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


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

                                     


            AMERICA'S AFFORDABLE HEALTH CHOICES ACT OF 2009

                               ----------                              

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                                   on

                               H.R. 3200

                             together with

                    DISSENTING AND ADDITIONAL VIEWS




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


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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

                                   on

                               H.R. 3200

                             together with

                    DISSENTING AND ADDITIONAL VIEWS




                October 14, 2009.--Ordered to be printed


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

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



 
            AMERICA'S AFFORDABLE HEALTH CHOICES ACT OF 2009

                                _______
                                

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

                                _______
                                

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

                              R E P O R T

                             together with

                    DISSENTING AND ADDITIONAL VIEWS

                        [To accompany H.R. 3200]

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

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

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

               DIVISION A--AFFORDABLE HEALTH CARE CHOICES

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

             DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

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

          DIVISION C--PUBLIC HEALTH AND WORKFORCE DEVELOPMENT

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

               DIVISION A--AFFORDABLE HEALTH CARE CHOICES

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

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

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

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

                     Subtitle A--General Standards

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

    Subtitle B--Standards Guaranteeing Access to Affordable Coverage

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

    Subtitle C--Standards Guaranteeing Access to Essential Benefits

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

              Subtitle D--Additional Consumer Protections

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

                         Subtitle E--Governance

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

       Subtitle F--Relation to Other Requirements; Miscellaneous

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

                     Subtitle G--Early Investments

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

       TITLE II--HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS

                 Subtitle A--Health Insurance Exchange

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

               Subtitle B--Public Health Insurance Option

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

              Subtitle C--Individual Affordability Credits

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

                    TITLE III--SHARED RESPONSIBILITY

                 Subtitle A--Individual Responsibility

Sec. 301. Individual responsibility.

                  Subtitle B--Employer Responsibility

           Part 1--Health Coverage Participation Requirements

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

   Part 2--Satisfaction of Health Coverage Participation Requirements

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

         TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

                   Subtitle A--Shared Responsibility

                   Part 1--Individual Responsibility

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

                    Part 2--Employer Responsibility

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

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

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

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

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

                  Subtitle D--Other Revenue Provisions

                       Part 1--General Provisions

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

                  Part 2--Prevention of Tax Avoidance

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

                   Part 3--Parity in Health Benefits

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

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

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

                     Subtitle A--General Standards

SEC. 101. REQUIREMENTS REFORMING HEALTH INSURANCE MARKETPLACE.

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

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

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

    Subtitle B--Standards Guaranteeing Access to Affordable Coverage

SEC. 111. PROHIBITING PRE-EXISTING CONDITION EXCLUSIONS.

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

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

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

SEC. 113. INSURANCE RATING RULES.

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

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

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

SEC. 115. ENSURING ADEQUACY OF PROVIDER NETWORKS.

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

SEC. 116. ENSURING VALUE AND LOWER PREMIUMS.

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

    Subtitle C--Standards Guaranteeing Access to Essential Benefits

SEC. 121. COVERAGE OF ESSENTIAL BENEFITS PACKAGE.

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

SEC. 122. ESSENTIAL BENEFITS PACKAGE DEFINED.

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

SEC. 123. HEALTH BENEFITS ADVISORY COMMITTEE.

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

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

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

              Subtitle D--Additional Consumer Protections

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

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

SEC. 132. REQUIRING FAIR GRIEVANCE AND APPEALS MECHANISMS.

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

SEC. 133. REQUIRING INFORMATION TRANSPARENCY AND PLAN DISCLOSURE.

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

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

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

SEC. 135. TIMELY PAYMENT OF CLAIMS.

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

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

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

SEC. 137. APPLICATION OF ADMINISTRATIVE SIMPLIFICATION.

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

                         Subtitle E--Governance

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

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

SEC. 142. DUTIES AND AUTHORITY OF COMMISSIONER.

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

SEC. 143. CONSULTATION AND COORDINATION.

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

SEC. 144. HEALTH INSURANCE OMBUDSMAN.

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

       Subtitle F--Relation to Other Requirements; Miscellaneous

SEC. 151. RELATION TO OTHER REQUIREMENTS.

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

SEC. 152. PROHIBITING DISCRIMINATION IN HEALTH CARE.

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

SEC. 153. WHISTLEBLOWER PROTECTION.

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

SEC. 154. CONSTRUCTION REGARDING COLLECTIVE BARGAINING.

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

SEC. 155. SEVERABILITY.

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

                     Subtitle G--Early Investments

SEC. 161. ENSURING VALUE AND LOWER PREMIUMS.

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

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

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

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

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

SEC. 162. ENDING HEALTH INSURANCE RESCISSION ABUSE.

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

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

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

SEC. 163. ADMINISTRATIVE SIMPLIFICATION.

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

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

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

SEC. 164. REINSURANCE PROGRAM FOR RETIREES.

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

       TITLE II--HEALTH INSURANCE EXCHANGE AND RELATED PROVISIONS

                 Subtitle A--Health Insurance Exchange

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

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

SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS.

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

SEC. 203. BENEFITS PACKAGE LEVELS.

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

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

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

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

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

SEC. 206. OTHER FUNCTIONS.

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

SEC. 207. HEALTH INSURANCE EXCHANGE TRUST FUND.

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

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

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

               Subtitle B--Public Health Insurance Option

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

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

SEC. 222. PREMIUMS AND FINANCING.

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

SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES.

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

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

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

SEC. 225. PROVIDER PARTICIPATION.

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

SEC. 226. APPLICATION OF FRAUD AND ABUSE PROVISIONS.

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

              Subtitle C--Individual Affordability Credits

SEC. 241. AVAILABILITY THROUGH HEALTH INSURANCE EXCHANGE.

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

SEC. 242. AFFORDABLE CREDIT ELIGIBLE INDIVIDUAL.

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

SEC. 243. AFFORDABILITY PREMIUM CREDIT.

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


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

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


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

SEC. 244. AFFORDABILITY COST-SHARING CREDIT.

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

SEC. 245. INCOME DETERMINATIONS.

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

SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED ALIENS.

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

                    TITLE III--SHARED RESPONSIBILITY

                 Subtitle A--Individual Responsibility

SEC. 301. INDIVIDUAL RESPONSIBILITY.

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

                  Subtitle B--Employer Responsibility

           PART 1--HEALTH COVERAGE PARTICIPATION REQUIREMENTS

SEC. 311. HEALTH COVERAGE PARTICIPATION REQUIREMENTS.

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

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

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

SEC. 313. EMPLOYER CONTRIBUTIONS IN LIEU OF COVERAGE.

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

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


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

SEC. 314. AUTHORITY RELATED TO IMPROPER STEERING.

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

   PART 2--SATISFACTION OF HEALTH COVERAGE PARTICIPATION REQUIREMENTS

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

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

     ``PART 8--NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS

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

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

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

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

``SEC. 803. HEALTH COVERAGE PARTICIPATION REQUIREMENTS.

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

``SEC. 804. RULES FOR APPLYING REQUIREMENTS.

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

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

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

``SEC. 806. REGULATIONS.

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

     ``Part 8--National Health Coverage Participation Requirements

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

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

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

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

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

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

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

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

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

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

         TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

                   Subtitle A--Shared Responsibility

                   PART 1--INDIVIDUAL RESPONSIBILITY

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

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

                 ``PART VIII--HEALTH CARE RELATED TAXES

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

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

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

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

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

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

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

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

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

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

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

                    PART 2--EMPLOYER RESPONSIBILITY

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

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

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

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

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

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

SEC. 412. RESPONSIBILITIES OF NONELECTING EMPLOYERS.

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

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


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

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

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

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

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

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

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

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

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

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

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

                  Subtitle D--Other Revenue Provisions

                       PART 1--GENERAL PROVISIONS

SEC. 441. SURCHARGE ON HIGH INCOME INDIVIDUALS.

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

           ``Subpart B--Surcharge on High Income Individuals

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

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

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

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

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

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

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

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

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

                  PART 2--PREVENTION OF TAX AVOIDANCE

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

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

SEC. 452. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

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

SEC. 453. PENALTIES FOR UNDERPAYMENTS.

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

                   PART 3--PARITY IN HEALTH BENEFITS

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

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

             DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

SEC. 1001. TABLE OF CONTENTS OF DIVISION.

  The table of contents for this division is as follows:

             DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

Sec. 1001. Table of contents of division.

                  TITLE I--IMPROVING HEALTH CARE VALUE

           Subtitle A--Provisions Related to Medicare Part A

                     Part 1--Market Basket Updates

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

                Part 2--Other Medicare Part A Provisions

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

                Subtitle B--Provisions Related to Part B

                      Part 1--Physicians' Services

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

                     Part 2--Market Basket Updates

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

                        Part 3--Other Provisions

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

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

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

                 Subtitle D--Medicare Advantage Reforms

                   Part 1--Payment and Administration

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

             Part 2--Beneficiary Protections and Anti-Fraud

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

                Part 3--Treatment of Special Needs Plans

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

              Subtitle E--Improvements to Medicare Part D

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

             Subtitle F--Medicare Rural Access Protections

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

              TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS

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

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

                Subtitle B--Reducing Health Disparities

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

                 Subtitle C--Miscellaneous Improvements

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

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

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

                           TITLE IV--QUALITY

             Subtitle A--Comparative Effectiveness Research

Sec. 1401. Comparative effectiveness research.

                 Subtitle B--Nursing Home Transparency

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

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

                     Part 2--Targeting Enforcement

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

                    Part 3--Improving Staff Training

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

                    Subtitle C--Quality Measurements

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

           Subtitle D--Physician Payments Sunshine Provision

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

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

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

              TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION

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

                      TITLE VI--PROGRAM INTEGRITY

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

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

           Subtitle B--Enhanced Penalties for Fraud and Abuse

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

         Subtitle C--Enhanced Program and Provider Protections

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

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

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

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

                 TITLE VIII--REVENUE-RELATED PROVISIONS

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

                   TITLE IX--MISCELLANEOUS PROVISIONS

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

                  TITLE I--IMPROVING HEALTH CARE VALUE

           Subtitle A--Provisions Related to Medicare Part A

                     PART 1--MARKET BASKET UPDATES

SEC. 1101. SKILLED NURSING FACILITY PAYMENT UPDATE.

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

SEC. 1102. INPATIENT REHABILITATION FACILITY PAYMENT UPDATE.

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

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

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

                PART 2--OTHER MEDICARE PART A PROVISIONS

SEC. 1111. PAYMENTS TO SKILLED NURSING FACILITIES.

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

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

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

SEC. 1113. EXTENSION OF HOSPICE REGULATION MORATORIUM.

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

                Subtitle B--Provisions Related to Part B

                      PART 1--PHYSICIANS' SERVICES

SEC. 1121. SUSTAINABLE GROWTH RATE REFORM.

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

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

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

SEC. 1123. PAYMENTS FOR EFFICIENT AREAS.

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

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

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

SEC. 1125. ADJUSTMENT TO MEDICARE PAYMENT LOCALITIES.

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

                     PART 2--MARKET BASKET UPDATES

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

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

                        PART 3--OTHER PROVISIONS

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

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

SEC. 1142. EXTENSION OF PAYMENT RULE FOR BRACHYTHERAPY.

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

SEC. 1143. HOME INFUSION THERAPY REPORT TO CONGRESS.

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

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

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

SEC. 1145. TREATMENT OF CERTAIN CANCER HOSPITALS.

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

SEC. 1146. MEDICARE IMPROVEMENT FUND.

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

SEC. 1147. PAYMENT FOR IMAGING SERVICES.

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

SEC. 1148. DURABLE MEDICAL EQUIPMENT PROGRAM IMPROVEMENTS.

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

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

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

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

SEC. 1151. REDUCING POTENTIALLY PREVENTABLE HOSPITAL READMISSIONS.

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

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

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

SEC. 1153. HOME HEALTH PAYMENT UPDATE FOR 2010.

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

SEC. 1154. PAYMENT ADJUSTMENTS FOR HOME HEALTH CARE.

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

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

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

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

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

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

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

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

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

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

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

                 Subtitle D--Medicare Advantage Reforms

                   PART 1--PAYMENT AND ADMINISTRATION

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

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

SEC. 1162. QUALITY BONUS PAYMENTS.

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

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

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

SEC. 1164. SIMPLIFICATION OF ANNUAL BENEFICIARY ELECTION PERIODS.

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

SEC. 1165. EXTENSION OF REASONABLE COST CONTRACTS.

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

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

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

SEC. 1167. IMPROVING RISK ADJUSTMENT FOR PAYMENTS.

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

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

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

             PART 2--BENEFICIARY PROTECTIONS AND ANTI-FRAUD

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

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

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

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

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

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

SEC. 1174. STRENGTHENING AUDIT AUTHORITY.

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

SEC. 1175. AUTHORITY TO DENY PLAN BIDS.

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

                PART 3--TREATMENT OF SPECIAL NEEDS PLANS

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

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

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

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

              Subtitle E--Improvements to Medicare Part D

SEC. 1181. ELIMINATION OF COVERAGE GAP.

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

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

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

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

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

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

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

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

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

             Subtitle F--Medicare Rural Access Protections

SEC. 1191. TELEHEALTH EXPANSION AND ENHANCEMENTS. .

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

SEC. 1192. EXTENSION OF OUTPATIENT HOLD HARMLESS PROVISION.

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

SEC. 1193. EXTENSION OF SECTION 508 HOSPITAL RECLASSIFICATIONS.

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

SEC. 1194. EXTENSION OF GEOGRAPHIC FLOOR FOR WORK.

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

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

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

SEC. 1196. EXTENSION OF AMBULANCE ADD-ONS.

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

              TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS

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

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

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

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

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

SEC. 1203. ELIMINATING BARRIERS TO ENROLLMENT.

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

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

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

SEC. 1205. INTELLIGENT ASSIGNMENT IN ENROLLMENT.

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

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

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

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

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

                Subtitle B--Reducing Health Disparities

SEC. 1221. ENSURING EFFECTIVE COMMUNICATION IN MEDICARE.

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

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

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

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

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

SEC. 1224. DEFINITIONS.

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

                 Subtitle C--Miscellaneous Improvements

SEC. 1231. EXTENSION OF THERAPY CAPS EXCEPTIONS PROCESS.

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

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

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

SEC. 1233. ADVANCE CARE PLANNING CONSULTATION.

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

                  ``Advance Care Planning Consultation

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

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

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

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

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

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

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

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

SEC. 1301. ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM.

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

SEC. 1302. MEDICAL HOME PILOT PROGRAM.

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

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

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

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

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

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

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

                 ``Medicare Covered Preventive Services

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

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

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

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

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

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

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

                ``Marriage and Family Therapist Services

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

                   ``Mental Health Counselor Services

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

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

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

SEC. 1310. EXPANDING ACCESS TO VACCINES.

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

                    ``Federally Recommended Vaccines

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

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

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

                           TITLE IV--QUALITY

             Subtitle A--Comparative Effectiveness Research

SEC. 1401. COMPARATIVE EFFECTIVENESS RESEARCH.

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

              ``Part D--Comparative Effectiveness Research

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

                 Subtitle B--Nursing Home Transparency

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

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

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

SEC. 1412. ACCOUNTABILITY REQUIREMENTS.

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

SEC. 1413. NURSING HOME COMPARE MEDICARE WEBSITE.

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

SEC. 1414. REPORTING OF EXPENDITURES.

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

SEC. 1415. STANDARDIZED COMPLAINT FORM.

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

SEC. 1416. ENSURING STAFFING ACCOUNTABILITY.

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

                     PART 2--TARGETING ENFORCEMENT

SEC. 1421. CIVIL MONEY PENALTIES.

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

SEC. 1422. NATIONAL INDEPENDENT MONITOR PILOT PROGRAM.

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

SEC. 1423. NOTIFICATION OF FACILITY CLOSURE.

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

                    PART 3--IMPROVING STAFF TRAINING

SEC. 1431. DEMENTIA AND ABUSE PREVENTION TRAINING.

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

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

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

                    Subtitle C--Quality Measurements

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

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

                     ``Part E--Quality Improvement

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

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

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

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

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

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

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

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

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

SEC. 1444. APPLICATION OF QUALITY MEASURES.

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

SEC. 1445. CONSENSUS-BASED ENTITY FUNDING.

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

           Subtitle D--Physician Payments Sunshine Provision

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

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

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

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

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

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

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

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

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

              TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION

SEC. 1501. DISTRIBUTION OF UNUSED RESIDENCY POSITIONS.

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

SEC. 1502. INCREASING TRAINING IN NONPROVIDER SETTINGS.

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

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

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

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

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

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

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

                      TITLE VI--PROGRAM INTEGRITY

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

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

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

           Subtitle B--Enhanced Penalties for Fraud and Abuse

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

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

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

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

SEC. 1613. ENHANCED PENALTIES FOR DELAYING INSPECTIONS.

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

SEC. 1614. ENHANCED HOSPICE PROGRAM SAFEGUARDS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

         Subtitle C--Enhanced Program and Provider Protections

SEC. 1631. ENHANCED CMS PROGRAM PROTECTION AUTHORITY.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                     [TITLE VII--MEDICAID AND CHIP]

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

                 TITLE VIII--REVENUE-RELATED PROVISIONS

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

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

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

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

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

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

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

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

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

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

``SEC. 4375. HEALTH INSURANCE.

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

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

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

``SEC. 4377. DEFINITIONS AND SPECIAL RULES.

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

           ``CHAPTER 34--TAXES ON CERTAIN INSURANCE POLICIES

          ``subchapter a. policies issued by foreign insurers

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

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

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

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

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

                   TITLE IX--MISCELLANEOUS PROVISIONS

SEC. 1901. REPEAL OF TRIGGER PROVISION.

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

SEC. 1902. REPEAL OF COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM.

  Section 1860C-1 of the Social Security Act (42 U.S.C. 1395w-29), as 
added by section 241(a) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (Public Law 108-173), is repealed.

SEC. 1903. EXTENSION OF GAINSHARING DEMONSTRATION.

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

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

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

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

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

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

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

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

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

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

         [DIVISION C--PUBLIC HEALTH AND WORKFORCE DEVELOPMENT]

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

                            I. INTRODUCTION


                         A. Purpose and Summary

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

                 B. Background and Need for Legislation


                 AFFORDABLE COVERAGE FOR ALL AMERICANS

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

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

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

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

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

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

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

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

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

                         HEALTH DELIVERY REFORM

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

                  STRENGTHENING MEDICARE AND MEDICAID

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

                         WORKFORCE INVESTMENTS

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

                               CONCLUSION

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

                         C. Legislative History


                               BACKGROUND

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

                          SUBCOMMITTEE ACTION

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

                         FULL COMMITTEE ACTION

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

                      II. EXPLANATION OF THE BILL


               DIVISION A--AFFORDABLE HEALTH CARE CHOICES


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


                     Subtitle A--General Standards


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

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

Sec. 101. Requirements Reforming Health Insurance Marketplace

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

Sec. 102. Protecting the Choice to Keep Current Coverage

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

    Subtitle B--Standards Guaranteeing Access to Affordable Coverage


Sec. 111. Prohibiting Pre-Existing Condition Exclusions

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

Sec. 112. Guaranteed Issue and Renewal for Insured Plans

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

Sec. 113. Insurance Rating Rules

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

Sec. 114. Nondiscrimination in Benefits

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

Sec. 115. Ensuring Adequacy of Provider Networks

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

Sec. 116. Ensuring Value and Lower Premiums

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

    Subtitle C--Standards Guaranteeing Access to Essential Benefits


Sec. 121. Coverage of Essential Benefits Package

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

Sec. 122. Essential Benefit Package Defined

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

Sec. 123. Health Benefits Advisory Committee

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

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

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

              Subtitle D--Additional Consumer Protections


Sec. 131. Requiring Fair Marketing Practices by Health Insurers

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

Sec. 132. Requiring Fair Grievance and Appeals Mechanisms

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

Sec. 133. Requiring Information Transparency and Plan Disclosure

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

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

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

Sec. 135. Timely Payment of Claims

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

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

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

Sec. 137. Application of Administrative Simplification

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

                         Subtitle E--Governance


Sec. 141. Health Choices Administration; Health Choices Commissioner

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

Sec. 142. Duties and Authority of Commissioner

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

Sec. 143. Consultation and Coordination

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

Sec. 144. Health Insurance Ombudsman

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

       Subtitle F--Relation to Other Requirements; Miscellaneous


Sec. 151. Relation to Other Requirements

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

Sec. 152. Prohibiting Discrimination in Health Care

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

Sec. 153. Whistleblower Protection

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

Sec. 154. Construction Regarding Collective Bargaining

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

Sec. 155. Severability

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

                     Subtitle G--Early Investments


Sec. 161. Ensuring Value and Lower Premiums

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

Sec. 162. Ending health insurance rescission abuse

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

Sec. 163. Administrative Simplification

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

Sec. 164. Reinsurance Program for Retirees

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

       Title II--Health Insurance Exchange and Related Provisions


                 Subtitle A--Health Insurance Exchange

            Current Law
    No provision.
            Proposed Law

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

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

Sec. 202. Exchange-eligible Individuals and Employers

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

Sec. 203. Benefits Package Levels

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

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

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

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

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

Sec. 206. Other Functions

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

Sec. 207. Health Insurance Exchange Trust Fund

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

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

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

               Subtitle B--Public Health Insurance Option


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

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

Sec. 222. Premiums and Financing

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

Sec. 223. Payment Rates for Items and Services

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

Sec. 224. Modernized Payment Initiatives and Delivery System Reform

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

Sec. 225. Provider Participation

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

Sec. 226. Application of Fraud and Abuse Provisions

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

              Subtitle C--Individual Affordability Credits


Sec. 241. Availability Through Health Insurance Exchange

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

Sec. 242. Affordable Credit Eligible Individual

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

Sec. 243. Affordable Premium Credit

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

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

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

Sec. 244. Affordability Cost-Sharing Credit.

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

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

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

Sec. 245 Income Determinations

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

Sec. 246. No Federal Payment for Undocumented Aliens

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

                    TITLE III--SHARED RESPONSIBILITY


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


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

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

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

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

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

Contribution requirements

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

Automatic enrollment for employee sponsored health benefits

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

Provision of information to multiple agencies

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

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

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

Elections

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

Aggregation rules

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

Noncompliance with coverage requirements

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

Elections

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

Aggregation rules

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

Noncompliance with coverage requirements

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

Regulations

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

         TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986


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


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

Maintenance of health insurance coverage

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

Exceptions

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

Delegation of regulatory authority

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

Information reporting

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

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

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

Elections

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

Contribution requirements

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

Noncompliance with coverage requirements

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

Multi-agency coordination

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

In general

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

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

Deduction of employer contributions for health coverage for employees

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

Employer contributions for health coverage

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

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

General rule

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

Qualified small employer

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

Qualified health coverage and expenses

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

Phase out of the credit

    If an employer's average annual employee compensation 
exceeds $20,000, the credit percentage phases out from the 
maximum available credit of 50 percent. The percentage is 
reduced by one percentage point for each $400 by which average 
annual employee compensation exceeds $20,000. For example, a 
firm with average compensation of $24,000 and 10 or fewer 
employees is entitled to a 40-percent credit. In general, if 
such firm had qualified employee health coverage expenses of 
$50,000, the credit amount would equal 40 percent of $50,000, 
or $20,000.
    The credit amount determined above is subject to a further 
phaseout for employers with more than 10 qualified employees. 
For employers with more than 10 qualified employees, the credit 
amount is reduced by an amount which bears the same ratio to 
the amount of the credit as the number of qualified employees 
of the employer in excess of 10 bears to 15. For example, if a 
firm has 16 qualified employees, the credit amount is reduced 
by 40 percent.\68\ In the example above, the $20,000 credit is 
thus reduced by $8,000 (40 percent of $20,000) to a credit of 
$12,000.
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    \68\(16-10)/115 = 40 percent.
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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.
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    \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).
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                             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\
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    \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\
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    \71\Sec. 6103(p)(4)(D).
    \72\Sec. 7213.
    \73\Sec. 7213A.
    \74\Sec. 7431.
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                           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.
---------------------------------------------------------------------------
    \78\Sec. 213(a).
    \79\Sec. 213(d). There are certain limitations on the general 
definition including a rule that cosmetic surgery or similar procedures 
are generally not medical care.
    \80\Sec. 213(b).
---------------------------------------------------------------------------

Exclusion for employer-provided health care

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

Medical savings arrangements

    Present law provides that individuals with a high 
deductible health plan (and generally no other health plan) 
purchased either through the individual market or through an 
employer may establish and make tax-deductible contributions to 
a health savings account (``HSA'').\84\ Subject to certain 
limitations,\85\ contributions made to an HSA by an employer, 
including contributions made through a cafeteria plan through 
salary reduction, are excluded from income (and from wages for 
payroll tax purposes). Contributions made by individuals are 
deductible for income tax purposes, regardless of whether the 
individuals itemize. Distributions from an HSA that are used 
for qualified medical expenses are excludible from gross 
income.\86\ The general definition of medical care without the 
explicit limitation on medicine also applies for purposes of 
this exclusion.\87\ Similar rules apply for another type of 
medical savings arrangement called an Archer MSA.\88\ Thus, a 
distribution from a HSA or an Archer MSA used to purchase over-
the-counter medicine also is excludible as an amount used for 
qualified medical expenses.
---------------------------------------------------------------------------
    \84\Sec. 223.
    \85\For 2009, the maximum aggregate annual contribution that can be 
made to an HSA is $3,000 in the case of self-only coverage and $5,950 
in the case of family coverage ($3,050 and $6,150 for 2010). The annual 
contribution limits are increased for individuals who have attained age 
55 by the end of the taxable year (referred to as ``catch-up 
contributions''). In the case of policyholders and covered spouses who 
are age 55 or older, the HSA annual contribution limit is greater than 
the otherwise applicable limit by $1,000 in 2009 and thereafter. 
Contributions, including catch-up contributions, cannot be made once an 
individual is enrolled in Medicare.
    \86\Sec. 223(f).
    \87\Sec. 223(d)(2).
    \88\Sec. 220.
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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.
---------------------------------------------------------------------------
    \89\Sec. 213(b) was added by sec. 202 of the Tax Equity and Fiscal 
Responsibility Act of 1982, Pub. L. 97-248. The reasons for the change 
to limit the deduction to prescription medicine are described in JCS-
38-82 at 24-25.
---------------------------------------------------------------------------

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

In general

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

Worldwide interest allocation

            In general
    The American Jobs Creation Act of 2004 (``AJCA'')\95\ 
modified the interest expense allocation rules described above 
(which generally apply for purposes of computing the foreign 
tax credit limitation) by providing a one-time election (the 
``worldwide affiliated group election'') under which the 
taxable income of the domestic members of an affiliated group 
from sources outside the United States generally is determined 
by allocating and apportioning interest expense of the domestic 
members of a worldwide affiliated group on a worldwide-group 
basis (i.e., as if all members of the worldwide group were a 
single corporation). If a group makes this election, the 
taxable income of the domestic members of a worldwide 
affiliated group from sources outside the United States is 
determined by allocating and apportioning the third-party 
interest expense of those domestic members to foreign-source 
income in an amount equal to the excess (if any) of (1) the 
worldwide affiliated group's worldwide third-party interest 
expense multiplied by the ratio that the foreign assets of the 
worldwide affiliated group bears to the total assets of the 
worldwide affiliated group,\96\ over (2) the third-party 
interest expense incurred by foreign members of the group to 
the extent such interest would be allocated to foreign sources 
if the principles of worldwide interest allocation were applied 
separately to the foreign members of the group.\97\
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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.
---------------------------------------------------------------------------
    For purposes of the new elective rules based on worldwide 
fungibility, the worldwide affiliated group means all 
corporations in an affiliated group as well as all controlled 
foreign corporations that, in the aggregate, either directly or 
indirectly,\98\ would be members of such an affiliated group if 
section 1504(b)(3) did not apply (i.e., in which at least 80 
percent of the vote and value of the stock of such corporations 
is owned by one or more other corporations included in the 
affiliated group). Thus, if an affiliated group makes this 
election, the taxable income from sources outside the United 
States of domestic group members generally is determined by 
allocating and apportioning interest expense of the domestic 
members of the worldwide affiliated group as if all of the 
interest expense and assets of 80-percent or greater owned 
domestic corporations (i.e., corporations that are part of the 
affiliated group, as modified to include insurance companies) 
and certain controlled foreign corporations were attributable 
to a single corporation.
---------------------------------------------------------------------------
    \98\Indirect ownership is determined under the rules of section 
958(a)(2) or through applying rules similar to those of section 
958(a)(2) to stock owned directly or indirectly by domestic 
partnerships, trusts, or estates.
---------------------------------------------------------------------------
            Financial institution group election
    Taxpayers are allowed to apply the bank group rules to 
exclude certain financial institutions from the affiliated 
group for interest allocation purposes under the worldwide 
fungibility approach. The rules also provide a one-time 
financial institution group election that expands the bank 
group. At the election of the common parent of the preelection 
worldwide affiliated group, the interest expense allocation 
rules are applied separately to a subgroup of the worldwide 
affiliated group that consists of (1) all corporations that are 
part of the bank group, and (2) all financial corporations. For 
this purpose, a corporation is a financial corporation if at 
least 80 percent of its gross income is financial services 
income (as described in section 904(d)(2)(C)(i) and the 
regulations thereunder) that is derived from transactions with 
unrelated persons.\99\ For these purposes, items of income or 
gain from a transaction or series of transactions are 
disregarded if a principal purpose for the transaction or 
transactions is to qualify any corporation as a financial 
corporation.
---------------------------------------------------------------------------
    \99\See Treas. Reg. sec. 1.904-4(e)(2).
---------------------------------------------------------------------------
    In addition, anti-abuse rules are provided under which 
certain transfers from one member of a financial institution 
group to a member of the worldwide affiliated group outside of 
the financial institution group are treated as reducing the 
amount of indebtedness of the separate financial institution 
group. Regulatory authority is provided with respect to the 
election to provide for the direct allocation of interest 
expense in circumstances in which such allocation is 
appropriate to carry out the purposes of these rules, to 
prevent assets or interest expense from being taken into 
account more than once, or to address changes in members of any 
group (through acquisitions or otherwise) treated as affiliated 
under these rules.
            Effective date of worldwide interest allocation
    The common parent of the domestic affiliated group must 
make the worldwide affiliated group election. It must be made 
for the first taxable year beginning after December 31, 2010, 
in which a worldwide affiliated group exists that includes at 
least one foreign corporation that meets the requirements for 
inclusion in a worldwide affiliated group.\100\ The common 
parent of the pre-election worldwide affiliated group must make 
the election for the first taxable year beginning after 
December 31, 2010, in which a worldwide affiliated group 
includes a financial corporation. Once either election is made, 
it applies to the common parent and all other members of the 
worldwide affiliated group or to all members of the financial 
institution group, as applicable, for the taxable year for 
which the election is made and all subsequent taxable years, 
unless revoked with the consent of the Secretary of the 
Treasury.
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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.
---------------------------------------------------------------------------
            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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------

                        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)).
---------------------------------------------------------------------------
    The Secretary may prescribe regulations that are necessary 
or appropriate to carry out the purposes of the provision, 
including regulations providing for the treatment of two or 
more persons as members of a foreign controlled group of 
entities if such persons would be the common parent of such 
group if treated as one corporation, and regulations providing 
for the treatment of any member of a foreign controlled group 
of entities as the common parent of that group if such 
treatment is appropriate taking into account the economic 
relationships among the group entities.
    For example, under the provision, a deductible payment made 
by a U.S. entity to a foreign entity with a foreign parent 
corporation that is resident in a country with respect to which 
the United States does not have an income tax treaty is always 
subject to the statutory U.S. withholding tax rate of 30 
percent, irrespective of whether the payee qualifies for 
benefits under a tax treaty. If, instead, the foreign parent 
corporation is a resident of a country with respect to which 
the United States does have an income tax treaty that would 
reduce the withholding tax rate on a payment made directly to 
the foreign parent corporation (regardless of the amount of 
such reduction), and the payment would qualify for benefits 
under that treaty if the payment were made directly to the 
foreign parent corporation, then the payee entity will continue 
to be eligible for the reduced withholding tax rate under the 
U.S. income tax treaty with the payee entity's residence 
country (even if such reduced treaty rate is lower than the 
rate that would be imposed on a hypothetical direct payment to 
the foreign parent corporation).

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

In general

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

Application by the courts

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

                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

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

                             EFFECTIVE DATE

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

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


                              PRESENT LAW

Definition of dependent for exclusion for employer-provided health 
        coverage

    The Code generally provides that employees are not taxed on 
(that is, may exclude from gross income) the value of employer-
provided health coverage for employees, their spouses, and 
their dependents under an accident or health plan.\166\ In 
addition, any reimbursements under the accident or health plan 
for medical care expenses for employees, their spouses, and 
their dependents generally are excluded from gross income.\167\ 
For purposes of these exclusions, dependents are determined 
under section 152, but without regard to section 152(b)(1), 
(b)(2), and (d)(1)(B). Section 152 defines a dependent as a 
qualifying child or qualifying relative.
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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).
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                           REASONS FOR CHANGE

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

                        EXPLANATION OF PROVISION

Exclusion for employer-provided health coverage

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

Deduction for health insurance premiums of self-employed individuals

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

                             EFFECTIVE DATE

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

             DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS


                  TITLE I--IMPROVING HEALTH CARE VALUE


           Subtitle A--Provisions Related to Medicare Part A


                     Part 1--Market Basket Updates


Sec. 1101. Skilled Nursing Facility Payment Update

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

Sec. 1102. Inpatient Rehabilitation Facility Payment Update

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

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

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

                Part 2--Other Medicare Part A Provisions


Sec. 1111. Payments to Skilled Nursing Facilities

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

Sec. 1112. Medicare DSH Report

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

Sec. 1113. Extension of Hospice Regulation Moratorium

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

                Subtitle B--Provisions Related to Part B


                      Part 1--Physicians Services


Sec. 1121. Sustainable Growth Rate Reform

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

Sec. 1122. Misvalued Codes Under the Physician Fee Schedule

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

Sec. 1123. Payments for Efficient Areas

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

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

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

Sec. 1125. Adjustment to Medicare Payment Localities

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

                     Part 2--Market Basket Updates


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

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

                        Part 3--Other Provisions


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

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

Sec. 1142. Extension of Payment Rule for Brachytherapy

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

Sec. 1143. Home Infusion Therapy Report to Congress

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

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

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

Sec. 1145. Treatment of Certain Cancer Hospitals

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

Sec. 1146. Medicare Improvement Fund

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

Sec. 1147. Payment for Imaging Services

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

Sec. 1148. Durable Medical Equipment Program Improvements

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

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

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

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


Sec. 1151. Reducing Potentially Preventable Hospital Readmissions

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

Application to Critical Access Hospitals (CAHs)

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

Application to Post-Acute Care Providers

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

Physicians

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

Funding

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

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

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

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

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

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

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

Sec. 1153. Home Health Payment Update for 2010

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

Sec. 1154. Payment Adjustments for Home Health Care

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

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

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

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

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

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

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

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

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

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

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

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

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

                 Subtitle D--Medicare Advantage Reforms


                   Part 1--Payment and Administration


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

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

Sec. 1162. Quality Bonus Payments

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

Sec. 1163. Extension of Secretarial Coding Intensity Adjustment 
        Authority

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

Sec. 1164. Simplification of Annual Beneficiary Election Periods

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

Sec. 1165. Extension of Reasonable Cost Contracts

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

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

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

Sec. 1167. Improving Risk Adjustment for MA Payments

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

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

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

              Part 2--Consumer Protections and Anti-Fraud


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

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

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

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

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

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

Sec. 1174. Strengthening Audit Authority

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

Sec. 1175. Authority to Deny Plan Bids

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

                Part 3--Treatment of Special Needs Plans


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

            Current Law
    Under the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA, P.L. 108-173), Congress created 
a new type of Medicare Advantage (MA) coordinated care plan 
focused on individuals with special needs. Special Needs Plans 
(SNPs) are allowed to target enrollment to one or more types of 
special needs individuals identified by Congress as 1) 
institutionalized; 2) dually eligible; and/or 3) individuals 
with severe or disabling chronic conditions.
    The number of SNPs has increased dramatically since 2004, 
the first year of operation. In 2004, CMS approved 11 SNPs, but 
by January 2008, CMS had approved 787 SNPs, including 442 dual-
eligible SNPs, 256 chronic care SNPs, and 89 institutional 
SNPs. In September 2008, there were 1.2 million beneficiaries 
in SNPs.
    Under current law, Medicare beneficiaries may enroll in or 
change their enrollment in MA plans from November 15th to 
December 31st each year. Changes go into effect January 1st of 
the next year. During the first three months of the year, 
beneficiaries can enroll in an MA plan, and individuals 
enrolled in an MA plan can either switch to a different MA plan 
or return to original Medicare. Beneficiaries may also enroll 
in MA or switch their enrollment if they qualify for a Special 
Election Period (SEP) as defined in statute or by the 
Secretary. One SEP specified by the Secretary in the Medicare 
Managed Care Manual allows individuals with severe or disabling 
chronic conditions to enroll in an SNP designed for individuals 
with those conditions. This SEP applies as long as the 
individual has the qualifying condition and ends once the 
beneficiary enrolls in an SNP. Once the SEP ends, that 
individual may make enrollment changes only during applicable 
MA election periods.
            Proposed Law
    This provision would require that beginning on January 1, 
2011, SNPs serving beneficiaries with severe or disabling 
conditions could only enroll eligible individuals during an 
annual, coordinated open enrollment period or at the time of 
diagnosis of the disease or condition that would qualify an 
individual for a chronic care SNP.
            Reason for Change
    The Committee is concerned that the current SEP for 
beneficiaries eligible for a chronic condition SNP encourages 
aggressive marketing by plans and is confusing for 
beneficiaries accustomed to annual enrollment periods. The new 
SEP must be more narrowly targeted to the time around a 
beneficiary's diagnosis, but the Committee gives authority to 
the Secretary to determine how long after a diagnosis the 
beneficiary is permitted to elect an SNP. The Committee intends 
that this be a length of time sufficient for the beneficiary to 
understand the consequences of a diagnosis and learn about 
options for specialized plans.
            Effective Date
    January 1, 2011.

Sec. 1177. Extension of Authority of Special Needs Plans to Restrict 
        Enrollment

            Current Law
    Prior to January 1, 2011, SNPs may restrict enrollment to 
those who are in one or more classes of special needs 
individuals. Starting January 1, 2010, new SNP enrollment must 
be limited exclusively to individuals that meet the criteria 
for which the SNP is designated: dual eligible, chronic care, 
and institutional care. Further, MIPPA required that dual 
eligible SNPs contract with state Medicaid agencies to provide 
medical assistance services (Medicaid), which may include long-
term care services. If SNPs do not have contracts with Medicaid 
agencies by January 1, 2010, then they can continue to operate, 
but are prohibited from expanding their service areas. However, 
state Medicaid agencies are not required to enter into 
contracts with SNPs.
            Proposed Law
    This provision would extend the time period, from January 
1, 2011, to January 1, 2013, during which SNPs may restrict 
current enrollment to individuals who meet the definition of 
the respective SNP. In addition, selected SNPs that had 
contracts with states that had a state program to operate an 
integrated Medicaid-Medicare program that was approved by CMS 
as of January 1, 2004, would be allowed to restrict enrollment 
to beneficiaries who meet the definition of special needs 
individuals through January 1, 2016.
    Through a contract with an independent health services 
evaluation organization, the Secretary would be required to 
provide an analysis of the SNPs that were approved by CMS as of 
January 1, 2004. The analysis of these grandfathered SNPs would 
include the impact of such plans on cost, quality of care, 
patient satisfaction, and other subjects as specified by the 
Secretary. By December 31, 2011, the Secretary would be 
required to submit a report to Congress on the analysis of the 
grandfathered SNPs, which would include recommendations on the 
appropriate treatment of these plans.
            Reason for Change
    Congress and the Secretary have taken legislative and 
regulatory steps to ensure that SNPs truly offer specialized 
services for the populations enrolled. The Committee believes 
that SNP authority should be extended for a limited number of 
years in order to allow plans to meet these requirements.
    A small subset of SNPs that have fully integrated Medicare 
and Medicaid services for dually eligible beneficiaries would 
receive a longer extension, as these plans have demonstrated an 
ability to integrate care, as originally envisioned for the SNP 
program.
            Effective Date
    Date of enactment.

              Subtitle E--Improvements to Medicare Part D


Sec. 1181. Elimination of Coverage Gap

            Current Law
    Medicare law sets out a defined standard benefit structure 
under the Part D prescription drug benefit. In 2009, the 
standard benefit includes a $295 deductible and a 25% 
coinsurance until the enrollee reaches $2,700 in total covered 
drug spending. After this initial coverage limit is reached, 
there is a gap in coverage in which the enrollee is responsible 
for the full cost of the drugs until total costs hit the 
catastrophic threshold, $6,153.75 in 2009. Each year, the 
deductible, co-payments, and coverage thresholds are increased 
by the annual percentage increase in average per-capita 
aggregate expenditures for covered outpatient drugs for 
Medicare beneficiaries for the 12-month period ending in July 
of the previous year.
    Part D plan sponsors are allowed to offer plans that differ 
in benefit design, but are actuarially equivalent, or they may 
offer ``enhanced'' plans that offer more generous coverage. 
Currently, almost all plans include a coverage gap in their 
benefit designs. CMS estimates that 31.7% (8.3 million) Part D 
enrollees reached the initial coverage limit of their drug 
plans in 2007.
    Some beneficiaries with limited income and resources may 
qualify for assistance with a portion of their Part D premiums, 
cost-sharing, and other out-of-pocket expenses. Medicare 
beneficiaries who qualify for Medicaid based on their income 
and assets (dual eligibles) are automatically deemed eligible 
for the full low-income subsidy. Prior to the implementation of 
the Medicare Part D outpatient prescription drug benefit, 
established by the Medicare Prescription Drug Improvement and 
Modernization Act of 2003 (MMA, P.L. 108-173), Medicaid was the 
primary payer for drugs for full-benefit dual-eligible 
beneficiaries.
    The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-
508) requires drug manufacturers who wish to have their drugs 
available for Medicaid enrollees to enter into rebate 
agreements with the Secretary of HHS, on behalf of the states. 
Under the agreements, pharmaceutical manufacturers must provide 
state Medicaid programs with rebates on drugs paid for Medicaid 
beneficiaries. The formulas used to compute the rebates are 
intended to ensure that Medicaid pays the lowest price that the 
manufacturers offer for the drugs. In return for entering into 
agreements with the Secretary, state Medicaid programs are 
required to cover all of the drugs marketed by those 
manufacturers (with possible exceptions for the 11 categories 
of drugs that states are allowed to exclude from coverage).
    The rebates are computed and remitted by pharmaceutical 
manufacturers each quarter based on utilization information 
supplied by the state programs. States collect the rebates from 
the manufacturers. The federal share of the rebates are 
subtracted from states' claims for their federal share of 
program costs. In setting the amount of required rebates, the 
law distinguishes between two classes of drugs. The first 
includes single source drugs (generally, those still under 
patent) and ``innovator'' multiple source drugs (drugs 
originally marketed under a patent or original new drug 
application (NDA) but for which generic competition now 
exists). The second class includes all other, ``non-innovator'' 
multiple source drugs (generics).
    Manufacturers are required to pay state Medicaid programs a 
basic rebate for single source and innovator multiple source 
drugs. Basic rebate amounts are determined by comparing the 
Average Manufacturer Price (AMP) for a drug to the ``best 
price,'' which is the lowest price offered by the manufacturer 
in the same period to any wholesaler, retailer, nonprofit, or 
public entity. Under current law, the basic rebate is the 
greater of 15.1% of the AMP or the difference between the AMP 
and the best price. For non-innovator multiple source drugs, 
basic rebates are equal to 11% of the AMP. Manufacturers are 
also required to pay an additional Medicaid inflation rebate 
for single source drugs. This rebate is equal to the amount by 
which the increase in the AMP of the single source drug exceeds 
the increase in the consumer price index.
            Proposed Law

Coverage Gap

    This provision would phase in an elimination of the 
coverage gap. For each year beginning with 2011, the Secretary 
would progressively increase the initial coverage limit and 
decrease the annual out-of-pocket threshold until there is a 
continuation of coverage from the initial coverage limit up to 
the expenditure threshold at which catastrophic coverage 
begins. Starting in 2011, the initial coverage limit for each 
year, as determined using current annual percentage increase 
methodology, would be increased by Y2 of the cumulative phase-
in percentage (the sum of the annual phase-in percentage for 
the year and the annual phase-in percentages for each previous 
year) times the out-of-pocket gap amount (the amount by which 
the annual out-of-pocket threshold for the year exceeds the sum 
of the annual deductible for the year and \1/4\ the amount by 
which the initial coverage limit for the year exceeds the 
annual deductible). Also beginning in 2011, the annual out-of-
pocket threshold would be decreased by \1/2\ of the cumulative 
phase-in percentage of the out-of pocket gap amount for the 
year multiplied by 1.75.
    The annual phase in percentage would be 13% for 2011; 5% 
for years 2012 through 2015; 7.5% for years 2016 through 2018, 
and 10% for 2019 and each subsequent year.

Requiring Drug Manufacturers to Provide Rebates for Full-Benefit Dual 
        Eligibles

    Under this provision, drug manufacturers would be required 
to provide the Secretary a rebate for any covered Part D drug 
of the manufacturer dispensed after December 31, 2010 to any 
full-benefit dual eligible individual for which payment was 
made by a prescription drug plan (PDP) sponsor or a Medicare 
Advantage (MA) organization.
    The amount of the rebate for a rebate period would be equal 
to the product of the total number of units of such dosage form 
and strength of the drug dispensed and the amount, if any, by 
which the Medicaid rebate, as modified by this statute, and 
including both the basic and inflation rebate, for such form, 
strength, and period, exceeds the average Medicare drug program 
full-benefit dual eligible rebate amount for such form, 
strength, and period.
    The average Medicare drug program full-benefit dual 
eligible rebate amount means, with respect to each dosage form 
and strength of a covered outpatient drug provided by a 
manufacturer for a rebate period, the sum for all PDP sponsors 
and MA organizations administering a Medicare Advantage drug 
plan (MA-PD), of the product for each such sponsor or 
organization of: the sum of all rebates, discounts, or other 
price concessions, calculated on a per unit basis (but only to 
the extent that any such rebate, discount, or other price 
concession applies equally to drugs dispensed to full-benefit 
dual eligible Medicare drug plan enrollees and drugs dispensed 
to PDP and MA-PD enrollees who are not full-benefit dual 
eligible enrollees), and the number of units of such dosage and 
strength of the drug dispensed during the rebate period to 
full-benefit dual eligible enrollees, divided by the total 
number of units of the drug dispensed during the rebate period 
to all full-benefit dual eligible PDP and MA-PD enrollees.
    In general, a rebate agreement would be effective for an 
initial period of not less than 1 year and would be 
automatically renewed for a period of not less than 1 year. The 
Secretary would be required to establish other terms and 
conditions of the rebate agreement including terms and 
conditions related to compliance.
    For contract years beginning on or after January 1, 2011, 
each drug plan contract entered into with a PDP sponsor or a MA 
organization would require that the sponsor or organization 
report to each manufacturer not later than 60 days after the 
end of each rebate period, information on the total number of 
units of each dosage, form, and strength of each drug the 
manufacturer dispensed to full-benefit dual eligible Medicare 
drug plan enrollees under any PDPs or MA-PDs operated by the 
sponsor during the rebate period; information on the price 
discounts, price concessions, and rebates for such drugs for 
such form, strength, and period; information on the extent to 
which such price discounts, price concessions, and rebates 
apply equally to full-benefit dual eligible Medicare drug plan 
enrollees and enrollees who are not full-benefit dual eligible 
plan enrollees; and any additional information that the 
Secretary determines is necessary to enable the Secretary to 
calculate the average Medicare drug program full-benefit dual 
eligible rebate amount. The report would be in a form 
consistent with a standard reporting format established by the 
Secretary, and a copy of the information would be reported to 
the Secretary for the purpose of oversight and evaluation. The 
information submitted would be treated as confidential. The 
rebate would be paid by the manufacturer to the Secretary not 
later than 30 days after the date of receipt of this 
information.
    The provision would allow the Medicare Payment Advisory 
Commission, the Congressional Budget Office and the GAO access 
to the information, and the information reported may be used by 
the HHS Office of Inspector general for audits, investigations, 
and evaluations. Additional confidentiality provisions (with 
the exception of clause iv) from the Medicaid rebate section 
(1927(b)(3)) of the Social Security Act also apply to the 
Medicare Part D rebate data reported under this section.
    In cases where information was not submitted timely or if 
false information is submitted, penalties would be imposed. PDP 
sponsors and MA organizations would be subject to a civil money 
penalty in the amount of $10,000 for each day in which such 
information has not been provided. If the sponsor or 
organization knowingly provides false information, the sponsor 
or organization would be subject to a civil money penalty in an 
amount not to exceed $100,000 for each item of false 
information. Such penalties would be in addition to any other 
civil money penalties as may be prescribed by law.
    The rebates for full-benefit dual eligible Medicare drug 
plan enrollees would be paid into the Medicare Prescription 
Drug Account in the Supplementary Medical Insurance Trust Fund 
and used to pay for all or part of the gradual elimination of 
the coverage gap.
            Reason for Change
    When prescription drug coverage for six million dually 
eligible beneficiaries was switched from Medicaid to Medicare 
Part D in 2006, drug manufacturers received a windfall 
amounting to almost $4 billion in just the first two years of 
the program. While Medicaid rebates are statutorily required at 
a certain level, rebates in the Part D program are entirely 
negotiated between plans and manufacturers, giving the federal 
government and taxpayers who pay for the Part D program--no 
control over the level of rebate provided. Requiring that 
rebates from drug manufacturers in the Part D program match the 
rebates required under Medicaid ensures that for the same 
beneficiary, manufacturers are not permitted to charge higher 
prices to the government under Part D than under Medicaid. 
Manufacturers will continue to enter into rebate agreements 
with the Part D plans, however, if that rebate amount does not 
equal the Medicaid rebate amount for a particular drug, the 
manufacturer would be required to make up the difference in 
rebate payments directly to the federal government. With 
respect to GAO, the confidentiality provision that incorporates 
section 1927(b)(3) of the Social Security Act is intended to 
reflect and confirm GAO's existing right to access Part D 
information in light of its broad authority at 31 U.S.C. 716.
    Funds received from the new rebate requirement will be used 
to pay for, in whole or in part, the elimination of the Part D 
coverage gap. Since the program's inception, this mid-year gap 
in benefits has plagued millions of beneficiaries who continue 
to pay their monthly premium, yet also have to pay 100 percent 
of the cost of their drugs out-of-pocket. This section would 
eliminate the gap over time, ensuring that beneficiaries are 
insured against the full cost of drugs throughout the entire 
benefit year.
            Effective Date
    January 1, 2011.

Sec. 1182. Discounts for Certain Part D Drugs in Original Coverage Gap

            Current Law
    No provision.
            Proposed Law
    Manufacturers of prescription drugs would, as a condition 
of allowing any of the drugs they manufacture to be treated as 
covered drugs under Medicare Part D, be required to enter into 
agreements with Medicare Part D drug plan sponsors to provide 
discounts on covered Part D drugs provided to plan enrollees in 
the coverage gap period. This provision would be applicable to 
drugs dispensed after December 31, 2010.
    Under a discount agreement, a drug manufacturer would be 
required to provide to each PDP or MA-PD plan a discount for 
qualifying drugs of the manufacturer dispensed to a qualifying 
enrollee when in the original Part D coverage gap. A qualifying 
drug would be defined as drug that is produced under an 
original new drug application approved by the FDA, or a drug 
that was initially marketed under such an application, or a 
biological product approved under Section 351(a) of the Public 
Health Service Act, and that is covered under the plan's 
formulary and is dispensed to an individual who is in the 
original coverage gap.
    The Secretary would establish the terms and conditions of 
the discount agreement, including those relating to compliance, 
similar to the terms and conditions for rebate agreements 
between states and drug manufacturers for drugs provided to 
Medicaid recipients. However, the discounts would be applied to 
PDPs and MA-PD plans rather than to states; PDP sponsors and MA 
organizations, instead of states, would be required to provide 
the necessary utilization information to drug manufacturers; 
and PDP sponsors and MA organizations would be responsible for 
reporting information on drug-component negotiated prices 
instead of other manufacturer prices used in calculating 
Medicaid rebates.
    The amount of the discount for a discount period for a plan 
would be equal to 50 percent of the amount of the negotiated 
price for qualifying drugs, excluding any dispensing fee for 
the period involved. The sponsor or plan would provide the 
discount to the enrollee at the time the enrollee pays for the 
drug if the enrollee is in the actual gap in coverage, and in 
such cases the amount of the discount, in addition to the 
amount actually paid by the enrollee, would count toward costs 
incurred by the plan enrollee. If the enrollee is in the 
portion of the original gap in coverage that is not in the 
actual gap in coverage, the discount shall not be applied 
against the negotiated price for the purpose of calculating the 
beneficiary payment.
    A qualifying enrollee is defined as an individual who is 
enrolled in a PDP or an MA-PD plan who is not a subsidy-
eligible individual as defined in section 1860-D-14(a)(3). The 
original gap in coverage is defined as the gap that would occur 
between the initial coverage limit and the out-of-pocket 
threshold if the phase-out of the coverage gap described in 
Section 1181 did not apply. The actual gap in coverage refers 
to the gap between the initial coverage limit and the out-of-
pocket threshold as modified by Section 1181.
    With regard to payments to pharmacists, discounts under 
this section are to be treated in a similar fashion to any 
other discounts, rebates, or price concessions provided to PDP 
sponsors, and payments to pharmacists in conjunction with these 
discounts are to be made consistent with prompt payment 
requirements under Section 1860D-12(b)(4), with the pharmacist 
to be fully reimbursed for clean claims within 14 days.
            Reason for Change
    In June 2009, the trade association representing brand-name 
pharmaceutical manufacturers--PhRMA--pledged to provide a 50 
percent discount to seniors in the Part D coverage gap to 
alleviate the high costs that seniors currently faced. This 
section would enact that promise into law. All Medicare 
beneficiaries who would otherwise face 100 percent cost sharing 
in the coverage gap, would receive a 50 percent discount on 
brand-name drugs. While this discount is important and will 
provide immediate relief for millions of seniors, it will still 
leave many beneficiaries with high out-of-pocket costs in the 
gap. Simultaneously, the act gradually closes the coverage gap 
so seniors' drug costs will be more consistent throughout the 
benefit year.
            Effective Date
    January 1, 2011.

Sec. 1183. Repeal of Provision Relating To Submission of Claims by 
        Pharmacies Located in or Contracting With Long-Term Care 
        Facilities

            Current Law
    Section 172 of the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA; P.L. 110-275) provided for a new 
set of requirements for contracts between Part D drug plan 
sponsors and pharmacies located in or contracting with long-
term care facilities for plan years beginning on or after 
January 1, 2010. Under this section, each contract entered into 
with a PDP sponsor or MA-PD plan is required to provide that a 
pharmacy located in or having a contract with a longterm care 
facility would have between 30 and 90 days to submit claims for 
reimbursement.
            Proposed Law
    Section 172 of MIPPA would be repealed. This provision 
would be applicable for contract years beginning with 2010.
            Reason for Change
    This provision is repealed to allow long-term pharmacies 
and nursing homes more time to coordinate with state Medicaid 
programs.
            Effective Date
    January 1, 2010.

Sec. 1184. Including Costs Incurred by AIDS Drug Assistance Programs 
        and Indian Health Service in Providing Prescription Drugs 
        Toward the Annual Out of Pocket Threshold Under Part D

            Current Law
    Under a standard Medicare Part D plan design, beneficiaries 
must incur a certain level of out-of-pocket costs ($4,350 in 
2009) before catastrophic protection begins. These include 
costs that are incurred for the deductible, cost-sharing, or 
benefits not paid because they fall in the coverage gap. Costs 
are counted as incurred, and thus treated as true out-of-pocket 
(TrOOP) costs only if they are paid by the individual (or by 
another family member on behalf of the individual), paid on 
behalf of a low-income individual under the subsidy provisions, 
or paid under a State Pharmaceutical Assistance Program. 
Incurred costs do not include amounts for which no benefits are 
provided--for example, because a drug is excluded under a 
particular plan's formulary. Additional payments that do not 
count toward TrOOP include Part D premiums and coverage by 
other insurance, including group health plans, workers' 
compensation, Part D plans' supplemental or enhanced benefits, 
or other third parties.
            Proposed Law
    The provision would treat as incurred those costs that are 
borne or paid by the Indian Health Service, Indian tribe or 
tribal organization or an urban Indian organization (as defined 
in Section 4 of the Indian Health Care Improvement Act) to 
count toward the out-of-pocket threshold. Costs paid under an 
AIDS Drug Assistance Program under Part B of Title XXVI of the 
Public Health Service Act would also count toward the out-of-
pocket threshold. The provision would apply costs incurred on 
or after January 1, 2011.
            Reason for Change
    This requires the Secretary to count contributions from 
other programs designed to help beneficiaries with their drug 
costs for the purpose of a beneficiary reaching the 
catastrophic cap.
    This change will lower costs for beneficiaries who receive 
assistance from other sources from continuing to paying higher 
costs for prescription drugs.
            Effective Date
    January 1, 2011.

Sec. 1185. Permitting Mid-Year Changes in Enrollment for Formulary 
        Changes That Adversely Impact an Enrollee

            Current Law
    Part D plans are permitted to operate formularies--lists of 
drugs that a plan chooses to cover and the terms under which 
they are covered. By law, Part D plans may not change the 
therapeutic categories and classes in a formulary other than at 
the beginning of each plan year except as the Secretary may 
permit, to take into account new therapeutic uses and newly-
approved covered Part D drugs. The law further stipulates that 
any removal of a covered Part D drug from a formulary and any 
change in the preferred or tiered cost-sharing status of such a 
drug shall take effect only after appropriate notice is made 
available to the Secretary, affected enrollees, physicians, 
pharmacies, and pharmacists.
    Under current regulations, a Part D sponsor may not remove 
a covered Part D drug from its Part D plan's formulary or make 
any change in the preferred or tiered cost-sharing status of a 
covered Part D drug on its plan's formulary between the 
beginning of the open enrollment period and 60 days after the 
beginning of the contract year associated with that open 
enrollment period except under certain circumstances, for 
example, when a covered drug has been deemed unsafe by the FDA 
or removed from the market by its manufacturer. After March 1 
of a given plan year, Part D sponsors may make maintenance 
changes to their formularies, such as replacing brand name 
drugs with new generic drugs or modifying formularies as a 
result of new information on drug safety or effectiveness. 
According to CMS policy, if Part D sponsors remove Part D drugs 
for their formularies, move covered Part D drugs to a less 
preferred tier status, or add utilization management 
requirements, these changes must be approved by CMS and 
sponsors may make such changes only if enrollees currently 
taking the affected drug are exempt from the formulary change 
for the remainder of the contract year.
    Part D sponsors may expand formularies by adding drugs to 
their formularies, reducing copayments or coinsurance by 
placing a drug on a lower cost-sharing tier, or deleting 
utilization management requirements at any time during the 
year.
            Proposed Law
    The provision would establish a special open enrollment 
period for an individual to change plans during a period other 
than during the annual open enrollment period. The provision 
would apply to an individual enrolled in a prescription drug 
plan (or an MA-PD plan) who has been prescribed and is using a 
drug while enrolled in the plan in the case where the formulary 
of the plan materially changed (other than at the end of the 
contract year) such as to reduce coverage or increase the cost-
sharing of the drug. The provision would not apply in cases 
where the drug was removed from the formulary because of a 
recall or withdrawal issued by the Food and Drug Administration 
or because the drug was replaced with a therapeutically 
equivalent generic drug. The provision would also not apply in 
instances where utilization management was applied for drugs 
for which FDA required a boxed warning or drugs subject to a 
Risk Evaluation and Management Strategy under subsection (f) of 
Section 505-1 of the Federal Food, Drug, and Cosmetic Act. The 
provision would apply to contract years beginning on or after 
January 1, 2011.
            Reason for Change
    Beneficiaries choose prescription drug plans based on a 
number of factors, not the least of which is whether a plan 
covers the drugs they are currently taking. Though CMS has 
imposed certain restrictions on plan formulary changes, there 
is no protection for beneficiaries who are nonetheless harmed 
by a mid-year formulary change. This provision will allow 
adversely affected beneficiaries to choose a new plan, and will 
discourage plans from making mid-year formulary changes for 
highly prescribed drugs.
            Effective Date
    January 1, 2011.

             Subtitle F--Medicare Rural Access Protections


Sec. 1191. Telehealth Expansion and Enhancements

            Current Law
    Medicare covers certain services including professional 
consultations, office and other outpatient visits, individual 
psychotherapy, pharmacological management, psychiatric 
diagnostic interview examinations, neurobehavioral status 
exams, and end stage renal disease related services delivered 
via an eligible telecommunications system. An interactive 
telecommunications system is required as a condition of 
payment. The originating site (the location of the beneficiary 
receiving the telehealth service) can be a physician or 
practitioner's office, a critical access hospital, a rural 
health clinic, a federally qualified health center, a hospital-
based renal dialysis center, a skilled nursing facility, a 
community mental health center or a hospital. The originating 
site must be in a rural health professional shortage area or in 
a county that is not in a metropolitan statistical area or at 
an entity that participates in a specified federal telemedicine 
demonstration project.
            Proposed Law
    A renal dialysis facility would be included as a covered 
originating site for telehealth services effective for services 
starting January 1, 2011.
    The Secretary would appoint a Telehealth Advisory Committee 
to make policy recommendations concerning/regarding telehealth 
services including the appropriate addition or deletion of 
covered services and procedure codes for authorized payments.
    The Advisory Committee would be composed of 9 members: 5 
would be practicing physicians; 2 would be practicing 
nonphysician health care practitioners, and 2 shall be 
administrators of telehealth programs. In appointing the 
committee members, the Secretary would be required to ensure 
that each member has prior experience with the practice of 
telemedicine or telehealth; would give preference to 
individuals who are currently providing telemedicine or 
telehealth services or who are involved in telemedicine or 
telehealth programs; would ensure that committee membership 
represents a balance of specialties and geographic regions; and 
would take into account the recommendations of stakeholders.
    The Telehealth Advisory Committee would meet at least twice 
each calendar year and at other times provided by the 
Secretary. The committee members would serve for the term 
specified by the Secretary. An advisory committee member would 
not be able to participate in a particular matter considered in 
meeting if such a member (or an immediate family member) had a 
financial interest that could be affected by the advice given 
to the Secretary. Section 14 of the Federal Advisory Committee 
Act governing termination, renewal and continuation of 
committees would not apply. The Secretary would establish this 
committee regardless of any limitation that would apply to the 
number of advisory committees that may be established with the 
Department of Health and Human Services or otherwise.
    In making determinations with respect to covered services, 
the Secretary would be required to take into account the 
recommendations of the Telehealth Advisory Committee. If the 
Secretary does not implement a recommendation, the Secretary 
would publish a statement providing the reason for such 
decision in the Federal Register.
    A telemedicine practitioner that is credentialed by a 
hospital in compliance with the Joint Commission Standards for 
Telemedicine would be considered in compliance with conditions 
of participation and reimbursement credentialing requirements 
for Medicare.
            Reason for Change
    Telehealth services can be a valuable way of delivering 
high quality care to underserved and other areas. This 
provision expands Medicare's telehealth benefit and ensures 
that CMS receives valuable outside expertise in the 
administration of the benefit.
            Effective Date
    January 1, 2011 for services provided by renal dialysis 
facilities; date of enactment for all other provisions.

Sec. 1192. Extension of Outpatient Hold Harmless Provision

            Current Law
    Small rural hospitals (with no more than 100 beds) that are 
not sole community hospitals (SCHs) can receive additional 
Medicare payments if their outpatient payments under the 
prospective payment system are less than under the prior 
reimbursement system. For calendar year (CY) 2006, these 
hospitals received 95% of the difference between payments under 
the prospective payment system and those that would have been 
made under the prior reimbursement system. The hospitals 
receive 90% of the difference in CY2007 and 85% of the 
difference in CY2008 and CY2009. Sole community hospitals with 
not more than 100 beds receive 85% of the payment difference 
for covered HOPD services furnished on or after January 1, 
2009, and before January 1, 2010.
            Proposed Law
    Small rural hospitals and sole community hospitals with not 
more than 100 beds would receive 85% of the payment difference 
for covered HOPD services furnished until January 1, 2012.
            Reason for Change
    This provision protects small rural hospitals from the 
financial losses they would face under the outpatient 
prospective payment system. Eligible hospitals will receive a 
partial hold harmless payment until the end of CY2011.
            Effective Date
    January 1, 2010.

Sec. 1193. Extension of Section 508 Hospital Reclassifications

            Current Law
    Section 508 of the Medicare Prescription Drug, Improvement 
and Modernization Act of 2003 (MMA, P.L. 108-173) provided $900 
million for a one-time, 3-year geographic reclassification of 
certain hospitals that were otherwise unable to qualify for 
administrative reclassification to areas with higher wage index 
values. These reclassifications were extended from March 31, 
2006 to September 30, 2007 by the Tax Relief and Health Care 
Act of 2006 (P.L. 109-432). The Medicare, Medicaid and SCHIP 
Extension Act (P.L. 110-173) extended the reclassifications to 
September 30, 2008. The Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA, P.L. 110-275) extended the 
reclassifications until September 30, 2009. These extensions 
are exempt from any budget neutrality requirements.
            Proposed Law
    The Section 508 reclassifications would be extended until 
September 30, 2011.
            Reason for Change
    This provision extends the MMA Section 508 geographic 
reclassification designations, and allows for other geographic 
reclassification designations, so that these hospitals may 
better compete with neighboring hospitals. The Committee notes 
that there are some hospitals that are eligible for 
reclassification both under the Medicare Geographic 
Classification Review Board (MGCRB) process as set forth at 
Section 1886(d)(10) of the Social Security Act and under 
Section 508. When publication of the final regulation for the 
Medicare inpatient prospective payment system precedes 
enactment of a Section 508 extension, these hospitals' wages 
are included into the reclassified wage index of the area to 
which they are being reclassified. The Committee does not see 
the need to provide further adjustments to these hospitals as 
the reclassified wage index they receive in such a scenario 
reflects inclusion of their own wages.
            Effective Date
    October 1, 2010.

Sec. 1194. Extension of Geographic Floor for Work

            Current Law
    The Medicare fee schedule is adjusted geographically for 
three factors to reflect differences in the cost of resources 
needed to produce physician services: physician work, practice 
expense, and medical malpractice insurance. The geographic 
adjustments are indices that reflect how each area compares to 
the national average in a ``market basket'' of goods. A 
geographic practice cost index (GPCI) with a value of 1.00 
represents an average across all areas. A series of bills set a 
temporary floor value of 1.00 on the physician work index 
beginning January 2004; most recently, Section 134 of the MIPPA 
extended the application of this floor when calculating 
Medicare physician reimbursement through December 2009. The 
other geographic indices (for practice expense and medical 
malpractice) were not modified by these Acts.
            Proposed Law
    The proposal would extend the 1.00 floor for the geographic 
index for physician work for an additional 2 years through 
December 2011.
            Reason for Change
    Rural physicians put in as much time, skill, and intensity 
into their work as physicians in urban areas. This provision 
ensures that rural physicians are paid at least the average 
rate for their work.
            Effective Date
    January 1, 2010.

Sec. 1195. Extension of Payment for Technical Component of Certain 
        Physician Pathology Services

            Current Law
    Legislation enacted in 1997 specified that independent labs 
that had agreements with hospitals on July 22, 1999 to bill 
directly for the technical component of pathology services 
could continue to do so in 2001 and 2002. The provision has 
been periodically extended, most recently through December 31, 
2009 by MIPPA.
            Proposed Law
    The bill would extend this provision through 2011.
            Reason for Change
    This provision is needed in order to continue allowing 
direct billing for the technical component for independent labs 
that have agreements with hospitals. Without this extension, 
hospitals will incur an additional cost that is not included in 
the payment rate under the prospective payment system. This 
provision protects rural beneficiaries' access to laboratory 
services.
            Effective Date
    January 1, 2010.

Sec. 1196. Extension of Ambulance Add-Ons

            Current Law
    Ambulance services are paid on the basis of a national fee 
schedule, which is being phased in. The fee schedule 
establishes seven categories of ground ambulance services and 
two categories of air ambulance services. The national fee 
schedule is fully phased in for air ambulance services. For 
ground ambulance services, payments through 2009 are equal to 
the greater of the national fee schedule or a blend of the 
national and regional fee schedule amounts. The portion of the 
blend based on national rates is 80% for 2007-2009. In 2010 and 
subsequently, the payments in all areas will be based on the 
national fee schedule amount.
    The fee schedule payment for an ambulance service equals a 
base rate for the level of service plus payment for mileage. 
Geographic adjustments are made to a portion of the base rate. 
For the period July 2004 to December 2009, mileage payments are 
increased for ground ambulance services originating in rural 
low population density areas. For the period July 1, 2004 until 
December 31, 2008, there is a 25% bonus on the mileage rate for 
trips of 51 miles and more. Payments for ground transports 
originating in rural areas or rural census tracts are increased 
by 3% for the period of October 1, 2008 through December 31, 
2009.
    MIPPA specifies that any area designated as rural for the 
purposes of making payments for air ambulance services on 
December 31, 2006, will be treated as rural for the purpose of 
making air ambulance payments during the period July 1, 2008 
until December 31, 2009.
            Proposed Law
    The provision would maintain the 3% higher payments for 
ground transports originating in rural areas or rural census 
tracts until December 31, 2011. The MIPPA provision maintaining 
the designation of certain areas as rural for the purposes of 
Medicare's payments for air ambulance services would be 
maintained until December 31, 2011.
            Reason for Change
    This provision helps to cover the cost of providing 
ambulance services in rural areas.
            Effective Date
    January 1, 2010.

              TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS


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


Sec. 1201. Improving Assets Tests for Medicare Savings Program and Low-
        income Subsidy Program

            Current Law
    Federal assistance is provided to certain low-income 
persons to help them meet Medicare Part D premium and cost-
sharing charges. To qualify for the Part D low-income subsidy, 
Medicare beneficiaries must have resources no greater than the 
income and resource limits established by the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 
(P.L.108-173, MMA).
    Individuals may qualify for the full subsidy in two ways: 
1) if they are eligible for Medicaid or one of the Medicare 
Savings Programs (Qualified Medicare Beneficiary (QMB), 
Specified Low Income Medicare Beneficiary (SLMB), or Qualifying 
Individual (QI)), or are recipients of Supplemental Security 
Income (SSI) benefits, they are deemed automatically eligible; 
or 2) if they apply for the benefit, through their State 
Medicaid agency or through the Social Security Administration 
(SSA) and are determined to have an annual income below 135% of 
the federal poverty level (FPL) and have resources below a 
certain limit (in 2009, $6,600 for an individual or $9,910 if 
married). Beneficiaries may qualify for a partial subsidy if 
they apply and are determined to have an annual income below 
150% of the FPL and whose resources do not exceed a certain 
limit (in 2009, $11,010 for individuals or $22,010 if married). 
(When determining whether a beneficiary qualifies for the 
Medicare Part D low-income subsidy, $1,500 per person in 
resources are excluded from consideration if the beneficiary 
indicates that he/she expects to use resources for burial 
expenses; otherwise $1,500 should be added to the above asset 
limits for an individual and $3,000 for a couple.)
            Proposed Law
    Under this provision, the maximum resources levels used to 
determine eligibility for the low income subsidy would be 
increased. In 2012, the level would be $17,000 for an 
individual and $34,000 for a couple. In subsequent years, the 
asset level would be increased by the annual percent increase 
in the Consumer Price Index (all items, U.S. city average) as 
of September of the previous year.
    These maximum resources levels would also apply for 
determining eligibility for Medicare Savings Programs, 
beginning January 1, 2012.
            Reason for Change
    Millions of low-income Medicare beneficiaries do not 
qualify for financial assistance under the Part D low-income 
subsidy (LIS) or the Medicare Savings Program (MSP) because 
they have a small nest egg that exceeds the maximum resource 
limits permitted by the programs. Even the presence of an asset 
test can be a barrier to applicants because of the daunting 
application process. This section harmonizes the asset tests 
for eligibility for all LIS eligible individuals--full and 
partial Part D subsidy--and the MSP to simplify the test, and 
raises the maximum level to prevent seniors with nest eggs from 
being disqualified from receiving the subsidy.
            Effective Date
    January 1, 2012.

Sec. 1202. Elimination of Part D) Cost-sharing for Certain Non-
        Institutionalized Full-Benefit Dual Eligible Individuals

            Current Law
    Cost-sharing subsidies for LIS enrollees are linked to the 
standard prescription drug coverage. Full-subsidy eligibles 
have no deductible, minimal cost sharing during the initial 
coverage period and coverage gap, and no cost-sharing over the 
catastrophic threshold.
    Full-benefit dual eligibles who are residents of medical 
institutions or nursing facilities have no cost-sharing. Other 
full-benefit dual-eligible individuals with incomes up to 100% 
of poverty have cost-sharing, for all costs up to the out-of-
pocket threshold, of $1.10 in 2009 for a generic drug 
prescription or preferred multiple source drug prescription and 
$3.20 in 2009 for any other drug prescription. All other full-
subsidy-eligible individuals have cost-sharing for all costs up 
to the out-of-pocket threshold, of $2.40 in 2009 for a generic 
drug or preferred multiple source drug and $6.00 in 2009 for 
any other drug.
            Proposed Law
    Under this provision, cost-sharing would not apply to 
persons who were full benefit dual eligibles and for whom a 
determination was made that but for the provision of home and 
community based care, the individual would require the level of 
care provided in a hospital or a nursing facility or 
intermediate care facility for the mentally retarded and such 
care would be paid for by Medicaid. Such home and community 
based care would be that provided under Section 1915 or 1932 of 
the SSA or under a waiver under Section 1115 of the Act. The 
provision would apply to drugs dispensed on or after January 1, 
2011.
            Reason for Change
    For decades, policymakers at the state and federal level 
have made efforts to eliminate the bias toward 
institutionalization for those needing long-term care services 
by providing benefits for needed health care services in 
community-based settings. Studies have shown that people 
needing long-term care prefer to receive benefits in the 
community and that often such benefits can be provided at less 
cost than similar benefits in an institution (e.g. a nursing 
home).
    The Medicare Modernization Act, for purposes of the Part D 
benefit, distinguished between beneficiaries who receive care 
in a community setting and those in an institution. 
Beneficiaries in institutions were exempted from Part D cost 
sharing, but those in the community--who were equally poor and 
needed an equivalent level of care--were not. This provision in 
the Medicare drug bill was a setback to decades of federal and 
state policy to encourage, or at least be neutral toward, 
beneficiaries receiving care in home or community settings.
    Extending the protection against cost-sharing to dually 
eligible beneficiaries who are eligible to be institutionalized 
in a hospital or facility for the mentally retarded ensures 
that these most vulnerable beneficiaries are not penalized for 
choosing to receive care in a home or community-based setting.
            Effective Date
    January 1, 2011.

Sec. 1203. Eliminating Barriers to Enrollment

            Current Law
    In general, federal law stipulates few documentation 
requirements for Medicaid applicants, including persons who 
apply for coverage under the Medicare Savings Program (MSP). 
Although states have flexibility to collect income and asset 
information through self-declaration alone, they also have the 
ability to require supporting documentation. State policies on 
this issue vary based on the eligibility group, but a 
considerable amount of documentation may be required to 
determine whether an individual meets financial eligibility 
requirements for Medicaid.
    Under the Medicare Part D low-income subsidy program, full-
benefit dual eligibles, those receiving assistance through 
Medicare Savings Programs, and recipients of SSI are deemed 
subsidy-eligible individuals for up to one year; other persons, 
or their personal representatives, have to apply for 
assistance. Applicants may apply either at state Medicaid 
offices or Social Security offices. Applicants are required to 
provide information from financial institutions, as requested, 
to support information in the application, and to certify as to 
the accuracy of the information provided.
            Proposed Law
    Medicare beneficiaries applying for a low-income subsidy 
under the prescription drug program would be permitted to apply 
on the basis of self-certification of income and resources. The 
information provided would be subject to verification; however, 
and except in extraordinary situations as determined by the 
Commissioner of SSA, the individual would not be required to 
provide additional documentation. Verification would be 
accomplished through data-sharing between the SSA and the 
Internal Revenue Service described under existing authority. 
This provision would be effective beginning January 1, 2010.
            Reason for Change
    Administrative barriers often prevent low-income Medicare 
beneficiaries from accessing the Part D low-income subsidy 
(LIS) that they might be eligible for under the law. This 
section requires the Social Security Administration (SSA) to 
administratively verify a beneficiary's income and assets, 
without requiring submission of burdensome paperwork or 
financial documentation. SSA already has authority to verify 
eligibility for the LIS through data it obtains directly from 
the Internal Revenue Service without requiring seniors, many of 
whom are frail or have limited mobility, to present financial 
documents.
            Effective Date
    January 1, 2010.

Sec. 1204. Enhanced Oversight Relating to Reimbursements for 
        Retroactive Low Income Subsidy Enrollment

            Current Law
    Certain groups of Medicare beneficiaries automatically 
qualify (and are deemed eligible) for the full low-income 
subsidy. Dual eligibles who qualify for Medicaid based on their 
income and assets are automatically deemed eligible for 
Medicare prescription drug low-income subsidies. Additionally, 
those who receive premium and/or cost-sharing assistance 
through the Medicare Savings Programs (MSP), plus those 
eligible for SSI cash assistance, are automatically deemed 
eligible for low-income subsidies and need not apply for them. 
CMS deems individuals automatically eligible for LIS effective 
as of the first day of the month that the individual attains 
the qualifying status (e.g., becomes eligible for Medicaid, 
MSP, or SSI). The end date is, at a minimum, through the end of 
the calendar year within which the individual becomes eligible.
    These individuals' Medicaid prescription drug coverage 
ceases as soon as the individual is eligible for Part D, 
regardless of whether the individual is enrolled in a Part D 
plan. This creates the risk of gaps in coverage. To prevent 
gaps between the end of Medicaid prescription drug coverage and 
the start of Medicare prescription drug coverage, CMS 
regulation specifies that auto-enrollment is effective the 
month in which the person becomes full-benefit dual eligible. 
Because Medicaid eligibility is often retroactive, CMS randomly 
auto-enrolls new full-benefit dual eligibles into Part D plans 
retroactive to the start of their full dual status.
    Other individuals with limited income and resources who do 
not automatically qualify may apply for the low-income subsidy 
and have their eligibility determined by either the SSA or 
their state Medicaid agency. An individual who applies and is 
determined eligible for the LIS is eligible effective the first 
day of the month in which the individual submitted an 
application. In most cases, this means that LIS status is 
applied retroactively. If a beneficiary is already enrolled in 
a Part D plan, the Part D sponsor must take steps to ensure 
that the beneficiary has been reimbursed for any premiums or 
cost-sharing the member had paid that should have been covered 
by the subsidy.
    The Centers for Medicare & Medicaid Services (CMS) issued a 
request for proposals (RFP) on February 17, 2009 to solicit a 
contractor (a national prescription drug plan sponsor) to cover 
Part D prescription drug claims for retroactive periods of 
coverage for full-benefit dual eligible and SSI-eligible 
individuals, as well as point-of-sale coverage at a pharmacy 
for certain individuals with the Part D low-income subsidy who 
are not yet enrolled in a Part D plan. Beginning in 2010, CMS 
has the demonstration authority to test a revised approach for 
providing retroactive and immediate need coverage. Under the 
demonstration, CMS will contract with a single PDP sponsor to 
pay for all claims for retroactive auto-enrollment periods plus 
current and immediate need claims for all LIS eligibles. CMS 
will modify its auto and facilitated enrollment process so that 
all those with retroactive effective dates are assigned to the 
demonstration for those retroactive periods, but continue to be 
randomly assigned for prospective periods to standard LIS PDPs.
            Proposed Law
    In the case of a retroactive LIS enrollment, the 
beneficiary, or a third party that is owed payment on behalf of 
the beneficiary, would be entitled to be reimbursed for covered 
drug costs incurred by the beneficiary during the retroactive 
coverage period. The retroactive coverage period is defined as 
the period beginning on the effective date of LIS assistance 
for which the individual is eligible and ending on the date the 
plan effectuates the status of such individual as eligible. 
Covered drug costs would be defined as the amount by which the 
costs incurred by the beneficiary for covered part D drugs, 
premiums and cost sharing exceeds such costs that would have 
been incurred if the beneficiary had been receiving a low-
income subsidy to which the individual was entitled.
    The reimbursement would be made automatically by the Part D 
plan sponsor upon appropriate notice that the beneficiary is 
eligible for assistance and no further information would need 
to be submitted to the plan by the beneficiary. For each such 
reimbursement, the PDP or MA-PD plan would be required to 
include a line-item description of the items for which the 
reimbursement is made. Additionally, the provision would 
require that reimbursement be submitted not later than 45 days 
after the date on which the plan receives notice from the 
Secretary that the beneficiary is eligible for assistance or 
the date on which the beneficiary files the claim with the 
plan.
    A retroactive LIS enrollment beneficiary would be defined 
as an individual who is enrolled in a PDP or an MA-PD plan and 
subsequently becomes eligible as a full-benefit dual eligible 
individual, Medicare Savings Program eligible, or eligible for 
SSI, or is a full-benefit dual eligible individual who is 
automatically enrolled in such a plan. Beneficiaries who 
enrolled in a plan whose sponsor entered into a contract with 
the Secretary, pursuant to CMS's request for proposals (RFP) 
issued on February 17, 2009 relating to Medicare Part D 
retroactive coverage for certain low-income beneficiaries, or a 
similar subsequent request for such proposals, would not be 
included in this definition.
    For each month, beginning with January 2011, each PDP and 
MA-PD plan would be required to report to the Secretary 
information on the number and value of claims the plan has re-
adjudicated on behalf of a beneficiary due to the beneficiary 
becoming retroactively eligible for the subsidy, the affected 
beneficiaries' Medicare identification number, and an 
attestation to the Administrator of CMS regarding the total 
amount of reimbursement the plan has provided to beneficiaries 
for premiums and cost-sharing that the beneficiary overpaid and 
for which the plan received payment.
            Reason for Change
    Through existing authority under current law, the Secretary 
has established a requirement that Part D plans make 
appropriate retroactive reimbursements to beneficiaries and 
third parties. This provision would enact and clarify that 
process. It also would implement oversight procedures of the 
retroactive reimbursement process to allow the Secretary to 
better determine whether the payments for this retroactive 
coverage from CMS to the Part D plans are accurately and 
consistently reimbursed to beneficiaries and third parties.
            Effective Date
    January 1, 2011.

Sec. 1205. Intelligent Assignment in Enrollment

            Current Law
    Special enrollment rules apply to individuals eligible for 
the Part D low income subsidy. Generally, there is a two-step 
process for low-income persons to gain Part D coverage. First, 
a determination must be made that they qualify for the 
assistance; second, they must enroll, or be enrolled, in a 
specific Part D plan.
    According to Section 1860D-14 of the SSA, full-benefit 
dual-eligible individuals who have not elected a Part D plan 
are to be auto-enrolled into one by CMS. If there is more than 
one plan available that has a monthly beneficiary premium that 
does not exceed the premium assistance amount under the low-
income subsidy, the beneficiary is to be enrolled on a random 
basis among all such plans in the PDP region. The individual 
has the option of declining or changing such enrollment.
    Some dual eligibles may find that they are auto-enrolled in 
a plan that may not best meet their needs. For example, it is 
possible that the specific drug(s) that a beneficiary is 
currently taking is not covered by the new plan. For this 
reason, beneficiaries are able to change enrollment at any 
time, with the new coverage effective the following month.
            Proposed Law
    The Secretary would be given the option to use an 
``intelligent assignment'' process as an alternative to the 
random assignment process. The intelligent assignment process 
would be designed to maximize the access of full-benefit dual 
eligibles to necessary prescription drugs while minimizing 
costs to the individual and to the program to the greatest 
extent possible. The process would need to take into account 
the extent to which prescription drugs necessary for the 
individual are covered, the use of prior authorization or other 
restrictions on access to coverage of drugs, and the overall 
quality of a prescription drug plan.
            Reason for Change
    The Medicare Modernization Act prohibited CMS from using 
any methodology other than random assignment when automatically 
enrolling full benefit dual eligibles into Part D plans. While 
this process results in beneficiaries enrolled in the lowest 
cost plans based on monthly premium, it does not take into 
consideration whether this vulnerable population is enrolled in 
quality plans that cover the beneficiaries' necessary 
medications. While dual eligibles have the option of enrolling 
in a different plan, this is a particularly frail population 
that may not have the capacity to evaluate and choose among all 
of the available plans. The Committee's intention is that CMS 
evaluate methodologies for intelligently assigning dual 
eligibles to Part D plans based on cost--but also on formulary 
coverage for beneficiaries' needed prescriptions, use of prior 
authorization and other restrictions, and quality measures--and 
to implement if the Secretary determines that a methodology 
could both minimize cost to the program and maximize access of 
dual eligibles to needed prescription drugs.
            Effective Date
    January 1, 2012.

Sec. 1206. Special Enrollment Period and Automatic Enrollment Process 
        for Certain Subsidy Eligible Individuals

            Current Law
    In general, a Medicare beneficiary who does not enroll in 
Part D during his or her initial enrollment period may enroll 
only during the annual open enrollment period, which occurs 
from November 15 to December 31 each year. Coverage begins the 
following January 1. Beneficiaries already enrolled in a Part D 
plan may change their plans during the annual open enrollment 
period.
    There are a few additional, limited occasions when an 
individual may enroll in or disenroll from a Part D plan or 
switch from one Part D plan to another, called special 
enrollment periods (SEPs). For example, SEPs are allowed for 
individuals who involuntarily lose creditable coverage, are 
subject to a federal error in enrollment, meet certain 
exceptional conditions as established by the Secretary, or are 
a full-benefit dual eligible individual.
            Proposed Law
    The provision would establish a new special enrollment 
period for persons deemed to be low-income subsidy eligible 
individuals. The provision would also require the Secretary to 
use an automatic assignment process to enroll low-income 
beneficiaries who failed to enroll in a prescription drug plan 
or MA-PD plan during the special enrollment period. This 
assignment process would be identical to that used for full-
benefit dual eligibles. The individual would have the option of 
declining or changing such enrollment.
            Reason for Change
    Under current statutory authority, the Secretary has 
established a continuous SEP whereby upon becoming eligible for 
Part D, the Secretary automatically enrolls full benefit dual 
eligibles into a Part D plan; the individual retains the right 
to decline or change enrollment in any month. The Secretary has 
also expanded this SEP to include all individuals who are 
eligible for the Part D low-income subsidy (LIS). This 
provision codifies CMS' interpretation of current law with 
regard to allowing an SEP and automatic enrollment process for 
all LIS-eligible beneficiaries, and harmonizes the auto-
enrollment process created in section 1205 of the Act for full-
benefit dual eligibles with other LIS-eligible beneficiaries 
(i.e. permitting CMS to use an intelligent assignment process). 
Although the MMA limited the statutory SEP to full-benefit dual 
eligibles, the Committee agrees with CMS that this SEP and 
subsequent automatic enrollment into a Part D plan should also 
apply to other LIS-eligible beneficiaries as a guarantee that 
individuals are properly enrolled in a Part D plan and able to 
access needed medications.
            Effective Date
    Subsidy determination made for months beginning with 
January 2011.

Sec. 1207. Application of MA Premiums Prior to Rebate in Calculation of 
        Low Income Subsidy Benchmark

            Current Law
    The federal government pays up to 100% of the Part D 
premiums for LIS beneficiaries who are enrolled in 
``benchmark'' plans. A Part D plan qualifies as a benchmark 
plan if it offers basic Part D coverage with premiums equal to 
or lower than the regional low-income premium subsidy amount. 
The regional low-income benchmark premium amount, calculated 
annually, is the weighted average of all premiums in each of 
the 34 prescription drug plan (PDP) regions for basic 
prescription drug coverage, or the actuarial value of basic 
prescription drug coverage for plans that offer enhanced 
coverage options, or for Medicare Advantage Prescription Drug 
(MA-PD) plans, the portion of the premium attributable to basic 
prescription drug benefits.
    Under the Medicare Advantage program (Part C), plans bid to 
offer Parts A and B coverage to beneficiaries. CMS bases the 
Medicare payment for a MA plan on the relationship between its 
bid and a benchmark (different from the LIS benchmark). The MA 
benchmark represents the maximum amount the federal government 
will pay a plan for providing required Medicare benefits. If a 
plan's bid is less than the benchmark, its payment equals its 
bid plus a rebate of 75% of the difference between the 
benchmark and the bid. The rebate must be used to provide 
additional benefits to enrollees, reduce Medicare cost sharing 
expenses, or reduce a beneficiary's monthly Part B, 
prescription drug, or supplemental premium (for services beyond 
the required Medicare benefits).
    MA plans offering prescription drug coverage submit a 
separate bid for the Part D portion. Payment for the portion of 
the premium attributable to basic prescription drug benefits is 
calculated in the same way as that for stand-alone PDPs; 
however the MA plan may choose to apply some of its Part C 
rebate payments to lower the Part D premium.
            Proposed Law
    The statute would be modified to exclude the Part C rebate 
amounts from the MA-PD plan premiums when calculating the low-
income regional benchmark for subsidy determinations made for 
months beginning with January 2011.
            Reason for Change
    CMS' current methodology for determining which plans are 
eligible for automatic enrollment of LIS-eligible beneficiaries 
results in millions of beneficiaries being switched into 
different Part D plans each year. This is disruptive and 
confusing for beneficiaries. Excluding the rebate portion of 
the premium--which goes solely to providing extra benefits, 
like gym memberships--from the calculation of the LIS benchmark 
which determines the plans eligible for auto-enrollment, will 
lessen the number of beneficiaries who have to switch plans 
each year because their plan's premium exceeds the LIS 
benchmark. This is one step toward ensuring that frail 
beneficiaries have continuity in their Part D plan from year-
to-year and maintain adequate access to needed prescription 
drugs.
            Effective Date
    Subsidy determination made for months beginning with 
January 2011.

                Subtitle B--Reducing Health Disparities


Sec. 1221. Ensuring Effective Communication in Medicare

            Current Law
    Congress passed Title VI of the Civil Rights Act of 1964 to 
ensure that federal money is not used to support programs or 
activities that discriminate on the basis of race, color, or 
national origin. The United States Supreme Court has treated 
discrimination based on language as national origin 
discrimination. Therefore, recipients of federal funds 
(including hospitals, nursing homes, state Medicaid agencies, 
managed care organizations, home health agencies, health 
service providers, human service organizations, and any other 
health or human services federal fund recipient, as well as 
subcontractors, vendors, and subrecipients) are required to 
take reasonable steps to ensure that persons with limited 
English proficiency have meaningful access to programs and 
activities. The Department of Health and Human Services has 
issued guidance, including a four-factor analysis, that 
implicates the ``mix'' of language services that should be 
offered, including oral and written interpretation services.
            Proposed Law
    The provision would require the Secretary of the Department 
of Health and Human Services to conduct a study to examine the 
extent to which Medicare providers utilize, offer, or make 
available language services for beneficiaries who are limited 
English proficient and ways that Medicare should develop 
payment systems for language services. The study would include 
an analysis of: ways to develop and structure appropriate 
payment systems for language services for Medicare providers; 
the feasibility of adopting a payment methodology for on-site 
interpreters; the feasibility of Medicare contracting directly 
with agencies that provide off-site interpretation, including 
telephonic and video interpretation; the feasibility of 
modifying the existing Medicare resource-based relative value 
scale (RBRVS) by using adjustments when a patient is LEP; and 
how each of these options would be funded. The study would also 
include an analysis of the extent to which providers under 
Medicare Parts A, B, C, and D utilize, offer, or make available 
language services for beneficiaries with LEP; and the nature 
and type of language services provided by states for Medicaid 
recipients, and the extent to which such services could be 
utilized by Medicare providers.
    The potential payment systems included in the analysis 
could allow variations based on types of service providers, 
available delivery methods, and costs for providing language 
services. Factors could include: the type of language service 
provided, such as the provision of health care or health care 
related services directly in a non-English language by a 
bilingual provider or use of an interpreter; the type of 
interpretation provided, such as in-person, telephonic, video 
interpretation; the methods and costs of providing language 
services, including the costs of providing language services 
with internal staff and/or through contract with external 
independent contractors or agencies; providing services for 
languages not frequently encountered in the United States; and 
providing services in rural areas.
    The Secretary would be required to submit a report to 
appropriate committees of Congress not later than 12 months 
after the date of enactment of this Act. The Paperwork 
Reduction Act would not apply for purposes of carrying out this 
study. The necessary funds to conduct the study would be 
authorized to be appropriated.
    This provision also would authorize the Secretary to apply 
sanctions, such as civil money penalties, suspension of 
enrollment, and suspension or payments, to Medicare Advantage 
organizations that substantially fail to provide required 
language services to LEP beneficiaries enrolled in their plans.
            Reason for Change
    Studies have shown that language barriers can have 
deleterious effects on patient care. Patients who face such 
barriers are less likely than others to have a usual source of 
medical care; they receive preventive services at reduced 
rates; and they have an increased risk of nonadherence to 
medication. Ad hoc interpreters, including family members, 
friends, untrained members of the support staff, and strangers 
found in waiting rooms or on the street, are commonly used in 
clinical encounters. However, such interpreters are 
considerably more likely than professional interpreters to 
commit errors that may have adverse clinical consequences. This 
policy is intended to evaluate the effectiveness of culturally 
and linguistically appropriate care by directing the Secretary 
to conduct a study that examines the extent to which Medicare 
providers utilize, offer or make available language services 
for beneficiaries who are limited English proficient. The study 
will also evaluate ways that Medicare should develop payment 
systems for language services.
            Effective Date
    Date of enactment.

Sec. 1222. Demonstration to Promote Access for Medicare Beneficiaries 
        with Limited English Proficiency by Providing Reimbursement for 
        Culturally and Linguistically Appropriate Services

            Current Law
    No provision.
            Proposed Law
    Not later than 6 months after the completion of the study 
described in section 1221, the Secretary, acting through the 
CMS, would be required to carry out a demonstration program 
under which the Secretary would award no fewer than 24 three-
year grants to eligible Medicare providers to improve effective 
communication between providers and Medicare beneficiaries 
living in communities where racial and ethnic minorities, 
including populations that face language barriers, are 
underserved with respect to such services. Using the results of 
the completed study, the Secretary would adjust, as 
appropriate, the distribution of grants to target Medicare 
beneficiaries who are in the greatest need of language 
services. The Secretary would be required to not authorize a 
grant larger than $500,000 over three years for any grantee.
    To be eligible to receive a grant, an entity would be 
required to be a Medicare provider of services under Parts A or 
B, a Medicare Advantage organization offering a Medicare part C 
plan, or a sponsor of a part D prescription drug plan (PDP). To 
the extent feasible, the Secretary would award at least 6 
grants each to part A providers, part B providers, part C 
organizations, and to prescription drug sponsors. The Secretary 
would be required to give priority to applicants that have 
developed partnerships with community organizations or agencies 
with experience in language access. The Secretary would also 
need to ensure that grantees represent variations in types of 
language services, languages needed and their frequency of use, 
urban and rural settings, at least two geographic regions as 
defined by the Secretary, and at least two large urban areas 
with diverse populations.
    The grantee would be required to use the grant funds to pay 
for the provision of competent language services to LEP 
Medicare beneficiaries. Such services may be provided through 
on-site interpretation, telephonic interpretation, video 
interpretation, or direct provision of health care or health 
care-related services by a bilingual health care provider. The 
grantee may also use bilingual providers, staff, or contract 
interpreters. The grantee may use up to 10% of the grant funds 
to pay for administrative costs associated with the provision 
of competent language services and for required reporting. 
Grantees that are part C organizations or PDP sponsors would be 
required to ensure that their network providers, including 
physicians and pharmacies, receive at least 50% of the grant 
funds to pay for the provision of language services.
    The payments to grantees would be calculated based on the 
estimated numbers of LEP Medicare beneficiaries in a grantee's 
service area, using the most recently available data from the 
Bureau of Census or other state-based study on the number of 
individuals served by the grantee who speak English less than 
``very well'', or using the grantee's own data on Medicare 
beneficiaries primary language if the Secretary determines such 
data to be reliable. Payment would only be provided to grantees 
that report their costs of providing language services and may 
be modified annually at the discretion of the Secretary. If the 
grantee does not provide the reports for the first year of a 
grant, the Secretary would be able to terminate the grant and 
to solicit applications from new grantees to participate in the 
subsequent two years of the demonstration program.
    Payments would only be provided to grantees that utilize 
competent bilingual staff or competent interpreter or 
translation services which meet the state standards currently 
in effect if the grantee operates in a state that has statewide 
health care interpreter standards. For grantees operating in 
states without such standards, the grantee would be required to 
utilize interpreters who follow the National Council on 
Interpreting in Health Care's Code of Ethics and Standards of 
Practice. This requirement would not apply if a beneficiary 
requests the use of family, friends, or other persons untrained 
in interpretation and the grantee documents the request in the 
beneficiary's record. This requirement would also not apply in 
the case of a medical emergency where the delay associated with 
obtaining an interpreter would jeopardize the health of the 
patient. Emergency rooms and other entities that regularly 
provide health care services in medical emergencies, would, 
however not be exempt from the requirement to provide 
interpreter and translation services without undue delay.
    Grantees would also be required to: ensure that appropriate 
clinical and support staff receive ongoing education and 
training in linguistically appropriate service delivery; ensure 
the linguistic competence of bilingual providers; offer and 
provide appropriate language services at no additional charge 
to each LEP patient at all points of contact, in a timely 
manner during all hours of operation; notify Medicare 
beneficiaries of their right to receive language services in 
their primary language; post signage in the languages of the 
commonly encountered group or groups present in the 
organization's service area; and ensure that primary language 
data are collected for recipients of language services (if the 
recipient of language services is a minor or is incapacitated, 
the primary language of the parent or legal guardian would be 
collected and utilized).
    Grantees would be required to provide the Secretary with 
reports at the end of each year of the grant. The report would 
include (1) the number of Medicare beneficiaries to whom 
language services are provided; (2) the languages of those 
Medicare beneficiaries; (3) the types of language services 
provided; (4) the type of interpretation; (5) the methods of 
providing language services; (6) the length of time for each 
interpretation encounter; and (7) the costs of providing 
language services.
    LEP Medicare beneficiaries would not be required to pay 
cost-sharing or co-pays for language services provided under 
this demonstration.
    The Secretary would be required to conduct an evaluation of 
the demonstration program and submit a report to the 
appropriate committees of Congress not later than 1 year after 
the completion of the program. The report would include an 
analysis of the patient outcomes and costs of furnishing care 
to the LEP Medicare beneficiaries participating in the project 
compared to those not participating; the effect of delivering 
culturally and linguistically appropriate services on 
beneficiary access to care, utilization of services, efficiency 
and cost-effectiveness of health care delivery, patient 
satisfaction, and health outcomes; and recommendations 
regarding the extension of the project to the entire Medicare 
program.
    This provision would not limit existing obligations of 
recipients of federal financial assistance under title VI of 
the Civil Rights Act of 1964. An amount of $16 million would be 
authorized to be appropriated for each fiscal year of the 
demonstration program.
            Reason for Change
    Although certain recipients of federal funds are required 
to offer language services, Medicare does not reimburse for 
these services. Testing alternative methods of delivering 
culturally and linguistically appropriate services will enable 
Medicare to apply best practices and vastly improve both access 
to and quality of services to beneficiaries with limited 
English proficiency.
            Effective Date
    The demonstration would begin not later than 6 months after 
the completion study described in section 1221.

Sec. 1223. IOM report on Impact of Language Access Services

            Current Law
    No Provision.
            Proposed Law
    Under this provision, the Secretary of HHS would be 
required to enter into an arrangement with the Institute of 
Medicine (IOM) under which the IOM would prepare a report on 
the impact of language access services on the health and health 
care of limited English proficient populations. The report 
would be issued not later than 3 years after the date of the 
enactment of the Act.
    The report would include recommendations on the development 
and implementation of policies and practices by health care 
organizations and providers for limited English proficient 
patient populations, a description of the effect of providing 
language access services on quality of health care and access 
to care and reduced medical error, and a description of the 
costs associated with, or savings related to, the provision of 
language access services.

Sec. 1224. Definitions

            Current Law
    No provision.
            Proposed Law
    This provision provides the following definitions to be 
applied in sections 1221 through 1223.
    The term bilingual would mean a person who has a sufficient 
degree of proficiency in two languages and can ensure that 
effective communication can occur in both languages.
    The term competent interpreter services would be defined as 
a trans-language rendition of a spoken message in which the 
interpreter comprehends the source language and can speak 
comprehensively in the target language to convey the intended 
meaning. The interpreter would be required to know health and 
health-related terminology.
    The term competent translation services would mean a trans-
language rendition of a written document in which the 
translator comprehends the source language and can write 
comprehensively in the target language to convey the meaning 
intended in the source language. The translator would be 
required to know health and health-related terminology.
    The term effective communication would mean an exchange of 
information between the provider of health care or health care-
related services and the LEP recipient of such services that 
enables the LEP individual to access, understand, and benefit 
from health care or health care-related services.
    The terms interpreting/interpretation would be defined as 
the transmission of a spoken message from one language into 
another, faithfully, accurately, and objectively.
    The term health care services would mean services that 
address physical as well as mental health conditions in all 
care settings.
    The term health care-related services would be defined as 
human or social services programs or activities that provide 
access, referrals or links to health care.
    The term language access would mean the provision of 
language services to an LEP individual designed to enhance that 
individual's access to, understanding of or benefit from health 
care or health care-related services.
    The term language services would be defined as the 
provision of health care services directly in a non-English 
language, interpretation, translation, and non-English signage.
    The term limited English proficient (LEP) would be defined 
as an individual who speaks a primary language other than 
English and who cannot speak, read, write or understand the 
English language at a level that permits the individual to 
effectively communicate with clinical or nonclinical staff at 
an entity providing health care or health care-related 
services.
    The term Medicare beneficiary would mean an individual 
entitled to benefits under Medicare part A or enrolled in 
Medicare part B.
    The term Medicare program would mean the programs under 
parts A through D of title XVIII of the Social Security Act 
(SSA).
    The term service provider would be defined as all 
suppliers, providers of services, or entities under contract to 
provide coverage, items or services under any part of title 
XVIII of the SSA.
            Reason for Change
    To provide definitions for certain terms used in Subtitle 
B.

                 Subtitle C--Miscellaneous Improvements


Sec. 1231. Extension of Therapy Caps Exceptions Process

            Current Law
    Current law places two annual per beneficiary payment 
limits for all outpatient therapy services provided by non-
hospital providers. For 2009, the annual limit on the allowed 
amount for outpatient physical therapy and speech-language 
pathology combined is $1,840, and there is a separate limit for 
occupational therapy of $1,840. The Secretary was required to 
implement an exceptions process for 2006, 2007, and the first 
half of 2008 for cases in which the provision of additional 
therapy services was determined to be medically necessary. 
Section 141 of the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA, P.L. 110-275) extended the 
exceptions process for therapy caps through December 31, 2009.
            Proposed Law
    The proposal would extend the exceptions process for 
therapy caps for 2 years, through December 31, 2011.
            Reason for Change
    There is wide consensus that the therapy cap created in the 
Balanced Budget Act of 1997 is not good health policy, yet to 
permanently repeal the cap is a very costly proposition. 
Extending the exceptions process for two additional years will 
provide Congress with an opportunity to consider alternative 
options to the current process.
            Effective Date
    January 1, 2010.

Sec. 1232. Extended Months of Coverage of Immunosuppressive Drugs for 
        Kidney Transplant Patients and Other Renal Dialysis Provisions

            Current Law
    To be eligible for Medicare, one must be (1) 65 years or 
older and eligible to receive Social Security; or (2) under 65, 
permanently disabled, and have received Social Security 
disability insurance payments for at least 2 years; or (3) have 
Amyotrophic Lateral Sclerosis (ALS-Lou Gehrig's disease); or 
(4) have end-stage renal disease (ESRD).
    Coverage for beneficiaries with ESRD generally begins in 
the fourth month of dialysis treatments or the month of a 
kidney transplant. After receiving a kidney transplant, 
individuals are prescribed immunosuppressive drugs to reduce 
the risk of their immune system rejecting the new organ. These 
drugs generally need to be taken for the rest of the 
individual's life.
    Under Medicare Secondary Payer (MSP) rules, Medicare is 
prohibited from making payments for any item or service when 
payment has been made or can reasonably be expected to be made 
by a third party payer. For individuals with Medicare 
entitlement based solely on ESRD, MSP rules apply for those 
covered by an employer-sponsored group plan, regardless of the 
employer size or current employment status. Any group health 
plan coverage these beneficiaries receive through their 
employer or their spouse's employer is the primary payer for 
the first 30 months of ESRD benefit eligibility. After 30 
months, Medicare becomes the primary insurer.
    If a beneficiary already had Medicare because of age or 
disability before the onset of end-stage renal disease, or if 
an individual became eligible for Medicare because of age or 
disability after receiving a transplant paid for by Medicare, 
Medicare will continue to pay for immunosuppressive drugs with 
no time limit. However, if a beneficiary qualifies for Medicare 
only because of kidney failure, Medicare, together with 
coverage of the immunosuppressive drugs, ends 36 months after 
the month of the successful transplant. After that period, 
kidney recipients must pay for immunosuppressive drugs through 
private insurance, public or pharmaceutical programs, or pay 
out-of-pocket until they reach 65 and qualify for Medicare 
because of age.
    Individuals with ESRD are eligible for all Part B Services. 
Part B also covers their dialysis services, drugs, and 
biologicals, including erythropoiesis stimulating agents, 
diagnostic laboratory tests, and other items and services 
furnished to individuals for the treatment of ESRD.
    Dialysis services are offered in three outpatient settings: 
hospital-based facilities, independent facilities, and the 
patient's home. There are two methods for payment. Under Method 
I, facilities are paid a prospectively set amount, known as the 
composite rate, for each dialysis session, regardless of 
whether services are provided at a facility or in the patient's 
home. Beneficiaries electing home dialysis may choose not to be 
associated with a facility and may make independent 
arrangements with a supplier for equipment, supplies, and 
support services. Payment to these suppliers, known as Method 
II, is made on the basis of reasonable charges.
    The Medicare Improvements for Patients and Providers Act of 
2008 (MIPPA, P.L. 110-275) requires the Secretary to implement 
a bundled payment system, making a single payment for Medicare 
renal dialysis services, to be phased in over 4 years beginning 
January 1, 2011. The bundled payment will include (1) items and 
services included in the composite rate as of December 31, 
2010; (2) erythropoiesis stimulating agents for the treatment 
of ESRD; (3) injectable biologicals and medications that were 
paid for separately under Part B, (before bundling) and any 
oral equivalent to such medications; and (4) diagnostic 
laboratory tests and other items and services furnished to 
individuals for the treatment of ESRD. Dialysis facilities will 
have the opportunity to opt out of the phase-in and be paid 
under the new bundled system starting in 2011. The new law also 
creates a quality incentive payment program that ties payments 
to certain quality measures including anemia management, 
dialysis adequacy, patient satisfaction, and bone mineral 
metabolism.
            Proposed Law
    This provision would amend SSA title II (Old Age, Survivors 
and Disability Insurance) to (1) continue entitlement to 
prescription drugs used in immunosuppressive therapy furnished 
to an individual who receives a kidney transplant for which 
payment is made under Medicare, and (2) extend Medicare 
secondary payer requirements for ESRD beneficiaries.
    It would also amend title XVIII (Medicare) of SSA to apply 
special rules to kidney transplant recipients who receive 
additional coverage for immunosuppressive drugs whose 
eligibility for benefits would have ended on or after January 
1, 2012, except for the coverage of immunosuppressive drugs. 
Such individuals would be deemed to be enrolled under Medicare 
Part B and would be responsible for the full amount of the 
applicable premiums, deductibles, and co-insurance payments 
that are not covered under the Medicare savings program.
    The provision makes several changes to Medicare coverage 
for ESRD patients under Section 1881 of SSA. The provision 
specifies that oral drugs that are not the oral equivalent of 
an intravenous drug would be included in the drugs and 
biologicals provided as part of the renal dialysis services 
covered by Medicare. The provision also would allow providers 
of renal dialysis services to make an election with respect to 
2011, 2012, or 2013, prior to the first date of such year, to 
be excluded from the phase in of the prospective rate (or the 
remainder of the phase in) and be paid entirely based on the 
prospective rate. Additionally, the provision changes the 
performance standards of ESRD providers from the ``lesser of'' 
to the ``greater of'' the performance of such provider or 
facility or a performance standard based on the national 
performance rates for such measures in a period determined by 
the Secretary.
            Reason for Change
    Under current law, Medicare coverage for patients who have 
had a kidney transplant ends after 36 months, unless the 
patients are otherwise eligible for Medicare because of age or 
disability. The Committee believes this is a penny-wise, pound-
foolish policy. Patients who receive a kidney transplant must 
continue taking immunosuppressive drugs for the rest of their 
lives in order to avoid rejecting the new organ. However, when 
Medicare coverage ends, beneficiaries must find another way to 
pay for immunosuppressive drugs, which cost $5,000 to $13,000 
per year. A recent survey of professionals treating kidney 
transplant patients found that almost 90 percent of patients 
have difficulty paying for these drugs once Medicare coverage 
ends, and 65 percent fail to take their drugs as prescribed. 
Once a patient stops taking the drugs, his or her body will 
almost immediately reject the transplanted kidney and the 
patient will either need another kidney transplant or require 
dialysis treatments for the rest of his or her life. These are 
costs that would also be incurred by the Medicare program.
    A recent GAO study found that the Medicare cost for a 
beneficiary who has a failed transplant is five times greater 
per year ($50,938) than a patient with a functioning transplant 
($8,550). This cost, as well as quality of life for the 
patient, underscores the benefits to the Medicare program and 
kidney transplant patients from the extension of coverage of 
immunosuppressive drug coverage in this section.
    This section also includes a technical clarification that 
oral drugs furnished to individuals for treatment of ESRD are 
included in the bundled payment. This authority already exists 
under current law (see statement of Health Subcommittee 
Chairman Pete Stark in the Congressional Record on June 24, 
2008), however, clarification of existing authority ensures 
that clinical and financial decision-making for dialysis 
patients are aligned, so that providers put patients before 
profits; advances better adherence to drug regimens; lowers 
beneficiary cost-sharing; and is consistent with statements 
made by MedPAC.
    As stated by MedPAC in questions submitted for the record 
to the Committee on Ways and Means, providers otherwise will 
have a financial incentive to shift patients to Part D drugs 
even though that may not be in the clinical best interest of 
the patient. Beneficiaries would then be subject to a double-
payment, as they would have to pay coinsurance for the ESRD 
bundle and a second coinsurance for the drugs under Part D. 
Medicare would also be paying twice, once for drugs in the 
bundle and once for drugs under Part D. It is for this reason 
that CBO estimates savings for this provision: the Medicare 
program will successfully avoid a doublepayment. MedPAC also 
points out that including these oral drugs in the bundle may 
improve dialysis quality for patients by improving patient 
adherence to drug regimens.
    The Committee notes that some providers are concerned about 
their ability to provide these drugs. The Committee understands 
that the two large dialysis providers have in-house pharmacies, 
and thus dispensing these drugs is not a problem. Dialysis 
providers who do not have in-house pharmacies will already need 
to find a way to provide oral drugs since oral drugs that have 
IV equivalents are also in the bundle. They can do so by 
contracting out for pharmacy services, as they currently do for 
lab services. The original statute recognized the potential 
cost burden of this activity when it created a 10 percent 
adjustment for low-volume providers--the purpose of this 
adjustment is to help low-volume providers cover additional 
costs such as possible contracting out of services.
    This section also modifies the restriction around when 
facilities can decide to opt into receiving the bundled payment 
during the four years before it is fully implemented in 2014. 
Currently, facilities can only opt-in during the first year. 
The Committee believes that bundled payments encourage more 
efficient provision of care and will improve quality of care. 
To the extent that a provider decides after one year of phased-
in payments that they would like to opt fully into the bundle, 
there is no reason to stop them from doing so. Therefore, this 
section would permit all facilities to opt-in during any year 
of the four year phase-in. The Committee understands from the 
CMS Office of the Actuary that this change will lower the 
budget neutrality adjustment needed because of the phase-in, so 
any concerns about uncertainty in payment rates due to this 
change will only move in the direction of improving payment 
rates.
    The Committee believes that implementation of an ESRD 
bundle must be accompanied by a rigorous system of quality 
measurement and incentives in order to ensure patients receive 
appropriate levels of care. However, the Committee is concerned 
that the performance measure in the existing statute for the 
initial period for anemia management sets the bar so low that 
there is no requirement for facilities to improve performance. 
The Committee notes that by the time bundling is implemented, 
providers will have had several years to adjust practice 
patterns in response to FDA black box label changes that 
occurred in 2007 and 2008, and thus has strengthened the 
quality measurement in the initial period.
            Effective Date
    Subsection (a) is effective January 1, 2012. Subsection (b) 
is effective January 1, 2011.

Sec. 1233. Advance Care Planning Consultation

            Current Law
    Section 1866(f) of Title XVIII of the SSA requires certain 
institutional providers and prepaid plans that participate in 
Medicare to follow specified policies and procedures in regard 
to advance directives. Specifically, it requires states to 
develop written descriptions of relevant state law concerning 
advance directives that would be distributed by Medicare 
participating institutional providers or organizations. Current 
law also mandates that Medicare participating providers 
distribute information about advance directives according to 
the timing of certain medical or health-related events. 
Hospitals and nursing homes must provide this information to 
individuals at the time of admission; home health agencies must 
provide it in advance of the individual coming under the care 
of such agencies; hospice providers must provide this 
information at the time of the initial receipt of hospice care; 
and prepaid health plans must provide it to individuals upon 
enrollment. Medicare-certified providers that do not comply 
with these requirements may have payments withheld by the 
Secretary. Furthermore, state laws that allow for an objection 
on the basis of conscience for any health care provider or any 
agent of such provider which, as a matter of conscience, cannot 
implement an advance directive, shall supersede these 
requirements.
    The Medicare Improvements for Patients and Providers Act of 
2008 (MIPPA, P.L. 110-275) added ``end-of-life planning'' to 
the initial preventive physical exam that Medicare 
beneficiaries receive upon enrollment in Medicare. MIPPA also 
defines ``end-of-life planning'' to mean verbal or written 
information regarding: an individual's ability to prepare an 
advance directive in the case that an injury or illness causes 
the individual to be unable to make health care decisions; and 
whether or not the physician is willing to follow the 
individual's wishes as expressed in an advance directive.
    The Physician Quality Reporting Initiative (PQRI), the 
voluntary individual reporting program that provides an 
incentive payment to eligible professionals (EPs) who 
satisfactorily report data on quality measures for covered 
Medicare Physician Fee Schedule (PFS) services, was established 
by Section 1848(k)(1) of the SSA. PQRI requires eligible 
professionals to report on certain quality measures in order to 
receive an incentive payment equal to 2.0% of covered 
professional services. The payment incentives were established 
by Section 1848(m)(1)(A) and (B) of the SSA. Participation in 
PQRI is voluntary. The PQRI program is not specific to end-of-
life care, but it does include several geriatrics measures, 
including one measure which specifically addresses advance care 
plans. This measure aims to assess whether a patient has an 
advance care plan or surrogate decision maker documented in 
their medical record.
    CMS was mandated by the Balanced Budget Act of 1997 (P.L. 
105-33) to develop and organize activities to educate 
beneficiaries about the Medicare program. Specifically, the Act 
mandated that CMS establish a toll-free helpline, mail written 
information to beneficiaries on Medicare and their options to 
enroll in private plans, create a Medicare website, and support 
a community outreach program to help beneficiaries and their 
caregivers make informed health care decisions. CMS conducts 
these activities as part of its National Medicare and You 
Education Program (NMEP). The Medicare & You Handbook is one 
component of the agency's NMEP program.
    The Handbook, which is produced in English and Spanish, is 
updated on an annual basis and mailed to beneficiaries every 
Fall. Handbooks are mailed monthly to newly eligible 
beneficiaries.
            Proposed Law
    The provision would amend Section 1861 of Title XVIII of 
the SSA under Medicare to add new language concerning an 
advance care planning consultation and add a new subsection 
describing these consultations. It would amend Section 
1848(j)(3) to provide payment to physicians for an advance care 
planning consultation under Medicare. The provision would also 
expand the physician quality reporting initiative for end-of-
life care. The Medicare & You Handbook would be updated to 
include an explanation of various end-of-life care planning 
terms and resources.
    The term ``advance care planning consultation'' would mean 
a consultation between the individual and an individual's 
physician, nurse practitioner or physician assistant as 
specified regarding advance care planning if the individual 
involved has not had such consultation within the last 5 years. 
Medicare's initial preventative physical examination would not 
be considered an advance care planning consultation for 
purposes of applying the 5-year limitation. Such consultation 
would be authorized to be conducted more frequently if there is 
a significant change in an individual's health.
    Such a consultation would be required to include an 
explanation by the practitioner of advance care planning; 
advance directives and their uses; role and responsibilities of 
a health care proxy; the continuum of end-of-life care services 
and supports available and Medicare benefits that are 
available. Practitioners would be required to provide a list of 
national and State-specific resources to assist consumers and 
their families with advance care planning. The advance care 
planning consultation would also be required to include an 
explanation of orders regarding life sustaining treatment or 
similar orders as specified. The Secretary would be required to 
limit this requirement to consultations furnished in a State in 
which all legal barriers for such orders have been addressed 
and that has a program in effect as specified. Such 
consultation is authorized to include the formulation of an 
order regarding life-sustaining treatment or similar order.
    The term ``order regarding life sustaining treatment'' 
would mean, with respect to an individual, an actionable 
medical order relating to the treatment of that individual that 
(1) is signed and dated by a physician or another health care 
professional as specified and is in a form that permits it to 
stay with the individual and be followed by health care 
professionals and providers across the continuum of care; (2) 
effectively communicates the individual's preferences regarding 
life sustaining treatment; (3) is uniquely identifiable and 
standardized within a given locality, region, or State (as 
identified by the Secretary); and (4) may incorporate any 
advance directive if executed by the individual.
    The level of life treatment indicated may range from an 
indication for full treatment to an indication to limit some or 
all or specified interventions. Such indicated levels of 
treatment may include indications respecting, among other items 
(1) the intensity of medical intervention if the patient is 
pulseless, apneic, or has serious cardiac or pulmonary 
problems; (2) the individual's desire regarding transfer to a 
hospital or remaining at the current care setting; (3) the use 
of antibiotics; and (4) the use of artificially administered 
nutrition and hydration.
    The provision would modify Section 1848(j)(3) of the SSA 
(concerning definitions for physicians' services) to include 
Medicare payment for physicians' services with respect to an 
advance care planning consultation. It would amend Section 
1862(a)(1) of the SSA (concerning exclusions from coverage and 
Medicare as secondary payer) to add that no Medicare payment 
would be authorized for expenses incurred in the case of an 
advance care planning consultation which is performed more 
frequently than covered under such section. It would also amend 
Section 1862(a)(7) to include an advance care planning 
consultation as an otherwise allowable expense, among the list 
of certain expenses excluded from coverage. The amendments 
would apply to advance care planning consultations furnished on 
or after January 1, 2011.
    The provision would amend Section 1848(k)(2) of the SSA to 
add new language that would require the Secretary, for the 
purposes of reporting data on quality measures for covered 
professional services furnished during 2011 and any subsequent 
year, to include quality measures on end of life care and 
advanced care planning that have been adopted or endorsed by a 
consensus-based organization, if available and appropriate. 
Such measures would be required to measure both creation and 
adherence to orders for life-sustaining treatment. The 
Secretary would be required to publish these proposed measures 
in the Federal Register and provide for a period of public 
comment before finalization.
    No later than 1 year after the date of enactment, the 
Secretary would be required to update the online version of the 
Medicare & You Handbook to include an explanation of advance 
care planning and advance directives, including living wills, 
durable power of attorney, orders of life-sustaining treatment, 
and health care proxies. It would also be updated to include a 
description of Federal and State resources available to assist 
individuals and their families with advance care planning and 
advance directives, including available State legal service 
organizations to assist individuals with advance care planning, 
including those organizations that receive funding pursuant to 
the Older Americans Act of 1965; website links or addresses for 
State-specific advance directive forms; and any additional 
information, as determined by the Secretary. The Secretary 
would also be required to include the above information in all 
paper and electronic versions of the Medicare & You Handbook 
that are published on or after the date that is 1 year after 
the date of enactment.
            Reason for Change
    It is vitally important that physicians provide patient-
centered care that follows the express wishes of each patient. 
Unfortunately, in some circumstances patient preferences may 
not be known by the treating physician and the patient is 
unable to express his or her wishes to that physician. 
Moreover, patients are often unaware of the different treatment 
options available in the event they need life sustaining 
treatment.
    Adding advanced care planning consultation to the list of 
Medicare covered services will help address those problems. 
These consultations are designed to assist patients to make 
informed decisions about the full range of life sustaining 
treatment options available and ensure that treating physicians 
are fully aware of patients' wishes. The provision does not 
require any beneficiary to receive such consultations and does 
not prescribe or restrict the advanced care treatment options 
available to any beneficiary.
    Adding quality measures on advance care planning to 
Medicare's quality reporting initiatives will provide important 
data about the use of such counseling. Adding information about 
advance care planning, living wills and advance directives to 
the Medicare & You Handbook will support efforts to ensure that 
patient wishes are followed regarding life sustaining 
treatment.
            Effective Date
    January 1, 2011, for advance care planning consultations 
and reporting data; one year after date of enactment for 
changes to Medicare & You Handbook.

Sec. 1234. Part B Special Enrollment Period and Waiver of Limited 
        Enrollment Penalty for TRICARE Beneficiaries

            Current Law
    TRICARE beneficiaries who are eligible for Medicare Part A 
must accept and pay for voluntary Medicare Part B in order to 
retain their TRICARE Coverage. Medicare functions as the 
primary payer and TRICARE serves as a supplement. This 
requirement is the result of many changes in the law the last 
of which came in the National Defense Authorization Act of 2001 
(P.L. 106-386) which created the TRICARE for Life program. With 
the establishment of TRICARE for Life and the concomitant need 
to enroll in Medicare Part B, there became concern about 
coordination between the two programs and the potential for 
penalties for late enrollment in Part B. To address this 
concern, section 625 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173) 
waived the Part B enrollment penalty for eligible retirees who 
enrolled in Part B prior to December 31, 2004.
            Explanation of Provision
    This provision creates a special 12 month enrollment period 
in which military retirees who are eligible for Medicare by 
reason of disability or End Stage Renal Disease (ESRD) who have 
not yet enrolled in Medicare Part B can enroll in Part B, thus 
becoming eligible for TRICARE for Life, without incurring a 
Medicare late enrollment penalty. The provision would apply to 
elections made on or after the date of enactment of the Act.
    This provision would also require the Secretary of HHS to 
establish a method for providing rebates for late enrollment 
penalties that were charged to certain disabled and End Stage 
Renal Disease (ESRD) beneficiaries who enrolled during or after 
January 2005 and before the month of enactment of this Act.
            Reason for Change
    When beneficiaries refuse Medicare Part B coverage, they 
are quickly disenrolled from Medicare and TRICARE and are left 
without any insurance coverage except for Medicare Part A 
Hospital coverage. Often, beneficiaries refuse Medicare Part B 
without proper knowledge and understanding of the consequences 
and only realize that they do not have comprehensive health 
insurance when they present at the doctor's office. Once 
beneficiaries have refused their Part B coverage, they must 
wait many months until the next Medicare general enrollment 
period to reenroll. This issue has become a particular concern 
for the severely disabled population who refuse Medicare Part B 
after receiving Medicare coverage retroactively because of a 
delayed disability determination. The provision is designed to 
provide a permanent grace period and allow certain service 
members to quickly reenroll in Medicare without penalty after 
initially refusing Part B to ensure that they have access to 
the vital medical services that they need.
            Effective Date
    The special enrollment period and waiver of penalty will be 
effective for elections made on or after the date of enactment 
of this Act.

Sec. 1235. Exception for Use of More Recent Tax Year in Case of Gains 
        From Sale of Primary Residence in Computing Part B Income-
        Related Premium

            Current Law
    Physician and outpatient services provided under Part B are 
financed through a combination of beneficiary premiums, 
deductibles, and federal general revenues. In general, Part B 
beneficiary premiums equal 25% of estimated program costs for 
the aged, with federal general revenues accounting for the 
remaining 75%. Beginning in 2007, Part B premiums are income 
related, requiring higher-income enrollees to pay a higher 
percentage of Part B costs. Beneficiaries experiencing major 
life events may apply to use a more recent tax year for 
determination of the income-related premium. Beginning in 2007, 
higher-income enrollees pay a higher percentage of Part B 
costs.
            Proposed Law
    This provision treats the sale of a primary residence as a 
major life event for purposes of qualifying for the use of a 
more recent tax year. This modification would apply to premiums 
and payments for years beginning with 2011.
            Reason for Change
    The Committee is aware of situations where Medicare 
beneficiaries are subject to the income related Part B premium 
due to a capital gain from the sale of a primary residence. 
These gains may be incurred after owning the home for several 
decades, and regardless of whether the beneficiary puts the 
proceeds into an annuity that pays them a monthly amount. This 
provision appropriately recognizes that sale of a primary 
residence should be treated as a major life changing event for 
purposes of determining whether a beneficiary is subject to the 
income related premium.
            Effective Date
    October 1, 2011.

Sec. 1236. Demonstration Program on Use of Patient Decisions Aids

            Current Law
    Current law does not explicitly address patient decision 
aids, which are information tools to help patients understand 
health care options, and make informed choices that take into 
account their lifestyle, preferences, and beliefs. A related 
concept is shared decision making (referred to by many other 
names as well), meaning the cooperation of providers and 
patients in making health care decisions.
    Section 646 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA, P.L. 108-173) requires the 
Secretary to carry out a Medicare quality demonstration 
program, which would, among other things, encourage shared 
decision making. Eligible entities include physician groups, 
integrated health systems, or regional coalitions of the same. 
Projects approved under this demonstration are expected to 
achieve significant improvements in safety, effectiveness, 
efficiency, patient-centeredness (i.e., shared decision 
making), timeliness, and equity, the six aims for quality 
improvement identified by the Institute of Medicine. Two 
demonstrations have been approved and will begin in 2009. Two 
others are in the final review process.
    In addition, under their general authorities, the Agency 
for Healthcare Research and Quality (AHRQ) and Centers for 
Disease Control and Prevention (CDC) conduct research on the 
application and use of shared decision making, including the 
use of patient decision aids.
            Proposed Law
    This section would require the Secretary to conduct a 
Medicare demonstration program to determine if using patient 
decision aids would improve beneficiaries' understanding of 
their medical treatment options. The program would enroll not 
more than 30 eligible providers, with preference given to 
providers that have documented experience in using patient 
decision aids, and that have the necessary information 
technology infrastructure. Eligible providers would be required 
to provide follow-up counseling visits after beneficiaries have 
viewed decision aids, to address questions about subsequent 
medical care and the beneficiary's preferences. The Secretary 
would have to provide for the development of a code(s) and 
reimbursement amounts for the follow-up counseling. Eligible 
providers would be responsible for the costs of selecting, 
purchasing, and delivering patient decision aids, and reporting 
data on quality and outcome measures.
    To carry out the program, the Secretary would be required 
to use funds from the Federal Supplementary Medical Insurance 
Trust Fund, and would be authorized to waive requirements under 
SSA Titles XI (general and administrative provisions) and XVIII 
(Medicare). Within 12 months of program completion, the 
Secretary would be required to report to Congress regarding the 
effects of the program on health quality, utilization of health 
care services, and quality of life; and any recommendations for 
legislation and administrative action.
    Eligible providers would be: (A) a primary care practice; 
(B) a specialty practice; (C) a multispecialty group practice; 
(D) a hospital; (E) a rural health clinic; (F) a Federally 
Qualified Health Center; (G) an integrated delivery system; 
[or] (H) a State cooperative entity that includes the State 
government and at least one other health care provider which is 
set up for the purpose of testing shared decision making and 
patient decision aids. The provision would define ``patient 
decision aid'' to mean ``an educational tool (such as the 
Internet, a video, or a pamphlet) that helps patients (or, if 
appropriate, the family caregiver of the patient) understand 
and communicate their beliefs and preferences related to their 
treatment options, and to decide with their health care 
provider what treatments are best for them based on their 
treatment options, scientific evidence, circumstances, beliefs, 
and preferences;'' and ``shared decision making'' to mean ``a 
collaborative process between patient and clinician that 
engages the patient in decision making, provides patients with 
information about trade-offs among treatment options, and 
facilitates the incorporation of patient preferences and values 
into the medical plan.''
            Reason for Change
    Studies have suggested that quality of care is improved and 
costs can be reduced when patients facing medical procedures 
use decision aids such as pamphlets and videos to receive 
information about treatment options available. The 
demonstration program under this section would test this 
approach within the Medicare population, with an emphasis on 
physician follow-up visits to discuss information disseminated 
by such decision aids.
            Effective Date
    Date of enactment.

     Title III--Promoting Primary Care, Mental Health Services and 
                           Coordinating Care


Sec. 1301. Accountable Care Organization Pilot Program

            Current Law
    No current provision. In April 2005, the Centers for 
Medicare and Medicaid Services initiated the Physician Group 
Practice demonstration, which offers 10 large practices the 
opportunity to earn performance payments for improving the 
quality and cost-efficiency of health care delivered to 
Medicare fee-for-service beneficiaries.
            Proposed Law
    A new section 1866D would be added to the Social Security 
Act (SSA) to establish the accountable care organization pilot 
program. The Secretary would conduct a pilot program to test 
different payment incentive models intended to reduce 
Medicare's expenditure growth and improve health outcomes. The 
pilot would promote accountability for services provided to a 
Medicare patient population, coordinate Medicare's part A and B 
items and services, encourage investment in infrastructure and 
the redesign of care processes, and reward high quality, 
efficient physician practices.
    A qualifying accountable care organization (qualifying ACO) 
would be a group of physicians or other physician 
organizational model which is organized, at least in part, for 
the purpose of providing physician services and meet other 
specified standards. A qualifying ACO could include other 
practitioners such as nurse practitioners or physician 
assistants, a hospital or multiple hospitals or any other 
provider or supplier (furnishing Medicare covered services) 
that is affiliated with the ACO under an arrangement structured 
to coordinate care. A physician would include any individual 
who furnishes services for which payment may be made as 
physicians' services except as otherwise determined by the 
Secretary. With respect to a qualifying ACO, other physician 
organizational model would mean any model of organization under 
which physicians enter into agreements with other providers for 
the purposes of participation in the pilot program in order to 
provide high quality, efficient health care services and share 
in the program's incentive payments. No requirements under this 
section would prevent a qualifying ACO from furnishing items or 
services for which Medicare payment is not made in order to 
achieve performance goals under the pilot program.
    A qualifying ACO would meet the following requirements: (1) 
have a legal structure that would allow the group to receive 
and distribute incentive payments; (2) include a sufficient 
number of primary care physicians regardless of specialty for 
the applicable beneficiaries for whose care the group is 
accountable (as determined by the Secretary); (3) report on 
required quality measures in the specified form, manner, and 
frequency; (4) report required data to monitor and evaluate the 
pilot program; (5) provide notice to applicable beneficiaries 
regarding the pilot program; (6) contribute to a best practices 
network or website to share strategies on quality improvement, 
care coordination, and efficiency; (7) utilize patient-centered 
processes of care, and (8) meet other criteria determined to be 
appropriate by the Secretary.
    Specific payment incentive models to be tested include: a 
performance target model, a partial capitation model, and other 
payment models.
    Under the performance target model, a qualifying ACO would 
receive an incentive payment if expenditures for applicable 
beneficiaries are less than a target spending level or a target 
rate of growth. The incentive payment would be made only if 
savings are greater than would result from normal variation in 
Medicare expenditures for Part A and B items and services. In 
general the Secretary would establish a base amount increased 
to the current year by an adjustment factor. The target may be 
established on a per capita basis. The base amount would equal 
the average total payments (or allowed charges) under parts A 
and B for applicable beneficiaries for whom the qualifying ACO 
furnishes items and services. The base amount may include 
Medicare Part D services if deemed appropriate. The adjustment 
factor would equal an annual per capita amount that reflects 
changes in expenditures from the base period to the current 
year. The factor could be determined as an amount or rate, 
determined on a national, regional, local or organization-
specific basis, and may be determined on a per capita basis. It 
could also include an risk adjustment factor as determined by 
the Secretary. The base amount would be periodically 
recalculated.
    A qualifying ACO that meets or exceeds annual quality and 
performance targets for a year would receive an incentive 
payment equal to an appropriate portion of the amount by which 
Medicare payments are estimated to be below the performance 
target. The Secretary could establish a cap on incentive 
payments for a year for a qualifying ACO. Incentive payments to 
qualifying ACOs would be limited to ensure that the aggregate 
expenditures do not exceed the amount that the Secretary 
estimates would be expended for such ACO for such beneficiaries 
if the pilot program were not implemented.
    The Secretary would be able to incorporate reporting 
requirements, incentive payments, and penalties related to the 
physician quality reporting initiative (PQRI), electronic 
prescribing, electronic health records, and other similar 
physician payment initiatives under section 1848 of the SSA. 
Alternative criteria than would otherwise apply could be used 
when determining whether to make these payments so as to 
streamline administration of the overlapping monitoring and 
reporting requirements for ACOs and fee-for-service Medicare. 
Also, these incentive payments would not be included in the 
aggregate expenditure test described previously or in the 
performance target model.
    Under the partial capitation model, a qualifying ACO would 
be at financial risk for some, but not all, of the part A and B 
items and services. The Secretary would be able to limit a 
partial capitation model to ACOs that are highly integrated 
systems of care and to ACOs capable of bearing risk. Payments 
under the partial capitation model would be established in a 
manner that does not result in spending more for such ACO for 
such beneficiaries than would otherwise be expended if the 
pilot were not implemented. Partial capitation would not 
constrain beneficiaries' to seeing any particular provider; 
beneficiaries would retain the ability to choose their doctor 
or practitioner and could leave the ACO at any time.
    The Secretary may develop other payment models that meet 
the goals of this pilot program to improve quality and 
efficiency. Payments under these models would be established in 
a manner that does not result in spending more for such ACO for 
such beneficiaries than would otherwise be expended if the 
pilot were not implemented.
    An applicable beneficiary would be an individual who is 
enrolled under Part B and entitled to Part A benefits; is not 
enrolled in a Medicare Advantage plan under Part C or a PACE 
program under Section 1894 of the SSA; and meets other 
appropriate criteria.
    The Secretary would monitor data on Medicare expenditures 
and quality of services after an applicable beneficiary 
discontinues receiving services through a qualifying ACO.
    The pilot program would begin no later than January 1, 
2012. An agreement with a qualifying ACO under this pilot would 
cover a multi-year period of between 3 and 5 years. The 
Secretary would be able to waive Medicare provisions and the 
general provisions established under Title XI of the SSA as 
necessary.
    The Secretary would be required to report performance 
results to qualifying ACOs under the pilot program at least 
annually. There would be no administrative or judicial review 
of the (1) elements, parameters, scope, and duration of the 
pilot program; (2) the selection of qualifying ACOs for the 
pilot program; (3) the establishment of targets, measurement of 
performance, determinations with respect to whether savings 
have been achieved and the amount of savings; (4) 
determinations regarding whether, to whom, and in what amounts 
incentive payments are paid; and (5) decisions about the 
extension of the program with successful ACOs, expansion of the 
program to additional ACOs or transitional extension of the 
existing physician group practice demonstration project.
    Also, Chapter 35 of Title 44 of the United States Code 
(concerning the coordination of Federal information policy) 
would not apply to this pilot.
    The Secretary would evaluate the payment incentive model 
for each qualifying ACO to assess the pilot's impact on 
beneficiaries, providers of services, suppliers and the 
program. The evaluation would be publicly available within 60 
days of the date of completion of such report.
    The OIG would be responsible for monitoring of the 
operation of ACOs under the pilot program with regard to 
violations of the Stark self referral prohibition (Section 1877 
of the SSA).
    No later than 2 years after the date the first pilot 
agreement is established, and every 2 years thereafter for 6 
years, the Secretary would report to Congress on the use of 
authorities under the pilot program and its impact on 
expenditures, access, and quality. Subject to monitoring of the 
qualifying ACO, the Secretary would be able to extend the 
duration of the agreement if (1) the ACO receives incentive 
payments with respect to any of the first 4 years of the pilot 
agreement and is consistently meeting quality standards or (2) 
the ACO is consistently exceeding quality standards and is not 
increasing spending under the program. The Secretary would be 
able to terminate an agreement if the ACO did not receive 
incentive payments or consistently failed to meet quality 
standards in any of the first 3 years under the program.
    Subject to the evaluation of the pilot, the Secretary would 
be able to enter into agreements with additional qualifying 
ACOs to further test and refine payment incentive models. The 
Secretary would be able issue regulations to implement on a 
permanent basis 1 or more models of the pilot program that are 
beneficial to Medicare. However, to do so, the Chief Actuary of 
the CMS would be required to certify that the expansion of the 
program's components would result in estimated spending that 
would be less than what spending would otherwise be estimated 
to be in the absence of such expansion.
    The Secretary would be able to enter into an agreement with 
an organization participating in the physician group practice 
demonstration as a qualifying ACO. Participation as a 
qualifying ACO would be subject to rebasing and other 
appropriate modifications, until the pilot program under this 
section is operational.
    The Secretary would be able to create separate incentive 
arrangements (including using multiple years of data, varying 
thresholds, varying shared savings amounts, and varying shared 
savings limits) for different categories of qualifying ACOs to 
reflect natural variations in data availability, variation in 
average annual attributable expenditures, program integrity, 
and other matters the Secretary deems appropriate.
    The Secretary would be able to limit a qualifying ACO's 
exposure to high cost patients in order to encourage the 
participation of smaller accountable care organizations in the 
pilot.
    Nothing in this section would be construed as preventing 
qualifying ACOs participating in the pilot program from 
negotiating similar contracts with private payers. The 
Secretary would not be able to enter into an agreement with an 
entity to provide health care items or services under the pilot 
program, or with an entity to administer the program, unless 
such entity guarantees that it will not deny, limit, or 
condition the coverage or provision of benefits under the 
program, for individuals eligible to be enrolled under such 
program, based on any health status-related factor described in 
section 2702(a)(1) of the Public Health Service Act, including 
health status, medical condition, claims experience, receipt of 
health care, medical history, genetic information, evidence of 
insurability and disability.
    Nothing in this section would be construed to compel an 
organization to use an organization-specific target growth rate 
for an accountable care organization under this section for 
purposes of Medicare's physician fee schedule established under 
section 1848 of the SSA.
    The program management account of CMS would be appropriated 
$25 million for FY2010 through FY2014 and $20 million in 
FY2015. The funds would be in addition to those otherwise 
appropriated and would be for the purposes of administering and 
carrying out the pilot program, but not for payments for 
Medicare covered items and services or for incentive payments.
            Reason for Change
    The Physician Group Practice (PGP) demonstration program 
has shown promise in incentivizing physicians and other 
providers to reduce health care costs and improve quality. The 
ACO pilot program will build on progress that has been made to 
date in the PGP demonstration and gives CMS a flexible platform 
on which to continue to test, adjust and expand the shared 
savings concept.
    Witnesses testified at an April hearing before the 
Committee that Medicare would be well served by rewarding 
providers who provide coordinated, efficient, high quality care 
by using the Accountable Care Organization shared savings 
model. Witnesses advised that by sharing a portion of spending 
reductions realized through efficient delivery of quality care, 
Medicare could move from simply paying physicians for the 
volume of care they provide toward paying for the value of care 
delivered. They expressed confidence that widespread use of 
ACOs, as facilitated by Medicare, would greatly improve the way 
care is organized and delivered throughout much of the health 
care system.
    The ACO pilot program is designed to be flexible enough 
that a variety of physicians and other providers can 
participate. Many large, multispecialty group practices are 
well positioned to participate in the pilot program since most 
already provide integrated, coordinated care for their 
patients. The ACO pilot will recognize and reward efforts 
already underway by such groups, often in conjunction with 
hospitals, to provide efficient, high quality care. It will 
also allow providers to be rewarded for using advances in 
health information technology such as electronic medical 
records, telemedicine, and home monitoring equipment in ways 
that improve patient care. The Secretary should allow for the 
use of such technologies in order to facilitate coordinated, 
patient-centered care.
    The Committee also recognizes that the majority of doctors 
in this country care for patients in practices of fewer than 10 
physicians. The pilot is designed to allow physicians in small- 
and mid-sized practices to form an ACO without disrupting care 
for their patients. By joining together in ACOs, it is the 
Committee's hope that physicians in independent practices will 
better coordinate care and reduce the amount of duplicative 
care that is sometimes provided under the current payment 
system. The Committee recognizes that smaller practices face 
unique challenges in forming and sustaining ACOs, and urges the 
Secretary to use authority granted under the legislation to 
mitigate such challenges.
    It is also the intent of the Committee that the Secretary 
should exercise flexibility in entering into participation 
agreements with a variety of ACO models to maximize the 
potential for innovation. The Committee believes that 
physicians, regardless of specialty, who play a central role in 
managing the care of their patient populations, and who are 
willing and able to be held accountable for the overall quality 
and costs of care for their patients across all care settings, 
should be allowed to form ACOs.
    For example, the Secretary could permit the formation of 
ACOs that are principally composed of primary care physicians 
whose specialties are oncology, cardiology, nephrology, or 
other specialties that serve beneficiaries being treated for 
chronic conditions; physicians in the ACO would be held 
accountable for the overall quality and costs of care for 
beneficiaries, including care not directly related to the 
beneficiaries' principle diagnoses. The legislation also allows 
for physicians who are employed or otherwise affiliated with 
hospitals to form ACOs, as long as such physicians can be held 
accountable for the preponderance of care furnished to a given 
patient population. The availability of such organizational 
models is especially important in regions where a large portion 
of physicians are employed by hospitals.
    In addition to sharing savings that accrue to the Medicare 
program, physicians who participate in ACOs could have their 
own set of spending targets under the reformed physician 
payment update system in section 1121 of the legislation. This 
option is intended to give physicians an additional reason to 
form and join ACOs, and give providers within each ACO even 
more incentive to provide efficient, high-value care. 
Physicians who do so are likely to receive payments under the 
shared savings program and see regular positive updates to 
payment rates for physician services. It is the Committee's 
belief that this ``virtuous cycle'' has great potential to 
reduce the rate of spending growth in the Medicare program and 
result in better care for Medicare beneficiaries.
    The Committee is aware that concerns have been raised about 
the possibility that providers in ACOs will attempt to meet the 
savings targets by selecting against beneficiaries that are 
more likely to require expensive care or under-provide needed 
care. No evidence of this behavior has been observed under the 
PGP demonstration, and the legislation calls for the use of 
risk adjusted spending targets and rigorous use of quality 
measures to mitigate such problems. Nevertheless, the Committee 
expects that the Secretary will take all appropriate steps to 
ensure that providers do not engage in activities that are 
contrary to the interest of Medicare beneficiaries. It is 
important to emphasize that providers are not required to take 
part in the ACO pilot program and providers who do participate 
must notify their patients.

Sec. 1302. Medical Home Pilot Program

            Current Law
    The Tax Relief and Health Care Act of 2006 (P.L. 109-432), 
as modified by the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA), requires the Secretary to 
establish a three-year demonstration in up to eight states with 
urban, rural and underserved areas, to redesign the health care 
delivery system to provide targeted, accessible, continuous, 
and coordinated family-centered care to high need Medicare 
populations with chronic or prolonged illnesses requiring 
regular medical monitoring, advising or treatment.
            Proposed Law
    A new section 1866E would be added to the SSA to establish 
the medical home pilot program for the purpose of evaluating 
the feasibility and advisability of reimbursing qualified 
patient-centered medical homes for furnishing medical home 
services to high need beneficiaries in urban, rural, and 
underserved areas. New subsection 1866E(a) would require the 
Secretary to establish pilot programs to evaluate two medical 
home models: (1) the independent patient-centered medical home 
model; and (2) the community-based medical home model.
    Subsection (b) of the new section would establish the 
following definitions. ``Patient-centered medical home 
services'' would be those services that (1) provide 
beneficiaries with direct, ongoing access to primary care or 
principal care provided by a physician or nurse practitioner; 
(2) coordinate the care provided to a beneficiary by a team of 
individuals at the practice level across office, institutional 
and home settings; (3) provide for all the patient's health 
care needs or take responsibility for appropriately arranging 
care with other qualified providers; (4) provide continuous 
access to care and communication with participating 
beneficiaries; (5) provide support for patient self-management, 
proactive and regular patient monitoring, support for family 
caregivers, and coordination with community resources; (6) 
integrate readily accessible, clinically useful information 
into the care plans for participating patients; and (7) 
implement evidence-based guidelines, applying them to the 
identified needs of beneficiaries over time and with the 
intensity needed by such beneficiaries. ``Primary care'' would 
mean health care that is provided by a physician, nurse 
practitioner, or physician assistant who practices in the field 
of family medicine, general internal medicine, geriatric 
medicine, or pediatric medicine. ``Principal care'' would mean 
integrated, accessible health care provided by a physician who 
is a medical subspecialist that addresses the majority of the 
personal health care needs of patients with chronic conditions, 
and for whom the subspecialist assumes care management.
    Subsection (c) of the new section establishes requirements 
for the independent patient-centered medical home pilot 
program. Under this program, the Secretary would be required to 
make payments for medical home services provided to targeted 
high need beneficiaries. An independent patient-centered 
medical home would be a physician-directed or nurse-
practitioner-directed practice that is qualified to provide 
beneficiaries with patient-centered medical home services, and 
meets such other requirements as the Secretary may specify. A 
targeted high need beneficiary would be defined as a 
beneficiary who, based on a chronic disease risk score as 
specified by the Secretary, is generally within the upper 50th 
percentile of Medicare beneficiaries.
    The Secretary would be required to determine an appropriate 
method to ensure that beneficiaries in the independent patient-
centered medical home pilot program have agreed to participate. 
The program would have to begin within 6 months of enactment. 
The Secretary would be required to review alternative models 
for standard setting and qualification, and to establish a 
process to develop standards (1) to enable medical practices to 
qualify as patient-centered medical homes; and (2) to provide 
for the review and certification of medical practices as 
meeting such standards.
    The Secretary would be required to establish a methodology 
for payment of services provided by independent patient-
centered medical homes, and to adjust payments based on 
beneficiary risk scores to ensure that higher payments are made 
for higher risk beneficiaries. Moreover, the Secretary would be 
required to pay independent patient-centered medical homes a 
monthly fee, paid prospectively, for each targeted high need 
beneficiary who consents to receive services. In setting the 
fee amount, the Secretary would be required to: (1) consider 
the clinical work and practice expenses involved in providing 
the service (including services not currently reimbursable 
under Medicare, such as care coordination, population disease 
management, and teaching self-care skills); (2) allow for 
differential monthly payments, depending on the capabilities of 
the independent patient-centered medical home; and (3) use 
appropriate risk-adjustment methods to ensure that higher 
payments are made for higher risk beneficiaries.
    The independent patient-centered medical home pilot program 
would have to be designed to include the participation of 
physicians in practices with fewer than 10 full-time equivalent 
physicians, as well as physicians in larger practices, 
particularly in underserved and rural areas, as well as 
federally qualified community health centers, and rural health 
centers. A physician in a group practice that participates in 
the Accountable Care Organization pilot program established in 
section 1866D of the SSA would not be eligible to participate 
in this pilot program, unless this program is ultimately made 
permanent.
    Subsection (d) of the new section would establish 
requirements for the community-based medical home (CBMH) model 
pilot program. Under this program, the Secretary would be 
required to make payments to a CBMH for providing medical home 
services to a high need beneficiary. A CBMH would mean an 
appropriately qualified nonprofit community-based or State-
based organization that provides beneficiaries with medical 
home services under the supervision of and in close 
collaboration with the primary care or principal care 
physician, nurse practitioner or physician assistant designated 
by the beneficiary as his or her CBMH provider. A CBMH would 
employ community health workers, including nurses or other non-
physician practitioners, lay health workers, or other 
appropriate persons (as determined by the Secretary) that 
assist the primary or principal care physician or nurse 
practitioner in chronic care management activities, such as 
teaching self-care skills for managing chronic illnesses, 
transitional care services, care plan setting, medication 
therapy management services for patients with multiple chronic 
conditions; or that help beneficiaries access health care or 
community-based services in their area. A CBMH would also have 
to meet other requirements as the Secretary may specify. In 
this section, the term ``high need beneficiary'' means an 
individual who requires regular medical monitoring, advising, 
or treatment.
    The Secretary would be required to establish a process: (1) 
to determine the necessary qualifications for community-based 
or State-based organizations to function as CBMHs; and (2) to 
provide for the review and assessment of these qualifications 
pursuant to criteria to be established by the Secretary.
    The Secretary would be required to start CBMH pilot program 
within 2 years of enactment. Demonstration sites under the 
pilot program would operate for up to 5 years after the initial 
implementation phase. In selecting sites, the Secretary would 
be authorized to give preference to (1) applications from 
geographic areas that propose to coordinate health care 
services for chronically ill beneficiaries across a variety of 
health care settings, practices with fewer than 10 physicians, 
rural health clinics, and federally qualified health centers; 
(2) payors that provide medical homes for chronically ill 
patients; or (3) States that propose to use the medical home 
model to coordinate health care services for individuals with 
chronic diseases who are enrolled under Medicare, Medicaid, or 
fully dual-eligible for Medicare and Medicaid, across a variety 
of health care settings.
    The Secretary would be required to establish a methodology 
for payment for medical home services furnished under the CBMH 
model, to include two separate prospective monthly payments for 
each high need beneficiary: one to a community-based or State-
based organization, and one to the primary or principal care 
practice. In determining the amount of the payment, the 
Secretary would be required to consider the clinical work and 
practice expenses involved in providing the service (including 
services not currently reimbursable under Medicare, such as 
care coordination, population disease management, and teaching 
self-care skills); and to use appropriate risk-adjustment. The 
Secretary would be authorized to provide initial implementation 
funding to a community-based or State-based organization or a 
State participating in the CBMH pilot.
    Subsection (e) of the new section would require the 
Secretary to evaluate the dual pilot program regarding (1) the 
extent to which medical homes result in a number of specified 
improvements in the quality and coordination of health care 
services delivered to complex patients, including reductions in 
health care expenditures; and (2) the feasibility and 
advisability of reimbursing medical homes for medical home 
services under Medicare on a permanent basis. The Secretary 
would be required, within 60 days of its completion, to publish 
and submit to Congress a report on the findings of such 
evaluation.
    Subject to the results of the evaluation, the Secretary 
would be authorized to issue regulations to implement one or 
more models on a permanent basis, to the extent that such 
models are beneficial to Medicare, but only if the Chief 
Actuary of CMS were to first certify that the expansion would 
not result in higher estimated Medicare spending.
    Subsection (f) of the new section would prohibit the 
Secretary from making payments under more than one model, or 
through more than one medical home under any model, for the 
furnishing of medical home services to an individual. Also, 
payments made under this pilot are in addition to, and have no 
effect on the amount of, payment for evaluation and management 
services made under this title. Chapter 35 of Title 44 of the 
U.S. Code (regarding federal information policy) would not 
apply to this section.
    Subsection (g) of the new section would require the 
transfer of $6 million for each of fiscal years 2010 through 
2014 from the Federal Supplementary Medical Insurance Trust 
Fund to the CMS Program Management Account, to carry out this 
section. In addition to funds otherwise available, $200 million 
for each of fiscal years 2010 through 2014 for payments for 
independent patient-centered medical home services, and $125 
million for each of fiscal years 2012 through 2016 for CBMH 
services, would be available for CMS from the Federal 
Supplementary Medical Insurance Trust Fund. In addition to 
funds otherwise available, $2.5 million for each of fiscal 
years 2010 through 2012 would be available to CMS from the 
Federal Supplementary Medical Insurance Trust Fund for initial 
implementation costs. Any amounts made available under this 
subsection for a fiscal year would be available until expended.
    Subsection (h) of the new section would provide that in 
addition to funds otherwise available for payment of medical 
home services, there would also be available, for the 
independent patient-centered medical home model, $100 million 
established by The Tax Relief and Health Care Act of 2006 (P.L. 
109-432) for the existing Medicare Medical Home Demonstration, 
and authority for the Medicare Medical Home Demonstration 
project would be repealed.
    Amendments made by this section would apply to services 
furnished on or after the date of enactment.
            Reason for Change
    Over 83 percent of Medicare beneficiaries have a chronic 
illness and over 95 percent of total spending in Medicare is 
linked to chronically ill patients. The medical home concept 
envisions a health care system where patient care is 
coordinated and integrated through a provider guided 
multidisciplinary team. The medical home model promotes 
accessible, continuous, patient-oriented, team-based and 
comprehensive care delivered in the context of a patient's 
family and community. The approach would manage care across a 
variety of settings according to the needs of the patient 
through the promotion of continuous care relationships as well 
as application of the chronic care model, use of evidence 
based-medicine, care coordination, and patient empowerment. The 
idea was described as early as 1967 by the American Academy of 
Pediatrics' Council on Pediatric Practice. The model has shown 
to be successful in improving outcomes for patients with 
chronic illnesses through improved care coordination. Many 
local pilot programs such as North Carolina's Community Care 
Program and Johns Hopkins' Guided Care Program have shown 
improved outcomes and potential for long term cost-savings. 
Vermont's Patient Centered Medical Home included payments to 
community entities for support of population-based health 
management.
    Recent research has shown that patient populations at risk 
for health disparities may particularly benefit from the 
accessible, coordinated, comprehensive care delivered through 
the patient-centered medical home. Transforming practices 
serving high risk and chronically ill populations is a major 
focus of the revised and expanded pilot.
    Systematic changes such as the use of evidence-based 
medicine and health-information technology offer new 
opportunities to achieve even better coordination, disease 
management, and patient empowerment. These goals would be 
achieved through practice transformation supported by new care-
coordination payment models to the medical home to support the 
delivery of enhanced primary care services provided by a 
multidisciplinary team composed of care managers, pharmacists, 
physician assistants, mental health professionals, palliative 
care experts, clinical nurse educators, nutritionists or health 
educators.
    This pilot program builds on the medical home approach 
currently being developed by Medicare and allows for a broader 
application of the medical home model to meet the needs of 
different patient populations and provider arrangements. It 
directs the Secretary to establish a ``community-based medical 
home model'' in addition to the ``independent patient-centered 
medical home model'' already under development. There are 
currently 25 active demonstrations with payment reform in 17 
States. This legislation will provide Medicare beneficiaries 
the ability to participate in locally based programs with an 
infrastructure that could facilitate practice transformation to 
become a medical home. Studies have indicated that such 
alternative models, that use community care teams within the 
medical home, can achieve cost savings and quality 
improvements. The independent patient-centered medical home 
model refers to the patient centered medical home demonstration 
program as legislated by MIPPA.
    Regardless of what model is used, the pilot program 
requires that to be eligible the personal provider must provide 
accessible, continuous, coordinated and comprehensive care. In 
most cases, primary care providers would be best suited to the 
role of leading a multidisciplinary team to manage the care 
coordination, but specialists who can perform the medical home 
functions set forth by the Secretary are not precluded. In 
giving the Secretary flexibility in developing the monthly 
medical home care management fee payment, the Secretary can 
expand this program if certain criteria such as budget 
neutrality and quality improvements are met.
            Effective Date
    Date of enactment.

Sec. 1303. Payment Incentive for Selected Primary Care Services

            Current Law
    Section 1833(m) of the Social Security Act provides bonus 
payments for physicians who furnish medical care services in 
geographic areas that are designated by the Health Resources 
and Services Administration (HRSA) as primary medical care 
health professional shortage areas (HPSAs) under section 332 
(a)(1)(A) of the Public Health Service (PHS) Act. In addition, 
for claims with dates of service on or after July 1, 2004, 
psychiatrists furnishing services in mental health HPSAs are 
also eligible to receive bonus payments.
    The bonus payment equals 10% of what would otherwise be 
paid under the fee schedule. HPSAs may be designated as having 
a shortage of primary medical care, dental or mental health 
providers. They may be urban or rural areas, population groups 
or medical or other public facilities
            Proposed Law
    The provision would establish payment incentives for 
primary care services furnished on or after January 1, 2011 by 
a primary care practitioner. The amount of the payment 
incentive would be 5 percent (or 10 percent if the practitioner 
provides the services predominately in an area that is 
designated as a primary care health professional shortage area) 
and would be paid from the Part B trust fund.
    Primary care services would be defined as physicians' 
services in section 1848(j)(5)(A) as well as services furnished 
by another health care professional that would be described 
above if furnished by a physician. A primary care practitioner 
would be defined as (1) a physician or other health care 
practitioner (including a nurse practitioner) who specializes 
in family medicine, general internal medicine, general 
pediatrics, geriatrics, or obstetrics and gynecology and has 
allowed charges for primary care services that account for at 
least 50 percent of the physician's or practitioner's total 
allowed charges under (Medicare Part B) section 1848, as 
determined by the Secretary for the most recent period for 
which data are available, or (2) a physician assistant who is 
under the supervision of a practitioner described above.
    There would be no administrative or judicial review 
respecting (1) any determination or designation of the primary 
care services payment incentive; (2) the identification of 
services as primary care services for the purpose of this 
payment incentive; or (3) the identification of a practitioner 
as a primary care practitioner for the purposes of this payment 
incentive.
    The primary care services incentive payments would not be 
taken into account in determining the additional payments for 
physicians in health professions shortage areas or in physician 
scarcity areas. Furthermore, any bonus payment to physicians in 
health professions shortage areas or physician scarcity areas 
would not be taken into account in computing incentive payments 
for primary care services, nor would the primary care incentive 
payments be taken into account in determining the amounts that 
would otherwise be paid to physicians providing outpatient 
critical access hospital (CAH) services.
            Reason for Change
    Studies show that health systems emphasizing primary care 
have lower costs and better quality. Access to health insurance 
does not ensure access to timely medical care, particularly in 
places where doctors are in short supply like rural and inner-
city urban areas. Currently, primary care accounts for about 
one third of the physician workforce, but far fewer U.S. 
medical students are pursuing careers in adult primary care 
than a decade ago. This provision is intended to encourage 
primary care providers who are currently practicing to remain 
in practice and incentivize additional physicians to choose a 
career in primary care. The provision also recognizes the 
challenges that certain areas of the country face in attracting 
a sufficient primary care workforce by providing an additional 
incentive to physicians who practice in health professional 
shortage areas.
            Effective Date
    January 1, 2011.

Sec. 1304. Increased Reimbursement Rate for Certified Nurse-Midwives

            Current law
    In general, Medicare pays 80% of the reasonable charges 
(the lesser of the actual charge for the services or the amount 
determined by the fee schedule) for provider services covered 
under Medicare Part B. However, Medicare payments for services 
performed by certified nurse-midwives to Medicare beneficiaries 
are currently limited to no more than 65% of the fee schedule 
amount for the same service performed by a physician.
            Proposed Law
    The proposal would remove the 65% restriction for Medicare 
payments to certified nurse-midwives. The modification would 
apply to services furnished on or after January 1, 2011.
            Reason for Change
    Nurse midwives are currently one of the lowest paid non-
providers in Medicare. Yet, they practice independently and 
provide access to needed services in communities where 
gynecologists or obstetricians may not be readily available. In 
order to increase access to women's health services for 
Medicare beneficiaries, the provision increases the 
reimbursement for nurse midwife services from 65 percent of the 
fee schedule to 100 percent.
            Effective Date
    January 1, 2011.

Sec. 1305. Coverage and Waiver of Cost-Sharing for Preventive Services

            Current law
    In general, Medicare law authorizes the Secretary to cover 
services for the diagnosis and treatment of illness, while 
coverage of preventive services (i.e., services provided in the 
absence of illness) has generally required legislation. Section 
1861 of the SSA requires coverage of a number of specified 
preventive services under Part B (often with specified 
conditions for coverage) in language interspersed throughout 
the section. There is no definition of ``preventive services'' 
in the law that refers to them collectively. Also, in Section 
101 of the Medicare Improvements for Patients and Providers Act 
of 2008 (P.L. 110-275), Congress provided administrative 
authority for the Secretary to add coverage of new preventive 
services, under certain conditions.
    Section 1833(a) of the SSA establishes coinsurance for the 
beneficiary, requiring Medicare to cover 80% of the costs of 
covered services under Part B, with specified exceptions. 
Section 1833(b) establishes an annual deductible for which the 
beneficiary is responsible. These sections have been amended 
over the years to waive coinsurance and/or the deductible for 
many, but not all, covered preventive services.
            Proposed law
    Subsection (a) of this section would add a new subsection 
to SSA Section 1861, which would define ``Medicare covered 
preventive services'' to mean a specified list of currently 
covered services. The list would also include any new services 
that were covered under the Secretary's administrative 
authority. Coverage would be subject to all conditions and 
limitations that apply to each listed service under current 
law.
    With respect to Medicare covered preventive services (as 
defined by this bill), subsection (b) of this section would 
amend Section 1833(a) of the SSA to require Medicare to cover 
100% of their costs. It would also amend several additional SSA 
sections to require the waiver of coinsurance for specified 
sigmoidoscopy and colonoscopy services, and, in outpatient 
hospital settings, for diagnostic mammograms and Medicare 
clinical preventive services. This subsection would also amend 
Section 1833(b) of the SSA to waive the application of the 
deductible for Medicare covered preventive services. Finally, 
it would amend the SSA to remove the authority of providers to 
charge coinsurance when providing Medicare covered preventive 
services.
    The amendments made by this section would apply to services 
furnished on or after January 1, 2011.
            Reason for Change
    Preventive benefits are vital to early detection and 
treatment of diseases, which can reduce the need for more 
serious treatments later.
    However, utilization rates for Medicare's preventive 
benefits are very low. To help address that problem, the 
provision eliminates both the coinsurance and application of 
the deductible for preventive services. By eliminating all 
beneficiary cost-sharing for these services, more people should 
utilize the services.
            Effective Date
    January 1, 2011.

Sec. 1306. Waiver of Deductible for Colorectal Cancer Screening Tests 
        Regardless of Coding, Subsequent Diagnosis, or Ancillary Tissue 
        Removal

            Current Law
    Section 1833(a) of the SSA establishes coinsurance for the 
beneficiary, requiring Medicare to cover 80% of the costs of 
covered services under Part B, with specified exceptions. 
Section 1833(b) of the SSA requires the application of an 
annual deductible, for which the beneficiary is responsible, 
for some Part B services. Under current law, coinsurance is 
applied to colorectal cancer screening services, but the 
deductible is not.
            Proposed Law
    This section would amend Sections 1833(a) and 1833(b) of 
the SSA (as amended by Section 1305 of this bill) to clarify 
that coinsurance and the deductible would be waived for 
colorectal cancer screening services regardless of the code 
applied, of the establishment of a diagnosis, or of the removal 
of tissue or other matter or other procedure that is performed 
in connection with and as a result of the screening test. This 
provision would apply to items and services furnished on or 
after January 1, 2011.
            Reason for Change
    Current law prohibits the application of the Medicare Part 
B deductible for screening colonscopies. However, if a patient 
has a screening colonscopy and the physician finds polyps that 
need to be removed during the screening exam, it is relabeled a 
diagnostic procedure and the deductible is applied. This policy 
is unfair to beneficiaries who are told that the screening 
colonscopy would bypass the deductible. This provision would 
therefore ensure that a screening colonscopy avoids the 
deductible and the coinsurance regardless of whether the 
procedure becomes diagnostic.
            Effective Date
    January 1, 2011.

Sec. 1307. Excluding Clinical Social Worker Services From Coverage 
        Under the Medicare Skilled Nursing Facility Prospective Payment 
        System and Consolidated Payment

            Current Law
    The majority of services provided to beneficiaries in a 
Medicare covered skilled nursing facility (SNF) stay are 
included in the bundled prospective payment made to the SNF. 
Certain services have been specifically excluded from SNF 
consolidated billing. In these instances, Medicare will pay the 
entity providing the service directly. Currently, the items and 
services provided by a clinical social worker are included in 
the SNF consolidated billing.
            Proposed Law
    Items and services provided by clinical social workers to 
Medicare beneficiaries in a SNF would receive separate Medicare 
payment on or after July 1, 2011.
            Reason for Change
    Numerous reports suggest that mental illness is highly 
prevalent in nursing homes, with mental health problems 
affecting more than 80% of the residents. These mental 
disorders including major depression, anxiety, and severe 
cognitive impairment or Alzheimer's disease interfere with a 
person's ability to carry out activities of daily living. 
Furthermore, older people have the highest rate of suicide of 
any age group, accounting for 20% of all suicide deaths. 
Clinical social workers are fundamental providers who 
facilitate care-planning and care-coordination. The provision 
treats clinical social workers identically to psychologists and 
psychiatrists with regard to their treatment of Medicare 
beneficiaries in nursing homes. Making this change will ensure 
better access to mental health services for Medicare 
beneficiaries in nursing homes.
            Effective Date
    July 1, 2010.

Sec. 1308. Coverage of Marriage and Family Therapist Services and 
        Mental Health Counselor Services

            Current Law
    Section 1861(s)(2) of the SSA (42 U.S.C. 1395x(s)(2)) 
defines services covered under the term ``medical and other 
health services.'' These services include medical supplies, 
hospital services, diagnostic services, outpatient physical 
therapy services, rural health clinic services, home dialysis 
services and supplies, antigens and physician assistant and 
nurse practitioner services. Marriage and family therapists and 
mental health counselors are not included under current law.
            Proposed Law
    The proposal would add two subcategories of services to be 
covered under the term ``medical and health services.'' These 
are (1) marriage and family therapists, and (2) mental health 
counselors.
    The proposal would stipulate the required qualifications 
for a marriage and family therapist, and mental health 
counselor. It would define these providers' services as the 
diagnosis and treatment of mental illnesses, as permitted by 
his or her state license, if no other provider or facility is 
also paid for those services. The proposal would add a payment 
provision for marriage and family therapists, and mental health 
counselors. The amount paid would be 80% of the lesser of the 
actual charge for services or 75% of the amount that would be 
paid for a psychologist's services. The proposal would require 
the Secretary to consider confidentiality issues while 
developing criteria allowing for direct payment of the 
therapist and medical information sharing with the patient's 
primary care physician. The proposal would exclude marriage and 
family therapists and mental health counselors from the 
prospective payment system for skilled nursing facilities. The 
proposal would include marriage and family therapists and 
mental health counselors as providers in rural health clinics 
and federally qualified health centers. The proposed law would 
include marriage and family therapists and mental health 
counselors as one of the practitioner categories who can file 
claims for services provided.
            Reason for Change
    In states that have licensed or certified marriage and 
family therapists and mental health counselors, these 
practitioners provide mental health services to people under 
age 65. Few states did so when Medicare was first created in 
1965. This provision updates Medicare coverage by allowing them 
to treat Medicare beneficiaries as well, subject to state law.

Sec. 1309. Extension of Physician Fee Schedule Mental Health Add-on

            Current Law
    By law, every five years CMS examines Medicare billing 
codes under the physician fee schedule to determine whether 
they are overvalued or undervalued. Subsequent to the most 
recent evaluation, Medicare increased the rates for the codes 
used by physicians to bill for ``evaluation and management'' 
(E/M) services (face-to-face visits with patients), effective 
January 1, 2007. To maintain budget neutrality, rates for 
certain other codes, including some used to bill for 
psychotherapy services, were reduced.
    The Medicare Improvements for Patients and Providers Act of 
2008 (MIPPA, P.L. 110-275) increased Medicare payments under 
the fee schedule for psychotherapy services by 5% beginning on 
July 1, 2008, and ending on December 31, 2009. Psychiatric 
therapeutic procedures that involve insight oriented, behavior 
modifying, or supportive psychotherapy or interactive 
psychotherapy furnished in an office or other outpatient 
facility setting or in an inpatient hospital or residential 
care facility are reimbursed at this higher amount.
            Proposed Law
    This proposal would extend the increased payments provided 
by MIPPA for psychotherapy services for an additional two years 
(ending December 31, 2011).
            Reason for Change
    Studies reveal that between 15-25% of elderly people in the 
U.S. suffer from significant symptoms of mental illness. Of the 
direct costs for treating mental illness, less than 1.5% is 
spent on behalf of the elderly. The highest suicide rate in 
America is among those aged 65 and older. Access to mental 
health services is limited to Medicare beneficiaries in many 
areas. This provision is intended to provide mental health 
parity and increase much needed mental health services to the 
Medicare beneficiary.
            Effective Date
    January 1, 2011.

Sec. 1310. Expanding Access to Vaccines

            Current Law
    Medicare Part B covers influenza, pneumococcal, and, for 
individuals at increased risk, hepatitis B vaccinations. This 
coverage includes both the costs of these vaccines and their 
administration by recognized providers. Medicare Part D covers 
all vaccines licensed by the FDA, and their administration, 
when prescribed by recognized providers.
            Proposed Law
    Under this provision, Medicare Part B would cover all 
federally recommended vaccines, defined as any licensed vaccine 
that is recommended by the Advisory Committee on Immunization 
Practices (an advisory committee established by the Secretary, 
acting through the Director of the Centers for Disease Control 
and Prevention). The provision would also include all federally 
recommended vaccines in the suite of Medicare covered 
preventive services defined under section 1305 of this Act, and 
make several conforming amendments.
            Reason for Change
    Currently, a limited number of vaccines are covered by 
Medicare Part B while the rest are covered by Medicare Part D. 
This is confusing for beneficiaries and providers. For vaccines 
covered by Part D, beneficiaries may have to fill the vaccine 
prescription at a pharmacy and carry it with them to a 
physician's office for administration. This is burdensome for 
beneficiaries and providers alike and could lead beneficiaries 
to avoid getting needed immunizations. Moving coverage for all 
vaccines to Part B will simplify the vaccination process and 
improve access for beneficiaries.
            Effective Date
    January 1, 2010.

Sec. 1311. Expansion of Medicare-Covered Preventive Services at 
        Federally Qualified Health Centers

            Current Law
    SSA Section 1861(aa)(3) establishes that Federally 
qualified health centers may receive Medicare reimbursement for 
providing specified services, namely: diabetes outpatient self-
management training services (DSMT); medical nutrition therapy 
(MNT) services; and preventive services that community health 
centers must provide under Section 330 of the Public Health 
Service Act (PHS Act). The latter services are: prenatal and 
perinatal services; appropriate cancer screening; well-child 
services; immunizations against vaccine-preventable diseases; 
screenings for elevated blood lead levels, communicable 
diseases, and cholesterol; pediatric eye, ear, and dental 
screenings to determine the need for vision and hearing 
correction and dental care; voluntary family planning services; 
and preventive dental services.
            Proposed Law
    This provision would amend SSA Section 1861(aa)(3) to 
remove the reference to DSMT and MNT services, replacing it 
with a reference to the package of Medicare covered preventive 
services established in Section 1305 of this Act (which 
includes DSMT and MNT services, and others). The list of 
preventive services required under Section 330 of the PHS Act 
would continue to apply.
            Reason for Change
    Disease prevention plays a critical role in maintaining the 
health of Medicare beneficiaries and is also a core service 
delivered at Federally Qualified Health Centers (FQHCs). This 
provision would update the preventive benefits covered by 
Medicare in FQHCs to include the range of preventative services 
covered by the rest of the Medicare program.
            Effective Date
    Date of enactment.

                           TITLE IV--QUALITY


             Subtitle A--Comparative Effectiveness Research


Sec. 1401. Comparative Effectiveness Research

            Current Law
    The need for more and better information about which 
clinical strategies work best and under what conditions has 
been widely recognized by clinicians, patients, researchers and 
policy makers. Most recently, comparative effectiveness 
research was addressed in the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173) 
and the American Recovery and Reinvestment Act (ARRA, P.L. 111-
5). Section 1013 of the MMA authorizes the Agency for 
Healthcare Research and Quality (AHRQ) to conduct and support 
research on the outcomes, comparative clinical effectiveness, 
and appropriateness of health care items and services. In ARRA 
Congress provided $1.1 billion for comparative effectiveness 
research, with $400 million going to the National Institutes of 
Health and $300 million to the Agency for Health Care Research 
and Quality to support comparative effectiveness research 
efforts at those agencies and $400 million to the Office of the 
Secretary to 1) conduct, support, or synthesize research that 
compares the clinical outcomes, effectiveness, and 
appropriateness of items, services, and procedures that are 
used to prevent, diagnose, or treat diseases, disorders, and 
other health conditions; and (2) encourage the development and 
use of clinical registries, clinical data networks, and other 
forms of electronic health data that can be used to generate or 
obtain outcomes data.
            Proposed Law
    The provision would establish a Center for Comparative 
Effectiveness Research within the Agency for Healthcare 
Research and Quality under title XI of the Social Security Act. 
The Center would conduct, support, and synthesize research with 
respect to the outcomes, effectiveness, and appropriateness of 
health care services and procedures in order to identify the 
manner in which diseases, disorders, and other health 
conditions can most effectively and appropriately be prevented, 
diagnosed, treated, and managed clinically.
    The duties of the Center would be to (1) conduct, support, 
and synthesize research relevant to the comparative 
effectiveness of the full spectrum of health care items, 
services, and systems, including pharmaceuticals, medical 
devices, medical and surgical procedures, and other medical 
interventions; (2) conduct and support systematic reviews of 
clinical research, including original research conducted 
subsequent to the date of the enactment of this section; (3) 
continuously develop rigorous scientific methodologies for 
conducting comparative effectiveness studies, and use such 
methodologies appropriately; (4) submit to the Comparative 
Effectiveness Research Commission (see below), the Secretary, 
and Congress relevant reports produced by the Center or a 
grantee or contractor of the Center; and (5) encourage, as 
appropriate, the development and use of clinical registries and 
the development of clinical effectiveness research data 
networks from electronic health records, post-marketing drug 
and medical device surveillance efforts, and other forms of 
electronic health data.
    The Center could secure information necessary to enable it 
to carry out its duties directly from any department or agency 
of the United States. Upon request of the Center, the head of 
that department or agency would furnish the information to the 
Center on an agreed upon schedule. In order to carry out its 
functions, the Center would (i) utilize existing information, 
both published and unpublished, where possible, collected and 
assessed either by its own staff or under other arrangements; 
(ii) carry out, or award grants or contracts for, original 
research and experimentation, where existing information is 
inadequate; and (iii) adopt procedures allowing any interested 
party to submit information for the Center or the Commission to 
use in making reports and recommendations. The Comptroller 
General would have unrestricted access to all deliberations, 
records, and nonproprietary data of the Center and Commission, 
immediately upon request, and both the Center and the 
Commission would be subject to periodic audit by the 
Comptroller General.
    The Secretary would establish an independent Comparative 
Effectiveness Research Commission to oversee and evaluate the 
activities carried out by the Center to ensure that the 
Center's activities result in highly credible research and 
information produced from such research. The duties of the 
Commission would include the following:
          (1) determine national priorities for research to be 
        conducted, supported or synthesized by the center, and 
        in making such determinations consult with a broad 
        array of public and private stakeholders, including 
        patients and health care providers and payers;
          (2) monitor the appropriateness of use of the 
        Comparative Effectiveness Research Trust Fund (CERTF) 
        (described below) with respect to the timely production 
        of comparative effectiveness research determined to be 
        a national priority;
          (3) identify highly credible research methods and 
        standards of evidence for such research to be 
        considered by the Center;
          (4) review the methodologies developed by the Center
        (5) not later than one year after the date of the 
enactment, enter into an arrangement under which the Institute 
of Medicine of the National Academy of Sciences would conduct 
an evaluation and report on standards of evidence for such 
comparative effectiveness research;
          (6) support forums to increase stakeholder awareness 
        and permit stakeholder feedback on the efforts of the 
        Center to advance methods and standards that promote 
        highly credible research;
          (7) make recommendations for policies that would 
        allow for public access of data produced under this 
        section, in accordance with appropriate privacy and 
        proprietary practices, while ensuring that the 
        information produced through such data is timely and 
        credible;
          (8) appoint a clinical perspective advisory panel for 
        each national research priority, which would consult 
        with patients and advise the Center on research 
        questions, methods and evidence gaps in terms of 
        clinical outcomes for the specific research inquiry to 
        be examined with respect to such priority to ensure 
        that the information produced from such research is 
        clinically relevant to decisions made by clinicians and 
        patients at the point of care;
          (9) make recommendations for the priority for 
        periodic reviews of previous comparative effectiveness 
        research and studies conducted by the Center;
          (10) routinely review processes of the Center with 
        respect to such research to confirm that the 
        information produced by such research is objective, 
        credible, consistent with standards of evidence 
        established under this section, and developed through a 
        transparent process that includes consultations with 
        appropriate stakeholders; and
          (11) make recommendations to the Center for the broad 
        dissemination of the findings of research conducted and 
        supported under this section that enables clinicians, 
        patients, consumers, and payers to make more informed 
        health care decisions that improve quality and value.
    The members of the Commission would consist of the Director 
of the Agency for Healthcare Research and Quality, the Chief 
Medical Officer of the Centers for Medicare & Medicaid 
Services, and 15 additional members who would represent broad 
constituencies of stakeholders, including clinicians, patients, 
researchers, third-party payers, and consumers of federal and 
state beneficiary programs. At least 9 of the 17 members would 
be practicing physicians, health care practitioners, consumers, 
or patients. The members of the Commission would represent a 
broad range of perspectives and collectively would have 
experience in epidemiology, health services research, 
bioethics, decision sciences, health disparities, and 
economics. To ensure a diverse representation of the health 
care community, at least one member would represent each of the 
following: (1) patients, (2) health care consumers, (3) 
practicing physicians, including surgeons, (4) other health 
care practitioners engaged in clinical care, (5) employers, (6) 
public payers, (7) insurance plans, and (8) clinical 
researchers who conduct research on behalf of pharmaceutical or 
device manufacturers. No more than 3 of the members of the 
Commission could be representatives of pharmaceutical or device 
manufacturers and these representatives could only be clinical 
researchers as described in (8).
    The Secretary would appoint the members of the Commission; 
in considering candidates for appointment to the Commission, 
the Secretary could consult with the Government Accountability 
Office and the Institute of Medicine of the National Academy of 
Sciences. The Secretary would designate a member of the 
Commission, at the time of appointment, as Chairman and a 
member as Vice Chairman for that term of appointment, except 
that in the case of vacancy of the Chairmanship or Vice 
Chairmanship, the Secretary could designate another member for 
the remainder of that member's term. The Chairman would serve 
as an ex officio member of the National Advisory Council of the 
Agency for Healthcare Research and Quality. Of the members 
first appointed, 8 would be appointed for a term of 4 years, 
and 7 would be appointed for a term of three years. 
Subsequently, each member of the Commission would be appointed 
for a term of four years.
    To enhance effectiveness and coordination, the Secretary 
would be encouraged, to the greatest extent possible, to seek 
coordination between the Commission and the National Advisory 
Council of the Agency for Healthcare Research and Quality.
    The bill includes provisions to protect against potential 
conflicts of interest. In appointing the members of the 
Commission or a clinical perspective advisory panel, the 
Secretary or the Commission, respectively, would take into 
consideration any financial interest and develop a plan for 
managing any identified conflicts. When considering an 
appointment to the Commission or a clinical perspective 
advisory panel, the Secretary or the Commission would review 
the expertise of the individual and the financial disclosure 
report filed by the individual pursuant to the Ethics in 
Government Act of 1978 for each individual under consideration 
for the appointment, so as to reduce the likelihood that an 
appointed individual would later require any pertinent waivers.
    Prior to a meeting of the Commission or a clinical 
perspective advisory panel, each member of the Commission or 
the clinical perspective advisory panel who is a full-time 
government employee or special government employee would 
disclose any relevant financial interests to the Secretary. A 
member of the Commission or a clinical perspective advisory 
panel could not participate with respect to a particular matter 
considered in a meeting of the Commission or the clinical 
perspective advisory panel if the member (or an immediate 
family member of the member) were to have a financial interest 
that could be affected by the advice given to the Secretary 
regarding the matter, excluding interests exempted in 
regulations issued by the Director of the Office of Government 
Ethics as too remote or inconsequential to affect the integrity 
of the services of the government officers or employees to 
which such regulations apply. The Secretary could grant a 
waiver if the Secretary were to determine it necessary to 
afford the Commission or a clinical perspective advisory panel 
the essential expertise of the member. The waiver would permit 
such a member to participate as a voting or nonvoting member 
with respect to a particular matter under consideration in a 
Commission or a clinical perspective advisory panel meeting. 
The number of waivers granted to members of the Commission 
could not exceed one-half of the total number of members for 
the Commission. However, no voting member of any clinical 
perspective advisory panel would be in receipt of a waiver, and 
no more than two nonvoting members of any clinical perspective 
advisory panel would be serving under waiver. For purposes of 
determining conflict of interest under this section, the term 
``financial interest'' would mean a financial interest under 
section 208(a) of title 18, United States Code.
    While serving on the business of the Commission (including 
travel time), a member of the Commission would be entitled to 
compensation at the per diem equivalent of the rate provided 
for level IV of the Executive Schedule, and while serving away 
from home and the member's regular place of business, a member 
could be allowed travel expenses, as authorized by the Director 
of the Commission.
    The Commission would transmit a copy of each report 
submitted to the Secretary and would make the reports available 
to the public.
    The Commission could (1) appoint an executive director 
(subject to the approval of the Secretary) and other personnel 
as Federal employees under section 2105 of title 5, United 
States Code as may be necessary to carry out its duties 
(without regard to the provisions of Title 5, United States 
Code, governing appointments in the competitive service); (2) 
seek assistance and support from appropriate federal 
departments and agencies as might be required in the 
performance of its duties; (3) enter into contracts or make 
other arrangements for the conduct of the work of the 
Commission, as may be necessary; (4) make advance payments, and 
other payments that relate to the work of the Commission; (5) 
provide transportation and subsistence for persons serving 
without compensation; and (6) prescribe such rules and 
regulations as it were to deem necessary with respect to the 
internal organization and operation of the Commission.
    Any research conducted, supported, or synthesized by the 
Center would (1) be required to meet certain transparency, 
credibility and access conditions; (2) consider advice given by 
clinical perspective advisory panels; (3) consider stakeholder 
input; and (4) take into account potential differences across 
subgroups of populations. To ensure transparency, credibility, 
and access, the research would meet the following conditions: 
(a) the establishment of the agenda and the conduct of the 
research would be insulated from inappropriate political or 
stakeholder influence; (b) the methods of conducting the 
research would be scientifically based; (c) all aspects of the 
prioritization of research, conduct of the research, and 
development of conclusions based on the research would be 
transparent to all stakeholders; (d) the process and methods 
for conducting such research would be publicly documented and 
available to all stakeholders; and (e) throughout the process 
of the research, the Center would provide opportunities for all 
stakeholders involved to review and provide public comment on 
the methods and findings of such research.
    The research would meet a national research priority as 
determined above and would consider advice given to the Center 
by the clinical perspective advisory panel for the national 
research priority.
    The Commission would consult with patients, health care 
providers, health care consumer representatives, and other 
appropriate stakeholders with an interest in the research 
through a transparent process recommended by the Commission. 
Specifically, where deemed appropriate by the Commission, the 
consultation would include (1) recommending research priorities 
and questions, (2) recommending research methodologies, and (3) 
advising on and assisting with efforts to disseminate research 
findings. The Secretary would designate a patient ombudsman who 
would serve as an available point of contact for any patients 
with an interest in proposed comparative effectiveness studies 
by the Center and ensure that any comments from patients 
regarding proposed comparative effectiveness studies are 
reviewed by the Commission.
    Research falling under the activities of this Center would 
(1) be designed, as appropriate, to take into account the 
potential for differences in the effectiveness of health care 
items and services used with various subpopulations such as 
racial and ethnic minorities, women, different age groups 
(including children, adolescents, adults, and seniors), and 
individuals with different comorbidities; and (2) seek, as 
feasible and appropriate, to include members of such 
subpopulations as subjects in the research.
    The proposal would require public access to comparative 
effectiveness information. Not later than 90 days after receipt 
by the Center or Commission, as applicable, of a relevant 
report made by the Center, Commission, or clinical perspective 
advisory panel under this section, the appropriate information 
contained in the report would be posted on the official public 
Internet site of the Center and of the Commission, as 
applicable. For purposes of this section, a relevant report 
would be each of the following submitted by the Center or a 
grantee or contractor of the Center: (1) any interim progress 
report as deemed appropriate by the Secretary, (2) stakeholder 
comments, and (3) a final report.
    To disseminate and assist in the incorporation of 
comparative effectiveness information, the Center would provide 
for the dissemination of appropriate findings produced by 
research supported, conducted, or synthesized under this 
section to health care providers, patients, vendors of health 
information technology focused on clinical decision support, 
appropriate professional associations, and federal and private 
health plans, and other relevant stakeholders. In disseminating 
such findings the Center would (1) convey findings of research 
so that they are comprehensible and useful to patients and 
providers in making health care decisions; (2) discuss findings 
and other considerations specific to certain sub-populations, 
risk factors, and comorbidities as appropriate; (3) include 
considerations such as limitations of research and what further 
research may be needed, as appropriate; (4) not include any 
data the dissemination of which would violate the privacy of 
research participants or violate any confidentiality agreements 
made with respect to the use of data under this section; and 
(5) assist the users of health information technology focused 
on clinical decision support to promote the timely 
incorporation of such findings into clinical practices and 
promote the ease of use of such incorporation.
    The Center would develop protocols and strategies for the 
appropriate dissemination of research findings in order to 
ensure effective communication of the findings and the use and 
incorporation of the findings into relevant activities for the 
purpose of informing higher quality and more effective and 
efficient decisions regarding medical items and services. In 
developing and adopting the protocols and strategies, the 
Center would consult with stakeholders concerning the types of 
dissemination that would be most useful to the end users of 
information and could provide for the utilization of multiple 
formats for conveying findings to different audiences, 
including dissemination to individuals with limited English 
proficiency.
    The provision would establish a number of reporting 
requirements. (1) Beginning not later than one year after the 
date of the enactment, the Director of the Agency of Healthcare 
Research and Quality and the Commission would submit an annual 
report on the activities of the Center and the Commission and 
research conducted under this section to Congress. Each report 
would include a discussion of the Center's compliance with the 
requirements for inclusion of subpopulations in research, 
including any reasons for lack of compliance. (2) Not later 
than December 31, 2011, the Secretary would submit to Congress 
an annual recommendation for a fair share per capita amount 
described below for purposes of funding the CERTF. (3) Not 
later than December 31, 2013, the Secretary, in consultation 
with the Commission, would submit to Congress a report on all 
activities conducted or supported under this section as of such 
date. The report would include an evaluation of the overall 
costs of such activities and an analysis of the backlog of any 
research proposals approved by the Commission but not funded.
    The proposal would establish the Health Care Comparative 
Effectiveness Research Trust Fund (``CERTF'') under the 
Internal Revenue Code (the ``Code'') to carry out the 
proposal's provisions relating to comparative effectiveness 
research. For fiscal year 2010 and in each subsequent fiscal 
year, amounts in the CERTF under section 9511 of the Internal 
Revenue Code of 1986 would be available to the Secretary to 
carry out this section without the need for further 
appropriations and without fiscal year limitation.
    Nothing in this section would be construed to permit the 
Commission or the Center to mandate coverage, reimbursement, or 
other policies for any public or private payer.
    For information regarding the establishment and financing 
the Comparative Effectiveness Research Trust Fund, see section 
1802.
            Reason for Change
    All too often physicians and patients struggle to 
understand when a new drug, diagnostic test, surgical procedure 
or method of care delivery will be most helpful compared to the 
existing one, or how to choose among existing courses of 
treatment. This lack of clear information can create great 
confusion when it comes to difficult medical decisions. Health 
policy experts, researchers, consumers, and physician groups 
advocate that comparative effectiveness information (CER) is a 
needed public good and that greater investment in CER is 
critical to assuring high-quality care.
    Better information about the relative strengths and 
weaknesses of various health care items, services and systems 
will help physicians and patients make more informed decisions 
regarding patient care.
    Great variation exists in patient outcomes after a 
particular treatment. Currently, clinicians do not have 
evidence of these differences in patient outcomes or the 
effectiveness of different interventions for the same condition 
until after patients have been treated. Original research, 
systematic reviews, and synthesis of evidence must be designed, 
as appropriate, to take into account the potential for 
differences in effectiveness of health care items, services and 
systems with various subpopulations of patients such as racial 
and ethnic minorities, women, different age groups and 
individuals with different comorbidities. CER should not be 
viewed as one-size-fits-all medicine; rather, research should 
be designed to increase the amount and quality of evidence 
regarding what works, for whom, in what situation and why.
    The dearth of knowledge about the comparative benefits of 
different interventions underscores the need for an objective 
entity to consider the evidence on all available interventions 
for a particular condition and their impact on different 
patient populations. Such an inquiry is a public good that 
could benefit all stakeholders and as such, there is a need for 
a sustained investment in comparative effectiveness research to 
improve the base of knowledge from which patients and 
physicians make important medical decisions.
    To accomplish this sustained investment, the legislation 
establishes a Center at the Agency for Healthcare Research and 
Quality to conduct, support and synthesize research relevant to 
the comparative effectiveness of the full spectrum of health 
care items, services and systems and to aid in the 
dissemination of such research. The center will build on 
infrastructure and expertise already in place and work with 
public and private entities to conduct CER. The legislation 
also creates a public/private stakeholder commission to oversee 
the activities of the center, determine national priorities for 
research, appoint advisory panels for specific national 
priorities, review methodologies and standards of evidence for 
research, conduct outreach to stakeholders and make 
recommendations for the dissemination of research findings. In 
order to ensure the integrity of the research process, the 
commission and advisory panels it appoints will be subject to 
strict conflict of interest requirements. These requirements 
are designed to ensure that the process for setting research 
priorities and evaluating research questions and methodologies 
will be free from inappropriate political and industry 
influence. Proper dissemination of research findings is an 
integral aspect of future investments in CER. The legislation 
reflects the importance of dissemination efforts to ensure that 
the research is comprehensible and useful to patients and 
providers in making health care decisions. In order to provide 
a consistent stream of public and private funding for CER 
through a mechanism insulated from outside influence, the 
legislation creates the Comparative Effectiveness Research 
Trust Fund (CERTF). The monies in the fund are derived from 
fees assessed to Medicare and private health insurance plans.
            Effective Date
    Date of enactment.

                 Subtitle B--Nursing Home Transparency


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


Sec. 1411. Required Disclosure of Ownership and Additional Disclosable 
        Parties Information

            Current Law
    In general, Medicare and Medicaid require that skilled 
nursing facilities (SNF) and nursing facilities to be 
administered in a manner that maintains residents' well-being 
and safety. SNFs and nursing facilities are also required to 
report certain changes in ownership or controlling interest; in 
those individuals who are officers, directors, agents or 
managing employees; in the corporation, association or other 
company responsible for facility management; or when a change 
occurs in the SNF or nursing facility administrator position. 
SNFs and nursing facilities also are required to disclose 
ownership and other information as a condition of 
participation, and of certification or re-certification. In 
general, administrators must meet standards established by the 
Secretary.
    Under Title XI of the Social Security Act, Section 1124, a 
person is considered to have an ownership or controlling 
interest, directly or indirectly, when (1) they own 5% or more 
of an entity, or they hold a whole or part of any mortgage, 
deed of trust, note or other obligation secured by the entity 
(nursing facility) or any property or assets that equal 5% of 
the total property; (2) are an officer or director of the 
entity, if the entity is organized as a corporation; or (3) are 
a partner in the entity if it is organized as a partnership. To 
a limited extent as determined feasible by the Secretary, 
nursing facility entities also are required to report other 
ownership and control interests for any persons named as owners 
or having a control interest.
            Proposed Law
    This provision would amend Section 1124 to require SNFs and 
nursing facilities to make available upon request by the 
Secretary, the Health and Human Services Office of the 
Inspector General (OIG), the state where the entity is located, 
and the state long-term care ombudsman, information on 
ownership (including direct and indirect ownership), 
information on additional disclosable parties and information 
describing the governing body and organizational structure of 
the facility. SNFs and nursing facilities would be required to 
update disclosure information whenever changes occur. 
Information would need to be made available to the Secretary, 
OIG, the state where the entity is located, or the state long-
term care ombudsman upon request until such time as this 
information became available publicly in accordance with final 
regulations promulgated by the Secretary. Facilities would not 
need to disclose and report vendors with which they do business 
on a routine basis that are independent third parties and do 
not have the ability to control the finances, operation, 
management or administration of a facility.
    In addition, SNFs and nursing facilities would be required 
to post prominent notices in facility lobbies that ownership 
and additional disclosable party information are available upon 
request.
    Facilities would be required to disclose the identity of 
and information on (1) each member of a facility's governing 
body including their name, title, date of start, and period of 
service for each SNF or nursing facility; (2) each person or 
entity who is an officer, director, member, partner, trustee, 
or managing employee, including their name, title, and period 
of service; (3) each person or entity who is an additional 
disclosable party; and (4) the organizational structure and 
relationship of the organizational entities to each SNF or 
nursing facility and each other for each ownership and 
governing individual or entity.
    To the extent practicable, the Secretary may allow SNFs and 
nursing facilities in a manner specified by the Secretary to 
submit information using existing reporting mechanisms on 
ownership interest, governance, and organizational structure if 
they already report such information to other oversight 
agencies, such as to the Internal Revenue Service (IRS), using 
Form 990, the Securities and Exchange Commission, the 
Secretary, or through information otherwise submitted to any 
other federal agency.
    Ownership or controlling interest would include direct or 
indirect interests through any number of intermediate entities 
and would include owners of a whole or part interest in any 
mortgage, deed of trust, note, or other obligation secured (in 
whole or in part) by the entity or any of the property or 
assets, if the ownership interest is at least 5%.
    Not later than two years after enactment, the Secretary 
would promulgate final regulations requiring SNFs and nursing 
facilities to report, in a standardized format, information 
about ownership, governing board, and organizational structure. 
The final regulations would require that as a condition of 
participation and payment, SNFs and nursing facilities certify 
that reported information is current and accurate. These 
regulations would take effect 90 days after the Secretary 
published the final regulations in the Federal Register.
    The Secretary would provide technical assistance and 
guidance to states on how to adopt and implement the reporting 
requirements in the standardized format. This provision would 
not reduce, diminish, or alter any existing facility reporting 
requirements.
    The following definitions would apply to this provision:
    (1) ``Additional disclosable party'' would be any 
individual or entity who (a) exercises operational, financial, 
or managerial control over the facility or any part of the 
facility; (b) provides policies or procedures for any facility 
operations or provides financial or cash management services to 
the facility; (c) leases or subleases real property to the 
facility; or owns a whole or part interest of at least 5% of 
the total value of such real property; (d) lends funds or 
provides a financial guarantee to the facility of at least 
$50,000; (e) provides management or administrative services, 
management or clinical consulting services, or accounting or 
financial services to the facility.
     (2) The facility is defined as a ``disclosing entity,'' 
which is a SNF operating under Medicare or a nursing facility 
operating under Medicaid.
     (3) ``Managing employees'' include any employees, such as 
a general manager, business manager, administrator, director, 
or consultant, who directly or indirectly manages, advises, or 
supervises any element of a SNF or nursing facility's 
practices, finances, or operations.
     (4) ``Organizational structure'' consists of the 
following: (a) the corporations, the officers, directors, and 
shareholders of corporations, who own at least 5% of the 
corporation; (b) the limited liability companies, the ownership 
interest of members and managers of limited liability companies 
(including the percentage owned by each member and manager); 
(c) the general partnerships, the general partners, the limited 
partnerships, the general and limited partners who own at least 
10% of the partnership; (d) a trust, the trustees of the trust; 
(e) an individual, contact information for the individual; (f) 
and any other person or entity, as the Secretary determines 
appropriate.
    Within one year of publication of the final regulations in 
the Federal Register, the Secretary shall make ownership 
disclosure and additional disclosable party information for SNF 
and nursing facilities available to the public as determined by 
the Secretary.
            Reason for Change
    Over the last 10 to 15 years, it has become clear that 
state and federal regulators are increasingly unable to 
effectively and quickly investigate complex webs of 
interlocking corporate relationships. When serious safety and 
quality problems become evident, sometimes in conjunction with 
financial irregularities, the response of regulators and law 
enforcement needs to be as swift as possible to protect the 
well-being of residents. However, under current law, regulators 
have increasingly encountered difficulties in identifying and 
holding accountable those persons and entities who are 
responsible for providing good resident care.
    This is illustrated in a case recently settled by the HHS 
Office of Inspector General under the False Claims Act for 
serious quality of care deficiencies involving a facility in 
the District of Columbia. During the OIG's investigation, the 
nursing home fought hard to avoid disclosing both the 
intermediate companies linking the facility to its parent 
company, and the parent company itself. This information was 
not disclosed on the form that CMS requires to be submitted, 
and which informs the agency's database known as the Provider 
Enrollment Chain and Ownership System, or PECOs. Even after an 
extensive investigation, the HHS OIG was still not able to 
uncover all of the multiple layers of limited liability 
companies and other structures that hid the true owners and 
operators--those who were calling the shots when it came to 
making decisions about the resources available for resident 
care.
    State regulators have encountered similar problems. In 
2008, the Connecticut Attorney General testified before the 
House Energy and Commerce Oversight and Investigations 
Subcommittee about a New England nursing home chain embroiled 
in a series of controversies and legal actions involving 
various allegations, including siphoning of Medicaid funds. The 
lack of transparency in the operations of the chain led to 
large legal expenditures by the State in order to try to 
identify the parties responsible for good resident care. 
Regrettably, issues of poor care and financial disarray 
continued even as investigators worked to try to identify those 
parties who should have been held accountable for providing 
good-quality services and overseeing proper management of 
fiscal resources, which include taxpayer funds, for those 
services.
    Such situations highlight the need for making improvements 
in disclosure and reporting requirements. Current disclosure 
and reporting rules for nursing homes to divulge key ownership 
and non-ownership relationships with persons and entities that 
are in a position to control the resources and operations 
essential to good resident care are inadequate. This lack of 
transparency hinders the ability of regulators to enforce basic 
safety and quality standards, and obscures adequate disclosure 
about how public funds that are intended for resident care are 
actually being spent. The proposed provisions in Section 1411, 
which call for nursing homes to divulge those persons and 
entities that are in a position to make decisions about the 
operation, management and financing of services for resident 
care, will restore a measure of appropriate public 
accountability.
            Effective Date
    Date of enactment.

Sec. 1412. Accountability Requirements

            Current Law
    There are no comparable requirements in current law for 
SNFs and nursing facilities to implement compliance and ethics 
training programs for their employees.
            Proposed Law
    (1) Thirty-six months after enactment of this provision, 
SNFs and nursing facilities would be required to have complied 
with regulations developed by the Secretary governing the 
operation of compliance and ethics programs. The compliance and 
ethics programs would need to be effective in preventing and 
detecting criminal, civil, and administrative violations and in 
promoting quality of care. Operating organizations (entities 
that operate SNFs and nursing facilities) would be required to 
comply with the compliance and ethics programs regulations, 
including corporate-level management of multi-unit nursing home 
chains.
    Within two years of the effective date of this provision, 
the. Secretary, in consultation with the HHS OIG, would 
promulgate regulations for effective compliance and ethics 
programs for operating organizations. These regulations may 
include a model compliance program, and would permit the design 
of the compliance and ethics programs to vary depending on an 
organization's size. Larger operating organizations would have 
more formal and rigorous programs with established written 
policies and procedures to guide employees. Regulations also 
would specifically address requirements for employees and 
managers of multi-nursing home chains.
    Within three years after promulgation of final regulations, 
the Secretary would be required to evaluate the compliance and 
ethics programs and submit a report to Congress to determine if 
the compliance and ethics programs led to changes in deficiency 
citations, quality performance, or other patient care quality 
metrics. The Secretary's report to Congress would include 
recommendations to change the requirements of the compliance 
and ethics program, as the Secretary determined appropriate.
    Compliance and ethics programs would need to be reasonably 
designed, implemented, and enforced to be generally effective 
in preventing and detecting civil, criminal, and administrative 
violations under the Social Security Act as well as in 
promoting quality of care, and would include the following 
required components:
          (A) compliance standards and procedures that would 
        guide employees and other agents and would reduce 
        criminal, civil, and administrative violations.
          (B) responsibility by senior individuals within 
        operating organizations for overseeing compliance with 
        the standards and procedures the entity establishes for 
        their compliance and ethics program. These individuals 
        would have resources and authority to assure 
        compliance.
          (C) diligence in ensuring that individuals who are at 
        risk for engaging in criminal, civil, or administrative 
        violations are not delegated responsibility for 
        implementing or monitoring an organization's compliance 
        and ethics program.
          (D) effective communication of standards and 
        procedures to employees (and other agents), through 
        training programs or explanatory publications that 
        practically illustrate what is required.
          (E) assurance that the standards for their compliance 
        and ethics programs are met by using procedures to 
        detect criminal, civil, and administrative violations. 
        Organizations can use procedures such as monitoring and 
        auditing systems as well as installing a reporting 
        system that enables employees (and other agents) to 
        report violations by others without fear of 
        retribution.
          (F) appropriate disciplinary mechanisms that are 
        consistently followed to enforce the compliance and 
        ethics program standards. Operating organizations also 
        must demonstrate that they have used, where 
        appropriate, disciplinary measures for individuals 
        failing to detect offenses.
          (G) appropriate mechanisms to respond to detected 
        offenses and strategies to prevent future similar 
        offenses, including repayment of any funds to which an 
        organization was not entitled, and modification of 
        compliance and ethics programs to detect criminal, 
        civil, and administrative violations.
          (H) periodic reassessment of their compliance and 
        ethics program standards to ensure that the programs 
        continue to be effective as the organization and 
        facilities change.
    (2) Before December 31, 2011, the Secretary would be 
required to establish and implement a quality assurance and 
performance improvement (QAPI) program. The QAPI program would 
include multi-unit chains. Under the QAPI program, the 
Secretary would establish facility standards and provide 
technical assistance to SNFs and nursing facilities on the 
development of best practices to meet the QAPI standards 
through regulation. Within one year after the Secretary 
promulgates such regulations--SNFs and nursing facilities would 
be required to submit plans to the Secretary describing how 
they will meet the QAPI standards and implement best practices.
    (3) The Comptroller General of the Government 
Accountability Office (GAO) would be required to conduct a 
study that examined the following: (A) the extent to which 
corporations that operate large numbers of SNFs and nursing 
facilities are undercapitalized, taking into account ownership 
type (including private equity and control interests) are 
undercapitalized; (B) the effects of undercapitalization on 
quality of care, including staffing and food costs; and (C) 
options to address undercapitalization issues, such as 
requirements for surety bonds, liability insurance, or minimum 
capitalization. Within 18 months after this provision became 
effective, GAO would submit a report to Congress.
            Reason for Change
    For more than a decade, the HHS OIG and other Federal 
agencies charged with responsibility for enforcement of Federal 
law have emphasized the importance of compliance plans. In 
1998, the OIG began offering guidance on the elements of a 
model compliance plan, noting in initial guidance for clinical 
labs that ``compliance plans offer the health care provider an 
opportunity to participate in a nationwide effort to reduce 
fraud and abuse in our national health care programs.''
    Compliance program guidance for nursing homes was 
subsequently published in 2000, with supplemental guidance 
published in April 2008. In its supplemental guidance, the OIG 
observed that ``a successful compliance program addresses the 
public and private sectors' common goals of reducing fraud and 
abuse, enhancing health care providers' operations, improving 
the quality of health care services, and reducing their overall 
cost. Meeting these goals benefits the nursing facility 
industry, the government, and residents alike. Compliance 
programs help nursing facilities fulfill their legal duty to 
provide quality care; to refrain from submitting false or 
inaccurate claims or cost information to the Federal health 
care programs; and to avoid engaging in other illegal 
practices''.
    Yet not all nursing homes have voluntarily implemented 
compliance and ethics programs. The OIG believes that the 
incidence of fraud and abuse in the nursing home industry, 
which costs the government tens of millions of dollars 
annually, will decrease if all facilities are required to 
develop and implement effective internal programs that aim to 
achieve better control of claims submissions, while also 
reducing the risk of criminal and civil liabilities.
    Accordingly, and because the Federal government has a zero 
tolerance policy towards fraud and abuse, the proposed 
provisions in Section 1412 are designed to outline those 
elements of an effective and comprehensive compliance and 
ethics programs that nursing homes can use and adapt to fit the 
scale and scope of their operations.
    In addition, this Section proposes that nursing homes 
develop Quality Assurance and Performance Improvement (QAPI) 
programs, which are vital for health care providers of all 
types. QAPI programs are designed to make health care 
organizations recognize and establish comprehensive systems 
that aim to deliver patient-centered care encompassing all 
individuals in an organization, from board to bedside, in an 
environment that promotes and demonstrates measurable improved 
outcomes for patients and families.
    To achieve this, QAPI programs that have been developed to 
date involve a range of activities, including: setting 
expectations for patient safety; setting priorities for areas 
requiring improvement, and approving policies and procedures 
used to organize those efforts; collecting objective data to 
demonstrate actual improvements in care, safety, and prevention 
and reduction of medical errors; development of strategies for 
reviewing and acting on quality and safety indicators; and 
documentation of evidence that staff at all levels are involved 
in quality efforts.
    Finally, Section 1412 asks the Government Accountability 
Office to undertake a study to shed light on reports that some 
nursing homes lack sufficient cash to carry on daily business 
at a level that is adequate for good patient care, which may in 
part be due to complex arrangements in which homes that are 
owned or operated by publicly or privately-held companies are 
stripped of assets to shield them from liability.

Sec. 1413. Nursing Home Compare Medicare Website

            Current Law
    There is no requirement in current law for Medicare's 
Nursing Home Compare website. The Nursing Home Compare website 
was developed by the Centers for Medicare and Medicaid Services 
(CMS) and launched in November 2002. The website was intended 
to bolster the agency's efforts to improve SNF and nursing 
facility quality of care and to make information on nursing 
home quality more accessible for long-term care consumers and 
their families. Since its launch, CMS has enhanced the website 
by adding or improving quality measures and website navigation. 
Medicare Nursing Home Compare includes national data on all 
nursing facilities that participate in Medicare and Medicaid. 
The data featured on Nursing Home Compare includes facility 
ratings, selected results from survey and certification 
inspections, and limited staffing information on SNFs and 
nursing facilities.
            Proposed Law
    The Secretary would ensure that the Nursing Home Compare 
website (or a successor website) contains additional 
information for SNFs and nursing facilities that is searchable 
and displayed in a manner that is prominent, easily accessible, 
and clearly understandable for consumers, including:
          (1) information on ownership and affiliated parties 
        as would be required under Sec. 1411 above, Required 
        Disclosure of Ownership and Affiliated Parties 
        Information, that identifies SNF and SNF facility 
        chains' ownership, governing boards, and organizational 
        structure;
          (2) information on CMS' Special Focus Facility 
        facilities (or a successor program), including the 
        names and locations of facilities that since the 
        previous quarter that were, (a) newly enrolled in the 
        program, (b) enrolled but failed to significantly 
        improve, (c) enrolled and significantly improved, (d) 
        graduated from the program, and (e) have closed 
        voluntarily or been terminated by the Secretary;
          (3) staffing data for each facility, including 
        resident census, hours of care provided per resident 
        per day, staff turnover, and tenure. These data would 
        need to be displayed in formats that are clearly 
        understandable to consumers and would permit them to 
        compare staffing differences between facilities. This 
        staffing information also would need to assist 
        consumers in comparing an individual facility's 
        staffing with state and national facility averages by 
        providing: (a) concise explanations of how to interpret 
        data (i.e., nursing home staff hours per resident day), 
        (b) differences between staffing categories and, their 
        associated training requirements, (c) the relationship 
        between staff levels and quality of care, and (d) an 
        explanation that residents with greater care needs can 
        require greater staff levels or more staff training;
          (4) links to state websites where state survey and 
        certification program information can be found, 
        including Form 2567 state inspection reports (or 
        successor forms) and facility correction plans or other 
        facility responses, along with information to guide 
        consumers in interpreting and understanding survey and 
        certification reports;
          (5) the standardized complaint form developed by the 
        Secretary under Sec. 1415 (below), which includes an 
        explanation of how complaint forms are used and how to 
        file a complaint with states' LTC ombudsman programs 
        and survey and certification programs;
          (6) summary information on the number, type, 
        severity, and outcome of substantiated complaints; and
          (7) the number of adjudicated criminal violations by 
        the nursing facility or crimes committed by nursing 
        facility employees (a) that were committed inside a 
        facility; (b) for crimes or violations committed 
        outside a facility, the instances where these were 
        elder abuse, neglect, exploitation, criminal sexual 
        abuse of an elder, or other violations that resulted in 
        serious bodily injury; and (c) the number of civil 
        monetary penalties levied against the facility, 
        employees, contractors, and other agents.
    The Secretary is further directed to undertake a Nursing 
Home Compare review and modification process that would: (1) 
address the accuracy, clarity of presentation, timeliness, and 
comprehensiveness of the information reported on the website; 
and (2) within one year after the review's completion, a 
process to modify or revamp the website in accordance with the 
Secretary's findings. In addition, this website review process 
would include consultation with the following organizations: 
(1) state LTC ombudsman programs, (2) consumer advocacy groups, 
(3) provider stakeholder groups, and (4) representatives of 
programs or groups the Secretary determines appropriate.
    To improve the public's access to timely information on 
state survey and certification inspections, states would be 
required to submit information, including any enforcement 
actions, to the Secretary at the same time or before the state 
nursing home surveyors sent that information to facilities. 
Corrections to prior information submitted to the state also 
would need to be submitted to the Secretary in a timely manner. 
The Secretary is directed to update the Nursing Home Compare 
website with the information from states' survey and 
certification inspections as expeditiously as practicable, but 
at least quarterly. This requirement would be required within 
one year after this provision became effective.
    The Secretary is also directed to conduct a Special Focus 
Facility program for enforcement of requirements for SNFs and 
nursing facilities that the Secretary identified as having 
substantially failed to meet applicable requirements of this 
provision. Under the Special Focus Facility program, the 
Secretary would conduct a survey of each facility in the 
program at least every six months.
    Within one year of the effective date of this provision, 
SNFs and nursing facilities would be required to make available 
for any individual's review reports on surveys, certifications, 
and complaint investigations for the past three years and to 
post notices in prominent and accessible facility areas that 
these reports are available for inspection. These reports would 
need to exclude information identifying complainants or 
residents.
    The Secretary would be required to provide guidance to 
states on how to establish Internet links to Form 2567 state 
inspection reports (or successor forms), complaint 
investigation reports, and facilities' correction plans or 
other responses to Form 2567. This information would be 
available on the state website for SNFs and nursing facilities. 
These reports also would be required to exclude information 
that identifies complainants or residents.
    States would be required to maintain a consumer-oriented 
website that provided useful information on all SNF and nursing 
facilities operating within that state. The information on each 
facility would include Form 2567 state inspection reports (or 
successor forms), complaint investigation reports, facilities' 
plans of correction, and other information as determined useful 
by the Secretary or the state for consumers to use in assessing 
the quality of LTC options and the quality of care in 
individual facilities.
            Reason for Change
    The Federal website, Nursing Home Compare, is visited 
annually by tens of thousands of individuals looking for 
reliable, accurate information about a suitable facility for a 
loved one. While already a valuable resource, this website 
would greatly benefit from the addition of certain critical 
information--e.g., staffing levels in facilities based on real-
time data; information about who the owners and affiliated 
business partners of nursing homes are; links to state websites 
where electronic copies of annual inspection reports can be 
found; and information about any substantiated complaints filed 
against the facility, as well as criminal violations committed 
by staff.
    Consumers would also benefit from the proposal in this 
Section that calls for states to develop clear information 
about the quality and safety of nursing homes as part of their 
websites, including explanations of how to interpret State 
inspection reports and plans of correction submitted by 
facilities when inspectors find deficiencies in quality and 
safety.
            Effective Date
    The modifications of Nursing Home Compare described in this 
section would become effective within one year of enactment, 
except that the Secretary would ensure that Ownership and 
Affiliated Parties, and Accountability Information as described 
in Sec. 1411, would be included on the website within one year 
of the date when those requirements were implemented.

Sec. 1414. Reporting of Expenditures

            Current Law
    There are no comparable provisions in current law that 
require SNFs or nursing facilities to report expenditures.
            Proposed Law
    Within one year of the effective date of this provision, 
the Secretary would consult with private sector accountants 
with knowledge of SNF cost reports to re-design cost report 
forms to separately capture wages and benefit expenditures for 
direct care staff.
    Beginning with cost reports submitted three years after the 
effective date of this provision, SNFs would need to separately 
report direct care staff wages and benefits including (at least 
breaking out) (1) registered nurses, (2) licensed professional 
nurses, (3) certified nurse assistants, and (4) other medical 
and therapy staff.
    Within 30 months (2\1/2\ years) of the effective date of 
this provision, the Secretary, in consultation with OIG, 
Medicare Payment Advisory Commission (MedPAC), and other 
experts identified by the Secretary, would categorize SNF's 
newly collected annual expenditure data for each facility, 
regardless of payment source, into the following functional 
accounts: spending on direct care services, including nursing, 
therapy, and medical services; spending on indirect care, 
including housekeeping and dietary services; capital assets, 
including building and land costs; and administrative services 
costs. The Secretary would establish procedures to make the 
expenditure data submitted under this provision, readily 
available to interested parties upon request, subject to 
requirements established by the Secretary.
            Reason for Change
    This provision would make it possible for policymakers and 
other interested parties to accurately determine and analyze 
how much funding a facility or chain dedicates to one of the 
most important aspects of resident care--staffing. Medicare 
cost reports do not currently capture this information, with 
the result that facilities may, if they wish, easily save money 
by making decisions to cut staff. While research has 
established that staffing levels below a certain threshold are 
detrimental to good resident care, no consensus among 
policymakers has yet been achieved about the level of staffing 
that should be in place to assure good or optimal care. This 
new source of data on what facilities spend on staffing, in 
conjunction with Section 1416 below on reporting of staffing 
levels, would allow facilities to assess the amount of total 
funding that they dedicate to nurse aides with overall quality 
of care.

Sec. 1415. Standardized Complaint Form

            Current Law
    There are no provisions in current law requiring use of a 
standardized complaint form. Oversight of nursing homes is a 
shared federal-state responsibility. Based on statutory 
requirements, CMS defines standards that nursing homes must 
meet to participate in the Medicare and Medicaid programs and 
contracts with states to assess whether homes meet these 
standards through annual surveys and complaint investigations. 
A range of statutorily defined sanctions is available to CMS 
and the states to help ensure that homes maintain compliance 
with federal quality requirements. CMS also is responsible for 
monitoring the adequacy of state survey activities.
    Every nursing home receiving Medicare or Medicaid payment 
must undergo a standard survey not less than once every 15 
months, and the statewide average interval for these surveys 
must not exceed 12 months. During a standard survey, separate 
teams of surveyors conduct a comprehensive assessment of 
federal quality-of-care and fire safety requirements. In 
contrast, complaint investigations generally focus on a 
specific allegation regarding resident care or safety.
    The quality-of-care component of a survey focuses on 
determining whether (1) the care and services provided meet the 
assessed needs of the residents and (2) the home is providing 
adequate quality care, including preventing avoidable pressure 
sores, weight loss, and accidents. Nursing homes that 
participate in Medicare and Medicaid are required to 
periodically assess residents' care needs in 17 areas, such as 
mood and behavior, physical functioning, and skin conditions, 
in order to develop an appropriate plan of care. Such resident-
assessment data are known as the minimum data set (MDS). To 
assess the care provided by SNF and nursing facilities, 
surveyors select a sample of residents and (1) review data 
derived from the residents' MDS assessments and medical 
records; (2) interview nursing home staff, residents, and 
family members; and (3) observe care provided to residents 
during the course of the survey. CMS establishes specific 
investigative protocols for state survey teams--generally 
consisting of RNs, social workers, dieticians, and other 
specialists--to use in conducting surveys. These procedural 
instructions are intended to make the on-site surveys thorough 
and consistent across states.
    Complaint investigations provide an opportunity for state 
surveyors to intervene promptly if problems arise between 
standard surveys. Complaints may be filed against a home by a 
resident, the resident's family, or a nursing home employee 
either verbally, via a complaint hotline, or in writing. 
Surveyors generally follow state procedures when investigating 
complaints but must comply with certain federal guidelines and 
time frames. In cases involving resident abuse, such as 
pushing, slapping, beating, or otherwise assaulting a resident 
by individuals to whom their care has been entrusted, state 
survey agencies may notify state or local law enforcement 
agencies that can initiate criminal investigations. States must 
maintain a registry of qualified nurse aides, the primary 
caregivers in nursing homes, that includes any findings that an 
aide has been responsible for abuse, neglect, or theft of a 
resident's property. The inclusion of such a finding 
constitutes a ban on nursing home employment.
            Proposed Law
    The Secretary would be required to develop a standardized 
complaint form for SNF and nursing facility residents or their 
representatives to use in filing complaints on SNFs and nursing 
facilities to state survey and certification agencies and state 
LTC ombudsman programs. States would be required to make the 
new standardized complaint form available on request to SNF 
residents, people acting on behalf of residents, and employees 
or representatives of SNF and nursing facility employees.
    States also would be required to establish a complaint 
resolution process that ensures that SNF and nursing facility 
residents, their representatives, or employees are not denied 
access to residents or retaliated against for complaining, in 
good faith, about quality of care or other issues in a 
facility, regardless of whether residents, their 
representatives or employees used the standardized form or some 
other method to submit their complaint. The state complaint 
resolution procedures would be required to include (a) 
procedures to ensure accurate tracking of complaints, (b) 
procedures to determine the likely severity of the complaint 
and procedures to investigate complaints, (c) deadlines for 
responding to complaints and procedures that would enable a 
complainant to track the complaint and investigation, and (d) 
procedures to ensure that the identity of complainants would be 
kept confidential.
    The complaint resolution process would be required to 
include prohibitions against retaliation to ensure that SNF and 
nursing facility employees would not be penalized, 
discriminated, or retaliated against because they or anyone 
they requested to act on their behalf, in good faith, 
complained about the quality of care, services provided, or 
other issues related to quality of care or service in a nursing 
facility. This retaliatory prohibition applies regardless 
whether employees used the new standard or some other complaint 
method. In addition, retaliatory actions would not affect any 
aspect of complainants' employment, including discharge, 
promotion, compensation, terms, conditions, or employment 
privileges, or termination of a contract for services. SNFs 
would not be permitted to file complaints or reports with state 
professional disciplinary agencies against current or former 
employees because they (or their agents), acting in good faith, 
submitted complaints about quality of care or services in their 
employers' facility.
    SNF and nursing facility employees who believed they were 
penalized, discriminated, or retaliated against, or lost 
service contracts because they submitted a quality-of-care 
complaint against a SNF, would be able to seek remedy in an 
appropriate U.S. district court. U.S. district courts would 
have jurisdiction to grant complete relief, regardless of 
citizenship or amount in question, but not limited to 
injunction, such as reinstatement, compensatory damages 
(reimbursement of lost wages, compensation, and benefits), 
costs of litigation (including attorney's and expert witnesses' 
fees), exemplary damages, and other relief deemed proper by the 
court.
    SNF and nursing facility employees' rights under this 
provision would not be diminished by contract or other 
agreement and would not diminish greater protection through 
other federal or state laws, contracts, or agreements. Nothing 
in this provision would prevent a resident, an agent acting on 
their behalf, or an employee from submitting a complaint in any 
manner and not necessarily by using the standardized complaint 
form. SNFs and nursing facilities would be required to 
conspicuously post in an appropriate location a sign as 
specified by the Secretary, that identifies employees' rights 
to bring complaints against the facility. Individuals would be 
considered to be acting in ``good faith'' when submitting 
complaints if they believe (1) their complaint is true, and (2) 
a violation has or may have occurred related to Medicare 
provisions of the Social Security Act. These amendments would 
apply one year after the effective date of this provision.
            Reason for Change
    Currently, there is inadequate documentation by the Federal 
government and by states of the number and type of complaints 
that residents and families file, the processes used to examine 
these complaints, and how and if they are resolved. Section 
1415 is designed to address these flaws by requiring states to 
establish more standardized, uniform processes and procedures 
for handling and addressing complaints, and in so doing, to 
improve resident care. This Section also puts in place 
protections for nursing home employees who could--but who may 
in some instances today decide not to bring a serious quality 
or safety issue to the attention of supervisors or owners--for 
fear of facing discrimination, intimidation or threat of 
termination.

Sec. 1416. Ensuring Staffing Accountability

            Current Law
    There are no comparable provisions in current law for SNF 
and nursing facilities to report staff levels that are derived 
from payroll data in a uniform format.
            Proposed Law
    Within two years after enactment SNFs and nursing 
facilities would be required to electronically submit to the 
Secretary direct care staffing information, including agency 
and contract staff. In developing specifications and direct 
care staffing data requirements, the Secretary would consult 
with state long-term care ombudsman programs, consumer advocacy 
groups, provider stakeholder groups, employees and their 
representatives, and other parties deemed appropriate by the 
Secretary. The direct care staffing specifications would be 
based on payroll and other verifiable data provided by SNFs and 
nursing facilities to the Secretary in a uniform format, and 
reporting on contract staff would be separate from information 
on employees. Specifications would include (1) work categories 
of certified employees, including registered nurses, licensed 
practical nurses, licensed vocational nurses, certified nursing 
assistants, therapists, or other medical personnel; (2) 
resident census data and information on resident case mix; (3) 
an established reporting schedule; and (4) employee tenure and 
turnover, as well as hours of care provided by each certified 
employee category, per resident per day.
            Reason for Change
    Congress and the States have long debated the merits of 
instituting minimum staffing levels for nursing homes in order 
to provide a level of consistent care that cannot otherwise be 
maintained. However, such discussions have frequently been 
hampered by a lack of sound data on actual staffing levels in 
facilities across the country. By requiring CMS to develop an 
electronic system that facilities would use to report staffing 
data extracted from their payroll systems several times a 
year--and that is categorized to distinguish staff providing 
direct care from other types of work--Section 1416 will make it 
possible to more precisely quantify and analyze what level of 
staffing correlates to high-quality services. The information 
from Section 1414 above on what facilities spend on staffing, 
as compared to other types of costs, will further inform 
policymakers and facilities about the costs associated with 
providing optimal staffing in different types of facilities 
with varying case mix.

                     Part 2--Targeting Enforcement


Sec. 1421. Civil Money Penalties

            Current Law
    Under Medicaid law, states have authority either by 
regulation or law to impose money penalties, deny payments, 
appoint temporary management to bring facilities into 
compliance, and close facilities if nursing facilities fail to 
meet state plan requirements or have deficiencies that 
jeopardize residents' health or safety. State expenses for 
enforcement may be funded under the proper and efficient state 
plan administration provision of the Medicaid Statute (Title 
XIX of the Social Security Act). States also have authority to 
establish reward programs for nursing facilities that deliver 
the highest quality care to medical assistance patients and 
fund these incentive rewards programs under Medicaid's proper 
and efficient administration provisions.
            Proposed Law
    For SNFs and nursing facilities, the Secretary--and for 
nursing facilities, states--would have the authority to impose 
per instance or per day civil money penalties (CMPs) for each 
instance or each day of noncompliance (as determined 
appropriate by the Secretary). The amounts of the per instance 
CMPs would be the following: (1) in the case where a deficiency 
is the direct proximate cause of a resident's death, the 
penalty would not exceed $100,000; (2) in each case where a 
facility is cited for a resident's actual harm or immediate 
jeopardy, an amount equal to or greater than $3,050, but not 
more than $25,000; and (3) in each case of any other 
deficiency, penalty amounts per deficiency would range from not 
less than $250 to not more than $3,050. The amount of the 
applicable per day CMPs would be the following: (1) an amount 
equal to or greater than $3,050 up to $25,000 where facilities 
were cited for deficiencies that caused actual harm or 
immediate jeopardy to residents; and (2) an amount between $250 
and $3,050 for each case of any other deficiency.
    Subject to limitations where reductions are prohibited if 
SNFs and nursing facilities self-report and promptly correct 
deficiencies within 10 calendar days after imposition of a CMP, 
the Secretary--or the state if applicable--may reduce the 
amount of the imposed CMP by up to 50%. The Secretary--or the 
state if applicable--would be prohibited from reducing CMPs for 
SNFs where the Secretary had previously reduced a penalty for 
that facility in the last year, with respect to a repeat 
deficiency. The Secretary--or the state if applicable--would be 
prohibited from reducing CMPs for other deficiencies: (1) where 
the deficiency was found to result in a pattern of harm or 
widespread harm that immediately jeopardizes residents' safety 
or health; or (2) where a deficiency resulted in the death of a 
patient.
    Aggregate CMP reductions would not be permitted to exceed 
35% on the basis of self-reporting, on the basis of a waiver or 
an appeal, or on the basis of both a waiver and an appeal. In 
collecting CMPs, the Secretary--or the state if applicable--
must provide for the facility to participate in an independent 
informal dispute resolution process that generates a written 
record prior to penalty collection, and cannot impose 
additional per-day penalties during the pendency of the dispute 
resolution process; may provide an escrow account for fees to 
be held beginning on the earlier of 90 days after fees are 
imposed or the date the informal resolution process was 
completed; may provide that penalty fees are held in escrow 
accounts until appeals are resolved.
    In situations where appeals are resolved in favor of 
facilities, the Secretary--or the state if applicable--may 
provide, if escrow accounts are established, that penalty fees 
would be returned to facilities with interest; and may provide, 
when facility appeals are unsuccessful, that some portion of 
penalty amounts are used to support state LTC ombudsman 
activities and to protect residents, including residents who 
reside in facilities that voluntarily or involuntarily close or 
are decertified.
    The activities funded with CMPs may include using the 
penalty funds to offset costs of relocating residents to home- 
and community-based settings and other facilities, as well as 
projects to support resident and family councils and other 
consumer quality of care involvement (including joint training 
of staff and surveyors, technical assistance for facilities 
under quality assurance programs, the appointment of temporary 
management, and other activities approved by the Secretary).
    Provisions of the Social Security Act, Section 1128A 
(except subsections (a) and (b)) and provisions that require a 
hearing prior to imposing CMPs, also would apply to the CMPs 
described here.
    The CMP amendments would apply one year after the effective 
date of the provision.
            Reason for Change
    Multiple reports issued by the Government Accountability 
Office have suggested that the penalties originally legislated 
as part of the 1987 Nursing Home Reform Act, and which took 
effect in 1994, may not be having a significant deterrent 
effect for several reasons. For example, a GAO report issued in 
December 2005, ``Nursing Homes: Despite Increased Oversight, 
Challenges Remain in Ensuring High-Quality Care and Resident 
Safety,'' noted that ``state surveyors continue to understate 
serious deficiencies, as shown by the larger number of serious 
deficiencies identified in federal comparative surveys than in 
state surveys of the same homes.''
    Earlier GAO work found that the impact of monetary 
penalties was often weak due to large backlogs of appeals filed 
by providers. Those backlogs in turn had the effect of 
encouraging the federal government ``to settle appealed cases, 
often reducing the size of the fine, and delay the imposition 
of the fine even if it is ultimately upheld after appeal. As a 
result,'' the agency's 1999 report concluded, ``it is not 
surprising that some nursing home owners routinely appeal 
imposed penalties.''
    More recently, the HHS Office of Inspector General 
testified before the House Energy and Commerce Oversight and 
Investigations Subcommittee in May 2008 that CMPs ``are an 
important element of an effective enforcement strategy, 
especially in cases when nursing homes are out of compliance 
for designated time periods or have deficiencies that put 
residents in immediate jeopardy,'' but also noted that ``this 
tool has not been used to its full potential. For example, in 
an April 2005 report, OIG found that although $81.7 million in 
CMPs were imposed during 2000 and 2001, CMS had collected only 
$34.6 million (42 percent) by the end of 2002. We found that 
CMS did not utilize the full dollar range allowed for CMPs and 
that impositions were frequently at the lower end of the 
allowed ranges.''
    In addition, a 2009 analysis by the Center for Medicare 
Advocacy argued that fines for very serious deficiencies are 
too low to affect provider behavior. The Center's study of all 
federal administrative decisions issued in 2007 for nursing 
home enforcement cases found that the fines levied were low in 
relation to the harm suffered: For example, in one case, a fine 
of only $4,050 was assigned for the strangulation death of a 
resident on a bedrail. In response, the Center notes, some 
states have enacted laws with far higher penalties: California, 
for example, has a penalty of up to $100,000 for causing the 
death of a resident.
    The provisions in this Section are designed to update and 
more effectively target CMP authority by focusing higher 
penalties only on serious quality of care and safety 
deficiencies that cause harm to residents, that put their 
health in immediate jeopardy, or that are life-threatening. 
Other modifications would allow facilities that self-report and 
promptly correct deficiencies to receive a reduction in their 
CMP of 50%. Finally, the Section aims to make collection of 
CMPs much more timely, by allowing the Federal government and 
States to collect fines following an initial independent 
dispute resolution process (IIDR) and to escrow these funds, 
pending the results of any further appeals.
    To implement IIDR, the Secretary shall promulgate 
regulations pursuant to notice and comment rulemaking under the 
Administrative Procedures Act. Such regulations shall allow 
IIDR to be conducted by an independent state agency (including 
an umbrella agency, such as the Health and Human Services 
Commission), a Quality Improvement Organization, or the state 
survey agency, so long as the participants in IIDR are not 
involved in the initial decision to cite the deficiency(ies) 
and impose the remedy(ies). Whoever is authorized to conduct 
IIDR must not have any conflicts of interest. The regulations 
may address the type of IIDR available to SNFs and NFs (desk 
review or in-person meeting) and the circumstances of each; may 
determine whether and when attorneys may represent the parties 
before IIDR; and may limit the duration of in-person meetings, 
depending on the scope and severity of deficiencies and other 
factors as determined by the Secretary.
    As under current informal dispute resolution (IDR) 
processes, facilities may challenge only the factual basis of 
the deficiency. They may not challenge issues related to 
surveyors' compliance with the survey process or the scope and 
severity of the deficiencies. Also as under current IDR 
processes, states and the Secretary retain the right to reject 
the IIDR recommendations and to cite deficiencies and to impose 
remedies, as the states and the Secretary determine 
appropriate. Finally, as authorized by regulations governing 
informal review procedures of the Office of Surface Mining, 30 
C.F.R. 723,18(b)(2), any person shall have the right to attend 
and participate in the conference.

Sec. 1422. National Independent Monitor Pilot Program

            Current Law
    No provision.
            Proposed Law
    Within one year of the effective date of this provision, 
the Secretary in consultation with CMG would establish a pilot 
program to develop, test, and implement use of an independent 
monitor to oversee interstate and large intrastate SNF and 
nursing facility chains. The Secretary would select SNF and 
nursing facility chains to participate in a pilot independent 
monitor program from among those chains that apply to 
participate. The pilot independent monitor program would be 
conducted over two years. The pilot independent monitor program 
would commence within one year of the effective date of this 
provision.
    The Secretary shall evaluate a chain to participate in the 
pilot program based on criteria selected by the Secretary, 
including chains with one or more facilities in CMS' Special 
Focus Facility program (or a successor program) or one or more 
facilities with a record of repeated serious safety and quality 
of care deficiencies.
    An independent monitor that enters into a contract to 
participate in the pilot program would have the following 
responsibilities: conduct periodic reviews and root-cause 
deficiency analyses of chains to assess their compliance with 
state and federal laws and regulations; sustained oversight of 
chains (whether public or private) to involve chain owners and 
principal partners in facilitating compliance with state and 
federal laws and regulations applicable to facilities; analyze 
management structure, expenditure distribution, and nurse staff 
levels of facilities of the chain compared to resident census, 
staff turnover rates, and tenure; report findings and 
recommendations with respect to reviews, analyses, and 
oversight to the chain and facilities in the chain, to the 
Secretary and to relevant states; and publish the results of 
these reviews, analyses, and oversight.
    Within 10 days of a chain receiving a finding (of 
deficiency) from the independent monitor, the chain would be 
required submit a report to the independent monitor (1) that 
outlines corrective actions the chain will take to address the 
independent monitor's recommendations or (2) indicates that the 
chain will not implement the recommendations and why it will 
not do so.
    Within 10 days after receiving the chain's response-report, 
the independent monitor would be required to submit a report 
containing the monitor's final recommendations to: the chain, 
the chain's facilities, the Secretary, and the state or states 
where the facilities in question operate.
    The chain would be responsible for a portion of the costs 
associated with the appointment of the pilot program 
independent monitors. The chain would pay their portion of the 
costs to the Secretary. The Secretary would determine the 
amount and procedures for collecting the independent pilot 
program costs. The Secretary would have authority to waive 
provisions of the Medicare and Medicaid statutes (Titles XVIII 
and XIX of the Social Security Act) if necessary to implement 
the independent monitor pilot program. Appropriations necessary 
to carry out the independent monitor pilot program would be 
authorized.
    The OIG would evaluate the independent monitor program 
within six months of completion of the program. The OIG would 
submit a report to Congress on the independent monitor program 
that included recommendations for legislative and 
administrative action.
            Reason for Change
    Promising work pioneered by the HHS OIG in the context of 
agreements with nursing home chains that have chronic, severe 
quality and safety problems, and which agree to a system of 
close monitoring by independent contractors with expertise to 
undertake ``root cause analyses'' provide a model for CMS, as 
the principal regulatory agency, to develop a similar mechanism 
of oversight.

Sec. 1423. Notification of Facility Closure

            Current Law
    Medicare and Medicaid law identifies patients' rights and 
SNF and nursing home requirements in ensuring residents are 
aware of their rights. Residents have specific discharge and 
transfer rights, which include advance notification in cases 
where facilities close.
            Proposed Law
    SNF and nursing facility administrators would be required 
to issue written notification of intent to close to the 
Secretary, LTC Ombudsman programs in the state where facilities 
are located, facility residents, and facility residents' legal 
representatives or other responsible parties. SNF and nursing 
facility administrators would need to provide 60 days' notice 
of their pending closure or, if closed by the Secretary, within 
the time frame specified by the Secretary. SNF and nursing 
facility administrators would be required not to admit new 
patients on or after written notice of planned closure; and to 
include in the closure notices the plans to transfer and 
adequately relocate facility residents by a specified date 
prior to closure that has been approved by the state, and which 
also would include assurances that residents will be 
transferred to the most appropriate facilities or settings in 
terms of quality, services, and location as determined by 
residents' needs, best interests, and preferences.
    The state would ensure that before SNFs and nursing 
facilities close, all residents would be relocated to 
alternative settings, such as home- and community-based 
settings or other facilities, taking into consideration the 
needs and best interests of each resident. The Secretary may 
determine the appropriate payment and whether and for how long 
to continue payments to closing facilities during the period 
after the notification of impending closure is submitted and 
the date when residents are transferred to other facilities or 
alternative settings.
            Reason for Change
    When nursing homes close, residents and their families are 
left to quickly find an alternative setting for care, a task 
that can be challenging under a tight timeframe and if there is 
limited availability or variable quality in neighboring 
institutions. This provision ensures that residents and their 
families have proper advance notice of a closure, and that 
residents are relocated prior to closure. The Committee 
recognizes the importance of making sure that the needs and 
best interests of each resident are taken into account during 
the relocation process.
            Effective Date
    One year after the date of enactment of this Act.

                    Part 3--Improving Staff Training


Sec. 1431. Dementia and Abuse Prevention Training

            Current Law
    Under Medicare law, the Secretary establishes SNF 
requirements for nurse aide training and competency evaluation 
programs and requirements for states to follow in evaluating 
and reevaluating these training programs. Similarly under 
Medicaid law, the Secretary establishes nursing facility 
requirements for nurse aide training and competency evaluation 
programs and requirements for states to follow in evaluating 
and re-evaluating these training programs.
            Proposed Law
    This provision would add dementia and abuse prevention 
training to staff training requirements for SNF and nursing 
facilities. The Secretary would revise initial nurse aide 
training, competency, and evaluation program requirements to 
include dementia management and patient abuse prevention 
training. If determined to be appropriate, the Secretary also 
may include dementia management training and patient abuse 
prevention in ongoing nurse aide training, competency, and 
evaluation program requirements.
            Reason for Change
    It has been reported that the majority of older nursing 
home residents have some form of psychiatric illness, with 
dementia affecting 1 out of 5 residents. Timely recognition and 
intervention are key to the optimal care of older adults with 
dementia, which may be attributable to a number of causes. 
Additionally, the frail elderly are some of the most vulnerable 
members of our society particularly when patients have co-
morbid conditions that will prohibit them from articulating 
maltreatment by others. This provision will direct the 
Secretary to include dementia and abuse prevention training of 
nursing home staff.
            Effective Date
    One year after the date of enactment of this Act.

Sec. 1432. Study and Report on Training Required for Certified Nurse 
        Aides and Supervisory Staff

            Current Law
    Medicare and Medicaid law have provisions that govern 
training for nurse aides for both SNF and nursing facilities. 
These laws require the Secretary to establish requirements for 
nurse aide training and competency evaluation programs as well 
as parameters for states to use in monitoring these programs.
            Proposed Law
    The Secretary would be required to conduct a study within 
two years of the effective date of this provision on the 
content of certified nurse aide and supervisory staff training 
in SNFs and nursing facilities. The report shall include the 
following: whether the 75 hours of initial nurse aide training 
required should be increased and if so, what the required 
number of recommended initial training hours should be 
(including dementia related training); and whether the 12 hours 
per year of ongoing nurse aide training should be increased and 
what content changes are recommended. In assessing the number 
of hours of initial nurse aide training required, the Secretary 
would consult with states that already have increased the 
number of hours of initial training above 75 hours. Within two 
years from the effective date of this provision, the Secretary 
would be required to submit a report to Congress on the 
certified nurse aide and supervisory training requirements. The 
report would include recommendations for legislative and 
administrative action.
            Reason for Change
    Certified Nurse Aides and supervisory staff are some of the 
primary caregivers in a skilled nursing facility. It is 
important to know whether existing training requirements are 
sufficient to ensure appropriate care for the patient 
population in these facilities.

                    Subtitle C--Quality Measurements


Sec. 1441. Establishment of National Priorities for Quality Improvement

            Current Law
    There are no provisions in current law that require the 
development of national priorities for performance improvement 
(directed either at the Secretary of Health and Human Services 
or the Agency for Healthcare Research and Quality).
    However, Section 1890 of the Social Security Act requires 
the Secretary to identify and have in effect a contract with a 
consensus-based entity, such as the National Quality Forum, to 
perform the following duties: (1) synthesize evidence and 
convene stakeholders to make recommendations, with respect to 
activities conducted under this Act, on an integrated national 
strategy and priorities for health care performance measurement 
in all applicable settings; (2) provide for the endorsement of 
standardized health care performance measures; (3) establish 
and implement a process to ensure that endorsed measures are 
updated or retired based on new evidence; (4) promote the 
development of electronic health records that facilitate the 
collection of performance measurement data; and (5) report 
annually to Congress.
    The National Quality Forum has been awarded this contract 
and recently released its first report, Improving Healthcare 
Performance: Setting Priorities and Enhancing Measurement 
Capacity, in fulfillment of this statutory requirement.
            Proposed Law
    This provision would amend Title XI of the Social Security 
Act, as amended by section 1401(a), by adding a new Part E- 
Quality Improvement- Establishment of National Priorities for 
Performance Improvement. Specifically, it would add a new 
section 1191 to establish national priorities for performance 
improvement.
    This Section would require the Secretary to establish and 
periodically update (not less frequently than triennially) 
national priorities for performance improvement. Specifically, 
it would require the Secretary, when establishing and updating 
national priorities, to solicit and consider recommendations 
from multiple outside stakeholders.
    This provision would require, with respect to the national 
priorities for performance improvement, the Secretary to give 
priority to areas in the delivery of health care services that 
(1) address a large burden of disease, as specified; (2) have 
the greatest potential to decrease morbidity and mortality in 
the United States, as specified; (3) have the greatest 
potential for improving the performance, affordability, and 
patient-centeredness of health care; (4) address health 
disparities across groups and areas; and (5) have the potential 
for rapid improvement due to existing evidence or standards of 
care.
    For the purposes of this Section: (1) consensus-based 
entity would mean an entity with a contract with the Secretary 
under Section 1890 of the Social Security Act; and (2) quality 
measure would mean a national consensus standard for measuring 
the performance and improvement of population health, or of 
institutional providers of services, physicians, and other 
health care practitioners in the delivery of health care 
services.
    This provision would require the Secretary to provide for 
the transfer, from the Federal Hospital Insurance Trust Fund 
and the Federal Supplementary Medical Insurance Trust Fund, of 
$2 million for each of the fiscal years 2010 through 2014. It 
would also authorize the appropriation of $2 million for each 
of the fiscal years 2010 through 2014 from any funds in the 
Treasury not already appropriated.
            Reason for Change
    Currently, there is no coordinated effort at the national 
level for prioritizing efforts to improve performance of the 
care delivery system or to measure those efforts. Section 1890 
of the Social Security Act establishes a process to prioritize 
performance improvement and measurement within the Medicare 
program. This provision would expand and build on those efforts 
by establishing priorities for health performance improvement 
at the national level. It is the Committee's intent that the 
priorities established by the Secretary will have wide 
applicability and help direct health improvement activities 
across the nation's health care system.
            Effective Date
    Date of enactment.

Sec. 1442. Development of New Quality Measures; GAO Evaluation of Data 
        Collection Process for Quality Measurement

            Current Law
    Section 1110(a)(1) of Title XI of the Social Security Act 
provides general authority to appropriate such sums as may be 
necessary for making grants to States and public and other 
organizations and agencies for research that will help improve 
the administration and effectiveness of the programs carried 
out under the Social Security Act, among other things.
    The Agency for Healthcare Research and Quality (AHRQ) has 
significant existing statutory authorities with respect to the 
development of quality measures. Specifically, the Agency's 
mission, among other things, is to promote health care quality 
improvement by conducting and supporting research that develops 
and presents scientific evidence regarding all aspects of 
health care, including methods for measuring quality and 
strategies for improving quality (Sec. 901 of the PHSA).
    Section 912 of the PHSA requires AHRQ to provide support 
for public and private efforts to improve health care quality, 
and that the role of the Agency shall specifically include the 
ongoing development, testing, and dissemination of quality 
measures, including Measures of health and functional outcomes 
and the compilation and dissemination of health care quality 
measures developed in the private and public sector. To comply 
with this last requirement, the Agency has established the 
National Quality Measures Clearinghouse, an online resource 
that compiles and catalogues quality measures.
    Finally, Section 917 of the PHSA requires AHRQ to 
coordinate all research, evaluations, and demonstrations 
related to health services research, quality measurement and 
quality improvement activities undertaken and supported by the 
Federal Government.
            Proposed Law
    This section would amend Part E of Title XI of the Social 
Security Act, as added by section 1441, by adding two new 
sections: Section 1192: development of new quality measures and 
Section 1193: GAO evaluation of data collection process for 
quality measurement.
            Section 1192
    This Section would require the Secretary to enter into 
agreements with qualified entities to develop quality measures 
for the delivery of health care services in the United States. 
The Secretary would be authorized to carry out these agreements 
by contract, grant, or otherwise. In addition, this Section 
would require the Secretary to seek public input and take into 
consideration recommendations of the consensus-based entity 
with a contract with the Secretary under Section 1890(a) of the 
Social Security Act. The Secretary would be required, as 
specified, to determine areas in which quality measures for 
assessing health care services in the United States are needed.
    Quality measures developed under these agreements would be 
required to be designed (1) to assess outcomes and functional 
status of patients; (2) to assess the continuity and 
coordination of care and care transitions, as specified; (3) to 
assess patient experience and patient engagement; (4) to assess 
the safety, effectiveness, and timeliness of care; (5) to 
assess health disparities as specified; (6) to assess the 
efficiency and resource use in the provision of care; (7) to 
the extent feasible, to be collected as part of health 
information technologies supporting better delivery of health 
care services; (8) to be available free of charge to users for 
the use of such measures; and (9) to assess delivery of health 
care service to individuals regardless of age.
    This provision would also require the Secretary to make 
proposed quality measures available to the public; would 
authorize the Secretary to use amounts made available under 
this Section to fund the testing of proposed quality measures 
by qualified entities, as specified; and would authorize the 
Secretary to use amounts made available under this Section to 
fund the updating, by consensus-based entities, of quality 
measures that have been previously endorsed by such an entity 
as new evidence is developed (consistent with Section 
1890(b)(3) of the Social Security Act).
    Grants would be authorized to be made under this Section 
only if an application for the grant would be submitted to the 
Secretary as specified and the Secretary would be required to 
ensure, before entering into agreements with qualified 
entities, that the entity is a public, nonprofit or academic 
institution with technical expertise in the area of health 
quality measurement.
    For purposes of carrying out this section, the Secretary 
would be required to provide for the transfer, from the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund, of $25 million each year from 
fiscal years 2010 through 2014. In addition, this section would 
authorize the appropriation of $25 million for each of the 
fiscal years 2010 through 2014 from any funds in the Treasury 
not otherwise appropriated.
            Section 1193
    This Section would require the Comptroller General of the 
United States to conduct periodic evaluations of the 
implementation of the data collection processes for quality 
measures used by the Secretary.
    It would require the Comptroller General to determine: (1) 
whether the system for the collection of data for quality 
measures provides for validation of data as relevant and 
scientifically credible; (2) whether data collection efforts 
under the system use the most efficient and cost-effective 
means in a manner that minimizes administrative burden on 
persons required to collect data and that adequately protects 
the privacy of patients' personal health information and 
provides data security; (3) whether standards under the system 
provide for an opportunity for physicians and other clinicians 
and institutional providers of services to review and correct 
findings; and (4) the extent to which quality measures are 
consistent with requirements for quality measures developed 
under this Act, as specified, or result in direct or indirect 
costs to users of such measures.
    This section would require the Comptroller General to 
report to Congress and to the Secretary on the findings and 
conclusions of the results of each such evaluation.
            Reason for Change
    Robust, accurate, and appropriate measures of health care 
quality are a critical component of improving the delivery 
system and health outcomes. It is difficult to develop and 
implement strategies to improve patient health without such 
measures, but in many cases measures do not exist or have yet 
to be fully developed. In other cases, measures do exist but 
need to be updated or modernized. Putting additional resources 
into quality measure development will speed the development of 
new measures and address shortcomings of existing measures. The 
requirement that the Comptroller General monitor the 
development and application of health quality measures will 
help ensure that such measures are being used properly.
            Effective Date
    Date of enactment.

Sec. 1443. Multi-Stakeholder Pre-Rulemaking Input Into Selection of 
        Quality Measures

            Current Law
    No provision.
            Proposed Law
    This section would amend section 1808 of the Social 
Security Act by adding a new subsection (d): Multi-Stakeholder 
Pre-Rulemaking Input into Selection of Quality Measures.
    The new subsection would require the Secretary, not later 
than December 1 before each year (beginning with 2011), to 
publish a list of measures being considered for selection for 
quality measurement by the Secretary in rulemaking with respect 
to payment systems under Title XVIII of the Social Security 
Act, as specified. This section would also require the 
consensus-based entity that has entered into a contract under 
section 1890 of the Social Security Act to convene multi-
stakeholder groups to provide recommendations on the selection 
of individual or composite quality measures, for use in public 
reporting of performance information or in public health care 
programs. The section would also require the consensus-based 
entity, not later than February 1 of each year (beginning with 
2011), to transmit to the Secretary the recommendations of 
these multi-stakeholder groups, as specified.
    This section would require the consensus-based entity, in 
convening multi-stakeholder groups, to provide for an open and 
transparent process for the activities conducted pursuant to 
such convening. This process would have to ensure that the 
selection of representatives of multi-stakeholder groups 
includes provision for public nominations for, and the 
opportunity for public comment on, such selection. This section 
would require the respective proposed rule to contain a summary 
of the recommendations made by the multi-stakeholder groups 
under this section, as well as other comments received 
regarding the proposed measures, and the extent to which such 
proposed rule follows such recommendations and the rationale 
for not following such recommendations.
    The provision would define the term ``multi-stakeholder 
groups'' to mean, with respect to a quality measure, a 
voluntary collaborative of organizations representing persons 
interested in or affected by the use of such quality measure, 
such as the following: (1) hospitals and other institutional 
providers; (2) physicians; (3) health care quality alliances; 
(4) nurses and other health care practitioners; (5) health 
plans; (6) patient advocates and consumer groups; (7) 
employers; (8) public and private purchasers of health care 
items and services; (9) labor organizations; (10) relevant 
departments or agencies of the United States; (11) 
biopharmaceutical companies and manufacturers of medical 
devices; (12) licensing, credentialing, and accrediting bodies.
    For purposes of carrying out this section, the Secretary 
would be required to provide for the transfer, from the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund under, of $1 million each year 
from fiscal years 2010 through 2014. In addition, this section 
would authorize the appropriation of $1 million for each of the 
fiscal years 2010 through 2014 from any funds in the Treasury 
not otherwise appropriated.
            Reason for Change
    The Medicare program is increasingly making use of health 
care quality measures in administration of its payment systems. 
As the program continues to evolve, the Committee expects this 
trend will continue and that a larger portion of provider 
payments will eventually become linked to performance on such 
measures. For instance, the Accountable Care Organization pilot 
program in section 1301 of this legislation will make extensive 
use of quality measures.
    Given the greater reliance on quality measures within 
Medicare, the process for selecting such measures should be an 
open and collaborative one. This section provides the Medicare 
program with a process for engaging with a wide array of 
stakeholders and interested parties, including patient advocacy 
organizations, employers, private purchasers, and providers. 
Such engagement will help ensure that Medicare selects the most 
appropriate measures for each of its payment systems and 
promote consistent use of measures among other stakeholders.
            Effective Date
    Date of enactment.

Sec. 1444. Application of Quality Measures

            Current Law
    Section 1886(b)(3)(B)(vii) of the Social Security Act 
requires hospitals to submit specified quality data to the 
Secretary in order to receive a full annual payment update. 
Section 1886(b)(3)(B)(viii)(V) provides that beginning with 
payments in fiscal year 2008, the Secretary shall add 
additional quality measures that reflect consensus among 
affected parties and, to the extent feasible and practicable, 
shall include measures set forth by one or more national 
consensus building entities.
    Section 1833(t)(17)(A)(i) of the Social Security Act 
requires hospitals to submit data on outpatient quality 
measures to the Secretary in order to receive a full outpatient 
department (OPD) fee schedule increase. In addition, section 
1833(t)(17)(C)(i) requires the Secretary to 302 develop 
measures that reflect consensus among affected parties, and to 
the extent feasible and practicable, to include measures set 
forth by one or more national consensus building entities.
    Section 1848(k) of the Social Security Act requires the 
Secretary to implement a system for the reporting by eligible 
professionals of data on specified quality measures. Section 
1848(k)(2)(C)(i) requires that for 2010 and subsequent years, 
the quality measures specified under this section will be such 
measures selected by the Secretary from measures that have been 
endorsed by the consensus-based entity with a contract under 
section 1890(a) of the Social Security Act. Section 
1848(k)(2)(C)(ii) provides an exception in the case of a 
specified area or medical topic for which feasible and 
practical measures have not been endorsed, stipulating that 
such measures may be used as long as due consideration has been 
given to measures that have been endorsed or adopted by a 
consensus organization.
    Section 1881(h)(1) of the Social Security Act requires 
renal dialysis facilities to meet (or exceed) a total 
performance score, based on quality measures as specified, in 
order to receive full payment for services furnished on or 
after January 1, 2012. In addition, section 1881(h)(2)(B) 
requires the Secretary to specify measures that have been 
endorsed by the consensus-based entity with a contract under 
section 1890(a), and authorizes the Secretary, where endorsed 
measures are not available, to use such measures provided that 
due consideration has been given to measures that have been 
endorsed or adopted by a consensus organization.
    Section 1890 of the Social Security Act requires the 
Secretary to identify and have in effect a contract with a 
consensus-based entity, such as the National Quality Forum, to 
perform certain duties. Included in these, at section 
1890(b)(2) of the Social Security Act, is a requirement that 
the consensus-based entity provide for the endorsement of 
standardized health care performance measures, as specified.
            Proposed Law
    Generally, this section places requirements on the 
Secretary when selecting quality measures for use in existing 
quality programs for inpatient, outpatient, physician and renal 
dialysis services. These requirements relate to the endorsement 
of quality measures.
    Specifically, this section would amend section 
1886(b)(3)(B) of the Social Security Act to require the 
Secretary to select measures for purposes of reporting data for 
inpatient hospital services furnished during fiscal year 2012 
and each subsequent year, that have been endorsed by the 
consensus-based entity with a contract with the Secretary under 
section 1890 of the Social Security Act. If feasible and 
practical measures were not available, the Secretary would be 
authorized to select a non-endorsed measure, providing the 
Secretary gives due consideration to endorsed or adopted 
measures. The Secretary would be required to submit non-
endorsed measures to the entity for consideration for 
endorsement, and if the entity were to not endorse the measure, 
and the Secretary were to continue to use the measure, the 
Secretary would be required to include the rationale for its 
continued use in rulemaking. This section would also amend 
section 1833(t)(17) of the Social Security Act to require that 
the provisions added to section 1886 (above) would also apply 
to quality measures for covered outpatient department services.
    This section would also amend sections 1848(k)(2)(C)(ii) 
and 1881(h)(2)(B)(ii) of the Social Security Act, to require 
the Secretary to submit non-endorsed measures for physicians' 
services and renal dialysis services, respectively, to the 
consensus-based entity for consideration for endorsement. It 
would further require the Secretary, if the measure does not 
gain endorsement and if the Secretary continues to use the 
measure, to provide a rationale for continued use in 
rulemaking.
    This section would, by amending section 1890(b)(2) of the 
Social Security Act, require the consensus-based entity with a 
contract with the Secretary in section 1890 to explain the 
reasons underlying non-endorsement of a given measure, and to 
provide suggestions about changes to such measure that might 
make such a measure potentially endorsable.
    This section would apply to quality measures applied for 
payment years beginning with 2012 or fiscal year 2012, as the 
case may be.
            Reason for Change
    To the extent feasible, the Medicare program should use 
measures of health quality that have been endorsed by a 
consensus-based organization, such as the National Quality 
Forum. The use of endorsed measures will help ensure that 
Medicare is utilizing the most appropriate and robust measures, 
while also using measures that have widespread support among 
various health care stakeholders. However, the Committee 
recognizes it is critical that the Medicare program maintain 
its independence and retain the flexibility to use non-endorsed 
measures when it deems necessary.
            Effective Date
    Date of enactment.

Sec. 1445. Consensus-Based Entity Funding

            Current Law
    Section 1890 of the Social Security Act requires the 
Secretary to identify and have in effect a contract with a 
consensus-based entity, such as the National Quality Foram, to 
perform the following duties: (1) synthesize evidence and 
convene stakeholders to make recommendations, with respect to 
activities conducted under this Act, on an integrated national 
strategy and priorities for health care performance measurement 
in all applicable settings; (2) provide for the endorsement of 
standardized health care performance measures; (3) establish 
and implement a process to ensure that endorsed measures are 
updated or retired based on new evidence; (4) promote the 
development of electronic health records that facilitate the 
collection of performance measurement data; and (5) report 
annually to Congress.
    Section 1890(d) of the Social Security Act provides for $10 
million to fund the activities of the consensus-based entity 
under contract in this section for each of fiscal years 2009 
through 2012.
            Proposed Law
    This section would amend section 1890(d) of the Social 
Security Act to provide for $10 million only for fiscal year 
2009, and $12 million for each of the fiscal years 2010 through 
2012.
            Reason for Change
    This provision is needed to provide funding available under 
CMS's current contract with the National Quality Forum to cover 
additional expenses related to implementation of section 1441 
of this legislation, regarding multi-stakeholder input on the 
selection of quality measures.
            Effective Date
    Date of enactment.

           Subtitle D--Physician Payments Sunshine Provision


Sec. 1451. Reports on Financial Relationships Between Manufacturers and 
        Distributors of Covered Drugs, Devices, Biologics, or Medical 
        Supplies Under Medicare, Medicaid, or CHIP and Physicians and 
        Other Health Care Entities and Between Physicians and Other 
        Health Care Entities

            Current Law
    Under section 1128B(b) of the Social Security Act, referred 
to as the federal anti-kickback statute, it is a felony for a 
person to knowingly and willfully offer, pay, solicit, or 
receive anything of value (i.e., ``remuneration'') in return 
for a referral or to induce generation of business reimbursable 
under a federal health care program. The statute prohibits both 
the offer or payment of remuneration for patient referrals, as 
well as the offer or payment of anything of value in return for 
purchasing, leasing, ordering, or arranging for, or 
recommending the purchase, lease, or ordering of any item or 
service that is reimbursable by a federal health care program. 
Persons found guilty of violating the anti-kickback statute may 
be subject to a fine of up to $25,000, imprisonment of up to 
five years, and exclusion from participation in federal health 
care programs for up to one year. However, a number of 
statutory and regulatory ``safe harbors'' to the anti-kickback 
statute protect various business arrangements from prosecution. 
Safe harbors include certain types of investment interests, 
personal services and management contracts, referral services, 
space rental or equipment rental arrangements, warranties, 
discounts, and employment arrangements.
    In 2003, OIG issued ``Compliance Program Guidance for 
Pharmaceutical Manufacturers'' (68 Federal Register 23731), 
which stated that pharmaceutical companies and their employees 
and agents often engage in a number of arrangements that offer 
benefits to physicians or others in a position to make or 
influence prohibited referrals under the anti-kickback statute. 
Examples of remunerative arrangements between pharmaceutical 
manufacturers and parties in a position to influence referrals 
that were cited by OIG included entertainment, recreation, 
travel, meals, or other benefits in association with 
information or marketing presentations, as well as gifts, 
gratuities, and other business courtesies. OIG indicated these 
arrangements potentially implicate the anti-kickback statute if 
any one purpose of the arrangement is to generate business for 
the pharmaceutical company.
    Under section 1877 of the Social Security Act, the federal 
prohibition on physician self-referrals, if a physician (or an 
immediate family member of a physician) has a ``financial 
relationship'' with an entity, the physician may not make a 
referral to the entity for the furnishing of designated health 
services (DHS) for which payment may be made under Medicare or 
Medicaid, and the entity may not present (or cause to be 
presented) a claim to the federal health care program or bill 
to any individual or entity for DHS furnished pursuant to a 
prohibited referral. ``Financial relationship'' is defined as 
either an ownership or investment interest or a compensation 
arrangement. An ownership or investment interest may be equity, 
debt, or other means; however, Section 1877(c) specifies that 
an ownership interest does not include certain investment 
securities which may be purchased on terms generally available 
to the public and meet additional requirements, or that are 
shares of certain regulated investment companies. A 
compensation arrangement means an arrangement involving 
remuneration between a physician or an immediate family member 
of such physician and an entity. Section 1877(f) requires an 
entity that provides covered services for which payment may be 
made under Medicare to report to the Secretary information on 
the entity's ownership, investment, and compensation 
arrangements, including the covered items and services provided 
by the entity, and the names and unique physician 
identification numbers of all physicians who have an ownership 
or investment interest in, or a compensation arrangement with 
the entity, or whose immediate relatives have such an ownership 
or investment interest or compensation relationship with the 
entity.
    Multiple states and the District of Columbia have enacted 
legislation requiring pharmaceutical and other companies to 
disclose gifts and payments made to physicians and other 
entities. These state laws generally require annual disclosures 
to the states of such gifts and payments. Certain categories of 
gifts and payments are exempted from reporting requirements 
under most of the state laws. For example, state laws may 
exempt product samples intended for free distribution to 
patients and gifts worth less than a certain amount. While 
companies may make a voluntary disclosure of these gifts and 
other payments, there are currently no similar federal 
reporting requirements.
            Proposed Law
    The bill would add a new Section 1128H of the Social 
Security Act to create certain reporting requirements 
applicable to manufacturers or distributors of a drug, device, 
biological, or medical supply for which payment may be made 
available under Medicare, Medicaid, or the State Children's 
Health Insurance Program, as well as hospitals or other 
entities that bill Medicare.
    Under the section, beginning in 2011, a manufacturer or 
distributor that provides a payment or other transfer of value 
to a covered recipient (e.g., a physician, a pharmacist, a 
hospital, a medical school, or a group purchasing organization) 
or a recipient's designee would be required to annually submit 
specified information to the Secretary regarding the 
recipients, any payments or other transfers of value, and 
information about a provided drug sample. Payments or transfers 
of value include, among other things, gifts, food, or 
entertainment, travel or trips, honoraria, research funding or 
grants, education or conference funding and consulting fees, 
profit distribution, stock or stock option grant, or any 
ownership or investment interest held by a physician in a 
manufacturer (subject to exclusion), but do not include 
payments or transfers of five dollars or less, a loan of a 
covered device for a short-term trial period for evaluation 
purposes, items or services provided under a contractual 
warranty where the terms are specified in a purchase or lease 
agreement, items given to a patient who is not acting in a 
professional capacity, in-kind items for the provision of 
charity care, a dividend or other profit distribution from or 
ownership or investment interest in a publicly traded security 
and mutual fund, compensation paid by a manufacturer or 
distributor to an employee who works solely for a manufacturer 
or distributor, and any discount or cash rebate. The 
information submitted must include the aggregate amount of all 
payments or transfers of value from manufacturers to covered 
recipients, regardless of whether such payments or transfers 
were individually disclosed. If a manufacturer or distributor 
provides a payment to another entity or individual at the 
request of or designated on behalf of a covered recipient, the 
manufacturer or distributor must disclose the payment or 
transfer under the name of the covered recipient.
    Section 1128H would allow manufacturers and distributors to 
delay submission of their reports to the Secretary of payments 
and transfers of value made to covered recipients pursuant to 
certain services furnished as part of a product development 
agreement, or in connection with a clinical investigation of a 
new drug, device, biological, or medical supply. The 
information subject to delayed reporting would be considered 
confidential and would not be subject to disclosure under the 
Freedom of Information Actor other similar federal, state, or 
local law until the date on which the information is reported.
    Manufacturers and distributors that fail to submit the 
required information in a timely manner in accordance with 
regulations would be subject to a civil monetary penalty of at 
least $1,000 but not more than $10,000 for each payment or 
transfer of value not reported, up to a maximum of $150,000 for 
each annual submission of information. Any manufacturer or 
distributor that knowingly fails to submit information would be 
subject to a civil monetary penalty of at least $10,000 but not 
more than $100,000 for each payment or transfer of value, and 
may not exceed $1 million or, if greater, 0.1 percent of the 
total annual revenue of the manufacturer or distributor.
    Each hospital or other health care entity, excluding a 
Medicare Advantage organization, that bills the Secretary under 
Medicare Part A or Part B would have to report on the ownership 
shares (other than shares generally available to the public or 
shares of certain regulated investment companies as described 
in Section 1877(c) of the Social Security Act) of each 
physician and the physician's immediate family members. 
Hospitals and other entities that fail to submit the required 
information in a timely manner in accordance with regulations 
would be subject to a civil monetary penalty of at least $1,000 
but not more than $10,000 for each ownership or investment 
interest not reported. Any hospital or other entity that 
knowingly fails to submit information would be subject to a 
civil monetary penalty of at least $10,000, but not more than 
$100,000 for each ownership or investment interest not 
reported. All funds collected by the Secretary under section 
1128H from the imposition of civil monetary penalties would be 
used to carry out the requirements of the section.
    The bill would require the Secretary to establish 
procedures no later than September 30, 2011 and on June 30 each 
year after to ensure public availability of the submitted 
information through an Internet web site that is searchable, 
has a clear and understandable format, and that meets various 
other requirements. Manufacturer and distributors would be 
responsible for the accuracy of the information that is 
submitted to the Secretary and made available on the web site, 
and the Secretary would be required to establish procedures to 
ensure that a covered recipient has an opportunity to submit 
corrections to the manufacturer with regard to information made 
public with respect to the covered recipient. Under such 
procedures, the corrections must be transmitted to the 
Secretary. Information relating to drug samples and provider 
identification numbers would not be made available to the 
public by the Secretary, but may be made available outside of 
the Department of Health and Human Services for research or 
legitimate business purposes pursuant to data use agreements.
    Under the bill, if a state attorney general has provided 
notice to the Secretary of the intent to proceed on a specific 
case and the Secretary has had an opportunity to bring an 
action and has declined to do so, the attorney general of a 
state would be permitted to bring an action against a 
manufacturer or distributor in the state for a violation of the 
section.
    Section 1128H would require the Secretary to submit a 
report to Congress no later than April 1 of each year, 
beginning in 2011, that includes information submitted in the 
preceding year by manufacturers and distributors and a 
description of any enforcement actions taken to carry out the 
section (including penalties imposed during the preceding 
year). The Secretary would also be required to submit to 
Congress a report on the results of the Disclosure of Physician 
Financial Relationships surveys required pursuant to section 
5006 of the Deficit Reduction Act of 2005. This report would be 
submitted to Congress not later than 6 months after the date 
such surveys are collected and would be made publicly available 
on an Internet web site of the Department of Health and Human 
Services. In addition, no later than April 1 of each year, 
beginning in 2011, the Secretary would be required to submit to 
states a report that includes information submitted by 
manufacturers and distributors in the preceding year, as well 
as other information.
    Additionally, beginning on January 1, 2011, Section 1128H 
would preempt any law or regulation of a state or its political 
subdivision that requires a manufacturer or distributor to 
disclose or report information regarding a payment or other 
transfer of value to a covered recipient, in accordance with 
the section. However, the section would not preempt state laws 
or regulations under which (A) the disclosure or reporting of 
information is not of the type required to be disclosed or 
reported under Section 1128H, (B) the information reported is 
required to be disclosed or reported to a Federal, State, or 
local governmental agency for public health surveillance, 
investigation, or other public health purposes or health 
oversight purposes, or (C) the state requires the discovery or 
admissibility of the information in a criminal, civil, or 
administrative proceeding.

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


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

            Current Law
    Current law does not, in general, require the reporting of 
health care-associated infections (HAIs), although such 
reporting is required in a number of states. Several provisions 
in current federal law have established programs that are 
somewhat related.
    First, Section 5001(c) of the Deficit Reduction Act (P.L. 
109-171) requires the Secretary, by regulation, to identify 
certain preventable conditions that are not present on 
admission, and that therefore are acquired in the health care 
facility. Medicare Part A reimbursement is not provided for the 
care of these secondary conditions. This provision is 
implemented in CMS's annual Inpatient Prospective Payment 
System (IPPS) rule for hospitals. At this time, listed 
conditions include some that are unrelated to infection (such 
as incompatible blood transfusions, and trauma resulting from 
falls in the facility), as well as specific types of catheter-
associated and surgical site infections. The rules explain that 
some other infections (such as infection with methicillin-
resistant Staph. aureus, or MRSA) are not included because, 
among other things, it can be hard to determine, in an 
individual patient, whether an infection is associated with 
health care or was acquired previously.
    Also, two voluntary CMS reporting programs established 
under current law may capture information related to HAIs. The 
Physician Quality Reporting Initiative (PQRI), established 
under Section 101(b) of the Tax Relief and Healthcare Act of 
2006 (P.L. 109-432), provides incentive payments to physicians 
who report certain quality measures, which include instances of 
catheter-associated or surgical site infection. Information 
from this program is not publicly reported. The Reporting 
Hospital Quality Data for Annual Payment Update (RHQDAPU) 
Program, originally established under Section 501(b) of the 
Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA, P.L. 108-173), requires participating hospitals 
to report quality data to CMS in order to receive a full annual 
payment update. Selected measures are publicly reported on the 
CMS Hospital Compare website. However, regarding infections, 
this program uses process measures (e.g., antibiotics were used 
properly in surgical patients) rather than outcome measures 
(e.g., a patient developed a surgical site infection).
    The Health Information Technology for Economic and Clinical 
Health (HITECH) Act, which was incorporated into the American 
Recovery and Reinvestment Act of 2009 (P.L. 111-5), promotes 
the widespread adoption of health information technology (HIT). 
Among its provisions, the HITECH Act established a process for 
the development of interoperability standards that support the 
nationwide electronic exchange of health information among 
doctors, hospitals, patients, health plans, the federal 
government, and other health care stakeholders.
            Proposed Law
    This section would require the Secretary to provide, by 
regulation, that in order to participate in Medicare and 
Medicaid, hospitals and ambulatory surgical centers would have 
to report certain health care-associated infections (HAIs) that 
develop in the facility. The Secretary would specify the types 
of information that must be reported, and develop reporting 
protocols through the Centers for Disease Control and 
Prevention (CDC), assuring that such protocols are coordinated 
with systems established under the HITECH Act. The Secretary 
would be required: to establish procedures regarding the 
validity of reported data to assure appropriate comparisons 
between facilities; to promulgate, through the Director of CDC, 
regulations to carry out this section, within one year of 
enactment; and to post information from the system on the HHS 
website in a manner that permits comparisons by facility and by 
patient demographic characteristics.
    This section would also require the Secretary annually to 
report to Congress on specified aspects of the program, and 
would provide that this section should not be construed as 
preempting or otherwise affecting State laws relating to the 
disclosure of information on HAIs or patient safety procedures 
for a hospital or ambulatory surgical center. It would also 
define an HAI and its relationship to the receipt of care, and 
would clarify that for the purposes of this section, hospitals 
include critical access hospitals.
    For hospitals and ambulatory surgical centers, reporting 
requirements would take effect when specified by the Secretary, 
but not later than 2 years after enactment. Within 18 months of 
enactment, the Comptroller General would be required to report 
to Congress regarding the reporting program, and the Secretary 
would be required to report to Congress regarding the 
appropriateness of expanding reporting requirements to include 
additional information, such as health care worker immunization 
rates.
            Reason for change
    Health care-associated infections (HAIs) are a result of 
treatment in a healthcare service setting such as a hospital or 
an ambulatory surgery center, but secondary to the patient's 
original condition. Studies have shown that such infections 
have been increasing over the past few years due to factors 
such as increasing drug resistance of bacteria and improper 
infection control measures. Collection of data is critical as a 
public health measure so as to identify and respond to emerging 
threats. Over 20 States now have mandatory reporting for health 
facilities on health care-associated infections. This policy 
would require hospital, critical access hospitals and 
ambulatory surgery centers that participate in Medicare and 
Medicaid to report HAIs to the CDC to improve public health. 
The Secretary would determine what infections information would 
be collected and how it is collected.

              TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION


Sec. 1501. Distribution of Unused Residency Positions

            Current Law
    With certain exceptions, the Balanced Budget Act of 1997 
(BBA, P.L. 105-33) limited the number of allopathic and 
osteopathic residents for which Medicare would reimburse a 
teaching hospital at the level reported in its cost report 
ending on or before December 31, 1996. The limit does not 
include dental or podiatry residents. The Medicare Prescription 
Drug, Improvement and Modernization Act of 2003 (P.L. 108-173, 
MMA) authorized the redistribution of up to 75% of each 
teaching hospital's unused resident positions to hospitals 
seeking to increase their medical residency training programs. 
Any adjustments made to teaching hospitals' resident limits 
were permanent. Rural teaching hospitals with less than 250 
beds were exempt from the redistribution of any of their 
unfilled positions. Under the redistribution program, teaching 
hospitals were allowed to request up to an additional 25 full 
time equivalent (FTE) positions for direct graduate medical 
education (DGME) and indirect medical education (IME) payments. 
Hospitals were required to demonstrate the likelihood that the 
redistributed positions would be filled within 3 cost reporting 
periods beginning July 1, 2005. MMA required that the unused 
slots be redistributed according to specific priorities: rural 
hospitals, urban hospitals located in areas with a population 
of one million or less, specialty training programs that are 
the only specialty program in a state, and all other hospitals. 
The redistribution was effective for portions of cost reporting 
periods starting July 1, 2005. The redistributed resident slots 
have different IME and DGME payment formulas from those used to 
reimburse hospitals' previous residents.
            Proposed Law
    The Secretary would reduce the otherwise applicable 
resident limit for a hospital that has residency positions that 
were unused. Unused positions would be established when a 
hospital's reference residence level is less than its otherwise 
applicable resident limit. The reduction would be effective for 
portions of cost reporting periods occurring on or after July 
1, 2011. Hospitals that are members of the same affiliated 
group would be subject to redistribution. The Secretary would 
adjust the determination of available slots for affiliated 
hospitals depending upon the extent that these hospitals could 
demonstrate that they are filling any additional residents 
slots allocated to other hospitals through an affiliation 
agreement. Ninety percent of unused slots would be 
redistributed to qualifying hospitals. The increase in resident 
training positions would be distributed to qualifying hospitals 
not later than July 1, 2011.
    A hospital's reference residence level would be established 
as the highest resident level of any of the 3 most recent cost 
reporting periods (ending before the date of enactment). 
Hospital cost reports that had been settled or those that had 
been submitted, subject to audit, would be used to establish 
the residence level. Also, upon timely request, a hospital's 
reference resident level could be increased to reflect an 
expansion or planned expansion of an existing residency 
training program that is not reflected on the most recent 
settled or submitted cost report. The increase would occur 
after audit and would include the previous redistribution of 
unused resident positions that occurred under MMA. The 
Secretary would be authorized to determine an alternative 
resident reference level for hospitals that submit a timely 
request for an increase in their reference resident level due 
to a planned expansion before the start of the 2009-2010 
academic year. A hospital's resident reference level would 
reflect any increases in slots granted under the prior 
redistribution of resident slots under the MMA.
    The Secretary would be required to increase the otherwise 
applicable resident limit for each qualifying hospital that 
submits a timely application by such number for portions of 
cost reporting periods that occur on or after July 1, 2011. The 
aggregate number of increases in resident limits may not exceed 
the estimated aggregate reduction in resident limits. In no 
case would more than 20 FTE additional residents be made 
available to a qualifying hospital.
    A hospital that qualifies for an increase in its otherwise 
applicable resident limit would be required to ensure that its 
base level of primary care residents is increased by the number 
of additional primary care residents provided to the hospital 
under this section. The hospital would have to assign all 
additional resident positions to primary care residents. The 
hospital's residency programs would have to be fully accredited 
or, if not yet in operation as of the base year, the hospital 
would have to be actively applying for such accreditation for 
the program. A hospital's base level of primary care residents 
is the level of such residents in a base period determined 
without regard to whether such positions were in excess of the 
otherwise applicable resident limits. Hospitals receiving 
positions would be required to maintain records and 
periodically report on the number of primary care residents in 
its training programs. As a condition of continuing payment for 
a cost reporting period, the hospitals would be required to 
maintain the base level of positions at not less than the sum 
of the level of primary care resident positions before 
receiving additional positions plus the number of additional 
positions.
    When determining which qualifying hospitals would receive 
an increase in their otherwise applicable resident limit, the 
Secretary would take into account the demonstrated likelihood 
that a hospital would fill the positions within the first 3 
cost reporting periods beginning on or after July 1, 2011. 
Also, the Secretary would distribute the resident slots based 
on the following criteria: (1) the hospital had a reduction in 
the resident training positions under this section; (2) the 
hospital has a 3-year primary care residency training program, 
such as family practice and general internal medicine; (3) the 
hospital has formal arrangements, as determined by the 
Secretary, that place greater emphasis upon training in 
federally qualified health centers, rural health clinics, and 
other nonprovider settings and to hospitals that receive 
additional disproportionate share hospital payments and 
emphasize training in an outpatient department; (4) the 
hospital has resident training positions in excess of its 
otherwise applicable resident level as of July 1, 2009; (5) the 
hospital has formal arrangements that place greater emphasis on 
training in a health professional shortage area or health 
professions needs area; or (6) the hospital is in a State with 
a low resident-to-population ratio (including a greater 
preference for those States with lower resident-to-population 
ratios).
    The per resident amounts (PRAs) for the resident positions 
distributed under this provision would equal the hospitals' 
PRAs for primary and nonprimary care positions for the purposes 
of calculating direct graduate medical payments. The indirect 
medical education adjustment for the resident positions 
distributed under this provision would be computed in the same 
fashion as the hospital's existing resident positions.
            Reasons for change
    The healthcare system is increasingly uncoordinated and 
complex, but a solid primary care workforce can help to support 
a well coordinated and integrated delivery model. Despite clear 
advantages of a strong primary care workforce, the number of 
primary care slots and medical students choosing primary care 
as a specialty has decreased over the past decade. This is the 
case even though the total amount of the physician workforce 
has remained stable Studies have recently shown that while 35 
percent of the current physician workforce is in primary care, 
21 to 24 percent of graduating medical students choose primary 
care medicine as a career specialty. According to the Council 
of Graduate Medical Education (COGME), since the Graduate 
Medical Education (GME) cap was put in place in 1996, primary 
care internal medicine positions in the annual student match 
have fallen 57 percent, primary care pediatric positions have 
fallen by 34 percent, and family medicine positions have fallen 
by 18 percent. Over the past ten years, nearly all graduate 
medical expansion in teaching hospitals has been in 
subspecialty medicine. Family practice residency programs, and 
three year training programs that emphasize a generalist 
training have decreased or have shut down as well.
    In their May 2009 report, COGME stated that graduate 
medical education should be realigned to meet society's 
evolving healthcare needs. COGME recommended an emphasis on 
training more primary care physicians, training residents 
capable of practicing in innovative delivery care models such 
as patient-centered medical homes and accountable care 
organizations, and increasing the accountability of graduate 
medical education's role in public health. Similarly, in its 
June 2009 report, MedPAC's recognized that residents will best 
learn the skills needed to provide high-quality, efficient care 
when medical education occurs in settings where such care is 
actually performed and will explore policies in their future 
work that might link medical education incentives with delivery 
system reforms. This policy is intended to increase training of 
primary care physicians in a broader array of settings in order 
to meet the future healthcare needs of the American public.
    The Committee notes that some policymakers point to earlier 
COGME reports to argue for the need for more residency slots; 
however, COGME now recognizes that earlier calls for increased 
residency slots focused on the growth in medical schools, and 
failed to take into account the fact that GME positions already 
exceed allopathic medical school slots by 30 percent. For 
instance, in 2007-2008, the U.S. graduated about 17,500 
allopathic students, but had more than 25,000 first year 
residency positions. COGME points out that first year residency 
positions grew 8 percent from 2002 and 2007 and that this 
expansion will accommodate increases in medical school 
production. The shortcoming is not in the number of medical 
residents being trained, but that nearly all of this expansion 
is in subspecialty training, resulting in a drop in primary 
care physicians.
    The legislation increases primary care physicians by 
directing the Secretary to redistribute residency positions 
that have been unfilled for the prior 3 cost reports and direct 
those slots for training of primary care physicians. Special 
preference will be given to programs that saw a reduction in 
their slots under this section, have formal arrangements to 
train residents in ambulatory settings or shortage areas, 
operate three year primary care residency programs, currently 
operate residency programs over their cap, or are located in 
states with low resident to population ratios. Primary 
physicians are trained via three year general medicine, 
pediatrics or family practice residency programs. Within this 
universe of residency programs are a select number of programs 
that place emphasis on a generalist curriculum (such as family 
practice programs) and referred to as ``three-year primary care 
residency training programs, as compared to the ``categorical'' 
or basic programs where a resident will then go on to 
specialize. This provision directs the Secretary to give 
preference to these ``three year primary care'' programs in 
general internal medicine or family practice. The increase in 
resident training positions would be distributed to qualifying 
hospitals not later than July 1, 2011.
            Effective date
    Cost reporting periods beginning on or after July 1, 2011.

Section 1502. Increasing Training in Non-Provider Settings

            Current Law
    Medicare reimburses the direct costs of graduate medical 
education (DGME) for approved residency training programs 
without regard for the setting where the residents' activities 
relating to patient care are performed as long as the hospital 
incurs all, or substantially all, of the costs for the training 
program in that setting. Through regulation, CMS has defined 
all, or substantially all costs, as 90% of resident stipends 
and fringe benefits and costs associated with a supervising 
physician. However, as presently administered, a hospital 
cannot include the time spent by residents working at a non-
hospital site if it incurs all, or substantially all, of the 
costs for only a portion of the residents in that program at 
the non-hospital site.
    Section 1886(k) provides for payment to qualified 
nonhospital providers, such as FQHCs and rural health clinics, 
for their direct costs of medical educations if those costs are 
incurred in the operation of an approved medical residency 
training program.
            Proposed Law
    Effective for cost reporting periods beginning on or after 
July 1, 2009, all time spent by a resident would count towards 
the determination of a FTE resident with respect to Medicare's 
direct graduate education payment, without regard to the 
setting where the activities are performed, if the hospital 
incurs the costs of the stipends and the fringe benefits of the 
resident during the time the resident spends in that setting. 
Any hospital claiming payment for the time spent in a non-
provider setting would be required to maintain and make 
available necessary records regarding the amount of time and 
this amount in comparison to the amounts of time in a specified 
base year.
    Effective for discharges on or after July 1, 2009, all the 
time spent by a resident in patient care activities in a non-
provider setting would be counted towards the determination of 
a FTE resident with respect to Medicare's indirect medical 
education payment if the hospital incurs the costs of the 
stipends and fringe benefits of the resident during the time 
spent in that setting.
    The Office of the Inspector General (OIG) would be required 
to analyze the resident data to assess the extent to which 
there is an increase in time spent by medical residents 
training in non-provider settings. No later than 4 years after 
the date of enactment the OIG would submit a report to Congress 
its analysis and assessment.
    The Secretary would conduct a demonstration project where 
an approved teaching health center would be eligible for direct 
medical education payments for its own direct cost of graduate 
medical education activities for primary care residents as well 
as for the direct costs of such graduate medical education 
activities of its contracting hospital for such residents. 
Under the project, an approved teaching health center would 
contract with an accredited teaching hospital to carry out the 
inpatient responsibilities of the primary care residency 
program. The center would be responsible for payment of the 
hospital's costs of the salary and fringe benefits for 
residents. The hospital's full-time equivalent resident amount 
would not affect the contracting hospital's resident limit. The 
contracting hospital would not reduce the number of residents 
in its primary care residency training program. An approved 
teaching health center would be a non-provider setting, such as 
a Federally qualified health center or rural health center that 
develops and operates an accredited primary care residency 
program for which funding would be available if it were 
operated by a hospital in connection with a hospital.
            Reason for change
    MedPAC and COGME have recommended that physicians be 
trained at alternative care settings such as ambulatory 
settings. COGME called for a ``broadening of the definition of 
the training venue'' and emphasized preparing a physician 
workforce for outpatient care, where most of the health care 
takes place, and to consider placing physicians at rural and 
community health centers and physician offices. Residents 
should also be exposed to patient care coordination in a 
variety of health care settings. Teaching hospitals face 
considerable financial incentives and regulatory barriers that 
discourage them from rotating residents to nonhospital 
settings.
    The intent of this legislation is to decrease the 
regulatory barriers so that residents can increase their 
training in non-provider settings (i.e., outside the acute care 
hospital). This policy modifies the rules that govern when 
hospitals can receive indirect medical education (IME) and 
direct graduate medical education (DGME) funding for residents 
who train in non-provider settings so that any time spent by 
the resident in a non-provider setting shall be counted toward 
DGME and IME if the hospital incurs any costs such as fringe 
and benefits. A study by the Office of the Inspector General 
shall assess the impact of this policy on increasing physician 
training in non-provider settings. The changes are effective 
for discharges on or after July 1, 2009 and the OIG study is 
scheduled to report to Congress 4 years after the date of 
enactment.
    A demonstration project is established to allow community 
health centers to host an approved primary care residency 
program and receive DGME for itself and for the hospital that 
it will contract with to provide the inpatient training. This 
demonstration project will inform the Secretary and Congress on 
the feasibility of health centers hosting a residency program 
and inform possible alternative payment methodologies for 
nonhospital teaching sites. While the Committee recognizes the 
importance of training in non-provider settings, including 
Federally Qualified Health Centers, the Committee does not 
think it is appropriate for teaching health centers to receive 
a hospital's IME payments since the payment methodology is 
based on Medicare patient activities that occur in the 
inpatient setting. The Committee also questions whether 
indirect medical education costs are incurred by an FQHC and 
notes that the average Medicare share for FQHCs is less than 10 
percent. While the Committee supports the need for more 
training in the non-provider setting, this must be balanced 
against the competing priority of ensuring that Medicare 
dollars are spent on Medicare patients.
            Effective date
    Cost reporting periods beginning on or after July 1, 2009.

Sec. 1503. Rules for Counting Resident Time for Didactic and Scholarly 
        Activities and Other Activities

            Current Law
    Medicare pays teaching hospitals the costs of approved 
medical residency training programs through two mechanisms: an 
indirect medical education (IME) adjustment within the 
inpatient prospective payment system (IPPS) and direct graduate 
medical education (DGME) payments made outside of IPPS. Certain 
non-patient care activities that are part of an approved 
training program are not allowable for DGME or IME payment 
purposes. With respect to training that occurs in hospital 
settings, Medicare does not include the time that residents 
spend in non-patient care activities, including didactic 
activities, when calculating IME payments. With respect to 
training that occurs in nonhospital settings, Medicare would 
not count the time that residents spend in non-patient care 
activities, including didactic activities, when calculating 
DGME or IME payments.
            Proposed Law
    When calculating DGME payments, Medicare would count the 
time that residents in approved training programs spend in 
certain non-direct patient care activities in a nonhospital 
setting that is primarily engaged in furnishing patient care. 
The term ``nonprovider setting that is primarily engaged in 
furnishing patient care'' would be a nonprovider setting in 
which the primary activity is the care and treatment of 
patients as defined by the Secretary. Reimbursable nonpatient 
care activities would include didactic conferences and seminars 
but would not include research that is not associated with the 
treatment or diagnosis of a particular patient. In addition, 
Medicare would count all the vacation, sick leave and other 
approved leave spent by resident in an approved training 
program as long as the leave time does not extend the program's 
duration.
    When calculating IME payments, Medicare would adopt the 
same rules about counting residents' leave time. Medicare would 
also include all the time spent by residents in approved 
training programs on certain nonpatient care activities 
(including didactic conferences and seminars, but not in 
certain research activities that are not associated with the 
treatment or diagnosis of an particular patient) if the 
hospital is an IPPS hospital, a hospital paid under the IPPS 
for Puerto Rico, is a hospital paid under a state specific 
hospital reimbursement system, or is a provider-based hospital 
outpatient department.
    Except as otherwise provided, these provisions would be 
effective for cost reporting periods beginning on or after 
January 1, 1983. The provisions affecting DGME would apply to 
cost reporting periods on or after July 1, 2008. The provisions 
affecting IME would apply to cost 317 reporting periods on or 
after October 1, 2001. This section would not affect the 
interpretation of the law in effect prior to that date. The 
provisions would not be implemented in a manner that would 
require reopening of any settled hospital cost reports where 
there is not a jurisdictionally proper appeal pending on IME 
and DGME payments as of the date of enactment.
            Reason for change
    Physicians in training need to learn critical evidenced 
based medicine and participate in scholarly activities related 
to the management of their patients. They devote time during 
their residency training to participate in didactic and 
scholarly activities that broadens their clinical knowledge 
base. The policy is to modify the rules to allow for inclusion 
of didactic and scholarly activities and other activities such 
as research related to the care of their patients. The 
provisions affecting IME would apply to cost reporting periods 
on or after October 1, 2001 and the provisions affecting DGME 
would apply to cost reporting periods on or after July 1, 2008.
            Effective date
    Subsection (a)(1)(B) pertaining to direct graduate medical 
education is effective for cost reporting periods beginning on 
or after July 1, 2008. Subsection (b), pertaining to indirect 
medical education is effective for cost reporting periods 
beginning on or after October 1, 2001. All other provisions are 
effective for cost reporting periods beginning on or after 
January 1, 1983.

Sec. 1504. Preservation of Resident Cap Positions from Closed and 
        Acquired Hospitals

            Current law
    With certain exceptions, the Balanced Budget Act (BBA) of 
1997 limited the number of allopathic and osteopathic residents 
for which Medicare would reimburse a teaching hospital at the 
level reported in its cost report ending on or before December 
31, 1996. If a teaching hospital closes (defined as withdrawing 
participation in the Medicare program), CMS permits a temporary 
cap increase to other teaching hospitals to accommodate 
residents suddenly displaced from the closed hospital. Upon 
completion of their training, the residency slots cease to 
exist.
    A hospital with a newly established residency program may 
receive an adjustment to its FTE cap (which otherwise would be 
zero) if it establishes one or more new medical residency 
training programs, but only for new programs established within 
3 academic years after residents begin training in the first 
new program. CMS recently put forth a final rule on July 31, 
2009 that clarifies that a ``newly established'' residency 
program for Medicare GME purposes is not a program that existed 
previously at another hospital. In determining that a program 
is truly new, CMS will use certain ``supporting factors,'' such 
as whether the program director, teaching staff, and residents 
are different. CMS will also consider whether the program 
relocated from a hospital that closed, and whether that program 
is part of any existing hospital's FTE cap determination. If 
the program did relocate from a closed hospital and that 
program is not part of any existing hospital's FTE cap 
determination, then even if there are significant similarities 
between the program in terms of the program director, teaching 
staff, or residents, CMS could consider the program that was 
transferred from the closed hospital to be new for Medicare 
direct GME and IME, since there would be no danger that an FTE 
cap adjustment to reflect a new program would result in 
duplicative FTE caps. CMS also has established certain 
regulations governing Medicare's provider enrollment 
requirements that determine under what circumstances providers 
can bill the Medicare program including those involved in 
change of ownership (CHOW) transactions. Very generally, in 
order to acquire a teaching hospital's resident cap under a 
CHOW transaction, the acquiring entity must retain the original 
provider agreement of the provider it is acquiring. However, 
the acquiring entity would also assume all liabilities 
associated with that provider agreement.
    Starting August 29, 2005 (the day after Hurricane Katrina), 
hospitals were permitted to form emergency affiliation 
agreements if located in federally declared disaster areas 
starting the first day of a Section 1135 emergency period. 
Under 42 Code of Federal Regulations (CFR) 413.79, a home 
hospital located in such an area that experiences at least a 
20% decline in inpatient occupancy can temporarily transfer its 
resident cap to a host hospital.
            Proposed Law
    The Secretary would promulgate regulations to establish a 
process where the FTE residency cap slots in a hospital with an 
approved medical residency program that closes on or after a 
date that is 2 years before the date of enactment could be used 
to increase the otherwise applicable residency limit for other 
hospitals in the State. The increase in residency programs 
would be distributed to one or more hospitals in the State in a 
manner specified by the Secretary. This process would be 
consistent with any recommendations submitted by the senior 
health official designated by the chief executive officer of 
the state in question provided that the recommendations are not 
submitted later than 180 days after the date of a hospital 
closure. In cases where a hospital closed before date of 
enactment, the time limit would be 180 days from the date of 
enactment. The aggregate number of increased residency limits 
in the state would equal the number of FTE resident cap slots 
from the hospital(s) that closed. These provisions would not 
affect any temporary adjustment to a hospital's FTE resident 
cap established under 42 CFR 413.79 as in effect on the date of 
enactment.
            Reason for change
    When hospitals close, the residency slots previously 
associated with those hospitals are no longer eligible for 
further Medicare reimbursement once the existing residents 
complete their training. This occurs regardless of any 
continued need for those residency slots to meet current or 
future workforce needs in the community or state. This 
provision allows for continued funding of those slots at other 
hospitals within the state, taking into consideration 
recommendations from the senior health official in the state 
when determining which hospitals shall receive upward 
adjustments or new residency caps.

Sec. 1505. Improving Accountability for Approved Medical Residency 
        Training

            Current law
    Medicare will reimburse teaching hospitals for the direct 
and indirect costs associated with an approved teaching program 
accredited by an independent entity, such as the Accreditation 
Council for Graduate Medical Education or the American 
Osteopathic Association. Medicare has never linked its payments 
to promoting or fostering any goals in medical education.
            Proposed law
    Certain goals of medical residency training programs would 
be established. Specifically, resident training would be 
designed so that physicians would be able to: (1) work 
effectively in various non-provider settings; (2) coordinate 
patient care within and across settings; (3) understand the 
relevant cost and value of various diagnostic and treatment 
options; (4) work effectively in inter-professional and multi-
disciplinary teams in provider and non-provider settings; (5) 
identify systematic errors in health care delivery and 
implement solutions for such errors; and (6) be meaningful 
electronic health record users.
    GAO would be required to evaluate the extent to which 
medical residency training programs are meeting the above 
workforce goals in a range of residency programs, including 
primary care and specialties; and have the appropriate faculty 
expertise to teach the topics required to achieve such goals. 
The study would be submitted to Congress no later than 18 
months after the date of the enactment. The study would include 
recommendations with respect to the development of curriculum 
requirements and an assessment of the accreditation processes 
of the Accreditation Council for Graduate Medical Education and 
the American Osteopathic Association.
            Reason for change
    MedPAC recommends that the residency training experience 
should encourage physicians to increase care coordination and 
assume greater accountability for quality of care. Graduate 
medical education should train a future physician workforce 
exposed to innovative delivery models that would support more 
integration. A MedPAC sponsored study conducted by RAND pointed 
out that the curricula of residency training programs fall 
short of recommendations by the Institute of Medicine and other 
experts on items such as formal training or experience in 
multidisciplinary teamwork, cost-awareness in clinical 
decision-making, comprehensive health information technology, 
and patient care in nonhospital settings. Residents should be 
trained in innovation delivery systems that will support 
coordinated care and enhance an integrated approach. The 
Accreditation Council for Graduate Medical Education has also 
included similar goals for residency programs to improve the 
training of residents. The COGME report calls for ``making 
accountability for the public's health the driving force for 
graduate medical education.'' The report further states that 
the $10 billion spent annually on GME should have parameters on 
how our physician workforce should be trained and the type of 
training residents should receive.
    This policy is intended to highlight broad goals for 
residency programs to improve their accountability. Such goals 
include: (1) work effectively in various non-provider settings; 
(2) coordinate patient care within and across settings; (3) 
understand the relevant cost and value of various diagnostic 
and treatment options; (4) work effectively in inter-
professional and multidisciplinary teams in provider and non-
provider settings; (5) identify systematic errors in health 
care delivery and implement solutions for such errors; and (6) 
be meaningful electronic health record users.
    The Comptroller General shall conduct a study to evaluate 
the extent to which residency training programs will meet the 
goals described in this provision and will report to Congress 
not later than 18 months after the enactment of this 
legislation.

                      TITLE VI--PROGRAM INTEGRITY


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


Sec. 1601. Increased Funding and Flexibility to Fight Fraud and Abuse

            Current Law
    The Health Care Fraud and Abuse Control (HCFAC) account 
funds activities to fight health care fraud. The HCFAC program 
along with the Medicare Integrity Program (MIP) were both 
established by the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA, P.L. 104-191) which sought 
to increase and stabilize federal funding for health care anti-
fraud activities. Specifically, HCFAC funds are directed to the 
enforcement and prosecution of health care fraud. MIP funding 
supports the program integrity activities undertaken by CMS 
contractors.
    For HCFAC, HIPAA appropriated funds to the Department of 
Health and Human Services (HHS), the Department of Justice 
(DOJ), and the Federal Bureau of Investigation (FBI) for 
antifraud activities undertaken for fiscal years 1997 through 
2003. Funds are appropriated to the Account from the Medicare 
Part A Trust Fund in amounts as the Secretary and the Attorney 
General certify are necessary to support audits, 
investigations, evaluations, and prosecutions related to health 
care fraud. For HHS and DOJ, the legislation authorized an 
amount, beginning at $104 million for FY1997, equal to the 
limit for the preceding year increased by 15%. Within this 
amount, the legislation authorized minimum and maximum 
appropriations for the HHS OIG. The maximum OIG appropriation 
increased from $70 million in FY1997 to $160 million in FY2003. 
For each fiscal year after 2003, the amount was capped at the 
2003 level. In December 2006, Congress passed the Tax Relief 
and Health Care Act of 2006 (TRHCA, P.L. 109-432) which 
extended the mandatory annual appropriation for HCFAC to 2010. 
For fiscal years 2007 through 2010, the mandatory annual 
appropriation is the limit for the preceding year plus the 
percentage increase in the consumer price index for all urban 
consumers (CPI-U). For years after FY2010, the annual 
appropriation remains at the FY2010 level.
    The MIP program authorizes the Secretary of HHS to enter 
into contracts with private organizations to conduct program 
integrity activities such as provider audits and medical review 
of claims. The largest share of the HIPAA appropriation was 
dedicated to the MIP program. Funding for MIP increased from 
$440 million in FY1997 to $720 million in FY2003. For fiscal 
years 2004 and 2005, the annual MIP appropriation remained at 
the FY2003 level. In 2005, Congress passed the Deficit 
Reduction Act (DRA, P.L. 109-171) which raised funding for the 
MIP program by $112 million for FY2006 to implement program 
integrity and oversight activities for the Medicare 
prescription drug benefit. This increased the annual MIP 
appropriation from $720 million to $832 million for FY2006 
only. Congress did not increase funding for MIP in TRHCA. 
Therefore the mandatory annual appropriation for MIP remains at 
$720 million.
            Proposed Law
    The provision would increase funding for HCFAC by $100 
million annually beginning with FY2011. Funding would be 
appropriated to HHS, the DOJ, and MIP in the same manner as is 
currently appropriated in statute. Funding allocated to MIP 
would be authorized for HCFAC activities as well as MIP 
activities and would not have to be distributed solely to 
private organizations to conduct program integrity activities. 
Funding for both HCFAC and MIP would be available without 
further appropriation until expended.
            Reason for Change
    According to the Congressional Budget Office, for every 
$1.00 that the government spends in increased funding for 
HCFAC, there is a $1.75 return on that investment. This 
increased funding will allow for the implementation of the 
measures in this bill aimed at fighting waste, fraud, and 
abuse; and will result in an overall increase in program 
integrity.
            Effective Date
    January 1, 2010.

           Subtitle B--Enhanced Penalties for Fraud and Abuse


Sec. 1611. Enhanced Penalties for False Statements on Provider or 
        Supplier Enrollment Applications

            Current Law
    Medicare statute provides the Secretary with general 
authority to prescribe regulations for the efficient 
administration of the Medicare program. Under this authority, 
the Center for Medicare and Medicaid Services (CMS) has 
implemented regulations requiring Medicare providers and 
suppliers to submit an application to enroll in the Medicare 
program and receive billing privileges. Providers and suppliers 
must resubmit and recertify the accuracy of their enrollment 
information every 5 years. Medicare enrollment activities, such 
as processing and reviewing applications, are handled by 
private contractors. CMS may deny a provider or supplier's 
enrollment in Medicare or revoke a provider's billing 
privileges for the following reasons: noncompliance with 
enrollment requirements, exclusion from participation in 
Federal health care programs, conviction of a felony, or the 
submission of false or misleading information on the enrollment 
application.
    Medicaid statute delegates the administration of the 
Medicaid program to the states. There is considerable variation 
in how states administer their provider enrollment processes. 
State Medicaid agencies determine whether a provider or 
supplier is eligible to participate in the Medicaid program by 
providing for written agreements with providers and suppliers. 
Written agreements require that providers and suppliers 
maintain specific records, disclose certain ownership 
information, and grant access to federal and state auditors to 
books and records.
    Section 1128A(a) of the Social Security Act (SSA) 
authorizes the imposition of Civil Monetary Penalties (CMPs) 
and assessments on a person, including an organization, agency, 
or other entity, who engages in various types of improper 
conduct with respect to federal health care programs. Under 
section 1128A(a)(1)(D) of the Act, a person who knowingly 
presents or causes to be presented a claim to federal or state 
agencies that the Secretary determines is for an item or 
service furnished during a period when the person was excluded 
from participation in the federal health care program under 
which the claim was made is subject to a civil monetary penalty 
of up to $10,000 for each item or service furnished, and an 
assessment of up to three times the amount claimed for each 
item or service.
            Proposed Law
    This provision would subject providers and suppliers 
applying to enroll or renewing enrollment in federal health 
care programs to CMPs for providing false information on an 
enrollment application. Medicaid managed care plans, MA plans, 
and PDP plans would also be subject to CMPs for providing false 
information on applications to participate in federal health 
care programs.
    Specifically, the provision would provide that a person who 
knowingly makes or causes to be made any false statement, 
omission, or misrepresentation of a material fact on an 
application, agreement, bid, or contract to participate or 
enroll as a provider of services or supplier under a federal 
health care program would be subject to a CMP of $50,000 for 
each violation. In addition to providers and suppliers, the 
provision would also apply to Medicaid managed care 
organizations, Medicare Advantage (MA) organizations and MA 
plans, Prescription Drug Plan (PDP) sponsors and plans, and 
providers and suppliers that participate in these Medicare or 
Medicaid plans. In addition, such a person may be subject to an 
assessment of not more than 3 times the amount claimed as the 
result of the false statement, omission, or misrepresentation.
    The provision would also eliminate the requirement for a 
determination by the Secretary when a person knowingly presents 
or causes to be presented a claim for an item or service 
furnished during a period when the person was excluded under 
federal law from the federal health care program under which 
the claim was made.
            Reason for Change
    The new provisions will increase the quality of data 
supplied on an application, agreement, bid, or contract when 
providers or suppliers enroll in a federal health care program.
            Effective Date
    These amendments would apply to acts committed on or after 
January 1, 2010.

Sec. 1612. Enhanced Penalties for Submission of False Statements 
        Material to a False Claim

            Current Law
    Section 1128A (a) of the SSA authorizes the imposition of 
CMPs (CMPs) and assessments on a person, including an 
organization, agency, or other entity, who engages in various 
types of improper conduct with respect to federal health care 
programs, including the imposition of penalties against a 
person who knowingly presents or causes to be presented false 
or fraudulent claims. This section generally provides for CMPs 
of up to $10,000 for each item or service claimed, $15,000 or 
$50,000 under other circumstances, and an assessment of up to 
three times the amount claimed.
            Proposed Law
    The bill would create a new section 1128A (a) (9) of the 
SSA, providing that persons who knowingly make, use, or cause 
to be made or used any false statement or record material to a 
false or fraudulent claim submitted for payment to a federal 
health care program would be subject to a civil monetary 
penalty of $50,000 for each violation.
            Reason for Change
    The new provisions will increase the quality of data 
supplied on claims submitted for payment and will deter false 
or fraudulent claims.
            Effective Date
    These amendments would apply to violations committed on or 
after January 1, 2010.

Sec. 1613. Enhanced Penalties for Delaying Investigations

            Current Law
    Section 1128A (a) of the SSA authorizes the imposition of 
CMPs and assessments on a person, including an organization, 
agency, or other entity, who engages in various types of 
improper conduct with respect to federal health care programs, 
including the imposition of penalties against a person who 
knowingly presents or causes to be presented false or 
fraudulent claims. This section generally provides for CMPs of 
up to $10,000 for each item or service claimed, $15,000 or 
$50,000 under other circumstances, and an assessment of up to 
three times the amount claimed.
    The Secretary is required to provide for the annual 
auditing of the financial records of at least \1/3\ of MA 
plans. Each contract with a MA plan is required to provide that 
the Secretary have the right to inspect or evaluate the 
quality, appropriateness and timeliness of services performed 
under the contract. Contracts must also provide the Secretary 
with right to audit any plan's books and records related to the 
plan's ability to bear risk or to the services performed, 
including determinations of amounts payable under the contract.
            Proposed Law
    The bill would create a new provision, section 1128A (a) 
(10), providing that persons who fail to grant timely access, 
upon reasonable request (as defined by the Secretary in 
regulations), to the Office of the Inspector General (OIG), for 
the purpose of audits, investigations, evaluations, or other 
statutory functions of the OIG, be subject to CMPs of $15,000 
for each day of failure. The provision would also modify the 
contractual requirements for MA plans to allow the Secretary to 
conduct timely audits and inspections of MA plans.
            Reason for Change
    According to an October 2007 report by the Government 
Accountability Office (GAO), the Centers for Medicare and 
Medicaid Services (CMS) did not fulfill its statutory mandate 
to audit the financial records of \1/3\ of MA plans for the 
years 2001-2006. Of the audits that were conducted, GAO found 
that CMS was limited in its ability to pursue financial 
recoveries based on the audits that were performed, because CMS 
did not use its statutory authority to include in contracts 
with MA plans an explanation of its audit authority and 
description of the steps to be taken to pursue deficiencies 
identified by these audits. This section requires that future 
contracts with MA plans contain this language, and imposes 
stronger daily penalties for the obstruction of audits, in 
order to facilitate more timely and efficient performance of 
this statutory duty by CMS in addition to audits, 
investigations or
            Effective Date
    These amendments would apply to violations committed on or 
after January 1, 2010.

Sec. 1614. Enhanced Hospice Program Safeguards

            Current Law
    Medicare statute mandates the establishment of minimum 
health and safety standards that must be met by providers 
participating in the Medicare and Medicaid programs (i.e. 
hospitals, hospices, nursing homes, and home health agencies). 
In order to receive payment, providers and suppliers must meet 
these health and safety standards, often referred to as 
Conditions of Participation (CoPs). Generally, state agencies, 
under contract with CMS, survey providers to determine 
compliance with CoPs. Alternatively, a provider can be deemed 
to meet these requirements if it has been accredited by an 
approved national accreditation body. If a provider has been 
found to be non-compliant with its CoPs, CMS has the authority 
to impose certain sanctions, including revoking the provider's 
participation agreement. States also have the authority to 
impose sanctions on Medicare and Medicaid participating 
facilities found to be noncompliant with CoPs.
            Proposed Law
    This provision would add a new section, Section 1819A, to 
the SSA that would require the Secretary to develop and 
implement intermediate sanctions to apply to hospices that, 
based on a determination by the Secretary, demonstrate a 
substandard quality of care and fail to meet such other 
requirements as the Secretary may find necessary in the 
interest of the health and safety of the individuals provided 
care and services by the agency or organization involved. The 
sanctions may include CMPs of up to $10,000 for each day of 
non-compliance or in the case of a per instance penalty not 
more than $25,000, a denial of all or part of future Medicare 
or Medicaid payments to which the hospice is entitled (which 
would terminate upon the Secretary's finding that the hospice 
program no longer demonstrated substandard quality and met 
other requirements as determined by the Secretary), requiring 
the appointment of managers to oversee the operation of the 
hospice program, correction plans, and staff training The 
sanctions could be imposed in addition to those imposed under 
State or Federal law and would not be construed as limiting 
other available remedies. The Secretary would have until 
January 1, 2012 to develop and implement the sanctions.
    By July 1, 2011, the Secretary would be required to create 
the specific procedures and conditions under which the relevant 
sanctions would apply, including the amount of any fines and 
severity of the sanctions. The conditions would be required to 
minimize the time between the identification of deficiencies 
and imposition of sanctions, and would provide for more severe 
fines for repeated deficiencies. The due process protections 
provided in the CMP law (SSA, Section 1128A), such as written 
notice and the right to a hearing, would apply in the same 
manner to the imposition of a CMP for hospices.
    This provision would also require the Secretary to take 
immediate action to correct any identified deficiencies that 
immediately jeopardize the health and safety of patients being 
cared for in a I hospice. The action would consist of either 
appointing managers to oversee the operations of the hospice or 
terminating the hospice's participation in federal health care 
programs. The Secretary would be authorized to impose 
additional remedies if necessary. If the Secretary determines 
that identified deficiencies do not immediately jeopardize the 
patients' health and safety, the Secretary, in lieu of 
terminating the providers' participation in the program, may 
impose other intermediate sanctions. If after a period of 
intermediate sanctions, the deficiencies have not been 
corrected, the Secretary would be required to terminate the 
providers' participation in federal health programs. The 
Secretary would also be authorized to impose CMPs on hospice 
providers for any former days of non-compliance with federal 
health and safety standards.
    These provisions would also apply to hospice programs 
participating in Medicaid and CHIP.
            Reason for Change
    The new provisions will enable CMS to take intermediate 
action in the case of poorly performing hospices, when 
previously the only option was exclusion. The section also 
instructs and authorizes the Secretary to take immediate action 
if deficiencies immediately jeopardize the health and safety of 
beneficiaries.
            Effective Date
    Date of enactment.

Sec. 1615. Enhanced Penalties for Individuals Excluded from Program 
        Participation

            Current Law
    Section 1128A (a) of the SSA authorizes the imposition of 
CMPs and assessments on a person, including an organization, 
agency, or other entity, who engages in various types of 
improper conduct with respect to federal health care programs, 
including the imposition of penalties against a person who 
knowingly presents or causes to be presented false or 
fraudulent claims. This section generally provides for CMPs of 
up to $10,000 for each item or service claimed, $15,000 or 
$50,000 under other circumstances, and an assessment of up to 
three times the amount claimed.
            Proposed Law
    The bill would create a new provision, section 1128A(a)(11) 
of the SSA, providing that a person who orders or prescribes an 
item or service, including without limitation home health care, 
diagnostic and clinical lab tests, prescription drugs, durable 
medical equipment, ambulance services, physical or occupational 
therapy, or any other item or service, during a period when the 
person has been excluded from participation in a federal health 
care program, and the person knows or should know that a claim 
for such item or service will be presented to such a program, 
be subject to a civil monetary penalty of $50,000 for each 
order or prescription. This amendment would apply to violations 
committed on or after January 1, 2010.
            Reason for Change
    The new provision will create a disincentive for excluded 
persons to violate that exclusion by continuing to prescribe 
services payable by a federal health program.
            Effective Date
    These amendments apply to violations committed on or after 
January 1, 2010.

Sec. 1616. Enhanced Penalties for Provision of False Information by 
        Medicare Advantage and Part D Plans

            Current Law
    MA plans enter into contracts with the Secretary to 
participate in the Medicare program. The Secretary has the 
authority to impose sanctions and CMPs on MA plans that violate 
the terms of the contract. Among the violations are failing to 
provide medically necessary care; imposing excess beneficiary 
premiums; expelling or refusing to re-enroll beneficiaries; 
discouraging or denying enrollment among eligible individuals 
expected to require future medical services; misrepresenting or 
falsifying information; failing to comply with balance billing 
requirements; interfering with a provider's advice to 
beneficiaries; and contracting with providers excluded from the 
Medicare program. For violations related to discouraging or 
denying enrollment or misrepresenting information provided to 
the Secretary, the Secretary can impose a maximum penalty of 
$100,000. For all other violations, the maximum penalty is 
$25,000. The Secretary has the authority to impose additional 
penalties for imposing excess beneficiary premiums and engaging 
in activities that discourage enrollment.
            Proposed Law
    This provision would enhance penalties for MA and Part D 
plans that misrepresent or falsify information to include an 
assessment of up to three times the amount claimed by a plan or 
plan sponsor based on the misrepresentation or falsified 
information. The provision would apply to violations committed 
on or after January 1, 2010.
            Reason for Change
    The new provision will improve the accuracy of information 
submitted by MA and Part D plans.
            Effective Date
    These amendments apply to violations committed on or after 
January 1, 2010.

Sec. 1617. Enhanced Penalties for Medicare Advantage and Part D 
        Marketing Violations

            Current Law
    MA plans enter into contracts with the Secretary to 
participate in the Medicare program. The Secretary has the 
authority to impose sanctions and CMPs on MA plans that violate 
the terms of the contract. Among the violations are failing to 
provide medically necessary care; imposing excess beneficiary 
premiums; expelling or refusing to re-enroll beneficiaries; 
discouraging or denying enrollment among eligible individuals 
expected to require future medical services; misrepresenting or 
falsifying information; failing to comply with balance billing 
requirements; interfering with a provider's advice to 
beneficiaries; and contracting with providers excluded from the 
Medicare program. For violations related to discouraging or 
denying enrollment or misrepresenting information provided to 
the Secretary, the Secretary can impose a maximum penalty of 
$100,000. For all other violations, the maximum penalty is 
$25,000. The Secretary has the authority to impose additional 
penalties for imposing excess beneficiary premiums and engaging 
in activities that discourage enrollment.
            Proposed Law
    This provision would increase the number of violations that 
could be subject to the imposition of sanctions and CMPs by the 
Secretary. Beginning January 1, 2010, plans that: (1) enroll 
individuals in a MA or Part D plan without their consent 
(except Part D dual eligibles), (2) transfer an individual from 
one plan to another for the purpose of earning a commission, 
(3) fail to comply with marketing requirements, including CMS 
guidance, or (4) employ or contract with an individual or 
entity that commits a violation would be subject to sanctions 
imposed by the Secretary. Sanctions would apply to any employee 
or agent of a MA or Part D plan, or any provider or supplier 
who contracts with a MA or Part D plan.
            Reason for Change
    The new provision will reduce the ``churning'' of 
beneficiaries by agents or brokers and clarifies that plans may 
be sanctioned for actions undertaken by their employees, 
agents, brokers. Providers, or suppliers.
            Effective Date
    These amendments apply to violations committed on or after 
January 1, 2010.

Sec. 1618. Enhanced Penalties for Obstruction of Program Audits

            Current Law
    The OIG has permissive authority (i.e. discretion) to 
exclude an entity or individual from a federal health program 
for a conviction related to the obstruction of a health care 
fraud investigation.
            Proposed Law
    This provision would expand the OIG's permissive exclusion 
authority to include a conviction related to the obstruction of 
an audit related to health care fraud as well as an 
investigation or audit related to the use of funds received 
from any health care program. The provision would apply to 
violations committed on or after January 1, 2010.
            Reason for Change
    The new provision will create a strong disincentive for the 
obstruction of program audits.
            Effective Date
    These amendments apply to violations committed on or after 
January 1, 2010.

Sec. 1619. Exclusion of Certain Individuals and Entities from 
        Participation in Medicare and State Health Care Programs

            Current Law
    Section 1128 of the Social Security Act provides that the 
Secretary (and through delegation, OIG) has the authority to 
exclude individuals and entities from participation in federal 
health care programs under a variety of circumstances. 
Exclusion is mandatory for those convicted of certain criminal 
offenses, and generally the exclusion cannot be for a period of 
less than five years. OIG also has permissive authority exclude 
an individual or entity from a federal health program, which 
includes the discretion to determine whether and for how long 
to impose an exclusion. A permissive exclusion may be imposed 
under numerous circumstances, including conviction of certain 
misdemeanors relating to fraud, theft, embezzlement, breach of 
fiduciary duty or other financial misconduct; a conviction 
based on an interference with or obstruction of an 
investigation into a criminal offense; and revocation or 
suspension of a health care practitioner's license for reasons 
bearing on the individual's or entity's professional 
competence, professional performance, or financial integrity.
    Under 42 C.F.R. Sec. 1001.1901, unless and until an 
excluded individual or entity is reinstated into a federal 
health care program, no payment will be made by a program for 
any item or service furnished by the individual or entity, or 
at the medical direction or on the prescription of a physician 
or other authorized individual who is excluded when the person 
furnishing such item or service knew or had reason to know of 
the exclusion.
            Proposed Law
    The bill would amend section 1128(c) to clarify the effect 
of an exclusion of an individual or entity on payment made 
under a federal health care program. The section would provide 
that payment cannot be made from any federal health care 
program with respect to an item or service furnished (1) by an 
excluded individual or entity, or (2) at the medical direction, 
or on the prescription of an authorized individual (e.g., a 
physician) when the person submitting a claim for the item or 
service knew or had reason to know of an individual's 
exclusion. Despite this prohibition, the bill would permit 
payment to be made for emergency items or services (not 
including items or services furnished in an emergency room of a 
hospital) that are furnished by these individuals and entities. 
For purposes of this section, as well as sections 1128A and 
1128B (dealing with civil and criminal penalties in federal 
health care programs), an item or service would be considered 
``furnished'' if the individual or entity directly or 
indirectly provided, ordered, manufactured, distributed, 
prescribed, or otherwise supplied the item or service 
regardless of how the item or service was paid for by a federal 
health care program or to whom such payment was made.
    Section 1128(c) would also provide that if a person 
eligible for benefits under Medicare or Medicaid submits a 
claim for payment for items or services furnished by an 
excluded individual or entity, and the eligible person did not 
know or have reason to know that such individual or entity was 
excluded, then payment must be made for the items or services. 
In this case, the Secretary must notify the eligible person of 
the exclusion of the individual or entity, and payment must not 
be made for items or services furnished by an excluded 
individual or entity to an eligible person after a reasonable 
time after this notification.
    The section would also provide that if claim for payment 
for items or services furnished by an excluded individual or 
entity is submitted by an individual or entity other than a 
person eligible for benefits under Medicare or Medicaid or that 
excluded individual or entity itself, and the Secretary 
determines that the individual or entity that submitted the 
claim took reasonable steps to learn of the exclusion and 
reasonably relied upon inaccurate or misleading information 
from the relevant federal health care program or its 
contractor, the Secretary may waive repayment of the amount 
paid in violation of the exclusion to the individual or entity 
that submitted the claim. If a federal health care program 
contractor provided inaccurate or misleading information 
resulting in the waiver of an overpayment under this section, 
the Secretary must take appropriate action to recover the 
improperly paid amount from the contractor.
            Reason for Change
    The new provision clarifies current practice.
            Effective Date
    Date of enactment.

         Subtitle C--Enhanced Program and Provider Protections


Sec. 1631. Enhanced CMS Program Protection Authority

            Current Law
    CMS has implemented regulations requiring providers and 
suppliers to complete an application to enroll in the Medicare 
program and receive billing privileges. As part of the 
enrollment process, providers and suppliers are required to 
submit information necessary to verify identity and state 
licensure. CMS reserves the right to perform on-site 
inspections of a provider or supplier to verify compliance with 
standards. If enrollment requirements are not met, CMS may 
revoke Medicare billing privileges. Providers and suppliers 
must resubmit and recertify the accuracy of their enrollment 
information every 5 years. CMS may deny a provider's or 
supplier's enrollment in Medicare or revoke a provider's 
billing privileges for the following reasons: noncompliance 
with enrollment requirements, exclusion from participation in 
Federal health care programs, conviction of a felony, or the 
submission of false or misleading information on the enrollment 
application.
    CMS manual instructions require that Medicare contractors 
query the following databases prior to approving an application 
for enrollment in Medicare: Qualifier.net, the Medicare 
Exclusions Database (List of Excluded Individuals/Entities or 
LEIE), and the Government Services Administration (GSA) 
debarment list. All Medicare contractors are required to query 
these databases when enrolling providers in the program.
    Medicaid beneficiaries may obtain services from any 
Medicaid participating provider recognized by the state. In 
addition, Medicaid beneficiaries enrolled in primary care case 
management system, a Medicaid managed care organization, or 
similar entities must not restrict the choice of a qualified 
provider of family planning services and supplies (with some 
other exceptions). States are not required to provide Medicaid 
coverage for such services when offered by persons or entities 
convicted of felonies.
            Proposed Law
    This provision would add a new section to the SSA, section 
1128G that would authorize the Secretary, in cases where there 
is a significant risk of fraud, to subject providers and 
suppliers to enhanced screening, oversight, or a moratorium on 
enrollment. The provision would take effect on January 1, 2011. 
The Secretary would determine what constitutes a significant 
risk of fraud by reviewing complaints, reports, referrals from 
law enforcement or other sources, and the results from data 
analysis, trend information, or claims review. Risk could be 
determined with respect to a single category of providers or 
suppliers or a single category of providers or suppliers 
operating within a specific geographic area.
    This provision would apply to providers or suppliers 
initially enrolling in Medicare, Medicaid, or CHIP as well as 
those renewing their enrollment. The Secretary would be 
authorized to require states to implement these program 
safeguards as a requirement in their Medicaid or CHIP state 
plans. State CHIP plans would also be required to include their 
procedures for enforcing these requirements. Any actions taken 
or determinations made by the Secretary in imposing these 
requirements would not be subject to judicial review. 
Additionally, states would be allowed to conduct enhanced 
oversight activities beyond those required by the Secretary.
    This provision would require the Secretary to establish 
procedures for screening and enhanced oversight. Screening 
procedures may include licensing board checks, reviews against 
the LEIE, background checks, and unannounced pre-enrollment or 
other site visits. During periods of enhanced oversight 
(between 30 days and one year) the Secretary would be 
authorized to take certain actions against providers, including 
required or unannounced site visits or inspections, prepayment 
review, enhanced review of claims, and other actions as 
specified by the Secretary. The Secretary would be allowed to 
extend these periods to more than one year if necessary.
    In instances where the Secretary determines that there is 
risk of serious ongoing fraud, the Secretary would have the 
authority to impose a moratorium on enrolling providers within 
a category of providers and suppliers, including a category 
within a specific geographic area. Moratoriums could not be 
imposed if the Secretary makes a determination that the 
moratorium would adversely impact access to care. Medicaid 
providers would be prohibited from providing coverage for 
services delivered by providers under a moratorium.
            Reason for Change
    The new provision will allow the Secretary to screen 
providers before they join the program to put in place 
additional safeguards when there is a heightened risk of waste, 
fraud, and abuse.
            Effective Date
    These amendments apply to applications submitted after 
January 1, 2011.

Sec. 1632. Enhanced Medicare, Medicaid, and CHIP Program Disclosure 
        Requirements Relating to Previous Affiliations

            Current Law
    In order to receive payment from Medicare, providers must 
enroll in the Medicare program CMS regulations mandate that 
enrollment applications contain information necessary to 
uniquely identify the provider (i.e. proof of business name, 
social security number, or Tax ID number) and include 
documentation necessary to verify licensure or eligibility to 
furnish Medicare covered items or services. Persons who sign 
the enrollment applications are required to have an ownership 
or control interest in the provider or supplier. Upon initial 
enrollment in the program, the signature on the enrollment 
application must be that of an authorized official. Renewal or 
updated applications may be signed by a delegated official. CMS 
has the authority to perform on-site inspections of a provider 
to verify enrollment information and determine compliance with 
Medicare enrollment requirements. CMS has established an 
internet database called the Provider Enrollment, Chain and 
Ownership System (PECOS) for providers to submit enrollment 
information.
    Medicaid statute delegates the administration of the 
Medicaid program to the states. There is considerable variation 
in how states' administer their provider enrollment processes. 
State Medicaid agencies determine whether a provider or 
supplier is eligible to participate in the Medicaid program by 
providing for written agreements with providers and suppliers. 
Written agreements require that providers and suppliers 
maintain specific records, disclose certain ownership 
information, and grant access to federal and state auditors to 
books and records.
            Proposed Law
    Providers or suppliers submitting applications for 
enrollment or renewing enrollment in Medicare, Medicaid, or 
CHIP after January 1, 2011 would be required to disclose 
information related to any current or previous affiliation 
(within the last 10 years) with providers or suppliers that 
have uncollected debt, or with persons or entities that have 
been suspended or excluded, been placed on payment suspension, 
or had their billing privileges revoked. The Secretary would 
have the authority to apply program safeguards to providers and 
suppliers, such as enhanced screening of claims, required or 
unannounced site visits and inspections, additional reporting 
requirements, and surety bonds, if the Secretary determines 
that certain affiliations pose a risk of fraud, waste, and 
abuse. The provision would also provide the Secretary with the 
authority to deny enrollment in Medicare, Medicaid, or CHIP in 
instances when at least one affiliation or affiliations poses a 
serious risk of fraud, waste or abuse.
            Reason for Change
    The new provision will allow the Secretary to take into 
account past affiliations with persons or entities that owe or 
posed past risk to the program, and will allow the Secretary to 
take steps to protect the program.
            Effective Date
    These amendments apply to applications submitted after July 
1, 2011.

Sec. 1633. Required Inclusion of Payment Modifier for Certain 
        Evaluation and Management Services

            Current Law
    Evaluation and management services include certain primary 
care services, hospital inpatient medical services, 
consultations, other visits, preventive medicine visits, 
psychiatric services, emergency care facility services, and 
critical care services.
            Proposed Law
    The provision would require the Secretary to establish a 
payment modifier for evaluation and management services that 
result in the ordering of additional services (i.e. lab tests), 
prescription drugs, durable medical equipment, or other 
services determined by the Secretary to be at high risk of 
fraud, waste, and abuse. The Secretary would be authorized to 
require providers and suppliers to report the payment modifier 
on claims.
            Reason for Change
    The new payment modifier will allow for greater analysis 
and data collection in areas at risk of fraud and abuse.
            Effective Date
    Date of enactment.

Sec. 1634. Evaluations and Reports Required Under Medicare Integrity 
        Program.

            Current Law
    Medicare statute authorizes the establishment of the MIP 
program. MIP requires the Secretary to enter into contracts 
with private entities to conduct a variety of program integrity 
activities for the Medicare program including auditing 
providers, reviewing claims for medical necessity, and 
identifying and investigating alleged fraud. MIP was 
established along with the HCFAC program by HIPAA, which sought 
to increase and stabilize federal funding for health care anti-
fraud activities.
    Established by the DRA, the Medicaid Integrity Program is 
modeled after Medicare's MIP program. The Medicaid Integrity 
Program provides HHS with dedicated resources to promote 
Medicaid integrity to contract with entities to reduce fraud, 
waste, and abuse and to add 100 full-time equivalent staff. 
Annual reports to Congress on program accomplishments and use 
of funds are required. In addition, the Secretary is required 
to develop comprehensive 5-year plans for the program.
            Proposed Law
    For the contract year beginning in 2011, this provision 
would require MIP contractors to assure the Secretary that they 
will conduct periodic evaluations of the effectiveness of their 
activities. Annual reports would be required to be submitted to 
the Secretary. A similar provision with respect to the Medicaid 
Integrity Program would be included in Section 1752 of this 
bill.
            Reason for Change
    The new provision will incease the accountability and 
effectiveness of MIP contractors.
            Effective Date
    Date of enactment.

Sec. 1635. Require Providers and Suppliers to Adopt Programs to Reduce 
        Waste, Fraud, and Abuse

            Current Law
    Since 1998, the OIG has been issuing a series of compliance 
guidance documents for providers participating in federal 
health care programs to assist in preventing fraud, waste, and 
abuse. The purpose of the documents is to encourage health care 
providers to adopt compliance programs and internal control 
measures to monitor their adherence to applicable rules, 
regulations, and requirements. The adoption of these programs 
is not mandatory. There is no current law explicitly directing 
health care providers to adopt compliance programs.
            Proposed Law
    This provision would require providers and suppliers to 
establish compliance programs to reduce fraud, waste, and 
abuse. Providers and suppliers that do not meet requirements 
for establishing these programs would be subject to certain 
sanctions. The provision would also authorize the Secretary to 
conduct a pilot program, prior to mandating these requirements 
to all providers, to test the establishment of compliance 
programs for providers that the Secretary has determined to be 
a high risk for fraud, waste, and abuse.
    The Secretary, in consultation with the OIG, would be 
required to establish the core requirements for provider 
compliance programs. Requirements may include written policies, 
procedures, and standards of conduct; a designated compliance 
officer and compliance committee; training and education on 
fraud, waste and abuse for employees and contractors; a 
confidential mechanism (i.e. hotline) for receiving compliance 
questions and reports; guidelines for enforcing standards; 
internal monitoring and auditing procedures applicable to 
providers and contractors; and procedures for (1) ensuring 
prompt responses to detected and potential offenses, (2) 
developing corrective action initiatives, and (3) returning all 
identified Medicare, Medicaid, and CHIP overpayments. The 
Secretary would be required to develop a timeline for the 
establishment of these requirements and the date by which 
providers and suppliers would be required to have a compliance 
program in place.
    The CMS Administrator would have the authority to assess 
whether or not a provider or supplier has met these 
requirements and impose a CMP of up to $50,000 for each 
violation. The Secretary would have the authority to impose 
other intermediate sanctions, such as corrective action plans 
and additional monitoring, on providers and suppliers for 
failing to meet these requirements. The provision would also 
give the Secretary the authority to disenroll a Medicare 
provider or supplier or impose a CMP or intermediate sanction 
on any provider or supplier who fails to establish a compliance 
program.
    The provisions of this section would not apply to 
individual physicians or skilled nursing facilities, although 
skilled nursing facilities would be required to develop 
compliance programs under Section 1412 of this Act.
            Reason for Change
    The new provisions will improve compliance and 
accountability of Medicare providers and suppliers.
            Effective Date
    Date of enactment.

Sec. 1636. Maximum Period for Submission of Medicare Claims Reduced to 
        Not More Than 12 Months

            Current Law
    Medicare statute requires that payments only be made, 
except in certain circumstances, to Medicare eligible providers 
and only if a written request for payment is filed within three 
calendar years after the year in which the services were 
provided. The Secretary is authorized to reduce this period to 
no less than one year if it deems it necessary for the 
efficient administration of the program.
    As established by CMS regulations, in general, the time 
limit on submitting a claim for payment is the close of the 
calendar year after the year in which the services were 
furnished. For services furnished in the first nine months of 
the year, claims must be submitted on or before December 31st 
of the following year. For services furnished in the last three 
months of a calendar year, claims must be submitted to the 
contractor on or before December 31st of the second year 
following the year services were furnished.
            Proposed Law
    The provision would reduce the time period for filing a 
written request for payment from three calendar years to one 
calendar year for services provided under Medicare Parts A and 
B. The Secretary would have the authority to specify exceptions 
to this one year period. The provision would eliminate the 
current statutory requirement that the Secretary must give 
Medicare Part A and B eligible providers at least one year to 
submit a claim for payment. The provision would also add a new 
requirement for MA and PDP plans. Contracts with MA 
organizations and PDP sponsors would be required to mandate 
that any provider under contract with, in partnership with, or 
affiliated with the MA organization or PDP sponsor ensure that 
a written request for payment be submitted no later than one 
calendar year after the date the services were furnished. The 
Secretary would have the authority to specify exceptions to 
this one year period.
    The provision would apply to services furnished on or after 
January 1, 2011.
            Reason for Change
    CMS has found that the current 36-month period for filing 
claims leads to fraudulent gaming of payment systems. 
Legitimate filers do not need this extended time to file 
claims--they prefer to receive payment sooner rather than 
later, while those persons and entities undertaking fraudulent 
filing will use the long period to watch to see which claims 
are approved and tailor their filings to reflect that. The 
reduced time for claims filing will reduce fraudulent claims.
            Effective Date
    These amendments apply to items and services furnished on 
or after January 1, 2011.

Sec. 1637. Physicians who Order Durable Medical Equipment or Home 
        Health Services Required to be Medicare Enrolled Physicians or 
        Eligible Professionals

            Current Law
    Medicare statute defines eligible professional as a 
physician, certain types of practitioners (i.e. physician 
assistant, nurse practitioner, clinical social worker, and 
others), a physical or occupational therapist, qualified speech 
language pathologist, or a qualified audiologist.
    CMS has implemented regulations requiring Medicare 
providers and suppliers to submit an application to enroll in 
the Medicare program in order to receive billing privileges. 
Providers and suppliers must resubmit and recertify the 
accuracy of their enrollment information every 5 years. CMS may 
deny a provider or supplier's enrollment in Medicare or revoke 
a provider's billing privileges for the following reasons: non-
compliance with enrollment requirements, exclusion from 
participation in Federal health care programs, conviction of a 
felony, or the submission of false or misleading information on 
the enrollment application.
    In order to receive payment from Medicare, physicians are 
required to certify that specified services (i.e. inpatient 
psychiatric services, post-hospital extended care services, and 
home health services) meet certain conditions. In the case of 
home health services, physicians are required to certify that 
such services were required because the individual was confined 
to his home and needs skilled nursing care or physical, speech, 
or occupational therapy; a plan for furnishing services to the 
individual has been established; and such services were 
provided under the care of a physician.
    In the case of DME, the Secretary is authorized to require, 
for specified covered items, that payment be made for items and 
services only if a physician has communicated to the supplier a 
written order for the item.
            Proposed Law
    Beginning January 1, 2010, this provision would require 
physicians who order durable medical equipment or home health 
services to be a Medicare eligible professional or enrolled in 
the Medicare program. The Secretary would have the authority to 
extend these requirements to other Medicare items and services, 
including covered Part D drugs, based on a determination that 
such application would help to reduce the risk of fraud, waste, 
and abuse.
            Reason for Change
    The new requirement that physicians ordering DME or home 
health services be Medicare-enrolled will ensure that all 
physicians prescribing these services undergo the new screening 
requirements provided in this section, and will reduce waste, 
fraud, and abuse.
            Effective Date
    Date of enactment.

Sec. 1638. Requirement for Physicians to Provide Documentation on 
        Referrals to Programs at High Risk of Waste and Abuse

            Current Law
    OIG has ``permissive'' authority to exclude an entity or an 
individual from a federal health program under numerous 
circumstances, including failing to supply documentation 
related to payment for items and services.
            Proposed Law
    Beginning January 1, 2010 the Secretary would have the 
authority to disenroll, for no more than one year, a Medicare 
enrolled physician or supplier that fails to maintain and 
provide access to written orders or requests for payment for 
DME, certification for home health services, or referrals for 
other items and services as specified by the Secretary. 
Medicare providers would be required to maintain and provide 
access to documentation relating to written orders or requests 
for payment for DME, certifications for home health services, 
or referrals for items and services as specified by the 
Secretary. The provision would also extend the OIG's permissive 
exclusion authority to include individuals or entities that 
order, refer, or certify the need for health care services that 
fail to provide adequate documentation to the Secretary to 
verify payment.
            Reason for Change
    The new requirement will improve the quality of 
documentation provided for areas at risk for waste, fraud, and 
abuse.
            Effective Date
    These amendments apply to orders, certifications, and 
referrals made on or after January 1, 2010.

Sec. 1639. Face to Face Encounter with Patient Required Before 
        Physicians May Certify Eligibility for Home Health Services or 
        Durable Medical Equipment under Medicare

            Current Law
    Home health services are covered under Medicare Parts A and 
B. In order to receive payment from Medicare, physicians are 
required to certify and re-certify that specified services 
(i.e. inpatient psychiatric services, post-hospital extended 
care services, and home health services) meet certain 
conditions. In the case of home health services, physicians are 
required to certify that such services were required because 
the individual was confined to his home and needs skilled 
nursing care or physical, speech, or occupational therapy; a 
plan for furnishing services to the individual has been 
established; and such services were provided under the care of 
a physician.
    In the case of DME, the Secretary is authorized to require, 
for specified covered items, that payment be made for items and 
services only if a physician has communicated to the supplier a 
written order for the item.
            Proposed Law
    This provision would require that after January 1, 2010, 
physicians have a face-to-face encounter (including through 
telehealth and other than with respect to encounters that are 
incident to services involved) with the individual prior to 
issuing a certification or re-certification for home health 
services or durable medical equipment as a condition for 
payment under Medicare Parts A and B. The provision would also 
apply to physicians making home health certifications in 
Medicaid and CHIP. Physicians must document that they had the 
face-to-face encounter with the individual during the 6-month 
period preceding the certification, or other reasonable 
timeframe as determined by the Secretary.
    The Secretary would be authorized to apply the face-to-face 
encounter requirement to other Medicare items and services 
based upon a finding that doing so would reduce the risk of 
waste, fraud, and abuse.
            Reason for Change
    The new requirement will ensure that a physician oversees 
the prescription of services in areas of high risk.
            Effective Date
    These amendments apply to certifications or 
recertifications made after January 1, 2010.

Sec. 1640. Extension of Testimonial Subpoena Authority to Program 
        Exclusion Investigations

            Current Law
    Section 1128 of the SSA provides that the Secretary (and 
through delegation, OIG) has the authority to exclude 
individuals and entities from participation in federal health 
care programs under a variety of circumstances. Exclusion is 
mandatory for those convicted of certain criminal offenses, and 
generally the exclusion cannot be for a period of less than 
five years. OIG also has permissive authority under numerous 
circumstances to exclude an individual or entity from a federal 
health program, including the discretion to determine whether 
and for how long to impose an exclusion.
            Proposed Law
    The provisions of 205(d) and (e) of the SSA would apply 
with respect to the Secretary's program exclusion authority. 
The Secretary would be able to issue subpoenas and require the 
attendance and testimony of witnesses and the production of any 
other evidence that relates to matters under investigation or 
in question by the Secretary. The Secretary would also have the 
ability to delegate this authority to the OIG and the 
Administrator of CMS for the purposes of a program exclusion 
investigation. Certain requirements regarding the serving of 
subpoenas and compensation for subpoenaed witnesses may apply. 
This section would also provide for judicial enforcement of 
subpoenas, including in cases where a person refuses to obey a 
properly served subpoena. This provision would apply to 
investigations beginning on or after January 1, 2010.
            Reason for Change
    The new provision will increase the ability of the 
Secretary to conduct investigations and reduce waste, fraud, 
and abuse.
            Effective Date
    These amendments apply to investigations beginning on or 
after January 1, 2010.

Sec. 1641. Required Repayments of Medicare and Medicaid Overpayments

            Current Law
    The Secretary is authorized to enter into contracts with 
private entities to conduct administrative functions, including 
audits of Medicare participating providers and suppliers to 
identify alleged overpayments. These entities are generally 
referred to as Medicare program integrity or MIP contractors.
    Medicare statute specifies that identified overpayments to 
providers or suppliers that are not paid within 30 days of the 
date of the overpayment determination will accrue interest on 
the balance of the overpayment at the rate applicable to late 
payments established by the Secretary of the Treasury. The 
Secretary is required to enter into repayment plans with 
providers for which payment within 30 days would constitute a 
financial hardship. In the case of a provider or supplier for 
which an overpayment has been identified seeks a 
reconsideration (the 2nd level of the Medicare appeals 
process), the Secretary is prohibited from recouping the 
overpayment until a decision on the reconsideration has been 
rendered.
            Proposed Law
    This provision would require the repayment of overpayments 
identified through an internal audit by Medicare and Medicaid 
participating providers, including private health plans. The 
term ``overpayment'' would be defined as any funds that a 
person receives or retains under Medicare or Medicaid of which 
they are not entitled. Person would be defined as any 
``person'' including a provider of services, supplier, Medicaid 
managed care organization, MA organization, or PDP sponsor. Any 
person who knows of an overpayment would be required to report 
and return the overpayment, along with notification for the 
reason for the overpayment, to the Secretary, the State, an 
intermediary, a carrier, or a contractor. ``Knows,'' which is 
referred to as knowing and knowingly in the statute, means that 
a person with respect to information has actual knowledge of 
the information, acts in deliberate ignorance of the truth or 
falsity of the information, or acts in reckless disregard of 
the truth or falsity of the information. An overpayment is 
defined as any finally determined funds that a person receives 
or retains under Medicare, Medicaid, or CHIP to which the 
person, after applicable reconciliation is not entitled. The 
reference to applicable reconciliation in this definition 
refers to reconciliations procedures that may already be in 
place for the relevant programs and payments, and is not 
intended to create any new required reconciliation procedures 
or rights to reconciliation or appeal. Overpayments would be 
required to be reported and returned within 60 days of the date 
of the overpayment determination. Overpayments returned after 
the 60 days would create an obligation as defined in section 
3729(b)(3) of title 31 of the U.S.C. If it is determined that 
the reason for the overpayment was related to fraud, repayment 
would not limit the provider or supplier's liability for 
additional administrative obligations such as interest, fines, 
specialties, or civil and criminal sanctions.
            Reason for Change
    The new requirement will encourage the timely repayment of 
overpayments.
            Effective Date
    Date of enactment.

Sec. 1642. Expanded Application of Hardship Waivers for OIG Exclusions 
        to Beneficiaries of any Federal Health Care Program

            Current Law
    Under section 1128 of the SSA, the Secretary (and, through 
delegation, OIG) has the authority to exclude individuals and 
entities from participation in federal health care programs. 
Exclusions from federal health programs are mandatory under 
certain circumstances, and permissive in others (i.e., OIG has 
discretion in whether to exclude an entity or individual). For 
purposes of section 1128, the term ``federal health care 
program'' means (1) any plan or program that provides health 
benefits, whether directly, through insurance, or otherwise, 
which is funded directly, in whole or in part, by the United 
States Government other than the health insurance program under 
chapter 89 of title 5, United States Code (governing health 
insurance for federal employees); or (2) any State health care 
program, as defined by the Social Security Act.
    Subject to exceptions, in the case of a mandatory 
exclusion, the minimum period of exclusion cannot be less than 
five years. However, under section 1128(c)(3)(B) of the Social 
Security Act, upon the request of a federal health care program 
administrator who determines that the exclusion would impose a 
hardship on individuals entitled to benefits under Medicare 
Part A or enrolled under Medicare Part B (or both), the 
Secretary may waive the exclusion under certain circumstances 
with respect to that program, in the case of an individual or 
entity that is the sole community physician or sole source of 
essential specialized services in a community.
            Proposed Law
    Under section 1128(c)(3)(B) of the SSA, the Secretary 
would, in accordance with the requirements of the section, be 
able to waive a mandatory exclusion period where a hardship is 
imposed on beneficiaries of federal health care programs, in 
addition to Medicare Part A and Part B beneficiaries.
            Reason for Change
    The new section increases the ability for the Secretary to 
use discretion to protect beneficiaries.
            Effective Date
    Date of enactment.

Sec. 1643. Access to Certain Information on Renal Dialysis Facilities

            Current Law
    No provision.
            Proposed Law
    This provision would require End State Renal Disease 
Facilities to provide the Secretary with access to information 
relating to any ownership or compensation arrangement between 
the facility and the medical director of such facility or 
between the facility and any physician for the purposes of an 
audit or evaluation.
            Reason for Change
    The Committee has been very concerned for several years 
about the financial relationships between medical directors and 
the dialysis organizations where they serve and the extent to 
which prescribing decisions are influenced by those financial 
arrangements or are independent of dosing guidelines, 
standards, protocols, and algorithms created by dialysis 
organizations. This authority is necessary so that the OIG may 
properly investigate these issues.
            Effective date
    Date of enactment.

Sec. 1644. Billing Agents, Clearinghouses, or Other Alternate Payees 
        Required to Register Under Medicare

            Current Law
    CMS has implemented regulations requiring Medicare 
providers and suppliers to submit an application to enroll in 
the Medicare program in order to receive billing privileges. 
Providers and suppliers must resubmit and recertify the 
accuracy of their enrollment information every 5 years. The 
enrollment application requires that providers and suppliers 
include the names, addresses, and tax ID numbers for billing 
agencies on their applications.
            Proposed Law
    Beginning January 1, 2012, this provision would require 
billing agencies, clearinghouses, or other payees that submit 
claims on behalf of a health care provider to register with the 
Secretary in a form and manner as determined by the Secretary. 
A similar provision is put in place with respect to the 
Medicaid program by section 1759 of this Act.
            Reason for Change
    By requiring that payees under Medicare are enrolled in the 
program, these entities will be subject to the enhanced 
screening procedures established in this section, which will 
reduce waste, fraud, and abuse in the program.
            Effective date
    This section applies to claims submitted on or after 
January 2012.

Sec. 1645. Conforming CMPs to False Claims Act Amendments

            Current Law
    Section 1128A(a) of the SSA authorizes the imposition of 
CMPs on any person, including an organization, agency, or other 
entity, who engages in various types of improper conduct with 
respect to federal health care programs. Under 1128A(a)(1), 
CMPs may be imposed on any person who knowingly presents or 
causes to be presented to certain government officers, 
employees, agents, or agencies certain false or fraudulent 
claims for items or services. As defined by section 1128A(i), 
an item or service is defined to include any particular item, 
device, medical supply, or service purportedly provided to a 
patient and listed in an itemized claim for payment. A claim is 
defined by this section as an application for payments for 
items and services under a federal health care program.
    Section 1128A generally provides for monetary penalties of 
up to $10,000 for each item or service claimed, and $15,000 or 
$50,000 under other circumstances, as well as additional 
assessments. Under Section 1128(a)(4), certain persons excluded 
from participating in Medicare or a State health care program 
who retain a direct or indirect ownership or control interest 
in an entity that is participating in Medicare or a State 
health care program and know or should know of the action 
constituting the basis for the exclusion, or who are an officer 
or managing such an entity, may be subject to civil penalties.
    Section 1128A(c)(1) of the SSA provides that the Secretary 
may initiate a proceeding to determine whether to impose a 
civil monetary penalty, assessment, or exclusion under the 
section only as authorized by the Attorney General pursuant to 
procedures agreed upon by them. The Secretary may not initiate 
an action with respect to any claim, request for payment, or 
other occurrence described in this section later than six years 
after the date the claim was presented, the request for payment 
was made, or the occurrence took place.
    The federal False Claims Act (FCA), codified at 31 U.S.C. 
Sec. Sec. 3729-3733, provides for judicial imposition of CMPs 
and damages for the knowing submission of false claims to the 
United States government. The recently enacted Fraud 
Enforcement and Recovery Act of 2009 (FERA), P.L. 111-21, made 
several amendments to the False Claims Act that, according to 
legislative history, were intended to clarify the meaning of 
several provisions of the FCA in light of judicial 
interpretations of the statute that were said to run contrary 
to congressional intent and limit the scope of the law. Among 
the changes made by FERA, the Act removed a requirement under 
30 U.S.C. 3729(a)(1) that provided that in order for liability 
to attach, a false claim must be presented ``to an officer or 
employee of the United States Government or a member of the 
Armed Forces of the United States.'' In addition, FERA expanded 
the definition of the term ``claim'' to include ``any request 
or demand, whether under a contract or otherwise, for money or 
property and whether or not the United States has title to the 
money or property, that . . . is made to a contractor, grantee, 
or other recipient, if the money or property is to be spent or 
used on the Government's behalf or to advance a Government 
program or interest, and if the Government provided or has 
provided any portion of the money or property requested or 
demanded . . .''.
            Proposed Law
    Similar to FERA, the bill would amend section 1128A(a)(1) 
to remove the requirement for presentment of a claim to a 
government officer, employees, agents, or agencies in order to 
be liable for CMPs. The bill would also expand the reach of 
section 1128A(a)(4), under which a person excluded from 
participating in a federal health care program (in addition to 
Medicare or a State health care program) who retains ownership 
in an entity participating in the program, or is an officer or 
managing employee of such an entity, would be subject to CMPs. 
The bill would create a new section 1128A(a)(12), which would 
impose CMPs on a person who conspires to commit a violation of 
section 1128A. Persons violating section 1128A(a)(12) would be 
subject to a $50,000 penalty for violations of the section and 
an additional assessment of no more than three times the total 
amount that would otherwise apply. In addition, a new section 
1128A(a)(13) would provide that a person who knowingly makes, 
uses, or causes to be made or used, a false record or statement 
material to an obligation to pay or transmit money or property 
to a federal health care program, or knowingly conceals or 
knowingly and improperly avoids or decreases an obligation to 
pay or transmit money or property to a federal health care 
program can be subject to CMPs. Penalties under this section 
would be $50,000 for each false record or statement, 
concealment, avoidance, or decrease. Persons would also be 
subject to an assessment of no more than three times the total 
amount of the obligation under certain circumstances.
    Under section 1128A(c)(1), the Secretary could initiate a 
proceeding to determine whether to impose a civil monetary 
penalty, assessment, or exclusion for an occurrence up to ten 
years, instead of six, after the occurrence took place.
    The bill would also amend certain definitions in section 
1128A(i). For example, under 1128(i)(2), the definition of a 
claim would be broadened to include any application, request, 
or demand, whether under contract, or otherwise, for money or 
property for items and services under a federal health care 
program, whether or not the United States or a State agency has 
title to the money or property, that is presented or caused to 
be presented to a government officer, employee, agent or 
agency. A claim under this section would also include 
applications, requests, or demands made to a contractor, 
grantee, or other recipient, if the money or property is to be 
spent or used on the federal health care program's behalf or to 
advance a federal health care program interest, and if the 
federal health care program (1) provides or has provided any 
portion of the money or property requested or demanded; or (2) 
will reimburse such contractor, grantee, or other recipient for 
any portion of the money or property which is requested or 
demanded. In addition, an ``item or service'' would include, 
without limitation, any medical, social, management, 
administrative, or other item or service used in connection 
with or directly or indirectly related to a federal health care 
program.
            Reason for Change
    The changes ensure consistency with amendments made 
recently to the False Calims Act.
            Effective date
    Date of enactment.

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


Sec. 1651. Access to Information Necessary to Identify Waste and Abuse

            Current Law
    Statutory offices of inspectors general (OIG) consolidate 
responsibility for audits and investigations within a federal 
agency. The Inspector General Act of 1978 and its amendments of 
1988 granted inspectors general substantial independence and 
powers to carry out their mandate to combat waste, fraud, and 
abuse. In carrying out their functions, IGs have relatively 
unlimited authority, including subpoena power, to access all 
records and information of an agency.
    Every contract with a PDP or MA-PD (Medicare Advantage 
Prescription Drug Plan) is required to provide the Secretary 
with the right to inspect and audit any books and records of 
the plan related to costs. Information obtained or disclosed 
during an audit may be used by officers, employees, and HHS 
contractors for the purposes of conducting the audit only.
            Proposed Law
    The provision would establish that the Attorney General 
have access to all Medicare and Medicaid claims and payment 
databases facilitated by the OIG and in consultation with CMS 
or the owner of any such database. Access would be required to 
be carried out for the purposes of law enforcement activity and 
in a manner consistent with any applicable disclosure, privacy, 
and security laws, including the HIPAA and Privacy Act of 1974, 
and subject to any statutory information systems security 
requirements in statute or mandated by the Secretary.
            Reason for Change
    The provision clarifies access to Medicare and Medicaid 
claims and payment database in order to facilitate 
investigations and enforcement, and reduce waste, fraud, and 
abuse.
            Effective date
    Date of enactment.

Sec. 1652. Elimination of Duplication Between the Healthcare Integrity 
        and Protection Databank and the National Practitioner Databank

            Current Law
    Medicare statute requires the Secretary to develop and 
maintain a national health care fraud and abuse data collection 
program for the reporting of adverse actions taken against 
health care providers or suppliers. The OIG issues regulations 
implementing the Health Care Integrity and Protection Data Bank 
(HIPDB). The statute requires the following types of health 
care related adverse actions be reported--civil judgments, 
federal or state criminal convictions, actions taken by federal 
or state licensing agencies, and provider exclusions from 
Medicare and Medicaid. Only final adverse actions are 
reportable to the HIPDB. Administrative fines, citations, 
corrective action plans, and other personnel actions are not 
reportable except under certain circumstances. Settlements, in 
which a finding of liability has not been established, are also 
not reportable. Both federal and state government agencies as 
well as health plans are required to report to the HIPDB. 
Health plans that fail to report are subject to a civil 
monetary penalty of $25,000. The Secretary is authorized to 
charge fees to access information in the database. However, 
fees cannot apply to requests from federal entities. HIPDB 
cannot duplicate the reporting requirements established for the 
National Practitioner Data Bank.
    Title IV of the Health Care Quality Improvement Act of 
1986, as amended, established the National Practitioner Data 
Bank (NPDB). The NPDB collects and releases data related to the 
professional competence of physicians, dentists, and certain 
healthcare practitioners. The types of information included in 
the NPDB are medical malpractice payments, certain adverse 
licensure actions, adverse clinical privileging actions, 
adverse professional society membership actions, and exclusions 
from Medicare and Medicaid. The statute defines the entities 
eligible to report and query the databank. Malpractice payers 
that fail to report are subject to a civil monetary penalty. 
Section 1921 of the Social Security Act expanded the scope of 
reporting requirements for the NPDB to encompass additional 
adverse licensure actions and actions taken by State licensing 
and certification agencies, peer review organizations, and 
private accreditation organizations. Section 1921 also required 
that actions taken against all health care practitioners be 
included in the databank. States are required to have a system 
for reporting adverse actions to the NPDB. Both databases are 
overseen by the Health Resources and Services Administration 
(HRSA) within HHS.
            Proposed Law
    Upon enactment of this Act, this provision would require 
the Secretary to establish a process to terminate the HIPDB. 
The Secretary would be required to ensure that the information 
that was formerly collected in the HIPDB is transferred to the 
NPDB. Requirements pertaining to the establishment of the 
HIPDB, such as rules for reporting information, the types of 
information that are reported, and rules for disclosure, would 
all apply to the NPDB upon termination of the HIPDB. The 
provision would eliminate the OIG's responsibility for 
reporting adverse actions to the database. After the Secretary 
certifies that the transition of information from the HIPDB to 
the NIPD is complete, any fees charged by the Secretary for 
access to the database would apply to federal agencies. The 
Department of Veterans Affairs (VA) would be exempted from 
these charges for one year. The transition would be funded from 
the fees collected to access the database and from additional 
amounts as necessary from the annual HCFAC appropriation 
available to the Secretary and the OIG. Funding would be 
available for one year after the enactment date of this 
legislation.
            Reason for Change
    The section establishes a timeline for the process already 
underway of consolidating databases. This will ensure the 
efficient use of resources and greater access to data necessary 
for preserving program integrity.
            Effective date
    Upon certification by the Secretary according to the 
provision or the first day of the second year after enactment.

Sec. 1653. Compliance with HIPAA Privacy and Security Standards

            Current Law
    The HIPAA Privacy and Security Rules were promulgated by 
HHS pursuant to sections 262(a) and 264 of the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) to establish 
national standards for the privacy and security of protected 
health information.
    The HIPAA Privacy and Security Rules apply primarily to 
covered entities--health plans, health care clearinghouses, and 
health care providers who transmit financial and administrative 
transactions electronically. Failure to comply with these 
regulations may result in civil or criminal penalties for 
covered entities. The HITECH Act, enacted as part of the 
American Recovery and Reinvestment Act, extends civil and 
criminal liability to business associates of covered entities 
for violations that occur on or after February 17, 2010. 
Business associates are defined as persons who perform, or 
assist in the performance of a function or activity involving 
the use or disclosure of individually identifiable health 
information on behalf of a covered entity. Examples of business 
associates include persons who perform legal, actuarial, 
accounting, consulting, data aggregation, management, 
administrative, accreditation, or financial services to or for 
such covered entity where the provision of the service involves 
the disclosure of individually identifiable health information 
from such covered entity or arrangement, or from another 
business associate of such covered entity or arrangement, to 
the person.
    The HIPAA Privacy Rule governs the disclosure of protected 
health information (PHI)--that is, individually identifiable 
health information ``created or received by a [covered 
entity]'' that ``[r]elates to the . . . health or condition of 
an individual'' or to the provision of or payment for health 
care. A covered entity is permitted to use or disclose PHI 
without patient authorization for treatment, payment, or health 
care operations. For other purposes, a covered entity may only 
use or disclose PHI with patient authorization subject to 
certain exceptions. Exceptions permit the use or disclosure of 
PHI without patient authorization or prior agreement for public 
health, judicial, law enforcement, and other narrow purposes. 
The HIPAA Privacy Rule also requires covered entities and 
business associates to provide an accounting of certain 
disclosures; to make reasonable efforts to disclose only the 
minimum information necessary; to safeguard PHI from 
inappropriate use or disclosure; and to provide a notice of 
their privacy practices. Individuals also have a right to 
review and obtain copies of their PHI and to request 
corrections.
    The HIPAA Security Rule, applies only to PHI in electronic 
form (EPHI), and requires a covered entity or business 
associate to maintain administrative, technical, and physical 
safeguards to ensure the confidentiality, integrity, and 
availability of all EPHI the covered entity creates, receives, 
maintains, or transmits.
    The HITECH Act will also impose a breach notification 
requirement that is triggered when unsecured PHI or EPHI is 
compromised. This requirement is applicable to both covered 
entities and business associates and will become effective 30 
days after HHS issues final regulations implementing this 
requirement.
    The Privacy Act of 1974 generally prohibits disclosures of 
records contained in a system of records maintained by a 
federal agency without the written request or consent of the 
individual to whom the record pertains. A system of records is 
a group of records under the control of an agency from which 
information is retrieved by the name of the individual or by 
some identifier assigned to the individual, such as a Social 
Security Number. The Privacy Act contains certain statutory 
exceptions, and a list of agency systems of records, including 
the routine uses of those records, is published in the Federal 
Register.
            Proposed Law
    The provision would mandate compliance with HIPAA privacy 
and security requirements and the Privacy Act of 1974 in 
carrying out the provisions of this subtitle.
            Reason for Change
    The provision clarifies that all provisions must protect 
privacy and security as outlined in HIPAA.
            Effective date
    Date of enactment.

                      TITLE VII--MEDICAID AND CHIP


    (Not Within the Jurisdiction of the Committee on Ways and Means)


                 TITLE VIII--REVENUE-RELATED PROVISIONS


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

        (Sec. 1801 of the bill and Sec. 6103(0(19) of the Code)


                              PRESENT LAW

Outreach efforts to increase awareness of the availability of Part D 
        subsidies for low-income individuals

    Under Medicare Part D (the prescription drug program), 
beneficiaries with incomes and assets below certain levels may 
be eligible for Low Income Subsidy (``LIS'') benefits. Section 
1144 of the Social Security Act requires the Commissioner of 
Social Security to conduct outreach efforts to inform potential 
LIS beneficiaries about the additional premium and cost-sharing 
subsidies. The Social Security Administration (``SSA''), from 
its own records and other non-tax records available to SSA, is 
able to determine a potential pool of LIS beneficiaries, but 
such pool includes many persons ineligible for the LIS benefits 
due to excess income or resources.
    For example, prior to the beginning of the Part D program, 
SSA identified and conducted outreach to 18.6 million 
potentially eligible individuals; of these, 6.2 million applied 
by March 2007 and 2.2 million were found to be eligible. The 
Centers for Medicare and Medicaid Services (``CMS'') believes 
that some of the remaining 12.4 million that did not apply 
could be eligible for LIS benefits. The SSA has contacted these 
individuals a number of times, but has had limited success 
identifying additional potentially eligible individuals and 
securing applications from them.

Confidentiality of returns and return information

    Section 6103 provides that returns and return information 
are confidential and may not be disclosed by the IRS, other 
Federal employees, State employees, and certain others having 
access to such information except as provided in the Code. 
Section 6103 contains a number of exceptions to the general 
rule of nondisclosure that authorize disclosure in specifically 
identified circumstances.
    For example, the Code provides for the disclosure of 
returns and return information to the SSA for several nontax 
administration purposes. For purposes of administering the 
Social Security Act, section 6103(1)(1)(A) authorizes the 
disclosure to the SSA of returns and return information 
relating to self-employment taxes, Federal Insurance 
Contributions Act taxes, and taxes withheld at the source on 
wages.\174\ Section 6103(1)(5) provides for the disclosure to 
the SSA of certain information returns for purposes of carrying 
out an effective return processing program, the Combined Annual 
Wage Reporting Program, and for providing mortality status of 
individuals for certain epidemiological and similar 
research.\175\ In addition, the Code provides for the 
disclosure of certain return information for purposes of 
establishing the appropriate amount of any Medicare Part B 
Premium Subsidy Adjustment.\176\
---------------------------------------------------------------------------
    \174\Documents which may be disclosed under this provision include 
but are not limited to:
     Schedule C, Form 1040, Profit (or Loss) from Business or 
Profession
     Schedule E, Form 1040, Supplemental Income Schedule-Part 
111, Income or Loss from Partnerships
     Schedule F, Form 1040, Farm Income and Expenses 
     Schedule SE, Form 1040, Computation of Social Security 
Self-Employment Tax
     Form 1065, U.S. Partnership Return of Income 
     Form 941, Employer's Quarterly Federal Tax Return
     Form 942, Employer's Quarterly Tax Return for Household 
Employees or portions Schedule H, Form 1040
     Form 943, Employer's Annual Tax Return for Agricultural 
Employees
     Form W-2, Wage and Tax Statement.
    See Internal Revenue Service, Internal Revenue Manual, sec. 
11.3.29.3--Administration of the Social Security Act--Social Security 
Administration (May 27, 2005).
    \175\The information returns that may be disclosed under section 
6103(1)(5) are those filed under Part Subchapter A, Chapter 61 of the 
Code. These include, primarily, Form W-2, Form W-3, and Form 1099-R. 
See Internal Revenue Service, Internal Revenue Manual, sec. 
11.3.29.3.2--Disclosure of Information Returns to Social Security 
Administration (May 27, 2005).
    \176\Sec. 6103(1)(20).
---------------------------------------------------------------------------
    A December 2008 Treasury study conducted jointly with the 
SSA found that certain income information in IRS's possession, 
and, through imputation, some asset information, could be used 
to narrow the pool of potentially eligible LIS beneficiaries 
identified by the SSA, thereby allowing the SSA to better 
target its outreach efforts. Specifically, tax information 
could be used to screen out some individuals whose income or 
resources make them likely to be ineligible for LIS 
benefits.\177\
---------------------------------------------------------------------------
    \177\Department of the Treasury, Office of Tax Analysis, Value of 
IRS Information for Determining Eligibility for the Low Income Subsidy 
Program (LIS) of the Medicare Prescription Drug Program (Medicare Part 
D) (December 2008) at 1 and 3.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes additional income and asset 
information will assist the SSA in narrowing the pool of 
identified individuals by excluding those persons likely to 
ineligible for LIS benefits. With a narrower pool, the SSA 
could better target its future efforts toward those individuals 
more likely to be eligible and not expend resources contacting 
persons that tax records indicate are probably ineligible for 
LIS benefits.

                        EXPLANATION OF PROVISION

    Under the provision, upon written request from the 
Commissioner of Social Security, officers and employees of the 
SSA will have access to the following information (including 
information available under sections 6103(l)(1) and (l)(5)) 
with respect to any individual identified by the Commissioner 
of Social Security:
          1. return information for the applicable year from 
        returns with respect to wages and payments of 
        retirement income;
          2. unearned income information and income information 
        of the taxpayer from partnerships, trusts, estates, and 
        subchapter S corporations for the applicable year;
          3. if the individual filed an income tax return for 
        the applicable year, the filing status, number of 
        dependents, income from farming, and income from self 
        employment on such return;
          4. if the taxpayer's return status was married filing 
        separately, the social security number of the 
        taxpayer's spouse;
          5. if the taxpayer filed a joint return, the social 
        security number, unearned income information, and 
        income information from partnerships, trusts, estates, 
        and Subchapter S corporations of the taxpayer's spouse; 
        and
          6. such other return information relating to the 
        taxpayer (and, in the case of a joint return, the 
        taxpayer's spouse) as is prescribed by the Secretary by 
        regulation as might indicate that the taxpayer is 
        likely to be ineligible for a low-income prescription 
        drug subsidy under section 1860D-14 of the Social 
        Security Act.
    For purposes of the provision, ``applicable year'' means 
the most recent taxable year for which information is available 
in the IRS's taxpayer information records. Under the provision, 
the SSA may only request tax information with respect to 
individuals the SSA has identified, through the use of all 
other reasonably available information, as likely to be 
eligible for a low-income prescription drug subsidy under 
section 1860D-14 of the Social Security Act and who have not 
applied for such subsidy. In the case of an identified 
individual whose return status was married filing separately 
and whose spouse was not identified by the SSA as likely to be 
eligible for a low-income prescription drug subsidy, the SSA 
may make a separate request for information related to such 
spouse.
    The information disclosed under the provision can only be 
used by the SSA for purposes of identifying those individuals 
likely to be ineligible for a low-income prescription drug 
subsidy for purposes of its outreach efforts under section 1144 
of the Social Security Act.

                             EFFECTIVE DATE

    The provision is effective for disclosures made after the 
date that is 12 months after the date of enactment.

 B. COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND; FINANCING FOR TRUST 
                                  FUND

(Sec. 1802 of the bill and new Secs. 4375, 4376, 4377, and 9511 of the 
                                 Code)


                              PRESENT LAW

    No provision.

                           REASONS FOR CHANGE

    The Committee believes that comparative effectiveness 
research is a public good and that a sustained investment in 
such research is needed to improve the quality of information 
about the relative strengths and weaknesses of various health 
care items, services and systems to allow physicians and 
patients to make more informed health care decisions. To ensure 
that there are sufficient amounts of public and private funds 
dedicated to this purpose, and to insulate such funding from 
inappropriate outside influence, the Committee believes that it 
is appropriate to establish a trust fund, impose fees on health 
insurance plans and receive transfer payments from Medicare, 
and have such amounts in the fund dedicated to finance 
comparative effectiveness research.

                        EXPLANATION OF PROVISION

In general

    The provision establishes the Health Care Comparative 
Effectiveness Research Trust Fund (``CERTF'') to carry out the 
provisions in the bill relating to comparative effectiveness 
research.
    The following amounts are appropriated to the CERTF: 
$90,000,000 for fiscal year 2010; $100,000,000 for fiscal year 
2011; and $110,000,000 for fiscal year 2012. For each fiscal 
year beginning with fiscal year 2013, the amount appropriated 
to the CERTF is (1) an amount equal to the net revenues 
received in the Treasury from the fees imposed on health 
insurance and self-insured plans under new Code sections 4375, 
4376 and 4377 for such fiscal year, and (2) amounts determined 
by the Secretary of Health and Human Services to be equivalent 
to the fair share per capita amount for the fiscal year 
multiplied by the average number of individuals entitled to 
benefits under Medicare part A, or enrolled under Medicare part 
B, for such fiscal year. The amount transferred under (2) is 
limited to $90,000,000. Net revenues means the amount, as 
estimated by the Secretary of the Treasury, equaling the excess 
of the fees received in the Treasury on account of the new fee 
on health insurance and self-insured plans under new Code 
sections 4375, 4376 and 4377, over the decrease in tax imposed 
by chapter one of the Code relating to the fees imposed by such 
sections.
    The amounts appropriated for fiscal years 2011 through 
2013, as well as the amounts transferred under (2), above, are 
to be transferred from the Federal Hospital Insurance Trust 
Fund and from the Federal Supplementary Medical Insurance Trust 
Fund, and from the Medicare Prescription Drug Account within 
such Trust Fund, in proportion to the total expenditures during 
such year that are made under Medicare for the respective trust 
fund or account.
    The fair share per capita amount is an amount computed by 
the Secretary of Health and Human Services for such fiscal year 
that will result in revenues to the CERTF of $375,000,000 for 
the fiscal year. If the Secretary is unable to compute the fair 
share per capita amount for a fiscal year, a default amount is 
used. The default amount is $2 for fiscal year 2013. For a 
subsequent year, the default amount is equal to the default 
amount for the preceding fiscal year increased by the annual 
percentage increase in the medical care component of the 
consumer price index for the 12-month period ending with April 
of the preceding fiscal year. Beginning not later than December 
31, 2011, the Secretary of Health and Human Services must 
submit to Congress an annual recommendation for a fair share 
per capita amount for purposes of funding the CERTF.
    At least the following amounts in the CERTF must be 
available to carry out the activities of the Comparative 
Effectiveness Research Commission established under the bill: 
$7,000,000 for fiscal year 2010; $9,000,000 for fiscal year 
2011; and $10,000,000 for each fiscal year beginning with 2012.

Financing CERTF from fees on health plans

    As discussed above, the CERTF is funded in part from fees 
imposed on health plans under new Code sections 4375 through 
4377. Under the provision, a fee is imposed on each specified 
health insurance policy equal to the fair share per capita 
amount multiplied by the average number of lives covered under 
the policy. The issuer of the policy is liable for payment of 
the fee. A specified health insurance policy includes any 
accident or health insurance policy\178\ issued with respect to 
individuals residing in the United States.\179\ An arrangement 
under which fixed payments of premiums are received as 
consideration for a person's agreement to provide or arrange 
for the provision of accident or health coverage to residents 
of the United States, regardless of how such coverage is 
provided or arranged to be provided, is treated as a specified 
health insurance policy. The person agreeing to provide or 
arrange for the provision of coverage is treated as the issuer.
---------------------------------------------------------------------------
    \178\A specified health insurance policy does not include insurance 
if substantially all of the coverage provided under such policy 
consists of excepted benefits described in section 9832(c) of the Code. 
Examples of excepted benefits described in section 9832(c) are coverage 
for only accident, or disability insurance, or any combination thereof; 
liability insurance, including general liability insurance and 
automobile liability insurance; workers' compensation or similar 
insurance; automobile medical payment insurance; coverage for on-site 
medical clinics; limited scope dental or vision benefits; benefits for 
long term care, nursing home care, community based care, or any 
combination thereof; coverage only for a specified disease or illness; 
hospital indemnity or other fixed indemnity insurance; and Medicare 
supplemental coverage.
    \179\Under the provision, the United States includes any possession 
of the United States.
---------------------------------------------------------------------------
    In the case of an applicable self-insured health plan, a 
fee is imposed equal to the fair share per capita amount 
multiplied by the average number of lives covered under the 
plan. The plan sponsor is liable for payment of the fee. For 
purposes of the provision, the plan sponsor is: the employer in 
the case of a plan established or maintained by a single 
employer or the employee organization in the case of a plan 
established or maintained by an employee organization. In the 
case of (1) a plan established or maintained by two or more 
employers or jointly by one of more employers and one or more 
employee organizations, (2) a multiple employer welfare 
arrangement, or (3) a voluntary employees' beneficiary 
association described in Code section 501(c)(9), the plan 
sponsor is the association, committee, joint board of trustees, 
or other similar group of representatives of the parties who 
establish or maintain the plan. In the case of a rural electric 
cooperative or a rural telephone cooperative, the plan sponsor 
is the cooperative or association.
    Under the provision, an applicable self-insured health plan 
is any plan providing accident or health coverage if any 
portion of such coverage is provided other than through an 
insurance policy if such plan is established or maintained (1) 
by one or more employers for the benefit of their employees or 
former employees, (2) by one or more employee organizations for 
the benefit of their members or former members, (3) jointly by 
one or more employers and one or more employee organizations 
for the benefit of employees or former employees, (4) by a 
voluntary employees' beneficiary association described in 
section 501(c)(9) of the Code, (5) by any organization 
described in section 501(c)(6) of the Code, or (6) in the case 
of a plan not previously described, by a multiple employer 
welfare arrangement (as defined in section 3(40) of the 
Employee Retirement Income Security Act of 1974 (``ERISA'')), a 
rural electric cooperative (as defined in section 3(40) of 
ERISA), or a rural telephone cooperative association (as 
defined in section 3(40)(B)(v) of ERISA).
    Governmental entities are not exempt from the fees imposed 
under the provision except in the case of certain exempt 
governmental programs. Exempt governmental programs include 
Medicare, Medicaid, SCHIP, and any program established by 
Federal law for providing medical care (other than through 
insurance policies) to members of the Armed Forces, veterans, 
or members of Indian tribes.
    No amount collected from the fee on health insurance and 
self insurance plans is covered over to any possession of the 
United States. For purposes of the procedure and administration 
rules under the Code, the fee imposed under the provision is 
treated as a tax.

                             EFFECTIVE DATE

    The fee on health insurance and self-insured plans is 
effective with respect to policies and plans for portions of 
policy or plan years beginning on or after October 1, 2012.

                   TITLE IX--MISCELLANEOUS PROVISIONS


Sec. 1901. Repeal of the Trigger Provision

            Current Law
    The Hospital Insurance (HI) and Supplementary Medical 
Insurance (SMI) trust funds are overseen by a board of trustees 
which reports annually to Congress. The Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (P.L. 108-173, 
MMA), Subtitle A of title VIII requires the trustees' report to 
include an expanded analysis of Medicare expenditures and 
revenues. Specifically, a determination must be made as to 
whether or not general revenue financing will exceed 45% of 
total Medicare outlays within the next seven years. General 
revenue financing is defined as total Medicare outlays minus 
dedicated financing sources (i.e., HI payroll taxes; income 
from taxation of Social Security benefits; state transfers for 
prescription drug benefits; premiums paid under Parts A, B, and 
D; and any gifts received by the trust funds). MMA requires 
that if an excess general revenue funding determination is made 
for two successive years, the President must submit a 
legislative proposal to respond to the warning. The Congress is 
required to consider the proposals on an expedited basis. 
However, passage of legislation within a specific time frame is 
not required. On January 6, 2009, the House approved a rules 
package (H.Res. 5) that nullifies the trigger provision in the 
House for the 111th Congress.
            Proposed Law
    The trigger provision would be repealed.
            Reason for Change
    The 45 percent threshold is an artificial and misleading 
measure of Medicare's fiscal health. Its continuation builds a 
case for unnecessary and radical changes to the Medicare 
program and makes it more difficult to address any future 
funding shortfalls.
            Effective date
    Date of enactment.

Sec. 1902. Repeal of the Comparative Cost Adjustment (CCA) Program

            Current Law
    The Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (P.L. 108-173, MMA) requires the 
Secretary to establish a program for the application of 
comparative cost adjustment (CCA) in CCA areas beginning in 
2010. The six-year program will begin January 1, 2010, and end 
December 31, 2015. The program is designed to test direct 
competition among local MA plans, as well as competition 
between local MA plans and fee-for-service Medicare. This 
program will occur only in a limited number of statutorily 
qualifying areas in the country.
    The benchmark for MA local plans in a CCA area will be 
calculated using a formula that weights (1) the projected FFS 
spending in an area (with certain adjustments for demographics 
and health status) and (2) a weighted average of plan bids.
    For Medicare beneficiaries in traditional Medicare, Part B 
premiums in CCA areas will be adjusted either up or down, 
depending on whether the FFS amount is more or less than the 
CCA area benchmark. If the FFS amount is greater than the 
benchmark, beneficiaries in traditional Medicare FFS will pay a 
higher Part B premium than other FFS beneficiaries in non-CCA 
areas. If the FFS amount is less than the benchmark, the Part B 
premium for FFS beneficiaries will be reduced by 75% of the 
difference. These increases and decreases are subject to a 5% 
limit; that is, adjustments to Part B premiums in CCA areas 
cannot exceed 5% of the national part B premium. Beneficiaries 
in traditional Medicare FFS with incomes below 150% of poverty, 
who qualify for low-income subsidies under the Medicare 
prescription drug program, will not have their Part B premium 
increased.
            Proposed Law
    The provision would repeal the comparative cost adjustment 
program.
            Reason for Change
    The CCA is an ideological attempt to fundamentally change 
Medicare from an entitlement to benefits to a defined 
contribution program. This concept was rejected by the 
Bipartisan Commission on the Future of Medicare in 1999.
            Effective date
    Date of enactment.

Sec. 1903. Extension of Gainsharing Demonstration

            Current Law
    Section 5007 of the Deficit Reduction Act of 2005 (P.L.109-
171; DRA) authorizes a gainsharing demonstration to evaluate 
arrangements between hospitals and physicians designed to 
improve the quality and the efficiency of care provided to 
beneficiaries. In the absence of this DRA authority, 
gainsharing arrangements are restricted by the Civil Monetary 
Penalty law. CMS is operating two projects, each consisting of 
one hospital in New York and West Virginia. Although authorized 
to begin on January 1, 2007, the project began on October 1, 
2008 and will end as mandated on December 31, 2009. The 
Secretary was required to submit a report on quality 
improvement and achieved savings as a result of the 
demonstration no later than December 1, 2009. The final report 
on these issues was due on May 1, 2010. The project was 
appropriated $6 million in FY2006 to be available for 
expenditure through FY2010.
            Proposed Law
    The authority to conduct the gainsharing demonstration 
would be extended until September 30, 2011. The due date of the 
quality improvement and achieved savings report would be 
extended from December 1, 2009, to March 31, 2011. The final 
report would be due March 31, 2013, instead of May 1, 2010. An 
additional $1.6 million would be appropriated in FY2010. All 
appropriations would be available for expenditure through 
FY201.
            Reason for change
    A key issue with many hospital-focused pay-for-performance 
initiatives is that physicians--crucial to generating changes 
in hospital care--often do not participate in the financial 
rewards of a hospital's quality improvement efforts. The 
hospitals can increase quality improvement with close 
collaboration of physicians by reducing adverse events and 
reducing length of stay. The gainsharing demonstration project 
authorized in the DRA was delayed in its start by 21 months. 
This provision allows for completion of the project so Congress 
can have a full evaluation report on the arrangements between 
hospitals and physicians in the context of quality improvement 
and cost-control.

Sec. 1904. Grants to States for Quality Home Visitation Programs for 
        Families with Young Children and Families Expecting Children

                            HOME VISITATION

            Current Law
    Title IV-B of the Social Security Act authorizes formula 
grants to states, territories and tribes for the provision of a 
range of child and family services. Those services are 
generally intended to improve children's safety, ensure them a 
permanent home, and, overall, support the well-being of 
children and their families. Subpart 1 authorizes the Stephanie 
Tubbs Jones Child Welfare Services program. Subpart 2 
authorizes the Promoting Safe and Stable Families program. Both 
programs are administered at the federal level by the 
Administration for Children and Families (ACF), within the U.S. 
Department of Health and Human Services (HHS). To receive funds 
under these programs states are required to submit state plans 
and to meet multiple requirements related to how the funds are 
used, including provision of certain protections for children 
in foster care (Subpart 1); expenditures of ``significant'' 
portions of funds for each of four broad categories of services 
to children and families: family support, family preservation, 
time-limited reunification, and adoption promotion and support 
(Subpart 2), and limits on spending for administrative purposes 
(both subparts). States must provide no less than 25% of the 
total program funding for child and family services under both 
of these programs.
    Title IV-B of the Social Security Act also authorizes funds 
for competitive grants to eligible entities to support child 
welfare related research and demonstration activities and 
Family Connections grants (Subpart 1) as well as Mentoring 
Children of Prisoners grants (Subpart 2). Funds appropriated 
for these purposes are also administered by HHS/ACF.
            Proposed Law
    Would create a new Subpart 3 of Title IV-B of the Social 
Security Act to provide funds to states, territories and tribes 
for the establishment and expansion of voluntary home 
visitation programs for families with young children (under 
school age) and families expecting children. The purpose of 
this support would be to improve the well-being, health, and 
development of children. The bill would appropriate a total of 
$750 million for this purpose over five years, as follows: $50 
million for FY2010; $100 million for FY2011; $150 million for 
FY2012; $200 million for FY2013; and $250 million for FY2014.
    State Application and Reporting Requirements: To receive a 
grant, states, territories, and tribes would be required to 
submit an application containing:
           A description of the programs to be 
        supported, outcomes intended to be achieved and 
        evidence to support effectiveness of the programs;
           Results of a statewide needs assessment 
        detailing current- services, sources and amount of 
        funding provided to these programs, capacity of home 
        visitation programs, gaps in services, and training and 
        technical assistance offered to support goals of 
        current program;
           An assurance that the state will identify 
        and give priority to funding home visitation programs 
        serving high-need communities;
           An assurance that the state will reserve 5% 
        of funding for training and technical assistance;
           An assurance that the state will promote 
        coordination and collaboration with other home 
        visitation programs, child and family services, health 
        services, and income supports, and other related 
        assistance; and will support programs that provide 
        referrals to other programs serving children and 
        families, as appropriate;
           An assurance that the state will submit an 
        annual report to HHS describing services delivered by 
        programs funded under this grant; and
           An assurance that the state will cooperate 
        with a national independent evaluation of the home 
        visitation program conducted by HHS (or by another 
        entity under contract with or via a grant from HHS).
    Maintenance of Effort: Beginning with FY2011, a state would 
not be eligible for these funds unless HHS determines that the 
state's spending (i.e., aggregate expenditures from state and 
local sources) for home visitation programs serving families 
with young children or those expecting children was no less in 
the immediately preceding fiscal year than in the second 
preceding fiscal year. (For example, for a state to receive 
FY2011 funding, HHS would need to find that the state's 
spending for home visitation in FY2010 was no less than it had 
been in FY2009; for a state to receive this home visitation 
funding in FY2012 funding, HHS must find that the state's home 
visitation spending in FY2011 was no less than it had been in 
FY2010, etc.)
    Payments to States and Territories and State Match: HHS 
must make a grant to each state, territory, or tribe that 
submits an application meeting the specified requirements, 
provided that the state also meets the applicable maintenance 
of effort requirement. A state is entitled to an annual 
allotment of funds under this program that is equal to the 
amount appropriated for the home visitation program in a given 
year (minus funds reserved for training and technical 
assistance and for tribal home visitation programs) multiplied 
by the state's relative share of all children in the nation who 
are living in families with income at or below 200% of the 
federal poverty line. From the available allotments for a given 
year, the Secretary would award grants in an amount equal to 
the reimbursable percentage of the eligible expenditures for 
the state in a given year. The reimbursable percentage would be 
equal to 85% for FY2010; 80% for FY2011, 75% for FY2010 and any 
succeeding fiscal year.
    States may not use any federal funds to meet the state 
share of total spending. Any federal funds that a state 
certifies to HHS that it will not use may be re-allotted to 
other states.
    Eligible Expenditures: To be eligible for federal 
reimbursement, a state's home visitation expenditures would 
need to be used only in support of voluntary home visitation 
programs for families with children under the age of entry to 
school or for families expecting children--provided those 
programs met certain criteria--and for training, technical 
assistance, and evaluations related to those programs. Also if 
a state had claimed reimbursement for a home visitation 
expenditure under another provision of federal law it could not 
also claim that expenditure for reimbursement under the home 
visitation program.
    Finally the bill provides that a declining share of 
expenditures for home visitation programs that do not meet the 
``strongest evidence of effectiveness'' may be claimed as 
eligible expenditures. Specifically no more than 60% of a 
state's total eligible home visitation expenditures in FY2010 
may be for programs that do not meet the strongest level of 
evidence and this share declines by 5 percentage points each 
year until it reaches 40% in FY2014.
    Evaluation, Training and Technical Assistance: Five percent 
of federal funding for the program ($2.5 million, FY2010; $5.0 
million, FY2011; $7.5 million, FY2012; $10.0 million, FY2013; 
and $12.5 million, FY2014) must be reserved by HHS for--
           training and technical assistance to states, 
        including dissemination of best practices in early 
        childhood home visitation; and
           an independent evaluation (conducted by HHS, 
        or by another entity under grant or contract with HHS) 
        of the effectiveness of home visitation programs funded 
        under this program.
    Tribal home visitation programs: After making reservation 
for evaluation, training and technical assistance, 3% of 
remaining funds are to be reserved for tribal home visitation 
programs ($1.425 million, FY2010; $2.850 million, FY2011; 
$4.275 million, FY2012; $5.700 million, FY2013; $7.125 million, 
FY2014). The amount appropriated for tribal home visitation 
programs in a given year would be distributed based on a 
formula that takes into account the tribe's relative share of 
all children in all Indian tribes who are living in families 
with income at or below 200% of the federal poverty line. 
Tribes must meet all of the grant application requirements and 
eligible expenditure rules made of states. However, HHS, 
generally, may waive or modify any other requirement for 
receipt of these home visitation funds, including the 
maintenance of effort requirement. For purposes of this program 
Indian tribes are defined to include any tribe, band, nation, 
or organized group or community of Indians that is federally 
recognized and for which there is a reservation (including 
Indian reservations, former Indian reservations in Oklahoma, 
and public domain Indian allotments), or any Alaska Native 
organization that is eligible to operate a federal program 
under the Indian Self-Determination and Education Assistance 
Act.
    State Reports and Reports to Congress: State's receiving 
grants for nurse home visitation programs under this provision 
would be required to submit an annual report to the Secretary 
of HHS on the progress made by State in improving the well-
being, health, and development of children through nurse home 
visitation programs. HHS would be required to provide an 
interim report on the independent evaluation of the home 
visitation program within three years of enactment of the home 
visitation program and a final report on the evaluation within 
five years. Further, HHS would be required to submit a report 
to Congress, annually, on activities carried out with funds 
provided under the home visitation program.

Sec. 1905. Improved Coordination and Protection for Dual Eligibles

            Current Law
    There are no specific provisions in current law for 
coordination and protection of dual eligibles.
            Proposed Law
    The Secretary would be required to create an identifiable 
office or program within the Centers for Medicare and Medicaid 
Services (CMS) to improve coordination between Medicare and 
Medicaid and to improve protections for dual eligibles. Dual 
eligibles would be defined as individuals eligible for both 
Medicare and Medicaid and would include those individuals who 
are eligible for benefits under the Medicare Savings Program 
(MSP). The CMS office or program would: (1) review Medicare 
(Parts A, B, and C) and Medicaid policies on enrollment, 
benefits, service delivery, payment, and grievance and appeals 
processes; (2) identify areas of Medicare and Medicaid policies 
where better coordination or protection could improve care and 
reduce costs for duals; (3) issue guidance to states on how to 
improve coordination and protection for dual eligibles.
    The elements of improved coordination and protection would 
include efforts (1) to simplify dual eligibles' access to 
benefits and services under Medicare and Medicaid, (2) to 
improve care continuity for dual eligibles and ensure safe and 
effective care transitions, (3) to harmonize regulatory 
conflicts between Medicare and Medicaid rules affecting dual 
eligibles, and (4) to improve Medicare and Medicaid's combined 
total cost and quality performance for dual eligibles.
    The Secretary's responsibilities for implementing the CMS 
office or program for coordination and protection for dual 
eligibles would include: (1) examination of Medicare and 
Medicaid payment systems to develop strategies to foster more 
integrated and higher quality care; (2) development of methods 
to facilitate dual eligibles' access to post-acute and 
community-based services and to identify actions to improve 
coordination of community-based care; (3) a study of enrollment 
in MSP (for both Medicare and Medicaid) to identify methods to 
more efficiently and effectively reach and enroll dual 
eligibles; (4) an assessment of communication strategies aimed 
at dual eligibles, including the Medicare website, 1-800-
MEDICARE, and the Medicare handbook; (5) research and 
evaluation of areas where service utilization, quality, and 
access to cost sharing protection could be improved and an 
assessment of factors relating to enrollee satisfaction with 
services and delivery; (6) collection and dissemination to the 
public of data and a database that describes eligibility, 
benefits, and cost-sharing assistance available to dual 
eligibles by state; (7) monitoring total combined Medicare and 
Medicaid program expenditures in serving dual eligibles and 
making recommendations to optimize total quality and cost 
performance across both programs; and (8) coordination of 
Medicare Advantage plan activities under Medicare and Medicaid.
    Within one year after enactment of this provision and then 
every three years thereafter, the Secretary would be required 
to submit a report to Congress on the progress in improving 
coordination and protection for dual eligibles as described in 
this provision.
            Reason for Change
    Individuals who become dually eligible for Medicare and 
Medicaid--through age, disability or low income--are among the 
frailest and sickest beneficiaries. These nearly 9 million 
individuals are more likely than other Medicare beneficiaries 
to have low incomes, be disabled or in poor health, lack a high 
school diploma and live in an institution. Dual eligibles are 
more likely than non-dually eligible Medicare beneficiaries to 
have a mental illness--33% of duals compared with 15% of non-
duals are living with a mental illness--and have higher rates 
of diabetes, pulmonary disease, stroke and Alzheimer's disease. 
These characteristics lead to high utilization and spending; in 
a year, 26% of dual eligibles had an inpatient hospital visit, 
compared with 16% of non-duals, and per capita spending on dual 
eligibles' medical care is nearly five times higher than 
spending on non-dual eligibles.
    Medicare is the primary payer for dual eligibles' health 
care and Medicaid fills in the gaps, including paying for 
Medicare premiums and cost sharing, and covering certain 
services not included in the Medicare benefit (e.g., long-term 
care). Though dual eligibles are served by both programs, there 
is very little coordination between Medicare and the 50 state 
Medicaid programs to ensure that individuals' health needs are 
covered and services are coordinated. Furthermore, policy 
discussions around Medicare and Medicaid often occur in 
isolation, with little regard for coordinating the two 
programs. The Committee is concerned about this lack of 
coordination because of the serious implications it can have 
both for dual eligibles' access to quality health care, and on 
spending in both programs. MedPAC has found that the current 
arrangement creates incentives for cost shifting between the 
programs and may be detrimental to quality care and access.
    The Committee believes that a dedicated office or program 
within CMS will allow for true program coordination between 
policymakers. The act specifies many areas which the Committee 
expects that coordination between programs would improve dual 
eligibles' quality of care and may decrease costs to both 
programs, including outreach and communication policies, access 
to post-acute and community-based care and increased data 
collection and dissemination. Regular reports to the Congress 
will ensure that the Congress is informed as to the progress 
made under this section and can take appropriate legislative 
actions.
            Effective Date
    Date of enactment.

Sec. 1906. Assessment of Medicare Cost-Intensive Diseases and 
        Conditions

            Current Law
    No provision.
            Proposed Law
    The CMS Administrator would conduct an assessment of the 
diseases and conditions that are the most cost-intensive for 
the Medicare program. The assessment would inform research 
priorities within HHS in order to improve the prevention, or 
treatment or cure, of such diseases and conditions. Not later 
than January 1, 2011, the Administrator would submit the report 
to the Secretary of Health and Human Services and the Secretary 
would transmit the report to the Congress.
    Not later than January 1, 2013, and biennially thereafter, 
the CMS Administrator would review and update the assessment 
described above and make such recommendations to the Secretary 
on changes in research priorities as appropriate. The Secretary 
would submit a report on such recommendations to the Congress.
    A new fund would be established in the Treasury of the 
United States, to be known as the Medicare Cost-Intensive 
Research Fund. The Fund would consist of such amounts as may be 
appropriated or credited to the Fund for research priorities 
identified as a result of the assessments conducted under this 
section.
            Reason for Change
    This provision will help to identify the most cost-
intensive diseases and conditions in the Medicare program with 
the goal of informing research priorities throughout the 
Department of Health and Human Services to improve the quality 
of care the Medicare beneficiaries receive and enhance the 
prevention, or treatment or cure of such diseases and 
conditions.

          DIVISION C--PUBLIC HEALTH AND WORKFORCE DEVELOPMENT


    (Not Within the Jurisdiction of the Committee on Ways and Means)


                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of H.R. 3200, ``America's Affordable Health 
Choices Act.''

                    MOTION TO REPORT RECOMMENDATIONS

    The Chairman's Amendment in the Nature of a Substitute, as 
amended, was ordered favorably reported by a rollcall vote of 
23 yeas to 18 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................        X   ........  .........  Mr. Camp.........  ........        X   .........
Mr. Stark......................        X   ........  .........  Mr. Herger.......  ........        X   .........
Mr. Levin......................        X   ........  .........  Mr. Johnson......  ........        X   .........
Mr. McDermott..................        X   ........  .........  Mr. Brady........  ........        X   .........
Mr. Lewis (GA).................        X   ........  .........  Mr. Ryan.........  ........        X   .........
Mr. Neal.......................        X   ........  .........  Mr. Cantor.......  ........        X   .........
Mr. Tanner.....................  ........        X   .........  Mr. Linder.......  ........        X   .........
Mr. Becerra....................        X   ........  .........  Mr. Nunes........  ........        X   .........
Mr. Doggett....................        X   ........  .........  Mr. Tiberi.......  ........        X   .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..  ........        X   .........
Mr. Thompson...................        X   ........  .........  Mr. Davis (KY)...  ........        X   .........
Mr. Larson.....................        X   ........  .........  Mr. Reichert.....  ........        X   .........
Mr. Blumenauer.................        X   ........  .........  Mr. Boustany.....  ........        X   .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......  ........        X   .........
Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......  ........        X   .........
Ms. Berkley....................        X   ........  .........
Mr. Van Hollen.................        X   ........  .........
Mr. Meek.......................        X   ........  .........
Ms. Schwartz...................        X   ........  .........
Mr. Davis (AL).................        X   ........  .........
Mr. Etheridge..................        X   ........  .........
Ms. Sanchez....................        X   ........  .........
Mr. Higgins....................        X   ........  .........
Mr. Yarmuth....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                          VOTES ON AMENDMENTS

    A rollcall vote was conducted on the following amendments 
to the Chairman's Amendment in the Nature of a Substitute.
    A motion offered by Mr. Stark to table the motion offered 
by Mr. Camp to postpone proceedings was agreed to by a rollcall 
vote of 24 yeas to 14 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................        X   ........  .........  Mr. Camp.........  ........        X   .........
Mr. Stark......................        X   ........  .........  Mr. Herger.......  ........        X   .........
Mr. Levin......................        X   ........  .........  Mr. Johnson......  ........        X   .........
Mr. McDermott..................        X   ........  .........  Mr. Brady........  ........        X   .........
Mr. Lewis (GA).................        X   ........  .........  Mr. Ryan.........  ........        X   .........
Mr. Neal.......................        X   ........  .........  Mr. Cantor.......  ........        X   .........
Mr. Tanner.....................        X   ........  .........  Mr. Linder.......  ........        X   .........
Mr. Becerra....................        X   ........  .........  Mr. Nunes........  ........        X   .........
Mr. Doggett....................        X   ........  .........  Mr. Tiberi.......  ........        X   .........
Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..  ........        X   .........
Mr. Thompson...................        X   ........  .........  Mr. Davis (KY)...  ........        X   .........
Mr. Larson.....................        X   ........  .........  Mr. Reichert.....  ........        X   .........
Mr. Blumenauer.................        X   ........  .........  Mr. Boustany.....  ........        X   .........
Mr. Kind.......................        X   ........  .........  Mr. Heller.......  ........        X   .........
Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......  ........        X   .........
Ms. Berkley....................        X   ........  .........
Mr. Crowley....................        X   ........  .........
Mr. Van Hollen.................        X   ........  .........
Mr. Meek.......................        X   ........  .........
Ms. Schwartz...................        X   ........  .........
Mr. Davis (AL).................        X   ........  .........
Mr. Davis (IL).................        X   ........  .........
Mr. Etheridge..................        X   ........  .........
Ms. Sanchez....................        X   ........  .........
Mr. Higgins....................        X   ........  .........
Mr. Yarmuth....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Ryan which would eliminate 
the public health insurance option which was defeated by a 
rollcall vote of 15 yeas to 25 nays. the vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........  ........  .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Heller which would require 
Members of Congress and their dependents who are exchange-
eligible and who enroll in health coverage to enroll in the 
public health insurance option which was defeated by a rollcall 
vote of 18 yeas to 21 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................        X   ........  .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................        X   ........  .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Herger and Mr. Boustany 
which would prohibit CMS from making coverage determinations 
using comparative effectiveness research on the basis of cost 
was defeated by a rollcall vote of 15 yeas to 26 nays. The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Brady which would eliminate 
the public health insurance option if the Secretary of Health 
and Human Services determines that the public plan option's 
average wait time for obtaining appointments with physicians 
exceeds the average private insurance plan wait time was 
defeated by a rollcall vote of 15 yeas to 26 nays. The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Brady and Mr. Johnson which 
would strike the employer responsibility requirement was 
defeated by a rollcall vote of 15 yeas to 25 nays. The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................  ........  ........  .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Linder, Mr. Brady, and Mr. 
Heller which would prohibit the Health Insurance Exchange from 
operating in states that do not have malpractice rules similar 
to malpractice rules in the State of California was defeated by 
a rollcall vote of 15 yeas and 26 nays. The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Heller which would require 
that an individual's eligibility for the affordability credit 
requires the individual's approval under the Income and 
Eligibility Verification System and the Systematic Alien 
Verification for Entitlements programs under Section 1137 of 
the Social Security Act was defeated by a rollcall vote of 15 
yeas to 26 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Mr. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Johnson and Mr. Ryan which 
would prohibit abortions from being a mandated benefit in the 
essential benefit standard, except in the cases of rape, incest 
or to save the life of the mother was defeated by a rollcall 
vote of 18 yeas to 23 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......        X   ........  .........
Mr. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Mr. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Boustany which would 
prohibit the Secretary from requiring that health care 
providers participate in the public health insurance option was 
defeated by a rollcall vote of 19 yeas to 22 nays. The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................        X   ........  .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Berkley....................        X   ........  .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Mr. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Boustany which would 
prohibit the use of Federal funds in maintaining reserves for 
the public health insurance option and require that the public 
health insurance option maintain reserves consistent with the 
National Association of Insurance Commissioners standards was 
defeated by a rollcall vote of 16 yeas to 25 nays. The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Mr. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........  ........  .........
Mr. Davis (IL).................  ........  ........  .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Reichert which would allow 
the sale of individual insurance policies without the 
protections afforded by the bill which was defeated by a 
rollcall vote of 15 yeas to 26 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Camp which would delay the 
effective date of additional revenue offsets until the GAO 
certifies that the Medicare fraud rate has been reduced to 
below 1% of total claims and which was defeated by a rollcall 
vote of 15 yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........  ........  .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Herger which would strike 
section 1121 of the bill (relating to Medicare physicians 
payment reform) and substitutes an identical provision and 
provides student loan forgiveness for certain primary care 
physicians and which was defeated by a rollcall vote of 18 yeas 
to 22 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................        X   ........  .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................        X   ........  .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................        X   ........  .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........  ........  .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Brady which would eliminate 
the following provisions in the subtitle containing the non-
health related revenue offsets: the healthcare surcharge, delay 
of the implementation of the worldwide interest allocation 
rules, limitation on treaty benefits for certain deductible 
payments, codification of economic substance doctrine, and 
penalties for underpayments was defeated by a rollcall vote of 
15 yeas to 26 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Ryan which would eliminate 
the Medicare solvency trigger, require the GAO to report an 
assessment of the impact of the Act on the Federal government's 
financial position, and require CBO to issue an annual report 
with a 75 year cost estimate on the act and which was defeated 
by a rollcall vote of 14 yeas to 26 nays. The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Cantor which would prohibit 
funds from this bill to be used to pay for abortion or plans 
that cover abortion, except in the case of rape, incest, or if 
there exists a danger to the life of the mother was defeated by 
a rollcall vote of 19 yeas to 22 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................        X   ........  .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................        X   ........  .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................        X   ........  .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Ms. Brown-Waite which would 
prohibit the Health Choices Commissioner or any other 
government employee from automatically enrolling any individual 
or family in the public health insurance option was defeated by 
a rollcall vote of 16 yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Davis of Kentucky which 
would eliminate the provision that requires an employer to pay 
a penalty if that employer offers creditable health insurance 
and the employee declines that insurance and obtains coverage 
from the Health Insurance Exchange was defeated by a rollcall 
vote of 17 yeas to 24 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................        X   ........  .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................        X   ........  .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Boustany which would 
require CMS to seek a recommendation of the Medicare Coverage 
Advisory Committee with respect to certain Medicare national 
coverage decisions was defeated by a rollcall vote of 15 yeas 
to 26 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Reichert.....        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Boustany.....        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Heller.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis (AL).................  ........        X   .........
Mr. Davis (IL).................  ........        X   .........
Mr. Etheridge..................  ........        X   .........
Ms. Sanchez....................  ........        X   .........
Mr. Higgins....................  ........        X   .........
Mr. Yarmuth....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Roskam which would require 
the public health insurance option to base payment rates on 
fair-market rates was defeated by a rollcall vote of 19 yeas to 
21 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................        X   ........  .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................        X   ........  .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................        X   ........  .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................        X   ........  .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Brady which would repeal 
the public health insurance option if enrollees in the option 
have poorer 5-year cancer survival rates than those enrolled in 
private health insurance offered through the Health Insurance 
Exchange was defeated by a rollcall vote of 15 yeas to 25 nays. 
The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................  ........  ........  .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Ryan which would exempt the 
first $200,000 ($250,000 for joint filers) in adjusted gross 
income from the individual responsibility payment that applies 
to uninsured individuals and exempt the first $250,000 of each 
employee's wages from the employer responsibility payment that 
applies to employers that do not provide health coverage was 
defeated by a rollcall vote of 15 yeas to 26 nays. The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................  ........        X   .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment was offered by Mr. Cantor which would prohibit 
the Secretary of Health and Human Services from implementing 
rules or regulations that would restrict individuals from 
enrolling or purchasing a high deductible health plan that 
includes a health savings account, and eliminate the provision 
that would limit excludable reimbursements from a health 
savings account or an Archer Medical savings account, or under 
a health reimbursement or flexible spending arrangement, to 
prescribed drugs or insulin was defeated by a rollcall vote of 
16 yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representative             Yea       Nay     Present     Representative      Yea       Nay      Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel....................  ........        X   .........  Mr. Camp.........        X   .........  .........
Mr. Stark.....................  ........        X   .........  Mr. Herger.......        X   .........  .........
Mr. Levin.....................  ........        X   .........  Mr. Johnson......        X   .........  .........
Mr. McDermott.................  ........        X   .........  Mr. Brady........        X   .........  .........
Mr. Lewis (GA)................  ........        X   .........  Mr. Ryan.........        X   .........  .........
Mr. Neal......................  ........        X   .........  Mr. Cantor.......        X   .........  .........
Mr. Tanner....................  ........        X   .........  Mr. Linder.......        X   .........  .........
Mr. Becerra...................  ........        X   .........  Mr. Nunes........        X   .........  .........
Mr. Doggett...................  ........        X   .........  Mr. Tiberi.......        X   .........  .........
Mr. Pomeroy...................  ........        X   .........  Ms. Brown-Waite..        X   .........  .........
Mr. Thompson..................  ........        X   .........  Mr. Davis (KY)...        X   .........  .........
Mr. Larson....................  ........        X   .........  Mr. Reichert.....        X   .........  .........
Mr. Blumenauer................  ........        X   .........  Mr. Boustany.....        X   .........  .........
Mr. Kind......................  ........        X   .........  Mr. Heller.......        X   .........  .........
Mr. Pascrell..................  ........        X   .........  Mr. Roskam.......        X   .........  .........
Ms. Berkley...................        X   ........  .........
Mr. Crowley...................  ........        X   .........
Mr. Van Hollen................  ........        X   .........
Mr. Meek......................  ........        X   .........
Ms. Schwartz..................  ........        X   .........
Mr. Davis (AL)................  ........        X   .........
Mr. Davis (IL)................  ........        X   .........
Mr. Etheridge.................  ........        X   .........
Ms. Sanchez...................  ........        X   .........
Mr. Higgins...................  ........        X   .........
Mr. Yarmuth...................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFECTS OF THE BILL


               A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of the revenue 
provisions of the bill, H.R. 3200 as reported. The Committee 
anticipates that a CBO cost estimate letter will address these 
issues when the bill proceeds to consideration on the House 
floor.

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES BUDGET 
                               AUTHORITY

    With respect to the requirements of clause 3(c)(2) of House 
rule XIII and section 308(a) of the Congressional Budget Act of 
1974, the Committee anticipates that a CBO cost estimate letter 
on H.R. 3200 will address these issues when the bill proceeds 
to consideration on the House floor. CBO is unable to provide a 
cost estimate prior to the reconciliation of the versions of 
the bill as amended and reported by the three committees of 
jurisdiction.

      C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    With respect to the requirements of 3(c)(3) of rule XIII of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee anticipates 
that a CBO cost estimate will address these issues when the 
bill proceeds to consideration on the House floor.

                    D. MACROECONOMIC IMPACT ANALYSIS

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the staff of the Joint 
Committee on Taxation provides the following macroeconomic 
analysis of H.R. 3200, ``America's Affordable Choices Act of 
2009,'' as reported by the Ways and Means Committee.

Summary

    The analysis examines the effects of the different parts of 
the bill on incentives that could affect either long-run growth 
or short-term fluctuations in economic activity, progressively 
incorporating three aspects of the bill in the analysis. All of 
the analysis is of expected effects within the standard Federal 
ten-year budget period. The first section looks at changes to 
the Internal Revenue Code in Title IV of the bill. Next, the 
effects of low income subsidies for the purchase of health 
insurance are added to the analysis. Finally, net changes in 
spending on Medicare and Medicaid are incorporated to provide a 
picture of the fiscal impacts of the bill as a whole. This 
analysis uses the Joint Committee staff's Macroeconomic 
Equilibrium Growth (``MEG'') model to evaluate these 
effects.\180\ The Joint Committee staff does not have a model 
designed to analyze possible efficiency, productivity, or labor 
market impacts of changes in the health sector of the economy, 
and thus this analysis will not include consideration of such 
impacts.\181\
---------------------------------------------------------------------------
    \180\Descriptions of the macroeconomic equilibrium growth model and 
other models used by the Joint Committee staff may be found in Joint 
Committee on Taxation, Overview of the Work of the Staff of the Joint 
Committee on Taxation to Model the Macroeconomic Effects of Proposed 
Tax Legislation to Comply with House Rule XIII.3(h)(2), JCX-105-03, 
December 22, 2003, and Background Information about the Dynamic 
Stochastic General Equilibrium Model Used by the staff of the Joint 
Committee on Taxation in the Macroeconomic Analysis of Tax Policy, JCX-
52-06, December 14, 2006.
    \181\For a thorough discussion of the issues and empirical evidence 
of the likely impacts of reforms similar to those in this bill, see 
Congressional Budget Office, Key Issues in Analyzing Major Health 
Insurance Proposals, December, 2008, and Effects of Changes to the 
Health Insurance System on Labor Markets, Economic and Budget Issue 
Brief, July 13, 2009.
---------------------------------------------------------------------------
    Tax and expenditure policy can affect economic growth 
through several different channels. Long-term growth is 
determined by the availability of labor, capital and materials 
for the production process. In addition, in the short-run, 
during periods when available resources are not being fully 
used, growth can also be affected by changes in demand for 
goods and services. Changes in taxes and government spending 
can affect the availability of labor and capital by influencing 
peoples' incentives to work, save, and invest. Fiscal policy, 
or net changes in Federal debt, can influence long-run growth 
to the extent that it constrains the amount of capital 
available for private investment; and, it can influence short-
run demand by affecting the amount of after-tax income people 
have to spend. In terms of the tax policy effects of the bill, 
H.R. 3200 contains provisions that slightly reduce incentives 
to work, save, and invest, resulting in a projected slight 
decline in GDP due to these incentives. From a fiscal policy 
standpoint, the bill would also result in a slight increase in 
Federal government debt, which may further reduce, or crowd 
out, the availability of funds for private investment.

Models and data

    The primary focus of Joint Committee staff macroeconomic 
analysis is to determine the effects of changes in tax policy 
on the economy. In order to determine the effects of tax policy 
on average and marginal tax rates, the Joint Committee staff 
uses large micro- simulation models based on large samples of 
individual, corporate, and other income tax returns provided by 
the Statistics of Income division of the Internal Revenue 
Service.\182\
---------------------------------------------------------------------------
    \182\These models are described in Joint Committee on Taxation, 
Overview of Revenue Estimating Procedures and Methodologies Used by the 
Staff of the Joint Committee on Taxation, JCX-1-05, February 2, 2005.
---------------------------------------------------------------------------
    To analyze the effects of these tax policy changes on the 
economy, the current analysis relies on the Joint Committee's 
Macroeconomic Equilibrium Growth model.\183\ The MEG model is a 
reduced form macroeconomic model with neoclassical foundations 
and myopic expectations. Peoples' willingness to work is 
determined by their after-tax wages and by the after-tax rate 
of return on additional hours of work. Changes in average and 
marginal tax rates affect these decisions. These labor supply 
decisions are modeled separately for four groups: low income 
primary workers, low- income secondary workers, high income 
primary workers, and high income secondary workers. Investment 
is determined by the after-tax return to capital, which is 
affected by changes in taxes on business and investment income. 
The taxation of corporate profits, proprietors' income, 
dividends, capital gains, and rents are each separately modeled 
in the MEG model.
---------------------------------------------------------------------------
    \183\To get a more complete picture of the range of possible 
macroeconomic effects from policy changes, it would generally be 
optimal to use additional models that are designed to examine the long-
term growth effects of tax policy in a computable, general equilibrium 
framework, with either partial or perfect foresight. The Joint 
Committee staff has used such models in past analyses. But given the 
current size and projected present-law growth of deficits, the use of 
such models would require making very strong counterfactual assumptions 
about present law fiscal policy that may distort the analysis. That is, 
there would have to be an assumption that the Federal debt is reduced 
to sustainable levels in the foreseeable future in a computable general 
equilibrium framework. Because the policy being implemented either 
reduces the debt (in the case of the revenue provisions analyzed by 
themselves) or is close to deficit neutral (in the case of the revenue 
items combined with the spending provisions), in a simulation that 
assumed some additional provision that would reduce Federal government 
debt by the required amount, the effects of the debt-closing policy 
would overwhelm the effects of the provision being analyzed.
---------------------------------------------------------------------------
    The MEG model can be operated in an equilibrium mode, or 
used to simulate disequilibrium growth paths, by varying 
monetary policy assumptions. The equilibrium mode assumes the 
Federal Reserve Board omnisciently counteracts any short-term 
demand effects of fiscal policy to maintain the existing 
equilibrium. The disequilibrium growth path reflects the 
effects of short-term fluctuations in demand. An increase in 
government spending or reduction in tax rates, all else equal, 
would increase the amount of disposable income available to 
consumers, and would generally be expected to increase consumer 
demand. In contrast, an increase in taxes or decrease in 
spending or transfer payments would reduce disposable income, 
and thus would be likely to decrease consumer demand. Often, 
the Federal Reserve Board (``Fed'') influences the interaction 
between fiscal policy and fluctuations in demand for goods and 
services by managing interest rates and the money supply.
    The following analysis is presented using alternate 
assumptions about whether the Federal Reserve Board intervenes 
to influence the demand consequences of the policy. In the 
first case, the Federal Reserve Board is assumed to swiftly 
counteract any demand effects of the policy. In the second 
case, the Federal Reserve Board is assumed not to change its 
monetary policy at all. Generally, the Federal Reserve Board 
would be expected to counter the demand effects of a policy if 
the policy were likely to accelerate a swing in the business 
cycle. If the policy is counter-cyclical, or neutral, the 
Federal Reserve Board would be less likely to intervene. 
Because of current economic conditions, with the economy in a 
recession and the Federal Reserve Board actively engaged in 
providing liquidity to the economy to encourage economy 
expansion, it is difficult to predict how much flexibility it 
would have in reacting to major fiscal policy initiatives in 
the near future. However, since most of the provisions of H.R. 
3200 would not take effect until 2013, this consideration 
should be of less relevance than it would be in the current 
year.

Analysis

    Effects of the revenue provisions.--Title IV of H.R. 3200 
includes several provisions to provide incentives to increase 
health insurance coverage, and several provisions to raise 
revenues to finance the increases in health insurance coverage. 
The coverage-related revenue provisions include taxes on 
certain individuals who fail to obtain coverage, and taxes on 
employers who fail to offer health insurance to their employees 
or who offer insurance that is not deemed ``affordable'' and 
whose employees obtain subsidized coverage through the new 
health insurance exchange. The following analysis first 
examines the macroeconomic effects of these revenue provisions. 
The provisions are projected to result in a net increase in 
Federal revenues of approximately $790 billion between 2010 and 
2019. Figure 1 illustrates the effects of these provisions on 
aggregate average and marginal tax rates on various sources of 
income. While the average and marginal tax rates of four 
different labor groups are separately modeled, for ease of 
exposition, Figure 1 shows combined wage tax effects. These 
rates are calculated including some of the behavioral responses 
to tax changes (such as timing, portfolio effects, and other 
shifting of income to minimize taxation) that are included in 
conventional Joint Committee staff revenue estimates.


    The most significant of the revenue provisions in this bill 
is the imposition of a surcharge on adjusted gross incomes 
(``AGI'') above $350,000 for joint filers and $280,000 for 
single filers, and heads of households. The surcharge is 
graduated. In 2011, the surtax begins at a rate of one percent 
on amounts up to $500,000 for joint filers, and $400,000 for 
individual filers, and increases to 5.4 percent on amounts 
above $1 million and $800,000 respectively. In 2013, the surtax 
rates range from two percent to 5.4 percent. Average and 
marginal tax rates on wages of high income earners are 
increased by roughly equivalent amounts due to this provision. 
The increase in average tax rates reduces disposable income, 
providing some incentive to increase labor supply, while the 
increase in marginal tax rates on wages reduces the after-tax 
earnings of additional labor; on net the tax changes provide an 
incentive for affected taxpayers to reduce their labor supply. 
Because the surtax applies to all income above the AGI 
threshold, it also taxes income generated from business 
activities of sole proprietors, partners, S-Corporation 
shareholders, and other individuals receiving income from 
capital. The increased tax on business income reduces the 
return to business activities, thus reducing incentives to 
invest in business activities.
    Additional provisions affecting individual taxpayers 
include a penalty on individuals with income above the income 
tax filing threshold who fail to purchase health insurance, a 
provision to conform the definition of qualified medical 
expenditures for Flexible Spending Arrangements, Individual 
Health Arrangements, Health Savings Accounts, and Medical 
Savings Accounts to the definition provided under Code section 
223, and a provision to provide for certain health benefits 
currently applicable to a taxpayer's spouse and dependents to 
certain other beneficiaries. The net effect of these provisions 
is to slightly increase average and marginal tax rates on 
individual income.
    Additional business-related provisions that are part of 
health reform include employer responsibility payments assessed 
on employers with payrolls above $250,000 in 2013 that fail to 
provide health insurance for their employees, and tax credits 
for up to 50 percent of the cost of employee health insurance 
by businesses with fewer than 26 employees and average wages 
less than $40,000. Additional business tax provisions that 
contribute to raising revenues include delaying the 
implementation of worldwide interest allocation for 
multinational firms until 2020, limiting eligibility for 
reduced withholding under certain treaties, and codification of 
the economic substance doctrine for assessing whether certain 
transactions should generate tax liabilities. The net effect of 
these additional business tax provisions is to slightly 
increase average and marginal tax rates on businesses with more 
than 25 employees.
    Table 1 shows the effects of the revenue provisions 
contained in Title W of H.R. 3200 on economic growth, measured 
as percent changes in Gross Domestic Product (``GDP'') relative 
to present-law baseline projections, and other key 
macroeconomic aggregates.

         TABLE 1.--EFFECTS OF REVENUE PROVISIONS PERCENT CHANGE RELATIVE TO PROJECTED PRESENT LAW LEVELS
----------------------------------------------------------------------------------------------------------------
                                                                 Fed Counters Demand         No Fed Reaction
                                                                 Response [Percent]             [Percent]
                                                             ---------------------------------------------------
                                                                2010-14      2015-19      2010-14      2015-19
----------------------------------------------------------------------------------------------------------------
Nominal GDP.................................................         -0.1         -0.4         -0.4         -1.5
Real GDP....................................................         -0.1         -0.2         -0.2         -0.3
Real producers' capital stock...............................         -0.2         -0.6         -0.2         -0.7
Labor force participation...................................         -0.1         -0.1         -0.1         -0.1
Employment..................................................         -0.1         -0.2         -0.2         -0.3
Real consumption............................................         -0.3         -0.5         -0.4         -0.7
----------------------------------------------------------------------------------------------------------------
Change in long-term interest rates (basis points)...........           -3          -32           -5          -39
----------------------------------------------------------------------------------------------------------------
Receipts feedback (percent change in receipts due to change          -0.1         -0.4         -0.2         -0.6
 in GDP)....................................................
----------------------------------------------------------------------------------------------------------------

    Consistent with the negative incentives for both labor 
supply and business investment described above, relative to 
present law, labor force participation is projected to fall by 
about 0.1 percent relative to the baseline, and business 
capital stock is projected to fall by 0.2 percent in the early 
years, and by up to 0.7 percent in the longer run. Because the 
policy reduces disposable income, it also exerts a downward 
pressure on demand. Nominal GDP is projected to fall by 0.1 to 
0.4 percent in the 2010-2014 and by 0.4 percent to 1.5 percent 
in 2015-2019, depending on whether the Federal Reserve Board 
counteracts the downward pressure on demand. Real (inflation-
adjusted) GDP would decline by 0.1 to 0.4 percent in 2010-14 
and 0.2 to 0.3 percent in 2015-19. Consumption is also 
projected to fall relative to the baseline by 0.3 to 0.4 
percent in 2010-14 and 0.5 to 0.7 percent in 2015-19. One 
positive effect of these provisions on the economy is a decline 
in long-term interest rates by up to 39 basis points in the 
long run due to the reduction in Federal debt. Because of the 
decline in GDP relative to the baseline, the taxable income 
base is reduced, and receipts would be 0.1 percent to 0.6 
percent lower taking growth effects into account.
    Effects of revenue provisions and health insurance 
subsidies combined.--Beginning in 2013, Title II of H.R. 3200 
also provides for subsidies for the purchase of certain 
qualified health insurance through new health insurance 
exchanges. These subsidies, referred to as ``affordability 
credits,'' along with out-of-pocket cost sharing assistance are 
available to individuals and families with adjusted gross 
incomes below 400 percent of the Federal poverty level. The 
affordability credits and subsidies, cost approximately $840 
billion from 2010-2019. On net, the subsidies and tax 
provisions together increase Federal government debt by 
approximately $50 billion from 2010-2019.
    Because of the way the affordability credits are 
structured, they have incentive effects similar to those of 
refundable tax credits. The subsidies themselves increase 
disposable income, just as reductions in average tax rates 
would for eligible individuals, reducing incentives to work. 
Because the credits are phased out by income levels, they have 
the same incentive effect with respect to income-producing 
activities as increasing marginal tax rates for eligible 
individuals reducing the return to additional income 
generation, and thus reducing incentives to work and invest. 
The affordability credits are designed to assist low-income 
individuals in purchasing qualified health insurance in 
compliance with a requirement that everyone have health 
insurance coverage. The increased health coverage could lead to 
increased consumption of medical services, which could in turn 
lead both to changes in individual health status and 
productivity. In addition, changes in demand for health care 
services within the context of the health market reforms 
included in the bill could produce significant changes in the 
health service delivery system, which could impact the 
efficiency of the health sector and/or the productivity of the 
population. The availability of subsidized, risk-pooled health 
insurance outside of the employment context could also affect 
people's decisions regarding job changes and retirement. Such 
effects are beyond the scope of this analysis.
    Figure 2 shows the combined effects of the revenue 
provisions of Title IV and the subsidy provisions of Title II 
of H.R. 3200. Overall, the effective marginal rate on aggregate 
wage income continues to increase, while the aggregate average 
rate declines. In particular, effective marginal tax rates 
increase for individuals qualifying for the subsidy (whose 
income is below 400 percent of the Federal poverty level), and 
for those subject to the surtax (whose adjusted gross income is 
above $350,000). While the average rate for those subject to 
the surtax increases, effective average rates (accounting for 
the subsidy) for subsidy-eligible individuals decrease by a 
greater amount.


    Similarly, Table 2 shows the combined macroeconomic effects 
of these two Titles of H.R. 3200. Relative to the present law 
baseline, real GDP is projected to decrease by slightly more 
from 2015-19, 0.4 percent under the combined tax and subsidy 
proposal than the with the revenue provisions alone. The 
combination of tax increases and affordability credits is 
projected to reduce labor force participation by 0.3 percent 
between 2015-2019, more than the effects of the revenue 
provisions alone. Employment is also projected to be reduced 
relative to what it would be under present law. Because Federal 
debt is only slightly increased under this scenario, there is 
little change in long-term interest rates; thus more private 
investment is displaced by public debt in this scenario 
relative to the tax provisions alone, and producers' capital 
stock falls by 0.2 percent in 2010-14 and 1.3 percent in 2015-
2019. Conversely, because disposable income is not being 
contracted, there is little short-run demand effect, with 
little difference between the effects of the proposal on 
nominal versus real GDP. The decline in GDP and associated 
macroeconomic aggregates relative to the present law baseline 
would result in receipts decreasing by 0.1 to 0.5 percent.

   TABLE 2.--EFFECTS OF TAX PROVISIONS AND EXCHANGE SUBSIDIES PERCENT CHANGE RELATIVE TO PROJECTED PRESENT LAW
                                                     LEVELS
----------------------------------------------------------------------------------------------------------------
                                                                 Fed Counters Demand         No Fed Reaction
                                                                 Response [Percent]             [Percent]
                                                             ---------------------------------------------------
                                                                2010-14      2015-19      2010-14      2015-19
----------------------------------------------------------------------------------------------------------------
Nominal GDP.................................................         -0.1         -0.4         -0.3         -0.3
Real GDP....................................................         -0.1         -0.4         -0.2         -0.2
Real producers' capital stock...............................         -0.2         -1.3         -0.2         -1.2
Labor force participation...................................         -0.1         -0.3         -0.1         -0.3
Employment..................................................         -0.1         -0.3         -0.2         -0.1
Real consumption............................................         -0.2         -0.3         -0.2         -0.3
----------------------------------------------------------------------------------------------------------------
Change in long-term interest rates (basis points)...........           -1           -3           -5           -2
----------------------------------------------------------------------------------------------------------------
Receipts feedback (percent change in receipts due to change          -0.1         -0.5         -0.2         -0.4
 in GDP)....................................................
----------------------------------------------------------------------------------------------------------------

    Fiscal effects of the entire bill.--Finally, H.R. 3200 
makes many changes to the Medicare and Medicaid programs. The 
net effect of these changes, in combination with the revenue 
provisions and the exchange subsidies, is to increase the 
Federal deficit by approximately $220 billion from 2010-2019. 
The Joint Committee staff models the Medicaid and Medicare 
changes as changes in untaxed transfer payments received by 
taxpayers. As with the affordability subsidies for the purchase 
of health insurance, these program changes could have effects 
on the health care delivery system, but these effects are not 
incorporated in this analysis.
    Because any income phase-outs associated with the changes 
to Medicare and Medicaid have not been modeled, the changes in 
effective marginal tax rates and average tax rates in this 
scenario are the same as in the second scenario, shown in 
Figure 2 above. Only the net effects of these changes on 
personal disposable income and Federal government debt are 
considered in this analysis. Table 3 shows the growth effects 
of the combined revenue provisions, affordability subsidies, 
and changes to Medicare and Medicaid.

     TABLE 3.--EFFECTS OF TAX PROVISIONS, SUBSIDIES, AND CHANGES IN OTHER OUTLAYS PERCENT CHANGE RELATIVE TO
                                          PROJECTED PRESENT LAW LEVELS
----------------------------------------------------------------------------------------------------------------
                                                                 Fed Counters Demand         No Fed Reaction
                                                                 Response [Percent]             [Percent]
                                                             ---------------------------------------------------
                                                                2010-14      2015-19      2010-14      2015-19
----------------------------------------------------------------------------------------------------------------
Nominal GDP.................................................         -0.1         -0.4         -0.2          0.1
Real GDP....................................................         -0.1         -0.4         -0.1         -0.1
Real producers' capital stock...............................         -0.2         -1.5         -0.2         -1.4
Labor force participation...................................         -0.1         -0.3         -0.1         -0.3
Employment..................................................         -0.1         -0.3         -0.1          0.0
Real consumption............................................         -0.2         -0.2         -0.3          0.0
----------------------------------------------------------------------------------------------------------------
Change in long-term interest rates (basis points)...........            1            8           -1           11
----------------------------------------------------------------------------------------------------------------
Receipts feedback (percent change in receipts due to change          -0.1         -0.6         -0.2         -0.3
 in GDP)....................................................
----------------------------------------------------------------------------------------------------------------

    Because effective tax rates are the same in this scenario 
as in the one above, incentives for work remain the same, and 
labor force participation is again projected to decline 
relative to the present law baseline by 0.1 percent from 2010-
14 and by 0.3 percent in 2015-19. One noticeable difference 
between this scenario and the others is the increase in long-
term interest rates that results from the increase in Federal 
government debt. The increased debt crowds out more private 
investment, reducing business capital stock by up to 1.5 
percent in 2015-19. The increase in disposable income also 
leads to more short-term demand pressure, resulting in smaller 
declines from the baseline in GDP in the case where the Fed 
does not attempt to counteract the demand effect. Changes in 
GDP continue to reduce Federal receipts by modest amounts, by 
0.1 to 0.2 percent in 2010-14 and 0.3 to 0.6 percent in 2015-
19.
    Conclusion.--The revenue, subsidy, and overall fiscal 
effects of H.R. 3200 create moderately negative growth 
incentives through raising marginal tax rates on labor and 
capital and through the interest-rate increase owing to 
increased deficits. When the revenue provisions are considered 
alone, the negative incentive effects are somewhat offset by 
the reduction in long run interest rates.

                             E. PAY-GO RULE

    In compliance with clause 10 of rule XXI of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the revenue provisions 
of the bill, H.R. 3200 as reported: the Committee anticipates 
that a CBO cost estimate letter on H.R. 3200 will address these 
issues when the bill proceeds to consideration on the House 
floor. CBO is unable to provide a cost estimate prior to the 
reconciliation of the versions of the bill as amended and 
reported by the three committees of jurisdiction.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was a result of the Committee's 
oversight review concerning the tax burden on taxpayers that 
the Committee concluded that it is appropriate and timely to 
enact the revenue provision included in the bill as reported.

        B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the goal of H.R. 3200, America's 
Affordable Health Choices Act of 2009 is to provide affordable, 
quality health care for all Americans and reduce the rate of 
growth in health care spending.

                 C. CONSTITUTIONAL AUTHORITY STATEMENT

    With respect to clause 3(d)(1) of the rule XIII of the 
Rules of the House of Representatives (relating to 
Constitutional Authority), the Committee states that the 
Committee's action in reporting this bill is derived from 
Article I of the Constitution, Section 8 (``The Congress shall 
have Power To lay and collect Taxes, Duties, Imposts and 
Excises. . . ''), and from the 16th Amendment to the 
Constitution.

              D. INFORMATION RELATING TO UNFUNDED MANDATES

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (Pub. L. No. 104-4).
    The Committee has determined that the bill contains nine 
private sector mandates: (i) Tax on individual without 
acceptable health care coverage; (ii) Election to satisfy 
health coverage participation requirements; (iii) 
Responsibilities of nonelecting employers; (iv) Comparative 
effectiveness research trust fund; financing for trust fund; 
(v) Impose a surcharge for certain AGI; (vi) Modify the 
definition of qualified medical expenses for purposes of HRAs, 
health FSAs, HSAs, and Archer MSAs; (vii) Delay implementation 
of worldwide interest allocation until 2020; (viii) Limit 
eligibility for reduced treaty withholding rates based on 
residency of foreign parent; and (ix) Codification of economic 
substance doctrine and penalties for underpayments.
    The Committee has determined that the bill contains one 
intergovernmental mandate on State, local, or tribal 
governments: Responsibilities of nonelecting employers.

                E. APPLICABILITY OF HOUSE RULE XXI 5(B)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the provisions of the bill, and states that 
the provisions of the bill do not involve any Federal income 
tax rate increases within the meaning of the rule.

                       F. TAX COMPLEXITY ANALYSIS

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses. For each such provision identified by the staff of 
the Joint Committee on Taxation a summary description of the 
provision is provided along with an estimate of the number and 
type of affected taxpayers, and a discussion regarding the 
relevant complexity and administrative issues.
    Following the analysis of the staff of the Joint Committee 
on Taxation are the comments of the IRS and Treasury regarding 
each of the provisions included in the complexity analysis.

1. Tax on individuals without acceptable health care coverage

Summary description of the provision

    The provision taxes individuals who do not maintain 
coverage under acceptable health insurance for themselves and 
their qualifying children. The tax is equal to the lesser of 
(a) the national average premium for single or family coverage, 
as applicable, or (b) 2.5 percent of the excess of the 
taxpayer's adjusted gross income (``AGI'') over the threshold 
filing amount. Acceptable coverage includes a health plan that 
covers at least an essential benefits package and that includes 
certain specified limits on required cost sharing, no annual or 
lifetime limit on covered health care items or services, 
certain specified minimum services, and certain requirements as 
to network adequacy as determined by the newly appointed Health 
Choices Commissioner. Acceptable coverage also includes a 
grandfathered plan, Medicare, Medicaid, Tricare (and other 
Armed Services coverage), Veterans Administration coverage, and 
certain other coverage. Those exempt from the penalty include: 
nonresident aliens, U.S. citizens and residents living abroad, 
those who can claim health insurance would cause financial 
hardship, those whose income is below the threshold for filing 
a Federal income tax return, and those who are properly claimed 
as dependents on the income tax return of another taxpayer for 
the taxable year. Individuals maintaining health insurance for 
part of the year are required to pay a pro-rated tax.
    The new additional tax for failure to maintain health 
insurance is accompanied by new reporting requirements for 
insurance providers. Any insurance provider is required to 
provide information to the Department of Treasury and the 
primary insured individual. The return is required to supply 
the name, address, and taxpayer identification numbers of all 
individuals receiving. insurance under the policy by January 31 
of the year following the calendar year the insurance was 
provided. Failure to file the required information return or to 
include complete and correct information on the required return 
is subject to the failure to file correct information returns 
penalty of section 6721.

Number of affected taxpayers

    It is estimated that the provision will affect more than 10 
percent of individual or small business tax returns.

Discussion

    The provision creates a reporting requirement for providers 
of insurance coverage. The reporting requirement obliges the 
provision of the following information to both the insured 
individual and the Department of Treasury directly: the name of 
all insured on the policy, the dates of insurance coverage 
during the tax year, the Taxpayer Identification Numbers 
(``TINs'') and any other information required by the Secretary. 
In addition, the insurer will have the added responsibility of 
determining which insurance plan offerings meet the standard of 
``qualified coverage.''
    For individuals for whom there is no additional tax, while 
the statute creates no requirement for the filing of insurance 
information by the taxpayer, the taxpayer will receive this 
information and discretion is left to the Secretary of Treasury 
for prescribing regulations to carry out the statute, which 
could include a supplemental reporting requirement from the 
individual. The 1040, 1040A and 1040-EZ must be amended to add 
a new line to reflect any additional tax. Individuals owing 
additional tax will be required to include the amount of the 
tax owed both on a new form and on the 1040, 1040A or 1040-EZ.
    The Internal Revenue Service (``IRS'') will be required to 
reprogram computers to reflect the additional rules, forms and 
information from employers, insurers and individuals. In 
addition, regulations would be needed to reflect statutory 
exemptions from the additional tax and resources needed to 
resolve disputes regarding maintenance of acceptable coverage 
and eligibility for exemption from additional tax.

2. Election to satisfy health coverage participation requirements and 
        responsibilities of nonelecting employers

Summary description of the provision

    The provisions create a system under which employers must 
elect whether to offer health benefits to employees. For 
employers that elect not to offer health benefits to their 
employees, the provisions establish a payroll tax equal to 
eight percent of the wages paid to employees.
    Employers that elect to offer health benefits are not 
required to pay the payroll tax. However, employers that elect 
to offer health benefits but fail to comply with the rules 
governing offers of coverage are subject to an excise tax. In 
addition, beginning in the second year after enactment of the 
provisions, employers that elect to offer health benefits are 
required to make contributions, in the amount of eight percent 
of the average wages paid to employees, to the Health Insurance 
Exchange for employees who decline employer-provided coverage 
and instead enroll in an Exchange-participating plan. Finally, 
employers that elect to offer health benefits to their 
employees must file an additional return with the IRS 
containing information about the insured, the period for which 
coverage was provided, and such other information as the 
Secretary of the Treasury may require. Similar returns must be 
filed with the insured employees as well.
    Special rules apply for certain small businesses. An 
employer with an annual payroll that does not exceed $250,000 
is exempt from the requirement to offer health benefits or pay 
a payroll tax and the requirement to make contributions to the 
Health Insurance Exchange for employees who decline employer-
provided coverage in the event that such coverage is offered. 
For an employer with an annual payroll from $250,000 through 
$400,000, the eight-percent payroll tax applicable to 
nonelecting employers, or the eight-percent of wages 
contribution to the Health Exchange Fund for coverage-declining 
employees, phases in ratably.

Number of affected taxpayers

    It is estimated that the provision will affect more than 10 
percent of small business tax returns.

Discussion

    It is anticipated that small businesses will have to keep 
additional records and perform additional analysis to comply 
with the new election and coverage requirements. Small 
businesses will need to make an affirmative election regarding 
whether to be subject to the national health coverage 
participation requirements. Small businesses that elect to 
offer health benefits will be required to set up provisions for 
auto-enrolling their employees in one of the employer-offered 
health plans, and must develop and disseminate written notices 
informing employees of their rights and obligations relating to 
the automatic enrollment, including the ability to opt-out of 
enrollment in the employer-provided plan. Small businesses that 
elect to provide health coverage to their employees will be 
required to file an additional return with the IRS containing 
information about the insured, the period for which coverage 
was provided, and such other information as the Secretary of 
the Treasury may require. Similar returns must be filed with 
the insured employees as well. Small businesses will have to 
maintain records documenting their election, which employees 
were provided coverage, whether appropriate taxes for non-
covered employees were paid, and that the business filed all 
necessary reports with the IRS.
    It is anticipated that the IRS will have to develop new 
forms to capture the election by employers whether to provide 
qualifying health care coverage. The IRS will also have to 
amend existing forms to implement the provision imposing a tax 
on employers who fail to satisfy the health coverage 
participation requirement, and revise several publications to 
explain the election, participation requirements, and tax 
imposed by the provisions.
    It is anticipated that the IRS will be required to make 
numerous computer programming changes to tax systems that 
support employment and excise tax forms required to be filed by 
employers. The computer systems will also need to be changed to 
accommodate the new payroll tax and excise taxes requirements. 
Computer programming changes will be required to accommodate 
the new information return that will be filed with the IRS by 
employers.
    The Department of the Treasury will have to issue 
regulations or other guidance regarding employers' elections, 
the application of the new tax, and the exceptions for failure 
to comply with the applicable coverage rules and the new 
reporting requirements (including details as to content and how 
to report).
    The Secretary of the Treasury will be required to 
coordinate enforcement of the provision with the Secretaries of 
Labor and Health and Human Services and the Health Choices 
Commissioner to ensure uniform interpretation and enforcement 
of the provision. The four agencies will be required to execute 
an interagency memorandum of understanding.

3. Distribution for medicine qualified only if for prescribed drug or 
        insulin

Summary description of the provision

    Under the provision, the cost of over-the-counter medicines 
may not be reimbursed with excludible income through health 
flexible spending arrangements under a cafeteria plan (``Health 
FSAs''), health reimbursement arrangements (``HRAs''), Health 
Savings Accounts (``HSAs''), or Archer MSAs.

Number of affected taxpayers

    It is estimated that the provision will affect more than 10 
percent of individual tax returns.

Discussion

    Many taxpayers currently use account balances in Health 
FSAs, HRAs, HSAs, and Archer MSAs to purchase over-the-counter 
medicine such as ibuprofen, acetaminophen, cold medicine, and 
suntan lotion with pre-tax dollars. Some taxpayers make these 
purchases at the end of the year, or the end of the grace 
period, to avoid forfeiting amounts in Health FSAs. Taxpayers 
will no longer be able to use these amounts in these accounts 
for this purpose. As a result, less money will be allocated to 
these accounts and more money will be allocated to taxable 
wages. This change will also increase the amount of 
compensation subject to payroll taxes.
    It is anticipated that the IRS will be required to revise 
the instructions to several forms and to revise several 
publications to reflect the changes to present law made by the 
provision. In addition, guidance will need to be issued 
withdrawing at least one Revenue Ruling and guidance may need 
to be issued on substantiation rules for reimbursement 
arrangements.

                        G. LIMITED TAX BENEFITS

    Pursuant to clause 9 of rule XXI of the Rules of the House 
of Representatives, the Ways and Means Committee has determined 
that the bill as reported contains no congressional earmarks, 
limited tax benefits or limited tariff benefits within the 
meaning of that rule.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In compliance with clause 3(e) of rule XIII of the Rule of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                          SOCIAL SECURITY ACT


TITLE II--FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE BENEFITS

           *       *       *       *       *       *       *



SPECIAL PROVISIONS RELATING TO COVERAGE UNDER MEDICARE PROGRAM FOR END 
                          STAGE RENAL DISEASE

  Sec. 226A. (a) * * *
  (b) Subject to subsection (c), entitlement of an individual 
to benefits under part A and eligibility to enroll under part B 
of title XVIII by reasons of this section on the basis of end 
stage renal disease--
          (1) * * *
          (2) shall end, in the case of an individual who 
        receives a kidney transplant (except for coverage of 
        immunosuppressive drugs under section 1861(s)(2)(J)), 
        with the thirty-sixth month after the month in which 
        such individual receives such transplant or, in the 
        case of an individual who has not received a kidney 
        transplant and no longer requires a regular course of 
        dialysis, with the twelfth month after the month in 
        which such course of dialysis is terminated.

           *       *       *       *       *       *       *

  [(c)] (d) For purposes of this section, each person whose 
monthly insurance benefit for any month is terminated or is 
otherwise not payable solely by reason of paragraph (1) or (7) 
of section 225(c) shall be treated as entitled to such benefit 
for such month.

           *       *       *       *       *       *       *


TITLE IV--GRANTS TO STATES FOR AID AND SERVICES TO NEEDY FAMILIES WITH 
CHILDREN AND FOR CHILD-WELFARE SERVICES

           *       *       *       *       *       *       *



Part B--Child and Family Services

           *       *       *       *       *       *       *



        Subpart 3--Support for Quality Home Visitation Programs

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

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

           *       *       *       *       *       *       *


     TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                             SIMPLIFICATION

Part A--General Provisions

           *       *       *       *       *       *       *


            DISCLOSURE OF OWNERSHIP AND RELATED INFORMATION

  Sec. 1124. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


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

  Sec. 1128. (a) * * *
  (b) Permissive Exclusion.--The Secretary may exclude the 
following individuals and entities from participation in any 
Federal health care program (as defined in section 1128B(f)):
          (1) * * *
          (2) Conviction relating to obstruction of an 
        investigation or audit.--Any individual or entity that 
        has been convicted, under Federal or State law, in 
        connection with the interference with or obstruction of 
        any [investigation into any criminal offense described 
        in paragraph (1) or in subsection (a).] investigation 
        or audit related to--
                          (i) any offense described in 
                        paragraph (1) or in subsection (a); or
                          (ii) the use of funds received, 
                        directly or indirectly, from any 
                        Federal health care program (as defined 
                        in section 1128B(f)).

           *       *       *       *       *       *       *

          (11) Failure to supply payment information.--Any 
        individual or entity furnishing, ordering, referring 
        for furnishing, or certifying the need for items or 
        services for which payment may be made under title 
        XVIII or a State health care program that fails to 
        provide such information as the Secretary or the 
        appropriate State agency finds necessary to determine 
        whether such payments are or were due and the amounts 
        thereof, or has refused to permit such examination of 
        its records by or on behalf of the Secretary or that 
        agency as may be necessary to verify such information.

           *       *       *       *       *       *       *

  (c) Notice, Effective Date, [and Period] Period, and Effect 
of Exclusion.--(1) * * *

           *       *       *       *       *       *       *

  (3)(A) * * *
  (B) Subject to subparagraph (G), in the case of an exclusion 
under subsection (a), the minimum period of exclusion shall be 
not less than five years, except that, upon the request of the 
administrator of a Federal health care program (as defined in 
section 1128B(f)) who determines that the exclusion would 
impose a hardship on [individuals entitled to benefits under 
part A of title XVIII or enrolled under part B of such title, 
or both] beneficiaries (as defined in section 1128A(i)(5)) of 
that program, the Secretary may, after consulting with the 
Inspector General of the Department of Health and Human 
Services, waive the exclusion under subsection (a)(1), (a)(3), 
or (a)(4) with respect to that program in the case of an 
individual or entity that is the sole community physician or 
sole source of essential specialized services in a community. 
The Secretary's decision whether to waive the exclusion shall 
not be reviewable.

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

  (f) Notice, Hearing, and Judicial Review.--(1) * * *

           *       *       *       *       *       *       *

  (4) The provisions of subsections (d) and (e) of section 205 
shall apply with respect to this section to the same extent as 
they are applicable with respect to title II. The Secretary may 
delegate the authority granted by section 205(d) (as made 
applicable to this section) to the Inspector General of the 
Department of Health and Human Services or the Administrator of 
the Centers for Medicare & Medicaid Services for purposes of 
any investigation under this section.

           *       *       *       *       *       *       *


                        CIVIL MONETARY PENALTIES

  Sec. 1128A. (a) Any person (including an organization, 
agency, or other entity, but excluding a beneficiary, as 
defined in subsection (i)(5)) that--
          (1) knowingly presents or causes to be presented [to 
        an officer, employee, or agent of the United States, or 
        of any department or agency thereof, or of any State 
        agency (as defined in subsection (i)(1))], a claim (as 
        defined in subsection (i)(2)) that the Secretary 
        determines--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) is for a medical or other item or service 
                furnished during a period in which the person 
                was excluded [from the program under which the 
                claim was made pursuant to a determination by 
                the Secretary under this section or under 
                section 1128, 1156, 1160(b) (as in effect on 
                September 2, 1982), 1862(d) (as in effect on 
                the date of the enactment of the Medicare and 
                Medicaid Patient and Program Protection Act of 
                1987), or 1866(b) or as a result of the 
                application of the provisions of section 
                1842(j)(2), or] under Federal law from the 
                Federal health care program under which the 
                claim was made, or

           *       *       *       *       *       *       *

          (4) in the case of a person who is not an 
        organization, agency, or other entity, is excluded from 
        [participating in a program under title XVIII or a 
        State health care program] participating in a Federal 
        health care program (as defined in section 1128B(f)) in 
        accordance with this subsection or under section 1128 
        and who, at the time of a violation of this 
        subsection--
                  (A) retains a direct or indirect ownership or 
                control interest in an entity that is 
                participating in a program under [title XVIII 
                or a State health care program] a Federal 
                health care program (as defined in section 
                1128B(f)), and who knows or should know of the 
                action constituting the basis for the 
                exclusion; or

           *       *       *       *       *       *       *

          (6) arranges or contracts (by employment or 
        otherwise) with an individual or entity that the person 
        knows or should know is excluded from participation in 
        a Federal health care program (as defined in section 
        1128B(f)), for the provision of items or services for 
        which payment may be made under such a program; [or]
          (7) commits an act described in paragraph (1) or (2) 
        of section 1128B(b);
          (8) knowingly makes or causes to be made any false 
        statement, omission, or misrepresentation of a material 
        fact in any application, agreement, bid, or contract to 
        participate or enroll as a provider of services or 
        supplier under a Federal health care program, including 
        managed care organizations under title XIX, Medicare 
        Advantage organizations under part C of title XVIII, 
        prescription drug plan sponsors under part D of title 
        XVIII, and entities that apply to participate as 
        providers of services or suppliers in such managed care 
        organizations and such plans;
          (9) knowingly makes, uses, or causes to be made or 
        used, a false record or statement material to a false 
        or fraudulent claim for payment for items and services 
        furnished under a Federal health care program;
          (10) fails to grant timely access, upon reasonable 
        request (as defined by the Secretary in regulations), 
        to the Inspector General of the Department of Health 
        and Human Services, for the purpose of audits, 
        investigations, evaluations, or other statutory 
        functions of the Inspector General of the Department of 
        Health and Human Services;
          (11) orders or prescribes an item or service, 
        including without limitation home health care, 
        diagnostic and clinical lab tests, prescription drugs, 
        durable medical equipment, ambulance services, physical 
        or occupational therapy, or any other item or service, 
        during a period when the person has been excluded from 
        participation in a Federal health care program, and the 
        person knows or should know that a claim for such item 
        or service will be presented to such a program;
          (12) conspires to commit a violation of this section; 
        or
          (13) knowingly makes, uses, or causes to be made or 
        used, a false record or statement material to an 
        obligation to pay or transmit money or property to a 
        Federal health care program, or knowingly conceals or 
        knowingly and improperly avoids or decreases an 
        obligation to pay or transmit money or property to a 
        Federal health care program;
shall be subject, in addition to any other penalties that may 
be prescribed by law, to a civil money penalty of not more than 
$10,000 for each item or service (or, in cases under paragraph 
(3), $15,000 for each individual with respect to whom false or 
misleading information was given; in cases under paragraph (4), 
$10,000 for each day the prohibited relationship occurs; [or in 
cases under paragraph (7), $50,000 for each such act)] in cases 
under paragraph (7), $50,000 for each such act, [or in cases 
under paragraph (8)] in cases under paragraph (8), $50,000 for 
each false statement, omission, or misrepresentation of a 
[material fact)] a material fact, in cases under paragraph (9), 
$50,000 for each false record or statement, or in cases under 
paragraph (10), $15,000 for each day of the failure described 
in such paragraph, in cases under paragraph (11), $50,000 for 
each order or prescription for an item or service by an 
excluded individual, in cases under paragraph (12), $50,000 for 
any violation described in this section committed in 
furtherance of the conspiracy involved; or in cases under 
paragraph (13), $50,000 for each false record or statement, or 
concealment, avoidance, or decrease). In addition, such a 
person shall be subject to an assessment of not more than 3 
times the amount claimed for each such item or service in lieu 
of damages sustained by the United States or a State agency 
because of such claim (or, in cases under paragraph (7), 
damages of not more than 3 times the total amount of 
remuneration offered, paid, solicited, or received, without 
regard to whether a portion of such remuneration was offered, 
paid, solicited, or received [for a lawful purpose)] for a 
lawful purpose, in cases under paragraph (8), an assessment of 
not more than 3 times the amount claimed as the result of the 
false statement, omission, or misrepresentation of material 
fact claimed by a provider of services or supplier whose 
application to participate contained such false statement or 
misrepresentation, in cases under paragraph (12), an assessment 
of not more than 3 times the total amount that would otherwise 
apply for any violation described in this section committed in 
furtherance of the conspiracy involved, or in cases under 
paragraph (13), an assessment of not more than 3 times the 
total amount of the obligation to which the false record or 
statement was material or that was avoided or decreased). In 
addition the Secretary may make a determination in the same 
proceeding to exclude the person from participation in the 
Federal health care programs (as defined in section 
1128B(f)(1)) and to direct the appropriate State agency to 
exclude the person from participation in any State health care 
program.

           *       *       *       *       *       *       *

  (c)(1) The Secretary may initiate a proceeding to determine 
whether to impose a civil money penalty, assessment, or 
exclusion under subsection (a) or (b) only as authorized by the 
Attorney General pursuant to procedures agreed upon by them. 
The Secretary may not initiate an action under this section 
with respect to any claim, request for payment, or other 
occurrence described in this section later than [six years] 10 
years after the date the claim was presented, the request for 
payment was made, or the occurrence took place. The Secretary 
may initiate an action under this section by serving notice of 
the action in any manner authorized by Rule 4 of the Federal 
Rules of Civil Procedure.

           *       *       *       *       *       *       *

  (i) For the purposes of this section:
          (1) * * *
          [(2) The term ``claim'' means an application for 
        payments for items and services under a Federal health 
        care program (as defined in section 1128B(f)).
          [(3) The term ``item or service'' includes (A) any 
        particular item, device, medical supply, or service 
        claimed to have been provided to a patient and listed 
        in an itemized claim for payment, and (B) in the case 
        of a claim based on costs, any entry in the cost 
        report, books of account or other documents sup- 
        porting such claim.]
          (2) The term ``claim'' means any application, 
        request, or demand, whether under contract, or 
        otherwise, for money or property for items and services 
        under a Federal health care program (as defined in 
        section 1128B(f)), whether or not the United States or 
        a State agency has title to the money or property, 
        that--
                  (A) is presented or caused to be presented to 
                an officer, employee, or agent of the United 
                States, or of any department or agency thereof, 
                or of any State agency (as defined in 
                subsection (i)(1)); or
                  (B) is made to a contractor, grantee, or 
                other recipient if the money or property is to 
                be spent or used on the Federal health care 
                program's behalf or to advance a Federal health 
                care program interest, and if the Federal 
                health care program--
                          (i) provides or has provided any 
                        portion of the money or property 
                        requested or demanded; or
                          (ii) will reimburse such contractor, 
                        grantee, or other recipient for any 
                        portion of the money or property which 
                        is requested or demanded.
          (3) The term ``item or service'' means, without 
        limitation, any medical, social, management, 
        administrative, or other item or service used in 
        connection with or directly or indirectly related to a 
        Federal health care program.

           *       *       *       *       *       *       *

          (6) The term ``remuneration'' includes the waiver of 
        coinsurance and deductible amounts (or any part 
        thereof), and transfers of items or services for free 
        or for other than fair market value. The term 
        ``remuneration'' does not include--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) differentials in coinsurance and 
                deductible amounts as part of a benefit plan 
                design as long as the differentials have been 
                disclosed in writing to all beneficiaries, 
                third party payers, and providers, to whom 
                claims are presented and as long as the 
                differentials meet the standards as defined in 
                regulations promulgated by the Secretary not 
                later than 180 days after the date of the 
                enactment of the Health Insurance Portability 
                and Accountability Act of 1996; [or]
                  (D) incentives given to individuals to 
                promote the delivery of preventive care as 
                determined by the Secretary in regulations so 
                promulgated[.]; or
                  [(D)] (E) a reduction in the copayment amount 
                for covered OPD services under section 
                1833(t)(5)(B).
          [(7) The term ``should know'' means that a person, 
        with respect to information--
                  [(A) acts in deliberate ignorance of the 
                truth or falsity of the information; or
                  [(B) acts in reckless disregard of the truth 
                or falsity of the information,
        and no proof of specific intent to defraud is 
        required.]
          (7) The terms ``knowing'', ``knowingly'', and 
        ``should know'' mean that a person, with respect to 
        information--
                  (A) has actual knowledge of the information;
                  (B) acts in deliberate ignorance of the truth 
                or falsity of the information; or
                  (C) acts in reckless disregard of the truth 
                or falsity of the information;
        and require no proof of specific intent to defraud.
          (8) The term ``obligation'' means an established 
        duty, whether or not fixed, arising from an express or 
        implied contractual, grantor-grantee, or licensor-
        licensee relationship, from a fee-based or similar 
        relationship, from statute or regulation, or from the 
        retention of any overpayment.
          (9) The term ``material'' means having a natural 
        tendency to influence, or be capable of influencing, 
        the payment or receipt of money or property.

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                    FRAUD AND ABUSE CONTROL PROGRAM

  Sec. 1128C. (a) Establishment of Program.--
          (1) In general.--Not later than January 1, 1997, the 
        Secretary, acting through the Office of the Inspector 
        General of the Department of Health and Human Services, 
        and the Attorney General shall establish a program--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) to facilitate the enforcement of the 
                provisions of sections 1128, 1128A, and 1128B 
                and other statutes applicable to health care 
                fraud and abuse, and
                  (D) to provide for the modification and 
                establishment of safe harbors and to issue 
                advisory opinions and special fraud alerts 
                pursuant to section 1128D[, and].
                  [(E) to provide for the reporting and 
                disclosure of certain final adverse actions 
                against health care providers, suppliers, or 
                practitioners pursuant to the data collection 
                system established under section 1128E.]

           *       *       *       *       *       *       *


          HEALTH CARE FRAUD AND ABUSE DATA COLLECTION PROGRAM

  Sec. 1128E. (a) General Purpose.--[Not later than] Subject to 
subsection (h), not later than January 1, 1997, the Secretary 
shall establish a national health care fraud and abuse data 
collection program for the reporting of final adverse actions 
(not including settlements in which no findings of liability 
have been made) against health care providers, suppliers, or 
practitioners as required by subsection (b), with access as set 
forth in subsection (c), and shall maintain a database of the 
information collected under this section.

           *       *       *       *       *       *       *

  (d) Access to Reported Information.--
          (1) * * *
          (2) Fees for disclosure.--The Secretary may establish 
        or approve reasonable fees for the disclosure of 
        information in such database [(other than with respect 
        to requests by Federal agencies)]. The amount of such a 
        fee shall be sufficient to recover the full costs of 
        operating the database. Such fees shall be available to 
        the Secretary or, in the Secretary's discretion to the 
        agency designated under this section to cover such 
        costs.

           *       *       *       *       *       *       *

  (h) Sunset of the Healthcare Integrity and Protection Data 
Bank; Transition Process.--Effective upon the enactment of this 
subsection, the Secretary shall implement a process to 
eliminate duplication between the Healthcare Integrity and 
Protection Data Bank (in this subsection referred to as the 
``HIPDB'' established pursuant to subsection (a) and the 
National Practitioner Data Bank (in this subsection referred to 
as the ``NPDB'') as implemented under the Health Care Quality 
Improvement Act of 1986 and section 1921 of this Act, including 
systems testing necessary to ensure that information formerly 
collected in the HIPDB will be accessible through the NPDB, and 
other activities necessary to eliminate duplication between the 
two data banks. Upon the completion of such process, 
notwithstanding any other provision of law, the Secretary shall 
cease the operation of the HIPDB and shall collect information 
required to be reported under the preceding provisions of this 
section in the NPDB. Except as otherwise provided in this 
subsection, the provisions of subsections (a) through (g) shall 
continue to apply with respect to the reporting of (or failure 
to report), access to, and other treatment of the information 
specified in this section.

           *       *       *       *       *       *       *


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

  (a) Certain Authorized Screening, Enhanced Oversight Periods, 
and Enrollment Moratoria.--
          (1) In general.--For periods beginning after January 
        1, 2011, in the case that the Secretary determines 
        there is a significant risk of fraudulent activity (as 
        determined by the Secretary based on relevant 
        complaints, reports, referrals by law enforcement or 
        other sources, data analysis, trending information, or 
        claims submissions by providers of services and 
        suppliers) with respect to a category of provider of 
        services or supplier of items or services, including a 
        category within a geographic area, under title XVIII, 
        XIX, or XXI, the Secretary may impose any of the 
        following requirements with respect to a provider of 
        services or a supplier (whether such provider or 
        supplier is initially enrolling in the program or is 
        renewing such enrollment):
                  (A) Screening under paragraph (2).
                  (B) Enhanced oversight periods under 
                paragraph (3).
                  (C) Enrollment moratoria under paragraph (4).
        In applying this subsection for purposes of title XIX 
        and XXI the Secretary may require a State to carry out 
        the provisions of this subsection as a requirement of 
        the State plan under title XIX or the child health plan 
        under title XXI. Actions taken and determinations made 
        under this subsection shall not be subject to review by 
        a judicial tribunal.
          (2) Screening.--For purposes of paragraph (1), the 
        Secretary shall establish procedures under which 
        screening is conducted with respect to providers of 
        services and suppliers described in such paragraph. 
        Such screening may include--
                  (A) licensing board checks;
                  (B) screening against the list of individuals 
                and entities excluded from the program under 
                title XVIII, XIX, or XXI;
                  (C) the excluded provider list system;
                  (D) background checks; and
                  (E) unannounced pre-enrollment or other site 
                visits.
          (3) Enhanced oversight period.--For purposes of 
        paragraph (1), the Secretary shall establish procedures 
        to provide for a period of not less than 30 days and 
        not more than 365 days during which providers of 
        services and suppliers described in such paragraph, as 
        the Secretary determines appropriate, would be subject 
        to enhanced oversight, such as required or unannounced 
        (or required and unannounced) site visits or 
        inspections, prepayment review, enhanced review of 
        claims, and such other actions as specified by the 
        Secretary, under the programs under titles XVIII, XIX, 
        and XXI. Under such procedures, the Secretary may 
        extend such period for more than 365 days if the 
        Secretary determines that after the initial period such 
        additional period of oversight is necessary.
          (4) Moratorium on enrollment of providers and 
        suppliers.--For purposes of paragraph (1), the 
        Secretary, based upon a finding of a risk of serious 
        ongoing fraud within a program under title XVIII, XIX, 
        or XXI, may impose a moratorium on the enrollment of 
        providers of services and suppliers within a category 
        of providers of services and suppliers (including a 
        category within a specific geographic area) under such 
        title. Such a moratorium may only be imposed if the 
        Secretary makes a determination that the moratorium 
        would not adversely impact access of individuals to 
        care under such program.
          (5) Clarification.--Nothing in this subsection shall 
        be interpreted to preclude or limit the ability of a 
        State to engage in provider screening or enhanced 
        provider oversight activities beyond those required by 
        the Secretary.
  (b) Enhanced Program Disclosure Requirements.--
          (1) Disclosure.--A provider of services or supplier 
        who submits on or after July 1, 2011, an application 
        for enrollment and renewing enrollment in a program 
        under title XVIII, XIX, or XXI shall disclose (in a 
        form and manner determined by the Secretary) any 
        current affiliation or affiliation within the previous 
        10-year period with a provider of services or supplier 
        that has uncollected debt or with a person or entity 
        that has been suspended or excluded under such program, 
        subject to a payment suspension, or has had its billing 
        privileges revoked.
          (2) Enhanced safeguards.--If the Secretary determines 
        that such previous affiliation of such provider or 
        supplier poses a risk of fraud, waste, or abuse, the 
        Secretary may apply such enhanced safeguards as the 
        Secretary determines necessary to reduce such risk 
        associated with such provider or supplier enrolling or 
        participating in the program under title XVIII, XIX, or 
        XXI. Such safeguards may include enhanced oversight, 
        such as enhanced screening of claims, required or 
        unannounced (or required and unannounced) site visits 
        or inspections, additional information reporting 
        requirements, and conditioning such enrollment on the 
        provision of a surety bond.
          (3) Authority to deny participation.--If the 
        Secretary determines that there has been at least one 
        such affiliation and that such affiliation or 
        affiliations, as applicable, of such provider or 
        supplier poses a serious risk of fraud, waste, or 
        abuse, the Secretary may deny the application of such 
        provider or supplier.
  (c) Reports on and Repayment of Overpayments Identified 
Through Internal Audits and Reviews.--
          (1) Reporting and returning overpayments.--If a 
        person knows of an overpayment, the person must--
                  (A) report and return the overpayment to the 
                Secretary, the State, an intermediary, a 
                carrier, or a contractor, as appropriate, at 
                the correct address, and
                  (B) notify the Secretary, the State, 
                intermediary, carrier, or contractor to whom 
                the overpayment was returned in writing of the 
                reason for the overpayment.
          (2) Timing.--An overpayment must be reported and 
        returned under paragraph (1)(A) by not later than the 
        date that is 60 days after the date the person knows of 
        the overpayment.
        Any known overpayment retained later than the 
        applicable date specified in this paragraph creates an 
        obligation as defined in section 3729(b)(3) of title 31 
        of the United States Code.
          (3) Clarification.--Repayment of any overpayments (or 
        refunding by withholding of future payments) by a 
        provider of services or supplier does not otherwise 
        limit the provider or supplier's potential liability 
        for administrative obligations such as applicable 
        interests, fines, and specialties or civil or criminal 
        sanctions involving the same claim if it is determined 
        later that the reason for the overpayment was related 
        to fraud by the provider or supplier or the employees 
        or agents of such provider or supplier.
          (4) Definitions.--In this subsection:
                  (A) Knows.--The term ``knows'' has the 
                meaning given the terms ``knowing'' and 
                ``knowingly'' in section 3729(b) of title 31 of 
                the United States Code.
                  (B) Overpayment.--The term ``overpayment'' 
                means any finally determined funds that a 
                person receives or retains under title XVIII, 
                XIX, or XXI to which the person, after 
                applicable reconciliation, is not entitled 
                under such title.
                  (C) Person.--The term ``person'' means a 
                provider of services, supplier, Medicaid 
                managed care organization (as defined in 
                section 1903(m)(1)(A)), Medicare Advantage 
                organization (as defined in section 
                1859(a)(1)), or PDP sponsor (as defined in 
                section 1860D-41(a)(13)), but excluding a 
                beneficiary.
  (d) Access to Information Necessary to Identify Fraud, Waste, 
and Abuse.--For purposes of law enforcement activity, and to 
the extent consistent with applicable disclosure, privacy, and 
security laws, including the Health Insurance Portability and 
Accountability Act of 1996 and the Privacy Act of 1974, and 
subject to any information systems security requirements 
enacted by law or otherwise required by the Secretary, the 
Attorney General shall have access, facilitation by the 
Inspector General of the Department of Health and Human 
Services, to claims and payment data relating to titles XVIII 
and XIX, in consultation with the Centers for Medicare & 
Medicaid Services or the owner of such data.

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

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

           *       *       *       *       *       *       *


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

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

           *       *       *       *       *       *       *


        IMPROVED COORDINATION AND PROTECTION FOR DUAL ELIGIBLES

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

           *       *       *       *       *       *       *


                 Part C--Administrative Simplification

                              DEFINITIONS

  Sec. 1171. For purposes of this part:
          (1) * * *

           *       *       *       *       *       *       *

          (7) Standard.--The term ``standard'', when used [with 
        reference to a data element of health information or a 
        transaction referred to in section 1173(a)(1), means 
        any such data element or transaction that meets each of 
        the standards and implementation specifications adopted 
        or established by the Secretary with respect to the 
        data element or transaction under sections 1172 through 
        1174.] with reference to a transaction or data element 
        of health information in section 1173 means 
        implementation specifications, certification criteria, 
        operating rules, messaging formats, codes, and code 
        sets adopted or established by the Secretary for the 
        electronic exchange and use of information.

           *       *       *       *       *       *       *

          (9) Operating rules.--The term ``operating rules'' 
        means business rules for using and processing 
        transactions. Operating rules should address the 
        following:
                  (A) Requirements for data content using 
                available and established national standards.
                  (B) Infrastructure requirements that 
                establish best practices for streamlining data 
                flow to yield timely execution of transactions.
                  (C) Policies defining the transaction related 
                rights and responsibilities for entities that 
                are transmitting or receiving data.

           *       *       *       *       *       *       *


SEC. 1173A. STANDARDIZE ELECTRONIC ADMINISTRATIVE TRANSACTIONS.

  (a) Standards for Financial and Administrative 
Transactions.--
          (1) In general.--The Secretary shall adopt and 
        regularly update standards consistent with the goals 
        described in paragraph (2).
          (2) Goals for financial and administrative 
        transactions.--The goals for standards under paragraph 
        (1) are that such standards shall--
                  (A) be unique with no conflicting or 
                redundant standards;
                  (B) be authoritative, permitting no additions 
                or constraints for electronic transactions, 
                including companion guides;
                  (C) be comprehensive, efficient and robust, 
                requiring minimal augmentation by paper 
                transactions or clarification by further 
                communications;
                  (D) enable the real-time (or near real-time) 
                determination of an individual's financial 
                responsibility at the point of service and, to 
                the extent possible, prior to service, 
                including whether the individual is eligible 
                for a specific service with a specific 
                physician at a specific facility, which may 
                include utilization of a machine-readable 
                health plan beneficiary identification card;
                  (E) enable, where feasible, near real-time 
                adjudication of claims;
                  (F) provide for timely acknowledgment, 
                response, and status reporting applicable to 
                any electronic transaction deemed appropriate 
                by the Secretary;
                  (G) describe all data elements (such as 
                reason and remark codes) in unambiguous terms, 
                not permit optional fields, require that data 
                elements be either required or conditioned upon 
                set values in other fields, and prohibit 
                additional conditions; and
                  (H) harmonize all common data elements across 
                administrative and clinical transaction 
                standards.
          (3) Time for adoption.--Not later than 2 years after 
        the date of implementation of the X12 Version 5010 
        transaction standards implemented under this part, the 
        Secretary shall adopt standards under this section.
          (4) Requirements for specific standards.--The 
        standards under this section shall be developed, 
        adopted, and enforced so as to--
                  (A) clarify, refine, complete, and expand, as 
                needed, the standards required under section 
                1173;
                  (B) require paper versions of standardized 
                transactions to comply with the same standards 
                as to data content such that a fully compliant, 
                equivalent electronic transaction can be 
                populated from the data from a paper version;
                  (C) enable electronic funds transfers, in 
                order to allow automated reconciliation with 
                the related health care payment and remittance 
                advice;
                  (D) require timely and transparent claim and 
                denial management processes, including 
                tracking, adjudication, and appeal processing ;
                  (E) require the use of a standard electronic 
                transaction with which health care providers 
                may quickly and efficiently enroll with a 
                health plan to conduct the other electronic 
                transactions provided for in this part; and
                  (F) provide for other requirements relating 
                to administrative simplification as identified 
                by the Secretary, in consultation with 
                stakeholders.
          (5) Building on existing standards.--In developing 
        the standards under this section, the Secretary shall 
        build upon existing and planned standards.
          (6) Implementation and enforcement.--Not later than 6 
        months after the date of the enactment of this section, 
        the Secretary shall submit to the appropriate 
        committees of Congress a plan for the implementation 
        and enforcement, by not later than 5 years after such 
        date of enactment, of the standards under this section. 
        Such plan shall include--
                  (A) a process and timeframe with milestones 
                for developing the complete set of standards;
                  (B) an expedited upgrade program for 
                continually developing and approving additions 
                and modifications to the standards as often as 
                annually to improve their quality and extend 
                their functionality to meet evolving 
                requirements in health care;
                  (C) programs to provide incentives for, and 
                ease the burden of, implementation for certain 
                health care providers, with special 
                consideration given to such providers serving 
                rural or underserved areas and ensure 
                coordination with standards, implementation 
                specifications, and certification criteria 
                being adopted under the HITECH Act;
                  (D) programs to provide incentives for, and 
                ease the burden of, health care providers who 
                volunteer to participate in the process of 
                setting standards for electronic transactions;
                  (E) an estimate of total funds needed to 
                ensure timely completion of the implementation 
                plan; and
                  (F) an enforcement process that includes 
                timely investigation of complaints, random 
                audits to ensure compliance, civil monetary and 
                programmatic penalties for non-compliance 
                consistent with existing laws and regulations, 
                and a fair and reasonable appeals process 
                building off of enforcement provisions under 
                this part.
  (b) Limitations on Use of Data.--Nothing in this section 
shall be construed to permit the use of information collected 
under this section in a manner that would adversely affect any 
individual.
  (c) Protection of Data.--The Secretary shall ensure (through 
the promulgation of regulations or otherwise) that all data 
collected pursuant to subsection (a) are--
          (1) used and disclosed in a manner that meets the 
        HIPAA privacy and security law (as defined in section 
        3009(a)(2) of the Public Health Service Act), including 
        any privacy or security standard adopted under section 
        3004 of such Act; and
          (2) protected from all inappropriate internal use by 
        any entity that collects, stores, or receives the data, 
        including use of such data in determinations of 
        eligibility (or continued eligibility) in health plans, 
        and from other inappropriate uses, as defined by the 
        Secretary.

           *       *       *       *       *       *       *


       PROCESSING PAYMENT TRANSACTIONS BY FINANCIAL INSTITUTIONS

  Sec. 1179. To the extent that an entity is engaged in 
activities of a financial institution (as defined in section 
1101 of the Right to Financial Privacy Act of 1978) on behalf 
of an individual, [or is engaged] and is engaged in 
authorizing, processing, clearing, settling, billing, 
transferring, reconciling, or collecting payments, for a 
financial institution on behalf of an individual (other than as 
a business associate for a covered entity), this part, and any 
standard adopted under this part, shall not apply to the entity 
with respect to such activities, including the following:
          (1) The use or disclosure of information by the 
        entity for authorizing, processing, clearing, settling, 
        billing, transferring, reconciling or collecting, a 
        payment for, or related to, health plan premiums or 
        health care, where such payment is made by any means, 
        including a credit, debit, or other payment card, an 
        account, check, or electronic funds transfer.

           *       *       *       *       *       *       *


               Part D--Comparative Effectiveness Research

                   COMPARATIVE EFFECTIVENESS RESEARCH

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

                      Part E--Quality Improvement

    ESTABLISHMENT OF NATIONAL PRIORITIES FOR PERFORMANCE IMPROVEMENT

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

SEC. 1192. DEVELOPMENT OF NEW QUALITY MEASURES.

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

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

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

           *       *       *       *       *       *       *


TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *


                 PROVISIONS RELATING TO ADMINISTRATION

  Sec. 1808. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


Part A--Hospital Insurance Benefits for the Aged and Disabled

           *       *       *       *       *       *       *


         CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES

  Sec. 1814. (a) Requirement of Requests and Certifications.--
Except as provided in subsections (d) and (g) and in section 
1876, payment for services furnished an individual may be made 
only to providers of services which are eligible therefor under 
section 1866 and only if--
          (1) written request, signed by such individual, 
        except in cases in which the Secretary finds it 
        impracticable for the individual to do so, is filed for 
        such payment in such form, in such manner, and by such 
        person or persons as the Secretary may by regulation 
        prescribe, no later than the close of the [period of 3 
        calendar years following the year in which such 
        services are furnished (deeming any services furnished 
        in the last 3 calendar months of any calendar year to 
        have been furnished in the succeeding calendar year) 
        except that where the Secretary deems that efficient 
        administration so requires, such period may be reduced 
        to not less than 1 calendar year;] period of 1 calendar 
        year from which such services are furnished; and
          (2) a physician, in the case of services described in 
        subparagraph (C), a physician enrolled under section 
        1866(j) or an eligible professional under section 
        1848(k)(3)(B), or, in the case of services described in 
        subparagraph (B), a physician, or a nurse practitioner 
        or clinical nurse specialist who does not have a direct 
        or indirect employment relationship with the facility 
        but is working in collaboration with a physician, 
        certifies (and recertifies, where such services are 
        furnished over a period of time, in such cases, with 
        such frequency, and accompanied by such supporting 
        material, appropriate to the case involved, as may be 
        provided by regulations, except that the first of such 
        recertifications shall be required in each case of 
        inpatient hospital services not later than the 20th day 
        of such period) that--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) in the case of home health services, such 
                services are or were required because the 
                individual is or was confined to his home 
                (except when receiving items and services 
                referred to in section 1861(m)(7)) and needs or 
                needed skilled nursing care (other than solely 
                venipuncture for the purpose of obtaining a 
                blood sample) on an intermittent basis or 
                physical or speech therapy or, in the case of 
                an individual who has been furnished home 
                health services based on such a need and who no 
                longer has such a need for such care or 
                therapy, continues or continued to need 
                occupational therapy; a plan for furnishing 
                such services to such individual has been 
                established and is periodically reviewed by a 
                physician; [and such services] such services 
                are or were furnished while the individual was 
                under the care of a physician, and, in the case 
                of a certification or recertification made by a 
                physician after January 1, 2010, prior to 
                making such certification the physician must 
                document that the physician has had a face-to-
                face encounter (including through use of 
                telehealth and other than with respect to 
                encounters that are incident to services 
                involved) with the individual during the 6-
                month period preceding such certification, or 
                other reasonable timeframe as determined by the 
                Secretary; or

           *       *       *       *       *       *       *

To the extent provided by regulations, the certification and 
recertification requirements of paragraph (2) shall be deemed 
satisfied where, at a later date, a physician, nurse 
practitioner, or clinical nurse specialist (as the case may be) 
makes certification of the kind provided in subparagraph (A), 
(B), (C), or (D) of paragraph (2) (whichever would have 
applied), but only where such certification is accompanied by 
such medical and other evidence as may be required by such 
regulations. With respect to the physician certification 
required by paragraph (2) for home health services furnished to 
any individual by a home health agency (other than an agency 
which is a governmental entity) and with respect to the 
establishment and review of a plan for such services, the 
Secretary shall prescribe regulations which shall become 
effective no later than July 1, 1981, and which prohibit a 
physician who has a significant ownership interest in, or a 
significant financial or contractual relationship with, such 
home health agency from performing such certification and from 
establishing or reviewing such plan, except that such 
prohibition shall not apply with respect to a home health 
agency which is a sole community home health agency (as 
determined by the Secretary). For purposes of the preceding 
sentence, service by a physician as an uncompensated officer or 
director of a home health agency shall not constitute having a 
significant ownership interest in, or a significant financial 
or contractual relationship with, such agency. For purposes of 
paragraph (2)(C), an individual shall be considered to be 
``confined to his home'' if the individual has a condition, due 
to an illness or injury, that restricts the ability of the 
individual to leave his or her home except with the assistance 
of another individual or the aid of a supportive device (such 
as crutches, a cane, a wheelchair, or a walker), or if the 
individual has a condition such that leaving his or her home is 
medically contraindicated. While an individual does not have to 
be bedridden to be considered ``confined to his home'', the 
condition of the individual should be such that there exists a 
normal inability to leave home and that leaving home requires a 
considerable and taxing effort by the individual. Any absence 
of an individual from the home attributable to the need to 
receive health care treatment, including regular absences for 
the purpose of participating in therapeutic, psychosocial, or 
medical treatment in an adult day-care program that is licensed 
or certified by a State, or accredited, to furnish adult day-
care services in the State shall not disqualify an individual 
from being considered to be ``confined to his home''. Any other 
absence of an individual from the home shall not so disqualify 
an individual if the absence is of infrequent or of relatively 
short duration. For purposes of the preceding sentence, any 
absence for the purpose of attending a religious service shall 
be deemed to be an absence of infrequent or short duration. In 
applying paragraph (1), the Secretary may specify exceptions to 
the 1 calendar year period specified in such paragraph.

           *       *       *       *       *       *       *

  (i) Payment for Hospice Care.--(1)(A) * * *

           *       *       *       *       *       *       *

  (C)(i) * * *
  (ii) With respect to routine home care and other services 
included in hospice care furnished during a subsequent fiscal 
year, the payment rates for such care and services shall be the 
payment rates in effect under this subparagraph during the 
previous fiscal year increased by--
          (I) * * *

           *       *       *       *       *       *       *

          (VII) for a subsequent fiscal year, the market basket 
        percentage increase (which is subject to the 
        productivity adjustment described in section 
        1886(b)(3)(B)(iii)(II)) for the fiscal year.

           *       *       *       *       *       *       *

  (l) Payment for Inpatient Critical Access Hospital 
Services.--(1) * * *

           *       *       *       *       *       *       *

  (5) The adjustment factor described in section 1886(p)(3) 
shall apply to payments with respect to a critical access 
hospital with respect to a cost reporting period beginning in 
fiscal year 2012 and each subsequent fiscal year (after 
application of paragraph (4) of this subsection) in a manner 
similar to the manner in which such section applies with 
respect to a fiscal year to an applicable hospital as described 
in section 1886(p)(2).
  [(5)] (6) There shall be no administrative or judicial review 
under section 1869, section 1878, or otherwise, of--
          (A) * * *

           *       *       *       *       *       *       *

          (C) the specification of EHR reporting periods under 
        section 1886(n)(6)(B) as applied under paragraphs (3) 
        and (4); [and]
          (D) the identification of costs for purposes of 
        paragraph (3)(C)[.]; and
          (E) the methodology for determining the adjustment 
        factor under paragraph (5), including the determination 
        of aggregate payments for actual and expected 
        readmissions, applicable periods, applicable conditions 
        and measures of readmissions.

           *       *       *       *       *       *       *


                 FEDERAL HOSPITAL INSURANCE TRUST FUND

  Sec. 1817. (a) * * *

           *       *       *       *       *       *       *

  (k) Health Care Fraud and Abuse Control Account.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Appropriated amounts to account for medicare 
        integrity program.--
                  (A) In general.--There are hereby 
                appropriated to the Account from the Trust Fund 
                for each fiscal year such amounts as are 
                necessary for activities described in paragraph 
                (3)(C) and to carry out the Medicare Integrity 
                Program under section 1893, subject to 
                subparagraphs (B), (C), and (D) and to be 
                available without further appropriation until 
                expended.

           *       *       *       *       *       *       *

          (7) Additional funding.--In addition to the funds 
        otherwise appropriated to the Account from the Trust 
        Fund under paragraphs (3) and (4) and for purposes 
        described in paragraphs (3)(C) and (4)(A), there are 
        hereby appropriated an additional $100,000,000 to such 
        Account from such Trust Fund for each fiscal year 
        beginning with 2011. The funds appropriated under this 
        paragraph shall be allocated in the same proportion as 
        the total funding appropriated with respect to 
        paragraphs (3)(A) and (4)(A) was allocated with respect 
        to fiscal year 2010, and shall be available without 
        further appropriation until expended.

           *       *       *       *       *       *       *


  REQUIREMENTS FOR, AND ASSURING QUALITY OF CARE IN, SKILLED NURSING 
                               FACILITIES

  Sec. 1819. (a) * * *
  (b) Requirements Relating to Provision of Services.--
          (1) Quality of life.--
                  (A) * * *
                  (B) Quality assessment and [assurance] 
                assurance and quality assurance and performance 
                improvement program.--
                          (i) In general.--A skilled nursing 
                        facility must maintain a quality 
                        assessment and assurance committee, 
                        consisting of the director of nursing 
                        services, a physician designated by the 
                        facility, and at least 3 other members 
                        of the facility's staff, which [(i)] 
                        (I) meets at least quarterly to 
                        identify issues with respect to which 
                        quality assessment and assurance 
                        activities are necessary and [(ii)] 
                        (II) develops and implements 
                        appropriate plans of action to correct 
                        identified quality deficiencies. A 
                        State or the Secretary may not require 
                        disclosure of the records of such 
                        committee except insofar as such 
                        disclosure is related to the compliance 
                        of such committee with the requirements 
                        of this subparagraph.
                          (ii) Quality assurance and 
                        performance improvement program.--
                                  (I) In general.--Not later 
                                than December 31, 2011, the 
                                Secretary shall establish and 
                                implement a quality assurance 
                                and performance improvement 
                                program (in this clause 
                                referred to as the ``QAPI 
                                program'') for skilled nursing 
                                facilities, including multi-
                                unit chains of such facilities. 
                                Under the QAPI program, the 
                                Secretary shall establish 
                                standards relating to such 
                                facilities and provide 
                                technical assistance to such 
                                facilities on the development 
                                of best practices in order to 
                                meet such standards. Not later 
                                than 1 year after the date on 
                                which the regulations are 
                                promulgated under subclause 
                                (II), a skilled nursing 
                                facility must submit to the 
                                Secretary a plan for the 
                                facility to meet such standards 
                                and implement such best 
                                practices, including how to 
                                coordinate the implementation 
                                of such plan with quality 
                                assessment and assurance 
                                activities conducted under 
                                clause (i).
                                  (II) Regulations.--The 
                                Secretary shall promulgate 
                                regulations to carry out this 
                                clause.

           *       *       *       *       *       *       *

          (8) Information on nurse staffing.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Submission of staffing information based 
                on payroll data in a uniform format.--Beginning 
                not later than 2 years after the date of the 
                enactment of this subparagraph, and after 
                consulting with State long-term care ombudsman 
                programs, consumer advocacy groups, provider 
                stakeholder groups, employees and their 
                representatives, and other parties the 
                Secretary deems appropriate, the Secretary 
                shall require a skilled nursing facility to 
                electronically submit to the Secretary direct 
                care staffing information (including 
                information with respect to agency and contract 
                staff) based on payroll and other verifiable 
                and auditable data in a uniform format 
                (according to specifications established by the 
                Secretary in consultation with such programs, 
                groups, and parties). Such specifications shall 
                require that the information submitted under 
                the preceding sentence--
                          (i) specify the category of work a 
                        certified employee performs (such as 
                        whether the employee is a registered 
                        nurse, licensed practical nurse, 
                        licensed vocational nurse, certified 
                        nursing assistant, therapist, or other 
                        medical personnel);
                          (ii) include resident census data and 
                        information on resident case mix;
                          (iii) include a regular reporting 
                        schedule; and
                          (iv) include information on employee 
                        turnover and tenure and on the hours of 
                        care provided by each category of 
                        certified employees referenced in 
                        clause (i) per resident per day.
                Nothing in this subparagraph shall be construed 
                as preventing the Secretary from requiring 
                submission of such information with respect to 
                specific categories, such as nursing staff, 
                before other categories of certified employees. 
                Information under this subparagraph with 
                respect to agency and contract staff shall be 
                kept separate from information on employee 
                staffing.
  (c) Requirements Relating to Residents' Rights.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Notification of facility closure.--
                  (A) In general.--Any individual who is the 
                administrator of a skilled nursing facility 
                must--
                          (i) submit to the Secretary, the 
                        State long-term care ombudsman, 
                        residents of the facility, and the 
                        legal representatives of such residents 
                        or other responsible parties, written 
                        notification of an impending closure--
                                  (I) subject to subclause 
                                (II), not later than the date 
                                that is 60 days prior to the 
                                date of such closure; and
                                  (II) in the case of a 
                                facility where the Secretary 
                                terminates the facility's 
                                participation under this title, 
                                not later than the date that 
                                the Secretary determines 
                                appropriate;
                          (ii) ensure that the facility does 
                        not admit any new residents on or after 
                        the date on which such written 
                        notification is submitted; and
                          (iii) include in the notice a plan 
                        for the transfer and adequate 
                        relocation of the residents of the 
                        facility by a specified date prior to 
                        closure that has been approved by the 
                        State, including assurances that the 
                        residents will be transferred to the 
                        most appropriate facility or other 
                        setting in terms of quality, services, 
                        and location, taking into consideration 
                        the needs and best interests of each 
                        resident.
                  (B) Relocation.--
                          (i) In general.--The State shall 
                        ensure that, before a facility closes, 
                        all residents of the facility have been 
                        successfully relocated to another 
                        facility or an alternative home and 
                        community-based setting.
                          (ii) Continuation of payments until 
                        residents relocated.--The Secretary 
                        may, as the Secretary determines 
                        appropriate, continue to make payments 
                        under this title with respect to 
                        residents of a facility that has 
                        submitted a notification under 
                        subparagraph (A) during the period 
                        beginning on the date such notification 
                        is submitted and ending on the date on 
                        which the resident is successfully 
                        relocated.
  (d) Requirements Relating to Administration and Other 
Matters.--
          (1) Administration.--
                  (A) * * *
                  [(B) Required notices.--If a change occurs 
                in--
                          [(i) the persons with an ownership or 
                        control interest (as defined in section 
                        1124(a)(3)) in the facility,
                          [(ii) the persons who are officers, 
                        directors, agents, or managing 
                        employees (as defined in section 
                        1126(b)) of the facility,
                          [(iii) the corporation, association, 
                        or other company responsible for the 
                        management of the facility, or
                          [(iv) the individual who is the 
                        administrator or director of nursing of 
                        the facility,--the skilled nursing 
                        facility must provide notice to the 
                        State agency responsible for the 
                        licensing of the facility, at the time 
                        of the change, of the change and of the 
                        identity of each new person, company, 
                        or individual described in the 
                        respective clause.]
                  [(C)] (B) Skilled nursing facility 
                administrator.--The administrator of a skilled 
                nursing facility must meet standards 
                established by the Secretary under subsection 
                (f)(4).
                  (C) Compliance and ethics programs.--
                          (i) Requirement.--On or after the 
                        date that is 36 months after the date 
                        of the enactment of this subparagraph, 
                        a skilled nursing facility shall, with 
                        respect to the entity that operates the 
                        facility (in this subparagraph referred 
                        to as the ``operating organization'' or 
                        ``organization''), have in operation a 
                        compliance and ethics program that is 
                        effective in preventing and detecting 
                        criminal, civil, and administrative 
                        violations under this Act and in 
                        promoting quality of care consistent 
                        with regulations developed under clause 
                        (ii).
                          (ii) Development of regulations.--
                                  (I) In general.--Not later 
                                than the date that is 2 years 
                                after such date of the 
                                enactment, the Secretary, in 
                                consultation with the Inspector 
                                General of the Department of 
                                Health and Human Services, 
                                shall promulgate regulations 
                                for an effective compliance and 
                                ethics program for operating 
                                organizations, which may 
                                include a model compliance 
                                program.
                                  (II) Design of regulations.--
                                Such regulations with respect 
                                to specific elements or 
                                formality of a program may vary 
                                with the size of the 
                                organization, such that larger 
                                organizations should have a 
                                more formal and rigorous 
                                program and include established 
                                written policies defining the 
                                standards and procedures to be 
                                followed by its employees. Such 
                                requirements shall specifically 
                                apply to the corporate level 
                                management of multi-unit 
                                nursing home chains.
                                  (III) Evaluation.--Not later 
                                than 3 years after the date of 
                                promulgation of regulations 
                                under this clause, the 
                                Secretary shall complete an 
                                evaluation of the compliance 
                                and ethics programs required to 
                                be established under this 
                                subparagraph. Such evaluation 
                                shall determine if such 
                                programs led to changes in 
                                deficiency citations, changes 
                                in quality performance, or 
                                changes in other metrics of 
                                resident quality of care. The 
                                Secretary shall submit to 
                                Congress a report on such 
                                evaluation and shall include in 
                                such report such 
                                recommendations regarding 
                                changes in the requirements for 
                                such programs as the Secretary 
                                determines appropriate.
                          (iii) Requirements for compliance and 
                        ethics programs.--In this subparagraph, 
                        the term ``compliance and ethics 
                        program'' means, with respect to a 
                        skilled nursing facility, a program of 
                        the operating organization that--
                                  (I) has been reasonably 
                                designed, implemented, and 
                                enforced so that it generally 
                                will be effective in preventing 
                                and detecting criminal, civil, 
                                and administrative violations 
                                under this Act and in promoting 
                                quality of care; and
                                  (II) includes at least the 
                                required components specified 
                                in clause (iv).
                          (iv) Required components of 
                        program.--The required components of a 
                        compliance and ethics program of an 
                        organization are the following:
                                  (I) The organization must 
                                have established compliance 
                                standards and procedures to be 
                                followed by its employees, 
                                contractors, and other agents 
                                that are reasonably capable of 
                                reducing the prospect of 
                                criminal, civil, and 
                                administrative violations under 
                                this Act.
                                  (II) Specific individuals 
                                within high-level personnel of 
                                the organization must have been 
                                assigned overall responsibility 
                                to oversee compliance with such 
                                standards and procedures and 
                                have sufficient resources and 
                                authority to assure such 
                                compliance.
                                  (III) The organization must 
                                have used due care not to 
                                delegate substantial 
                                discretionary authority to 
                                individuals whom the 
                                organization knew, or should 
                                have known through the exercise 
                                of due diligence, had a 
                                propensity to engage in 
                                criminal, civil, and 
                                administrative violations under 
                                this Act.
                                  (IV) The organization must 
                                have taken steps to communicate 
                                effectively its standards and 
                                procedures to all employees and 
                                other agents, such as by 
                                requiring participation in 
                                training programs or by 
                                disseminating publications that 
                                explain in a practical manner 
                                what is required.
                                  (V) The organization must 
                                have taken reasonable steps to 
                                achieve compliance with its 
                                standards, such as by utilizing 
                                monitoring and auditing systems 
                                reasonably designed to detect 
                                criminal, civil, and 
                                administrative violations under 
                                this Act by its employees and 
                                other agents and by having in 
                                place and publicizing a 
                                reporting system whereby 
                                employees and other agents 
                                could report violations by 
                                others within the organization 
                                without fear of retribution.
                                  (VI) The standards must have 
                                been consistently enforced 
                                through appropriate 
                                disciplinary mechanisms, 
                                including, as appropriate, 
                                discipline of individuals 
                                responsible for the failure to 
                                detect an offense.
                                  (VII) After an offense has 
                                been detected, the organization 
                                must have taken all reasonable 
                                steps to respond appropriately 
                                to the offense and to prevent 
                                further similar offenses, 
                                including repayment of any 
                                funds to which it was not 
                                entitled and any necessary 
                                modification to its program to 
                                prevent and detect criminal, 
                                civil, and administrative 
                                violations under this Act.
                                  (VIII) The organization must 
                                periodically undertake 
                                reassessment of its compliance 
                                program to identify changes 
                                necessary to reflect changes 
                                within the organization and its 
                                facilities.
                          (v) Coordination.--The provisions of 
                        this subparagraph shall apply with 
                        respect to a skilled nursing facility 
                        in lieu of section 1874(d).
                  (D) Availability of survey, certification, 
                and complaint investigation reports.--A skilled 
                nursing facility must--
                          (i) have reports with respect to any 
                        surveys, certifications, and complaint 
                        investigations made respecting the 
                        facility during the 3 preceding years 
                        available for any individual to review 
                        upon request; and
                          (ii) post notice of the availability 
                        of such reports in areas of the 
                        facility that are prominent and 
                        accessible to the public.
                The facility shall not make available under 
                clause (i) identifying information about 
                complainants or residents.

           *       *       *       *       *       *       *

  (e) State Requirements Relating to Skilled Nursing Facility 
Requirements.--The requirements, referred to in section 
1864(d), with respect to a State are as follows:
          (1) * * *

           *       *       *       *       *       *       *

          (6) Complaint processes and whistle-blower 
        protection.--
                  (A) Complaint forms.--The State must make the 
                standardized complaint form developed under 
                subsection (f)(9) available upon request to--
                          (i) a resident of a skilled nursing 
                        facility;
                          (ii) any person acting on the 
                        resident's behalf; and
                          (iii) any person who works at a 
                        skilled nursing facility or is a 
                        representative of such a worker.
                  (B) Complaint resolution process.--The State 
                must establish a complaint resolution process 
                in order to ensure that a resident, the legal 
                representative of a resident of a skilled 
                nursing facility, or other responsible party is 
                not retaliated against if the resident, legal 
                representative, or responsible party has 
                complained, in good faith, about the quality of 
                care or other issues relating to the skilled 
                nursing facility, that the legal representative 
                of a resident of a skilled nursing facility or 
                other responsible party is not denied access to 
                such resident or otherwise retaliated against 
                if such representative party has complained, in 
                good faith, about the quality of care provided 
                by the facility or other issues relating to the 
                facility, and that a person who works at a 
                skilled nursing facility is not retaliated 
                against if the worker has complained, in good 
                faith, about quality of care or services or an 
                issue relating to the quality of care or 
                services provided at the facility, whether the 
                resident, legal representative, other 
                responsible party, or worker used the form 
                developed under subsection (f)(9) or some other 
                method for submitting the complaint. Such 
                complaint resolution process shall include--
                          (i) procedures to assure accurate 
                        tracking of complaints received, 
                        including notification to the 
                        complainant that a complaint has been 
                        received;
                          (ii) procedures to determine the 
                        likely severity of a complaint and for 
                        the investigation of the complaint;
                          (iii) deadlines for responding to a 
                        complaint and for notifying the 
                        complainant of the outcome of the 
                        investigation; and
                          (iv) procedures to ensure that the 
                        identity of the complainant will be 
                        kept confidential.
                  (C) Whistleblower protection.--
                          (i) Prohibition against 
                        retaliation.--No person who works at a 
                        skilled nursing facility may be 
                        penalized, discriminated, or retaliated 
                        against with respect to any aspect of 
                        employment, including discharge, 
                        promotion, compensation, terms, 
                        conditions, or privileges of 
                        employment, or have a contract for 
                        services terminated, because the person 
                        (or anyone acting at the person's 
                        request) complained, in good faith, 
                        about the quality of care or services 
                        provided by a nursing facility or about 
                        other issues relating to quality of 
                        care or services, whether using the 
                        form developed under subsection (f)(9) 
                        or some other method for submitting the 
                        complaint.
                          (ii) Retaliatory reporting.--A 
                        skilled nursing facility may not file a 
                        complaint or a report against a person 
                        who works (or has worked at the 
                        facility with the appropriate State 
                        professional disciplinary agency 
                        because the person (or anyone acting at 
                        the person's request) complained in 
                        good faith, as described in clause (i).
                          (iii) Commencement of action.--Any 
                        person who believes the person has been 
                        penalized, discriminated , or 
                        retaliated against or had a contract 
                        for services terminated in violation of 
                        clause (i) or against whom a complaint 
                        has been filed in violation of clause 
                        (ii) may bring an action at law or 
                        equity in the appropriate district 
                        court of the United States, which shall 
                        have jurisdiction over such action 
                        without regard to the amount in 
                        controversy or the citizenship of the 
                        parties, and which shall have 
                        jurisdiction to grant complete relief, 
                        including, but not limited to, 
                        injunctive relief (such as 
                        reinstatement, compensatory damages 
                        (which may include reimbursement of 
                        lost wages, compensation, and 
                        benefits), costs of litigation 
                        (including reasonable attorney and 
                        expert witness fees), exemplary damages 
                        where appropriate, and such other 
                        relief as the court deems just and 
                        proper.
                          (iv) Rights not waivable.--The rights 
                        protected by this paragraph may not be 
                        diminished by contract or other 
                        agreement, and nothing in this 
                        paragraph shall be construed to 
                        diminish any greater or additional 
                        protection provided by Federal or State 
                        law or by contract or other agreement.
                          (v) Requirement to post notice of 
                        employee rights.--Each skilled nursing 
                        facility shall post conspicuously in an 
                        appropriate location a sign (in a form 
                        specified by the Secretary) specifying 
                        the rights of persons under this 
                        paragraph and including a statement 
                        that an employee may file a complaint 
                        with the Secretary against a skilled 
                        nursing facility that violates the 
                        provisions of this paragraph and 
                        information with respect to the manner 
                        of filing such a complaint.
                  (D) Rule of construction.--Nothing in this 
                paragraph shall be construed as preventing a 
                resident of a skilled nursing facility (or a 
                person acting on the resident's behalf) from 
                submitting a complaint in a manner or format 
                other than by using the standardized complaint 
                form developed under subsection (f)(9) 
                (including submitting a complaint orally).
                  (E) Good faith defined.--For purposes of this 
                paragraph, an individual shall be deemed to be 
                acting in good faith with respect to the filing 
                of a complaint if the individual reasonably 
                believes--
                          (i) the information reported or 
                        disclosed in the complaint is true; and
                          (ii) the violation of this title has 
                        occurred or may occur in relation to 
                        such information.
  (f) Responsibilities of Secretary Relating to Skilled Nursing 
Facility Requirements.--
          (1) * * *
          (2) Requirements for nurse aide training and 
        competency evaluation programs and for nurse aide 
        competency evaluation programs.--
                  (A) In general.--For purposes of subsections 
                (b)(5) and (e)(1)(A), the Secretary shall 
                establish, by not later than September 1, 
                1988--
                          (i) requirements for the approval of 
                        nurse aide training and competency 
                        evaluation programs, including 
                        requirements relating to (I) the areas 
                        to be covered in such a program 
                        (including at least basic nursing 
                        skills, personal care skills, 
                        recognition of mental health and social 
                        service needs, care of cognitively 
                        impaired residents, basic restorative 
                        services, and residents' rights) and 
                        content of the curriculum (including, 
                        in the case of initial training and, if 
                        the Secretary determines appropriate, 
                        in the case of ongoing training, 
                        dementia management training and 
                        resident abuse prevention training), 
                        (II) minimum hours of initial and 
                        ongoing training and retraining 
                        (including not less than 75 hours in 
                        the case of initial training), (III) 
                        qualifications of instructors, and (IV) 
                        procedures for determination of 
                        competency;

           *       *       *       *       *       *       *

          (8) Special focus facility program.--
                  (A) In general.--The Secretary shall conduct 
                a special focus facility program for 
                enforcement of requirements for skilled nursing 
                facilities that the Secretary has identified as 
                having substantially failed to meet applicable 
                requirement of this Act.
                  (B) Periodic surveys.--Under such program the 
                Secretary shall conduct surveys of each 
                facility in the program not less than once 
                every 6 months.
          (9) Standardized complaint form.--The Secretary shall 
        develop a standardized complaint form for use by a 
        resident (or a person acting on the resident's behalf) 
        in filing a complaint with a State survey and 
        certification agency and a State long-term care 
        ombudsman program with respect to a skilled nursing 
        facility.
  (g) Survey and Certification Process.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Disclosure of results of inspections and 
        activities.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Submission of survey and certification 
                information to the secretary.--In order to 
                improve the timeliness of information made 
                available to the public under subparagraph (A) 
                and provided on the Nursing Home Compare 
                Medicare website under subsection (i), each 
                State shall submit information respecting any 
                survey or certification made respecting a 
                skilled nursing facility (including any 
                enforcement actions taken by the State) to the 
                Secretary not later than the date on which the 
                State sends such information to the facility. 
                The Secretary shall use the information 
                submitted under the preceding sentence to 
                update the information provided on the Nursing 
                Home Compare Medicare website as expeditiously 
                as practicable but not less frequently than 
                quarterly.
  (h) Enforcement Process.--
          (1) * * *
          (2) Secretarial authority.--
                  (A) * * *
                  (B) Specified remedies.--The Secretary may 
                take the following actions with respect to a 
                finding that a facility has not met an 
                applicable requirement:
                          (i) * * *
                          [(ii) Authority with respect to civil 
                        money penalties.--The Secretary may 
                        impose a civil money penalty in an 
                        amount not to exceed $10,000 for each 
                        day of noncompliance. The provisions of 
                        section 1128A (other than subsections 
                        (a) and (b)) shall apply to a civil 
                        money penalty under the previous 
                        sentence in the same manner as such 
                        provisions apply to a penalty or 
                        proceeding under section 1128A(a).]
                          (ii) Authority with respect to civil 
                        money penalties.--
                                  (I) Amount.--The Secretary 
                                may impose a civil money 
                                penalty in the applicable per 
                                instance or per day amount (as 
                                defined in subclause (II) and 
                                (III)) for each day or 
                                instance, respectively, of 
                                noncompliance (as determined 
                                appropriate by the Secretary).
                                  (II) Applicable per instance 
                                amount.--In this clause, the 
                                term ``applicable per instance 
                                amount'' means--
                                          (aa) in the case 
                                        where the deficiency is 
                                        found to be a direct 
                                        proximate cause of 
                                        death of a resident of 
                                        the facility, an amount 
                                        not to exceed $100,000.
                                          (bb) in each case of 
                                        a deficiency where the 
                                        facility is cited for 
                                        actual harm or 
                                        immediate jeopardy, an 
                                        amount not less than 
                                        $3,050 and not more 
                                        than $25,000; and
                                          (cc) in each case of 
                                        any other deficiency, 
                                        an amount not less than 
                                        $250 and not to exceed 
                                        $3050.
                                  (III) Applicable per day 
                                amount.--In this clause, the 
                                term ``applicable per day 
                                amount'' means--
                                          (aa) in each case of 
                                        a deficiency where the 
                                        facility is cited for 
                                        actual harm or 
                                        immediate jeopardy, an 
                                        amount not less than 
                                        $3,050 and not more 
                                        than $25,000 and
                                          (bb) in each case of 
                                        any other deficiency, 
                                        an amount not less than 
                                        $250 and not to exceed 
                                        $3,050.
                                  (IV) Reduction of civil money 
                                penalties in certain 
                                circumstances.--Subject to 
                                subclauses (V) and (VI), in the 
                                case where a facility self-
                                reports and promptly corrects a 
                                deficiency for which a penalty 
                                was imposed under this clause 
                                not later than 10 calendar days 
                                after the date of such 
                                imposition, the Secretary may 
                                reduce the amount of the 
                                penalty imposed by not more 
                                than 50 percent.
                                  (V) Prohibition on reduction 
                                for certain deficiencies.--
                                          (aa) Repeat 
                                        deficiencies.--The 
                                        Secretary may not 
                                        reduce under subclause 
                                        (IV) the amount of a 
                                        penalty if the 
                                        deficiency is a repeat 
                                        deficiency.
                                          (bb) Certain other 
                                        deficiencies.--The 
                                        Secretary may not 
                                        reduce under subclause 
                                        (IV) the amount of a 
                                        penalty if the penalty 
                                        is imposed for a 
                                        deficiency described in 
                                        subclause (II)(aa) or 
                                        (III)(aa) and the 
                                        actual harm or 
                                        widespread harm 
                                        immediately jeopardizes 
                                        the health or safety of 
                                        a resident or residents 
                                        of the facility, or if 
                                        the penalty is imposed 
                                        for a deficiency 
                                        described in subclause 
                                        (II)(bb).
                                  (VI) Limitation on aggregate 
                                reductions.--The aggregate 
                                reduction in a penalty under 
                                subclause (IV) may not exceed 
                                35 percent on the basis of 
                                self-reporting, on the basis of 
                                a waiver or an appeal (as 
                                provided for under regulations 
                                under section 488.436 of title 
                                42, Code of Federal 
                                Regulations), or on the basis 
                                of both.
                                  (VII) Collection of civil 
                                money penalties.--In the case 
                                of a civil money penalty 
                                imposed under this clause, the 
                                Secretary--
                                          (aa) subject to item 
                                        (cc), shall, not later 
                                        than 30 days after the 
                                        date of imposition of 
                                        the penalty, provide 
                                        the opportunity for the 
                                        facility to participate 
                                        in an independent 
                                        informal dispute 
                                        resolution process 
                                        which generates a 
                                        written record prior to 
                                        the collection of such 
                                        penalty, but such 
                                        opportunity shall not 
                                        affect the 
                                        responsibility of the 
                                        State survey agency for 
                                        making final 
                                        recommendations for 
                                        such penalties;
                                          (bb) in the case 
                                        where the penalty is 
                                        imposed for each day of 
                                        noncompliance, shall 
                                        not impose a penalty 
                                        for any day during the 
                                        period beginning on the 
                                        initial day of the 
                                        imposition of the 
                                        penalty and ending on 
                                        the day on which the 
                                        informal dispute 
                                        resolution process 
                                        under item (aa) is 
                                        completed;
                                          (cc) may provide for 
                                        the collection of such 
                                        civil money penalty and 
                                        the placement of such 
                                        amounts collected in an 
                                        escrow account under 
                                        the direction of the 
                                        Secretary on the 
                                        earlier of the date on 
                                        which the informal 
                                        dispute resolution 
                                        process under item (aa) 
                                        is completed or the 
                                        date that is 90 days 
                                        after the date of the 
                                        imposition of the 
                                        penalty;
                                          (dd) may provide that 
                                        such amounts collected 
                                        are kept in such 
                                        account pending the 
                                        resolution of any 
                                        subsequent appeals;
                                          (ee) in the case 
                                        where the facility 
                                        successfully appeals 
                                        the penalty, may 
                                        provide for the return 
                                        of such amounts 
                                        collected (plus 
                                        interest) to the 
                                        facility; and
                                          (ff) in the case 
                                        where all such appeals 
                                        are unsuccessful, may 
                                        provide that some 
                                        portion of such amounts 
                                        collected may be used 
                                        to support activities 
                                        that benefit residents, 
                                        including assistance to 
                                        support and protect 
                                        residents of a facility 
                                        that closes 
                                        (voluntarily or 
                                        involuntarily) or is 
                                        decertified (including 
                                        offsetting costs of 
                                        relocating residents to 
                                        home and community-
                                        based settings or 
                                        another facility), 
                                        projects that support 
                                        resident and family 
                                        councils and other 
                                        consumer involvement in 
                                        assuring quality care 
                                        in facilities, and 
                                        facility improvement 
                                        initiatives approved by 
                                        the Secretary 
                                        (including joint 
                                        training of facility 
                                        staff and surveyors, 
                                        technical assistance 
                                        for facilities under 
                                        quality assurance 
                                        programs, the 
                                        appointment of 
                                        temporary management, 
                                        and other activities 
                                        approved by the 
                                        Secretary).
                                  (VIII) Procedure.--The 
                                provisions of section 1128A 
                                (other than subsections (a) and 
                                (b) and except to the extent 
                                that such provisions require a 
                                hearing prior to the imposition 
                                of a civil money penalty) shall 
                                apply to a civil money penalty 
                                under this clause in the same 
                                manner as such provisions apply 
                                to a penalty or proceeding 
                                under section 1128A(a).

           *       *       *       *       *       *       *

          (4) Immediate termination of participation for 
        facility where secretary finds noncompliance and 
        immediate jeopardy.--If the Secretary finds that a 
        skilled nursing facility has not met a requirement of 
        subsection (b), (c), or (d), and finds that the failure 
        immediately jeopardizes the health or safety of its 
        residents, the Secretary shall take immediate action to 
        remove the jeopardy and correct the deficiencies 
        through the remedy specified in paragraph (2)(B)(iii), 
        or [the Secretary shall terminate] the Secretary, 
        subject to subsection (c)(7), shall terminate the 
        facility's participation under this title. If the 
        facility's participation under this title is 
        terminated, the State shall provide for the safe and 
        orderly transfer of the residents eligible under this 
        title consistent with the requirements of [subsection 
        (c)(2)] paragraphs (2) and (7) of subsection (c).
          (5) Construction.--The remedies provided under this 
        subsection are in addition to those otherwise available 
        under State or Federal law and shall not be construed 
        as limiting such other remedies, including any remedy 
        available to an individual at common law. The remedies 
        described in clauses (i), (ii), and (iii) of paragraph 
        (2)(B) may be imposed during the pendency of any 
        hearing.

           *       *       *       *       *       *       *

  (i) Nursing Home Compare Website.--
          (1) Inclusion of additional information.--
                  (A) In general.--The Secretary shall ensure 
                that the Department of Health and Human 
                Services includes, as part of the information 
                provided for comparison of nursing homes on the 
                official Internet website of the Federal 
                Government for Medicare beneficiaries (commonly 
                referred to as the ``Nursing Home Compare'' 
                Medicare website) (or a successor website), the 
                following information in a manner that is 
                prominent, easily accessible, readily 
                understandable to consumers of long-term care 
                services, and searchable:
                          (i) Information that is reported to 
                        the Secretary under section 1124(c)(4).
                          (ii) Information on the ``Special 
                        Focus Facility program'' (or a 
                        successor program) established by the 
                        Centers for Medicare and Medicaid 
                        Services, according to procedures 
                        established by the Secretary. Such 
                        procedures shall provide for the 
                        inclusion of information with respect 
                        to, and the names and locations of, 
                        those facilities that, since the 
                        previous quarter--
                                  (I) were newly enrolled in 
                                the program;
                                  (II) are enrolled in the 
                                program and have failed to 
                                significantly improve;
                                  (III) are enrolled in the 
                                program and have significantly 
                                improved;
                                  (IV) have graduated from the 
                                program; and
                                  (V) have closed voluntarily 
                                or no longer participate under 
                                this title.
                          (iii) Staffing data for each facility 
                        (including resident census data and 
                        data on the hours of care provided per 
                        resident per day) based on data 
                        submitted under subsection (b)(8)(C), 
                        including information on staffing 
                        turnover and tenure, in a format that 
                        is clearly understandable to consumers 
                        of long-term care services and allows 
                        such consumers to compare differences 
                        in staffing between facilities and 
                        State and national averages for the 
                        facilities. Such format shall include--
                                  (I) concise explanations of 
                                how to interpret the data (such 
                                as a plain English explanation 
                                of data reflecting ``nursing 
                                home staff hours per resident 
                                day'');
                                  (II) differences in types of 
                                staff (such as training 
                                associated with different 
                                categories of staff);
                                  (III) the relationship 
                                between nurse staffing levels 
                                and quality of care; and
                                  (IV) an explanation that 
                                appropriate staffing levels 
                                vary based on patient case mix.
                          (iv) Links to State Internet websites 
                        with information regarding State survey 
                        and certification programs, links to 
                        Form 2567 State inspection reports (or 
                        a successor form) on such websites, 
                        information to guide consumers in how 
                        to interpret and understand such 
                        reports, and the facility plan of 
                        correction or other response to such 
                        report.
                          (v) The standardized complaint form 
                        developed under subsection (f)(8), 
                        including explanatory material on what 
                        complaint forms are, how they are used, 
                        and how to file a complaint with the 
                        State survey and certification program 
                        and the State long-term care ombudsman 
                        program.
                          (vi) Summary information on the 
                        number, type, severity, and outcome of 
                        substantiated complaints.
                          (vii) The number of adjudicated 
                        instances of criminal violations by 
                        employees of a nursing facility--
                                  (I) that were committed 
                                inside the facility;
                                  (II) with respect to such 
                                instances of violations or 
                                crimes committed inside of the 
                                facility that were the 
                                violations or crimes of abuse, 
                                neglect, and exploitation, 
                                criminal sexual abuse, or other 
                                violations or crimes that 
                                resulted in serious bodily 
                                injury; and
                                  (III) the number of civil 
                                monetary penalties levied 
                                against the facility, 
                                employees, contractors, and 
                                other agents.
                  (B) Deadline for provision of information.--
                          (i) In general.--Except as provided 
                        in clause (ii), the Secretary shall 
                        ensure that the information described 
                        in subparagraph (A) is included on such 
                        website (or a successor website) not 
                        later than 1 year after the date of the 
                        enactment of this subsection.
                          (ii) Exception.--The Secretary shall 
                        ensure that the information described 
                        in subparagraph (A)(i) and (A)(iii) is 
                        included on such website (or a 
                        successor website) not later than the 
                        date on which the requirements under 
                        section 1124(c)(4) and subsection 
                        (b)(8)(C)(ii) are implemented.
          (2) Review and modification of website.--
                  (A) In general.--The Secretary shall 
                establish a process--
                          (i) to review the accuracy, clarity 
                        of presentation, timeliness, and 
                        comprehensiveness of information 
                        reported on such website as of the day 
                        before the date of the enactment of 
                        this subsection; and
                          (ii) not later than 1 year after the 
                        date of the enactment of this 
                        subsection, to modify or revamp such 
                        website in accordance with the review 
                        conducted under clause (i).
                  (B) Consultation.--In conducting the review 
                under subparagraph (A)(i), the Secretary shall 
                consult with--
                          (i) State long-term care ombudsman 
                        programs;
                          (ii) consumer advocacy groups;
                          (iii) provider stakeholder groups; 
                        and
                          (iv) any other representatives of 
                        programs or groups the Secretary 
                        determines appropriate.
  [(i)] (j) Construction.--Where requirements or obligations 
under this section are identical to those provided under 
section 1919 of this Act, the fulfillment of those requirements 
or obligations under section 1919 shall be considered to be the 
fulfillment of the corresponding requirements or obligations 
under this section.

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

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

           *       *       *       *       *       *       *


   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *


                           SCOPE OF BENEFITS

  Sec. 1832. (a) The benefits provided to an individual by the 
insurance program established by this part shall consist of--
          (1) * * *
          (2) entitlement to have payment made on his behalf 
        (subject to the provisions of this part) for--
                  (A) * * *
                  (B) medical and other health services (other 
                than items described in subparagraph (G) or 
                subparagraph (I)) furnished by a provider of 
                services or by others under arrangement with 
                them made by a provider of services, 
                excluding--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) services of a nurse practitioner 
                        or clinical nurse specialist but only 
                        if no facility or other provider 
                        charges or is paid any amounts with 
                        respect to the furnishing of such 
                        services; [and]
                          (v) marriage and family therapist 
                        services; and
                          (vi) mental health counselor 
                        services;

           *       *       *       *       *       *       *


                          PAYMENT OF BENEFITS

  Sec. 1833. (a) Except as provided in section 1876, and 
subject to the succeeding provisions of this section, there 
shall be paid from the Federal Supplementary Medical Insurance 
Trust Fund, in the case of each individual who is covered under 
the insurance program established by this part and incurs 
expenses for services with respect to which benefits are 
payable under this part, amounts equal to--
          (1) in the case of services described in section 
        1832(a)(1)--80 percent of the reasonable charges for 
        the services; except that (A) an organization which 
        provides medical and other health services (or arranges 
        for their availability) on a prepayment basis (and 
        either is sponsored by a union or employer, or does not 
        provide, or arrange for the provision of, any inpatient 
        hospital services) may elect to be paid 80 percent of 
        the reasonable cost of services for which payment may 
        be made under this part on behalf of individuals 
        enrolled in such organization in lieu of 80 percent of 
        the reasonable charges for such services if the 
        organization undertakes to charge such individuals no 
        more than 20 percent of such reasonable cost plus any 
        amounts payable by them as a result of subsection (b), 
        (B) with respect to items and services described in 
        section [1861(s)(10)(A)] 1861(s)(10), the amounts paid 
        shall be 100 percent of the reasonable charges for such 
        items and services, (C) with respect to expenses 
        incurred for those physicians' services for which 
        payment may be made under this part that are described 
        in section 1862(a)(4), the amounts paid shall be 
        subject to such limitations as may be prescribed by 
        regulations, (D) with respect to clinical diagnostic 
        laboratory tests for which payment is made under this 
        part (i) on the basis of a fee schedule under 
        subsection (h)(1) or section 1834(d)(1), the amount 
        paid shall be equal to 80 percent (or 100 percent, in 
        the case of such tests for which payment is made on an 
        assignment-related basis) of the lesser of the amount 
        determined under such fee schedule, the limitation 
        amount for that test determined under subsection 
        (h)(4)(B), or the amount of the charges billed for the 
        tests, or (ii) on the basis of a negotiated rate 
        established under subsection (h)(6), the amount paid 
        shall be equal to 100 percent of such negotiated rate,, 
        (E) with respect to services furnished to individuals 
        who have been determined to have end stage renal 
        disease, the amounts paid shall be determined subject 
        to the provisions of section 1881, (F) with respect to 
        clinical social worker services under section 
        1861(s)(2)(N), the amounts paid shall be 80 percent of 
        the lesser of (i) the actual charge for the services or 
        (ii) 75 percent of the amount determined for payment of 
        a psychologist under clause (L),
                  (G) * * *
          (H) with respect to services of a certified 
        registered nurse anesthetist under section 1861(s)(11), 
        the amounts paid shall be 80 percent of the least of 
        the actual charge, the prevailing charge that would be 
        recognized (or, for services furnished on or after 
        January 1, 1992, the fee schedule amount provided under 
        section 1848) if the services had been performed by an 
        anesthesiologist, or the fee schedule for such services 
        established by the Secretary in accordance with 
        subsection (l), (I) with respect to covered items 
        (described in section 1834(a)(13)), the amounts paid 
        shall be the amounts described in section 1834(a)(1), 
        and (J) with respect to expenses incurred for 
        radiologist services (as defined in section 
        1834(b)(6)), subject to section 1848, the amounts paid 
        shall be 80 percent of the lesser of the actual charge 
        for the services or the amount provided under the fee 
        schedule established under section 1834(b), (K) with 
        respect to certified nurse-midwife services under 
        section 1861(s)(2)(L), the amounts paid shall be 80 
        percent of the lesser of the actual charge for the 
        services or the amount determined by a fee schedule 
        established by the Secretary for the purposes of this 
        subparagraph [(but in no event shall such fee schedule 
        exceed 65 percent of the prevailing charge that would 
        be allowed for the same service performed by a 
        physician, or, for services furnished on or after 
        January 1, 1992, 65 percent of the fee schedule amount 
        provided under section 1848 for the same service 
        performed by a physician)], (L) with respect to 
        qualified psychologist services under section 
        1861(s)(2)(M), the amounts paid shall be 80 percent of 
        the lesser of the actual charge for the services or the 
        amount determined by a fee schedule established by the 
        Secretary for the purposes of this subparagraph, (M) 
        with respect to prosthetic devices and orthotics and 
        prosthetics (as defined in section 1834(h)(4)), the 
        amounts paid shall be the amounts described in section 
        1834(h)(1), (N) with respect to expenses incurred for 
        physicians' services (as defined in section 
        1848(j)(3)), the amounts paid shall be 80 percent of 
        the payment basis determined under section 1848(a)(1), 
        (O) with respect to services described in section 
        1861(s)(2)(K) (relating to services furnished by 
        physician assistants, nurse practitioners, or clinic 
        nurse specialists), the amounts paid shall be equal to 
        80 percent of (i) the lesser of the actual charge or 85 
        percent of the fee schedule amount provided under 
        section 1848, or (ii) in the case of services as an 
        assistant at surgery, the lesser of the actual charge 
        or 85 percent of the amount that would otherwise be 
        recognized if performed by a physician who is serving 
        as an assistant at surgery, (P) with respect to 
        surgical dressings, the amounts paid shall be the 
        amounts determined under section 1834(i), (Q) with 
        respect to items or services for which fee schedules 
        are established pursuant to section 1842(s), the 
        amounts paid shall be 80 percent of the lesser of the 
        actual charge or the fee schedule established in such 
        section, (R) with respect to ambulance services, (i) 
        the amounts paid shall be 80 percent of the lesser of 
        the actual charge for the services or the amount 
        determined by a fee schedule established by the 
        Secretary under section 1834(l) and (ii) with respect 
        to ambulance services described in section 1834(l)(8), 
        the amounts paid shall be the amounts determined under 
        section 1834(g) for outpatient critical access hospital 
        services, (S) with respect to drugs and biologicals 
        (including intravenous immune globulin (as defined in 
        section 1861(zz))) not paid on a cost or prospective 
        payment basis as otherwise provided in this part (other 
        than items and services described in subparagraph (B)), 
        the amounts paid shall be 80 percent of the lesser of 
        the actual charge or the payment amount established in 
        section 1842(o) (or, if applicable, under section 1847, 
        1847A, or 1847B), (T) with respect to medical nutrition 
        therapy services (as defined in section 1861(vv)), the 
        amount paid shall be 80 percent of the lesser of the 
        actual charge for the services or 85 percent of the 
        amount determined under the fee schedule established 
        under section 1848(b) for the same services if 
        furnished by a physician, (U) with respect to facility 
        fees described in section 1834(m)(2)(B), the amounts 
        paid shall be 80 percent of the lesser of the actual 
        charge or the amounts specified in such section, (V) 
        notwithstanding subparagraphs (I) (relating to durable 
        medical equipment), (M) (relating to prosthetic devices 
        and orthotics and prosthetics), and (Q) (relating to 
        1842(s) items), with respect to competitively priced 
        items and services (described in section 1847(a)(2)) 
        that are furnished in a competitive area, the amounts 
        paid shall be the amounts described in section 
        1847(b)(5), [and] (W) with respect to additional 
        preventive services (as defined in section 
        1861(ddd)(1)), the amount paid shall be (i) in the case 
        of such services which are clinical diagnostic 
        laboratory tests, the amount determined under 
        subparagraph (D), and (ii) in the case of all other 
        such services, 80 percent of the lesser of the actual 
        charge for the service or the amount determined under a 
        fee schedule established by the Secretary for purposes 
        of this subparagraph, (X) with respect to marriage and 
        family therapist services under section 1861(s)(2)(GG), 
        the amounts paid shall be 80 percent of the lesser of 
        the actual charge for the services or 75 percent of the 
        amount determined for payment of a psychologist under 
        clause (L), and (Y), with respect to mental health 
        counselor services under section 1861(s)(2)(HH), the 
        amounts paid shall be 80 percent of the lesser of the 
        actual charge for the services or 75 percent of the 
        amount determined for payment of a psychologist under 
        clause (L);
          (2) in the case of services described in section 
        1832(a)(2) (except those services described in 
        subparagraphs (C), (D), (E), (F), (G), (H), and (I) of 
        such section and unless otherwise specified in section 
        1881)--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) with respect to a covered osteoporosis 
                drug (as defined in section 1861(kk)) furnished 
                by a home health agency, 80 percent of the 
                reasonable cost of such service, as determined 
                under section 1861(v); [and]
                  (G) with respect to items and services 
                described in section [1861(s)(10)(A)] 
                1861(s)(10), the lesser of--
                          (i) * * *
                          (ii) the customary charges with 
                        respect to such services,
                or, if such services are furnished by a public 
                provider of services, or by another provider 
                which demonstrates to the satisfaction of the 
                Secretary that a significant portion of its 
                patients are low-income (and requests that 
                payment be made under this provision), free of 
                charge or at nominal charges to the public, the 
                amount determined in accordance with section 
                1814(b)(2); and
                  (H) with respect to additional preventive 
                services (as defined in section 1861(ddd)) 
                furnished by an outpatient department of a 
                hospital, the amount determined under paragraph 
                (1)(W);
          (3) in the case of services described in section 
        1832(a)(2)(D)--
                  (A) except as provided in subparagraph (B), 
                the costs which are reasonable and related to 
                the cost of furnishing such services or which 
                are based on such other tests of reasonableness 
                as the Secretary may prescribe in regulations, 
                including those authorized under section 
                1861(v)(1)(A), less the amount a provider may 
                charge as described in clause (ii) of section 
                1866(a)(2)(A), but in no case may the payment 
                for such services (other than for items and 
                services described in section [1861(s)(10)(A)] 
                1861(s)(10)) exceed 80 percent of such costs; 
                or

           *       *       *       *       *       *       *

With respect to Medicare covered preventive services (including 
services described in the last sentence of section 1833(b)), in 
any case in which the payment rate otherwise provided under 
this part is computed as a percent of less than 100 percent of 
an actual charge, fee schedule rate, or other rate, such 
percentage shall be increased to 100 percent.
  (b) Before applying subsection (a) with respect to expenses 
incurred by an individual during any calendar year, the total 
amount of the expenses incurred by such individual during such 
year (which would, except for this subsection, constitute 
incurred expenses from which benefits payable under subsection 
(a) are determinable) shall be reduced by a deductible of $75 
for calendar years before 1991, $100 for 1991 through 2004, 
$110 for 2005, and for a subsequent year the amount of such 
deductible for the previous year increased by the annual 
percentage increase in the monthly actuarial rate under section 
1839(a)(1) ending with such subsequent year (rounded to the 
nearest $1); except that (1) such total amount shall not 
include expenses incurred for [items and services described in 
section 1861(s)(10)(A)] Medicare covered preventive services 
(as defined in section 1861(iii)), (2) such deductible shall 
not apply with respect to home health services (other than a 
covered osteoporosis drug (as defined in section 1861(kk))), 
(3) such deductible shall not apply with respect to clinical 
diagnostic laboratory tests for which payment is made under 
this part (A) under subsection (a)(1)(D)(i) or (a)(2)(D)(i) on 
an assignment-related basis, or to a provider having an 
agreement under section 1866, or (B) on the basis of a 
negotiated rate determined under subsection (h)(6), and (4) 
such deductible shall not apply to Federally qualified health 
center services, [(5) such deductible shall not apply with 
respect to screening mammography (as described in section 
1861(jj)), (6) such deductible shall not apply with respect to 
screening pap smear and screening pelvic exam (as described in 
section 1861(nn)), (7) such deductible shall not apply with 
respect to ultrasound screening for abdominal aortic aneurysm 
(as defined in section 1861(bbb)), (8) such deductible shall 
not apply with respect to colorectal cancer screening tests (as 
described in section 1861(pp)(1)), and] (9) such deductible 
shall not apply with respect to an initial preventive physical 
examination (as defined in section 1861(ww)). The stotal amount 
of the expenses incurred by an individual as determined under 
the preceding sentence shall, after the reduction specified in 
such sentence, be further reduced by an amount equal to the 
expenses incurred for the first three pints of whole blood (or 
equivalent quantities of packed red blood cells, as defined 
under regulations) furnished to the individual during the 
calendar year, except that such deductible for such blood shall 
in accordance with regulations be appropriately reduced to the 
extent that there has been a replacement of such blood (or 
equivalent quantities of packed red blood cells, as so 
defined); and for such purposes blood (or equivalent quantities 
of packed red blood cells, as so defined) furnished such 
individual shall be deemed replaced when the institution or 
other person furnishing such blood (or such equivalent 
quantities of packed red blood cells, as so defined) is given 
one pint of blood for each pint of blood (or equivalent 
quantities of packed red blood cells, as so defined) furnished 
such individual with respect to which a deduction is made under 
this sentence. The deductible under the previous sentence for 
blood or blood cells furnished an individual in a year shall be 
reduced to the extent that a deductible has been imposed under 
section 1813(a)(2) to blood or blood cells furnished the 
individual in the year. Clause (1) of the first sentence of 
this subsection shall apply with respect to a colorectal cancer 
screening test regardless of the code that is billed for the 
establishment of a diagnosis as a result of the test, or for 
the removal of tissue or other matter or other procedure that 
is furnished in connection with, as a result of, and in the 
same clinical encounter as, the screening test.

           *       *       *       *       *       *       *

  (g)(1) * * *

           *       *       *       *       *       *       *

  (5) With respect to expenses incurred during the period 
beginning on January 1, 2006, and ending on [December 31, 2009] 
December 31, 2011, for services, the Secretary shall implement 
a process under which an individual enrolled under this part 
may, upon request of the individual or a person on behalf of 
the individual, obtain an exception from the uniform dollar 
limitation specified in paragraph (2), for services described 
in paragraphs (1) and (3) if the provision of such services is 
determined to be medically necessary. Under such process, if 
the Secretary does not make a decision on such a request for an 
exception within 10 business days of the date of the 
Secretary's receipt of the request, the Secretary shall be 
deemed to have found the services to be medically necessary.
  (h)(1) * * *
  (2)(A)(i) Except as provided in paragraph (4), the Secretary 
shall set the fee schedules at 60 percent (or, in the case of a 
test performed by a qualified hospital laboratory (as defined 
in paragraph (1)(D)) for outpatients of such hospital, 62 
percent) of the prevailing charge level determined pursuant to 
the third and fourth sentences of section 1842(b)(3) for 
similar clinical diagnostic laboratory tests for the applicable 
region, State, or area for the 12-month period beginning July 
1, 1984, adjusted annually (to become effective on January 1 of 
each year) by a percentage increase or decrease equal to the 
percentage increase or decrease in the Consumer Price Index for 
All Urban Consumers (United States city average) minus, [for 
each of the years 2009 through 2013] for 2009, 0.5 percentage 
points, and subject to such other adjustments as the Secretary 
determines are justified by technological changes.
  (ii) Notwithstanding clause (i)--
          (I) * * *

           *       *       *       *       *       *       *

          (III) the annual adjustment in the fee schedules 
        determined under clause (i) for each of the years 1991, 
        1992, and 1993 shall be 2 percent, [and]
          (IV) the annual adjustment in the fee schedules 
        determined under clause (i) for each of the years 1994 
        and 1995, 1998 through 2002, and 2004 through 2008 
        shall be 0 percent[.]; and
          (V) the annual adjustment in the fee schedules 
        determined under clause (i) for years beginning with 
        2010 shall be subject to the productivity adjustment 
        described in section 1886(b)(3)(B)(iii)(II).

           *       *       *       *       *       *       *

  (i)(1) * * *
  (2)(A) * * *

           *       *       *       *       *       *       *

  (D)(i) * * *

           *       *       *       *       *       *       *

  (v) In implementing the system described in clause (i), for 
services furnished during 2010 or any subsequent year, to the 
extent that an annual percentage change factor applies, such 
factor shall be subject to the productivity adjustment 
described in section 1886(b)(3)(B)(iii)(II).
  [(v)] (vi) There shall be no administrative or judicial 
review under section 1869, 1878, or otherwise, of the 
classification system, the relative weights, payment amounts, 
and the geographic adjustment factor, if any, under this 
subparagraph.

           *       *       *       *       *       *       *

  (7)(A) * * *
  (B) Except as the Secretary may otherwise provide, subject to 
subparagraph (C), the provisions of subparagraphs (B), (C), 
(D), and (E) of paragraph (17) of section 1833(t) shall apply 
with respect to services of ambulatory surgical centers under 
this paragraph in a similar manner to the manner in which they 
apply under such paragraph and, for purposes of this 
subparagraph, any reference to a hospital, outpatient setting, 
or outpatient hospital services is deemed a reference to an 
ambulatory surgical center, the setting of such a center, or 
services of such a center, respectively.
  (C) Under subparagraph (B) the Secretary shall require the 
reporting of such additional data relating to quality of 
services furnished in an ambulatory surgical facility, 
including data on health care associated infections, as the 
Secretary may specify.
  (8) The Secretary shall require, as a condition of the 
agreement described in section 1832(a)(2)(F)(i), the submission 
of such cost report as the Secretary may specify, taking into 
account the requirements for such reports under section 1815 in 
the case of a hospital.

           *       *       *       *       *       *       *

  (m)(1) * * *

           *       *       *       *       *       *       *

  (4) The provisions of this subsection shall not be taken into 
account in applying subsections (m) or (u) and any payment 
under such subsections shall not be taken into account in 
computing payments under this subsection.
  [(4)] (5) There shall be no administrative or judicial review 
under section 1869, section 1878, or otherwise, respecting--
          (A) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

  (t) Prospective Payment System for Hospital Outpatient 
Department Services.--
          (1) Amount of payment.--
                  (A) * * *
                  (B) Definition of covered opd services.--For 
                purposes of this subsection, the term ``covered 
                OPD services''--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) does not include any therapy 
                        services described in subsection (a)(8) 
                        or ambulance services, for which 
                        payment is made under a fee schedule 
                        described in section 1834(k) or section 
                        1834(l) and does not include [screening 
                        mammography (as defined in section 
                        1861(jj)) and diagnostic mammography] 
                        diagnostic mammograms and Medicare 
                        covered preventive services (as defined 
                        in section 1861(iii)(1)).

           *       *       *       *       *       *       *

          (3) Calculation of base amounts.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Calculation of conversion factors.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) OPD fee schedule increase 
                        factor.--For purposes of this 
                        subparagraph, subject to paragraph 
                        (17), the ``OPD fee schedule increase 
                        factor'' for services furnished in a 
                        year is equal to the market basket 
                        percentage increase applicable under 
                        section 1886(b)(3)(B)(iii) (which is 
                        subject to the productivity adjustment 
                        described in subclause (II) of such 
                        section) to hospital discharges 
                        occurring during the fiscal year ending 
                        in such year, reduced (but not below 0) 
                        by 1 percentage point for such factor 
                        for services furnished in each of 2000 
                        and 2002. In applying the previous 
                        sentence for years beginning with 2000, 
                        the Secretary may substitute for the 
                        market basket percentage increase an 
                        annual percentage increase that is 
                        computed and applied with respect to 
                        covered OPD services furnished in a 
                        year in the same manner as the market 
                        basket percentage increase is 
                        determined and applied to inpatient 
                        hospital services for discharges 
                        occurring in a fiscal year.

           *       *       *       *       *       *       *

          (7) Transitional adjustment to limit decline in 
        payment.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) Hold harmless provisions.--
                          (i) Temporary treatment for certain 
                        rural hospitals.--(I) * * *
                          (II) In the case of a hospital 
                        located in a rural area and that has 
                        not more than 100 beds and that is not 
                        a sole community hospital (as defined 
                        in section 1886(d)(5)(D)(iii)), for 
                        covered OPD services furnished on or 
                        after January 1, 2006, and before 
                        January 1, [2010] 2012, for which the 
                        PPS amount is less than the pre-BBA 
                        amount, the amount of payment under 
                        this subsection shall be increased by 
                        the applicable percentage of the amount 
                        of such difference. For purposes of the 
                        preceding sentence, the applicable 
                        percentage shall be 95 percent with 
                        respect to covered OPD services 
                        furnished in 2006, 90 percent with 
                        respect to such services furnished in 
                        2007, and 85 percent with respect to 
                        such services furnished in 2008 [or 
                        2009], 2009, 2010, or 2011.
                          (III) In the case of a sole community 
                        hospital (as defined in section 
                        1886(d)(5)(D)(iii)) that has not more 
                        than 100 beds, for covered OPD services 
                        furnished on or after January 1, 2009, 
                        and before [January 1, 2010] January 1, 
                        2012, for which the PPS amount is less 
                        than the pre-BBA amount, the amount of 
                        payment under this subsection shall be 
                        increased by 85 percent of the amount 
                        of such difference.

           *       *       *       *       *       *       *

          (16) Miscellaneous provisions.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Payment for devices of brachytherapy and 
                therapeutic radiopharmaceuticals at charges 
                adjusted to cost.--Notwithstanding the 
                preceding provisions of this subsection, for a 
                device of brachytherapy consisting of a seed or 
                seeds (or radioactive source) furnished on or 
                after January 1, 2004, and before [January 1, 
                2010] January 1, 2012, and for therapeutic 
                radiopharmaceuticals furnished on or after 
                January 1, 2008, and before January 1, 2010, 
                the payment basis for the device or therapeutic 
                radiopharmaceutical under this subsection shall 
                be equal to the hospital's charges for each 
                device or therapeutic radiopharmaceutical 
                furnished, adjusted to cost. Charges for such 
                devices or therapeutic radiopharmaceuticals 
                shall not be included in determining any 
                outlier payment under this subsection.
          (17) Quality reporting.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) Use of endorsed quality measures.--The 
                provisions of clause (x) of section 
                1886(b)(3)(C) shall apply to quality measures 
                for covered OPD services under this paragraph 
                in the same manner as such provisions apply to 
                quality measures for inpatient hospital 
                services.
          (18) Authorization of adjustment for cancer 
        hospitals.--
                  (A) Study.--The Secretary shall conduct a 
                study to determine if, under the system under 
                this subsection, costs incurred by hospitals 
                described in section 1886(d)(1)(B)(v) with 
                respect to ambulatory payment classification 
                groups exceed those costs incurred by other 
                hospitals furnishing services under this 
                subsection (as determined appropriate by the 
                Secretary).
                  (B) Authorization of adjustment.--Insofar as 
                the Secretary determines under subparagraph (A) 
                that costs incurred by hospitals described in 
                section 1886(d)(1)(B)(v) exceed those costs 
                incurred by other hospitals furnishing services 
                under this subsection, the Secretary shall 
                provide for an appropriate adjustment under 
                paragraph (2)(E) to reflect those higher costs 
                effective for services furnished on or after 
                January 1, 2011.

           *       *       *       *       *       *       *

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

        SPECIAL PAYMENT RULES FOR PARTICULAR ITEMS AND SERVICES

  Sec. 1834. (a) Payment for Durable Medical Equipment.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Payment for oxygen and oxygen equipment.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) Rental cap.--
                          (i) * * *
                          (ii) Payments and rules after rental 
                        cap.--[After the] Except as provided in 
                        clause (iii), after the 36th continuous 
                        month during which payment is made for 
                        the equipment under this paragraph--
                                  (I) * * *

           *       *       *       *       *       *       *

                          (iii) Continuation of supply.--In the 
                        case of a supplier furnishing such 
                        equipment to an individual under this 
                        subsection as of the 27th month of the 
                        36 months described in clause (i), the 
                        supplier furnishing such equipment as 
                        of such month shall continue to furnish 
                        such equipment to such individual 
                        (either directly or though arrangements 
                        with other suppliers of such equipment) 
                        during any subsequent period of medical 
                        need for the remainder of the 
                        reasonable useful lifetime of the 
                        equipment, as determined by the 
                        Secretary, regardless of the location 
                        of the individual, unless another 
                        supplier has accepted responsibility 
                        for continuing to furnish such 
                        equipment during the remainder of such 
                        period.
                          (iv) Exception for bankruptcy.--If a 
                        supplier who furnishes oxygen and 
                        oxygen equipment to an individual is 
                        declared bankrupt and its assets are 
                        liquidated and at the time of such 
                        declaration and liquidation more than 
                        24 months of rental payments have been 
                        made, such individual may begin a new 
                        36-month rental period under this 
                        subparagraph with another supplier of 
                        oxygen.

           *       *       *       *       *       *       *

          (7) Payment for other items of durable medical 
        equipment.--
                  (A) Payment.--In the case of an item of 
                durable medical equipment not described in 
                paragraphs (2) through (6), the following rules 
                shall apply:
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) Purchase agreement option for 
                        certain complex rehabilitative power-
                        driven wheelchairs.--In the case of a 
                        [power-driven wheelchair] complex 
                        rehabilitative power-driven wheelchair 
                        recognized by the Secretary as 
                        classified within group 3 or higher, at 
                        the time the supplier furnishes the 
                        item, the supplier shall offer the 
                        individual the option to purchase the 
                        item, and payment for such item shall 
                        be made on a lump-sum basis if the 
                        individual exercises such option.

           *       *       *       *       *       *       *

          (11) Improper billing and requirement of physician 
        order.--
                  (A) * * *
                  (B) Requirement of physician order.--The 
                Secretary is authorized to require, for 
                specified covered items, that payment may be 
                made under this subsection with respect to the 
                item only if a [physician] physician enrolled 
                under section 1866(j) or an eligible 
                professional under section 1848(k)(3)(B) has 
                communicated to the supplier, before delivery 
                of the item, a written order for the item and 
                shall require that such an order be written 
                pursuant to the physician documenting that the 
                physician has had a face-to-face encounter 
                (including through use of telehealth and other 
                than with respect to encounters that are 
                incident to services involved) with the 
                individual involved during the 6-month period 
                preceding such written order, or other 
                reasonable timeframe as determined by the 
                Secretary.

           *       *       *       *       *       *       *

          (14) Covered item update.--In this subsection, the 
        term ``covered item update'' means, with respect to a 
        year--
                  (A) * * *

           *       *       *       *       *       *       *

                  (K) for 2010, 2011, 2012, and 2013, the 
                percentage increase in the consumer price index 
                for all urban consumers (U.S. urban average) 
                for the 12-month period ending with June of the 
                previous year, subject to the productivity 
                adjustment described in section 
                1886(b)(3)(B)(iii)(II);
                  (L) for 2014--
                          (i) in the case of items and services 
                        described in subparagraph (J)(i) for 
                        which a payment adjustment has not been 
                        made under subsection (a)(1)(F)(ii) in 
                        any previous year, the percentage 
                        increase in the consumer price index 
                        for all urban consumers (U.S. urban 
                        average) for the 12-month period ending 
                        with June 2013, subject to the 
                        productivity adjustment described in 
                        section 1886(b)(3)(B)(iii)(II), plus 
                        2.0 percentage points; or
                          (ii) in the case of other items and 
                        services, the percentage increase in 
                        the consumer price index for all urban 
                        consumers (U.S. urban average) for the 
                        12-month period ending with June 2013, 
                        subject to the productivity adjustment 
                        described in section 
                        1886(b)(3)(B)(iii)(II); and
                  (M) for a subsequent year, the percentage 
                increase in the consumer price index for all 
                urban consumers (U.S. urban average) for the 
                12-month period ending with June of the 
                previous year, subject to the productivity 
                adjustment described in section 
                1886(b)(3)(B)(iii)(II).

           *       *       *       *       *       *       *

          (16) Disclosure of information and surety bond.--The 
        Secretary shall not provide for the issuance (or 
        renewal) of a provider number for a supplier of durable 
        medical equipment, for purposes of payment under this 
        part for durable medical equipment furnished by the 
        supplier, unless the supplier provides the Secretary on 
        a continuing basis--
                  (A) * * *

           *       *       *       *       *       *       *

        The Secretary may waive the requirement of a bond under 
        subparagraph (B) in the case of a supplier that 
        provides a comparable surety bond under State law. The 
        Secretary, at the Secretary's discretion, may impose 
        the requirements of the first sentence with respect to 
        some or all providers of items or services under part A 
        or some or all suppliers or other persons (other than 
        physicians or other practitioners, as defined in 
        section 1842(b)(18)(C)) who furnish items or services 
        under this part. The requirement for a surety bond 
        described in subparagraph (B) shall not apply in the 
        case of a pharmacy (i) that has been enrolled under 
        section 1866(j) as a supplier of durable medical 
        equipment, prosthetics, orthotics, and supplies and has 
        been issued (which may include renewal of) a provider 
        number (as described in the first sentence of this 
        paragraph) for at least 5 years, and (ii) for which a 
        final adverse action (as defined in section 424.57(a) 
        of title 42, Code of Federal Regulations) has never 
        been imposed.

           *       *       *       *       *       *       *

          (20) Identification of quality standards.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) Application of accreditation 
                requirement.--In implementing quality standards 
                under this paragraph--
                          (i) subject to [clause (ii)] clauses 
                        (ii) and (iii), the Secretary shall 
                        require suppliers furnishing items and 
                        services described in subparagraph (D) 
                        on or after October 1, 2009, directly 
                        or as a subcontractor for another 
                        entity, to have submitted to the 
                        Secretary evidence of accreditation by 
                        an accreditation organization 
                        designated under subparagraph (B) as 
                        meeting applicable quality standards; 
                        [and]
                          (ii) in applying such standards and 
                        the accreditation requirement of clause 
                        (i) with respect to eligible 
                        professionals (as defined in section 
                        1848(k)(3)(B)), and including such 
                        other persons, such as orthotists and 
                        prosthetists, as specified by the 
                        Secretary, furnishing such items and 
                        services--
                                  (I) * * *
                                  (II) the Secretary may exempt 
                                such professionals and persons 
                                from such standards and 
                                requirement if the Secretary 
                                determines that licensing, 
                                accreditation, or other 
                                mandatory quality requirements 
                                apply to such professionals and 
                                persons with respect to the 
                                furnishing of such items and 
                                services[.]; and
                          (iii) the requirement for 
                        accreditation described in clause (i) 
                        shall not apply for purposes of 
                        supplying diabetic testing supplies, 
                        canes, and crutches in the case of a 
                        pharmacy that is enrolled under section 
                        1866(j) as a supplier of durable 
                        medical equipment, prosthetics, 
                        orthotics, and supplies.
                Any supplier that has submitted an application 
                for accreditation before August 1, 2009, shall 
                be deemed as meeting applicable standards and 
                accreditation requirement under this 
                subparagraph until such time as the independent 
                accreditation organization takes action on the 
                supplier's application.

           *       *       *       *       *       *       *

  (d) Frequency Limits and Payment for Colorectal Cancer 
Screening Tests.--
          (1) * * *
          (2) Screening flexible sigmoidoscopies.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Facility payment limit.--
                          (i) * * *
                          [(ii) Limitation on coinsurance.--
                        Notwithstanding any other provision of 
                        this title, in the case of a 
                        beneficiary who receives the services 
                        described in clause (i)--
                                  [(I) in computing the amount 
                                of any applicable copayment, 
                                the computation of such 
                                coinsurance shall be based upon 
                                the fee schedule under which 
                                payment is made for the 
                                services, and
                                  [(II) the amount of such 
                                coinsurance is equal to 25 
                                percent of the payment amount 
                                under the fee schedule 
                                described in subclause (I).]
                          (ii) No coinsurance.--In the case of 
                        a beneficiary who receives services 
                        described in clause (i), there shall be 
                        no coinsurance applied.

           *       *       *       *       *       *       *

          (3) Screening colonoscopy.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Facility payment limit.--
                          (i) * * *
                          [(ii) Limitation on coinsurance.--
                        Notwithstanding any other provision of 
                        this title, in the case of a 
                        beneficiary who receives the services 
                        described in clause (i)--
                                  [(I) in computing the amount 
                                of any applicable coinsurance, 
                                the computation of such 
                                coinsurance shall be based upon 
                                the fee schedule under which 
                                payment is made for the 
                                services, and
                                  [(II) the amount of such 
                                coinsurance is equal to 25 
                                percent of the payment amount 
                                under the fee schedule 
                                described in subclause (I).]
                          (ii) No coinsurance.--In the case of 
                        a beneficiary who receives services 
                        described in clause (i), there shall be 
                        no coinsurance applied.

           *       *       *       *       *       *       *

  (l) Establishment of Fee Schedule for Ambulance Services.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Savings.--In establishing such fee schedule, the 
        Secretary shall--
                  (A) * * *
                  (B) set the payment amounts provided under 
                the fee schedule for services furnished in 2001 
                and each subsequent year at amounts equal to 
                the payment amounts under the fee schedule for 
                services furnished during the previous year, 
                increased by the percentage increase in the 
                consumer price index for all urban consumers 
                (U.S. city average) for the 12-month period 
                ending with June of the previous year reduced 
                in the case of 2002 by 1.0 percentage points 
                and, in the case of years beginning with 2010, 
                subject to the productivity adjustment 
                described in section 1886(b)(3)(B)(iii)(II).

           *       *       *       *       *       *       *

          (13) Temporary increase for ground ambulance 
        services.--
                  (A) In general.--After computing the rates 
                with respect to ground ambulance services under 
                the other applicable provisions of this 
                subsection, in the case of such services 
                furnished on or after July 1, 2004, and before 
                January 1, 2007, and for such services 
                furnished on or after July 1, 2008, and [before 
                January 1, 2010] before January 1, 2012 for 
                which the transportation originates in--
                          (i) a rural area described in 
                        paragraph (9) or in a rural census 
                        tract described in such paragraph, the 
                        fee schedule established under this 
                        section shall provide that the rate for 
                        the service otherwise established, 
                        after the application of any increase 
                        under paragraphs (11) and (12), shall 
                        be increased by 2 percent (or 3 percent 
                        if such service is furnished on or 
                        after July 1, 2008, and [before January 
                        1, 2010] before January 1, 2012); and
                          (ii) an area not described in clause 
                        (i), the fee schedule established under 
                        this subsection shall provide that the 
                        rate for the service otherwise 
                        established, after the application of 
                        any increase under paragraph (11), 
                        shall be increased by 1 percent (or 2 
                        percent if such service is furnished on 
                        or after July 1, 2008, and [before 
                        January 1, 2010] before January 1, 
                        2012).

           *       *       *       *       *       *       *

  (m) Payment for Telehealth Services.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Definitions.--For purposes of this subsection:
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Originating site.--
                          (i) * * *
                          (ii) Sites described.--The sites 
                        referred to in clause (i) are the 
                        following sites:
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (IX) A renal dialysis 
                                facility.

           *       *       *       *       *       *       *

                  (F) Telehealth service.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) Recommendations of the 
                        telehealth advisory committee.--In 
                        making determinations under clauses (i) 
                        and (ii), the Secretary shall take into 
                        account the recommendations of the 
                        Telehealth Advisory Committee 
                        (established under section 1868(c)) 
                        when adding or deleting services (and 
                        HCPCS codes) and in establishing 
                        policies of the Centers for Medicare & 
                        Medicaid Services regarding the 
                        delivery of telehealth services. If the 
                        Secretary does not implement such a 
                        recommendation, the Secretary shall 
                        publish in the Federal Register a 
                        statement regarding the reason such 
                        recommendation was not implemented.
          (5) Hospital credentialing of telemedicine 
        practitioners.--A telemedicine practitioner that is 
        credentialed by a hospital in compliance with the Joint 
        Commission Standards for Telemedicine shall be 
        considered in compliance with conditions of 
        participation and reimbursement credentialing 
        requirements under this title for telemedicine 
        services.

        PROCEDURE FOR PAYMENT OF CLAIMS OF PROVIDERS OF SERVICES

  Sec. 1835. (a) Except as provided in subsections (b), (c), 
and (e), payment for services described in section 1832(a)(2) 
furnished an individual may be made only to providers of 
services which are eligible therefor under section 1866(a), and 
only if--
          (1) written request, signed by such individual, 
        except in cases in which the Secretary finds it 
        impracticable for the individual to do so, is filed for 
        such payment in such form, in such manner and by such 
        person or persons as the Secretary may by regulation 
        prescribe, no later than the close of the [period of 3 
        calendar years following the year in which such 
        services are furnished (deeming any services furnished 
        in the last 3 calendar months of any calendar year to 
        have been furnished in the succeeding calendar year) 
        except that, where the Secretary deems that efficient 
        administration so requires, such period may be reduced 
        to not less than 1 calendar year; and] period of 1 
        calendar year from which such services are furnished; 
        and
          (2) a physician, or in the case of services described 
        in subparagraph (A), a physician enrolled under section 
        1866(j) or an eligible professional under section 
        1848(k)(3)(B), certifies (and recertifies, where such 
        services are furnished over a period of time, in such 
        cases, with such frequency, and accompanied by such 
        supporting material, appropriate to the case involved, 
        as may be provided by regulations) that--
                  (A) in the case of home health services (i) 
                such services are or were required because the 
                individual is or was confined to his home 
                (except when receiving items and services 
                referred to in section 1861(m)(7)) and needs or 
                needed skilled nursing care (other than solely 
                venipuncture for the purpose of obtaining a 
                blood sample) on an intermittent basis or 
                physical or speech therapy or, in the case of 
                an individual who has been furnished home 
                health services based on such a need and who no 
                longer has such a need for such care or 
                therapy, continues or continued to need 
                occupational therapy, (ii) a plan for 
                furnishing such services to such individual has 
                been established and is periodically reviewed 
                by a physician, [and] (iii) such services are 
                or were furnished while the individual is or 
                was under the care of a physician, and (iv) in 
                the case of a certification or recertification 
                after January 1, 2010, prior to making such 
                certification the physician must document that 
                the physician has had a face-to-face encounter 
                (including through use of telehealth and other 
                than with respect to encounters that are 
                incident to services involved) with the 
                individual during the 6-month period preceding 
                such certification or recertification, or other 
                reasonable timeframe as determined by the 
                Secretary;

           *       *       *       *       *       *       *

To the extent provided by regulations, the certification and 
recertification requirements of paragraph (2) shall be deemed 
satisfied where, at a later date, a physician makes a 
certification of the kind provided in subparagraph (A) or (B) 
of paragraph (2) (whichever would have applied), but only where 
such certification is accompanied by such medical and other 
evidence as may be required by such regulations. With respect 
to the physician certification required by paragraph (2) for 
home health services furnished to any individual by a home 
health agency (other than an agency which is a governmental 
entity) and with respect to the establishment and review of a 
plan for such services, the Secretary shall prescribe 
regulations which shall become effective no later than July 1, 
1981, and which prohibit a physician who has a significant 
ownership interest in, or a significant financial or 
contractual relationship with, such home health agency from 
performing such certification and from establishing or 
reviewing such plan, except that such prohibition shall not 
apply with respect to a home health agency which is a sole 
community home health agency (as determined by the Secretary). 
For purposes of the preceding sentence, service by a physician 
as an uncompensated officer or director of a home health agency 
shall not constitute having a significant ownership interest 
in, or a significant financial or contractual relationship 
with, such agency. For purposes of paragraph (2)(A), an 
individual shall be considered to be ``confined to his home'' 
if the individual has a condition, due to an illness or injury, 
that restricts the ability of the individual to leave his or 
her home except with the assistance of another individual or 
the aid of a supportive device (such as crutches, a cane, a 
wheelchair, or a walker), or if the individual has a condition 
such that leaving his or her home is medically contraindicated. 
While an individual does not have to be bedridden to be 
considered ``confined to his home'', the condition of the 
individual should be such that there exists a normal inability 
to leave home and that leaving home requires a considerable and 
taxing effort by the individual. Any absence of an individual 
from the home attributable to the need to receive health care 
treatment, including regular absences for the purpose of 
participating in therapeutic, psychosocial, or medical 
treatment in an adult day-care program that is licensed or 
certified by a State, or accredited, to furnish adult day-care 
services in the State shall not disqualify an individual from 
being considered to be ``confined to his home''. Any other 
absence of an individual from the home shall not so disqualify 
an individual if the absence is of infrequent or of relatively 
short duration. For purposes of the preceding sentence, any 
absence for the purpose of attending a religious service shall 
be deemed to be an absence of infrequent or short duration. In 
applying paragraph (1), the Secretary may specify exceptions to 
the 1 calendar year period specified in such paragraph.

           *       *       *       *       *       *       *


                          ELIGIBLE INDIVIDUALS

  Sec. 1836. [Every individual who] (a) In General.--Every 
individual who--
          (1) * * *

           *       *       *       *       *       *       *

  (b) Special Rules Applicable to Individuals Only Eligible for 
Coverage of Immunosuppressive Drugs.--
          (1) In general.--In the case of an individual whose 
        eligibility for benefits under this title has ended on 
        or after January 1, 2012, except for the coverage of 
        immunosuppressive drugs by reason of section 
        226A(b)(2), the following rules shall apply:
                  (A) The individual shall be deemed to be 
                enrolled under this part for purposes of 
                receiving coverage of such drugs.
                  (B) The individual shall be responsible for 
                providing for payment of the portion of the 
                premium under section 1839 which is not covered 
                under the Medicare savings program (as defined 
                in section 1144(c)(7)) in order to receive such 
                coverage.
                  (C) The provision of such drugs shall be 
                subject to the application of--
                          (i) the deductible under section 
                        1833(b); and
                          (ii) the coinsurance amount 
                        applicable for such drugs (as 
                        determined under this part).
                  (D) If the individual is an inpatient of a 
                hospital or other entity, the individual is 
                entitled to receive coverage of such drugs 
                under this part.
          (2) Establishment of procedures in order to implement 
        coverage.--The Secretary shall establish procedures 
        for--
                  (A) identifying individuals that are entitled 
                to coverage of immunosuppressive drugs by 
                reason of section 226A(b)(2); and
                  (B) distinguishing such individuals from 
                individuals that are enrolled under this part 
                for the complete package of benefits under this 
                part.

                           ENROLLMENT PERIODS

  Sec. 1837. (a) * * *

           *       *       *       *       *       *       *

  (l)(1) In the case of any individual who is a covered 
beneficiary (as defined in section 1072(5) of title 10, United 
States Code) at the time the individual is entitled to hospital 
insurance benefits under part A under section 226(b) or section 
226A and who is eligible to enroll but who has elected not to 
enroll (or to be deemed enrolled) during the individual's 
initial enrollment period, there shall be a special enrollment 
period described in paragraph (2).
  (2) The special enrollment period described in this 
paragraph, with respect to an individual, is the 12-month 
period beginning on the day after the last day of the initial 
enrollment period of the individual or, if later, the 12-month 
period beginning with the month the individual is notified of 
enrollment under this section.
  (3) In the case of an individual who enrolls during the 
special enrollment period provided under paragraph (1), the 
coverage period under this part shall begin on the first day of 
the month in which the individual enrolls or, at the option of 
the individual, on the first day of the second month following 
the last month of the individual's initial enrollment period.
  (4) The Secretary of Defense shall establish a method for 
identifying individuals described in paragraph (1) and 
providing notice to them of their eligibility for enrollment 
during the special enrollment period described in paragraph 
(2).

           *       *       *       *       *       *       *


                          AMOUNTS OF PREMIUMS

  Sec. 1839. (a) * * *
  (b) In the case of an individual whose coverage period began 
pursuant to an enrollment after his initial enrollment period 
(determined pursuant to subsection (c) or (d) of section 1837) 
and not pursuant to a special enrollment period under [section 
1837(i)(4)] subsection (i)(4) or (l) of section 1837, the 
monthly premium determined under subsection (a) (without regard 
to any adjustment under subsection (i)) shall be increased by 
10 percent of the monthly premium so determined for each full 
12 months (in the same continuous period of eligibility) in 
which he could have been but was not enrolled. For purposes of 
the preceding sentence, there shall be taken into account (1) 
the months which elapsed between the close of his initial 
enrollment period and the close of the enrollment period in 
which he enrolled, plus (in the case of an individual who 
reenrolls) (2) the months which elapsed between the date of 
termination of a previous coverage period and the close of the 
enrollment period in which he reenrolled, but there shall not 
be taken into account months for which the individual can 
demonstrate that the individual was enrolled in a group health 
plan described in section 1862(b)(1)(A)(v) by reason of the 
individual's (or the individual's spouse's) current employment 
or months during which the individual has not attained the age 
of 65 and for which the individual can demonstrate that the 
individual was enrolled in a large group health plan as an 
active individual (as those terms are defined in section 
1862(b)(1)(B)(iii)) or months for which the individual can 
demonstrate that the individual was an individual described in 
section 1837(k)(3). Any increase in an individual's monthly 
premium under the first sentence of this subsection with 
respect to a particular continuous period of eligibility shall 
not be applicable with respect to any other continuous period 
of eligibility which such individual may have. No increase in 
the premium shall be effected for a month in the case of an 
individual who enrolls under this part during 2001, 2002, 2003, 
or 2004 and who demonstrates to the Secretary before December 
31, 2004, that the individual is a covered beneficiary (as 
defined in section 1072(5) of title 10, United States Code). 
The Secretary of Health and Human Services shall consult with 
the Secretary of Defense in identifying individuals described 
in the previous sentence.

           *       *       *       *       *       *       *

  (i) Reduction in Premium Subsidy Based on Income.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Modified adjusted gross income.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Use of more recent taxable year.--
                          (i) * * *
                          (ii) Standard for granting 
                        requests.--A request under clause 
                        (i)(I) to use a more recent taxable 
                        year may be granted only if--
                                  (I) * * *
                                  (II) the individual's 
                                modified adjusted gross income 
                                for such year is significantly 
                                less than such income for the 
                                taxable year determined under 
                                subparagraph (B) by reason of 
                                the death of such individual's 
                                spouse, the marriage or divorce 
                                of such individual, sale of 
                                primary residence, or other 
                                major life changing events 
                                specified in regulations 
                                prescribed by the Commissioner 
                                in consultation with the 
                                Secretary.

           *       *       *       *       *       *       *


          PROVISIONS RELATING TO THE ADMINISTRATION OF PART B

  Sec. 1842. (a) * * *
  (b)
          (2) * * *

           *       *       *       *       *       *       *

  (18)(A) * * *

           *       *       *       *       *       *       *

  (C) A practitioner described in this subparagraph is any of 
the following:
          (i) * * *

           *       *       *       *       *       *       *

          (vii) A marriage and family therapist (as defined in 
        section 1861(jjj)(2)).
          (viii) A mental health counselor (as defined in 
        section 1861(kkk)(2)).

           *       *       *       *       *       *       *

  (h)(1) * * *

           *       *       *       *       *       *       *

  (10) The Secretary may disenroll, for a period of not more 
than one year for each act, a physician or supplier under 
section 1866(j) if such physician or supplier fails to maintain 
and, upon request of the Secretary, provide access to 
documentation relating to written orders or requests for 
payment for durable medical equipment, certifications for home 
health services, or referrals for other items or services 
written or ordered by such physician or supplier under this 
title, as specified by the Secretary.

           *       *       *       *       *       *       *

  (o)(1) If a physician's, supplier's, or any other person's 
bill or request for payment for services includes a charge for 
a drug or biological for which payment may be made under this 
part and the drug or biological is not paid on a cost or 
prospective payment basis as otherwise provided in this part, 
the amount payable for the drug or biological is equal to the 
following:
          (A) In the case of any of the following drugs or 
        biologicals, 95 percent of the average wholesale price:
                  (i) * * *

           *       *       *       *       *       *       *

                  (iv) A vaccine described in [subparagraph (A) 
                or (B) of] section 1861(s)(10) furnished on or 
                after January 1, 2004 and before January 1, 
                2011, and influenza vaccines furnished on or 
                after January 1, 2011.

           *       *       *       *       *       *       *


             USE OF AVERAGE SALES PRICE PAYMENT METHODOLOGY

  Sec. 1847A. (a) * * *

           *       *       *       *       *       *       *

  (c) Manufacturer's Average Sales Price.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Definitions and other rules.--In this section:
                  (A) * * *

           *       *       *       *       *       *       *

                  [(G) Inclusion of vaccines.--In applying 
                provisions of section 1927 under this section, 
                ``other than a vaccine'' is deemed deleted from 
                section 1927(k)(2)(B).]
                  (G) Implementation.--Chapter 35 of title 44, 
                United States Code shall not apply to 
                manufacturer provision of information pursuant 
                to section 1927(b)(3)(A)(iii) for purposes of 
                implementation of this section.

           *       *       *       *       *       *       *


                    PAYMENT FOR PHYSICIANS' SERVICES

  Sec. 1848. (a) * * *
  (b) Establishment of Fee Schedules.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Special rule for imaging services.--
                  (A) * * *
                  (B) Imaging services described.--For purposes 
                of [subparagraph (A)] this paragraph, imaging 
                services described in this subparagraph are 
                imaging and computer-assisted imaging services, 
                including X-ray, ultrasound (including 
                echocardiography), nuclear medicine (including 
                positron emission tomography), magnetic 
                resonance imaging, computed tomography, and 
                fluoroscopy, but excluding diagnostic and 
                screening mammography.
                  (C) Adjustment in practice expense to reflect 
                higher presumed utilization.--In computing the 
                number of practice expense relative value units 
                under subsection (c)(2)(C)(ii) with respect to 
                advanced diagnostic imaging services (as 
                defined in section 1834(e)(1)(B)) , the 
                Secretary shall adjust such number of units so 
                it reflects a 75 percent (rather than 50 
                percent) presumed rate of utilization of 
                imaging equipment.
                  (D) Adjustment in technical component 
                discount on single-session imaging involving 
                consecutive body parts.--The Secretary shall 
                increase the reduction in expenditures 
                attributable to the multiple procedure payment 
                reduction applicable to the technical component 
                for imaging under the final rule published by 
                the Secretary in the Federal Register on 
                November 21, 2005 (part 405 of title 42, Code 
                of Federal Regulations) from 25 percent to 50 
                percent.

           *       *       *       *       *       *       *

  (c) Determination of Relative Values for Physicians' 
Services.--
          (1) * * *
          (2) Determination of relative values.--
                  (A) * * *
                  (B) Periodic review and adjustments in 
                relative values.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (v) Exemption of certain reduced 
                        expenditures from budget-neutrality 
                        calculation.--The following reduced 
                        expenditures, as estimated by the 
                        Secretary, shall not be taken into 
                        account in applying clause (ii)(II):
                                  (I) * * *
                                  (II) OPD payment cap and 
                                other provisions for imaging 
                                services.--Effective for fee 
                                schedules established beginning 
                                with 2007, reduced expenditures 
                                attributable to subsection 
                                (b)(4).

           *       *       *       *       *       *       *

                  (K) Potentially misvalued codes.--
                          (i) In general.--The Secretary 
                        shall--
                                  (I) periodically identify 
                                services as being potentially 
                                misvalued using criteria 
                                specified in clause (ii); and
                                  (II) review and make 
                                appropriate adjustments to the 
                                relative values established 
                                under this paragraph for 
                                services identified as being 
                                potentially misvalued under 
                                subclause (I).
                          (ii) Identification of potentially 
                        misvalued codes.--For purposes of 
                        identifying potentially misvalued 
                        services pursuant to clause (i)(I), the 
                        Secretary shall examine (as the 
                        Secretary determines to be appropriate) 
                        codes (and families of codes as 
                        appropriate) for which there has been 
                        the fastest growth; codes (and families 
                        of codes as appropriate) that have 
                        experienced substantial changes in 
                        practice expenses; codes for new 
                        technologies or services within an 
                        appropriate period (such as three 
                        years) after the relative values are 
                        initially established for such codes; 
                        multiple codes that are frequently 
                        billed in conjunction with furnishing a 
                        single service; codes with low relative 
                        values, particularly those that are 
                        often billed multiple times for a 
                        single treatment; codes which have not 
                        been subject to review since the 
                        implementation of the RBRVS (the so-
                        called ``Harvard-valued codes''); and 
                        such other codes determined to be 
                        appropriate by the Secretary.
                          (iii) Review and adjustments.--
                                  (I) The Secretary may use 
                                existing processes to receive 
                                recommendations on the review 
                                and appropriate adjustment of 
                                potentially misvalued services 
                                described clause (i)(II).
                                  (II) The Secretary may 
                                conduct surveys, other data 
                                collection activities, studies, 
                                or other analyses as the 
                                Secretary determines to be 
                                appropriate to facilitate the 
                                review and appropriate 
                                adjustment described in clause 
                                (i)(II).
                                  (III) The Secretary may use 
                                analytic contractors to 
                                identify and analyze services 
                                identified under clause (i)(I), 
                                conduct surveys or collect 
                                data, and make recommendations 
                                on the review and appropriate 
                                adjustment of services 
                                described in clause (i)(II).
                                  (IV) The Secretary may 
                                coordinate the review and 
                                appropriate adjustment 
                                described in clause (i)(II) 
                                with the periodic review 
                                described in subparagraph (B).
                                  (V) As part of the review and 
                                adjustment described in clause 
                                (i)(II), including with respect 
                                to codes with low relative 
                                values described in clause 
                                (ii), the Secretary may make 
                                appropriate coding revisions 
                                (including using existing 
                                processes for consideration of 
                                coding changes) which may 
                                include consolidation of 
                                individual services into 
                                bundled codes for payment under 
                                the fee schedule under 
                                subsection (b).
                                  (VI) The provisions of 
                                subparagraph (B)(ii)(II) shall 
                                apply to adjustments to 
                                relative value units made 
                                pursuant to this subparagraph 
                                in the same manner as such 
                                provisions apply to adjustments 
                                under subparagraph (B)(ii)(II).
                  (L) Validating relative value units.--
                          (i) In general.--The Secretary shall 
                        establish a process to validate 
                        relative value units under the fee 
                        schedule under subsection (b).
                          (ii) Components and elements of 
                        work.--The process described in clause 
                        (i) may include validation of work 
                        elements (such as time, mental effort 
                        and professional judgment, technical 
                        skill and physical effort, and stress 
                        due to risk) involved with furnishing a 
                        service and may include validation of 
                        the pre, post, and intra-service 
                        components of work.
                          (iii) Scope of codes.--The validation 
                        of work relative value units shall 
                        include a sampling of codes for 
                        services that is the same as the codes 
                        listed under subparagraph (K)(ii)
                          (iv) Methods.--The Secretary may 
                        conduct the validation under this 
                        subparagraph using methods described in 
                        subclauses (I) through (V) of 
                        subparagraph (K)(iii) as the Secretary 
                        determines to be appropriate.
                          (v) Adjustments.--The Secretary shall 
                        make appropriate adjustments to the 
                        work relative value units under the fee 
                        schedule under subsection (b). The 
                        provisions of subparagraph (B)(ii)(II) 
                        shall apply to adjustments to relative 
                        value units made pursuant to this 
                        subparagraph in the same manner as such 
                        provisions apply to adjustments under 
                        subparagraph (B)(ii)(II).

           *       *       *       *       *       *       *

  (d) Conversion Factors.--
          (1) Establishment.--
                  (A) In general.--
                          [The conversion factor] (i) 
                        Application of single conversion 
                        factor.--Subject to clause (ii), the 
                        conversion factor for each year shall 
                        be the conversion factor established 
                        under this subsection for the previous 
                        year (or, in the case of 1992, 
                        specified in subparagraph (B)) adjusted 
                        by the update (established under 
                        paragraph (3)) for the year involved 
                        (for years before 2001) and, for years 
                        beginning with 2001, multiplied by the 
                        update (established under paragraph 
                        (4)) for the year involved.
                          (ii) Application of multiple 
                        conversion factors beginning with 
                        2011.--
                                  (I) In general.--In applying 
                                clause (i) for years beginning 
                                with 2011, separate conversion 
                                factors shall be established 
                                for each service category of 
                                physicians' services (as 
                                defined in subsection (j)(5)) 
                                and any reference in this 
                                section to a conversion factor 
                                for such years shall be deemed 
                                to be a reference to the 
                                conversion factor for each of 
                                such categories.
                                  (II) Initial conversion 
                                factors.--Such factors for 2011 
                                shall be based upon the single 
                                conversion factor for the 
                                previous year multiplied by the 
                                update established under 
                                paragraph (11) for such 
                                category for 2011.
                                  (III) Updating of conversion 
                                factors.--Such factor for a 
                                service category for a 
                                subsequent year shall be based 
                                upon the conversion factor for 
                                such category for the previous 
                                year and adjusted by the update 
                                established for such category 
                                under paragraph (11) for the 
                                year involved.

           *       *       *       *       *       *       *

                  (D) Special rules for anesthesia services.--
                The separate conversion factor for anesthesia 
                services for a year shall be equal to 46 
                percent of the single conversion factor 
                established for [other physicians' services] 
                for physicians' services described in the 
                service category described in subsection 
                (j)(5)(B), except as adjusted for changes in 
                work, practice expense, or malpractice relative 
                value units.
                  (E) Publication and dissemination of 
                information.--The Secretary shall--
                          (i) * * *
                          (ii) make available to the Medicare 
                        Payment Advisory Commission and the 
                        public by March 1 of each year 
                        (beginning with 2000) an estimate of 
                        the sustainable or target growth rate 
                        and of the conversion factor which will 
                        apply to physicians' services for the 
                        succeeding year and data used in making 
                        such estimate.

           *       *       *       *       *       *       *

          (4) Update for years beginning with 2001.--
                  (A) * * *
                  (B) Update adjustment factor.--For purposes 
                of subparagraph (A)(ii), subject to 
                [subparagraph (D)] subparagraphs (D) and (G) 
                and the succeeding paragraphs of this 
                subsection, the ``update adjustment factor'' 
                for a year is equal (as estimated by the 
                Secretary) to the sum of the following:
                          (i) * * *
                          (ii) Cumulative adjustment 
                        component.--An amount determined by--
                                  (I) * * *
                                  (II) dividing that difference 
                                by actual expenditures for such 
                                services for the prior year as 
                                increased by the sustainable or 
                                target growth rate under 
                                subsection (f) for the year for 
                                which the update adjustment 
                                factor is to be determined; and

           *       *       *       *       *       *       *

                  (C) Determination of allowed expenditures.--
                For purposes of this paragraph:
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) Years beginning with 2000.--
                        [The allowed] Subject to paragraph 
                        (11)(B), the allowed expenditures for a 
                        year (beginning with 2000) is equal to 
                        the allowed expenditures for 
                        physicians' services for the previous 
                        year, increased by the sustainable 
                        growth rate under subsection (f) for 
                        the year involved.

           *       *       *       *       *       *       *

                  (G) Rebasing using 2009 for future update 
                adjustments.--In determining the update 
                adjustment factor under subparagraph (B) for 
                2011 and subsequent years--
                          (i) the allowed expenditures for 2009 
                        shall be equal to the amount of the 
                        actual expenditures for physicians' 
                        services during 2009; and
                          (ii) the reference in subparagraph 
                        (B)(ii)(I) to ``April 1, 1996'' shall 
                        be treated as a reference to ``January 
                        1, 2009 (or, if later, the first day of 
                        the fifth year before the year 
                        involved)''.

           *       *       *       *       *       *       *

          (10) Update for 2010.--The update to the single 
        conversion factor established in paragraph (1)(C) for 
        2010 shall be the percentage increase in the MEI (as 
        defined in section 1842(i)(3)) for that year.
          (11) Updates for service categories beginning with 
        2011.--
                  (A) In general.--In applying paragraph (4) 
                for a year beginning with 2011, the following 
                rules apply:
                          (i) Application of separate update 
                        adjustments for each service 
                        category.--Pursuant to paragraph 
                        (1)(A)(ii)(I), the update shall be made 
                        to the conversion factor for each 
                        service category (as defined in 
                        subsection (j)(5)) based upon an update 
                        adjustment factor for the respective 
                        category and year and the update 
                        adjustment factor shall be computed, 
                        for a year, separately for each service 
                        category.
                          (ii) Computation of allowed and 
                        actual expenditures based on service 
                        categories.--In computing the prior 
                        year adjustment component and the 
                        cumulative adjustment component under 
                        clauses (i) and (ii) of paragraph 
                        (4)(B), the following rules apply:
                                  (I) Application based on 
                                service categories.--The 
                                allowed expenditures and actual 
                                expenditures shall be the 
                                allowed and actual expenditures 
                                for the service category, as 
                                determined under subparagraph 
                                (B).
                                  (II) Application of category 
                                specific target growth rate.--
                                The growth rate applied under 
                                clause (ii)(II) of such 
                                paragraph shall be the target 
                                growth rate for the service 
                                category involved under 
                                subsection (f)(5).
                  (B) Determination of allowed expenditures.--
                In applying paragraph (4) for a year beginning 
                with 2010, notwithstanding subparagraph 
                (C)(iii) of such paragraph, the allowed 
                expenditures for a service category for a year 
                is an amount computed by the Secretary as 
                follows:
                          (i) For 2010.--For 2010:
                                  (I) Total 2009 actual 
                                expenditures for all services 
                                included in sgr computation for 
                                each service category.--Compute 
                                total actual expenditures for 
                                physicians' services (as 
                                defined in subsection 
                                (f)(4)(A)) for 2009 for each 
                                service category.
                                  (II) Increase by growth rate 
                                to obtain 2010 allowed 
                                expenditures for service 
                                category.--Compute allowed 
                                expenditures for the service 
                                category for 2010 by increasing 
                                the allowed expenditures for 
                                the service category for 2009 
                                computed under subclause (I) by 
                                the target growth rate for such 
                                service category under 
                                subsection (f) for 2010.
                          (ii) For subsequent years.--For a 
                        subsequent year, take the amount of 
                        allowed expenditures for such category 
                        for the preceding year (under clause 
                        (i) or this clause) and increase it by 
                        the target growth rate determined under 
                        subsection (f) for such category and 
                        year.
  (e) Geographic Adjustment Factors.--
          (1) Establishment of geographic indices.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Floor at 1.0 on work geographic index.--
                After calculating the work geographic index in 
                subparagraph (A)(iii), for purposes of payment 
                for services furnished on or after January 1, 
                2004, and [before January 1, 2010] before 
                January 1, 2012, the Secretary shall increase 
                the work geographic index to 1.00 for any 
                locality for which such work geographic index 
                is less than 1.00.

           *       *       *       *       *       *       *

          (6) Transition to use of msas as fee schedule areas 
        in california.--
                  (A) In general.--
                          (i) Revision.--Subject to clause (ii) 
                        and notwithstanding the previous 
                        provisions of this subsection, for 
                        services furnished on or after January 
                        1, 2011, the Secretary shall revise the 
                        fee schedule areas used for payment 
                        under this section applicable to the 
                        State of California using the 
                        Metropolitan Statistical Area (MSA) 
                        iterative Geographic Adjustment Factor 
                        methodology as follows:
                                  (I) The Secretary shall 
                                configure the physician fee 
                                schedule areas using the Core-
                                Based Statistical Areas-
                                Metropolitan Statistical Areas 
                                (each in this paragraph 
                                referred to as an ``MSA''), as 
                                defined by the Director of the 
                                Office of Management and 
                                Budget, as the basis for the 
                                fee schedule areas. The 
                                Secretary shall employ an 
                                iterative process to transition 
                                fee schedule areas. First, the 
                                Secretary shall list all MSAs 
                                within the State by Geographic 
                                Adjustment Factor described in 
                                paragraph (2) (in this 
                                paragraph referred to as a 
                                ``GAF'') in descending order. 
                                In the first iteration, the 
                                Secretary shall compare the GAF 
                                of the highest cost MSA in the 
                                State to the weighted-average 
                                GAF of the group of remaining 
                                MSAs in the State. If the ratio 
                                of the GAF of the highest cost 
                                MSA to the weighted-average GAF 
                                of the rest of State is 1.05 or 
                                greater then the highest cost 
                                MSA becomes a separate fee 
                                schedule area.
                                  (II) In the next iteration, 
                                the Secretary shall compare the 
                                MSA of the second-highest GAF 
                                to the weighted-average GAF of 
                                the group of remaining MSAs. If 
                                the ratio of the second-highest 
                                MSA's GAF to the weighted-
                                average of the remaining lower 
                                cost MSAs is 1.05 or greater, 
                                the second-highest MSA becomes 
                                a separate fee schedule area. 
                                The iterative process continues 
                                until the ratio of the GAF of 
                                the highest-cost remaining MSA 
                                to the weighted-average of the 
                                remaining lower-cost MSAs is 
                                less than 1.05, and the 
                                remaining group of lower cost 
                                MSAs form a single fee schedule 
                                area, If two MSAs have 
                                identical GAFs, they shall be 
                                combined in the iterative 
                                comparison.
                          (ii) Transition.--For services 
                        furnished on or after January 1, 2011, 
                        and before January 1, 2016, in the 
                        State of California, after calculating 
                        the work, practice expense, and 
                        malpractice geographic indices 
                        described in clauses (i), (ii), and 
                        (iii) of paragraph (1)(A) that would 
                        otherwise apply through application of 
                        this paragraph, the Secretary shall 
                        increase any such index to the county-
                        based fee schedule area value on 
                        December 31, 2009, if such index would 
                        otherwise be less than the value on 
                        January 1, 2010.
                  (B) Subsequent revisions.--
                          (i) Periodic review and adjustments 
                        in fee schedule areas.--Subsequent to 
                        the process outlined in paragraph 
                        (1)(C), not less often than every three 
                        years, the Secretary shall review and 
                        update the California Rest-of-State fee 
                        schedule area using MSAs as defined by 
                        the Director of the Office of 
                        Management and Budget and the iterative 
                        methodology described in subparagraph 
                        (A)(i).
                          (ii) Link with geographic index data 
                        revision.--The revision described in 
                        clause (i) shall be made effective 
                        concurrently with the application of 
                        the periodic review of the adjustment 
                        factors required under paragraph (1)(C) 
                        for California for 2012 and subsequent 
                        periods. Upon request, the Secretary 
                        shall make available to the public any 
                        county-level or MSA derived data used 
                        to calculate the geographic practice 
                        cost index.
                  (C) References to fee schedule areas.--
                Effective for services furnished on or after 
                January 1, 2010, for the State of California, 
                any reference in this section to a fee schedule 
                area shall be deemed a reference to an MSA in 
                the State.
  (f) Sustainable Growth Rate and Target Growth Rate.--
          (1) Publication.--The Secretary shall cause to have 
        published in the Federal Register not later than--
                  (A) November 1, 2000, the sustainable growth 
                rate for 2000 and 2001; [and]
                  (B) November 1 of each succeeding year before 
                2010 the sustainable growth rate for such 
                succeeding year and each of the preceding 2 
                years[.]; and
                  (C) November 1 of each succeeding year the 
                target growth rate for such succeeding year and 
                each of the 2 preceding years.
          (2) Specification of growth rate.--The sustainable 
        growth rate for all physicians' services for a fiscal 
        year (beginning with fiscal year 1998 and ending with 
        fiscal year 2000) and a year beginning with 2000 and 
        ending with 2009 shall be equal to the product of--
                  (A) * * *

           *       *       *       *       *       *       *

          (4) Definitions.--In this subsection:
                  (A) Services included in physicians' 
                services.--The term ``physicians' services'' 
                includes other items and services [(such as 
                clinical diagnostic laboratory tests and 
                radiology services), specified by the 
                Secretary, that are commonly performed or 
                furnished by a physician or in a physician's 
                office] for which payment under this part is 
                made under the fee schedule under this section, 
                for services for practitioners described in 
                section 1842(b)(18)(C) on a basis related to 
                such fee schedule, or for services described in 
                section 1861(p) (other than such services when 
                furnished in the facility of a provider of 
                services), but does not include services 
                furnished to a Medicare+Choice plan enrollee.

           *       *       *       *       *       *       *

          (5) Application of separate target growth rates for 
        each service category beginning with 2010.--The target 
        growth rate for a year beginning with 2010 shall be 
        computed and applied separately under this subsection 
        for each service category (as defined in subsection 
        (j)(5)) and shall be computed using the same method for 
        computing the target growth rate except that the factor 
        described in paragraph (2)(C) for--
                  (A) the service category described in 
                subsection (j)(5)(A) shall be increased by 
                0.02; and
                  (B) the service category described in 
                subsection (j)(5)(B) shall be increased by 
                0.01.

           *       *       *       *       *       *       *

  (j) Definitions.--In this section:
          (1) * * *
          (2) Fee schedule area.--[The term] Except as provided 
        in subsection (e)(6)(C), the term ``fee schedule area'' 
        means a locality used under section 1842(b) for 
        purposes of computing payment amounts for physicians' 
        services.
          (3) Physicians' services.--The term ``physicians' 
        services'' includes items and services described in 
        paragraphs (1), (2)(A), (2)(D), (2)(G), (2)(P) (with 
        respect to services described in subparagraphs (A) and 
        (C) of section 1861(oo)(2)), (2)(R) (with respect to 
        services described in suparagraphs (B), (C), and (D) of 
        section 1861(pp)(1)), (2)(S), (2)(W), (2)(AA), (2)(DD), 
        (2)(EE), (2)(FF), (3), (4), (13), (14) (with respect to 
        services described in section 1861(nn)(2)), and (15) of 
        section 1861(s) (other than clinical diagnostic 
        laboratory tests and, except for purposes of subsection 
        (a)(3), (g), and (h) such other items and services as 
        the Secretary may specify).

           *       *       *       *       *       *       *

          (5) Service categories.--For services furnished on or 
        after January 1, 2009, each of the following categories 
        of physicians' services (as defined in paragraph (3)) 
        shall be treated as a separate ``service category'':
                  (A) Evaluation and management services that 
                are procedure codes (for services covered under 
                this title) for--
                          (i) services in the category 
                        designated Evaluation and Management in 
                        the Health Care Common Procedure Coding 
                        System (established by the Secretary 
                        under subsection (c)(5) as of December 
                        31, 2009, and as subsequently modified 
                        by the Secretary); and
                          (ii) preventive services (as defined 
                        in section 1861(iii)) for which payment 
                        is made under this section.
                  (B) All other services not described in 
                subparagraph (A).
        Service categories established under this paragraph 
        shall apply without regard to the specialty of the 
        physician furnishing the service.
  (k) Quality Reporting System.--
          (1) * * *
          (2) Use of consensus-based quality measures.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) For 2010 and subsequent years.--
                          (i) * * *
                          (ii) Exception.--In the case of a 
                        specified area or medical topic 
                        determined appropriate by the Secretary 
                        for which a feasible and practical 
                        measure has not been endorsed by the 
                        entity with a contract under section 
                        1890(a), the Secretary may specify a 
                        measure that is not so endorsed as long 
                        as due consideration is given to 
                        measures that have been endorsed or 
                        adopted by a consensus organization 
                        identified by the Secretary, such as 
                        the AQA alliance. The Secretary shall 
                        submit such a non-endorsed measure to 
                        the entity for consideration for 
                        endorsement. If the entity considers 
                        but does not endorse such a measure and 
                        if the Secretary does not phase-out use 
                        of such measure, the Secretary shall 
                        include the rationale for continued use 
                        of such a measure in rulemaking.

           *       *       *       *       *       *       *

                  (E) Physician's quality reporting 
                initiative.--
                          (i) In general.--For purposes of 
                        reporting data on quality measures for 
                        covered professional services furnished 
                        during 2011 and any subsequent year, to 
                        the extent that measures are available, 
                        the Secretary shall include quality 
                        measures on end of life care and 
                        advanced care planning that have been 
                        adopted or endorsed by a consensus-
                        based organization, if appropriate. 
                        Such measures shall measure both the 
                        creation of and adherence to orders for 
                        life-sustaining treatment.
                          (ii) Proposed set of measures.--The 
                        Secretary shall publish in the Federal 
                        Register proposed quality measures on 
                        end of life care and advanced care 
                        planning that the Secretary determines 
                        are described in subparagraph (A) and 
                        would be appropriate for eligible 
                        professionals to use to submit data to 
                        the Secretary. The Secretary shall 
                        provide for a period of public comment 
                        on such set of measures before 
                        finalizing such proposed measures.

           *       *       *       *       *       *       *

  (m) Incentive Payments for Quality Reporting.--
          (1) Incentive payments.--
                  (A) In general.--For 2007 through [2010] 
                2012, with respect to covered professional 
                services furnished during a reporting period by 
                an eligible professional, if--
                          (i) * * *

           *       *       *       *       *       *       *

                  (B) Applicable quality percent.--For purposes 
                of subparagraph (A), the term ``applicable 
                quality percent'' means--
                          (i) * * *
                          (ii) for [2009 and 2010] for each of 
                        the years 2009 through 2012, 2.0 
                        percent.

           *       *       *       *       *       *       *

          (5) Application.--
                  (A) * * *
                  (B) Coordination with other bonus payments.--
                The provisions of this subsection shall not be 
                taken into account in applying subsections (m), 
                (p), and (u) of section 1833 and any payment 
                under such subsections shall not be taken into 
                account in computing allowable charges under 
                this subsection.

           *       *       *       *       *       *       *

                  (E) Limitations on review.--
                          [There shall be] Subject to 
                        subparagraph (I), there shall be no 
                        administrative or judicial review under 
                        1869, section 1878, or otherwise of
                          (i) * * *

           *       *       *       *       *       *       *

                  (H) Feedback.--The Secretary shall provide 
                timely feedback to eligible professionals on 
                the performance of the eligible professional 
                with respect to satisfactorily submitting data 
                on quality measures under this subsection.
                  (I) Informal appeals process.--
                Notwithstanding subparagraph (E), by not later 
                than January 1, 2011, the Secretary shall 
                establish and have in place an informal process 
                for eligible professionals to appeal the 
                determination that an eligible professional did 
                not satisfactorily submit data on quality 
                measures under this subsection.

           *       *       *       *       *       *       *

          (7) Integration of physician quality reporting and 
        ehr reporting.--Not later than January 1, 2012, the 
        Secretary shall develop a plan to integrate clinical 
        reporting on quality measures under this subsection 
        with reporting requirements under subsection (o) 
        relating to the meaningful use of electronic health 
        records. Such integration shall consist of the 
        following:
                  (A) The development of measures, the 
                reporting of which would both demonstrate--
                          (i) meaningful use of an electronic 
                        health record for purposes of 
                        subsection (o); and
                          (ii) clinical quality of care 
                        furnished to an individual.
                  (B) The collection of health data to identify 
                deficiencies in the quality and coordination of 
                care for individuals eligible for benefits 
                under this part.
                  (C) Such other activities as specified by the 
                Secretary.

           *       *       *       *       *       *       *

  (o) Incentives for Adoption and Meaningful Use of Certified 
EHR Technology.--
          (1) Incentive payments.--
                  (A) * * *
                  (B) Limitations on amounts of incentive 
                payments.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) Increase for certain eligible 
                        professionals.--In the case of an 
                        eligible professional who predominantly 
                        furnishes services under this part in 
                        an area that is designated by the 
                        Secretary (under section 332(a)(1)(A) 
                        of the Public Health Service Act) as a 
                        primary care health professional 
                        shortage area, the amount that would 
                        otherwise apply for a payment year for 
                        such professional under subclauses (I) 
                        through (V) of clause (ii) shall be 
                        increased by 10 percent. In 
                        implementing the preceding sentence, 
                        the Secretary may, as determined 
                        appropriate, apply provisions of 
                        subsections (m) and (u) of section 1833 
                        in a similar manner as such provisions 
                        apply under such subsection.

           *       *       *       *       *       *       *

  (p) Payment Modifier for Certain Evaluation and Management 
Services.--The Secretary shall establish a payment modifier 
under the fee schedule under this section for evaluation and 
management services (as specified in section 
1842(b)(16)(B)(ii)) that result in the ordering of additional 
services (such as lab tests), the prescription of drugs, the 
furnishing or ordering of durable medical equipment in order to 
enable better monitoring of claims for payment for such 
additional services under this title, or the ordering, 
furnishing, or prescribing of other items and services 
determined by the Secretary to pose a high risk of waste, 
fraud, and abuse. The Secretary may require providers of 
services or suppliers to report such modifier in claims 
submitted for payment.

                    Part C--Medicare+choice Program

                 ELIGIBILITY, ELECTION, AND ENROLLMENT

  Sec. 1851. (a) * * *

           *       *       *       *       *       *       *

  (e) Coverage Election Periods.--
          (1) * * *
          (2) Open enrollment and disenrollment 
        opportunities.--Subject to paragraph (5)--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(C) Continuous open enrollment and 
                disenrollment for first 3 months in subsequent 
                years.--
                          [(i) In general.--Subject to clauses 
                        (ii) and (iii) and subparagraph (D), at 
                        any time during the first 3 months of a 
                        year after 2006, or, if the individual 
                        first becomes a Medicare+Choice 
                        eligible individual during a year after 
                        2006, during the first 3 months of such 
                        year in which the individual is a 
                        Medicare+Choice eligible individual, a 
                        Medicare+Choice eligible individual may 
                        change the election under subsection 
                        (a)(1).
                          [(ii) Limitation of one change during 
                        open enrollment period each year.--An 
                        individual may exercise the right under 
                        clause (i) only once during the 
                        applicable 3-month period described in 
                        such clause in each year. The 
                        limitation under this clause shall not 
                        apply to changes in elections effected 
                        during an annual, coordinated election 
                        period under paragraph (3) or during a 
                        special enrollment period under 
                        paragraph (4).
                          [(iii) Limitation on exercise of 
                        right with respect to prescription drug 
                        coverage.--Effective for plan years 
                        beginning on or after January 1, 2006, 
                        in applying clause (i) (and clause (i) 
                        of subparagraph (B)) in the case of an 
                        individual who--
                                  [(I) is enrolled in an MA 
                                plan that does provide 
                                qualified prescription drug 
                                coverage, the individual may 
                                exercise the right under such 
                                clause only with respect to 
                                coverage under the original 
                                fee-for-service plan or 
                                coverage under another MA plan 
                                that does not provide such 
                                coverage and may not exercise 
                                such right to obtain coverage 
                                under an MA-PD plan or under a 
                                prescription drug plan under 
                                part D; or
                                  [(II) is enrolled in an MA-PD 
                                plan, the individual may 
                                exercise the right under such 
                                clause only with respect to 
                                coverage under another MA-PD 
                                plan (and not an MA plan that 
                                does not provide qualified 
                                prescription drug coverage) or 
                                under the original fee-for-
                                service plan and coverage under 
                                a prescription drug plan under 
                                part D.]

           *       *       *       *       *       *       *

          (3) Annual, coordinated election period.--
                  (A) * * *
                  (B) Annual, coordinated election period.--For 
                purposes of this section, the term ``annual, 
                coordinated election period'' means--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) with respect to 2006, the 
                        period beginning on November 15, 2005, 
                        and ending on May 15, 2006; [and]
                          (iv) with respect to 2007 [and 
                        succeeding years], 2008, 2009, and 
                        2010, the period beginning on November 
                        15 and ending on December 31 of the 
                        year before such year[.]; and
                          (v) with respect to 2011 and 
                        succeeding years, the period beginning 
                        on November 1 and ending on December 15 
                        of the year before such year.

           *       *       *       *       *       *       *

          (4) Special election periods.--Effective as of 
        January 1, 2006, an individual may discontinue an 
        election of a Medicare+Choice plan offered by a 
        Medicare+Choice organization other than during an 
        annual, coordinated election period and make a new 
        election under this section if--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) the individual demonstrates (in 
                accordance with guidelines established by the 
                Secretary) that--
                          (i) * * *
                          (ii) the organization (or an agent or 
                        other entity acting on the 
                        organization's behalf) materially 
                        misrepresented the plan's provisions in 
                        marketing the plan to the individual; 
                        [or]
                  (D) the individual is enrolled in an MA plan 
                and enrollment in the plan is suspended under 
                paragraph (2)(B) or (3)(C) of section 1857(g) 
                because of a failure of the plan to meet 
                applicable requirements; or
                  [(D)] (E) the individual meets such other 
                exceptional conditions as the Secretary may 
                provide, taking into account the health or 
                well-being of the individual.

           *       *       *       *       *       *       *

  (p) Publication of Medical Loss Ratios and Other Cost-Related 
Information.--
          (1) In general.--The Secretary shall publish, not 
        later than November 1 of each year (beginning with 
        2011), for each MA plan contract, the medical loss 
        ratio of the plan in the previous year.
          (2) Submission of data.--
                  (A) In general.--Each MA organization shall 
                submit to the Secretary, in a form and manner 
                specified by the Secretary, data necessary for 
                the Secretary to publish the medical loss ratio 
                on a timely basis.
                  (B) Data for 2010 and 2011.--The data 
                submitted under subparagraph (A) for 2010 and 
                for 2011 shall be consistent in content with 
                the data reported as part of the MA plan bid in 
                June 2009 for 2010.
                  (C) Use of standardized elements and 
                definitions.--The data to be submitted under 
                subparagraph (A) relating to medical loss ratio 
                for a year, beginning with 2012, shall be 
                submitted based on the standardized elements 
                and definitions developed under paragraph (3).
          (3) Development of data reporting standards.--
                  (A) In general.--The Secretary shall develop 
                and implement standardized data elements and 
                definitions for reporting under this 
                subsection, for contract years beginning with 
                2012, of data necessary for the calculation of 
                the medical loss ratio for MA plans. Not later 
                than December 31, 2010, the Secretary shall 
                publish a report describing the elements and 
                definitions so developed.
                  (B) Consultation.--The Secretary shall 
                consult with the Health Choices Commissioner, 
                representatives of MA organizations, experts on 
                health plan accounting systems, and 
                representatives of the National Association of 
                Insurance Commissioners, in the development of 
                such data elements and definitions.
          (4) Medical loss ratio to be defined.--For purposes 
        of this part, the term ``medical loss ratio'' has the 
        meaning given such term by the Secretary, taking into 
        account the meaning given such term by the Health 
        Choices Commissioner under section 116 of the America's 
        Affordable Health Choices Act of 2009.

                  BENEFITS AND BENEFICIARY PROTECTIONS

  Sec. 1852. (a) Basic Benefits.--
          (1) Requirement.--
                  (A) In general.--Except as provided in 
                section 1859(b)(3) for MSA plans and except as 
                provided in paragraph (6) for MA regional 
                plans, each Medicare+Choice plan shall provide 
                to members enrolled under this part, through 
                providers and other persons that meet the 
                applicable requirements of this title and part 
                A of title XI, benefits under the original 
                medicare fee-for-service program option (and, 
                for plan years before 2006, additional benefits 
                required under section 1854(f)(1)(A)) with 
                cost-sharing that is no greater (and may be 
                less) than the cost-sharing that would 
                otherwise be imposed under such program option.
                  (B) Benefits under the original medicare fee-
                for-service program option defined.--
                          (i) In general.--For purposes of this 
                        part, the term ``benefits under the 
                        original medicare fee-for-service 
                        program option'' means those items and 
                        services (other than hospice care) for 
                        which benefits are available under 
                        parts A and B to individuals entitled 
                        to benefits under part A and enrolled 
                        under part B, with cost-sharing for 
                        those services as required under parts 
                        A and B [or an actuarially equivalent 
                        level of cost-sharing as determined in 
                        this part].
                          [(ii) Special rule for regional 
                        plans.--In the case of an MA regional 
                        plan in determining an actuarially 
                        equivalent level of cost-sharing with 
                        respect to benefits under the original 
                        medicare fee-for-service program 
                        option, there shall only be taken into 
                        account, with respect to the 
                        application of section 1858(b)(2), such 
                        expenses only with respect to 
                        subparagraph (A) of such section.]
                          (ii) Permitting use of flat copayment 
                        or per diem rate.--Nothing in clause 
                        (i) shall be construed as prohibiting a 
                        Medicare Advantage plan from using a 
                        flat copayment or per diem rate, in 
                        lieu of the cost-sharing that would be 
                        imposed under part A or B, so long as 
                        the amount of the cost-sharing imposed 
                        does not exceed the amount of the cost-
                        sharing that would be imposed under the 
                        respective part if the individual were 
                        not enrolled in a plan under this part.

           *       *       *       *       *       *       *

          [(7) Limitation on cost-sharing for dual eligibles 
        and qualified medicare beneficiaries.--In the case of 
        an individual who is a full-benefit dual eligible 
        individual (as defined in section 1935(c)(6)) or a 
        qualified medicare beneficiary (as defined in section 
        1905(p)(1)) and who is enrolled in a specialized 
        Medicare Advantage plan for special needs individuals 
        described in section 1859(b)(6)(B)(ii), the plan may 
        not impose cost-sharing that exceeds the amount of 
        cost-sharing that would be permitted with respect to 
        the individual under title XIX if the individual were 
        not enrolled in such plan.]
          (7) Limitation on cost-sharing for dual eligibles and 
        qualified medicare beneficiaries.--In the case of a 
        individual who is a full-benefit dual eligible 
        individual (as defined in section 1935(c)(6)) or a 
        qualified medicare beneficiary (as defined in section 
        1905(p)(1)) who is enrolled in a Medicare Advantage 
        plan, the plan may not impose cost-sharing that exceeds 
        the amount of cost-sharing that would be permitted with 
        respect to the individual under this title and title 
        XIX if the individual were not enrolled with such plan.

           *       *       *       *       *       *       *


               PAYMENTS TO MEDICARE+CHOICE ORGANIZATIONS

  Sec. 1853. (a) Payments to Organizations.--
          (1) Monthly payments.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Demographic adjustment, including 
                adjustment for health status.--
                          (i) * * *
                          (ii) Application during phase-out of 
                        budget neutrality factor.--For 2006 
                        [through 2010] and each subsequent 
                        year:
                                  (I)  * * *
                                  (II) In order to ensure 
                                payment accuracy, the Secretary 
                                shall periodically conduct an 
                                analysis of the differences 
                                described in subclause (I). The 
                                Secretary shall complete such 
                                analysis by a date necessary to 
                                ensure that the results of such 
                                analysis are incorporated on a 
                                timely basis into the risk 
                                scores [only for 2008, 2009, 
                                and 2010] for 2008 and 
                                subsequent years. In conducting 
                                such analysis, the Secretary 
                                shall use data submitted with 
                                respect to 2004 and subsequent 
                                years, as available.

           *       *       *       *       *       *       *

  (j) Computation of Benchmark Amounts.--For purposes of this 
part, subject to subsection (o), the term ``MA area-specific 
non-drug monthly benchmark amount'' means for a month in a 
year--
          (1) with respect to--
                  (A) a service area that is entirely within an 
                MA local area, subject to section 1860C-
                1(d)(2)(A), an amount equal to \1/12\ of the 
                annual MA capitation rate under section 
                1853(c)(1) (or, [beginning with 2007] for 2007, 
                2008, 2009, and 2010, \1/12\ of the applicable 
                amount determined under subsection (k)(1), or, 
                beginning with 2011, \1/12\ of the blended 
                benchmark amount determined under subsection 
                (n)(1)) for the area for the year, adjusted as 
                appropriate (for years before 2007) for the 
                purpose of risk adjustment; or

           *       *       *       *       *       *       *

  (n) Determination of Blended Benchmark Amount.--
          (1) In general.--For purposes of subsection (j), 
        subject to paragraphs (3) and (4), the term ``blended 
        benchmark amount'' means for an area--
                  (A) for 2011 the sum of--
                          (i) \2/3\ of the applicable amount 
                        (as defined in subsection (k)) for the 
                        area and year; and
                          (ii) \1/3\ of the amount specified in 
                        paragraph (2) for the area and year;
                  (B) for 2012 the sum of--
                          (i) \1/3\ of the applicable amount 
                        for the area and year; and
                          (ii) \2/3\ of the amount specified in 
                        paragraph (2) for the area and year; 
                        and
                  (C) for a subsequent year the amount 
                specified in paragraph (2) for the area and 
                year.
          (2) Specified amount.--The amount specified in this 
        paragraph for an area and year is the amount specified 
        in subsection (c)(1)(D)(i) for the area and year 
        adjusted (in a manner specified by the Secretary) to 
        take into account the phase-out in the indirect costs 
        of medical education from capitation rates described in 
        subsection (k)(4).
          (3) Fee-for-service payment floor.--In no case shall 
        the blended benchmark amount for an area and year be 
        less than the amount specified in paragraph (2).
          (4) Exception for pace plans.--This subsection shall 
        not apply to payments to a PACE program under section 
        1894.
  (o) Quality Based Payment Adjustment.--
          (1) In general.--In the case of a qualifying plan in 
        a qualifying county with respect to a year beginning 
        with 2011, the blended benchmark amount under 
        subsection (n)(1) shall be increased--
                  (A) for 2011, by 2.6 percent;
                  (B) for 2012, by 5.3 percent; and
                  (C) for a subsequent year, by 8.0 percent.
          (2) Qualifying plan and qualifying county defined.--
        For purposes of this subsection:
                  (A) Qualifying plan.--The term ``qualifying 
                plan'' means, for a year and subject to 
                paragraph (4), a plan that, in a preceding year 
                specified by the Secretary, had a quality 
                ranking (based on the quality ranking system 
                established by the Centers for Medicare & 
                Medicaid Services for Medicare Advantage plans) 
                of 4 stars or higher.
                  (B) Qualifying county.--The term ``qualifying 
                county'' means, for a year, a county--
                          (i) that ranked within the lowest 
                        quartile of counties in the amount 
                        specified in subsection (n)(2) for the 
                        year specified by the Secretary under 
                        subparagraph (A); and
                          (ii) for which, as of June of such 
                        specified year, of the Medicare 
                        Advantage eligible individuals residing 
                        in the county--
                                  (I) at least 50 percent of 
                                such individuals were enrolled 
                                in Medicare Advantage plans; 
                                and
                                  (II) of the residents so 
                                enrolled at least 50 percent of 
                                such individuals were enrolled 
                                in such plans with a quality 
                                ranking (based on the quality 
                                ranking system established by 
                                the Centers for Medicare & 
                                Medicaid Services for Medicare 
                                Advantage plans) of 4 stars or 
                                higher.
          (3) Notification.--The Secretary, in the annual 
        announcement required under subsection (b)(1)(B) in 
        2010 and each succeeding year, shall notify the 
        Medicare Advantage organization that is offering a 
        qualifying plan in a qualifying county of such 
        identification for the year. The Secretary shall 
        provide for publication on the website for the Medicare 
        program of the information described in the previous 
        sentence.
          (4) Authority to disqualify deficient plans.--The 
        Secretary may determine that a Medicare Advantage plan 
        is not a qualifying plan if the Secretary has 
        identified deficiencies in the plan's compliance with 
        rules for Medicare Advantage plans under this part.

                        PREMIUMS AND BID AMOUNTS

  Sec. 1854. (a) Submission of Proposed Premiums, Bid Amounts, 
and Related Information.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Review.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Rejection of bids.--Nothing in this 
                section shall be construed as requiring the 
                Secretary to accept any or every bid by an MA 
                organization under this subsection.

           *       *       *       *       *       *       *


              CONTRACTS WITH MEDICARE+CHOICE ORGANIZATIONS

  Sec. 1857. (a) * * *

           *       *       *       *       *       *       *

  (d) Protections Against Fraud and Beneficiary Protections.--
          (1) Periodic auditing.--The Secretary shall provide 
        for the annual auditing of the financial records 
        (including data relating to medicare utilization and 
        costs, including allowable costs under section 
        1858(c)), and data submitted with respect to risk 
        adjustment under section 1853(a)(3) of at least one-
        third of the Medicare+Choice organizations offering 
        Medicare+Choice plans under this part. The Comptroller 
        General shall monitor auditing activities conducted 
        under this subsection.
          (2) Inspection and audit.--Each contract under this 
        section shall provide that the Secretary, or any person 
        or organization designated by the Secretary--
                  (A) shall have the right to timely inspect or 
                otherwise evaluate (i) the quality, 
                appropriateness, and timeliness of services 
                performed under the contract, and (ii) the 
                facilities of the organization when there is 
                reasonable evidence of some need for such 
                inspection, and
                  (B) shall have the right to timely audit and 
                inspect any books and records of the 
                Medicare+Choice organization that pertain (i) 
                to the ability of the organization to bear the 
                risk of potential financial losses, or (ii) to 
                services performed or determinations of amounts 
                payable under the contract.

           *       *       *       *       *       *       *

          (7) Period for submission of claims.--The contract 
        shall require an MA organization or PDP sponsor to 
        require any provider of services under contract with, 
        in partnership with, or affiliated with such 
        organization or sponsor to ensure that, with respect to 
        items and services furnished by such provider to an 
        enrollee of such organization, written request, signed 
        by such enrollee, except in cases in which the 
        Secretary finds it impracticable for the enrollee to do 
        so, is filed for payment for such items and services in 
        such form, in such manner, and by such person or 
        persons as the Secretary may by regulation prescribe, 
        no later than the close of the 1 calendar year period 
        after such items and services are furnished. In 
        applying the previous sentence, the Secretary may 
        specify exceptions to the 1 calendar year period 
        specified.
  (e) Additional Contract Terms.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Requirement for minimum medical loss ratio.--If 
        the Secretary determines for a contract year (beginning 
        with 2014) that an MA plan has failed to have a medical 
        loss ratio (as defined in section 1851(p)(4)) of at 
        least .85--
                  (A) the Secretary shall require the Medicare 
                Advantage organization offering the plan to 
                give enrollees a rebate (in the second 
                succeeding contract year) of premiums under 
                this part (or part B or part D, if applicable) 
                by such amount as would provide for a benefits 
                ratio of at least .85;
                  (B) for 3 consecutive contract years, the 
                Secretary shall not permit the enrollment of 
                new enrollees under the plan for coverage 
                during the second succeeding contract year; and
                  (C) the Secretary shall terminate the plan 
                contract if the plan fails to have such a 
                medical loss ratio for 5 consecutive contract 
                years.
          (5) Enforcement of audits and deficiencies.--
                  (A) Information in contract.--The Secretary 
                shall require that each contract with an MA 
                organization under this section shall include 
                terms that inform the organization of the 
                provisions in subsection (d).
                  (B) Enforcement authority.--The Secretary is 
                authorized, in connection with conducting 
                audits and other activities under subsection 
                (d), to take such actions, including pursuit of 
                financial recoveries, necessary to address 
                deficiencies identified in such audits or other 
                activities.
  (f) Prompt Payment by Medicare+choice Organization.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Incorporation of certain prescription drug plan 
        contract requirements.--The following provisions shall 
        apply to contracts with a Medicare Advantage 
        organization offering an MA-PD plan in the same manner 
        as they apply to contracts with a PDP sponsor offering 
        a prescription drug plan under part D:
                  (A) * * *
                  [(B) Submission of claims by pharmacies 
                located in or contracting with long-term care 
                facilities.--Section 1860D-12(b)(5).]
                  [(C)] (B) Regular update of prescription drug 
                pricing standard.--Section 1860D-12(b)(6).
                  (C) Reporting requirement related to rebate 
                for full-benefit dual eligible medicare drug 
                plan enrollees.--Section 1860D-12(b)(7).
  (g) Intermediate Sanctions.--
          (1) In general.--If the Secretary determines that a 
        Medicare+Choice organization with a contract under this 
        section--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) fails to comply with the applicable 
                requirements of section 1852(j)(3) or 
                1852(k)(2)(A)(ii); [or]
                  (G) employs or contracts with any individual 
                or entity that is excluded from participation 
                under this title under section 1128 or 1128A 
                for the provision of health care, utilization 
                review, medical social work, or administrative 
                services or employs or contracts with any 
                entity for the provision (directly or 
                indirectly) through such an excluded individual 
                or entity of such services;
                  (H) fails substantially to provide language 
                services to limited English proficient 
                beneficiaries enrolled in the plan that are 
                required under law;
                  (I) except as provided under subparagraph (C) 
                or (D) of section 1860D-1(b)(1), enrolls an 
                individual in any plan under this part without 
                the prior consent of the individual or the 
                designee of the individual;
                  (J) transfers an individual enrolled under 
                this part from one plan to another without the 
                prior consent of the individual or the designee 
                of the individual or solely for the purpose of 
                earning a commission;
                  (K) fails to comply with marketing 
                restrictions described in subsections (h) and 
                (j) of section 1851 or applicable implementing 
                regulations or guidance; or
                  (L) employs or contracts with any individual 
                or entity who engages in the conduct described 
                in subparagraphs (A) through (K) of this 
                paragraph;
        the Secretary may provide, in addition to any other 
        remedies authorized by law, for any of the remedies 
        described in paragraph (2). The Secretary may provide, 
        in addition to any other remedies authorized by law, 
        for any of the remedies described in paragraph (2), if 
        the Secretary determines that any employee or agent of 
        such organization, or any provider or supplier who 
        contracts with such organization, has engaged in any 
        conduct described in subparagraphs (A) through (L) of 
        this paragraph.
          (2) Remedies.--The remedies described in this 
        paragraph are--
                  (A) civil money penalties of not more than 
                $25,000 for each determination under paragraph 
                (1) or, with respect to a determination under 
                subparagraph (D) or (E)(i) of such paragraph, 
                of not more than $100,000 for each such 
                determination, except with respect to a 
                determination under subparagraph (E), an 
                assessment of not more than 3 times the amount 
                claimed by such plan or plan sponsor based upon 
                the misrepresentation or falsified information 
                involved, plus, with respect to a determination 
                under paragraph (1)(B), double the excess 
                amount charged in violation of such paragraph 
                (and the excess amount charged shall be 
                deducted from the penalty and returned to the 
                individual concerned), and plus, with respect 
                to a determination under paragraph (1)(D), 
                $15,000 for each individual not enrolled as a 
                result of the practice involved,

           *       *       *       *       *       *       *

  (i) Medicare+choice Program Compatibility With Employer or 
Union Group Health Plans.--
          (1) * * *
          (2) Employer sponsored ma plans.--To facilitate the 
        offering of MA plans by employers, labor organizations, 
        or the trustees of a fund established by one or more 
        employers or labor organizations (or combination 
        thereof) to furnish benefits to the entity's employees, 
        former employees (or combination thereof) or members or 
        former members (or combination thereof) of the labor 
        organizations, the Secretary may waive or modify 
        requirements that hinder the design of, the offering 
        of, or the enrollment in such MA plans, but only if 90 
        percent of the Medicare Advantage eligible individuals 
        enrolled under such plan reside in a county in which 
        the MA organization offers an MA local plan. 
        Notwithstanding section 1851(g), an MA plan described 
        in the previous sentence may restrict the enrollment of 
        individuals under this part to individuals who are 
        beneficiaries and participants in such plan.

                  SPECIAL RULES FOR MA REGIONAL PLANS

  Sec. 1858. (a) * * *

           *       *       *       *       *       *       *

  [(e) Stabilization Fund.--
          [(1) Establishment.--The Secretary shall establish 
        under this subsection an MA Regional Plan Stabilization 
        Fund (in this subsection referred to as the ``Fund'') 
        which shall be available for two purposes:
                  [(A) Plan entry.--To provide incentives to 
                have MA regional plans offered in each MA 
                region under paragraph (3).
                  [(B) Plan retention.--To provide incentives 
                to retain MA regional plans in certain MA 
                regions with below-national-average MA market 
                penetration under paragraph (4).
          [(2) Funding.--
                  [(A) Initial funding.--
                          [(i) In general.--There shall be 
                        available to the Fund, for expenditures 
                        from the Fund during 2014, $1.
                          [(ii) Payment from trust funds.--Such 
                        amount shall be available to the Fund, 
                        as expenditures are made from the Fund, 
                        from the Federal Hospital Insurance 
                        Trust Fund and the Federal 
                        Supplementary Medical Insurance Trust 
                        Fund in the proportion specified in 
                        section 1853(f).
                  [(B) Additional funding from savings.--
                          [(i) In general.--There shall also be 
                        made available to the Fund, 50 percent 
                        of savings described in clause (ii).
                          [(ii) Savings.--The savings described 
                        in this clause are 25 percent of the 
                        average per capita savings described in 
                        section 1854(b)(4)(C) for which monthly 
                        rebates are provided under section 
                        1854(b)(1)(C) in the fiscal year 
                        involved that are attributable to MA 
                        regional plans.
                          [(iii) Availability.--Funds made 
                        available under this subparagraph shall 
                        be transferred into a special account 
                        in the Treasury from the Federal 
                        Hospital Insurance Trust Fund and the 
                        Federal Supplementary Medical Insurance 
                        Trust Fund in the proportion specified 
                        in section 1853(f) on a monthly basis.
                  [(C) Obligations.--Amounts in the Fund shall 
                be available in advance of appropriations to MA 
                regional plans in qualifying MA regions only in 
                accordance with paragraph (5).
                  [(D) Ordering.--Expenditures from the Fund 
                shall first be made from amounts made available 
                under subparagraph (A).
          [(3) Plan entry funding.--
                  [(A) In general.--Funding is available under 
                this paragraph for a year only as follows:
                          [(i) National plan.--For a national 
                        bonus payment described in subparagraph 
                        (B) for the offering by a single MA 
                        organization of an MA regional plan in 
                        each MA region in the year, but only if 
                        there was not such a plan offered in 
                        each such region in the previous year. 
                        Funding under this clause is only 
                        available with respect to any 
                        individual MA organization for a single 
                        year, but may be made available to more 
                        than one such organization in the same 
                        year.
                          [(ii) Regional plans.--Subject to 
                        clause (iii), for an increased amount 
                        under subparagraph (C) for an MA 
                        regional plan offered in an MA region 
                        which did not have any MA regional plan 
                        offered in the prior year.
                          [(iii) Limitation on regional plan 
                        funding in case of national plan.--In 
                        no case shall there be any payment 
                        adjustment under subparagraph (C) for a 
                        year for which a national payment 
                        adjustment is made under subparagraph 
                        (B).
                  [(B) National bonus payment.--The national 
                bonus payment under this subparagraph shall--
                          [(i) be available to an MA 
                        organization only if the organization 
                        offers MA regional plans in every MA 
                        region;
                          [(ii) be available with respect to 
                        all MA regional plans of the 
                        organization regardless of whether any 
                        other MA regional plan is offered in 
                        any region; and
                          [(iii) subject to amounts available 
                        under paragraph (5) for a year, be 
                        equal to 3 percent of the benchmark 
                        amount otherwise applicable for each MA 
                        regional plan offered by the 
                        organization.
                  [(C) Regional payment adjustment.--
                          [(i) In general.--The increased 
                        amount under this subparagraph for an 
                        MA regional plan in an MA region for a 
                        year shall be an amount, determined by 
                        the Secretary, based on the bid 
                        submitted for such plan (or plans) and 
                        shall be available to all MA regional 
                        plans offered in such region and year. 
                        Such amount may be based on the mean, 
                        mode, or median, or other measure of 
                        such bids and may vary from region to 
                        region. The Secretary may not limit the 
                        number of plans or bids in a region.
                          [(ii) Multi-year funding.--
                                  [(I) In general.--Subject to 
                                amounts available under 
                                paragraph (5), funding under 
                                this subparagraph shall be 
                                available for a period 
                                determined by the Secretary.
                                  [(II) Report.--If the 
                                Secretary determines that 
                                funding will be provided for a 
                                second consecutive year with 
                                respect to an MA region, the 
                                Secretary shall submit to the 
                                Congress a report that 
                                describes the underlying market 
                                dynamics in the region and that 
                                includes recommendations 
                                concerning changes in the 
                                payment methodology otherwise 
                                provided for MA regional plans 
                                under this part.
                          [(iii) Application to all plans in a 
                        region.--Funding under this 
                        subparagraph with respect to an MA 
                        region shall be made available with 
                        respect to all MA regional plans 
                        offered in the region.
                          [(iv) Limitation on availability of 
                        plan retention funding in next year.--
                        If an increased amount is made 
                        available under this subparagraph with 
                        respect to an MA region for a period 
                        determined by the Secretary under 
                        clause (ii)(I), in no case shall 
                        funding be available under paragraph 
                        (4) with respect to MA regional plans 
                        offered in the region in the year 
                        following such period.
                  [(D) Application.--Any additional payment 
                under this paragraph provided for an MA 
                regional plan for a year shall be treated as if 
                it were an addition to the benchmark amount 
                otherwise applicable to such plan and year, but 
                shall not be taken into account in the 
                computation of any benchmark amount for any 
                subsequent year.
          [(4) Plan retention funding.--
                  [(A) In general.--Funding is available under 
                this paragraph for a year with respect to MA 
                regional plans offered in an MA region for the 
                increased amount specified in subparagraph (B) 
                but only if the region meets the requirements 
                of subparagraphs (C) and (E).
                  [(B) Payment increase.--The increased amount 
                under this subparagraph for an MA regional plan 
                in an MA region for a year shall be an amount, 
                determined by the Secretary, that does not 
                exceed the greater of--
                          [(i) 3 percent of the benchmark 
                        amount applicable in the region; or
                          [(ii) such amount as (when added to 
                        the benchmark amount applicable to the 
                        region) will result in the ratio of--
                                  [(I) such additional amount 
                                plus the benchmark amount 
                                computed under section 
                                1854(b)(4)(B)(i) for the region 
                                and year, to the adjusted 
                                average per capita cost for the 
                                region and year, as estimated 
                                by the Secretary under section 
                                1876(a)(4) and adjusted as 
                                appropriate for the purpose of 
                                risk adjustment; being equal to
                                  [(II) the weighted average of 
                                such benchmark amounts for all 
                                the regions and such year, to 
                                the average per capita cost for 
                                the United States and such 
                                year, as estimated by the 
                                Secretary under section 
                                1876(a)(4) and adjusted as 
                                appropriate for the purpose of 
                                risk adjustment.
                  [(C) Regional requirements.--The requirements 
                of this subparagraph for an MA region for a 
                year are as follows:
                          [(i) Notification of plan exit.--The 
                        Secretary has received notice (in such 
                        form and manner as the Secretary 
                        specifies) before a year that one or 
                        more MA regional plans that were 
                        offered in the region in the previous 
                        year will not be offered in the 
                        succeeding year.
                          [(ii) Regional plans available from 
                        fewer than 2 ma organizations in the 
                        region.--The Secretary determines that 
                        if the plans referred to in clause (i) 
                        are not offered in the year, fewer than 
                        2 MA organizations will be offering MA 
                        regional plans in the region in the 
                        year involved.
                          [(iii) Percentage enrollment in ma 
                        regional plans below national 
                        average.--For the previous year, the 
                        Secretary determines that the average 
                        percentage of MA eligible individuals 
                        residing in the region who are enrolled 
                        in MA regional plans is less than the 
                        average percentage of such individuals 
                        in the United States enrolled in such 
                        plans.
                  [(D) Application.--Any additional payment 
                under this paragraph provided for an MA 
                regional plan for a year shall be treated as if 
                it were an addition to the benchmark amount 
                otherwise applicable to such plan and year, but 
                shall not be taken into account in the 
                computation of any benchmark amount for any 
                subsequent year.
                  [(E) 2-consecutive-year limitation.--
                          [(i) In general.--In no case shall 
                        any funding be available under this 
                        paragraph in an MA region in a period 
                        of consecutive years that exceeds 2 
                        years.
                          [(ii) Report.--If the Secretary 
                        determines that funding will be 
                        provided under this paragraph for a 
                        second consecutive year with respect to 
                        an MA region, the Secretary shall 
                        submit to the Congress a report that 
                        describes the underlying market 
                        dynamics in the region and that 
                        includes recommendations concerning 
                        changes in the payment methodology 
                        otherwise provided for MA regional 
                        plans under this part.
          [(5) Funding limitation.--
                  [(A) In general.--The total amount expended 
                from the Fund as a result of the application of 
                this subsection through the end of a calendar 
                year may not exceed the amount available to the 
                Fund as of the first day of such year. For 
                purposes of this subsection, amounts that are 
                expended under this title insofar as such 
                amounts would not have been expended but for 
                the application of this subsection shall be 
                counted as amounts expended as a result of such 
                application.
                  [(B) Application of limitation.--The 
                Secretary may obligate funds from the Fund for 
                a year only if the Secretary determines (and 
                the Chief Actuary of the Centers for Medicare & 
                Medicaid Services and the appropriate budget 
                officer certify) that there are available in 
                the Fund at the beginning of the year 
                sufficient amounts to cover all such 
                obligations incurred during the year consistent 
                with subparagraph (A). The Secretary shall take 
                such steps, in connection with computing 
                additional payment amounts under paragraphs (3) 
                and (4) and including limitations on enrollment 
                in MA regional plans receiving such payments, 
                as will ensure that sufficient funds are 
                available to make such payments for the entire 
                year. Funds shall only be made available from 
                the Fund pursuant to an apportionment made in 
                accordance with applicable procedures.
          [(6) Secretary reports.--Not later than April 1 of 
        each year (beginning in 2008), the Secretary shall 
        submit a report to Congress and the Comptroller General 
        of the United States that includes--
                  [(A) a detailed description of--
                          [(i) the total amount expended as a 
                        result of the application of this 
                        subsection in the previous year 
                        compared to the total amount that would 
                        have been expended under this title in 
                        the year if this subsection had not 
                        been enacted;
                          [(ii) the projections of the total 
                        amount that will be expended as a 
                        result of the application of this 
                        subsection in the year in which the 
                        report is submitted compared to the 
                        total amount that would have been 
                        expended under this title in the year 
                        if this subsection had not been 
                        enacted;
                          [(iii) amounts remaining within the 
                        funding limitation specified in 
                        paragraph (5); and
                          [(iv) the steps that the Secretary 
                        will take under paragraph (5)(B) to 
                        ensure that the application of this 
                        subsection will not cause expenditures 
                        to exceed the amount available in the 
                        Fund; and
                  [(B) a certification from the Chief Actuary 
                of the Centers for Medicare & Medicaid Services 
                that the description provided under 
                subparagraph (A) is reasonable, accurate, and 
                based on generally accepted actuarial 
                principles and methodologies.]

           *       *       *       *       *       *       *


                 DEFINITIONS; MISCELLANEOUS PROVISIONS

  Sec. 1859. (a) * * *

           *       *       *       *       *       *       *

  (f) Requirements Regarding Enrollment in Specialized MA Plans 
for Special Needs Individuals.--
          (1) Requirements for enrollment.--In the case of a 
        specialized MA plan for special needs individuals (as 
        defined in subsection (b)(6)), notwithstanding any 
        other provision of this part and in accordance with 
        regulations of the Secretary and for periods before 
        [January 1, 2011] January 1, 2013 (or January 1, 2016, 
        in the case of a plan described in section 1177(b)(1) 
        of the America's Affordable Health Choices Act of 
        2009), the plan may restrict the enrollment of 
        individuals under the plan to individuals who are 
        within one or more classes of special needs 
        individuals.

           *       *       *       *       *       *       *

          (4) Additional requirements for severe or disabling 
        chronic condition snps.--In the case of a specialized 
        MA plan for special needs individuals described in 
        subsection (b)(6)(B)(iii), the applicable requirements 
        described in this paragraph are as follows:
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) The plan does not enroll an individual on 
                or after January 1, 2011, other than during an 
                annual, coordinated open enrollment period or 
                when at the time of the diagnosis of the 
                disease or condition that qualifies the 
                individual as an individual described in 
                subsection (b)(6)(B)(iii).

           *       *       *       *       *       *       *


               [COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM

  [Sec. 1860C-1. (a) Establishment of Program.--
          [(1) In general.--The Secretary shall establish a 
        program under this section (in this section referred to 
        as the ``CCA program'') for the application of 
        comparative cost adjustment in CCA areas selected under 
        this section.
          [(2) Duration.--The CCA program shall begin January 
        1, 2010, and shall extend over a period of 6 years, and 
        end on December 31, 2015.
          [(3) Report.--Upon the completion of the CCA program, 
        the Secretary shall submit a report to Congress. Such 
        report shall include the following, with respect to 
        both this part and the original medicare fee-for-
        service program:
                  [(A) An evaluation of the financial impact of 
                the CCA program.
                  [(B) An evaluation of changes in access to 
                physicians and other health care providers.
                  [(C) Beneficiary satisfaction.
                  [(D) Recommendations regarding any extension 
                or expansion of the CCA program.
  [(b) Requirements for Selection of CCA Areas.--
          [(1) CCA area defined.--
                  [(A) In general.--For purposes of this 
                section, the term ``CCA area'' means an MSA 
                that meets the requirements of paragraph (2) 
                and is selected by the Secretary under 
                subsection (c).
                  [(B) MSA defined.--For purposes of this 
                section, the term ``MSA'' means a Metropolitan 
                Statistical Area (or such similar area as the 
                Secretary recognizes).
          [(2) Requirements for cca areas.--The requirements of 
        this paragraph for an MSA to be a CCA area are as 
        follows:
                  [(A) MA enrollment requirement.--For the 
                reference month (as defined under section 
                1858(f)(4)(B)) with respect to 2010, at least 
                25 percent of the total number of MA eligible 
                individuals who reside in the MSA were enrolled 
                in an MA local plan described in section 
                1851(a)(2)(A)(i).
                  [(B) 2 plan requirement.--There will be 
                offered in the MSA during the annual, 
                coordinated election period under section 
                1851(e)(3)(B) before the beginning of 2010 at 
                least 2 MA local plans described in section 
                1851(a)(2)(A)(i) (in addition to the fee-for-
                service program under parts A and B), each 
                offered by a different MA organization and each 
                of which met the minimum enrollment 
                requirements of paragraph (1) of section 
                1857(b) (as applied without regard to paragraph 
                (3) thereof) as of the reference month.
  [(c) Selection of CCA Areas.--
          [(1) General selection criteria.--The Secretary shall 
        select CCA areas from among those MSAs qualifying under 
        subsection (b) in a manner that--
                  [(A) seeks to maximize the opportunity to 
                test the application of comparative cost 
                adjustment under this title;
                  [(B) does not seek to maximize the number of 
                MA eligible individuals who reside in such 
                areas; and
                  [(C) provides for geographic diversity 
                consistent with the criteria specified in 
                paragraph (2).
          [(2) Selection criteria.--With respect to the 
        selection of MSAs that qualify to be CCA areas under 
        subsection (b), the following rules apply, to the 
        maximum extent feasible:
                  [(A) Maximum number.--The number of such MSAs 
                selected may not exceed the lesser of (i) 6, or 
                (ii) 25 percent of the number of MSAs that meet 
                the requirement of subsection (b)(2)(A).
                  [(B) One of 4 largest areas by population.--
                At least one such qualifying MSA shall be 
                selected from among the 4 such qualifying MSAs 
                with the largest total population of MA 
                eligible individuals.
                  [(C) One of 4 areas with lowest population 
                density.--At least one such qualifying MSA 
                shall be selected from among the 4 such 
                qualifying MSAs with the lowest population 
                density (as measured by residents per square 
                mile or similar measure of density).
                  [(D) Multistate area.--At least one such 
                qualifying MSA shall be selected that includes 
                a multi-State area. Such an MSA may be an MSA 
                described in subparagraph (B) or (C).
                  [(E) Limitation within same geographic 
                region.--No more than 2 such MSAs shall be 
                selected that are, in whole or in part, within 
                the same geographic region (as specified by the 
                Secretary) of the United States.
                  [(F) Priority to areas not within certain 
                demonstration projects.--Priority shall be 
                provided for those qualifying MSAs that do not 
                have a demonstration project in effect as of 
                the date of the enactment of this section for 
                medicare preferred provider organization plans 
                under this part.
  [(d) Application of Comparative Cost Adjustment.--
          [(1) In general.--In the case of a CCA area for a 
        year--
                  [(A) for purposes of applying this part with 
                respect to payment for MA local plans, any 
                reference to an MA area-specific non-drug 
                monthly benchmark amount shall be treated as a 
                reference to such benchmark computed as if the 
                CCA area-specific non-drug monthly benchmark 
                amount (as defined in subsection (e)(1)) were 
                substituted for the amount described in section 
                1853(j)(1)(A) for the CCA area and year 
                involved, as phased in under paragraph (3); and
                  [(B) with respect to months in the year for 
                individuals residing in the CCA area who are 
                not enrolled in an MA plan, the amount of the 
                monthly premium under section 1839 is subject 
                to adjustment under subsection (f).
          [(2) Exclusion of ma local areas with fewer than 2 
        organizations offering ma plans.--
                  [(A) In general.--In no case shall an MA 
                local area that is within an MSA be included as 
                part of a CCA area unless for 2010 (and, except 
                as provided in subparagraph (B), for a 
                subsequent year) there is offered in each part 
                of such MA local area at least 2 MA local plans 
                described in section 1851(a)(2)(A)(i) each of 
                which is offered by a different MA 
                organization.
                  [(B) Continuation.--If an MA local area meets 
                the requirement of subparagraph (A) and is 
                included in a CCA area for 2010, such local 
                area shall continue to be included in such CCA 
                area for a subsequent year notwithstanding that 
                it no longer meets such requirement so long as 
                there is at least one MA local plan described 
                in section 1851(a)(2)(A)(i) that is offered in 
                such local area.
          [(3) Phase-in of cca benchmark.--
                  [(A) In general.--In applying this section 
                for a year before 2013, paragraph (1)(A) shall 
                be applied as if the phase-in fraction under 
                subparagraph (B) of the CCA non-drug monthly 
                benchmark amount for the year were substituted 
                for such fraction of the MA area-specific non-
                drug monthly benchmark amount.
                  [(B) Phase-in fraction.--The phase-in 
                fraction under this subparagraph is--
                          [(i) for 2010 \1/4\; and
                          [(ii) for a subsequent year is the 
                        phase-in fraction under this 
                        subparagraph for the previous year 
                        increased by \1/4\, but in no case more 
                        than 1.
  [(e) Computation of CCA Benchmark Amount.--
          [(1) CCA non-drug monthly benchmark amount.--For 
        purposes of this section, the term ``CCA non-drug 
        monthly benchmark amount'' means, with respect to a CCA 
        area for a month in a year, the sum of the 2 components 
        described in paragraph (2) for the area and year. The 
        Secretary shall compute such benchmark amount for each 
        such CCA area before the beginning of each annual, 
        coordinated election period under section 1851(e)(3)(B) 
        for each year (beginning with 2010) in which the CCA 
        area is so selected.
          [(2) 2 Components.--For purposes of paragraph (1), 
        the 2 components described in this paragraph for a CCA 
        area and a year are the following:
                  [(A) MA local component.--The product of the 
                following:
                          [(i) Weighted average of medicare 
                        advantage plan bids in area.--The 
                        weighted average of the plan bids for 
                        the area and year (as determined under 
                        paragraph (3)(A)).
                          [(ii) Non-ffs market share.--One 
                        minus the fee-for-service market share 
                        percentage, determined under paragraph 
                        (4) for the area and year.
                  [(B) Fee-for-service component.--The product 
                of the following:
                          [(i) Fee-for-service area-specific 
                        non-drug amount.--The fee-for-service 
                        area-specific non-drug amount (as 
                        defined in paragraph (5)) for the area 
                        and year.
                          [(ii) Fee-for-service market share.--
                        The fee-for-service market share 
                        percentage, determined under paragraph 
                        (4) for the area and year.
          [(3) Determination of weighted average ma bids for a 
        cca area.--
                  [(A) In general.--For purposes of paragraph 
                (2)(A)(i), the weighted average of plan bids 
                for a CCA area and a year is, subject to 
                subparagraph (D), the sum of the following 
                products for MA local plans described in 
                subparagraph (C) in the area and year:
                          [(i) Monthly medicare advantage 
                        statutory non-drug bid amount.--The 
                        accepted unadjusted MA statutory non-
                        drug monthly bid amount.
                          [(ii) Plan's share of medicare 
                        advantage enrollment in area.--The 
                        number of individuals described in 
                        subparagraph (B), divided by the total 
                        number of such individuals for all MA 
                        plans described in subparagraph (C) for 
                        that area and year.
                  [(B) Counting of individuals.--The Secretary 
                shall count, for each MA local plan described 
                in subparagraph (C) for an area and year, the 
                number of individuals who reside in the area 
                and who were enrolled under such plan under 
                this part during the reference month for that 
                year.
                  [(C) Exclusion of plans not offered in 
                previous year.--For an area and year, the MA 
                local plans described in this subparagraph are 
                MA local plans described in section 
                1851(a)(2)(A)(i) that are offered in the area 
                and year and were offered in the CCA area in 
                the reference month.
                  [(D) Computation of weighted average of plan 
                bids.--In calculating the weighted average of 
                plan bids for a CCA area under subparagraph 
                (A)--
                          [(i) in the case of an MA local plan 
                        that has a service area only part of 
                        which is within such CCA area, the MA 
                        organization offering such plan shall 
                        submit a separate bid for such plan for 
                        the portion within such CCA area; and
                          [(ii) the Secretary shall adjust such 
                        separate bid (or, in the case of an MA 
                        local plan that has a service area 
                        entirely within such CCA area, the plan 
                        bid) as may be necessary to take into 
                        account differences between the service 
                        area of such plan within the CCA area 
                        and the entire CCA area and the 
                        distribution of plan enrollees of all 
                        MA local plans offered within the CCA 
                        area.
          [(4) Computation of fee-for-service market share 
        percentage.--The Secretary shall determine, for a year 
        and a CCA area, the proportion (in this subsection 
        referred to as the ``fee-for-service market share 
        percentage'') equal to--
                  [(A) the total number of MA eligible 
                individuals residing in such area who during 
                the reference month for the year were not 
                enrolled in any MA plan; divided by
                  [(B) the sum of such number and the total 
                number of MA eligible individuals residing in 
                such area who during such reference month were 
                enrolled in an MA local plan described in 
                section 1851(a)(2)(A)(i),
        or, if greater, such proportion determined for 
        individuals nationally.
          [(5) Fee-for-service area-specific non-drug amount.--
                  [(A) In general.--For purposes of paragraph 
                (2)(B)(i) and subsection (f)(2)(A), subject to 
                subparagraph (C), the term ``fee-for-service 
                area-specific non-drug amount'' means, for a 
                CCA area and a year, the adjusted average per 
                capita cost for such area and year involved, 
                determined under section 1876(a)(4) and 
                adjusted as appropriate for the purpose of risk 
                adjustment for benefits under the original 
                medicare fee-for-service program option for 
                individuals entitled to benefits under part A 
                and enrolled under part B who are not enrolled 
                in an MA plan for the year, but adjusted to 
                exclude costs attributable to payments under 
                section 1886(h).
                  [(B) Use of full risk adjustment to 
                standardize fee-for-service costs to typical 
                beneficiary.--In determining the adjusted 
                average per capita cost for an area and year 
                under subparagraph (A), such costs shall be 
                adjusted to fully take into account the 
                demographic and health status risk factors 
                established under section 1853(a)(1)(A)(iv) so 
                that such per capita costs reflect the average 
                costs for a typical beneficiary residing in the 
                CCA area.
                  [(C) Inclusion of costs of va and dod 
                military facility services to medicare-eligible 
                beneficiaries.--In determining the adjusted 
                average per capita cost under subparagraph (A) 
                for a year, such cost shall be adjusted to 
                include the Secretary's estimate, on a per 
                capita basis, of the amount of additional 
                payments that would have been made in the area 
                involved under this title if individuals 
                entitled to benefits under this title had not 
                received services from facilities of the 
                Department of Veterans Affairs or the 
                Department of Defense.
  [(f) Premium Adjustment.--
          [(1) Application.--
                  [(A) In general.--Except as provided in 
                subparagraph (B), in the case of an individual 
                who is enrolled under part B, who resides in a 
                CCA area, and who is not enrolled in an MA plan 
                under this part, the monthly premium otherwise 
                applied under part B (determined without regard 
                to subsections (b), (f), and (i) of section 
                1839 or any adjustment under this subsection) 
                shall be adjusted in accordance with paragraph 
                (2), but only in the case of premiums for 
                months during the period in which the CCA 
                program under this section for such area is in 
                effect.
                  [(B) No premium adjustment for subsidy 
                eligible beneficiaries.--No premium adjustment 
                shall be made under this subsection for a 
                premium for a month if the individual is 
                determined to be a subsidy eligible individual 
                (as defined in section 1860D-14(a)(3)(A)) for 
                the month.
          [(2) Amount of adjustment.--
                  [(A) In general.--Under this paragraph, 
                subject to the exemption under paragraph (1)(B) 
                and the limitation under subparagraph (B), if 
                the fee-for-service area-specific non-drug 
                amount (as defined in section (e)(5)) for a CCA 
                area in which an individual resides for a 
                month--
                          [(i) does not exceed the CCA non-drug 
                        monthly benchmark amount (as determined 
                        under subsection (e)(1)) for such area 
                        and month, the amount of the premium 
                        for the individual for the month shall 
                        be reduced, by an amount equal to 75 
                        percent of the amount by which such CCA 
                        benchmark exceeds such fee-for-service 
                        area-specific non-drug amount; or
                          [(ii) exceeds such CCA non-drug 
                        benchmark, the amount of the premium 
                        for the individual for the month shall 
                        be adjusted to ensure, that--
                                  [(I) the sum of the amount of 
                                the adjusted premium and the 
                                CCA non-drug benchmark for the 
                                area; is equal to
                                  [(II) the sum of the 
                                unadjusted premium plus the 
                                amount of such fee-for-service 
                                area-specific non-drug amount 
                                for the area.
                  [(B) Limitation.--In no case shall the actual 
                amount of an adjustment under subparagraph (A) 
                for an area and month in a year result in an 
                adjustment that exceeds the maximum adjustment 
                permitted under subparagraph (C) for the area 
                and year, or, if less, the maximum annual 
                adjustment permitted under subparagraph (D) for 
                the area and year.
                  [(C) Phase-in of adjustment.--The amount of 
                an adjustment under subparagraph (A) for a CCA 
                area and year may not exceed the product of the 
                phase-in fraction for the year under subsection 
                (d)(3)(B) multiplied by the amount of the 
                adjustment otherwise computed under 
                subparagraph (A) for the area and year, 
                determined without regard to this subparagraph 
                and subparagraph (D).
                  [(D) 5-percent limitation on adjustment.--The 
                amount of the adjustment under this subsection 
                for months in a year shall not exceed 5 percent 
                of the amount of the monthly premium amount 
                determined for months in the year under section 
                1839 without regard to subsections (b), (f), 
                and (i) of such section and this subsection.]

          Part D--Voluntary Prescription Drug Benefit Program

 Subpart 1--Part D Eligible Individuals and Prescription Drug Benefits

                ELIGIBILITY, ENROLLMENT, AND INFORMATION

  Sec. 1860D-1. (a) * * *
  (b) Enrollment Process for Prescription Drug Plans.--
          (1) Establishment of process.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Special rule.--The process established 
                under subparagraph (A) shall include, in the 
                case of a part D eligible individual who is a 
                full-benefit dual eligible individual (as 
                defined in section 1935(c)(6)) who has failed 
                to enroll in a prescription drug plan or an MA-
                PD plan, for the enrollment in a prescription 
                drug plan that has a monthly beneficiary 
                premium that does not exceed the premium 
                assistance available under section 1860D-
                14(a)(1)(A)). If there is more than one such 
                plan available, the Secretary shall enroll such 
                an individual on a random basis among all such 
                plans in the PDP region or through use of an 
                intelligent assignment process that is designed 
                to maximize the access of such individual to 
                necessary prescription drugs while minimizing 
                costs to such individual and to the program 
                under this part to the greatest extent 
                possible. In the case the Secretary enrolls 
                such individuals through use of an intelligent 
                assignment process, such process shall take 
                into account the extent to which prescription 
                drugs necessary for the individual are covered 
                in the case of a PDP sponsor of a prescription 
                drug plan that uses a formulary, the use of 
                prior authorization or other restrictions on 
                access to coverage of such prescription drugs 
                by such a sponsor, and the overall quality of a 
                prescription drug plan as measured by quality 
                ratings established by the Secretary. Nothing 
                in the previous sentence shall prevent such an 
                individual from declining or changing such 
                enrollment.
                  (D) Special rule for subsidy eligible 
                individuals.--The process established under 
                subparagraph (A) shall include, in the case of 
                an individual described in section 1860D-
                1(b)(3)(D) who fails to enroll in a 
                prescription drug plan or an MA-PD plan during 
                the special enrollment established under such 
                section applicable to such individual, the 
                application of the assignment process described 
                in subparagraph (C) to such individual in the 
                same manner as such assignment process applies 
                to a part D eligible individual described in 
                such subparagraph (C). Nothing in the previous 
                sentence shall prevent an individual described 
                in such sentence from declining enrollment in a 
                plan determined appropriate by the Secretary 
                (or in the program under this part) or from 
                changing such enrollment.

           *       *       *       *       *       *       *

          (3) Additional special enrollment periods.--The 
        Secretary shall establish special enrollment periods, 
        including the following:
                  (A) * * *

           *       *       *       *       *       *       *

                  [(D) Medicaid coverage.--In the case of an 
                individual (as determined by the Secretary) who 
                is a full-benefit dual eligible individual (as 
                defined in section 1935(c)(6)).]
                  (D) Subsidy eligible individuals.--In the 
                case of an individual (as determined by the 
                Secretary) who is determined under subparagraph 
                (B) of section 1860D-14(a)(3) to be a subsidy 
                eligible individual.

           *       *       *       *       *       *       *

                  (F) Change in formulary resulting in increase 
                in cost-sharing.--
                          (i) In general.--Except as provided 
                        in clause (ii), in the case of an 
                        individual enrolled in a prescription 
                        drug plan (or MA-PD plan) who has been 
                        prescribed and is using a covered part 
                        D drug while so enrolled, if the 
                        formulary of the plan is materially 
                        changed (other than at the end of a 
                        contract year) so to reduce the 
                        coverage (or increase the cost-sharing) 
                        of the drug under the plan.
                          (ii) Exception.--Clause (i) shall not 
                        apply in the case that a drug is 
                        removed from the formulary of a plan 
                        because of a recall or withdrawal of 
                        the drug issued by the Food and Drug 
                        Administration, because the drug is 
                        replaced with a generic drug that is a 
                        therapeutic equivalent, or because of 
                        utilization management applied to--
                                  (I) a drug whose labeling 
                                includes a boxed warning 
                                required by the Food and Drug 
                                Administration under section 
                                210.57(c)(1) of title 21, Code 
                                of Federal Regulations (or a 
                                successor regulation); or
                                  (II) a drug required under 
                                subsection (c)(2) of section 
                                505-1 of the Federal Food, 
                                Drug, and Cosmetic Act to have 
                                a Risk Evaluation and 
                                Management Strategy that 
                                includes elements under 
                                subsection (f) of such section.

           *       *       *       *       *       *       *


                       PRESCRIPTION DRUG BENEFITS

  Sec. 1860D-2. (a) * * *
  (b) Standard Prescription Drug Coverage.--For purposes of 
this part and part C, the term ``standard prescription drug 
coverage'' means coverage of covered part D drugs that meets 
the following requirements:
          (1) * * *

           *       *       *       *       *       *       *

          (3) Initial coverage limit.--
                  (A) In general.--Except as provided in 
                [paragraph (4)] paragraphs (4) and (7), the 
                coverage has an initial coverage limit on the 
                maximum costs that may be recognized for 
                payment purposes (including the annual 
                deductible)--
                          (i) * * *

           *       *       *       *       *       *       *

          (4) Protection against high out-of-pocket 
        expenditures.--
                  (A) * * *
                  (B) Annual out-of-pocket threshold.--
                          (i) In general.--For purposes of this 
                        part subject to paragraph (7), the 
                        ``annual out-of-pocket threshold'' 
                        specified in this subparagraph--
                                  (I) * * *

           *       *       *       *       *       *       *

                  (C) Application.--In applying subparagraph 
                (A)--
                          (i) incurred costs shall only include 
                        costs incurred with respect to covered 
                        part D drugs for the annual deductible 
                        described in paragraph (1), for cost-
                        sharing described in paragraph (2), and 
                        for amounts for which benefits are not 
                        provided because of the application of 
                        the initial coverage limit described in 
                        paragraph (3), but does not include any 
                        costs incurred for covered part D drugs 
                        which are not included (or treated as 
                        being included) in the plan's 
                        formulary; [and]
                          (ii) [such costs shall be treated as 
                        incurred only if] subject to subsection 
                        (g)(2)(C), subject to clause (iii), 
                        such costs shall be treated as incurred 
                        only if they are paid by the part D 
                        eligible individual (or by another 
                        person, such as a family member, on 
                        behalf of the individual)[, under 
                        section 1860D-14, or under a State 
                        Pharmaceutical Assistance Program] and 
                        the part D eligible individual (or 
                        other person) is not reimbursed through 
                        insurance or otherwise, a group health 
                        plan, or other third-party payment 
                        arrangement (other than under such 
                        section or such a Program) for such 
                        costs[.]; and
                          (iii) such costs shall be treated as 
                        incurred and shall not be considered to 
                        be reimbursed under clause (ii) if such 
                        costs are borne or paid--
                                  (I) under section 1860D-14;
                                  (II) under a State 
                                Pharmaceutical Assistance 
                                Program;
                                  (III) by the Indian Health 
                                Service, an Indian tribe or 
                                tribal organization, or an 
                                urban Indian organization (as 
                                defined in section 4 of the 
                                Indian Health Care Improvement 
                                Act); or
                                  (IV) under an AIDS Drug 
                                Assistance Program under part B 
                                of title XXVI of the Public 
                                Health Service Act.

           *       *       *       *       *       *       *

          (7) Phased-in elimination of coverage gap.--
                  (A) In general.--For each year beginning with 
                2011, the Secretary shall consistent with this 
                paragraph progressively increase the initial 
                coverage limit (described in subsection (b)(3)) 
                and decrease the annual out-of-pocket threshold 
                from the amounts otherwise computed until there 
                is a continuation of coverage from the initial 
                coverage limit for expenditures incurred 
                through the total amount of expenditures at 
                which benefits are available under paragraph 
                (4).
                  (B) Increase in initial coverage limit.--For 
                a year beginning with 2011, the initial 
                coverage limit otherwise computed without 
                regard to this paragraph shall be increased by 
                \1/2\ of the cumulative phase-in percentage (as 
                defined in subparagraph (D)(ii) for the year) 
                times the out-of-pocket gap amount (as defined 
                in subparagraph (E)) for the year.
                  (C) Decrease in annual out-of-pocket 
                threshold.--For a year beginning with 2011, the 
                annual out-of-pocket threshold otherwise 
                computed without regard to this paragraph shall 
                be decreased by \1/2\ of the cumulative phase-
                in percentage of the out-of-pocket gap amount 
                for the year multiplied by 1.75.
                  (D) Phase-in.--For purposes of this 
                paragraph:
                          (i) Annual phase-in percentage.--The 
                        term ``annual phase-in percentage'' 
                        means--
                                  (I) for 2011, 13 percent;
                                  (II) for 2012, 2013, 2014, 
                                and 2015, 5 percent;
                                  (III) for 2016 through 2018, 
                                7.5 percent; and
                                  (IV) for 2019 and each 
                                subsequent year, 10 percent.
                          (ii) Cumulative phase-in 
                        percentage.--The term ``cumulative 
                        phase-in percentage'' means for a year 
                        the sum of the annual phase-in 
                        percentage for the year and the annual 
                        phase-in percentages for each previous 
                        year beginning with 2011, but in no 
                        case more than 100 percent.
                  (E) Out-of-pocket gap amount.--For purposes 
                of this paragraph, the term ``out-of-pocket gap 
                amount'' means for a year the amount by which--
                          (i) the annual out-of-pocket 
                        threshold specified in paragraph (4)(B) 
                        for the year (as determined as if this 
                        paragraph did not apply), exceeds
                          (ii) the sum of--
                                  (I) the annual deductible 
                                under paragraph (1) for the 
                                year; and
                                  (II) \1/4\ of the amount by 
                                which the initial coverage 
                                limit under paragraph (3) for 
                                the year (as determined as if 
                                this paragraph did not apply) 
                                exceeds such annual deductible.

           *       *       *       *       *       *       *

  (e) Covered Part D Drug Defined.--
          (1) In general.--Except as provided in this 
        subsection and subsections (f) and (g), for purposes of 
        this part, the term ``covered part D drug'' means--
                  (A)  * * *
                  (B) a biological product described in clauses 
                (i) through (iii) of subparagraph (B) of such 
                section or insulin described in subparagraph 
                (C) of such section and medical supplies 
                associated with the injection of insulin (as 
                defined in regulations of the Secretary),
        and [such term includes a vaccine licensed under 
        section 351 of the Public Health Service Act (and, for 
        vaccines administered on or after January 1, 2008, its 
        administration) and] any use of a covered part D drug 
        for a medically accepted indication (as defined in 
        paragraph (4)).

           *       *       *       *       *       *       *

  (f) Prescription Drug Rebate Agreement for Full-Benefit Dual 
Eligible Individuals.--
          (1) In general.--In this part, the term ``covered 
        part D drug'' does not include any drug or biologic 
        that is manufactured by a manufacturer that has not 
        entered into and have in effect a rebate agreement 
        described in paragraph (2).
          (2) Rebate agreement.--A rebate agreement under this 
        subsection shall require the manufacturer to provide to 
        the Secretary a rebate for each rebate period (as 
        defined in paragraph (6)(B)) ending after December 31, 
        2010, in the amount specified in paragraph (3) for any 
        covered part D drug of the manufacturer dispensed after 
        December 31, 2010, to any full-benefit dual eligible 
        individual (as defined in paragraph (6)(A)) for which 
        payment was made by a PDP sponsor under part D or a MA 
        organization under part C for such period. Such rebate 
        shall be paid by the manufacturer to the Secretary not 
        later than 30 days after the date of receipt of the 
        information described in section 1860D-12(b)(7), 
        including as such section is applied under section 
        1857(f)(3).
          (3) Rebate for full-benefit dual eligible medicare 
        drug plan enrollees.--
                  (A) In general.--The amount of the rebate 
                specified under this paragraph for a 
                manufacturer for a rebate period, with respect 
                to each dosage form and strength of any covered 
                part D drug provided by such manufacturer and 
                dispensed to a full-benefit dual eligible 
                individual, shall be equal to the product of--
                          (i) the total number of units of such 
                        dosage form and strength of the drug so 
                        provided and dispensed for which 
                        payment was made by a PDP sponsor under 
                        part D or a MA organization under part 
                        C for the rebate period (as reported 
                        under section 1860D-12(b)(7), including 
                        as such section is applied under 
                        section 1857(f)(3)); and
                          (ii) the amount (if any) by which--
                                  (I) the Medicaid rebate 
                                amount (as defined in 
                                subparagraph (B)) for such 
                                form, strength, and period, 
                                exceeds
                                  (II) the average Medicare 
                                drug program full-benefit dual 
                                eligible rebate amount (as 
                                defined in subparagraph (C)) 
                                for such form, strength, and 
                                period.
                  (B) Medicaid rebate amount.--For purposes of 
                this paragraph, the term ``Medicaid rebate 
                amount'' means, with respect to each dosage 
                form and strength of a covered part D drug 
                provided by the manufacturer for a rebate 
                period--
                          (i) in the case of a single source 
                        drug or an innovator multiple source 
                        drug, the amount specified in paragraph 
                        (1)(A)(ii) of section 1927(b) plus the 
                        amount, if any, specified in paragraph 
                        (2)(A)(ii) of such section, for such 
                        form, strength, and period; or
                          (ii) in the case of any other covered 
                        outpatient drug, the amount specified 
                        in paragraph (3)(A)(i) of such section 
                        for such form, strength, and period.
                  (C) Average medicare drug program full-
                benefit dual eligible rebate amount.--For 
                purposes of this subsection, the term ``average 
                Medicare drug program full-benefit dual 
                eligible rebate amount'' means, with respect to 
                each dosage form and strength of a covered part 
                D drug provided by a manufacturer for a rebate 
                period, the sum, for all PDP sponsors under 
                part D and MA organizations administering a MA-
                PD plan under part C, of--
                          (i) the product, for each such 
                        sponsor or organization, of--
                                  (I) the sum of all rebates, 
                                discounts, or other price 
                                concessions (not taking into 
                                account any rebate provided 
                                under paragraph (2) for such 
                                dosage form and strength of the 
                                drug dispensed, calculated on a 
                                per-unit basis, but only to the 
                                extent that any such rebate, 
                                discount, or other price 
                                concession applies equally to 
                                drugs dispensed to full-benefit 
                                dual eligible Medicare drug 
                                plan enrollees and drugs 
                                dispensed to PDP and MA-PD 
                                enrollees who are not full-
                                benefit dual eligible 
                                individuals; and
                                  (II) the number of the units 
                                of such dosage and strength of 
                                the drug dispensed during the 
                                rebate period to full-benefit 
                                dual eligible individuals 
                                enrolled in the prescription 
                                drug plans administered by the 
                                PDP sponsor or the MA-PD plans 
                                administered by the MA-PD 
                                organization; divided by
                          (ii) the total number of units of 
                        such dosage and strength of the drug 
                        dispensed during the rebate period to 
                        full-benefit dual eligible individuals 
                        enrolled in all prescription drug plans 
                        administered by PDP sponsors and all 
                        MA-PD plans administered by MA-PD 
                        organizations.
          (4) Length of agreement.--The provisions of paragraph 
        (4) of section 1927(b) (other than clauses (iv) and (v) 
        of subparagraph (B)) shall apply to rebate agreements 
        under this subsection in the same manner as such 
        paragraph applies to a rebate agreement under such 
        section.
          (5) Other terms and conditions.--The Secretary shall 
        establish other terms and conditions of the rebate 
        agreement under this subsection, including terms and 
        conditions related to compliance, that are consistent 
        with this subsection.
          (6) Definitions.--In this subsection and section 
        1860D-12(b)(7):
                  (A) Full-benefit dual eligible individual.--
                The term ``full-benefit dual eligible 
                individual'' has the meaning given such term in 
                section 1935(c)(6).
                  (B) Rebate period.--The term ``rebate 
                period'' has the meaning given such term in 
                section 1927(k)(8).
  (g) Requirement for Manufacturer Discount Agreement for 
Certain Qualifying Drugs.--
          (1) In general.--In this part, the term ``covered 
        part D drug'' does not include any drug or biologic 
        that is manufactured by a manufacturer that has not 
        entered into and have in effect for all qualifying 
        drugs (as defined in paragraph (5)(A)) a discount 
        agreement described in paragraph (2).
          (2) Discount agreement.--
                  (A) Periodic discounts.--A discount agreement 
                under this paragraph shall require the 
                manufacturer involved to provide, to each PDP 
                sponsor with respect to a prescription drug 
                plan or each MA organization with respect to 
                each MA-PD plan, a discount in an amount 
                specified in paragraph (3) for qualifying drugs 
                (as defined in paragraph (5)(A)) of the 
                manufacturer dispensed to a qualifying enrollee 
                after December 31, 2010, insofar as the 
                individual is in the original gap in coverage 
                (as defined in paragraph (5)(E)).
                  (B) Discount agreement.--Insofar as not 
                inconsistent with this subsection, the 
                Secretary shall establish terms and conditions 
                of such agreement, including terms and 
                conditions relating to compliance, similar to 
                the terms and conditions for rebate agreements 
                under paragraphs (2), (3), and (4) of section 
                1927(b), except that--
                          (i) discounts shall be applied under 
                        this subsection to prescription drug 
                        plans and MA-PD plans instead of State 
                        plans under title XIX;
                          (ii) PDP sponsors and MA 
                        organizations shall be responsible, 
                        instead of States, for provision of 
                        necessary utilization information to 
                        drug manufacturers; and
                          (iii) sponsors and MA organizations 
                        shall be responsible for reporting 
                        information on drug-component 
                        negotiated price, instead of other 
                        manufacturer prices.
                  (C) Counting discount toward true out-of-
                pocket costs.--Under the discount agreement, in 
                applying subsection (b)(4), with regard to 
                subparagraph (C)(i) of such subsection, if a 
                qualified enrollee purchases the qualified drug 
                insofar as the enrollee is in an actual gap of 
                coverage (as defined in paragraph (5)(D)), the 
                amount of the discount under the agreement 
                shall be treated and counted as costs incurred 
                by the plan enrollee.
          (3) Discount amount.--The amount of the discount 
        specified in this paragraph for a discount period for a 
        plan is equal to 50 percent of the amount of the drug-
        component negotiated price (as defined in paragraph 
        (5)(C)) for qualifying drugs for the period involved.
          (4) Additional terms.--In the case of a discount 
        provided under this subsection with respect to a 
        prescription drug plan offered by a PDP sponsor or an 
        MA-PD plan offered by an MA organization, if a 
        qualified enrollee purchases the qualified drug--
                  (A) insofar as the enrollee is in an actual 
                gap of coverage (as defined in paragraph 
                (5)(D)), the sponsor or plan shall provide the 
                discount to the enrollee at the time the 
                enrollee pays for the drug; and
                  (B) insofar as the enrollee is in the portion 
                of the original gap in coverage (as defined in 
                paragraph (5)(E)) that is not in the actual gap 
                in coverage, the discount shall not be applied 
                against the negotiated price (as defined in 
                subsection (d)(1)(B)) for the purpose of 
                calculating the beneficiary payment.
          (5) Definitions.--In this subsection:
                  (A) Qualifying drug.--The term ``qualifying 
                drug'' means, with respect to a prescription 
                drug plan or MA-PD plan, a drug or biological 
                product that--
                          (i)(I) is a drug produced or 
                        distributed under an original new drug 
                        application approved by the Food and 
                        Drug Administration, including a drug 
                        product marketed by any cross-licensed 
                        producers or distributors operating 
                        under the new drug application;
                          (II) is a drug that was originally 
                        marketed under an original new drug 
                        application approved by the Food and 
                        Drug Administration; or
                          (III) is a biological product as 
                        approved under Section 351(a) of the 
                        Public Health Services Act;
                          (ii) is covered under the formulary 
                        of the plan; and
                          (iii) is dispensed to an individual 
                        who is in the original gap in coverage.
                  (B) Qualifying enrollee.--The term 
                ``qualifying enrollee'' means an individual 
                enrolled in a prescription drug plan or MA-PD 
                plan other than such an individual who is a 
                subsidy-eligible individual (as defined in 
                section 1860D-14(a)(3)).
                  (C) Drug-component negotiated price.--The 
                term ``drug-component negotiated price'' means, 
                with respect to a qualifying drug, the 
                negotiated price (as defined in subsection 
                (d)(1)(B)), as determined without regard to any 
                dispensing fee, of the drug under the 
                prescription drug plan or MA-PD plan involved.
                  (D) Actual gap in coverage.--The term 
                ``actual gap in coverage'' means the gap in 
                prescription drug coverage that occurs between 
                the initial coverage limit (as modified under 
                subparagraph (B) of subsection (b)(7)) and the 
                annual out-of-pocket threshold (as modified 
                under subparagraph (C) of such subsection).
                  (E) Original gap in coverage.--The term 
                ``original in gap coverage'' means the gap in 
                prescription drug coverage that would occur 
                between the initial coverage limit (described 
                in subsection (b)(3)) and the out-of-pocket 
                threshold (as defined in subsection (b)(4))(B) 
                if subsection (b)(7) did not apply.

           *       *       *       *       *       *       *


      Subpart 2--Prescription Drug Plans; PDP Sponsors; Financing

             PDP REGIONS; SUBMISSION OF BIDS; PLAN APPROVAL

  Sec. 1860D-11. (a) * * *

           *       *       *       *       *       *       *

  (d) Review of Information and Negotiation.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Rejection of bids.--Paragraph (5)(C) of section 
        1854(a) shall apply with respect to bids under this 
        section in the same manner as it applies to bids by an 
        MA organization under such section.

           *       *       *       *       *       *       *


   REQUIREMENTS FOR AND CONTRACTS WITH PRESCRIPTION DRUG PLAN (PDP) 
                                SPONSORS

  Sec. 1860D-12. (a) * * *
  (b) Contract Requirements.--
          (1) * * *

           *       *       *       *       *       *       *

          [(5) Submission of claims by pharmacies located in or 
        contracting with long-term care facilities.--Each 
        contract entered into with a PDP sponsor under this 
        part with respect to a prescription drug plan offered 
        by such sponsor shall provide that a pharmacy located 
        in, or having a contract with, a long-term care 
        facility shall have not less than 30 days (but not more 
        than 90 days) to submit claims to the sponsor for 
        reimbursement under the plan.]
          [(6)] (5) Regular update of prescription drug pricing 
        standard.--If the PDP sponsor of a prescription drug 
        plan uses a standard for reimbursement of pharmacies 
        based on the cost of a drug, each contract entered into 
        with such sponsor under this part with respect to the 
        plan shall provide that the sponsor shall update such 
        standard not less frequently than once every 7 days, 
        beginning with an initial update on January 1 of each 
        year, to accurately reflect the market price of 
        acquiring the drug.
          (6) Reporting requirement for the determination and 
        payment of rebates by manufacturers related to rebate 
        for full-benefit dual eligible medicare drug plan 
        enrollees.--
                  (A) In general.--For purposes of the rebate 
                under section 1860D-2(f) for contract years 
                beginning on or after January 1, 2011, each 
                contract entered into with a PDP sponsor under 
                this part with respect to a prescription drug 
                plan shall require that the sponsor comply with 
                subparagraphs (B) and (C).
                  (B) Report form and contents.--Not later than 
                60 days after the end of each rebate period (as 
                defined in section 1860D-2(f)(6)(B)) within 
                such a contract year to which such section 
                applies, a PDP sponsor of a prescription drug 
                plan under this part shall report to each 
                manufacturer--
                          (i) information (by National Drug 
                        Code number) on the total number of 
                        units of each dosage, form, and 
                        strength of each drug of such 
                        manufacturer dispensed to full-benefit 
                        dual eligible Medicare drug plan 
                        enrollees under any prescription drug 
                        plan operated by the PDP sponsor during 
                        the rebate period;
                          (ii) information on the price 
                        discounts, price concessions, and 
                        rebates for such drugs for such form, 
                        strength, and period;
                          (iii) information on the extent to 
                        which such price discounts, price 
                        concessions, and rebates apply equally 
                        to full-benefit dual eligible Medicare 
                        drug plan enrollees and PDP enrollees 
                        who are not full-benefit dual eligible 
                        Medicare drug plan enrollees; and
                          (iv) any additional information that 
                        the Secretary determines is necessary 
                        to enable the Secretary to calculate 
                        the average Medicare drug program full-
                        benefit dual eligible rebate amount (as 
                        defined in paragraph (3)(C) of such 
                        section), and to determine the amount 
                        of the rebate required under this 
                        section, for such form, strength, and 
                        period.
                Such report shall be in a form consistent with 
                a standard reporting format established by the 
                Secretary.
                  (C) Submission to secretary.--Each PDP 
                sponsor shall promptly transmit a copy of the 
                information reported under subparagraph (B) to 
                the Secretary for the purpose of audit 
                oversight and evaluation.
                  (D) Confidentiality of information.--The 
                provisions of subparagraph (D) of section 
                1927(b)(3), relating to confidentiality of 
                information, shall apply to information 
                reported by PDP sponsors under this paragraph 
                in the same manner that such provisions apply 
                to information disclosed by manufacturers or 
                wholesalers under such section, except--
                          (i) that any reference to ``this 
                        section'' in clause (i) of such 
                        subparagraph shall be treated as being 
                        a reference to this section;
                          (ii) the reference to the Director of 
                        the Congressional Budget Office in 
                        clause (iii) of such subparagraph shall 
                        be treated as including a reference to 
                        the Medicare Payment Advisory 
                        Commission; and
                          (iii) clause (iv) of such 
                        subparagraph shall not apply.
                  (E) Oversight.--Information reported under 
                this paragraph may be used by the Inspector 
                General of the Department of Health and Human 
                Services for the statutorily authorized 
                purposes of audit, investigation, and 
                evaluations.
                  (F) Penalties for failure to provide timely 
                information and provision of false 
                information.--In the case of a PDP sponsor--
                          (i) that fails to provide information 
                        required under subparagraph (B) on a 
                        timely basis, the sponsor is subject to 
                        a civil money penalty in the amount of 
                        $10,000 for each day in which such 
                        information has not been provided; or
                          (ii) that knowingly (as defined in 
                        section 1128A(i)) provides false 
                        information under such subparagraph, 
                        the sponsor is subject to a civil money 
                        penalty in an amount not to exceed 
                        $100,000 for each item of false 
                        information.
                Such civil money penalties are in addition to 
                other penalties as may be prescribed by law. 
                The provisions of section 1128A (other than 
                subsections (a) and (b)) shall apply to a civil 
                money penalty under this subparagraph in the 
                same manner as such provisions apply to a 
                penalty or proceeding under section 1128A(a).

           *       *       *       *       *       *       *


     PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME INDIVIDUALS

  Sec. 1860D-14. (a) Income-Related Subsidies for Individuals 
With Income Up to 150 Percent of Poverty Line.--
          (1) Individuals with income below 135 percent of 
        poverty line.--In the case of a subsidy eligible 
        individual (as defined in paragraph (3)) who is 
        determined to have income that is below 135 percent of 
        the poverty line applicable to a family of the size 
        involved and who meets the resources requirement 
        described in paragraph (3)(D) (or, beginning with 2012, 
        paragraph (3)(E)) or who is covered under this 
        paragraph under paragraph (3)(B)(i), the individual is 
        entitled under this section to the following:
                  (A)  * * *

           *       *       *       *       *       *       *

                  (D) Reduction in cost-sharing below out-of-
                pocket threshold.--
                          (i) [Institutionalized individuals.--
                        In] Elimination of cost-sharing for 
                        certain full-benefit dual eligible 
                        individuals.--
                                  (I) Institutionalized 
                                individuals.--In the case of an 
                                individual who is a full-
                                benefit dual eligible 
                                individual and who is an 
                                institutionalized individual or 
                                couple (as defined in section 
                                1902(q)(1)(B)), the elimination 
                                of any beneficiary coinsurance 
                                described in section 1860D-
                                2(b)(2) (for all amounts 
                                through the total amount of 
                                expenditures at which benefits 
                                are available under section 
                                1860D-2(b)(4)).
                                  (II) Certain other 
                                individuals.--In the case of an 
                                individual who is a full-
                                benefit dual eligible 
                                individual and with respect to 
                                whom there has been a 
                                determination that but for the 
                                provision of home and community 
                                based care (whether under 
                                section 1915, 1932, or under a 
                                waiver under section 1115) the 
                                individual would require the 
                                level of care provided in a 
                                hospital or a nursing facility 
                                or intermediate care facility 
                                for the mentally retarded the 
                                cost of which could be 
                                reimbursed under the State plan 
                                under title XIX, the 
                                elimination of any beneficiary 
                                coinsurance described in 
                                section 1860D-2(b)(2) (for all 
                                amounts through the total 
                                amount of expenditures at which 
                                benefits are available under 
                                section 1860D-2(b)(4)).

           *       *       *       *       *       *       *

          (3) Determination of eligibility.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Alternative resource standard.--
                          (i) In general.--The resources 
                        requirement of this subparagraph is 
                        that an individual's resources (as 
                        determined under section 1613 for 
                        purposes of the supplemental security 
                        income program subject to the life 
                        insurance policy exclusion provided 
                        under subparagraph (G)) do not exceed--
                                  (I) for 2006, $10,000 (or 
                                $20,000 in the case of the 
                                combined value of the 
                                individual's assets or 
                                resources and the assets or 
                                resources of the individual's 
                                spouse); [and]
                                  (II) for a subsequent year 
                                (before 2012) the dollar 
                                amounts specified in this 
                                subclause (or subclause (I)) 
                                for the previous year increased 
                                by the annual percentage 
                                increase in the consumer price 
                                index (all items; U.S. city 
                                average) as of September of 
                                such previous year[.];
                                  (III) for 2012, $17,000 (or 
                                $34,000 in the case of the 
                                combined value of the 
                                individual's assets or 
                                resources and the assets or 
                                resources of the individual's 
                                spouse); and
                                  (IV) for a subsequent year, 
                                the dollar amounts specified in 
                                this subclause (or subclause 
                                (III)) for the previous year 
                                increased by the annual 
                                percentage increase in the 
                                consumer price index (all 
                                items; U.S. city average) as of 
                                September of such previous 
                                year.
                        Any dollar amount established under 
                        subclause (II) or (IV) that is not a 
                        multiple of $10 shall be rounded to the 
                        nearest multiple of $10.

           *       *       *       *       *       *       *

                          [(iii) Documentation and 
                        safeguards.--Under such process--
                                  [(I) the application form 
                                shall consist of an attestation 
                                under penalty of perjury 
                                regarding the level of assets 
                                or resources (or combined 
                                assets and resources in the 
                                case of a married part D 
                                eligible individual) and 
                                valuations of general classes 
                                of assets or resources;
                                  [(II) such form shall be 
                                accompanied by copies of recent 
                                statements (if any) from 
                                financial institutions in 
                                support of the application; and
                                  [(III) matters attested to in 
                                the application shall be 
                                subject to appropriate methods 
                                of verification.]
                          (iii) Certification of income and 
                        resources.--For purposes of applying 
                        this section--
                                  (I) an individual shall be 
                                permitted to apply on the basis 
                                of self-certification of income 
                                and resources; and
                                  (II) matters attested to in 
                                the application shall be 
                                subject to appropriate methods 
                                of verification without the 
                                need of the individual to 
                                provide additional 
                                documentation, except in 
                                extraordinary situations as 
                                determined by the Commissioner.

           *       *       *       *       *       *       *

  (b) Premium Subsidy Amount.--
          (1) * * *
          (2) Low-income benchmark premium amount defined.--
                  (A) * * *
                  (B) Premium amounts described.--The premium 
                amounts described in this subparagraph are, in 
                the case of--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) an MA-PD plan, the portion of 
                        the MA monthly prescription drug 
                        beneficiary premium that is 
                        attributable to basic prescription drug 
                        benefits (described in section 
                        1852(a)(6)(B)(ii)) before the 
                        application of the monthly rebate 
                        computed under section 1854(b)(1)(C)(i) 
                        for that plan and year involved.

           *       *       *       *       *       *       *


MEDICARE PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL SUPPLEMENTARY MEDICAL 
                          INSURANCE TRUST FUND

  Sec. 1860D-16. (a) * * *

           *       *       *       *       *       *       *

  (c) Deposits Into Account.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Rebate for full-benefit dual eligible medicare 
        drug plan enrollees.--Amounts paid under a rebate 
        agreement under section 1860D-2(f) shall be deposited 
        into the Account and shall be used to pay for all or 
        part of the gradual elimination of the coverage gap 
        under section 1860D-2(b)(7).

           *       *       *       *       *       *       *


                    Part E--Miscellaneous Provisions

              DEFINITIONS OF SERVICES, INSTITUTIONS, ETC.

  Sec. 1861. For purposes of this title--
  (a) * * *

           *       *       *       *       *       *       *

  (s) Medical and Other Health Services.--The term ``medical 
and other health services'' means any of the following items or 
services:
          (1) * * *
          (2)(A) * * *

           *       *       *       *       *       *       *

          (DD) items and services furnished under an intensive 
        cardiac rehabilitation program (as defined in 
        subsection (eee)(4)); [and]
          (EE) kidney disease education services (as defined in 
        subsection (ggg));
          (FF) advance care planning consultation (as defined 
        in subsection (hhh)(1));
          (GG) marriage and family therapist services (as 
        defined in subsection (jjj)); and
          (HH) mental health counselor services (as defined in 
        subsection (kkk)(1));

           *       *       *       *       *       *       *

          [(10)(A) pneumococcal vaccine and its administration 
        and, subject to section 4071(b) of the Omnibus Budget 
        Reconciliation Act of 1987, influenza vaccine and its 
        administration; and
          [(B) hepatitis B vaccine and its administration, 
        furnished to an individual who is at high or 
        intermediate risk of contracting hepatitis B (as 
        determined by the Secretary under regulations);]
          (10) federally recommended vaccines (as defined in 
        subsection (lll)) and their respective administration;

           *       *       *       *       *       *       *

  (aa) Rural Health Clinic Services and Federally Qualified 
Health Center Services.--(1) The term ``rural health clinic 
services'' means --
          (A) * * *
          (B) such services furnished by a physician assistant 
        or a nurse practitioner (as defined in paragraph (5)), 
        by a clinical psychologist (as defined by the 
        Secretary) [or by a clinical social worker (as defined 
        in subsection (hh)(1)),], by a clinical social worker 
        (as defined in subsection (hh)(1)), by a marriage and 
        family therapist (as defined in subsection (jjj)(2)), 
        or a mental health counselor (as defined in subsection 
        (kkk)(2)), and such services and supplies furnished as 
        an incident to his service as would otherwise be 
        covered if furnished by a physician or as an incident 
        to a physician's service, and

           *       *       *       *       *       *       *

  (3) The term ``Federally qualified health center services'' 
means--
          [(A) services of the type described in subparagraphs 
        (A) through (C) of paragraph (1) and services described 
        in subsections (qq) and (vv); and]
          (A) services of the type described subparagraphs (A) 
        through (C) of paragraph (1) and services described in 
        section 1861(iii); and

           *       *       *       *       *       *       *

  (hh) Clinical Social Worker; Clinical Social Worker 
Services.--(1) * * *
  (2) The term ``clinical social worker services'' means 
services performed by a clinical social worker (as defined in 
paragraph (1)) for the diagnosis and treatment of mental 
illnesses (other than services furnished to an inpatient of a 
hospital [and other than services furnished to an inpatient of 
a skilled nursing facility which the facility is required to 
provide as a requirement for participation]) which the clinical 
social worker is legally authorized to perform under State law 
(or the State regulatory mechanism provided by State law) of 
the State in which such services are performed as would 
otherwise be covered if furnished by a physician or as an 
incident to a physician's professional service.

           *       *       *       *       *       *       *

  (ww) Initial Preventive Physical Examination.--(1) * * *
  (2) The screening and other preventive services described in 
this paragraph include the following:
          (A) [Pneumococcal, influenza, and hepatitis B vaccine 
        and administration] Federally recommended vaccines (as 
        defined in subsection (lll)) and their respective 
        administration under subsection (s)(10).

           *       *       *       *       *       *       *


                   Advance Care Planning Consultation

  (hhh)(1) Subject to paragraphs (3) and (4), the term 
``advance care planning consultation'' means a consultation 
between the individual and a practitioner described in 
paragraph (2) regarding advance care planning, if, subject to 
paragraph (3), the individual involved has not had such a 
consultation within the last 5 years. Such consultation shall 
include the following:
          (A) An explanation by the practitioner of advance 
        care planning, including key questions and 
        considerations, important steps, and suggested people 
        to talk to.
          (B) An explanation by the practitioner of advance 
        directives, including living wills and durable powers 
        of attorney, and their uses.
          (C) An explanation by the practitioner of the role 
        and responsibilities of a health care proxy.
          (D) The provision by the practitioner of a list of 
        national and State-specific resources to assist 
        consumers and their families with advance care 
        planning, including the national toll-free hotline, the 
        advance care planning clearinghouses, and State legal 
        service organizations (including those funded through 
        the Older Americans Act of 1965).
          (E) An explanation by the practitioner of the 
        continuum of end-of-life services and supports 
        available, including palliative care and hospice, and 
        benefits for such services and supports that are 
        available under this title.
          (F)(i) Subject to clause (ii), an explanation of 
        orders regarding life sustaining treatment or similar 
        orders, which shall include--
                          (I) the reasons why the development 
                        of such an order is beneficial to the 
                        individual and the individual's family 
                        and the reasons why such an order 
                        should be updated periodically as the 
                        health of the individual changes;
                          (II) the information needed for an 
                        individual or legal surrogate to make 
                        informed decisions regarding the 
                        completion of such an order; and
                          (III) the identification of resources 
                        that an individual may use to determine 
                        the requirements of the State in which 
                        such individual resides so that the 
                        treatment wishes of that individual 
                        will be carried out if the individual 
                        is unable to communicate those wishes, 
                        including requirements regarding the 
                        designation of a surrogate 
                        decisionmaker (also known as a health 
                        care proxy).
          (ii) The Secretary shall limit the requirement for 
        explanations under clause (i) to consultations 
        furnished in a State--
                  (I) in which all legal barriers have been 
                addressed for enabling orders for life 
                sustaining treatment to constitute a set of 
                medical orders respected across all care 
                settings; and
                  (II) that has in effect a program for orders 
                for life sustaining treatment described in 
                clause (iii).
          (iii) A program for orders for life sustaining 
        treatment for a States described in this clause is a 
        program that--
                  (I) ensures such orders are standardized and 
                uniquely identifiable throughout the State;
                  (II) distributes or makes accessible such 
                orders to physicians and other health 
                professionals that (acting within the scope of 
                the professional's authority under State law) 
                may sign orders for life sustaining treatment;
                  (III) provides training for health care 
                professionals across the continuum of care 
                about the goals and use of orders for life 
                sustaining treatment; and
                  (IV) is guided by a coalition of stakeholders 
                includes representatives from emergency medical 
                services, emergency department physicians or 
                nurses, state long-term care association, state 
                medical association, state surveyors, agency 
                responsible for senior services, state 
                department of health, state hospital 
                association, home health association, state bar 
                association, and state hospice association.
  (2) A practitioner described in this paragraph is--
          (A) a physician (as defined in subsection (r)(1)); 
        and
          (B) a nurse practitioner or physician assistant who 
        has the authority under State law to sign orders for 
        life sustaining treatments.
  (3)(A) An initial preventive physical examination under 
subsection (WW), including any related discussion during such 
examination, shall not be considered an advance care planning 
consultation for purposes of applying the 5-year limitation 
under paragraph (1).
  (B) An advance care planning consultation with respect to an 
individual may be conducted more frequently than provided under 
paragraph (1) if there is a significant change in the health 
condition of the individual, including diagnosis of a chronic, 
progressive, life-limiting disease, a life-threatening or 
terminal diagnosis or life-threatening injury, or upon 
admission to a skilled nursing facility, a long-term care 
facility (as defined by the Secretary), or a hospice program.
  (4) A consultation under this subsection may include the 
formulation of an order regarding life sustaining treatment or 
a similar order.
  (5)(A) For purposes of this section, the term ``order 
regarding life sustaining treatment'' means, with respect to an 
individual, an actionable medical order relating to the 
treatment of that individual that--
                  (i) is signed and dated by a physician (as 
                defined in subsection (r)(1)) or another health 
                care professional (as specified by the 
                Secretary and who is acting within the scope of 
                the professional's authority under State law in 
                signing such an order, including a nurse 
                practitioner or physician assistant) and is in 
                a form that permits it to stay with the 
                individual and be followed by health care 
                professionals and providers across the 
                continuum of care;
                  (ii) effectively communicates the 
                individual's preferences regarding life 
                sustaining treatment, including an indication 
                of the treatment and care desired by the 
                individual;
                  (iii) is uniquely identifiable and 
                standardized within a given locality, region, 
                or State (as identified by the Secretary); and
                  (iv) may incorporate any advance directive 
                (as defined in section 1866(f)(3)) if executed 
                by the individual.
  (B) The level of treatment indicated under subparagraph 
(A)(ii) may range from an indication for full treatment to an 
indication to limit some or all or specified interventions. 
Such indicated levels of treatment may include indications 
respecting, among other items--
          (i) the intensity of medical intervention if the 
        patient is pulse less, apneic, or has serious cardiac 
        or pulmonary problems;
          (ii) the individual's desire regarding transfer to a 
        hospital or remaining at the current care setting;
          (iii) the use of antibiotics; and
          (iv) the use of artificially administered nutrition 
        and hydration.

                  Medicare Covered Preventive Services

  (iii)(1) Subject to the succeeding provisions of this 
subsection, the term ``Medicare covered preventive services'' 
means the following:
          (A) Prostate cancer screening tests (as defined in 
        subsection (oo)).
          (B) Colorectal cancer screening tests (as defined in 
        subsection (pp).
          (C) Diabetes outpatient self-management training 
        services (as defined in subsection (qq)).
          (D) Screening for glaucoma for certain individuals 
        (as described in subsection (s)(2)(U)).
          (E) Medical nutrition therapy services for certain 
        individuals (as described in subsection (s)(2)(V)).
          (F) An initial preventive physical examination (as 
        defined in subsection (ww)).
          (G) Cardiovascular screening blood tests (as defined 
        in subsection (xx)(1)).
          (H) Diabetes screening tests (as defined in 
        subsection (yy)).
          (I) Ultrasound screening for abdominal aortic 
        aneurysm for certain individuals (as described in 
        subsection (s)(2)(AA)).
          (J) Federally recommended vaccines (as defined in 
        subsection (lll)) and their respective administration.
          (K) Screening mammography (as defined in subsection 
        (jj)).
          (L) Screening pap smear and screening pelvic exam (as 
        defined in subsection (nn)).
          (M) Bone mass measurement (as defined in subsection 
        (rr)).
          (N) Kidney disease education services (as defined in 
        subsection (ggg)).
          (O) Additional preventive services (as defined in 
        subsection (ddd)).
  (2) With respect to specific Medicare covered preventive 
services, the limitations and conditions described in the 
provisions referenced in paragraph (1) with respect to such 
services shall apply.

                 Marriage and Family Therapist Services

  (jjj)(1) The term ``marriage and family therapist services'' 
means services performed by a marriage and family therapist (as 
defined in paragraph (2)) for the diagnosis and treatment of 
mental illnesses, which the marriage and family therapist is 
legally authorized to perform under State law (or the State 
regulatory mechanism provided by State law) of the State in 
which such services are performed, as would otherwise be 
covered if furnished by a physician or as incident to a 
physician's professional service, but only if no facility or 
other provider charges or is paid any amounts with respect to 
the furnishing of such services.
  (2) The term ``marriage and family therapist'' means an 
individual who--
          (A) possesses a master's or doctoral degree which 
        qualifies for licensure or certification as a marriage 
        and family therapist pursuant to State law;
          (B) after obtaining such degree has performed at 
        least 2 years of clinical supervised experience in 
        marriage and family therapy; and
          (C) is licensed or certified as a marriage and family 
        therapist in the State in which marriage and family 
        therapist services are performed.

                    Mental Health Counselor Services

  (kkk)(1) The term ``mental health counselor services'' means 
services performed by a mental health counselor (as defined in 
paragraph (2)) for the diagnosis and treatment of mental 
illnesses which the mental health counselor is legally 
authorized to perform under State law (or the State regulatory 
mechanism provided by the State law) of the State in which such 
services are performed, as would otherwise be covered if 
furnished by a physician or as incident to a physician's 
professional service, but only if no facility or other provider 
charges or is paid any amounts with respect to the furnishing 
of such services.
  (2) The term ``mental health counselor'' means an individual 
who--
          (A) possesses a master's or doctor's degree which 
        qualifies the individual for licensure or certification 
        for the practice of mental health counseling in the 
        State in which the services are performed;
          (B) after obtaining such a degree has performed at 
        least 2 years of supervised mental health counselor 
        practice; and
          (C) is licensed or certified as a mental health 
        counselor or professional counselor by the State in 
        which the services are performed.

                     Federally Recommended Vaccines

  (lll) The term ``federally recommended vaccine'' means an 
approved vaccine recommended by the Advisory Committee on 
Immunization Practices (an advisory committee established by 
the Secretary, acting through the Director of the Centers for 
Disease Control and Prevention).

        EXCLUSIONS FROM COVERAGE AND MEDICARE AS SECONDARY PAYER

  Sec. 1862. (a) Notwithstanding any other provision of this 
title, no payment may be made under part A or part B for any 
expenses incurred for items or services--
          (1)(A) * * *

           *       *       *       *       *       *       *

          (N) in the case of ultrasound screening for abdominal 
        aortic aneurysm which is performed more frequently than 
        is provided for under section 1861(s)(2)(AA), [and]
          (O) in the case of kidney disease education services 
        (as defined in paragraph (1) of section 1861(ggg)), 
        which are furnished in excess of the number of sessions 
        covered under paragraph (4) of such section[;], and
          (P) in the case of advance care planning 
        consultations (as defined in section 1861(hhh)(1)), 
        which are performed more frequently than is covered 
        under such section;

           *       *       *       *       *       *       *

          (7) where such expenses are for routine physical 
        checkups, eyeglasses (other than eyewear described in 
        section 1861(s)(8)) or eye examinations for the purpose 
        of prescribing, fitting, or changing eyeglasses, 
        procedures performed (during the course of any eye 
        examination) to determine the refractive state of the 
        eyes, hearing aids or examinations therefor, or 
        immunizations (except as otherwise allowed under 
        section 1861(s)(10) and subparagraph (B), (F), (G), 
        (H), [or (K)] (K), or (P) of paragraph (1));

           *       *       *       *       *       *       *

  (b) Medicare as Secondary Payer.--
          (1) Requirements of group health plans.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Individuals with end stage renal 
                disease.--A group health plan (as defined in 
                subparagraph (A)(v))--
                          (i) * * *

           *       *       *       *       *       *       *

                except that clause (ii) shall not prohibit a 
                plan from paying benefits secondary to this 
                title when an individual is entitled to or 
                eligible for benefits under this title under 
                section 226A after the end of the 12-month 
                period described in clause (i). Effective for 
                items and services furnished on or after 
                February 1, 1991, and before the date of 
                enactment of the Balanced Budget Act of 1997 
                (with respect to periods beginning on or after 
                February 1, 1990), this subparagraph shall be 
                applied by substituting ``18- month'' for ``12-
                month'' each place it appears. Effective for 
                items and services furnished on or after the 
                date of enactment of the Balanced Budget Act of 
                1997, (with respect to periods beginning on or 
                after the date that is 18 months prior to such 
                date), clauses (i) and (ii) shall be applied by 
                substituting ``30-month'' for ``12-month'' each 
                place it appears. With regard to 
                immunosuppressive drugs furnished on or after 
                the date of the enactment of the America's 
                Affordable Health Choices Act of 2009, this 
                subparagraph shall be applied without regard to 
                any time limitation.

           *       *       *       *       *       *       *


      AGREEMENTS WITH PROVIDERS OF SERVICES; ENROLLMENT PROCESSES

  Sec. 1866. (a)(1) Any provider of services (except a fund 
designated for purposes of section 1814(g) and section 1835(e)) 
shall be qualified to participate under this title and shall be 
eligible for payments under this title if it files with the 
Secretary an agreement--
          (A) * * *

           *       *       *       *       *       *       *

          (U) in the case of hospitals which furnish inpatient 
        hospital services for which payment may be made under 
        this title, to be a participating provider of medical 
        care both--
                  (i)  * * *

           *       *       *       *       *       *       *

        in accordance with regulations promulgated by the 
        Secretary regarding admission practices, payment 
        methodology, and rates of payment (including the 
        acceptance of no more than such payment rate as payment 
        in full for such items and services, [and]
          (V) in the case of hospitals that are not otherwise 
        subject to the Occupational Safety and Health Act of 
        1970 (or a State occupational safety and health plan 
        that is approved under 18(b) of such Act), to comply 
        with the Bloodborne Pathogens standard under section 
        1910.1030 of title 29 of the Code of Federal 
        Regulations (or as subsequently redesignated)[.]; and

           *       *       *       *       *       *       *

          (W) maintain and, upon request of the Secretary, 
        provide access to documentation relating to written 
        orders or requests for payment for durable medical 
        equipment, certifications for home health services, or 
        referrals for other items or services written or 
        ordered by the provider under this title, as specified 
        by the Secretary.

           *       *       *       *       *       *       *

  (2)(A) A provider of services may charge such individual or 
other person (i) the amount of any deduction or coinsurance 
amount imposed pursuant to section 1813(a)(1), (a)(3), or 
(a)(4), section 1833(b), or section 1861(y)(3) with respect to 
such items and services (not in excess of the amount 
customarily charged for such items and services by such 
provider), and (ii) an amount equal to 20 per centum of the 
reasonable charges for such items and services (other than for 
Medicare covered preventive services and not in excess of 20 
per centum of the amount customarily charged for such items and 
services by such provider) for which payment is made under part 
B or which are durable medical equipment furnished as home 
health services (but in the case of items and services 
furnished to individuals with end-stage renal disease, an 
amount equal to 20 percent of the estimated amounts for such 
items and services calculated on the basis established by the 
Secretary). In the case of items and services described in 
section 1833(c), clause (ii) of the preceding sentence shall be 
applied by substituting for 20 percent the proportion which is 
appropriate under such section. A provider of services may not 
impose a charge under clause (ii) of the first sentence of this 
subparagraph with respect to items and services described in 
section 1861(s)(10)(A) and with respect to clinical diagnostic 
laboratory tests for which payment is made under part B. 
Notwithstanding the first sentence of this subparagraph, a home 
health agency may charge such an individual or person, with 
respect to covered items subject to payment under section 
1834(a), the amount of any deduction imposed under section 
1833(b) and 20 percent of the payment basis described in 
section 1834(a)(1)(B). In the case of items and services for 
which payment is made under part B under the prospective 
payment system established under section 1833(t), clause (ii) 
of the first sentence shall be applied by substituting for 20 
percent of the reasonable charge, the applicable copayment 
amount established under section 1833(t)(5). In the case of 
services described in section 1833(a)(8) or section 1833(a)(9) 
for which payment is made under part B under section 1834(k), 
clause (ii) of the first sentence shall be applied by 
substituting for 20 percent of the reasonable charge for such 
services 20 percent of the lesser of the actual charge or the 
applicable fee schedule amount (as defined in such section) for 
such services.

           *       *       *       *       *       *       *

  (j) Enrollment Process for Providers of Services and 
Suppliers.--
          (1) Enrollment process.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) Billing agents and clearinghouses 
                required to be registered under medicare.--Any 
                agent, clearinghouse, or other alternate payee 
                that submits claims on behalf of a health care 
                provider must be registered with the Secretary 
                in a form and manner specified by the 
                Secretary.

           *       *       *       *       *       *       *

          (3) Program integrity.--The provisions of section 
        1128G(a) apply to enrollments and renewals of 
        enrollments of providers of services and suppliers 
        under this title.

           *       *       *       *       *       *       *


               HEALTH CARE QUALITY DEMONSTRATION PROGRAM

  Sec. 1866C. (a) * * *
  (b) Demonstration Projects.--[The Secretary] Subject to 
section 1866D, the Secretary shall establish a 5-year 
demonstration program under which the Secretary shall approve 
demonstration projects that examine health delivery factors 
that encourage the delivery of improved quality in patient 
care, including--
          (1) * * *

           *       *       *       *       *       *       *


  CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION TO PILOT PROGRAM AND 
                EXPANSION TO INCLUDE POST ACUTE SERVICES

  Sec. 1866D.  (a) Conversion and Expansion.--
          (1) In general.--By not later than January 1, 2011, 
        the Secretary shall, for the purpose of promoting the 
        use of bundled payments to promote efficient and high 
        quality delivery of care--
                  (A) convert the acute care episode 
                demonstration program conducted under section 
                1866C to a pilot program; and
                  (B) subject to subsection (c), expand such 
                program as so converted to include post acute 
                services and such other services the Secretary 
                determines to be appropriate, which may include 
                transitional services.
          (2) Bundled payment structures.--
                  (A) In general.--In carrying out paragraph 
                (1), the Secretary may apply bundled payments 
                with respect to--
                          (i) hospitals and physicians;
                          (ii) hospitals and post-acute care 
                        providers;
                          (iii) hospitals, physicians, and 
                        post-acute care providers; or
                          (iv) combinations of post-acute 
                        providers.
                  (B) Further application.--
                          (i) In general.--In carrying out 
                        paragraph (1), the Secretary shall 
                        apply bundled payments in a manner so 
                        as to include collaborative care 
                        networks and continuing care hospitals.
                          (ii) Collaborative care network 
                        defined.--For purposes of this 
                        subparagraph, the term ``collaborative 
                        care network'' means a consortium of 
                        health care providers that provides a 
                        comprehensive range of coordinated and 
                        integrated health care services to low-
                        income patient populations (including 
                        the uninsured) which may include 
                        coordinated and comprehensive care by 
                        safety net providers to reduce any 
                        unnecessary use of items and services 
                        furnished in emergency departments, 
                        manage chronic conditions, improve 
                        quality and efficiency of care, 
                        increase preventive services, and 
                        promote adherence to post-acute and 
                        follow-up care plans.
                          (iii) Continuing care hospital 
                        defined.--For purposes of this 
                        subparagraph, the term ``continuing 
                        care hospital'' means an entity that 
                        has demonstrated the ability to meet 
                        patient care and patient safety 
                        standards and that provides under 
                        common management the medical and 
                        rehabilitation services provided in 
                        inpatient rehabilitation hospitals and 
                        units (as defined in section 
                        1886(d)(1)(B)(ii)), long-term care 
                        hospitals (as defined in section 
                        1886(d)(1)(B)(iv)(I)), and skilled 
                        nursing facilities (as defined in 
                        section 1819(a)) that are located in a 
                        hospital described in section 1886(d).
  (b) Scope.--The pilot program under subsection (a) may 
include additional geographic areas and additional conditions 
which account for significant program spending, as defined by 
the Secretary. Nothing in this subsection shall be construed as 
limiting the number of hospital and physician groups or the 
number of hospital and post-acute provider groups that may 
participate in the pilot program.
  (c) Limitation.--The Secretary shall only expand the pilot 
program under subsection (a) if the Secretary finds that--
          (1) the demonstration program under section 1866C and 
        pilot program under this section maintain or increase 
        the quality of care received by individuals enrolled 
        under this title; and
          (2) such demonstration program and pilot program 
        reduce program expenditures and, based on the 
        certification under subsection (d), that the expansion 
        of such pilot program would result in estimated 
        spending that would be less than what spending would 
        otherwise be in the absence of this section.
  (d) Certification.--For purposes of subsection (c), the Chief 
Actuary of the Centers for Medicare & Medicaid Services shall 
certify whether expansion of the pilot program under this 
section would result in estimated spending that would be less 
than what spending would otherwise be in the absence of this 
section.
  (e) Voluntary Participation.--Nothing in this paragraph shall 
be construed as requiring the participation of an entity in the 
pilot program under this section.
  (f) Evaluation on Cost and Quality of Care.--The Secretary 
shall conduct an evaluation of the pilot program under 
subsection (a) to study the effect of such program on costs and 
quality of care. The findings of such evaluation shall be 
included in the final report required under section 1152(e)(2) 
of America's Affordable Health Choices Act of 2009.
  (g) Study of Additional Bundling and Episode-based Payment 
for Physicians' Services.--
          (1) In general.--The Secretary shall provide for a 
        study of and development of a plan for testing 
        additional ways to increase bundling of payments for 
        physicians in connection with an episode of care, such 
        as in connection with outpatient hospital services or 
        services rendered in physicians' offices, other than 
        those provided under the pilot program.
          (2) Application.--The Secretary may implement such a 
        plan through a demonstration program.

              ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM

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

                       MEDICAL HOME PILOT PROGRAM

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

           *       *       *       *       *       *       *


  PRACTICING PHYSICIANS ADVISORY COUNCIL; COUNCIL FOR TECHNOLOGY AND 
                INNOVATION TELEHEALTH ADVISORY COMMITTEE

  Sec. 1868. [(a) Practicing Physicians Advisory Council.--(1) 
The Secretary shall appoint, based upon nominations submitted 
by medical organizations representing physicians, a Practicing 
Physicians Advisory Council (in this subsection referred to as 
the ``Council'') to be composed of 15 physicians, each of whom 
has submitted at least 250 claims for physicians' services 
under this title in the previous year. At least 11 of the 
members of the Council shall be physicians described in section 
1861(r)(1) and the members of the Council shall include both 
participating and nonparticipating physicians and physicians 
practicing in rural areas and underserved urban areas.
  [(2) The Council shall meet once during each calendar quarter 
to discuss certain proposed changes in regulations and carrier 
manual instructions related to physician services identified by 
the Secretary. To the extent feasible and consistent with 
statutory deadlines, such consultation shall occur before the 
publication of such proposed changes.
  [(3) Members of the Council shall be entitled to receive 
reimbursement of expenses and per diem in lieu of subsistence 
in the same manner as other members of advisory councils 
appointed by the Secretary are provided such reimbursement and 
per diem under this title.]

           *       *       *       *       *       *       *

  (c) Telehealth Advisory Committee.--
          (1) In general.--The Secretary shall appoint a 
        Telehealth Advisory Committee (in this subsection 
        referred to as the ``Advisory Committee'') to make 
        recommendations to the Secretary on policies of the 
        Centers for Medicare & Medicaid Services regarding 
        telehealth services as established under section 
        1834(m), including the appropriate addition or deletion 
        of services (and HCPCS codes) to those specified in 
        paragraphs (4)(F)(i) and (4)(F)(ii) of such section and 
        for authorized payment under paragraph (1) of such 
        section.
          (2) Membership; terms.--
                  (A) Membership.--
                          (i) In general.--The Advisory 
                        Committee shall be composed of 9 
                        members, to be appointed by the 
                        Secretary, of whom--
                                  (I) 5 shall be practicing 
                                physicians;
                                  (II) 2 shall be practicing 
                                non-physician health care 
                                practitioners; and
                                  (III) 2 shall be 
                                administrators of telehealth 
                                programs.
                          (ii) Requirements for appointing 
                        members.--In appointing members of the 
                        Advisory Committee, the Secretary 
                        shall--
                                  (I) ensure that each member 
                                has prior experience with the 
                                practice of telemedicine or 
                                telehealth;
                                  (II) give preference to 
                                individuals who are currently 
                                providing telemedicine or 
                                telehealth services or who are 
                                involved in telemedicine or 
                                telehealth programs;
                                  (III) ensure that the 
                                membership of the Advisory 
                                Committee represents a balance 
                                of specialties and geographic 
                                regions; and
                                  (IV) take into account the 
                                recommendations of 
                                stakeholders.
                  (B) Terms.--The members of the Advisory 
                Committee shall serve for such term as the 
                Secretary may specify.
                  (C) Conflicts of interest.--An advisory 
                committee member may not participate with 
                respect to a particular matter considered in an 
                advisory committee meeting if such member (or 
                an immediate family member of such member) has 
                a financial interest that could be affected by 
                the advice given to the Secretary with respect 
                to such matter.
          (3) Meetings.--The Advisory Committee shall meet 
        twice each calendar year and at such other times as the 
        Secretary may provide.
          (4) Permanent committee.--Section 14 of the Federal 
        Advisory Committee Act (5 U.S.C. App.) shall not apply 
        to the Advisory Committee.

           *       *       *       *       *       *       *


                             ADMINISTRATION

  Sec. 1874. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


 PAYMENTS TO HEALTH MAINTENANCE ORGANIZATIONS AND COMPETITIVE MEDICAL 
                                 PLANS

  Sec. 1876. (a) * * *

           *       *       *       *       *       *       *

  (h)(1) * * *

           *       *       *       *       *       *       *

  (5)(A) * * *

           *       *       *       *       *       *       *

  (C)(i) * * *
  (ii) For any period beginning on or after [January 1, 2010] 
January 1, 2012, a reasonable cost reimbursement contract under 
this subsection may not be extended or renewed for a service 
area insofar as such area during the entire previous year was 
within the service area of--
          (I) * * *

           *       *       *       *       *       *       *

  (iii) A plan described in this clause for a year for a 
service area is a plan described in section 1851(a)(2)(A)(i) if 
[the service area for the year] the portion of the plan's 
service area for the year that is within the service area of a 
reasonable cost reimbursement contract meets the following 
minimum enrollment requirements:
          (I) * * *

           *       *       *       *       *       *       *


               LIMITATION ON CERTAIN PHYSICIAN REFERRALS

  Sec. 1877. (a) * * *

           *       *       *       *       *       *       *

  (d) Additional Exceptions Related Only to Ownership or 
Investment Prohibition.--The following, if not otherwise 
excepted under subsection (b), shall not be considered to be an 
ownership or investment interest described in subsection 
(a)(2)(A):
          (1) * * *
          (2) Rural providers.--In the case of designated 
        health services furnished in a rural area (as defined 
        in section 1886(d)(2)(D)) by an entity, if--
                  (A) substantially all of the designated 
                health services furnished by the entity are 
                furnished to individuals residing in such a 
                rural area; [and]
                  (B) effective for the 18-month period 
                beginning on the date of the enactment of the 
                Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003, the entity is not a 
                specialty hospital (as defined in subsection 
                (h)(7))[.]; and
                  (C) in the case where the entity is a 
                hospital, the hospital meets the requirements 
                of paragraph (3)(D).
          (3) Hospital ownership.--In the case of designated 
        health services provided by a hospital (other than a 
        hospital described in paragraph (1)) if--
                  (A) * * *
                  (B) effective for the 18-month period 
                beginning on the date of the enactment of the 
                Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003, the hospital is not 
                a specialty hospital (as defined in subsection 
                (h)(7)); [and]
                  (C) the ownership or investment interest is 
                in the hospital itself (and not merely in a 
                subdivision of the hospital)[.]; and
                  (D) the hospital meets the requirements 
                described in subsection (i)(1).

           *       *       *       *       *       *       *

  [(f) Reporting Requirements.--Each entity providing covered 
items or services for which payment may be made under this 
title shall provide the Secretary with the information 
concerning the entity's ownership, investment, and compensation 
arrangements, including--
          [(1) the covered items and services provided by the 
        entity, and
          [(2) the names and unique physician identification 
        numbers of all physicians with an ownership or 
        investment interest (as described in subsection 
        (a)(2)(A)), or with a compensation arrangement (as 
        described in subsection (a)(2)(B)), in the entity, or 
        whose immediate relatives have such an ownership or 
        investment interest or who have such a compensation 
        relationship with the entity.
Such information shall be provided in such form, manner, and at 
such times as the Secretary shall specify. The requirement of 
this subsection shall not apply to designated health services 
provided outside the United States or to entities which the 
Secretary determines provides services for which payment may be 
made under this title very infrequently.]
  (f) Reporting and Disclosure Requirements.--
          (1) In general.--Each entity providing covered items 
        or services for which payment may be made under this 
        title shall provide the Secretary with the information 
        concerning the entity's ownership, investment, and 
        compensation arrangements, including--
                  (A) the covered items and services provided 
                by the entity, and
                  (B) the names and unique physician 
                identification numbers of all physicians with 
                an ownership or investment interest (as 
                described in subsection (a)(2)(A)), or with a 
                compensation arrangement (as described in 
                subsection (a)(2)(B)), in the entity, or whose 
                immediate relatives have such an ownership or 
                investment interest or who have such a 
                compensation relationship with the entity.
        Such information shall be provided in such form, 
        manner, and at such times as the Secretary shall 
        specify. The requirement of this subsection shall not 
        apply to designated health services provided outside 
        the United States or to entities which the Secretary 
        determines provide services for which payment may be 
        made under this title very infrequently.
          (2) Requirements for hospitals with physician 
        ownership or investment.--In the case of a hospital 
        that meets the requirements described in subsection 
        (i)(1), the hospital shall--
                  (A) submit to the Secretary an initial 
                report, and periodic updates at a frequency 
                determined by the Secretary, containing a 
                detailed description of the identity of each 
                physician owner and physician investor and any 
                other owners or investors of the hospital;
                  (B) require that any referring physician 
                owner or investor discloses to the individual 
                being referred, by a time that permits the 
                individual to make a meaningful decision 
                regarding the receipt of services, as 
                determined by the Secretary, the ownership or 
                investment interest, as applicable, of such 
                referring physician in the hospital; and
                  (C) disclose the fact that the hospital is 
                partially or wholly owned by one or more 
                physicians or has one or more physician 
                investors--
                          (i) on any public website for the 
                        hospital; and
                          (ii) in any public advertising for 
                        the hospital.
        The information to be reported or disclosed under this 
        paragraph shall be provided in such form, manner, and 
        at such times as the Secretary shall specify. The 
        requirements of this paragraph shall not apply to 
        designated health services furnished outside the United 
        States or to entities which the Secretary determines 
        provide services for which payment may be made under 
        this title very infrequently.
          (3) Publication of information.--The Secretary shall 
        publish, and periodically update, the information 
        submitted by hospitals under paragraph (2)(A) on the 
        public Internet website of the Centers for Medicare & 
        Medicaid Services.
  (g) Sanctions.--
          (1) * * *

           *       *       *       *       *       *       *

          [(5) Failure to report information.--Any person who 
        is required, but fails, to meet a reporting requirement 
        of subsection (f) is subject to a civil money penalty 
        of not more than $10,000 for each day for which 
        reporting is required to have been made. The provisions 
        of section 1128A (other than the first sentence of 
        subsection (a) and other than subsection (b)) shall 
        apply to a civil money penalty under the previous 
        sentence in the same manner as such provisions apply to 
        a penalty or proceeding under section 1128A(a).]
          (5) Failure to report or disclose information.--
                  (A) Reporting.--Any person who is required, 
                but fails, to meet a reporting requirement of 
                paragraphs (1) and (2)(A) of subsection (f) is 
                subject to a civil money penalty of not more 
                than $10,000 for each day for which reporting 
                is required to have been made.
                  (B) Disclosure.--Any physician who is 
                required, but fails, to meet a disclosure 
                requirement of subsection (f)(2)(B) or a 
                hospital that is required, but fails, to meet a 
                disclosure requirement of subsection (f)(2)(C) 
                is subject to a civil money penalty of not more 
                than $10,000 for each case in which disclosure 
                is required to have been made.
                  (C) Application.--The provisions of section 
                1128A (other than the first sentence of 
                subsection (a) and other than subsection (b)) 
                shall apply to a civil money penalty under 
                subparagraphs (A) and (B) in the same manner as 
                such provisions apply to a penalty or 
                proceeding under section 1128A(a).

           *       *       *       *       *       *       *

  (i) Requirements to Qualify for Rural Provider and Hospital 
Ownership Exceptions to Self-Referral Prohibition.--
          (1) Requirements described.--For purposes of 
        subsection (d)(3)(D), the requirements described in 
        this paragraph are as follows:
                  (A) Provider agreement.--The hospital had--
                          (i) physician ownership or investment 
                        on January 1, 2009; and
                          (ii) a provider agreement under 
                        section 1866 in effect on such date.
                  (B) Prohibition on physician ownership or 
                investment.--The percentage of the total value 
                of the ownership or investment interests held 
                in the hospital, or in an entity whose assets 
                include the hospital, by physician owners or 
                investors in the aggregate does not exceed such 
                percentage as of the date of enactment of this 
                subsection.
                  (C) Prohibition on expansion of facility 
                capacity.--Except as provided in paragraph (2), 
                the number of operating rooms, procedure rooms, 
                or beds of the hospital at any time on or after 
                the date of the enactment of this subsection 
                are no greater than the number of operating 
                rooms, procedure rooms, or beds, respectively, 
                as of such date.
                  (D) Ensuring bona fide ownership and 
                investment.--
                          (i) Any ownership or investment 
                        interests that the hospital offers to a 
                        physician are not offered on more 
                        favorable terms than the terms offered 
                        to a person who is not in a position to 
                        refer patients or otherwise generate 
                        business for the hospital.
                          (ii) The hospital (or any investors 
                        in the hospital) does not directly or 
                        indirectly provide loans or financing 
                        for any physician owner or investor in 
                        the hospital.
                          (iii) The hospital (or any investors 
                        in the hospital) does not directly or 
                        indirectly guarantee a loan, make a 
                        payment toward a loan, or otherwise 
                        subsidize a loan, for any physician 
                        owner or investor or group of physician 
                        owners or investors that is related to 
                        acquiring any ownership or investment 
                        interest in the hospital.
                          (iv) Ownership or investment returns 
                        are distributed to each owner or 
                        investor in the hospital in an amount 
                        that is directly proportional to the 
                        ownership or investment interest of 
                        such owner or investor in the hospital.
                          (v) The investment interest of the 
                        owner or investor is directly 
                        proportional to the owner's or 
                        investor's capital contributions made 
                        at the time the ownership or investment 
                        interest is obtained.
                          (vi) Physician owners and investors 
                        do not receive, directly or indirectly, 
                        any guaranteed receipt of or right to 
                        purchase other business interests 
                        related to the hospital, including the 
                        purchase or lease of any property under 
                        the control of other owners or 
                        investors in the hospital or located 
                        near the premises of the hospital.
                          (vii) The hospital does not offer a 
                        physician owner or investor the 
                        opportunity to purchase or lease any 
                        property under the control of the 
                        hospital or any other owner or investor 
                        in the hospital on more favorable terms 
                        than the terms offered to a person that 
                        is not a physician owner or investor.
                          (viii) The hospital does not 
                        condition any physician ownership or 
                        investment interests either directly or 
                        indirectly on the physician owner or 
                        investor making or influencing 
                        referrals to the hospital or otherwise 
                        generating business for the hospital.
                  (E) Patient safety.--In the case of a 
                hospital that does not offer emergency 
                services, the hospital has the capacity to--
                          (i) provide assessment and initial 
                        treatment for medical emergencies; and
                          (ii) if the hospital lacks additional 
                        capabilities required to treat the 
                        emergency involved, refer and transfer 
                        the patient with the medical emergency 
                        to a hospital with the required 
                        capability.
                  (F) Limitation on application to certain 
                converted facilities.--The hospital was not 
                converted from an ambulatory surgical center to 
                a hospital on or after the date of enactment of 
                this subsection.
          (2) Exception to prohibition on expansion of facility 
        capacity.--
                  (A) Process.--
                          (i) Establishment.--The Secretary 
                        shall establish and implement a process 
                        under which a hospital may apply for an 
                        exception from the requirement under 
                        paragraph (1)(C).
                          (ii) Opportunity for community 
                        input.--The process under clause (i) 
                        shall provide persons and entities in 
                        the community in which the hospital 
                        applying for an exception is located 
                        with the opportunity to provide input 
                        with respect to the application.
                          (iii) Timing for implementation.--The 
                        Secretary shall implement the process 
                        under clause (i) on the date that is 
                        one month after the promulgation of 
                        regulations described in clause (iv).
                          (iv) Regulations.--Not later than the 
                        first day of the month beginning 18 
                        months after the date of the enactment 
                        of this subsection, the Secretary shall 
                        promulgate regulations to carry out the 
                        process under clause (i). The Secretary 
                        may issue such regulations as interim 
                        final regulations.
                  (B) Frequency.--The process described in 
                subparagraph (A) shall permit a hospital to 
                apply for an exception up to once every 2 
                years.
                  (C) Permitted increase.--
                          (i) In general.--Subject to clause 
                        (ii) and subparagraph (D), a hospital 
                        granted an exception under the process 
                        described in subparagraph (A) may 
                        increase the number of operating rooms, 
                        procedure rooms, or beds of the 
                        hospital above the baseline number of 
                        operating rooms, procedure rooms, or 
                        beds, respectively, of the hospital 
                        (or, if the hospital has been granted a 
                        previous exception under this 
                        paragraph, above the number of 
                        operating rooms, procedure rooms, or 
                        beds, respectively, of the hospital 
                        after the application of the most 
                        recent increase under such an 
                        exception).
                          (ii) 100 percent increase 
                        limitation.--The Secretary shall not 
                        permit an increase in the number of 
                        operating rooms, procedure rooms, or 
                        beds of a hospital under clause (i) to 
                        the extent such increase would result 
                        in the number of operating rooms, 
                        procedure rooms, or beds of the 
                        hospital exceeding 200 percent of the 
                        baseline number of operating rooms, 
                        procedure rooms, or beds of the 
                        hospital.
                          (iii) Baseline number of operating 
                        rooms, procedure rooms, or beds.--In 
                        this paragraph, the term ``baseline 
                        number of operating rooms, procedure 
                        rooms, or beds'' means the number of 
                        operating rooms, procedure rooms, or 
                        beds of a hospital as of the date of 
                        enactment of this subsection.
                  (D) Increase limited to facilities on the 
                main campus of the hospital.--Any increase in 
                the number of operating rooms, procedure rooms, 
                or beds of a hospital pursuant to this 
                paragraph may only occur in facilities on the 
                main campus of the hospital.
                  (E) Conditions for approval of an increase in 
                facility capacity.--The Secretary may grant an 
                exception under the process described in 
                subparagraph (A) only to a hospital--
                          (i) that is located in a county in 
                        which the percentage increase in the 
                        population during the most recent 5-
                        year period for which data are 
                        available is estimated to be at least 
                        150 percent of the percentage increase 
                        in the population growth of the State 
                        in which the hospital is located during 
                        that period, as estimated by Bureau of 
                        the Census and available to the 
                        Secretary;
                          (ii) whose annual percent of total 
                        inpatient admissions that represent 
                        inpatient admissions under the program 
                        under title XIX is estimated to be 
                        equal to or greater than the average 
                        percent with respect to such admissions 
                        for all hospitals located in the county 
                        in which the hospital is located;
                          (iii) that does not discriminate 
                        against beneficiaries of Federal health 
                        care programs and does not permit 
                        physicians practicing at the hospital 
                        to discriminate against such 
                        beneficiaries;
                          (iv) that is located in a State in 
                        which the average bed capacity in the 
                        State is estimated to be less than the 
                        national average bed capacity;
                          (v) that has an average bed occupancy 
                        rate that is estimated to be greater 
                        than the average bed occupancy rate in 
                        the State in which the hospital is 
                        located; and
                          (vi) that meets other conditions as 
                        determined by the Secretary.
                  (F) Procedure rooms.--In this subsection, the 
                term ``procedure rooms'' includes rooms in 
                which catheterizations, angiographies, 
                angiograms, and endoscopies are furnished, but 
                such term shall not include emergency rooms or 
                departments (except for rooms in which 
                catheterizations, angiographies, angiograms, 
                and endoscopies are furnished).
                  (G) Publication of final decisions.--Not 
                later than 120 days after receiving a complete 
                application under this paragraph, the Secretary 
                shall publish on the public Internet website of 
                the Centers for Medicare & Medicaid Services 
                the final decision with respect to such 
                application.
                  (H) Limitation on review.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the 
                exception process under this paragraph, 
                including the establishment of such process, 
                and any determination made under such process.
          (3) Physician owner or investor defined.--For 
        purposes of this subsection and subsection (f)(2), the 
        term ``physician owner or investor'' means a physician 
        (or an immediate family member of such physician) with 
        a direct or an indirect ownership or investment 
        interest in the hospital.
          (4) Patient safety requirement.--In the case of a 
        hospital to which the requirements of paragraph (1) 
        apply, insofar as the hospital admits a patient and 
        does not have any physician available on the premises 
        24 hours per day, 7 days per week, before admitting the 
        patient--
                  (A) the hospital shall disclose such fact to 
                the patient; and
                  (B) following such disclosure, the hospital 
                shall receive from the patient a signed 
                acknowledgment that the patient understands 
                such fact.
          (5) Clarification.--Nothing in this subsection shall 
        be construed as preventing the Secretary from 
        terminating a hospital's provider agreement if the 
        hospital is not in compliance with regulations pursuant 
        to section 1866.

           *       *       *       *       *       *       *


         MEDICARE COVERAGE FOR END STAGE RENAL DISEASE PATIENTS

  Sec. 1881. (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (14)(A) * * *
  (B) For purposes of this paragraph, the term ``renal dialysis 
services'' includes--
                  (i) * * *

           *       *       *       *       *       *       *

                  (iii) other drugs and biologicals, including 
                oral drugs that are not the oral equivalent of 
                an intravenous drug (such as oral phosphate 
                binders and calcimimetics), that are furnished 
                to individuals for the treatment of end stage 
                renal disease and for which payment was (before 
                the application of this paragraph) made 
                separately under this title, and any oral 
                equivalent form of such drug or biological; and

           *       *       *       *       *       *       *

  (E)(i) * * *
  (ii) A provider of services or renal dialysis facility may 
make [a one-time election to be excluded from the phase-in] an 
election, with respect to 2011, 2012, or 2013, to be excluded 
from the phase-in (or the remainder of the phase-in) under 
clause (i) and be paid entirely based on the payment amount 
under the payment system under this paragraph for such year and 
for each subsequent year during the phase-in described in 
clause (i). Such an election shall be made prior to [January 1, 
2011] the first date of such year, in a form and manner and at 
a time specified by the Secretary, and is final and may not be 
rescinded.

           *       *       *       *       *       *       *

  (15) For purposes of evaluating or auditing payments made to 
renal dialysis facilities for items and services under this 
section under paragraph (1), each such renal dialysis facility, 
upon the request of the Secretary, shall provide to the 
Secretary access to information relating to any ownership or 
compensation arrangement between such facility and the medical 
director of such facility or between such facility and any 
physician.

           *       *       *       *       *       *       *

  (h) Quality Incentives in the End-Stage Renal Disease 
Program.--
          (1) * * *
          (2) Measures.--
                  (A) * * *
                  (B) Use of endorsed measures.--
                          (i) * * *
                          (ii) Exception.--In the case of a 
                        specified area or medical topic 
                        determined appropriate by the Secretary 
                        for which a feasible and practical 
                        measure has not been endorsed by the 
                        entity with a contract under section 
                        1890(a), the Secretary may specify a 
                        measure that is not so endorsed as long 
                        as due consideration is given to 
                        measures that have been endorsed or 
                        adopted by a consensus organization 
                        identified by the Secretary. The 
                        Secretary shall submit such a non-
                        endorsed measure to the entity for 
                        consideration for endorsement. If the 
                        entity considers but does not endorse 
                        such a measure and if the Secretary 
                        does not phase-out use of such measure, 
                        the Secretary shall include the 
                        rationale for continued use of such a 
                        measure in rulemaking.

           *       *       *       *       *       *       *

          (4) Performance standards.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Special rule.--The Secretary shall 
                initially use as the performance standard for 
                the measures specified under paragraph 
                (2)(A)(i) for a provider of services or a renal 
                dialysis facility the [lesser] greater of--
                          (i) * * *

           *       *       *       *       *       *       *


          PAYMENT TO HOSPITALS FOR INPATIENT HOSPITAL SERVICES

  Sec. 1886. (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (3)(A) * * *
  (B)(i) * * *

           *       *       *       *       *       *       *

  [(iii) For purposes of this subparagraph,] (iii)(I) For 
purposes of this subparagraph, subject to the productivity 
adjustment described in subclause (II), the term ``market 
basket percentage increase'' means, with respect to cost 
reporting periods and discharges occurring in a fiscal year, 
the percentage, estimated by the Secretary before the beginning 
of the period or fiscal year, by which the cost of the mix of 
goods and services (including personnel costs but excluding 
nonoperating costs) comprising routine, ancillary, and special 
care unit inpatient hospital services, based on an index of 
appropriately weighted indicators of changes in wages and 
prices which are representative of the mix of goods and 
services included in such inpatient hospital services, for the 
period or fiscal year will exceed the cost of such mix of goods 
and services for the preceding 12-month cost reporting period 
or fiscal year.
  (II) The productivity adjustment described in this subclause, 
with respect to an increase or change for a fiscal year or year 
or cost reporting period, or other annual period, is a 
productivity offset equal to the percentage change in the 10-
year moving average of annual economy-wide private nonfarm 
business multi-factor productivity (as recently published 
before the promulgation of such increase for the year or period 
involved). Except as otherwise provided, any reference to the 
increase described in this clause shall be a reference to the 
percentage increase described in subclause (I) minus the 
percentage change under this subclause.

           *       *       *       *       *       *       *

  (viii)(I) For purposes of clause (i) for fiscal year 2007 and 
each subsequent fiscal year, in the case of a subsection (d) 
hospital that does not submit, to the Secretary in accordance 
with this clause, data required to be submitted on measures 
selected under this clause with respect to such a fiscal year, 
the applicable percentage increase under clause (i) for such 
fiscal year shall be reduced (but not below zero) by 2.0 
percentage points (or, beginning with fiscal year 2015, by one-
quarter). Such reduction shall apply only with respect to the 
fiscal year involved and the Secretary shall not take into 
account such reduction in computing the applicable percentage 
increase under clause (i) for a subsequent fiscal year, and the 
Secretary and the Medicare Payment Advisory Commission shall 
carry out the requirements under section 5001(b) of the Deficit 
Reduction Act of 2005.

           *       *       *       *       *       *       *

  (ix)(I) For purposes of clause (i) for fiscal year 2015 and 
each subsequent fiscal year, in the case of an eligible 
hospital (as defined in subsection (n)(6)(A)) that is not a 
meaningful EHR user (as defined in subsection (n)(3)) for an 
EHR reporting period for such fiscal year, three-quarters of 
the applicable percentage increase otherwise applicable under 
clause (i) (determined without regard to clause (iii)(II) for 
such fiscal year shall be reduced (but not below zero) by 33\1/
3\ percent for fiscal year 2015, 66\2/3\ percent for fiscal 
year 2016, and 100 percent for fiscal year 2017 and each 
subsequent fiscal year. Such reduction shall apply only with 
respect to the fiscal year involved and the Secretary shall not 
take into account such reduction in computing the applicable 
percentage increase under clause (i) for a subsequent fiscal 
year.

           *       *       *       *       *       *       *

  (x)(I) Subject to subclause (II), for purposes of reporting 
data on quality measures for inpatient hospital services 
furnished during fiscal year 2012 and each subsequent fiscal 
year, the quality measures specified under clause (viii) shall 
be measures selected by the Secretary from measures that have 
been endorsed by the entity with a contract with the Secretary 
under section 1890(a).
  (II) In the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible 
and practical quality measure has not been endorsed by the 
entity with a contract under section 1890(a), the Secretary may 
specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been endorsed or 
adopted by a consensus organization identified by the 
Secretary. The Secretary shall submit such a non-endorsed 
measure to the entity for consideration for endorsement. If the 
entity considers but does not endorse such a measure and if the 
Secretary does not phase-out use of such measure, the Secretary 
shall include the rationale for continued use of such a measure 
in rulemaking.

           *       *       *       *       *       *       *

  (d)(1) * * *

           *       *       *       *       *       *       *

  (5)(A) * * *
  (B) The Secretary shall provide for an additional payment 
amount for subsection (d) hospitals with indirect costs of 
medical education, in an amount computed in the same manner as 
the adjustment for such costs under regulations (in effect as 
of January 1, 1983) under subsection (a)(2), except as follows:
          (i) * * *

           *       *       *       *       *       *       *

          [(iv) Effective for discharges occurring on or after 
        October 1, 1997] (iv)(I) Effective for discharges 
        occurring on or after October 1, 1997, and before July 
        1, 2009, all the time spent by an intern or resident in 
        patient care activities under an approved medical 
        residency training program at an entity in a 
        nonhospital setting shall be counted towards the 
        determination of full-time equivalency if the hospital 
        incurs all, or substantially all, of the costs for the 
        training program in that setting.
          (II) Effective for discharges occurring on or after 
        July 1, 2009, all the time spent by an intern or 
        resident in patient care activities at an entity in a 
        nonprovider setting shall be counted towards the 
        determination of full-time equivalency if the hospital 
        incurs the costs of the stipends and fringe benefits of 
        the intern or resident during the time the intern or 
        resident spends in that setting.
          (v) In determining the adjustment with respect to a 
        hospital for discharges occurring on or after October 
        1, 1997, the total number of full-time equivalent 
        interns and residents in the fields of allopathic and 
        osteopathic medicine in either a hospital or 
        nonhospital setting may not exceed the number (or, 130 
        percent of such number in the case of a hospital 
        located in a rural area) of such full-time equivalent 
        interns and residents in the hospital with respect to 
        the hospital's most recent cost reporting period ending 
        on or before December 31, 1996. Rules similar to the 
        rules of subsection (h)(4)(F)(ii) shall apply for 
        purposes of this clause. The provisions of [subsection 
        (h)(7)] subsections (h)(7) and (h)(8) shall apply with 
        respect to the first sentence of this clause in the 
        same manner as [it applies] they apply with respect to 
        subsection (h)(4)(F)(i).

           *       *       *       *       *       *       *

  (x) For discharges occurring on or after July 1, 2011, 
insofar as an additional payment amount under this subparagraph 
is attributable to resident positions distributed to a hospital 
under subsection (h)(8)(B), the indirect teaching adjustment 
factor shall be computed in the same manner as provided under 
clause (ii) with respect to such resident positions.
  (xi)(I) The provisions of subparagraph (I) of subsection 
(h)(4) shall apply under this subparagraph in the same manner 
as they apply under such subsection.
  (II) In determining the hospital's number of full-time 
equivalent residents for purposes of this subparagraph, all the 
time spent by an intern or resident in an approved medical 
residency training program in nonpatient care activities, such 
as didactic conferences and seminars, as such time and 
activities are defined by the Secretary, that occurs in the 
hospital shall be counted toward the determination of full-time 
equivalency if the hospital--
          (aa) is recognized as a subsection (d) hospital;
          (bb) is recognized as a subsection (d) Puerto Rico 
        hospital;
          (cc) is reimbursed under a reimbursement system 
        authorized under section 1814(b)(3); or
          (dd) is a provider-based hospital outpatient 
        department.
  (III) In determining the hospital's number of full-time 
equivalent residents for purposes of this subparagraph, all the 
time spent by an intern or resident in an approved medical 
residency training program in research activities that are not 
associated with the treatment or diagnosis of a particular 
patient, as such time and activities are defined by the 
Secretary, shall not be counted toward the determination of 
full-time equivalency.

           *       *       *       *       *       *       *

  (h) Payments for Direct Graduate Medical Education Costs.--
          (1) Substitution of special payment rules.--
                  (A) In general.--Notwithstanding section 
                1861(v), instead of any amounts that are 
                otherwise payable under this title with respect 
                to the reasonable costs of hospitals for direct 
                graduate medical education costs, the Secretary 
                shall provide for payments for such costs in 
                accordance with paragraph (3) of this 
                subsection.
                  (B) Goals and accountability for approved 
                medical residency training programs.--The goals 
                of medical residency training programs are to 
                foster a physician workforce so that physicians 
                are trained to be able to do the following:
                          (i) Work effectively in various 
                        health care delivery settings, such as 
                        nonprovider settings.
                          (ii) Coordinate patient care within 
                        and across settings relevant to their 
                        specialties.
                          (iii) Understand the relevant cost 
                        and value of various diagnostic and 
                        treatment options.
                          (iv) Work in inter-professional teams 
                        and multi-disciplinary team-based 
                        models in provider and nonprovider 
                        settings to enhance safety and improve 
                        quality of patient care.
                          (v) Be knowledgeable in methods of 
                        identifying systematic errors in health 
                        care delivery and in implementing 
                        systematic solutions in case of such 
                        errors, including experience and 
                        participation in continuous quality 
                        improvement projects to improve health 
                        outcomes of the population the 
                        physicians serve.
                          (vi) Be meaningful EHR users (as 
                        determined under section 1848(o)(2)) in 
                        the delivery of care and in improving 
                        the quality of the health of the 
                        community and the individuals that the 
                        hospital serves.

           *       *       *       *       *       *       *

          (4) Determination of full-time-equivalent 
        residents.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Counting time spent in outpatient 
                settings.--
                          [Such rules] (i) In general.--Subject 
                        to clause (ii), such rules shall 
                        provide that only time spent in 
                        activities relating to patient care 
                        [shall be counted and that all the 
                        time] shall be counted and that--
                                  (I) effective for cost 
                                reporting periods beginning 
                                before July 1, 2009, all the 
                                time so spent by a resident 
                                under an approved medical 
                                residency training program 
                                shall be counted towards the 
                                determination of full-time 
                                equivalency, without regard to 
                                the setting in which the 
                                activities are performed, if 
                                the hospital incurs all, or 
                                substantially all, of the costs 
                                for the training program in 
                                that setting[.]; and
                                  (II) effective for cost 
                                reporting periods beginning on 
                                or after July 1, 2009, all the 
                                time so spent by a resident 
                                shall be counted towards the 
                                determination of full-time 
                                equivalency, without regard to 
                                the setting in which the 
                                activities are performed, if 
                                the hospital incurs the costs 
                                of the stipends and fringe 
                                benefits of the resident during 
                                the time the resident spends in 
                                that setting.
                        Any hospital claiming under this 
                        subparagraph for time spent in a 
                        nonprovider setting shall maintain and 
                        make available to the Secretary records 
                        regarding the amount of such time and 
                        such amount in comparison with amounts 
                        of such time in such base year as the 
                        Secretary shall specify.
                          (ii) Treatment of certain nonprovider 
                        and didactic activities.--Such rules 
                        shall provide that all time spent by an 
                        intern or resident in an approved 
                        medical residency training program in a 
                        nonprovider setting that is primarily 
                        engaged in furnishing patient care (as 
                        defined in paragraph (5)(K)) in 
                        nonpatient care activities, such as 
                        didactic conferences and seminars, but 
                        not including research not associated 
                        with the treatment or diagnosis of a 
                        particular patient, as such time and 
                        activities are defined by the 
                        Secretary, shall be counted toward the 
                        determination of full-time equivalency.
                  (F) Limitation on number of residents in 
                allopathic and osteopathic medicine.--
                          (i) In general.--Such rules shall 
                        provide that for purposes of a cost 
                        reporting period beginning on or after 
                        October 1, 1997, subject to [paragraph 
                        (7)] paragraphs (7) and (8), the total 
                        number of full-time equivalent 
                        residents before application of 
                        weighting factors (as determined under 
                        this paragraph) with respect to a 
                        hospital's approved medical residency 
                        training program in the fields of 
                        allopathic medicine and osteopathic 
                        medicine may not exceed the number (or, 
                        130 percent of such number in the case 
                        of a hospital located in a rural area) 
                        of such full-time equivalent residents 
                        for the hospital's most recent cost 
                        reporting period ending on or before 
                        December 31, 1996.

           *       *       *       *       *       *       *

                  (H) Special rules for application of 
                subparagraphs (f) and (g).--
                          (i) New facilities.--The Secretary 
                        shall, consistent with the principles 
                        of subparagraphs (F) and (G) and 
                        subject to [paragraph (7)] paragraphs 
                        (7) and (8), prescribe rules for the 
                        application of such subparagraphs in 
                        the case of medical residency training 
                        programs established on or after 
                        January 1, 1995. In promulgating such 
                        rules for purposes of subparagraph (F), 
                        the Secretary shall give special 
                        consideration to facilities that meet 
                        the needs of underserved rural areas.

           *       *       *       *       *       *       *

                          (vi) Redistribution of residency 
                        slots after a hospital closes.--
                                  (I) In general.--The 
                                Secretary shall, by regulation, 
                                establish a process consistent 
                                with subclauses (II) and (III) 
                                under which, in the case where 
                                a hospital (other than a 
                                hospital described in clause 
                                (v)) with an approved medical 
                                residency program in a State 
                                closes on or after the date 
                                that is 2 years before the date 
                                of the enactment of this 
                                clause, the Secretary shall 
                                increase the otherwise 
                                applicable resident limit under 
                                this paragraph for other 
                                hospitals in the State in 
                                accordance with this clause.
                                  (II) Process for hospitals in 
                                certain areas.--In determining 
                                for which hospitals the 
                                increase in the otherwise 
                                applicable resident limit 
                                described in subclause (I) is 
                                provided, the Secretary shall 
                                establish a process to provide 
                                for such increase to one or 
                                more hospitals located in the 
                                State. Such process shall take 
                                into consideration the 
                                recommendations submitted to 
                                the Secretary by the senior 
                                health official (as designated 
                                by the chief executive officer 
                                of such State) if such 
                                recommendations are submitted 
                                not later than 180 days after 
                                the date of the hospital 
                                closure involved (or, in the 
                                case of a hospital that closed 
                                after the date that is 2 years 
                                before the date of the 
                                enactment of this clause, 180 
                                days after such date of 
                                enactment).
                                  (III) Limitation.--The 
                                estimated aggregate number of 
                                increases in the otherwise 
                                applicable resident limits for 
                                hospitals under this clause 
                                shall be equal to the estimated 
                                number of resident positions in 
                                the approved medical residency 
                                programs that closed on or 
                                after the date described in 
                                subclause (I).
                  (I) Treatment of certain time in approved 
                medical residency training programing.--In 
                determining the hospital's number of full-time 
                equivalent residents for purposes of this 
                subsection, all the time that is spent by an 
                intern or resident in an approved medical 
                residency training program on vacation, sick 
                leave, or other approved leave, as such time is 
                defined by the Secretary, and that does not 
                prolong the total time the resident is 
                participating in the approved program beyond 
                the normal duration of the program shall be 
                counted toward the determination of full-time 
                equivalency.
          (5) Definitions and special rules.--As used in this 
        subsection:
                  (A) * * *

           *       *       *       *       *       *       *

                  (K) Nonprovider setting that is primarily 
                engaged in furnishing patient care.--The term 
                ``nonprovider setting that is primarily engaged 
                in furnishing patient care'' means a 
                nonprovider setting in which the primary 
                activity is the care and treatment of patients, 
                as defined by the Secretary.

           *       *       *       *       *       *       *

          (7) Redistribution of unused resident positions.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Judicial review.--There shall be no 
                administrative or judicial review under section 
                1869, 1878, or otherwise, with respect to 
                determinations made under this paragraph or 
                under paragraph (4)(H)(vi) and paragraph (8).
          (8) Additional redistribution of unused residency 
        positions.--
                  (A) Reductions in limit based on unused 
                positions.--
                          (i) Programs subject to reduction.--
                        If a hospital's reference resident 
                        level (specified in clause (ii)) is 
                        less than the otherwise applicable 
                        resident limit (as defined in 
                        subparagraph (C)(ii)), effective for 
                        portions of cost reporting periods 
                        occurring on or after July 1, 2011, the 
                        otherwise applicable resident limit 
                        shall be reduced by 90 percent of the 
                        difference between such otherwise 
                        applicable resident limit and such 
                        reference resident level.
                          (ii) Reference resident level.--
                                  (I) In general.--Except as 
                                otherwise provided in a 
                                subsequent subclause, the 
                                reference resident level 
                                specified in this clause for a 
                                hospital is the highest 
                                resident level for any of the 3 
                                most recent cost reporting 
                                periods (ending before the date 
                                of the enactment of this 
                                paragraph) of the hospital for 
                                which a cost report has been 
                                settled (or, if not, submitted 
                                (subject to audit)), as 
                                determined by the Secretary.
                                  (II) Use of most recent 
                                accounting period to recognize 
                                expansion of existing 
                                programs.--If a hospital 
                                submits a timely request to 
                                increase its resident level due 
                                to an expansion, or planned 
                                expansion, of an existing 
                                residency training program that 
                                is not reflected on the most 
                                recent settled or submitted 
                                cost report, after audit and 
                                subject to the discretion of 
                                the Secretary, subject to 
                                subclause (IV), the reference 
                                resident level for such 
                                hospital is the resident level 
                                that includes the additional 
                                residents attributable to such 
                                expansion or establishment, as 
                                determined by the Secretary. 
                                The Secretary is authorized to 
                                determine an alternative 
                                reference resident level for a 
                                hospital that submitted to the 
                                Secretary a timely request, 
                                before the start of the 2009-
                                2010 academic year, for an 
                                increase in its reference 
                                resident level due to a planned 
                                expansion.
                                  (III) Special provider 
                                agreement.--In the case of a 
                                hospital described in paragraph 
                                (4)(H)(v), the reference 
                                resident level specified in 
                                this clause is the limitation 
                                applicable under subclause (I) 
                                of such paragraph.
                                  (IV) Previous 
                                redistribution.--The reference 
                                resident level specified in 
                                this clause for a hospital 
                                shall be increased to the 
                                extent required to take into 
                                account an increase in resident 
                                positions made available to the 
                                hospital under paragraph (7)(B) 
                                that are not otherwise taken 
                                into account under a previous 
                                subclause.
                          (iii) Affiliation.--The provisions of 
                        clause (i) shall be applied to 
                        hospitals which are members of the same 
                        affiliated group (as defined by the 
                        Secretary under paragraph (4)(H)(ii)) 
                        and to the extent the hospitals can 
                        demonstrate that they are filling any 
                        additional resident slots allocated to 
                        other hospitals through an affiliation 
                        agreement, the Secretary shall adjust 
                        the determination of available slots 
                        accordingly, or which the Secretary 
                        otherwise has permitted the resident 
                        positions (under section 402 of the 
                        Social Security Amendments of 1967) to 
                        be aggregated for purposes of applying 
                        the resident position limitations under 
                        this subsection.
                  (B) Redistribution.--
                          (i) In general.--The Secretary shall 
                        increase the otherwise applicable 
                        resident limit for each qualifying 
                        hospital that submits an application 
                        under this subparagraph by such number 
                        as the Secretary may approve for 
                        portions of cost reporting periods 
                        occurring on or after July 1, 2011. The 
                        estimated aggregate number of increases 
                        in the otherwise applicable resident 
                        limit under this subparagraph may not 
                        exceed the Secretary's estimate of the 
                        aggregate reduction in such limits 
                        attributable to subparagraph (A).
                          (ii) Requirements for qualifying 
                        hospitals.--A hospital is not a 
                        qualifying hospital for purposes of 
                        this paragraph unless the following 
                        requirements are met:
                                  (I) Maintenance of primary 
                                care resident level.--The 
                                hospital maintains the number 
                                of primary care residents at a 
                                level that is not less than the 
                                base level of primary care 
                                residents increased by the 
                                number of additional primary 
                                care resident positions 
                                provided to the hospital under 
                                this subparagraph. For purposes 
                                of this subparagraph, the 
                                ``base level of primary care 
                                residents'' for a hospital is 
                                the level of such residents as 
                                of a base period (specified by 
                                the Secretary), determined 
                                without regard to whether such 
                                positions were in excess of the 
                                otherwise applicable resident 
                                limit for such period but 
                                taking into account the 
                                application of subclauses (II) 
                                and (III) of subparagraph 
                                (A)(ii).
                                  (II) Dedicated assignment of 
                                additional resident positions 
                                to primary care.--The hospital 
                                assigns all such additional 
                                resident positions for primary 
                                care residents.
                                  (III) Accreditation.--The 
                                hospital's residency programs 
                                in primary care are fully 
                                accredited or, in the case of a 
                                residency training program not 
                                in operation as of the base 
                                year, the hospital is actively 
                                applying for such accreditation 
                                for the program for such 
                                additional resident positions 
                                (as determined by the 
                                Secretary).
                          (iii) Considerations in 
                        redistribution.--In determining for 
                        which qualifying hospitals the increase 
                        in the otherwise applicable resident 
                        limit is provided under this 
                        subparagraph, the Secretary shall take 
                        into account the demonstrated 
                        likelihood of the hospital filling the 
                        positions within the first 3 cost 
                        reporting periods beginning on or after 
                        July 1, 2011, made available under this 
                        subparagraph, as determined by the 
                        Secretary.
                          (iv) Priority for certain 
                        hospitals.--In determining for which 
                        qualifying hospitals the increase in 
                        the otherwise applicable resident limit 
                        is provided under this subparagraph, 
                        the Secretary shall distribute the 
                        increase to qualifying hospitals based 
                        on the following criteria:
                                  (I) The Secretary shall give 
                                preference to hospitals that 
                                had a reduction in resident 
                                training positions under 
                                subparagraph (A).
                                  (II) The Secretary shall give 
                                preference to hospitals with 3-
                                year primary care residency 
                                training programs, such as 
                                family practice and general 
                                internal medicine.
                                  (III) The Secretary shall 
                                give preference to hospitals 
                                insofar as they have in effect 
                                formal arrangements (as 
                                determined by the Secretary) 
                                that place greater emphasis 
                                upon training in Federally 
                                qualified health centers, rural 
                                health clinics, and other 
                                nonprovider settings, and to 
                                hospitals that receive 
                                additional payments under 
                                subsection (d)(5)(F) and 
                                emphasize training in an 
                                outpatient department.
                                  (IV) The Secretary shall give 
                                preference to hospitals with a 
                                number of positions (as of July 
                                1, 2009) in excess of the 
                                otherwise applicable resident 
                                limit for such period.
                                  (V) The Secretary shall give 
                                preference to hospitals that 
                                place greater emphasis upon 
                                training in a health 
                                professional shortage area 
                                (designated under section 332 
                                of the Public Health Service 
                                Act) or a health professional 
                                needs area (designated under 
                                section 2211 of such Act).
                                  (VI) The Secretary shall give 
                                preference to hospitals in 
                                States that have low resident-
                                to-population ratios (including 
                                a greater preference for those 
                                States with lower resident-to-
                                population ratios).
                          (v) Limitation.--In no case shall 
                        more than 20 full-time equivalent 
                        additional residency positions be made 
                        available under this subparagraph with 
                        respect to any hospital.
                          (vi) Application of per resident 
                        amounts for primary care.--With respect 
                        to additional residency positions in a 
                        hospital attributable to the increase 
                        provided under this subparagraph, the 
                        approved FTE resident amounts are 
                        deemed to be equal to the hospital per 
                        resident amounts for primary care and 
                        nonprimary care computed under 
                        paragraph (2)(D) for that hospital.
                          (vii) Distribution.--The Secretary 
                        shall distribute the increase in 
                        resident training positions to 
                        qualifying hospitals under this 
                        subparagraph not later than July 1, 
                        2011.
                  (C) Resident level and limit defined.--In 
                this paragraph:
                          (i) The term ``resident level'' has 
                        the meaning given such term in 
                        paragraph (7)(C)(i).
                          (ii) The term ``otherwise applicable 
                        resident limit'' means, with respect to 
                        a hospital, the limit otherwise 
                        applicable under subparagraphs (F)(i) 
                        and (H) of paragraph (4) on the 
                        resident level for the hospital 
                        determined without regard to this 
                        paragraph but taking into account 
                        paragraph (7)(A).
                  (D) Maintenance of primary care resident 
                level.--In carrying out this paragraph, the 
                Secretary shall require hospitals that receive 
                additional resident positions under 
                subparagraph (B)--
                          (i) to maintain records, and 
                        periodically report to the Secretary, 
                        on the number of primary care residents 
                        in its residency training programs; and
                          (ii) as a condition of payment for a 
                        cost reporting period under this 
                        subsection for such positions, to 
                        maintain the level of such positions at 
                        not less than the sum of--
                                  (I) the base level of primary 
                                care resident positions (as 
                                determined under subparagraph 
                                (B)(ii)(I)) before receiving 
                                such additional positions; and
                                  (II) the number of such 
                                additional positions.

           *       *       *       *       *       *       *

  (j) Prospective Payment for Inpatient Rehabilitation 
Services.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Payment rate.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Increase factor.--For purposes of this 
                subsection for payment units in each fiscal 
                year (beginning with fiscal year 2001), the 
                Secretary shall establish an increase factor. 
                Such factor shall be based on an appropriate 
                percentage increase (subject to the 
                productivity adjustment described in subsection 
                (b)(3)(B)(iii)(II)) in a market basket of goods 
                and services comprising services for which 
                payment is made under this subsection, which 
                may be the market basket percentage increase 
                described in subsection (b)(3)(B)(iii). The 
                increase factor to be applied under this 
                subparagraph for each of fiscal years 2008 [and 
                2009] through 2010 shall be 0 percent.

           *       *       *       *       *       *       *

  (m) Prospective Payment for Long-Term Care Hospitals.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Productivity adjustment.--In implementing the 
        system described in paragraph (1) for discharges 
        occurring during the rate year ending in 2010 or any 
        subsequent rate year for a hospital, to the extent that 
        an annual percentage increase factor applies to a base 
        rate for such discharges for the hospital, such factor 
        shall be subject to the productivity adjustment 
        described in subsection (b)(3)(B)(iii)(II).

           *       *       *       *       *       *       *

  (o) Prospective Payment for Psychiatric Hospitals.--
          (1) Reference to establishment and implementation of 
        system.--For provisions related to the establishment 
        and implementation of a prospective payment system for 
        payments under this title for inpatient hospital 
        services furnished by psychiatric hospitals (as 
        described in clause (i) of subsection (d)(1)(B) and 
        psychiatric units (as described in the matter following 
        clause (v) of such subsection), see section 124 of the 
        Medicare, Medicaid, and SCHIP Balanced Budget 
        Refinement Act of 1999.
          (2) Productivity adjustment.--In implementing the 
        system described in paragraph (1) for discharges 
        occurring during the rate year ending in 2011 or any 
        subsequent rate year for a psychiatric hospital or unit 
        described in such paragraph, to the extent that an 
        annual percentage increase factor applies to a base 
        rate for such discharges for the hospital or unit, 
        respectively, such factor shall be subject to the 
        productivity adjustment described in subsection 
        (b)(3)(B)(iii)(II).
  (p) Adjustment to Hospital Payments for Excess 
Readmissions.--
          (1) In general.--With respect to payment for 
        discharges from an applicable hospital (as defined in 
        paragraph (5)(C)) occurring during a fiscal year 
        beginning on or after October 1, 2011, in order to 
        account for excess readmissions in the hospital, the 
        Secretary shall reduce the payments that would 
        otherwise be made to such hospital under subsection (d) 
        (or section 1814(b)(3), as the case may be) for such a 
        discharge by an amount equal to the product of--
                  (A) the base operating DRG payment amount (as 
                defined in paragraph (2)) for the discharge; 
                and
                  (B) the adjustment factor (described in 
                paragraph (3)(A)) for the hospital for the 
                fiscal year.
          (2) Base operating drg payment amount.--
                  (A) In general.--Except as provided in 
                subparagraph (B), for purposes of this 
                subsection, the term ``base operating DRG 
                payment amount'' means, with respect to a 
                hospital for a fiscal year, the payment amount 
                that would otherwise be made under subsection 
                (d) for a discharge if this subsection did not 
                apply, reduced by any portion of such amount 
                that is attributable to payments under 
                subparagraphs (B) and (F) of paragraph (5).
                  (B) Adjustments.--For purposes of 
                subparagraph (A), in the case of a hospital 
                that is paid under section 1814(b)(3), the term 
                ``base operating DRG payment amount'' means the 
                payment amount under such section.
          (3) Adjustment factor.--
                  (A) In general.--For purposes of paragraph 
                (1), the adjustment factor under this paragraph 
                for an applicable hospital for a fiscal year is 
                equal to the greater of--
                          (i) the ratio described in 
                        subparagraph (B) for the hospital for 
                        the applicable period (as defined in 
                        paragraph (5)(D)) for such fiscal year; 
                        or
                          (ii) the floor adjustment factor 
                        specified in subparagraph (C).
                  (B) Ratio.--The ratio described in this 
                subparagraph for a hospital for an applicable 
                period is equal to 1 minus the ratio of--
                          (i) the aggregate payments for excess 
                        readmissions (as defined in paragraph 
                        (4)(A)) with respect to an applicable 
                        hospital for the applicable period; and
                          (ii) the aggregate payments for all 
                        discharges (as defined in paragraph 
                        (4)(B)) with respect to such applicable 
                        hospital for such applicable period.
                  (C) Floor adjustment factor.--For purposes of 
                subparagraph (A), the floor adjustment factor 
                specified in this subparagraph for--
                          (i) fiscal year 2012 is 0.99;
                          (ii) fiscal year 2013 is 0.98;
                          (iii) fiscal year 2014 is 0.97; or
                          (iv) a subsequent fiscal year is 
                        0.95.
          (4) Aggregate payments, excess readmission ratio 
        defined.--For purposes of this subsection:
                  (A) Aggregate payments for excess 
                readmissions.--The term ``aggregate payments 
                for excess readmissions'' means, for a hospital 
                for a fiscal year, the sum, for applicable 
                conditions (as defined in paragraph (5)(A)), of 
                the product, for each applicable condition, 
                of--
                          (i) the base operating DRG payment 
                        amount for such hospital for such 
                        fiscal year for such condition;
                          (ii) the number of admissions for 
                        such condition for such hospital for 
                        such fiscal year; and
                          (iii) the excess readmissions ratio 
                        (as defined in subparagraph (C)) for 
                        such hospital for the applicable period 
                        for such fiscal year minus 1.
                  (B) Aggregate payments for all discharges.--
                The term ``aggregate payments for all 
                discharges'' means, for a hospital for a fiscal 
                year, the sum of the base operating DRG payment 
                amounts for all discharges for all conditions 
                from such hospital for such fiscal year.
                  (C) Excess readmission ratio.--
                          (i) In general.--Subject to clauses 
                        (ii) and (iii), the term ``excess 
                        readmissions ratio'' means, with 
                        respect to an applicable condition for 
                        a hospital for an applicable period, 
                        the ratio (but not less than 1.0) of--
                                  (I) the risk adjusted 
                                readmissions based on actual 
                                readmissions, as determined 
                                consistent with a readmission 
                                measure methodology that has 
                                been endorsed under paragraph 
                                (5)(A)(ii)(I), for an 
                                applicable hospital for such 
                                condition with respect to the 
                                applicable period; to
                                  (II) the risk adjusted 
                                expected readmissions (as 
                                determined consistent with such 
                                a methodology) for such 
                                hospital for such condition 
                                with respect to such applicable 
                                period.
                          (ii) Exclusion of certain 
                        readmissions.--For purposes of clause 
                        (i), with respect to a hospital, excess 
                        readmissions shall not include 
                        readmissions for an applicable 
                        condition for which there are fewer 
                        than a minimum number (as determined by 
                        the Secretary) of discharges for such 
                        applicable condition for the applicable 
                        period and such hospital.
                          (iii) Adjustment.--In order to 
                        promote a reduction over time in the 
                        overall rate of readmissions for 
                        applicable conditions, the Secretary 
                        may provide, beginning with discharges 
                        for fiscal year 2014, for the 
                        determination of the excess 
                        readmissions ratio under subparagraph 
                        (C) to be based on a ranking of 
                        hospitals by readmission ratios (from 
                        lower to higher readmission ratios) 
                        normalized to a benchmark that is lower 
                        than the 50th percentile.
          (5) Definitions.--For purposes of this subsection:
                  (A) Applicable condition.--The term 
                ``applicable condition'' means, subject to 
                subparagraph (B), a condition or procedure 
                selected by the Secretary among conditions and 
                procedures for which--
                          (i) readmissions (as defined in 
                        subparagraph (E)) that represent 
                        conditions or procedures that are high 
                        volume or high expenditures under this 
                        title (or other criteria specified by 
                        the Secretary); and
                          (ii) measures of such readmissions--
                                  (I) have been endorsed by the 
                                entity with a contract under 
                                section 1890(a); and
                                  (II) such endorsed measures 
                                have appropriate exclusions for 
                                readmissions that are unrelated 
                                to the prior discharge (such as 
                                a planned readmission or 
                                transfer to another applicable 
                                hospital).
                  (B) Expansion of applicable conditions.--
                Beginning with fiscal year 2013, the Secretary 
                shall expand the applicable conditions beyond 
                the 3 conditions for which measures have been 
                endorsed as described in subparagraph 
                (A)(ii)(I) as of the date of the enactment of 
                this subsection to the additional 4 conditions 
                that have been so identified by the Medicare 
                Payment Advisory Commission in its report to 
                Congress in June 2007 and to other conditions 
                and procedures which may include an all-
                condition measure of readmissions, as 
                determined appropriate by the Secretary. In 
                expanding such applicable conditions, the 
                Secretary shall seek the endorsement described 
                in subparagraph (A)(ii)(I) but may apply such 
                measures without such an endorsement.
                  (C) Applicable hospital.--The term 
                ``applicable hospital'' means a subsection (d) 
                hospital or a hospital that is paid under 
                section 1814(b)(3).
                  (D) Applicable period.--The term ``applicable 
                period'' means, with respect to a fiscal year, 
                such period as the Secretary shall specify for 
                purposes of determining excess readmissions.
                  (E) Readmission.--The term ``readmission'' 
                means, in the case of an individual who is 
                discharged from an applicable hospital, the 
                admission of the individual to the same or 
                another applicable hospital within a time 
                period specified by the Secretary from the date 
                of such discharge. Insofar as the discharge 
                relates to an applicable condition for which 
                there is an endorsed measure described in 
                subparagraph (A)(ii)(I), such time period (such 
                as 30 days) shall be consistent with the time 
                period specified for such measure.
          (6) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise of--
                  (A) the determination of base operating DRG 
                payment amounts;
                  (B) the methodology for determining the 
                adjustment factor under paragraph (3), 
                including excess readmissions ratio under 
                paragraph (4)(C), aggregate payments for excess 
                readmissions under paragraph (4)(A), and 
                aggregate payments for all discharges under 
                paragraph (4)(B), and applicable periods and 
                applicable conditions under paragraph (5);
                  (C) the measures of readmissions as described 
                in paragraph (5)(A)(ii); and
                  (D) the determination of a targeted hospital 
                under paragraph (8)(B)(i), the increase in 
                payment under paragraph (8)(B)(ii), the 
                aggregate cap under paragraph (8)(C)(i), the 
                hospital-specific limit under paragraph 
                (8)(C)(ii), and the form of payment made by the 
                Secretary under paragraph (8)(D).
          (7) Monitoring inappropriate changes in admissions 
        practices.--The Secretary shall monitor the activities 
        of applicable hospitals to determine if such hospitals 
        have taken steps to avoid patients at risk in order to 
        reduce the likelihood of increasing readmissions for 
        applicable conditions. If the Secretary determines that 
        such a hospital has taken such a step, after notice to 
        the hospital and opportunity for the hospital to 
        undertake action to alleviate such steps, the Secretary 
        may impose an appropriate sanction.
          (8) Assistance to certain hospitals.--
                  (A) In general.--For purposes of providing 
                funds to applicable hospitals to take steps 
                described in subparagraph (E) to address 
                factors that may impact readmissions of 
                individuals who are discharged from such a 
                hospital, for fiscal years beginning on or 
                after October 1, 2011, the Secretary shall make 
                a payment adjustment for a hospital described 
                in subparagraph (B), with respect to each such 
                fiscal year, by a percent estimated by the 
                Secretary to be consistent with subparagraph 
                (C).
                  (B) Targeted hospitals.--Subparagraph (A) 
                shall apply to an applicable hospital that--
                          (i) received (or, in the case of an 
                        1814(b)(3) hospital, otherwise would 
                        have been eligible to receive) 
                        $10,000,000 or more in disproportionate 
                        share payments using the latest 
                        available data as estimated by the 
                        Secretary; and
                          (ii) provides assurances satisfactory 
                        to the Secretary that the increase in 
                        payment under this paragraph shall be 
                        used for purposes described in 
                        subparagraph (E).
                  (C) Caps.--
                          (i) Aggregate cap.--The aggregate 
                        amount of the payment adjustment under 
                        this paragraph for a fiscal year shall 
                        not exceed 5 percent of the estimated 
                        difference in the spending that would 
                        occur for such fiscal year with and 
                        without application of the adjustment 
                        factor described in paragraph (3) and 
                        applied pursuant to paragraph (1).
                          (ii) Hospital-specific limit.--The 
                        aggregate amount of the payment 
                        adjustment for a hospital under this 
                        paragraph shall not exceed the 
                        estimated difference in spending that 
                        would occur for such fiscal year for 
                        such hospital with and without 
                        application of the adjustment factor 
                        described in paragraph (3) and applied 
                        pursuant to paragraph (1).
                  (D) Form of payment.--The Secretary may make 
                the additional payments under this paragraph on 
                a lump sum basis, a periodic basis, a claim by 
                claim basis, or otherwise.
                  (E) Use of additional payment.--Funding under 
                this paragraph shall be used by targeted 
                hospitals for transitional care activities 
                designed to address the patient noncompliance 
                issues that result in higher than normal 
                readmission rates, such as one or more of the 
                following:
                          (i) Providing care coordination 
                        services to assist in transitions from 
                        the targeted hospital to other 
                        settings.
                          (ii) Hiring translators and 
                        interpreters.
                          (iii) Increasing services offered by 
                        discharge planners.
                          (iv) Ensuring that individuals 
                        receive a summary of care and 
                        medication orders upon discharge.
                          (v) Developing a quality improvement 
                        plan to assess and remedy preventable 
                        readmission rates.
                          (vi) Assigning discharged individuals 
                        to a medical home.
                          (vii) Doing other activities as 
                        determined appropriate by the 
                        Secretary.
                  (F) GAO report on use of funds.--Not later 
                than 3 years after the date on which funds are 
                first made available under this paragraph, the 
                Comptroller General of the United States shall 
                submit to Congress a report on the use of such 
                funds.
                  (G) Disproportionate share hospital 
                payment.--In this paragraph, the term 
                ``disproportionate share hospital payment'' 
                means an additional payment amount under 
                subsection (d)(5)(F).

           *       *       *       *       *       *       *


    PAYMENT TO SKILLED NURSING FACILITIES FOR ROUTINE SERVICE COSTS

  Sec. 1888. (a) * * *

           *       *       *       *       *       *       *

  (e) Prospective Payment.--
          (1) * * *
          (2) Definitions.--For purposes of this subsection:
                  (A) Covered skilled nursing facility 
                services.--
                          (i) * * *
                          (ii) Services excluded.--Services 
                        described in this clause are 
                        physicians' services, services 
                        described by clauses (i) and (ii) of 
                        section 1861(s)(2)(K), certified nurse-
                        midwife services, qualified 
                        psychologist services, clinical social 
                        worker services, marriage and family 
                        therapist services (as defined in 
                        subsection (jjj)(1)), mental health 
                        counselor services (as defined in 
                        section 1861(kkk)(1)), services of a 
                        certified registered nurse anesthetist, 
                        items and services described in 
                        subparagraphs (F) and (O) of section 
                        1861(s)(2), telehealth services 
                        furnished under section 
                        1834(m)(4)(C)(ii)(VII), and, only with 
                        respect to services furnished during 
                        1998, the transportation costs of 
                        electrocardiogram equipment for 
                        electrocardiogram test services (HCPCS 
                        Code R0076). Services described in this 
                        clause do not include any physical, 
                        occupational, or speech-language 
                        therapy services regardless of whether 
                        or not the services are furnished by, 
                        or under the supervision of, a 
                        physician or other health care 
                        professional.

           *       *       *       *       *       *       *

          (4) Federal per diem rate.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Updating.--
                          (i) * * *
                          (ii) Subsequent fiscal years.--The 
                        Secretary shall compute an unadjusted 
                        Federal per diem rate equal to the 
                        Federal per diem rate computed under 
                        this subparagraph--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) for each of fiscal 
                                years 2002 and 2003, the rate 
                                computed for the previous 
                                fiscal year increased by the 
                                skilled nursing facility market 
                                basket percentage change for 
                                the fiscal year involved minus 
                                0.5 percentage points; [and]
                                  (IV) for each of fiscal years 
                                2004 through 2009, the rate 
                                computed for the previous 
                                fiscal year increased by the 
                                skilled nursing facility market 
                                basket percentage change for 
                                the fiscal year involved;
                                  (V) for fiscal year 2010, the 
                                rate computed for the previous 
                                fiscal year; and
                                  [(IV)] (VI) for each 
                                subsequent fiscal year, the 
                                rate computed for the previous 
                                fiscal year increased by the 
                                skilled nursing facility market 
                                basket percentage change for 
                                the fiscal year involved.

           *       *       *       *       *       *       *

          (5) Skilled nursing facility market basket index and 
        percentage.--For purposes of this subsection:
                  (A) * * *
                  (B) Skilled nursing facility market basket 
                percentage.--The term ``skilled nursing 
                facility market basket percentage'' means, for 
                a fiscal year or other annual period and as 
                calculated by the Secretary subject to the 
                productivity adjustment described in section 
                1886(b)(3)(B)(iii)(II), the percentage change 
                in the skilled nursing facility market basket 
                index (established under subparagraph (A)) from 
                the midpoint of the prior fiscal year (or 
                period) to the midpoint of the fiscal year (or 
                other period) involved.

           *       *       *       *       *       *       *

          (8) Limitation on review.--There shall be no 
        administrative or judicial review under section 1869, 
        1878, or otherwise of--
                  (A) the establishment of Federal per diem 
                rates under paragraph (4), including the 
                computation of the standardized per diem rates 
                under paragraph (4)(C), adjustments and 
                corrections for case mix under paragraphs 
                (4)(F) and (4)(G)(i), adjustments for 
                variations in labor-related costs under 
                paragraph (4)(G)(ii), [and] adjustments under 
                paragraph (4)(G)(iii), and adjustment under 
                section 1111(b) of the America's Affordable 
                Health Choices Act of 2009;
                  (B) the establishment of facility specific 
                rates before July 1, 1999 (except any 
                determination of costs paid under part A of 
                this title); [and]
                  (C) the establishment of transitional amounts 
                under paragraph (7)[.]; and
                  (D) the establishment of outliers under 
                paragraph (13).

           *       *       *       *       *       *       *

          (13) Outliers for nta and therapy.--
                  (A) In general.--With respect to outliers 
                because of unusual variations in the type or 
                amount of medically necessary care, beginning 
                with October 1, 2010, the Secretary--
                          (i) shall provide for an addition or 
                        adjustment to the payment amount 
                        otherwise made under this section with 
                        respect to non-therapy ancillary 
                        services in the case of such outliers; 
                        and
                          (ii) may provide for such an addition 
                        or adjustment to the payment amount 
                        otherwise made under this section with 
                        respect to therapy services in the case 
                        of such outliers.
                  (B) Outliers based on aggregate costs.--
                Outlier adjustments or additional payments 
                described in subparagraph (A) shall be based on 
                aggregate costs during a stay in a skilled 
                nursing facility and not on the number of days 
                in such stay.
                  (C) Budget neutrality.--The Secretary shall 
                reduce estimated payments that would otherwise 
                be made under the prospective payment system 
                under this subsection with respect to a fiscal 
                year by 2 percent. The total amount of the 
                additional payments or payment adjustments for 
                outliers made under this paragraph with respect 
                to a fiscal year may not exceed 2 percent of 
                the total payments projected or estimated to be 
                made based on the prospective payment system 
                under this subsection for the fiscal year.
  (f) Reporting of Direct Care Expenditures.--
          (1) In general.--For cost reports submitted under 
        this title for cost reporting periods beginning on or 
        after the date that is 3 years after the date of the 
        enactment of this subsection, skilled nursing 
        facilities shall separately report expenditures for 
        wages and benefits for direct care staff (breaking out 
        (at a minimum) registered nurses, licensed professional 
        nurses, certified nurse assistants, and other medical 
        and therapy staff).
          (2) Modification of form.--The Secretary, in 
        consultation with private sector accountants 
        experienced with skilled nursing facility cost reports, 
        shall redesign such reports to meet the requirement of 
        paragraph (1) not later than 1 year after the date of 
        the enactment of this subsection.
          (3) Categorization by functional accounts.--Not later 
        than 30 months after the date of the enactment of this 
        subsection, the Secretary, working in consultation with 
        the Medicare Payment Advisory Commission, the Inspector 
        General of the Department of Health and Human Services, 
        and other expert parties the Secretary determines 
        appropriate, shall take the expenditures listed on cost 
        reports, as modified under paragraph (1), submitted by 
        skilled nursing facilities and categorize such 
        expenditures, regardless of any source of payment for 
        such expenditures, for each skilled nursing facility 
        into the following functional accounts on an annual 
        basis:
                  (A) Spending on direct care services 
                (including nursing, therapy, and medical 
                services).
                  (B) Spending on indirect care (including 
                housekeeping and dietary services).
                  (C) Capital assets (including building and 
                land costs).
                  (D) Administrative services costs.
          (4) Availability of information submitted.--The 
        Secretary shall establish procedures to make 
        information on expenditures submitted under this 
        subsection readily available to interested parties upon 
        request, subject to such requirements as the Secretary 
        may specify under the procedures established under this 
        paragraph.

           *       *       *       *       *       *       *


     CONTRACT WITH A CONSENSUS-BASED ENTITY REGARDING PERFORMANCE 
                              MEASUREMENT

  Sec. 1890. (a) * * *
  (b) Duties.--The duties described in this subsection are the 
following:
          (1) * * *
          (2) Endorsement of measures.--The entity shall 
        provide for the endorsement of standardized health care 
        performance measures. The endorsement process under the 
        preceding sentence shall consider whether a measure--
                  (A) * * *

           *       *       *       *       *       *       *

        If the entity does not endorse a measure, such entity 
        shall explain the reasons and provide suggestions about 
        changes to such measure that might make it a 
        potentially endorsable measure.

           *       *       *       *       *       *       *

  (d) Funding.--For purposes of carrying out this section, the 
Secretary shall provide for the transfer, from the Federal 
Hospital Insurance Trust Fund under section 1817 and the 
Federal Supplementary Medical Insurance Trust Fund under 
section 1841 (in such proportion as the Secretary determines 
appropriate), of $10,000,000 to the Centers for Medicare & 
Medicaid Services Program Management Account [for each of 
fiscal years 2009 through 2012] for fiscal year 2009, and 
$12,000,000 for each of the fiscal years 2010 through 2012.

           *       *       *       *       *       *       *


                       MEDICARE INTEGRITY PROGRAM

  Sec. 1893. (a) Establishment of Program.--There is hereby 
established the Medicare Integrity Program (in this section 
referred to as the ``Program'') under which the Secretary shall 
promote the integrity of the medicare program by entering into 
contracts in accordance with this section with eligible 
entities, or otherwise, to carry out the activities described 
in subsection (b).

           *       *       *       *       *       *       *

  (c) Eligibility of Entities.--An entity is eligible to enter 
into a contract under the Program to carry out any of the 
activities described in subsection (b) if--
          (1) * * *

           *       *       *       *       *       *       *

          (3) the entity complies with such conflict of 
        interest standards as are generally applicable to 
        Federal acquisition and procurement; [and]
          (4) for the contract year beginning in 2011 and each 
        subsequent contract year, the entity provides 
        assurances to the satisfaction of the Secretary that 
        the entity will conduct periodic evaluations of the 
        effectiveness of the activities carried out by such 
        entity under the Program and will submit to the 
        Secretary an annual report on such activities; and
          [(4)] (5) the entity meets such other requirements as 
        the Secretary may impose.

           *       *       *       *       *       *       *


              PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES

  Sec. 1895. (a) * * *
  (b) System of Prospective Payment for Home Health Services.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Payment basis.--
                  (A) Initial basis.--
                          (i) In general.--Under such system 
                        the Secretary shall provide for 
                        computation of a standard prospective 
                        payment amount (or amounts) as follows:
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) For periods beginning 
                                after the period described in 
                                subclause (II) and before 2011, 
                                such amount (or amounts) shall 
                                be equal to the amount (or 
                                amounts) that would have been 
                                determined under subclause (I) 
                                that would have been made for 
                                fiscal year 2001 if the system 
                                had not been in effect and if 
                                section 1861(v)(1)(L)(ix) had 
                                not been enacted but if the 
                                reduction in limits described 
                                in clause (ii) had been in 
                                effect, updated under 
                                subparagraph (B).
                                  (IV) Subject to clause 
                                (iii)(I), for 2011, such amount 
                                (or amounts) shall be adjusted 
                                by a uniform percentage 
                                determined to be appropriate by 
                                the Secretary based on analysis 
                                of factors such as changes in 
                                the average number and types of 
                                visits in an episode, the 
                                change in intensity of visits 
                                in an episode, growth in cost 
                                per episode, and other factors 
                                that the Secretary considers to 
                                be relevant.
                                  (V) Subject to clause 
                                (iii)(II), for a year after 
                                2011, such a amount (or 
                                amounts) shall be equal to the 
                                amount (or amounts) determined 
                                under this clause for the 
                                previous year, updated under 
                                subparagraph (B).

           *       *       *       *       *       *       *

                          (iii) Special rule in case of 
                        inability to effect timely rebasing.--
                                  (I) Application of proxy 
                                amount for 2011.--If the 
                                Secretary is not able to 
                                compute the amount (or amounts) 
                                under clause (i)(IV) so as to 
                                permit, on a timely basis, the 
                                application of such clause for 
                                2011, the Secretary shall 
                                substitute for such amount (or 
                                amounts) 95 percent of the 
                                amount (or amounts) that would 
                                otherwise be specified under 
                                clause (i)(III) if it applied 
                                for 2011.
                                  (II) Adjustment for 
                                subsequent years based on 
                                data.--If the Secretary applies 
                                subclause (I), the Secretary 
                                before July 1, 2011, shall 
                                compare the amount (or amounts) 
                                applied under such subclause 
                                with the amount (or amounts) 
                                that should have been applied 
                                under clause (i)(IV). The 
                                Secretary shall decrease or 
                                increase the prospective 
                                payment amount (or amounts) 
                                under clause (i)(V) for 2012 
                                (or, at the Secretary's 
                                discretion, over a period of 
                                several years beginning with 
                                2012) by the amount (if any) by 
                                which the amount (or amounts) 
                                applied under subclause (I) is 
                                greater or less, respectively, 
                                than the amount (or amounts) 
                                that should have been applied 
                                under clause (i)(IV).
                  (B) Annual update.--
                          (i) * * *
                          (ii) Home health applicable increase 
                        percentage.--For purposes of this 
                        subparagraph, the term ``home health 
                        applicable increase percentage'' means, 
                        with respect to--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (IV) 2006, 0 percent; [and]
                                  (V) 2007, 2008, and 2009, 
                                subject to clause (v), the home 
                                health market basket percentage 
                                increase;
                                  (VI) 2010, subject to clause 
                                (v), 0 percent; and
                                  [(V)] (VII) any subsequent 
                                year, subject to clause (v), 
                                the home health market basket 
                                percentage increase.
                          (iii) Home health market basket 
                        percentage increase.--For purposes of 
                        this subsection, the term ``home health 
                        market basket percentage increase'' 
                        means, with respect to a fiscal year or 
                        year, a percentage (estimated by the 
                        Secretary before the beginning of the 
                        fiscal year or year) determined and 
                        applied with respect to the mix of 
                        goods and services included in home 
                        health services in the same manner 
                        (including being subject to the 
                        productivity adjustment described in 
                        section 1886(b)(3)(B)(iii)(II)) as the 
                        market basket percentage increase under 
                        section 1886(b)(3)(B)(iii) is 
                        determined and applied to the mix of 
                        goods and services comprising inpatient 
                        hospital services for the fiscal year 
                        or year.
                          (iv) Adjustment for case mix 
                        changes.--[Insofar as] Subject to 
                        clause (vi), insofar as the Secretary 
                        determines that the adjustments under 
                        paragraph (4)(A)(i) for a previous 
                        fiscal year or year (or estimates that 
                        such adjustments for a future fiscal 
                        year or year) did (or are likely to) 
                        result in a change in aggregate 
                        payments under this subsection during 
                        the fiscal year or year that are a 
                        result of changes in the coding or 
                        classification of different units of 
                        services that do not reflect real 
                        changes in case mix, the Secretary may 
                        adjust the standard prospective payment 
                        amount (or amounts) under paragraph (3) 
                        for subsequent fiscal years or years so 
                        as to eliminate the effect of such 
                        coding or classification changes.
                          (v) Adjustment if quality data not 
                        submitted.--
                                  (I) Adjustment.--For purposes 
                                of clause (ii)(V), for 2007 and 
                                each subsequent year, in the 
                                case of a home health agency 
                                that does not submit data to 
                                the Secretary in accordance 
                                with subclause (II) with 
                                respect to such a year, the 
                                home health market basket 
                                percentage increase applicable 
                                under such clause for such year 
                                shall be reduced (but not below 
                                0) by 2 percentage points. Such 
                                reduction shall apply only with 
                                respect to the year involved, 
                                and the Secretary shall not 
                                take into account such 
                                reduction in computing the 
                                prospective payment amount 
                                under this section for a 
                                subsequent year, and the 
                                Medicare Payment Advisory 
                                Commission shall carry out the 
                                requirements under section 
                                5201(d) of the Deficit 
                                Reduction Act of 2005.

           *       *       *       *       *       *       *

                          (vi) Special rule for case mix 
                        changes for 2011.--
                                  (I) In general.--With respect 
                                to the case mix adjustments 
                                established in section 
                                484.220(a) of title 42, Code of 
                                Federal Regulations, the 
                                Secretary shall apply, in 2010, 
                                the adjustment established in 
                                paragraph (3) of such section 
                                for 2011, in addition to 
                                applying the adjustment 
                                established in paragraph (2) 
                                for 2010.
                                  (II) Construction.--Nothing 
                                in this clause shall be 
                                construed as limiting the 
                                amount of adjustment for case 
                                mix for 2010 or 2011 if more 
                                recent data indicate an 
                                appropriate adjustment that is 
                                greater than the amount 
                                established in the section 
                                described in subclause (I).

           *       *       *       *       *       *       *


                       MEDICARE IMPROVEMENT FUND

  Sec. 1898. (a) * * *
  (b) Funding.--
          (1) In general.--There shall be available to the 
        Fund, for expenditures from the Fund for services 
        furnished during--
                  [(A) fiscal year 2014, $22,290,000,000; and]
                  (A) the period beginning with fiscal year 
                2011 and ending with fiscal year 2019, 
                $8,000,000,000; and

           *       *       *       *       *       *       *


TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *


                   STATE PLANS FOR MEDICAL ASSISTANCE

  Sec. 1902. (a) A State plan for medical assistance must--
          (1) * * *

           *       *       *       *       *       *       *

          (9) provide--
                  (A) * * *
                  (B) for the establishment or designation of a 
                State authority or authorities which shall be 
                responsible for establishing and maintaining 
                standards, other than those relating to health, 
                for such institutions, [and]
                  (C) that any laboratory services paid for 
                under such plan must be provided by a 
                laboratory which meets the applicable 
                requirements of section 1861(e)(9) or 
                paragraphs (16) and (17) of section 1861(s), 
                or, in the case of a laboratory which is in a 
                rural health clinic, of section 
                1861(aa)(2)(G)[;], and
                  (D) that the State maintain a consumer-
                oriented website providing useful information 
                to consumers regarding all skilled nursing 
                facilities and all nursing facilities in the 
                State, including for each facility, Form 2567 
                State inspection reports (or a successor form), 
                complaint investigation reports, the facility's 
                plan of correction, and such other information 
                that the State or the Secretary considers 
                useful in assisting the public to assess the 
                quality of long term care options and the 
                quality of care provided by individual 
                facilities;

           *       *       *       *       *       *       *

          (23) provide that (A) any individual eligible for 
        medical assistance (including drugs) may obtain such 
        assistance from any institution, agency, community 
        pharmacy, or person, qualified to perform the service 
        or services required (including an organization which 
        provides such services, or arranges for their 
        availability, on a prepayment basis), who undertakes to 
        provide him such services, and (B) an enrollment of an 
        individual eligible for medical assistance in a primary 
        care case-management system (described in section 
        1915(b)(1)), a medicaid managed care organization, or a 
        similar entity shall not restrict the choice of the 
        qualified person from whom the individual may receive 
        services under section 1905(a)(4)(C), except as 
        provided in subsection (g) and in section 1915, except 
        that this paragraph shall not apply in the case of 
        Puerto Rico, the Virgin Islands, and Guam, and except 
        that nothing in this paragraph shall be construed as 
        requiring a State to provide medical assistance for 
        such services furnished by a person or entity convicted 
        of a felony under Federal or State law for an offense 
        which the State agency determines is inconsistent with 
        the best interests of beneficiaries under the State 
        plan or by a person to whom or entity to which a 
        moratorium under section 1128G(a)(4) is applied during 
        the period of such moratorium;

           *       *       *       *       *       *       *

          (72) provide that the State will not prevent a 
        Federally-qualified health center from entering into 
        contractual relationships with private practice dental 
        providers in the provision of Federally-qualified 
        health center services; [and]
          (73) in the case of any State in which 1 or more 
        Indian Health Programs or Urban Indian Organizations 
        furnishes health care services, provide for a process 
        under which the State seeks advice on a regular, 
        ongoing basis from designees of such Indian Health 
        Programs and Urban Indian Organizations on matters 
        relating to the application of this title that are 
        likely to have a direct effect on such Indian Health 
        Programs and Urban Indian Organizations and that--
                  (A)  * * *
                  (B) may include appointment of an advisory 
                committee and of a designee of such Indian 
                Health Programs and Urban Indian Organizations 
                to the medical care advisory committee advising 
                the State on its State plan under this 
                title[.]; and
          (74) provide that the State will enforce any 
        determination made by the Secretary under subsection 
        (a) of section 1128G (relating to a significant risk of 
        fraudulent activity with respect to a category of 
        provider or supplier described in such subsection (a) 
        through use of the appropriate procedures described in 
        such subsection (a)) or subsection (b) of such section 
        (relating to disclosure requirements), and that the 
        State will carry out any activities as required by the 
        Secretary for purposes of such subsection (a) and apply 
        any enhanced safeguards, with respect to a provider or 
        supplier described in such subsection (b), as the 
        Secretary determines necessary under such subsection 
        (b).

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 1905. For purposes of this title--
  (a) * * *

           *       *       *       *       *       *       *

  (o)(1) * * *

           *       *       *       *       *       *       *

  (4) The provisions of section 1819A shall apply to a hospice 
program providing hospice care under this title in the same 
manner as such provisions apply to a hospice program providing 
hospice care under title XVIII.
  (p)(1) The term ``qualified medicare beneficiary'' means an 
individual--
          (A) * * *

           *       *       *       *       *       *       *

          (C) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed twice the maximum amount of 
        resources that an individual may have and obtain 
        benefits under that program or, [effective beginning 
        with January 1, 2010] effective for the period 
        beginning with January 1, 2010, and ending with 
        December 31, 2011, whose resources (as so determined) 
        do not exceed the maximum resource level applied for 
        the year under subparagraph (D) of section 1860D-
        14(a)(3) (determined without regard to the life 
        insurance policy exclusion provided under subparagraph 
        (G) of such section) applicable to an individual or to 
        the individual and the individual's spouse (as the case 
        may be) or, effective beginning with January 1, 2012, 
        whose resources (as so determined) do not exceed the 
        maximum resource level applied for the year under 
        subparagraph (E) of section 1860D-14(a)(3) (determined 
        without regard to the life insurance policy exclusion 
        provided under subparagraph (G) of such section) 
        applicable to an individual or to the individual and 
        the individual's spouse (as the case may be).

           *       *       *       *       *       *       *


                  REQUIREMENTS FOR NURSING FACILITIES

  Sec. 1919. (a) * * *
  (b) Requirements Relating to Provision of Services.--
          (1) Quality of life.--
                  (A) * * *
                  (B) Quality assessment and [assurance] 
                assurance and quality assurance and performance 
                improvement program.--
                          (i) In general.--A nursing facility 
                        must maintain a quality assessment and 
                        assurance committee, consisting of the 
                        director of nursing services, a 
                        physician designated by the facility, 
                        and at least 3 other members of the 
                        facility's staff, which (i) meets at 
                        least quarterly to identify issues with 
                        respect to which quality assessment and 
                        assurance activities are necessary and 
                        (ii) develops and implements 
                        appropriate plans of action to correct 
                        identified quality deficiencies.
                          (ii) Quality assurance and 
                        performance improvement program.--
                                  (I) In general.--Not later 
                                than December 31, 2011, the 
                                Secretary shall establish and 
                                implement a quality assurance 
                                and performance improvement 
                                program (in this clause 
                                referred to as the ``QAPI 
                                program'') for nursing 
                                facilities, including multi-
                                unit chains of such facilities. 
                                Under the QAPI program, the 
                                Secretary shall establish 
                                standards relating to such 
                                facilities and provide 
                                technical assistance to such 
                                facilities on the development 
                                of best practices in order to 
                                meet such standards. Not later 
                                than 1 year after the date on 
                                which the regulations are 
                                promulgated under subclause 
                                (II), a nursing facility must 
                                submit to the Secretary a plan 
                                for the facility to meet such 
                                standards and implement such 
                                best practices, including how 
                                to coordinate the 
                                implementation of such plan 
                                with quality assessment and 
                                assurance activities conducted 
                                under clause (i).
                                  (II) Regulations.--The 
                                Secretary shall promulgate 
                                regulations to carry out this 
                                clause.

           *       *       *       *       *       *       *

          (8) Information on nurse staffing.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Submission of staffing information based 
                on payroll data in a uniform format.--Beginning 
                not later than 2 years after the date of the 
                enactment of this subparagraph, and after 
                consulting with State long-term care ombudsman 
                programs, consumer advocacy groups, provider 
                stakeholder groups, employees and their 
                representatives, and other parties the 
                Secretary deems appropriate, the Secretary 
                shall require a nursing facility to 
                electronically submit to the Secretary direct 
                care staffing information (including 
                information with respect to agency and contract 
                staff) based on payroll and other verifiable 
                and auditable data in a uniform format 
                (according to specifications established by the 
                Secretary in consultation with such programs, 
                groups, and parties). Such specifications shall 
                require that the information submitted under 
                the preceding sentence--
                          (i) specify the category of work a 
                        certified employee performs (such as 
                        whether the employee is a registered 
                        nurse, licensed practical nurse, 
                        licensed vocational nurse, certified 
                        nursing assistant, therapist, or other 
                        medical personnel);
                          (ii) include resident census data and 
                        information on resident case mix;
                          (iii) include a regular reporting 
                        schedule; and
                          (iv) include information on employee 
                        turnover and tenure and on the hours of 
                        care provided by each category of 
                        certified employees referenced in 
                        clause (i) per resident per day.
                Nothing in this subparagraph shall be construed 
                as preventing the Secretary from requiring 
                submission of such information with respect to 
                specific categories, such as nursing staff, 
                before other categories of certified employees. 
                Information under this subparagraph with 
                respect to agency and contract staff shall be 
                kept separate from information on employee 
                staffing.
  (c) Requirements Relating to Residents' Rights.--
          (1) * * *

           *       *       *       *       *       *       *

          (9) Notification of facility closure.--
                  (A) In general.--Any individual who is an 
                administrator of a nursing facility must--
                          (i) submit to the Secretary, the 
                        State long-term care ombudsman, 
                        residents of the facility, and the 
                        legal representatives of such residents 
                        or other responsible parties, written 
                        notification of an impending closure--
                                  (I) subject to subclause 
                                (II), not later than the date 
                                that is 60 days prior to the 
                                date of such closure; and
                                  (II) in the case of a 
                                facility where the Secretary 
                                terminates the facility's 
                                participation under this title, 
                                not later than the date that 
                                the Secretary determines 
                                appropriate;
                          (ii) ensure that the facility does 
                        not admit any new residents on or after 
                        the date on which such written 
                        notification is submitted; and
                          (iii) include in the notice a plan 
                        for the transfer and adequate 
                        relocation of the residents of the 
                        facility by a specified date prior to 
                        closure that has been approved by the 
                        State, including assurances that the 
                        residents will be transferred to the 
                        most appropriate facility or other 
                        setting in terms of quality, services, 
                        and location, taking into consideration 
                        the needs and best interests of each 
                        resident.
                  (B) Relocation.--
                          (i) In general.--The State shall 
                        ensure that, before a facility closes, 
                        all residents of the facility have been 
                        successfully relocated to another 
                        facility or an alternative home and 
                        community-based setting.
                          (ii) Continuation of payments until 
                        residents relocated.--The Secretary 
                        may, as the Secretary determines 
                        appropriate, continue to make payments 
                        under this title with respect to 
                        residents of a facility that has 
                        submitted a notification under 
                        subparagraph (A) during the period 
                        beginning on the date such notification 
                        is submitted and ending on the date on 
                        which the resident is successfully 
                        relocated.
  (d) Requirements Relating to Administration and Other 
Matters.--
          (1) Administration.--
                  (A) * * *
                  [(B) Required notices.--If a change occurs 
                in--
                          [(i) the persons with an ownership or 
                        control interest (as defined in section 
                        1124(a)(3)) in the facility,
                          [(ii) the persons who are officers, 
                        directors, agents, or managing 
                        employees (as defined in section 
                        1126(b)) of the facility,
                          [(iii) the corporation, association, 
                        or other company responsible for the 
                        management of the facility, or
                          [(iv) the individual who is the 
                        administrator or director of nursing of 
                        the facility,
                nursing facility must provide notice to the 
                State agency responsible for the licensing of 
                the facility, at the time of the change, of the 
                change and of the identity of each new person, 
                company, or individual described in the 
                respective clause.]
                  [(C)] (B) Nursing facility administrator.--
                The administrator of a nursing facility must 
                meet standards established by the Secretary 
                under subsection (f)(4).
                  (C) Compliance and ethics program.--
                          (i) Requirement.--On or after the 
                        date that is 36 months after the date 
                        of the enactment of this subparagraph, 
                        a nursing facility shall, with respect 
                        to the entity that operates the 
                        facility (in this subparagraph referred 
                        to as the ``operating organization'' or 
                        ``organization''), have in operation a 
                        compliance and ethics program that is 
                        effective in preventing and detecting 
                        criminal, civil, and administrative 
                        violations under this Act and in 
                        promoting quality of care consistent 
                        with regulations developed under clause 
                        (ii).
                          (ii) Development of regulations.--
                                  (I) In general.--Not later 
                                than the date that is 2 years 
                                after such date of the 
                                enactment, the Secretary, in 
                                consultation with the Inspector 
                                General of the Department of 
                                Health and Human Services, 
                                shall develop regulations for 
                                an effective compliance and 
                                ethics program for operating 
                                organizations, which may 
                                include a model compliance 
                                program.
                                  (II) Design of regulations.--
                                Such regulations with respect 
                                to specific elements or 
                                formality of a program may vary 
                                with the size of the 
                                organization, such that larger 
                                organizations should have a 
                                more formal and rigorous 
                                program and include established 
                                written policies defining the 
                                standards and procedures to be 
                                followed by its employees. Such 
                                requirements may specifically 
                                apply to the corporate level 
                                management of multi-unit 
                                nursing home chains.
                                  (III) Evaluation.--Not later 
                                than 3 years after the date of 
                                promulgation of regulations 
                                under this clause the Secretary 
                                shall complete an evaluation of 
                                the compliance and ethics 
                                programs required to be 
                                established under this 
                                subparagraph. Such evaluation 
                                shall determine if such 
                                programs led to changes in 
                                deficiency citations, changes 
                                in quality performance, or 
                                changes in other metrics of 
                                resident quality of care. The 
                                Secretary shall submit to 
                                Congress a report on such 
                                evaluation and shall include in 
                                such report such 
                                recommendations regarding 
                                changes in the requirements for 
                                such programs as the Secretary 
                                determines appropriate.
                          (iii) Requirements for compliance and 
                        ethics programs.--In this subparagraph, 
                        the term ``compliance and ethics 
                        program'' means, with respect to a 
                        nursing facility, a program of the 
                        operating organization that--
                                  (I) has been reasonably 
                                designed, implemented, and 
                                enforced so that it generally 
                                will be effective in preventing 
                                and detecting criminal, civil, 
                                and administrative violations 
                                under this Act and in promoting 
                                quality of care; and
                                  (II) includes at least the 
                                required components specified 
                                in clause (iv).
                          (iv) Required components of 
                        program.--The required components of a 
                        compliance and ethics program of an 
                        organization are the following:
                                  (I) The organization must 
                                have established compliance 
                                standards and procedures to be 
                                followed by its employees and 
                                other agents that are 
                                reasonably capable of reducing 
                                the prospect of criminal, 
                                civil, and administrative 
                                violations under this Act.
                                  (II) Specific individuals 
                                within high-level personnel of 
                                the organization must have been 
                                assigned overall responsibility 
                                to oversee compliance with such 
                                standards and procedures and 
                                has sufficient resources and 
                                authority to assure such 
                                compliance.
                                  (III) The organization must 
                                have used due care not to 
                                delegate substantial 
                                discretionary authority to 
                                individuals whom the 
                                organization knew, or should 
                                have known through the exercise 
                                of due diligence, had a 
                                propensity to engage in 
                                criminal, civil, and 
                                administrative violations under 
                                this Act.
                                  (IV) The organization must 
                                have taken steps to communicate 
                                effectively its standards and 
                                procedures to all employees and 
                                other agents, such as by 
                                requiring participation in 
                                training programs or by 
                                disseminating publications that 
                                explain in a practical manner 
                                what is required.
                                  (V) The organization must 
                                have taken reasonable steps to 
                                achieve compliance with its 
                                standards, such as by utilizing 
                                monitoring and auditing systems 
                                reasonably designed to detect 
                                criminal, civil, and 
                                administrative violations under 
                                this Act by its employees and 
                                other agents and by having in 
                                place and publicizing a 
                                reporting system whereby 
                                employees and other agents 
                                could report violations by 
                                others within the organization 
                                without fear of retribution.
                                  (VI) The standards must have 
                                been consistently enforced 
                                through appropriate 
                                disciplinary mechanisms, 
                                including, as appropriate, 
                                discipline of individuals 
                                responsible for the failure to 
                                detect an offense.
                                  (VII) After an offense has 
                                been detected, the organization 
                                must have taken all reasonable 
                                steps to respond appropriately 
                                to the offense and to prevent 
                                further similar offenses, 
                                including repayment of any 
                                funds to which it was not 
                                entitled and any necessary 
                                modification to its program to 
                                prevent and detect criminal, 
                                civil, and administrative 
                                violations under this Act.
                                  (VIII) The organization must 
                                periodically undertake 
                                reassessment of its compliance 
                                program to identify changes 
                                necessary to reflect changes 
                                within the organization and its 
                                facilities.
                          (v) Coordination.--The provisions of 
                        this subparagraph shall apply with 
                        respect to a nursing facility in lieu 
                        of section 1902(a)(77).
                  (D) Availability of survey, certification, 
                and complaint investigation reports.--A nursing 
                facility must--
                          (i) have reports with respect to any 
                        surveys, certifications, and complaint 
                        investigations made respecting the 
                        facility during the 3 preceding years 
                        available for any individual to review 
                        upon request; and
                          (ii) post notice of the availability 
                        of such reports in areas of the 
                        facility that are prominent and 
                        accessible to the public.
                The facility shall not make available under 
                clause (i) identifying information about 
                complainants or residents.

           *       *       *       *       *       *       *

  (e) State Requirements Relating to Nursing Facility 
Requirements.--As a condition of approval of its plan under 
this title, a State must provide for the following:
          (1) * * *

           *       *       *       *       *       *       *

          (8) Complaint processes and whistleblower 
        protection.--
                  (A) Complaint forms.--The State must make the 
                standardized complaint form developed under 
                subsection (f)(11) available upon request to--
                          (i) a resident of a nursing facility;
                          (ii) any person acting on the 
                        resident's behalf; and
                          (iii) any person who works at a 
                        nursing facility or a representative of 
                        such a worker.
                  (B) Complaint resolution process.--The State 
                must establish a complaint resolution process 
                in order to ensure that a resident, the legal 
                representative of a resident of a nursing 
                facility, or other responsible party is not 
                retaliated against if the resident, legal 
                representative, or responsible party has 
                complained, in good faith, about the quality of 
                care or other issues relating to the nursing 
                facility, that the legal representative of a 
                resident of a nursing facility or other 
                responsible party is not denied access to such 
                resident or otherwise retaliated against if 
                such representative party has complained, in 
                good faith, about the quality of care provided 
                by the facility or other issues relating to the 
                facility, and that a person who works at a 
                nursing facility is not retaliated against if 
                the worker has complained, in good faith, about 
                quality of care or services or an issue 
                relating to the quality of care or services 
                provided at the facility, whether the resident, 
                legal representative, other responsible party, 
                or worker used the form developed under 
                subsection (f)(11) or some other method for 
                submitting the complaint. Such complaint 
                resolution process shall include--
                          (i) procedures to assure accurate 
                        tracking of complaints received, 
                        including notification to the 
                        complainant that a complaint has been 
                        received;
                          (ii) procedures to determine the 
                        likely severity of a complaint and for 
                        the investigation of the complaint;
                          (iii) deadlines for responding to a 
                        complaint and for notifying the 
                        complainant of the outcome of the 
                        investigation; and
                          (iv) procedures to ensure that the 
                        identity of the complainant will be 
                        kept confidential.
                  (C) Whistleblower protection.--
                          (i) Prohibition against 
                        retaliation.--No person who works at a 
                        nursing facility may be penalized, 
                        discriminated, or retaliated against 
                        with respect to any aspect of 
                        employment, including discharge, 
                        promotion, compensation, terms, 
                        conditions, or privileges of 
                        employment, or have a contract for 
                        services terminated, because the person 
                        (or anyone acting at the person's 
                        request) complained, in good faith, 
                        about the quality of care or services 
                        provided by a nursing facility or about 
                        other issues relating to quality of 
                        care or services, whether using the 
                        form developed under subsection (f)(11) 
                        or some other method for submitting the 
                        complaint.
                          (ii) Retaliatory reporting.--A 
                        nursing facility may not file a 
                        complaint or a report against a person 
                        who works (or has worked at the 
                        facility with the appropriate State 
                        professional disciplinary agency 
                        because the person (or anyone acting at 
                        the person's request) complained in 
                        good faith, as described in clause (i).
                          (iii) Commencement of action.--Any 
                        person who believes the person has been 
                        penalized, discriminated, or retaliated 
                        against or had a contract for services 
                        terminated in violation of clause (i) 
                        or against whom a complaint has been 
                        filed in violation of clause (ii) may 
                        bring an action at law or equity in the 
                        appropriate district court of the 
                        United States, which shall have 
                        jurisdiction over such action without 
                        regard to the amount in controversy or 
                        the citizenship of the parties, and 
                        which shall have jurisdiction to grant 
                        complete relief, including, but not 
                        limited to, injunctive relief (such as 
                        reinstatement, compensatory damages 
                        (which may include reimbursement of 
                        lost wages, compensation, and 
                        benefits), costs of litigation 
                        (including reasonable attorney and 
                        expert witness fees), exemplary damages 
                        where appropriate, and such other 
                        relief as the court deems just and 
                        proper.
                          (iv) Rights not waivable.--The rights 
                        protected by this paragraph may not be 
                        diminished by contract or other 
                        agreement, and nothing in this 
                        paragraph shall be construed to 
                        diminish any greater or additional 
                        protection provided by Federal or State 
                        law or by contract or other agreement.
                          (v) Requirement to post notice of 
                        employee rights.--Each nursing facility 
                        shall post conspicuously in an 
                        appropriate location a sign (in a form 
                        specified by the Secretary) specifying 
                        the rights of persons under this 
                        paragraph and including a statement 
                        that an employee may file a complaint 
                        with the Secretary against a nursing 
                        facility that violates the provisions 
                        of this paragraph and information with 
                        respect to the manner of filing such a 
                        complaint.
                  (D) Rule of construction.--Nothing in this 
                paragraph shall be construed as preventing a 
                resident of a nursing facility (or a person 
                acting on the resident's behalf) from 
                submitting a complaint in a manner or format 
                other than by using the standardized complaint 
                form developed under subsection (f)(11) 
                (including submitting a complaint orally).
                  (E) Good faith defined.--For purposes of this 
                paragraph, an individual shall be deemed to be 
                acting in good faith with respect to the filing 
                of a complaint if the individual reasonably 
                believes--
                          (i) the information reported or 
                        disclosed in the complaint is true; and
                          (ii) the violation of this title has 
                        occurred or may occur in relation to 
                        such information.
  (f) Responsibilities of Secretary Relating to Nursing 
Facility Requirements.--
          (1) * * *
          (2) Requirements for nurse aide training and 
        competency evaluation programs and for nurse aide 
        competency evaluation programs.--
                  (A) In general.--For purposes of subsections 
                (b)(5) and (e)(1)(A), the Secretary shall 
                establish, by not later than September 1, 
                1988--
                          (i) requirements for the approval of 
                        nurse aide training and competency 
                        evaluation programs, including 
                        requirements relating to (I) the areas 
                        to be covered in such a program 
                        (including at least basic nursing 
                        skills, personal care skills, 
                        recognition of mental health and social 
                        service needs, care of cognitively 
                        impaired residents, basic restorative 
                        services, and residents' rights) and 
                        content of the curriculum (including, 
                        in the case of initial training and, if 
                        the Secretary determines appropriate, 
                        in the case of ongoing training, 
                        dementia management training and 
                        resident abuse prevention training), 
                        (II) minimum hours of initial and 
                        ongoing training and retraining 
                        (including not less than 75 hours in 
                        the case of initial training), (III) 
                        qualifications of instructors, and (IV) 
                        procedures for determination of 
                        competency;

           *       *       *       *       *       *       *

          (10) Special focus facility program.--
                  (A) In general.--The Secretary shall conduct 
                a special focus facility program for 
                enforcement of requirements for nursing 
                facilities that the Secretary has identified as 
                having substantially failed to meet applicable 
                requirements of this Act.
                  (B) Periodic surveys.--Under such program the 
                Secretary shall conduct surveys of each 
                facility in the program not less often than 
                once every 6 months.
          (11) Standardized complaint form.--The Secretary 
        shall develop a standardized complaint form for use by 
        a resident (or a person acting on the resident's 
        behalf) in filing a complaint with a State survey and 
        certification agency and a State long-term care 
        ombudsman program with respect to a nursing facility.
  (g) Survey and Certification Process.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Disclosure of results of inspections and 
        activities.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Submission of survey and certification 
                information to the secretary.--In order to 
                improve the timeliness of information made 
                available to the public under subparagraph (A) 
                and provided on the Nursing Home Compare 
                Medicare website under subsection (i), each 
                State shall submit information respecting any 
                survey or certification made respecting a 
                nursing facility (including any enforcement 
                actions taken by the State) to the Secretary 
                not later than the date on which the State 
                sends such information to the facility. The 
                Secretary shall use the information submitted 
                under the preceding sentence to update the 
                information provided on the Nursing Home 
                Compare Medicare website as expeditiously as 
                practicable but not less frequently than 
                quarterly.
  (h) Enforcement Process.--
          (1) * * *
          (2) Specified remedies.--
                  (A) Listing.--Except as provided in 
                subparagraph (B)(ii), each State shall 
                establish by law (whether statute or 
                regulation) at least the following remedies:
                          (i) * * *
                          (ii) [A civil money penalty assessed 
                        and collected, with interest, for each 
                        day in which the facility is or was out 
                        of compliance with a requirement of 
                        subsection (b), (c), or (d).] A civil 
                        money penalty in accordance with 
                        subparagraph (G). Funds collected by a 
                        State as a result of imposition of such 
                        a penalty (or as a result of the 
                        imposition by the State of a civil 
                        money penalty for activities described 
                        in subsections (b)(3)(B)(ii)(I), 
                        (b)(3)(B)(ii)(II), or (g)(2)(A)(i)) 
                        shall be applied to the protection of 
                        the health or property of residents of 
                        nursing facilities that the State or 
                        the Secretary finds deficient, 
                        including payment for the costs of 
                        relocation of residents to other 
                        facilities, maintenance of operation of 
                        a facility pending correction of 
                        deficiencies or closure, and 
                        reimbursement of residents for personal 
                        funds lost, and some portion of such 
                        funds may be used to support activities 
                        that benefit residents, including 
                        assistance to support and protect 
                        residents of a facility that closes 
                        (voluntarily or involuntarily) or is 
                        decertified (including offsetting costs 
                        of relocating residents to home and 
                        community-based settings or another 
                        facility), projects that support 
                        resident and family councils and other 
                        consumer involvement in assuring 
                        quality care in facilities, and 
                        facility improvement initiatives 
                        approved by the Secretary (including 
                        joint training of facility staff and 
                        surveyors, providing technical 
                        assistance to facilities under quality 
                        assurance programs, the appointment of 
                        temporary management, and other 
                        activities approved by the Secretary).

           *       *       *       *       *       *       *

                  (G) Civil money penalties.--
                          (i) In general.--The State may impose 
                        a civil money penalty under 
                        subparagraph (A)(ii) in the applicable 
                        per instance or per day amount (as 
                        defined in subclause (II) and (III)) 
                        for each day or instance, respectively, 
                        of noncompliance (as determined 
                        appropriate by the Secretary).
                          (ii) Applicable per instance 
                        amount.--In this subparagraph, the term 
                        ``applicable per instance amount'' 
                        means--
                                  (I) in the case where the 
                                deficiency is found to be a 
                                direct proximate cause of death 
                                of a resident of the facility, 
                                an amount not to exceed 
                                $100,000.
                                  (II) in each case of a 
                                deficiency where the facility 
                                is cited for actual harm or 
                                immediate jeopardy, an amount 
                                not less than $3,050 and not 
                                more than $25,000; and
                                  (III) in each case of any 
                                other deficiency, an amount not 
                                less than $250 and not to 
                                exceed $3050.
                          (iii) Applicable per day amount.--In 
                        this subparagraph, the term 
                        ``applicable per day amount'' means--
                                  (I) in each case of a 
                                deficiency where the facility 
                                is cited for actual harm or 
                                immediate jeopardy, an amount 
                                not less than $3,050 and not 
                                more than $25,000 and
                                  (II) in each case of any 
                                other deficiency, an amount not 
                                less than $250 and not to 
                                exceed $3,050.
                          (iv) Reduction of civil money 
                        penalties in certain circumstances.--
                        Subject to clauses (v) and (vi), in the 
                        case where a facility self-reports and 
                        promptly corrects a deficiency for 
                        which a penalty was imposed under 
                        subparagraph (A)(ii) not later than 10 
                        calendar days after the date of such 
                        imposition, the State may reduce the 
                        amount of the penalty imposed by not 
                        more than 50 percent.
                          (v) Prohibition on reduction for 
                        certain deficiencies.--
                                  (I) Repeat deficiencies.--The 
                                State may not reduce under 
                                clause (iv) the amount of a 
                                penalty if the State had 
                                reduced a penalty imposed on 
                                the facility in the preceding 
                                year under such clause with 
                                respect to a repeat deficiency.
                                  (II) Certain other 
                                deficiencies.--The State may 
                                not reduce under clause (iv) 
                                the amount of a penalty if the 
                                penalty is imposed for a 
                                deficiency described in clause 
                                (ii)(II) or (iii)(I) and the 
                                actual harm or widespread harm 
                                that immediately jeopardizes 
                                the health or safety of a 
                                resident or residents of the 
                                facility, or if the penalty is 
                                imposed for a deficiency 
                                described in clause (ii)(I).
                                  (III) Limitation on aggregate 
                                reductions.--The aggregate 
                                reduction in a penalty under 
                                clause (iv) may not exceed 35 
                                percent on the basis of self-
                                reporting, on the basis of a 
                                waiver or an appeal (as 
                                provided for under regulations 
                                under section 488.436 of title 
                                42, Code of Federal 
                                Regulations), or on the basis 
                                of both.
                          (vi) Collection of civil money 
                        penalties.--In the case of a civil 
                        money penalty imposed under 
                        subparagraph (A)(ii), the State--
                                  (I) subject to subclause 
                                (III), shall, not later than 30 
                                days after the date of 
                                imposition of the penalty, 
                                provide the opportunity for the 
                                facility to participate in an 
                                independent informal dispute 
                                resolution process which 
                                generates a written record 
                                prior to the collection of such 
                                penalty, but such opportunity 
                                shall not affect the 
                                responsibility of the State 
                                survey agency for making final 
                                recommendations for such 
                                penalties;
                                  (II) in the case where the 
                                penalty is imposed for each day 
                                of noncompliance, shall not 
                                impose a penalty for any day 
                                during the period beginning on 
                                the initial day of the 
                                imposition of the penalty and 
                                ending on the day on which the 
                                informal dispute resolution 
                                process under subclause (I) is 
                                completed;
                                  (III) may provide for the 
                                collection of such civil money 
                                penalty and the placement of 
                                such amounts collected in an 
                                escrow account under the 
                                direction of the State on the 
                                earlier of the date on which 
                                the informal dispute resolution 
                                process under subclause (I) is 
                                completed or the date that is 
                                90 days after the date of the 
                                imposition of the penalty;
                                  (IV) may provide that such 
                                amounts collected are kept in 
                                such account pending the 
                                resolution of any subsequent 
                                appeals;
                                  (V) in the case where the 
                                facility successfully appeals 
                                the penalty, may provide for 
                                the return of such amounts 
                                collected (plus interest) to 
                                the facility; and
                                  (VI) in the case where all 
                                such appeals are unsuccessful, 
                                may provide that such funds 
                                collected shall be used for the 
                                purposes described in the 
                                second sentence of subparagraph 
                                (A)(ii).
          (3) Secretarial authority.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Specified remedies.--The Secretary may 
                take the following actions with respect to a 
                finding that a facility has not met an 
                applicable requirement:
                          (i) * * *
                          [(ii) Authority with respect to civil 
                        money penalties.--The Secretary may 
                        impose a civil money penalty in an 
                        amount not to exceed $10,000 for each 
                        day of noncompliance. The provisions of 
                        section 1128A (other than subsections 
                        (a) and (b)) shall apply to a civil 
                        money penalty under the previous 
                        sentence in the same manner as such 
                        provisions apply to a penalty or 
                        proceeding under section 1128A(a).]
                          (ii) Authority with respect to civil 
                        money penalties.--
                                  (I) Amount.--Subject to 
                                subclause (II), the Secretary 
                                may impose a civil money 
                                penalty in an amount not to 
                                exceed $10,000 for each day or 
                                each instance of noncompliance 
                                (as determined appropriate by 
                                the Secretary).
                                  (II) Reduction of civil money 
                                penalties in certain 
                                circumstances.--Subject to 
                                subclause (III), in the case 
                                where a facility self-reports 
                                and promptly corrects a 
                                deficiency for which a penalty 
                                was imposed under this clause 
                                not later than 10 calendar days 
                                after the date of such 
                                imposition, the Secretary may 
                                reduce the amount of the 
                                penalty imposed by not more 
                                than 50 percent.
                                  (III) Prohibition on 
                                reduction for repeat 
                                deficiencies.--The Secretary 
                                may not reduce the amount of a 
                                penalty under subclause (II) if 
                                the Secretary had reduced a 
                                penalty imposed on the facility 
                                in the preceding year under 
                                such subclause with respect to 
                                a repeat deficiency.
                                  (IV) Collection of civil 
                                money penalties.--In the case 
                                of a civil money penalty 
                                imposed under this clause, the 
                                Secretary--
                                          (aa) subject to item 
                                        (bb), shall, not later 
                                        than 30 days after the 
                                        date of imposition of 
                                        the penalty, provide 
                                        the opportunity for the 
                                        facility to participate 
                                        in an independent 
                                        informal dispute 
                                        resolution process 
                                        which generates a 
                                        written record prior to 
                                        the collection of such 
                                        penalty;
                                          (bb) in the case 
                                        where the penalty is 
                                        imposed for each day of 
                                        noncompliance, shall 
                                        not impose a penalty 
                                        for any day during the 
                                        period beginning on the 
                                        initial day of the 
                                        imposition of the 
                                        penalty and ending on 
                                        the day on which the 
                                        informal dispute 
                                        resolution process 
                                        under item (aa) is 
                                        completed;
                                          (cc) may provide for 
                                        the collection of such 
                                        civil money penalty and 
                                        the placement of such 
                                        amounts collected in an 
                                        escrow account under 
                                        the direction of the 
                                        Secretary on the 
                                        earlier of the date on 
                                        which the informal 
                                        dispute resolution 
                                        process under item (aa) 
                                        is completed or the 
                                        date that is 90 days 
                                        after the date of the 
                                        imposition of the 
                                        penalty;
                                          (dd) may provide that 
                                        such amounts collected 
                                        are kept in such 
                                        account pending the 
                                        resolution of any 
                                        subsequent appeals;
                                          (ee) in the case 
                                        where the facility 
                                        successfully appeals 
                                        the penalty, may 
                                        provide for the return 
                                        of such amounts 
                                        collected (plus 
                                        interest) to the 
                                        facility; and
                                          (ff) in the case 
                                        where all such appeals 
                                        are unsuccessful, may 
                                        provide that some 
                                        portion of such amounts 
                                        collected may be used 
                                        to support activities 
                                        that benefit residents, 
                                        including assistance to 
                                        support and protect 
                                        residents of a facility 
                                        that closes 
                                        (voluntarily or 
                                        involuntarily) or is 
                                        decertified (including 
                                        offsetting costs of 
                                        relocating residents to 
                                        home and community-
                                        based settings or 
                                        another facility), 
                                        projects that support 
                                        resident and family 
                                        councils and other 
                                        consumer involvement in 
                                        assuring quality care 
                                        in facilities, and 
                                        facility improvement 
                                        initiatives approved by 
                                        the Secretary 
                                        (including joint 
                                        training of facility 
                                        staff and surveyors, 
                                        technical assistance 
                                        for facilities under 
                                        quality assurance 
                                        programs, the 
                                        appointment of 
                                        temporary management, 
                                        and other activities 
                                        approved by the 
                                        Secretary).
                                  (V) Procedure.--The 
                                provisions of section 1128A 
                                (other than subsections (a) and 
                                (b) and except to the extent 
                                that such provisions require a 
                                hearing prior to the imposition 
                                of a civil money penalty) shall 
                                apply to a civil money penalty 
                                under this clause in the same 
                                manner as such provisions apply 
                                to a penalty or proceeding 
                                under section 1128A(a).

           *       *       *       *       *       *       *

          (8) Construction.--The remedies provided under this 
        subsection are in addition to those otherwise available 
        under State or Federal law and shall not be construed 
        as limiting such other remedies, including any remedy 
        available to an individual at common law. The remedies 
        described in clauses (i), (iii), and (iv) of paragraph 
        (2)(A) and in paragraph (3)(C)(ii) may be imposed 
        during the pendency of any hearing. The provisions of 
        this subsection shall apply to a nursing facility (or 
        portion thereof) notwithstanding that the facility (or 
        portion thereof) also is a skilled nursing facility for 
        purposes of title XVIII.

           *       *       *       *       *       *       *

  (i) Nursing Home Compare Website.--
          (1) Inclusion of additional information.--
                  (A) In general.--The Secretary shall ensure 
                that the Department of Health and Human 
                Services includes, as part of the information 
                provided for comparison of nursing homes on the 
                official Internet website of the Federal 
                Government for Medicare beneficiaries (commonly 
                referred to as the ``Nursing Home Compare'' 
                Medicare website) (or a successor website), the 
                following information in a manner that is 
                prominent, easily accessible, readily 
                understandable to consumers of long-term care 
                services, and searchable:
                          (i) Staffing data for each facility 
                        (including resident census data and 
                        data on the hours of care provided per 
                        resident per day) based on data 
                        submitted under subsection 
                        (b)(8)(C)(ii), including information on 
                        staffing turnover and tenure, in a 
                        format that is clearly understandable 
                        to consumers of long-term care services 
                        and allows such consumers to compare 
                        differences in staffing between 
                        facilities and State and national 
                        averages for the facilities. Such 
                        format shall include--
                                  (I) concise explanations of 
                                how to interpret the data (such 
                                as plain English explanation of 
                                data reflecting ``nursing home 
                                staff hours per resident 
                                day'');
                                  (II) differences in types of 
                                staff (such as training 
                                associated with different 
                                categories of staff);
                                  (III) the relationship 
                                between nurse staffing levels 
                                and quality of care; and
                                  (IV) an explanation that 
                                appropriate staffing levels 
                                vary based on patient case mix.
                          (ii) Links to State Internet websites 
                        with information regarding State survey 
                        and certification programs, links to 
                        Form 2567 State inspection reports (or 
                        a successor form) on such websites, 
                        information to guide consumers in how 
                        to interpret and understand such 
                        reports, and the facility plan of 
                        correction or other response to such 
                        report.
                          (iii) The standardized complaint form 
                        developed under subsection (f)(10), 
                        including explanatory material on what 
                        complaint forms are, how they are used, 
                        and how to file a complaint with the 
                        State survey and certification program 
                        and the State long-term care ombudsman 
                        program.
                          (iv) Summary information on the 
                        number, type, severity, and outcome of 
                        substantiated complaints.
                          (v) The number of adjudicated 
                        instances of criminal violations by 
                        employees of a nursing facility--
                                  (I) that were committed 
                                inside of the facility; and
                                  (II) with respect to such 
                                instances of violations or 
                                crimes committed outside of the 
                                facility, that were the 
                                violations or crimes that 
                                resulted in the serious bodily 
                                injury of an elder.
                  (B) Deadline for provision of information.--
                          (i) In general.--Except as provided 
                        in clause (ii), the Secretary shall 
                        ensure that the information described 
                        in subparagraph (A) is included on such 
                        website (or a successor website) not 
                        later than 1 year after the date of the 
                        enactment of this subsection.
                          (ii) Exception.--The Secretary shall 
                        ensure that the information described 
                        in subparagraph (A)(i) and (A)(iii) is 
                        included on such website (or a 
                        successor website) not later than the 
                        date on which the requirements under 
                        section 1124(c)(4) and subsection 
                        (b)(8)(C)(ii) are implemented.
          (2) Review and modification of website.--
                  (A) In general.--The Secretary shall 
                establish a process--
                          (i) to review the accuracy, clarity 
                        of presentation, timeliness, and 
                        comprehensiveness of information 
                        reported on such website as of the day 
                        before the date of the enactment of 
                        this subsection; and
                          (ii) not later than 1 year after the 
                        date of the enactment of this 
                        subsection, to modify or revamp such 
                        website in accordance with the review 
                        conducted under clause (i).
                  (B) Consultation.--In conducting the review 
                under subparagraph (A)(i), the Secretary shall 
                consult with--
                          (i) State long-term care ombudsman 
                        programs;
                          (ii) consumer advocacy groups;
                          (iii) provider stakeholder groups;
                          (iv) skilled nursing facility 
                        employees and their representatives; 
                        and
                          (v) any other representatives of 
                        programs or groups the Secretary 
                        determines appropriate.
  [(i)] (j) Construction.--Where requirements or obligations 
under this section are identical to those provided under 
section 1819 of this Act, the fulfillment of those requirements 
or obligations under section 1819 shall be considered to be the 
fulfillment of the corresponding requirements or obligations 
under this section.

           *       *       *       *       *       *       *


                  PAYMENT FOR COVERED OUTPATIENT DRUGS

  Sec. 1927. (a) * * *
  (b) Terms of Rebate Agreement.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Manufacturer provision of price information.--
                  (A) In general.--Each manufacturer with an 
                agreement in effect under this section shall 
                report to the Secretary--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) for calendar quarters beginning 
                        on or after January 1, 2004, in 
                        conjunction with reporting required 
                        under clause (i) and by National Drug 
                        Code (including package size)--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) information on those 
                                sales that were made at a 
                                nominal price or otherwise 
                                described in section 
                                1847A(c)(2)(B);
                        for a drug or biological described in 
                        subparagraph (A)(iv) (including 
                        influenza vaccines furnished on or 
                        after January 1, 2011), (C), (D), (E), 
                        or (G) of section 1842(o)(1) or section 
                        1881(b)(13)(A)(ii), and, for calendar 
                        quarters beginning on or after January 
                        1, 2007 and only with respect to the 
                        information described in subclause 
                        (III), for covered outpatient drugs.

           *       *       *       *       *       *       *


TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE PROGRAM

           *       *       *       *       *       *       *


SEC. 2102. GENERAL CONTENTS OF STATE CHILD HEALTH PLAN; ELIGIBILITY; 
                    OUTREACH.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Program Integrity.--A State child health plan shall 
include a description of the procedures to be used by the 
State--
          (1) to enforce any determination made by the 
        Secretary under subsection (a) of section 1128G 
        (relating to a significant risk of fraudulent activity 
        with respect to a category of provider or supplier 
        described in such subsection through use of the 
        appropriate procedures described in such subsection);
          (2) to carry out any activities as required by the 
        Secretary for purposes of such subsection; and
          (3) to enforce any determination made by the 
        Secretary under subsection (b) of section 1128G 
        (relating to disclosure requirements) and to apply any 
        enhanced safeguards, with respect to a provider or 
        supplier described in such subsection, as the Secretary 
        determines necessary under such subsection.

           *       *       *       *       *       *       *


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

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


INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *


Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


              Subchapter A--Determination of Tax Liability

                       PART I--TAX ON INDIVIDUALS

     * * * * * * *

Part VIII. Health Care Related Taxes.

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *


                  Subpart D--Business Related Credits

Sec. 38. General business credit.
     * * * * * * *
Sec. 45R. Small business employee health coverage credit.

           *       *       *       *       *       *       *


SEC. 38. GENERAL BUSINESS CREDIT.

  (a) * * *
  (b) Current Year Business Credit.--For purposes of this 
subpart, the amount of the current year business credit is the 
sum of the following credits determined for the taxable year:
          (1) * * *

           *       *       *       *       *       *       *

          (34) the carbon dioxide sequestration credit 
        determined under section 45Q(a) [plus]
          (35) the portion of the new qualified plug-in 
        electric drive motor vehicle credit to which section 
        30D(c)(1) applies[.], plus
          (36) in the case of a qualified small employer (as 
        defined in section 45R(e)), the small business employee 
        health coverage credit determined under section 45R(a).

           *       *       *       *       *       *       *


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

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

           *       *       *       *       *       *       *


                  PART VIII--HEALTH CARE RELATED TAXES

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

            subpart b. surcharge on high income individuals.

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

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

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

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

            Subpart B--Surcharge on High Income Individuals

Sec. 59C. Surcharge on high income individuals.

SEC. 59C. SURCHARGE ON HIGH INCOME INDIVIDUALS.

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

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

           *       *       *       *       *       *       *


SEC. 105. AMOUNTS RECEIVED UNDER ACCIDENT AND HEALTH PLANS.

  (a) * * *
  (b) Amounts Expended for Medical Care.--Except in the case of 
amounts attributable to (and not in excess of) deductions 
allowed under section 213 (relating to medical, etc., expenses) 
for any prior taxable year, gross income does not include 
amounts referred to in subsection (a) if such amounts are paid, 
directly or indirectly, to the taxpayer to reimburse the 
taxpayer for expenses incurred by him for the medical care (as 
defined in section 213(d)) of the taxpayer, his spouse, [and 
his dependents] his dependents (as defined in section 152, 
determined without regard to subsections (b)(1), (b)(2), and 
(d)(1)(B) thereof) and any eligible beneficiary (within the 
meaning of section 106(f)) with respect to the taxpayer. Any 
child to whom section 152(e) applies shall be treated as a 
dependent of both parents for purposes of this subsection.

           *       *       *       *       *       *       *


SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Reimbursements for Medicine Restricted to Prescribed 
Drugs and Insulin.--For purposes of this section and section 
105, reimbursement for expenses incurred for a medicine or a 
drug shall be treated as a reimbursement for medical expenses 
only if such medicine or drug is a prescribed drug or is 
insulin.
  (g) Coverage Provided for Eligible Beneficiaries of 
Employees.--
          (1) In general.--Subsection (a) shall apply with 
        respect to any eligible beneficiary of the employee.
          (2) Eligible beneficiary.--For purposes of this 
        subsection, the term ``eligible beneficiary'' means any 
        individual who is eligible to receive benefits or 
        coverage under an accident or health plan.

           *       *       *       *       *       *       *


PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

           *       *       *       *       *       *       *


SEC. 162. TRADE OR BUSINESS EXPENSES.

  (a) * * *

           *       *       *       *       *       *       *

  (l) Special Rules for Health Insurance Costs of Self-Employed 
Individuals.--
          [(1) Allowance of deduction.--
                  [(A) In general.--In the case of an 
                individual who is an employee within the 
                meaning of section 401(c)(1), there shall be 
                allowed as a deduction under this section an 
                amount equal to the applicable percentage of 
                the amount paid during the taxable year for 
                insurance which constitutes medical care for 
                the taxpayer, his spouse, and dependents.
                  [(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                shall be determined under the following table:

 
------------------------------------------------------------------------
  [For taxable years beginning in
          calendar year -               The applicable percentage is -
------------------------------------------------------------------------
1999 through 2001                    60
2002                                 70
2003 and thereafter                  100.]
------------------------------------------------------------------------

          (1) Allowance of deduction.--In the case of a 
        taxpayer who is an employee within the meaning of 
        section 401(c)(1), there shall be allowed as a 
        deduction under this section an amount equal to the 
        amount paid during the taxable year for insurance which 
        constitutes medical care for--
                  (A) the taxpayer,
                  (B) the taxpayer's spouse,
                  (C) the taxpayer's dependents, and
                  (D) any individual who--
                          (i) satisfies the age requirements of 
                        section 152(c)(3)(A),
                          (ii) bears a relationship to the 
                        taxpayer described in section 
                        152(d)(2)(H), and
                          (iii) meets the requirements of 
                        section 152(d)(1)(C), and
                  (E) one individual who--
                          (i) does not satisfy the age 
                        requirements of section 152(c)(3)(A),
                          (ii) bears a relationship to the 
                        taxpayer described in section 
                        152(d)(2)(H),
                          (iii) meets the requirements of 
                        section 152(d)(1)(D), and
                          (iv) is not the spouse of the 
                        taxpayer and does not bear any 
                        relationship to the taxpayer described 
                        in subparagraphs (A) through (G) of 
                        section 152(d)(2).
          (2) Limitations.--
                  (A) * * *
                  (B) Other coverage.--Paragraph (1) shall not 
                apply to any taxpayer for any calendar month 
                for which the taxpayer is eligible to 
                participate in any subsidized health plan 
                maintained by any employer of the taxpayer or 
                of the spouse, any dependent, or individual 
                described in subparagraph (D) or (E) of 
                paragraph (1) with respect to of the taxpayer. 
                The preceding sentence shall be applied 
                separately with respect to--
                          (i) * * *

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *


SEC. 220. ARCHER MSAS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Archer MSA.--For purposes of this section--
          (1) * * *
          (2) Qualified medical expenses.--
                  (A) In general.--The term ``qualified medical 
                expenses'' means, with respect to an account 
                holder, amounts paid by such holder for medical 
                care (as defined in section 213(d)) for such 
                individual, the spouse of such individual, and 
                any dependent (as defined in section 152, 
                determined without regard to subsections 
                (b)(1), (b)(2), and (d)(1)(B) thereof) of such 
                individual, but only to the extent such amounts 
                are not compensated for by insurance or 
                otherwise. Such term shall include an amount 
                paid for medicine or a drug only if such 
                medicine or drug is a prescribed drug or is 
                insulin.

           *       *       *       *       *       *       *


SEC. 223. HEALTH SAVINGS ACCOUNTS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Health Savings Account.--For purposes of this section--
          (1) * * *
          (2) Qualified medical expenses.--
                  (A) In general.--The term ``qualified medical 
                expenses'' means, with respect to an account 
                beneficiary, amounts paid by such beneficiary 
                for medical care (as defined in section 213(d) 
                for such individual, the spouse of such 
                individual, and any dependent (as defined in 
                section 152, determined without regard to 
                subsections (b)(1), (b)(2), and (d)(1)(B) 
                thereof) of such individual, but only to the 
                extent such amounts are not compensated for by 
                insurance or otherwise. Such term shall include 
                an amount paid for medicine or a drug only if 
                such medicine or drug is a prescribed drug or 
                is insulin.

           *       *       *       *       *       *       *


Subchapter F--Exempt Organizations

           *       *       *       *       *       *       *


PART I--GENERAL RULE

           *       *       *       *       *       *       *


SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.

  (a) * * *

           *       *       *       *       *       *       *

  (c) List of Exempt Organizations.--The following 
organizations are referred to in subsection (a):
          (1) * * *

           *       *       *       *       *       *       *

          (9) Voluntary employees' beneficiary associations 
        providing for the payment of life, sick, accident, or 
        other benefits to the members of such association or 
        their dependents or designated beneficiaries, if no 
        part of the net earnings of such association inures 
        (other than through such payments) to the benefit of 
        any private shareholder or individual. For purposes of 
        providing for the payment of sick and accident benefits 
        to members of such an association and their dependents, 
        the term ``dependents'' shall include any individual 
        who is an eligible beneficiary (within the meaning of 
        section 106(f)), as determined under the terms of a 
        medical benefit, health insurance, or other program 
        under which members and their dependents are entitled 
        to sick and accident benefits.

           *       *       *       *       *       *       *


 Subchapter N--Tax Based on Income From Sources Within or Without the 
United States

           *       *       *       *       *       *       *


PART I--SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME

           *       *       *       *       *       *       *


SEC. 864. DEFINITIONS AND SPECIAL RULES.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Election to Allocate Interest, etc. on Worldwide Basis.--
For purposes of this subchapter, at the election of the 
worldwide affiliated group--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Election to expand financial institution group of 
        worldwide.--group (A) * * *

           *       *       *       *       *       *       *

                  (D) Election.--An election under this 
                paragraph with respect to any financial 
                institution group may be made only by the 
                common parent of the pre-election worldwide 
                affiliated group and may be made only for the 
                first taxable year beginning after [December 
                31, 2010] December 31, 2019, in which such 
                affiliated group includes 1 or more financial 
                corporations. Such an election, once made, 
                shall apply to all financial corporations which 
                are members of the electing financial 
                institution group for such taxable year and all 
                subsequent years unless revoked with the 
                consent of the Secretary.

           *       *       *       *       *       *       *

          (6) Election.--An election to have this subsection 
        apply with respect to any worldwide affiliated group 
        may be made only by the common parent of the domestic 
        affiliated group referred to in paragraph (1)(C) and 
        may be made only for the first taxable year beginning 
        after [December 31, 2010] December 31, 2019, in which a 
        worldwide affiliated group exists which includes such 
        affiliated group and at least 1 foreign corporation. 
        Such an election, once made, shall apply to such common 
        parent and all other corporations which are members of 
        such worldwide affiliated group for such taxable year 
        and all subsequent years unless revoked with the 
        consent of the Secretary.
          [(7) Transition.--In the case of the first taxable 
        year to which this subsection applies, the increase (if 
        any) in the amount of the interest expense allocable to 
        sources within the United States by reason of the 
        application of this subsection shall be 30 percent of 
        the amount of such increase determined without regard 
        to this paragraph.]

           *       *       *       *       *       *       *


PART II--NONRESIDENT ALIENS AND FOREIGN CORPORATIONS

           *       *       *       *       *       *       *


Subpart D--Miscellaneous Provisions

           *       *       *       *       *       *       *


SEC. 894. INCOME AFFECTED BY TREATY.

  (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


Subtitle C--Employment Taxes

           *       *       *       *       *       *       *


CHAPTER 21--FEDERAL INSURANCE CONTRIBUTIONS ACT

           *       *       *       *       *       *       *


Subchapter B--Tax on Employers

           *       *       *       *       *       *       *


SEC. 3111. RATE OF TAX.

  (a) * * *

           *       *       *       *       *       *       *

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

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

                  (B) Small employer.--For purposes of this 
                paragraph, the term ``small employer'' means 
                any employer for any calendar year if the 
                annual payroll of such employer for the 
                preceding calendar year does not exceed 
                $400,000.
                  (C) Annual payroll.--For purposes of this 
                paragraph, the term ``annual payroll'' means, 
                with respect to any employer for any calendar 
                year, the aggregate wages (as defined in 
                section 3121(a)) paid by him with respect to 
                employment (as defined in section 3121(b)) 
                during such calendar year.
          (3) Nonelecting employer.--For purposes of paragraph 
        (1), the term ``nonelecting employer'' means any 
        employer for any period with respect to which such 
        employer does not have an election under section 
        4980H(a) in effect.
          (4) Special rule for separate elections.--In the case 
        of an employer who makes a separate election described 
        in section 4980H(a)(4) for any period, paragraph (1) 
        shall be applied for such period by taking into account 
        only the wages paid to employees who are not subject to 
        such election.
          (5) Aggregation; predecessors.--For purposes of this 
        subsection--
                  (A) all persons treated as a single employer 
                under subsection (b), (c), (m), or (o) of 
                section 414 shall be treated as 1 employer, and
                  (B) any reference to any person shall be 
                treated as including a reference to any 
                predecessor of such person.
  [(c)] (d) Relief From Taxes in Cases Covered by Certain 
International Agreements.--During any period in which there is 
in effect an agreement entered into pursuant to section 233 of 
the Social Security Act with any foreign country, wages 
received by or paid to an individual shall be exempt from the 
taxes imposed by [this section] subsections (a) and (b) to the 
extent that such wages are subject under such agreement 
exclusively to the laws applicable to the social security 
system of such foreign country.

           *       *       *       *       *       *       *


Subchapter C--General Provisions

           *       *       *       *       *       *       *


SEC. 3121. DEFINITIONS.

  (a) Wages.--For purposes of this chapter, the term ``wages'' 
means all remuneration for employment, including the cash value 
of all remuneration (including benefits) paid in any medium 
other than cash; except that such term shall not include--
          (1) * * *
          (2) the amount of any payment (including any amount 
        paid by an employer for insurance or annuities, or into 
        a fund, to provide for any such payment) made to, or on 
        behalf of, an employee [or any of his dependents], any 
        of his dependents, or any eligible beneficiary (within 
        the meaning of section 106(g)) with respect to the 
        employee under a plan or system established by an 
        employer which makes provision for his employees 
        generally (or for his employees generally [and their 
        dependents] and such employees' dependents and eligible 
        beneficiaries (within the meaning of section 106(g))) 
        or for a class or classes of his employees (or for a 
        class or classes of his employees [and their 
        dependents] and such employees' dependents and eligible 
        beneficiaries (within the meaning of section 106(g))), 
        on account of--
                  (A) sickness or accident disability (but, in 
                the case of payments made to an employee [or 
                any of his dependents,], any of his dependents, 
                or any eligible beneficiary (within the meaning 
                of section 106(g)) with respect to the 
                employee, this subparagraph shall exclude from 
                the term ``wages'' only payments which are 
                received under a workman's compensation law), 
                or

           *       *       *       *       *       *       *

  (aa) Special Rules for Tax on Employers Electing Not to 
Provide Health Benefits.--For purposes of section 3111(c)--
          (1) Paragraphs (1), (5), and (19) of subsection (b) 
        shall not apply.
          (2) Paragraph (7) of subsection (b) shall apply by 
        treating all services as not covered by the retirement 
        systems referred to in subparagraphs (C) and (F) 
        thereof.
          (3) Subsection (e) shall not apply and the term 
        ``State'' shall include the District of Columbia.

           *       *       *       *       *       *       *


CHAPTER 22--RAILROAD RETIREMENT TAX ACT

           *       *       *       *       *       *       *


Subchapter C--Tax on Employers

           *       *       *       *       *       *       *


SEC. 3221. RATE OF TAX.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Employers Electing to Not Provide Health Benefits.--
          (1) In general.--In addition to other taxes, there is 
        hereby imposed on every nonelecting employer an excise 
        tax, with respect to having individuals in his employ, 
        equal to 8 percent of the compensation paid during any 
        calendar year by such employer for services rendered to 
        such employer.
          (2) Exception for small employers.--Rules similar to 
        the rules of section 3111(c)(2) shall apply for 
        purposes of this subsection.
          (3) Nonelecting employer.--For purposes of paragraph 
        (1), the term ``nonelecting employer'' means any 
        employer for any period with respect to which such 
        employer does not have an election under section 
        4980H(a) in effect.
          (4) Special rule for separate elections.--In the case 
        of an employer who makes a separate election described 
        in section 4980H(a)(4) for any period, subsection (a) 
        shall be applied for such period by taking into account 
        only the wages paid to employees who are not subject to 
        such election.
  [(c)] (d) Cross Reference.--For application of different 
contribution bases with respect to the taxes imposed by 
[subsections (a) and (b), see section 3231(e)(2)] this section, 
see paragraphs (2) and (13)(B) of section 3231(e).

           *       *       *       *       *       *       *


Subchapter D--General Provisions

           *       *       *       *       *       *       *


SEC. 3231. DEFINITIONS.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Compensation.--For purposes of this chapter--
          (1) The term ``compensation'' means any form of money 
        remuneration paid to an individual for services 
        rendered as an employee to one or more employers. Such 
        term does not include (i) the amount of any payment 
        (including any amount paid by an employer for insurance 
        or annuities, or into a fund, to provide for any such 
        payment) made to, or on behalf of, an employee [or any 
        of his dependents], any of his dependents, or any 
        eligible beneficiary (within the meaning of section 
        106(g)) with respect to the employee, under a plan or 
        system established by an employer which makes provision 
        for his employees generally (or for his employees 
        generally [and their dependents] and such employees' 
        dependents and eligible beneficiaries (within the 
        meaning of section 106(g))) or for a class or classes 
        of his employees (or for a class or classes of his 
        employees [and their dependents] and such employees' 
        dependents and eligible beneficiaries (within the 
        meaning of section 106(g))), on account of sickness or 
        accident disability or medical or hospitalization 
        expenses in connection with sickness or accident 
        disability or death, except that this clause does not 
        apply to a payment for group-term life insurance to the 
        extent that such payment is includible in the gross 
        income of the employee, (ii) tips (except as is 
        provided under paragraph (3)), (iii) an amount paid 
        specifically - either as an advance, as reimbursement 
        or allowance - for traveling or other bona fide and 
        necessary expenses incurred or reasonably expected to 
        be incurred in the business of the employer provided 
        any such payment is identified by the employer either 
        by a separate payment or by specifically indicating the 
        separate amounts where both wages and expense 
        reimbursement or allowance are combined in a single 
        payment, or (iv) any remuneration which would not (if 
        chapter 21 applied to such remuneration) be treated as 
        wages (as defined in section 3121(a)) by reason of 
        section 3121(a)(5). Such term does not include 
        remuneration for service which is performed by a 
        nonresident alien individual for the period he is 
        temporarily present in the United States as a 
        nonimmigrant under subparagraph (F), (J), (M), or (Q) 
        of section 101(a)(15) of the Immigration and 
        Nationality Act, as amended, and which is performed to 
        carry out the purpose specified in subparagraph (F), 
        (J), (M), or (Q), as the case may be. For the purpose 
        of determining the amount of taxes under sections 3201 
        and 3221, compensation earned in the service of a local 
        lodge or division of a railway-labor-organization 
        employer shall be disregarded with respect to any 
        calendar month if the amount thereof is less than $25. 
        Compensation for service as a delegate to a national or 
        international convention of a railway labor 
        organization defined as an ``employer'' in subsection 
        (a) of this section shall be disregarded for purposes 
        of determining the amount of taxes due pursuant to this 
        chapter if the individual rendering such service has 
        not previously rendered service, other than as such a 
        delegate, which may be included in his ``years of 
        service'' for purposes of the Railroad Retirement Act. 
        Nothing in the regulations prescribed for purposes of 
        chapter 24 (relating to wage withholding) which 
        provides an exclusion from ``wages'' as used in such 
        chapter shall be construed to require a similar 
        exclusion from ``compensation'' in regulations 
        prescribed for purposes of this chapter.

           *       *       *       *       *       *       *

          (13) Special rules for tax on employers electing not 
        to provide health benefits.--For purposes of section 
        3221(c)--
                  (A) Paragraph (1) shall be applied without 
                regard to the third sentence thereof.
                  (B) Paragraph (2) shall not apply.

           *       *       *       *       *       *       *


CHAPTER 23--FEDERAL UNEMPLOYMENT TAX ACT

           *       *       *       *       *       *       *


SEC. 3306. DEFINITIONS.

  (a) * * *
  (b) Wages.--For purposes of this chapter, the term ``wages'' 
means all remuneration for employment, including the cash value 
of all remuneration (including benefits) paid in any medium 
other than cash; except that such term shall not include--
          (1) * * *
          (2) the amount of any payment (including any amount 
        paid by an employer for insurance or annuities, or into 
        a fund, to provide for any such payment) made to, or on 
        behalf of, an employee [or any of his dependents], any 
        of his dependents, or any eligible beneficiary (within 
        the meaning of section 106(f)) with respect to the 
        employee, under a plan or system established by an 
        employer which makes provision for his employees 
        generally (or for his employees generally [and their 
        dependents] and such employees' dependents and eligible 
        beneficiaries (within the meaning of section 106(g))) 
        or for a class or classes of his employees (or for a 
        class or classes of his employees [and their 
        dependents] and such employees' dependents and eligible 
        beneficiaries (within the meaning of section 106(g))), 
        on account of--
                  (A) sickness or accident disability (but, in 
                the case of payments made to an employee [or 
                any of his dependents], any of his dependents, 
                or any eligible beneficiary (within the meaning 
                of section 106(g)) with respect to the 
                employee,, this subparagraph shall exclude from 
                the term ``wages'' only payments which are 
                received under a workmen's compensation law), 
                or

           *       *       *       *       *       *       *


CHAPTER 24--COLLECTION OF INCOME TAX AT SOURCE ON WAGES

           *       *       *       *       *       *       *


SEC. 3401. DEFINITIONS.

  (a) Wages.--For purposes of this chapter, the term ``wages'' 
means all remuneration (other than fees paid to a public 
official) for services performed by an employee for his 
employer, including the cash value of all remuneration 
(including benefits) paid in any medium other than cash; except 
that such term shall not include remuneration paid--
          (1) * * *

           *       *       *       *       *       *       *

          (22) any payment made to or for the benefit of an 
        employee if at the time of such payment it is 
        reasonable to believe that the employee will be able to 
        exclude such payment from income under section 106(d); 
        [or]
          (23) for any benefit or payment which is excludable 
        from the gross income of the employee under section 
        139B(b)[.]; or
          (24) for any payment made to or for the benefit of an 
        employee or any eligible beneficiary (within the 
        meaning of section 106(f)) if at the time of such 
        payment it is reasonable to believe that the employee 
        will be able to exclude such payment from income under 
        section 106 or under section 105 by reference in 
        section 105(b) to section 106(f).

           *       *       *       *       *       *       *


                 Subtitle D--Miscellaneous Excise Taxes

                    Chapter 31--Retail Excise Taxes.

     * * * * * * *

            [Chapter 34--Policies Issued by Foreign Insurers]

Chapter 34--Taxes on Certain Insurance Policies

           *       *       *       *       *       *       *


           [CHAPTER 34--POLICIES ISSUED BY FOREIGN INSURERS]

            CHAPTER 34--TAXES ON CERTAIN INSURANCE POLICIES

            subchapter a. policies issued by foreign insurers

           subchapter b. insured and self-insured health plans

Subchapter A--Policies Issued By Foreign Insurers

           *       *       *       *       *       *       *


          Subchapter B--Insured and Self-Insured Health Plans

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

SEC. 4375. HEALTH INSURANCE.

  (a) Imposition of Fee.--There is hereby imposed on each 
specified health insurance policy for each policy year a fee 
equal to the fair share per capita amount determined under 
section 9511(c)(1) multiplied by the average number of lives 
covered under the policy.
  (b) Liability for Fee.--The fee imposed by subsection (a) 
shall be paid by the issuer of the policy.
  (c) Specified Health Insurance Policy.--For purposes of this 
section:
          (1) In general.--Except as otherwise provided in this 
        section, the term ``specified health insurance policy'' 
        means any accident or health insurance policy issued 
        with respect to individuals residing in the United 
        States.
          (2) Exemption for certain policies.--The term 
        ``specified health insurance policy'' does not include 
        any insurance if substantially all of its coverage is 
        of excepted benefits described in section 9832(c).
          (3) Treatment of prepaid health coverage 
        arrangements.--
                  (A) In general.--In the case of any 
                arrangement described in subparagraph (B)--
                          (i) such arrangement shall be treated 
                        as a specified health insurance policy, 
                        and
                          (ii) the person referred to in such 
                        subparagraph shall be treated as the 
                        issuer.
                  (B) Description of arrangements.--An 
                arrangement is described in this subparagraph 
                if under such arrangement fixed payments or 
                premiums are received as consideration for any 
                person's agreement to provide or arrange for 
                the provision of accident or health coverage to 
                residents of the United States, regardless of 
                how such coverage is provided or arranged to be 
                provided.

SEC. 4376. SELF-INSURED HEALTH PLANS.

  (a) Imposition of Fee.--In the case of any applicable self-
insured health plan for each plan year, there is hereby imposed 
a fee equal to the fair share per capita amount determined 
under section 9511(c)(1) multiplied by the average number of 
lives covered under the plan.
  (b) Liability for Fee.--
          (1) In general.--The fee imposed by subsection (a) 
        shall be paid by the plan sponsor.
          (2) Plan sponsor.--For purposes of paragraph (1) the 
        term ``plan sponsor'' means--
                  (A) the employer in the case of a plan 
                established or maintained by a single employer,
                  (B) the employee organization in the case of 
                a plan established or maintained by an employee 
                organization,
                  (C) in the case of--
                          (i) a plan established or maintained 
                        by 2 or more employers or jointly by 1 
                        or more employers and 1 or more 
                        employee organizations,
                          (ii) a multiple employer welfare 
                        arrangement, or
                          (iii) a voluntary employees' 
                        beneficiary association described in 
                        section 501(c)(9),
                the association, committee, joint board of 
                trustees, or other similar group of 
                representatives of the parties who establish or 
                maintain the plan, or
                  (D) the cooperative or association described 
                in subsection (c)(2)(F) in the case of a plan 
                established or maintained by such a cooperative 
                or association.
  (c) Applicable Self-Insured Health Plan.--For purposes of 
this section, the term ``applicable self-insured health plan'' 
means any plan for providing accident or health coverage if--
          (1) any portion of such coverage is provided other 
        than through an insurance policy, and
          (2) such plan is established or maintained--
                  (A) by one or more employers for the benefit 
                of their employees or former employees,
                  (B) by one or more employee organizations for 
                the benefit of their members or former members,
                  (C) jointly by 1 or more employers and 1 or 
                more employee organizations for the benefit of 
                employees or former employees,
                  (D) by a voluntary employees' beneficiary 
                association described in section 501(c)(9),
                  (E) by any organization described in section 
                501(c)(6), or
                  (F) in the case of a plan not described in 
                the preceding subparagraphs, by a multiple 
                employer welfare arrangement (as defined in 
                section 3(40) of Employee Retirement Income 
                Security Act of 1974 ), a rural electric 
                cooperative (as defined in section 3(40)(B)(iv) 
                of such Act), or a rural telephone cooperative 
                association (as defined in section 3(40)(B)(v) 
                of such Act).

SEC. 4377. DEFINITIONS AND SPECIAL RULES.

  (a) Definitions.--For purposes of this subchapter--
          (1) Accident and health coverage.--The term 
        ``accident and health coverage'' means any coverage 
        which, if provided by an insurance policy, would cause 
        such policy to be a specified health insurance policy 
        (as defined in section 4375(c)).
          (2) Insurance policy.--The term ``insurance policy'' 
        means any policy or other instrument whereby a contract 
        of insurance is issued, renewed, or extended.
          (3) United states.--The term ``United States'' 
        includes any possession of the United States.
  (b) Treatment of Governmental Entities.--
          (1) In general.--For purposes of this subchapter--
                  (A) the term ``person'' includes any 
                governmental entity, and
                  (B) notwithstanding any other law or rule of 
                law, governmental entities shall not be exempt 
                from the fees imposed by this subchapter except 
                as provided in paragraph (2).
          (2) Treatment of exempt governmental programs.--In 
        the case of an exempt governmental program, no fee 
        shall be imposed under section 4375 or section 4376 on 
        any covered life under such program.
          (3) Exempt governmental program defined.--For 
        purposes of this subchapter, the term ``exempt 
        governmental program'' means--
                  (A) any insurance program established under 
                title XVIII of the Social Security Act,
                  (B) the medical assistance program 
                established by title XIX or XXI of the Social 
                Security Act,
                  (C) any program established by Federal law 
                for providing medical care (other than through 
                insurance policies) to individuals (or the 
                spouses and dependents thereof) by reason of 
                such individuals being--
                          (i) members of the Armed Forces of 
                        the United States, or
                          (ii) veterans, and
                  (D) any program established by Federal law 
                for providing medical care (other than through 
                insurance policies) to members of Indian tribes 
                (as defined in section 4(d) of the Indian 
                Health Care Improvement Act).
  (c) Treatment as Tax.--For purposes of subtitle F, the fees 
imposed by this subchapter shall be treated as if they were 
taxes.
  (d) No Cover Over to Possessions.--Notwithstanding any other 
provision of law, no amount collected under this subchapter 
shall be covered over to any possession of the United States.

           *       *       *       *       *       *       *


               CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

Sec. 4971. Taxes on failure to meet minimum funding standards
     * * * * * * *
Sec. 4980H. Election with respect to health coverage participation 
          requirements.

           *       *       *       *       *       *       *


SEC. 4980H. ELECTION WITH RESPECT TO HEALTH COVERAGE PARTICIPATION 
                    REQUIREMENTS.

  (a) Election of Employer Responsibility to Provide Health 
Coverage.--
          (1) In general.--Subsection (b) shall apply to any 
        employer with respect to whom an election under 
        paragraph (2) is in effect.
          (2) Time and manner.--An employer may make an 
        election under this paragraph at such time and in such 
        form and manner as the Secretary may prescribe.
          (3) Affiliated groups.--In the case of any employer 
        which is part of a group of employers who are treated 
        as a single employer under subsection (b), (c), (m), or 
        (o) of section 414, the election under paragraph (2) 
        shall be made by such person as the Secretary may 
        provide. Any such election, once made, shall apply to 
        all members of such group.
          (4) Separate elections.--Under regulations prescribed 
        by the Secretary, separate elections may be made under 
        paragraph (2) with respect to--
                  (A) separate lines of business, and
                  (B) full-time employees and employees who are 
                not full-time employees.
          (5) Termination of election in cases of substantial 
        noncompliance.--The Secretary may terminate the 
        election of any employer under paragraph (2) if the 
        Secretary (in coordination with the Health Choices 
        Commissioner) determines that such employer is in 
        substantial noncompliance with the health coverage 
        participation requirements.
  (b) Excise Tax With Respect to Failure to Meet Health 
Coverage Participation Requirements.--
          (1) In general.--In the case of any employer who 
        fails (during any period with respect to which the 
        election under subsection (a) is in effect) to satisfy 
        the health coverage participation requirements with 
        respect to any employee to whom such election applies, 
        there is hereby imposed on each such failure with 
        respect to each such employee a tax of $100 for each 
        day in the period beginning on the date such failure 
        first occurs and ending on the date such failure is 
        corrected.
          (2) Limitations on amount of tax.--
                  (A) Tax not to apply where failure not 
                discovered exercising reasonable diligence.--No 
                tax shall be imposed by paragraph (1) on any 
                failure during any period for which it is 
                established to the satisfaction of the 
                Secretary that the employer neither knew, nor 
                exercising reasonable diligence would have 
                known, that such failure existed.
                  (B) Tax not to apply to failures corrected 
                within 30 days.--No tax shall be imposed by 
                paragraph (1) on any failure if--
                          (i) such failure was due to 
                        reasonable cause and not to willful 
                        neglect, and
                          (ii) such failure is corrected during 
                        the 30-day period beginning on the 1st 
                        date that the employer knew, or 
                        exercising reasonable diligence would 
                        have known, that such failure existed.
                  (C) Overall limitation for unintentional 
                failures.--In the case of failures which are 
                due to reasonable cause and not to willful 
                neglect, the tax imposed by subsection (a) for 
                failures during the taxable year of the 
                employer shall not exceed the amount equal to 
                the lesser of--
                          (i) 10 percent of the aggregate 
                        amount paid or incurred by the employer 
                        (or predecessor employer) during the 
                        preceding taxable year for employment-
                        based health plans, or
                          (ii) $500,000.
                  (D) Coordination with other enforcement 
                provisions.--The tax imposed under paragraph 
                (1) with respect to any failure shall be 
                reduced (but not below zero) by the amount of 
                any civil penalty collected under section 
                502(c)(11) of the Employee Retirement Income 
                Security Act of 1974 or section 2793(g) of the 
                Public Health Service Act with respect to such 
                failure.
  (c) Health Coverage Participation Requirements.--For purposes 
of this section, the term ``health coverage participation 
requirements'' means the requirements of part I of subtitle B 
of title III of the America's Affordable Health Choices Act of 
2009 (as in effect on the date of the enactment of this 
section).

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


Subchapter A--Returns and Records

           *       *       *       *       *       *       *


PART II--TAX RETURNS OR STATEMENTS

           *       *       *       *       *       *       *


Subpart B--Income Tax Returns

           *       *       *       *       *       *       *


SEC. 6012. PERSONS REQUIRED TO MAKE RETURNS OF INCOME.

  (a) General Rule.--Returns with respect to income taxes under 
subtitle A shall be made by the following:
          (1) * * *

           *       *       *       *       *       *       *

          (10) Every individual to whom section 59B(a) applies 
        and who fails to meet the requirements of section 
        59B(d) with respect to such individual or any 
        qualifying child (as defined in section 152(c)) of such 
        individual.

           *       *       *       *       *       *       *


PART III--INFORMATION RETURNS

           *       *       *       *       *       *       *


   Subpart B--Information Concerning Transactions With Other Persons

Sec. 6041. Information at source.
     * * * * * * *
Sec. 6050X. Returns relating to health insurance coverage.

           *       *       *       *       *       *       *


SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE COVERAGE.

  (a) Requirement of Reporting.--Every person who provides 
acceptable coverage (as defined in section 59B(d)) to any 
individual during any calendar year shall, at such time as the 
Secretary may prescribe, make the return described in 
subsection (b) with respect to such individual.
  (b) Form and Manner of Returns.--A return is described in 
this subsection if such return--
          (1) is in such form as the Secretary may prescribe, 
        and
          (2) contains--
                  (A) the name, address, and TIN of the primary 
                insured and the name of each other individual 
                obtaining coverage under the policy,
                  (B) the period for which each such individual 
                was provided with the coverage referred to in 
                subsection (a), and
                  (C) such other information as the Secretary 
                may require.
  (c) Statements to be Furnished to Individuals With Respect to 
Whom Information is Required.--Every person required to make a 
return under subsection (a) shall furnish to each primary 
insured whose name is required to be set forth in such return a 
written statement showing--
          (1) the name and address of the person required to 
        make such return and the phone number of the 
        information contact for such person, and
          (2) the information required to be shown on the 
        return with respect to such individual.
The written statement required under the preceding sentence 
shall be furnished on or before January 31 of the year 
following the calendar year for which the return under 
subsection (a) is required to be made.
  (d) Coverage Provided by Governmental Units.--In the case of 
coverage provided by any governmental unit or any agency or 
instrumentality thereof, the officer or employee who enters 
into the agreement to provide such coverage (or the person 
appropriately designated for purposes of this section) shall 
make the returns and statements required by this section.

           *       *       *       *       *       *       *


Subchapter B--Miscellaneous Provisions

           *       *       *       *       *       *       *


SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN 
                    INFORMATION.

  (a) General Rule.--Returns and return information shall be 
confidential, and except as authorized by this title--
          (1) * * *

           *       *       *       *       *       *       *

          (3) no other person (or officer or employee thereof) 
        who has or had access to returns or return information 
        under subsection (e)(1)(D)(iii), paragraph (6), (10), 
        (12), (16), [(19),] or (20) of subsection (l), 
        paragraph (2) or (4)(B) of subsection (m), or 
        subsection (n),

           *       *       *       *       *       *       *

  (l) Disclosure of Returns and Return Information for Purposes 
Other Than Tax Administration.--
          (1) * * *

           *       *       *       *       *       *       *

          [(19) Disclosure of return information for purposes 
        of providing transitional assistance under medicare 
        discount card program.--
                  [(A) In general.--The Secretary, upon written 
                request from the Secretary of Health and Human 
                Services pursuant to carrying out section 
                1860D-31 of the Social Security Act, shall 
                disclose to officers, employees, and 
                contractors of the Department of Health and 
                Human Services with respect to a taxpayer for 
                the applicable year--
                          [(i)(I) whether the adjusted gross 
                        income, as modified in accordance with 
                        specifications of the Secretary of 
                        Health and Human Services for purposes 
                        of carrying out such section, of such 
                        taxpayer and, if applicable, such 
                        taxpayer's spouse, for the applicable 
                        year, exceeds the amounts specified by 
                        the Secretary of Health and Human 
                        Services in order to apply the 100 and 
                        135 percent of the poverty lines under 
                        such section, (II) whether the return 
                        was a joint return, and (III) the 
                        applicable year, or
                          [(ii) if applicable, the fact that 
                        there is no return filed for such 
                        taxpayer for the applicable year.
                  [(B) Definition of applicable year.--For the 
                purposes of this subsection, the term 
                ``applicable year'' means the most recent 
                taxable year for which information is available 
                in the Internal Revenue Service's taxpayer data 
                information systems, or, if there is no return 
                filed for such taxpayer for such year, the 
                prior taxable year.
                  [(C) Restriction on use of disclosed 
                information.--Return information disclosed 
                under this paragraph may be used only for the 
                purposes of determining eligibility for and 
                administering transitional assistance under 
                section 1860D-31 of the Social Security Act.]
          (19) Disclosures to facilitate identification of 
        individuals likely to be ineligible for low-income 
        subsidies under medicare prescription drug program to 
        assist social security administration's outreach to 
        eligible individuals.--
                  (A) In general.--Upon written request from 
                the Commissioner of Social Security, the 
                following return information (including such 
                information disclosed to the Social Security 
                Administration under paragraph (1) or (5)) 
                shall be disclosed to officers and employees of 
                the Social Security Administration, with 
                respect to any taxpayer identified by the 
                Commissioner of Social Security--
                          (i) return information for the 
                        applicable year from returns with 
                        respect to wages (as defined in section 
                        3121(a) or 3401(a)) and payments of 
                        retirement income (as described in 
                        paragraph (1) of this subsection),
                          (ii) unearned income information and 
                        income information of the taxpayer from 
                        partnerships, trusts, estates, and 
                        subchapter S corporations for the 
                        applicable year,
                          (iii) if the individual filed an 
                        income tax return for the applicable 
                        year, the filing status, number of 
                        dependents, income from farming, and 
                        income from self-employment, on such 
                        return,
                          (iv) if the individual is a married 
                        individual filing a separate return for 
                        the applicable year, the social 
                        security number (if reasonably 
                        available) of the spouse on such 
                        return,
                          (v) if the individual files a joint 
                        return for the applicable year, the 
                        social security number, unearned income 
                        information, and income information 
                        from partnerships, trusts, estates, and 
                        subchapter S corporations of the 
                        individual's spouse on such return, and
                          (vi) such other return information 
                        relating to the individual (or the 
                        individual's spouse in the case of a 
                        joint return) as is prescribed by the 
                        Secretary by regulation as might 
                        indicate that the individual is likely 
                        to be ineligible for a low-income 
                        prescription drug subsidy under section 
                        1860D-14 of the Social Security Act.
                  (B) Applicable year.--For the purposes of 
                this paragraph, the term ``applicable year'' 
                means the most recent taxable year for which 
                information is available in the Internal 
                Revenue Service's taxpayer information records.
                  (C) Restriction on individuals for whom 
                disclosure may be requested.--The Commissioner 
                of Social Security shall request information 
                under this paragraph only with respect to--
                          (i) individuals the Social Security 
                        Administration has identified, using 
                        all other reasonably available 
                        information, as likely to be eligible 
                        for a low-income prescription drug 
                        subsidy under section 1860D-14 of the 
                        Social Security Act and who have not 
                        applied for such subsidy, and
                          (ii) any individual the Social 
                        Security Administration has identified 
                        as a spouse of an individual described 
                        in clause (i).
                  (D) Restriction on use of disclosed 
                information.--Return information disclosed 
                under this paragraph may be used only by 
                officers and employees of the Social Security 
                Administration solely for purposes of 
                identifying individuals likely to be ineligible 
                for a low-income prescription drug subsidy 
                under section 1860D-14 of the Social Security 
                Act for use in outreach efforts under section 
                1144 of the Social Security Act.

           *       *       *       *       *       *       *

          (21) Disclosure of return information to carry out 
        health insurance exchange subsidies.--
                  (A) In general.--The Secretary, upon written 
                request from the Health Choices Commissioner or 
                the head of a State-based health insurance 
                exchange approved for operation under section 
                208 of the America's Affordable Health Choices 
                Act of 2009, shall disclose to officers and 
                employees of the Health Choices Administration 
                or such State-based health insurance exchange, 
                as the case may be, return information of any 
                taxpayer whose income is relevant in 
                determining any affordability credit described 
                in subtitle C of title II of the America's 
                Affordable Health Choices Act of 2009. Such 
                return information shall be limited to--
                          (i) taxpayer identity information 
                        with respect to such taxpayer,
                          (ii) the filing status of such 
                        taxpayer,
                          (iii) the modified adjusted gross 
                        income of such taxpayer (as defined in 
                        section 59B(e)(5)),
                          (iv) the number of dependents of the 
                        taxpayer,
                          (v) such other information as is 
                        prescribed by the Secretary by 
                        regulation as might indicate whether 
                        the taxpayer is eligible for such 
                        affordability credits (and the amount 
                        thereof), and
                          (vi) the taxable year with respect to 
                        which the preceding information relates 
                        or, if applicable, the fact that such 
                        information is not available.
                  (B) Restriction on use of disclosed 
                information.--Return information disclosed 
                under subparagraph (A) may be used by officers 
                and employees of the Health Choices 
                Administration or such State-based health 
                insurance exchange, as the case may be, only 
                for the purposes of, and to the extent 
                necessary in, establishing and verifying the 
                appropriate amount of any affordability credit 
                described in subtitle C of title II of the 
                America's Affordable Health Choices Act of 2009 
                and providing for the repayment of any such 
                credit which was in excess of such appropriate 
                amount.

           *       *       *       *       *       *       *

  (p) Procedure and Recordkeeping.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Safeguards.--Any Federal agency described in 
        subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or 
        (7), (j)(1), (2), or (5), (k)(8) or (10), (l)(1), (2), 
        (3), (5), (10), (11), (13), (14), [or (17)] (17), or 
        (19) or (o)(1)(A), the Government Accountability 
        Office, the Congressional Budget Office, or any agency, 
        body, or commission described in subsection (d), 
        (i)(3)(B)(i) or 7(A)(ii), or (l)(6), (7), (8), (9), 
        (12), (15), or (16), any appropriate State officer (as 
        defined in section 6104(c)), or any other person 
        described in subsection (l)(10), (16), (18), [(19),] or 
        (20), or any entity described in subsection (l)(21), 
        shall, as a condition for receiving returns or return 
        information--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) upon completion of use of such returns or 
                return information--
                          (i) in the case of an agency, body, 
                        or commission described in subsection 
                        (d), (i)(3)(B)(i), or (l)(6), (7), (8), 
                        (9), or (16), any appropriate State 
                        officer (as defined in section 
                        6104(c)), or any other person described 
                        in subsection (l)(10), (16), (18), 
                        [(19),] or (20) or any entity described 
                        in subsection (l)(21), return to the 
                        Secretary such returns or return 
                        information (along with any copies made 
                        therefrom) or make such returns or 
                        return information undisclosable in any 
                        manner and furnish a written report to 
                        the Secretary describing such manner,
                          (ii) in the case of an agency 
                        described in subsections (h)(2), 
                        (h)(5), (i)(1), (2), (3), (5) or (7), 
                        (j)(1), (2), or (5), (k)(8) or (10), 
                        (l)(1), (2), (3), (5), (10), (11), 
                        (12), (13), (14), (15), [or (17)] (17), 
                        or (19), or (o)(1)(A), or any entity 
                        described in subsection (l)(21), the 
                        Government Accountability Office, or 
                        the Congressional Budget Office, 
                        either--
                                  (I) * * *

           *       *       *       *       *       *       *

        except that the conditions of subparagraphs (A), (B), 
        (C), (D), and (E) shall cease to apply with respect to 
        any return or return information if, and to the extent 
        that, such return or return information is disclosed in 
        the course of any judicial or administrative proceeding 
        and made a part of the public record thereof. If the 
        Secretary determines that any such agency, body, or 
        commission, including an agency, an appropriate State 
        officer (as defined in section 6104(c)), or any other 
        person described in subsection (l)(10), (16), (18), 
        [(19),] or (20), or any entity described in subsection 
        (l)(21), or the Government Accountability Office or the 
        Congressional Budget Office, has failed to, or does 
        not, meet the requirements of this paragraph, he may, 
        after any proceedings for review established under 
        paragraph (7), take such actions as are necessary to 
        ensure such requirements are met, including refusing to 
        disclose returns or return information to such agency, 
        body, or commission, including an agency, an 
        appropriate State officer (as defined in section 
        6104(c)), or any other person described in subsection 
        (l)(10), (16), (18), [(19),] or (20) or any entity 
        described in subsection (l)(21),, or the Government 
        Accountability Office or the Congressional Budget 
        Office, until he determines that such requirements have 
        been or will be met. In the case of any agency which 
        receives any mailing address under paragraph (2), (4), 
        (6), or (7) of subsection (m) and which discloses any 
        such mailing address to any agent or which receives any 
        information under paragraph (6)(A), (10), (12)(B), or 
        (16) of subsection (l) and which discloses any such 
        information to any agent, or any person including an 
        agent described in subsection (l)(10) or (16), this 
        paragraph shall apply to such agency and each such 
        agent or other person (except that, in the case of an 
        agent, or any person including an agent described in 
        subsection (l)(10) or (16), any report to the Secretary 
        or other action with respect to the Secretary shall be 
        made or taken through such agency). For purposes of 
        applying this paragraph in any case to which subsection 
        (m)(6) applies, the term ``return information'' 
        includes related blood donor records (as defined in 
        section 1141(h)(2) of the Social Security Act).

           *       *       *       *       *       *       *


 CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
PENALTIES

           *       *       *       *       *       *       *


Subchapter A--Additions to the Tax and Additional Amounts

           *       *       *       *       *       *       *


PART II--ACCURACY-RELATED AND FRAUD PENALTIES

           *       *       *       *       *       *       *


SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERPAYMENTS.

  (a) * * *
  (b) Portion of Underpayment to Which Section Applies.--This 
section shall apply to the portion of any underpayment which is 
attributable to 1 or more of the following:
          (1) * * *

           *       *       *       *       *       *       *

          (6) Any disallowance of claimed tax benefits by 
        reason of a transaction lacking economic substance 
        (within the meaning of section 7701(o)) or failing to 
        meet the requirements of any similar rule of law.
This section shall not apply to any portion of an underpayment 
on which a penalty is imposed under section 6663. Except as 
provided in paragraph (1) or (2)(B) of section 6662A(e), this 
section shall not apply to the portion of any underpayment 
which is attributable to a reportable transaction 
understatement on which a penalty is imposed under section 
6662A.

           *       *       *       *       *       *       *

  (d) Substantial Understatement of Income Tax.--
          (1) * * *
          (2) Understatement.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Reduction not to apply to tax shelters.--
                          (i) In general.--[Subparagraph (B)] 
                        Subparagraphs (B) and (D)(i)(II) shall 
                        not apply to any item attributable to a 
                        tax shelter.

           *       *       *       *       *       *       *

                  (D) Special reduction rule for certain large 
                or publicly traded persons.--
                          (i) In general.--In the case of any 
                        specified person--
                                  (I) subparagraph (B) shall 
                                not apply, and
                                  (II) the amount of the 
                                understatement under 
                                subparagraph (A) shall be 
                                reduced by that portion of the 
                                understatement which is 
                                attributable to any item with 
                                respect to which the taxpayer 
                                has a reasonable belief that 
                                the tax treatment of such item 
                                by the taxpayer is more likely 
                                than not the proper tax 
                                treatment of such item.
                          (ii) Specified person.--For purposes 
                        of this subparagraph, the term 
                        ``specified person'' means--
                                  (I) any person required to 
                                file periodic or other reports 
                                under section 13 of the 
                                Securities Exchange Act of 
                                1934, and
                                  (II) any corporation with 
                                gross receipts in excess of 
                                $100,000,000 for the taxable 
                                year involved.
                        All persons treated as a single 
                        employer under section 52(a) shall be 
                        treated as one person for purposes of 
                        subclause (II).

           *       *       *       *       *       *       *

  (i) Increase in Penalty in Case of Nondisclosed Noneconomic 
Substance Transactions.--
          (1) In general.--In the case of any portion of an 
        underpayment which is attributable to one or more 
        nondisclosed noneconomic substance transactions, 
        subsection (a) shall be applied with respect to such 
        portion by substituting ``40 percent'' for ``20 
        percent''.
          (2) Nondisclosed noneconomic substance 
        transactions.--For purposes of this subsection, the 
        term ``nondisclosed noneconomic substance transaction'' 
        means any portion of a transaction described in 
        subsection (b)(6) with respect to which the relevant 
        facts affecting the tax treatment are not adequately 
        disclosed in the return nor in a statement attached to 
        the return.
          (3) Special rule for amended returns.--Except as 
        provided in regulations, in no event shall any 
        amendment or supplement to a return of tax be taken 
        into account for purposes of this subsection if the 
        amendment or supplement is filed after the earlier of 
        the date the taxpayer is first contacted by the 
        Secretary regarding the examination of the return or 
        such other date as is specified by the Secretary.

SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERSTATEMENTS 
                    WITH RESPECT TO REPORTABLE TRANSACTIONS.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Special Rules.--
          (1) * * *
          (2) Coordination with other penalties.--
                  (A) * * *
                  (B) Coordination with [gross valuation 
                misstatement penalty] certain increased 
                underpayment penalties.--This section shall not 
                apply to any portion of an understatement on 
                which a penalty is imposed under section 6662 
                if the rate of the penalty is determined under 
                [section 6662(h)] subsections (h) or (i) of 
                section 6662.

           *       *       *       *       *       *       *


SEC. 6664. DEFINITIONS AND SPECIAL RULES.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Reasonable Cause Exception for Underpayments.--
          (1) * * *
          (2) Exception.--Paragraph (1) shall not apply to--
                  (A) to any portion of an underpayment which 
                is attributable to one or more tax shelters (as 
                defined in section 6662(d)(2)(C)) or 
                transactions described in section 6662(b)(6), 
                and
                  (B) to any taxpayer if such taxpayer is a 
                specified person (as defined in section 
                6662(d)(2)(D)(ii)).
          [(2)] (3) Special rule for certain valuation 
        overstatements.--In the case of any underpayment 
        attributable to a substantial or gross valuation 
        overstatement under chapter 1 with respect to 
        charitable deduction property, paragraph (1) shall not 
        apply. The preceding sentence shall not apply to a 
        substantial valuation overstatement under chapter 1 
        if--
                  (A) * * *

           *       *       *       *       *       *       *

          [(3)] (4) Definitions.--For purposes of this 
        subsection--
                  (A) Charitable deduction property.--The term 
                ``charitable deduction property'' means any 
                property contributed by the taxpayer in a 
                contribution for which a deduction was claimed 
                under section 170. For purposes of [paragraph 
                (2)] paragraph (3), such term shall not include 
                any securities for which (as of the date of the 
                contribution) market quotations are readily 
                available on an established securities market.

           *       *       *       *       *       *       *


Subchapter B--Assessable Penalties

           *       *       *       *       *       *       *


PART I--GENERAL PROVISIONS

           *       *       *       *       *       *       *


SEC. 6676. ERRONEOUS CLAIM FOR REFUND OR CREDIT.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Noneconomic Substance Transactions Treated as Lacking 
Reasonable Basis.--For purposes of this section, any excessive 
amount which is attributable to any transaction described in 
section 6662(b)(6) shall not be treated as having a reasonable 
basis.
  [(c)] (d) Coordination With Other Penalties.--This section 
shall not apply to any portion of the excessive amount of a 
claim for refund or credit which is subject to a penalty 
imposed under part II of subchapter A of chapter 68.

           *       *       *       *       *       *       *


     PART II--FAILURE TO COMPLY WITH CERTAIN INFORMATION REPORTING 
REQUIREMENTS

           *       *       *       *       *       *       *


SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Definitions.--For purposes of this part--
          (1) Information return.--The term ``information 
        return'' means--
                  (A) * * *
                  (B) any return required by--
                          (i) * * *

           *       *       *       *       *       *       *

                          (xxii) section 6039(a) (relating to 
                        returns required with respect to 
                        certain options), [or]
                          (xxiii) section 6050W (relating to 
                        returns to payments made in settlement 
                        of payment card transactions), [and] or
                          (xxiv) section 6050X (relating to 
                        returns relating to health insurance 
                        coverage), and

           *       *       *       *       *       *       *

          (2) Payee statement.--The term ``payee statement'' 
        means any statement required to be furnished under--
                  (A) * * *

           *       *       *       *       *       *       *

                  (EE) section 6050U (relating to charges or 
                payments for qualified long-term care insurance 
                contracts under combined arrangements), [or]
                  (FF) section 6050W(c) (relating to returns 
                relating to payments made in settlement of 
                payment card transactions)[.], or
                  (GG) section 6050X (relating to returns 
                relating to health insurance coverage).

           *       *       *       *       *       *       *


CHAPTER 75--CRIMES, OTHER OFFENSES, AND FORFEITURES

           *       *       *       *       *       *       *


Subchapter A--Crimes

           *       *       *       *       *       *       *


PART I--GENERAL PROVISIONS

           *       *       *       *       *       *       *


SEC. 7213. UNAUTHORIZED DISCLOSURE OF INFORMATION.

  (a) Returns and Return Information.--
          (1) * * *
          (2) State and other employees.--It shall be unlawful 
        for any person (not described in paragraph (1)) 
        willfully to disclose to any person, except as 
        authorized in this title, any return or return 
        information (as defined in section 6103(b)) acquired by 
        him or another person under subsection (d), 
        (i)(3)(B)(i) or (7)(A)(ii), (l)(6), (7), (8), (9), 
        (10), (12), (15), (16), (19), [or (20)] (20), or (21) 
        or (m)(2), (4), (5), (6), or (7) of section 6103 or 
        under section 6104(c). Any violation of this paragraph 
        shall be a felony punishable by a fine in any amount 
        not exceeding $5,000, or imprisonment of not more than 
        5 years, or both, together with the costs of 
        prosecution.

           *       *       *       *       *       *       *


CHAPTER 79--DEFINITIONS

           *       *       *       *       *       *       *


SEC. 7701. DEFINITIONS.

  (a) * * *

           *       *       *       *       *       *       *

  (o) Clarification of Economic Substance Doctrine.--
          (1) Application of doctrine.--In the case of any 
        transaction to which the economic substance doctrine is 
        relevant, such transaction shall be treated as having 
        economic substance only if--
                  (A) the transaction changes in a meaningful 
                way (apart from Federal income tax effects) the 
                taxpayer's economic position, and
                  (B) the taxpayer has a substantial purpose 
                (apart from Federal income tax effects) for 
                entering into such transaction.
          (2) Special rule where taxpayer relies on profit 
        potential.--
                  (A) In general.--The potential for profit of 
                a transaction shall be taken into account in 
                determining whether the requirements of 
                subparagraphs (A) and (B) of paragraph (1) are 
                met with respect to the transaction only if the 
                present value of the reasonably expected pre-
                tax profit from the transaction is substantial 
                in relation to the present value of the 
                expected net tax benefits that would be allowed 
                if the transaction were respected.
                  (B) Treatment of fees and foreign taxes.--
                Fees and other transaction expenses and foreign 
                taxes shall be taken into account as expenses 
                in determining pre-tax profit under 
                subparagraph (A).
          (3) State and local tax benefits.--For purposes of 
        paragraph (1), any State or local income tax effect 
        which is related to a Federal income tax effect shall 
        be treated in the same manner as a Federal income tax 
        effect.
          (4) Financial accounting benefits.--For purposes of 
        paragraph (1)(B), achieving a financial accounting 
        benefit shall not be taken into account as a purpose 
        for entering into a transaction if the origin of such 
        financial accounting benefit is a reduction of Federal 
        income tax.
          (5) Definitions and special rules.--For purposes of 
        this subsection--
                  (A) Economic substance doctrine.--The term 
                ``economic substance doctrine'' means the 
                common law doctrine under which tax benefits 
                under subtitle A with respect to a transaction 
                are not allowable if the transaction does not 
                have economic substance or lacks a business 
                purpose.
                  (B) Exception for personal transactions of 
                individuals.--In the case of an individual, 
                paragraph (1) shall apply only to transactions 
                entered into in connection with a trade or 
                business or an activity engaged in for the 
                production of income.
                  (C) Other common law doctrines not 
                affected.--Except as specifically provided in 
                this subsection, the provisions of this 
                subsection shall not be construed as altering 
                or supplanting any other rule of law, and the 
                requirements of this subsection shall be 
                construed as being in addition to any such 
                other rule of law.
                  (D) Determination of application of doctrine 
                not affected.--The determination of whether the 
                economic substance doctrine is relevant to a 
                transaction (or series of transactions) shall 
                be made in the same manner as if this 
                subsection had never been enacted.
          (6) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection.
  [(o)] (p) Cross References.--
  (1) * * *

           *       *       *       *       *       *       *


Subtitle I--Trust Fund Code

           *       *       *       *       *       *       *


CHAPTER 98 TRUST FUND CODE

           *       *       *       *       *       *       *


               Subchapter A--Establishment of Trust Funds

Sec. 9501. Black Lung Disability Trust Fund.
     * * * * * * *
Sec. 9511. Health Care Comparative Effectiveness Research Trust Fund.

           *       *       *       *       *       *       *


SEC. 9511. HEALTH CARE COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND.

  (a) Creation of Trust Fund.--There is established in the 
Treasury of the United States a trust fund to be known as the 
``Health Care Comparative Effectiveness Research Trust Fund'' 
(hereinafter in this section referred to as the ``CERTF''), 
consisting of such amounts as may be appropriated or credited 
to such Trust Fund as provided in this section and section 
9602(b).
  (b) Transfers to Fund.--There are hereby appropriated to the 
Trust Fund the following:
          (1) For fiscal year 2010, $90,000,000.
          (2) For fiscal year 2011, $100,000,000.
          (3) For fiscal year 2012, $110,000,000.
          (4) For each fiscal year beginning with fiscal year 
        2013--
                  (A) an amount equivalent to the net revenues 
                received in the Treasury from the fees imposed 
                under subchapter B of chapter 34 (relating to 
                fees on health insurance and self-insured 
                plans) for such fiscal year; and
                  (B) subject to subsection (c)(2), amounts 
                determined by the Secretary of Health and Human 
                Services to be equivalent to the fair share per 
                capita amount computed under subsection (c)(1) 
                for the fiscal year multiplied by the average 
                number of individuals entitled to benefits 
                under part A, or enrolled under part B, of 
                title XVIII of the Social Security Act during 
                such fiscal year.
The amounts appropriated under paragraphs (1), (2), (3), and 
(4)(B) shall be transferred from the Federal Hospital Insurance 
Trust Fund and from the Federal Supplementary Medical Insurance 
Trust Fund (established under section 1841 of such Act), and 
from the Medicare Prescription Drug Account within such Trust 
Fund, in proportion (as estimated by the Secretary) to the 
total expenditures during such fiscal year that are made under 
title XVIII of such Act from the respective trust fund or 
account.
  (c) Fair Share Per Capita Amount.--
          (1) Computation.--
                  (A) In general.--Subject to subparagraph (B), 
                the fair share per capita amount under this 
                paragraph for a fiscal year (beginning with 
                fiscal year 2013) is an amount computed by the 
                Secretary of Health and Human Services for such 
                fiscal year that, when applied under this 
                section and subchapter B of chapter 34 of the 
                Internal Revenue Code of 1986, will result in 
                revenues to the CERTF of $375,000,000 for the 
                fiscal year.
                  (B) Alternative computation.--
                          (i) In general.--If the Secretary is 
                        unable to compute the fair share per 
                        capita amount under subparagraph (A) 
                        for a fiscal year, the fair share per 
                        capita amount under this paragraph for 
                        the fiscal year shall be the default 
                        amount determined under clause (ii) for 
                        the fiscal year.
                          (ii) Default amount.--The default 
                        amount under this clause for--
                                  (I) fiscal year 2013 is equal 
                                to $2; or
                                  (II) a subsequent year is 
                                equal to the default amount 
                                under this clause for the 
                                preceding fiscal year increased 
                                by the annual percentage 
                                increase in the medical care 
                                component of the consumer price 
                                index (United States city 
                                average) for the 12-month 
                                period ending with April of the 
                                preceding fiscal year.
                        Any amount determined under subclause 
                        (II) shall be rounded to the nearest 
                        penny.
          (2) Limitation on medicare funding.--In no case shall 
        the amount transferred under subsection (b)(4)(B) for 
        any fiscal year exceed $90,000,000.
  (d) Expenditures From Fund.--
          (1) In general.--Subject to paragraph (2), amounts in 
        the CERTF are available, without the need for further 
        appropriations and without fiscal year limitation, to 
        the Secretary of Health and Human Services for carrying 
        out section 1181 of the Social Security Act.
          (2) Allocation for commission.--Not less than the 
        following amounts in the CERTF for a fiscal year shall 
        be available to carry out the activities of the 
        Comparative Effectiveness Research Commission 
        established under section 1181(b) of the Social 
        Security Act for such fiscal year:
                  (A) For fiscal year 2010, $7,000,000.
                  (B) For fiscal year 2011, $9,000,000.
                  (C) For each fiscal year beginning with 2012, 
                $10,000,000.
        Nothing in this paragraph shall be construed as 
        preventing additional amounts in the CERTF from being 
        made available to the Comparative Effectiveness 
        Research Commission for such activities.
  (e) Net Revenues.--For purposes of this section, the term 
``net revenues'' means the amount estimated by the Secretary 
based on the excess of--
          (1) the fees received in the Treasury under 
        subchapter B of chapter 34, over
          (2) the decrease in the tax imposed by chapter 1 
        resulting from the fees imposed by such subchapter.

           *       *       *       *       *       *       *

                              ----------                              


AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

           *       *       *       *       *       *       *


 DIVISION B--TAX, UNEMPLOYMENT, HEALTH, STATE FISCAL RELIEF, AND OTHER 
PROVISIONS

           *       *       *       *       *       *       *


    TITLE IV--MEDICARE AND MEDICAID HEALTH INFORMATION TECHNOLOGY; 
MISCELLANEOUS MEDICARE PROVISIONS

           *       *       *       *       *       *       *


             Subtitle C--Miscellaneous Medicare Provisions

SEC. 4301. MORATORIA ON CERTAIN MEDICARE REGULATIONS.

  (a) Delay in Phase Out of Medicare Hospice Budget Neutrality 
Adjustment Factor During Fiscal Year 2009.--Notwithstanding any 
other provision of law, including the final rule published on 
August 8, 2008, 73 Federal Register 46464 et seq., relating to 
Medicare Program; Hospice Wage Index for Fiscal Year 2009, the 
Secretary of Health and Human Services shall not phase out or 
eliminate the budget neutrality adjustment factor in the 
Medicare hospice wage index before [October 1, 2009] October 1, 
2010, and the Secretary shall recompute and apply the final 
Medicare hospice wage index [for fiscal year 2009] for fiscal 
years 2009 and 2010 as if there had been no reduction in the 
budget neutrality adjustment factor.

           *       *       *       *       *       *       *

                              ----------                              


            SECTION 4505 OF THE BALANCED BUDGET ACT OF 1997

SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES.

  (a) * * *

           *       *       *       *       *       *       *

  [(d) Requirements for Developing New Resource-Based Practice 
Expense Relative Value Units.--
          [(1) Development.--For purposes of section 
        1848(c)(2)(C)(ii) of the Social Security Act, the 
        Secretary of Health and Human Services shall develop 
        new resource-based relative value units. In developing 
        such units the Secretary shall--
                  [(A) utilize, to the maximum extent 
                practicable, generally accepted cost accounting 
                principles which (i) recognize all staff, 
                equipment, supplies, and expenses, not just 
                those which can be tied to specific procedures, 
                and (ii) use actual data on equipment 
                utilization and other key assumptions;
                  [(B) consult with organizations representing 
                physicians regarding methodology and data to be 
                used; and
                  [(C) develop a refinement process to be used 
                during each of the 4 years of the transition 
                period.
          [(2) Report.--The Secretary shall transmit a report 
        by March 1, 1998, on the development of resource-based 
        relative value units under paragraph (1) to the 
        Committee on Ways and Means and the Committee on 
        Commerce of the House of Representatives and the 
        Committee on Finance of the Senate. The report shall 
        include a presentation of data to be used in developing 
        the value units and an explanation of the methodology.
          [(3) Notice of proposed rulemaking.--The Secretary 
        shall publish a notice of proposed rulemaking with the 
        new resource-based relative value units on or before 
        May 1, 1998, and shall allow for a 90-day public 
        comment period.
          [(4) Items included.--The new proposed rule shall 
        consider the following:
                  [(A) Impact projections which compare new 
                proposed payment amounts on data on actual 
                physician practice expenses.
                  [(B) Impact projections for hospital-based 
                and other specialties, geographic payment 
                localities, and urban versus rural localities.]

           *       *       *       *       *       *       *

                              ----------                              


TAX RELIEF AND HEALTH CARE ACT OF 2006

           *       *       *       *       *       *       *


DIVISION B--MEDICARE AND OTHER HEALTH PROVISIONS

           *       *       *       *       *       *       *


TITLE I--MEDICARE IMPROVED QUALITY AND PROVIDER PAYMENTS

           *       *       *       *       *       *       *


SEC. 106. HOSPITAL MEDICARE REPORTS AND CLARIFICATIONS.

  (a) Correction of Mid-Year Reclassification Expiration.--
Notwithstanding any other provision of law, in the case of a 
subsection (d) hospital (as defined for purposes of section 
1886 of the Social Security Act (42 U.S.C. 1395ww)) with 
respect to which a reclassification of its wage index for 
purposes of such section would (but for this subsection) expire 
on March 31, 2007, such reclassification of such hospital shall 
be extended through [September 30, 2009] September 30, 2011. 
The previous sentence shall not be effected in a budget-neutral 
manner.

           *       *       *       *       *       *       *


TITLE II--MEDICARE BENEFICIARY PROTECTIONS

           *       *       *       *       *       *       *


[SEC. 204. MEDICARE MEDICAL HOME DEMONSTRATION PROJECT.

  [(a) In General.--The Secretary of Health and Human Services 
(in this section referred to as the ``Secretary'') shall 
establish under title XVIII of the Social Security Act a 
medical home demonstration project (in this section referred to 
as the ``project'') to redesign the health care delivery system 
to provide targeted, accessible, continuous and coordinated, 
family-centered care to high-need populations and under which--
          [(1) care management fees are paid to persons 
        performing services as personal physicians; and
          [(2) incentive payments are paid to physicians 
        participating in practices that provide services as a 
        medical home under subsection (d).
For purposes of this subsection, the term ``high-need 
population'' means individuals with multiple chronic illnesses 
that require regular medical monitoring, advising, or 
treatment.
  [(b) Details.--
          [(1) Duration; scope.--Subject to paragraph (3), the 
        project shall operate during a period of three years 
        and shall include urban, rural, and underserved areas 
        in a total of no more than 8 States.
          [(2) Encouraging participation of small physician 
        practices.--The project shall be designed to include 
        the participation of physicians in practices with fewer 
        than three full-time equivalent physicians, as well as 
        physicians in larger practices particularly in rural 
        and underserved areas.
          [(3) Expansion.--The Secretary may expand the 
        duration and the scope of the project under paragraph 
        (1), to an extent determined appropriate by the 
        Secretary, if the Secretary determines that such 
        expansion will result in any of the following 
        conditions being met:
                  [(A) The expansion of the project is expected 
                to improve the quality of patient care without 
                increasing spending under the Medicare program 
                (not taking into account amounts available 
                under subsection (g)).
                  [(B) The expansion of the project is expected 
                to reduce spending under the Medicare program 
                (not taking into account amounts available 
                under subsection (g)) without reducing the 
                quality of patient care.
  [(c) Personal Physician Defined.--
          [(1) In general.--For purposes of this section, the 
        term ``personal physician'' means a physician (as 
        defined in section 1861(r)(1) of the Social Security 
        Act (42 U.S.C. 1395x(r)(1)) who--
                  [(A) meets the requirements described in 
                paragraph (2); and
                  [(B) performs the services described in 
                paragraph (3).
        Nothing in this paragraph shall be construed as 
        preventing such a physician from being a specialist or 
        subspecialist for an individual requiring ongoing care 
        for a specific chronic condition or multiple chronic 
        conditions (such as severe asthma, complex diabetes, 
        cardiovascular disease, rheumatologic disorder) or for 
        an individual with a prolonged illness.
          [(2) Requirements.--The requirements described in 
        this paragraph for a personal physician are as follows:
                  [(A) The physician is a board certified 
                physician who provides first contact and 
                continuous care for individuals under the 
                physician's care.
                  [(B) The physician has the staff and 
                resources to manage the comprehensive and 
                coordinated health care of each such 
                individual.
          [(3) Services performed.--A personal physician shall 
        perform or provide for the performance of at least the 
        following services:
                  [(A) Advocates for and provides ongoing 
                support, oversight, and guidance to implement a 
                plan of care that provides an integrated, 
                coherent, cross-discipline plan for ongoing 
                medical care developed in partnership with 
                patients and including all other physicians 
                furnishing care to the patient involved and 
                other appropriate medical personnel or agencies 
                (such as home health agencies).
                  [(B) Uses evidence-based medicine and 
                clinical decision support tools to guide 
                decision-making at the point-of-care based on 
                patient-specific factors.
                  [(C) Uses health information technology, that 
                may include remote monitoring and patient 
                registries, to monitor and track the health 
                status of patients and to provide patients with 
                enhanced and convenient access to health care 
                services.
                  [(D) Encourages patients to engage in the 
                management of their own health through 
                education and support systems.
  [(d) Medical Home Defined.--For purposes of this section, the 
term ``medical home'' means a physician practice that--
          [(1) is in charge of targeting beneficiaries for 
        participation in the project; and
          [(2) is responsible for--
                  [(A) providing safe and secure technology to 
                promote patient access to personal health 
                information;
                  [(B) developing a health assessment tool for 
                the individuals targeted; and
                  [(C) providing training programs for 
                personnel involved in the coordination of care.
  [(e) Payment Mechanisms.--
          [(1) Personal physician care management fee.--Under 
        the project, the Secretary shall provide for payment 
        under section 1848 of the Social Security Act (42 
        U.S.C. 1395w-4) of a care management fee to personal 
        physicians providing care management under the project. 
        Under such section and using the relative value scale 
        update committee (RUC) process under such section, the 
        Secretary shall develop a care management fee code for 
        such payments and a value for such code.
          [(2) Medical home sharing in savings.--The Secretary 
        shall provide for payment under the project of a 
        medical home based on the payment methodology applied 
        to physician group practices under section 1866A of the 
        Social Security Act (42 U.S.C. 1395cc-1). Under such 
        methodology, 80 percent of the reductions in 
        expenditures under title XVIII of the Social Security 
        Act resulting from participation of individuals that 
        are attributable to the medical home (as reduced by the 
        total care managements fees paid to the medical home 
        under the project) shall be paid to the medical home. 
        The amount of such reductions in expenditures shall be 
        determined by using assumptions with respect to 
        reductions in the occurrence of health complications, 
        hospitalization rates, medical errors, and adverse drug 
        reactions.
          [(3) Source.--Payments paid under the project shall 
        be made from the Federal Supplementary Medical 
        Insurance Trust Fund under section 1841 of the Social 
        Security Act (42 U.S.C. 1395t).
  [(f) Evaluations and Reports.--
          [(1) Annual interim evaluations and reports.--For 
        each year of the project, the Secretary shall provide 
        for an evaluation of the project and shall submit to 
        Congress, by a date specified by the Secretary, a 
        report on the project and on the evaluation of the 
        project for each such year.
          [(2) Final evaluation and report.--The Secretary 
        shall provide for an evaluation of the project and 
        shall submit to Congress, not later than one year after 
        completion of the project, a report on the project and 
        on the evaluation of the project.
  [(g) Funding From SMI Trust Fund.--There shall be available, 
from the Federal Supplementary Medical Insurance Trust Fund 
(under section 1841 of the Social Security Act (42 U.S.C. 
1395t)), the amount of $100,000,000 to carry out the project.
  [(h) Application.--Chapter 35 of title 44, United States 
Code, shall not apply to the conduct of the project.]

           *       *       *       *       *       *       *

                              ----------                              


 SECTION 542 OF THE MEDICARE, MEDICAID, AND SCHIP BENEFITS IMPROVEMENT 
                       AND PROTECTION ACT OF 2000

SEC. 542. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES UNDER 
                    MEDICARE.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Effective Date.--This section shall apply to services 
furnished during the 2-year period beginning on January 1, 
2001, and for services furnished during 2005, 2006, 2007, 2008, 
[and 2009] 2009, 2010, and 2011.
                              ----------                              


MEDICARE IMPROVEMENTS FOR PATIENTS AND PROVIDERS ACT OF 2008

           *       *       *       *       *       *       *


TITLE I--MEDICARE

           *       *       *       *       *       *       *


               Subtitle C--Provisions Relating to Part B

PART I--PHYSICIANS' SERVICES

           *       *       *       *       *       *       *


SEC. 138. ADJUSTMENT FOR MEDICARE MENTAL HEALTH SERVICES.

  (a) Payment Adjustment.--
          (1) In general.--For purposes of payment for services 
        furnished under the physician fee schedule under 
        section 1848 of the Social Security Act (42 U.S.C. 
        1395w-4) during the period beginning on July 1, 2008, 
        and ending on [December 31, 2009] December 31, 2011, 
        the Secretary of Health and Human Services shall 
        increase the fee schedule otherwise applicable for 
        specified services by 5 percent.

           *       *       *       *       *       *       *


PART II--OTHER PAYMENT AND COVERAGE IMPROVEMENTS

           *       *       *       *       *       *       *


SEC. 146. IMPROVED ACCESS TO AMBULANCE SERVICES.

  (a) * * *

           *       *       *       *       *       *       *

  (b) Air Ambulance Payment Improvements.--
          (1) Treatment of certain areas for payment for air 
        ambulance services under the ambulance fee schedule.--
        Notwithstanding any other provision of law, for 
        purposes of making payments under section 1834(l) of 
        the Social Security Act (42 U.S.C. 1395m(l)) for air 
        ambulance services furnished during the period 
        beginning on July 1, 2008, and [ending on December 31, 
        2009] ending on December 31, 2011, any area that was 
        designated as a rural area for purposes of making 
        payments under such section for air ambulance services 
        furnished on December 31, 2006, shall be treated as a 
        rural area for purposes of making payments under such 
        section for air ambulance services furnished during 
        such period.

           *       *       *       *       *       *       *

                              ----------                              


MEDICARE PRESCRIPTION DRUG, IMPROVEMENT, AND MODERNIZATION ACT OF 2003

           *       *       *       *       *       *       *


TITLE IV--RURAL PROVISIONS

           *       *       *       *       *       *       *


Subtitle C--Provisions Relating to Parts A and B

           *       *       *       *       *       *       *


SEC. 422. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

  (a) * * *
  (b) Conforming Provisions.--(1) * * *
  (2) Chapter 35 of title 44, United States Code, shall not 
apply with respect to applications under [section 1886(h)(7) of 
the Social Security Act, as added by subsection (a)(3).] 
paragraphs (4)(H)(vi), (7), and (8) of subsection (h) of 
section 1886 of the Social Security Act.

           *       *       *       *       *       *       *


                      TITLE VIII--COST CONTAINMENT

                     [Subtitle A--Cost Containment

[SEC. 801. INCLUSION IN ANNUAL REPORT OF MEDICARE TRUSTEES OF 
                    INFORMATION ON STATUS OF MEDICARE TRUST FUNDS.

  [(a) Determinations of Excess General Revenue Medicare 
Funding.--
          [(1) In general.--The Board of Trustees of each 
        medicare trust fund shall include in the annual reports 
        submitted under subsection (b)(2) of sections 1817 and 
        1841 of the Social Security Act (42 U.S.C. 1395i and 
        1395t)--
                  [(A) the information described in subsection 
                (b); and
                  [(B) a determination as to whether there is 
                projected to be excess general revenue medicare 
                funding (as defined in subsection (c)) for the 
                fiscal year in which the report is submitted or 
                for any of the succeeding 6 fiscal years.
          [(2) Medicare funding warning.--For purposes of 
        section 1105(h) of title 31, United States Code, and 
        this subtitle, an affirmative determination under 
        paragraph (1)(B) in 2 consecutive annual reports shall 
        be treated as a medicare funding warning in the year in 
        which the second such report is made.
          [(3) 7-fiscal-year reporting period.--For purposes of 
        this subtitle, the term ``7-fiscal-year reporting 
        period'' means, with respect to a year in which an 
        annual report described in paragraph (1) is made, the 
        period of 7 consecutive fiscal years beginning with the 
        fiscal year in which the report is submitted.
  [(b) Information.--The information described in this 
subsection for an annual report in a year is as follows:
          [(1) Projections of growth of general revenue 
        spending.--A statement of the general revenue medicare 
        funding as a percentage of the total medicare outlays 
        for each of the following:
                  [(A) Each fiscal year within the 7-fiscal-
                year reporting period.
                  [(B) Previous fiscal years and as of 10, 50, 
                and 75 years after such year.
          [(2) Comparison with other growth trends.--A 
        comparison of the trend of such percentages with the 
        annual growth rate in the following:
                  [(A) The gross domestic product.
                  [(B) Private health costs.
                  [(C) National health expenditures.
                  [(D) Other appropriate measures.
          [(3) Part d spending.--Expenditures, including trends 
        in expenditures, under part D of title XVIII of the 
        Social Security Act, as added by section 101.
          [(4) Combined medicare trust fund analysis.--A 
        financial analysis of the combined medicare trust funds 
        if general revenue medicare funding were limited to the 
        percentage specified in subsection (c)(1)(B) of total 
        medicare outlays.
  [(c) Definitions.--For purposes of this section:
          [(1) Excess general revenue medicare funding.--The 
        term ``excess general revenue medicare funding'' means, 
        with respect to a fiscal year, that--
                  [(A) general revenue medicare funding (as 
                defined in paragraph (2)), expressed as a 
                percentage of total medicare outlays (as 
                defined in paragraph (4)) for the fiscal year; 
                exceeds
                  [(B) 45 percent.
          [(2) General revenue medicare funding.--The term 
        ``general revenue medicare funding'' means for a year--
                  [(A) the total medicare outlays (as defined 
                in paragraph (4)) for the year; minus
                  [(B) the dedicated medicare financing sources 
                (as defined in paragraph (3)) for the year.
          [(3) Dedicated medicare financing sources.--The term 
        ``dedicated medicare financing sources'' means the 
        following:
                  [(A) Hospital insurance tax.--Amounts 
                appropriated to the Hospital Insurance Trust 
                Fund under the third sentence of section 
                1817(a) of the Social Security Act (42 U.S.C. 
                1395i(a)) and amounts transferred to such Trust 
                Fund under section 7(c)(2) of the Railroad 
                Retirement Act of 1974 (45 U.S.C. 231f(c)(2)).
                  [(B) Taxation of certain oasdi benefits.--
                Amounts appropriated to the Hospital Insurance 
                Trust Fund under section 121(e)(1)(B) of the 
                Social Security Amendments of 1983 (Public Law 
                98-21), as inserted by section 13215(c) of the 
                Omnibus Budget Reconciliation Act of 1993 
                (Public Law 103-66).
                  [(C) State transfers.--The State share of 
                amounts paid to the Federal Government by a 
                State under section 1843 of the Social Security 
                Act (42 U.S.C. 1395v) or pursuant to section 
                1935(c) of such Act.
                  [(D) Premiums.--The following premiums:
                          [(i) Part a.--Premiums paid by non-
                        Federal sources under sections 1818 and 
                        section 1818A (42 U.S.C. 1395i-2 and 
                        1395i-2a) of such Act.
                          [(ii) Part b.--Premiums paid by non-
                        Federal sources under section 1839 of 
                        such Act (42 U.S.C. 1395r), including 
                        any adjustments in premiums under such 
                        section.
                          [(iii) Part d.--Monthly beneficiary 
                        premiums paid under part D of title 
                        XVIII of such Act, as added by section 
                        101, and MA monthly prescription drug 
                        beneficiary premiums paid under part C 
                        of such title insofar as they are 
                        attributable to basic prescription drug 
                        coverage.
        Premiums under clauses (ii) and (iii) shall be 
        determined without regard to any reduction in such 
        premiums attributable to a beneficiary rebate under 
        section 1854(b)(1)(C) of such title, as amended by 
        section 222(b)(1), and premiums under clause (iii) are 
        deemed to include any amounts paid under section 1860D-
        13(b) of such title, as added by section 101.
                  [(E) Gifts.--Amounts received by the medicare 
                trust funds under section 201(i) of the Social 
                Security Act (42 U.S.C. 401(i)).
          [(4) Total medicare outlays.--The term ``total 
        medicare outlays'' means total outlays from the 
        medicare trust funds and shall--
                  [(A) include payments made to plans under 
                part C of title XVIII of the Social Security 
                Act that are attributable to any rebates under 
                section 1854(b)(1)(C) of such Act (42 U.S.C. 
                1395w-24(b)(1)(C)), as amended by section 
                222(b)(1);
                  [(B) include administrative expenditures made 
                in carrying out title XVIII of such Act and 
                Federal outlays under section 1935(b) of such 
                Act, as added by section 103(a)(2); and
                  [(C) offset outlays by the amount of fraud 
                and abuse collections insofar as they are 
                applied or deposited into a medicare trust 
                fund.
          [(5) Medicare trust fund.--The term ``medicare trust 
        fund'' means--
                  [(A) the Federal Hospital Insurance Trust 
                Fund established under section 1817 of the 
                Social Security Act (42 U.S.C. 1395i); and
                  [(B) the Federal Supplementary Medical 
                Insurance Trust Fund established under section 
                1841 of such Act (42 U.S.C. 1395t), including 
                the Medicare Prescription Drug Account under 
                such Trust Fund.
  [(d) Conforming Amendments.--
          [(1) Federal hospital insurance trust fund.--Section 
        1817(b)(2) (42 U.S.C. 1395i(b)(2)) is amended by adding 
        at the end the following: ``Each report provided under 
        paragraph (2) beginning with the report in 2005 shall 
        include the information specified in section 801(a) of 
        the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003.''.
          [(2) Federal supplementary medical insurance trust 
        fund.--Section 1841(b)(2) (42 U.S.C. 1395t(b)(2)) is 
        amended by adding at the end the following: ``Each 
        report provided under paragraph (2) beginning with the 
        report in 2005 shall include the information specified 
        in section 801(a) of the Medicare Prescription Drug, 
        Improvement, and Modernization Act of 2003.''.
  [(e) Notice of Medicare Funding Warning.--Whenever any report 
described in subsection (a) contains a determination that for 
any fiscal year within the 7-fiscal-year reporting period there 
will be excess general revenue medicare funding, Congress and 
the President should address the matter under existing rules 
and procedures.

[SEC. 802. PRESIDENTIAL SUBMISSION OF LEGISLATION.

  [(a) In General.--Section 1105 of title 31, United States 
Code, is amended by adding at the end the following new 
subsection:
  [``(h)(1) If there is a medicare funding warning under 
section 801(a)(2) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 made in a year, the 
President shall submit to Congress, within the 15-day period 
beginning on the date of the budget submission to Congress 
under subsection (a) for the succeeding year, proposed 
legislation to respond to such warning.
  [``(2) Paragraph (1) does not apply if, during the year in 
which the warning is made, legislation is enacted which 
eliminates excess general revenue medicare funding (as defined 
in section 801(c) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003) for the 7-fiscal-
year reporting period, as certified by the Board of Trustees of 
each medicare trust fund (as defined in section 801(c)(5) of 
such Act) not later than 30 days after the date of the 
enactment of such legislation.''.
  [(b) Sense of Congress.--It is the sense of Congress that 
legislation submitted pursuant to section 1105(h) of title 31, 
United States Code, in a year should be designed to eliminate 
excess general revenue medicare funding (as defined in section 
801(c)) for the 7-fiscal-year period that begins in such year.

[SEC. 803. PROCEDURES IN THE HOUSE OF REPRESENTATIVES.

  [(a) Introduction and Referral of President's Legislative 
Proposal.--
          [(1) Introduction.--In the case of a legislative 
        proposal submitted by the President pursuant to section 
        1105(h) of title 31, United States Code, within the 15-
        day period specified in paragraph (1) of such section, 
        the Majority Leader of the House of Representatives (or 
        his designee) and the Minority Leader of the House of 
        Representatives (or his designee) shall introduce such 
        proposal (by request), the title of which is as 
        follows: ``A bill to respond to a medicare funding 
        warning.'' Such bill shall be introduced within 3 
        legislative days after Congress receives such proposal.
          [(2) Referral.--Any legislation introduced pursuant 
        to paragraph (1) shall be referred to the appropriate 
        committees of the House of Representatives.
  [(b) Direction to the Appropriate House Committees.--
          [(1) In general.--In the House, in any year during 
        which the President is required to submit proposed 
        legislation to Congress under section 1105(h) of title 
        31, United States Code, the appropriate committees 
        shall report medicare funding legislation by not later 
        than June 30 of such year.
          [(2) Medicare funding legislation.--For purposes of 
        this section, the term ``medicare funding legislation'' 
        means--
                  [(A) legislation introduced pursuant to 
                subsection (a)(1), but only if the legislative 
                proposal upon which the legislation is based 
                was submitted within the 15-day period referred 
                to in such subsection; or
                  [(B) any bill the title of which is as 
                follows: ``A bill to respond to a medicare 
                funding warning.''.
          [(3) Certification.--With respect to any medicare 
        funding legislation or any amendment to such 
        legislation to respond to a medicare funding warning, 
        the chairman of the Committee on the Budget of the 
        House shall certify--
                  [(A) whether or not such legislation 
                eliminates excess general revenue medicare 
                funding (as defined in section 801(c)) for each 
                fiscal year in the 7-fiscal-year reporting 
                period; and
                  [(B) with respect to such an amendment, 
                whether the legislation, as amended, would 
                eliminate excess general revenue medicare 
                funding (as defined in section 801(c)) for each 
                fiscal year in such 7-fiscal-year reporting 
                period.
  [(c) Fallback Procedure for Floor Consideration if the House 
Fails to Vote on Final Passage by July 30.--
          [(1) After July 30 of any year during which the 
        President is required to submit proposed legislation to 
        Congress under section 1105(h) of title 31, United 
        States Code, unless the House of Representatives has 
        voted on final passage of any medicare funding 
        legislation for which there is an affirmative 
        certification under subsection (b)(3)(A), then, after 
        the expiration of not less than 30 calendar days (and 
        concurrently 5 legislative days), it is in order to 
        move to discharge any committee to which medicare 
        funding legislation which has such a certification and 
        which has been referred to such committee for 30 
        calendar days from further consideration of the 
        legislation.
          [(2) A motion to discharge may be made only by an 
        individual favoring the legislation, may be made only 
        if supported by one-fifth of the total membership of 
        the House (a quorum being present), and is highly 
        privileged in the House. Debate thereon shall be 
        limited to not more than one hour, the time to be 
        divided in the House equally between those favoring and 
        those opposing the motion. An amendment to the motion 
        is not in order, and it is not in order to move to 
        reconsider the vote by which the motion is agreed to or 
        disagreed to.
          [(3) Only one motion to discharge a particular 
        committee may be adopted under this subsection in any 
        session of a Congress.
          [(4) Notwithstanding paragraph (1), it shall not be 
        in order to move to discharge a committee from further 
        consideration of medicare funding legislation pursuant 
        to this subsection during a session of a Congress if, 
        during the previous session of the Congress, the House 
        passed medicare funding legislation for which there is 
        an affirmative certification under subsection 
        (b)(3)(A).
  [(d) Floor Consideration in the House of Discharged 
Legislation.--
          [(1) In the House, not later than 3 legislative days 
        after any committee has been discharged from further 
        consideration of legislation under subsection (c), the 
        Speaker shall resolve the House into the Committee of 
        the Whole for consideration of the legislation.
          [(2) The first reading of the legislation shall be 
        dispensed with. All points of order against 
        consideration of the legislation are waived. General 
        debate shall be confined to the legislation and shall 
        not exceed five hours, which shall be divided equally 
        between those favoring and those opposing the 
        legislation. After general debate the legislation shall 
        be considered for amendment under the five-minute rule. 
        During consideration of the legislation, no amendments 
        shall be in order in the House or in the Committee of 
        the Whole except those for which there has been an 
        affirmative certification under subsection (b)(3)(B). 
        All points of order against consideration of any such 
        amendment in the Committee of the Whole are waived. The 
        legislation, together with any amendments which shall 
        be in order, shall be considered as read. During the 
        consideration of the bill for amendment, the Chairman 
        of the Committee of the Whole may accord priority in 
        recognition on the basis of whether the Member offering 
        an amendment has caused it to be printed in the portion 
        of the Congressional Record designated for that purpose 
        in clause 8 of Rule XVIII of the Rules of the House of 
        Representatives. Debate on any amendment shall not 
        exceed one hour, which shall be divided equally between 
        those favoring and those opposing the amendment, and no 
        pro forma amendments shall be offered during the 
        debate. The total time for debate on all amendments 
        shall not exceed 10 hours. At the conclusion of 
        consideration of the legislation for amendment, the 
        Committee shall rise and report the legislation to the 
        House with such amendments as may have been adopted. 
        The previous question shall be considered as ordered on 
        the legislation and amendments thereto to final passage 
        without intervening motion except one motion to 
        recommit with or without instructions. If the Committee 
        of the Whole rises and reports that it has come to no 
        resolution on the bill, then on the next legislative 
        day the House shall, immediately after the third daily 
        order of business under clause 1 of Rule XIV of the 
        Rules of the House of Representatives, resolve into the 
        Committee of the Whole for further consideration of the 
        bill.
          [(3) All appeals from the decisions of the Chair 
        relating to the application of the Rules of the House 
        of Representatives to the procedure relating to any 
        such legislation shall be decided without debate.
          [(4) Except to the extent specifically provided in 
        the preceding provisions of this subsection, 
        consideration of any such legislation and amendments 
        thereto (or any conference report thereon) shall be 
        governed by the Rules of the House of Representatives 
        applicable to other bills and resolutions, amendments, 
        and conference reports in similar circumstances.
  [(e) Legislative Day Defined.--As used in this section, the 
term ``legislative day'' means a day on which the House of 
Representatives is in session.
  [(f) Restriction on Waiver.--In the House, the provisions of 
this section may be waived only by a rule or order proposing 
only to waive such provisions.
  [(g) Rulemaking Power.--The provisions of this section are 
enacted by the Congress--
          [(1) as an exercise of the rulemaking power of the 
        House of Representatives and, as such, shall be 
        considered as part of the rules of that House and shall 
        supersede other rules only to the extent that they are 
        inconsistent therewith; and
          [(2) with full recognition of the constitutional 
        right of that House to change the rules (so far as they 
        relate to the procedures of that House) at any time, in 
        the same manner, and to the same extent as in the case 
        of any other rule of that House.

[SEC. 804. PROCEDURES IN THE SENATE.

  [(a) Introduction and Referral of President's Legislative 
Proposal.--
          [(1) Introduction.--In the case of a legislative 
        proposal submitted by the President pursuant to section 
        1105(h) of title 31, United States Code, within the 15-
        day period specified in paragraph (1) of such section, 
        the Majority Leader and Minority Leader of the Senate 
        (or their designees) shall introduce such proposal (by 
        request), the title of which is as follows: ``A bill to 
        respond to a medicare funding warning.'' Such bill 
        shall be introduced within 3 days of session after 
        Congress receives such proposal.
          [(2) Referral.--Any legislation introduced pursuant 
        to paragraph (1) shall be referred to the Committee on 
        Finance.
  [(b) Medicare Funding Legislation.--For purposes of this 
section, the term ``medicare funding legislation'' means--
          [(1) legislation introduced pursuant to subsection 
        (a)(1), but only if the legislative proposal upon which 
        the legislation is based was submitted within the 15-
        day period referred to in such subsection; or
          [(2) any bill the title of which is as follows: ``A 
        bill to respond to a medicare funding warning.''.
  [(c) Qualification for Special Procedures.--
          [(1) In general.--The special procedures set forth in 
        subsections (d) and (e) shall apply to medicare funding 
        legislation, as described in subsection (b), only if 
        the legislation--
                  [(A) is medicare funding legislation that is 
                passed by the House of Representatives; or
                  [(B) contains matter within the jurisdiction 
                of the Committee on Finance in the Senate.
          [(2) Failure to qualify for special procedures.--If 
        the medicare funding legislation does not satisfy 
        paragraph (1), then the legislation shall be considered 
        under the ordinary procedures of the Standing Rules of 
        the Senate.
  [(d) Discharge.--
          [(1) In general.--If the Committee on Finance has not 
        reported medicare funding legislation described in 
        subsection (c)(1) by June 30 of a year in which the 
        President is required to submit medicare funding 
        legislation to Congress under section 1105(h) of title 
        31, United States Code, then any Senator may move to 
        discharge the Committee of any single medicare funding 
        legislation measure. Only one such motion shall be in 
        order in any session of Congress.
          [(2) Debate limits.--Debate in the Senate on any such 
        motion to discharge, and all appeals in connection 
        therewith, shall be limited to not more than 2 hours. 
        The time shall be equally divided between, and 
        controlled by, the maker of the motion and the Majority 
        Leader, or their designees, except that in the event 
        the Majority Leader is in favor of such motion, the 
        time in opposition thereto shall be controlled by the 
        Minority Leader or the Minority Leader's designee. A 
        point of order under this subsection may be made at any 
        time. It is not in order to move to proceed to another 
        measure or matter while such motion (or the motion to 
        reconsider such motion) is pending.
          [(3) Amendments.--No amendment to the motion to 
        discharge shall be in order.
          [(4) Exception if certified legislation enacted.--
        Notwithstanding paragraph (1), it shall not be in order 
        to discharge the Committee from further consideration 
        of medicare funding legislation pursuant to this 
        subsection during a session of a Congress if the 
        chairman of the Committee on the Budget of the Senate 
        certifies that medicare funding legislation has been 
        enacted that eliminates excess general revenue medicare 
        funding (as defined in section 801(c)) for each fiscal 
        year in the 7-fiscal-year reporting period.
  [(e) Consideration.--After the date on which the Committee on 
Finance has reported medicare funding legislation described in 
subsection (c)(1), or has been discharged (under subsection 
(d)) from further consideration of, such legislation, it is in 
order (even though a previous motion to the same effect has 
been disagreed to) for any Member of the Senate to move to 
proceed to the consideration of such legislation.
  [(f) Rules of the Senate.--This section is enacted by the 
Senate--
          [(1) as an exercise of the rulemaking power of the 
        Senate and as such it is deemed a part of the rules of 
        the Senate, but applicable only with respect to the 
        procedure to be followed in the Senate in the case of a 
        bill described in this paragraph, and it supersedes 
        other rules only to the extent that it is inconsistent 
        with such rules; and
          [(2) with full recognition of the constitutional 
        right of the Senate to change the rules (so far as 
        relating to the procedure of the Senate) at any time, 
        in the same manner, and to the same extent as in the 
        case of any other rule of the Senate.]

           *       *       *       *       *       *       *

                              ----------                              


           SECTION 5007 OF THE DEFICIT REDUCTION ACT OF 2005

SEC. 5007. MEDICARE DEMONSTRATION PROJECTS TO PERMIT GAINSHARING 
                    ARRANGEMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Program Administration.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Duration.--The qualified gainsharing 
        demonstration program under this section shall be 
        conducted for the period beginning on January 1, 2007, 
        and ending on December 31, 2009 (or September 30, 2011, 
        in the case of a demonstration project in operation as 
        of October 1, 2008).
  (e) Reports.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Quality improvement and savings.--By not later 
        than [December 1, 2008] March 31, 2011, the Secretary 
        shall submit to Congress a report on quality 
        improvement and savings achieved as a result of the 
        qualified gainsharing demonstration program established 
        under subsection (a).
          (4) Final report.--By not later than [May 1, 2010] 
        March 31, 2013, the Secretary shall submit to Congress 
        a final report on the information described in 
        paragraph (3).
  (f) Funding.--
          (1) In general.--Out of any funds in the Treasury not 
        otherwise appropriated, there are appropriated to the 
        Secretary for fiscal year 2006 $6,000,000, and for 
        fiscal year 2010, $1,600,000, to carry out this 
        section.
          (2) Availability.--Funds appropriated under paragraph 
        (1) shall remain available for expenditure through 
        fiscal year [2010] 2014 or until expended.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

                                ------                                


                            Dissenting Views

                                OVERVIEW

    H.R. 3200 is fundamentally flawed legislation that 
threatens to simultaneously do irreparable harm to the health 
delivery system and add mountains of additional debt on our 
children and grandchildren. Long before those bills come due, 
though, Americans with health insurance would pay thousands of 
dollars more per year for coverage, and a host of new taxes on 
individuals and businesses would further hamper efforts to 
revive an already struggling economy if this bill becomes law.
    The bill violates oft-repeated promises by the President 
and others that health care reform won't cause people to lose 
coverage they like, that taxes won't increase on families with 
income less than $250,000 and that tax rates won't increase 
above what they were during the 1990s.
    The minority was united in opposition to the bill for five 
main reasons:
    1. It was unnecessarily rushed through the Committee 
without proper understanding or even a reading of the bill by 
Members;
    2. The massive spending and tax increases will damage an 
already reeling economy;
    3. Americans will lose coverage they have and like;
    4. The bill gives the government control over Americans' 
personal health decisions; and
    5. Numerous specific improvements we proposed to the bill 
were all rejected.

     I. BILL SHOULD NOT HAVE BEEN RUSHED INTO AND OUT OF COMMITTEE

    While we share the majority's goal of improving the 
nation's health care system, the issues are too important and 
the decisions too difficult to act in haste and without the 
full range of information necessary to make such critical 
policy choices.
    We held only one hearing on the discussion draft released 
in June, however not one of the witnesses spoke knowledgably 
about all of the provisions in the bill because they were only 
given a couple of days to digest it.
    The measure approved by the Committee was substantially 
changed from the June draft, with the last round of edits 
coming out just after midnight on Thursday, July 16th, a few 
hours before the one-day markup of the legislation that began 
at 9 a.m. that morning.
    This contrasts starkly with the health care reform debate 
in 1994. That year, the full Ways and Means Committee spent 17 
days over six weeks conducting our markup. And that was only 
after holding a dozen hearings (eight at Subcommittee, four at 
full Committee) on the bill after its introduction.
    It is also worth pointing out that the Committee refused to 
act on the Clinton bill in 1994 until nearly three months after 
the Congressional Budget Office (CBO) released a comprehensive, 
104-page analysis and score. We had no such analysis of H.R. 
3200 or the Chairman's mark. What we had instead was a very 
rough estimate on only a portion of the bill based on 
specifications as outlined by the Majority to CBO, not on 
actual legislative text. As Director Elmendorf wrote to 
Chairman Rangel:
    ``It is important to note, however, that [those] estimates 
are based on specifications provided by the tri-committee group 
rather than an analysis of the language released [this week]. 
For that reason and others outlined below, those figures do not 
represent a formal or complete cost estimate for the coverage 
provisions of the draft legislation.''
    Quite simply, that is not adequate for a bill as important 
as this, one that will have such far-reaching impacts on every 
family and business in America. We cannot afford to guess and 
hope we got it right. This Committee had no business marking up 
a bill of which CBO cannot tell us its cost or impacts. That 
view was further confirmed by testimony during the day by 
Director Elmendorf about the long-term budget impact of this 
legislation.

        II. MASSIVE SPENDING AND TAX INCREASES WILL HURT ECONOMY

    What we do know about the bill is that it matches more than 
a trillion dollars in new spending that grows even faster than 
the revenues being generated to pay for it, creating a massive, 
long-term unfunded federal mandate that imperils the fiscal 
future of this nation. Ironically, despite claims that the 
United States is already ``spending too much on health care,'' 
the bill finances even higher spending with more than $820 
billion in new taxes that will be paid for by families making 
as little as $20,000, small businesses, and manufacturers--all 
while we are in the midst of a recession and with unemployment 
moving quickly toward 10 percent.
    Section 412 of the bill includes a mandate that employers 
provide health coverage deemed acceptable by the Federal 
Government or else pay a new payroll tax of eight percent of 
total payroll (a so-called ``pay-or-play'' scheme) that will 
bring the total U.S. federal payroll tax to more than 23 
percent. Only the smallest of businesses would get any relief 
from this job-killing tax. Economists across the political 
spectrum agree that workers suffer the economic burden of 
payroll taxes. In a July 13, 2009 report entitled, ``Effects of 
Changes to the Health Insurance System on Labor Markets,'' the 
Congressional Budget Office concluded that an employer mandate 
``is likely to reduce employment,'' with the effect being most 
severe for low-wage workers. It is therefore disappointing that 
the Majority chose to ignore the warnings of leading groups 
representing businesses in America about the damage this will 
do to employment and wages in America.
    Section 441 of the bill attempts to plug part of the fiscal 
hole it creates with a new surtax on individuals and small 
businesses. The 5.4-percent surtax rate, combined with the 
already scheduled increase in the top marginal rate to 39.6 
percent, would result in an increase in the top Federal income 
tax rate from 35 percent in 2010 to 45 percent in 2011. Adding 
in the 2.9-percent Medicare payroll tax and hidden marginal 
rate increases that operate by phasing out certain deductions, 
the proposed top Federal rate would jump to about 48 percent, 
and the average top Federal-State marginal tax rate would be 
over 52 percent.
    While nominally aimed at individuals, the surtax will fall 
heavily on small businesses, the engine of job creation. 
According to a Joint Committee on Taxation data projection for 
2011, 42 percent of small business income (including the income 
of sole proprietorships, partnerships, and S Corporations) 
would be subject to the surtax.
    Not content to just tax ``the wealthy,'' the bill also 
imposes large taxes on some of America's poorest families. 
Effective in 2013, section 401 would impose a tax on 
individuals without ``acceptable coverage'', which would hit 
single filers with incomes as low as $9,350 and married couples 
with incomes as low as $18,700 (in 2009 dollars). This 
undermines President Obama's ongoing promise not to raise taxes 
on families with incomes under $250,000.
    Section 442 would prohibit the use of tax-free 
distributions from Health Savings Accounts (HSAs), Flexible 
Spending Arrangements (FSAs), and Health Reimbursement 
Arrangements (HRAs) to purchase medicine or drugs other than 
prescription drugs or insulin. By imposing this restriction on 
the estimated 47 to 50 million individuals who currently carry 
coverage that includes either an HSA, FSA, or HRA, the bill 
violates another of President Obama's pledges: to allow 
families to keep the coverage they have and like.
    In addition, the Majority would impose several unwise tax 
increases that bear no relationship to the purpose of the 
legislation other than to fund the move toward nationalization 
of health care in this country. These tax increases include a 
provision that appears to violate our tax treaties with our 
trading partners; a multi-year delay in rules that would allow 
worldwide American businesses to calculate their interest 
expense more accurately; and codification of the economic 
substance doctrine. The delay of the interest expense 
allocation rules is especially troubling. By terminating this 
tax increase at the end of the budget window, the Majority 
seems to be subtly acknowledging that the revenues generated by 
the bill will further fail to keep pace with its spending in 
the long-run.

        III. AMERICANS WILL LOSE THE COVERAGE THEY HAVE AND LIKE

    Independent analysis demonstrates that under H.R. 3200, two 
out of three Americans will lose the coverage they currently 
enjoy because it establishes a government-run health plan. It 
will, over time, force other coverage out of the market, 
eventually turning the government option into a federal 
monopoly.
    This starts with the creation of a federally subsidized 
government-run insurance plan that would pay hospitals and 
doctors at set Medicare rates for services. As Medicare 
significantly underpays providers, the government-run plan will 
force private plans to pick up the slack. As a result, the 
average cost of private coverage for a family of four would be 
$3,628 more expensive because of the new and existing cost-
shift, according to analysis by Milliman and the Lewin Group. 
Because it is unlikely that providers will willingly accept the 
government-run plan's low reimbursements, the Secretary of HHS 
would have the authority to force providers to participate in 
this plan.
    The government-run plan will not have to pay state or 
federal taxes. It would be exempt from complying with state 
benefit and provider mandates, which have been shown to 
increase the cost of health insurance. The plan provides a $2 
billion interest free loan from taxpayers. Unlike private 
insurance plans, who can be sued in state courts, the 
government-run plan could only be sued in federal court. And 
finally it will have the full backing of the United States 
government. Regardless of any assurances to the contrary, the 
government-run insurance plan will be ``too big to fail,'' 
almost ensuring that taxpayers will be responsible for any 
funding shortfalls. This affords the government plan further 
significant advantage over the plans it is supposed to 
``compete'' against.
    To further guarantee that result, all private health plans 
would be required to conform to benefit mandates, as determined 
by the federal government. Any employer offering coverage that 
wasn't approved by the government would be forced to pay a 
steep tax penalty. Further, individual market plans would be 
prohibited from enrolling new members and would be prohibited 
from updating their benefits or cost-sharing arrangements for 
those currently enrolled. This prohibition on new enrollment 
will result in a death spiral where insurance costs for a plan 
climb at an unsustainable rate for all existing health 
insurance plans. By guaranteeing adverse selection will occur, 
the bill will ultimately force these plans to close down 
completely.
    The bill further prohibits any new insurance plan from 
creating health coverage that does not conform to the federal 
government's requirements, and that insurance plan will not be 
allowed to exist outside of the government established super-
structure, referred to in H.R. 3200 as the Exchange. By 
prohibiting new insurance plans that don't comply with various 
new federal requirements, the bill effectively limits choice in 
the insurance market.

  IV. GIVES THE GOVERNMENT CONTROL OVER PERSONAL HEALTH CARE DECISIONS

    H.R. 3200 will create a system by which health care 
decisions will be made in Washington that should be made in 
doctor's offices by patients and their physicians and at 
kitchen tables by families. House Democrats would establish a 
new government-run ``Exchange'' run by a new ``Health Choices 
Commissioner'' nominated by the President and confirmed by the 
Senate. As the Commissioner is serving at the pleasure of the 
President, some may be concerned about the lack of independence 
of this individual. The Commissioner would also be required to 
work with the Secretary of Health and Human Services, who 
oversees the government-run insurance plan described above, 
creating the potential for a serious conflict of interest that 
could significantly disadvantage the private coverage that 
insures more than 170 million Americans today.
    Aside from the will of the President, the Commissioner's 
power would be unchecked. This is extremely troubling given the 
large scope of responsibility given to the Commissioner. In 
fact, the Commissioner is so powerful that the title is 
referenced almost 200 times in H.R. 3200. This government 
official would have:
           The power to decide which treatments 
        patients could receive and at what cost;
           The power to decide which private plans 
        would be allowed to participate in the Exchange;
           The power to regulate all insurance plans, 
        both in and out of the Exchange;
           The power to determine which employers would 
        be allowed to participate in the Exchange;
           The power to determine how many Americans 
        will be allowed to choose health coverage through the 
        Exchange;
           The power to form and control which 
        physicians and hospitals participate in the government-
        run plan and in private plan provider networks;
           The power to determine which states are 
        allowed to operate their own Exchange and terminate a 
        previously-approved State Exchange at any time;
           The power to override state laws regarding 
        covered health benefits;
           The power to determine how trillions of 
        taxpayer and employer dollars would be spent within the 
        Exchange;
           The power to determine who qualifies for 
        premium assistance; and
           The power to automatically enroll Americans 
        into the Exchange if they don't have coverage, 
        including potentially forcing these individuals into 
        the government-run plan.
    Also troubling is the fact the Secretary of Health and 
Human Services would decide which prescription drugs are made 
available in the government plan. Evidence has shown that 
government officials in other countries have used this power to 
deny access to needed treatments on the basis of cost.
    The bill also contains a new initiative on Comparative 
Effectiveness Research (CER). This board and its research will 
significantly harm the patient-doctor relationship if 
government-run health care uses the research to restrict 
treatments deemed too expensive. The bill reported by the 
Committee contains a provision expressly prohibiting the CER 
board from using its research to make coverage determinations. 
That may be the biggest of many fig leaves in the bill; in this 
case, the joke is on us, since the CER board would never make a 
coverage determination--it doesn't issue health insurance or 
pay claims, or have to decide what is covered and what is not.
    But those who would make such coverage decisions, like the 
Centers for Medicare and Medicaid Services (CMS), face no such 
restrictions on their use of CER data. Peter Orszag, Director 
of the Office of Management and Budget, has publicly affirmed 
the Administration's desire to use CER to ``bend the cost 
curve.'' As it relates to CER, this means that CMS and the 
Health Choices Commissioner will be able to deny coverage based 
on the cost of treatment, or ration access to health care 
services, for people in Medicare and every American enrolled in 
insurance plans offered through the Exchange.

          V. ATTEMPTS TO IMPROVE THE LEGISLATION WERE REJECTED

    Sadly, the foregoing does not constitute a complete review 
of the flaws of this legislation. During the Committee mark-up, 
these and other concerns were identified. Republicans attempted 
to address them through more than three dozen amendments. Those 
included amendments to: eliminate the government-run health 
insurance plan that could result in two out of three Americans 
losing their current coverage; ensure that comparative 
effectiveness research isn't used to ration care based on cost; 
terminate the government-run plan if wait times for care become 
too long; prevent the government from requiring health care 
providers to serve patients enrolled in the government-run 
health plan; ensure the Health Choices Commissioner could not 
deem abortion to be a required benefit; reverse cuts to 
Medicare Advantage plans, which give seniors access to benefits 
not found in the government-run Medicare program; and promote 
medical liability reform, which would help address the impact 
that the practice of defensive medicine has on health care 
spending.
    Sadly, not a single one of these or the other amendments 
offered was accepted, reinforcing the widely held belief that 
this effort is a purely partisan exercise in which additional 
views and suggestions simply are not welcome.

                               CONCLUSION

    At the outset of the mark-up, the Majority rejected a 
motion by the Ranking Member to delay consideration of the bill 
by one week, notwithstanding the fact the bill had been 
available for only a few hours and that the Committee did not 
even have a Congressional Budget Office estimate about the 
short and long-term impact of the package.
    We suppose that should have been an indication about what 
was to come and the futility of trying to improve this deeply 
flawed product.
    Hours after the mark-up ended, the Congressional Budget 
Office did release a further partial score of the bill (still 
based on descriptions of what is in the bill rather than on the 
legislative text itself). The overall conclusion is that the 
bill adds nearly $240 billion to the deficit this decade, with 
the bulk of those costs occurring at the end of the budget 
window. In 2015 alone, the bill will add $40 billion to the 
federal deficit. By 2019, that figure will rise to $65 billion 
and the deepening debt impact shows no signs of slowing down in 
future years. In short, the $240 billion that this adds to the 
deficit this decade is just the tip of the fiscal iceberg.
    We would like to hope that the Majority's mad dash for an 
arbitrary finish line, regardless of the consequences, will be 
called off before real and lasting damage is done to our health 
care system and our economy. But as we write this, the 
prognosis is not good.

                                   Dave Camp, Michigan,
                                   Wally Herger, California,
                                   Sam Johnson, Texas,
                                   Kevin Brady, Texas,
                                   Paul Ryan, Wisconsin,
                                   Eric Cantor, Virginia,
                                   John Linder, Georgia,
                                   Devin Nunes, California,
                                   Patrick J. Tiberi, Ohio,
                                   Ginny Brown-Waite, Florida,
                                   Geoff Davis, Kentucky,
                                   David G. Reichert, Washington,
                                   Charles W. Boustany, Jr., Louisiana,
                                   Dean Heller, Nevada,
                                   Peter J. Roskam, Illinois.

                         VIII. ADDITIONAL VIEWS

   Restricts Current Physician Owned Hospitals, Prohibits Ones Under 
                              Construction

    Section 1156 of H.R. 3200 contains provisions that would 
devastate physician-owned hospitals across this country in two 
ways. First, it contains a retroactive effective date. Section 
1156 states that in order for a physician-owned facility to 
have the ability to bill Medicare for services, it needs to 
have received a Medicare provider number by January 1, 2009, a 
date that came and went over 6 months ago.
    This language would prevent 104 hospitals that are under 
development in over 20 states from ever receiving their 
Medicare provider number. This includes hospitals that have 
opened their doors and are already seeing patients, but have 
not received a provider number through no fault of their own. 
This means that hospitals, which were relying on current law, 
would be prohibited from ever becoming a Medicare provider, 
because of some arbitrary and retroactive deadline set forth in 
this legislation. Over $5 billion of investments have been made 
towards these 104 projects; this provision threatens not only 
those investments but also the 21,000 jobs that stand to be 
created by these hospitals. This legislation should not 
threaten this boost in economic growth for our communities and 
our states at a time our country desperately needs them the 
most.
    Second, this provision restricts the 222 physician-owned 
hospitals currently operating in 32 states from growing and 
responding to the needs of the patients and communities they 
serve. Section 1156 sets forth qualifications that a physician-
owned hospital must meet to just be able to apply for 
permission to grow from the Secretary of Health and Human 
Services. Besides the policy implications of a hospital needing 
to petition the federal government for permission to add a 
hospital bed if their community needs it, the qualifications 
listed are so restrictive that only 3 of the current 222 
facilities meet them.
    We are disheartened that these provisions seek to legislate 
away hospitals in our districts that provide much needed 
quality and efficient healthcare for our constituents. As this 
bill continues through the legislative process at such a rapid 
speed, it is our hope these restrictions are changed so that 
our constituents can continue to have access to the great care 
they are currently receiving.
                                                        Sam Johnson
                                                       Wally Herger
                                                          Paul Ryan
                                                          Dave Camp
                                                        Kevin Brady
                                                        John Linder
                                                        Dean Heller

                                  
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