House Report 111-299 - AMERICA'S AFFORDABLE HEALTH CHOICES ACT OF 2009

[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

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

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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

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.''.

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

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.
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\37\Sec. 106.
\38\Sec. 105(b).
\39\Sec. 125.
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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.
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\41\Pub. L. No. 99-272.
\42\Pub. L. No. 104-191.
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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\
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\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\
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\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.
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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\
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\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.
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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.
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\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

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).
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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.
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\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.
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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.
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\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.
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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.
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\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).
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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.
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\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).
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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.
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\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.
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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.
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\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.
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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.
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\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.
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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\
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\92\Treas. Reg. sec. 1.861-11T(d)(4).
\93\Sec. 864(e)(5)(C).
\94\Sec. 864(e)(5)(D).
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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\
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\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.
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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.
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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).
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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.
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\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.
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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\
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\101\United States Model Income Tax Convention of November 15,
2006, Art. 4, par. 1.
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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.
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\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.
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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.
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\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).
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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.
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\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)).
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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\
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\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).
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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\
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\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\
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\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\
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\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'.'')
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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\
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\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.
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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.
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\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).
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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\
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\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.
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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\
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\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).
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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.
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\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.
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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\
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\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.
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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\
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\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).
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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\
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\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.'').
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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\
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\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.
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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\
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\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).
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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.
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\137\Thus, a ``reasonable possibility of profit'' alone will not be
sufficient to establish that a transaction has economic substance.
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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.
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\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).
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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\
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\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.
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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.
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\143\Sec. 6662A(b)(2).
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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\
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\144\Sec. 6707A(c)(1).
\145\Sec. 6707A(c)(2).
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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\
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\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''.
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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\
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\148\Sec. 6662A(c).
\149\Sec. 6664(d).
\150\Sec. 6707A(d).
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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\
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\151\Sec. 6707A(e).
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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.
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\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).
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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\
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\153\Sec. 6662A(e)(3).
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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\
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\154\See the previous discussion regarding the penalty for failing
to disclose a reportable transaction.
\155\Sec. 6664(d).
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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.
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\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.
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\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.
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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\
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\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.
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\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.
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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\
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\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\
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\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.
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\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.
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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.
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\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

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

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.

* * * * * * *

(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) * * *

* * * * * * *

(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) * * *

* * * * * * *

(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) * * *

* * * * * * *

(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

* * * * * * *

(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) * * *

* * * * * * *

(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) * * *

* * * * * * *

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) * * *

* * * * * * *

(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) * * *

* * * * * * *

(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'':

(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.

* * * * * * *

----------

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