[111th Congress Public Law 152]
[From the U.S. Government Printing Office]



[[Page 124 STAT.1029]]

Public Law 111-152
111th Congress

                                 An Act


 
  To provide for reconciliation pursuant to Title II of the concurrent 
      resolution on the budget for fiscal year 2010 (S. Con. Res. 
              13). <<NOTE: Mar. 30, 2010 -  [H.R. 4872]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Health Care and 
Education Reconciliation Act of 2010.>> 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short <<NOTE: 42 USC 1305 note.>> Title.--This Act may be cited 
as the ``Health Care and Education Reconciliation Act of 2010''.

    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

           TITLE I--COVERAGE, MEDICARE, MEDICAID, AND REVENUES

                          Subtitle A--Coverage

Sec. 1001. Tax credits.
Sec. 1002. Individual responsibility.
Sec. 1003. Employer responsibility.
Sec. 1004. Income definitions.
Sec. 1005. Implementation funding.

                          Subtitle B--Medicare

Sec. 1101. Closing the medicare prescription drug ``donut hole''.
Sec. 1102. Medicare Advantage payments.
Sec. 1103. Savings from limits on MA plan administrative costs.
Sec. 1104. Disproportionate share hospital (DSH) payments.
Sec. 1105. Market basket updates.
Sec. 1106. Physician ownership-referral.
Sec. 1107. Payment for imaging services.
Sec. 1108. PE GPCI adjustment for 2010.
Sec. 1109. Payment for qualifying hospitals.

                          Subtitle C--Medicaid

Sec. 1201. Federal funding for States.
Sec. 1202. Payments to primary care physicians.
Sec. 1203. Disproportionate share hospital payments.
Sec. 1204. Funding for the territories.
Sec. 1205. Delay in Community First Choice option.
Sec. 1206. Drug rebates for new formulations of existing drugs.

              Subtitle D--Reducing Fraud, Waste, and Abuse

Sec. 1301. Community mental health centers.
Sec. 1302. Medicare prepayment medical review limitations.
Sec. 1303. Funding to fight fraud, waste, and abuse.
Sec. 1304. 90-day period of enhanced oversight for initial claims of DME 
           suppliers.

               Subtitle E--Provisions Relating to Revenue

Sec. 1401. High-cost plan excise tax.
Sec. 1402. Unearned income Medicare contribution.
Sec. 1403. Delay of limitation on health flexible spending arrangements 
           under cafeteria plans.

[[Page 124 STAT.1030]]

Sec. 1404. Brand name pharmaceuticals.
Sec. 1405. Excise tax on medical device manufacturers.
Sec. 1406. Health insurance providers.
Sec. 1407. Delay of elimination of deduction for expenses allocable to 
           medicare part D subsidy.
Sec. 1408. Elimination of unintended application of cellulosic biofuel 
           producer credit.
Sec. 1409. Codification of economic substance doctrine and penalties.
Sec. 1410. Time for payment of corporate estimated taxes.

                      Subtitle F--Other Provisions

Sec. 1501. Community college and career training grant program.

                     TITLE II--EDUCATION AND HEALTH

                          Subtitle A--Education

Sec. 2001. Short title; references.

               Part I--Investing in Students and Families

Sec. 2101. Federal Pell Grants.
Sec. 2102. College access challenge grant program.
Sec. 2103. Investment in historically black colleges and universities 
           and minority-serving institutions.

                      Part II--Student Loan Reform

Sec. 2201. Termination of Federal Family Education Loan appropriations.
Sec. 2202. Termination of Federal loan insurance program.
Sec. 2203. Termination of applicable interest rates.
Sec. 2204. Termination of Federal payments to reduce student interest 
           costs.
Sec. 2205. Termination of FFEL PLUS Loans.
Sec. 2206. Federal Consolidation Loans.
Sec. 2207. Termination of Unsubsidized Stafford Loans for middle-income 
           borrowers.
Sec. 2208. Termination of special allowances.
Sec. 2209. Origination of Direct Loans at institutions outside the 
           United States.
Sec. 2210. Conforming amendments.
Sec. 2211. Terms and conditions of loans.
Sec. 2212. Contracts; mandatory funds.
Sec. 2213. Income-based repayment.

                           Subtitle B--Health

Sec. 2301. Insurance reforms.
Sec. 2302. Drugs purchased by covered entities.
Sec. 2303. Community health centers.

           TITLE I--COVERAGE, MEDICARE, MEDICAID, AND REVENUES

                          Subtitle A--Coverage

SEC. 1001. TAX CREDITS.

    (a) Premium Tax Credits.--Section 36B of the Internal Revenue Code 
of 1986, as added by section 1401 of the Patient Protection and 
Affordable Care Act and amended by section 10105 of such <<NOTE: Ante, 
p. 213, 906.>> Act, is amended--
            (1) in subsection (b)(3)(A)--
                    (A) in clause (i), by striking ``with respect to any 
                taxpayer'' and all that follows up to the end period and 
                inserting: ``for any taxable year shall be the 
                percentage such that the applicable percentage for any 
                taxpayer whose household income is within an income tier 
                specified in the following table shall increase, on a 
                sliding scale in a linear manner, from the initial 
                premium percentage to

[[Page 124 STAT.1031]]

                the final premium percentage specified in such table for 
                such income tier:

 
 ``In the case of household
   income (expressed as a
  percent of poverty line)     The initial premium    The final premium
 within the following income     percentage is--       percentage is--
            tier:
 
Up to 133%                    2.0%                  2.0%
133% up to 150%               3.0%                  4.0%
150% up to 200%               4.0%                  6.3%
200% up to 250%               6.3%                  8.05%
250% up to 300%               8.05%                 9.5%
300% up to 400%               9.5%                  9.5%''; and
 


                    (B) by striking clauses (ii) and (iii), and 
                inserting the following:
                          ``(ii) Indexing.--
                                    ``(I) In general.--Subject to 
                                subclause (II), in the case of taxable 
                                years beginning in any calendar year 
                                after 2014, the initial and final 
                                applicable percentages under clause (i) 
                                (as in effect for the preceding calendar 
                                year after application of this clause) 
                                shall be adjusted to reflect the excess 
                                of the rate of premium growth for the 
                                preceding calendar year over the rate of 
                                income growth for the preceding calendar 
                                year.
                                    ``(II) Additional adjustment.--
                                Except as provided in subclause (III), 
                                in the case of any calendar year after 
                                2018, the percentages described in 
                                subclause (I) shall, in addition to the 
                                adjustment under subclause (I), be 
                                adjusted to reflect the excess (if any) 
                                of the rate of premium growth estimated 
                                under subclause (I) for the preceding 
                                calendar year over the rate of growth in 
                                the consumer price index for the 
                                preceding calendar year.
                                    ``(III) Failsafe.--
                                Subclause <<NOTE: Applicability.>> (II) 
                                shall apply for any calendar year only 
                                if the aggregate amount of premium tax 
                                credits under this section and cost-
                                sharing reductions under section 1402 of 
                                the Patient Protection and Affordable 
                                Care Act for the preceding calendar year 
                                exceeds an amount equal to 0.504 percent 
                                of the gross domestic product for the 
                                preceding calendar year.''; and
            (2) in subsection (c)(2)(C)--
                    (A) by striking ``9.8 percent'' in clauses (i)(II) 
                and (iv) and inserting ``9.5 percent''; and
                    (B) by striking ``(b)(3)(A)(iii)'' in clause (iv) 
                and inserting ``(b)(3)(A)(ii)''.

    (b) Cost Sharing.--Section 1402(c) of the Patient Protection and 
Affordable Care <<NOTE: Ante, p. 221.>> Act is amended--
            (1) in paragraph (1)(B)(i)--
                    (A) in subclause (I), by striking ``90'' and 
                inserting ``94'';
                    (B) in subclause (II)--
                          (i) by striking ``80'' and inserting ``87''; 
                      and
                          (ii) by striking ``and''; and

[[Page 124 STAT.1032]]

                    (C) by striking subclause (III) and inserting the 
                following:
                                    ``(III) 73 percent in the case of an 
                                eligible insured whose household income 
                                is more than 200 percent but not more 
                                than 250 percent of the poverty line for 
                                a family of the size involved; and
                                    ``(IV) 70 percent in the case of an 
                                eligible insured whose household income 
                                is more than 250 percent but not more 
                                than 400 percent of the poverty line for 
                                a family of the size involved.''; and
            (2) in paragraph (2)--
                    (A) in subparagraph (A)--
                          (i) by striking ``90'' and inserting ``94''; 
                      and
                          (ii) by striking ``and'';
                    (B) in subparagraph (B)--
                          (i) by striking ``80'' and inserting ``87''; 
                      and
                          (ii) by striking the period and inserting ``; 
                      and''; and
                    (C) by inserting after subparagraph (B) the 
                following new subparagraph:
                    ``(C) in the case of an eligible insured whose 
                household income is more than 200 percent but not more 
                than 250 percent of the poverty line for a family of the 
                size involved, increase the plan's share of the total 
                allowed costs of benefits provided under the plan to 73 
                percent of such costs.''.
SEC. 1002. INDIVIDUAL RESPONSIBILITY.

    (a) Amounts.--Section 5000A(c) of the Internal Revenue Code of 1986, 
as added by section 1501(b) of the Patient Protection and Affordable 
Care Act and amended by section 10106 of <<NOTE: Ante, p. 244, 
907.>> such Act, is amended--
            (1) in paragraph (2)(B)--
                    (A) in the matter preceding clause (i), by--
                          (i) inserting ``the excess of'' before ``the 
                      taxpayer's household income''; and
                          (ii) inserting ``for the taxable year over the 
                      amount of gross income specified in section 
                      6012(a)(1) with respect to the taxpayer'' before 
                      ``for the taxable year'';
                    (B) in clause (i), by striking ``0.5'' and inserting 
                ``1.0'';
                    (C) in clause (ii), by striking ``1.0'' and 
                inserting ``2.0''; and
                    (D) in clause (iii), by striking ``2.0'' and 
                inserting ``2.5''; and
            (2) in paragraph (3)--
                    (A) in subparagraph (A), by striking ``$750'' and 
                inserting ``$695'';
                    (B) in subparagraph (B), by striking ``$495'' and 
                inserting ``$325''; and
                    (C) in subparagraph (D)--
                          (i) in the matter preceding clause (i), by 
                      striking ``$750'' and inserting ``$695''; and
                          (ii) in clause (i), by striking ``$750'' and 
                      inserting ``$695''.

    (b) Threshold.--Section 5000A of such Code, as so added and amended, 
is amended--
            (1) by striking subsection (c)(4)(D); and
            (2) in subsection (e)(2)--

[[Page 124 STAT.1033]]

                    (A) by striking ``under 100 percent of poverty 
                line'' and inserting ``below filing threshold''; and
                    (B) by striking all that follows ``less than'' and 
                inserting ``the amount of gross income specified in 
                section 6012(a)(1) with respect to the taxpayer.''.
SEC. 1003. EMPLOYER RESPONSIBILITY.

    (a) Payment Calculation.--Subparagraph (D) of subsection (d)(2) of 
section 4980H of the Internal Revenue Code of 1986, as added by section 
1513 of the Patient Protection and Affordable Care Act and amended by 
section 10106 of such Act, <<NOTE: Ante, p. 253, 907.>> is amended to 
read as follows:
                    ``(D) Application of employer size to assessable 
                penalties.--
                          ``(i) In general.--The number of individuals 
                      employed by an applicable large employer as full-
                      time employees during any month shall be reduced 
                      by 30 solely for purposes of calculating--
                                    ``(I) the assessable payment under 
                                subsection (a), or
                                    ``(II) the overall limitation under 
                                subsection (b)(2).
                          ``(ii) Aggregation.--In the case of persons 
                      treated as 1 employer under subparagraph (C)(i), 
                      only 1 reduction under subclause (I) or (II) shall 
                      be allowed with respect to such persons and such 
                      reduction shall be allocated among such persons 
                      ratably on the basis of the number of full-time 
                      employees employed by each such person.''.

    (b) Applicable Payment Amount.--Section 4980H of such Code, as so 
added and amended, is amended--
            (1) in the flush text following subsection (c)(1)(B), by 
        striking ``400 percent of the applicable payment amount'' and 
        inserting ``an amount equal to \1/12\ of $3,000'';
            (2) in subsection (d)(1), by striking ``$750'' and inserting 
        ``$2,000''; and
            (3) in subsection (d)(5)(A), in the matter preceding clause 
        (i), by striking ``subsection (b)(2) and (d)(1)'' and inserting 
        ``subsection (b) and paragraph (1)''.

    (c) Counting Part-time Workers in Setting the Threshold for Employer 
Responsibility.--Section 4980H(d)(2) of such Code, as so added and 
amended and as amended by subsection (a), is amended by adding at the 
end the following new subparagraph:
                    ``(E) Full-time equivalents treated as full-time 
                employees.--Solely for purposes of determining whether 
                an employer is an applicable large employer under this 
                paragraph, an employer shall, in addition to the number 
                of full-time employees for any month otherwise 
                determined, include for such month a number of full-time 
                employees determined by dividing the aggregate number of 
                hours of service of employees who are not full-time 
                employees for the month by 120.''.

    (d) Eliminating Waiting Period Assessment.--Section 4980H of such 
Code, as so added and amended and as amended by the preceding 
subsections, is amended by striking subsection (b) and redesignating 
subsections (c), (d), and (e) as subsections (b), (c), and (d), 
respectively.

[[Page 124 STAT.1034]]

SEC. 1004. INCOME DEFINITIONS.

    (a) Modified Adjusted Gross Income.--
            (1) In general.--The following provisions of the Internal 
        Revenue Code of 1986 are each amended by striking ``modified 
        gross'' each place it appears and inserting ``modified adjusted 
        gross'':
                    (A) Clauses (i) and (ii) of section 36B(d)(2)(A), as 
                added by section 1401 of the Patient Protection and 
                Affordable Care Act. <<NOTE: Ante, p. 213.>> 
                    (B) Section 6103(l)(21)(A)(iv), as added by section 
                1414 of such Act. <<NOTE: Ante, p. 236.>> 
                    (C) Clauses (i) and (ii) of section 5000A(c)(4), as 
                added by section 1501(b) <<NOTE: Ante, p. 244.>> of such 
                Act.
            (2) Definition.--
                    (A) Section 36B(d)(2)(B) of such Code, as so added, 
                is amended to read as follows:
                    ``(B) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income increased by--
                          ``(i) any amount excluded from gross income 
                      under section 911, and
                          ``(ii) any amount of interest received or 
                      accrued by the taxpayer during the taxable year 
                      which is exempt from tax.''.
                    (B) Section 5000A(c)(4)(C) of such Code, as so 
                added, is amended to read as follows:
                    ``(C) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income increased by--
                          ``(i) any amount excluded from gross income 
                      under section 911, and
                          ``(ii) any amount of interest received or 
                      accrued by the taxpayer during the taxable year 
                      which is exempt from tax.''.

    (b) Modified Adjusted Gross Income Definition.--
            (1) Medicaid.--Section 1902 of the Social Security Act (42 
        U.S.C. 1396a) is amended by striking ``modified gross income'' 
        each place it appears in the text and headings of the following 
        provisions and inserting ``modified adjusted gross income'':
                    (A) Paragraph (14) of subsection (e), as added by 
                section 2002(a) of the Patient Protection and Affordable 
                Care Act.
                    (B) Subsection (gg)(4)(A), as added by section 
                2001(b) of such Act.
            (2) Chip.--
                    (A) State plan requirements.--Section 
                2102(b)(1)(B)(v) of the Social Security Act (42 U.S.C. 
                1397bb(b)(1)(B)(v)), as added by section 2101(d)(1) of 
                the Patient Protection and Affordable Care Act, is 
                amended by striking ``modified gross income'' and 
                inserting ``modified adjusted gross income''.
                    (B) Plan administration.--Section 2107(e)(1)(E) of 
                the Social Security Act (42 U.S.C. 1397gg(e)(1)(E)), as 
                added by section 2101(d)(2) of the Patient Protection 
                and Affordable Care Act, is amended by striking 
                ``modified gross income'' and inserting ``modified 
                adjusted gross income''.

[[Page 124 STAT.1035]]

    (c) No Excess Payments.--Section 36B(f) of the Internal Revenue Code 
of 1986, as added by section 1401(a) of the Patient Protection and 
Affordable Care Act, <<NOTE: Ante, p. 213.>> is amended by adding at the 
end the following new paragraph:
            ``(3) Information requirement.--Each Exchange (or any person 
        carrying out 1 or more responsibilities of an Exchange under 
        section 1311(f)(3) or 1321(c) of the Patient Protection and 
        Affordable Care Act) shall provide the following information to 
        the Secretary and to the taxpayer with respect to any health 
        plan provided through the Exchange:
                    ``(A) The level of coverage described in section 
                1302(d) of the Patient Protection and Affordable Care 
                Act and the period such coverage was in effect.
                    ``(B) The total premium for the coverage without 
                regard to the credit under this section or cost-sharing 
                reductions under section 1402 of such Act.
                    ``(C) The aggregate amount of any advance payment of 
                such credit or reductions under section 1412 of such 
                Act.
                    ``(D) The name, address, and TIN of the primary 
                insured and the name and TIN of each other individual 
                obtaining coverage under the policy.
                    ``(E) Any information provided to the Exchange, 
                including any change of circumstances, necessary to 
                determine eligibility for, and the amount of, such 
                credit.
                    ``(F) Information necessary to determine whether a 
                taxpayer has received excess advance payments.''.

    (d) Adult Dependents.--
            (1) Exclusion of amounts expended for medical care.--The 
        first sentence of section 105(b) of the Internal Revenue Code of 
        1986 <<NOTE: 26 USC 105.>> (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 child (as defined in section 152(f)(1)) of 
                the taxpayer who as of the end of the taxable year has 
                not attained age 27''.
            (2) Self-employed health insurance deduction.--Section 
        162(l)(1) of such Code <<NOTE: 26 USC 162.>> 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 child (as defined in section 152(f)(1)) of 
                the taxpayer who as of the end of the taxable year has 
                not attained age 27.''.
            (3) Coverage under self-employed deduction.--Section 
        162(l)(2)(B) of such Code is amended by inserting ``, or any 
        dependent, or individual described in subparagraph (D) of 
        paragraph (1) with respect to,'' after ``spouse of''.
            (4) Sick and accident benefits provided to members of a 
        voluntary employees' beneficiary association and

[[Page 124 STAT.1036]]

        their dependents.--Section 501(c)(9) of such Code <<NOTE: 26 USC 
        501.>> 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 `dependent' shall include any 
        individual who is a child (as defined in section 152(f)(1)) of a 
        member who as of the end of the calendar year has not attained 
        age 27.''.
            (5) Medical and other benefits for retired employees.--
        Section 401(h) of such Code <<NOTE: 26 USC 401.>> is amended by 
        adding at the end the following: ``For purposes of this 
        subsection, the term `dependent' shall include any individual 
        who is a child (as defined in section 152(f)(1)) of a retired 
        employee who as of the end of the calendar year has not attained 
        age 27.''.

    (e) Five Percent Income Disregard for Certain Individuals.--Section 
1902(e)(14) of the Social Security Act (42 U.S.C. 1396a(e)(14)), as 
amended by subsection (b)(1), is further amended--
            (1) in subparagraph (B), by striking ``No type'' and 
        inserting ``Subject to subparagraph (I), no type''; and
            (2) by adding at the end the following new subparagraph:
                    ``(I) Treatment of portion of modified adjusted 
                gross income.--For purposes of determining the income 
                eligibility of an individual for medical assistance 
                whose eligibility is determined based on the application 
                of modified adjusted gross income under subparagraph 
                (A), the State shall--
                          ``(i) determine <<NOTE: Determination.>> the 
                      dollar equivalent of the difference between the 
                      upper income limit on eligibility for such an 
                      individual (expressed as a percentage of the 
                      poverty line) and such upper income limit 
                      increased by 5 percentage points; and
                          ``(ii) notwithstanding the requirement in 
                      subparagraph (A) with respect to use of modified 
                      adjusted gross income, utilize as the applicable 
                      income of such individual, in determining such 
                      income eligibility, an amount equal to the 
                      modified adjusted gross income applicable to such 
                      individual reduced by such dollar equivalent 
                      amount.''.
SEC. 1005. <<NOTE: 42 USC 18121.>> IMPLEMENTATION FUNDING.

    (a) In General.--There is hereby established a Health Insurance 
Reform Implementation Fund (referred to in this section as the ``Fund'') 
within the Department of Health and Human Services to carry out the 
Patient Protection and Affordable Care Act and this Act (and the 
amendments made by such Acts).
    (b) Funding.--There is appropriated to the Fund, out of any funds in 
the Treasury not otherwise appropriated, $1,000,000,000 for Federal 
administrative expenses to carry out such Act (and the amendments made 
by such Acts).

                          Subtitle B--Medicare

SEC. 1101. CLOSING THE MEDICARE PRESCRIPTION DRUG ``DONUT HOLE''.

    (a) Coverage Gap Rebate for 2010.--

[[Page 124 STAT.1037]]

            (1) In general.--Section 1860D-42 of the Social Security Act 
        (42 U.S.C. 1395w-152) is amended by adding at the end the 
        following new subsection:

    ``(c) Coverage <<NOTE: Payments.>> Gap Rebate for 2010.--
            ``(1) In general.--In <<NOTE: Deadline.>> the case of an 
        individual described in subparagraphs (A) through (D) of section 
        1860D-14A(g)(1) who as of the last day of a calendar quarter in 
        2010 has incurred costs for covered part D drugs so that the 
        individual has exceeded the initial coverage limit under section 
        1860D-2(b)(3) for 2010, the Secretary shall provide for payment 
        from the Medicare Prescription Drug Account of $250 to the 
        individual by not later than the 15th day of the third month 
        following the end of such quarter.
            ``(2) Limitation.--The Secretary shall provide only 1 
        payment under this subsection with respect to any individual.''.
            (2) Repeal of provision.--Section 3315 of the Patient 
        Protection and Affordable Care Act (including the amendments 
        made by such section) <<NOTE: Ante, p. 479.>> is repealed, and 
        any provision of law amended or repealed by such sections is 
        hereby restored or revived as if such section had not been 
        enacted into law.

    (b) Closing the Donut Hole.--Part D of title XVIII of the Social 
Security Act (42 U.S.C. 1395w-101 et seq.), as amended by section 3301 
of the Patient Protection and Affordable Care Act, is further amended--
            (1) in section <<NOTE: Ante, p. 461.>> 1860D-43--
                    (A) in subsection (b), by striking ``July 1, 2010'' 
                and inserting ``January 1, 2011''; and
                    (B) in subsection (c)(2), by striking ``July 1, 
                2010, and ending on December 31, 2010,'' and inserting 
                ``January 1, 2011, and December 31, 2011,'';
            (2) in section <<NOTE: Ante, p. 462.>> 1860D-14A--
                    (A) in subsection (a)--
                          (i) by striking ``July 1, 2010'' and inserting 
                      ``January 1, 2011''; and
                          (ii) by striking ``April 1, 2010'' and 
                      inserting ``180 days after the date of the 
                      enactment of this section'';
                    (B) in subsection (b)(1)(C)--
                          (i) in the heading, by striking ``2010 and'';
                          (ii) by striking ``July 1, 2010'' and 
                      inserting ``January 1, 2011''; and
                          (iii) by striking ``May 1, 2010'' and 
                      inserting ``not later than 30 days after the date 
                      of the establishment of a model agreement under 
                      subsection (a)'';
                    (C) in subsection (c)--
                          (i) in paragraph (1)(A)(iii), by striking 
                      ``July 1, 2010, and ending on December 31, 2011'' 
                      and inserting ``January 1, 2011, and ending on 
                      December 31, 2011''; and
                          (ii) in paragraph (2), by striking ``2010'' 
                      and inserting ``2011'';
                    (D) in subsection (d)(2)(B), by striking ``July 1, 
                2010, and ending on December 31, 2010'' and inserting 
                ``January 1, 2011, and ending on December 31, 2011''; 
                and
                    (E) in subsection (g)(1)--
                          (i) in the matter before subparagraph (A), by 
                      striking ``an applicable drug'' and inserting ``a 
                      covered part D drug'';

[[Page 124 STAT.1038]]

                          (ii) by adding ``and'' at the end of 
                      subparagraph (C);
                          (iii) by striking subparagraph (D); and
                          (iv) by redesignating subparagraph (E) as 
                      subparagraph (D); and
            (3) in section <<NOTE: 42 USC 1395w-102.>> 1860D-2(b)--
                    (A) in paragraph (2)(A), by striking ``The 
                coverage'' and inserting ``Subject to subparagraphs (C) 
                and (D), the coverage'';
                    (B) in paragraph (2)(B), by striking ``subparagraph 
                (A)(ii)'' and inserting ``subparagraphs (A)(ii), (C), 
                and (D)'';
                    (C) by adding at the end of paragraph (2) the 
                following new subparagraphs:
                    ``(C) Coverage for generic drugs in coverage gap.--
                          ``(i) In general.--Except as provided in 
                      paragraph (4), the coverage for an applicable 
                      beneficiary (as defined in section 1860D-
                      14A(g)(1)) has coinsurance (for costs above the 
                      initial coverage limit under paragraph (3) and 
                      below the out-of-pocket threshold) for covered 
                      part D drugs that are not applicable drugs under 
                      section 1860D-14A(g)(2) that is--
                                    ``(I) equal to the generic-gap 
                                coinsurance percentage (specified in 
                                clause (ii)) for the year; or
                                    ``(II) actuarially equivalent (using 
                                processes and methods established under 
                                section 1860D-11(c)) to an average 
                                expected payment of such percentage of 
                                such costs for covered part D drugs that 
                                are not applicable drugs under section 
                                1860D-14A(g)(2).
                          ``(ii) Generic-gap coinsurance percentage.--
                      The generic-gap coinsurance percentage specified 
                      in this clause for--
                                    ``(I) 2011 is 93 percent;
                                    ``(II) 2012 and each succeeding year 
                                before 2020 is the generic-gap 
                                coinsurance percentage under this clause 
                                for the previous year decreased by 7 
                                percentage points; and
                                    ``(III) 2020 and each subsequent 
                                year is 25 percent.
                    ``(D) Coverage for applicable drugs in coverage 
                gap.--
                          ``(i) In general.--Except as provided in 
                      paragraph (4), the coverage for an applicable 
                      beneficiary (as defined in section 1860D-
                      14A(g)(1)) has coinsurance (for costs above the 
                      initial coverage limit under paragraph (3) and 
                      below the out-of-pocket threshold) for the 
                      negotiated price (as defined in section 1860D-
                      14A(g)(6)) of covered part D drugs that are 
                      applicable drugs under section 1860D-14A(g)(2) 
                      that is--
                                    ``(I) equal to the difference 
                                between the applicable gap percentage 
                                (specified in clause (ii) for the year) 
                                and the discount percentage specified in 
                                section 1860D-14A(g)(4)(A) for such 
                                applicable drugs; or

[[Page 124 STAT.1039]]

                                    ``(II) actuarially equivalent (using 
                                processes and methods established under 
                                section 1860D-11(c)) to an average 
                                expected payment of such percentage of 
                                such costs, for covered part D drugs 
                                that are applicable drugs under section 
                                1860D-14A(g)(2).
                          ``(ii) Applicable gap percentage.--The 
                      applicable gap percentage specified in this clause 
                      for--
                                    ``(I) 2013 and 2014 is 97.5 percent;
                                    ``(II) 2015 and 2016 is 95 percent;
                                    ``(III) 2017 is 90 percent;
                                    ``(IV) 2018 is 85 percent;
                                    ``(V) 2019 is 80 percent; and
                                    ``(VI) 2020 and each subsequent year 
                                is 75 percent.'';
                    (D) in paragraph (3)(A), as restored under 
                subsection (a)(2), by striking ``paragraph (4)'' and 
                inserting ``paragraphs (2)(C), (2)(D), and (4)''; and
                    (E) in paragraph (4)(E), by inserting before the 
                period at the end the following: ``, except that 
                incurred costs shall not include the portion of the 
                negotiated price that represents the reduction in 
                coinsurance resulting from the application of paragraph 
                (2)(D)''; and
            (4) in section 1860D-22(a)(2)(A), <<NOTE: 42 USC 1395w-
        132.>> by inserting before the period at the end the following: 
        ``, not taking into account the value of any discount or 
        coverage provided during the gap in prescription drug coverage 
        that occurs between the initial coverage limit under section 
        1860D-2(b)(3) during the year and the out-of-pocket threshold 
        specified in section 1860D-2(b)(4)(B)''.

    (c) Conforming Amendment to AMP Under Medicaid.--Section 
1927(k)(1)(B)(i) of the Social Security Act (42 U.S.C. 1396r-
8(k)(1)(B)(i)), as amended by section 2503(a)(2)(B) of the Patient 
Protection and Affordable Care Act, is amended--
            (1) by striking ``and'' at the end of subclause (III);
            (2) by striking the period at the end of subclause (IV); and
            (3) by adding at the end the following new subclause:
                                    ``(V) discounts provided by 
                                manufacturers under section 1860D-
                                14A.''.

    (d) Reducing Growth Rate of Out-of-pocket Cost Threshold.--Section 
1860D-2(b) of the Social Security Act (42 U.S.C. 1395w-102(b)) is 
amended--
            (1) in paragraph (4)(B)(i)--
                    (A) in subclause (I), by striking ``or'' at the end;
                    (B) by redesignating subclause (II) as subclause 
                (VI); and
                    (C) by inserting after subclause (I) the following 
                new subclauses:
                                    ``(II) for each of years 2007 
                                through 2013, is equal to the amount 
                                specified in this subparagraph for the 
                                previous year, increased by the annual 
                                percentage increase described in 
                                paragraph (6) for the year involved;
                                    ``(III) for 2014 and 2015, is equal 
                                to the amount specified in this 
                                subparagraph for the previous year, 
                                increased by the annual percentage 
                                increase

[[Page 124 STAT.1040]]

                                described in paragraph (6) for the year 
                                involved, minus 0.25 percentage point;
                                    ``(IV) for each of years 2016 
                                through 2019, is equal to the amount 
                                specified in this subparagraph for the 
                                previous year, increased by the lesser 
                                of--
                                            ``(aa) the annual percentage 
                                        increase described in paragraph 
                                        (7) for the year involved, plus 
                                        2 percentage points; or
                                            ``(bb) the annual percentage 
                                        increase described in paragraph 
                                        (6) for the year;
                                    ``(V) for 2020, is equal to the 
                                amount that would have been applied 
                                under this subparagraph for 2020 if the 
                                amendments made by section 1101(d)(1) of 
                                the Health Care and Education 
                                Reconciliation Act of 2010 had not been 
                                enacted; or''; and
            (2) by adding at the end the following new paragraph:
            ``(7) Additional annual percentage increase.--The annual 
        percentage increase specified in this paragraph for a year is 
        equal to the annual percentage increase in the consumer price 
        index for all urban consumers (United States city average) for 
        the 12-month period ending in July of the previous year.''.
SEC. 1102. MEDICARE ADVANTAGE PAYMENTS.

    (a) Repeal.--Effective <<NOTE: Effective date. 42 USC 1395w-21 et 
seq. and note.>> as if included in the enactment of the Patient 
Protection and Affordable Care Act, sections 3201 and 3203 of such Act 
(and the amendments made by such sections) are repealed.

    (b) Phase-in of Modified Benchmarks.--Section 1853 of the Social 
Security Act (42 U.S.C. 1395w-23) is amended--
            (1) in subsection (j)(1)(A), by striking ``(or, beginning 
        with 2007, \1/12\ of the applicable amount determined under 
        subsection (k)(1)) for the area for the year'' and inserting 
        ``for the area for the year (or, for 2007, 2008, 2009, and 2010, 
        \1/12\ of the applicable amount determined under subsection 
        (k)(1) for the area for the year; for 2011, \1/12\ of the 
        applicable amount determined under subsection (k)(1) for the 
        area for 2010; and, beginning with 2012, \1/12\ of the blended 
        benchmark amount determined under subsection (n)(1) for the area 
        for the year)''; and
            (2) by adding at the end the following new subsection:

    ``(n) Determination of Blended Benchmark Amount.--
            ``(1) In general.--For <<NOTE: Definition.>> purposes of 
        subsection (j), subject to paragraphs (3), (4), and (5), the 
        term `blended benchmark amount' means for an area--
                    ``(A) for 2012 the sum of--
                          ``(i) \1/2\ of the applicable amount for the 
                      area and year; and
                          ``(ii) \1/2\ of the amount specified in 
                      paragraph (2)(A) for the area and year; and
                    ``(B) for a subsequent year the amount specified in 
                paragraph (2)(A) for the area and year.
            ``(2) Specified amount.--
                    ``(A) In general.--The amount specified in this 
                subparagraph for an area and year is the product of--
                          ``(i) the base payment amount specified in 
                      subparagraph (E) for the area and year adjusted to 
                      take into

[[Page 124 STAT.1041]]

                      account the phase-out in the indirect costs of 
                      medical education from capitation rates described 
                      in subsection (k)(4); and
                          ``(ii) the applicable percentage for the area 
                      for the year specified under subparagraph (B).
                    ``(B) Applicable percentage.--Subject to 
                subparagraph (D), the applicable percentage specified in 
                this subparagraph for an area for a year in the case of 
                an area that is ranked--
                          ``(i) in the highest quartile under 
                      subparagraph (C) for the previous year is 95 
                      percent;
                          ``(ii) in the second highest quartile under 
                      such subparagraph for the previous year is 100 
                      percent;
                          ``(iii) in the third highest quartile under 
                      such subparagraph for the previous year is 107.5 
                      percent; or
                          ``(iv) in the lowest quartile under such 
                      subparagraph for the previous year is 115 percent.
                    ``(C) Periodic ranking.--For purposes of this 
                paragraph in the case of an area located--
                          ``(i) in 1 of the 50 States or the District of 
                      Columbia, the Secretary shall rank such area in 
                      each year specified under subsection (c)(1)(D)(ii) 
                      based upon the level of the amount specified in 
                      subparagraph (A)(i) for such areas; or
                          ``(ii) in a territory, the Secretary shall 
                      rank such areas in each such year based upon the 
                      level of the amount specified in subparagraph 
                      (A)(i) for such area relative to quartile rankings 
                      computed under clause (i).
                    ``(D) 1-year transition for changes in applicable 
                percentage.--If, for a year after 2012, there is a 
                change in the quartile in which an area is ranked 
                compared to the previous year, the applicable percentage 
                for the area in the year shall be the average of--
                          ``(i) the applicable percentage for the area 
                      for the previous year; and
                          ``(ii) the applicable percentage that would 
                      otherwise apply for the area for the year.
                    ``(E) Base payment amount.--Subject to subparagraph 
                (F), the base payment amount specified in this 
                subparagraph--
                          ``(i) for 2012 is the amount specified in 
                      subsection (c)(1)(D) for the area for the year; or
                          ``(ii) for a subsequent year that--
                                    ``(I) is not specified under 
                                subsection (c)(1)(D)(ii), is the base 
                                amount specified in this subparagraph 
                                for the area for the previous year, 
                                increased by the national per capita MA 
                                growth percentage, described in 
                                subsection (c)(6) for that succeeding 
                                year, but not taking into account any 
                                adjustment under subparagraph (C) of 
                                such subsection for a year before 2004; 
                                and
                                    ``(II) is specified under subsection 
                                (c)(1)(D)(ii), is the amount specified 
                                in subsection (c)(1)(D) for the area for 
                                the year.

[[Page 124 STAT.1042]]

                    ``(F) Application of indirect medical education 
                phase-out.--The base payment amount specified in 
                subparagraph (E) for a year shall be adjusted in the 
                same manner under paragraph (4) of subsection (k) as the 
                applicable amount is adjusted under such subsection.
            ``(3) Alternative phase-ins.--
                    ``(A) 4-year phase-in for certain areas.--If the 
                difference between the applicable amount (as defined in 
                subsection (k)) for an area for 2010 and the projected 
                2010 benchmark amount (as defined in subparagraph (C)) 
                for the area is at least $30 but less than $50, the 
                blended benchmark amount for the area is--
                          ``(i) for 2012 the sum of--
                                    ``(I) \3/4\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \1/4\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year;
                          ``(ii) for 2013 the sum of--
                                    ``(I) \1/2\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \1/2\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year;
                          ``(iii) for 2014 the sum of--
                                    ``(I) \1/4\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \3/4\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year; and
                          ``(iv) for a subsequent year the amount 
                      specified in paragraph (2)(A) for the area and 
                      year.
                    ``(B) 6-year phase-in for certain areas.--If the 
                difference between the applicable amount (as defined in 
                subsection (k)) for an area for 2010 and the projected 
                2010 benchmark amount (as defined in subparagraph (C)) 
                for the area is at least $50, the blended benchmark 
                amount for the area is--
                          ``(i) for 2012 the sum of--
                                    ``(I) \5/6\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \1/6\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year;
                          ``(ii) for 2013 the sum of--
                                    ``(I) \2/3\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \1/3\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year;
                          ``(iii) for 2014 the sum of--
                                    ``(I) \1/2\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \1/2\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year;
                          ``(iv) for 2015 the sum of--
                                    ``(I) \1/3\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \2/3\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year; and
                          ``(v) for 2016 the sum of--

[[Page 124 STAT.1043]]

                                    ``(I) \1/6\ of the applicable amount 
                                for the area and year; and
                                    ``(II) \5/6\ of the amount specified 
                                in paragraph (2)(A) for the area and 
                                year; and
                          ``(vi) for a subsequent year the amount 
                      specified in paragraph (2)(A) for the area and 
                      year.
                    ``(C) Projected 2010 benchmark amount.--The 
                projected 2010 benchmark amount described in this 
                subparagraph for an area is equal to the sum of--
                          ``(i) \1/2\ of the applicable amount (as 
                      defined in subsection (k)) for the area for 2010; 
                      and
                          ``(ii) \1/2\ of the amount specified in 
                      paragraph (2)(A) for the area for 2010 but 
                      determined as if there were substituted for the 
                      applicable percentage specified in clause (ii) of 
                      such paragraph the sum of--
                                    ``(I) the applicable percent that 
                                would be specified under subparagraph 
                                (B) of paragraph (2) (determined without 
                                regard to subparagraph (D) of such 
                                paragraph) for the area for 2010 if any 
                                reference in such paragraph to `the 
                                previous year' were deemed a reference 
                                to 2010; and
                                    ``(II) the applicable percentage 
                                increase that would apply to a 
                                qualifying plan in the area under 
                                subsection (o) as if any reference in 
                                such subsection to 2012 were deemed a 
                                reference to 2010 and as if the 
                                determination of a qualifying county 
                                under paragraph (3)(B) of such 
                                subsection were made for 2010.
            ``(4) Cap on benchmark amount.--In no case shall the blended 
        benchmark amount for an area for a year (determined taking into 
        account subsection (o)) be greater than the applicable amount 
        that would (but for the application of this subsection) be 
        determined under subsection (k)(1) for the area for the year.
            ``(5) Non-application to pace plans.--This subsection shall 
        not apply to payments to a PACE program under section 1894.''.

    (c) Applicable Percentage Quality Increases.--Section 1853 of such 
Act (42 U.S.C. 1395w-23), as amended by subsection (b), is amended--
            (1) in subsection (j), by inserting ``subject to subsection 
        (o),'' after ``For purposes of this part,'';
            (2) in subsection (n)(2)(B), as added by subsection (b), by 
        inserting ``, subject to subsection (o)'' after ``as follows''; 
        and
            (3) by adding at the end the following new subsection:

    ``(o) Applicable Percentage Quality Increases.--
            ``(1) In general.--Subject <<NOTE: Determination.>> to the 
        succeeding paragraphs, in the case of a qualifying plan with 
        respect to a year beginning with 2012, the applicable percentage 
        under subsection (n)(2)(B) shall be increased on a plan or 
        contract level, as determined by the Secretary--
                    ``(A) for 2012, by 1.5 percentage points;
                    ``(B) for 2013, by 3.0 percentage points; and
                    ``(C) for 2014 or a subsequent year, by 5.0 
                percentage points.

[[Page 124 STAT.1044]]

            ``(2) Increase for qualifying plans in qualifying 
        counties.--The increase applied under paragraph (1) for a 
        qualifying plan located in a qualifying county for a year shall 
        be doubled.
            ``(3) Qualifying plans and qualifying county defined; 
        application of increases to low enrollment and new plans.--For 
        purposes of this subsection:
                    ``(A) Qualifying plan.--
                          ``(i) In general.--The term `qualifying plan' 
                      means, for a year and subject to paragraph (4), a 
                      plan that had a quality rating under paragraph (4) 
                      of 4 stars or higher based on the most recent data 
                      available for such year.
                          ``(ii) Application of increases to low 
                      enrollment plans.--
                                    ``(I) 2012.--
                                For <<NOTE: Determination.>> 2012, the 
                                term `qualifying plan' includes an MA 
                                plan that the Secretary determines is 
                                not able to have a quality rating under 
                                paragraph (4) because of low enrollment.
                                    ``(II) 2013 and subsequent years.--
                                For 2013 and subsequent years, for 
                                purposes of determining whether an MA 
                                plan with low enrollment (as defined by 
                                the Secretary) is included as a 
                                qualifying plan, the Secretary shall 
                                establish a method to apply to MA plans 
                                with low enrollment (as defined by the 
                                Secretary) the computation of quality 
                                rating and the rating system under 
                                paragraph (4).
                          ``(iii) Application of increases to new 
                      plans.--
                                    ``(I) In general.--A new MA plan 
                                that meets criteria specified by the 
                                Secretary shall be treated as a 
                                qualifying plan, except that in applying 
                                paragraph (1), the applicable percentage 
                                under subsection (n)(2)(B) shall be 
                                increased--
                                            ``(aa) for 2012, by 1.5 
                                        percentage points;
                                            ``(bb) for 2013, by 2.5 
                                        percentage points; and
                                            ``(cc) for 2014 or a 
                                        subsequent year, by 3.5 
                                        percentage points.
                                    ``(II) New ma plan defined.--The 
                                term `new MA plan' means, with respect 
                                to a year, a plan offered by an 
                                organization or sponsor that has not had 
                                a contract as a Medicare Advantage 
                                organization in the preceding 3-year 
                                period.
                    ``(B) Qualifying county.--The term `qualifying 
                county' means, for a year, a county--
                          ``(i) that has an MA capitation rate that, in 
                      2004, was based on the amount specified in 
                      subsection (c)(1)(B) for a Metropolitan 
                      Statistical Area with a population of more than 
                      250,000;
                          ``(ii) for which, as of December 2009, of the 
                      Medicare Advantage eligible individuals residing 
                      in the county at least 25 percent of such 
                      individuals were enrolled in Medicare Advantage 
                      plans; and
                          ``(iii) that has per capita fee-for-service 
                      spending that is lower than the national monthly 
                      per capita cost for expenditures for individuals 
                      enrolled under

[[Page 124 STAT.1045]]

                      the original medicare fee-for-service program for 
                      the year.
            ``(4) Quality determinations for application of increase.--
                    ``(A) Quality determination.--The quality rating for 
                a plan shall be determined according to a 5-star rating 
                system (based on the data collected under section 
                1852(e)).
                    ``(B) Plans that failed to report.--An MA plan which 
                does not report data that enables the Secretary to rate 
                the plan for purposes of this paragraph shall be counted 
                as having a rating of fewer than 3.5 stars.
            ``(5) Exception for pace plans.--This subsection shall not 
        apply to payments to a PACE program under section 1894.''.
            (4) Determination of medicare part d low-income benchmark 
        premium.--Section 1860D-14(b)(2)(B)(iii) of the Social Security 
        Act (42 U.S.C. 1395w-114(b)(2)(B)(iii)) as amended by section 
        3302 of the Patient Protection and Affordable Care Act, is 
        amended by striking ``, determined without regard to any 
        reduction in such premium as a result of any beneficiary rebate 
        under section 1854(b)(1)(C) or bonus payment under section 
        1853(n)'' and inserting the following: ``and determined before 
        the application of the monthly rebate computed under section 
        1854(b)(1)(C)(i) for that plan and year involved and, in the 
        case of a qualifying plan, before the application of the 
        increase under section 1853(o) for that plan and year 
        involved''.

    (d) Beneficiary Rebates.--Section 1854(b)(1)(C) of such Act (42 
U.S.C. 1395w-24(b)(1)(C)), as amended by section 3202(b) of the Patient 
Protection and Affordable Care Act, is further amended--
            (1) in clause (i), by inserting ``(or the applicable rebate 
        percentage specified in clause (iii) in the case of plan years 
        beginning on or after January 1, 2012)'' after ``75 percent''; 
        and
            (2) by striking clause (iii), by redesignating clauses (iv) 
        and (v) as clauses (vii) and (viii), respectively, and by 
        inserting after clause (ii) the following new clauses:
                          ``(iii) Applicable rebate percentage.--The 
                      applicable rebate percentage specified in this 
                      clause for a plan for a year, based on the system 
                      under section 1853(o)(4)(A), is the sum of--
                                    ``(I) the product of the old phase-
                                in proportion for the year under clause 
                                (iv) and 75 percent; and
                                    ``(II) the product of the new phase-
                                in proportion for the year under clause 
                                (iv) and the final applicable rebate 
                                percentage under clause (v).
                          ``(iv) Old and new phase-in proportions.--For 
                      purposes of clause (iv)--
                                    ``(I) for 2012, the old phase-in 
                                proportion is \2/3\ and the new phase-in 
                                proportion is \1/3\;
                                    ``(II) for 2013, the old phase-in 
                                proportion is \1/3\ and the new phase-in 
                                proportion is \2/3\; and
                                    ``(III) for 2014 and any subsequent 
                                year, the old phase-in proportion is 0 
                                and the new phase-in proportion is 1.

[[Page 124 STAT.1046]]

                          ``(v) Final applicable rebate percentage.--
                      Subject to clause (vi), the final applicable 
                      rebate percentage under this clause is--
                                    ``(I) in the case of a plan with a 
                                quality rating under such system of at 
                                least 4.5 stars, 70 percent;
                                    ``(II) in the case of a plan with a 
                                quality rating under such system of at 
                                least 3.5 stars and less than 4.5 stars, 
                                65 percent; and
                                    ``(III) in the case of a plan with a 
                                quality rating under such system of less 
                                than 3.5 stars, 50 percent.
                          ``(vi) Treatment of low enrollment and new 
                      plans.--For purposes of clause (v)--
                                    ``(I) for 2012, in the case of a 
                                plan described in subclause (I) of 
                                subsection (o)(3)(A)(ii), the plan shall 
                                be treated as having a rating of 4.5 
                                stars; and
                                    ``(II) for 2012 or a subsequent 
                                year, in the case of a new MA plan (as 
                                defined under subclause (III) of 
                                subsection (o)(3)(A)(iii)) that is 
                                treated as a qualifying plan pursuant to 
                                subclause (I) of such subsection, the 
                                plan shall be treated as having a rating 
                                of 3.5 stars.''.

    (e) Coding Intensity Adjustment.--Section 1853(a)(1)(C)(ii) of such 
Act (42 U.S.C. 1395w-23(a)(1)(C)(ii)) is amended--
            (1) in the heading, by striking ``during phaseout of budget 
        neutrality factor'' and inserting ``of coding adjustment'';
            (2) in the matter before subclause (I), by striking 
        ``through 2010'' and inserting ``and each subsequent year''; and
            (3) in subclause (II)--
                    (A) in the first sentence, by inserting ``annually'' 
                before ``conduct an analysis'';
                    (B) in the second sentence--
                          (i) by inserting ``on a timely basis'' after 
                      ``are incorporated''; and
                          (ii) by striking ``only for 2008, 2009, and 
                      2010'' and inserting ``for 2008 and subsequent 
                      years'';
                    (C) in the third sentence, by inserting ``and 
                updated as appropriate'' before the period at the end; 
                and
                    (D) by adding at the end the following new 
                subclauses:
                                    ``(III) In calculating each year's 
                                adjustment, the adjustment factor shall 
                                be for 2014, not less than the 
                                adjustment factor applied for 2010, plus 
                                1.3 percentage points; for each of years 
                                2015 through 2018, not less than the 
                                adjustment factor applied for the 
                                previous year, plus 0.25 percentage 
                                point; and for 2019 and each subsequent 
                                year, not less than 5.7 percent.
                                    ``(IV) <<NOTE: Applicability.>> Such 
                                adjustment shall be applied to risk 
                                scores until the Secretary implements 
                                risk adjustment using Medicare Advantage 
                                diagnostic, cost, and use data.''.

    (f) Repeal of Comparative Cost Adjustment Program.--Section 1860C-1 
of the Social Security Act (42 U.S.C. 1395w-29), as added by section 
241(a) of the Medicare Prescription Drug,

[[Page 124 STAT.1047]]

Improvement, and Modernization Act of 2003 (Public Law 108-173), is 
repealed.
SEC. 1103. SAVINGS FROM LIMITS ON MA PLAN ADMINISTRATIVE COSTS.

    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 <<NOTE: Time periods.>> for minimum 
        medical loss ratio.--If the 
        Secretary <<NOTE: Determination.>> determines for a contract 
        year (beginning with 2014) that an MA plan has failed to have a 
        medical loss ratio of at least .85--
                    ``(A) the <<NOTE: Payments.>> MA plan shall remit to 
                the Secretary an amount equal to the product of--
                          ``(i) the total revenue of the MA plan under 
                      this part for the contract year; and
                          ``(ii) the difference between .85 and the 
                      medical loss ratio;
                    ``(B) for 3 consecutive contract years, the 
                Secretary shall not permit the enrollment of new 
                enrollees under the plan for coverage 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. 1104. DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS.

    Section 1886(r) of the Social Security Act (42 U.S.C. 1395ww(r)), as 
added by section 3133 of the Patient Protection and Affordable Care Act 
and as amended by section 10316 of such Act, is amended--
            (1) in paragraph (1), by striking ``2015'' and inserting 
        ``2014''; and
            (2) in paragraph (2)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``2015'' and inserting ``2014'';
                    (B) in subparagraph (B)(i)--
                          (i) in the heading, by inserting ``2014,'' 
                      after ``years'';
                          (ii) in the matter preceding subclause (I), by 
                      inserting ``2014,'' after ``each of fiscal 
                      years'';
                          (iii) in subclause (I), by striking ``on such 
                      Act'' and inserting ``on the Health Care and 
                      Education Reconciliation Act of 2010''; and
                          (iv) in the matter following subclause (II), 
                      by striking ``minus 1.5 percentage points'' and 
                      inserting ``minus 0.1 percentage points for fiscal 
                      year 2014 and minus 0.2 percentage points for each 
                      of fiscal years 2015, 2016, and 2017''; and
                    (C) in subparagraph (B)(ii), in the matter following 
                subclause (II), by striking ``and, for each of 2018 and 
                2019, minus 1.5 percentage points'' and inserting 
                ``minus 0.2 percentage points for each of fiscal years 
                2018 and 2019''.
SEC. 1105. MARKET BASKET UPDATES.

    (a) IPPS.--Section 1886(b)(3)(B) of the Social Security Act (42 
U.S.C. 1395ww(b)(3)(B)), as amended by sections 3401(a)(4) and 10319(a) 
of the Patient Protection and Affordable Care Act, is amended--

[[Page 124 STAT.1048]]

            (1) in clause (xii)--
                    (A) by placing the subclause (II) (inserted by 
                section 10319(a)(3) of the Patient Protection and 
                Affordable Care Act) immediately after subclause (I) 
                and, in such subclause (II), by striking ``and'' at the 
                end; and
                    (B) by striking subclause (III) and inserting the 
                following:
            ``(III) for fiscal year 2014, by 0.3 percentage point;
            ``(IV) for each of fiscal years 2015 and 2016, by 0.2 
        percentage point; and
            ``(V) for each of fiscal years 2017, 2018, and 2019, by 0.75 
        percentage point.''; and
            (2) by striking clause (xiii).

    (b) Long-term Care Hospitals.--Section 1886(m)(4) of the Social 
Security Act (42 U.S.C. 1395ww(m)(4)), as added by section 3401(c) of 
the Patient Protection and Affordable Care Act and amended by section 
10319(b) of such Act, is amended--
            (1) in subparagraph (A)--
                    (A) in clause (iii), by striking ``and'' at the end; 
                and
                    (B) by striking clause (iv) and inserting the 
                following:
                          ``(iv) for rate year 2014, 0.3 percentage 
                      point;
                          ``(v) for each of rate years 2015 and 2016, 
                      0.2 percentage point; and
                          ``(vi) for each of rate years 2017, 2018, and 
                      2019, 0.75 percentage point.'';
            (2) by striking subparagraph (B); and
            (3) by striking ``(4) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(4) Other 
        adjustment.--For purposes'' (and redesignating clauses (i) 
        through (vi) as subparagraphs (A) through (F), respectively, 
        with appropriate indentation).

    (c) Inpatient Rehabilitation Facilities.--Section 1886(j)(3)(D) of 
the Social Security Act (42 U.S.C. 1395ww(j)(3)(D)), as added by section 
3401(d)(2) of the Patient Protection and Affordable Care Act and amended 
by section 10319(c) of such Act, is amended--
            (1) in clause (i)--
                    (A) by placing the subclause (II) (inserted by 
                section 10319(c)(3) of the Patient Protection and 
                Affordable Care Act) immediately after subclause (I) 
                and, in such subclause (II), by striking ``and'' at the 
                end; and
                    (B) by striking subclause (III) and inserting the 
                following:
                                    ``(III) for fiscal year 2014, 0.3 
                                percentage point;
                                    ``(IV) for each of fiscal years 2015 
                                and 2016, 0.2 percentage point; and
                                    ``(V) for each of fiscal years 2017, 
                                2018, and 2019, 0.75 percentage 
                                point.'';
            (2) by striking clause (ii); and
            (3) by striking ``(D) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(D) Other 
        adjustment.--For purposes'' (and redesignating subclauses (I) 
        through (V) as clauses (i) through (v), respectively, with 
        appropriate indentation).

    (d) Psychiatric Hospitals.--Section 1886(s)(3) of the Social 
Security Act, as added by section 3401(f) of the Patient Protection

[[Page 124 STAT.1049]]

and Affordable Care Act and amended by section 10319(e) of such 
Act, <<NOTE: Ante, p. 484, 949.>>  is amended--
            (1) in subparagraph (A)--
                    (A) by placing the clause (ii) (inserted by section 
                10319(e)(3) of the Patient Protection and Affordable 
                Care Act) immediately after clause (i) and, in such 
                clause (ii), by striking ``and'' at the end; and
                    (B) by striking clause (iii) and inserting the 
                following:
                          ``(iii) for the rate year beginning in 2014, 
                      0.3 percentage point;
                          ``(iv) for each of the rate years beginning in 
                      2015 and 2016, 0.2 percentage point; and
                          ``(v) for each of the rate years beginning in 
                      2017, 2018, and 2019, 0.75 percentage point.'';
            (2) by striking subparagraph (B); and
            (3) by striking ``(3) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(3) Other 
        adjustment.--For purposes'' (and redesignating clauses (i) 
        through (v) as subparagraphs (A) through (E), respectively, with 
        appropriate indentation).

    (e) Outpatient Hospitals.--Section 1833(t)(3)(G) of the Social 
Security Act (42 U.S.C. 1395l(t)(3)(G)), as added by section 3401(i)(2) 
of the Patient Protection and Affordable Care Act and amended by section 
10319(g) of such Act, is amended--
            (1) in clause (i)--
                    (A) by placing the subclause (II) (inserted by 
                section 10319(g)(3) of the Patient Protection and 
                Affordable Care Act) immediately after subclause (I) 
                and, in such subclause (II), by striking ``and'' at the 
                end; and
                    (B) by striking subclause (III) and inserting the 
                following:
                                    ``(III) for 2014, 0.3 percentage 
                                point;
                                    ``(IV) for each of 2015 and 2016, 
                                0.2 percentage point; and
                                    ``(V) for each of 2017, 2018, and 
                                2019, 0.75 percentage point.'';
            (2) by striking clause (ii); and
            (3) by striking ``(G) Other adjustment.--'' and all that 
        follows through ``For purposes'' and inserting ``(G) Other 
        adjustment.--For purposes'' (and redesignating subclauses (I) 
        through (V) as clauses (i) through (v), respectively, with 
        appropriate indentation).
SEC. 1106. PHYSICIAN OWNERSHIP-REFERRAL.

    Section 1877(i) of the Social Security Act (42 U.S.C. 1395nn(i)), as 
added by section 6001(a)(3) of the Patient Protection and Affordable 
Care Act and as amended by section 10601(a) of such Act, is amended--
            (1) in paragraph (1)(A)(i), by striking ``August 1, 2010'' 
        and inserting ``December 31, 2010''; and
            (2) in paragraph (3)--
                    (A) in subparagraph (A)(i), by striking ``an 
                applicable hospital (as defined in subparagraph (E))'' 
                and inserting ``a hospital that is an applicable 
                hospital (as defined in subparagraph (E)) or is a high 
                Medicaid facility described in subparagraph (F)'';

[[Page 124 STAT.1050]]

                    (B) in subparagraph (C)(iii), by inserting after 
                ``date of enactment of this subsection'' the following: 
                ``(or, in the case of a hospital that did not have a 
                provider agreement in effect as of such date but does 
                have such an agreement in effect on December 31, 2010, 
                the effective date of such provider agreement)'';
                    (C) by redesignating subparagraphs (F) through (H) 
                as subparagraphs (G) through (I), respectively; and
                    (D) by inserting after subparagraph (E) the 
                following new subparagraph:
                    ``(F) High medicaid facility described.--A high 
                Medicaid facility described in this subparagraph is a 
                hospital that--
                          ``(i) is not the sole hospital in a county;
                          ``(ii) with respect to each of the 3 most 
                      recent years for which data are available, has an 
                      annual percent of total inpatient admissions that 
                      represent inpatient admissions under title XIX 
                      that is estimated to be greater than such percent 
                      with respect to such admissions for any other 
                      hospital located in the county in which the 
                      hospital is located; and
                          ``(iii) meets the conditions described in 
                      subparagraph (E)(iii).''.
SEC. 1107. PAYMENT FOR IMAGING SERVICES.

    Section 1848 of the Social Security Act (42 U.S.C. 1395w-4), as 
amended by section 3135(a) of the Patient Protection and Affordable Care 
Act, is amended--
            (1) in subsection (b)(4)--
                    (A) in subparagraph (B), by striking ``this 
                paragraph'' and inserting ``subparagraph (A)''; and
                    (B) by amending subparagraph (C) to read as follows:
                    ``(C) Adjustment in imaging utilization rate.--With 
                respect to fee schedules established for 2011 and 
                subsequent years, in the methodology for determining 
                practice expense relative value units for expensive 
                diagnostic imaging equipment under the final rule 
                published by the Secretary in the Federal Register on 
                November 25, 2009 (42 CFR 410 et al.), the Secretary 
                shall use a 75 percent assumption instead of the 
                utilization rates otherwise established in such final 
                rule.''; and
            (2) in subsection (c)(2)(B)(v), by striking subclauses 
        (III), (IV), and (V) and inserting the following new subclause:
                                    ``(III) Change in utilization rate 
                                for certain imaging 
                                services. <<NOTE: Effective date.>> --
                                Effective for fee schedules established 
                                beginning with 2011, reduced 
                                expenditures attributable to the change 
                                in the utilization rate applicable to 
                                2011, as described in subsection 
                                (b)(4)(C).''.
SEC. 1108. <<NOTE: 42 USC 1395w-4 note.>> PE GPCI ADJUSTMENT FOR 
                          2010.

     <<NOTE: Effective date.>> Effective as if included in the enactment 
of the Patient Protection and Affordable Care Act, section 
1848(e)(1)(H)(i) of the Social Security Act (42 U.S.C. 1395w-
4(e)(1)(H)(i)), as added by section 3102(b)(2) of the Patient Protection 
and Affordable Care Act, is amended by striking ``\3/4\'' and inserting 
``\1/2\''.

[[Page 124 STAT.1051]]

SEC. 1109. <<NOTE: 42 USC 1395ww note.>> PAYMENT FOR QUALIFYING 
                          HOSPITALS.

    (a) In General.--From the amount available under subsection (b), the 
Secretary of Health and Human Services shall provide for a payment to 
qualifying hospitals (as defined in subsection (d)) for fiscal years 
2011 and 2012 of the amount determined under subsection (c).
    (b) Amounts Available.--There shall be available from the Federal 
Hospital Insurance Trust Fund $400,000,000 for payments under this 
section for fiscal years 2011 and 2012.
    (c) Payment Amount.--The amount of payment under this section for a 
qualifying hospital shall be determined, in a manner consistent with the 
amount available under subsection (b), in proportion to the portion of 
the amount of the aggregate payments under section 1886(d) of the Social 
Security Act to the hospital for fiscal year 2009 bears to the sum of 
all such payments to all qualifying hospitals for such fiscal year.
    (d) Qualifying Hospital Defined.--In this section, the term 
``qualifying hospital'' means a subsection (d) hospital (as defined for 
purposes of section 1886(d) of the Social Security Act) that is located 
in a county that ranks, based upon its ranking in age, sex, and race 
adjusted spending for benefits under parts A and B under title XVIII of 
such Act per enrollee, within the lowest quartile of such counties in 
the United States.

                          Subtitle C--Medicaid

SEC. 1201. FEDERAL FUNDING FOR STATES.

    Section 1905 of the Social Security Act (42 U.S.C. 1396d), as 
amended by sections 2001(a)(3) and 10201(c) of the Patient Protection 
and Affordable Care Act, is amended--
            (1) in subsection (y)--
                    (A) by redesignating subclause (II) of paragraph 
                (1)(B)(ii) as paragraph (5) of subsection (z) and 
                realigning the left margins accordingly; and
                    (B) by striking paragraph (1) and inserting the 
                following:
            ``(1) Amount of increase.--Notwithstanding subsection (b), 
        the Federal medical assistance percentage for a State that is 
        one of the 50 States or the District of Columbia, with respect 
        to amounts expended by such State for medical assistance for 
        newly eligible individuals described in subclause (VIII) of 
        section 1902(a)(10)(A)(i), shall be equal to--
                    ``(A) 100 percent for calendar quarters in 2014, 
                2015, and 2016;
                    ``(B) 95 percent for calendar quarters in 2017;
                    ``(C) 94 percent for calendar quarters in 2018;
                    ``(D) 93 percent for calendar quarters in 2019; and
                    ``(E) 90 percent for calendar quarters in 2020 and 
                each year thereafter.''; and
            (2) in subsection (z)--
                    (A) in paragraph (1), by striking ``September 30, 
                2019'' and inserting ``December 31, 2015'' and by 
                striking ``subsection (y)(1)(B)(ii)(II)'' and inserting 
                ``paragraph (3)'';
                    (B) by striking paragraphs (2) through (4) and 
                inserting the following:

[[Page 124 STAT.1052]]

            ``(2)(A) For calendar quarters in 2014 and each year 
        thereafter, the Federal medical assistance percentage otherwise 
        determined under subsection (b) for an expansion State described 
        in paragraph (3) with respect to medical assistance for 
        individuals described in section 1902(a)(10)(A)(i)(VIII) who are 
        nonpregnant childless adults with respect to whom the State may 
        require enrollment in benchmark coverage under section 1937 
        shall be equal to the percent specified in subparagraph (B)(i) 
        for such year.
            ``(B)(i) The percent specified in this subparagraph for a 
        State for a year is equal to the Federal medical assistance 
        percentage (as defined in the first sentence of subsection (b)) 
        for the State increased by a number of percentage points equal 
        to the transition percentage (specified in clause (ii) for the 
        year) of the number of percentage points by which--
                    ``(I) such Federal medical assistance percentage for 
                the State, is less than
                    ``(II) the percent specified in subsection (y)(1) 
                for the year.
            ``(ii) The transition percentage specified in this clause 
        for--
                    ``(I) 2014 is 50 percent;
                    ``(II) 2015 is 60 percent;
                    ``(III) 2016 is 70 percent;
                    ``(IV) 2017 is 80 percent;
                    ``(V) 2018 is 90 percent; and
                    ``(VI) 2019 and each subsequent year is 100 
                percent.''; and
                    (C) by redesignating paragraph (5) (as added by 
                paragraph (1)(A) of this section) as paragraph (3), 
                realigning the left margins to align with paragraph (2), 
                and striking the heading and all that follows through 
                ``a State is'' and inserting ``A State is''.
SEC. 1202. PAYMENTS TO PRIMARY CARE PHYSICIANS.

    (a) In General.--
            (1) Fee-for-service payments.--Section 1902 of the Social 
        Security Act (42 U.S.C. 1396a), as amended by section 2303(a)(2) 
        of the Patient Protection and Affordable Care Act, is amended--
                    (A) in subsection (a)(13)--
                          (i) by striking ``and'' at the end of 
                      subparagraph (A);
                          (ii) by adding ``and'' at the end of 
                      subparagraph (B); and
                          (iii) by adding at the end the following new 
                      subparagraph:
                    ``(C) payment for primary care services (as defined 
                in subsection (jj)) furnished in 2013 and 2014 by a 
                physician with a primary specialty designation of family 
                medicine, general internal medicine, or pediatric 
                medicine at a rate not less than 100 percent of the 
                payment rate that applies to such services and physician 
                under part B of title XVIII (or, if greater, the payment 
                rate that would be applicable under such part if the 
                conversion factor under section 1848(d) for the year 
                involved were the conversion factor under such section 
                for 2009);''; and
                    (B) by adding at the end the following new 
                subsection:

[[Page 124 STAT.1053]]

    ``(jj) Primary Care Services Defined.--For purposes of subsection 
(a)(13)(C), the term `primary care services' means--
            ``(1) evaluation and management services that are procedure 
        codes (for services covered under title XVIII) for services in 
        the category designated Evaluation and Management in the 
        Healthcare Common Procedure Coding System (established by the 
        Secretary under section 1848(c)(5) as of December 31, 2009, and 
        as subsequently modified); and
            ``(2) services related to immunization administration for 
        vaccines and toxoids for which CPT codes 90465, 90466, 90467, 
        90468, 90471, 90472, 90473, or 90474 (as subsequently modified) 
        apply under such System.''.
            (2) Under medicaid managed care plans.--Section 1932(f) of 
        such Act (42 U.S.C. 1396u-2(f)) is amended--
                    (A) in the heading, by adding at the end the 
                following: ``; Adequacy of Payment for Primary Care 
                Services''; and
                    (B) by inserting before the period at the end the 
                following: ``and, in the case of primary care services 
                described in section 1902(a)(13)(C), consistent with the 
                minimum payment rates specified in such section 
                (regardless of the manner in which such payments are 
                made, including in the form of capitation or partial 
                capitation)''.

    (b) Increase in Payment Using Increased FMAP.--Section 1905 of the 
Social Security Act, as amended by section 1004(b) of this Act and 
section 10201(c)(6) of the Patient Protection and Affordable Care Act, 
is amended by adding at the end the following new subsection:
    ``(dd) Increased FMAP for Additional Expenditures for Primary Care 
Services.--Notwithstanding subsection (b), with respect to the portion 
of the amounts expended for medical assistance for services described in 
section 1902(a)(13)(C) furnished on or after January 1, 2013, and before 
January 1, 2015, that is attributable to the amount by which the minimum 
payment rate required under such section (or, by application, section 
1932(f)) exceeds the payment rate applicable to such services under the 
State plan as of July 1, 2009, the Federal medical assistance percentage 
for a State that is one of the 50 States or the District of Columbia 
shall be equal to 100 percent. The preceding sentence does not prohibit 
the payment of Federal financial participation based on the Federal 
medical assistance percentage for amounts in excess of those specified 
in such sentence.''.
SEC. 1203. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS.

    (a) In General.--Section 1923(f) of the Social Security Act (42 
U.S.C. 1396r-4(f)), as amended by sections 2551(a)(4) and 10201(e)(1) of 
the Patient Protection and Affordable Care Act, is amended--
            (1) in paragraph (6)(B)(iii), in the matter preceding 
        subclause (I), by striking ``or paragraph (7)''; and
            (2) by striking paragraph (7) and inserting the following:
            ``(7) Medicaid dsh reductions.--
                    ``(A) Reductions.--
                          ``(i) In general.--For each of fiscal years 
                      2014 through 2020 the Secretary shall effect the 
                      following reductions:

[[Page 124 STAT.1054]]

                                    ``(I) Reduction in dsh allotments.--
                                The Secretary shall reduce DSH 
                                allotments to States in the amount 
                                specified under the DSH health reform 
                                methodology under subparagraph (B) for 
                                the State for the fiscal year.
                                    ``(II) Reductions in payments.--The 
                                Secretary shall reduce payments to 
                                States under section 1903(a) for each 
                                calendar quarter in the fiscal year, in 
                                the manner specified in clause (iii), in 
                                an amount equal to \1/4\ of the DSH 
                                allotment reduction under subclause (I) 
                                for the State for the fiscal year.
                          ``(ii) Aggregate reductions.--The aggregate 
                      reductions in DSH allotments for all States under 
                      clause (i)(I) shall be equal to--
                                    ``(I) $500,000,000 for fiscal year 
                                2014;
                                    ``(II) $600,000,000 for fiscal year 
                                2015;
                                    ``(III) $600,000,000 for fiscal year 
                                2016;
                                    ``(IV) $1,800,000,000 for fiscal 
                                year 2017;
                                    ``(V) $5,000,000,000 for fiscal year 
                                2018;
                                    ``(VI) $5,600,000,000 for fiscal 
                                year 2019; and
                                    ``(VII) $4,000,000,000 for fiscal 
                                year 2020.
                      The Secretary shall distribute such aggregate 
                      reductions among States in accordance with 
                      subparagraph (B).
                          ``(iii) Manner of payment reduction.--The 
                      amount of the payment reduction under clause 
                      (i)(II) for a State for a quarter shall be deemed 
                      an overpayment to the State under this title to be 
                      disallowed against the State's regular quarterly 
                      draw for all spending under section 1903(d)(2). 
                      Such a disallowance is not subject to a 
                      reconsideration under subsections (d) and (e) of 
                      section 1116.
                          ``(iv) Definition.--In this paragraph, the 
                      term `State' means the 50 States and the District 
                      of Columbia.
                    ``(B) DSH health reform methodology.--The Secretary 
                shall carry out subparagraph (A) through use of a DSH 
                Health Reform methodology that meets the following 
                requirements:
                          ``(i) The methodology imposes the largest 
                      percentage reductions on the States that--
                                    ``(I) have the lowest percentages of 
                                uninsured individuals (determined on the 
                                basis of data from the Bureau of the 
                                Census, audited hospital cost reports, 
                                and other information likely to yield 
                                accurate data) during the most recent 
                                year for which such data are available; 
                                or
                                    ``(II) do not target their DSH 
                                payments on--
                                            ``(aa) hospitals with high 
                                        volumes of Medicaid inpatients 
                                        (as defined in subsection 
                                        (b)(1)(A)); and
                                            ``(bb) hospitals that have 
                                        high levels of uncompensated 
                                        care (excluding bad debt).
                          ``(ii) The methodology imposes a smaller 
                      percentage reduction on low DSH States described 
                      in paragraph (5)(B).

[[Page 124 STAT.1055]]

                          ``(iii) The methodology takes into account the 
                      extent to which the DSH allotment for a State was 
                      included in the budget neutrality calculation for 
                      a coverage expansion approved under section 1115 
                      as of July 31, 2009.''.

    (b) Extension of DSH Allotment.--Section 1923(f)(6)(A) of the Social 
Security Act (42 U.S.C. 1396r-4(f)(6)(A)) is amended by adding at the 
end the following:
                          ``(v) Allotment for 2d, 3rd, and 4th quarters 
                      of fiscal year 2012 and for fiscal year 2013.--
                      Notwithstanding the table set forth in paragraph 
                      (2):
                                    ``(I) 2d, 3rd, and 4th quarters of 
                                fiscal year 2012.--In the case of a 
                                State that has a DSH allotment of $0 for 
                                the 2d, 3rd, and 4th quarters of fiscal 
                                year 2012, the DSH allotment shall be 
                                $47,200,000 for such quarters.
                                    ``(II) Fiscal year 2013.--In the 
                                case of a State that has a DSH allotment 
                                of $0 for fiscal year 2013, the DSH 
                                allotment shall be $53,100,000 for such 
                                fiscal year.''.
SEC. 1204. FUNDING FOR THE TERRITORIES.

    (a) In General.--Part III of subtitle D of title I of the Patient 
Protection and Affordable Care Act, as amended by section 10104(m) of 
such Act, is amended by inserting after section 1322 the following 
section:
``SEC. 1323. <<NOTE: 42 USC 18043.>> FUNDING FOR THE TERRITORIES.

    ``(a) In General.--A territory that--
            ``(1) elects consistent with subsection (b) to establish an 
        Exchange in accordance with part II of this subtitle and 
        establishes such an Exchange in accordance with such part shall 
        be treated as a State for purposes of such part and shall be 
        entitled to payment from the amount allocated to the territory 
        under subsection (c); or
            ``(2) does not make such election shall be entitled to an 
        increase in the dollar limitation applicable to the territory 
        under subsections (f) and (g) of section 1108 of the Social 
        Security Act (42 U.S.C. 1308) for such period in such amount for 
        such territory and such increase shall not be taken into account 
        in computing any other amount under such subsections.

    ``(b) Terms and Conditions.--An election under subsection (a)(1) 
shall--
            ``(1) <<NOTE: Deadline.>> not be effective unless the 
        election is consistent with section 1321 and is received not 
        later than October 1, 2013; and
            ``(2) <<NOTE: Contracts.>> be contingent upon entering into 
        an agreement between the territory and the Secretary that 
        requires that--
                    ``(A) funds provided under the agreement shall be 
                used only to provide premium and cost-sharing assistance 
                to residents of the territory obtaining health insurance 
                coverage through the Exchange; and
                    ``(B) the premium and cost-sharing assistance 
                provided under such agreement shall be structured in 
                such a manner so as to prevent any gap in assistance for 
                individuals between the income level at which medical 
                assistance is available through the territory's Medicaid 
                plan under title XIX of the Social Security Act and the 
                income level at

[[Page 124 STAT.1056]]

                which premium and cost-sharing assistance is available 
                under the agreement.

    ``(c) Appropriation and Allocation.--
            ``(1) <<NOTE: Time period.>> Appropriation.--Out of any 
        funds in the Treasury not otherwise appropriated, there is 
        appropriated for purposes of payment pursuant to subsection (a) 
        $1,000,000,000, to be available during the period beginning with 
        2014 and ending with 2019.
            ``(2) Allocation.--The Secretary shall allocate the amount 
        appropriated under paragraph (1) among the territories for 
        purposes of carrying out this section as follows:
                    ``(A) For Puerto Rico, $925,000,000.
                    ``(B) For another territory, the portion of 
                $75,000,000 specified by the Secretary.''.

    (b) Medicaid Funding.--
            (1) Increase in funding caps.--Section 1108(g) of the Social 
        Security Act (42 U.S.C. 1308(g)), as amended by section 2005(a) 
        of the Patient Protection and Affordable Care Act, is amended--
                    (A) in paragraph (2), by inserting ``and section 
                1323(a)(2) of the Patient Protection and Affordable Care 
                Act'' after ``subject to''; and
                    (B) by striking paragraph (5) and inserting the 
                following:
            ``(5) Additional increase.-- <<NOTE: Time period.>> The 
        Secretary shall increase the amounts otherwise determined under 
        this subsection for Puerto Rico, the Virgin Islands, Guam, the 
        Northern Mariana Islands, and American Samoa (after the 
        application of subsection (f) and the preceding paragraphs of 
        this subsection) for the period beginning July 1, 2011, and 
        ending on September 30, 2019, by such amounts that the total 
        additional payments under title XIX to such territories equals 
        $6,300,000,000 for such period. The Secretary shall increase 
        such amounts in proportion to the amounts applicable to such 
        territories under this subsection and subsection (f) on the date 
        of enactment of this paragraph.''.
            (2) Disregard of payments; increased fmap.--Section 2005 of 
        the Patient Protection and Affordable Care Act <<NOTE: Ante, p. 
        283.>> is amended--
                    (A) <<NOTE: Applicability.>> by repealing subsection 
                (b) (and the amendments made by that subsection) and 
                section 1108(g)(4) of the Social Security Act shall be 
                applied as if such amendments had never been enacted; 
                and
                    (B) in subsection (c)(2), by striking ``January'' 
                and inserting ``July''.
SEC. 1205. DELAY IN COMMUNITY FIRST CHOICE OPTION.

    Section 1915(k)(1) of the Social Security Act (42 U.S.C. 1396n(k)), 
as added by section 2401 of the Patient Protection and Affordable Care 
Act, is amended by striking ``October 1, 2010'' and inserting ``October 
1, 2011''.
SEC. 1206. DRUG REBATES FOR NEW FORMULATIONS OF EXISTING DRUGS.

    (a) Treatment of New Formulations.--Subparagraph (C) of section 
1927(c)(2) of the Social Security Act (42 U.S.C. 1396r-8(c)(2)), as 
added by section 2501(d) of the Patient Protection and Affordable Care 
Act, is amended to read as follows:

[[Page 124 STAT.1057]]

                    ``(C) Treatment of new formulations.--In the case of 
                a drug that is a line extension of a single source drug 
                or an innovator multiple source drug that is an oral 
                solid dosage form, the rebate obligation with respect to 
                such drug under this section shall be the amount 
                computed under this section for such new drug or, if 
                greater, the product of--
                          ``(i) the average manufacturer price of the 
                      line extension of a single source drug or an 
                      innovator multiple source drug that is an oral 
                      solid dosage form;
                          ``(ii) the highest additional rebate 
                      (calculated as a percentage of average 
                      manufacturer price) under this section for any 
                      strength of the original single source drug or 
                      innovator multiple source drug; and
                          ``(iii) the total number of units of each 
                      dosage form and strength of the line extension 
                      product paid for under the State plan in the 
                      rebate period (as reported by the State).
                <<NOTE: Definition.>> In this subparagraph, the term 
                `line extension' means, with respect to a drug, a new 
                formulation of the drug, such as an extended release 
                formulation.''.

    (b) <<NOTE: 42 USC 1396r-8 note.>> Effective Date.--The amendment 
made by subsection (a) shall take effect as if included in the enactment 
of the Patient Protection and Affordable Care Act.

              Subtitle D--Reducing Fraud, Waste, and Abuse

SEC. 1301. COMMUNITY MENTAL HEALTH CENTERS.

    (a) In General.--Section 1861(ff)(3)(B) of the Social Security Act 
(42 U.S.C. 1395x(ff)(3)(B)) is amended--
            (1) in clause (ii), by striking ``and'' at the end;
            (2) by redesignating clause (iii) as clause (iv); and
            (3) by inserting after clause (ii) the following:
            ``(iii) provides at least 40 percent of its services to 
        individuals who are not eligible for benefits under this title; 
        and''.

    (b) Restriction.--Section 1861(ff)(3)(A) of such Act (42 U.S.C. 
1395x(ff)(3)(A)) is amended by inserting ``other than in an individual's 
home or in an inpatient or residential setting'' before the period.
    (c) <<NOTE: Applicability. 42 USC 1395x note.>> Effective Date.--The 
amendments made by this section shall apply to items and services 
furnished on or after the first day of the first calendar quarter that 
begins at least 12 months after the date of the enactment of this Act.
SEC. 1302. MEDICARE PREPAYMENT MEDICAL REVIEW LIMITATIONS.

    Section 1874A(h) of the Social Security Act <<NOTE: 42 USC 1395kk-
1.>> (42 U.S.C. 1395w-3a(h)) is repealed.
SEC. 1303. FUNDING TO FIGHT FRAUD, WASTE, AND ABUSE.

    (a) Funding to Fight Fraud, Waste, and Abuse.--
            (1) In general.--Section 1817(k) of the Social Security Act 
        42 U.S.C. 1395i(k)), as amended by section 6402(i) of the 
        Patient Protection and Affordable Care Act, is further amended--
                    (A) by adding at the end the following new 
                paragraph:

[[Page 124 STAT.1058]]

            ``(8) Additional funding.--
                    ``(A) In general.--In addition to the funds 
                otherwise appropriated to the Account from the Trust 
                Fund under paragraphs (3)(C) and (4)(A) and for purposes 
                described in paragraphs (3)(C) and (4)(A), there are 
                hereby appropriated to such Account from such Trust Fund 
                the following additional amounts:
                          ``(i) For fiscal year 2011, $95,000,000.
                          ``(ii) For fiscal year 2012, $55,000,000.
                          ``(iii) For each of fiscal years 2013 and 
                      2014, $30,000,000.
                          ``(iv) For each of fiscal years 2015 and 2016, 
                      $20,000,000.
                    ``(B) Allocation.--The funds 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.''; and
                    (B) in paragraph (4)(A), by inserting ``for 
                activities described in paragraph (3)(C) and'' after 
                ``necessary''.

    (b) Medicaid Integrity Program.--Section 1936(e)(1) of such Act (42 
U.S.C. 1396-u6(e)(1)) <<NOTE: 42 USC 1396u-6.>> is amended--
            (1) in subparagraph (B), by striking at the end ``and'';
            (2) in subparagraph (C)--
                    (A) by striking ``for each fiscal year thereafter'' 
                and inserting ``for each of fiscal years 2009 and 
                2010''; and
                    (B) by striking the period and inserting ``; and''; 
                and
            (3) by adding at the end the following new subparagraph:
                    ``(D) for each fiscal year after fiscal year 2010, 
                the amount appropriated under this paragraph for the 
                previous fiscal year, increased by the percentage 
                increase in the consumer price index for all urban 
                consumers (all items; United States city average) over 
                the previous year.''.
SEC. 1304. 90-DAY PERIOD OF ENHANCED OVERSIGHT FOR INITIAL CLAIMS 
                          OF DME SUPPLIERS.

    Section 1866(j), as amended by section 6401 of the Patient 
Protection and Affordable Care Act, <<NOTE: 42 USC 1395cc.>> is further 
amended--
            (1) by redesignating paragraphs (4) through (7) as 
        paragraphs (5) through (8), respectively; and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) 90-day period of enhanced oversight for initial claims 
        of dme suppliers. <<NOTE: Determination.>> --For periods 
        beginning after January 1, 2011, if the Secretary determines 
        that there is a significant risk of fraudulent activity among 
        suppliers of durable medical equipment, in the case of a 
        supplier of durable medical equipment who is within a category 
        or geographic area under title XVIII identified pursuant to such 
        determination and who is initially enrolling under such title, 
        the Secretary shall, notwithstanding sections 1816(c), 1842(c), 
        and 1869(a)(2), withhold payment under such title with respect 
        to durable medical equipment furnished by such supplier during 
        the 90-day period beginning on the date of the first submission 
        of a claim under such title for durable medical equipment 
        furnished by such supplier.''.

[[Page 124 STAT.1059]]

               Subtitle E--Provisions Relating to Revenue

SEC. 1401. HIGH-COST PLAN EXCISE TAX.

    (a) In General.--Section 4980I of the Internal Revenue Code of 1986, 
as added by section 9001 of the Patient Protection and Affordable Care 
Act and amended by section 10901 of such Act, is <<NOTE: Ante, p. 848, 
1015.>>  amended--
            (1) in subsection (b)(3)(B)--
                    (A) by striking ``The annual'' and inserting the 
                following:
                          ``(i) In general.--Except as provided in 
                      clause (ii), the annual''; and
                    (B) by adding at the end the following new clause:
                          ``(ii) Multiemployer plan coverage.--Any 
                      coverage provided under a multiemployer plan (as 
                      defined in section 414(f)) shall be treated as 
                      coverage other than self-only coverage.'';
            (2) in subsection (b)(3)(C)--
                    (A) by striking ``Except as provided in subparagraph 
                (D)--'';
                    (B) in clause (i)--
                          (i) by striking ``2013'' each place it appears 
                      in the heading and the text and inserting 
                      ``2018'';
                          (ii) by striking ``$8,500'' in subclause (I) 
                      and inserting ``$10,200 multiplied by the health 
                      cost adjustment percentage (determined by only 
                      taking into account self-only coverage)''; and
                          (iii) by striking ``$23,000'' in subclause 
                      (II) and inserting ``$27,500 multiplied by the 
                      health cost adjustment percentage (determined by 
                      only taking into account coverage other than self-
                      only coverage)'';
                    (C) by redesignating clauses (ii) and (iii) as 
                clauses (iv) and (v), respectively, and by inserting 
                after clause (i) the following new clauses:
                          ``(ii) Health cost adjustment percentage.--For 
                      purposes of clause (i), the health cost adjustment 
                      percentage is equal to 100 percent plus the excess 
                      (if any) of--
                                    ``(I) the percentage by which the 
                                per employee cost for providing coverage 
                                under the Blue Cross/Blue Shield 
                                standard benefit option under the 
                                Federal Employees Health Benefits Plan 
                                for plan year 2018 (determined by using 
                                the benefit package for such coverage in 
                                2010) exceeds such cost for plan year 
                                2010, over
                                    ``(II) 55 percent.
                          ``(iii) Age and gender adjustment.--
                                    ``(I) In general.--The amount 
                                determined under subclause (I) or (II) 
                                of clause (i), whichever is applicable, 
                                for any taxable period shall be 
                                increased by the amount determined under 
                                subclause (II).
                                    ``(II) Amount determined.--The 
                                amount determined under this subclause 
                                is an amount equal to the excess (if 
                                any) of--

[[Page 124 STAT.1060]]

                                            ``(aa) the premium cost of 
                                        the Blue Cross/Blue Shield 
                                        standard benefit option under 
                                        the Federal Employees Health 
                                        Benefits Plan for the type of 
                                        coverage provided such 
                                        individual in such taxable 
                                        period if priced for the age and 
                                        gender characteristics of all 
                                        employees of the individual's 
                                        employer, over
                                            ``(bb) that premium cost for 
                                        the provision of such coverage 
                                        under such option in such 
                                        taxable period if priced for the 
                                        age and gender characteristics 
                                        of the national workforce.''.
                    (D) in clause (iv), as redesignated by subparagraph 
                (C)--
                          (i) by inserting ``covered by the plan'' after 
                      ``whose employees''; and
                          (ii) by striking subclauses (I) and (II) and 
                      inserting the following:
                                    ``(I) the dollar amount in clause 
                                (i)(I) shall be increased by $1,650, and
                                    ``(II) the dollar amount in clause 
                                (i)(II) shall be increased by $3,450,'', 
                                and
                    (E) in clause (v), as redesignated by subparagraph 
                (C)--
                          (i) by striking ``2013'' and inserting 
                      ``2018'';
                          (ii) by striking ``clauses (i) and (ii)'' and 
                      inserting ``clauses (i) (after the application of 
                      clause (ii)) and (iv)''; and
                          (iii) by inserting ``in the case of 
                      determinations for calendar years beginning before 
                      2020'' after ``1 percentage point'' in subclause 
                      (II) thereof;
            (3) by striking subparagraph (D) of subsection (b)(3);
            (4) in subsection (d)(1)(B), by redesignating clause (ii) as 
        clause (iii) and by inserting after clause (i) the following new 
        clause:
                          ``(ii) any coverage under a separate policy, 
                      certificate, or contract of insurance which 
                      provides benefits substantially all of which are 
                      for treatment of the mouth (including any organ or 
                      structure within the mouth) or for treatment of 
                      the eye, or''; and
            (5) in subsection (d), by adding at the end the following 
        new paragraph:
            ``(3) Employee.--The term `employee' includes any former 
        employee, surviving spouse, or other primary insured 
        individual.''.

    (b) Effective Dates.--
            (1) Section 9001(c) of the Patient Protection and Affordable 
        Care Act <<NOTE: Ante, p. 853.>> is amended by striking ``2012'' 
        and inserting ``2017''.
            (2) Section 10901(c) of the Patient Protection and 
        Affordable Care Act is <<NOTE: Ante, p. 1016.>> amended by 
        striking ``2012'' and inserting ``2017''.
SEC. 1402. UNEARNED INCOME MEDICARE CONTRIBUTION.

    (a) Investment Income.--
            (1) In general.--Subtitle A of the Internal Revenue Code of 
        1986 is amended by inserting after chapter 2 the following new 
        chapter:

[[Page 124 STAT.1061]]

           ``CHAPTER 2A--UNEARNED INCOME MEDICARE CONTRIBUTION

``Sec. 1411. Imposition of tax.

``SEC. 1411. <<NOTE: Definitions. 26 USC 1411.>> IMPOSITION OF 
                          TAX.

    ``(a) In General.--Except as provided in subsection (e)--
            ``(1) Application to individuals.--In the case of an 
        individual, there is hereby imposed (in addition to any other 
        tax imposed by this subtitle) for each taxable year a tax equal 
        to 3.8 percent of the lesser of--
                    ``(A) net investment income for such taxable year, 
                or
                    ``(B) the excess (if any) of--
                          ``(i) the modified adjusted gross income for 
                      such taxable year, over
                          ``(ii) the threshold amount.
            ``(2) Application to estates and trusts.--In the case of an 
        estate or trust, there is hereby imposed (in addition to any 
        other tax imposed by this subtitle) for each taxable year a tax 
        of 3.8 percent of the lesser of--
                    ``(A) the undistributed net investment income for 
                such taxable year, or
                    ``(B) the excess (if any) of--
                          ``(i) the adjusted gross income (as defined in 
                      section 67(e)) for such taxable year, over
                          ``(ii) the dollar amount at which the highest 
                      tax bracket in section 1(e) begins for such 
                      taxable year.

    ``(b) Threshold Amount.--For purposes of this chapter, the term 
`threshold amount' means--
            ``(1) in the case of a taxpayer making a joint return under 
        section 6013 or a surviving spouse (as defined in section 2(a)), 
        $250,000,
            ``(2) in the case of a married taxpayer (as defined in 
        section 7703) filing a separate return, \1/2\ of the dollar 
        amount determined under paragraph (1), and
            ``(3) in any other case, $200,000.

    ``(c) Net Investment Income.--For purposes of this chapter--
            ``(1) In general.--The term `net investment income' means 
        the excess (if any) of--
                    ``(A) the sum of--
                          ``(i) gross income from interest, dividends, 
                      annuities, royalties, and rents, other than such 
                      income which is derived in the ordinary course of 
                      a trade or business not described in paragraph 
                      (2),
                          ``(ii) other gross income derived from a trade 
                      or business described in paragraph (2), and
                          ``(iii) net gain (to the extent taken into 
                      account in computing taxable income) attributable 
                      to the disposition of property other than property 
                      held in a trade or business not described in 
                      paragraph (2), over
                    ``(B) the deductions allowed by this subtitle which 
                are properly allocable to such gross income or net gain.
            ``(2) Trades and businesses to which tax applies.--A trade 
        or business is described in this paragraph if such trade or 
        business is--
                    ``(A) a passive activity (within the meaning of 
                section 469) with respect to the taxpayer, or

[[Page 124 STAT.1062]]

                    ``(B) a trade or business of trading in financial 
                instruments or commodities (as defined in section 
                475(e)(2)).
            ``(3) Income on investment of working capital subject to 
        tax.-- <<NOTE: Applicability.>> A rule similar to the rule of 
        section 469(e)(1)(B) shall apply for purposes of this 
        subsection.
            ``(4) Exception for certain active interests in partnerships 
        and s corporations.--In the case of a disposition of an interest 
        in a partnership or S corporation--
                    ``(A) gain from such disposition shall be taken into 
                account under clause (iii) of paragraph (1)(A) only to 
                the extent of the net gain which would be so taken into 
                account by the transferor if all property of the 
                partnership or S corporation were sold for fair market 
                value immediately before the disposition of such 
                interest, and
                    ``(B) <<NOTE: Applicability.>> a rule similar to the 
                rule of subparagraph (A) shall apply to a loss from such 
                disposition.
            ``(5) Exception for distributions from qualified plans.--The 
        term `net investment income' shall not include any distribution 
        from a plan or arrangement described in section 401(a), 403(a), 
        403(b), 408, 408A, or 457(b).
            ``(6) Special rule.--Net investment income shall not include 
        any item taken into account in determining self-employment 
        income for such taxable year on which a tax is imposed by 
        section 1401(b).

    ``(d) Modified Adjusted Gross Income.--For purposes of this chapter, 
the term `modified adjusted gross income' means adjusted gross income 
increased by the excess of--
            ``(1) the amount excluded from gross income under section 
        911(a)(1), over
            ``(2) the amount of any deductions (taken into account in 
        computing adjusted gross income) or exclusions disallowed under 
        section 911(d)(6) with respect to the amounts described in 
        paragraph (1).

    ``(e) Nonapplication of Section.--This section shall not apply to--
            ``(1) a nonresident alien, or
            ``(2) a trust all of the unexpired interests in which are 
        devoted to one or more of the purposes described in section 
        170(c)(2)(B).''.
            (2) Estimated taxes.--Section 6654 of the Internal Revenue 
        Code of 1986 <<NOTE: 26 USC 6654.>> is amended--
                    (A) in subsection (a), by striking ``and the tax 
                under chapter 2'' and inserting ``the tax under chapter 
                2, and the tax under chapter 2A''; and
                    (B) in subsection (f)--
                          (i) by striking ``minus'' at the end of 
                      paragraph (2) and inserting ``plus''; and
                          (ii) by redesignating paragraph (3) as 
                      paragraph (4) and inserting after paragraph (2) 
                      the following new paragraph:
            ``(3) the taxes imposed by chapter 2A, minus''.
            (3) Clerical amendment.--The table of chapters for subtitle 
        A of chapter 1 of the Internal Revenue Code of 1986 is amended 
        by inserting after the item relating to chapter 2 the following 
        new item:

[[Page 124 STAT.1063]]

         ``Chapter 2A--Unearned Income Medicare Contribution''.

            (4) <<NOTE: 26 USC 1411 note.>> Effective dates.--The 
        amendments made by this subsection shall apply to taxable years 
        beginning after December 31, 2012.

    (b) Earned Income.--
            (1) Threshold.--
                    (A) FICA.--Paragraph (2) of section 3101(b) of the 
                Internal Revenue Code of 1986, as added by section 9015 
                of the Patient Protection and Affordable Care Act and 
                amended by section 10906 of such Act, <<NOTE: 26 USC 
                3101.>> is amended by striking ``and'' at the end of 
                subparagraph (A), by redesignating subparagraph (B) as 
                subparagraph (C), and by inserting after subparagraph 
                (A) the following new subparagraph:
                    ``(B) in the case of a married taxpayer (as defined 
                in section 7703) filing a separate return, \1/2\ of the 
                dollar amount determined under subparagraph (A), and''.
                    (B) SECA.--Section 1401(b)(2) of the Internal 
                Revenue Code of 1986, as added by section 9015 of the 
                Patient Protection and Affordable Care Act and amended 
                by section 10906 of such Act, <<NOTE: 26 USC 1401.>> is 
                amended--
                          (i) in subparagraph (A), by striking ``and'' 
                      at the end of clause (i), by redesignating clause 
                      (ii) as clause (iii), and by inserting after 
                      clause (i) the following new clause:
                          ``(ii) in the case of a married taxpayer (as 
                      defined in section 7703) filing a separate return, 
                      \1/2\ of the dollar amount determined under clause 
                      (i), and''; and
                          (ii) in subparagraph (B), by striking ``under 
                      clauses (i) and (ii)'' and inserting ``under 
                      clause (i), (ii), or (iii) (whichever is 
                      applicable)''.
            (2) Estimated taxes.--Section 6654 of the Internal Revenue 
        Code of 1986 <<NOTE: 26 USC 6654.>> is amended by redesignating 
        subsection (m) as subsection (n) and by inserting after 
        subsection (l) the following new subsection:

    ``(m) Special Rule for Medicare Tax.--For purposes of this section, 
the tax imposed under section 3101(b)(2) (to the extent not withheld) 
shall be treated as a tax imposed under chapter 2.''.
            (3) <<NOTE: Applicability. 26 USC 1401 note.>> Effective 
        date.--The amendments made by this subsection shall apply with 
        respect to remuneration received, and taxable years beginning 
        after, December 31, 2012.
SEC. 1403. DELAY OF LIMITATION ON HEALTH FLEXIBLE SPENDING 
                          ARRANGEMENTS UNDER CAFETERIA PLANS.

    (a) In General.--Section 10902(b) of the Patient Protection and 
Affordable Care Act <<NOTE: Ante, p. 1016.>> is amended by striking 
``December 31, 2010'' and inserting ``December 31, 2012''.

    (b) Inflation Adjustment.--Paragraph (2) of section 125(i) of the 
Internal Revenue Code of 1986, as added by section 9005 of the Patient 
Protection and Affordable Care Act and amended by section 10902 of such 
Act, <<NOTE: Ante, p. 855, 1016.>> is amended--
            (1) in the matter preceding subparagraph (A), by striking 
        ``December 31, 2011'' and inserting ``December 31, 2013''; and
            (2) in subparagraph (B), by striking ``2010'' and inserting 
        ``2012''.

[[Page 124 STAT.1064]]

SEC. 1404. BRAND NAME PHARMACEUTICALS.

    (a) In General.--Section 9008 of the Patient Protection and 
Affordable Care <<NOTE: Ante, p. 859.>> Act is amended--
            (1) in subsection (a)(1), by striking ``2009'' and inserting 
        ``2010'';
            (2) in subsection (b)--
                    (A) by striking ``$2,300,000,000'' in paragraph (1) 
                and inserting ``the applicable amount''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Applicable amount.--For purposes of paragraph (1), the 
        applicable amount shall be determined in accordance with the 
        following table:


``Calendar year                          Applicable amount
  2011.................................  $2,500,000,000
  2012.................................  $2,800,000,000
  2013.................................  $2,800,000,000
  2014.................................  $3,000,000,000
  2015.................................  $3,000,000,000
  2016.................................  $3,000,000,000
  2017.................................  $4,000,000,000
  2018.................................  $4,100,000,000
  2019 and thereafter..................  $2,800,000,000.'';
 


            (3) in subsection (d), by adding at the end the following 
        new paragraph:
            ``(3) Joint and several liability.--If more than one person 
        is liable for payment of the fee under subsection (a) with 
        respect to a single covered entity by reason of the application 
        of paragraph (2), all such persons shall be jointly and 
        severally liable for payment of such fee.''; and
            (4) by striking subsection (j) and inserting the following 
        new subsection:

    ``(j) Effective Date.--This section shall apply to calendar years 
beginning after December 31, 2010.''.
    (b) <<NOTE: 26 USC 4001 note prec.>> Effective Date.--The amendments 
made by this section shall take effect as if included in section 9008 of 
the Patient Protection and Affordable Care Act.
SEC. 1405. EXCISE TAX ON MEDICAL DEVICE MANUFACTURERS.

    (a) In General.--Chapter 32 of the Internal Revenue Code of 1986 is 
amended--
            (1) by inserting after subchapter D the following new 
        subchapter:

                     ``Subchapter E--Medical Devices

``Sec. 4191. <<NOTE: 26 USC 4191.>> Medical devices.

``SEC. 4191. MEDICAL DEVICES.

    ``(a) In General.--There is hereby imposed on the sale of any 
taxable medical device by the manufacturer, producer, or importer a tax 
equal to 2.3 percent of the price for which so sold.
    ``(b) Taxable Medical Device.--For purposes of this section--
            ``(1) In general.-- <<NOTE: Definition.>> The term `taxable 
        medical device' means any device (as defined in section 201(h) 
        of the Federal Food, Drug, and Cosmetic Act) intended for 
        humans.
            ``(2) Exemptions.--Such term shall not include--

[[Page 124 STAT.1065]]

                    ``(A) eyeglasses,
                    ``(B) contact lenses,
                    ``(C) hearing aids, and
                    ``(D) any other medical device determined by the 
                Secretary to be of a type which is generally purchased 
                by the general public at retail for individual use.'', 
                and
            (2) by inserting after the item relating to subchapter D in 
        the table of subchapters for such chapter the following new 
        item:

                   ``subchapter e. medical devices''.

    (b) Certain Exemptions Not to Apply.--
            (1) Section 4221(a) of the Internal Revenue Code of 1986 
        is <<NOTE: 26 USC 4221.>> amended by adding at the end the 
        following new sentence: ``In the case of the tax imposed by 
        section 4191, paragraphs (3), (4), (5), and (6) shall not 
        apply.''.
            (2) Section 6416(b)(2) of such Code <<NOTE: 26 USC 
        6416.>> is amended by adding at the end the following: ``In the 
        case of the tax imposed by section 4191, subparagraphs (B), (C), 
        (D), and (E) shall not apply.''.

    (c) <<NOTE: 26 USC 4191 note.>> Effective Date.--The amendments made 
by this section shall apply to sales after December 31, 2012.

    (d) Repeal of Section 9009 of the Patient Protection and Affordable 
Care Act.-- <<NOTE: Effective date.>> Section 9009 of the Patient 
Protection and Affordable Care Act, as amended by section 10904 of such 
Act, <<NOTE: Ante, p. 862, 1016.>> is repealed effective as of the date 
of enactment of that Act.
SEC. 1406. HEALTH INSURANCE PROVIDERS.

    (a) In General.--Section 9010 of the Patient Protection and 
Affordable Care Act, as amended by section 10905 of such Act, 
is <<NOTE: Ante, p. 865, 1017.>> amended--
            (1) in subsection (a)(1), by striking ``2010'' and inserting 
        ``2013'';
            (2) in subsection (b)(2)--
                    (A) by striking ``For purposes of paragraph (1), the 
                net premiums'' and inserting ``For purposes of paragraph 
                (1)--
                    ``(A) In general.--The net premiums''; and
                    (B) by adding at the end the following subparagraph:
                    ``(B) Partial exclusion for certain exempt 
                activities.--After the application of subparagraph (A), 
                only 50 percent of the remaining net premiums written 
                with respect to health insurance for any United States 
                health risk that are attributable to the activities 
                (other than activities of an unrelated trade or business 
                as defined in section 513 of the Internal Revenue Code 
                of 1986) of any covered entity qualifying under 
                paragraph (3), (4), (26), or (29) of section 501(c) of 
                such Code and exempt from tax under section 501(a) of 
                such Code shall be taken into account.'';
            (3) in subsection (c)--
                    (A) by inserting ``during the calendar year in which 
                the fee under this section is due'' in paragraph (1) 
                after ``risk'';
                    (B) in paragraph (2), by striking subparagraphs (C), 
                (D), and (E) and inserting the following new 
                subparagraphs:
                    ``(C) any entity--

[[Page 124 STAT.1066]]

                          ``(i) which is incorporated as a nonprofit 
                      corporation under a State law,
                          ``(ii) no part of the net earnings of which 
                      inures to the benefit of any private shareholder 
                      or individual, no substantial part of the 
                      activities of which is carrying on propaganda, or 
                      otherwise attempting, to influence legislation 
                      (except as otherwise provided in section 501(h) of 
                      the Internal Revenue Code of 1986), and which does 
                      not participate in, or intervene in (including the 
                      publishing or distributing of statements), any 
                      political campaign on behalf of (or in opposition 
                      to) any candidate for public office, and
                          ``(iii) more than 80 percent of the gross 
                      revenues of which is received from government 
                      programs that target low-income, elderly, or 
                      disabled populations under titles XVIII, XIX, and 
                      XXI of the Social Security Act, and
                    ``(D) any entity which is described in section 
                501(c)(9) of such Code and which is established by an 
                entity (other than by an employer or employers) for 
                purposes of providing health care benefits.'';
                    (C) in paragraph (3)(A), by striking ``subparagraph 
                (C)(i)(I), (D)(i)(I), or (E)(i)'' and inserting 
                ``subparagraph (C) or (D)''; and
                    (D) by adding at the end the following new 
                paragraph:
            ``(4) Joint and several liability.--If more than one person 
        is liable for payment of the fee under subsection (a) with 
        respect to a single covered entity by reason of the application 
        of paragraph (3), all such persons shall be jointly and 
        severally liable for payment of such fee.'';
            (4) by striking subsection (e) and inserting the following:

    ``(e) Applicable Amount.--For purposes of subsection (b)(1)--
            ``(1) Years before 2019.-- <<NOTE: Determination.>> In the 
        case of calendar years beginning before 2019, the applicable 
        amount shall be determined in accordance with the following 
        table:


``Calendar year                          Applicable amount
  2014.................................  $8,000,000,000
  2015.................................  $11,300,000,000
  2016.................................  $11,300,000,000
  2017.................................  $13,900,000,000
  2018.................................  $14,300,000,000.
 


            ``(2) Years after 2018.--In the case of any calendar year 
        beginning after 2018, the applicable amount shall be the 
        applicable amount for the preceding calendar year increased by 
        the rate of premium growth (within the meaning of section 
        36B(b)(3)(A)(ii) of the Internal Revenue Code of 1986) for such 
        preceding calendar year.'';
            (5) in subsection (g), by adding at the end the following 
        new paragraphs:
            ``(3) Accuracy-related penalty.--
                    ``(A) In general.--In the case of any understatement 
                of a covered entity's net premiums written with respect 
                to health insurance for any United States health risk 
                for any calendar year, there shall be paid by the 
                covered entity making such understatement, an amount 
                equal to the excess of--

[[Page 124 STAT.1067]]

                          ``(i) the amount of the covered entity's fee 
                      under this section for the calendar year the 
                      Secretary determines should have been paid in the 
                      absence of any such understatement, over
                          ``(ii) the amount of such fee the Secretary 
                      determined based on such understatement.
                    ``(B) Understatement.--For purposes of this 
                paragraph, an understatement of a covered entity's net 
                premiums written with respect to health insurance for 
                any United States health risk for any calendar year is 
                the difference between the amount of such net premiums 
                written as reported on the return filed by the covered 
                entity under paragraph (1) and the amount of such net 
                premiums written that should have been reported on such 
                return.
                    ``(C) Treatment of penalty.--The penalty imposed 
                under subparagraph (A) shall be subject to the 
                provisions of subtitle F of the Internal Revenue Code of 
                1986 that apply to assessable penalties imposed under 
                chapter 68 of such Code.
            ``(4) Treatment of information.--Section 6103 of the 
        Internal Revenue Code of 1986 shall not apply to any information 
        reported under this subsection.''; and
            (6) by striking subsection (j) and inserting the following 
        new subsection:

    ``(j) Effective Date.--This section shall apply to calendar years 
beginning after December 31, 2013.''.
    (b) <<NOTE: 26 USC 4001 note prec.>> Effective Date.--The amendments 
made by this section shall take effect as if included in section 9010 of 
the Patient Protection and Affordable Care Act.
SEC. 1407. DELAY OF ELIMINATION OF DEDUCTION FOR EXPENSES 
                          ALLOCABLE TO MEDICARE PART D SUBSIDY.

    Section 9012(b) of the Patient Protection and Affordable Care 
Act <<NOTE: Ante, p. 868.>> is amended by striking ``2010'' and 
inserting ``2012''.
SEC. 1408. ELIMINATION OF UNINTENDED APPLICATION OF CELLULOSIC 
                          BIOFUEL PRODUCER CREDIT.

    (a) In General.--Section 40(b)(6)(E) of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 40.>> is amended by adding at the end the following 
new clause:
                          ``(iii) Exclusion of unprocessed fuels.--The 
                      term `cellulosic biofuel' shall not include any 
                      fuel if--
                                    ``(I) more than 4 percent of such 
                                fuel (determined by weight) is any 
                                combination of water and sediment, or
                                    ``(II) the ash content of such fuel 
                                is more than 1 percent (determined by 
                                weight).''.

    (b) <<NOTE: 26 USC 40 note.>> Effective Date.--The amendment made by 
this section shall apply to fuels sold or used on or after January 1, 
2010.
SEC. 1409. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE AND 
                          PENALTIES.

    (a) In General.-- <<NOTE: 26 USC 7701.>> 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.--

[[Page 124 STAT.1068]]

            ``(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 shall be taken into account 
                as expenses in determining pre-tax profit under 
                subparagraph (A). <<NOTE: Regulations.>> The Secretary 
                shall issue regulations requiring foreign taxes to be 
                treated as expenses in determining pre-tax profit in 
                appropriate cases.
            ``(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.-- <<NOTE: Applicability.>> 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) Determination of application of doctrine not 
                affected.--The determination of whether the economic 
                substance doctrine is relevant to a transaction shall be 
                made in the same manner as if this subsection had never 
                been enacted.
                    ``(D) Transaction.--The term `transaction' includes 
                a series of transactions.''.

    (b) Penalty for Underpayments Attributable to Transactions Lacking 
Economic Substance.--

[[Page 124 STAT.1069]]

            (1) In general.--Subsection (b) of section 6662 <<NOTE: 26 
        USC 6662.>> 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 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.-- <<NOTE: Applicability.>> 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.-- 
        <<NOTE: Definition.>> 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.--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) <<NOTE: 26 USC 6662A.>> 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''.

    (c) Reasonable Cause Exception Not Applicable to Noneconomic 
Substance Transactions.--
            (1) Reasonable cause exception for underpayments.--
        Subsection (c) of section 6664 <<NOTE: 26 USC 6664.>> is 
        amended--
                    (A) by redesignating paragraphs (2) and (3) as 
                paragraphs (3) and (4), respectively;
                    (B) by striking ``paragraph (2)'' in paragraph 
                (4)(A), as so redesignated, and inserting ``paragraph 
                (3)''; and
                    (C) by inserting after paragraph (1) the following 
                new paragraph:
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        portion of an underpayment which is attributable to one or more 
        transactions described in section 6662(b)(6).''.
            (2) Reasonable cause exception for reportable transaction 
        understatements.--Subsection (d) of section 6664 is amended--
                    (A) by redesignating paragraphs (2) and (3) as 
                paragraphs (3) and (4), respectively;
                    (B) by striking ``paragraph (2)(C)'' in paragraph 
                (4), as so redesignated, and inserting ``paragraph 
                (3)(C)''; and

[[Page 124 STAT.1070]]

                    (C) by inserting after paragraph (1) the following 
                new paragraph:
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        portion of a reportable transaction understatement which is 
        attributable to one or more transactions described in section 
        6662(b)(6).''.

    (d) Application of Penalty for Erroneous Claim for Refund or Credit 
to Noneconomic Substance Transactions.--Section 6676 <<NOTE: 26 USC 
6676.>> 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.''.
    (e) <<NOTE: Applicability. 26 USC 6662 note.>> Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        transactions entered into after the date of the enactment of 
        this Act.
            (2) Underpayments.--The amendments made by subsections (b) 
        and (c)(1) shall apply to underpayments attributable to 
        transactions entered into after the date of the enactment of 
        this Act.
            (3) Understatements.--The amendments made by subsection 
        (c)(2) shall apply to understatements attributable to 
        transactions entered into after the date of the enactment of 
        this Act.
            (4) Refunds and credits.--The amendment made by subsection 
        (d) shall apply to refunds and credits attributable to 
        transactions entered into after the date of the enactment of 
        this Act.
SEC. 1410. <<NOTE: 26 USC 6655 note.>> TIME FOR PAYMENT OF 
                          CORPORATE ESTIMATED TAXES.

    The percentage under paragraph (1) of section 202(b) of the 
Corporate Estimated Tax Shift Act of 2009 in effect on the date of the 
enactment of this Act is increased by 15.75 percentage points.

                      Subtitle F--Other Provisions

SEC. 1501. COMMUNITY COLLEGE AND CAREER TRAINING GRANT PROGRAM.

    Section 279(b) of the Trade Act of 1974 (19 U.S.C. 2372a(b)) is 
amended by striking ``Supplement'' and all that follows through 
``Funds'' and inserting ``There are'' and by striking ``pursuant'' and 
all that follows and inserting ``$500,000,000 for each of fiscal years 
2011, 2012, 2013, and 2014 to carry out this subchapter, except that the 
limitations contained in section 278(a)(2) shall not apply to such funds 
and each State shall receive not less than 0.5 percent of the amount 
appropriated pursuant to this subsection for each such fiscal year.''.

[[Page 124 STAT.1071]]

                     TITLE II--EDUCATION AND HEALTH

Subtitle A-- <<NOTE: SAFRA Act.>> Education
SEC. 2001. SHORT TITLE; REFERENCES.

    (a) <<NOTE: 20 USC 1001 note.>> Short Title.--This subtitle may be 
cited as the ``SAFRA Act''.

    (b) References.--Except as otherwise expressly provided, whenever in 
this subtitle an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).

               PART I--INVESTING IN STUDENTS AND FAMILIES

SEC. 2101. FEDERAL PELL GRANTS.

    (a) Amount of Grants.--Section 401(b) (20 U.S.C. 1070a(b)) is 
amended--
            (1) by amending paragraph (2)(A) to read as follows:
                    ``(A) The amount of the Federal Pell Grant for a 
                student eligible under this part shall be--
                          ``(i) the maximum Federal Pell Grant, as 
                      specified in the last enacted appropriation Act 
                      applicable to that award year, plus
                          ``(ii) the amount of the increase calculated 
                      under paragraph (8)(B) for that year, less
                          ``(iii) an amount equal to the amount 
                      determined to be the expected family contribution 
                      with respect to that student for that year.''; and
            (2) in paragraph (8)--
                    (A) in subparagraph (A)--
                          (i) in the matter preceding clause (i), by 
                      striking ``, to carry out subparagraph (B) of this 
                      paragraph''; and
                          (ii) by striking clauses (iii) through (x) and 
                      inserting the following:
                          ``(iii) to carry out subparagraph (B) of this 
                      paragraph, such sums as may be necessary for 
                      fiscal year 2010 and each subsequent fiscal year 
                      to provide the amount of increase of the maximum 
                      Federal Pell Grant required by clauses (ii) and 
                      (iii) of subparagraph (B); and
                          ``(iv) to carry out this section, 
                      $13,500,000,000 for fiscal year 2011.'';
                    (B) in subparagraph (B)--
                          (i) in the matter preceding clause (i), by 
                      striking ``subparagraph (A)'' and inserting 
                      ``clauses (i) through (iii) of subparagraph (A)'';
                          (ii) in clause (ii), by striking ``and 2011-
                      2012'' and inserting ``, 2011-2012, and 2012-
                      2013''; and
                          (iii) by striking clause (iii) and inserting 
                      the following:

[[Page 124 STAT.1072]]

                          ``(iii) the amount determined under 
                      subparagraph (C) for each succeeding award 
                      year.''; and
                    (C) by striking subparagraph (C) and inserting the 
                following:
                    ``(C) Adjustment amounts.--
                          ``(i) Award year 2013-2014.--For award year 
                      2013-2014, the amount determined under this 
                      subparagraph for purposes of subparagraph (B)(iii) 
                      shall be equal to--
                                    ``(I) $5,550 or the total maximum 
                                Federal Pell Grant for the preceding 
                                award year (as determined under clause 
                                (v)(II)), whichever is greater, 
                                increased by a percentage equal to the 
                                annual adjustment percentage for award 
                                year 2013-2014, reduced by
                                    ``(II) $4,860 or the maximum Federal 
                                Pell Grant for which a student was 
                                eligible for the preceding award year, 
                                as specified in the last enacted 
                                appropriation Act applicable to that 
                                year, whichever is greater; and
                                    ``(III) rounded to the nearest $5.
                          ``(ii) Award years 2014-2015 through 2017-
                      2018.--For each of the award years 2014-2015 
                      through 2017-2018, the amount determined under 
                      this subparagraph for purposes of subparagraph 
                      (B)(iii) shall be equal to--
                                    ``(I) the total maximum Federal Pell 
                                Grant for the preceding award year (as 
                                determined under clause (v)(II)), 
                                increased by a percentage equal to the 
                                annual adjustment percentage for the 
                                award year for which the amount under 
                                this subparagraph is being determined, 
                                reduced by
                                    ``(II) $4,860 or the maximum Federal 
                                Pell Grant for which a student was 
                                eligible for the preceding award year, 
                                as specified in the last enacted 
                                appropriation Act applicable to that 
                                year, whichever is greater; and
                                    ``(III) rounded to the nearest $5.
                          ``(iii) Subsequent award years.--For award 
                      year 2018-2019 and each subsequent award year, the 
                      amount determined under this subparagraph for 
                      purposes of subparagraph (B)(iii) shall be equal 
                      to the amount determined under clause (ii) for 
                      award year 2017-2018.
                          ``(iv) Definitions.--For purposes of this 
                      subparagraph--
                                    ``(I) the term `annual adjustment 
                                percentage' as applied to an award year, 
                                is equal to the estimated percentage 
                                change in the Consumer Price Index (as 
                                determined by the Secretary, using the 
                                definition in section 478(f)) for the 
                                most recent calendar year ending prior 
                                to the beginning of that award year; and
                                    ``(II) the term `total maximum 
                                Federal Pell Grant' as applied to a 
                                preceding award year, is equal to the 
                                sum of--

[[Page 124 STAT.1073]]

                                            ``(aa) the maximum Federal 
                                        Pell Grant for which a student 
                                        is eligible during an award 
                                        year, as specified in the last 
                                        enacted appropriation Act 
                                        applicable to that preceding 
                                        award year; and
                                            ``(bb) the amount of the 
                                        increase in the maximum Federal 
                                        Pell Grant required by this 
                                        paragraph for that preceding 
                                        award year.''.

    (b) Conforming Amendments.--Title IV (20 U.S.C. 1070 et seq.) is 
further amended--
            (1) in section 401(b) (20 U.S.C. 1070a(b))--
                    (A) in paragraph (4)--
                          (i) by striking ``maximum basic grant level 
                      specified in the appropriate appropriation Act'' 
                      and inserting ``maximum amount of a Federal Pell 
                      Grant award determined under paragraph (2)(A)''; 
                      and
                          (ii) by striking ``such level'' each place it 
                      appears and inserting ``such Federal Pell Grant 
                      amount'' in each such place; and
                    (B) in paragraph (6), by striking ``the grant level 
                specified in the appropriate Appropriation Act for this 
                subpart for such year'' and inserting ``the maximum 
                amount of a Federal Pell Grant award determined under 
                paragraph (2)(A), for which a student is eligible during 
                such award year'';
            (2) in section 402D(d)(1) (20 U.S.C. 1070a-14(d)(1)), by 
        striking ``exceed the maximum'' and all that follows through 
        ``Grant, for'' and inserting ``exceed the Federal Pell Grant 
        amount, determined under section 401(b)(2)(A), for which a 
        student is eligible, or be less than the minimum Federal Pell 
        Grant amount described in section 401(b)(4), for'';
            (3) in section 435(a)(5)(A)(i)(I) (20 U.S.C. 
        1085(a)(5)(A)(i)(I)), by striking ``one-half the maximum Federal 
        Pell Grant award for which a student would be eligible'' and 
        inserting ``one-half the Federal Pell Grant amount, determined 
        under section 401(b)(2)(A), for which a student would be 
        eligible'';
            (4) in section 483(e)(3)(A)(ii) (20 U.S.C. 
        1090(e)(3)(A)(ii)), by striking ``based on the maximum Federal 
        Pell Grant award at the time of application'' and inserting 
        ``based on the Federal Pell Grant amount, determined under 
        section 401(b)(2)(A), for which a student is eligible at the 
        time of application'';
            (5) in section 485E(b)(1)(A) (20 U.S.C. 1092f(b)(1)(A)), by 
        striking ``of such students' potential eligibility for a maximum 
        Federal Pell Grant under subpart 1 of part A'' and inserting 
        ``of such students' potential eligibility for the Federal Pell 
        Grant amount, determined under section 401(b)(2)(A), for which 
        the student would be eligible''; and
            (6) in section 894(f)(2)(C)(ii)(I) (20 U.S.C. 
        1161y(f)(2)(C)(ii)(I)), by striking ``the maximum Federal Pell 
        Grant for each award year'' and inserting ``the Federal Pell 
        Grant amount, determined under section 401(b)(2)(A), for which a 
        student may be eligible for each award year''.

    (c) <<NOTE: 20 USC 1070a note.>> Effective Date.--The amendments 
made by subsections (a) and (b) shall take effect on July 1, 2010.
SEC. 2102. COLLEGE ACCESS CHALLENGE GRANT PROGRAM.

    Section 781 (20 U.S.C. 1141) is amended--

[[Page 124 STAT.1074]]

            (1) in the first sentence of subsection (a), by striking 
        ``$66,000,000'' and all that follows through the period and 
        inserting ``$150,000,000 for each of the fiscal years 2010 
        through 2014. The authority to award grants under this section 
        shall expire at the end of fiscal year 2014.''; and
            (2) in subsection (c)(2), by striking ``0.5 percent'' and 
        inserting ``1.0 percent''.
SEC. 2103. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND 
                          UNIVERSITIES AND MINORITY-SERVING 
                          INSTITUTIONS.

    Section 371(b)(1)(A) (20 U.S.C. 1067q(b)(1)(A)) is amended by 
striking ``and 2009.'' and all that follows and inserting ``through 
2019. <<NOTE: Expiration date.>> The authority to award grants under 
this section shall expire at the end of fiscal year 2019.''.

                      PART II--STUDENT LOAN REFORM

SEC. 2201. TERMINATION OF FEDERAL FAMILY EDUCATION LOAN 
                          APPROPRIATIONS.

    Section 421 (20 U.S.C. 1071) is amended--
            (1) in subsection (b), in the first sentence of the matter 
        following paragraph (6), by inserting ``, except that no sums 
        may be expended after June 30, 2010, with respect to loans under 
        this part for which the first disbursement is after such date'' 
        after ``expended''; and
            (2) by adding at the end the following new subsection:

    ``(d) Termination of Authority to Make or Insure New Loans.--
Notwithstanding paragraphs (1) through (6) of subsection (b) or any 
other provision of law--
            ``(1) no new loans (including consolidation loans) may be 
        made or insured under this part after June 30, 2010; and
            ``(2) no funds are authorized to be appropriated, or may be 
        expended, under this Act or any other Act to make or insure 
        loans under this part (including consolidation loans) for which 
        the first disbursement is after June 30, 2010,

except as expressly authorized by an Act of Congress enacted after the 
date of enactment of the SAFRA Act.''.
SEC. 2202. TERMINATION OF FEDERAL LOAN INSURANCE PROGRAM.

    Section 424(a) (20 U.S.C. 1074(a)) is amended by striking 
``September 30, 1976,'' and all that follows and inserting ``September 
30, 1976, for each of the succeeding fiscal years ending prior to 
October 1, 2009, and for the period from October 1, 2009, to June 30, 
2010, for loans first disbursed on or before June 30, 2010.''.
SEC. 2203. TERMINATION OF APPLICABLE INTEREST RATES.

    Section 427A(l) (20 U.S.C. 1077a(l)) is amended--
            (1) in the subsection heading, by inserting ``and Before 
        July 1, 2010'' after ``2006'';
            (2) in paragraph (1), by inserting ``and before July 1, 
        2010,'' after ``July 1, 2006,'';
            (3) in paragraph (2), by inserting ``and before July 1, 
        2010,'' after ``July 1, 2006,'';
            (4) in paragraph (3), by inserting ``and that was disbursed 
        before July 1, 2010,'' after ``July 1, 2006,''; and
            (5) in paragraph (4)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``July 1, 2012'' and inserting ``July 1, 
                2010''; and

[[Page 124 STAT.1075]]

                    (B) by repealing subparagraphs (D) and (E).
SEC. 2204. TERMINATION OF FEDERAL PAYMENTS TO REDUCE STUDENT 
                          INTEREST COSTS.

    (a) Higher Education Act of 1965.--Section 428 (20 U.S.C. 1078) is 
amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), in the matter preceding 
                subparagraph (A), by inserting ``for which the first 
                disbursement is made before July 1, 2010, and'' after 
                ``eligible institution''; and
                    (B) in paragraph (5), by striking ``September 30, 
                2014,'' and all that follows through the period and 
                inserting ``June 30, 2010.'';
            (2) in subsection (b)(1)--
                    (A) in subparagraph (G)(ii), by inserting ``and 
                before July 1, 2010,'' after ``July 1, 2006,''; and
                    (B) in subparagraph (H)(ii), by inserting ``and that 
                are first disbursed before July 1, 2010,'' after ``July 
                1, 2006,'';
            (3) in subsection (f)(1)(A)(ii)--
                    (A) by striking ``during fiscal years beginning''; 
                and
                    (B) by inserting ``and first disbursed before July 
                1, 2010,'' after ``October 1, 2003,''; and
            (4) in subsection (j)(1), by inserting ``, before July 1, 
        2010,'' after ``section 435(d)(1)(D) of this Act shall''.

    (b) College Cost Reduction and Access Act.--Section 303 of the 
College Cost Reduction and Access Act (Public Law 110-84) <<NOTE: 20 USC 
1078 and note.>> is repealed.
SEC. 2205. TERMINATION OF FFEL PLUS LOANS.

    Section 428B(a)(1) (20 U.S.C. 1078-2(a)(1)) is amended by striking 
``A graduate'' and inserting ``Prior to July 1, 2010, a graduate''.
SEC. 2206. FEDERAL CONSOLIDATION LOANS.

    (a) In General.--Section 428C (20 U.S.C. 1078-3) is amended--
            (1) in subsection (a)(4)(A), by inserting ``, and first 
        disbursed before July 1, 2010'' after ``under this part'';
            (2) in subsection (b)--
                    (A) in paragraph (1)(E), by inserting before the 
                semicolon ``, and before July 1, 2010''; and
                    (B) in paragraph (5), by striking ``In the event 
                that'' and inserting ``If, before July 1, 2010,'';
            (3) in subsection (c)(1)--
                    (A) in subparagraph (A)(ii), by inserting ``and that 
                is disbursed before July 1, 2010,'' after ``2006,''; and
                    (B) in subparagraph (C), by inserting ``and 
                disbursed before July 1, 2010,'' after ``1994,''; and
            (4) in subsection (e), by striking ``September 30, 2014.'' 
        and inserting ``June 30, 2010. No loan may be made under this 
        section for which the disbursement is on or after July 1, 
        2010.''.

    (b) Temporary Loan Consolidation Authority.--Part D of title IV (20 
U.S.C. 1087a et seq.) is amended by inserting after section 459A (20 
U.S.C. 1087i) the following:

[[Page 124 STAT.1076]]

``SEC. 459B. <<NOTE: 20 USC 1087i-2.>> TEMPORARY LOAN 
                          CONSOLIDATION AUTHORITY.

    ``(a) Temporary Loan Consolidation Authority.--
            ``(1) In general.--A borrower who has 1 or more loans in 2 
        or more of the categories described in paragraph (2), and who 
        has not yet entered repayment on 1 or more of those loans in any 
        of the categories, may consolidate all of the loans of the 
        borrower that are described in paragraph (2) into a Federal 
        Direct Consolidation Loan during the period described in 
        paragraph (3).
            ``(2) Categories of loans that may be consolidated.--The 
        categories of loans that may be consolidated under paragraph (1) 
        are--
                    ``(A) loans made under this part;
                    ``(B) loans purchased by the Secretary pursuant to 
                section 459A; and
                    ``(C) loans made under part B that are held by an 
                eligible lender, as such term is defined in section 
                435(d).
            ``(3) Time period in which loans may be consolidated.--The 
        Secretary may make a Federal Direct Consolidation Loan under 
        this section to a borrower whose application for such Federal 
        Direct Consolidation Loan is received on or after July 1, 2010, 
        and before July 1, 2011.

    ``(b) Terms of Loans.--A Federal Direct Consolidation Loan made 
under this section shall have the same terms and conditions as a Federal 
Direct Consolidation Loan made under section 455(g), except that--
            ``(1) <<NOTE: Applicability.>> in determining the applicable 
        rate of interest on the Federal Direct Consolidation Loan made 
        under this section (other than on a Federal Direct Consolidation 
        Loan described in paragraph (2)), section 427A(l)(3) shall be 
        applied without rounding the weighted average of the interest 
        rate on the loans consolidated to the nearest higher one-eighth 
        of 1 percent as described in subparagraph (A) of section 
        427A(l)(3); and
            ``(2) if a Federal Direct Consolidation Loan made under this 
        section that repays a loan which is subject to an interest rate 
        determined under section 427A(g)(2), (j)(2), or (k)(2), then the 
        interest rate for such Federal Direct Consolidation Loan shall 
        be calculated--
                    ``(A) by using the applicable rate of interest 
                described in section 427A(g)(2), (j)(2), or (k)(2), 
                respectively; and
                    ``(B) in accordance with section 427A(l)(3).''.
SEC. 2207. TERMINATION OF UNSUBSIDIZED STAFFORD LOANS FOR MIDDLE-
                          INCOME BORROWERS.

    Section 428H (20 U.S.C. 1078-8) is amended--
            (1) in subsection (a), by inserting ``that are first 
        disbursed before July 1, 2010,'' after ``under this part'';
            (2) in subsection (b)--
                    (A) by striking ``Any student'' and inserting 
                ``Prior to July 1, 2010, any student''; and
                    (B) by inserting ``for which the first disbursement 
                is made before such date'' after ``unsubsidized Federal 
                Stafford Loan''; and
            (3) in subsection (h), by inserting ``and that are first 
        disbursed before July 1, 2010,'' after ``July 1, 2006,''.

[[Page 124 STAT.1077]]

SEC. 2208. TERMINATION OF SPECIAL ALLOWANCES.

    Section 438 (20 U.S.C. 1087-1) is amended--
            (1) in subsection (b)(2)(I)--
                    (A) in the subclause heading, by inserting ``, and 
                before july 1, 2010'' after ``2000'';
                    (B) in clause (i), by inserting ``and before July 1, 
                2010,'' after ``2000,'';
                    (C) in clause (ii)(II), by inserting ``and before 
                July 1, 2010,'' after ``2006,'';
                    (D) in clause (iii), by inserting ``and before July 
                1, 2010,'' after ``2000,'';
                    (E) in clause (iv), by inserting ``and that is 
                disbursed before July 1, 2010,'' after ``2000,'';
                    (F) in clause (v)(I), by inserting ``and before July 
                1, 2010,'' after ``2006,''; and
                    (G) in clause (vi)--
                          (i) in the clause heading, by inserting ``, 
                      and before july 1, 2010'' after ``2007''; and
                          (ii) in the matter preceding subclause (I), by 
                      inserting ``and before July 1, 2010,'' after 
                      ``2007,'';
            (2) in subsection (c)--
                    (A) in paragraph (2)(B)--
                          (i) in clause (iii), by inserting ``and'' 
                      after the semicolon;
                          (ii) in clause (iv), by striking ``; and'' and 
                      inserting a period; and
                          (iii) by striking clause (v); and
                    (B) in paragraph (6), by inserting ``and first 
                disbursed before July 1, 2010,'' after ``1992,''; and
            (3) in subsection (d)(2)(B), by inserting ``, and before 
        July 1, 2010'' after ``2007''.
SEC. 2209. ORIGINATION OF DIRECT LOANS AT INSTITUTIONS OUTSIDE THE 
                          UNITED STATES.

    (a) Loans for Students Attending Institutions Outside the United 
States.--Section 452 (20 U.S.C. 1087b) is amended by adding at the end 
the following:
    ``(d) Institutions Outside the United States.--Loan funds for 
students (and parents of students) attending institutions outside the 
United States shall be disbursed through a financial institution located 
or operating in the United States and designated by the Secretary to 
serve as the agent of such institutions with respect to the receipt of 
the disbursements of such loan funds and the transfer of such funds to 
such institutions. To be eligible to receive funds under this part, an 
institution outside the United States shall make arrangements with the 
agent designated by the Secretary under this subsection to receive funds 
under this part.''.
    (b) Conforming Amendments.--
            (1) Amendments.--Section 102 (20 U.S.C. 1002), as amended by 
        section 102 of the Higher Education Opportunity Act (Public Law 
        110-315) and section 101 of Public Law 111-39, is amended--
                    (A) by striking ``part B'' each place the term 
                appears and inserting ``part D'';
                    (B) in subsection (a)(1)(C), by inserting ``, 
                consistent with the requirements of section 452(d)'' 
                before the period at the end; and

[[Page 124 STAT.1078]]

                    (C) in subsection (a)(2)(A)--
                          (i) in the second sentence of the matter 
                      preceding clause (i), by striking ``made, insured, 
                      or guaranteed'' and inserting ``made''; and
                          (ii) in clause (iii)--
                                    (I) in subclause (III), by striking 
                                ``only Federal Stafford'' and all that 
                                follows through ``section 428B'' and 
                                inserting ``only Federal Direct Stafford 
                                Loans under section 455(a)(2)(A), 
                                Federal Direct Unsubsidized Stafford 
                                Loans under section 455(a)(2)(D), or 
                                Federal Direct PLUS Loans under section 
                                455(a)(2)(B)''; and
                                    (II) in subclause (V), by striking 
                                ``a Federal Stafford'' and all that 
                                follows through ``section 428B'' and 
                                inserting ``a Federal Direct Stafford 
                                Loan under section 455(a)(2)(A), a 
                                Federal Direct Unsubsidized Stafford 
                                Loan under section 455(a)(2)(D), or a 
                                Federal Direct PLUS Loan under section 
                                455(a)(2)(B)''.
            (2) <<NOTE: 20 USC 1002 note.>> Effective date.--The 
        amendments made by subparagraph (C) of paragraph (1) shall be 
        effective on July 1, 2010, as if enacted as part of section 
        102(a)(1) of the Higher Education Opportunity Act (Public Law 
        110-315) and subject to section 102(e) of such Act as amended by 
        section 101(a)(2) of Public Law 111-39 (20 U.S.C. 1002 note).
SEC. 2210. CONFORMING AMENDMENTS.

    (a) Amendments.--Section 454 (20 U.S.C. 1087d) is amended--
            (1) in subsection (a)--
                    (A) by striking paragraph (4); and
                    (B) by redesignating paragraphs (5) through (7) as 
                paragraphs (4) through (6), respectively; and
            (2) in subsection (b)(2), by striking ``(5), (6), and (7)'' 
        and inserting ``(5), and (6)''.

    (b) <<NOTE: 20 USC 1087d note.>> Effective Date.--The amendments 
made by subsection (a) shall take effect on July 1, 2010.
SEC. 2211. TERMS AND CONDITIONS OF LOANS.

    (a) In General.--Section 455 (20 U.S.C. 1087e) is amended--
            (1) in subsection (a)(1), by inserting ``, and first 
        disbursed on June 30, 2010,'' before ``under sections 428''; and
            (2) in subsection (g)--
                    (A) by inserting ``, including any loan made under 
                part B and first disbursed before July 1, 2010'' after 
                ``section 428C(a)(4)''; and
                    (B) by striking the third sentence.

    (b) <<NOTE: Applicability.>> Effective Date.--The amendment made by 
subsection (a)(1) shall apply with respect to loans first disbursed 
under part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 
1087a et seq.) on or after July 1, 2010.
SEC. 2212. CONTRACTS; MANDATORY FUNDS.

    (a) Contracts.--Section 456 (20 U.S.C. 1087f) is amended--
            (1) in subsection (a)--
                    (A) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) Servicing by eligible not-for-profit servicers.--
                    ``(A) Servicing contracts.--

[[Page 124 STAT.1079]]

                          ``(i) In general.--The Secretary shall 
                      contract with each eligible not-for-profit 
                      servicer to service loans originated under this 
                      part, if the servicer--
                                    ``(I) meets the standards for 
                                servicing Federal assets that apply to 
                                contracts awarded pursuant to paragraph 
                                (1); and
                                    ``(II) has the capacity to service 
                                the applicable loan volume allocation 
                                described in subparagraph (B).
                          ``(ii) Competitive market rate determination 
                      for first 100,000 borrower accounts.--The 
                      Secretary shall establish a separate pricing tier 
                      for each of the first 100,000 borrower loan 
                      accounts at a competitive market rate.
                          ``(iii) Ineligibility.--An eligible not-for-
                      profit servicer shall no longer be eligible for a 
                      contract under this paragraph after July 1, 2014, 
                      if--
                                    ``(I) the servicer has not been 
                                awarded such a contract before that 
                                date; or
                                    ``(II) the servicer's contract was 
                                terminated, and the servicer had not 
                                reapplied for, and been awarded, a 
                                contract under this paragraph.
                    ``(B) Allocations.--
                          ``(i) In general.--The Secretary shall (except 
                      as provided in clause (ii)) allocate to an 
                      eligible not-for-profit servicer, subject to the 
                      contract of such servicer described in 
                      subparagraph (A), the servicing rights for the 
                      loan accounts of 100,000 borrowers (including 
                      borrowers who borrowed loans in a prior year that 
                      were serviced by the servicer).
                          ``(ii) Servicer allocation.--The Secretary may 
                      reallocate, increase, reduce, or terminate an 
                      eligible not-for-profit servicer's allocation of 
                      servicing rights under clause (i) based on the 
                      performance of such servicer, on the same terms as 
                      loan allocations provided by contracts awarded 
                      pursuant to paragraph (1).''; and
            (2) by adding at the end the following:

    ``(c) Definition of Eligible Not-for-profit Servicer.--In this 
section:
            ``(1) In general.--The term `eligible not-for-profit 
        servicer' means an entity--
                    ``(A) that is not owned or controlled in whole or in 
                part by--
                          ``(i) a for-profit entity; or
                          ``(ii) a nonprofit entity having its principal 
                      place of business in another State; and
                    ``(B) that--
                          ``(i) as of July 1, 2009--
                                    ``(I) meets the definition of an 
                                eligible not-for-profit holder under 
                                section 435(p), except that such term 
                                does not include eligible lenders 
                                described in paragraph (1)(D) of such 
                                section; and
                                    ``(II) was performing, or had 
                                entered into a contract with a third 
                                party servicer (as such term is defined 
                                in section 481(c)) who was performing, 
                                student loan servicing functions for 
                                loans made under part B of this title;

[[Page 124 STAT.1080]]

                          ``(ii) notwithstanding clause (i), as of July 
                      1, 2009--
                                    ``(I) is the sole beneficial owner 
                                of a loan for which the special 
                                allowance rate is calculated under 
                                section 438(b)(2)(I)(vi)(II) because the 
                                loan is held by an eligible lender 
                                trustee that is an eligible not-for-
                                profit holder as defined under section 
                                435(p)(1)(D); and
                                    ``(II) was performing, or had 
                                entered into a contract with a third 
                                party servicer (as such term is defined 
                                in section 481(c)) who was performing, 
                                student loan servicing functions for 
                                loans made under part B of this title; 
                                or
                          ``(iii) is an affiliated entity of an eligible 
                      not-for-profit servicer described in clause (i) or 
                      (ii) that--
                                    ``(I) directly employs, or will 
                                directly employ (on or before the date 
                                the entity begins servicing loans under 
                                a contract awarded by the Secretary 
                                pursuant to subsection (a)(3)(A)), the 
                                majority of individuals who perform 
                                borrower-specific student loan servicing 
                                functions; and
                                    ``(II) as of July 1, 2009, was 
                                performing, or had entered into a 
                                contract with a third party servicer (as 
                                such term is defined in section 481(c)) 
                                who was performing, student loan 
                                servicing functions for loans made under 
                                part B of this title.
            ``(2) Affiliated entity.--For the purposes of paragraph (1), 
        the term `affiliated entity'--
                    ``(A) means an entity contracted to perform services 
                for an eligible not-for-profit servicer that--
                          ``(i) is a nonprofit entity or is wholly owned 
                      by a nonprofit entity; and
                          ``(ii) is not owned or controlled, in whole or 
                      in part, by--
                                    ``(I) a for-profit entity; or
                                    ``(II) an entity having its 
                                principal place of business in another 
                                State; and
                    ``(B) may include an affiliated entity that is 
                established by an eligible not-for-profit servicer after 
                the date of enactment of the SAFRA Act, if such 
                affiliated entity is otherwise described in paragraph 
                (1)(B)(iii)(I) and subparagraph (A) of this 
                paragraph.''.

    (b) Mandatory Funds.--
            (1) Amendments.--Section 458(a) (20 U.S.C. 1087h(a)) is 
        amended--
                    (A) by redesignating paragraph (5) as paragraph (8);
                    (B) by redesignating paragraphs (2) through (4) as 
                paragraphs (3) through (5), respectively;
                    (C) by inserting after paragraph (1) the following 
                new paragraph:
            ``(2) Mandatory funds for eligible not-for-profit 
        servicers.--For fiscal years 2010 through 2019, there shall be 
        available to the Secretary, in addition to any other amounts 
        appropriated to carry out this paragraph and out of any money in 
        the Treasury not otherwise appropriated, funds to be obligated 
        for administrative costs of servicing contracts with eligible 
        not-for-profit servicers as described in section 456.''; and

[[Page 124 STAT.1081]]

                    (D) by inserting after paragraph (5), as 
                redesignated by subparagraph (B) of this paragraph, the 
                following:
            ``(6) Technical assistance to institutions of higher 
        education.--
                    ``(A) Provision of assistance.--The Secretary shall 
                provide institutions of higher education participating, 
                or seeking to participate, in the loan programs under 
                this part with technical assistance in establishing and 
                administering such programs.
                    ``(B) Funds.--There are authorized to be 
                appropriated, and there are appropriated, to carry out 
                this paragraph (in addition to any other amounts 
                appropriated to carry out this paragraph and out of any 
                money in the Treasury not otherwise appropriated), 
                $50,000,000 for fiscal year 2010.
                    ``(C) Definition.--In this paragraph, the term 
                `assistance' means the provision of technical support, 
                training, materials, technical assistance, and financial 
                assistance.
            ``(7) Additional payments.--
                    ``(A) Provision of assistance.--The Secretary shall 
                provide payments to loan servicers for retaining jobs at 
                locations in the United States where such servicers were 
                operating under part B on January 1, 2010.
                    ``(B) Funds.--There are authorized to be 
                appropriated, and there are appropriated, to carry out 
                this paragraph (in addition to any other amounts 
                appropriated to carry out this paragraph and out of any 
                money in the Treasury not otherwise appropriated), 
                $25,000,000 for each of the fiscal years 2010 and 
                2011.''.
            (2) Conforming amendment.--Section 458 (20 U.S.C. 1087h) is 
        further amended by striking ``subsection (a)(3)'' in subsection 
        (b) and inserting ``subsection (a)(4)''.
SEC. 2213. INCOME-BASED REPAYMENT.

    Section 493C (20 U.S.C. 1098e) is amended by adding at the end the 
following new subsection:
    ``(e) Special Terms for New Borrowers on and After July 1, 2014.-- 
<<NOTE: Effective date.>> With respect to any loan made to a new 
borrower on or after July 1, 2014--
            ``(1) subsection (a)(3)(B) shall be applied by substituting 
        `10 percent' for `15 percent'; and
            ``(2) subsection (b)(7)(B) shall be applied by substituting 
        `20 years' for `25 years'.''.

                           Subtitle B--Health

SEC. 2301. INSURANCE REFORMS.

    (a) Extending Certain Insurance Reforms to Grandfathered Plans.--
Section 1251(a) of the Patient Protection and Affordable Care Act, as 
added by section 10103(d) of such Act, is <<NOTE: Ante, p. 161, 
894.>> amended by adding at the end the following:
            ``(4) Application of certain provisions.--
                    ``(A) In general.--The following provisions of the 
                Public Health Service Act (as added by this title) shall

[[Page 124 STAT.1082]]

                apply to grandfathered health plans for plan years 
                beginning with the first plan year to which such 
                provisions would otherwise apply:
                          ``(i) Section 2708 (relating to excessive 
                      waiting periods).
                          ``(ii) Those provisions of section 2711 
                      relating to lifetime limits.
                          ``(iii) Section 2712 (relating to 
                      rescissions).
                          ``(iv) Section 2714 (relating to extension of 
                      dependent coverage).
                    ``(B) Provisions applicable only to group health 
                plans.--
                          ``(i) Provisions described.--Those provisions 
                      of section 2711 relating to annual limits and the 
                      provisions of section 2704 (relating to pre-
                      existing condition exclusions) of the Public 
                      Health Service Act (as added by this subtitle) 
                      shall apply to grandfathered health plans that are 
                      group health plans for plan years beginning with 
                      the first plan year to which such provisions 
                      otherwise apply.
                          ``(ii) Adult child coverage.--For plan years 
                      beginning before January 1, 2014, the provisions 
                      of section 2714 of the Public Health Service Act 
                      (as added by this subtitle) shall apply in the 
                      case of an adult child with respect to a 
                      grandfathered health plan that is a group health 
                      plan only if such adult child is not eligible to 
                      enroll in an eligible employer-sponsored health 
                      plan (as defined in section 5000A(f)(2) of the 
                      Internal Revenue Code of 1986) other than such 
                      grandfathered health plan.''.

    (b) Clarification Regarding Dependent Coverage.--Section 2714(a) of 
the Public Health Service Act, as added by section 1001(5) of the 
Patient Protection and Affordable Care Act, <<NOTE: Ante, p. 130.>> is 
amended by striking ``(who is not married)''.
SEC. 2302. DRUGS PURCHASED BY COVERED ENTITIES.

    Section 340B of the Public Health Service Act (42 U.S.C. 256b), as 
amended by sections 7101 and 7102 of the Patient Protection and 
Affordable Care Act, is amended--
            (1) in subsection (a)--
                    (A) in paragraphs (1), (2), (5), (7), and (9), by 
                striking the terms ``covered drug'' and ``covered 
                drugs'' each place either term appears and inserting 
                ``covered outpatient drug'' or ``covered outpatient 
                drugs'', respectively;
                    (B) in paragraph (4)(L)--
                          (i) in clause (i), by striking ``and'' at the 
                      end;
                          (ii) in clause (ii), by striking the period 
                      and inserting ``; and''; and
                          (iii) by inserting after clause (ii), the 
                      following:
                          ``(iii) does not obtain covered outpatient 
                      drugs through a group purchasing organization or 
                      other group purchasing arrangement.''; and
                    (C) in paragraph (5)--
                          (i) by striking subparagraph (C);
                          (ii) by redesignating subparagraphs (D) and 
                      (E) as subparagraphs (C) and (D), respectively; 
                      and

[[Page 124 STAT.1083]]

                          (iii) in subparagraph (D), as so redesignated, 
                      by striking ``subparagraph (D)'' and inserting 
                      ``subparagraph (C)'';
            (2) by striking subsection (c);
            (3) in subsection (d)--
                    (A) by striking ``covered drugs'' each place it 
                appears and inserting ``covered outpatient drugs'';
                    (B) by striking ``(a)(5)(D)'' each place it appears 
                and inserting ``(a)(5)(C)''; and
                    (C) by striking ``(a)(5)(E)'' each place it appears 
                and inserting ``(a)(5)(D)''; and
            (4) by inserting after subsection (d) the following:

    ``(e) Exclusion of Orphan Drugs for Certain Covered Entities.--For 
covered entities described in subparagraph (M), (N), or (O) of 
subsection (a)(4), the term `covered outpatient drug' shall not include 
a drug designated by the Secretary under section 526 of the Federal 
Food, Drug, and Cosmetic Act for a rare disease or condition.''.
SEC. 2303. COMMUNITY HEALTH CENTERS.

    Section 10503(b)(1) of the Patient Protection and Affordable Care 
Act is <<NOTE: Ante, p. 1004.>> amended--
            (1) in subparagraph (A), by striking ``700,000,000'' and 
        inserting ``1,000,000,000'';
            (2) in subparagraph (B), by striking ``800,000,000'' and 
        inserting ``1,200,000,000'';
            (3) in subparagraph (C), by striking ``1,000,000,000'' and 
        inserting ``1,500,000,000'';
            (4) in subparagraph (D), by striking ``1,600,000,000'' and 
        inserting ``2,200,000,000''; and
            (5) in subparagraph (E), by striking ``2,900,000,000'' and 
        inserting ``3,600,000,000''.

    Approved March 30, 2010.

LEGISLATIVE HISTORY--H.R. 4872:
---------------------------------------------------------------------------

HOUSE REPORTS: No. 111-443 (Comm. on the Budget).
CONGRESSIONAL RECORD, Vol. 156 (2010):
            Mar. 21, considered and passed House.
            Mar. 23, 24, considered in Senate.
            Mar. 25, considered and passed Senate, amended. House 
                concurred in Senate amendments.
DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2010):
            Mar. 30, Presidential remarks.

                                  <all>