Home
                    Compare Medicare website as expeditiously as
                    practicable but not less frequently than
                    quarterly.
      (h) Enforcement Process.--
              (1) * * *
              (2) Specified remedies.--
                      (A) Listing.--Except as provided in
                    subparagraph (B)(ii), each State shall
                    establish by law (whether statute or
                    regulation) at least the following remedies:
                              (i) * * *
                              (ii) [A civil money penalty assessed
                            and collected, with interest, for each
                            day in which the facility is or was out
                            of compliance with a requirement of
                            subsection (b), (c), or (d).] A civil
                            money penalty in accordance with
                            subparagraph (G). Funds collected by a
                            State as a result of imposition of such
                            a penalty (or as a result of the
                            imposition by the State of a civil
                            money penalty for activities described
                            in subsections (b)(3)(B)(ii)(I),
                            (b)(3)(B)(ii)(II), or (g)(2)(A)(i))
                            shall be applied to the protection of
                            the health or property of residents of
                            nursing facilities that the State or
                            the Secretary finds deficient,
                            including payment for the costs of
                            relocation of residents to other
                            facilities, maintenance of operation of
                            a facility pending correction of
                            deficiencies or closure, and
                            reimbursement of residents for personal
                            funds lost, and some portion of such
                            funds may be used to support activities
                            that benefit residents, including
                            assistance to support and protect
                            residents of a facility that closes
                            (voluntarily or involuntarily) or is
                            decertified (including offsetting costs
                            of relocating residents to home and
                            community-based settings or another
                            facility), projects that support
                            resident and family councils and other
                            consumer involvement in assuring
                            quality care in facilities, and
                            facility improvement initiatives
                            approved by the Secretary (including
                            joint training of facility staff and
                            surveyors, providing technical
                            assistance to facilities under quality
                            assurance programs, the appointment of
                            temporary management, and other
                            activities approved by the Secretary).

               *       *       *       *       *       *       *

                      (G) Civil money penalties.--
                              (i) In general.--The State may impose
                            a civil money penalty under
                            subparagraph (A)(ii) in the applicable
                            per instance or per day amount (as
                            defined in subclause (II) and (III))
                            for each day or instance, respectively,
                            of noncompliance (as determined
                            appropriate by the Secretary).
                              (ii) Applicable per instance
                            amount.--In this subparagraph, the term
                            ``applicable per instance amount''
                            means--
                                      (I) in the case where the
                                    deficiency is found to be a
                                    direct proximate cause of death
                                    of a resident of the facility,
                                    an amount not to exceed
                                    $100,000.
                                      (II) in each case of a
                                    deficiency where the facility
                                    is cited for actual harm or
                                    immediate jeopardy, an amount
                                    not less than $3,050 and not
                                    more than $25,000; and
                                      (III) in each case of any
                                    other deficiency, an amount not
                                    less than $250 and not to
                                    exceed $3050.
                              (iii) Applicable per day amount.--In
                            this subparagraph, the term
                            ``applicable per day amount'' means--
                                      (I) in each case of a
                                    deficiency where the facility
                                    is cited for actual harm or
                                    immediate jeopardy, an amount
                                    not less than $3,050 and not
                                    more than $25,000 and
                                      (II) in each case of any
                                    other deficiency, an amount not
                                    less than $250 and not to
                                    exceed $3,050.
                              (iv) Reduction of civil money
                            penalties in certain circumstances.--
                            Subject to clauses (v) and (vi), in the
                            case where a facility self-reports and
                            promptly corrects a deficiency for
                            which a penalty was imposed under
                            subparagraph (A)(ii) not later than 10
                            calendar days after the date of such
                            imposition, the State may reduce the
                            amount of the penalty imposed by not
                            more than 50 percent.
                              (v) Prohibition on reduction for
                            certain deficiencies.--
                                      (I) Repeat deficiencies.--The
                                    State may not reduce under
                                    clause (iv) the amount of a
                                    penalty if the State had
                                    reduced a penalty imposed on
                                    the facility in the preceding
                                    year under such clause with
                                    respect to a repeat deficiency.
                                      (II) Certain other
                                    deficiencies.--The State may
                                    not reduce under clause (iv)
                                    the amount of a penalty if the
                                    penalty is imposed for a
                                    deficiency described in clause
                                    (ii)(II) or (iii)(I) and the
                                    actual harm or widespread harm
                                    that immediately jeopardizes
                                    the health or safety of a
                                    resident or residents of the
                                    facility, or if the penalty is
                                    imposed for a deficiency
                                    described in clause (ii)(I).
                                      (III) Limitation on aggregate
                                    reductions.--The aggregate
                                    reduction in a penalty under
                                    clause (iv) may not exceed 35
                                    percent on the basis of self-
                                    reporting, on the basis of a
                                    waiver or an appeal (as
                                    provided for under regulations
                                    under section 488.436 of title
                                    42, Code of Federal
                                    Regulations), or on the basis
                                    of both.
                              (vi) Collection of civil money
                            penalties.--In the case of a civil
                            money penalty imposed under
                            subparagraph (A)(ii), the State--
                                      (I) subject to subclause
                                    (III), shall, not later than 30
                                    days after the date of
                                    imposition of the penalty,
                                    provide the opportunity for the
                                    facility to participate in an
                                    independent informal dispute
                                    resolution process which
                                    generates a written record
                                    prior to the collection of such
                                    penalty, but such opportunity
                                    shall not affect the
                                    responsibility of the State
                                    survey agency for making final
                                    recommendations for such
                                    penalties;
                                      (II) in the case where the
                                    penalty is imposed for each day
                                    of noncompliance, shall not
                                    impose a penalty for any day
                                    during the period beginning on
                                    the initial day of the
                                    imposition of the penalty and
                                    ending on the day on which the
                                    informal dispute resolution
                                    process under subclause (I) is
                                    completed;
                                      (III) may provide for the
                                    collection of such civil money
                                    penalty and the placement of
                                    such amounts collected in an
                                    escrow account under the
                                    direction of the State on the
                                    earlier of the date on which
                                    the informal dispute resolution
                                    process under subclause (I) is
                                    completed or the date that is
                                    90 days after the date of the
                                    imposition of the penalty;
                                      (IV) may provide that such
                                    amounts collected are kept in
                                    such account pending the
                                    resolution of any subsequent
                                    appeals;
                                      (V) in the case where the
                                    facility successfully appeals
                                    the penalty, may provide for
                                    the return of such amounts
                                    collected (plus interest) to
                                    the facility; and
                                      (VI) in the case where all
                                    such appeals are unsuccessful,
                                    may provide that such funds
                                    collected shall be used for the
                                    purposes described in the
                                    second sentence of subparagraph
                                    (A)(ii).
              (3) Secretarial authority.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Specified remedies.--The Secretary may
                    take the following actions with respect to a
                    finding that a facility has not met an
                    applicable requirement:
                              (i) * * *
                              [(ii) Authority with respect to civil
                            money penalties.--The Secretary may
                            impose a civil money penalty in an
                            amount not to exceed $10,000 for each
                            day of noncompliance. The provisions of
                            section 1128A (other than subsections
                            (a) and (b)) shall apply to a civil
                            money penalty under the previous
                            sentence in the same manner as such
                            provisions apply to a penalty or
                            proceeding under section 1128A(a).]
                              (ii) Authority with respect to civil
                            money penalties.--
                                      (I) Amount.--Subject to
                                    subclause (II), the Secretary
                                    may impose a civil money
                                    penalty in an amount not to
                                    exceed $10,000 for each day or
                                    each instance of noncompliance
                                    (as determined appropriate by
                                    the Secretary).
                                      (II) Reduction of civil money
                                    penalties in certain
                                    circumstances.--Subject to
                                    subclause (III), in the case
                                    where a facility self-reports
                                    and promptly corrects a
                                    deficiency for which a penalty
                                    was imposed under this clause
                                    not later than 10 calendar days
                                    after the date of such
                                    imposition, the Secretary may
                                    reduce the amount of the
                                    penalty imposed by not more
                                    than 50 percent.
                                      (III) Prohibition on
                                    reduction for repeat
                                    deficiencies.--The Secretary
                                    may not reduce the amount of a
                                    penalty under subclause (II) if
                                    the Secretary had reduced a
                                    penalty imposed on the facility
                                    in the preceding year under
                                    such subclause with respect to
                                    a repeat deficiency.
                                      (IV) Collection of civil
                                    money penalties.--In the case
                                    of a civil money penalty
                                    imposed under this clause, the
                                    Secretary--
                                              (aa) subject to item
                                            (bb), shall, not later
                                            than 30 days after the
                                            date of imposition of
                                            the penalty, provide
                                            the opportunity for the
                                            facility to participate
                                            in an independent
                                            informal dispute
                                            resolution process
                                            which generates a
                                            written record prior to
                                            the collection of such
                                            penalty;
                                              (bb) in the case
                                            where the penalty is
                                            imposed for each day of
                                            noncompliance, shall
                                            not impose a penalty
                                            for any day during the
                                            period beginning on the
                                            initial day of the
                                            imposition of the
                                            penalty and ending on
                                            the day on which the
                                            informal dispute
                                            resolution process
                                            under item (aa) is
                                            completed;
                                              (cc) may provide for
                                            the collection of such
                                            civil money penalty and
                                            the placement of such
                                            amounts collected in an
                                            escrow account under
                                            the direction of the
                                            Secretary on the
                                            earlier of the date on
                                            which the informal
                                            dispute resolution
                                            process under item (aa)
                                            is completed or the
                                            date that is 90 days
                                            after the date of the
                                            imposition of the
                                            penalty;
                                              (dd) may provide that
                                            such amounts collected
                                            are kept in such
                                            account pending the
                                            resolution of any
                                            subsequent appeals;
                                              (ee) in the case
                                            where the facility
                                            successfully appeals
                                            the penalty, may
                                            provide for the return
                                            of such amounts
                                            collected (plus
                                            interest) to the
                                            facility; and
                                              (ff) in the case
                                            where all such appeals
                                            are unsuccessful, may
                                            provide that some
                                            portion of such amounts
                                            collected may be used
                                            to support activities
                                            that benefit residents,
                                            including assistance to
                                            support and protect
                                            residents of a facility
                                            that closes
                                            (voluntarily or
                                            involuntarily) or is
                                            decertified (including
                                            offsetting costs of
                                            relocating residents to
                                            home and community-
                                            based settings or
                                            another facility),
                                            projects that support
                                            resident and family
                                            councils and other
                                            consumer involvement in
                                            assuring quality care
                                            in facilities, and
                                            facility improvement
                                            initiatives approved by
                                            the Secretary
                                            (including joint
                                            training of facility
                                            staff and surveyors,
                                            technical assistance
                                            for facilities under
                                            quality assurance
                                            programs, the
                                            appointment of
                                            temporary management,
                                            and other activities
                                            approved by the
                                            Secretary).
                                      (V) Procedure.--The
                                    provisions of section 1128A
                                    (other than subsections (a) and
                                    (b) and except to the extent
                                    that such provisions require a
                                    hearing prior to the imposition
                                    of a civil money penalty) shall
                                    apply to a civil money penalty
                                    under this clause in the same
                                    manner as such provisions apply
                                    to a penalty or proceeding
                                    under section 1128A(a).

               *       *       *       *       *       *       *

              (8) Construction.--The remedies provided under this
            subsection are in addition to those otherwise available
            under State or Federal law and shall not be construed
            as limiting such other remedies, including any remedy
            available to an individual at common law. The remedies
            described in clauses (i), (iii), and (iv) of paragraph
            (2)(A) and in paragraph (3)(C)(ii) may be imposed
            during the pendency of any hearing. The provisions of
            this subsection shall apply to a nursing facility (or
            portion thereof) notwithstanding that the facility (or
            portion thereof) also is a skilled nursing facility for
            purposes of title XVIII.

               *       *       *       *       *       *       *

      (i) Nursing Home Compare Website.--
              (1) Inclusion of additional information.--
                      (A) In general.--The Secretary shall ensure
                    that the Department of Health and Human
                    Services includes, as part of the information
                    provided for comparison of nursing homes on the
                    official Internet website of the Federal
                    Government for Medicare beneficiaries (commonly
                    referred to as the ``Nursing Home Compare''
                    Medicare website) (or a successor website), the
                    following information in a manner that is
                    prominent, easily accessible, readily
                    understandable to consumers of long-term care
                    services, and searchable:
                              (i) Staffing data for each facility
                            (including resident census data and
                            data on the hours of care provided per
                            resident per day) based on data
                            submitted under subsection
                            (b)(8)(C)(ii), including information on
                            staffing turnover and tenure, in a
                            format that is clearly understandable
                            to consumers of long-term care services
                            and allows such consumers to compare
                            differences in staffing between
                            facilities and State and national
                            averages for the facilities. Such
                            format shall include--
                                      (I) concise explanations of
                                    how to interpret the data (such
                                    as plain English explanation of
                                    data reflecting ``nursing home
                                    staff hours per resident
                                    day'');
                                      (II) differences in types of
                                    staff (such as training
                                    associated with different
                                    categories of staff);
                                      (III) the relationship
                                    between nurse staffing levels
                                    and quality of care; and
                                      (IV) an explanation that
                                    appropriate staffing levels
                                    vary based on patient case mix.
                              (ii) Links to State Internet websites
                            with information regarding State survey
                            and certification programs, links to
                            Form 2567 State inspection reports (or
                            a successor form) on such websites,
                            information to guide consumers in how
                            to interpret and understand such
                            reports, and the facility plan of
                            correction or other response to such
                            report.
                              (iii) The standardized complaint form
                            developed under subsection (f)(10),
                            including explanatory material on what
                            complaint forms are, how they are used,
                            and how to file a complaint with the
                            State survey and certification program
                            and the State long-term care ombudsman
                            program.
                              (iv) Summary information on the
                            number, type, severity, and outcome of
                            substantiated complaints.
                              (v) The number of adjudicated
                            instances of criminal violations by
                            employees of a nursing facility--
                                      (I) that were committed
                                    inside of the facility; and
                                      (II) with respect to such
                                    instances of violations or
                                    crimes committed outside of the
                                    facility, that were the
                                    violations or crimes that
                                    resulted in the serious bodily
                                    injury of an elder.
                      (B) Deadline for provision of information.--
                              (i) In general.--Except as provided
                            in clause (ii), the Secretary shall
                            ensure that the information described
                            in subparagraph (A) is included on such
                            website (or a successor website) not
                            later than 1 year after the date of the
                            enactment of this subsection.
                              (ii) Exception.--The Secretary shall
                            ensure that the information described
                            in subparagraph (A)(i) and (A)(iii) is
                            included on such website (or a
                            successor website) not later than the
                            date on which the requirements under
                            section 1124(c)(4) and subsection
                            (b)(8)(C)(ii) are implemented.
              (2) Review and modification of website.--
                      (A) In general.--The Secretary shall
                    establish a process--
                              (i) to review the accuracy, clarity
                            of presentation, timeliness, and
                            comprehensiveness of information
                            reported on such website as of the day
                            before the date of the enactment of
                            this subsection; and
                              (ii) not later than 1 year after the
                            date of the enactment of this
                            subsection, to modify or revamp such
                            website in accordance with the review
                            conducted under clause (i).
                      (B) Consultation.--In conducting the review
                    under subparagraph (A)(i), the Secretary shall
                    consult with--
                              (i) State long-term care ombudsman
                            programs;
                              (ii) consumer advocacy groups;
                              (iii) provider stakeholder groups;
                              (iv) skilled nursing facility
                            employees and their representatives;
                            and
                              (v) any other representatives of
                            programs or groups the Secretary
                            determines appropriate.
      [(i)] (j) Construction.--Where requirements or obligations
    under this section are identical to those provided under
    section 1819 of this Act, the fulfillment of those requirements
    or obligations under section 1819 shall be considered to be the
    fulfillment of the corresponding requirements or obligations
    under this section.

               *       *       *       *       *       *       *

                      PAYMENT FOR COVERED OUTPATIENT DRUGS

      Sec. 1927. (a) * * *
      (b) Terms of Rebate Agreement.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Manufacturer provision of price information.--
                      (A) In general.--Each manufacturer with an
                    agreement in effect under this section shall
                    report to the Secretary--
                              (i) * * *

               *       *       *       *       *       *       *

                              (iii) for calendar quarters beginning
                            on or after January 1, 2004, in
                            conjunction with reporting required
                            under clause (i) and by National Drug
                            Code (including package size)--
                                      (I) * * *

               *       *       *       *       *       *       *

                                      (III) information on those
                                    sales that were made at a
                                    nominal price or otherwise
                                    described in section
                                    1847A(c)(2)(B);
                            for a drug or biological described in
                            subparagraph (A)(iv) (including
                            influenza vaccines furnished on or
                            after January 1, 2011), (C), (D), (E),
                            or (G) of section 1842(o)(1) or section
                            1881(b)(13)(A)(ii), and, for calendar
                            quarters beginning on or after January
                            1, 2007 and only with respect to the
                            information described in subclause
                            (III), for covered outpatient drugs.

               *       *       *       *       *       *       *

    TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE PROGRAM

               *       *       *       *       *       *       *

    SEC. 2102. GENERAL CONTENTS OF STATE CHILD HEALTH PLAN; ELIGIBILITY;
                        OUTREACH.

      (a) * * *

               *       *       *       *       *       *       *

      (d) Program Integrity.--A State child health plan shall
    include a description of the procedures to be used by the
    State--
              (1) to enforce any determination made by the
            Secretary under subsection (a) of section 1128G
            (relating to a significant risk of fraudulent activity
            with respect to a category of provider or supplier
            described in such subsection through use of the
            appropriate procedures described in such subsection);
              (2) to carry out any activities as required by the
            Secretary for purposes of such subsection; and
              (3) to enforce any determination made by the
            Secretary under subsection (b) of section 1128G
            (relating to disclosure requirements) and to apply any
            enhanced safeguards, with respect to a provider or
            supplier described in such subsection, as the Secretary
            determines necessary under such subsection.

               *       *       *       *       *       *       *

    SEC. 2114. ASSURING QUALITY OF CARE IN HOSPICE CARE.

      The provisions of section 1819A shall apply to a hospice
    program providing hospice care under this title in the same
    manner such provisions apply to a hospice program providing
    hospice care under title XVIII.
                                  ----------

    INTERNAL REVENUE CODE OF 1986

               *       *       *       *       *       *       *

    Subtitle A--Income Taxes

               *       *       *       *       *       *       *

    CHAPTER 1--NORMAL TAXES AND SURTAXES

               *       *       *       *       *       *       *

                  Subchapter A--Determination of Tax Liability

                           PART I--TAX ON INDIVIDUALS

         * * * * * * *

    Part VIII. Health Care Related Taxes.

               *       *       *       *       *       *       *

    PART IV--CREDITS AGAINST TAX

               *       *       *       *       *       *       *

                      Subpart D--Business Related Credits

    Sec. 38. General business credit.
         * * * * * * *
    Sec. 45R. Small business employee health coverage credit.

               *       *       *       *       *       *       *

    SEC. 38. GENERAL BUSINESS CREDIT.

      (a) * * *
      (b) Current Year Business Credit.--For purposes of this
    subpart, the amount of the current year business credit is the
    sum of the following credits determined for the taxable year:
              (1) * * *

               *       *       *       *       *       *       *

              (34) the carbon dioxide sequestration credit
            determined under section 45Q(a) [plus]
              (35) the portion of the new qualified plug-in
            electric drive motor vehicle credit to which section
            30D(c)(1) applies[.], plus
              (36) in the case of a qualified small employer (as
            defined in section 45R(e)), the small business employee
            health coverage credit determined under section 45R(a).

               *       *       *       *       *       *       *

    SEC. 45R. SMALL BUSINESS EMPLOYEE HEALTH COVERAGE CREDIT.

      (a) In General.--For purposes of section 38, in the case of a
    qualified small employer, the small business employee health
    coverage credit determined under this section for the taxable
    year is an amount equal to the applicable percentage of the
    qualified employee health coverage expenses of such employer
    for such taxable year.
      (b) Applicable Percentage.--
              (1) In general.--For purposes of this section, the
            applicable percentage is 50 percent.
              (2) Phaseout based on average compensation of
            employees.--In the case of an employer whose average
            annual employee compensation for the taxable year
            exceeds $20,000, the percentage specified in paragraph
            (1) shall be reduced by a number of percentage points
            which bears the same ratio to 50 as such excess bears
            to $20,000.
      (c) Limitations.--
              (1) Phaseout based on employer size.--In the case of
            an employer who employs more than 10 qualified
            employees during the taxable year, the credit
            determined under subsection (a) shall be reduced by an
            amount which bears the same ratio to the amount of such
            credit (determined without regard to this paragraph and
            after the application of the other provisions of this
            section) as--
                      (A) the excess of--
                              (i) the number of qualified employees
                            employed by the employer during the
                            taxable year, over
                              (ii) 10, bears to
                      (B) 15.
              (2) Credit not allowed with respect to certain highly
            compensated employees.--No credit shall be allowed
            under subsection (a) with respect to qualified employee
            health coverage expenses paid or incurred with respect
            to any employee for any taxable year if the aggregate
            compensation paid by the employer to such employee
            during such taxable year exceeds $80,000.
      (d) Qualified Employee Health Coverage Expenses.--For
    purposes of this section--
              (1) In general.--The term ``qualified employee health
            coverage expenses'' means, with respect to any employer
            for any taxable year, the aggregate amount paid or
            incurred by such employer during such taxable year for
            coverage of any qualified employee of the employer
            (including any family coverage which covers such
            employee) under qualified health coverage.
              (2) Qualified health coverage.--The term ``qualified
            health coverage'' means acceptable coverage (as defined
            in section 59B(d)) which--
                      (A) is provided pursuant to an election under
                    section 4980H(a), and
                      (B) satisfies the requirements referred to in
                    section 4980H(c).
      (e) Other Definitions.--For purposes of this section--
              (1) Qualified small employer.--For purposes of this
            section, the term ``qualified small employer'' means
            any employer for any taxable year if--
                      (A) the number of qualified employees
                    employed by such employer during the taxable
                    year does not exceed 25, and
                      (B) the average annual employee compensation
                    of such employer for such taxable year does not
                    exceed the sum of the dollar amounts in effect
                    under subsection (b)(2).
              (2) Qualified employee.--The term ``qualified
            employee'' means any employee of an employer for any
            taxable year of the employer if such employee received
            at least $5,000 of compensation from such employer for
            services performed in the trade or business of such
            employer during such taxable year.
              (3) Average annual employee compensation.--The term
            ``average annual employee compensation'' means, with
            respect to any employer for any taxable year, the
            average amount of compensation paid by such employer to
            qualified employees of such employer during such
            taxable year.
              (4) Compensation.--The term ``compensation'' has the
            meaning given such term in section 408(p)(6)(A).
              (5) Family coverage.--The term ``family coverage''
            means any coverage other than self-only coverage.
      (f) Special Rules.--For purposes of this section--
              (1) Special rule for partnerships and self-
            employed.--In the case of a partnership (or a trade or
            business carried on by an individual) which has one or
            more qualified employees (determined without regard to
            this paragraph) with respect to whom the election under
            4980H(a) applies, each partner (or, in the case of a
            trade or business carried on by an individual, such
            individual) shall be treated as an employee.
              (2) Aggregation rule.--All persons treated as a
            single employer under subsection (b), (c), (m), or (o)
            of section 414 shall be treated as 1 employer.
              (3) Denial of double benefit.--Any deduction
            otherwise allowable with respect to amounts paid or
            incurred for health insurance coverage to which
            subsection (a) applies shall be reduced by the amount
            of the credit determined under this section.
              (4) Inflation adjustment.--In the case of any taxable
            year beginning after 2013, each of the dollar amounts
            in subsections (b)(2), (c)(2), and (e)(2) shall be
            increased by an amount equal to--
                      (A) such dollar amount, multiplied by
                      (B) the cost of living adjustment determined
                    under section 1(f)(3) for the calendar year in
                    which the taxable year begins determined by
                    substituting ``calendar year 2012'' for
                    ``calendar year 1992'' in subparagraph (B)
                    thereof.
            If any increase determined under this paragraph is not
            a multiple of $50, such increase shall be rounded to
            the next lowest multiple of $50.

               *       *       *       *       *       *       *

                      PART VIII--HEALTH CARE RELATED TAXES

     subpart a. tax on individuals without acceptable health care coverage.

                subpart b. surcharge on high income individuals.

     Subpart A--Tax on Individuals Without Acceptable Health Care Coverage

    Sec. 59B. Tax on individuals without acceptable health care coverage.

    SEC. 59B. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE.

      (a) Tax Imposed.--In the case of any individual who does not
    meet the requirements of subsection (d) at any time during the
    taxable year, there is hereby imposed a tax equal to 2.5
    percent of the excess of--
              (1) the taxpayer's modified adjusted gross income for
            the taxable year, over
              (2) the amount of gross income specified in section
            6012(a)(1) with respect to the taxpayer.
      (b) Limitations.--
              (1) Tax limited to average premium.--
                      (A) In general.--The tax imposed under
                    subsection (a) with respect to any taxpayer for
                    any taxable year shall not exceed the
                    applicable national average premium for such
                    taxable year.
                      (B) Applicable national average premium.--
                              (i) In general.--For purposes of
                            subparagraph (A), the ``applicable
                            national average premium'' means, with
                            respect to any taxable year, the
                            average premium (as determined by the
                            Secretary, in coordination with the
                            Health Choices Commissioner) for self-
                            only coverage under a basic plan which
                            is offered in a Health Insurance
                            Exchange for the calendar year in which
                            such taxable year begins.
                              (ii) Failure to provide coverage for
                            more than one individual.--In the case
                            of any taxpayer who fails to meet the
                            requirements of subsection (e) with
                            respect to more than one individual
                            during the taxable year, clause (i)
                            shall be applied by substituting
                            ``family coverage'' for ``self-only
                            coverage''.
              (2) Proration for part year failures.--The tax
            imposed under subsection (a) with respect to any
            taxpayer for any taxable year shall not exceed the
            amount which bears the same ratio to the amount of tax
            so imposed (determined without regard to this paragraph
            and after application of paragraph (1)) as--
                      (A) the aggregate periods during such taxable
                    year for which such individual failed to meet
                    the requirements of subsection (d), bears to
                      (B) the entire taxable year.
      (c) Exceptions.--
              (1) Dependents.--Subsection (a) shall not apply to
            any individual for any taxable year if a deduction is
            allowable under section 151 with respect to such
            individual to another taxpayer for any taxable year
            beginning in the same calendar year as such taxable
            year.
              (2) Nonresident aliens.--Subsection (a) shall not
            apply to any individual who is a nonresident alien.
              (3) Individuals residing outside united states.--Any
            qualified individual (as defined in section 911(d))
            (and any qualifying child residing with such
            individual) shall be treated for purposes of this
            section as covered by acceptable coverage during the
            period described in subparagraph (A) or (B) of section
            911(d)(1), whichever is applicable.
              (4) Individuals residing in possessions of the united
            states.--Any individual who is a bona fide resident of
            any possession of the United States (as determined
            under section 937(a)) for any taxable year (and any
            qualifying child residing with such individual) shall
            be treated for purposes of this section as covered by
            acceptable coverage during such taxable year.
              (5) Religious conscience exemption.--
                      (A) In general.--Subsection (a) shall not
                    apply to any individual (and any qualifying
                    child residing with such individual) for any
                    period if such individual has in effect an
                    exemption which certifies that such individual
                    is a member of a recognized religious sect or
                    division thereof described in section
                    1402(g)(1) and an adherent of established
                    tenets or teachings of such sect or division as
                    described in such section.
                      (B) Exemption.--An application for the
                    exemption described in subparagraph (A) shall
                    be filed with the Secretary at such time and in
                    such form and manner as the Secretary may
                    prescribe. Any such exemption granted by the
                    Secretary shall be effective for such period as
                    the Secretary determines appropriate.
      (d) Acceptable Coverage Requirement.--
              (1) In general.--The requirements of this subsection
            are met with respect to any individual for any period
            if such individual (and each qualifying child of such
            individual) is covered by acceptable coverage at all
            times during such period.
              (2) Acceptable coverage.--For purposes of this
            section, the term ``acceptable coverage'' means any of
            the following:
                      (A) Qualified health benefits plan
                    coverage.--Coverage under a qualified health
                    benefits plan (as defined in section 100(c) of
                    the America's Affordable Health Choices Act of
                    2009).
                      (B) Grandfathered health insurance coverage;
                    coverage under grandfathered employment-based
                    health plan.--Coverage under a grandfathered
                    health insurance coverage (as defined in
                    subsection (a) of section 102 of the America's
                    Affordable Health Choices Act of 2009) or under
                    a current employment-based health plan (within
                    the meaning of subsection (b) of such section).
                      (C) Medicare.--Coverage under part A of title
                    XVIII of the Social Security Act.
                      (D) Medicaid.--Coverage for medical
                    assistance under title XIX of the Social
                    Security Act.
                      (E) Members of the armed forces and
                    dependents (including tricare).--Coverage under
                    chapter 55 of title 10, United States Code,
                    including similar coverage furnished under
                    section 1781 of title 38 of such Code.
                      (F) VA.--Coverage under the veteran's health
                    care program under chapter 17 of title 38,
                    United States Code, but only if the coverage
                    for the individual involved is determined by
                    the Secretary in coordination with the Health
                    Choices Commissioner to be not less than the
                    level specified by the Secretary of the
                    Treasury, in coordination with the Secretary of
                    Veteran's Affairs and the Health Choices
                    Commissioner, based on the individual's
                    priority for services as provided under section
                    1705(a) of such title.
                      (G) Other coverage.--Such other health
                    benefits coverage as the Secretary, in
                    coordination with the Health Choices
                    Commissioner, recognizes for purposes of this
                    subsection.
      (e) Other Definitions and Special Rules.--
              (1) Qualifying child.--For purposes of this section,
            the term ``qualifying child'' has the meaning given
            such term by section 152(c). With respect to any period
            during which health coverage for a child must be
            provided by an individual pursuant to a child support
            order, such child shall be treated as a qualifying
            child of such individual (and not as a qualifying child
            of any other individual).
              (2) Basic plan.--For purposes of this section, the
            term ``basic plan'' has the meaning given such term
            under section 100(c) of the America's Affordable Health
            Choices Act of 2009.
              (3) Health insurance exchange.--For purposes of this
            section, the term ``Health Insurance Exchange'' has the
            meaning given such term under section 100(c) of the
            America's Affordable Health Choices Act of 2009,
            including any State-based health insurance exchange
            approved for operation under section 208 of such Act.
              (4) Family coverage.--For purposes of this section,
            the term ``family coverage'' means any coverage other
            than self-only coverage.
              (5) Modified adjusted gross income.--For purposes of
            this section, the term ``modified adjusted gross
            income'' means adjusted gross income--
                      (A) determined without regard to section 911,
                    and
                      (B) increased by the amount of interest
                    received or accrued by the taxpayer during the
                    taxable year which is exempt from tax.
              (6) Not treated as tax imposed by this chapter for
            certain purposes.--The tax imposed under this section
            shall not be treated as tax imposed by this chapter for
            purposes of determining the amount of any credit under
            this chapter or for purposes of section 55.
      (f) Regulations.--The Secretary shall prescribe such
    regulations or other guidance as may be necessary or
    appropriate to carry out the purposes of this section,
    including regulations or other guidance (developed in
    coordination with the Health Choices Commissioner) which
    provide--
              (1) exemption from the tax imposed under subsection
            (a) in cases of de minimis lapses of acceptable
            coverage, and
              (2) a process for applying for a waiver of the
            application of subsection (a) in cases of hardship.

                Subpart B--Surcharge on High Income Individuals

    Sec. 59C. Surcharge on high income individuals.

    SEC. 59C. SURCHARGE ON HIGH INCOME INDIVIDUALS.

      (a) General Rule.--In the case of a taxpayer other than a
    corporation, there is hereby imposed (in addition to any other
    tax imposed by this subtitle) a tax equal to--
              (1) 1 percent of so much of the modified adjusted
            gross income of the taxpayer as exceeds $350,000 but
            does not exceed $500,000,
              (2) 1.5 percent of so much of the modified adjusted
            gross income of the taxpayer as exceeds $500,000 but
            does not exceed $1,000,000, and
              (3) 5.4 percent of so much of the modified adjusted
            gross income of the taxpayer as exceeds $1,000,000.
      (b) Taxpayers Not Making a Joint Return.--In the case of any
    taxpayer other than a taxpayer making a joint return under
    section 6013 or a surviving spouse (as defined in section
    2(a)), subsection (a) shall be applied by substituting for each
    of the dollar amounts therein (after any increase determined
    under subsection (e)) a dollar amount equal to--
              (1) 50 percent of the dollar amount so in effect in
            the case of a married individual filing a separate
            return, and
              (2) 80 percent of the dollar amount so in effect in
            any other case.
      (c) Adjustments Based on Federal Health Reform Savings.--
              (1) In general.--Except as provided in paragraph (2),
            in the case of any taxable year beginning after
            December 31, 2012, subsection (a) shall be applied--
                      (A) by substituting ``2 percent'' for ``1
                    percent'', and
                      (B) by substituting ``3 percent'' for ``1.5
                    percent''.
              (2) Adjustments based on excess federal health reform
            savings.--
                      (A) Exception if federal health reform
                    savings significantly exceeds base amount.--If
                    the excess Federal health reform savings is
                    more than $150,000,000,000 but not more than
                    $175,000,000,000, paragraph (1) shall not
                    apply.
                      (B) Further adjustment for additional federal
                    health reform savings.--If the excess Federal
                    health reform savings is more than
                    $175,000,000,000, paragraphs (1) and (2) of
                    subsection (a) (and paragraph (1) of this
                    subsection) shall not apply to any taxable year
                    beginning after December 31, 2012.
                      (C) Excess federal health reform savings.--
                    For purposes of this subsection, the term
                    ``excess Federal health reform savings'' means
                    the excess of--
                              (i) the Federal health reform
                            savings, over
                              (ii) $525,000,000,000.
                      (D) Federal health reform savings.--The term
                    ``Federal health reform savings'' means the sum
                    of the amounts described in subparagraphs (A)
                    and (B) of paragraph (3).
              (3) Determination of federal health reform savings.--
            Not later than December 1, 2012, the Director of the
            Office of Management and Budget shall--
                      (A) determine, on the basis of the study
                    conducted under paragraph (4), the aggregate
                    reductions in Federal expenditures which have
                    been achieved as a result of the provisions of,
                    and amendments made by, division B of the
                    America's Affordable Health Choices Act of 2009
                    during the period beginning on October 1, 2009,
                    and ending with the latest date with respect to
                    which the Director has sufficient data to make
                    such determination, and
                      (B) estimate, on the basis of such study and
                    the determination under subparagraph (A), the
                    aggregate reductions in Federal expenditures
                    which will be achieved as a result of such
                    provisions and amendments during so much of the
                    period beginning with fiscal year 2010 and
                    ending with fiscal year 2019 as is not taken
                    into account under subparagraph (A).
              (4) Study of federal health reform savings.--The
            Director of the Office of Management and Budget shall
            conduct a study of the reductions in Federal
            expenditures during fiscal years 2010 through 2019
            which are attributable to the provisions of, and
            amendments made by, division B of the America's
            Affordable Health Choices Act of 2009. The Director
            shall complete such study not later than December 1,
            2012.
              (5) Reductions in federal expenditures determined
            without regard to program investments.--For purposes of
            paragraphs (3) and (4), reductions in Federal
            expenditures shall be determined without regard to
            section 1121 of the America's Affordable Health Choices
            Act of 2009 and other program investments under
            division B thereof.
      (d) Modified Adjusted Gross Income.--For purposes of this
    section, the term ``modified adjusted gross income'' means
    adjusted gross income reduced by any deduction (not taken into
    account in determining adjusted gross income) allowed for
    investment interest (as defined in section 163(d)). In the case
    of an estate or trust, adjusted gross income shall be
    determined as provided in section 67(e).
      (e) Inflation Adjustments.--
              (1) In general.--In the case of taxable years
            beginning after 2011, the dollar amounts in subsection
            (a) shall be increased by an amount equal to--
                      (A) such dollar amount, multiplied by
                      (B) the cost-of-living adjustment determined
                    under section 1(f)(3) for the calendar year in
                    which the taxable year begins, by substituting
                    ``calendar year 2010'' for ``calendar year
                    1992'' in subparagraph (B) thereof.
              (2) Rounding.--If any amount as adjusted under
            paragraph (1) is not a multiple of $5,000, such amount
            shall be rounded to the next lowest multiple of $5,000.
      (f) Special Rules.--
              (1) Nonresident alien.--In the case of a nonresident
            alien individual, only amounts taken into account in
            connection with the tax imposed under section 871(b)
            shall be taken into account under this section.
              (2) Citizens and residents living abroad.--The dollar
            amounts in effect under subsection (a) (after the
            application of subsections (b) and (e)) shall be
            decreased by the excess of--
                      (A) the amounts excluded from the taxpayer's
                    gross income under section 911, over
                      (B) the amounts of any deductions or
                    exclusions disallowed under section 911(d)(6)
                    with respect to the amounts described in
                    subparagraph (A).
              (3) Charitable trusts.--Subsection (a) shall not
            apply to a trust all the unexpired interests in which
            are devoted to one or more of the purposes described in
            section 170(c)(2)(B).
              (4) Not treated as tax imposed by this chapter for
            certain purposes.--The tax imposed under this section
            shall not be treated as tax imposed by this chapter for
            purposes of determining the amount of any credit under
            this chapter or for purposes of section 55.

               *       *       *       *       *       *       *

    Subchapter B--Computation of Taxable Income

               *       *       *       *       *       *       *

    PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

               *       *       *       *       *       *       *

    SEC. 105. AMOUNTS RECEIVED UNDER ACCIDENT AND HEALTH PLANS.

      (a) * * *
      (b) Amounts Expended for Medical Care.--Except in the case of
    amounts attributable to (and not in excess of) deductions
    allowed under section 213 (relating to medical, etc., expenses)
    for any prior taxable year, gross income does not include
    amounts referred to in subsection (a) if such amounts are paid,
    directly or indirectly, to the taxpayer to reimburse the
    taxpayer for expenses incurred by him for the medical care (as
    defined in section 213(d)) of the taxpayer, his spouse, [and
    his dependents] his dependents (as defined in section 152,
    determined without regard to subsections (b)(1), (b)(2), and
    (d)(1)(B) thereof) and any eligible beneficiary (within the
    meaning of section 106(f)) with respect to the taxpayer. Any
    child to whom section 152(e) applies shall be treated as a
    dependent of both parents for purposes of this subsection.

               *       *       *       *       *       *       *

    SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

      (a) * * *

               *       *       *       *       *       *       *

      (f) Reimbursements for Medicine Restricted to Prescribed
    Drugs and Insulin.--For purposes of this section and section
    105, reimbursement for expenses incurred for a medicine or a
    drug shall be treated as a reimbursement for medical expenses
    only if such medicine or drug is a prescribed drug or is
    insulin.
      (g) Coverage Provided for Eligible Beneficiaries of
    Employees.--
              (1) In general.--Subsection (a) shall apply with
            respect to any eligible beneficiary of the employee.
              (2) Eligible beneficiary.--For purposes of this
            subsection, the term ``eligible beneficiary'' means any
            individual who is eligible to receive benefits or
            coverage under an accident or health plan.

               *       *       *       *       *       *       *

    PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

               *       *       *       *       *       *       *

    SEC. 162. TRADE OR BUSINESS EXPENSES.

      (a) * * *

               *       *       *       *       *       *       *

      (l) Special Rules for Health Insurance Costs of Self-Employed
    Individuals.--
              [(1) Allowance of deduction.--
                      [(A) In general.--In the case of an
                    individual who is an employee within the
                    meaning of section 401(c)(1), there shall be
                    allowed as a deduction under this section an
                    amount equal to the applicable percentage of
                    the amount paid during the taxable year for
                    insurance which constitutes medical care for
                    the taxpayer, his spouse, and dependents.
                      [(B) Applicable percentage.--For purposes of
                    subparagraph (A), the applicable percentage
                    shall be determined under the following table:

    ------------------------------------------------------------------------
      [For taxable years beginning in
              calendar year -               The applicable percentage is -
    ------------------------------------------------------------------------
    1999 through 2001                    60
    2002                                 70
    2003 and thereafter                  100.]
    ------------------------------------------------------------------------

              (1) Allowance of deduction.--In the case of a
            taxpayer who is an employee within the meaning of
            section 401(c)(1), there shall be allowed as a
            deduction under this section an amount equal to the
            amount paid during the taxable year for insurance which
            constitutes medical care for--
                      (A) the taxpayer,
                      (B) the taxpayer's spouse,
                      (C) the taxpayer's dependents, and
                      (D) any individual who--
                              (i) satisfies the age requirements of
                            section 152(c)(3)(A),
                              (ii) bears a relationship to the
                            taxpayer described in section
                            152(d)(2)(H), and
                              (iii) meets the requirements of
                            section 152(d)(1)(C), and
                      (E) one individual who--
                              (i) does not satisfy the age
                            requirements of section 152(c)(3)(A),
                              (ii) bears a relationship to the
                            taxpayer described in section
                            152(d)(2)(H),
                              (iii) meets the requirements of
                            section 152(d)(1)(D), and
                              (iv) is not the spouse of the
                            taxpayer and does not bear any
                            relationship to the taxpayer described
                            in subparagraphs (A) through (G) of
                            section 152(d)(2).
              (2) Limitations.--
                      (A) * * *
                      (B) Other coverage.--Paragraph (1) shall not
                    apply to any taxpayer for any calendar month
                    for which the taxpayer is eligible to
                    participate in any subsidized health plan
                    maintained by any employer of the taxpayer or
                    of the spouse, any dependent, or individual
                    described in subparagraph (D) or (E) of
                    paragraph (1) with respect to of the taxpayer.
                    The preceding sentence shall be applied
                    separately with respect to--
                              (i) * * *

               *       *       *       *       *       *       *

    PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

               *       *       *       *       *       *       *

    SEC. 220. ARCHER MSAS.

      (a) * * *

               *       *       *       *       *       *       *

      (d) Archer MSA.--For purposes of this section--
              (1) * * *
              (2) Qualified medical expenses.--
                      (A) In general.--The term ``qualified medical
                    expenses'' means, with respect to an account
                    holder, amounts paid by such holder for medical
                    care (as defined in section 213(d)) for such
                    individual, the spouse of such individual, and
                    any dependent (as defined in section 152,
                    determined without regard to subsections
                    (b)(1), (b)(2), and (d)(1)(B) thereof) of such
                    individual, but only to the extent such amounts
                    are not compensated for by insurance or
                    otherwise. Such term shall include an amount
                    paid for medicine or a drug only if such
                    medicine or drug is a prescribed drug or is
                    insulin.

               *       *       *       *       *       *       *

    SEC. 223. HEALTH SAVINGS ACCOUNTS.

      (a) * * *

               *       *       *       *       *       *       *

      (d) Health Savings Account.--For purposes of this section--
              (1) * * *
              (2) Qualified medical expenses.--
                      (A) In general.--The term ``qualified medical
                    expenses'' means, with respect to an account
                    beneficiary, amounts paid by such beneficiary
                    for medical care (as defined in section 213(d)
                    for such individual, the spouse of such
                    individual, and any dependent (as defined in
                    section 152, determined without regard to
                    subsections (b)(1), (b)(2), and (d)(1)(B)
                    thereof) of such individual, but only to the
                    extent such amounts are not compensated for by
                    insurance or otherwise. Such term shall include
                    an amount paid for medicine or a drug only if
                    such medicine or drug is a prescribed drug or
                    is insulin.

               *       *       *       *       *       *       *

    Subchapter F--Exempt Organizations

               *       *       *       *       *       *       *

    PART I--GENERAL RULE

               *       *       *       *       *       *       *

    SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.

      (a) * * *

               *       *       *       *       *       *       *

      (c) List of Exempt Organizations.--The following
    organizations are referred to in subsection (a):
              (1) * * *

               *       *       *       *       *       *       *

              (9) Voluntary employees' beneficiary associations
            providing for the payment of life, sick, accident, or
            other benefits to the members of such association or
            their dependents or designated beneficiaries, if no
            part of the net earnings of such association inures
            (other than through such payments) to the benefit of
            any private shareholder or individual. For purposes of
            providing for the payment of sick and accident benefits
            to members of such an association and their dependents,
            the term ``dependents'' shall include any individual
            who is an eligible beneficiary (within the meaning of
            section 106(f)), as determined under the terms of a
            medical benefit, health insurance, or other program
            under which members and their dependents are entitled
            to sick and accident benefits.

               *       *       *       *       *       *       *

     Subchapter N--Tax Based on Income From Sources Within or Without the
    United States

               *       *       *       *       *       *       *

    PART I--SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME

               *       *       *       *       *       *       *

    SEC. 864. DEFINITIONS AND SPECIAL RULES.

      (a) * * *

               *       *       *       *       *       *       *

      (f) Election to Allocate Interest, etc. on Worldwide Basis.--
    For purposes of this subchapter, at the election of the
    worldwide affiliated group--
              (1) * * *

               *       *       *       *       *       *       *

              (5) Election to expand financial institution group of
            worldwide.--group (A) * * *

               *       *       *       *       *       *       *

                      (D) Election.--An election under this
                    paragraph with respect to any financial
                    institution group may be made only by the
                    common parent of the pre-election worldwide
                    affiliated group and may be made only for the
                    first taxable year beginning after [December
                    31, 2010] December 31, 2019, in which such
                    affiliated group includes 1 or more financial
                    corporations. Such an election, once made,
                    shall apply to all financial corporations which
                    are members of the electing financial
                    institution group for such taxable year and all
                    subsequent years unless revoked with the
                    consent of the Secretary.

               *       *       *       *       *       *       *

              (6) Election.--An election to have this subsection
            apply with respect to any worldwide affiliated group
            may be made only by the common parent of the domestic
            affiliated group referred to in paragraph (1)(C) and
            may be made only for the first taxable year beginning
            after [December 31, 2010] December 31, 2019, in which a
            worldwide affiliated group exists which includes such
            affiliated group and at least 1 foreign corporation.
            Such an election, once made, shall apply to such common
            parent and all other corporations which are members of
            such worldwide affiliated group for such taxable year
            and all subsequent years unless revoked with the
            consent of the Secretary.
              [(7) Transition.--In the case of the first taxable
            year to which this subsection applies, the increase (if
            any) in the amount of the interest expense allocable to
            sources within the United States by reason of the
            application of this subsection shall be 30 percent of
            the amount of such increase determined without regard
            to this paragraph.]

               *       *       *       *       *       *       *

    PART II--NONRESIDENT ALIENS AND FOREIGN CORPORATIONS

               *       *       *       *       *       *       *

    Subpart D--Miscellaneous Provisions

               *       *       *       *       *       *       *

    SEC. 894. INCOME AFFECTED BY TREATY.

      (a) * * *

               *       *       *       *       *       *       *

      (d) Limitation on Treaty Benefits for Certain Deductible
    Payments.--
              (1) In general.--In the case of any deductible
            related-party payment, any withholding tax imposed
            under chapter 3 (and any tax imposed under subpart A or
            B of this part) with respect to such payment may not be
            reduced under any treaty of the United States unless
            any such withholding tax would be reduced under a
            treaty of the United States if such payment were made
            directly to the foreign parent corporation.
              (2) Deductible related-party payment.--For purposes
            of this subsection, the term ``deductible related-party
            payment'' means any payment made, directly or
            indirectly, by any person to any other person if the
            payment is allowable as a deduction under this chapter
            and both persons are members of the same foreign
            controlled group of entities.
              (3) Foreign controlled group of entities.--For
            purposes of this subsection--
                      (A) In general.--The term ``foreign
                    controlled group of entities'' means a
                    controlled group of entities the common parent
                    of which is a foreign corporation.
                      (B) Controlled group of entities.--The term
                    ``controlled group of entities'' means a
                    controlled group of corporations as defined in
                    section 1563(a)(1), except that--
                              (i) ``more than 50 percent'' shall be
                            substituted for ``at least 80 percent''
                            each place it appears therein, and
                              (ii) the determination shall be made
                            without regard to subsections (a)(4)
                            and (b)(2) of section 1563.
                    A partnership or any other entity (other than a
                    corporation) shall be treated as a member of a
                    controlled group of entities if such entity is
                    controlled (within the meaning of section
                    954(d)(3)) by members of such group (including
                    any entity treated as a member of such group by
                    reason of this sentence).
              (4) Foreign parent corporation.--For purposes of this
            subsection, the term ``foreign parent corporation''
            means, with respect to any deductible related-party
            payment, the common parent of the foreign controlled
            group of entities referred to in paragraph (3)(A).
              (5) Regulations.--The Secretary may prescribe such
            regulations or other guidance as are necessary or
            appropriate to carry out the purposes of this
            subsection, including regulations or other guidance
            which provide for--
                      (A) the treatment of two or more persons as
                    members of a foreign controlled group of
                    entities if such persons would be the common
                    parent of such group if treated as one
                    corporation, and
                      (B) the treatment of any member of a foreign
                    controlled group of entities as the common
                    parent of such group if such treatment is
                    appropriate taking into account the economic
                    relationships among such entities.

               *       *       *       *       *       *       *

    Subtitle C--Employment Taxes

               *       *       *       *       *       *       *

    CHAPTER 21--FEDERAL INSURANCE CONTRIBUTIONS ACT

               *       *       *       *       *       *       *

    Subchapter B--Tax on Employers

               *       *       *       *       *       *       *

    SEC. 3111. RATE OF TAX.

      (a) * * *

               *       *       *       *       *       *       *

      (c) Employers Electing to Not Provide Health Benefits.--
              (1) In general.--In addition to other taxes, there is
            hereby imposed on every nonelecting employer an excise
            tax, with respect to having individuals in his employ,
            equal to 8 percent of the wages (as defined in section
            3121(a)) paid by him with respect to employment (as
            defined in section 3121(b)).
              (2) Special rules for small employers.--
                      (A) In general.--In the case of any employer
                    who is small employer for any calendar year,
                    paragraph (1) shall be applied by substituting
                    the applicable percentage determined in
                    accordance with the following table for ``8
                    percent'':

    If the annual payroll of such employer   The applicable percentage is:
     for the preceding calendar year:
      Does not exceed $250,000.............  0 percent
      Exceeds $250,000, but does not exceed  2 percent
       $300,000.
      Exceeds $300,000, but does not exceed  4 percent
       $350,000.
      Exceeds $350,000, but does not exceed  6 percent
       $400,000.

                      (B) Small employer.--For purposes of this
                    paragraph, the term ``small employer'' means
                    any employer for any calendar year if the
                    annual payroll of such employer for the
                    preceding calendar year does not exceed
                    $400,000.
                      (C) Annual payroll.--For purposes of this
                    paragraph, the term ``annual payroll'' means,
                    with respect to any employer for any calendar
                    year, the aggregate wages (as defined in
                    section 3121(a)) paid by him with respect to
                    employment (as defined in section 3121(b))
                    during such calendar year.
              (3) Nonelecting employer.--For purposes of paragraph
            (1), the term ``nonelecting employer'' means any
            employer for any period with respect to which such
            employer does not have an election under section
            4980H(a) in effect.
              (4) Special rule for separate elections.--In the case
            of an employer who makes a separate election described
            in section 4980H(a)(4) for any period, paragraph (1)
            shall be applied for such period by taking into account
            only the wages paid to employees who are not subject to
            such election.
              (5) Aggregation; predecessors.--For purposes of this
            subsection--
                      (A) all persons treated as a single employer
                    under subsection (b), (c), (m), or (o) of
                    section 414 shall be treated as 1 employer, and
                      (B) any reference to any person shall be
                    treated as including a reference to any
                    predecessor of such person.
      [(c)] (d) Relief From Taxes in Cases Covered by Certain
    International Agreements.--During any period in which there is
    in effect an agreement entered into pursuant to section 233 of
    the Social Security Act with any foreign country, wages
    received by or paid to an individual shall be exempt from the
    taxes imposed by [this section] subsections (a) and (b) to the
    extent that such wages are subject under such agreement
    exclusively to the laws applicable to the social security
    system of such foreign country.

               *       *       *       *       *       *       *

    Subchapter C--General Provisions

               *       *       *       *       *       *       *

    SEC. 3121. DEFINITIONS.

      (a) Wages.--For purposes of this chapter, the term ``wages''
    means all remuneration for employment, including the cash value
    of all remuneration (including benefits) paid in any medium
    other than cash; except that such term shall not include--
              (1) * * *
              (2) the amount of any payment (including any amount
            paid by an employer for insurance or annuities, or into
            a fund, to provide for any such payment) made to, or on
            behalf of, an employee [or any of his dependents], any
            of his dependents, or any eligible beneficiary (within
            the meaning of section 106(g)) with respect to the
            employee under a plan or system established by an
            employer which makes provision for his employees
            generally (or for his employees generally [and their
            dependents] and such employees' dependents and eligible
            beneficiaries (within the meaning of section 106(g)))
            or for a class or classes of his employees (or for a
            class or classes of his employees [and their
            dependents] and such employees' dependents and eligible
            beneficiaries (within the meaning of section 106(g))),
            on account of--
                      (A) sickness or accident disability (but, in
                    the case of payments made to an employee [or
                    any of his dependents,], any of his dependents,
                    or any eligible beneficiary (within the meaning
                    of section 106(g)) with respect to the
                    employee, this subparagraph shall exclude from
                    the term ``wages'' only payments which are
                    received under a workman's compensation law),
                    or

               *       *       *       *       *       *       *

      (aa) Special Rules for Tax on Employers Electing Not to
    Provide Health Benefits.--For purposes of section 3111(c)--
              (1) Paragraphs (1), (5), and (19) of subsection (b)
            shall not apply.
              (2) Paragraph (7) of subsection (b) shall apply by
            treating all services as not covered by the retirement
            systems referred to in subparagraphs (C) and (F)
            thereof.
              (3) Subsection (e) shall not apply and the term
            ``State'' shall include the District of Columbia.

               *       *       *       *       *       *       *

    CHAPTER 22--RAILROAD RETIREMENT TAX ACT

               *       *       *       *       *       *       *

    Subchapter C--Tax on Employers

               *       *       *       *       *       *       *

    SEC. 3221. RATE OF TAX.

      (a) * * *

               *       *       *       *       *       *       *

      (c) Employers Electing to Not Provide Health Benefits.--
              (1) In general.--In addition to other taxes, there is
            hereby imposed on every nonelecting employer an excise
            tax, with respect to having individuals in his employ,
            equal to 8 percent of the compensation paid during any
            calendar year by such employer for services rendered to
            such employer.
              (2) Exception for small employers.--Rules similar to
            the rules of section 3111(c)(2) shall apply for
            purposes of this subsection.
              (3) Nonelecting employer.--For purposes of paragraph
            (1), the term ``nonelecting employer'' means any
            employer for any period with respect to which such
            employer does not have an election under section
            4980H(a) in effect.
              (4) Special rule for separate elections.--In the case
            of an employer who makes a separate election described
            in section 4980H(a)(4) for any period, subsection (a)
            shall be applied for such period by taking into account
            only the wages paid to employees who are not subject to
            such election.
      [(c)] (d) Cross Reference.--For application of different
    contribution bases with respect to the taxes imposed by
    [subsections (a) and (b), see section 3231(e)(2)] this section,
    see paragraphs (2) and (13)(B) of section 3231(e).

               *       *       *       *       *       *       *

    Subchapter D--General Provisions

               *       *       *       *       *       *       *

    SEC. 3231. DEFINITIONS.

      (a) * * *

               *       *       *       *       *       *       *

      (e) Compensation.--For purposes of this chapter--
              (1) The term ``compensation'' means any form of money
            remuneration paid to an individual for services
            rendered as an employee to one or more employers. Such
            term does not include (i) the amount of any payment
            (including any amount paid by an employer for insurance
            or annuities, or into a fund, to provide for any such
            payment) made to, or on behalf of, an employee [or any
            of his dependents], any of his dependents, or any
            eligible beneficiary (within the meaning of section
            106(g)) with respect to the employee, under a plan or
            system established by an employer which makes provision
            for his employees generally (or for his employees
            generally [and their dependents] and such employees'
            dependents and eligible beneficiaries (within the
            meaning of section 106(g))) or for a class or classes
            of his employees (or for a class or classes of his
            employees [and their dependents] and such employees'
            dependents and eligible beneficiaries (within the
            meaning of section 106(g))), on account of sickness or
            accident disability or medical or hospitalization
            expenses in connection with sickness or accident
            disability or death, except that this clause does not
            apply to a payment for group-term life insurance to the
            extent that such payment is includible in the gross
            income of the employee, (ii) tips (except as is
            provided under paragraph (3)), (iii) an amount paid
            specifically - either as an advance, as reimbursement
            or allowance - for traveling or other bona fide and
            necessary expenses incurred or reasonably expected to
            be incurred in the business of the employer provided
            any such payment is identified by the employer either
            by a separate payment or by specifically indicating the
            separate amounts where both wages and expense
            reimbursement or allowance are combined in a single
            payment, or (iv) any remuneration which would not (if
            chapter 21 applied to such remuneration) be treated as
            wages (as defined in section 3121(a)) by reason of
            section 3121(a)(5). Such term does not include
            remuneration for service which is performed by a
            nonresident alien individual for the period he is
            temporarily present in the United States as a
            nonimmigrant under subparagraph (F), (J), (M), or (Q)
            of section 101(a)(15) of the Immigration and
            Nationality Act, as amended, and which is performed to
            carry out the purpose specified in subparagraph (F),
            (J), (M), or (Q), as the case may be. For the purpose
            of determining the amount of taxes under sections 3201
            and 3221, compensation earned in the service of a local
            lodge or division of a railway-labor-organization
            employer shall be disregarded with respect to any
            calendar month if the amount thereof is less than $25.
            Compensation for service as a delegate to a national or
            international convention of a railway labor
            organization defined as an ``employer'' in subsection
            (a) of this section shall be disregarded for purposes
            of determining the amount of taxes due pursuant to this
            chapter if the individual rendering such service has
            not previously rendered service, other than as such a
            delegate, which may be included in his ``years of
            service'' for purposes of the Railroad Retirement Act.
            Nothing in the regulations prescribed for purposes of
            chapter 24 (relating to wage withholding) which
            provides an exclusion from ``wages'' as used in such
            chapter shall be construed to require a similar
            exclusion from ``compensation'' in regulations
            prescribed for purposes of this chapter.

               *       *       *       *       *       *       *

              (13) Special rules for tax on employers electing not
            to provide health benefits.--For purposes of section
            3221(c)--
                      (A) Paragraph (1) shall be applied without
                    regard to the third sentence thereof.
                      (B) Paragraph (2) shall not apply.

               *       *       *       *       *       *       *

    CHAPTER 23--FEDERAL UNEMPLOYMENT TAX ACT

               *       *       *       *       *       *       *

    SEC. 3306. DEFINITIONS.

      (a) * * *
      (b) Wages.--For purposes of this chapter, the term ``wages''
    means all remuneration for employment, including the cash value
    of all remuneration (including benefits) paid in any medium
    other than cash; except that such term shall not include--
              (1) * * *
              (2) the amount of any payment (including any amount
            paid by an employer for insurance or annuities, or into
            a fund, to provide for any such payment) made to, or on
            behalf of, an employee [or any of his dependents], any
            of his dependents, or any eligible beneficiary (within
            the meaning of section 106(f)) with respect to the
            employee, under a plan or system established by an
            employer which makes provision for his employees
            generally (or for his employees generally [and their
            dependents] and such employees' dependents and eligible
            beneficiaries (within the meaning of section 106(g)))
            or for a class or classes of his employees (or for a
            class or classes of his employees [and their
            dependents] and such employees' dependents and eligible
            beneficiaries (within the meaning of section 106(g))),
            on account of--
                      (A) sickness or accident disability (but, in
                    the case of payments made to an employee [or
                    any of his dependents], any of his dependents,
                    or any eligible beneficiary (within the meaning
                    of section 106(g)) with respect to the
                    employee,, this subparagraph shall exclude from
                    the term ``wages'' only payments which are
                    received under a workmen's compensation law),
                    or

               *       *       *       *       *       *       *

    CHAPTER 24--COLLECTION OF INCOME TAX AT SOURCE ON WAGES

               *       *       *       *       *       *       *

    SEC. 3401. DEFINITIONS.

      (a) Wages.--For purposes of this chapter, the term ``wages''
    means all remuneration (other than fees paid to a public
    official) for services performed by an employee for his
    employer, including the cash value of all remuneration
    (including benefits) paid in any medium other than cash; except
    that such term shall not include remuneration paid--
              (1) * * *

               *       *       *       *       *       *       *

              (22) any payment made to or for the benefit of an
            employee if at the time of such payment it is
            reasonable to believe that the employee will be able to
            exclude such payment from income under section 106(d);
            [or]
              (23) for any benefit or payment which is excludable
            from the gross income of the employee under section
            139B(b)[.]; or
              (24) for any payment made to or for the benefit of an
            employee or any eligible beneficiary (within the
            meaning of section 106(f)) if at the time of such
            payment it is reasonable to believe that the employee
            will be able to exclude such payment from income under
            section 106 or under section 105 by reference in
            section 105(b) to section 106(f).

               *       *       *       *       *       *       *

                     Subtitle D--Miscellaneous Excise Taxes

                        Chapter 31--Retail Excise Taxes.

         * * * * * * *

                [Chapter 34--Policies Issued by Foreign Insurers]

    Chapter 34--Taxes on Certain Insurance Policies

               *       *       *       *       *       *       *

               [CHAPTER 34--POLICIES ISSUED BY FOREIGN INSURERS]

                CHAPTER 34--TAXES ON CERTAIN INSURANCE POLICIES

                subchapter a. policies issued by foreign insurers

               subchapter b. insured and self-insured health plans

    Subchapter A--Policies Issued By Foreign Insurers

               *       *       *       *       *       *       *

              Subchapter B--Insured and Self-Insured Health Plans

    Sec. 4375. Health insurance.
    Sec. 4376. Self-insured health plans.
    Sec. 4377. Definitions and special rules.

    SEC. 4375. HEALTH INSURANCE.

      (a) Imposition of Fee.--There is hereby imposed on each
    specified health insurance policy for each policy year a fee
    equal to the fair share per capita amount determined under
    section 9511(c)(1) multiplied by the average number of lives
    covered under the policy.
      (b) Liability for Fee.--The fee imposed by subsection (a)
    shall be paid by the issuer of the policy.
      (c) Specified Health Insurance Policy.--For purposes of this
    section:
              (1) In general.--Except as otherwise provided in this
            section, the term ``specified health insurance policy''
            means any accident or health insurance policy issued
            with respect to individuals residing in the United
            States.
              (2) Exemption for certain policies.--The term
            ``specified health insurance policy'' does not include
            any insurance if substantially all of its coverage is
            of excepted benefits described in section 9832(c).
              (3) Treatment of prepaid health coverage
            arrangements.--
                      (A) In general.--In the case of any
                    arrangement described in subparagraph (B)--
                              (i) such arrangement shall be treated
                            as a specified health insurance policy,
                            and
                              (ii) the person referred to in such
                            subparagraph shall be treated as the
                            issuer.
                      (B) Description of arrangements.--An
                    arrangement is described in this subparagraph
                    if under such arrangement fixed payments or
                    premiums are received as consideration for any
                    person's agreement to provide or arrange for
                    the provision of accident or health coverage to
                    residents of the United States, regardless of
                    how such coverage is provided or arranged to be
                    provided.

    SEC. 4376. SELF-INSURED HEALTH PLANS.

      (a) Imposition of Fee.--In the case of any applicable self-
    insured health plan for each plan year, there is hereby imposed
    a fee equal to the fair share per capita amount determined
    under section 9511(c)(1) multiplied by the average number of
    lives covered under the plan.
      (b) Liability for Fee.--
              (1) In general.--The fee imposed by subsection (a)
            shall be paid by the plan sponsor.
              (2) Plan sponsor.--For purposes of paragraph (1) the
            term ``plan sponsor'' means--
                      (A) the employer in the case of a plan
                    established or maintained by a single employer,
                      (B) the employee organization in the case of
                    a plan established or maintained by an employee
                    organization,
                      (C) in the case of--
                              (i) a plan established or maintained
                            by 2 or more employers or jointly by 1
                            or more employers and 1 or more
                            employee organizations,
                              (ii) a multiple employer welfare
                            arrangement, or
                              (iii) a voluntary employees'
                            beneficiary association described in
                            section 501(c)(9),
                    the association, committee, joint board of
                    trustees, or other similar group of
                    representatives of the parties who establish or
                    maintain the plan, or
                      (D) the cooperative or association described
                    in subsection (c)(2)(F) in the case of a plan
                    established or maintained by such a cooperative
                    or association.
      (c) Applicable Self-Insured Health Plan.--For purposes of
    this section, the term ``applicable self-insured health plan''
    means any plan for providing accident or health coverage if--
              (1) any portion of such coverage is provided other
            than through an insurance policy, and
              (2) such plan is established or maintained--
                      (A) by one or more employers for the benefit
                    of their employees or former employees,
                      (B) by one or more employee organizations for
                    the benefit of their members or former members,
                      (C) jointly by 1 or more employers and 1 or
                    more employee organizations for the benefit of
                    employees or former employees,
                      (D) by a voluntary employees' beneficiary
                    association described in section 501(c)(9),
                      (E) by any organization described in section
                    501(c)(6), or
                      (F) in the case of a plan not described in
                    the preceding subparagraphs, by a multiple
                    employer welfare arrangement (as defined in
                    section 3(40) of Employee Retirement Income
                    Security Act of 1974 ), a rural electric
                    cooperative (as defined in section 3(40)(B)(iv)
                    of such Act), or a rural telephone cooperative
                    association (as defined in section 3(40)(B)(v)
                    of such Act).

    SEC. 4377. DEFINITIONS AND SPECIAL RULES.

      (a) Definitions.--For purposes of this subchapter--
              (1) Accident and health coverage.--The term
            ``accident and health coverage'' means any coverage
            which, if provided by an insurance policy, would cause
            such policy to be a specified health insurance policy
            (as defined in section 4375(c)).
              (2) Insurance policy.--The term ``insurance policy''
            means any policy or other instrument whereby a contract
            of insurance is issued, renewed, or extended.
              (3) United states.--The term ``United States''
            includes any possession of the United States.
      (b) Treatment of Governmental Entities.--
              (1) In general.--For purposes of this subchapter--
                      (A) the term ``person'' includes any
                    governmental entity, and
                      (B) notwithstanding any other law or rule of
                    law, governmental entities shall not be exempt
                    from the fees imposed by this subchapter except
                    as provided in paragraph (2).
              (2) Treatment of exempt governmental programs.--In
            the case of an exempt governmental program, no fee
            shall be imposed under section 4375 or section 4376 on
            any covered life under such program.
              (3) Exempt governmental program defined.--For
            purposes of this subchapter, the term ``exempt
            governmental program'' means--
                      (A) any insurance program established under
                    title XVIII of the Social Security Act,
                      (B) the medical assistance program
                    established by title XIX or XXI of the Social
                    Security Act,
                      (C) any program established by Federal law
                    for providing medical care (other than through
                    insurance policies) to individuals (or the
                    spouses and dependents thereof) by reason of
                    such individuals being--
                              (i) members of the Armed Forces of
                            the United States, or
                              (ii) veterans, and
                      (D) any program established by Federal law
                    for providing medical care (other than through
                    insurance policies) to members of Indian tribes
                    (as defined in section 4(d) of the Indian
                    Health Care Improvement Act).
      (c) Treatment as Tax.--For purposes of subtitle F, the fees
    imposed by this subchapter shall be treated as if they were
    taxes.
      (d) No Cover Over to Possessions.--Notwithstanding any other
    provision of law, no amount collected under this subchapter
    shall be covered over to any possession of the United States.

               *       *       *       *       *       *       *

                   CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

    Sec. 4971. Taxes on failure to meet minimum funding standards
         * * * * * * *
    Sec. 4980H. Election with respect to health coverage participation
              requirements.

               *       *       *       *       *       *       *

    SEC. 4980H. ELECTION WITH RESPECT TO HEALTH COVERAGE PARTICIPATION
                        REQUIREMENTS.

      (a) Election of Employer Responsibility to Provide Health
    Coverage.--
              (1) In general.--Subsection (b) shall apply to any
            employer with respect to whom an election under
            paragraph (2) is in effect.
              (2) Time and manner.--An employer may make an
            election under this paragraph at such time and in such
            form and manner as the Secretary may prescribe.
              (3) Affiliated groups.--In the case of any employer
            which is part of a group of employers who are treated
            as a single employer under subsection (b), (c), (m), or
            (o) of section 414, the election under paragraph (2)
            shall be made by such person as the Secretary may
            provide. Any such election, once made, shall apply to
            all members of such group.
              (4) Separate elections.--Under regulations prescribed
            by the Secretary, separate elections may be made under
            paragraph (2) with respect to--
                      (A) separate lines of business, and
                      (B) full-time employees and employees who are
                    not full-time employees.
              (5) Termination of election in cases of substantial
            noncompliance.--The Secretary may terminate the
            election of any employer under paragraph (2) if the
            Secretary (in coordination with the Health Choices
            Commissioner) determines that such employer is in
            substantial noncompliance with the health coverage
            participation requirements.
      (b) Excise Tax With Respect to Failure to Meet Health
    Coverage Participation Requirements.--
              (1) In general.--In the case of any employer who
            fails (during any period with respect to which the
            election under subsection (a) is in effect) to satisfy
            the health coverage participation requirements with
            respect to any employee to whom such election applies,
            there is hereby imposed on each such failure with
            respect to each such employee a tax of $100 for each
            day in the period beginning on the date such failure
            first occurs and ending on the date such failure is
            corrected.
              (2) Limitations on amount of tax.--
                      (A) Tax not to apply where failure not
                    discovered exercising reasonable diligence.--No
                    tax shall be imposed by paragraph (1) on any
                    failure during any period for which it is
                    established to the satisfaction of the
                    Secretary that the employer neither knew, nor
                    exercising reasonable diligence would have
                    known, that such failure existed.
                      (B) Tax not to apply to failures corrected
                    within 30 days.--No tax shall be imposed by
                    paragraph (1) on any failure if--
                              (i) such failure was due to
                            reasonable cause and not to willful
                            neglect, and
                              (ii) such failure is corrected during
                            the 30-day period beginning on the 1st
                            date that the employer knew, or
                            exercising reasonable diligence would
                            have known, that such failure existed.
                      (C) Overall limitation for unintentional
                    failures.--In the case of failures which are
                    due to reasonable cause and not to willful
                    neglect, the tax imposed by subsection (a) for
                    failures during the taxable year of the
                    employer shall not exceed the amount equal to
                    the lesser of--
                              (i) 10 percent of the aggregate
                            amount paid or incurred by the employer
                            (or predecessor employer) during the
                            preceding taxable year for employment-
                            based health plans, or
                              (ii) $500,000.
                      (D) Coordination with other enforcement
                    provisions.--The tax imposed under paragraph
                    (1) with respect to any failure shall be
                    reduced (but not below zero) by the amount of
                    any civil penalty collected under section
                    502(c)(11) of the Employee Retirement Income
                    Security Act of 1974 or section 2793(g) of the
                    Public Health Service Act with respect to such
                    failure.
      (c) Health Coverage Participation Requirements.--For purposes
    of this section, the term ``health coverage participation
    requirements'' means the requirements of part I of subtitle B
    of title III of the America's Affordable Health Choices Act of
    2009 (as in effect on the date of the enactment of this
    section).

               *       *       *       *       *       *       *

    Subtitle F--Procedure and Administration

               *       *       *       *       *       *       *

    CHAPTER 61--INFORMATION AND RETURNS

               *       *       *       *       *       *       *

    Subchapter A--Returns and Records

               *       *       *       *       *       *       *

    PART II--TAX RETURNS OR STATEMENTS

               *       *       *       *       *       *       *

    Subpart B--Income Tax Returns

               *       *       *       *       *       *       *

    SEC. 6012. PERSONS REQUIRED TO MAKE RETURNS OF INCOME.

      (a) General Rule.--Returns with respect to income taxes under
    subtitle A shall be made by the following:
              (1) * * *

               *       *       *       *       *       *       *

              (10) Every individual to whom section 59B(a) applies
            and who fails to meet the requirements of section
            59B(d) with respect to such individual or any
            qualifying child (as defined in section 152(c)) of such
            individual.

               *       *       *       *       *       *       *

    PART III--INFORMATION RETURNS

               *       *       *       *       *       *       *

       Subpart B--Information Concerning Transactions With Other Persons

    Sec. 6041. Information at source.
         * * * * * * *
    Sec. 6050X. Returns relating to health insurance coverage.

               *       *       *       *       *       *       *

    SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE COVERAGE.

      (a) Requirement of Reporting.--Every person who provides
    acceptable coverage (as defined in section 59B(d)) to any
    individual during any calendar year shall, at such time as the
    Secretary may prescribe, make the return described in
    subsection (b) with respect to such individual.
      (b) Form and Manner of Returns.--A return is described in
    this subsection if such return--
              (1) is in such form as the Secretary may prescribe,
            and
              (2) contains--
                      (A) the name, address, and TIN of the primary
                    insured and the name of each other individual
                    obtaining coverage under the policy,
                      (B) the period for which each such individual
                    was provided with the coverage referred to in
                    subsection (a), and
                      (C) such other information as the Secretary
                    may require.
      (c) Statements to be Furnished to Individuals With Respect to
    Whom Information is Required.--Every person required to make a
    return under subsection (a) shall furnish to each primary
    insured whose name is required to be set forth in such return a
    written statement showing--
              (1) the name and address of the person required to
            make such return and the phone number of the
            information contact for such person, and
              (2) the information required to be shown on the
            return with respect to such individual.
    The written statement required under the preceding sentence
    shall be furnished on or before January 31 of the year
    following the calendar year for which the return under
    subsection (a) is required to be made.
      (d) Coverage Provided by Governmental Units.--In the case of
    coverage provided by any governmental unit or any agency or
    instrumentality thereof, the officer or employee who enters
    into the agreement to provide such coverage (or the person
    appropriately designated for purposes of this section) shall
    make the returns and statements required by this section.

               *       *       *       *       *       *       *

    Subchapter B--Miscellaneous Provisions

               *       *       *       *       *       *       *

    SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN
                        INFORMATION.

      (a) General Rule.--Returns and return information shall be
    confidential, and except as authorized by this title--
              (1) * * *

               *       *       *       *       *       *       *

              (3) no other person (or officer or employee thereof)
            who has or had access to returns or return information
            under subsection (e)(1)(D)(iii), paragraph (6), (10),
            (12), (16), [(19),] or (20) of subsection (l),
            paragraph (2) or (4)(B) of subsection (m), or
            subsection (n),

               *       *       *       *       *       *       *

      (l) Disclosure of Returns and Return Information for Purposes
    Other Than Tax Administration.--
              (1) * * *

               *       *       *       *       *       *       *

              [(19) Disclosure of return information for purposes
            of providing transitional assistance under medicare
            discount card program.--
                      [(A) In general.--The Secretary, upon written
                    request from the Secretary of Health and Human
                    Services pursuant to carrying out section
                    1860D-31 of the Social Security Act, shall
                    disclose to officers, employees, and
                    contractors of the Department of Health and
                    Human Services with respect to a taxpayer for
                    the applicable year--
                              [(i)(I) whether the adjusted gross
                            income, as modified in accordance with
                            specifications of the Secretary of
                            Health and Human Services for purposes
                            of carrying out such section, of such
                            taxpayer and, if applicable, such
                            taxpayer's spouse, for the applicable
                            year, exceeds the amounts specified by
                            the Secretary of Health and Human
                            Services in order to apply the 100 and
                            135 percent of the poverty lines under
                            such section, (II) whether the return
                            was a joint return, and (III) the
                            applicable year, or
                              [(ii) if applicable, the fact that
                            there is no return filed for such
                            taxpayer for the applicable year.
                      [(B) Definition of applicable year.--For the
                    purposes of this subsection, the term
                    ``applicable year'' means the most recent
                    taxable year for which information is available
                    in the Internal Revenue Service's taxpayer data
                    information systems, or, if there is no return
                    filed for such taxpayer for such year, the
                    prior taxable year.
                      [(C) Restriction on use of disclosed
                    information.--Return information disclosed
                    under this paragraph may be used only for the
                    purposes of determining eligibility for and
                    administering transitional assistance under
                    section 1860D-31 of the Social Security Act.]
              (19) Disclosures to facilitate identification of
            individuals likely to be ineligible for low-income
            subsidies under medicare prescription drug program to
            assist social security administration's outreach to
            eligible individuals.--
                      (A) In general.--Upon written request from
                    the Commissioner of Social Security, the
                    following return information (including such
                    information disclosed to the Social Security
                    Administration under paragraph (1) or (5))
                    shall be disclosed to officers and employees of
                    the Social Security Administration, with
                    respect to any taxpayer identified by the
                    Commissioner of Social Security--
                              (i) return information for the
                            applicable year from returns with
                            respect to wages (as defined in section
                            3121(a) or 3401(a)) and payments of
                            retirement income (as described in
                            paragraph (1) of this subsection),
                              (ii) unearned income information and
                            income information of the taxpayer from
                            partnerships, trusts, estates, and
                            subchapter S corporations for the
                            applicable year,
                              (iii) if the individual filed an
                            income tax return for the applicable
                            year, the filing status, number of
                            dependents, income from farming, and
                            income from self-employment, on such
                            return,
                              (iv) if the individual is a married
                            individual filing a separate return for
                            the applicable year, the social
                            security number (if reasonably
                            available) of the spouse on such
                            return,
                              (v) if the individual files a joint
                            return for the applicable year, the
                            social security number, unearned income
                            information, and income information
                            from partnerships, trusts, estates, and
                            subchapter S corporations of the
                            individual's spouse on such return, and
                              (vi) such other return information
                            relating to the individual (or the
                            individual's spouse in the case of a
                            joint return) as is prescribed by the
                            Secretary by regulation as might
                            indicate that the individual is likely
                            to be ineligible for a low-income
                            prescription drug subsidy under section
                            1860D-14 of the Social Security Act.
                      (B) Applicable year.--For the purposes of
                    this paragraph, the term ``applicable year''
                    means the most recent taxable year for which
                    information is available in the Internal
                    Revenue Service's taxpayer information records.
                      (C) Restriction on individuals for whom
                    disclosure may be requested.--The Commissioner
                    of Social Security shall request information
                    under this paragraph only with respect to--
                              (i) individuals the Social Security
                            Administration has identified, using
                            all other reasonably available
                            information, as likely to be eligible
                            for a low-income prescription drug
                            subsidy under section 1860D-14 of the
                            Social Security Act and who have not
                            applied for such subsidy, and
                              (ii) any individual the Social
                            Security Administration has identified
                            as a spouse of an individual described
                            in clause (i).
                      (D) Restriction on use of disclosed
                    information.--Return information disclosed
                    under this paragraph may be used only by
                    officers and employees of the Social Security
                    Administration solely for purposes of
                    identifying individuals likely to be ineligible
                    for a low-income prescription drug subsidy
                    under section 1860D-14 of the Social Security
                    Act for use in outreach efforts under section
                    1144 of the Social Security Act.

               *       *       *       *       *       *       *

              (21) Disclosure of return information to carry out
            health insurance exchange subsidies.--
                      (A) In general.--The Secretary, upon written
                    request from the Health Choices Commissioner or
                    the head of a State-based health insurance
                    exchange approved for operation under section
                    208 of the America's Affordable Health Choices
                    Act of 2009, shall disclose to officers and
                    employees of the Health Choices Administration
                    or such State-based health insurance exchange,
                    as the case may be, return information of any
                    taxpayer whose income is relevant in
                    determining any affordability credit described
                    in subtitle C of title II of the America's
                    Affordable Health Choices Act of 2009. Such
                    return information shall be limited to--
                              (i) taxpayer identity information
                            with respect to such taxpayer,
                              (ii) the filing status of such
                            taxpayer,
                              (iii) the modified adjusted gross
                            income of such taxpayer (as defined in
                            section 59B(e)(5)),
                              (iv) the number of dependents of the
                            taxpayer,
                              (v) such other information as is
                            prescribed by the Secretary by
                            regulation as might indicate whether
                            the taxpayer is eligible for such
                            affordability credits (and the amount
                            thereof), and
                              (vi) the taxable year with respect to
                            which the preceding information relates
                            or, if applicable, the fact that such
                            information is not available.
                      (B) Restriction on use of disclosed
                    information.--Return information disclosed
                    under subparagraph (A) may be used by officers
                    and employees of the Health Choices
                    Administration or such State-based health
                    insurance exchange, as the case may be, only
                    for the purposes of, and to the extent
                    necessary in, establishing and verifying the
                    appropriate amount of any affordability credit
                    described in subtitle C of title II of the
                    America's Affordable Health Choices Act of 2009
                    and providing for the repayment of any such
                    credit which was in excess of such appropriate
                    amount.

               *       *       *       *       *       *       *

      (p) Procedure and Recordkeeping.--
              (1) * * *

               *       *       *       *       *       *       *

              (4) Safeguards.--Any Federal agency described in
            subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or
            (7), (j)(1), (2), or (5), (k)(8) or (10), (l)(1), (2),
            (3), (5), (10), (11), (13), (14), [or (17)] (17), or
            (19) or (o)(1)(A), the Government Accountability
            Office, the Congressional Budget Office, or any agency,
            body, or commission described in subsection (d),
            (i)(3)(B)(i) or 7(A)(ii), or (l)(6), (7), (8), (9),
            (12), (15), or (16), any appropriate State officer (as
            defined in section 6104(c)), or any other person
            described in subsection (l)(10), (16), (18), [(19),] or
            (20), or any entity described in subsection (l)(21),
            shall, as a condition for receiving returns or return
            information--
                      (A) * * *

               *       *       *       *       *       *       *

                      (F) upon completion of use of such returns or
                    return information--
                              (i) in the case of an agency, body,
                            or commission described in subsection
                            (d), (i)(3)(B)(i), or (l)(6), (7), (8),
                            (9), or (16), any appropriate State
                            officer (as defined in section
                            6104(c)), or any other person described
                            in subsection (l)(10), (16), (18),
                            [(19),] or (20) or any entity described
                            in subsection (l)(21), return to the
                            Secretary such returns or return
                            information (along with any copies made
                            therefrom) or make such returns or
                            return information undisclosable in any
                            manner and furnish a written report to
                            the Secretary describing such manner,
                              (ii) in the case of an agency
                            described in subsections (h)(2),
                            (h)(5), (i)(1), (2), (3), (5) or (7),
                            (j)(1), (2), or (5), (k)(8) or (10),
                            (l)(1), (2), (3), (5), (10), (11),
                            (12), (13), (14), (15), [or (17)] (17),
                            or (19), or (o)(1)(A), or any entity
                            described in subsection (l)(21), the
                            Government Accountability Office, or
                            the Congressional Budget Office,
                            either--
                                      (I) * * *

               *       *       *       *       *       *       *

            except that the conditions of subparagraphs (A), (B),
            (C), (D), and (E) shall cease to apply with respect to
            any return or return information if, and to the extent
            that, such return or return information is disclosed in
            the course of any judicial or administrative proceeding
            and made a part of the public record thereof. If the
            Secretary determines that any such agency, body, or
            commission, including an agency, an appropriate State
            officer (as defined in section 6104(c)), or any other
            person described in subsection (l)(10), (16), (18),
            [(19),] or (20), or any entity described in subsection
            (l)(21), or the Government Accountability Office or the
            Congressional Budget Office, has failed to, or does
            not, meet the requirements of this paragraph, he may,
            after any proceedings for review established under
            paragraph (7), take such actions as are necessary to
            ensure such requirements are met, including refusing to
            disclose returns or return information to such agency,
            body, or commission, including an agency, an
            appropriate State officer (as defined in section
            6104(c)), or any other person described in subsection
            (l)(10), (16), (18), [(19),] or (20) or any entity
            described in subsection (l)(21),, or the Government
            Accountability Office or the Congressional Budget
            Office, until he determines that such requirements have
            been or will be met. In the case of any agency which
            receives any mailing address under paragraph (2), (4),
            (6), or (7) of subsection (m) and which discloses any
            such mailing address to any agent or which receives any
            information under paragraph (6)(A), (10), (12)(B), or
            (16) of subsection (l) and which discloses any such
            information to any agent, or any person including an
            agent described in subsection (l)(10) or (16), this
            paragraph shall apply to such agency and each such
            agent or other person (except that, in the case of an
            agent, or any person including an agent described in
            subsection (l)(10) or (16), any report to the Secretary
            or other action with respect to the Secretary shall be
            made or taken through such agency). For purposes of
            applying this paragraph in any case to which subsection
            (m)(6) applies, the term ``return information''
            includes related blood donor records (as defined in
            section 1141(h)(2) of the Social Security Act).

               *       *       *       *       *       *       *

     CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE
    PENALTIES

               *       *       *       *       *       *       *

    Subchapter A--Additions to the Tax and Additional Amounts

               *       *       *       *       *       *       *

    PART II--ACCURACY-RELATED AND FRAUD PENALTIES

               *       *       *       *       *       *       *

    SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERPAYMENTS.

      (a) * * *
      (b) Portion of Underpayment to Which Section Applies.--This
    section shall apply to the portion of any underpayment which is
    attributable to 1 or more of the following:
              (1) * * *

               *       *       *       *       *       *       *

              (6) Any disallowance of claimed tax benefits by
            reason of a transaction lacking economic substance
            (within the meaning of section 7701(o)) or failing to
            meet the requirements of any similar rule of law.
    This section shall not apply to any portion of an underpayment
    on which a penalty is imposed under section 6663. Except as
    provided in paragraph (1) or (2)(B) of section 6662A(e), this
    section shall not apply to the portion of any underpayment
    which is attributable to a reportable transaction
    understatement on which a penalty is imposed under section
    6662A.

               *       *       *       *       *       *       *

      (d) Substantial Understatement of Income Tax.--
              (1) * * *
              (2) Understatement.--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) Reduction not to apply to tax shelters.--
                              (i) In general.--[Subparagraph (B)]
                            Subparagraphs (B) and (D)(i)(II) shall
                            not apply to any item attributable to a
                            tax shelter.

               *       *       *       *       *       *       *

                      (D) Special reduction rule for certain large
                    or publicly traded persons.--
                              (i) In general.--In the case of any
                            specified person--
                                      (I) subparagraph (B) shall
                                    not apply, and
                                      (II) the amount of the
                                    understatement under
                                    subparagraph (A) shall be
                                    reduced by that portion of the
                                    understatement which is
                                    attributable to any item with
                                    respect to which the taxpayer
                                    has a reasonable belief that
                                    the tax treatment of such item
                                    by the taxpayer is more likely
                                    than not the proper tax
                                    treatment of such item.
                              (ii) Specified person.--For purposes
                            of this subparagraph, the term
                            ``specified person'' means--
                                      (I) any person required to
                                    file periodic or other reports
                                    under section 13 of the
                                    Securities Exchange Act of
                                    1934, and
                                      (II) any corporation with
                                    gross receipts in excess of
                                    $100,000,000 for the taxable
                                    year involved.
                            All persons treated as a single
                            employer under section 52(a) shall be
                            treated as one person for purposes of
                            subclause (II).

               *       *       *       *       *       *       *

      (i) Increase in Penalty in Case of Nondisclosed Noneconomic
    Substance Transactions.--
              (1) In general.--In the case of any portion of an
            underpayment which is attributable to one or more
            nondisclosed noneconomic substance transactions,
            subsection (a) shall be applied with respect to such
            portion by substituting ``40 percent'' for ``20
            percent''.
              (2) Nondisclosed noneconomic substance
            transactions.--For purposes of this subsection, the
            term ``nondisclosed noneconomic substance transaction''
            means any portion of a transaction described in
            subsection (b)(6) with respect to which the relevant
            facts affecting the tax treatment are not adequately
            disclosed in the return nor in a statement attached to
            the return.
              (3) Special rule for amended returns.--Except as
            provided in regulations, in no event shall any
            amendment or supplement to a return of tax be taken
            into account for purposes of this subsection if the
            amendment or supplement is filed after the earlier of
            the date the taxpayer is first contacted by the
            Secretary regarding the examination of the return or
            such other date as is specified by the Secretary.

    SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERSTATEMENTS
                        WITH RESPECT TO REPORTABLE TRANSACTIONS.

      (a) * * *

               *       *       *       *       *       *       *

      (e) Special Rules.--
              (1) * * *
              (2) Coordination with other penalties.--
                      (A) * * *
                      (B) Coordination with [gross valuation
                    misstatement penalty] certain increased
                    underpayment penalties.--This section shall not
                    apply to any portion of an understatement on
                    which a penalty is imposed under section 6662
                    if the rate of the penalty is determined under
                    [section 6662(h)] subsections (h) or (i) of
                    section 6662.

               *       *       *       *       *       *       *

    SEC. 6664. DEFINITIONS AND SPECIAL RULES.

      (a) * * *

               *       *       *       *       *       *       *

      (c) Reasonable Cause Exception for Underpayments.--
              (1) * * *
              (2) Exception.--Paragraph (1) shall not apply to--
                      (A) to any portion of an underpayment which
                    is attributable to one or more tax shelters (as
                    defined in section 6662(d)(2)(C)) or
                    transactions described in section 6662(b)(6),
                    and
                      (B) to any taxpayer if such taxpayer is a
                    specified person (as defined in section
                    6662(d)(2)(D)(ii)).
              [(2)] (3) Special rule for certain valuation
            overstatements.--In the case of any underpayment
            attributable to a substantial or gross valuation
            overstatement under chapter 1 with respect to
            charitable deduction property, paragraph (1) shall not
            apply. The preceding sentence shall not apply to a
            substantial valuation overstatement under chapter 1
            if--
                      (A) * * *

               *       *       *       *       *       *       *

              [(3)] (4) Definitions.--For purposes of this
            subsection--
                      (A) Charitable deduction property.--The term
                    ``charitable deduction property'' means any
                    property contributed by the taxpayer in a
                    contribution for which a deduction was claimed
                    under section 170. For purposes of [paragraph
                    (2)] paragraph (3), such term shall not include
                    any securities for which (as of the date of the
                    contribution) market quotations are readily
                    available on an established securities market.

               *       *       *       *       *       *       *

    Subchapter B--Assessable Penalties

               *       *       *       *       *       *       *

    PART I--GENERAL PROVISIONS

               *       *       *       *       *       *       *

    SEC. 6676. ERRONEOUS CLAIM FOR REFUND OR CREDIT.

      (a) * * *

               *       *       *       *       *       *       *

      (c) Noneconomic Substance Transactions Treated as Lacking
    Reasonable Basis.--For purposes of this section, any excessive
    amount which is attributable to any transaction described in
    section 6662(b)(6) shall not be treated as having a reasonable
    basis.
      [(c)] (d) Coordination With Other Penalties.--This section
    shall not apply to any portion of the excessive amount of a
    claim for refund or credit which is subject to a penalty
    imposed under part II of subchapter A of chapter 68.

               *       *       *       *       *       *       *

         PART II--FAILURE TO COMPLY WITH CERTAIN INFORMATION REPORTING
    REQUIREMENTS

               *       *       *       *       *       *       *

    SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES.

      (a) * * *

               *       *       *       *       *       *       *

      (d) Definitions.--For purposes of this part--
              (1) Information return.--The term ``information
            return'' means--
                      (A) * * *
                      (B) any return required by--
                              (i) * * *

               *       *       *       *       *       *       *

                              (xxii) section 6039(a) (relating to
                            returns required with respect to
                            certain options), [or]
                              (xxiii) section 6050W (relating to
                            returns to payments made in settlement
                            of payment card transactions), [and] or
                              (xxiv) section 6050X (relating to
                            returns relating to health insurance
                            coverage), and

               *       *       *       *       *       *       *

              (2) Payee statement.--The term ``payee statement''
            means any statement required to be furnished under--
                      (A) * * *

               *       *       *       *       *       *       *

                      (EE) section 6050U (relating to charges or
                    payments for qualified long-term care insurance
                    contracts under combined arrangements), [or]
                      (FF) section 6050W(c) (relating to returns
                    relating to payments made in settlement of
                    payment card transactions)[.], or
                      (GG) section 6050X (relating to returns
                    relating to health insurance coverage).

               *       *       *       *       *       *       *

    CHAPTER 75--CRIMES, OTHER OFFENSES, AND FORFEITURES

               *       *       *       *       *       *       *

    Subchapter A--Crimes

               *       *       *       *       *       *       *

    PART I--GENERAL PROVISIONS

               *       *       *       *       *       *       *

    SEC. 7213. UNAUTHORIZED DISCLOSURE OF INFORMATION.

      (a) Returns and Return Information.--
              (1) * * *
              (2) State and other employees.--It shall be unlawful
            for any person (not described in paragraph (1))
            willfully to disclose to any person, except as
            authorized in this title, any return or return
            information (as defined in section 6103(b)) acquired by
            him or another person under subsection (d),
            (i)(3)(B)(i) or (7)(A)(ii), (l)(6), (7), (8), (9),
            (10), (12), (15), (16), (19), [or (20)] (20), or (21)
            or (m)(2), (4), (5), (6), or (7) of section 6103 or
            under section 6104(c). Any violation of this paragraph
            shall be a felony punishable by a fine in any amount
            not exceeding $5,000, or imprisonment of not more than
            5 years, or both, together with the costs of
            prosecution.

               *       *       *       *       *       *       *

    CHAPTER 79--DEFINITIONS

               *       *       *       *       *       *       *

    SEC. 7701. DEFINITIONS.

      (a) * * *

               *       *       *       *       *       *       *

      (o) Clarification of Economic Substance Doctrine.--
              (1) Application of doctrine.--In the case of any
            transaction to which the economic substance doctrine is
            relevant, such transaction shall be treated as having
            economic substance only if--
                      (A) the transaction changes in a meaningful
                    way (apart from Federal income tax effects) the
                    taxpayer's economic position, and
                      (B) the taxpayer has a substantial purpose
                    (apart from Federal income tax effects) for
                    entering into such transaction.
              (2) Special rule where taxpayer relies on profit
            potential.--
                      (A) In general.--The potential for profit of
                    a transaction shall be taken into account in
                    determining whether the requirements of
                    subparagraphs (A) and (B) of paragraph (1) are
                    met with respect to the transaction only if the
                    present value of the reasonably expected pre-
                    tax profit from the transaction is substantial
                    in relation to the present value of the
                    expected net tax benefits that would be allowed
                    if the transaction were respected.
                      (B) Treatment of fees and foreign taxes.--
                    Fees and other transaction expenses and foreign
                    taxes shall be taken into account as expenses
                    in determining pre-tax profit under
                    subparagraph (A).
              (3) State and local tax benefits.--For purposes of
            paragraph (1), any State or local income tax effect
            which is related to a Federal income tax effect shall
            be treated in the same manner as a Federal income tax
            effect.
              (4) Financial accounting benefits.--For purposes of
            paragraph (1)(B), achieving a financial accounting
            benefit shall not be taken into account as a purpose
            for entering into a transaction if the origin of such
            financial accounting benefit is a reduction of Federal
            income tax.
              (5) Definitions and special rules.--For purposes of
            this subsection--
                      (A) Economic substance doctrine.--The term
                    ``economic substance doctrine'' means the
                    common law doctrine under which tax benefits
                    under subtitle A with respect to a transaction
                    are not allowable if the transaction does not
                    have economic substance or lacks a business
                    purpose.
                      (B) Exception for personal transactions of
                    individuals.--In the case of an individual,
                    paragraph (1) shall apply only to transactions
                    entered into in connection with a trade or
                    business or an activity engaged in for the
                    production of income.
                      (C) Other common law doctrines not
                    affected.--Except as specifically provided in
                    this subsection, the provisions of this
                    subsection shall not be construed as altering
                    or supplanting any other rule of law, and the
                    requirements of this subsection shall be
                    construed as being in addition to any such
                    other rule of law.
                      (D) Determination of application of doctrine
                    not affected.--The determination of whether the
                    economic substance doctrine is relevant to a
                    transaction (or series of transactions) shall
                    be made in the same manner as if this
                    subsection had never been enacted.
              (6) Regulations.--The Secretary shall prescribe such
            regulations as may be necessary or appropriate to carry
            out the purposes of this subsection.
      [(o)] (p) Cross References.--
      (1) * * *

               *       *       *       *       *       *       *

    Subtitle I--Trust Fund Code

               *       *       *       *       *       *       *

    CHAPTER 98 TRUST FUND CODE

               *       *       *       *       *       *       *

                   Subchapter A--Establishment of Trust Funds

    Sec. 9501. Black Lung Disability Trust Fund.
         * * * * * * *
    Sec. 9511. Health Care Comparative Effectiveness Research Trust Fund.

               *       *       *       *       *       *       *

    SEC. 9511. HEALTH CARE COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND.

      (a) Creation of Trust Fund.--There is established in the
    Treasury of the United States a trust fund to be known as the
    ``Health Care Comparative Effectiveness Research Trust Fund''
    (hereinafter in this section referred to as the ``CERTF''),
    consisting of such amounts as may be appropriated or credited
    to such Trust Fund as provided in this section and section
    9602(b).
      (b) Transfers to Fund.--There are hereby appropriated to the
    Trust Fund the following:
              (1) For fiscal year 2010, $90,000,000.
              (2) For fiscal year 2011, $100,000,000.
              (3) For fiscal year 2012, $110,000,000.
              (4) For each fiscal year beginning with fiscal year
            2013--
                      (A) an amount equivalent to the net revenues
                    received in the Treasury from the fees imposed
                    under subchapter B of chapter 34 (relating to
                    fees on health insurance and self-insured
                    plans) for such fiscal year; and
                      (B) subject to subsection (c)(2), amounts
                    determined by the Secretary of Health and Human
                    Services to be equivalent to the fair share per
                    capita amount computed under subsection (c)(1)
                    for the fiscal year multiplied by the average
                    number of individuals entitled to benefits
                    under part A, or enrolled under part B, of
                    title XVIII of the Social Security Act during
                    such fiscal year.
    The amounts appropriated under paragraphs (1), (2), (3), and
    (4)(B) shall be transferred from the Federal Hospital Insurance
    Trust Fund and from the Federal Supplementary Medical Insurance
    Trust Fund (established under section 1841 of such Act), and
    from the Medicare Prescription Drug Account within such Trust
    Fund, in proportion (as estimated by the Secretary) to the
    total expenditures during such fiscal year that are made under
    title XVIII of such Act from the respective trust fund or
    account.
      (c) Fair Share Per Capita Amount.--
              (1) Computation.--
                      (A) In general.--Subject to subparagraph (B),
                    the fair share per capita amount under this
                    paragraph for a fiscal year (beginning with
                    fiscal year 2013) is an amount computed by the
                    Secretary of Health and Human Services for such
                    fiscal year that, when applied under this
                    section and subchapter B of chapter 34 of the
                    Internal Revenue Code of 1986, will result in
                    revenues to the CERTF of $375,000,000 for the
                    fiscal year.
                      (B) Alternative computation.--
                              (i) In general.--If the Secretary is
                            unable to compute the fair share per
                            capita amount under subparagraph (A)
                            for a fiscal year, the fair share per
                            capita amount under this paragraph for
                            the fiscal year shall be the default
                            amount determined under clause (ii) for
                            the fiscal year.
                              (ii) Default amount.--The default
                            amount under this clause for--
                                      (I) fiscal year 2013 is equal
                                    to $2; or
                                      (II) a subsequent year is
                                    equal to the default amount
                                    under this clause for the
                                    preceding fiscal year increased
                                    by the annual percentage
                                    increase in the medical care
                                    component of the consumer price
                                    index (United States city
                                    average) for the 12-month
                                    period ending with April of the
                                    preceding fiscal year.
                            Any amount determined under subclause
                            (II) shall be rounded to the nearest
                            penny.
              (2) Limitation on medicare funding.--In no case shall
            the amount transferred under subsection (b)(4)(B) for
            any fiscal year exceed $90,000,000.
      (d) Expenditures From Fund.--
              (1) In general.--Subject to paragraph (2), amounts in
            the CERTF are available, without the need for further
            appropriations and without fiscal year limitation, to
            the Secretary of Health and Human Services for carrying
            out section 1181 of the Social Security Act.
              (2) Allocation for commission.--Not less than the
            following amounts in the CERTF for a fiscal year shall
            be available to carry out the activities of the
            Comparative Effectiveness Research Commission
            established under section 1181(b) of the Social
            Security Act for such fiscal year:
                      (A) For fiscal year 2010, $7,000,000.
                      (B) For fiscal year 2011, $9,000,000.
                      (C) For each fiscal year beginning with 2012,
                    $10,000,000.
            Nothing in this paragraph shall be construed as
            preventing additional amounts in the CERTF from being
            made available to the Comparative Effectiveness
            Research Commission for such activities.
      (e) Net Revenues.--For purposes of this section, the term
    ``net revenues'' means the amount estimated by the Secretary
    based on the excess of--
              (1) the fees received in the Treasury under
            subchapter B of chapter 34, over
              (2) the decrease in the tax imposed by chapter 1
            resulting from the fees imposed by such subchapter.

               *       *       *       *       *       *       *

                                  ----------

    AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

               *       *       *       *       *       *       *

     DIVISION B--TAX, UNEMPLOYMENT, HEALTH, STATE FISCAL RELIEF, AND OTHER
    PROVISIONS

               *       *       *       *       *       *       *

        TITLE IV--MEDICARE AND MEDICAID HEALTH INFORMATION TECHNOLOGY;
    MISCELLANEOUS MEDICARE PROVISIONS

               *       *       *       *       *       *       *

                 Subtitle C--Miscellaneous Medicare Provisions

    SEC. 4301. MORATORIA ON CERTAIN MEDICARE REGULATIONS.

      (a) Delay in Phase Out of Medicare Hospice Budget Neutrality
    Adjustment Factor During Fiscal Year 2009.--Notwithstanding any
    other provision of law, including the final rule published on
    August 8, 2008, 73 Federal Register 46464 et seq., relating to
    Medicare Program; Hospice Wage Index for Fiscal Year 2009, the
    Secretary of Health and Human Services shall not phase out or
    eliminate the budget neutrality adjustment factor in the
    Medicare hospice wage index before [October 1, 2009] October 1,
    2010, and the Secretary shall recompute and apply the final
    Medicare hospice wage index [for fiscal year 2009] for fiscal
    years 2009 and 2010 as if there had been no reduction in the
    budget neutrality adjustment factor.

               *       *       *       *       *       *       *

                                  ----------

                SECTION 4505 OF THE BALANCED BUDGET ACT OF 1997

    SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES.

      (a) * * *

               *       *       *       *       *       *       *

      [(d) Requirements for Developing New Resource-Based Practice
    Expense Relative Value Units.--
              [(1) Development.--For purposes of section
            1848(c)(2)(C)(ii) of the Social Security Act, the
            Secretary of Health and Human Services shall develop
            new resource-based relative value units. In developing
            such units the Secretary shall--
                      [(A) utilize, to the maximum extent
                    practicable, generally accepted cost accounting
                    principles which (i) recognize all staff,
                    equipment, supplies, and expenses, not just
                    those which can be tied to specific procedures,
                    and (ii) use actual data on equipment
                    utilization and other key assumptions;
                      [(B) consult with organizations representing
                    physicians regarding methodology and data to be
                    used; and
                      [(C) develop a refinement process to be used
                    during each of the 4 years of the transition
                    period.
              [(2) Report.--The Secretary shall transmit a report
            by March 1, 1998, on the development of resource-based
            relative value units under paragraph (1) to the
            Committee on Ways and Means and the Committee on
            Commerce of the House of Representatives and the
            Committee on Finance of the Senate. The report shall
            include a presentation of data to be used in developing
            the value units and an explanation of the methodology.
              [(3) Notice of proposed rulemaking.--The Secretary
            shall publish a notice of proposed rulemaking with the
            new resource-based relative value units on or before
            May 1, 1998, and shall allow for a 90-day public
            comment period.
              [(4) Items included.--The new proposed rule shall
            consider the following:
                      [(A) Impact projections which compare new
                    proposed payment amounts on data on actual
                    physician practice expenses.
                      [(B) Impact projections for hospital-based
                    and other specialties, geographic payment
                    localities, and urban versus rural localities.]

               *       *       *       *       *       *       *

                                  ----------

    TAX RELIEF AND HEALTH CARE ACT OF 2006

               *       *       *       *       *       *       *

    DIVISION B--MEDICARE AND OTHER HEALTH PROVISIONS

               *       *       *       *       *       *       *

    TITLE I--MEDICARE IMPROVED QUALITY AND PROVIDER PAYMENTS

               *       *       *       *       *       *       *

    SEC. 106. HOSPITAL MEDICARE REPORTS AND CLARIFICATIONS.

      (a) Correction of Mid-Year Reclassification Expiration.--
    Notwithstanding any other provision of law, in the case of a
    subsection (d) hospital (as defined for purposes of section
    1886 of the Social Security Act (42 U.S.C. 1395ww)) with
    respect to which a reclassification of its wage index for
    purposes of such section would (but for this subsection) expire
    on March 31, 2007, such reclassification of such hospital shall
    be extended through [September 30, 2009] September 30, 2011.
    The previous sentence shall not be effected in a budget-neutral
    manner.

               *       *       *       *       *       *       *

    TITLE II--MEDICARE BENEFICIARY PROTECTIONS

               *       *       *       *       *       *       *

    [SEC. 204. MEDICARE MEDICAL HOME DEMONSTRATION PROJECT.

      [(a) In General.--The Secretary of Health and Human Services
    (in this section referred to as the ``Secretary'') shall
    establish under title XVIII of the Social Security Act a
    medical home demonstration project (in this section referred to
    as the ``project'') to redesign the health care delivery system
    to provide targeted, accessible, continuous and coordinated,
    family-centered care to high-need populations and under which--
              [(1) care management fees are paid to persons
            performing services as personal physicians; and
              [(2) incentive payments are paid to physicians
            participating in practices that provide services as a
            medical home under subsection (d).
    For purposes of this subsection, the term ``high-need
    population'' means individuals with multiple chronic illnesses
    that require regular medical monitoring, advising, or
    treatment.
      [(b) Details.--
              [(1) Duration; scope.--Subject to paragraph (3), the
            project shall operate during a period of three years
            and shall include urban, rural, and underserved areas
            in a total of no more than 8 States.
              [(2) Encouraging participation of small physician
            practices.--The project shall be designed to include
            the participation of physicians in practices with fewer
            than three full-time equivalent physicians, as well as
            physicians in larger practices particularly in rural
            and underserved areas.
              [(3) Expansion.--The Secretary may expand the
            duration and the scope of the project under paragraph
            (1), to an extent determined appropriate by the
            Secretary, if the Secretary determines that such
            expansion will result in any of the following
            conditions being met:
                      [(A) The expansion of the project is expected
                    to improve the quality of patient care without
                    increasing spending under the Medicare program
                    (not taking into account amounts available
                    under subsection (g)).
                      [(B) The expansion of the project is expected
                    to reduce spending under the Medicare program
                    (not taking into account amounts available
                    under subsection (g)) without reducing the
                    quality of patient care.
      [(c) Personal Physician Defined.--
              [(1) In general.--For purposes of this section, the
            term ``personal physician'' means a physician (as
            defined in section 1861(r)(1) of the Social Security
            Act (42 U.S.C. 1395x(r)(1)) who--
                      [(A) meets the requirements described in
                    paragraph (2); and
                      [(B) performs the services described in
                    paragraph (3).
            Nothing in this paragraph shall be construed as
            preventing such a physician from being a specialist or
            subspecialist for an individual requiring ongoing care
            for a specific chronic condition or multiple chronic
            conditions (such as severe asthma, complex diabetes,
            cardiovascular disease, rheumatologic disorder) or for
            an individual with a prolonged illness.
              [(2) Requirements.--The requirements described in
            this paragraph for a personal physician are as follows:
                      [(A) The physician is a board certified
                    physician who provides first contact and
                    continuous care for individuals under the
                    physician's care.
                      [(B) The physician has the staff and
                    resources to manage the comprehensive and
                    coordinated health care of each such
                    individual.
              [(3) Services performed.--A personal physician shall
            perform or provide for the performance of at least the
            following services:
                      [(A) Advocates for and provides ongoing
                    support, oversight, and guidance to implement a
                    plan of care that provides an integrated,
                    coherent, cross-discipline plan for ongoing
                    medical care developed in partnership with
                    patients and including all other physicians
                    furnishing care to the patient involved and
                    other appropriate medical personnel or agencies
                    (such as home health agencies).
                      [(B) Uses evidence-based medicine and
                    clinical decision support tools to guide
                    decision-making at the point-of-care based on
                    patient-specific factors.
                      [(C) Uses health information technology, that
                    may include remote monitoring and patient
                    registries, to monitor and track the health
                    status of patients and to provide patients with
                    enhanced and convenient access to health care
                    services.
                      [(D) Encourages patients to engage in the
                    management of their own health through
                    education and support systems.
      [(d) Medical Home Defined.--For purposes of this section, the
    term ``medical home'' means a physician practice that--
              [(1) is in charge of targeting beneficiaries for
            participation in the project; and
              [(2) is responsible for--
                      [(A) providing safe and secure technology to
                    promote patient access to personal health
                    information;
                      [(B) developing a health assessment tool for
                    the individuals targeted; and
                      [(C) providing training programs for
                    personnel involved in the coordination of care.
      [(e) Payment Mechanisms.--
              [(1) Personal physician care management fee.--Under
            the project, the Secretary shall provide for payment
            under section 1848 of the Social Security Act (42
            U.S.C. 1395w-4) of a care management fee to personal
            physicians providing care management under the project.
            Under such section and using the relative value scale
            update committee (RUC) process under such section, the
            Secretary shall develop a care management fee code for
            such payments and a value for such code.
              [(2) Medical home sharing in savings.--The Secretary
            shall provide for payment under the project of a
            medical home based on the payment methodology applied
            to physician group practices under section 1866A of the
            Social Security Act (42 U.S.C. 1395cc-1). Under such
            methodology, 80 percent of the reductions in
            expenditures under title XVIII of the Social Security
            Act resulting from participation of individuals that
            are attributable to the medical home (as reduced by the
            total care managements fees paid to the medical home
            under the project) shall be paid to the medical home.
            The amount of such reductions in expenditures shall be
            determined by using assumptions with respect to
            reductions in the occurrence of health complications,
            hospitalization rates, medical errors, and adverse drug
            reactions.
              [(3) Source.--Payments paid under the project shall
            be made from the Federal Supplementary Medical
            Insurance Trust Fund under section 1841 of the Social
            Security Act (42 U.S.C. 1395t).
      [(f) Evaluations and Reports.--
              [(1) Annual interim evaluations and reports.--For
            each year of the project, the Secretary shall provide
            for an evaluation of the project and shall submit to
            Congress, by a date specified by the Secretary, a
            report on the project and on the evaluation of the
            project for each such year.
              [(2) Final evaluation and report.--The Secretary
            shall provide for an evaluation of the project and
            shall submit to Congress, not later than one year after
            completion of the project, a report on the project and
            on the evaluation of the project.
      [(g) Funding From SMI Trust Fund.--There shall be available,
    from the Federal Supplementary Medical Insurance Trust Fund
    (under section 1841 of the Social Security Act (42 U.S.C.
    1395t)), the amount of $100,000,000 to carry out the project.
      [(h) Application.--Chapter 35 of title 44, United States
    Code, shall not apply to the conduct of the project.]

               *       *       *       *       *       *       *

                                  ----------

     SECTION 542 OF THE MEDICARE, MEDICAID, AND SCHIP BENEFITS IMPROVEMENT
                           AND PROTECTION ACT OF 2000

    SEC. 542. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES UNDER
                        MEDICARE.

      (a) * * *

               *       *       *       *       *       *       *

      (c) Effective Date.--This section shall apply to services
    furnished during the 2-year period beginning on January 1,
    2001, and for services furnished during 2005, 2006, 2007, 2008,
    [and 2009] 2009, 2010, and 2011.
                                  ----------

    MEDICARE IMPROVEMENTS FOR PATIENTS AND PROVIDERS ACT OF 2008

               *       *       *       *       *       *       *

    TITLE I--MEDICARE

               *       *       *       *       *       *       *

                   Subtitle C--Provisions Relating to Part B

    PART I--PHYSICIANS' SERVICES

               *       *       *       *       *       *       *

    SEC. 138. ADJUSTMENT FOR MEDICARE MENTAL HEALTH SERVICES.

      (a) Payment Adjustment.--
              (1) In general.--For purposes of payment for services
            furnished under the physician fee schedule under
            section 1848 of the Social Security Act (42 U.S.C.
            1395w-4) during the period beginning on July 1, 2008,
            and ending on [December 31, 2009] December 31, 2011,
            the Secretary of Health and Human Services shall
            increase the fee schedule otherwise applicable for
            specified services by 5 percent.

               *       *       *       *       *       *       *

    PART II--OTHER PAYMENT AND COVERAGE IMPROVEMENTS

               *       *       *       *       *       *       *

    SEC. 146. IMPROVED ACCESS TO AMBULANCE SERVICES.

      (a) * * *

               *       *       *       *       *       *       *

      (b) Air Ambulance Payment Improvements.--
              (1) Treatment of certain areas for payment for air
            ambulance services under the ambulance fee schedule.--
            Notwithstanding any other provision of law, for
            purposes of making payments under section 1834(l) of
            the Social Security Act (42 U.S.C. 1395m(l)) for air
            ambulance services furnished during the period
            beginning on July 1, 2008, and [ending on December 31,
            2009] ending on December 31, 2011, any area that was
            designated as a rural area for purposes of making
            payments under such section for air ambulance services
            furnished on December 31, 2006, shall be treated as a
            rural area for purposes of making payments under such
            section for air ambulance services furnished during
            such period.

               *       *       *       *       *       *       *

                                  ----------

    MEDICARE PRESCRIPTION DRUG, IMPROVEMENT, AND MODERNIZATION ACT OF 2003

               *       *       *       *       *       *       *

    TITLE IV--RURAL PROVISIONS

               *       *       *       *       *       *       *

    Subtitle C--Provisions Relating to Parts A and B

               *       *       *       *       *       *       *

    SEC. 422. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

      (a) * * *
      (b) Conforming Provisions.--(1) * * *
      (2) Chapter 35 of title 44, United States Code, shall not
    apply with respect to applications under [section 1886(h)(7) of
    the Social Security Act, as added by subsection (a)(3).]
    paragraphs (4)(H)(vi), (7), and (8) of subsection (h) of
    section 1886 of the Social Security Act.

               *       *       *       *       *       *       *

                          TITLE VIII--COST CONTAINMENT

                         [Subtitle A--Cost Containment

    [SEC. 801. INCLUSION IN ANNUAL REPORT OF MEDICARE TRUSTEES OF
                        INFORMATION ON STATUS OF MEDICARE TRUST FUNDS.

      [(a) Determinations of Excess General Revenue Medicare
    Funding.--
              [(1) In general.--The Board of Trustees of each
            medicare trust fund shall include in the annual reports
            submitted under subsection (b)(2) of sections 1817 and
            1841 of the Social Security Act (42 U.S.C. 1395i and
            1395t)--
                      [(A) the information described in subsection
                    (b); and
                      [(B) a determination as to whether there is
                    projected to be excess general revenue medicare
                    funding (as defined in subsection (c)) for the
                    fiscal year in which the report is submitted or
                    for any of the succeeding 6 fiscal years.
              [(2) Medicare funding warning.--For purposes of
            section 1105(h) of title 31, United States Code, and
            this subtitle, an affirmative determination under
            paragraph (1)(B) in 2 consecutive annual reports shall
            be treated as a medicare funding warning in the year in
            which the second such report is made.
              [(3) 7-fiscal-year reporting period.--For purposes of
            this subtitle, the term ``7-fiscal-year reporting
            period'' means, with respect to a year in which an
            annual report described in paragraph (1) is made, the
            period of 7 consecutive fiscal years beginning with the
            fiscal year in which the report is submitted.
      [(b) Information.--The information described in this
    subsection for an annual report in a year is as follows:
              [(1) Projections of growth of general revenue
            spending.--A statement of the general revenue medicare
            funding as a percentage of the total medicare outlays
            for each of the following:
                      [(A) Each fiscal year within the 7-fiscal-
                    year reporting period.
                      [(B) Previous fiscal years and as of 10, 50,
                    and 75 years after such year.
              [(2) Comparison with other growth trends.--A
            comparison of the trend of such percentages with the
            annual growth rate in the following:
                      [(A) The gross domestic product.
                      [(B) Private health costs.
                      [(C) National health expenditures.
                      [(D) Other appropriate measures.
              [(3) Part d spending.--Expenditures, including trends
            in expenditures, under part D of title XVIII of the
            Social Security Act, as added by section 101.
              [(4) Combined medicare trust fund analysis.--A
            financial analysis of the combined medicare trust funds
            if general revenue medicare funding were limited to the
            percentage specified in subsection (c)(1)(B) of total
            medicare outlays.
      [(c) Definitions.--For purposes of this section:
              [(1) Excess general revenue medicare funding.--The
            term ``excess general revenue medicare funding'' means,
            with respect to a fiscal year, that--
                      [(A) general revenue medicare funding (as
                    defined in paragraph (2)), expressed as a
                    percentage of total medicare outlays (as
                    defined in paragraph (4)) for the fiscal year;
                    exceeds
                      [(B) 45 percent.
              [(2) General revenue medicare funding.--The term
            ``general revenue medicare funding'' means for a year--
                      [(A) the total medicare outlays (as defined
                    in paragraph (4)) for the year; minus
                      [(B) the dedicated medicare financing sources
                    (as defined in paragraph (3)) for the year.
              [(3) Dedicated medicare financing sources.--The term
            ``dedicated medicare financing sources'' means the
            following:
                      [(A) Hospital insurance tax.--Amounts
                    appropriated to the Hospital Insurance Trust
                    Fund under the third sentence of section
                    1817(a) of the Social Security Act (42 U.S.C.
                    1395i(a)) and amounts transferred to such Trust
                    Fund under section 7(c)(2) of the Railroad
                    Retirement Act of 1974 (45 U.S.C. 231f(c)(2)).
                      [(B) Taxation of certain oasdi benefits.--
                    Amounts appropriated to the Hospital Insurance
                    Trust Fund under section 121(e)(1)(B) of the
                    Social Security Amendments of 1983 (Public Law
                    98-21), as inserted by section 13215(c) of the
                    Omnibus Budget Reconciliation Act of 1993
                    (Public Law 103-66).
                      [(C) State transfers.--The State share of
                    amounts paid to the Federal Government by a
                    State under section 1843 of the Social Security
                    Act (42 U.S.C. 1395v) or pursuant to section
                    1935(c) of such Act.
                      [(D) Premiums.--The following premiums:
                              [(i) Part a.--Premiums paid by non-
                            Federal sources under sections 1818 and
                            section 1818A (42 U.S.C. 1395i-2 and
                            1395i-2a) of such Act.
                              [(ii) Part b.--Premiums paid by non-
                            Federal sources under section 1839 of
                            such Act (42 U.S.C. 1395r), including
                            any adjustments in premiums under such
                            section.
                              [(iii) Part d.--Monthly beneficiary
                            premiums paid under part D of title
                            XVIII of such Act, as added by section
                            101, and MA monthly prescription drug
                            beneficiary premiums paid under part C
                            of such title insofar as they are
                            attributable to basic prescription drug
                            coverage.
            Premiums under clauses (ii) and (iii) shall be
            determined without regard to any reduction in such
            premiums attributable to a beneficiary rebate under
            section 1854(b)(1)(C) of such title, as amended by
            section 222(b)(1), and premiums under clause (iii) are
            deemed to include any amounts paid under section 1860D-
            13(b) of such title, as added by section 101.
                      [(E) Gifts.--Amounts received by the medicare
                    trust funds under section 201(i) of the Social
                    Security Act (42 U.S.C. 401(i)).
              [(4) Total medicare outlays.--The term ``total
            medicare outlays'' means total outlays from the
            medicare trust funds and shall--
                      [(A) include payments made to plans under
                    part C of title XVIII of the Social Security
                    Act that are attributable to any rebates under
                    section 1854(b)(1)(C) of such Act (42 U.S.C.
                    1395w-24(b)(1)(C)), as amended by section
                    222(b)(1);
                      [(B) include administrative expenditures made
                    in carrying out title XVIII of such Act and
                    Federal outlays under section 1935(b) of such
                    Act, as added by section 103(a)(2); and
                      [(C) offset outlays by the amount of fraud
                    and abuse collections insofar as they are
                    applied or deposited into a medicare trust
                    fund.
              [(5) Medicare trust fund.--The term ``medicare trust
            fund'' means--
                      [(A) the Federal Hospital Insurance Trust
                    Fund established under section 1817 of the
                    Social Security Act (42 U.S.C. 1395i); and
                      [(B) the Federal Supplementary Medical
                    Insurance Trust Fund established under section
                    1841 of such Act (42 U.S.C. 1395t), including
                    the Medicare Prescription Drug Account under
                    such Trust Fund.
      [(d) Conforming Amendments.--
              [(1) Federal hospital insurance trust fund.--Section
            1817(b)(2) (42 U.S.C. 1395i(b)(2)) is amended by adding
            at the end the following: ``Each report provided under
            paragraph (2) beginning with the report in 2005 shall
            include the information specified in section 801(a) of
            the Medicare Prescription Drug, Improvement, and
            Modernization Act of 2003.''.
              [(2) Federal supplementary medical insurance trust
            fund.--Section 1841(b)(2) (42 U.S.C. 1395t(b)(2)) is
            amended by adding at the end the following: ``Each
            report provided under paragraph (2) beginning with the
            report in 2005 shall include the information specified
            in section 801(a) of the Medicare Prescription Drug,
            Improvement, and Modernization Act of 2003.''.
      [(e) Notice of Medicare Funding Warning.--Whenever any report
    described in subsection (a) contains a determination that for
    any fiscal year within the 7-fiscal-year reporting period there
    will be excess general revenue medicare funding, Congress and
    the President should address the matter under existing rules
    and procedures.

    [SEC. 802. PRESIDENTIAL SUBMISSION OF LEGISLATION.

      [(a) In General.--Section 1105 of title 31, United States
    Code, is amended by adding at the end the following new
    subsection:
      [``(h)(1) If there is a medicare funding warning under
    section 801(a)(2) of the Medicare Prescription Drug,
    Improvement, and Modernization Act of 2003 made in a year, the
    President shall submit to Congress, within the 15-day period
    beginning on the date of the budget submission to Congress
    under subsection (a) for the succeeding year, proposed
    legislation to respond to such warning.
      [``(2) Paragraph (1) does not apply if, during the year in
    which the warning is made, legislation is enacted which
    eliminates excess general revenue medicare funding (as defined
    in section 801(c) of the Medicare Prescription Drug,
    Improvement, and Modernization Act of 2003) for the 7-fiscal-
    year reporting period, as certified by the Board of Trustees of
    each medicare trust fund (as defined in section 801(c)(5) of
    such Act) not later than 30 days after the date of the
    enactment of such legislation.''.
      [(b) Sense of Congress.--It is the sense of Congress that
    legislation submitted pursuant to section 1105(h) of title 31,
    United States Code, in a year should be designed to eliminate
    excess general revenue medicare funding (as defined in section
    801(c)) for the 7-fiscal-year period that begins in such year.

    [SEC. 803. PROCEDURES IN THE HOUSE OF REPRESENTATIVES.

      [(a) Introduction and Referral of President's Legislative
    Proposal.--
              [(1) Introduction.--In the case of a legislative
            proposal submitted by the President pursuant to section
            1105(h) of title 31, United States Code, within the 15-
            day period specified in paragraph (1) of such section,
            the Majority Leader of the House of Representatives (or
            his designee) and the Minority Leader of the House of
            Representatives (or his designee) shall introduce such
            proposal (by request), the title of which is as
            follows: ``A bill to respond to a medicare funding
            warning.'' Such bill shall be introduced within 3
            legislative days after Congress receives such proposal.
              [(2) Referral.--Any legislation introduced pursuant
            to paragraph (1) shall be referred to the appropriate
            committees of the House of Representatives.
      [(b) Direction to the Appropriate House Committees.--
              [(1) In general.--In the House, in any year during
            which the President is required to submit proposed
            legislation to Congress under section 1105(h) of title
            31, United States Code, the appropriate committees
            shall report medicare funding legislation by not later
            than June 30 of such year.
              [(2) Medicare funding legislation.--For purposes of
            this section, the term ``medicare funding legislation''
            means--
                      [(A) legislation introduced pursuant to
                    subsection (a)(1), but only if the legislative
                    proposal upon which the legislation is based
                    was submitted within the 15-day period referred
                    to in such subsection; or
                      [(B) any bill the title of which is as
                    follows: ``A bill to respond to a medicare
                    funding warning.''.
              [(3) Certification.--With respect to any medicare
            funding legislation or any amendment to such
            legislation to respond to a medicare funding warning,
            the chairman of the Committee on the Budget of the
            House shall certify--
                      [(A) whether or not such legislation
                    eliminates excess general revenue medicare
                    funding (as defined in section 801(c)) for each
                    fiscal year in the 7-fiscal-year reporting
                    period; and
                      [(B) with respect to such an amendment,
                    whether the legislation, as amended, would
                    eliminate excess general revenue medicare
                    funding (as defined in section 801(c)) for each
                    fiscal year in such 7-fiscal-year reporting
                    period.
      [(c) Fallback Procedure for Floor Consideration if the House
    Fails to Vote on Final Passage by July 30.--
              [(1) After July 30 of any year during which the
            President is required to submit proposed legislation to
            Congress under section 1105(h) of title 31, United
            States Code, unless the House of Representatives has
            voted on final passage of any medicare funding
            legislation for which there is an affirmative
            certification under subsection (b)(3)(A), then, after
            the expiration of not less than 30 calendar days (and
            concurrently 5 legislative days), it is in order to
            move to discharge any committee to which medicare
            funding legislation which has such a certification and
            which has been referred to such committee for 30
            calendar days from further consideration of the
            legislation.
              [(2) A motion to discharge may be made only by an
            individual favoring the legislation, may be made only
            if supported by one-fifth of the total membership of
            the House (a quorum being present), and is highly
            privileged in the House. Debate thereon shall be
            limited to not more than one hour, the time to be
            divided in the House equally between those favoring and
            those opposing the motion. An amendment to the motion
            is not in order, and it is not in order to move to
            reconsider the vote by which the motion is agreed to or
            disagreed to.
              [(3) Only one motion to discharge a particular
            committee may be adopted under this subsection in any
            session of a Congress.
              [(4) Notwithstanding paragraph (1), it shall not be
            in order to move to discharge a committee from further
            consideration of medicare funding legislation pursuant
            to this subsection during a session of a Congress if,
            during the previous session of the Congress, the House
            passed medicare funding legislation for which there is
            an affirmative certification under subsection
            (b)(3)(A).
      [(d) Floor Consideration in the House of Discharged
    Legislation.--
              [(1) In the House, not later than 3 legislative days
            after any committee has been discharged from further
            consideration of legislation under subsection (c), the
            Speaker shall resolve the House into the Committee of
            the Whole for consideration of the legislation.
              [(2) The first reading of the legislation shall be
            dispensed with. All points of order against
            consideration of the legislation are waived. General
            debate shall be confined to the legislation and shall
            not exceed five hours, which shall be divided equally
            between those favoring and those opposing the
            legislation. After general debate the legislation shall
            be considered for amendment under the five-minute rule.
            During consideration of the legislation, no amendments
            shall be in order in the House or in the Committee of
            the Whole except those for which there has been an
            affirmative certification under subsection (b)(3)(B).
            All points of order against consideration of any such
            amendment in the Committee of the Whole are waived. The
            legislation, together with any amendments which shall
            be in order, shall be considered as read. During the
            consideration of the bill for amendment, the Chairman
            of the Committee of the Whole may accord priority in
            recognition on the basis of whether the Member offering
            an amendment has caused it to be printed in the portion
            of the Congressional Record designated for that purpose
            in clause 8 of Rule XVIII of the Rules of the House of
            Representatives. Debate on any amendment shall not
            exceed one hour, which shall be divided equally between
            those favoring and those opposing the amendment, and no
            pro forma amendments shall be offered during the
            debate. The total time for debate on all amendments
            shall not exceed 10 hours. At the conclusion of
            consideration of the legislation for amendment, the
            Committee shall rise and report the legislation to the
            House with such amendments as may have been adopted.
            The previous question shall be considered as ordered on
            the legislation and amendments thereto to final passage
            without intervening motion except one motion to
            recommit with or without instructions. If the Committee
            of the Whole rises and reports that it has come to no
            resolution on the bill, then on the next legislative
            day the House shall, immediately after the third daily
            order of business under clause 1 of Rule XIV of the
            Rules of the House of Representatives, resolve into the
            Committee of the Whole for further consideration of the
            bill.
              [(3) All appeals from the decisions of the Chair
            relating to the application of the Rules of the House
            of Representatives to the procedure relating to any
            such legislation shall be decided without debate.
              [(4) Except to the extent specifically provided in
            the preceding provisions of this subsection,
            consideration of any such legislation and amendments
            thereto (or any conference report thereon) shall be
            governed by the Rules of the House of Representatives
            applicable to other bills and resolutions, amendments,
            and conference reports in similar circumstances.
      [(e) Legislative Day Defined.--As used in this section, the
    term ``legislative day'' means a day on which the House of
    Representatives is in session.
      [(f) Restriction on Waiver.--In the House, the provisions of
    this section may be waived only by a rule or order proposing
    only to waive such provisions.
      [(g) Rulemaking Power.--The provisions of this section are
    enacted by the Congress--
              [(1) as an exercise of the rulemaking power of the
            House of Representatives and, as such, shall be
            considered as part of the rules of that House and shall
            supersede other rules only to the extent that they are
            inconsistent therewith; and
              [(2) with full recognition of the constitutional
            right of that House to change the rules (so far as they
            relate to the procedures of that House) at any time, in
            the same manner, and to the same extent as in the case
            of any other rule of that House.

    [SEC. 804. PROCEDURES IN THE SENATE.

      [(a) Introduction and Referral of President's Legislative
    Proposal.--
              [(1) Introduction.--In the case of a legislative
            proposal submitted by the President pursuant to section
            1105(h) of title 31, United States Code, within the 15-
            day period specified in paragraph (1) of such section,
            the Majority Leader and Minority Leader of the Senate
            (or their designees) shall introduce such proposal (by
            request), the title of which is as follows: ``A bill to
            respond to a medicare funding warning.'' Such bill
            shall be introduced within 3 days of session after
            Congress receives such proposal.
              [(2) Referral.--Any legislation introduced pursuant
            to paragraph (1) shall be referred to the Committee on
            Finance.
      [(b) Medicare Funding Legislation.--For purposes of this
    section, the term ``medicare funding legislation'' means--
              [(1) legislation introduced pursuant to subsection
            (a)(1), but only if the legislative proposal upon which
            the legislation is based was submitted within the 15-
            day period referred to in such subsection; or
              [(2) any bill the title of which is as follows: ``A
            bill to respond to a medicare funding warning.''.
      [(c) Qualification for Special Procedures.--
              [(1) In general.--The special procedures set forth in
            subsections (d) and (e) shall apply to medicare funding
            legislation, as described in subsection (b), only if
            the legislation--
                      [(A) is medicare funding legislation that is
                    passed by the House of Representatives; or
                      [(B) contains matter within the jurisdiction
                    of the Committee on Finance in the Senate.
              [(2) Failure to qualify for special procedures.--If
            the medicare funding legislation does not satisfy
            paragraph (1), then the legislation shall be considered
            under the ordinary procedures of the Standing Rules of
            the Senate.
      [(d) Discharge.--
              [(1) In general.--If the Committee on Finance has not
            reported medicare funding legislation described in
            subsection (c)(1) by June 30 of a year in which the
            President is required to submit medicare funding
            legislation to Congress under section 1105(h) of title
            31, United States Code, then any Senator may move to
            discharge the Committee of any single medicare funding
            legislation measure. Only one such motion shall be in
            order in any session of Congress.
              [(2) Debate limits.--Debate in the Senate on any such
            motion to discharge, and all appeals in connection
            therewith, shall be limited to not more than 2 hours.
            The time shall be equally divided between, and
            controlled by, the maker of the motion and the Majority
            Leader, or their designees, except that in the event
            the Majority Leader is in favor of such motion, the
            time in opposition thereto shall be controlled by the
            Minority Leader or the Minority Leader's designee. A
            point of order under this subsection may be made at any
            time. It is not in order to move to proceed to another
            measure or matter while such motion (or the motion to
            reconsider such motion) is pending.
              [(3) Amendments.--No amendment to the motion to
            discharge shall be in order.
              [(4) Exception if certified legislation enacted.--
            Notwithstanding paragraph (1), it shall not be in order
            to discharge the Committee from further consideration
            of medicare funding legislation pursuant to this
            subsection during a session of a Congress if the
            chairman of the Committee on the Budget of the Senate
            certifies that medicare funding legislation has been
            enacted that eliminates excess general revenue medicare
            funding (as defined in section 801(c)) for each fiscal
            year in the 7-fiscal-year reporting period.
      [(e) Consideration.--After the date on which the Committee on
    Finance has reported medicare funding legislation described in
    subsection (c)(1), or has been discharged (under subsection
    (d)) from further consideration of, such legislation, it is in
    order (even though a previous motion to the same effect has
    been disagreed to) for any Member of the Senate to move to
    proceed to the consideration of such legislation.
      [(f) Rules of the Senate.--This section is enacted by the
    Senate--
              [(1) as an exercise of the rulemaking power of the
            Senate and as such it is deemed a part of the rules of
            the Senate, but applicable only with respect to the
            procedure to be followed in the Senate in the case of a
            bill described in this paragraph, and it supersedes
            other rules only to the extent that it is inconsistent
            with such rules; and
              [(2) with full recognition of the constitutional
            right of the Senate to change the rules (so far as
            relating to the procedure of the Senate) at any time,
            in the same manner, and to the same extent as in the
            case of any other rule of the Senate.]

               *       *       *       *       *       *       *

                                  ----------

               SECTION 5007 OF THE DEFICIT REDUCTION ACT OF 2005

    SEC. 5007. MEDICARE DEMONSTRATION PROJECTS TO PERMIT GAINSHARING
                        ARRANGEMENTS.

      (a) * * *

               *       *       *       *       *       *       *

      (d) Program Administration.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Duration.--The qualified gainsharing
            demonstration program under this section shall be
            conducted for the period beginning on January 1, 2007,
            and ending on December 31, 2009 (or September 30, 2011,
            in the case of a demonstration project in operation as
            of October 1, 2008).
      (e) Reports.--
              (1) * * *

               *       *       *       *       *       *       *

              (3) Quality improvement and savings.--By not later
            than [December 1, 2008] March 31, 2011, the Secretary
            shall submit to Congress a report on quality
            improvement and savings achieved as a result of the
            qualified gainsharing demonstration program established
            under subsection (a).
              (4) Final report.--By not later than [May 1, 2010]
            March 31, 2013, the Secretary shall submit to Congress
            a final report on the information described in
            paragraph (3).
      (f) Funding.--
              (1) In general.--Out of any funds in the Treasury not
            otherwise appropriated, there are appropriated to the
            Secretary for fiscal year 2006 $6,000,000, and for
            fiscal year 2010, $1,600,000, to carry out this
            section.
              (2) Availability.--Funds appropriated under paragraph
            (1) shall remain available for expenditure through
            fiscal year [2010] 2014 or until expended.

               *       *       *       *       *       *       *

                             VII. DISSENTING VIEWS

                                    ------

                                Dissenting Views

                                    OVERVIEW

        H.R. 3200 is fundamentally flawed legislation that
    threatens to simultaneously do irreparable harm to the health
    delivery system and add mountains of additional debt on our
    children and grandchildren. Long before those bills come due,
    though, Americans with health insurance would pay thousands of
    dollars more per year for coverage, and a host of new taxes on
    individuals and businesses would further hamper efforts to
    revive an already struggling economy if this bill becomes law.
        The bill violates oft-repeated promises by the President
    and others that health care reform won't cause people to lose
    coverage they like, that taxes won't increase on families with
    income less than $250,000 and that tax rates won't increase
    above what they were during the 1990s.
        The minority was united in opposition to the bill for five
    main reasons:
        1. It was unnecessarily rushed through the Committee
    without proper understanding or even a reading of the bill by
    Members;
        2. The massive spending and tax increases will damage an
    already reeling economy;
        3. Americans will lose coverage they have and like;
        4. The bill gives the government control over Americans'
    personal health decisions; and
        5. Numerous specific improvements we proposed to the bill
    were all rejected.

         I. BILL SHOULD NOT HAVE BEEN RUSHED INTO AND OUT OF COMMITTEE

        While we share the majority's goal of improving the
    nation's health care system, the issues are too important and
    the decisions too difficult to act in haste and without the
    full range of information necessary to make such critical
    policy choices.
        We held only one hearing on the discussion draft released
    in June, however not one of the witnesses spoke knowledgably
    about all of the provisions in the bill because they were only
    given a couple of days to digest it.
        The measure approved by the Committee was substantially
    changed from the June draft, with the last round of edits
    coming out just after midnight on Thursday, July 16th, a few
    hours before the one-day markup of the legislation that began
    at 9 a.m. that morning.
        This contrasts starkly with the health care reform debate
    in 1994. That year, the full Ways and Means Committee spent 17
    days over six weeks conducting our markup. And that was only
    after holding a dozen hearings (eight at Subcommittee, four at
    full Committee) on the bill after its introduction.
        It is also worth pointing out that the Committee refused to
    act on the Clinton bill in 1994 until nearly three months after
    the Congressional Budget Office (CBO) released a comprehensive,
    104-page analysis and score. We had no such analysis of H.R.
    3200 or the Chairman's mark. What we had instead was a very
    rough estimate on only a portion of the bill based on
    specifications as outlined by the Majority to CBO, not on
    actual legislative text. As Director Elmendorf wrote to
    Chairman Rangel:
        ``It is important to note, however, that [those] estimates
    are based on specifications provided by the tri-committee group
    rather than an analysis of the language released [this week].
    For that reason and others outlined below, those figures do not
    represent a formal or complete cost estimate for the coverage
    provisions of the draft legislation.''
        Quite simply, that is not adequate for a bill as important
    as this, one that will have such far-reaching impacts on every
    family and business in America. We cannot afford to guess and
    hope we got it right. This Committee had no business marking up
    a bill of which CBO cannot tell us its cost or impacts. That
    view was further confirmed by testimony during the day by
    Director Elmendorf about the long-term budget impact of this
    legislation.

            II. MASSIVE SPENDING AND TAX INCREASES WILL HURT ECONOMY

        What we do know about the bill is that it matches more than
    a trillion dollars in new spending that grows even faster than
    the revenues being generated to pay for it, creating a massive,
    long-term unfunded federal mandate that imperils the fiscal
    future of this nation. Ironically, despite claims that the
    United States is already ``spending too much on health care,''
    the bill finances even higher spending with more than $820
    billion in new taxes that will be paid for by families making
    as little as $20,000, small businesses, and manufacturers--all
    while we are in the midst of a recession and with unemployment
    moving quickly toward 10 percent.
        Section 412 of the bill includes a mandate that employers
    provide health coverage deemed acceptable by the Federal
    Government or else pay a new payroll tax of eight percent of
    total payroll (a so-called ``pay-or-play'' scheme) that will
    bring the total U.S. federal payroll tax to more than 23
    percent. Only the smallest of businesses would get any relief
    from this job-killing tax. Economists across the political
    spectrum agree that workers suffer the economic burden of
    payroll taxes. In a July 13, 2009 report entitled, ``Effects of
    Changes to the Health Insurance System on Labor Markets,'' the
    Congressional Budget Office concluded that an employer mandate
    ``is likely to reduce employment,'' with the effect being most
    severe for low-wage workers. It is therefore disappointing that
    the Majority chose to ignore the warnings of leading groups
    representing businesses in America about the damage this will
    do to employment and wages in America.
        Section 441 of the bill attempts to plug part of the fiscal
    hole it creates with a new surtax on individuals and small
    businesses. The 5.4-percent surtax rate, combined with the
    already scheduled increase in the top marginal rate to 39.6
    percent, would result in an increase in the top Federal income
    tax rate from 35 percent in 2010 to 45 percent in 2011. Adding
    in the 2.9-percent Medicare payroll tax and hidden marginal
    rate increases that operate by phasing out certain deductions,
    the proposed top Federal rate would jump to about 48 percent,
    and the average top Federal-State marginal tax rate would be
    over 52 percent.
        While nominally aimed at individuals, the surtax will fall
    heavily on small businesses, the engine of job creation.
    According to a Joint Committee on Taxation data projection for
    2011, 42 percent of small business income (including the income
    of sole proprietorships, partnerships, and S Corporations)
    would be subject to the surtax.
        Not content to just tax ``the wealthy,'' the bill also
    imposes large taxes on some of America's poorest families.
    Effective in 2013, section 401 would impose a tax on
    individuals without ``acceptable coverage'', which would hit
    single filers with incomes as low as $9,350 and married couples
    with incomes as low as $18,700 (in 2009 dollars). This
    undermines President Obama's ongoing promise not to raise taxes
    on families with incomes under $250,000.
        Section 442 would prohibit the use of tax-free
    distributions from Health Savings Accounts (HSAs), Flexible
    Spending Arrangements (FSAs), and Health Reimbursement
    Arrangements (HRAs) to purchase medicine or drugs other than
    prescription drugs or insulin. By imposing this restriction on
    the estimated 47 to 50 million individuals who currently carry
    coverage that includes either an HSA, FSA, or HRA, the bill
    violates another of President Obama's pledges: to allow
    families to keep the coverage they have and like.
        In addition, the Majority would impose several unwise tax
    increases that bear no relationship to the purpose of the
    legislation other than to fund the move toward nationalization
    of health care in this country. These tax increases include a
    provision that appears to violate our tax treaties with our
    trading partners; a multi-year delay in rules that would allow
    worldwide American businesses to calculate their interest
    expense more accurately; and codification of the economic
    substance doctrine. The delay of the interest expense
    allocation rules is especially troubling. By terminating this
    tax increase at the end of the budget window, the Majority
    seems to be subtly acknowledging that the revenues generated by
    the bill will further fail to keep pace with its spending in
    the long-run.

            III. AMERICANS WILL LOSE THE COVERAGE THEY HAVE AND LIKE

        Independent analysis demonstrates that under H.R. 3200, two
    out of three Americans will lose the coverage they currently
    enjoy because it establishes a government-run health plan. It
    will, over time, force other coverage out of the market,
    eventually turning the government option into a federal
    monopoly.
        This starts with the creation of a federally subsidized
    government-run insurance plan that would pay hospitals and
    doctors at set Medicare rates for services. As Medicare
    significantly underpays providers, the government-run plan will
    force private plans to pick up the slack. As a result, the
    average cost of private coverage for a family of four would be
    $3,628 more expensive because of the new and existing cost-
    shift, according to analysis by Milliman and the Lewin Group.
    Because it is unlikely that providers will willingly accept the
    government-run plan's low reimbursements, the Secretary of HHS
    would have the authority to force providers to participate in
    this plan.
        The government-run plan will not have to pay state or
    federal taxes. It would be exempt from complying with state
    benefit and provider mandates, which have been shown to
    increase the cost of health insurance. The plan provides a $2
    billion interest free loan from taxpayers. Unlike private
    insurance plans, who can be sued in state courts, the
    government-run plan could only be sued in federal court. And
    finally it will have the full backing of the United States
    government. Regardless of any assurances to the contrary, the
    government-run insurance plan will be ``too big to fail,''
    almost ensuring that taxpayers will be responsible for any
    funding shortfalls. This affords the government plan further
    significant advantage over the plans it is supposed to
    ``compete'' against.
        To further guarantee that result, all private health plans
    would be required to conform to benefit mandates, as determined
    by the federal government. Any employer offering coverage that
    wasn't approved by the government would be forced to pay a
    steep tax penalty. Further, individual market plans would be
    prohibited from enrolling new members and would be prohibited
    from updating their benefits or cost-sharing arrangements for
    those currently enrolled. This prohibition on new enrollment
    will result in a death spiral where insurance costs for a plan
    climb at an unsustainable rate for all existing health
    insurance plans. By guaranteeing adverse selection will occur,
    the bill will ultimately force these plans to close down
    completely.
        The bill further prohibits any new insurance plan from
    creating health coverage that does not conform to the federal
    government's requirements, and that insurance plan will not be
    allowed to exist outside of the government established super-
    structure, referred to in H.R. 3200 as the Exchange. By
    prohibiting new insurance plans that don't comply with various
    new federal requirements, the bill effectively limits choice in
    the insurance market.

      IV. GIVES THE GOVERNMENT CONTROL OVER PERSONAL HEALTH CARE DECISIONS

        H.R. 3200 will create a system by which health care
    decisions will be made in Washington that should be made in
    doctor's offices by patients and their physicians and at
    kitchen tables by families. House Democrats would establish a
    new government-run ``Exchange'' run by a new ``Health Choices
    Commissioner'' nominated by the President and confirmed by the
    Senate. As the Commissioner is serving at the pleasure of the
    President, some may be concerned about the lack of independence
    of this individual. The Commissioner would also be required to
    work with the Secretary of Health and Human Services, who
    oversees the government-run insurance plan described above,
    creating the potential for a serious conflict of interest that
    could significantly disadvantage the private coverage that
    insures more than 170 million Americans today.
        Aside from the will of the President, the Commissioner's
    power would be unchecked. This is extremely troubling given the
    large scope of responsibility given to the Commissioner. In
    fact, the Commissioner is so powerful that the title is
    referenced almost 200 times in H.R. 3200. This government
    official would have:
               The power to decide which treatments
            patients could receive and at what cost;
               The power to decide which private plans
            would be allowed to participate in the Exchange;
               The power to regulate all insurance plans,
            both in and out of the Exchange;
               The power to determine which employers would
            be allowed to participate in the Exchange;
               The power to determine how many Americans
            will be allowed to choose health coverage through the
            Exchange;
               The power to form and control which
            physicians and hospitals participate in the government-
            run plan and in private plan provider networks;
               The power to determine which states are
            allowed to operate their own Exchange and terminate a
            previously-approved State Exchange at any time;
               The power to override state laws regarding
            covered health benefits;
               The power to determine how trillions of
            taxpayer and employer dollars would be spent within the
            Exchange;
               The power to determine who qualifies for
            premium assistance; and
               The power to automatically enroll Americans
            into the Exchange if they don't have coverage,
            including potentially forcing these individuals into
            the government-run plan.
        Also troubling is the fact the Secretary of Health and
    Human Services would decide which prescription drugs are made
    available in the government plan. Evidence has shown that
    government officials in other countries have used this power to
    deny access to needed treatments on the basis of cost.
        The bill also contains a new initiative on Comparative
    Effectiveness Research (CER). This board and its research will
    significantly harm the patient-doctor relationship if
    government-run health care uses the research to restrict
    treatments deemed too expensive. The bill reported by the
    Committee contains a provision expressly prohibiting the CER
    board from using its research to make coverage determinations.
    That may be the biggest of many fig leaves in the bill; in this
    case, the joke is on us, since the CER board would never make a
    coverage determination--it doesn't issue health insurance or
    pay claims, or have to decide what is covered and what is not.
        But those who would make such coverage decisions, like the
    Centers for Medicare and Medicaid Services (CMS), face no such
    restrictions on their use of CER data. Peter Orszag, Director
    of the Office of Management and Budget, has publicly affirmed
    the Administration's desire to use CER to ``bend the cost
    curve.'' As it relates to CER, this means that CMS and the
    Health Choices Commissioner will be able to deny coverage based
    on the cost of treatment, or ration access to health care
    services, for people in Medicare and every American enrolled in
    insurance plans offered through the Exchange.

              V. ATTEMPTS TO IMPROVE THE LEGISLATION WERE REJECTED

        Sadly, the foregoing does not constitute a complete review
    of the flaws of this legislation. During the Committee mark-up,
    these and other concerns were identified. Republicans attempted
    to address them through more than three dozen amendments. Those
    included amendments to: eliminate the government-run health
    insurance plan that could result in two out of three Americans
    losing their current coverage; ensure that comparative
    effectiveness research isn't used to ration care based on cost;
    terminate the government-run plan if wait times for care become
    too long; prevent the government from requiring health care
    providers to serve patients enrolled in the government-run
    health plan; ensure the Health Choices Commissioner could not
    deem abortion to be a required benefit; reverse cuts to
    Medicare Advantage plans, which give seniors access to benefits
    not found in the government-run Medicare program; and promote
    medical liability reform, which would help address the impact
    that the practice of defensive medicine has on health care
    spending.
        Sadly, not a single one of these or the other amendments
    offered was accepted, reinforcing the widely held belief that
    this effort is a purely partisan exercise in which additional
    views and suggestions simply are not welcome.

                                   CONCLUSION

        At the outset of the mark-up, the Majority rejected a
    motion by the Ranking Member to delay consideration of the bill
    by one week, notwithstanding the fact the bill had been
    available for only a few hours and that the Committee did not
    even have a Congressional Budget Office estimate about the
    short and long-term impact of the package.
        We suppose that should have been an indication about what
    was to come and the futility of trying to improve this deeply
    flawed product.
        Hours after the mark-up ended, the Congressional Budget
    Office did release a further partial score of the bill (still
    based on descriptions of what is in the bill rather than on the
    legislative text itself). The overall conclusion is that the
    bill adds nearly $240 billion to the deficit this decade, with
    the bulk of those costs occurring at the end of the budget
    window. In 2015 alone, the bill will add $40 billion to the
    federal deficit. By 2019, that figure will rise to $65 billion
    and the deepening debt impact shows no signs of slowing down in
    future years. In short, the $240 billion that this adds to the
    deficit this decade is just the tip of the fiscal iceberg.
        We would like to hope that the Majority's mad dash for an
    arbitrary finish line, regardless of the consequences, will be
    called off before real and lasting damage is done to our health
    care system and our economy. But as we write this, the
    prognosis is not good.

                                       Dave Camp, Michigan,
                                       Wally Herger, California,
                                       Sam Johnson, Texas,
                                       Kevin Brady, Texas,
                                       Paul Ryan, Wisconsin,
                                       Eric Cantor, Virginia,
                                       John Linder, Georgia,
                                       Devin Nunes, California,
                                       Patrick J. Tiberi, Ohio,
                                       Ginny Brown-Waite, Florida,
                                       Geoff Davis, Kentucky,
                                       David G. Reichert, Washington,
                                       Charles W. Boustany, Jr., Louisiana,
                                       Dean Heller, Nevada,
                                       Peter J. Roskam, Illinois.

                             VIII. ADDITIONAL VIEWS

       Restricts Current Physician Owned Hospitals, Prohibits Ones Under
                                  Construction

        Section 1156 of H.R. 3200 contains provisions that would
    devastate physician-owned hospitals across this country in two
    ways. First, it contains a retroactive effective date. Section
    1156 states that in order for a physician-owned facility to
    have the ability to bill Medicare for services, it needs to
    have received a Medicare provider number by January 1, 2009, a
    date that came and went over 6 months ago.
        This language would prevent 104 hospitals that are under
    development in over 20 states from ever receiving their
    Medicare provider number. This includes hospitals that have
    opened their doors and are already seeing patients, but have
    not received a provider number through no fault of their own.
    This means that hospitals, which were relying on current law,
    would be prohibited from ever becoming a Medicare provider,
    because of some arbitrary and retroactive deadline set forth in
    this legislation. Over $5 billion of investments have been made
    towards these 104 projects; this provision threatens not only
    those investments but also the 21,000 jobs that stand to be
    created by these hospitals. This legislation should not
    threaten this boost in economic growth for our communities and
    our states at a time our country desperately needs them the
    most.
        Second, this provision restricts the 222 physician-owned
    hospitals currently operating in 32 states from growing and
    responding to the needs of the patients and communities they
    serve. Section 1156 sets forth qualifications that a physician-
    owned hospital must meet to just be able to apply for
    permission to grow from the Secretary of Health and Human
    Services. Besides the policy implications of a hospital needing
    to petition the federal government for permission to add a
    hospital bed if their community needs it, the qualifications
    listed are so restrictive that only 3 of the current 222
    facilities meet them.
        We are disheartened that these provisions seek to legislate
    away hospitals in our districts that provide much needed
    quality and efficient healthcare for our constituents. As this
    bill continues through the legislative process at such a rapid
    speed, it is our hope these restrictions are changed so that
    our constituents can continue to have access to the great care
    they are currently receiving.
                                                            Sam Johnson
                                                           Wally Herger
                                                              Paul Ryan
                                                              Dave Camp
                                                            Kevin Brady
                                                            John Linder
                                                            Dean Heller